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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 14, 1999
_______________
JACOBS ENGINEERING GROUP INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 1-7463 95-4081636
- --------------------------------------------------------------------------------
(State of (Commission File (I.R.S. Employer
Incorporation) File Number) Identification
Number)
1111 S. Arroyo Parkway, Pasadena CA 91105
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(626) 578-3500
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
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Item 2. Acquisition or Disposition of Assets.
On January 14, 1999, Jacobs Engineering Group Inc. ("Jacobs") completed its
Agreement and Plan of Merger with the Sverdrup Corporation ("Sverdrup").
Founded in 1928, Sverdrup Corporation provides engineering, architecture,
construction and scientific services for the development, design, construction
and operation of capital facilities, infrastructure projects and advanced
technical systems for public and private sector clients in the United States and
internationally. Sverdrup employs more than 5,600 people in 35 offices.
Under the terms of the merger agreement, at closing, a wholly-owned subsidiary
of Jacobs ("Merger Subsidiary") was merged with and into Sverdrup. Thereupon,
each outstanding share of common stock of Sverdrup was converted into the right
to receive a proportional share of the total amount of initial merger
consideration paid at closing ($198.0 million), plus a proportional amount of
any additional merger consideration that may be paid in the future ("Deferred
Merger Consideration"). Amounts payable as Deferred Merger Consideration, if
any, will be payable shortly after each of the first three anniversaries of the
date of the merger agreement, and is contingent upon Jacobs' stock price
reaching certain price thresholds as defined in the merger agreement. After the
merger and conversion, the Merger Subsidiary ceased to exist, and Sverdrup
survives as a new, wholly-owned subsidiary of Jacobs. The terms of the merger
were arrived at by arms-length negotiations between the parties.
Of the total initial merger consideration paid at closing, $10.0 million was
paid into an escrow account, the purpose of which will be to settle certain
claims or disputes relating to certain contracts and litigation matters
identified in the merger agreement.
The initial merger consideration was financed in part by a new, $230.0 million
revolving credit facility obtained by Jacobs from a group of banks led by Bank
of America NT&SA. Amounts borrowed under this facility initially were used to
fund that portion of the initial merger consideration not financed using
existing internal funds, and the repayment of certain Sverdrup indebtedness
existing at closing.
The shareholders of Sverdrup consisted of approximately 400 employees and former
employees of Sverdrup. The merger will be accounted for as a purchase.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
(i) Filed as Exhibit 99.2 to this Form 8-K are the audited, consolidated
financial statements of Sverdrup Corporation at December 31, 1997,
and 1996 and for each of the three years in the period ended December
31, 1997, together with the report of the independent auditors on
those consolidated financial statements.
(ii) Filed as Exhibit 99.3 to this Form 8-K are the unaudited, condensed
consolidated financial statements of Sverdrup Corporation at October
2, 1998 and October 3, 1997, and for each of the nine month periods
then ended.
(b) Pro Form Financial Information.
Introductory Paragraphs:
As a result of the transaction described under Item 2., above, Jacobs
Engineering Group Inc. (the "Company") acquired all of the assets and
liabilities of the Sverdrup Corporation ("Sverdrup") effective January 1,
1999 for an initial cash purchase price of $198.0 million.
The transaction will be accounted for as a purchase. Accordingly, the
purchase price will be allocated among the assets and liabilities
acquired based upon their relative estimated fair values. The excess of
the purchase price over the sum of the fair values of the net assets
acquired will be classified as goodwill and will be amortized in
accordance with the Company's existing policies.
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Any additional purchase price that may be paid in the future, as well any
reduction of the purchase price that may be received in the future, will
be accounted for as either an increase or decrease in goodwill as the
case may be, and will be recognized at the time any such additional
payments are made or as any such reductions are received.
In connection with the purchase of Sverdrup, the Company terminated its
existing $45.0 million revolving credit agreement and entered into a new,
$230.0 million revolving credit agreement. At closing, the Company
borrowed approximately $165.0 million under the new facility which it
used, along with approximately $56.1 million of internal funds, to pay
(i) the initial purchase price of $198.0 million, (ii) certain fees
incurred in connection with the transaction ($2.1 million), and (iii) to
pay-off certain existing indebtedness of Sverdrup ($21.0 million).
The accompanying Unaudited Pro Forma Condensed Combined Balance Sheet
presents, in columnar form, the consolidated balance sheet of the Company
as of September 30, 1998, as filed with the Commission, the consolidated
balance sheet of Sverdrup as of October 2, 1998 (its normal month-end
date for the month of September 1998), the pro forma adjustments thereto,
and the pro forma combined balance sheet. The Unaudited Pro Forma
Condensed Combined Balance Sheet was prepared assuming the transaction
was consummated on September 30, 1998.
The accompanying Unaudited Pro Forma Condensed Combined Statement of
Income presents, in columnar form, the consolidated statement of income
of the Company for the year ended September 30, 1998, as filed with the
Commission, the consolidated statement of income of Sverdrup for the year
ended October 2, 1998, the pro forma adjustments thereto, and the pro
forma combined statement of income. Sverdrup's normal year-end is
December 31. Accordingly, the historical financial information of
Sverdrup has been adjusted to conform to a September 30 year-end. The
Unaudited Pro Forma Condensed Combined Statement of Income was prepared
assuming the transaction was consummated on October 1, 1997, and includes
those adjustments that are directly attributable to the transaction and
which are expected to have a continuing impact on the Company.
Readers of the accompanying Unaudited Pro Forma Condensed Combined
Balance Sheet and Unaudited Pro Forma Condensed Combined Statement of
Income should also read the explanations of the pro forma adjustments
immediately following the Unaudited Pro Forma Condensed Combined
Statement of Income.
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Jacobs Engineering Group Inc.
Pro Forma Condensed Combined Balance Sheet
September 30, 1998
(In thousands of dollars - unaudited)
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Jacobs Sverdrup
Engineering Corp. Pro Forma Pro Forma
(as reported) (Historical) Adjustments Combined
------------- ------------ ------------ -----------
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ASSETS:
Current Assets:
Cash and cash equivalents $101,328 $ 6,524 $(56,063)(a) $ 51,789
Marketable securities 16,482 - 16,482
Receivables 394,841 176,264 571,105
Deferred income taxes 45,419 - 45,419
Other 7,937 12,621 20,558
-------- -------- ----------
Total current assets 566,007 195,409 705,353
-------- -------- ----------
Property and Equipment, Net 100,565 30,384 130,949
Other Noncurrent Assets, Net 140,917 34,782 139,905 (b) 315,604
-------- -------- ----------
Total Assets $807,489 $260,575 $1,151,906
======== ======== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY:
Current Liabilities:
Notes payable $ 217 $ 10,019 (7,000)(c) $ 3,236
Accounts payable 101,846 62,597 6,170 (b) 170,613
Accrued liabilities 161,552 29,024 190,576
Customer advances 85,049 37,249 122,298
Income taxes payable 19,684 3,558 23,242
-------- -------- ----------
Total current liabilities 368,348 142,447 509,965
-------- -------- ----------
Long-term Debt 26,221 34,639 151,000 (c) 211,860
Other Long-term Liabilities 35,170 17,161 52,331
Minority Interests 6,345 - 6,345
Stockholders' Equity:
Preferred stock - -
Common stock 25,867 - 25,867
Additional paid-in capital 55,698 - 55,698
Retained earnings 300,296 - 300,296
Other (10,456) - (10,456)
Equity of Sverdrup - 66,328 (66,328)(d) -
-------- -------- ----------
Total stockholders' equity 371,405 66,328 371,405
-------- -------- ----------
$807,489 $260,575 $1,151,906
======== ======== ==========
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Jacobs Engineering Group Inc.
Pro Forma Condensed Combined Statement of Income
For the Year Ended September 30, 1998
(In thousands of dollars - unaudited)
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Jacobs Sverdrup
Engineering Corp. Pro Forma Pro Forma
(as reported) (Historical) Adjustments Combined
------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Revenues $2,101,145 $996,482 $3,097,627
---------- -------- ----------
Costs and Expenses:
Direct costs of contracts 1,830,618 866,028 2,696,646
Selling, general and
administrative expenses 184,043 103,731 3,498 (e) 291,272
Other (income) expense 436 (615) (179)
Interest (income) expense (2,736) 2,576 13,436 (f) 13,276
---------- -------- ----------
Total costs and expenses 2,012,361 971,720 3,001,015
---------- -------- ----------
Income Before Taxes 88,784 24,762 (x) 96,612 (x)
Income Tax Expense 34,399 10,397 (5,206)(g) 39,590
---------- -------- ----------
Net Income $ 54,385 $ 14,365 $ 57,022
========== ======== ==========
Net Income Per Share:
Basic $ 2.12 $ 2.22
Diluted $ 2.08 $ 2.19
========== ==========
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Jacobs Engineering Group Inc.
Notes to Unaudited Pro Forma Condensed Financial Statements
(a) This adjustment reflects the pro forma effect on cash at September 30, 1998
giving effect to the amount of internal funds used by the Company to
finance the acquisition of Sverdrup.
(b) This adjustment reflects the initial pro forma increase to goodwill
resulting from the acquisition, and includes an estimated amount for
certain known, direct costs of the acquisition. The final purchase price
allocation, which will yield the final goodwill amount to be recorded in
connection with this transaction, will be completed in accordance with APB
Opinion No. 16, as amended.
(c) As discussed above, in connection with the acquisition of Sverdrup, the
Company entered into a new, $230.0 million revolving credit facility which
it used to assist in the financing of the acquisition. Also in connection
with the acquisition, the Company modified one of its existing short-term
credit facilities under which it refinanced amounts outstanding under its
old $45.0 million revolving credit facility. This adjustment reflects the
effects of the aforementioned financings and refinancings on the September
30, 1998 pro forma balance sheet.
(d) This adjustment eliminates the equity of Sverdrup as of the date of
acquisition from the pro forma combined balance sheet.
(e) This adjustment reflects the pro forma amortization of goodwill, computed
in accordance with the established policies of the Company.
(f) This adjustment reflects the pro forma effect on net interest expense as a
result of the additional debt incurred as a result of the acquisition,
combined with the reduction of interest income caused by the pro forma use
of the Company's internal funds.
(g) This adjustment reflects the pro forma effects on consolidated income tax
expense resulting from the other pro forma adjustments to the pro forma
combined results of operations.
(x) Includes $2,909,000 of gains from sales of real estate, which, although
included in the historical results of operations of Sverdrup, are non-
recurring in nature.
<PAGE>
Item 7. Financial Statements and Exhibits (continued).
(c) Exhibits.
99.1 Agreement and Plan of Merger Among Sverdrup Corporation, Jacobs
Engineering Group Inc., and Jacobs Acquisition Corp., dated as of
December 21, 1998.
99.2 The consolidated financial statements of Sverdrup Corporation at
December 31, 1997 and 1996 and for each of the three years in the
period ended December 31, 1997, together with the report of the
independent auditors on those consolidated financial statements.
99.3 The unaudited, condensed consolidated financial statements of
Sverdrup Corporation at October 2, 1998 and October 3, 1997, and
for each of the nine month periods then ended.
99.4 The $230,000,000 Revolving Credit Agreement dated as of January 11,
1999 Among Jacobs Engineering Group Inc. and Certain of its
Designated Subsidiaries, Bank of America NT&SA (as Administrative
Agent and Issuing Bank), ABN AMRO Bank, N.A., The First National
Bank of Chicago, First Union National Bank and Wells Fargo Bank,
N.A. (as the Managing Agents), and NationsBank Montgomery
Securities LLC (as Lead Arranger)
SIGNATURES
Pursuant to the requirements 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.
Jacobs Engineering Group Inc.
/s/ John W. Prosser, Jr.
___________________________
John W. Prosser, Jr.
Senior Vice President, Finance
and Administration and Treasurer
Date: January 15, 1999
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EXHIBIT 99.1
AGREEMENT AND PLAN OF MERGER
AMONG
SVERDRUP CORPORATION
JACOBS ENGINEERING GROUP INC., AND
JACOBS ACQUISITION CORP.
DATED AS OF DECEMBER 21, 1998
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TABLE OF CONTENTS
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Page
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TABLE OF DEFINITIONS.................................................................. vi
ARTICLE 1 THE MERGER................................................................. 1
SECTION 1.1. The Merger.............................................................. 1
SECTION 1.2. Conversion of Shares.................................................... 2
SECTION 1.3. Payment of Initial Aggregate Merger Consideration, Initial
Aggregate Company Option Consideration and Initial Aggregate Redeemed
Company Shares Consideration................................................ 3
SECTION 1.4. Escrow Amount........................................................... 6
SECTION 1.5. Payment of Deferred Consideration....................................... 8
SECTION 1.6. Dissenting Shares....................................................... 13
SECTION 1.7. Stock Options........................................................... 13
SECTION 1.8. Certain Redeemed Shares................................................. 14
SECTION 1.9. Payments with Respect to Certain Shares................................. 14
ARTICLE 2 THE SURVIVING CORPORATION.................................................. 14
SECTION 2.1. Articles of Incorporation............................................... 14
SECTION 2.2. Bylaws.................................................................. 15
SECTION 2.3. Directors and Officers.................................................. 15
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................. 15
SECTION 3.1. Corporate Existence and Power........................................... 15
SECTION 3.2. Subsidiaries............................................................ 16
SECTION 3.3. Corporate Records....................................................... 16
SECTION 3.4. Corporate Authorization................................................. 16
SECTION 3.5. Governmental Authorization.............................................. 17
SECTION 3.6. Non-Contravention....................................................... 17
SECTION 3.7. Capitalization.......................................................... 18
SECTION 3.8. Company Reports and Financial Statements................................ 19
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SECTION 3.9. Receivables............................................................. 19
SECTION 3.10. Absence of Undisclosed Liabilities..................................... 20
SECTION 3.11. Information Supplied................................................... 20
SECTION 3.12. Absence of Certain Changes............................................. 20
SECTION 3.13. Litigation............................................................. 21
SECTION 3.14. Employee Benefit Plans................................................. 21
SECTION 3.15. Taxes.................................................................. 24
SECTION 3.16. Compliance with Laws................................................... 25
SECTION 3.17. Takeover Statutes...................................................... 26
SECTION 3.18. Finders' Fees.......................................................... 26
SECTION 3.19. Environmental Matters.................................................. 26
SECTION 3.20. Insurance; Bonds....................................................... 27
SECTION 3.21. Labor and Employment Matters........................................... 27
SECTION 3.22. Material Contracts..................................................... 28
SECTION 3.23. Related Party Transactions............................................. 31
SECTION 3.24. Real Estate............................................................ 31
SECTION 3.25. Government Contracting................................................. 33
SECTION 3.26. Foreign Corrupt Practices.............................................. 34
SECTION 3.27. Year 2000.............................................................. 34
SECTION 3.28. Intellectual Property.................................................. 34
SECTION 3.29. Title to Assets........................................................ 35
SECTION 3.30. Accuracy and Completeness of Securityholders' Schedules................ 35
SECTION 3.31. No Other Representations............................................... 35
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF JACOBS................................... 36
SECTION 4.1. Corporate Existence and Power........................................... 36
SECTION 4.2. Corporate Authorization................................................. 36
SECTION 4.3. Governmental Authorization.............................................. 37
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SECTION 4.4. Non-Contravention.......................................................37
SECTION 4.5. Jacobs SEC Reports and Financial Statements.............................37
SECTION 4.6. Absence of Undisclosed Liabilities......................................38
SECTION 4.7. Information Supplied....................................................38
SECTION 4.8. Absence of Certain Changes..............................................39
SECTION 4.9. Financing...............................................................39
ARTICLE 5 COVENANTS OF THE COMPANY...................................................39
SECTION 5.1. Confidentiality.........................................................39
SECTION 5.2. Conduct of the Company..................................................39
SECTION 5.3. Advice of Changes.......................................................41
SECTION 5.4. Merger Approval; Proxy Materials; Fiduciary Out.........................41
SECTION 5.5. Acquisition Proposals...................................................42
SECTION 5.6. Access to Information...................................................43
SECTION 5.7. Notices of Certain Events...............................................43
SECTION 5.8. HSR Act Filing..........................................................44
SECTION 5.9. Return of Information...................................................44
ARTICLE 6 COVENANTS OF JACOBS........................................................44
SECTION 6.1. Confidentiality.........................................................44
SECTION 6.2. Conduct of Jacobs.......................................................44
SECTION 6.3. Access to Information...................................................43
SECTION 6.4. Obligations of Merger Subsidiary........................................43
SECTION 6.5. Notices of Certain Events...............................................45
SECTION 6.6. Employee Benefits.......................................................45
SECTION 6.7. Indemnification.........................................................46
SECTION 6.8. HSR Act Filing..........................................................47
SECTION 6.9. Return of Information...................................................47
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ARTICLE 7 COVENANTS OF JACOBS AND THE COMPANY........................................47
SECTION 7.1. Reasonable Best Efforts.................................................47
SECTION 7.2. Certain Filings.........................................................47
SECTION 7.3. Proxy Statement.........................................................48
SECTION 7.4. Publicity...............................................................48
SECTION 7.5. Further Assurances......................................................48
ARTICLE 8 CONDITIONS TO THE MERGER...................................................48
SECTION 8.1. Conditions to the Obligations of Each Party.............................48
SECTION 8.2. Conditions to Obligations of Jacobs.....................................49
SECTION 8.3. Conditions to Obligations of the Company................................50
ARTICLE 9 TERMINATION................................................................51
SECTION 9.1. Termination.............................................................51
SECTION 9.2. Procedure Upon Termination
SECTION 9.3. Termination Fee Payable by the Company..................................52
SECTION 9.4. Termination Fee Payable by Jacobs.......................................53
ARTICLE 10 MISCELLANEOUS.............................................................53
SECTION 10.1. Notices................................................................53
SECTION 10.2. Survival of Representations and Warranties and Covenants...............54
SECTION 10.3. Appointment of Securityholder Committee................................54
SECTION 10.4. Amendments; No Waivers.................................................55
SECTION 10.5. Expenses...............................................................56
SECTION 10.6. Entire Agreement/No Third Party Beneficiaries..........................56
SECTION 10.7. Waivers................................................................56
SECTION 10.8. Amendments, Supplements or Modifications...............................56
SECTION 10.9. Successors and Assigns.................................................56
SECTION 10.10. Governing Law.........................................................57
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SECTION 10.11. Exclusive Jurisdiction................................................57
SECTION 10.12. Disclosure Schedules..................................................57
SECTION 10.13. Counterparts; Effectiveness...........................................57
SECTION 10.14. Severability..........................................................57
SECTION 10.15. Incorporation of Exhibits and Schedules...............................57
SECTION 10.16. Headings..............................................................58
SECTION 10.17. Knowledge.............................................................58
SECTION 10.18. Construction..........................................................58
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TABLE OF DEFINITIONS
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1999 Earnout Payment..........................................................Section 1.5.(a)(i)
1999 Jacobs Stock Price.......................................................Section 1.5.(a)(iv)
2000 Earnout Payment..........................................................Section 1.5.(a)(ii)
2000 Jacobs Stock Price.......................................................Section 1.5.(a)(v)
2001 Earnout Payment..........................................................Section 1.5.(a)(iii)
2001 Jacobs Stock Price.......................................................Section 1.5.(a)(vi)
Acquisition Proposal..........................................................Section 5.5.(a)
Aggregate Options Exercise Price..............................................Section 1.2.
Aggregate Redeemed Shares Price...............................................Section 1.2.
Bid...........................................................................Section 3.22.
Board Action..................................................................Section 5.3.(c)
Client Contract...............................................................Section 3.22.(c)
Closing.......................................................................Section 1.1.(b)
Closing Date..................................................................Section 1.1.(b)
Closing Price.................................................................Section 1.5.(a)(vii)
Code..........................................................................Section 3.14.(c)
Committee Chairman............................................................Section 10.3.(b)
Company.......................................................................Introduction
Company Balance Sheet.........................................................Section 3.8.
Company Balance Sheet Date....................................................Section 3.8.
Company Benefit Arrangements..................................................Section 3.14.(d)
Company Common Stock..........................................................Section 1.2.(a)
Company Disclosure Schedule...................................................Article 3.
Company Financial Statements..................................................Section 3.8.
Company Material Adverse Effect...............................................Section 3.1.
Company Option................................................................Section 1.7.(a)
Company Plans.................................................................Section 3.14.(a)
Company Reports...............................................................Section 3.8.
Company Securities............................................................Section 3.7.(b)
Company Shareholder Meeting...................................................Section 5.4.(a)
Company Subsidiaries..........................................................Section 3.2.
Competing Proposal............................................................Section 5.5.(b)
Confidentiality Letter........................................................Section 5.1.
Contracts.....................................................................Section 3.22.(a)(x)
Deferred Consideration........................................................Section 1.5.(a)(viii)
Deferred Consideration Letter of Transmittal..................................Section 1.5.(b)(i)
Dissenting Shares.............................................................Section 1.6.
DOJ...........................................................................Section 5.8.
Earnout Payments..............................................................Section 1.5.(a)(ix)
Effective Time................................................................Section 1.1.(b)
Eligible Holder...............................................................Section 1.5.(a)(x)
Environmental Law.............................................................Section 3.19.
ERISA.........................................................................Section 3.14.(a)
ERISA Affiliate...............................................................Section 3.14.(c)
Ernst & Young.................................................................Section 3.18.
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Escrow........................................................................Section 1.4.(a)
Escrow Agent..................................................................Section 1.4.(a)
Escrow Agreement..............................................................Section 1.4.(a)
Escrow Amount.................................................................Section 1.4.(a)
Exchange Agent................................................................Section 3.11.(a)
Exchange Act..................................................................Section 3.5.
Excluded Shares...............................................................Section 1.2.(c)
Facilities....................................................................Section 3.24.(a)(ii)
Fixed Expense Fee.............................................................Section 9.3.
Fixed Price Construction Contracts............................................Sectoin 3.22.(a)(i)
Flexi-Trust...................................................................Section 1.9.
FOCI..........................................................................Section 3.25.(c)
FTC...........................................................................Section 5.8.
GAAP..........................................................................Section 3.8.
GBCL..........................................................................Section 1.1.(a)
Government....................................................................Section 3.15.(d)
Government Authority..........................................................Section 3.22.
Government Contract...........................................................Section 3.22.
Hazardous Substance...........................................................Section 3.19.
Houlihan Lokey................................................................Section 3.4.
HSR Act.......................................................................Section 3.5.
Indemnitees...................................................................Section 6.6.(a)
Initial Aggregate Consideration...............................................Section 1.2.(c)
Initial Company Option Consideration..........................................Section 1.7.(a)
Initial Per Share Merger Consideration........................................Section 1.2.(c)
Initial Redeemed Company Shares Consideration.................................Section 1.8.
Intellectual Property Rights..................................................Section 3.28.
ISO Plan......................................................................Section 1.7.(a)
Jacobs........................................................................Introduction
Jacobs Balance Sheet..........................................................Section 4.5.
Jacobs Balance Sheet Date.....................................................Section 4.5.
Jacobs Disclosure Schedule....................................................Article 4.
Jacobs Financial Statements...................................................Section 4.5.
Jacobs Material Adverse Effect................................................Section 4.1.
Jacobs SEC Reports............................................................Section 4.5.
Jacobs Stock..................................................................Section 1.5.(a)(xi)
Jacobs Subsidiaries...........................................................Section 4.1.
Leased Property...............................................................Section 3.24.(a)(ii)
Leases........................................................................Section 3.24.(a)(ii)
Legal Proceeding..............................................................Section 3.13.
Lien..........................................................................Section 3.6.
Loss Contract.................................................................Section 3.22.(c)(vi)
Losses........................................................................Section 1.4.(c)
Merger........................................................................Section 1.1.(a)
Merger Approval...............................................................Section 5.4.(a)
Merger Subsidiary.............................................................Introduction
Missouri Secretary of State...................................................Section 1.1.(b)
Net Risk Dollars Amount.......................................................Section 1.4.(c)
NYSE..........................................................................Section 1.5(a)(vii)
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Other Proposal................................................................Section 5.3.(c)
Owned Property................................................................Section 3.24.(a)(i)
Payment Agreement.............................................................Section 3.1.(a)
Pension Plans.................................................................Section 3.14.(b)
Percentage Interest...........................................................Section 1.54.(a)(xii)
Person........................................................................Section 1.5.(a)(xiii)
Plan(s).......................................................................Section 3.14.(a)
Proxy Statement...............................................................Section 3.11.
Redeemed Company Shares.......................................................Section 1.8.
Risk Contracts................................................................Section 1.4.(c)
Risk Litigation...............................................................Section 1.5(g)
SEC...........................................................................Section 4.5.
Securityholder Committee......................................................Section 10.3.(a)
Securityholders...............................................................Section 10.3.(a)
Securities Act................................................................Section 3.5.
Shares........................................................................Section 1.2.(c)
Surviving Corporation.........................................................Section 1.1.(a)
Takeover Statute..............................................................Section 3.17.
Tax Returns...................................................................Section 3.15.(a)
Taxes.........................................................................Section 3.15.(d)
Termination Fee...............................................................Section 9.3.
Year 2000 Compliance..........................................................Section 3.27.
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<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is dated as of December 21, 1998, and is
by and among SVERDRUP CORPORATION, a Missouri corporation (the "Company"),
-------
JACOBS ENGINEERING GROUP INC., a Delaware corporation ("Jacobs") and JACOBS
------
ACQUISITION CORP., a Missouri corporation and a wholly-owned subsidiary of
Jacobs ("Merger Subsidiary").
-----------------
RECITALS
WHEREAS, the Boards of Directors of Company and Jacobs deem it advisable
and in the best interests of their respective shareholders that they combine
their businesses, and to that end the Boards of Directors of the Company, Jacobs
and Merger Subsidiary have approved the merger of Merger Subsidiary with and
into the Company upon the terms and subject to the conditions set forth herein;
and
WHEREAS, certain shareholders of the Company holding in the aggregate more
than a majority of the outstanding voting stock of the Company have entered into
an agreement with Jacobs pursuant to which such shareholders will have agreed to
vote their respective shares of Company Common Stock (as defined in Section
1.2(a)) in favor of the merger of Merger Subsidiary with and into the Company
upon the terms and subject to the conditions set forth herein at any meeting of
the shareholders of the Company called for such purpose.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties and covenants set forth herein and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
THE MERGER
SECTION 1.1. The Merger.
----------
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time (as defined in Section 1.1(b)), Merger Subsidiary shall be merged
with and into the Company (the "Merger") in accordance with the General Business
------
and Corporation Law of Missouri ("GBCL"), whereupon the separate existence of
----
Merger Subsidiary shall cease, and the Company shall be the surviving
corporation (the "Surviving Corporation").
---------------------
(b) The consummation of the Merger (the "Closing") shall take place
-------
(i) at the offices of Bryan Cave LLP, One Metropolitan Square, 211 N. Broadway,
Suite 3600, St. Louis, Missouri at 10:00 A.M., on such date (the "Closing Date")
------------
which is the later to occur of (A) January 8, 1999 and (B) the date which is
five business days after the date on which the last
1
<PAGE>
of the conditions set forth in Article 8 hereof shall have been satisfied or
waived in accordance with this Agreement, or (ii) such other place, time and
date as the parties hereto shall agree. Prior to the Closing, Merger Subsidiary
and the Company shall execute and deliver to the Secretary of State of the State
of Missouri (the "Missouri Secretary of State"), a Certificate of Merger in the
---------------------------
form of Exhibit 1.1(b) hereto for filing under the GBCL on the day of the
--------------
Closing, and the Merger shall become effective upon the filing of the
Certificate of Merger with the Missouri Secretary of State or at such later time
as may be specified in the Certificate of Merger, such time being herein called
the "Effective Time."
--------------
(c) The Merger shall have the effects set forth in Section 351.450 of
the GBCL. Without limiting the generality of the foregoing, at the Effective
Time (i) the Surviving Corporation shall possess all assets and property of
every description, and every interest therein, wherever located, and the rights,
privileges, immunities, powers, franchises, and authority, of a public as well
as of a private nature, of each of the Company and Merger Subsidiary and all
obligations belonging to or due each of them shall be vested in the Surviving
Corporation without further act or deed; (ii) title to any real estate or any
interest therein vested in either of the Company or Merger Subsidiary shall not
revert or in any way be impaired by reason of the Merger; (iii) all rights of
creditors and all liens on any property of the Company and Merger Subsidiary
shall be preserved unimpaired; and (iv) the Surviving Corporation shall be
liable for all the obligations of the Company and Merger Subsidiary, and any
claim existing, or action or proceeding pending, by or against either of them,
may be prosecuted to judgment with the right of appeal, as if the Merger had not
taken place.
(d) If, at any time after the Effective Time, the Surviving
Corporation shall consider or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties, or assets of the Company or Merger Subsidiary acquired or to be
acquired as a result of, or in connection with, the Merger or to otherwise carry
out this Agreement, the officers and directors of the Surviving Corporation
shall and will be authorized to execute and deliver, in the name and on behalf
of the parties hereto or otherwise, all such deeds, bills of sale, assignments
and assurances and to take and do, in the name and on behalf of such parties or
otherwise, all such other actions and things as may be necessary or desirable to
vest, perfect or confirm any and all right, title and interest in, to and under
such rights, properties or assets in the Surviving Corporation or otherwise to
carry out this Agreement.
SECTION 1.2. Conversion of Shares. At the Effective Time, by virtue of
--------------------
the Merger and without any action on the part of the holder thereof:
(a) each share of common stock, par value $0.0625, of the Company
("Company Common Stock") held by the Company as treasury stock or owned by
- ----------------------
Jacobs or any subsidiary of Jacobs immediately prior to the Effective Time shall
be canceled, retired, and shall cease to exist, and no payment shall be made
with respect thereto;
2
<PAGE>
(b) each share of common stock of Merger Subsidiary issued and
outstanding immediately prior to the Effective Time shall be converted into and
become one share of common stock of the Surviving Corporation with the same
rights, powers and privileges as the shares so converted and such shares in the
aggregate shall constitute the only outstanding shares of capital stock of the
Surviving Corporation; and
(c) each share of Company Common Stock outstanding immediately prior
to the Effective Time ("Shares") shall, except as otherwise provided in Section
------
1.2(a) or as provided in Section 1.6 with respect to Shares as to which
appraisal rights have been exercised (collectively, the "Excluded Shares"), be
---------------
converted into the right to receive (A) a cash payment per Share, without
interest, equal to (x) the total of (1) one hundred and ninety-eight million
dollars ($198,000,000), minus (2) the Escrow Amount (as defined in Section
1.4(a)), plus (3) the Aggregate Options Exercise Price (as defined below), plus
(4) the Aggregate Redeemed Shares Price (as defined below) and plus (5) the
Aggregate Flexi-Trust Debt (as defined in Section 1.3(b)), divided by (y) the
total of (1) the number of Shares issued and outstanding immediately prior to
the Effective Time, plus (2) the number of shares of the Company Common Stock
issuable upon exercise of the Company Options (as defined in Section 1.7)
immediately prior to the Effective Time and plus (3) the number of Redeemed
Company Shares immediately prior to the Effective Time (the "Initial Per Share
-----------------
Merger Consideration"), (B) an additional pro rata amount of cash, payable as
- --------------------
set forth in Section 1.5, equal to a portion of the Deferred Consideration (as
defined in Section 1.5(a)(viii)), if any, determined in accordance with Section
1.5, and (C) an additional pro rata amount of cash, payable as set forth in
Section 1.4, equal to a portion of the Opportunity Premium Payment (as defined
below) and/or the Escrow Amount (as defined in Section 1.4(a)).
For purposes of this Agreement, the "Aggregate Options Exercise Price"
--------------------------------
shall mean the sum of all exercise prices payable upon the exercise of all
Company Options, the "Aggregate Redeemed Shares Price" shall mean the sum of the
-------------------------------
purchase prices (whether paid in cash or notes) previously paid by the Company
to the holders of the Redeemed Company Shares in connection with the redemption
of such shares, and "Opportunity Premium Payment" shall mean the amount of cash,
---------------------------
other than all or any portion of the Escrow Amount, which is payable in
accordance with the terms of Section 1.4(c) to the Eligible Holders (as defined
in Section 1.5(a)(x)) in the manner set forth in Section 1.4(d).
SECTION 1.3 Payment of Initial Aggregate Merger Consideration, Initial
----------------------------------------------------------
Aggregate Company Option Consideration and Initial Aggregate Redeemed Company
- -----------------------------------------------------------------------------
Shares Consideration.
- --------------------
(a) Bank of America, N.T. & S.A. or another bank or trust company
designated by Jacobs and reasonably acceptable to the Company, shall act as the
payment agent (the "Payment Agent"), for the benefit of the holders of Shares in
-------------
connection with the payment to such holders of a portion of the Initial
Aggregate Merger Consideration (as defined below) to which they are entitled
pursuant to the terms of this Agreement. At the Effective Time, Jacobs will
deposit with the Payment Agent an amount of cash equal to the difference between
(i) the product of (A) the aggregate number of Shares issued and outstanding as
of the Effective Time
3
<PAGE>
(other than Excluded Shares) multiplied by (B) the Initial Per Share Merger
Consideration minus (ii) the Aggregate Flexi-Trust Debt (as defined below) (the
"Initial Aggregate Merger Consideration"). Promptly after the Effective Time,
--------------------------------------
Jacobs shall cause the Payment Agent to mail to (A) each Person (as defined in
Section 1.5(a)(xiii)) who owns Shares of record as of the Effective Time, other
than the Flexi-Trust (as defined in Section 1.9) and other than Persons who own
Excluded Shares at such time and (B) each Person who owns a beneficial interest
in the Flexi-Trust as of the Effective Time, a letter of transmittal in the form
of Exhibit 1.3 in order to facilitate the distribution of the Initial Aggregate
-----------
Merger Consideration to such Persons. Upon delivery of an executed letter of
transmittal, the Payment Agent shall deliver to each such Person a portion of
the Initial Aggregate Merger Consideration in cash in an amount equal to each
such Person's Initial Net Merger Consideration (as defined below) and (ii) to
NationsBank, N.A. (the "Lender"), an amount in cash equal to the Aggregate Bank
------
Debt (as defined below). At the Closing, the Company shall provide Jacobs with a
schedule which lists (i) each Person who owns Shares of record as of the
Effective Time (other than the Flexi-Trust) and each Person who owns a
beneficial interest in the Flexi-Trust as of the Effective Time, (ii) the
mailing address of each such Person, (iii) the number of Shares which each such
Person owns of record at such time, (iv) the number of Shares which are owned by
the Flexi-Trust and attributable to each such Person in accordance with the
terms of Section 1.9 at such time (with respect to each such Person, such
Person's "Flexi-Trust Shares," and together with the Flexi-Trust Shares
------------------
attributable to each other Person who owns a beneficial interest in the Flexi-
Trust, the "Aggregate Flexi-Trust Shares"), (v) the amount of each such Person's
----------------------------
Bank Debt as of the Effective Time and (vi) the amount of each such Person's
Flexi-Trust Debt as of the Effective Time.
(b) The term "Initial Net Merger Consideration" shall mean, with
--------------------------------
respect to any Person (other than the Flexi-Trust), an amount equal to the
difference between (i) the product of (A) the sum of (1) the number of Shares
owned of record by such Person as of the Effective Time plus (2) such Person's
Flexi-Trust Shares multiplied by (B) the Initial Per Share Merger Consideration
minus (ii) the sum of (A) the aggregate amount of indebtedness which is (1) due
and owing by such Person to the Lender at the Effective Time, (2) secured by a
pledge of Shares by such Person to the Lender and (3) guaranteed by the Company
(with respect to each such Person, such Person's "Bank Debt," and together with
---------
the aggregate Bank Debt of all other Persons, the "Aggregate Bank Debt") plus
-------------------
(B) the portion of the aggregate amount of indebtedness associated with the
Flexi-Trust at the Effective Time which is attributable to such Person (with
respect to each such Person, such Person's "Flexi-Trust Debt," and together with
----------------
the aggregate Flexi-Trust Debt of all other such Persons, the "Aggregate Flexi-
---------------
Trust Debt").
- ----------
(c) The portion of the Initial Aggregate Merger Consideration paid
with respect to Shares in accordance with the terms hereof shall be deemed to
have been paid in full satisfaction of all rights pertaining to such Shares,
including any preemptive rights that such holders may have had with respect to
such Shares, subject, however, to the distribution of any portion of the Escrow
Amount or Opportunity Premium Payment as provided in Section 1.4 and any portion
of the Deferred Consideration as provided in Section 1.5, and there shall be no
further registration of transfers on the stock transfer books of the Surviving
Corporation of such Shares which were outstanding immediately prior to the
Effective Time. By voting to approve the Merger or accepting the Initial
Aggregate Merger Consideration or the Initial Redeemed
4
<PAGE>
Company Shares Consideration, the holders of the Company Common Stock and the
former holders of the Redeemed Company Shares shall automatically be deemed to
have released and forever discharged all right, title and interest in and to all
manner of claims, demands, actions, causes of action, damages, debts, accounts,
bonds, contracts, losses, costs, liabilities and/or expenses whatever which may
be made or brought by any such holder or former holder, or any of their
predecessors, successors or assigns in respect of, or in any way relating to,
any failure by the Company at any time to have offered to such holder or former
holder the opportunity to purchase any additional shares of capital stock of the
Company in connection with, or in respect of, any and all preemptive rights to
which any such holder or former holder may have been entitled at any time.
(d) Immediately prior to the Effective Time, the Company shall deliver
to the Payment Agent a schedule which lists the name and address of, and the
amount to be paid to, each holder of a Company Option and each former holder of
a Redeemed Company Share. At or prior to the Effective Time, Jacobs will
deposit with the Payment Agent an amount of cash equal to the sum of (i) the
Initial Aggregate Company Option Consideration (as defined in Section 1.7) plus
(ii) the Initial Aggregate Redeemed Company Shares Consideration (as defined in
Section 1.8). Promptly after the Effective Time, the Payment Agent shall mail
to each such holder of Company Options and each such former holder of Redeemed
Company Shares: (i) a letter of transmittal and (ii) instructions for the
execution and delivery of documentation relating to the termination of the
rights of such Persons with respect to such Company Options or Redeemed Company
Shares, as the case may be, in exchange for the cash payments contemplated by
Section 1.7(a) or 1.8, as appropriate. Such letter of transmittal and
instructions shall be in the form of Exhibit 1.3 hereto.
(e) Upon delivery of an executed letter of transmittal, the Payment
Agent shall pay (i) to each holder of Company Options by check an amount equal
to such holder's Initial Company Option Consideration (as defined in Section
1.7(a)) and (ii) to each former holder of Redeemed Company Shares by check an
amount equal to such holder's Initial Redeemed Company Shares Consideration (as
defined in Section 1.8).
(f) Any portion of the Initial Aggregate Consideration (as defined
below) which remains undistributed pursuant to this Section 1.3 for six months
after the Effective Time shall be delivered to Jacobs, upon demand, and any
shareholder of the Company, holder of Company Options or former holder of
Redeemed Company Shares who has not theretofore complied with this Article 1
shall thereafter look only to Jacobs for payment of their claim for any monies
pursuant to the terms of this Agreement. For purposes of this Agreement, the
term "Initial Aggregate Consideration" shall mean the sum of the Initial
-------------------------------
Aggregate Merger Consideration plus the Initial Aggregate Company Option
Consideration plus the Initial Aggregate Redeemed Company Shares Consideration.
SECTION 1.4. Escrow Amount.
-------------
(a) Promptly after the Effective Time, Jacobs will pay ten million
dollars ($10,000,000) of the Initial Aggregate Merger Consideration (the "Escrow
------
Amount") to Bank of
- ------
5
<PAGE>
America, N.T. & S.A. (the "Escrow Agent") as the escrow (the "Escrow")
------------ ------
established hereunder by the escrow agreement (the "Escrow Agreement") to be
----------------
entered into among Jacobs, the Securityholder Committee (as defined in Section
10.3) and the Escrow Agent, the form of which is attached hereto as Exhibit
-------
1.4(a). Within 15 days of the second anniversary of the Closing Date, Jacobs
- ------
shall deliver, or caused to be delivered, to the Securityholder Committee
pursuant to Section 10.1 a notice setting forth Jacobs' calculation of the Net
Risk Dollars Amount (as defined in Section 1.4(c)) and any documentation
supporting such calculation. Jacobs' calculation of the Net Risk Dollars Amount
shall become final and binding for purposes of this Agreement unless, within 30
days of its receipt of the notice from Jacobs, the Securityholder Committee
furnishes written notice to Jacobs pursuant to Section 10.1 of any dispute or
disagreement with Jacobs' calculation of the Net Risk Dollars Amount. Such
written notice shall specify, in reasonable detail, the nature and extent of
such dispute or disagreement.
(b) If the Securityholder Committee timely notifies Jacobs of any
dispute or disagreement with Jacobs' calculation of the Net Risk Dollars Amount,
the Securityholder Committee and Jacobs shall meet promptly to resolve such
dispute or disagreement in good faith. If the Securityholder Committee and
Jacobs are unable to resolve such dispute or disagreement within 30 days after
receipt by Jacobs of the Securityholders Committee's written notice of dispute
or disagreement, either the Securityholder Committee or Jacobs shall be entitled
to submit such dispute or disagreement for final determination to Arthur
Andersen LLP (unless another accounting firm is mutually agreed upon by the
Securityholder Committee and Jacobs). Such accounting firm shall act as an
arbitrator to determine and resolve such dispute or disagreement within 30 days
after the date upon which the Securityholder Committee or Jacobs submits the
dispute or disagreement, together with their presentation and evidence, and in
that undertaking shall not be required to follow any particular procedure but
shall proceed in a manner designed to achieve a speedy and economic resolution
of the dispute. Such accounting firm shall set forth its determination, which
shall be binding and conclusive, absent a showing of fraud, in a written
statement delivered to Jacobs and the Securityholder Committee, stating its
reasons therefor.
(c) Promptly after the final determination of the Net Risk Dollars
Amount by Jacobs or the accounting firm, as applicable, if:
(i) the absolute amount of the Net Risk Dollars Amount (without
regard to whether such number is positive or negative) is less than two
million dollars ($2,000,000), then Jacobs shall instruct the Escrow Agent
to release the full Escrow Amount to the Eligible Holders;
(ii) the amount of the Net Risk Dollars Amount is equal to or
greater than two million dollars ($2,000,000) but less than seven million
dollars ($7,000,000), then Jacobs shall (a) instruct the Escrow Agent to
release the full Escrow Amount to the Eligible Holders and (b) pay to the
Eligible Holders an additional amount equal to fifty percent (50%) of the
amount by which the Net Risk Dollars Amount exceeds two million dollars
($2,000,000);
6
<PAGE>
(iii) the amount of the Net Risk Dollars Amount is equal to or
less than negative two million dollars (-$2,000,000) but greater than
negative seven million dollars (-$7,000,000), then Jacobs shall (a)
instruct the Escrow Agent to release to Jacobs out of the Escrow an amount
equal to fifty percent (50%) of the negative number of the amount by which
the Net Risk Dollars Amount exceeds two million dollars ($2,000,000) and
(b) instruct the Escrow Agent to release to the Eligible Holders any funds
remaining in the Escrow after payment to Jacobs pursuant to clause (a);
(iv) the amount of the Net Risk Dollars Amount is equal to or
greater than seven million dollar ($7,000,000), then Jacobs shall (a)
instruct the Escrow Agent to release the full Escrow Amount to the Eligible
Holders and (b) pay to the Eligible Holders an additional amount equal to
the sum of (x) two and a half million dollars ($2,500,000) and (y) the Net
Risk Dollars Amount minus seven million dollars ($7,000,000); provided,
however, that any additional amount shall not exceed twenty million dollars
($20,000,000); and
(v) the amount of the Net Risk Dollars Amount is equal to or less
than negative seven million dollar (-$7,000,000), then Jacobs shall (a)
instruct the Escrow Agent to release to Jacobs out of the Escrow an amount
equal to the negative of the sum of (x) negative two and a half million
dollars (-$2,500,000) and (y) the Net Risk Dollars Amount plus seven
million dollars ($7,000,000) and (b) instruct the Escrow Agent to release
to the Eligible Holders any funds remaining in the Escrow after payment to
Jacobs pursuant to clause (a); provided, however, that Jacobs shall have
such offset rights against the Deferred Consideration as provided in
Section 1.5(g).
"Net Risk Dollars Amount" shall mean an amount equal to (i) the amount
-----------------------
equal to (a) the aggregate dollar gross profit or loss (with any loss expressed
as a negative number) recognized and reasonably expected to be recognized on the
Risk Contracts as determined as of and at the second anniversary of the Closing
Date, minus (b) an amount equal to all Losses incurred by or reasonably expected
to be incurred by Jacobs and its affiliates at the second anniversary of the
Closing Date with respect to those certain litigation matters set forth on
Exhibit 1.4(b) (the "Special Litigation Matters"), minus (ii) the amount equal
--------------------------
to the remaining aggregate dollar gross profit or loss expected by the Company
to be recognized on the Risk Contracts as set forth on Exhibit 1.4(b). In
making such determination, gross profit or loss shall be calculated in
accordance with generally accepted accounting principles applied on a basis
consistent with prior periods.
For purposes of this Agreement, the term, "Losses" means any and all
------
deficiencies, judgments, settlements, demands, claims, suits, actions or causes
of action, assessments, liabilities, losses, damages (whether direct, indirect,
incidental or consequential), interest, fines, penalties, costs and expenses
(including, without limitation, reasonable legal, accounting and other costs and
expenses incurred in connection with investigating, defending, settling or
satisfying any and all demands, claims, actions, causes of action, suits,
proceedings, assessments, judgments or appeals, and in seeking indemnification
therefor).
7
<PAGE>
For purposes of this Agreement, the term "Risk Contracts" means those
--------------
certain contracts set forth on Exhibit 1.4(b).
(d) Immediately prior to the Effective Time, the Company shall deliver
to the Escrow Agent a schedule listing the name, address and Percentage Interest
(as defined below) of the Eligible Holders. Any payments to the Eligible
Holders pursuant to Section 1.4(c) shall be made pro rata in proportion to their
Percentage Interests. Interest or other earnings on any funds in the Escrow
shall be paid to the Eligible Holders annually pro rata in proportion to their
Percentage Interests and such interest or other earnings shall not be deemed
part of the funds held in escrow hereunder and shall not be subject to the
claims of Jacobs hereunder.
(e) Jacobs and the Securityholder Committee shall cooperate in the
defense of the Special Litigation Matters and make available to each other all
relevant information in their possession relating to the Special Litigation
Matters, subject to protection of attorney client and attorney work product
privileges. Notwithstanding the foregoing, Jacobs shall control the defense of
the Special Litigation Matters using its reasonable best efforts to limit the
amount of the Losses resulting therefrom. The Securityholder Committee shall
have the right to participate in the defense of any of the Special Litigation
Matters with its own counsel; provided, however, that notwithstanding any
provision to the contrary set forth in Section 10.3, Jacobs shall not be liable
for any cost or expense incurred by the Securityholder Committee pursuant to
such participation. There shall be no settlement by Jacobs of any of the
Special Litigation Matters without the consent (which shall not be unreasonably
withheld) of the Securityholder Committee; provided, however, that if the
Securityholder Committee withholds its consent to any such settlement proposed
by Jacobs, then if the ultimate resolution of the Special Litigation Matters
results in Losses in excess of the proposed settlement amount, such excess
Losses shall be allocated fully to the Eligible Holders for purposes of
calculating the Net Risk Dollars Amount.
(f) Notwithstanding anything to the contrary contained herein or
elsewhere, Jacobs agrees that it shall not provide the Escrow Agent with any
disbursement notice or disbursement instructions pursuant to Section 3(b) of the
Escrow Agreement other than those disbursement notices or disbursement
instructions which Jacobs is entitled to provide to the Escrow Agent pursuant to
this Section 1.4.
SECTION 1.5. Payment of Deferred Consideration.
---------------------------------
(a) For purposes of this Agreement, the following terms shall have the
following meanings:
(i) "1999 Earnout Payment" means the product of (a) 466,667 and
--------------------
(b) the amount, if any, by which the 1999 Jacobs Stock Price exceeds
$37.00.
(ii) "2000 Earnout Payment" means the product of (a) 466,667 and
--------------------
(b) the amount, if any, by which the 2000 Jacobs Stock Price exceeds
$42.00; provided, however:
8
<PAGE>
(A) if the 2000 Earnout Payment is eligible for acceleration
and is accelerated in accordance with the provisions of Section 1.5(b)(ii)
hereof, then the 2000 Earnout Payment means the product of (a) 466,667 and
(b) the amount by which the 1999 Jacobs Stock Price exceeds $42.00; and
(B) if the 1999 Earnout Payment is equal to 0, then the 2000
Earnout Payment shall mean the product of (a) 560,000.5 and (b) the amount,
if any, by which the 2000 Jacobs Stock Price exceeds $42.00.
(iii) "2001 Earnout Payment" means the product of (a) 466,667
--------------------
and (b) the amount, if any, by which the 2001 Jacobs Stock Price exceeds
$47.50; provided, however:
(A) if the 2001 Earnout Payment is eligible for acceleration
and is accelerated in accordance with the provisions of Section 1.5(b)(ii)
hereof, then the 2001 Earnout Payment means the product of (a) 466,667 and
(b) the amount by which the 1999 Jacobs Stock Price exceeds $47.50;
(B) if the 2001 Earnout Payment is eligible for acceleration
and is accelerated in accordance with the provisions of Section 1.5(b)(iii)
hereof, then the 2001 Earnout Payment means the product of (a) 466,667 and
(b) the amount by which the 2000 Jacobs Stock Price exceeds $47.50;
(C) if the 1999 Earnout Payment is equal to 0 and the 2000
Earnout Payment is greater than 0, then the 2001 Earnout Payment shall mean
the product of (a) 560,000.5 and (b) the amount, if any, by which the 2001
Jacobs Stock Price exceeds $47.50, except that if the 1999 Earnout Payment
is equal to 0, the 2000 Earnout Payment is greater than 0, and the 2001
Earnout Payment is eligible for acceleration and is accelerated in
accordance with the provisions of Section 1.5(b)(iii) hereof, then the 2001
Earnout Payment means the product of (a) 560,000.5 and (b) the amount by
which the 2000 Jacobs Stock Price exceeds $47.50;
(D) if the 1999 Earnout Payment is greater than 0 and the
2000 Earnout Payment is equal to 0, then the 2001 Earnout Payment shall
mean the product of (a) 513,334 and (b) the amount, if any, by which the
2001 Jacobs Stock Price exceeds $47.50; and
(E) if the 1999 Earnout Payment is equal to 0 and the 2000
Earnout Payment is equal to 0, then the 2001 Earnout Payment shall mean the
product of (a) 700,001 and (b) the amount, if any, by which the 2001 Jacobs
Stock Price exceeds $47.50.
(iv) "1999 Jacobs Stock Price" means the average of the Closing
-----------------------
Prices of Jacobs Stock for the twenty five consecutive trading days ending
on December 31, 1999.
9
<PAGE>
(v) "2000 Jacobs Stock Price" means the average of the Closing
-----------------------
Prices of Jacobs Stock for the twenty five consecutive trading days ending
on December 31, 2000.
(vi) "2001 Jacobs Stock Price" means the average of the Closing
-----------------------
Prices of Jacobs Stock for the twenty five consecutive trading days ending
on December 31, 2001.
(vii) "Closing Price" means, with respect to any trading day,
-------------
the last sale price, regular way, as reported in the principal consolidated
transaction reporting system for securities listed on the New York Stock
Exchange ("NYSE") or any other principal stock exchange listing, or over-
----
the-counter market quoting, the Jacobs Stock (as defined below) if the
Jacobs Stock is no longer listed on the NYSE.
(viii) "Deferred Consideration" shall mean the sum of (1) the
----------------------
1999 Earnout Payment, (2) the 2000 Earnout Payment and (3) the 2001 Earnout
Payment.
(ix) "Earnout Payments" shall mean the 1999 Earnout Payment, the
----------------
2000 Earnout Payment and the 2001 Earnout Payment referred to collectively.
(x) "Eligible Holder" means any of the following Persons (as
---------------
defined below): (A) a Person (other than the Flexi-Trust) who owns Shares
(specifically excluding Excluded Shares) of record or who owns a beneficial
interest in the Flexi-Trust; (B) a Person who is entitled to receive a
payment with respect to Company Options pursuant to Section 1.7(b); or (C)
a Person who is entitled to receive a payment with respect to Redeemed
Company Shares pursuant to Section 1.8.
(xi) "Jacobs Stock" means shares of common stock, par value 1.00
------------
per share, of Jacobs.
(xii) "Percentage Interest" means, with respect to each Eligible
-------------------
Holder, the percentage interest set forth next to the name of each such
Eligible Holder on Section 1.5(a)(xii) of the Company Disclosure Schedule.
(xiii) "Person" means an individual, a corporation, a limited
------
liability company, a limited liability partnership, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or any agency or instrumentality
thereof.
(b) The Deferred Consideration shall be payable as follows:
(i) Promptly after each of January 1, 2000, January 1, 2001 and
January 1, 2002, the Securityholder Committee and Jacobs shall agree on the
calculation of the 1999 Jacobs Stock Price, the 2000 Jacobs Stock Price or
the 2001 Jacobs Stock Price, as applicable, and the amount of any
applicable Earnout Payments in accordance with this Section 1.5, and the
Securityholder Committee thereafter shall send to (i) Jacobs
10
<PAGE>
a notice pursuant to Section 10.1 as to whether or not the Securityholder
Committee is accelerating any Earnout Payments and (ii) each Eligible
Holder a letter of transmittal substantially in the form of Exhibit 1.5(b)
--------------
hereto (a "Deferred Consideration Letter of Transmittal"). Such letter of
---------------------------------------------
transmittal shall set forth the Jacobs Stock Price for the relevant year,
demonstrate the calculation of any Earnout Payments for such year and state
whether or not the Securityholder Committee has decided to accelerate the
Earnout Payments for subsequent year(s). Notwithstanding the foregoing, the
Securityholder Committee shall not be obligated to send a Deferred
Consideration Letter of Transmittal (A) in the year 2001 in the event that
(1) (aa) the 2000 Earnout Payment has been accelerated in accordance with
the terms of Section 1.5(b)(ii) and (bb) the 2000 Jacobs Stock Price does
not exceed $47.50 or (2) each of the 2000 Earnout Payment and the 2001
Earnout Payment has been accelerated in accordance with Section 1.5(b)(ii)
or (B) in the year 2002 in the event that the 2001 Earnout Payment has been
accelerated in accordance with the terms of Section 1.5(b)(ii) or (iii).
(ii) On or before January 31, 2000, Jacobs will mail or otherwise
deliver to the Eligible Holders a portion of the Deferred Consideration
equal to the 1999 Earnout Payment, and the 2000 Earnout Payment and the
2001 Earnout Payment, if such additional Earnout Payments are eligible for
acceleration and the Securityholder Committee has properly notified Jacobs
of its intention to accelerate such Earnout Payments as provided for in
Section 1.5(b)(i). Each Eligible Holder shall receive a check for the
portion of the Deferred Consideration equal to the sum of (x) the product
of such Eligible Holder's Percentage Interest and the 1999 Earnout Payment,
(y) the product of such Eligible Holder's Percentage Interest and any
accelerated 2000 Earnout Payment and (z) the product of such Eligible
Holder's Percentage Interest and any accelerated 2001 Earnout Payment.
(iii) On or before January 31, 2001, subject to Section 1.5(g),
Jacobs will mail or otherwise deliver to the Eligible Holders a portion of
the Deferred Consideration equal to the 2000 Earnout Payment and the 2001
Earnout Payment, if the 2001 Earnout Payment has not previously been
accelerated and is eligible for acceleration and the Securityholder
Committee has properly notified Jacobs of its intention to accelerate the
2001 Earnout Payment as provided for in Section 1.5(b)(i). Each Eligible
Holder shall receive a check for the portion of the Deferred Consideration
equal to the sum of (x) the product of such Eligible Holder's Percentage
Interest and the 2000 Earnout Payment (as it may be reduced by any offset
amount) and (y) the product of such Eligible Holder's Percentage Interest
and any accelerated 2001 Earnout Payment (as it may be reduced by any
offset amount).
(iv) On or before January 31, 2002, subject to Section 1.5(g),
Jacobs will mail or otherwise deliver to the Eligible Holders a portion of
the Deferred Consideration equal to the 2001 Earnout Payment provided,
however, that Jacobs shall not be required to deliver any such amount if
the 2001 Earnout Payment has been accelerated and paid by Jacobs in
accordance with the provisions of Section 1.5(b)(ii) or (iii). Each
Eligible Holder will receive a portion of the Deferred Consideration equal
to
11
<PAGE>
the product of (A) such Eligible Holder's Percentage Interest and (B) the
2001 Earnout Payment (as it may be reduced by any offset amount).
(c) Notwithstanding anything contained herein or elsewhere to the
contrary, the Eligible Holders shall not be entitled to receive any Deferred
Consideration pursuant to this Agreement in excess of an aggregate of
$31,000,000.
(d) In the event that at any time prior to December 31, 2001, there is
any change in the number of shares of outstanding Jacobs Stock by reason of
stock dividends, recapitalizations, split-ups, combinations or exchanges of
shares and the like, the respective strike prices for the respective Earnout
Payments (i.e., $37.00 for the 1999 Earnout Payment, $42.00 for the 2000 Earnout
Payment and $47.50 for the 2001 Earnout Payment) and the applicable multipliers
for such Earnout Payments (i.e., 466,667, 560,000.5, 513,334 and 700,001) shall
be adjusted proportionately from and after any such event so that the Eligible
Holders would derive the same benefits from such Earnout Payments as they would
have derived had any such event not occurred.
(e) The right to receive a portion of the Deferred Consideration in
accordance with the terms hereof may not be sold, assigned or otherwise
transferred by any Eligible Holder or any other Person except by operation of
law and except by will or laws of descent and distribution upon the death of an
Eligible Holder.
(f) Exhibit 1.5(f) attached hereto provides, by way of example only,
--------------
illustrations of the calculation of the Deferred Consideration.
(g) If the Net Risk Dollars Amount set forth in Jacobs' notice to the
Securityholder Committee pursuant to Section 1.4(a) is less than negative
fourteen and a half million dollars (-$14,500,000), then an amount of any 2000
Earnout Payment and any accelerated 2001 Earnout Payment equal to the lesser of
(i) the amount equal to negative fourteen and a half million dollars (-
$14,500,000) minus the Net Risk Dollars Amount and (ii) ten million dollars
($10,000,000) shall be treated in the same manner as if it were additional funds
in the Escrow in accordance with Section 1.4 and shall not be paid to the
Eligible Holders pursuant to Section 1.5(b) until final resolution of the
Escrow. In addition, if the Net Risk Dollars Amount as finally determined is
less than negative fourteen and a half million dollars (-$14,500,000) and the
portion of any 2000 Earnout Payment and any accelerated 2001 Earnout Payment
withheld pursuant to the preceding sentences (the "Withheld Amount") is less
---------------
than ten million dollars ($10,000,000), then Jacobs shall have the right to
offset against any 2001 Earnout Payment an amount equal to the lesser of (x) the
amount equal to negative fourteen and a half million dollars (-$14,500,000),
minus the Net Risk Dollars Amount and minus the Withheld Amount and (y) ten
million dollars ($10,000,000) minus the Withheld Amount.
SECTION 1.6. Dissenting Shares. Notwithstanding anything in this
-----------------
Agreement to the contrary, Shares which are held by shareholders who have (i)
objected to the Company, in writing, to the Merger prior to the Company
shareholder vote on the Merger, (ii) not voted in favor of, or whose Shares are
not entitled to vote regarding approval of, the Merger and (iii) properly and
timely perfected appraisal rights under Section 351.455 of the GBCL
12
<PAGE>
("Dissenting Shares") shall not be converted into or be exchangeable for the
-----------------
right to receive the consideration described in Section 1.2, Section 1.4 and/or
Section 1.5 hereof (unless and until such holder shall have effectively
withdrawn or lost his or her right to appraisal and payment under the GBCL) but
shall be converted into the right to receive such cash consideration as may be
properly determined and payable to such holder as provided in the GBCL.
SECTION 1.7. Stock Options.
-------------
(a) At the Effective Time, each holder of an option to purchase
Company Common Stock (a "Company Option") then outstanding pursuant to the
--------------
Company's 1995 Incentive Stock Option Plan ("ISO Plan"), whether or not such
--------
Company Option is exercisable at such time, and whether or not such Company
Option is vested at such time, shall be entitled, in exchange for the
termination of such Company Option, to receive (i) cash from the Payment Agent
in an amount equal to the product of (x) the difference of (A) the Initial Per
Share Merger Consideration minus (B) the exercise price per share of such
Company Option multiplied by (y) the number of shares underlying such Company
Option (with respect to each such holder individually, such holder's "Initial
-------
Company Option Consideration"), and together with the aggregate Initial Company
- ----------------------------
Option Consideration of all other such holders, the "Initial Aggregate Company
-------------------------
Option Consideration"), plus (ii) an additional amount in cash from the
- --------------------
Securityholder Committee, payable in accordance with Section 1.5(b), equal to
such Eligible Holder's Percentage Interest in the Deferred Consideration and
(iii) an additional pro rata amount of cash, payable as set forth in Section
1.4, equal to such Eligible Holder's Percentage Interest in the Escrow Amount
and the Opportunity Premium Payment. Any amounts payable by Jacobs to the
holders of Company Options pursuant to (i), (ii) and (iii) above shall be paid
to such holders by Jacobs net of any applicable withholding taxes.
(b) Each holder of a Company Option, upon surrender to the Payment
Agent of the Option Agreement relating to any such Company Option together with
a properly completed letter of transmittal covering such Company Option, will
receive the Initial Company Option Consideration in respect of such Company
Option (and, if applicable, such Eligible Holder's Percentage Interest of any
portion of the Deferred Consideration or the Escrow Amount payable prior to the
date of surrender). Until so surrendered, each such Option Agreement shall,
after the Effective Time, represent for all purposes only the right to receive
the amounts provided for herein. No interest shall be paid on such amounts.
SECTION 1.8. Certain Redeemed Shares. Each current or former
-----------------------
shareholder of the Company who has had or will have had shares of Company Common
Stock repurchased by the Company during the period from and after June 24, 1998
to and including the Closing Date pursuant to the terms of the Company's
Shareholder Agreement (as defined below) (any such shares being referred to as
"Redeemed Company Shares") shall be entitled to receive (a) cash from the
- ------------------------
Payment Agent in an amount equal to the product of (i) the difference of (A) the
cash value of the Initial Per Share Merger Consideration minus (B) the price per
share which the Company paid for such Redeemed Company Shares multiplied by (ii)
the number of Redeemed Company Shares which such Person had so repurchased at
such price by the Company during such period (with respect to each such Person
individually, such Person's "Initial Redeemed
----------------
13
<PAGE>
Company Shares Consideration", and together with the aggregate Initial Redeemed
- ----------------------------
Company Shares Consideration, the "Initial Aggregate Redeemed Company Shares
-----------------------------------------
Consideration"), (b) an additional amount in cash from the Securityholder
- -------------
Committee, payable in accordance with Section 1.5(b), in an amount equal to such
Eligible Holder's Percentage Interest in the Deferred Consideration and (c) an
additional pro rata amount of cash, payable as set forth in Section 1.4, equal
to such Eligible Holder's Percentage Interest in the Escrow Amount and the
Opportunity Premium Payment. At Closing, the Company will certify to Jacobs the
number of Redeemed Company Shares and the holders thereof at the time of
repurchase by the Company. No interest shall be paid on such amount.
SECTION 1.9. Payments with Respect to Certain Shares. Notwithstanding
---------------------------------------
anything contained herein to the contrary, any amounts of money which are
payable hereunder to the Sverdrup Flexible Benefits Trust, dated December 20,
1993 (the "Flexi-Trust"), whether as a result of such Flexi-Trust being the
-----------
record holder of Shares or the holder of Company Options or otherwise, shall not
be paid to such Flexi-Trust, but shall instead be paid directly to the account
holders in such Flexi-Trust in proportion to the number of Shares held in such
account holder's account in such Flexi-Trust. The number of Shares held in each
such account holder's account is set forth on Section 1.9 of the Company
Disclosure Schedule. Such account holders shall be deemed to be the Eligible
Holders of the Shares, Company Options or Redeemed Company Shares for all
purposes hereunder. Notwithstanding anything contained herein to the contrary,
the Aggregate Flexi-Trust Debt shall be deemed to have been paid in full and
extinguished as a consequence of the payment of the Initial Aggregate Merger
Consideration by Jacobs to the Payment Agent in the manner provided in the
second sentence of Section 1.3(a) hereof.
ARTICLE 2
THE SURVIVING CORPORATION
SECTION 2.1. Articles of Incorporation. The articles of incorporation
-------------------------
of Merger Subsidiary in effect at the Effective Time shall be the articles of
incorporation of the Surviving Corporation, except that such articles of
incorporation shall be amended to change the name of the Surviving Corporation
to "Sverdrup Corporation."
SECTION 2.2. Bylaws. The bylaws of Merger Subsidiary in effect at the
------
Effective Time shall be the bylaws of the Surviving Corporation until amended in
accordance with the applicable law.
SECTION 2.3. Directors and Officers. From and after the Effective
----------------------
Time, until successors are duly elected or appointed and qualified in accordance
with applicable law, (a) Richard J. Slater, William R. Kerler, Thomas R.
Hammond, Richard E. Beumer and James C. Uselton shall be the directors of the
Surviving Corporation, and (b) the officers of Merger Subsidiary at the
Effective Time shall be the officers of the Surviving Corporation.
14
<PAGE>
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to Jacobs that, except as otherwise
disclosed on the disclosure schedules delivered on or prior to the date hereof
to Jacobs by the Company (collectively, the "Company Disclosure Schedule"):
---------------------------
SECTION 3.1. Corporate Existence and Power. The Company is a
-----------------------------
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Missouri, and has all corporate powers and all licenses,
authorizations, consents and approvals required to carry on its business as now
conducted other than any such licenses, authorizations, permits, registrations,
consents and approvals the failure of which to have would not reasonably be
expected to have a Company Material Adverse Effect. The Company is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where the character of the property owned or leased by it or
the nature of its activities makes such qualification necessary, except for
those jurisdictions where the failure to be so qualified would not reasonably be
expected to have a Company Material Adverse Effect. The Company has heretofore
delivered to Jacobs true and complete copies of the Company's articles of
incorporation and bylaws as currently in effect. For purposes of this
Agreement, a "Company Material Adverse Effect" or the term "material" or any
-------------------------------
variations thereof used in conjunction with the Company means (i) any material
adverse change in, or a material adverse effect on, the assets, liabilities,
business or operations of the Company and the Company Subsidiaries (as defined
in Section 3.2) taken as a whole in an amount in excess of $500,000 individually
or $1,000,000 in the aggregate with respect to all matters arising under the
relevant section of this Agreement, or (ii) any event or circumstance that would
prevent, materially hinder or materially delay the consummation of the
transactions contemplated by this Agreement. For purposes of this Agreement,
any reference to any event, change or effect being "material" with respect to
any Person other than the Company and the Company Subsidiaries means an event,
change or effect which is material in relation to the assets, liabilities,
business or operations of such Person (and its subsidiaries, if any) taken as a
whole or on the ability of such Person to perform its obligations hereunder.
Notwithstanding anything to the contrary herein, a Company Material Adverse
Effect shall not include events, changes or effects relating to or caused by (i)
general economic or industry conditions or (ii) the announcement or pendency of
this Agreement or any of the transactions or actions contemplated hereby.
SECTION 3.2. Subsidiaries. Section 3.2 of the Company Disclosure
------------
Schedule contains a true and complete list of all of the Company's subsidiaries
(the "Company Subsidiaries"). Such list sets forth the authorized capital
--------------------
stock, the number of shares duly issued and outstanding, the number so owned by
the Company and the jurisdiction of incorporation of each of the Company
Subsidiaries. The shares of capital stock of the Company Subsidiaries owned
directly or indirectly by Company are validly issued, fully paid and non-
assessable (subject to statutory obligations of holders, if any), and are owned
free and clear of any liens, claims, charges or encumbrances except as set forth
on such list. Except as set forth on
15
<PAGE>
Section 3.2 of the Company Disclosure Schedule, the Company (i) does not have
any direct or indirect subsidiaries other than the Company Subsidiaries, and
(ii) other than in the ordinary course of business of the Company, has not made
any advances to or investments in, and does not own any securities of or other
interests in, any Person other than the Company Subsidiaries. Each of the
Company Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation, has the
requisite corporate power to own or lease its properties and carry on its
business as now being conducted in all material respects, and is duly qualified
as a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary, except where
the failure so to qualify would not reasonably be expected to have a Company
Material Adverse Effect.
SECTION 3.3. Corporate Records. The corporate minute books, transfer
-----------------
books and stock ledgers of the Company and each of the Company Subsidiaries are
complete and accurate in all material respects.
SECTION 3.4. Corporate Authorization.
-----------------------
(a) The execution, delivery and performance by the Company of this
Agreement and the consummation by the Company of the transactions contemplated
hereby are within the Company's corporate powers, subject to the conditions set
forth in this Agreement. Except for the approval by the Company's shareholders,
this Agreement, the Merger, and the transactions contemplated hereby have been
duly authorized by all necessary corporate action. Subject to the approval of
the Company's shareholders of this Agreement and assuming due authorization,
execution and delivery of this Agreement by Jacobs and Merger Subsidiary, this
Agreement constitutes a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except as limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or affecting generally the enforcement of creditors rights and by the
availability of equitable remedies.
(b) The Company's Board of Directors, at a meeting duly called and
held, has, by majority vote of the members of the Company's Board of Directors
present at such meeting, duly and validly approved, and taken all corporate
actions required to be taken by the Company's Board of Directors for the
consummation of, the Merger and the other transactions contemplated hereby.
Without limiting the generality of the foregoing, the Company's Board of
Directors has (i) determined that the Merger is fair and in the best interests
of the Company and its shareholders, (ii) received the opinion of Houlihan Lokey
Howard & Zukin ("Houlihan Lokey") to the effect that the consideration to be
--------------
received by the shareholders of the Company in the Merger is fair to such
shareholders from a financial point of view, (iii) adopted this Agreement in
accordance with the GBCL and (iv) directed that this Agreement and the Merger be
submitted to the shareholders of the Company for their adoption and approval and
resolved to recommend that the shareholders of the Company approve and adopt
this Agreement and the Merger.
SECTION 3.5. Governmental Authorization . The execution, delivery and
--------------------------
performance by the Company of this Agreement and the consummation of the Merger
by the
16
<PAGE>
Company require no action by or in respect of, or filing with, any court or
tribunal or administrative governmental or regulatory body, agency, official or
authority other than (a) the filing of a certificate of merger in accordance
with the GBCL; (b) compliance with any applicable requirements of the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"); (c)
-------
compliance with any applicable requirements of the Securities Exchange Act of
1934 and the rules and regulations promulgated thereunder (the "Exchange Act");
------------
(d) compliance with any applicable requirements of the Securities Act of 1933,
as amended (the "Securities Act"); (e) compliance with any applicable foreign or
--------------
state securities or blue sky laws; (f) compliance with state takeover, antitrust
and competition law filings and approvals; and (g) such actions by or filings
with governmental bodies, agencies, officials or authorities, the failure of
which to obtain or make would not reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect.
SECTION 3.6. Non-Contravention. The execution, delivery and
-----------------
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby do not and will not, (a) assuming the
approval by the Company's shareholders, contravene or conflict with the articles
or certificate of incorporation or bylaws (or similar governing documents) of
the Company or any of the Company Subsidiaries, or (b) except for any such
matters that do not have, and would not reasonably be expected to have, a
Company Material Adverse Effect or except as set forth on Section 3.6 of the
Company Disclosure Schedule, (i) assuming compliance with the matters referred
to in Section 3.5, contravene or conflict with or constitute a violation of any
provision of any law, rule, regulation, judgment, injunction, order or decree
binding upon or applicable to the Company, any Company Subsidiary or any of
their respective assets, (ii) result in a violation or breach of, or constitute
a default under, or give rise to a right of termination, amendment, cancellation
or acceleration of any right or obligation of the Company or any Company
Subsidiary or to a loss of any benefit to which the Company or any Company
Subsidiary is entitled under any provision of any note, bond, mortgage,
indenture, lease, agreement, contract or other instrument binding upon the
Company or to which the Company or such Company Subsidiary is a party or by
which it is affected or any license, franchise, permit or other similar
authorization held by the Company or such Company Subsidiary or to which the
Company or such Company Subsidiary is a party or by which it is affected, or
(iii) result in the creation or imposition of any Lien (as defined below) on any
asset of the Company or any Company Subsidiary. For purposes of this Agreement,
"Lien" means, with respect to an asset, any mortgage, lien, pledge, charge,
----
security interest or encumbrance of any kind in respect of such asset other than
purchase money security interests incurred in connection with the purchase of
assets in the ordinary course of business.
SECTION 3.7. Capitalization.
--------------
(a) The authorized capital stock of the Company consists of 10,000,000
shares of Company Common Stock. There are issued and outstanding 3,108,837
shares of Company Common Stock and Company Options to purchase 309,500 shares of
Company Common Stock.
(b) Except as set forth in Section 3.7 of the Company Disclosure
Schedule, all outstanding shares of capital stock of the Company have been duly
authorized and validly issued
17
<PAGE>
and are fully paid and nonassessable and were issued free of preemptive or
similar rights and in compliance with all applicable state and federal
securities laws and regulations. Except as set forth in this Section 3.7, there
are outstanding (i) no other shares of capital stock or other voting securities
of the Company, (ii) no securities of the Company convertible into or
exchangeable for shares of capital stock or voting securities of the Company,
and (iii) no other options, warrants, calls, rights (including preemptive
rights), commitments or any other agreement of any character to acquire from the
Company, and no obligation of the Company to issue, transfer, dispose of, sell,
purchase, redeem or otherwise acquire (or to refrain from doing any of the
foregoing), any capital stock, voting securities or securities convertible into
or exchangeable for capital stock or voting securities of the Company (the items
in clauses (i), (ii) and (iii) being referred to collectively as the "Company
-------
Securities").
- ----------
(c) The number of Redeemed Company Shares and the price paid by the
Company therefor are as set forth in Section 3.7(c) of the Company Disclosure
Schedule.
(d) All of the Company Options were issued pursuant to the ISO Plan or
the Company's 1992 Incentive Stock Option Plan. Section 3.7(d) of the Company
Disclosure Schedule sets forth a true, correct and complete list, as of the date
of this Agreement, of the name of each holder of outstanding Company Options,
the exercise price therefor and the number of shares of Company Common Stock
exercisable therefor, and indicating the portion of such Company Options that
are vested. Immediately after the Effective Time, upon execution and delivery
to the Payment Agent by each holder of a Company Option of a letter of
transmittal in the form of Exhibit 1.3 hereto and payment of the amounts set
-----------
forth in Section 1.7, no holder of Company Options shall have any right or claim
with respect to the Company Common Stock issuable upon the exercise therefor.
(e) Except as set forth on Section 3.7(e) of the Company Disclosure
Schedule and except for the Company Options, there are no shareholders
agreements, investors' rights agreements, voting trusts or other agreements or
understandings to which the Company is a party or by which the Company is bound
relating to the voting of, or placing any restrictions on, any shares of the
capital stock of the Company.
(f) None of the securities of the Company are registered or required
to be registered under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
- -------------
(g) The number of Redeemed Company Shares as of the date hereof and
the names of the holders thereof at the time of repurchase by the Company are
set forth on Section 3.7(g) of the Company Disclosure Schedule. All redemptions
of the Company Common Stock prior to the date hereof have been made in
accordance with the terms and conditions of the Company's standard form of
shareholders agreement, a copy of which form of agreement has been provided to
Jacobs prior to the date hereof, or otherwise in accordance with applicable law.
No event has occurred and no circumstance, matter or set of facts exist which
would constitute a valid basis for the assertion by any third party of any claim
or Legal Proceeding (as defined in Section 3.13) relating to such redemptions by
the Company, except as will be resolved by the payments to be made hereunder to
the former holders of Redeemed Company Shares.
18
<PAGE>
SECTION 3.8. Company Reports and Financial Statements. The Company has
----------------------------------------
delivered or made available to Jacobs true and complete copies of each financial
report, proxy statement or annual information statement, including, without
limitation, its Annual Reports to Shareholders, delivered to its shareholders,
at any time since January 1, 1994 (collectively, the "Company Reports"). Except
---------------
as set forth in Section 3.8 of the Company Disclosure Schedule, as of the
respective dates of such Company Reports, none of such Company Reports contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Each of the audited consolidated financial statements of the Company
(including any related notes and schedules) included in the Company Reports for
each of the five fiscal years ended December 31, 1993, 1994, 1995, 1996 and
1997, and each of the interim unaudited financial statements of the Company
(including any related notes and schedules) for each of the interim periods
subsequent to December 31, 1997 (collectively, the "Company Financial
-----------------
Statements"), fairly present, in conformity with generally accepted accounting
- ----------
principles ("GAAP") applied on a basis consistent with prior periods (except as
----
may be indicated in the notes thereto), the consolidated financial position of
the Company and the Company Subsidiaries as of its date and the consolidated
results of operations and cash flows for the period then ended (subject to
normal year-end adjustments in the case of any unaudited interim financial
statements). For purposes of this Agreement, "Company Balance Sheet" means the
---------------------
Company's unaudited balance sheet dated as of October 30, 1998 and "Company
-------
Balance Sheet Date" means October 30, 1998.
- ------------------
SECTION 3.9. Receivables. Except as set forth on Section 3.9 of the
-----------
Company Disclosure Schedule, with respect to accounts receivable in excess of
$500,000, there is (i) no account debtor that has refused (or, to the knowledge
of the Company, threatened to refuse) to pay its obligations for any reason,
(ii) to the knowledge of the Company, no account debtor that is insolvent or
bankrupt, and (iii) no account receivable which is pledged to any third party by
the Company.
SECTION 3.10. Absence of Undisclosed Liabilities. Except for
----------------------------------
liabilities or obligations which are accrued or reserved against in the Company
Balance Sheet (or reflected in the notes thereto), or which were incurred after
the date of the Company Balance Sheet in the ordinary course of business and
consistent with past practices or in connection with the transactions
contemplated by this Agreement, the Company and the Company Subsidiaries do not
have any liabilities or obligations (whether absolute, accrued, contingent or
otherwise) of a nature required by GAAP to be reflected in, reserved against or
otherwise described in the Company Balance Sheet (or reflected in the notes
thereto).
SECTION 3.11. Information Supplied. None of the information supplied or
--------------------
to be supplied by the Company or the Company Subsidiaries, or on their behalf by
their auditors, attorneys, financial advisors, or other consultants or advisors
for inclusion in the proxy statement and any amendment or supplement thereto to
be distributed in connection with the meeting of the shareholders of the Company
to vote upon this Agreement and the transactions contemplated hereby (the "Proxy
-----
Statement"), will: (1) at the time of the mailing of the Proxy Statement and any
- ---------
amendments or supplements thereto, and (2) at the time of the Company's meeting
of
19
<PAGE>
shareholders, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The Company agrees to correct as promptly as practicable
any such information provided by it that shall have become false or misleading
in any material respect and to take all steps necessary to cause the Proxy
Statement as so corrected to be disseminated to the Company shareholders to the
extent required by applicable law.
SECTION 3.12. Absence of Certain Changes. Except as described in Section
--------------------------
3.12 of the Company Disclosure Schedule, since the Company Balance Sheet Date,
the Company and the Company Subsidiaries have conducted their respective
businesses in the ordinary and usual course and there has not been:
(a) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company, or any
repurchase, redemption or other acquisition by the Company of any outstanding
shares of capital stock or other ownership interests in, the Company, other than
the Redeemed Company Shares;
(b) any incurrence, assumption or guarantee by the Company or any of
the Company Subsidiaries of any outstanding amount of indebtedness for borrowed
money or any other liabilities of any nature, whether or not accrued, contingent
or otherwise, other than in the ordinary course of business;
(c) any transaction or commitment made, or any contract or agreement
entered into, by the Company or any of the Company Subsidiaries relating to
their respective assets or businesses (including the acquisition or disposition
of any assets) or any loss or relinquishment by the Company or any of the
Company Subsidiaries of any material contract or other material right, other
than transactions and commitments in the ordinary course of business in
accordance with their customary practices;
(d) any material change in any method of accounting or accounting
practice or policy or application thereof by the Company or any of the Company
Subsidiaries, except as required by GAAP;
(e) any increase in (or commitment, oral or written, to increase) the
rate or terms (including, without limitation, any acceleration of the right to
receive payment) of compensation payable or to become payable by the Company or
any of the Company Subsidiaries to their directors, officers, employees or
consultants, except increases occurring in the ordinary course of business; or
(f) any increase in (or commitment, oral or written, to increase) the
rate or terms (including, without limitation, any acceleration of the right to
receive payment) of any bonus, insurance, pension or other employee benefit plan
or contract, payment or arrangement made to, for or with any director, officer,
employee or consultant of the Company or any of the Company Subsidiaries, except
increases occurring in the ordinary course of business.
20
<PAGE>
SECTION 3.13. Litigation. Except as set forth in Section 3.13 of the
----------
Company Disclosure Schedule, there is no action, suit, claim, investigation or
proceeding (each a "Legal Proceeding") pending against, or to the knowledge of
----------------
the Company threatened against or affecting, the Company or any of the Company
Subsidiaries or any of their respective assets before any court or arbitrator or
any administrative, regulatory or governmental body, agency or official which
would reasonably be expected to have a Company Material Adverse Effect or which
in any manner challenges or seeks to prevent, enjoin, alter or delay the Merger
or any of the other transactions contemplated hereby. To the knowledge of the
Company, no event has occurred and no circumstance, matter or set of facts exist
which would constitute a valid basis for the assertion by any third party of any
claim or Legal Proceeding, other than those listed in Section 3.13 of the
Company Disclosure Schedule, which would be expected to result in a Company
Material Adverse Effect. There is no outstanding or, to the knowledge of the
Company, threatened, judgment, injunction, order, consent or decree of any
Governmental Authority against the Company, any Company Subsidiary or any of
their respective assets.
SECTION 3.14. Employee Benefit Plans. (a) Section 3.14 of the Company
----------------------
Disclosure Schedule contains a list of each employee benefit plan (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), which are hereinafter referred to individually as a "Plan" and
----- ----
collectively as the "Plans") pursuant to which the Company, the Company
-----
Subsidiaries or any ERISA Affiliates (as defined below) has any present or
future obligations or liabilities with respect to its employees or former
employees or their dependents or beneficiaries (the "Company Plans"). There are
-------------
no negotiations, demands or proposals (other than routine claims for benefits)
which are pending or, to the knowledge of the Company, threatened that concern
matters now covered, or that would be covered, by the Company Plans.
(b) The Company has delivered or made available to Jacobs copies of
the following documents, as they may have been amended to the date hereof,
embodying or relating to the Company Plans: (i) each of the Company Plans
listed in Section 3.14 of the Company Disclosure Schedule, including all
amendments thereto, and any related trust agreements, group annuity contracts,
insurance policies or other funding agreements, (ii) the most recent
determination letter, if any, from the Internal Revenue Service with respect to
the Company Plans that are pension benefit plans as defined in Section 3(2)(A)
of ERISA (hereinafter referred to as "Pension Plans"); (iii) current summary
-------------
plan descriptions and prospectuses; (iv) the three (3) most recently filed
annual returns/reports on Form 5500 for each of the Company Plans; and (v)
general notification to employees of their rights under Code Section 4980B and
form of letter(s) distributed upon the occurrence of a qualifying event
described in Code Section 4980B, in the case of a plan that is a "group health
plan" as defined in Code Section 5000(b)(1).
(c) Except as set forth in Section 3.14 of the Company Disclosure
Schedule: (i) the written terms of each of the Company Plans and any related
trust agreement, group annuity contract, insurance policy or other funding
arrangement are in substantial compliance with ERISA, the Internal Revenue Code
of 1986, as amended (the "Code") and all other applicable legal requirements,
----
and each of the Company Plans has been administered in
21
<PAGE>
substantial compliance with, and has no direct or indirect material liability in
connection with such regulatory requirements, (ii) each of the Company Plans has
been administered in substantial compliance with its terms; (iii) each Company
Plan which is a Pension Plan meets the requirements of Section 401(a), and, if
applicable, Sections 409 and 4975(e)(7), of the Code and has been so qualified
since its inception date to the date of this Agreement, and each trust forming a
part thereof is exempt from income tax pursuant to Section 501(a) of the Code;
(iv) no Company Plan has engaged in, participated in or been a party to any
"prohibited transaction" (as defined in Section 4975 of the Code or Sections 406
or 407 of ERISA) which could subject the Company or any of its ERISA Affiliates
to any material tax or penalty under Section 4975 of the Code or Title I of
ERISA; (v) there is no material violation of any reporting or disclosure
requirement imposed by ERISA or the Code with respect to any Company Plan; (vi)
there are no actions, suits, arbitrations or claims pending (other than routine
claims for benefits), legal, administrative or other proceedings or governmental
investigations pending or, to the Company's knowledge, threatened, against (X)
the Company Plans, the Company Plan fiduciaries or the Company Plan assets, or
(Y) the Company or the Company Subsidiaries with respect to claims related to
such Company Plans, (vii) no officer, director or employee of the Company or a
Company Subsidiary has committed a material breach of any responsibility or
obligation imposed on fiduciaries by Title I of ERISA with respect to any
Company Plan, (viii) all contributions due and payable from the Company with
respect to each of the Company Plans and all expenses and liabilities relating
to each of the Company Plans for all calendar (plan) years through December 31,
1997 are reflected on the financial statements of the Company and each of the
Company Subsidiaries, to the extent required by GAAP; (ix) no Company Pension
Plan which is a "single-employer plan," within the meaning of Section
4001(a)(15) of ERISA, nor any single-employer plan of any entity which is
considered a predecessor of the Company or one employer with the Company under
Section 4001 of ERISA or Section 414 of the Code (an "ERISA Affiliate") is
---------------
subject to Section 412 of the Code or Title IV of ERISA; (x) no Company Plan
maintained currently or within the past five (5) years by the Company or an
ERISA Affiliate, and no other "employee benefit plan" under which the Company or
an ERISA Affiliate has any liability or other obligation, is or was a "multiple
employer plan" (within the meaning of Section 413(c) of the Code) or a
"multiemployer plan" (as defined in Section 3(37) of ERISA); (xi) neither the
Company nor any of its ERISA Affiliates has incurred any withdrawal liability
under Subtitle E of Title IV of ERISA with respect to a multiemployer plan;
(xii) neither the Company nor any of the Company Subsidiaries has any
obligations for retiree health, life or other welfare benefits under any Company
Plan or pursuant to any agreement or understanding other than pursuant to
Section 4980B of the Code, (xiii) with respect to the qualified status of each
Company Pension Plan under Section 401(a) of the Code, a favorable determination
letter has been received within the last three years, or an application for a
favorable determination letter has been filed within the applicable remedial
amendment period under Code Section 401(b), is pending, and no indication of an
adverse response has been received; and (xiv) the Company and the Company's
ERISA Affiliates have materially complied with all applicable notice
requirements and have provided group health care continuation and conversion
coverage under Section 4980B of the Code and/or any other applicable law and
have complied with the provisions of Code Sections 9801 and 9802.
22
<PAGE>
(d) Section 3.14(d) of the Company Disclosure Schedule lists each
employment, severance or other similar contract, arrangement or policy, each
cafeteria, educational assistance, dependent care assistance, and fringe benefit
plan or arrangement, and each plan or arrangement (written or oral) providing
for insurance coverage (including any self-insured arrangements), workers'
compensation, disability benefits, supplemental unemployment benefits, vacation
benefits, retirement benefits or deferred compensation, profit-sharing, bonuses,
stock options, stock appreciation or other forms of incentive compensation or
post retirement insurance, compensation or benefits which (i) is not one of the
Company Plans, and (ii) is entered into, maintained or contributed to, as the
case may be, by the Company. Such contracts, plans and arrangements as are
described above are referred to collectively herein as the "Company Benefit
---------------
Arrangements." Each Company Benefit Arrangement has been maintained in material
- ------------
compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations that are applicable to such Company
Benefit Arrangement. Except as set forth on Section 3.14(d) of the Company
Disclosure Schedule, neither the Company nor any of the Company Subsidiaries has
any obligations for post-retirement benefits under any Company Benefit
Arrangement other than pursuant to Section 490B of the Code. There are no
negotiations, demands or proposals (other than routine claims for benefits) that
are pending, or to the knowledge of the Company, threatened which concern
matters now covered, or that would be covered, by the foregoing types of Company
Benefit Arrangements. The Company has delivered or made available to Jacobs
copies of all documents evidencing or describing the Company Benefit
Arrangements, including documents of the type listed in paragraph 3.13(b).
(e) Except as disclosed in Section 3.14(e) of the Company Disclosure
Schedule, no individual shall accrue or receive additional benefits, service or
accelerated rights to payments of benefits under any Company Plan or Company
Benefit Arrangement, including the right to receive any parachute payment, as
defined in Section 280G of the Code, or become entitled to severance termination
allowance or similar payments as a direct result of the transactions
contemplated by this Agreement.
(f) Except as disclosed on Section 3.14(f) of the Company Disclosure
Schedule, the Company is not a party to or subject to any collective bargaining
agreement with any union or any employment contract or arrangement providing for
annual future compensation of any officer, consultant, director or employee.
SECTION 3.15. Taxes. Except as disclosed on Section 3.15 of the Company
-----
Disclosure Schedule and except for any matter that would not reasonably be
expected to have a Company Material Adverse Effect:
(a) The Company and the Company Subsidiaries have timely filed all Tax
Returns (as defined below) required to have been filed by them and all such Tax
Returns are true, correct and complete in all respects; each affiliated group
with which any of the Company and the Company Subsidiaries files a consolidated
or combined Tax Return has filed all such Tax Returns that it was required to
file for each taxable period during which any of the Company and the Company
Subsidiaries was a member of the group and all such consolidated and combined
Tax Returns were correct and complete in all respects; none of such Tax Returns
contains a
23
<PAGE>
disclosure statement under Section 6662 of the Code (or any predecessor statute)
or any similar provision of state, local or foreign law.
(b) All Taxes due and payable by the Company and the Company
Subsidiaries (whether or not shown on any Tax Return) have been timely paid in
full or reflected as a reserve on the Company Financial Statements.
(c) The charges, accruals and reserves for Taxes (including deferred
Taxes) currently reflected on the Company Financial Statements were adequate to
cover all unpaid Taxes accruing or payable by the Company and the Company
Subsidiaries in respect of taxable periods that end on or before the date of
each such Company Financial Statement.
(d) There are no audits or administrative proceedings, court
proceedings or claims pending against the Company or any of the Company
Subsidiaries with respect to any Taxes and no assessment, deficiency or
adjustment has been asserted or, to the knowledge of the Company, proposed with
respect to any Tax Return of or with respect to the Company or any of the
Company Subsidiaries and there are no liens for Taxes upon the assets or
properties of the Company or any of the Company Subsidiaries, except for liens
for Taxes not yet due and owing.
(e) Within the past five years, no written claim has been made by an
authority in a jurisdiction where the Company or any of the Company Subsidiaries
currently do not file Tax Returns that any of the Company or the Company
Subsidiaries are or may be subject to taxation by that jurisdiction.
(f) The Company and each of the Company Subsidiaries have withheld and
paid over all Taxes required to have been withheld and paid over in connection
with amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(g) Neither the Company nor any Company Subsidiary is required to
include in income any adjustment pursuant to Section 481(a) of the Code (or
similar provisions of other law or regulations) by reason of a change in
accounting method nor does the Company or any such Subsidiary have any knowledge
that the IRS (or other taxing authority) has proposed, or is considering, any
such change in accounting method.
(h) The Company and the Company Subsidiaries are in full compliance
with Section 263A of the Code and the Treasury Regulations thereunder for all
taxable years for which the statute of limitations is not yet closed.
(i) Neither the Company nor any Company Subsidiary has been included
in any consolidated, combined or unitary Tax Return (other than for a group of
which the Company is the common parent) provided for under the laws of the
United States, any state or locality with respect to Taxes for any taxable
period for which the statute of limitations has not expired; and neither the
Company nor any Company Subsidiaries has any liability for the Taxes of any
Person under Treasury Regulation Section 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by contract, or
otherwise.
24
<PAGE>
(j) Neither the Company nor any of the Company Subsidiaries are a
party to or bound by any affiliated group consolidated return tax allocation
agreement, tax sharing agreement or tax indemnification agreement, other than
among themselves.
(k) As of the Closing Date there will be no excess loss accounts,
deferred intercompany gains or losses, or other like items pertaining to the
Company or any of the Company Subsidiaries.
As used in this Agreement, "Taxes" means all taxes, charges, fees,
-----
levies, or other like assessments, including without limitation income, gross
receipts, ad valorem, value added, premium, excise, real property, personal
property, windfall profit, sales, use, transfer, license, withholding,
employment, payroll, and franchise taxes imposed by: the United States or any
other nation, state, or bilateral or multilateral governmental authority, any
local governmental unit or subdivision thereof, or any branch, agency, or
judicial body thereof ("Government") irrespective of whether imposed directly or
----------
indirectly, as a successor or transferee liability, as a joint and several
liability pursuant to Section 1.1502-6 of the Treasury Regulations or comparable
or similar provisions of state, local or foreign law; and shall include any
interest, fines, penalties, assessments, or additions to tax resulting from,
attributable to, or incurred in connection with any such Taxes or any contest or
dispute thereof. "Tax Return" means all returns, reports, statements, forms or
----------
other materials or information required to be filed with any Taxing authority.
SECTION 3.16. Compliance with Laws. Except as disclosed in Section 3.16
--------------------
of the Company Disclosure Schedule, and except for any matter that would not
reasonably be expected to have a Company Material Adverse Effect, neither the
Company nor any Company Subsidiary is in violation of any applicable provisions
of any laws, statutes, ordinances or regulations.
SECTION 3.17. Takeover Statutes. No "fair price," "moratorium" or
-----------------
"control share acquisition" or other similar anti-takeover statute or regulation
(each a "Takeover Statute") or any applicable anti-takeover provision in the
----------------
Company's Articles of Incorporation or bylaws is applicable to the Company, this
Agreement, the Merger or any of the other transactions contemplated by this
Agreement.
SECTION 3.18. Finders' Fees. Except for Ernst & Young LLP ("Ernst &
------------- -------
Young"), there is no investment banker, broker, finder or other intermediary
- -----
which has been retained by or is authorized to act on behalf of the Company who
would be entitled to any fee or commission upon consummation of the transactions
contemplated by this Agreement.
SECTION 3.19. Environmental Matters. Except as disclosed in Section 3.19
---------------------
of the Company Disclosure Schedule, neither the Company nor any of the Company
Subsidiaries has (i) received any notice of noncompliance with, violation of, or
liability or potential liability under, any Environmental Law (as defined below)
since January 1, 1994; (ii) entered into or agreed to any consent decree or
order, and is not subject to any pending action, claim, judgment, decree,
injunction or judicial order under any Environmental Law or relating to the
cleanup of any hazardous materials or wastes
25
<PAGE>
(including infectious and medical wastes); (iii) agreed to undertake, and has
not undertaken, any other material cleanup of hazardous materials or wastes
(including infectious and medical wastes) relating to properties currently or
formerly owned or leased by the Company or any of the Company Subsidiaries; (iv)
disposed or arranged for disposal of Hazardous Substances (as defined below) on
any third party property that has subjected or may subject the Company or any of
the Company Subsidiaries to material liability under any Environmental Law; or
(v) entered into any indemnity agreement or other contractual arrangement in
which it has agreed to assume the liabilities of any other party under any
Environmental Law. The Company and the Company Subsidiaries are in compliance
with (and, to the knowledge of the Company, have at all times been in compliance
with) all Environmental Laws in all material respects. There has been no
disposal, release, or threatened release of Hazardous Substances on, under, in,
or from properties currently or formerly owned or leased by the Company or any
of the Company Subsidiaries, or otherwise related to the operations of the
Company or any of the Company Subsidiaries that has subjected or may subject the
Company or any of the Company Subsidiaries to material liability under any
Environmental Law. No underground storage tanks, asbestos-containing material,
or polychlorinated biphenyls have ever been located on properties currently or
formerly owned or leased by the Company or any of the Company Subsidiaries, in
any such case, the presence of which has, or would reasonably be expected to
have, a Company Material Adverse Effect. The Company has delivered to Jacobs
copies of all environmental assessments, audits, studies, and other
environmental reports in its possession or in the possession of any of the
Company Subsidiaries relating to the Company, any of the Company Subsidiaries or
any of their current or former properties or operations.
For purposes of this Agreement, "Environmental Law" means any federal,
-----------------
state, local or foreign law, statute, ordinance, rule, regulation, or treaty;
all judicial, administrative, and regulatory orders, judgments, decrees,
permits, and authorizations; and common law relating to: (A) the protection,
investigation, remediation, or restoration of the environment or natural
resources, (B) the handling, use, storage, treatment, disposal, release or
threatened release of any Hazardous Substance, (C) noise, odor, pollution,
contamination, land use, any injury or threat of injury to persons or property
or (D) the protection of the health and safety of employees or the public.
For purposes of this Agreement, "Hazardous Substance" means any substance,
-------------------
material, or waste that is: (A) listed, classified or regulated in any
concentration pursuant to any Environmental Law; (B) any petroleum hydrocarbon,
asbestos-containing material, lead-containing paint or plumbing, polychlorinated
biphenyls, radioactive materials or radon; or (C) any other substance, material,
or waste which may be the subject of regulatory action by any governmental
entity pursuant to any Environmental Law.
SECTION 3.20. Insurance; Bonds. The Company has provided to Jacobs a
----------------
complete list accurately describing all insurance policies, other than insurance
policies purchased by subcontractors or other third parties under which the
Company or any of the Company Subsidiaries are additional named insureds, held
by or for the benefit of the Company or any of the Company Subsidiaries or
concerning their respective businesses and properties, including but not limited
to all casualty, errors and omissions insurance and officers' and directors'
liability insurance policies that cover the Company or any of the Company
Subsidiaries or their officers and directors and all material outstanding
bonds, letters of credit and other surety arrangements
26
<PAGE>
issued or entered into in connection with the businesses, assets and liabilities
of the Company or any of the Company Subsidiaries. There are no pending material
claims against such insurance by the Company or any of the Company Subsidiaries
as to which the applicable insurers have denied coverage. In addition, there
exist no material claims under such insurance that have not been properly filed
by the Company or any of the Company Subsidiaries. During the past three (3)
years, neither the Company nor any Company Subsidiary has been refused any
insurance coverage by any insurer from which the Company or any Company
Subsidiary has sought coverage.
SECTION 3.21. Labor and Employment Matters. Except as set forth in
----------------------------
Section 3.21 of the Company Disclosure Schedule, there is no collective
bargaining agreement or other labor agreement to which the Company or any of the
Company Subsidiaries is a party or by which the Company or any of the Company
Subsidiaries is bound. Each of the Company and the Company Subsidiaries has
complied in all material respects with all applicable laws, rules and
regulations relating to the employment of the employees of the Company and the
Company Subsidiaries, including, without limitation, those related to wages,
hours, collective bargaining and the payment and withholding of taxes and other
sums as required by appropriate governmental authorities and have withheld and
paid to the appropriate governmental entities, or are holding for payment not
yet due to such authorities, all material amounts required to be withheld from
the employees of the Company or the Company Subsidiaries and are not liable for
any material arrears of wages, taxes, penalties or other sums for failure to
comply with any of the foregoing. There is no: (a) unfair labor practice
complaint against the Company or any of the Company Subsidiaries pending before
the National Labor Relations Board or any state or local agency; (b) pending
labor strike or other material labor trouble involving the Company or any
Company Subsidiary; (c) material labor grievance pending against the Company or
any Company Subsidiary; (d) pending representation question respecting the
employees of the Company or any Company Subsidiary; or (e) pending arbitration
proceedings arising out of or under any collective bargaining agreement to which
the Company or any Company Subsidiary is a party or by which it is bound.
SECTION 3.22. Material Contracts. (a) Section 3.22 of the Company
------------------
Disclosure Schedule lists all of the following types of contracts or
arrangements to which the Company or any Company Subsidiary is a party or by
which any of their respective properties or assets are bound:
(i) all Client Contracts (as defined below) (A) which are "fixed-
price," "guaranteed maximum price" or similar contracts, (B) pursuant to
which the Company or any of the Company Subsidiaries has responsibility for
any construction activity and (C) with a total contract value in excess of
$5,000,000, including all such contracts involving a joint venture,
partnership or teaming arrangement of the Company or any of the Company
Subsidiaries with another party (collectively, the "Fixed-Price
-----------
Construction Contracts");
----------------------
27
<PAGE>
(ii) any agreement, other than Client Contracts and purchase
orders or sub-contracts associated with Client Contracts, presently in
effect for the purchase of inventory, supplies, equipment or other personal
property, or the procurement of services, except individual purchase orders
or aggregate purchase orders to a single vendor involving payments of less
than $500,000;
(iii) any lease presently in effect or ownership of equipment,
machinery or other personal property involving aggregate annual payments in
excess of $500,000;
(iv) any agreement presently in effect relating to the purchase
or acquisition, by merger or otherwise, of a significant portion of its
business, assets or securities by any other Person, or of any other Person
by it, other than as contemplated herein;
(v) any agreement presently in effect containing a covenant or
covenants which purport to limit its ability or right to engage in any
lawful business activity material to it or to compete with any Person in a
business material to it;
(vi) any agreement presently in effect pursuant to which it has
appointed any Person to act as its sales agent or pursuant to which it has
been appointed a sales agent by any third party;
(vii) any agreement presently in effect with any of its officers
or directors and any material agreement presently in effect with any of its
employees or affiliates, not otherwise listed on Section 3.14(d) of the
Company Disclosure Schedule, including all non-competition and
indemnification agreements;
(viii) any agreement presently in effect for the license of any
patent, copyright, trade secret or other proprietary information agreements
involving the payment by or to the Company or any Company Subsidiary in
excess of $500,000 per year;
(ix) any agreement entered into outside the ordinary course of
business and presently in effect, involving payments to or obligations of
in excess of $500,000, not otherwise described in this Section 3.22, and
other than Client Contracts; and
(x) any loan agreement, agreement of indebtedness, note, security
agreement, guarantee or other document pursuant to or in connection with
the Company's or any of the Company Subsidiaries' receipt or extension of
credit in excess of $500,000 other than in connection with Client Contracts
(items listed in (i) through (x) are collectively referred to herein as the
"Contracts").
---------
(b) The Company has delivered or otherwise made available to Jacobs
and its representatives all Contracts, Client Contracts and all Bids (as defined
below) for Fixed-Price Construction Contracts (and all amendments, modifications
and supplements thereto and all side letters to which the Company or any Company
Subsidiary is a party affecting the obligations of any party thereunder).
28
<PAGE>
(c) Except as set forth in Section 3.22(c) of the Company Disclosure
Schedule (and with respect to clauses (i), (ii), (iii), (iv) and (v) below,
except as otherwise would not reasonably be expected to have a Company Material
Adverse Effect):
(i) There is no default under any Contract or Client Contract
either by the Company or any of the Company Subsidiaries or, to the
knowledge of the Company, by any other party thereto, and no event has
occurred that with the lapse of time or the giving of notice or both would
constitute a default thereunder by the Company or any of the Company
Subsidiaries or, to the knowledge of the Company, any other party;
(ii) No party to any Contract or Client Contract has given notice
to the Company or any Company Subsidiary of or made a claim against the
Company or any Company Subsidiary with respect to any breach or default
thereunder;
(iii) To the knowledge of the Company, no party to any Contract
or Client Contract intends to cancel, withdraw, modify or amend any such
Contract or Client Contract;
(iv) With respect to each and every Client Contract or Bid, (a)
the Company has fully complied with all terms and conditions of such Client
Contract or Bid, including all clauses, provisions and requirements
incorporated expressly, by reference or by operation of law therein; (b)
the Company has fully complied with all requirements of any statute, rule,
regulation or order of any Governmental Authority or any agreement,
pertaining to such Client Contract or Bid, including the International
Trade in Arms Regulation; (c) all representations and certifications
executed, acknowledged or set forth in or pertaining to such Client
Contract or Bid were current, accurate and complete as of their effective
date, and the Company has fully complied with all such representations and
certifications, including, without limitation, all representations and
certifications required by or relating to the Truth-In-Negotiations-Act,
the Procurement Integrity Act, the Foreign Corrupt Practices Act, the Cost
Accounting Standards, the regulations and rules relating to Foreign
Military Sales and the regulations and rules relating to the submission of
progress payment requests; (d) no Governmental Authority nor any prime
contractor, subcontractor or other Person has notified the Company, either
orally or in writing, that the Company has breached or violated any
statute, rule, regulation, certification, representation, clause, provision
or requirement; (e) no termination for convenience, termination for
default, cure notice or show cause notice has been issued; (f) no cost
incurred by the Company has been questioned or disallowed; and (g) no money
due to the Company has been withheld or set off;
(v) There exist (a) no financing arrangements with respect to
performance of any Client Contract; (b) no outstanding claims or requests
for equitable or financial adjustments against the Company or any of the
Company Subsidiaries, either by any party to a Client Contract, any
Governmental Authority or by any prime contractor, subcontractor, vendor or
other third party, arising under or relating to any Client Contract or Bid;
(c) no facts that are known by the Company or any of the Company
Subsidiaries
29
<PAGE>
upon which such a claim may be validly based in the future; (d) no disputes
between the Company or any of the Company Subsidiaries and any party to a
Client Contract, any Governmental Authority or any prime contractor,
subcontractor or vendor arising under or relating to any Client Contract or
Bid; and (e) no facts that are known by the Company or any of the Company
Subsidiaries over which such a dispute may validly arise in the future; and
(vi) There exists no uncompleted Client Contract as to which the
Company's estimated cost at completion (including material and labor costs,
other direct costs, overheads, engineering costs and manufacturing costs,
whether incurred or yet to be incurred) as of the Company Balance Sheet
Date exceeds by $500,000 the aggregate contract revenue recorded or to be
recorded under such Client Contract through completion (a "Loss Contract").
-------------
For purposes of this Agreement, "Client Contract" means any contract,
---------------
subcontract, teaming agreement or arrangement, joint venture, basic ordering
agreement, letter contract, purchase order, delivery order, change order, or
other enforceable commitment of any kind relating to the business of the Company
or any of the Company Subsidiaries pursuant to which the Company or any of the
Company Subsidiaries has derived, or is expected to derive, any revenue.
For purposes of this Agreement, "Government Contract" means (a) any Client
-------------------
Contract between the Company or any of the Company Subsidiaries and (i) any
Governmental Authority, (ii) any prime contractor to any Governmental Authority,
or (iii) any subcontractor with respect to any contract described in clause (i)
or (ii) and (b) any Client Contract which is wholly or partially funded by,
directly or indirectly, or through any Governmental Authority.
For purposes of this Agreement, "Bid" means any quotation, bid or proposal
---
by the Company or any of the Company Subsidiaries which, if accepted or awarded,
would lead to a Fixed-Price Construction Contract.
For purposes of this Agreement, "Governmental Authority" means any foreign,
----------------------
domestic, federal, territorial, state or local governmental authority, quasi-
governmental authority, instrumentality, court, government or self-regulatory
organization, commission, tribunal or organization or any regulatory,
administrative or other agency, or any political or other subdivision,
department or branch of any of the foregoing.
SECTION 3.23. Related Party Transactions. Except as set forth in
--------------------------
Sections 3.22 or 3.23 of the Company Disclosure Schedule and except for
compensation and benefits payable in the ordinary course of business and except
for normal travel advances made in the ordinary course of business consistent
with past practice, no shareholder, director, officer, partner, employee,
"affiliate" or "associate" (as such terms are defined in Rule 12b-2 under the
Exchange Act) of the Company or any of the Company Subsidiaries (a) since
January 1, 1996, has lent or borrowed any monies to or from or has outstanding
any indebtedness or other similar obligations to the Company or any of the
Company Subsidiaries (other than such Person's Flexi-Trust Debt), (b) to the
knowledge of the Company, owns any direct or indirect interest of any kind
(except
30
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with respect to the ownership of not more than one percent (1%) of any class of
equity security in a publicly-held company) in, or is a director, officer,
employee, partner, affiliate or associate of, or consultant or lender to, or
borrower from, or has the right to participate in the management, operations or
profits of, any Person that is a competitor, supplier, customer, distributor,
lessor, tenant, creditor or debtor of the Company or any of the Company
Subsidiaries, (c) is otherwise a party to, or since January 1, 1996 has been a
party to, any contract, arrangement or understanding with the Company or any of
the Company Subsidiaries involving payments equal to or in excess of $60,000 per
year or (d) to the knowledge of the Company, owns or has any rights in any
assets, properties, licenses or rights which are used or leased (or, since
January 1, 1996, were used or leased) by the Company or any of the Company
Subsidiaries in the conduct of their respective businesses.
SECTION 3.24. Real Estate. (a) The Company has delivered or otherwise
-----------
made available to Jacobs and its representatives a complete and accurate list of
the following:
(i) all real property and interests in real property and the
buildings, structures and improvements thereon (the "Owned Property") which
--------------
the Company or any of the Company Subsidiaries owns;
(ii) all leases (the "Leases") of real property and interests in
------
real property and the buildings, structures and improvements thereon (the
"Leased Property" and together with the Owned Property, the "Facilities")
---------------- ----------
pursuant to which the Company or any of the Company Subsidiaries is the
lessee;
(iii) all contracts or options (and all amendments, extensions
and modifications thereto) held by the Company or any of the Company
Subsidiaries, or contractual obligations (and all amendments, extensions
and modifications thereto) on the part of either the Company or any of the
Company Subsidiaries, to purchase or acquire any interest in real property;
(iv) all contracts or options (and all amendments, extensions and
modifications thereto) granted by either the Company or any of the Company
Subsidiaries, or contractual obligations (and all amendments, extensions
and modifications thereto) on the part of either the Company or any of the
Company Subsidiaries, to sell or dispose of any interest in real property;
and
(v) all policies of title insurance issued to the Company or any
of the Company Subsidiaries with respect to the Facilities.
The Facilities are sufficient for the conduct of the Company's business as such
business is now being conducted. All Owned Properties have received all
required approvals of Governmental Authorities (including, without limitation,
permits and a certificate of occupancy or other similar certificate permitting
lawful occupancy of the Facilities) required in connection with the operation
thereof and are being operated and maintained in all material respects in
accordance
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with applicable laws, rules and regulations. The improvements constructed on the
Facilities, including, without limitation, all leasehold improvements situated
in or on the Leased Property and owned by the Company, and all material fixtures
and equipment and other material tangible assets owned, leased or used by the
Company or any of the Company Subsidiaries at the Facilities are (i) subject to
no known material defects, (ii) in good operating condition and repair, subject
to ordinary wear and tear, and (iii) in conformity in all material respects with
all applicable laws, ordinances, orders, regulations and other requirements
relating thereto currently in effect.
(b) Except as set forth in Section 3.24 of the Company Disclosure
Schedule, (i) each Lease is in full force and effect, (ii) neither the Company
nor any of the Company Subsidiaries is in default in any material respect of
their respective obligations under any Lease, and (iii) the Company and the
Company Subsidiaries have no knowledge of any restriction or any asserted
restriction that does or could reasonably be expected to impair in any material
respect the use of the applicable Facility in the business of the Company or any
Company Subsidiary as now used.
(c) Except as set forth in Section 3.24 of the Company Disclosure
Schedule and except for matters that do not have, and would not reasonably be
expected to have, a Company Material Adverse Effect and except for matters
disclosed on any policies of title insurance issued to the Company or any of the
Company Subsidiaries with respect to the Owned Properties which have been made
available to Jacobs, none of the Owned Properties are subject to any liens,
mortgages, deeds of trust, claims against title, security interests, rights of
way, written agreements, reservations of an interest in title or other
encumbrances on title.
SECTION 3.25. Government Contracting. (a) Except as set forth in Section
----------------------
3.25 of the Company Disclosure Schedule: (i) neither the Company, any of the
Company Subsidiaries nor any of the Company's and the Company Subsidiaries'
directors, officers or employees, or to the knowledge of the Company, any of the
Company's and the Company Subsidiaries' agents or consultants, is (or for the
last five years has been) under administrative, civil or criminal investigation
(including as a result of a qui tam or similar action brought under the Civil
-------
False Claims Act or any similar state or local law, rule or regulation),
indictment or information, audit or internal investigation with respect to any
alleged irregularity, misstatement or omission arising under or relating to any
Government Contract or Bid or is (or for the last five years has been) in
violation of any statutes or regulations relative to prohibited practices,
including but not limited to the False Claims Act, prohibitions against "Buying
In", the Anti-Kickback Act, the Federal Election Campaign Act, Truth-In-
Negotiations-Act, the Procurement Integrity Act, the Foreign Corrupt Practices
Act, International Trade in Arms Regulation, Cost Accounting Standards,
prohibitions against conflict of interest and anti-trust laws or any
governmental accounting regulations; (ii) neither the Company nor any of the
Company Subsidiaries have made a voluntary disclosure to any Governmental
Authority with respect to any alleged irregularity, misstatement or omission
arising under or relating to any Government Contract or Bid that has led or
would reasonably be expected to lead, either before
32
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or after the Closing Date, to any of the consequences set forth in (i) - (ii)
above or any other material damage, penalty assessment, recoupment of payment or
disallowance of cost.
(b) Except as set forth in Section 3.25 of the Company Disclosure
Schedule, neither the Company, any of the Company Subsidiaries nor any of the
Company's and the Company Subsidiaries' directors, officers or employees is (or
for the last five years has been) suspended or debarred from doing business with
any Governmental Authority or has been declared nonresponsible or ineligible for
U.S. Government contracting. The Company knows of no circumstances that would
warrant the institution of suspension or debarment proceedings or the finding of
nonresponsibility or ineligibility on the part of the Company or any of the
Company Subsidiaries in the future.
(c) Except to the extent prohibited by the Industrial Security Manual
For Safeguarding Classified Information, Section 3.25 of the Company Disclosure
Schedule sets forth all facility security clearances held by the Company or any
of the Company Subsidiaries. The Company and the Company Subsidiaries and each
of their respective officers, directors or employees are in compliance in all
material respects with all laws, rules, regulations and other requirements
relating to such facility security clearances or the safeguarding of classified
information, and none of the Company or any of the Company Subsidiaries know of
any facts or circumstances which would result in the revocation of such facility
security clearances. The Company and the Company Subsidiaries are in full
compliance with all Foreign Ownership and Control Interests ("FOCI") regulations
----
and have received all appropriate approvals within the last five years.
(d) Except as set forth in Section 3.25 of the Company Disclosure
Schedule, the Company's cost accounting and procurement systems with respect to
Government Contracts are in compliance in all material respects with all
applicable governmental regulations and rules.
SECTION 3.26. Foreign Corrupt Practices. Neither the Company, the Company
-------------------------
Subsidiaries nor any director, officer or employee of the Company or any Company
Subsidiary, nor, to the knowledge of the Company, any other Person acting on
behalf of the Company or any of the Company Subsidiaries, has, directly or
indirectly, within the past four years (a) given or agreed to give any gift or
similar benefit to any customer, supplier, governmental official or employee,
representative of a political party, or other person who is or may be in a
position to help or hinder the Company or any Company Subsidiary (or assist the
Company or any Company Subsidiary in connection with any actual or proposed
transaction) which (i) is in violation of applicable federal, state, local or
foreign law, (ii) for any of the purposes described in Section 162(c) of the
Foreign Corrupt Practices Act, or (iii) for establishment or maintenance of any
concealed fund or concealed bank account, or (b) acted in a manner which would
be unlawful under any applicable United States or foreign laws pertaining to the
export or import of technical data, restrictive trade practices or boycotts or
the regulations under any of such statutes or laws.
SECTION 3.27. Year 2000. Except as set forth in Section 3.27 of the
---------
Company Disclosure Schedule, all of the material computer software, computer
firmware, computer
33
<PAGE>
hardware (whether general or special purpose), and other similar or related
items of automated, computerized, and/or software system(s) that are used or
relied on in any material respect by the Company or any of the Company
Subsidiaries in the conduct of their respective businesses will not malfunction
in any material respect, will not cease to function in any material respect,
will not generate incorrect data in any material respect, and will not produce
incorrect results in any material respect when processing, providing, and/or
receiving (i) date-related data into and between the twentieth and twenty-first
centuries and (ii) date-related data in connection with any valid date in the
twentieth and twenty-first centuries, in any such case, assuming that all
computer software, computer firmware, computer hardware (whether general or
special purpose) and other similar or related items of automated, computerized
and/or software system(s) that are used by any other Person (including Jacobs
and/or its affiliates) after the Effective Time in combination with the
foregoing property of the Company, properly exchange date/time data with such
Company property (collectively, "Year 2000 Compliance"). Neither the Company nor
--------------------
any of the Company Subsidiaries have (i) received any communications asserting
any claim with respect to the Company's or any of the Company Subsidiaries' Year
2000 Compliance and (ii) made any certifications relating to Year 2000
Compliance.
SECTION 3.28. Intellectual Property. The Company and the Company
---------------------
Subsidiaries own, or are validly licensed or otherwise have the right to use all
(i) foreign and United States federal and state patents, trademarks, trade
names, service marks and copyright registrations, (ii) foreign and United States
federal and state patent, trademark, trade name, service mark and copyright
applications for registration, (iii) common law claims to trademarks, service
marks and trade names, (iv) claims of copyright which exist although no
registrations have been issued with respect thereto, (v) fictitious business
name filings with any state or local Governmental Authority and (vi) inventions,
concepts, designs, improvements, original works of authorship, computer
programs, know-how, research and development, techniques, modifications to
existing copyrightable works of authorship, data and other proprietary and
intellectual property rights (whether or not patentable or subject to copyright
or trade secret protection), in each case which are material to the conduct of
the business of the Company and the Company Subsidiaries, taken as a whole
(collectively, the "Intellectual Property Rights"). There are no Liens on the
----------------------------
Intellectual Property Rights. There are no outstanding and, to the Company's
knowledge, no threatened material disputes or disagreements with the Company or
any of the Company Subsidiaries with respect to any Intellectual Property
Rights.
SECTION 3.29. Title to Assets. Except as set forth in Section 3.29 of the
---------------
Company Disclosure Schedule and except where the failure to have a good, valid
and indefeasible title would not reasonably be expected to have a Company
Material Adverse Effect, each of the Company and the Company Subsidiaries has
good, valid and indefeasible title to all of the tangible assets purported to be
owned by it, whether real, personal or mixed. All tangible property owned by the
Company or any of the Company Subsidiaries is free and clear of restrictions
on or conditions to transfer or assignment, and free and clear of mortgages,
liens, pledges, charges, encumbrances, equities, claims, easements, rights of
way, covenants, conditions or restrictions, except for those disclosed in the
Company Financial Statements, except for matters disclosed on any policies of
title insurance issued to the Company or any of
34
<PAGE>
the Company Subsidiaries with respect to any Facilities and made available to
Jacobs and except for those not reasonably expected to have a Company Material
Adverse Effect.
SECTION 3.30. Accuracy and Completeness of Securityholders' Schedules.
-------------------------------------------------------
The schedules provided or to be provided by the Company to Jacobs, the Payment
Agent or the Escrow Agent pursuant to Article I shall accurately and completely
reflect the corresponding information set forth in the books and records of the
Company and the Flexi-Trust, respectively.
SECTION 3.31. No Other Representations. Neither the Company nor any
------------------------
Person affiliated therewith shall be deemed to have made to Jacobs or any other
Person any representation or warranty other than as expressly made by the
Company in this Article 3. Neither the Company nor any Person affiliated
therewith makes any representation or warranty regarding any projections,
estimates, budgets or forward-looking information heretofore delivered to or
made available to Jacobs or any other Person regarding future revenues, expenses
or expenditures, future results of operation or, except as expressly covered by
a representation and warranty contained in Article 3 hereof, any other
information or documents made available to Jacobs or any other Person with
respect to the Company.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF JACOBS
Jacobs represents and warrants to the Company that, except as otherwise
disclosed on a disclosure schedule delivered on or prior to the date hereof to
the Company by Jacobs (the "Jacobs Disclosure Schedule") or any Jacobs SEC
--------------------------
Reports (as defined herein):
SECTION 4.1. Corporate Existence and Power. Jacobs is a corporation
-----------------------------
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and Merger Subsidiary is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Missouri
and each of Jacobs and Merger Subsidiary has all corporate powers and all
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted other than any such licenses, authorizations,
permits, registrations, consents and approvals the failure of which to have
would not reasonably be expected to have a Jacobs Material Adverse Effect (as
defined below). Each of Jacobs and Merger Subsidiary is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where the character of the property owned or leased by it or the nature of its
activities makes such qualification necessary, except for those jurisdictions
where the failure to be so qualified would not reasonably be expected to have a
Jacobs Material Adverse Effect. Jacobs has heretofore delivered to the Company
true and complete copies of the certificate or articles of incorporation and
bylaws as currently in effect for each of Jacobs and Merger Subsidiary. For
purposes of this Agreement, a "Jacobs Material Adverse Effect" means a material
------------------------------
adverse effect on the assets, liabilities, business or operations of Jacobs
and/or any of the Jacobs Subsidiaries (as defined below) taken as a whole, or on
the ability of Jacobs to
35
<PAGE>
perform its obligations hereunder. The Jacobs Disclosure Schedule contains a
true and complete list of all of Jacobs' subsidiaries (the "Jacobs
------
Subsidiaries").
- ------------
SECTION 4.2. Corporate Authorization. The execution, delivery and
-----------------------
performance by Jacobs and Merger Subsidiary of this Agreement and the
consummation by Jacobs and Merger Subsidiary of the transactions contemplated
hereby are within Jacobs' and Merger Subsidiary's corporate powers subject to
the conditions set forth in this Agreement, and have been duly authorized by the
Boards of Directors of Jacobs and Merger Subsidiary, and by Jacobs as the sole
shareholder of Merger Subsidiary, and no other corporate proceedings on the part
of Jacobs or Merger Subsidiary are necessary to authorize this Agreement, the
Merger, and the transactions contemplated hereby. This Agreement constitutes a
valid and binding agreement of Jacobs and Merger Subsidiary, enforceable against
Jacobs and Merger Subsidiary in accordance with its terms, except as limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or affecting generally the enforcement of creditors rights and by the
availability of equitable remedies.
SECTION 4.3. Governmental Authorization. The execution, delivery and
--------------------------
performance by Jacobs and Merger Subsidiary of this Agreement and the
consummation of the transactions contemplated hereby and the Merger by Jacobs
and Merger Subsidiary require no action by or in respect of, or filing with, any
governmental body, agency, official or authority other than (a) the filing of a
certificate of merger in accordance with the GBCL; (b) compliance with any
applicable requirements of the HSR Act; (c) compliance with any applicable
requirements of the Exchange Act and the Securities Act, (d) compliance with any
applicable foreign or state securities or Blue Sky laws; (e) compliance with
state takeover, antitrust and competition law filings and approvals; and (f)
such actions by or filings with governmental bodies, agencies, officials or
authorities, the failure of which to obtain or make would not reasonably be
expected to: (1) have, individually or in the aggregate, a Jacobs Material
Adverse Effect; (2) impair the ability of Jacobs and Merger Subsidiary to
perform their obligations under this Agreement; or (3) prevent the consummation
of the transactions contemplated by this Agreement.
SECTION 4.4. Non-Contravention. The execution, delivery and performance
-----------------
by Jacobs and/or Merger Subsidiary of this Agreement and the consummation by
Jacobs and Merger Subsidiary of the transactions contemplated hereby do not and
will not (except in the case of clauses (b), (c) and (d) of this Section 4.4,
for any such matters that have not had, and would not reasonably be expected to
have, a Jacobs Material Adverse Effect): (a) contravene or conflict with the
articles or certificate of incorporation or bylaws of Jacobs, Merger Subsidiary
or the Jacobs Subsidiaries, (b) assuming compliance with the matters referred to
in Section 4.3, contravene or conflict with or constitute a violation of any
provision of any law, regulation, judgment, injunction, order or instrument
binding upon or applicable to Jacobs, the Jacobs Subsidiaries and/or Merger
Subsidiary or any of their respective assets, (c) result in a violation or
breach of, or constitute a default under, or give rise to a right of
termination, cancellation or acceleration of any right or obligation of Jacobs
and/or Merger Subsidiary or to a loss of any benefit to which Jacobs and/or
Merger Subsidiary is entitled under any provision of any agreement, contract or
other decree binding upon Jacobs and/or Merger Subsidiary or to which
36
<PAGE>
Jacobs and/or Merger Subsidiary is a party or by which it is affected or any
license, franchise, permit or other similar authorization held by Jacobs and/or
Merger Subsidiary or to which Jacobs and/or Merger Subsidiary is a party or by
which it is affected or (d) result in the creation or imposition of any Lien on
any asset of Jacobs and/or Merger Subsidiary.
SECTION 4.5. Jacobs SEC Reports and Financial Statements. Jacobs has
-------------------------------------------
delivered to the Company true and complete copies of each registration
statement, report and proxy or information statement, including, without
limitation, its Annual Reports to Shareholders incorporated in material part by
reference in certain of such reports, in the form (including exhibits and any
amendments thereto) required to be filed with the Securities and Exchange
Commission (the "SEC") since January 1, 1996 (collectively, the "Jacobs SEC
--- ----------
Reports"). Except as set forth in the Jacobs Disclosure Schedule, as of the
- -------
respective dates such Jacobs SEC Reports were filed or, if any such Jacobs SEC
Reports were amended, as of the date such amendment was filed, each of the
Jacobs SEC Reports (i) complied in all material respects with all applicable
requirements of the Securities Act and the Exchange Act, and the rules and
regulations promulgated thereunder, and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Each of the
audited consolidated financial statements and unaudited consolidated interim
financial statements of Jacobs (including any related notes and schedules)
included (or incorporated by reference) in its Annual Reports on Form 10-K for
each of the three fiscal years ended September 30, 1996, 1997 and 1998, when
filed, and Quarterly Reports on Form 10-Q for all interim periods subsequent
thereto (the "Jacobs Financial Statements") fairly present, in conformity with
---------------------------
GAAP applied on a consistent basis (except as may be indicated in the notes
thereto), the consolidated financial position of Jacobs and the Jacobs
Subsidiaries as of its date and the consolidated results of operations and cash
flows for the period then ended (subject to normal year-end adjustments in the
case of any unaudited interim financial statements). There has been no change
in Jacobs' accounting policies or methods of making accounting estimates or
changes in estimates that are material to the Jacobs Financial Statements,
except as described in the notes thereto. For purposes of this Agreement,
"Jacobs Balance Sheet" means Jacobs' balance sheet dated as of September 30,
- ---------------------
1998 and "Jacobs Balance Sheet Date" means September 30, 1998.
-------------------------
SECTION 4.6. Absence of Undisclosed Liabilities. Except for
----------------------------------
liabilities or obligations which are accrued or reserved against in the Jacobs
Financial Statements (or reflected in the notes thereto) or which were incurred
after the Jacobs Balance Sheet Date in the ordinary course of business and
consistent with past practices or in connection with the transactions
contemplated by this Agreement, Jacobs and the Jacobs Subsidiaries do not have
any material liabilities or obligations (whether absolute, accrued, contingent
or otherwise) of a nature required by GAAP to be reflected in a consolidated
balance sheet (or reflected in the notes thereto).
SECTION 4.7. Information Supplied. None of the information supplied or
--------------------
to be supplied by Jacobs, the Jacobs Subsidiaries, or on their behalf by their
auditors, attorneys, financial advisors, other consultants or advisors for
inclusion in the Proxy Statement, will at the time of any meeting of
shareholders of the Company to vote upon this Agreement and the
37
<PAGE>
transactions contemplated hereby contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which they are
made, not misleading or necessary to correct any statement in any earlier
communication (including the Proxy Statement) to shareholders of the Company
with respect to the transactions contemplated by this Agreement. The Proxy
Statement as it relates to Jacobs and the Jacobs Subsidiaries will comply as to
form in all material respects with the provisions of all applicable laws
including the provisions of the Securities Act and the Exchange Act and the
rules and regulations of the SEC thereunder, except that no representation is
made by Jacobs with respect to information supplied by or on behalf of the
Company specifically for inclusion therein.
SECTION 4.8. Absence of Certain Changes. Since the Jacobs Balance Sheet
--------------------------
Date, Jacobs and the Jacobs Subsidiaries have conducted their business in the
ordinary course consistent with past practices and there has not been any Jacobs
Material Adverse Effect.
SECTION 4.9. Financing. Jacobs has and until the Effective Time will
---------
continuously have sufficient funds or binding commitments therefor, subject to
no material conditions other than those contained herein, in amounts sufficient
to fund all amounts payable hereunder.
ARTICLE 5
COVENANTS OF THE COMPANY
SECTION 5.1. Confidentiality. The Company hereby acknowledges that all
---------------
non-public documents and information concerning Jacobs furnished to the Company
in connection with the transactions contemplated by this Agreement are subject
to the terms and conditions of a confidentiality letter dated July 22, 1998, by
and between the Company and Jacobs, as amended from time to time (the
"Confidentiality Letter"). The Confidentiality Letter is incorporated herein by
- -----------------------
this reference. Effective upon Closing, and only upon Closing, the
Confidentiality Letter shall terminate.
SECTION 5.2. Conduct of the Company. During the period from the date of
----------------------
this Agreement and continuing until the Effective Time, the Company agrees
(except as expressly contemplated or permitted by this Agreement, or to the
extent that Jacobs shall otherwise consent in writing, which consent shall not
be unreasonably withheld) as follows:
(a) The Company and the Company Subsidiaries shall carry on their
respective businesses in the ordinary course consistent with past practice
(provided, however, that neither the Company nor any of the Company Subsidiaries
shall enter into any Fixed-Price Construction Contract or any other contract,
agreement, arrangement or understanding that would involve amounts in excess of
$10,000,000) and use their reasonable best efforts to preserve intact their
present business organizations, keep available the services of their present
officers and employees and preserve their relationships with customers,
suppliers and others having business dealings with them to the end that their
goodwill and ongoing business shall not be impaired in any material respect at
the Effective Time.
38
<PAGE>
(b) The Company shall not, nor shall it permit any of the Company
Subsidiaries to, nor shall it propose to, (i) declare or pay any dividends on or
make other distributions in respect of any of its capital stock, except that it
may continue the declaration and payment of regular quarterly cash dividends,
with usual record and payment dates for such dividends in accordance with the
Company's past dividend practice, (ii) split, combine or reclassify its capital
stock or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock, or
(iii) except as required by the Company's Shareholder Agreement, repurchase,
redeem or otherwise acquire, any shares of capital stock of the Company or any
of the Company Subsidiaries. It is understood that the foregoing shall not
prevent the Company from taking any action required by the terms of the Company
Options.
(c) The Company shall not, nor shall it permit any of the Company
Subsidiaries to, issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock of any class or any
securities convertible into, or any rights (including preemptive rights),
warrants, calls, subscriptions or options to acquire, any such shares or
convertible securities, other than (i) the issuance of shares of Company Common
Stock upon the exercise of Company Options outstanding on the date hereof and
(ii) issuance by a Company Subsidiary of its capital stock to its parent.
(d) Neither the Company nor any of the Company Subsidiaries shall
amend or propose to amend their respective Articles of Incorporation or bylaws
except as may be necessary to accomplish the Merger and other transactions
contemplated by this Agreement on the terms and conditions hereof.
(e) The Company shall provide Jacobs, within 5 business days, copies
of all filings made by the Company with any Governmental Authority in connection
with this Agreement and the transactions contemplated hereby, other than the
portions of such filings that include confidential information not directly
related to the transactions contemplated by this Agreement.
(f) The Company shall not (i) enter into, adopt, amend in any material
respect (except as may be required by law) or terminate any Company Benefit Plan
or other employee benefit plan or any agreement, arrangement, plan or policy
between the Company and one or more of its directors or officers, or (ii) except
as may be required for the Company to satisfy its obligations pursuant to the
Company Bonus Plan and except for normal increases in the ordinary course of
business consistent with past practice that, in the aggregate, do not result in
a greater than 5% increase in benefits or compensation expense to the Company or
any of the Company Subsidiaries, increase by more than 5% in the aggregate the
compensation or fringe benefits of the directors and officers of the Company and
the Company Subsidiaries or pay any benefit not required by any plan and
arrangement as in effect as of the date hereof (including, without limitation,
the granting of stock options, restricted stock, or similar stock-based awards)
or enter into any contract, agreement, commitment or arrangement to do any of
the foregoing, except as otherwise provided herein.
39
<PAGE>
(g) Each of the Company and the Company Subsidiaries shall use its
reasonable best efforts to materially comply with all laws, rules and
regulations and comply with all material contractual and other material
obligations applicable to such Company or the Company Subsidiaries.
(h) Neither the Company nor any of the Company Subsidiaries shall
incur any indebtedness for borrowed money, not issue any bond, debenture or
promissory note and, except for trade payables and any other liabilities or
obligations incurred in the ordinary course of business (consistent with past
practice), not create, incur, acquire, assume, guarantee or become subject to,
or agree to incur or become subject to, any other obligation or liability
(contingent or otherwise) in excess of $500,000.
(i) Each of the Company and the Company Subsidiaries shall be
obligated to not subject any of its respective assets (whether tangible or
intangible) to any Lien (except for leases that do not materially impair the use
of the property subject thereto).
(j) Each of the Company and the Company Subsidiaries shall be
obligated to not acquire any material properties or assets in excess of $500,000
and not sell, assign, transfer, convey, lease or otherwise dispose of any of its
material properties or assets in excess of $500,000 (except for fair
consideration in the ordinary course of business consistent with past practice).
(k) Each of the Company and the Company Subsidiaries shall be
obligated to not cancel or compromise any material debt or material claim or
waive or release any material right of the Company or any of the Company
Subsidiaries except in the ordinary course of business consistent with past
practice;
(l) Each of the Company and the Company Subsidiaries shall be
obligated to not enter into any commitment for capital expenditures of the
Company in excess of $100,000 for any individual commitment and $250,000 for all
commitments in the aggregate except as set forth on Section 5.2 of the Company
Disclosure Schedule.
(m) Each of the Company and the Company Subsidiaries shall not agree
to take any action which would be prohibited by this Section 5.2.
SECTION 5.3. Advice of Changes. The Company shall confer on a regular and
-----------------
frequent basis with Jacobs, report on operational matters and promptly advise
Jacobs orally and in writing of any change or event having, or which, insofar as
reasonably can be foreseen, would have, a Company Material Adverse Effect.
SECTION 5.4. Merger Approval; Proxy Materials. (a) Subject to Section
--------------------------------
5.4(c), the directors of the Company shall recommend approval of this Agreement,
the Merger, and the transactions contemplated hereby ("Merger Approval") by the
---------------
Company's shareholders and the Company shall cause a meeting of its shareholders
(the "Company Shareholder Meeting") to be duly called and held as soon as
---------------------------
40
<PAGE>
reasonably practicable, but in any event no later than 30 days after the date of
this Agreement, for the purpose of voting on the Merger Approval.
(b) Subject to Section 5.5, in connection with the Company Shareholder
Meeting, the Company (i) as soon as reasonably practicable, will participate in
the preparation of and thereafter mail to its shareholders, the Proxy Statement
and all other proxy materials for such meeting, and (ii) will use its best
efforts to obtain the requisite vote of shareholders in favor of the Merger
Approval.
SECTION 5.5. Acquisition Proposals. (a) The Company agrees that it has had
---------------------
sufficient opportunity, and has taken advantage of such opportunity, to solicit
other competing Acquisition Proposals (as defined below). In view of the
foregoing, the Company agrees that neither it nor any of the Company
Subsidiaries shall authorize or permit any of its officers, directors,
employees, agents or representatives (including, without limitation, any
investment banker, attorney or accountant retained by it or any of the Company
Subsidiaries) to directly or indirectly, initiate, solicit, encourage or
otherwise facilitate any inquiries or the making of any proposal or offer
(including, without limitation, any proposal, tender offer or exchange offer to
the Company's shareholders) for the acquisition of the Company or any of the
Company Subsidiaries (whether by way of merger, consolidation, purchase of
capital stock, purchase of assets or otherwise) or any material portion of its
capital stock or assets by any Person other than Jacobs and Merger Subsidiary
(any such proposal or offer being hereinafter referred to as an "Acquisition
-----------
Proposal") or engage in any negotiations concerning or provide any confidential
- --------
information or data to, or have any discussions with, any Person relating to an
Acquisition Proposal, or otherwise facilitate any effort or attempt to make or
implement an Acquisition Proposal. The Company shall immediately cease and cause
to be terminated any existing activities, discussions or negotiations with any
parties (other than Jacobs) conducted heretofore with respect to any of the
foregoing. The Company will take the necessary steps to inform promptly the
appropriate individuals or entities referred to in the first sentence hereof of
the obligations undertaken in this Section 5.5. The Company also agrees that it
promptly shall request each other Person (other than Jacobs) that has heretofore
executed a confidentiality agreement in connection with its consideration of
acquiring the Company or any of the Company Subsidiaries to return all
confidential information heretofore furnished to such Person by or on behalf of
the Company or any of the Company Subsidiaries and enforce any such
confidentiality agreements.
(b) The Company shall notify Jacobs immediately of any communications
received by, or any request for information from, the Company relating to a
possible Acquisition Proposal, and the Company shall promptly (and in no event
more than two days) thereafter provide to Jacobs in writing the details of, and
copies of any written material reflecting, any such communication or request.
In the event that the Company receives a bona fide Acquisition Proposal that is,
in the reasonable good faith judgment of the Board of Directors of the Company,
after consultation with the Company's financial advisors, financially more
favorable to the Company's shareholders than the terms of the Merger (a
"Competing Proposal"), then, notwithstanding Section 5.5(a), the Company may
- -------------------
provide information to and negotiate with the
41
<PAGE>
party making the Competing Proposal, communicate the Competing Proposal to the
Company's shareholders and make a recommendation in favor of the Competing
Proposal if the Board of Directors of the Company determines in good faith,
after consultation with outside legal counsel, that such action or actions are
required by reason of the fiduciary duties of the members of the Board of
Directors of the Company to the Company's shareholders under applicable law;
provided, however, that the Company shall not enter into any written agreement
relating to a Competing Proposal without first terminating this Agreement
pursuant to Section 9.1 and paying to Jacobs the amounts required under Section
9.3. Until such termination of this Agreement, the Company shall advise Jacobs
on a daily basis of all discussions and negotiations relating to a Competing
Proposal and, promptly upon the Company's (or its representative's) receipt or
delivery of any draft or definitive agreement relating to a Competing Proposal,
the Company shall deliver a copy thereof to Jacobs. Nothing in this Section
5.5(b) shall limit Jacobs' right or ability to seek equitable or injunctive
relief in enforcing this Agreement.
(c) Nothing contained in this Agreement shall prohibit the Company
from making any disclosure to the Company's shareholders if, in the opinion of
the Board of Directors of the Company, after consultation with outside legal
counsel, failure so to disclose would be inconsistent with its fiduciary duties
to the Company's shareholders.
SECTION 5.6. Access to Information. From the date hereof until the
---------------------
Effective Time, the Company will provide Jacobs, its counsel, financial
advisors, auditors and other authorized representatives reasonable supervised
access during normal business hours to the offices, properties, books and
records of the Company and each of the Company Subsidiaries and will furnish to
Jacobs, its counsel, financial advisors, auditors and other authorized
representatives such financial and operating data and other information as such
Persons may reasonably request and will instruct the Company's and each of the
Company Subsidiaries' employees, counsel and financial advisors to cooperate
with Jacobs in its investigation of the business of the Company and each of the
Company Subsidiaries. From the date hereof until the Effective Time, the Company
will allow Jacobs, its counsel, financial advisors, auditors and other
authorized representatives to make extracts and copies of the books and records
of the Company and each of the Company Subsidiaries during normal business
hours. The Company shall use its commercial best efforts to cause the Company's
officers, employees, consultants, agents, accountants, attorneys and other
representatives to cooperate in all reasonable respects with Jacobs' counsel,
financial advisors, auditors and other authorized representatives in connection
with such review and examination.
SECTION 5.7. Notices of Certain Events. The Company shall promptly notify
-------------------------
Jacobs of:
(a) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
42
<PAGE>
(b) any notice or other communication from or to any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement;
(c) any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge threatened against, relating to or
involving or otherwise affecting the Company which, if pending on the date of
this Agreement, would have been required to have been disclosed pursuant to
Section 3.12 or which relate to the consummation of the transactions
contemplated by this Agreement;
(d) any notice of, or other communication relating to, a default,
received by it subsequent to the date of this Agreement and prior to the Closing
Date, under any contract material to the financial condition, properties,
businesses or results of operations of the Company to which it is a party or is
subject; and
(e) any material adverse change in the financial condition,
properties, businesses, prospects or results of operations of the Company, other
than changes resulting from general economic conditions.
SECTION 5.8. HSR Act Filing. The Company has filed, or shall file
--------------
promptly after the execution and delivery of this Agreement, with the Federal
Trade Commission ("FTC") and the Department of Justice ("DOJ") any applicable
--- ---
notification and report or similar required form and shall file any supplemental
information which may be requested in connection therewith pursuant to the HSR
Act, which report and notification form and supplemental information has
complied or will comply in all material respects with the requirements of the
HSR Act.
SECTION 5.9. Return of Information. In the event that this Agreement
---------------------
is terminated for any reason, the Company and the Company Subsidiaries shall,
and shall cause their respective officers, directors, employees, counsel,
financial advisors, auditors and other representatives to, return all
confidential information heretofore furnished to any such Persons by or on
behalf of Jacobs and to otherwise enforce the terms of the Confidentiality
Letter.
ARTICLE 6
COVENANTS OF JACOBS
SECTION 6.1. Confidentiality. Jacobs hereby acknowledges that all non-
---------------
public documents and information concerning the Company and the Company
Subsidiaries furnished to Jacobs or any of its advisors in connection with the
transactions contemplated by this Agreement are subject to the terms and
conditions of the Confidentiality Letter. Effective upon Closing, and only upon
Closing, the Confidentiality Letter shall terminate.
SECTION 6.2. Conduct of Jacobs. During the period from the date of this
-----------------
Agreement and continuing until the Effective Time, Jacobs agrees (except as
expressly contemplated or permitted by this Agreement, or to the extent that
Jacobs shall otherwise consent in writing) as follows:
43
<PAGE>
(a) Ordinary Course. Jacobs and the Jacobs Subsidiaries shall carry on
---------------
their respective businesses in the ordinary course and use all reasonable
efforts to preserve intact their present business organizations, keep available
the services of their present officers and employees and preserve their
relationships with customers, suppliers and others having business dealings with
them to the end that their goodwill and ongoing business shall not be impaired
in any material respect at the Effective Time.
(b) Governing Documents. Jacobs shall not amend or propose to amend
-------------------
its Certificate of Incorporation or bylaws except as may be necessary to
accomplish the Merger and other transactions contemplated by this Agreement on
the terms and conditions hereof.
(c) Filings. Jacobs shall promptly provide the Company copies of all
-------
filings made by such party with any Federal, state or foreign governmental
entity in connection with this Agreement and the transactions contemplated
hereby, other than the portions of such filings that include confidential
information not directly related to the transactions contemplated by this
Agreement.
SECTION 6.3. Access to Information. From the date hereof until the
---------------------
Effective Time, Jacobs will provide the Company, its counsel, financial
advisors, auditors and other authorized representatives reasonable supervised
access during normal business hours to the offices, properties, books and
records of Jacobs and each of the Jacobs Subsidiaries and will furnish to the
Company, its counsel, financial advisors, auditors and other authorized
representatives such financial and operating data and other information as such
Persons may reasonably request and will instruct Jacobs' and each of the Jacobs
Subsidiaries employees, counsel and financial advisors to cooperate with the
Company in its investigation of the business of Jacobs and each of the Jacobs
Subsidiaries.
SECTION 6.4. Obligations of Merger Subsidiary. Jacobs will take all
--------------------------------
action necessary to cause Merger Subsidiary to perform its obligations under
this Agreement and to consummate the Merger on the terms and conditions set
forth in this Agreement.
SECTION 6.5. Notices of Certain Events. Jacobs shall promptly notify
-------------------------
the Company of:
(a) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement; and
(c) any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge threatened against, relating to or
involving or otherwise affecting Jacobs which relate to the consummation of the
transaction contemplated by this Agreement.
44
<PAGE>
SECTION 6.6. Employee Benefits. Jacobs shall (or shall cause Surviving
-----------------
Corporation to) provide the eligible employees of Surviving Corporation and its
subsidiaries with employment benefits, including but not limited to, health
benefits, dental benefits, life insurance and disability benefits, medical
reimbursement benefits, 401(k) plan benefits, pension, retirement, deferred
compensation and similar benefits, vacation benefits, dependent care benefits,
severance benefits and the like that are generally as favorable in the aggregate
as the benefits provided to the eligible employees of Jacobs and the Jacobs
Subsidiaries. Jacobs shall (or shall cause Surviving Corporation to) pay any
severance, change of control or similar payments contemplated herein to
employees and directors of the Company, if any, who are entitled thereto
pursuant to agreements or plans of the Company existing as of the date hereof
and disclosed to Jacobs in Section 3.22 of the Company Disclosure Schedule.
SECTION 6.7. Indemnification. (a) The Surviving Corporation shall honor,
---------------
and Jacobs shall cause and take such steps (including, but not limited to, the
provision of funds) as are necessary to allow the Surviving Corporation and the
Company Subsidiaries to honor, any obligation of the Company and the Company
Subsidiaries prior to the Effective Time to indemnify and hold harmless the
present and former officers and directors of the Company and of the Company
Subsidiaries (the "Indemnitees") to the full extent required or allowed by the
-----------
Company's and the Company Subsidiaries' Articles of Incorporation and bylaws, or
any indemnification agreement to which the Company and the Company Subsidiaries
and any Indemnitee are parties and which are described on Section 3.22 of the
Company Disclosure Schedule.
(b) The Surviving Corporation shall, and Jacobs shall cause and take
such steps (including, but not limited to, the provision of funds) as are
necessary to allow the Surviving Corporation and the Company Subsidiaries to,
indemnify and hold harmless any Indemnitee who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit, or proceeding, whether civil, criminal, administrative or investigative,
including without limitation derivative actions, against expenses (including
reasonable attorneys' fees and expenses), judgments, fines and amounts paid in
settlement to the full extent allowed by law.
(c) The Surviving Corporation shall, and Jacobs shall cause and take
such steps (including, but not limited to, the provision of funds) as are
necessary to allow the Surviving Corporation and the Company Subsidiaries to,
pay expenses as incurred by an Indemnitee in defending a civil or criminal
action, suit or proceeding in advance of the final disposition of the action,
suit, or proceeding upon receipt of an undertaking by or on behalf of the
Indemnity to repay such amount if it shall finally be judicially determined that
such Indemnitee was not entitled to indemnification as provided in this Section
6.7.
(d) The Surviving Corporation shall, and Jacobs shall cause and take
such steps (including, but not limited to, the provision of funds) as are
necessary to allow the Surviving Corporation to, reimburse all expenses,
including reasonable attorneys' fees, incurred
45
<PAGE>
by any person required to enforce the indemnity and other obligations of the
Surviving Corporation and Jacobs under this Section 6.7.
(e) For three years after the Effective Time, Jacobs will cause and
will take such steps (including, but not limited to, the provision of funds) as
are necessary to allow the Surviving Corporation to provide officers' and
directors' liability insurance in respect of acts or omissions occurring prior
to the Effective Time covering each such Indemnitee on terms with respect to
coverage and amounts at least as favorable as the coverage and amounts currently
provided by the Company's policy.
(f) The rights under this Section 6.7 shall be in addition to any
other rights under the GBCL or otherwise. This Section 6.7 shall survive the
consummation of the Merger.
SECTION 6.8. HSR Act Filing. Jacobs has filed, or shall file promptly
--------------
after the execution and delivery of this Agreement, with the FTC and DOJ any
applicable notification and report or similar required form, has paid or shall
pay any required filing fee in connection therewith (as its sole and separate
expense) and shall file any supplemental information which may be requested in
connection therewith pursuant to the HSR Act, which report and notification form
and supplemental information has complied or will comply in all material
respects with the requirements of the HSR Act.
SECTION 6.9. Return of Information. In the event that this Agreement is
---------------------
terminated for any reason, Jacobs shall, and shall cause its officers,
directors, employees, counsel, financial advisors, auditors and other
representatives to, return all confidential information heretofore furnished to
any such Persons by or on behalf of the Company and any of the Company
Subsidiaries and to otherwise enforce the terms of the Confidentiality Letter.
ARTICLE 7
COVENANTS OF JACOBS AND THE COMPANY
The parties hereto agree that:
SECTION 7.1. Reasonable Best Efforts. Subject to the terms and conditions
-----------------------
of this Agreement, each party will use its reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable to consummate the transactions contemplated by
this Agreement.
SECTION 7.2. Certain Filings. The Company and Jacobs shall cooperate with
---------------
each other (a) in connection with the preparation of the Proxy Statement, (b) in
determining whether any action by or in respect of, or filing with, any,
governmental body, agency or official, or authority is required, or any actions,
consents, approvals or waivers are required to be obtained from parties to any
material contracts, in connection with the consummation of the transactions
contemplated by this Agreement and (c) in seeking any such actions, consents,
approvals or waivers or making any such filings, furnishing information required
in connection therewith or
46
<PAGE>
with the Proxy Statement and seeking timely to obtain any such actions,
consents, approvals or waivers.
SECTION 7.3. Proxy Statement. The Company shall provide Jacobs a copy
---------------
of the Proxy Statement at least 2 days prior to the mailing of such Proxy
Statement to the Company's shareholders. The Company agrees to consider in good
faith incorporating Jacobs' comments to the Proxy Statement prior to the mailing
of such Proxy Statement to the Company's shareholders. Each of Jacobs, Merger
Subsidiary and the Company agrees to provide promptly to the other such
information concerning its business and financial statements and affairs as may
be reasonably required or appropriate for inclusion in the Proxy Statement or in
any amendments or supplements thereto, and to cause its counsel and auditors to
cooperate with the other's counsel and auditors in the preparation of the same.
If, at any time prior to the Effective Time, any event with respect to the
Company, its officers and directors or any of the Company Subsidiaries should
occur which is required to be described in an amendment of, or a supplement to,
the Proxy Statement, as applicable, the Company shall promptly so advise Jacobs
and Merger Subsidiary and such event shall be so described, and such amendment
or supplement (which Jacobs and Merger Subsidiary shall have a reasonable
opportunity to review) shall, if required by law, be promptly disseminated to
the shareholders of the Company.
SECTION 7.4. Publicity. On or prior to the Closing Date, Jacobs, Merger
---------
Subsidiary and the Company will consult with each other and will mutually agree
upon any press release or public announcement pertaining to this Agreement and
the transactions contemplated thereby and shall not issue any such press release
or make any such public announcement prior to such consultation and agreement,
except that either party and its affiliates may issue any such release or make
any such public announcement as it determines, in its reasonable discretion, is
required by applicable law or by obligations pursuant to any listing agreement
with any national securities exchange, in which case such party shall, and shall
cause its affiliates to, use reasonable efforts to consult in good faith with
the other party before issuing any such press release or making any such public
announcement.
SECTION 7.5. Further Assurances. At and after the Effective Time, the
------------------
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Merger
Subsidiary, any deeds, bills of sale, assignments or assurances and to take and
do, in the name and on behalf of the Company or Merger Subsidiary, any other
actions and things to vest, perfect or confirm of record or otherwise in the
Surviving Corporation any and all right, title and interest in, to and under any
of the rights, properties or assets of the Company acquired or to be acquired by
the Surviving Corporation as a result of, or in connection with, the Merger.
47
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ARTICLE 8
CONDITIONS TO THE MERGER
SECTION 8.1. Conditions to the Obligations of Each Party. The obligations
-------------------------------------------
of the Company, Jacobs and Merger Subsidiary to consummate the Merger are
subject to the satisfaction or waiver at or prior to the Closing of the
following conditions:
(a) The shareholders of the Company shall have duly approved and
adopted this Agreement, the Merger, and the other transactions contemplated
hereby to the extent required by applicable requirements of law and the Articles
of Incorporation and bylaws of the Company.
(b) any applicable waiting period under the HSR Act relating to the
Merger shall have expired or terminated;
(c) the transactions contemplated by this Agreement shall have been
approved by any federal, state, foreign or local governmental or regulatory
authority or self-regulatory body the approval of which is required to permit
the consummation thereof;
(d) no court, arbitrator or governmental body, agency or official
shall have issued any order or injunction and there shall not be any statute,
rule or regulation, restraining or prohibiting the consummation of the Merger;
provided that prior to invoking this condition, each party shall use all
commercially reasonable efforts to have any such order, injunction, legal
restraint or prohibition vacated;
(e) all actions by or in respect of or filings with any governmental
body, agency, official, or authority required to permit the consummation of the
Merger, shall have been obtained.
SECTION 8.2. Conditions to Obligations of Jacobs. The obligation of
-----------------------------------
Jacobs to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction or waiver at or prior to the Closing of the
following additional conditions; provided, however, that for purposes of this
Section 8.2, the term "Company Material Adverse Effect" shall be modified to
mean only a $4,000,000 aggregate threshold:
(a) The representations and warranties of the Company set forth in
Article 3 shall also be true and correct as of the Closing (except to the extent
that any change therein is as a result of the transactions contemplated hereby)
with the same effect as though made on the date of the Closing, except where any
breach of the representations and warranties of the Company set forth in Article
3 would not have, or would not be reasonably be expected to have a Company
Material Adverse Effect.
(b) The Company shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Effective Time.
48
<PAGE>
(c) The Company shall have given all notices to, and obtained all
consents, approvals or authorizations of or from, any Person which may be
necessary to permit the consummation of the transactions contemplated hereby
(including, without limitation, any consents required under contracts and
agreements to which the Company or any of the Company Subsidiaries is a party or
by which the Company or any of the Company Subsidiaries or any of their assets
may be bound, or which may be required to permit the change of ownership of the
Company); provided, however, that the condition specified in this Section 8.2(c)
shall not include any required novations under any Government Contract or any
notice, consent, approval or authorization which if not obtained by the Company,
would not have a Company Material Adverse Effect.
(d) Employment agreements, substantially in the form of Exhibit
-------
8.2(d)(1) hereto, or a non-competition agreement containing the same covenant
- --------
not to compete as is contained in the employment agreement, in form reasonably
acceptable to the Company and Jacobs, as the case may be, shall have been duly
executed and delivered by each of the individuals listed on Exhibit 8.2(d)(2)
----------------
hereto, and shall be in full force and effect.
(e) Since the date of this Agreement, there shall have been no event,
change, occurrence or circumstance having, or which would reasonably be expected
to have a Company Material Adverse Effect.
(f) Jacobs shall have received from Ernst & Young, a letter, dated the
Closing Date and addressed to the Board of Directors of Jacobs, stating that on
the basis of the results of certain agreed-upon procedures (not constituting an
audit) performed on the latest available accounting records of the Company,
which will include consultations with officers of the Company and the Company
Subsidiaries responsible for financial and accounting matters and other
pertinent inquiries that such accountants may deem necessary, such accountants
have no reason to believe that during the period from the Company Balance Sheet
Date to a specified date not more than five business days before the Closing
Date there was any change in the financial condition or results of operations of
the Company except for changes that have occurred in the ordinary and usual
course of its business during that period.
(g) Jacobs shall have received the opinions of the Company's counsel,
dated the Effective Time, substantially in the form of Exhibit 8.2(g) hereto.
--------------
(h) Jacobs shall have received a certificate dated as of the date of
the Closing and signed on behalf of Company by the Chief Executive Officer and
Chief Financial Officer of the Company, to the effect that the conditions to
Jacobs' obligations set forth in Sections 8.2(a), (b), (c) and (e) have been
satisfied. In addition, Jacobs shall have received a certificate dated as of
the date of the Closing and signed on behalf of the Company by the Chief
Executive Officer and Chief Financial Officer of the Company certifying (i) the
number of shares underlying and the aggregate exercise price of the unexercised
Company Options as of the Effective Time and (ii) the number of Redeemed Company
Shares as of the Effective Time and the price paid by the Company therefor.
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(i) The Company shall have amended its Benefit Replacement Plan as set
forth on Exhibit 8.2(i).
SECTION 8.3. Conditions to Obligations of the Company. The obligation of
----------------------------------------
the Company to consummate the transactions contemplated by this Agreement shall
be subject to the satisfaction or waiver at or prior to the Closing of the
following additional conditions:
(a) The representations and warranties of Jacobs set forth in Article
4 shall also be true and correct in all material respects as of the Closing
(except to the extent that any change therein is as a result of the transactions
contemplated hereby) with the same effect as though made on the date of the
Closing.
(b) Jacobs and Merger Subsidiary shall have performed in all material
respects all obligations required to be performed by them under this Agreement
at or prior to the Effective Time.
(c) The Company shall have received the opinions of the Jacobs'
counsel, dated the Effective Time, substantially in the form of Exhibit 8.3(c)
--------------
hereto.
(d) The Company shall have received a certificate dated as of the date
of the Closing and signed on behalf of Jacobs and Merger Subsidiary by the
respective Chief Executive Officers and Chief Financial Officers of each such
entity, to the effect that the conditions to the Company's obligations set forth
in Sections 8.3(a), (b) and (e) have been satisfied.
(e) Since the date of this Agreement, there shall have been no event,
change, occurrence or circumstance having, or which would reasonably be expected
to have, a Jacobs Material Adverse Effect.
ARTICLE 9
TERMINATION
SECTION 9.1. Termination. This Agreement may be terminated and the Merger
-----------
may be abandoned at any time prior to the Effective Time (notwithstanding any
Merger Approval by the shareholders of the Company):
(a) by mutual written consent of the Company and Jacobs, on behalf of
itself and Merger Subsidiary;
(b) by either the Company or Jacobs, if there shall be any law or
regulation that makes consummation of the Merger illegal or otherwise prohibited
or if any judgment, injunction, order or decree enjoining Jacobs or the Company
from consummating the Merger is entered and such judgment, injunction, order or
decree shall become final and nonappealable;
(c) by either Jacobs or the Company, if the Effective Time shall not
have occurred on or before February 26, 1999, or as otherwise extended by the
parties; provided that
50
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no party may terminate this Agreement pursuant to this clause (c) if such
party's failure to fulfill any of its obligations under this Agreement shall
have directly or indirectly resulted in the failure of the Effective Time to
occur on or before said date;
(d) by either Jacobs or the Company, if the shareholders of the
Company fail to make the Merger Approval by requisite vote at a meeting duly
convened therefor;
(e) by the Company, if the Company's Board of Directors shall have
approved a Competing Proposal in a manner permitted by Section 5.5(b);
(f) by the Company if (i) there shall have been a breach of any
representation or warranty on the part of Jacobs or Merger Subsidiary set forth
in this Agreement, or (ii) there shall have been a breach by Jacobs and Merger
Subsidiary of any of their respective covenants or agreements hereunder
materially adversely affecting (or materially delaying) the consummation of the
Merger, and Jacobs or Merger Subsidiary, as the case may be, has not cured such
breach within twenty (20) business days after notice by the Company thereof,
provided that, with respect to clauses (i) and (ii) above, the Company has not
materially breached any of its obligations hereunder and has not failed to
timely cure such breach; or
(g) by Jacobs and Merger Subsidiary if (i) there shall have been a
breach of any representation or warranty on the part of the Company set forth in
this Agreement which would reasonably be expected to have a Company Material
Adverse Effect, or (ii) there shall have been a breach by the Company of its
covenants or agreements hereunder having a Company Material Adverse Effect or
materially adversely affecting the consummation of the Merger, and the Company
has not cured such breach within twenty (20) business days after notice by
Jacobs or Merger Subsidiary thereof, provided that, with respect to clauses (i)
or (ii) above, neither Jacobs nor Merger Subsidiary has materially breached any
of their respective obligations hereunder and has not failed to timely cure such
breach; provided, further, that with respect to this Section 9.1(g), the term
"Company Material Adverse Effect" shall be modified to include a $4,000,000
rather than a $500,000 threshold.
The party desiring to terminate this Agreement pursuant to this Section 9.1
shall give written notice of such termination to the other party in accordance
with Section 10.1.
SECTION 9.2. Procedure Upon Termination. In the event of termination and
--------------------------
abandonment pursuant to this Article 9, this Agreement shall terminate and the
Merger shall be abandoned without further action by the Company or Jacobs,
provided that the agreements contained in Sections 5.1 [Confidentiality (by
Company)], 6.1 [Confidentiality (by Jacobs)], 7.3 [Public Announcements], 9.3
[Termination Fee Payable by the Company] and 9.4 [Termination Fee Payable by
Jacobs] hereof shall remain in full force and effect. If this Agreement is
terminated as provided herein, each party shall use its reasonable best efforts
to redeliver all documents, work papers and other material (including any copies
thereof) of any other party relating to the transactions contemplated hereby,
whether so obtained before or after the execution hereof, to the party
furnishing the same. Nothing contained in this Agreement shall relieve any party
from any liability for any willful breach of this Agreement prior to
termination.
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SECTION 9.3. Termination Fee Payable by the Company. Concurrently with
--------------------------------------
a termination of this Agreement pursuant to Section 9.1(e), the Company will pay
to Jacobs as liquidated damages an amount equal to the sum of $6.0 million (the
"Termination Fee") plus an additional $850,000 to cover all out-of-pocket
---------------
expenses, including, without limitation, attorneys' and accountants' fees
whether or not actually incurred by Jacobs in connection with the transaction
contemplated by this Agreement (the "Fixed Expense Fee"). If Jacobs terminates
-----------------
this Agreement pursuant to Section 9.1(d) or (g), the Company shall, within two
business days of such termination, pay Jacobs the Fixed Expense Fee as
liquidated damages.
SECTION 9.4. Termination Fee Payable by Jacobs. If the Company terminates
---------------------------------
this Agreement pursuant to Section 9.1(f), Jacobs will pay to the Company as
liquidated damages $850,000 to cover all out-of-pocket expenses, including,
without limitation, attorneys' fees and accountants' fees whether or not
actually incurred by the Company in connection with the transaction contemplated
by this Agreement.
ARTICLE 10
MISCELLANEOUS
SECTION 10.1. Notices. All notices, requests and other communications
-------
to any party hereunder shall be in writing (including telecopy or similar
writing) and shall be given,
if to Jacobs or Merger Subsidiary, to:
Jacobs Engineering Group Inc.
1111 S. Arroyo Parkway 91105
P.O. Box 7084
Pasadena, California 91109-7084
Attention: Mr. John W. Prosser, Jr.
Facsimile: (626) 578-6837
with a copy to: Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071-3197
Attention: Peter F. Ziegler, Esq.
Facsimile: (213) 229-6595
if to the Company, to:
Sverdrup Corporation
13723 Riverport Drive
Maryland Heights, Missouri 63043
Attention: Richard E. Beumer
Facsimile: (314) 770-5105
52
<PAGE>
with a copy to: Bryan Cave LLP
211 North Broadway, Suite 3600
St. Louis, Missouri 63102
Attention: Don G. Lents, Esq.
Facsimile: (314) 259-2020
if to the Securityholder Committee, to:
Sverdrup Corporation
13723 Riverport Drive
Maryland Heights, Missouri 63043
Attention: Richard E. Beumer,
Chairman
Facsimile: (314) 770-5105
or such other address or facsimile number as such party may hereafter specify by
notice to the other parties hereto. Each such notice, request or other
communication shall be effective (a) if given by facsimile, when such facsimile
is transmitted to the facsimile number specified in this Section and the
appropriate facsimile confirmation is received or (b) if given by any other
means, when delivered at the address specified in this Section.
SECTION 10.2. Survival of Representations and Warranties and Covenants.
--------------------------------------------------------
If this Agreement is not terminated pursuant to Section 9.1, the representations
and warranties and agreements of the Company and Jacobs contained herein and in
any certificate or other writing delivered pursuant hereto shall not survive the
Effective Time, provided that each covenant and agreement set forth in this
Agreement which, by its terms, is to be performed after the Effective Time shall
survive the execution and delivery of this Agreement and shall continue until
the expiration of the applicable statute of limitations period, unless otherwise
expressly provided for herein. Following the Effective Time, none of Jacobs,
the Company, their respective subsidiaries and affiliates, and any party
claiming through or under any of them (including, without limitation, through
any claim or right of subrogation) shall have any claim against any of the
shareholders of the Company or the directors or officers of the Company or any
of the Company Subsidiaries or their respective affiliates for any breach of any
representation, warranty or covenant contained herein or any act or omission
occurring prior to the Effective Time, whether based on contract, tort,
contribution, negligence or breach of duty; provided, however, that this
sentence shall not preclude any claim against any of the shareholders of the
Company or the directors or officers of the Company or any of the Company
Subsidiaries or their respective affiliates based on fraud.
SECTION 10.3. Appointment of Securityholder Committee.
---------------------------------------
(a) By voting to approve the Merger or accepting the Initial Aggregate
Merger Consideration, the Initial Company Option Consideration or the Initial
Redeemed Company Shares Consideration, the holders of the Company Common Stock,
the Company Options and the Redeemed Company Shares (collectively, the
"Securityholders") shall AUTOMATICALLY BE DEEMED TO HAVE APPOINTED RICHARD E.
- -----------------
BEUMER, JAMES C. USELTON AND ROBERT J. MESSEY, AND EACH OF THEIR SUCCESSORS, AS
THE ATTORNEYS-IN-
53
<PAGE>
FACT AND REPRESENTATIVES OF THE SECURITYHOLDERS (collectively, the
"Securityholder Committee"). The Securityholder Committee shall have full power
------------------------
to act on behalf of the Securityholders in connection with all matters with
respect to which action by the Securityholder Committee is contemplated by this
Agreement including, but not limited to the right to (x) authorize any payment
to Jacobs from the Escrow, (y) elect to accelerate the payment of any Deferred
Consideration pursuant to Section 1.5 and (z) agree on behalf of the
Securityholders as to the amount of payments to the Eligible Holders with
respect to any Earnout Payment, any remaining Escrow Amount or the Opportunity
Premium Payment. No further documentation shall be required to evidence such
appointment and such power of attorney shall be coupled with an interest and
shall be irrevocable. The Securityholder Committee shall be entitled to
reasonable administrative support and reimbursement from Jacobs of all
documented reasonable expenses incurred in the performance of its duties under
this Agreement including, but not limited to the right to employ financial
advisors, attorneys and other advisors and agents to undertake or assist in the
assessment of arbitration, litigation, and/or settlement of any such disputes.
The Securityholder Committee is expressly authorized to rely upon the advice of
any advisors, consultants and agents. THE SECURITYHOLDERS SHALL AUTOMATICALLY BE
DEEMED TO HAVE WAIVED ANY RIGHT OR CAUSE OF ACTION FOR ANY ACTION, OF ANY NATURE
WHATSOEVER, TAKEN OR OMITTED FROM BEING TAKEN BY THE SECURITYHOLDER COMMITTEE OR
ANY SUCCESSOR ABSENT A CLEAR SHOWING OF GROSS ERROR OR FRAUD.
(b) The Securityholder Committee shall take all actions required to be
taken by the Securityholder Committee under this Agreement and may take any
action contemplated by this Agreement on behalf of the Securityholders.
Immediately prior to the Closing, the Securityholder Committee shall elect a
Chairman (the "Committee Chairman") of such Securityholder Committee and inform
------------------
Jacobs of his or her identity, address and phone and fax numbers. By giving
notice to the Committee Chairman in the manner provided by Section 10.1, Jacobs
shall be deemed to have given notice to the Securityholder Committee and all of
the Securityholders and any action taken by the Committee Chairman may be
considered by Jacobs to be, and relied upon by Jacobs as, the action of the
Securityholder Committee and each Securityholder for whom such action was taken
for all purposes of this Agreement. The actions of the Securityholder Committee
shall be final and binding on the Securityholders. The Securityholder
Committee's duties shall terminate upon the final distribution of any Earnout
Payment and the Escrow.
(c) Notwithstanding anything contained herein or elsewhere to the
contrary, any member of the Securityholder Committee may resign his position as
a member of the Securityholder Committee at any time for any reason whatsoever.
Upon the resignation of one or more members of the Securityholder Committee, the
remaining member or members of the Securityholder Committee shall promptly
appoint by unanimous consent a substitute member or members to the
Securityholder Committee to fill any such vacancy or vacancies.
54
<PAGE>
SECTION 10.4. Amendments; No Waivers. (a) Any provision of this Agreement
----------------------
may be amended or waived prior to the Effective Time if, and only if, such
amendment or waiver is in writing and signed, in the case of an amendment, by
the Company, Jacobs and Merger Subsidiary or in the case of a waiver, by the
party against whom the waiver is to be effective; provided that after the
adoption of this Agreement by the shareholders of the Company, no such amendment
or waiver shall, without the further approval of such shareholders, alter or
change (i) the amount or kind of consideration to be received in exchange for
any Shares of capital stock of the Company; (ii) any term of the Articles of
Incorporation of the Surviving Corporation or (iii) any of the terms or
conditions of this Agreement if such alteration or change would adversely affect
the holders of any Shares of capital stock of the Company.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 10.5. Expenses. Except as otherwise provided in this Agreement,
--------
each party hereto shall pay its own legal and accounting fees, costs and
expenses in connection with the negotiation and execution of this Agreement and
the transactions contemplated hereby.
SECTION 10.6. Entire Agreement/No Third Party Beneficiaries. Except for the
---------------------------------------------
Confidentiality Letter, all prior negotiations and agreements between the
parties hereto relating to the subject matter hereof are superseded by this
Agreement and as of the date hereof there are no representations, warranties,
understandings or agreements, whether written or oral, expressed or implied,
other than those specifically set forth herein. Except for the shareholders,
directors, officers, employees and agents of the Company to the extent such
persons benefit from the provisions set forth herein, there are no third party
beneficiaries to this Agreement.
SECTION 10.7. Waivers. Any failure by any of the parties hereto to comply
-------
with any of the obligations, agreements or conditions set forth herein may be
waived by the other party or parties provided, however, that any such waiver
shall not be deemed a waiver of any other obligation, agreement or condition.
SECTION 10.8. Amendments, Supplements or Modifications. Each of the
----------------------------------------
parties agrees to cooperate fully in the effectuation of the transactions
contemplated hereby and to execute any and all additional documents or take such
additional actions as shall be reasonably necessary or appropriate for such
purpose.
SECTION 10.9. Successors and Assigns. The provisions of this Agreement
----------------------
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the prior written consent of the other parties hereto.
55
<PAGE>
SECTION 10.10. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws and not the conflicts of laws
provisions of the State of Missouri.
SECTION 10.11. Exclusive Jurisdiction. The parties agree that any legal
----------------------
action, suit or proceeding arising out of or relating to this Agreement or the
agreements and transactions contemplated hereby shall be instituted in a Federal
district court located in the city or county of St. Louis, Missouri or a
Missouri state court located in the city or county of St. Louis, Missouri, which
shall be the exclusive jurisdiction and venue of said legal proceedings, and
each party hereto waives any objection which such party may now or hereafter
have to the laying of venue of any such action, suit or proceeding.
SECTION 10.12. Disclosure Schedules. Notwithstanding anything herein to
--------------------
the contrary, any matter disclosed in any Section of either the Company
Disclosure Schedule or the Jacobs Disclosure Schedule shall be deemed to be
disclosed in all parts of such Schedules regardless of whether such matter is
specifically cross-referenced. The disclosure of any matter in a Schedule is not
to be deemed determinative of or an indication that such matter is material to
the operations of the Company or Jacobs, as the case may be.
SECTION 10.13. Counterparts; Effectiveness. This Agreement may be signed
---------------------------
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
SECTION 10.14. Severability. If any term or other provision of this
------------
Agreement is invalid, illegal, or incapable of being enforced by any rule or
law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated by this Agreement are not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in mutually acceptable manner in order that the transactions
contemplated by this Agreement be consummated as originally contemplated to the
fullest extent possible.
SECTION 10.15. Incorporation of Exhibits and Schedules. The Company
---------------------------------------
Disclosure Schedule, the Jacobs Disclosure Schedule and all Exhibits attached
hereto and referred to herein are hereby incorporated herein and made a part
hereof for all purposes as if fully set forth herein.
SECTION 10.16. Headings. The descriptive headings contained in this
--------
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 10.17. Knowledge. Whenever used in this Agreement, the terms
---------
"knowledge," "to the knowledge of" "has received no notice" or "is not aware"
(and all variants and derivatives thereof) with respect to any Person, means the
current actual knowledge
56
<PAGE>
of such Person. Notwithstanding the foregoing, the foregoing terms, when applied
to the Company, shall mean the actual knowledge of any and all Persons listed on
Section 10.17 of the Company Disclosure Schedule.
SECTION 10.18. Construction. The language used in this Agreement will
------------
be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against
either party. Whenever required by the context, any gender shall include any
other gender, the singular shall include the plural and the plural shall include
the singular. Whenever the word "including" is used in this Agreement, it shall
be deemed to mean "including, without limitation," "including, but not limited
to" or other words of similar import such that the items following the word
"including" shall be deemed to be a list by way of illustration only and shall
not be deemed to be an exhaustive list of applicable items in the context
thereof.
[signature page(s) follow]
57
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
SVERDRUP CORPORATION
By: /s/ Richard E. Beumer
----------------------------------------
Richard E. Beumer
Chief Executive Officer
JACOBS ENGINEERING GROUP INC.
By: /s/ Noel G. Watson
----------------------------------------
Noel G. Watson
Chief Executive Officer
JACOBS ACQUISITION CORP.
By: /s/ Noel G. Watson
----------------------------------------
Noel G. Watson
President
58
<PAGE>
EXHIBITS
EXHIBIT 1.1(b) FORM OF CERTIFICATE OF MERGER
EXHIBIT 1.3 FORM OF LETTER OF TRANSMITTAL FOR SHARES, COMPANY OPTIONS AND
REDEEMED COMPANY SHARES
EXHIBIT 1.4(a) FORM OF ESCROW AGREEMENT
EXHIBIT 1.4(b) RISK SCHEDULE
EXHIBIT 1.5(b) FORM OF LETTER OF TRANSMITTAL FOR DEFERRED MERGER CONSIDERATION
EXHIBIT 1.5(f) ILLUSTRATIONS OF CALCULATIONS OF DEFERRED CONSIDERATION
EXHIBIT 8.2(d)(1)FORM OF EMPLOYMENT AGREEMENT
EXHIBIT 8.2(d)(2)NAMES OF PERSONS TO HAVE EMPLOYMENT AGREEMENTS
EXHIBIT 8.2(g) FORM OF COMPANY COUNSEL'S OPINION
EXHIBIT 8.2(i) AMENDMENT TO BENEFIT REPLACEMENT PLAN
EXHIBIT 8.3(c) FORM OF JACOBS COUNSEL'S OPINION
59
<PAGE>
TABLE OF CONTENTS OF COMPANY DISCLOSURE SCHEDULES
-------------------------------------------------
<TABLE>
<S> <C>
Section 1.3(a)..................................................Payment Schedule
Section 1.5(a)(xii)..........................................Percentage Interest
Section 1.9..........................................................Flexi-Trust
Section 3.2.................................................Company Subsidiaries
Section 3.6....................................................Non-Contravention
Section 3.7.......................................................Capitalization
Section 3.7(c)...........................................Redeemed Company Shares
Section 3.7(d)...................................................Company Options
Section 3.7(e)...........................................Shareholders Agreements
Section 3.7(g)...................................................Redeemed Shares
Section 3.8.............................Company Reports and Financial Statements
Section 3.9..........................................................Receivables
Section 3.12..........................................Absence of Certain Changes
Section 3.13..........................................................Litigation
Section 3.14..............................................Employee Benefit Plans
Section 3.14(d).............................................Employment Contracts
Section 3.14(e)..............................................Additional Benefits
Section 3.14(f)........Collective Bargaining Agreements and Employment Contracts
Section 3.15...............................................................Taxes
Section 3.16................................................Compliance with Laws
Section 3.19...............................................Environmental Matters
Section 3.21........................................Labor and Employment Matters
Section 3.22(a)...............................................Material Contracts
Section 3.22(c)...........................Exceptions to Contract Representations
Section 3.23..........................................Related Party Transactions
Section 3.24.........................................................Real Estate
Section 3.25..............................................Government Contracting
Section 3.27...........................................................Year 2000
Section 3.29.....................................................Title to Assets
Section 10.17..................................................Knowledge Persons
</TABLE>
-60-
<PAGE>
EXHIBIT 99.2
Consolidated Financial Statements
Sverdrup Corporation
With Report of Independent Auditors
December 31, 1997
<PAGE>
Sverdrup Corporation
Consolidated Financial Statements
December 31, 1997
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors..................... 1
Consolidated Financial Statements
Consolidated Balance Sheets....................... 2
Consolidated Statements of Income................. 3
Consolidated Statements of Stockholders' Equity... 4
Consolidated Statements of Cash Flows............. 5
Notes to Consolidated Financial Statements........ 6
</TABLE>
<PAGE>
Report of Independent Auditors
The Board of Directors
Sverdrup Corporation
We have audited the accompanying consolidated balance sheets of Sverdrup
Corporation as of December 31, 1997 and 1996, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the three
years in the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Sverdrup
Corporation at December 31, 1997 and 1996, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
St Louis, Missouri
February 27, 1998
1
<PAGE>
Sverdrup Corporation
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31
1997 1996
-------------------------
(In thousands, except per
share information)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,151 $ 18,482
Accounts receivable 173,921 127,299
Prepaid expenses and other current assets 11,518 13,206
-----------------------
TOTAL CURRENT ASSETS 186,590 158,987
Investments in real estate 19,126 26,165
Property and equipment 26,061 25,170
Other assets 22,954 32,441
-----------------------
$254,731 $242,763
=======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 63,940 $ 61,487
Contract billings in excess of earnings 31,856 20,861
Accrued expenses 26,436 24,630
Dividends payable 1,496 318
Income taxes - 1,056
Current maturities of long-term debt 11,087 11,262
-----------------------
TOTAL CURRENT LIABILITIES 134,815 119,614
Long-term debt, less current maturities 40,902 44,528
Other long-term liabilities 18,208 31,941
Stockholders' equity:
Common stock, $.0625 par value, authorized - 10,000,000
shares, issued - 7,911,900, and outstanding - 3,400,301
and 3,421,057 shares, respectively 213 215
Retained earnings 67,973 53,845
Shares held in trust (7,380) (7,380)
-----------------------
60,806 46,680
-----------------------
$254,731 $242,763
=======================
</TABLE>
See accompanying notes.
2
<PAGE>
Sverdrup Corporation
Consolidated Statements of Income
<TABLE>
<CAPTION>
Year Ended December 31
1997 1996 1995
---------------------------------
(In thousands)
<S> <C> <C> <C>
Revenue:
Professional services $340,146 $293,535 $288,131
Construction 331,478 228,542 174,313
Facilities operations 228,636 216,475 145,012
Real estate operations 18,675 8,658 18,427
---------------------------------
918,935 747,210 625,883
Costs and expenses:
Productive salaries 78,744 71,363 70,966
Project costs 131,329 99,786 97,897
Salary-related expenses 32,231 30,157 30,570
General expenses 88,919 89,519 82,941
Reimbursable costs 545,811 438,911 309,466
Real estate expenses 10,205 8,004 15,079
---------------------------------
887,239 737,740 606,919
---------------------------------
Operating income 31,696 9,470 18,964
Interest expense - net 3,474 1,659 2,091
Other (income) expense - net (311) 240 396
---------------------------------
Income before income taxes 28,533 7,571 16,477
Income taxes (credit):
Current 12,022 2,026 8,974
Deferred (1,150) 207 (2,478)
---------------------------------
10,872 2,233 6,496
---------------------------------
Net income $ 17,661 $ 5,338 $ 9,981
=================================
</TABLE>
See accompanying notes.
3
<PAGE>
Sverdrup Corporation
Consolidated Statements of
Stockholders' Equity
<TABLE>
<CAPTION>
Common Stock
Shares Common Retained
Outstanding Stock Earnings
-----------------------------------
(In thousands, except per share
information)
<S> <C> <C> <C>
Balance at January 1, 1995 4,002,206 $251 $ 56,491
Net income - - 9,981
Cash dividend - $.60 per share - - (2,157)
Sale of treasury stock and exercise
of options 241,000 15 4,838
Issuance of stock for acquisition 33,129 2 748
Share transactions related to trust 41,968 3 345
Income tax benefit from trust transactions - - 200
Cost of common stock purchased
for treasury (639,874) (40) (13,932)
--------------------------------
Balance at December 31, 1995 3,678,429 231 56,514
Net income - - 5,338
Cash dividend - $ .50 per share - - (1,607)
Sale of treasury stock and exercise
of options 171,853 11 3,960
Cost of common stock purchased
for treasury (429,225) (27) (10,360)
--------------------------------
Balance at December 31, 1996 3,421,057 215 53,845
Net income - - 17,661
Cash dividend - $ .90 per share - - (2,703)
Sale of treasury stock and exercise
of options 150,500 9 3,780
Cost of common stock purchased
for treasury (171,256) (11) (4,610)
---------------------------------
Balance at December 31, 1997 3,400,301 $213 $ 67,973
=================================
</TABLE>
See accompanying notes.
4
<PAGE>
Sverdrup Corporation
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended December 31
1997 1996 1995
--------------------------------
(In thousands)
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 17,661 $ 5,338 $ 9,981
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 5,236 5,201 6,151
Deferred income taxes (credit) (521) 207 (2,478)
Equity in income of real estate ventures (6,976) (707) (1,021)
Cash distributions from real estate ventures 8,630 500 3,250
Gain on sale of real estate (464) - (791)
Accounts receivable direct write-offs 908 43 802
Changes in operating assets and liabilities:
Increase in notes and accounts receivables, prepaid
expenses, and other assets (50,762) (24,140) (3,267)
Increase in payables, accrued expenses, and other
liabilities 15,320 15,560 10,466
Other - - (279)
-------------------------------
Cash provided by (used in) operating activities (10,968) 2,002 22,814
Cash flows from investing activities
Purchase of property and equipment, net of disposals (5,823) (20,755) (3,953)
Proceeds from sale of real estate 5,618 - 8,572
-------------------------------
Cash provided by (used in) investing activities (205) (20,755) 4,619
Cash flows from financing activities
Proceeds from sale of stock and exercise of options 3,789 3,971 4,853
Net outlays from trust transactions - - (45)
Proceeds from new borrowings 7,833 26,000 641
Principal payments on debt (11,747) (5,490) (25,144)
Purchase of common stock (excluding $113 in 1997,
$2,183 in 1996 and $9,659 in 1995 in debt) (4,508) (8,204) (4,313)
Dividends paid (1,525) (2,017) (2,758)
-------------------------------
Cash provided by (used in) financing activities (6,158) 14,260 (26,766)
-------------------------------
Increase (decrease) in cash and cash equivalents (17,331) (4,493) 667
Cash and cash equivalents at beginning of year 18,482 22,975 22,308
-------------------------------
Cash and cash equivalents at end of year $ 1,151 $ 18,482 $ 22,975
===============================
</TABLE>
See accompanying notes.
5
<PAGE>
Sverdrup Corporation
Notes to Consolidated Financial Statements
December 31, 1997
1. Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of Sverdrup
Corporation (the "Company"). All significant intercompany accounts and
transactions have been eliminated. Investments of 20 to 50 percent interest in
partnerships and joint ventures are accounted for using the equity method.
Certain items in the prior years' financial statements have been reclassified to
be consistent with the 1997 presentation.
Description of the Business
The Company is predominately a professional services company engaged in
development, design, construction and operation of capital facilities and
technical systems across the United States and internationally. Its wholly owned
real estate subsidiary is engaged in the business of owning properties and real
estate partnership interests for investment, leasing and development, primarily
in St. Louis, Missouri.
Revenue Accounting for Contracts
The Company recognizes revenues at the time services are performed. On cost-
reimbursable contracts, revenue is recognized as costs are incurred and includes
applicable fees earned through the date services are provided. On fixed-price
contracts, revenues are recorded using the percentage-of-completion method of
accounting by relating contract costs incurred to date to total estimated
contract costs at completion. Contract costs include both direct and indirect
costs. Contract losses are provided for in their entirety in the period they
become determinable, without regard to the percentage of completion.
Some of the Company's contracts with the U.S. federal government, as well as
certain contracts with commercial clients, provide that contract costs
(including indirect costs) are subject to audit and adjustment. For all such
contracts, revenues have been recorded based upon those amounts expected to be
realized upon final settlement.
The practice of not recognizing as income the retentions withheld from fees
under contract terms until such retentions may be billed has been consistently
followed by the Company. Retentions withheld from fees and not recognized as
income were approximately $3,140,000, $3,393,000 and $3,849,000 for the years
ended December 31, 1997, 1996 and 1995, respectively.
6
<PAGE>
Sverdrup Corporation
Notes to Consolidated Financial Statements (continued)
1. Significant Accounting Policies (continued)
Foreign Operations
In 1997, 1996 and 1995, the Company's operations outside of the United States
were less than 10 percent of the consolidated revenue. The construction and
professional service activities were conducted primarily in Asia during each of
these years. During 1997, the Asian economy and certain other foreign markets
have declined, as a result, it is possible that the Company's financial results
could be negatively affected by these foreign markets.
Cash Equivalents
The Company considers all highly liquid investments with original maturities of
90 days or less to be cash equivalents.
Accounts Receivable
Accounts receivable at December 31 include the following:
<TABLE>
<CAPTION>
1997 1996
--------------------
(In thousands)
<S> <C> <C>
Billed:
Commercial $ 83,811 $ 56,202
U.S. government 20,725 11,648
Unbilled:
Commercial 50,594 43,026
U.S. government 18,791 16,423
--------------------
$173,921 $127,299
====================
</TABLE>
Unbilled receivables represent amounts earned under contracts in progress, but
not yet billable under the terms of those contracts. These amounts become
billable according to contract terms which usually consider passage of time,
achievement of certain milestones or completion of the project.
In October 1996, the Company entered into a contract with an Indonesian
government agency for the supply, construction, commissioning, and start-up of a
Transonic Speed Tunnel. As of December 31, 1997, $7,300,000 of the Company's
accounts receivable remained uncollected due to the downturn in the Indonesian
economy. It is the Company's position that it is more likely than not that all
of the accounts receivable will be realized.
7
<PAGE>
Sverdrup Corporation
Notes to Consolidated Financial Statements (continued)
1. Significant Accounting Policies (continued)
Investments in Real Estate
The following summarizes investments and ventures in real estate at December 31:
<TABLE>
<CAPTION>
1997 1996
-------------------
(In thousands)
<S> <C> <C>
Operating properties $12,482 $14,156
Ventures 10,222 11,876
Land held for development - 5,154
Less accumulated depreciation and amortization (3,578) (5,021)
-------------------
$19,126 $26,165
===================
</TABLE>
Ventures include varying ownership interests ranging from 6 percent to 50
percent in various general and limited partnerships that own office buildings,
an amphitheatre, undeveloped land and other assets. Total assets and liabilities
of the ventures directly and indirectly owned are $40,510,000 and $6,109,000 at
December 31, 1997 and $84,663,000 and $47,517,000 at December 31, 1996,
respectively. The ventures' liabilities at December 31, 1996 consisted primarily
of mortgage loans of which the Company guaranteed $8,189,000. There were no
guarantees at December 31, 1997. Substantially all of the Company's investments
and ventures in real estate are held for sale at December 31, 1997.
Net operating income from real estate operations and ventures is comprised of
the following for the year ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------
(In thousands)
<S> <C> <C> <C>
Income from operations $1,705 $ 654 $2,557
Net gain on sale of properties 6,765 - 791
------------------------
$8,470 $ 654 $3,348
========================
</TABLE>
Operating properties depreciation expense for 1997, 1996 and 1995 was $360,000,
$575,000 and $1,151,000, respectively.
8
<PAGE>
Sverdrup Corporation
Notes to Consolidated Financial Statements (continued)
1. Significant Accounting Policies (continued)
Property and Equipment
Property and equipment are stated at cost and consisted of the following at
December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
--------------------
(In thousands)
<S> <C> <C>
Office buildings and land $ 16,696 $ 16,171
Leasehold improvements and computer software 13,103 13,280
Furniture and equipment 44,512 42,960
Less accumulated depreciation and amortization (48,250) (47,241)
--------------------
$ 26,061 $ 25,170
====================
</TABLE>
Depreciation and amortization are computed principally using the straight-line
method over the estimated useful lives of the assets, or in the case of
leasehold improvements, over the remaining term of the lease, if shorter.
Estimated useful lives generally range from three to ten years.
Stock Based Compensation
The Company accounts for stock issued to employees in accordance with Accounting
Principles Board Opinion No. 25 - "Accounting for Stock Issued to Employees"
("APB No. 25"). APB No. 25 prescribes an intrinsic value based method for
accounting for stock options. Since the stock issued to participants in the
Company's stock purchase and stock option plans (described in Note 3, below) has
little or no intrinsic value as of the grant date, no compensation cost is
recorded.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires the Company to make estimates and assumptions
that necessarily affect certain amounts reported in its consolidated financial
statements. The more significant estimates affecting amounts reported in the
consolidated financial statements relate to revenues under long-term
construction contracts and self-insurance accruals. Actual results could differ
from those estimates.
9
<PAGE>
Sverdrup Corporation
Notes to Consolidated Financial Statements (continued)
2. Debt and Credit Arrangements
Short-Term Credit Arrangements
At December 31, 1997, the Company had approximately $70,000,000 available
through multiple bank lines of credit, under which the Company may utilize these
lines for letters of credit or unsecured borrowing needs. Interest under these
lines is based on either the fed funds rate, the 30-day LIBOR plus .7 percent,
or the corporate based rate quoted by the bank at the time of borrowing. The
agreements require the payment of a fee based on the unused portion of the
facility. The lines are renewed annually and extend through the second and third
quarters of 1998.
Long-Term Debt and Credit Arrangements
The following summarizes long-term debt at December 31:
<TABLE>
<CAPTION>
1997 1996
--------------------
(In thousands)
<S> <C> <C>
Notes payable to former stockholders $ 7,249 $ 10,818
Notes payable to bank 24,000 18,000
Real estate mortgage and participating mortgage notes 18,204 24,380
Industrial revenue bonds 2,536 2,592
--------------------
51,989 55,790
Less current maturities (11,087) (11,262)
--------------------
$ 40,902 $ 44,528
====================
</TABLE>
The notes payable to former stockholders bear interest at prime-based and LIBOR-
based rates of 6.3 percent to 8.5 percent at December 31, 1997 and have
principal installments due through 2000.
The notes payable to bank include a credit line borrowing of $4,000,000 and a
long-term note payable of $20,000,000. The interest rate for the credit line
borrowing (LIBOR plus .7 percent) was swapped for a five-year fixed rate of 6.93
percent. The long-term note bears interest at LIBOR plus .7 percent and is due
in monthly principal installments of $250,000 with the remainder of the maturity
due December 1999. The terms of the long-term note include certain covenants
which require maintenance of certain financial ratios and net worth.
Various real estate mortgage and participating mortgage notes are due in
installments through 2019, bearing interest at LIBOR-based and prime-based rates
which have an average effective interest rate of 7.7 percent at December 31,
1997 and 1996, respectively. The notes are secured by real estate and limited
guarantees totaling $19,329,000.
10
<PAGE>
Sverdrup Corporation
Notes to Consolidated Financial Statements (continued)
2. Debt and Credit Arrangements (continued)
Long-Term Debt and Credit Arrangements (continued)
Industrial revenue bonds are due in installments through 2014 at a tax-exempt
interest rate. The average effective interest rate was 7.7 percent at December
31, 1997 and 7.4 percent at December 31, 1996. The bonds are secured by real
estate with a cost basis of $2,527,000. Deferred loan and bond fees are
amortized over the period of the related debt issues.
Maturities of long-term debt during each of the following years ending after
December 31, 1997 are as follows: 1998 - $11,087,000; 1999 - $19,388,000; 2000 -
$2,368,000; 2001 - $533,000; 2002 - $494,000; and thereafter - $18,119,000.
Interest paid and expensed totaled $3,874,000, $2,386,000 and $3,320,000 in
1997, 1996 and 1995, respectively.
3. Stock Option Plan and Purchase Agreements
The Company has an incentive stock option plan under which certain employees are
participants. The incentive stock options are to be granted at not less than
market value. The options have ten year terms, vest and become fully exercisable
at the grant date. At December 31, 1997, the 1992 and 1995 Incentive Stock
Option Plans had incentive stock options to purchase an additional 391,736
shares available for grants in future years.
A summary of the Company's stock option activity and related information for the
year ended December 31 follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------------------------------------------------------------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding - beginning of year 340,500 $20.58 280,500 $19.07 274,500 $16.18
Granted - - 80,000 24.20 91,000 22.82
Exercised (5,000) 18.12 (9,000) 8.62 (76,000) 13.17
Forfeited (11,000) 20.42 (11,000) 18.25 (9,000) 18.40
-------- ------- -------
Outstanding - end of year 324,500 $20.63 340,500 20.58 280,500 $19.07
======== ======= =======
Range of option prices for options
outstanding at the end of the year $10.84 - $24.20 $10.84 - $24.20 $8.62 - $22.82
</TABLE>
11
<PAGE>
Sverdrup Corporation
Notes to Consolidated Financial Statements (continued)
3. Stock Option Plan and Purchase Agreements (continued)
Purchase Agreement - All stockholders of the Company have agreed to sell their
- ------------------
stock to the Company under certain conditions, and the Company has agreed to
purchase such stock at market value. The purchase price per share (market value)
is book value (as defined in the agreement), plus an amount determined for
anticipated profit to be derived from uncompleted work of the Company under
contract at that date. These agreements provide that the Company may pay all or
any part of the purchase price in interest-bearing installment notes over a
period not to exceed five years (see Note 2).
Shares Held in Trust - The Company has a "flexi-trust" (trust) which holds
- --------------------
Company common stock purchased from certain stockholders upon their exercise of
incentive stock options. The trust does not change the incentive stock option
plan or the amount of stock expected to be issued under that plan. The Company
has a promissory note from the trust totaling $7,380,000 at both December 31,
1997 and 1996, respectively. The principal amount of the note includes the
options' exercise price plus the alternative minimum income taxes incurred by
the holders when the options were exercised. Amounts owed by the trust to the
Company are repaid with cash received upon redemption or release of the shares
to the shareholders.
For financial reporting purposes, the trust is consolidated with the Company.
The cost of the shares held by the trust is shown as a reduction to
stockholders' equity in the consolidated balance sheets. All dividends and
interest transactions between the trust and the Company are eliminated. At
December 31, 1997, shares held by the trust totaled 408,446.
Alternate Stock Option Valuation Method - The Company has elected to continue
- ---------------------------------------
accounting for stock option grants in accordance with APB 25. The alternative
accounting for stock option grants (SFAS 123, Accounting for Stock Based
Compensation) requires use of valuation models. In management's opinion, these
models do not provide a reliable measure of fair value of stock options, because
the fair value models were developed for publicly traded options and include
assumptions that can materially affect the alternate fair value amount. Using
the minimum value option pricing model, the impact is insignificant on the
Company's net income for 1997, 1996 and 1995.
4. Employee Benefit Plans
The Company and its subsidiaries have pension plans covering substantially all
employees which provide pension benefits that are based on the employee's
compensation and years of service. The Company makes annual contributions to the
pension plans equal to the maximum amount that can be deducted for federal
income tax purposes. The assets of the plans are held in equity securities and
fixed income securities.
12
<PAGE>
Sverdrup Corporation
Notes to Consolidated Financial Statements (continued)
4. Employee Benefit Plans (continued)
The following table sets forth the funded status recognized for the Company's
defined benefit pension plans in the consolidated balance sheets at December 31:
<TABLE>
<CAPTION>
1997 1996
------------------------------- -------------------------------
(In thousands) (In thousands)
Plan Whose Plans Whose Plans Whose Plan Whose
Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefits Accumulated Benefits
Benefits Exceed Assets Benefits Exceed Assets
-------------------------------- -------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit obligation $ 78,760 $ 92,934 $86,476 $ 81,668
========================== =========================
Accumulated benefit
obligation $ 80,204 $104,534 $88,015 $ 91,665
========================== =========================
Projected benefit
obligation $ 86,509 $128,443 $95,191 $114,347
Plan assets at fair value 94,264 100,674 97,032 77,605
-------------------------- -------------------------
Plan assets in excess of (less
than) projected benefit obligation 7,755 (27,769) 1,841 (36,742)
Unrecognized pension assets
and liabilities:
Net (gain) loss (13,182) 19,834 (2,662) 22,837
Prior service cost 7,543 13,036 7,820 14,137
Net asset at transition (1,236) (153) (2,149) (218)
Net pension liability
adjustment - (8,807) - (14,074)
-------------------------- -------------------------
Net pension asset (liability) in
other assets and other long-term
liabilities $ 880 $ (3,859) $ 4,850 $(14,060)
========================== =========================
</TABLE>
All of the 1997 and 1996 net pension liability is reimbursable under operating
contracts with the United States government. Other assets include $14,892,000
and $26,262,000 at December 31, 1997 and 1996, respectively, related to the
pension plans. Other long-term liabilities include $6,726,000 and $19,719,000 at
December 31, 1997 and 1996, respectively, related to the pension plans. During
1996, the Company terminated pension coverage for three operating contracts and
settled a portion of its pension obligation due to a significant number of
retirees at another operating contract.
13
<PAGE>
Sverdrup Corporation
Notes to Consolidated Financial Statements (continued)
4. Employee Benefit Plans (continued)
The components of net periodic pension cost for each of the years ended December
31, 1997, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------------------------------
(In thousands)
<S> <C> <C> <C>
Cost of benefits earned $ 7,007 $ 7,670 $ 5,309
Interest cost on projected benefit obligation 14,728 14,530 11,861
Actual return on plan assets (25,178) (16,138) (23,431)
Net amortization of transition asset and deferral
of gain 10,577 609 11,543
Curtailment/settlement costs 119 7,561 -
--------------------------------
Net pension cost $ 7,253 $ 14,232 $ 5,282
================================
</TABLE>
The significant actuarial assumptions used in determining the funded status of
the plans were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------------------------------------
<S> <C> <C> <C>
Discount rates 7.5% and 7.75% 7.5% 7.0%
Compensation increase rate 4.0% 4.0% 4.0%
Expected asset rate of return 7.5% and 9.5% 8.5% and 9.5% 9.5%
</TABLE>
The accounting method for treating the amortization of actuarial gains/losses
was changed from a 10 percent corridor in 1996 to a 4 percent corridor in 1997.
The effect of this change on 1997 results of operations was not material.
The Company also sponsors a voluntary defined contribution 401(k) plan which is
available to substantially all employees. Company contributions to this plan of
$6,619,000, $6,102,000 and $4,674,000 in 1997, 1996 and 1995, respectively,
represent a partial matching of employee contributions.
14
<PAGE>
Sverdrup Corporation
Notes to Consolidated Financial Statements (continued)
5. Provision for Income Taxes
The Company accounts for income taxes in accordance with SFAS 109 - Accounting
for Income Taxes. Accordingly, deferred tax assets and liabilities are
determined based on the differences between the financial reporting and tax
bases of assets and liabilities and are measured using the enacted tax rates and
laws that will be in effect when the differences are expected to reverse.
Consolidated income tax expense for the years ended December 31, 1997, 1996 and
1995 consisted of the following:
<TABLE>
<CAPTION>
1997 1996 1995
-----------------------------
(In thousands)
<S> <C> <C> <C>
Current:
Federal $10,531 $1,604 $ 7,836
State 1,491 422 1,138
----------------------------
12,022 2,026 8,974
Deferred:
Federal (1,041) 190 (2,201)
State (109) 17 (277)
----------------------------
(1,150) 207 (2,478)
----------------------------
$10,872 $2,233 $ 6,496
============================
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and their related amounts used for income tax purposes. The significant
components of the Company's deferred tax assets (liabilities) at December 31,
1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
------------------
(In thousands)
<S> <C> <C>
Assets:
Benefit plans $ - $ 36
Self-insurance reserves 4,200 4,567
Other, net 97 95
------------------
Total deferred tax assets 4,297 4,698
Liabilities:
Depreciation and amortization (901) (727)
Employee benefit plans (85) -
Accounts receivable reserves (1,114) -
Deferred gains on real estate (910) (3,205)
------------------
Total deferred tax liabilities (3,010) (3,932)
------------------
Net deferred tax asset $ 1,287 $ 766
===================
</TABLE>
15
<PAGE>
Sverdrup Corporation
Notes to Consolidated Financial Statements (continued)
5. Provision for Income Taxes (continued)
The reconciliations of the tax provisions recorded for the years ended December
30, 1997, 1996 and 1995 to those based on the federal statutory rate were as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
-----------------------------
(In thousands)
<S> <C> <C> <C>
Statutory amount $ 9,987 $2,574 $5,767
State taxes, net of the federal benefit 969 279 708
Other, net (84) (620) 21
-----------------------------
$10,872 $2,233 $6,496
=============================
Rate used to compute statutory amount 35% 34% 35%
=============================
</TABLE>
For the years ended December 31, 1997, 1996 and 1995, the Company paid
approximately $11,771,000, $7,075,000 and $6,929,000, respectively, in income
taxes. The 1996 tax provision was reduced by research and development credits of
$1,200,000.
6. Commitments and Contingencies
Claims
The Company is involved in a number of proceedings and claims incidental to its
business. Company management and counsel believe that losses from such
proceedings in the aggregate will be substantially covered by insurance and
existing provisions for the self-insured portion of these claims. Provision for
self-insured losses is made at the time the claim is reported based upon the
Company's best estimate of the eventual settlement costs.
Guarantees
Letters of credit issued as prerequisites for receiving advance payments from
clients, professional liability insurance guarantees, performance bonds, and
guarantees of indebtedness in the amounts of $30,626,000 and $32,863,000 were
outstanding at December 31, 1997 and 1996, respectively.
16
<PAGE>
Sverdrup Corporation
Notes to Consolidated Financial Statements (continued)
6. Commitments and Contingencies (continued)
Operating Leases
Future minimum payments of $37,575,000 under noncancellable operating leases
with initial or remaining terms exceeding one year are due as follows: 1998 -
$11,258,000; 1999 - $9,006,000; 2000 - $7,055,000; 2001 - $3,989,000; 2002 -
$2,910,000; and thereafter - $3,357,000. Rent expense for all operating leases
amounts to $12,400,000, $10,281,000 and $11,048,000 for 1997, 1996 and 1995 ,
respectively, excluding related party leases discussed below.
7. Fair value of Financial Instruments
The carrying amounts of cash, receivables, payables and accrued expenses are a
reasonable estimate of their fair value due to their short-term nature. The
carrying amount of debt is also a reasonable estimate of its fair value due to
the market-based interest rates on the debt.
8. Related Party Transactions
During 1997, 1996 and 1995, the Company and subsidiaries performed $1,351,000,
$295,000 and $811,000, respectively, of design/build services for various
affiliated real estate ventures. The Company also leased office facilities from
these affiliated ventures for $1,718,000, $1,932,000 and $2,145,000 during 1997,
1996 and 1995, respectively. The Company recognized income of $7,690,000,
$1,921,000 and $2,371,000 in 1997, 1996 and 1995, respectively, from management
fees and equity in income from related ventures. Notes and accounts receivable
include $385,000 and $12,000 in 1997 and 1996, respectively, from related
ventures.
17
<PAGE>
Sverdrup Corporation
Notes to Consolidated Financial Statements (continued)
9. Quarterly Data - Unaudited
Summarized quarterly financial information for the years ended December 31, 1997
and 1996 is presented below (in thousands, except per share information):
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997
Revenue $200,253 $210,917 $259,750 $248,015 $918,935
Operating income 6,040 6,764 13,689 5,203 31,696
Income before income taxes 5,202 5,983 12,573 4,775 28,533
Net income 3,191 3,657 8,234 2,579 17,661
Stock price:
High $25.03 $26.83 $27.75 $28.15 $28.15
Low $24.45 $25.40 $27.03 $27.79 $24.45
----------------------------------------------------------
1996
Revenue $173,136 $169,063 $189,637 $215,374 $747,210
Operating income 4,466 4,736 34 234 9,470
Income (loss) before income taxes 4,203 3,995 (472) (155) 7,571
Net income (loss) 2,508 2,381 (304) 753 5,338
Stock price:
High $23.76 $24.64 $24.65 $24.32 $24.65
Low $23.52 $23.90 $24.20 $24.07 $23.52
----------------------------------------------------------
</TABLE>
During the third quarter of 1997, operating income increased along with net
income due to the gain from the sale of real estate holdings. In 1996, the
decreases in third and fourth quarter results relate to a major construction
project loss.
10. Year 2000 Issue - Unaudited
The Company has developed a plan to modify its information technology to be
ready for the year 2000 and has begun converting critical data processing
systems. Currently, the Company expects the project to be substantially complete
by early 1999 and does not expect this project to have a significant effect on
operations or costs.
18
<PAGE>
Sverdrup Corporation
Notes to Consolidated Financial Statements (continued)
11. Subsequent Event
On February 3, 1998, real estate with a cost basis of $2,527,000 was sold, and
related revenue bonds totaling $2,536,000 were redeemed. A mortgage note secured
by the same real estate totaling $464,000 was paid in full. There was no gain or
loss recognized as a result of this early extinguishment of debt.
On February 27, 1998, the Company's real estate investee, Sverdrup/Boeing Realty
Company joint venture, sold its investment in Riverport Performing Arts Centre
for a gain. The Company's cost basis for the investment in real estate sold was
$2,210,000 at December 31, 1997.
19
<PAGE>
Exhibit 99.3
------------
Sverdrup Corporation
Condensed Consolidated Financial Statements
At October 2, 1998 and October 3, 1997
and for Each of the Nine Month Periods Then Ended
(Unaudited)
Page 1
<PAGE>
Sverdrup Corporation
Unaudited Consolidated Condensed Balance Sheets
At October 2, 1998 and October 3, 1997
(In thousands, except share information)
<TABLE>
<CAPTION>
1998 1997
- ---------------------------------------------- -------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 6,524 $ 9,443
Accounts receivable 176,264 169,183
Prepaid expenses and other 12,621 12,984
- ---------------------------------------------- -------- --------
Total current assets 195,409 191,610
- ---------------------------------------------- -------- --------
Investments in Real Estate 10,862 21,613
Property and Equipment, Net 30,384 25,422
Other Assets 23,920 34,321
- ---------------------------------------------- -------- --------
$260,575 $272,966
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 62,597 $ 65,075
Contract billings in excess of earnings 37,249 28,706
Accrued expenses 29,024 29,416
Income taxes 3,558 5,350
Current maturities of long-term debt 10,019 18,104
- ---------------------------------------------- -------- --------
Total current liabilities 142,447 146,651
- ---------------------------------------------- -------- --------
Long-term Debt, Less Current Maturities 34,639 34,955
- ---------------------------------------------- -------- --------
Other Long-term Liabilities 17,161 30,974
- ---------------------------------------------- -------- --------
Commitments and Contingencies
- ----------------------------------------------
Stockholders' Equity:
Capital stock:
Common stock, $0.0625 par value;
authorized - 10,000,000 shares;
issued - 7,911,900 shares;
outstanding - 3,143,687 and
3,410,801 shares, respectively 197 214
Retained earnings 71,846 67,552
Shares held in trust (5,715) (7,380)
- ---------------------------------------------- -------- --------
Total stockholders' equity 66,328 60,386
- ---------------------------------------------- -------- --------
$260,575 $272,966
======== ========
</TABLE>
See the accompanying notes.
Page 2
<PAGE>
Sverdrup Corporation
Unaudited Consolidated Condensed Statements of Income
For the Nine Months Ended October 2, 1998 and October 3, 1997
(In thousands)
<TABLE>
<CAPTION>
1998 1997
- ------------------------------ -------- --------
<S> <C> <C>
Revenues:
Professional services $264,393 $257,710
Construction 285,278 225,114
Facilities operations 189,250 171,714
Real estate operations 9,546 16,382
- ------------------------------ -------- --------
Total revenues 748,467 670,920
- ------------------------------ -------- --------
Costs and Expenses:
Productive salaries 65,532 60,051
Project costs 90,276 98,111
Salary-related expenses 27,681 24,905
General expenses 74,515 66,229
Reimbursable costs 463,185 386,570
Real estate expenses 5,758 8,561
- ------------------------------ -------- --------
Total costs and expenses 726,947 644,427
- ------------------------------ -------- --------
Operating Income 21,520 26,493
Interest Expense, Net (1,870) (2,768)
Other Income, Net 337 33
- ------------------------------ -------- --------
Income Before Taxes 19,987 23,758
- ------------------------------ -------- --------
Income Tax Expense (8,201) (8,676)
- ------------------------------ -------- --------
Net Income $ 11,786 $ 15,082
============================== ======== ========
</TABLE>
See the accompanying notes.
Page 3
<PAGE>
Sverdrup Corporation
Unaudited Consolidated Condensed Statements of Cash Flows
For the Nine Months Ended October 2, 1998 and October 3, 1997
(In thousands)
<TABLE>
<CAPTION>
1998 1997
- ---------------------------------------------------- -------- --------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 11,786 $ 15,082
Adjustments to reconcile net income
to net cash flows from operations:
Depreciation and amortization 4,171 4,118
Deferred income taxes (944) (2,723)
Equity in income of real estate ventures (1,656) (6,220)
Cash distributions from real estate ventures 7,439 7,203
Gains on disposals of property (1,880) (794)
Direct write-offs of accounts receivable 680 87
Changes in operating assets and liabilities:
(Increase) in accounts and notes receivable,
prepaid expenses and other assets (4,866) (43,811)
Increase in payables, accrued expenses,
other liabilities 10,209 21,651
- ---------------------------------------------------- -------- --------
Net cash provided (used) 24,939 (5,407)
- ---------------------------------------------------- -------- --------
Cash Flows from Investing Activities:
Additions to property and equipment, net
of disposals (8,830) (4,003)
Proceeds from sales of real estate 4,355 4,794
- ---------------------------------------------------- -------- --------
Net cash provided (used) (4,475) 791
- ---------------------------------------------------- -------- --------
Cash Flows from Financing Activities:
Proceeds from the sales of stock, and the
exercise of stock options 3,886 3,738
Proceeds from new borrowings 450 8,600
Principal payments on debt (8,959) (11,356)
Purchases of common stock, less amounts
amounts financed with debt (8,060) (4,179)
Dividends paid (2,360) (1,226)
Other (48) -
- ---------------------------------------------------- -------- --------
Net cash used (15,091) (4,423)
- ---------------------------------------------------- -------- --------
Increase (Decrease) in Cash and Cash Equivalents 5,373 (9,039)
Cash and Cash Equivalents at the Beginning
of the Period 1,151 18,482
- ---------------------------------------------------- -------- --------
Cash and Cash Equivalents at the End
of the Period $ 6,524 $ 9,443
==================================================== ======== ========
</TABLE>
See the accompanying notes.
Page 4
<PAGE>
Sverdrup Corporation
Notes to Unaudited Consolidated Condensed Financial Statements
1. The accompanying consolidated condensed financial statements have been
prepared by Sverdrup Corporation (the "Company"), without audit, pursuant
to the interim period reporting requirements of Form 10-Q. Consequently,
certain information and note disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted.
In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of only
normal recurring adjustments) necessary for the fair presentation of its
consolidated financial position at October 2, 1998 and October 3, 1997, and
its consolidated results of operations and cash flows for the nine months
ended October 2, 1998 and October 3, 1997.
The Company's interim results of operations are not necessarily indicative
of the results to be expected for the full year.
2. Included in receivables at October 2, 1998 and October 3, 1997 were
unbilled amounts totaling $79,903,000 and $67,155,000, respectively.
3. Property, equipment and improvements are stated at cost and consisted of
the following at October 2, 1998 and October 3, 1997 (in thousands):
<TABLE>
<CAPTION>
1998 1997
- -------------------------------------------- -------- --------
<S> <C> <C>
Office buildings and land $ 14,953 $ 13,174
Leasehold improvements and computer
software 19,252 15,844
Furniture and equipment 47,208 43,637
- -------------------------------------------- -------- --------
81,413 72,655
Accumulated depreciation
and amortization (51,029) (47,233)
- -------------------------------------------- -------- --------
$ 30,384 $ 25,422
======== ========
</TABLE>
Page 5
<PAGE>
Sverdrup Corporation
Notes to Unaudited Consolidated Condensed Financial Statements
4. The following table summarizes the Company's investments and ventures in
real estate at October 2, 1998 and October 3, 1997 (in thousands):
<TABLE>
<CAPTION>
1998 1997
- ------------------------------------- ------- -------
<S> <C> <C>
Operating properties $ 9,086 $12,354
Ventures 4,439 11,635
Land held for development - 1,154
Accumulated depreciation and
amortization (2,663) (3,530)
- ------------------------------------- ------- -------
$10,862 $21,613
======= =======
</TABLE>
5. During the nine months ended October 2, 1998 and October 3, 1997, the
Company made cash payments of $2,601,000 and $3,234,000, respectively, for
interest and $5,518,000 and $4,958,000, respectively, for income taxes.
Page 6
<PAGE>
EXHIBIT 99.4
- --------------------------------------------------------------------------------
$230,000,000
CREDIT AGREEMENT
Dated as of January 11, 1999
among
JACOBS ENGINEERING GROUP INC.
and
CERTAIN OF ITS DESIGNATED SUBSIDIARIES
as the Borrowers
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
as Administrative Agent and Issuing Bank
ABN AMRO BANK N.V.
THE FIRST NATIONAL BANK OF CHICAGO
FIRST UNION NATIONAL BANK
and
WELLS FARGO BANK, NATIONAL ASSOCIATION
as the Managing Agents
THE OTHER FINANCIAL INSTITUTIONS FROM TIME TO TIME PARTY HERETO
and
NATIONSBANC MONTGOMERY SECURITIES LLC
as Lead Arranger
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page(s)
-------
<S> <C>
ARTICLE I DEFINITIONS........................................................... 1
1.01 Certain Defined Terms................................................. 1
1.02 Other Interpretive Provisions......................................... 17
1.03 Accounting Principles................................................. 18
1.04 Currency Equivalents Generally........................................ 18
ARTICLE II THE CREDITS........................................................... 18
2.01 Amounts and Terms of Commitments...................................... 18
2.02 Loan Accounts......................................................... 19
2.03 Procedure for Committed Borrowing..................................... 19
2.04 Conversion and Continuation Elections for Committed Borrowings........ 20
2.05 Utilization of Commitments in Offshore Currencies..................... 22
2.06 Bid Borrowings........................................................ 25
2.07 Procedure for Bid Borrowing........................................... 25
2.08 Voluntary Termination or Reduction of Commitments..................... 29
2.09 Optional Prepayments.................................................. 29
2.10 Repayment............................................................. 29
2.11 Interest.............................................................. 29
2.12 Fees.................................................................. 30
(a) Arrangement, Agency Fees......................................... 30
(b) Facility Fee..................................................... 30
2.13 Computation of Fees and Interest...................................... 30
2.14 Payments by the Borrowers............................................. 31
2.15 Payments by the Banks to the Administrative Agent..................... 31
2.16 Sharing of Payments, Etc.............................................. 32
2.17 Designation of Additional Subsidiary Borrowers........................ 33
2.18 Additional Guaranties by Material Subsidiaries........................ 33
2.19 Joint Borrower Provisions............................................. 33
ARTICLE III THE LETTERS OF CREDIT................................................. 34
3.01 The Letter of Credit Commitment....................................... 35
3.02 Issuance, Amendment and Renewal of Letters of Credit.................. 36
3.03 Risk Participations, Drawings and Reimbursements...................... 38
3.04 Repayment of Participations........................................... 39
3.05 Role of the Issuing Bank.............................................. 40
3.06 Obligations Absolute.................................................. 41
3.07 Letter of Credit Fees................................................. 42
3.08 Issuance Fee and Documentary and Processing Charges Payable to
Issuing Bank.......................................................... 42
3.09 Uniform Customs and Practice.......................................... 43
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
ARTICLE IV TAXES, YIELD PROTECTION AND ILLEGALITY................................ 43
4.01 Taxes................................................................. 43
4.02 Illegality............................................................ 44
4.03 Increased Costs and Reduction of Return............................... 45
4.04 Funding Losses........................................................ 45
4.05 Inability to Determine Rates.......................................... 46
4.06 Certificates of Banks................................................. 46
4.07 Survival.............................................................. 46
ARTICLE V CONDITIONS PRECEDENT.................................................. 47
5.01 Conditions of Initial Loans........................................... 47
(a) Credit Agreement and Note........................................ 47
(b) Guaranties....................................................... 47
(c) Resolutions; Incumbency.......................................... 47
(d) Organization Documents; Good Standing............................ 47
(e) Legal Opinion.................................................... 47
(f) Payment of Fees.................................................. 47
(g) Certificate...................................................... 48
(h) Copies of Certain Acquisition Documents.......................... 48
(i) Other Indebtedness............................................... 48
(j) Evidence of Satisfactory Insurance............................... 48
(k) Financial Statements............................................. 48
(l) Capital and Ownership Structure.................................. 48
(m) Other Documents.................................................. 49
5.02 Conditions to All Borrowing........................................... 49
(a) Notice of Borrowing; L/C Application............................. 49
(b) Continuation of Representations and Warranties................... 49
(c) No Existing Default.............................................. 49
ARTICLE VI REPRESENTATIONS AND WARRANTIES........................................ 49
6.01 Corporate Existence and Power......................................... 49
6.02 Corporate Authorizations; No Contravention............................ 50
6.03 Governmental Authorization............................................ 50
6.04 Binding Effect........................................................ 50
6.05 Litigation............................................................ 50
6.06 No Default............................................................ 51
6.07 ERISA Compliance...................................................... 51
6.08 Use of Proceeds: Margin Regulations................................... 51
6.09 Title to Properties................................................... 51
6.10 Taxes................................................................. 52
6.11 Financial Condition................................................... 52
6.12 Environmental Matters................................................. 52
6.13 Regulated Entities.................................................... 52
6.14 No Burdensome Restriction............................................. 52
6.15 Copyrights, Patents, Trademarks and Licenses, etc..................... 53
6.16 Subsidiaries.......................................................... 53
6.17 Insurance............................................................. 53
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
6.18 Year 2000............................................................. 53
6.19 Full Disclosure....................................................... 53
6.20 Company's Authority to Act............................................ 53
ARTICLE VII AFFIRMATIVE COVENANTS................................................. 54
7.01 Financial Statements.................................................. 54
7.02 Certificates: Other Information....................................... 54
7.03 Notices............................................................... 55
7.04 Preservation of Corporate Existence, Etc.............................. 56
7.05 Maintenance of Property............................................... 56
7.06 Insurance............................................................. 56
7.07 Payment of Obligation................................................. 56
7.08 Compliance with Laws.................................................. 57
7.09 Inspection of Property and Books and Records.......................... 57
7.10 Environmental Laws.................................................... 57
7.11 Use of Proceeds....................................................... 57
7.12 Year 2000............................................................. 57
ARTICLE VIII NEGATIVE COVENANTS.................................................... 58
8.01 Limitation on Lien.................................................... 58
8.02 Disposition of Assets................................................. 59
8.03 Consolidations and Mergers............................................ 60
8.04 Loans and Investments................................................. 60
8.05 Limitation on Indebtedness............................................ 61
8.06 Transactions with Affiliates.......................................... 62
8.07 Use of Proceeds....................................................... 62
8.08 Use of Proceeds; Ineligible Securities................................ 62
8.09 Contingent Obligation................................................. 62
8.10 Joint Ventures........................................................ 63
8.11 Lease Obligation...................................................... 63
8.12 Restricted Payments................................................... 63
8.13 Change in Business.................................................... 63
8.14 Accounting Changes.................................................... 64
8.15 Fixed Charge Coverage Ratio........................................... 64
8.16 Tangible Net Worth.................................................... 64
8.17 Leverage Ratio........................................................ 64
8.18 Modification of Acquisition Agreement................................. 64
ARTICLE IX EVENTS OF DEFAULT..................................................... 64
9.01 Event of Default...................................................... 64
(a) Non-Payment...................................................... 64
(b) Representation or Warranty....................................... 65
(c) Specific Defaults................................................ 65
(d) Other Defaults................................................... 65
(e) Cross-Default.................................................... 65
(f) Insolvency; Voluntary Proceedings................................ 65
(g) Involuntary Proceedings.......................................... 65
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
(h) ERISA............................................................ 66
(i) Monetary Judgments............................................... 66
(j) Non-Monetary Judgments........................................... 66
(k) Change of Control................................................ 66
(l) Adverse Change................................................... 66
(m) Guaranty Recission............................................... 66
9.02 Remedies................................................................. 66
9.03 Rights Not Exclusive..................................................... 67
ARTICLE X THE AGENT............................................................. 67
10.01 Appointment and Authorization......................................... 67
10.02 Delegation of Duties.................................................. 68
10.03 Liability of Administrative Agent..................................... 68
10.04 Reliance by Administrative Agent...................................... 68
10.05 Notice of Default..................................................... 69
10.06 Credit Decision....................................................... 69
10.07 Indemnification....................................................... 69
10.08 Administrative Agent in Individual Capacity........................... 70
10.09 Successor Administrative Agent........................................ 70
10.10 Withholding Tax....................................................... 71
ARTICLE XI MISCELLANEOUS......................................................... 72
11.01 Amendment and Waivers................................................. 72
11.02 Notices............................................................... 73
11.03 No Waiver; Cumulative Remedies........................................ 74
11.04 Costs and Expenses.................................................... 74
11.05 Indemnity............................................................. 74
11.06 Payments Set Aside.................................................... 75
11.07 Successors and Assigns................................................ 75
11.08 Assignments, Participations, etc...................................... 75
11.09 Setoff................................................................ 77
11.10 Notification of Addresses, Lending Offices, Etc....................... 77
11.11 Counterparts.......................................................... 77
11.12 Severability.......................................................... 77
11.13 No Third Parties Benefited............................................ 78
11.14 Governing Law and Jurisdiction........................................ 78
11.15 Waiver of Jury Trial.................................................. 78
11.16 Entire Agreement...................................................... 79
11.17 Judgment.............................................................. 79
</TABLE>
iv
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is entered into as of January 11, 1999, among JACOBS
ENGINEERING GROUP INC., a Delaware corporation (the "Company"), certain
-------
subsidiaries of the Company from time to time party to this Agreement
(individually, a "Subsidiary Borrower" and collectively the "Subsidiary
------------------- ----------
Borrowers"), the several financial institutions from time to time party to this
- ---------
Agreement (collectively, the "Banks"; individually, a "Bank"), Bank of America
----- ----
National Trust and Savings Association, as administrative agent for the Banks
(in such capacity, the "Administrative Agent"), Bank of America National Trust
--------------------
and Savings Association as Issuing Bank (in such capacity, the "Issuing Bank"),
------------
NationsBanc Montgomery Securities, LLC, as the Lead Arranger (in such capacity,
the "Lead Arranger"), and ABN AMRO Bank N.V., The First National Bank of
-------------
Chicago, First Union National Bank and Wells Fargo Bank, National Association,
as the Managing Agents (in such capacity, the "Managing Agents").
---------------
WHEREAS, the Banks have agreed to make available to the Company and the
Subsidiary Borrowers (the Company and each Subsidiary Borrower are each referred
to herein as a "Borrower", and are collectively referred to herein as
--------
"Borrowers") a revolving credit facility for loans and letters of credit upon
---------
the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.01 Certain Defined Terms. The following terms have the following
---------------------
meanings:
"Absolute Rate" has the meaning specified in subsection 2.07(c).
-------------
"Absolute Rate Auction" means a solicitation of Competitive Bids setting
---------------------
forth Absolute Rates pursuant to Section 2.07.
"Absolute Rate Bid Loan" means a Bid Loan that bears interest at a rate
----------------------
determined with reference to the Absolute Rate.
"Accession Agreement" has the meaning given such term in Section 2.17.
-------------------
"Acquired Company" means Sverdrup Corporation, a Missouri corporation.
----------------
"Acquisition" means the acquisition by the Company of all of the
-----------
outstanding stock of the Acquired Company.
"Acquisition Agreement" means that certain Agreement and Plan of Merger
---------------------
among the Acquired Company, the Company and Jacobs Acquisition Corp. dated as of
December 21, 1998, as amended by that certain First Amendment dated as of
December 23, 1998.
1
<PAGE>
"Administrative Agent" has the meaning specified in the introductory
--------------------
paragraph hereof and includes BofA in its capacity as administrative agent and
bid loan agent for the Banks hereunder, and any successor agent pursuant to
Section 10.09.
"Administrative Agent's Payment Office" means (a) in respect of payments in
-------------------------------------
Dollars, the address for payments set forth on Schedule 11.02 or such other
--------------
address as the Administrative Agent may from time to time specify in accordance
with Section 11.02, and (b) in the case of payments in any Offshore Currency,
such address as the Administrative Agent may from time to time specify in
accordance with Section 11.02.
"Affiliate" means, as to any Person, any other Person which, directly or
---------
indirectly, is in control of, is controlled by, or is under common control with,
such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, by contract, or otherwise.
"Agent-Related Persons" means BofA and any successor agent pursuant to
---------------------
Section 10.09, together with their respective Affiliates (including, in the case
of BofA, the Lead Arranger), and the officers, directors, employees, agents and
attorneys-in-fact of such Persons and Affiliates.
"Agreed Alternative Currency" has the meaning specified in Section 2.05(e).
---------------------------
"Agreement" means this Credit Agreement as amended, supplemented or
---------
otherwise modified from time to time.
"Applicable Currency" means, as to any particular payment or Loan, Dollars
-------------------
or the Offshore Currency in which it is denominated or is payable.
"Applicable L/C Fee Percentage" shall mean at any date for purposes of
-----------------------------
computing fees payable on account of outstanding Financial Letters of Credit and
Peformance Letters of Credit payable pursuant to Section 3.07(a), that
percentage determined in accordance with the Pricing Matrix.
"Applicable Margin" shall mean at any date for purposes of computing an
-----------------
interest rate, that percentage determined in accordance with the Pricing Matrix.
"Applicable Facility Fee Percentage" shall mean at any date for purposes of
----------------------------------
computing the facility fee payable pursuant to Section 2.12(b), that percentage
determined in accordance with the Pricing Matrix.
"Assignee" has the meaning specified in subsection 11.08(a).
--------
"Attorney Costs" means and includes all fees and disbursements of any law
--------------
firm or other external counsel, plus the allocated cost of internal legal
services and all disbursements of internal counsel.
"Bank" has the meaning specified in the introductory clause hereto.
----
2
<PAGE>
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11 U. S.
---------------
C. (S) 10 1, et seq.).
-- ----
"Base Rate" means, for any day, the higher of:
---------
(a) the rate of interest in effect for such day as publicly announced from
time to time by BofA in San Francisco, California, as its "reference rate."
(The "reference rate" is a rate set by BofA based upon various factors
including BoAs costs and desired return, general economic conditions and
other factors, and is used as a reference point for pricing some loans,
which may be priced at, above, or below such announced rate); or
(b) 0.50% per annum above the latest Federal Funds Rate.
Any change in the reference rate announced by BofA shall take effect at the
opening of business on the day specified in the public announcement of such
change.
"Base Rate Committed Loan" means a Committed Loan that bears interest based
------------------------
on the Base Rate.
"Bid Borrowing" means a Borrowing hereunder consisting of one or more Bid
-------------
Loans made to the Requesting Borrower on the same day by one or more Banks.
"Bid Loan" means a Loan by a Bank to the Requesting Borrower under Section
--------
2.06, which may be a LIBOR Bid Loan or an Absolute Rate Bid Loan.
"Bid Loan Lender" means, in respect of any Bid Loan, the Bank making such
---------------
Bid Loan to the Requesting Borrower.
"Bid Loan Sublimit" means $50,000,000.
-----------------
"BofA" means Bank of America National Trust and Savings Association, a
----
national banking association.
"Borrower(s)" has the meaning specified in the recitals hereto.
-----------
"Borrowing" means a borrowing hereunder consisting of Loans of the same
---------
Type made to the Requesting Borrower on the same day by the Banks under Article
II, and may be a Committed Borrowing or a Bid Borrowing and, other than in the
case of Base Rate Committed Loans, having the same Interest Period.
"Borrowing Date" means any date on which a Borrowing occurs under Section
--------------
2.03 or Section 2.06.
"Business Day" means any day other than a Saturday, Sunday or other day on
------------
which commercial banks in New York City or San Francisco are authorized or
required by law to close and (a) with respect to disbursements and payments
pertaining to any Offshore Rate Committed Loan denominated in Dollars, a day on
which dealings are carried on in the applicable offshore Dollar interbank
market, (b) from and after the Euro Commencement Date, with respect to
3
<PAGE>
disbursements and payments pertaining to any Offshore Currency Committed Loan,
if the applicable Business Day relates to an Offshore Currency Committed Loan
denominated in euros or the currency of a Euro Participating Member State, a day
which is also a Euro Business Day, and (c) with respect to any disbursements and
payments in and calculations pertaining to any Offshore Currency Committed Loan
denominated in any other Offshore Currency, a day on which commercial banks are
open for foreign exchange business in London, England, and on which dealings in
the relevant Offshore Currency are carried on in the applicable offshore foreign
exchange interbank market in which disbursement of or payment in such Offshore
Currency will be made or received hereunder.
"Capital Adequacy Regulation" means any guideline, request or directive of
---------------------------
any central bank or other Governmental Authority, or any other law, rule or
regulation whether or not having the force of law, in each case, regarding
capital adequacy of any bank or of any corporation controlling a bank.
"Change of Control" means the occurrence, after the date of this Agreement,
-----------------
of any Person or two or more Persons acting in concert acquiring beneficial
ownership (within the meaning of Rule l3d3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934) (a "13d Group") directly
or indirectly of securities of the Company or any Subsidiary Borrower (or other
securities convertible into such securities) representing, together with the
securities already held by such Person or Persons, 25% or more of the combined
voting power of all securities of the Company or any Subsidiary Borrower
entitled to vote in the election of directors.
"Closing Date" means the date on which all conditions precedent set forth
------------
in Section 5.01 are satisfied or waived by all Banks (or, in the case of
subsection 5.01(f), waived by the Person entitled to receive such payment).
"Code" means the Internal Revenue Code of 1986, and regulations promulgated
----
thereunder, as amended from time to time.
"Commitment", as to each Bank, has the meaning specified in Section 2.01.
----------
"Committed Borrowing" means a borrowing hereunder consisting of Committed
-------------------
Loans made on the same day by the Banks in the same Applicable Currency ratably
in accordance with their respective Pro Rata Shares and, in the case of Offshore
Rate Committed Loans, having the same Interest Periods.
"Committed Loan" means a Loan by a Bank to any Borrower under Section 2.01,
--------------
and may be an Offshore Rate Committed Loan or a Base Rate Committed Loan (each,
a "Type" of Committed Loan),
"Company" has the meaning specified in the introductory clause hereto.
-------
"Competitive Bid" means an offer by a Bank to make a Bid Loan in accordance
---------------
with subsection 2.07(c).
"Competitive Bid Request" has the meaning specified in subsection 2.07(a).
-----------------------
4
<PAGE>
"Compliance Certificate" means a certificate substantially in the form of
----------------------
Exhibit C.
- ---------
"Computation Date" has the meaning specified in Section 2.05(a).
----------------
"Consolidated Net Income" means, for any period, the Company's consolidated
-----------------------
net income as determined in accordance with GAAP.
"Contingent Obligation" means, as to any Person, any direct or indirect
---------------------
liability of that Person, whether or not contingent, with or without recourse:
(a) with respect to any Indebtedness, lease, dividend, letter of credit or
other obligation (the "primary obligations") of another Person (the
"primary obligor"), including any obligation of that Person (i) to
purchase, repurchase or otherwise acquire such primary obligations or any
security therefor, (ii) to advance or provide funds for the payment or
discharge of any such primary obligation, or to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net
worth or solvency or any balance sheet item, level of income or financial
condition of the primary obligor, (iii) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such
primary obligation of the ability of the primary obligor to make payment of
such primary obligation, or (iv) otherwise to assure or hold harmless the
holder of any such primary obligation against loss in respect thereof
(each, a "Guaranty Obligation");
-------------------
(b) with respect to any Surety Instrument issued for the account of that
Person or as to which that Person is otherwise liable for reimbursement of
drawings or payments;
(c) to purchase any materials, supplies or other property from, or to
obtain the services of, another Person if the relevant contract or other
related document or obligation requires that payment for such materials,
supplies or other property, or for such services, shall be made regardless
of whether delivery of such materials, supplies or other property is ever
made or tendered, or such services are ever performed or tendered; or
(d) in respect of any Swap Contract.
Notwithstanding the foregoing, project guarantees in favor of customers
rendered in the ordinary course of business shall not be deemed to be Contingent
Obligations.
The amount of any Contingent Obligation shall, in the case of Guaranty
Obligations, be deemed equal to the stated or determinable amount of the primary
obligation in respect of which such Guaranty Obligation is made or, if not
stated or if indeterminable, the maximum reasonably anticipated liability in
respect thereof, and in the case of other Contingent Obligations, shall be equal
to the maximum reasonably anticipated liability in respect thereof.
"Contractual Obligation" means, as to any Person, any provision of any
----------------------
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument, document or agreement to
which such Person is a party or by which it or any of its property is bound.
5
<PAGE>
"Conversion/Continuation Date" means any date on which, under Section 2.04,
----------------------------
the Company (a) converts Committed Loans of one Type to another Type, or (b)
continues as Committed Loans of the same Type, but with a new Interest Period,
Committed Loans having Interest Periods expiring on such date.
"Credit Extension" means and includes (a) the making of any Loans
----------------
hereunder, and (b) the issuance of any Letters of Credit hereunder.
"Debt" means, on any date of determination, total liabilities as determined
----
in accordance with GAAP.
"Default" means any event or circumstance which, with the giving of notice,
-------
the lapse of time, or both, would (if not cured or otherwise remedied during
such time) constitute an Event of Default.
"Documentary Letter of Credit" means a Letter of Credit used directly to
----------------------------
support an obligation to pay the acquisition price for goods upon presentation
of documents of title and/or other designated documents evidencing such goods or
the delivery thereof.
"Dollar Equivalent" means, at any time, (a) as to any amount denominated in
-----------------
Dollars, the amount thereof at such time, and (b) as to any amount denominated
in an Offshore Currency, the equivalent amount in Dollars as determined by the
Administrative Agent at such time on the basis of the Spot Rate for the purchase
of Dollars with such Offshore Currency on the applicable or most recent
Computation Date provided for in Section 2.05(a).
"Dollars", "dollars" and "$" each mean lawful money of the United States.
------- ------- -
"Domestic Subsidiary" means any Subsidiary which maintains its chief
-------------------
executive office in the United States or is incorporated in any jurisdiction in
the United States.
"EBITDA" means, at any date of determination, the Company's Consolidated
------
Net Income, plus interest expense, plus tax expense plus depreciation and
amortization of intangibles. For purposes of this definition only, Consolidated
Net Income shall be calculated excluding any extraordinary gains and
extraordinary losses.
"Effective Amount" means, as of any date, (a) with respect to Loans, the
----------------
aggregate outstanding Equivalent Amount thereof after giving effect to any
Borrowings and prepayments or repayments of Loans occurring on such date; and
(b) with respect to L/C Obligations, the aggregate outstanding Equivalent Amount
of such L/C Obligations on such date after giving effect to any Issuances of
Letters of Credit occurring on such date and any other changes in the aggregate
Equivalent Amount of the L/C Obligations as of such date, including as a result
of any reimbursements of outstanding unpaid drawings under any Letters of Credit
or any reductions in the maximum amount available for drawing under Letters of
Credit taking effect on such date.
"Eligible Assignee" means (i) a Bank, (ii) an Affiliate of a Bank or any
-----------------
fund that invests in bank loans and is managed by an investment advisor to a
Bank, and (iii) any other Person approved as required pursuant to Section 11.08;
provided, however, that neither the Company nor any Affiliate of the Company
shall qualify as an Eligible Assignee.
6
<PAGE>
"EMU Legislation" means legislative measures of the European Council for
---------------
the introduction of, changeover to or operation of a single or unified European
currency (whether known as the euro or otherwise), being in part the
implementation of the third stage of the Economic and Monetary Union as
contemplated in the Treaty on European Union.
"Environmental Claims" means all claims, however asserted, by any
--------------------
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release or injury
to the environment.
"Environmental Laws" means all federal, state or local laws, statutes,
------------------
common law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any Governmental Authorities, in each case
relating to environmental, health, safety and land use matters.
"Equivalent Amount" means (a) whenever this Agreement requires or permits a
-----------------
determination on any date of the equivalent in Dollars of an amount expressed in
Dollars, such amount; (b) whenever this Agreement requires or permits a
determination on any date of the equivalent in Dollars of an amount expressed in
an Offshore Currency, the equivalent amount in Dollars of an amount expressed in
an Offshore Currency as determined by the Agent on such date on the basis of the
Spot Rate for the purchase of Dollars with such Offshore Currency on the
relevant Computation Date provided for hereunder; or (c) whenever this Agreement
requires or permits a determination on any date of the equivalent in an Offshore
Currency of an amount expressed in Dollars, the equivalent amount in an Offshore
Currency of an amount expressed in Dollars as determined by the Agent on such
date on the basis of the Spot Rate for the purchase of such Offshore Currency
with Dollars on the relevant Computation Date provided for hereunder.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
-----
regulations promulgated thereunder, as amended from time to time.
"ERISA Event" means (a) a Reportable Event with respect to a Pension Plan;
-----------
(b) a withdrawal by the Company from a Pension Plan subject to Section 4063 of
ERISA during a plan year in which it was a substantial employer (as defined in
Section 4001(a)(2) of ERISA) or a cessation of operations which is treated as
such a withdrawal under Section 4062(e) of ERISA; (c) the filing of a notice of
intent to terminate, the treatment of a plan amendment as a termination under
Section 4041 or 4041A of ERISA or the commencement of proceedings by the PBGC to
terminate a Pension Plan subject to Title IV of ERISA; (d) a failure by the
Company to make required contributions to a Pension Plan or other Plan subject
to Section 412 of the Code; (e) an event or condition which might reasonably be
expected to constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Pension Plan; (f) the
imposition of any liability under Title IV of ERISA, other than PBGC premiums
due but not delinquent under Section 4007 of ERISA, upon the Company; or (g) an
application for a funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code with respect to any Pension Plan.
"euro" means the single currency of Euro Participating Member States of the
----
European Union.
7
<PAGE>
"Euro Business Day" means any day other than a Saturday , Sunday, Christmas
-----------------
Day or New Year's Day on which the TARGET clearing system (or any successor
settlement system) is operating, as determined by the Administrative Agent.
"Euro Commencement Date" means January 1, 1999 or such other date which is
----------------------
the date of the commencement of the third stage of the Economic and Monetary
Union as contemplated in the Treaty on European Union (the Treaty of Rome of
March 25, 1957, as amended by the Single European Act 1986 and the Maastricht
Treaty (which was signed at Maastricht on February 1, 1992 and came into force
on November 1, 1993), as amended from time to time) or the date on which
circumstances arise which (in the opinion of the Administrative Agent) have
substantially the same effect and result in substantially the same consequences
as commencement of the third stage of EMU as contemplated by the Treaty on
European Union. With respect to any country (or the currency of such country)
that is not a Euro Participating Member State on the initial date set forth
above, "Euro Commencement Date" shall mean, as to such country and the currency
of such country, the date such country (and the currency of such country)
becomes a Euro Participating Member State.
"Eurodollar Reserve Percentage" has the meaning specified in the definition
-----------------------------
of "Offshore Rate".
"Euro National Currency Unit" means the unit of currency (other than a euro
---------------------------
unit) of a Euro Participating Member State.
"Euro Participating Member State" means each country so described in any
-------------------------------
EMU Legislation.
"euro unit" means the currency unit of the euro.
---------
"Event of Default" means any of the events or circumstances specified in
----------------
Section 9.01, provided that any requirement for the giving of notice, the lapse
of time, or both, or any other condition, has been satisfied.
"Exchange Act" means the Securities and Exchange Act of 1934, and
------------
regulations promulgated thereunder, as amended from time to time.
"Existing Credit Agreement" means that certain Revolving Credit Agreement
-------------------------
dated as of December 21, 1994, among the Company, the several financial
institutions from time to time party thereto and BofA which provides for a
$45,000,000 revolving credit facility.
"FDIC" means the Federal Deposit Insurance Corporation, and any
----
Governmental Authority succeeding to any of its principal functions.
"Federal Funds Rate" means, for any day, the rate set forth in the weekly
------------------
statistical release designated as H.15(519), or any successor publication,
published by the Federal Reserve Bank of New York (including any such successor,
"H.15(519)") on the preceding Business Day opposite the caption "Federal Funds
(Effective)"; or, if any relevant day such rate is not so published on any such
preceding Business Day, the rate for such day will be the arithmetic mean
8
<PAGE>
as determined by the Administrative Agent of the rates for the last transaction
in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on
that day by each of three leading brokers of Federal funds transactions in New
York City selected by the Administrative Agent.
"Fee Letter" has the meaning specified in subsection 2.12(a).
----------
"Financial Letter of Credit" means a standby or direct pay Letter of Credit
--------------------------
supporting indebtedness owing to third parties, which may include workers'
compensation requirements.
"Fixed Charges" means the sum of interest expense plus the current portion
-------------
of long term Debt, plus taxes paid.
"FRB" means the Board of Governors of the Federal Reserve System, and any
---
Governmental Authority succeeding to any of its principal functions.
"Funded Debt" shall mean for any Person at any date of calculation the
-----------
aggregate dollar amount of Debt of such Person which has actually been funded
and is outstanding at such time, whether or not such amount is due and payable
on such date; provided, however, that Funded Debt shall not include the amount
of Letters of Credit in which such Person is the "account party."
"GAAP" means generally accepted accounting principles set forth from time
----
to time in the opinions and pronouncements of the Accounting Principles Board
and the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the Closing Date,
"Governmental Authority" means any nation or government, any state or other
----------------------
political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Guaranties" means the Guaranties dated as of even date herewith executed
----------
by each of the Company, the Initial Subsidiary Borrowers and the Initial
Material Subsidiaries, substantially in the form of Exhibit J hereto together
---------
with any other Guaranties executed pursuant to Section 2.17 by any Person that
becomes a Subsidary Borrower hereunder following the Closing Date or under 2.18
by any Person that becomes a Material Subsidiary following the Closing Date, as
the same may, from time to time, be supplemented, modified, amended, renewed or
extended.
"Guarantor Subordination Agreement" has the meaning given such term in
---------------------------------
Section 2.17.
"Guaranty Obligation" has the meaning specified in the definition of
-------------------
"Contingent Obligation."
"Honor Date" has the meaning specified in subsection 3.03(b).
----------
9
<PAGE>
"Inclusion Date" has the meaning specified in Section 2.17.
--------------
"Indebtedness" of any Person means, without duplication, (a) all
------------
indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than trade
payables entered into in the ordinary course of business on ordinary terms); (c)
all non-contingent reimbursement or payment obligations with respect to Surety
Instruments; (d) all obligations evidenced by notes, bonds, debentures or
similar instruments, including obligations so evidenced incurred in connection
with the acquisition of property, assets or businesses; (e) all indebtedness
created or arising under any conditional sale or other title retention
agreement, or incurred as financing, in either case with respect to property
acquired by the Person (even though the rights and remedies of the seller or
bank under such agreement in the event of default are limited to repossession or
sale of such property); (f) all obligations with respect to capital leases; (g)
all net obligations with respect to Swap Contracts; (h) all indebtedness
referred to in clauses (a) through (g) above secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien upon or in property (including accounts and contracts
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness; and (i) all Guaranty Obligations in
respect of indebtedness or obligations of others of the kinds referred to in
clauses (a) through (g) above.
"Indemnified Liabilities" has the meaning specified in Section 11.05.
-----------------------
"Indemnified Person" has the meaning specified in Section 11.05.
------------------
"Independent Auditor" means Ernst & Young, or other nationally recognized
-------------------
independent public accounting firm.
"Initial Material Subsidiary" means each Subsidiary of the Borrower
---------------------------
existing on the Closing Date which is a Material Subsidiary, as indicated on
Schedule 6.16 attached hereto.
- -------------
"Initial Subsidiary Borrowers" means those Borrowers (other than the
----------------------------
Company) party to this Agreement on the Closing Date.
"Insolvency Proceeding" means (a) any case, action or proceeding before any
---------------------
court or other Governmental Authority relating to bankruptcy, reorganization,
insolvency, liquidation, receivership, dissolution, winding-up or relief of
debtors, or (b) any general assignment for the benefit of creditors,
composition, marshalling of assets for creditors, or other, similar arrangement
in respect of its creditors generally or any substantial portion of its
creditors; undertaken under U.S. Federal, state or foreign law, including the
Bankruptcy Code.
"Interest Payment Date" means, as to any Loan other than a Base Rate
---------------------
Committed Loan, the last day of each Interest Period applicable to such Loan
and, as to any Base Rate Committed Loan, the last Business Day of each calendar
quarter; provided, however, that if any Interest Period for an Offshore Rate
-------- -------
Committed Loan exceeds three months, the date that falls three months after the
beginning of such Interest Period and after each Interest Payment Date
thereafter is also an Interest Payment Date.
10
<PAGE>
"Interest Period" means, (a) the period commencing on the Borrowing Date
---------------
any Offshore Rate Loan is disbursed, or on the Conversion/Continuation Date on
which the Loan is converted into or continued as an Offshore Rate Committed
Loan, and ending on the date one, two, three or six months thereafter as
selected by the Company in its Notice of Borrowing, Notice of
Conversion/Continuation or Notice of Bid Request, as the case may be; and (b) as
to any Absolute Rate Bid Loan, a period of not less than 30 days and not more
than 180 days as selected by the Company in the applicable Competitive Bid
Request;
provided that:
- --------
(i) if any Interest Period would otherwise end on a day that is not a
Business Day, that Interest Period shall be extended to the following
Business Day unless, in the case of an Offshore Rate Loan, the result of
such extension would be to carry such Interest Period into another calendar
month, in which event such Interest Period shall end on the preceding
Business Day;
(ii) any Interest Period pertaining to an Offshore Rate Loan that
begins on the last Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the end
of such Interest Period) shall end on the last Business Day of the calendar
month at the end of such Interest Period; and
(iii) no Interest Period for any Loan shall extend beyond the
Termination Date.
"Invitation for Competitive Bids" means a solicitation for Competitive Bids
-------------------------------
substantially in the form of Exhibit F.
---------
"IRS" means the Internal Revenue Service, and any Governmental Authority
---
succeeding to any of its principal functions.
"Issuance Date" has the meaning specified in Section 3.01(a).
-------------
"Issue" means with respect to any Letter of Credit, to issue or to extend
-----
the expiry of, or to renew or increase the amount of, such Letter of Credit; and
the terms "Issued," "Issuing" and "Issuance" have corresponding meanings.
------- ------- --------
"Issuing Bank" means Bank of America in its capacity as issuer of one or
------------
more Letters of Credit hereunder, together with any replacement letter of credit
issuer arising hereunder.
"Joint Venture" means a single-purpose corporation, partnership, joint
-------------
venture or other similar legal arrangement (whether created by contract or
conducted through a separate legal entity) now or hereafter formed by the
Company or any of its Subsidiaries with another Person in order to conduct a
common venture or enterprise with such Person.
"L/C Advance" means each Bank's participation in any L/C Borrowing in
-----------
accordance with its Pro Rata Share.
11
<PAGE>
"L/C Amendment Application" means an application form for amendment of
-------------------------
outstanding standby or commercial documentary letters of credit as shall at any
time be in use at the Issuing Bank, as the Issuing Bank shall request.
"L/C Application" means an application form for issuances of Financial
---------------
Letters of Credit, Performance Letters of Credit or Documentary Letters of
Credit or for amendment thereof as shall at any time be in use at the Issuing
Bank.
"L/C Borrowing" means an extension of credit resulting from a drawing under
-------------
any Letter of Credit which shall not have been reimbursed on the date when made
nor converted into a Borrowing of Committed Loans under subsection 3.03(c).
"L/C Obligations" means at any time the sum of (a) the aggregate undrawn
---------------
amount of all Letters of Credit then outstanding, plus (b) the amount of all
unreimbursed drawings under all Letters of Credit, including all outstanding L/C
Borrowings.
"L/C-Related Documents" means the Letters of Credit, the L/C Applications,
---------------------
and any other document relating to any Letter of Credit, including any of the
Issuing Bank's standard form documents for letter of credit issuances.
"Lead Arranger" has the meaning specified in the introductory clause
-------------
hereto.
"Lending Office" means, as to any Bank, the office or offices of such Bank
--------------
specified as its "Lending Office" or "Domestic Lending Office" or "Offshore
Lending Office", as the case may be, on Schedule 11.02, or such other office or
--------------
offices as such Bank may from time to time notify the Company and the
Administrative Agent.
"Letters of Credit" means the Financial Letters of Credit, Performance
-----------------
Letters of Credit or Documentary Letters of Credit Issued by the Issuing Bank
hereunder.
"LIBOR" has the meaning set forth in the definition of Offshore Rate.
-----
"LIBOR Auction" means a solicitation of Competitive Bids setting forth a
-------------
LIBOR Bid Margin pursuant to Section 2.07.
"LIBOR Bid Loan" means any Bid Loan that bears interest at a rate based
--------------
upon LIBOR.
"LIBOR Bid Margin" has the meaning specified in subsection 2.07(c)(ii)(C).
----------------
"Lien" means any security interest, mortgage, deed of trust, pledge,
----
hypothecation, assignment, charge or deposit arrangement, encumbrance, lien
(statutory or other) or preferential arrangement of any kind or nature
whatsoever in respect of any property (including those created by, arising under
or evidenced by any conditional sale or other title retention agreement, the
interest of a lessor under a capital lease, any financing lease having
substantially the same economic effect as any of the foregoing, or the filing of
any financing statement naming the owner of the asset to which such lien relates
as debtor, under the Uniform Commercial Code or any comparable law) and any
contingent or other agreement to provide any of the foregoing, but not including
the interest of a lessor under an operating lease.
12
<PAGE>
"Loan" means an extension of credit by a Bank to any Borrower under Article
----
II or Article III, and may be a Committed Loan, a Bid Loan or a L/C Borrowing.
"Loan Documents" means this Agreement, any Notes, the Guaranties, the
--------------
Guarantor Subordination Agreements, the Accession Agreements, the Assignment and
Acceptance Agreements, the Fee Letter and all other documents delivered to the
Administrative Agent or any Bank in connection herewith.
"Majority Banks" means Banks holding at any time more than 50% of the sum
--------------
of the Commitments, or, in the event the Commitments have been terminated, Banks
holding more than 50% of the Loans.
"Managing Agents" has the meaning specified in the introductory clause
---------------
hereto.
"Margin Stock" means "margin stock" as such term is defined in Regulation
------------
T, U or X of the FRB.
"Material Adverse Effect" means (a) a material adverse change in, or a
-----------------------
material adverse effect upon, the operations, business, properties, condition
(financial or otherwise) or prospects of (i) the Company; or (ii) the Company
and its Subsidiaries taken as a whole; (b) a material impairment of the ability
of the Company or any Subsidiary to perform under any Loan Document and to avoid
any Event of Default; or (c) a material adverse effect upon the legality,
validity, binding effect or enforceability against the Company or any Subsidiary
of any Loan Document.
"Material Subsidiary" means, at any time, any Domestic Subsidiary that: (i)
-------------------
has revenues which constitute five percent (5%) or more of the Company's total
revenue; or (ii) contributes at least five percent (5%) to the Company's EBITDA;
or (iii) has assets the net book value of which constitutes five percent (5%) or
more of the Company's net book value of total assets, in each case, based upon
the Company's most recent annual or quarterly financial statements delivered to
the Administrative Agent under Section 6.01.
"Note" has the meaning specified in Section 2.02.
----
"Notice of Borrowing" means a notice in substantially the form of Exhibit
------------------- -------
A.
- -
"Notice of Conversion/Continuation" means a notice in substantially the
---------------------------------
form of Exhibit B.
---------
"Obligations" means all advances, debts, liabilities, obligations,
-----------
covenants and duties arising under any Loan Document, owing by the Borrowers to
any Bank, the Administrative Agent, or any Indemnified Person, whether direct or
indirect (including those acquired by assignment), absolute or contingent, due
or to become due, now existing or hereafter arising.
"Offshore Currency" means French Francs, British Pound Sterling and any
-----------------
Agreed Alternative Currency and, from and after the Euro Commencement Date, the
euro.
13
<PAGE>
"Offshore Currency Committed Loan" means any Offshore Rate Committed Loan
--------------------------------
denominated in an Offshore Currency.
"Offshore Rate" means, for any Interest Period with respect to Offshore
-------------
Rate Committed Loans comprising part of the same Borrowing, the rate of interest
per annum (rounded, if necessary, upward to the next 1/16th of 1%) determined by
the Administrative Agent as follows:
Offshore Rate = LIBOR
-------------------------------------------
1.00 -- Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means for any day for any Interest
-----------------------------
Period the maximum reserve percentage (expressed as a decimal, rounded, if
necessary, upward to the next 1/100th of 1%) in effect on such day (whether
or not applicable to any Bank) under regulations issued from time to time
by the FRB for determining the maximum reserve requirement (including any
emergency, supplemental or other marginal reserve requirement) with respect
to Eurocurrency funding (currently referred to as "Eurocurrency
liabilities") having a term comparable to such Interest Period, and
"LIBOR" means the rate of interest per annum (rounded, if necessary,
-----
upward to the next l/16th of 1%) equal to the rate at which BofA is offered
deposits in the Applicable Currency in the approximate amount of the amount
of the Loan to be made or continued as, or converted into, an Offshore Rate
Loan and having a maturity comparable to such Interest Period, in the
London interbank market at approximately 11:00 a.m. (London time) two
Business Days prior to the commencement of such Interest Period.
The Offshore Rate shall be adjusted automatically as to all Offshore Rate
Loans then outstanding as of the effective date of any change in the Eurodollar
Reserve Percentage.
"Offshore Rate Committed Loan" means any Committed Loan that bears interest
----------------------------
based on the Offshore Rate, which may be denominated in U.S. Dollars or an
Offshore Currency.
"Organization Documents" means, for any corporation, the certificate or
----------------------
articles of incorporation, the bylaws, any certificate of determination or
instrument relating to the rights of preferred shareholders of such corporation,
any shareholder rights agreement, and all applicable resolutions of the board of
directors (or any committee thereof) of such corporation.
"Other Taxes" means any present or future stamp or documentary taxes or any
-----------
other excise or property taxes, charges or similar levies which arise from any
payment made hereunder or from the execution, delivery or registration of, or
otherwise with respect to, this Agreement or any other Loan Documents.
"Overnight Rate" means, for any day, the rate of interest per annum at
--------------
which overnight deposits in the Applicable Currency, in an amount approximately
equal to the amount with respect to which such rate is being determined, would
be offered for such day by BofA's London Branch to major banks in the London or
other applicable offshore interbank market.
14
<PAGE>
"Participant" has the meaning specified in subsection 11.08(c).
-----------
"PBGC" means the Pension Benefit Guaranty Corporation, or any Governmental
----
Authority succeeding to any of its principal functions under ERISA.
"Pension Plan" means a pension plan (as defined in Section 3(2) of ERISA)
------------
subject to Title IV of ERISA which the Company sponsors, maintains, or to which
it makes, is making, or is obligated to make contributions, or in the case of a
multiple employer plan (as described in Section 4064(a) of ERISA) has made
contributions at any time during the immediately preceding five (5) plan years.
"Performance Letter of Credit" means a standby Letter of Credit used
----------------------------
directly or indirectly to cover bid, performance, advance and retention
obligations, including, without limitation, Letters of Credit issued in favor of
sureties who in connection therewith cover bid, performance and retention
obligations.
"Permitted Liens" has the meaning specified in Section 8.01.
---------------
"Person" means an individual, partnership, corporation, business trust,
------
joint stock company, trust, unincorporated association, joint venture or
Governmental Authority.
"Plan" means an employee benefit plan (as defined in Section 3(3) of ERISA)
----
which the Company sponsors or maintains or to which the Company makes, is
making, or is obligated to make contributions and includes any Pension Plan.
"Pricing Matrix" shall mean the matrix attached hereto as Exhibit L.
-------------- ---------
"Pro Rata Share" means, as to any Bank at any time, the percentage
--------------
equivalent (rounded to the ninth decimal place) at such time of such Bank's
Commitment divided by the combined Commitments of all Banks.
"Reportable Event" means, any of the events set forth in Section 4043(b) of
----------------
ERISA or the regulations thereunder, other than any such event for which the 30-
day notice requirement under ERISA has been waived in regulations issued by the
PBGC.
"Requesting Borrower" means the particular Borrower requesting Loans and/or
-------------------
Letters of Credit pursuant to the procedures set forth in Articles II and III.
"Requirement of Law" means, as to any Person, any law (statutory or
------------------
common), treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person or
any of its property or to which the Person or any of its property is subject.
"Responsible Officer" means the chief executive officer or the president or
-------------------
the chief financial officer or treasurer of the Company, or any other officer
having substantially the same authority and responsibility.
15
<PAGE>
"SEC" means the Securities and Exchange Commission, or any Governmental
---
Authority succeeding to any of its principal functions.
"Spot Rate" for a currency means the rate quoted by BofA as the spot rate
---------
for the purchase by BofA of such currency with another currency through its FX
Trading Office at approximately 8:00 a.m. (San Francisco time) on the date two
Business Days prior to the applicable Computation Date.
"Subsidiary" of a Person means any corporation, association, partnership,
----------
joint venture or other business entity of which more than 50% of the voting
stock or other equity interests (in the case of Persons other than
corporations), is owned or controlled directly or indirectly by the Person, or
one or more of the Subsidiaries of the Person, or a combination thereof. Unless
the context otherwise clearly requires, references herein to a "Subsidiary"
refer to a Subsidiary of the Company.
"Subsidiary Borrower" has the meaning specified in the introductory clause
-------------------
hereto.
"Surety Instruments" means all letters of credit (including standby and
------------------
commercial), banker's acceptances, bank guaranties, shipside bonds, surety bonds
and similar instruments.
"Swap Contracts" means swap agreements (as such term is defined in Section
--------------
101 of the Bankruptcy Code) and any other agreements, or arrangements designed
to provide protection against fluctuations in interest or currency exchange
rates or commodity prices.
"Tangible Net Worth" means, at any date of determination, the aggregate
------------------
amount of stockholders equity minus treasury stock, minus intangible assets.
"Taxes" means any and all present or future taxes, levies, imposts,
-----
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding, in the case of each Bank and the Administrative Agent, such taxes
(including income taxes or franchise taxes) as are imposed on or measured by
each Bank's net income by the jurisdiction (or any political subdivision
thereof) under the laws of which such Bank or the Administrative Agent, as the
case may be, is organized or maintains a lending office.
"Termination Date" means the earlier to occur of:
----------------
(a) March 31, 2004;
(b) the date five years after the Closing Date; and
(c) the date on which the Commitments terminate in accordance with
the provisions of this Agreement.
"Type" has the meaning specified in the definition of "Committed Loan."
----
"Unfunded Pension Liability" means the excess of a Plan's benefit
--------------------------
liabilities under Section 4001(a)(16) of ERISA, over the current value of that
Plan's assets, determined in
16
<PAGE>
accordance with the assumptions used for funding the Pension Plan pursuant to
Section 412 of the Code for the applicable plan year.
"United States" and "U.S." each means the United States of America.
------------- ----
"Wholly-Owned Subsidiary" means any corporation in which (other than
-----------------------
nominees' and directors' qualifying shares required by law) 100% of the capital
stock of each class having ordinary voting power, and 100% of the capital stock
of every other class, in each case, at the time as of which any determination is
being made, is owned, beneficially and of record, by the Company, or by one or
more of the other Wholly-Owned Subsidiaries, or both.
"Year 2000 Problem" means the risk that computer applications used by any
-----------------
Person may be unable to recognize and perform properly date-sensitive functions
involving certain dates prior to and any date after December 31, 1999.
1.02 Other Interpretive Provisions.
-----------------------------
(a) The meanings of defined terms are equally applicable to the
singular and plural forms of the defined terms.
(b) The words "hereof', "herein", "hereunder" and similar words
refer to this Agreement as a whole and not to any particular provision of this
Agreement; and subsection, Section, Schedule and Exhibit references are to this
Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other writings,
however evidenced.
(ii) The term "including" is not limiting and means "including
without limitation."
(iii) In the computation of periods of time from a specified
date to a later specified date, the word "from" means "from and including";
the words "to" and "until" each mean "to but excluding", and the word
"through" means "to and including."
(d) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments shall be
deemed to include all subsequent amendments and other modifications thereto, but
only to the extent such amendments and other modifications are not prohibited by
the terms of any Loan Document, and (ii) references to any statute or regulation
are to be construed as including all statutory and regulatory provisions
consolidating, amending, replacing, supplementing or interpreting the statute or
regulation.
(e) The captions and headings of this Agreement are for convenience
of reference only and shall not affect the interpretation of this Agreement.
(f) This Agreement and other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations,
17
<PAGE>
tests and measurements are cumulative and shall each be performed in accordance
with their terms.
(g) This Agreement and the other Loan Documents are the result of
negotiations among and has been reviewed by counsel to the Administrative Agent,
the Company and the other parties, and are the products of all parties.
Accordingly, they shall not be construed against the Banks or the Administrative
Agent merely because of the Administrative Agent's or Banks' involvement in
their preparation.
1.03 Accounting Principles.
---------------------
(a) Unless the context otherwise clearly requires, all accounting
terms not expressly defined herein shall be construed, and all financial
computations required under this Agreement shall be made, in accordance with
GAAP, consistently applied.
(b) References herein to "fiscal year" and "fiscal quarter" refer
to such fiscal periods of the Company.
1.04 Currency Equivalents Generally. For all purposes of this Agreement
------------------------------
(but not for purposes of the preparation of any financial statements delivered
pursuant hereto), the equivalent in any Offshore Currency or other currency of
an amount in Dollars, and the equivalent in Dollars of an amount in any Offshore
Currency or other currency, shall be determined at the Spot Rate.
ARTICLE II
THE CREDITS
2.01 Amounts and Terms of Commitments.
--------------------------------
Subject to the terms and conditions hereof, each Bank severally agrees to
make loans (each, a "Loan" and, collectively, the "Loans") to the Borrowers
pursuant to this Article II on a revolving basis from time to time from the
Closing Date to the Termination Date; provided, however, that, after giving
-------- -------
effect to any Credit Extension:
(a) each Bank's Pro Rata Share of the Effective Amount of all Credit
Extensions at any one time hereunder shall not exceed the Commitment amount set
forth on Schedule 2.01 opposite each Bank's name (such amount, as the same may
-------------
be reduced under Section 2.08 or as a result of one or more assignments under
Section 11.08, the Bank's "Commitment");
----------
(b) the Effective Amount of all Credit Extensions at any one time
hereunder shall not exceed the combined Commitments; and
(c) the Effective Amount of all Credit Extensions comprised of Bid
Loans at any one time hereunder shall not exceed the Bid Loan Sublimit.
18
<PAGE>
The Loans made to a Borrower may be maintained, at the election of such
Borrower made from time to time as permitted herein, as Committed Loans or Bid
Loans or any combination thereof. Within the limits of each Bank's Commitment,
and subject to the other terms and conditions hereof, each Borrower may borrow
under this Section 2.01, prepay under Section 2.09 and reborrow under this
Section 2.01.
2.02 Loan Accounts.
-------------
(a) The Loans made by each Bank and the L/C Obligations shall be
evidenced by one or more loan accounts or records maintained by such Bank or the
Issuing Bank, as the case may be, in the ordinary course of business. The loan
accounts or records maintained by the Administrative Agent, the Issuing Bank and
each Bank shall be prima facie evidence of the amount of the Loans made by the
Banks to each Borrower and the Letters of Credit Issued for the account of each
Borrower, and the interest and payments thereon. Any failure so to record or any
error in doing so shall not, however, limit or otherwise affect the obligation
of any Borrower hereunder to pay any amount owing with respect to the Loans or
any Letter of Credit.
(b) Upon the request of any Bank made through the Administrative
Agent, the Loans made by such Bank may be evidenced by one or more Notes,
instead of loan accounts. Each such Bank shall endorse on the schedules annexed
to its Note(s) the date, amount and Applicable Currency and maturity of each
Loan made by it and the amount and Applicable Currency of each payment of
principal made by each Borrower with respect thereto. Each such Bank is
irrevocably authorized by each Borrower to endorse its Note(s) and each Bank's
record shall be prima facie evidence of the interest and payments thereon;
provided, however, that the failure of a Bank to make, or an error in making, a
- -------- -------
notation thereon with respect to any Loan shall not limit or otherwise affect
the obligations of any Borrower hereunder or under any such Note to such Bank.
2.03 Procedure for Committed Borrowing.
---------------------------------
(a) Each Committed Borrowing shall be made upon a Requesting
Borrower's irrevocable written notice delivered to the Administrative Agent in
the form of a Notice of Borrowing (which notice must be received by the
Administrative Agent prior to 9:00 a.m. (San Francisco time)) (i) three Business
Days prior to the requested Borrowing Date, in the case of Offshore Rate Loans
denominated in U.S. Dollars; (ii) on the requested Borrowing Date, in the case
of Base Rate Loans, and (iii) five Business Days prior to the requested
Borrowing Date, in the case of Offshore Currency Committed Loans, specifying:
(A) the amount of the Committed Borrowing, which shall be in
an aggregate minimum amount of $5,000,000 or any multiple of
$1,000,000 in excess thereof or, in the case of Offshore Currency
Committed Loans, 10,000 units of the Applicable Currency in an
Equivalent Amount of not less than $5,000,000 and integral multiples
of such 10,000 units of the Applicable Currency in excess of the
initial 10,000 units of the Applicable Currency;
(B) the requested Borrowing Date, which shall be a Business
Day;
19
<PAGE>
(C) the Type of Loans comprising the Committed Borrowing;
(D) the duration of the Interest Period applicable to such
Committed Loans included in such notice. If the Notice of Borrowing
fails to specify the duration of the Interest Period for any Committed
Borrowing comprised of Offshore Rate Loans, such Interest Period shall
be three months; and
(E) in the case of a Committed borrowing comprised of
Offshore Currency Committed Loans, the Applicable Currency.
provided, however, that with respect to the Committed Borrowing to be made on
- -------- -------
the Closing Date, the Notice of Borrowing shall be delivered to the
Administrative Agent not later than 9:00 a.m. (San Francisco time) on the
Closing Date and such Committed Borrowing will consist of Base Rate Committed
Loans only.
(b) The Administrative Agent will promptly notify each Bank of its
receipt of any Notice of Borrowing, the name of the Borrower delivering
such request, and of the amount of such Bank's Pro Rata Share of that
Committed Borrowing. The Equivalent Amount of any Committed Borrowing in an
Offshore Currency will be determined by the Administrative Agent for such
Committed Borrowing on the Computation Date therefor in accordance with
Section 2.05(a). In the case of a Committed Borrowing comprised of Offshore
Currency Committed Loans, such notice will provide the approximate amount
of each Bank's Pro Rata Share of such Committed Borrowing, and the
Administrative Agent will, upon the determination of the Equivalent Amount
of such Committed Borrowing as specified in the Notice of Borrowing,
promptly notify each Bank of the exact amount of such Bank's Pro Rata Share
of such Committed Borrowing.
(c) Each Bank will make the amount of its Pro Rata Share of each
Committed Borrowing available to the Administrative Agent for the account
of the Requesting Borrower at the Administrative Agent's Payment Office by
11:00 a.m. (San Francisco time) on the Borrowing Date requested by the
Requesting Borrower in the case of a Committed Borrowing comprised of Loans
in Dollars, and by such time as the Administrative Agent may specify, in
the case of a Committed Borrowing comprised of Offshore Currency Committed
Loans, in each case in the Applicable Currency and in funds immediately
available to the Administrative Agent. The proceeds of all such Committed
Loans will then be made available to the Requesting Borrower by the
Administrative Agent at such office by crediting the account of the
Requesting Borrower on the books of BofA (or, in the case of Offshore
Currency Committed Loans, on the books of BofA or an affiliate of BofA or
such other account as the Requesting Borrower may from time to time
specify) with the aggregate of the amounts made available to the
Administrative Agent by the Banks and in like funds as received by the
Administrative Agent.
(d) After giving effect to any Committed Borrowing, there may not be
more than eight (8) different Interest Periods in effect in respect of all
Committed Loans and Bid Loans together then outstanding.
20
<PAGE>
2.04 Conversion and Continuation Elections for Committed Borrowings.
--------------------------------------------------------------
(a) Each Borrower may, upon irrevocable written notice to the
Administrative Agent in accordance with subsection 2.04(b):
(i) elect, as of any Business Day, in the case of Base Rate
Committed Loans to such Borrower or as of the last day of the applicable
Interest Period, in the case of any other Type of Committed Loans, to
convert any such Committed Loans (or any part thereof in an amount not less
than $5,000,000, or that is in an integral multiple of $1,000,000 in excess
thereof) into Committed Loans of any other Type; or
(ii) elect, as of the last day of the applicable Interest
Period, to continue any Committed Loans to such Borrower having Interest
Periods expiring on such day (or any part thereof in an amount not less
than $5,000,000, or that is in an integral multiple of $1,000,000 in excess
thereof or, in the case of Offshore Currency Committed Loans, 10,000 units
of the Applicable Currency in an Equivalent Amount of not less than
$5,000,000 and multiples of 10,000 units of the Applicable Currency in
excess of the initial 10,000 units of the Applicable Currency);
provided, that if at any time the aggregate amount of Offshore Rate Committed
- --------
Loans in respect of any Committed Borrowing is reduced, by payment, prepayment,
or conversion of part thereof to be in an Equivalent Amount less than
$5,000,000, such Offshore Rate Committed Loans shall automatically convert into
Base Rate Committed Loans, and on and after such date the right of any Borrower
to continue such Committed Loans as, and convert such Committed Loans into,
Offshore Rate Committed Loans shall terminate.
(b) A Borrower shall deliver a Notice of Conversion/Continuation to
be received by the Administrative Agent not later than 9:00 a.m. (San Francisco
time) at least (i) three Business Days in advance of the Conversion/Continuation
Date, if the Committed Loans are to be converted into or continued as Offshore
Rate Committed Loans denominated in U.S. Dollars; (ii) on the
Conversion/Continuation Date, if the Loans are to be converted into Base Rate
Committed Loans; and (iii) five business Days in advance of the
Conversion/Continuation Date, if the Loans are to be continued as Offshore
Currency Committed Loans, specifying:
(A) the proposed Conversion/Continuation Date;
(B) the aggregate amount of Committed Loans to be
converted or renewed;
(C) the Type of Committed Loans resulting from the
proposed conversion or continuation, and
(D) other than in the case of conversions into Base Rate
Committed Loans, the duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable to
Offshore Rate Committed Loans made to a Borrower, such Borrower has failed to
select timely a new Interest Period to be applicable to such Offshore Rate
Committed Loans, or if any Default or Event of Default then exists, such
Borrower shall be deemed to have elected to convert such Offshore Rate Committed
Loans into Base Rate Committed Loans effective as of the expiration date of
21
<PAGE>
such Interest Period. If any Borrower has failed to select a new Interest Period
to be applicable to Offshore Currency Committed Loans made to such Borrower
prior to the fifth Business Day in advance of the expiration date of the current
Interest Period applicable thereto as provided in Section 2.04(b), or if any
Default or Event of Default shall then exist, such Borrower shall be deemed to
have elected to continue such Offshore Currency Committed Loans on the last day
of the current Interest Period for a period of one month.
(d) The Administrative Agent will promptly notify each Bank of its
receipt of a Notice of Conversion/Continuation, or, if no timely notice is
provided by any Borrower, the Administrative Agent will promptly notify each
Bank of the details of any automatic conversion. All conversions and
continuations shall be made ratably according to the respective outstanding
principal amounts of the Committed Loans with respect to which the notice was
given held by each Bank.
(e) Unless the Majority Banks otherwise agree, during the existence
of a Default or Event of Default, no Borrower may elect to have a Committed Loan
converted into or continued as an Offshore Rate Committed Loan.
(f) After giving effect to any conversion or continuation of
Committed Loans, there may not be more than eight (8) different Interest Periods
in effect in respect of all Committed Loans and Bid Loans together then
outstanding.
2.05 Utilization of Commitments in Offshore Currencies.
-------------------------------------------------
(a) The Administrative Agent will determine the Equivalent Amount
with respect to any (i) Committed Borrowing comprised of Offshore Currency
Committed Loans as of the requested Borrowing Date (including any Borrowing Date
for a Committed Borrowing originally comprised of Offshore Currency Committed
Loans that is deemed converted into a Committed Borrowing of Base Rate Loans
pursuant to the last sentence in Section 2.05(b)), and (ii) outstanding Offshore
Currency Committed Loans as of (A) the last Business Day of each month, (B) the
date of any reduction in the Commitments, (C) the date any such Loans are
continued, and (D) as of any redenomination date pursuant to this Section 2.05
or Section 4.05 (each such date under clauses (i) and (ii) a "Computation
Date").
(b) In the case of a proposed Committed Borrowing comprised of
Offshore Currency Committed Loans, the Banks shall be under no obligation to
make Offshore Currency Committed Loans in the requested Offshore Currency as
part of such Committed Borrowing if the Administrative Agent has received notice
from any of the Banks by 5:00 p.m. (San Francisco time) five Business Days prior
to the requested Borrowing Date that such Bank cannot provide Committed Loans in
the requested Offshore Currency, in which event the Administrative Agent will
give notice to the Requesting Borrower no later than 9:00 a.m. (San Francisco
time) on the fourth Business Day prior to the requested Borrowing Date that the
Committed Borrowing in the requested Offshore Currency is not then available,
and notice thereof also will be given promptly by the Administrative Agent to
the Banks. If the Administrative Agent shall have so notified the Requesting
Borrower that any such Committed Borrowing in a requested Offshore Currency is
not then available, the Requesting Borrower may, by notice to the Administrative
Agent not later than 5:00 p.m. (San Francisco time) four Business Days prior to
the requested Borrowing Date,
22
<PAGE>
withdraw the Notice of Borrowing relating to such requested Committed Borrowing.
If the Requesting Borrower does so withdraw such Notice of Borrowing, the
Committed Borrowing requested therein shall not occur and the Administrative
Agent will promptly so notify each Bank. If the Requesting Borrower does not so
withdraw such Notice of Borrowing, the Administrative Agent will promptly so
notify each Bank and such Notice of Borrowing shall be deemed to be a Notice of
Borrowing that requests a Committed Borrowing comprised of Base Rate Loans in
the Equivalent Amount of the requested Committed Borrowing, and not later than
one Business Day prior to the requested Borrowing Date, the Administrative Agent
shall notify each Bank of the aggregate amount of such Committed Borrowing in
Dollars and such Bank's Pro Rata Share thereof.
(c) In the case of a proposed continuation of Offshore Currency
Committed Loans for an additional Interest Period pursuant to Section 2.04, the
Banks shall be under no obligation to continue such Offshore Currency Committed
Loans if the Administrative Agent has received notice from any of the Banks by
5:00 p.m. (San Francisco time) five Business Days prior to the day of such
continuation that such Bank cannot continue to provide Committed Loans in the
relevant Offshore Currency, in which event the Administrative Agent will give
notice to the affected Borrowers not later than 9:00 a.m. (San Francisco time)
on the fourth Business Day prior to the requested date of such continuation that
the continuation of such Offshore Currency Committed Loans in the relevant
Offshore Currency is not then available, and notice thereof also will be given
promptly by the Administrative Agent to the Banks. If the Administrative Agent
shall have so notified the affected Borrowers that any such continuation of
Offshore Currency Committed Loans is not then available, any Notice of
Continuation/Conversion with respect thereto shall be deemed withdrawn and such
Offshore Currency Committed Loans shall be redenominated into Base Rate Loans in
Dollars with effect from the last day of the Interest Period with respect to any
such Offshore Currency Committed Loans. The Administrative Agent will promptly
notify the affected Borrowers and the Banks of any such redenomination, and not
later than one Business Day prior to the last day of such Interest Period, the
Administrative Agent shall notify each Bank of the aggregate Equivalent Amount
of the redenominated Offshore Currency Committed Loans as of the Computation
Date with respect thereto and such Bank's Pro Rata Share thereof.
(d) Notwithstanding anything herein to the contrary, during the
existence of a Default or an Event of Default, upon the request of the Majority
Banks, all or any part of any outstanding Offshore Currency Committed Loans
shall be redenominated and converted into Base Rate Loans in Dollars with effect
from the last day of the Interest Period with respect to any such Offshore
Currency Committed Loans. The Administrative Agent will promptly notify the
affected Borrowers of any such redenomination and conversion request. Except as
aforesaid and as provided in Section 4.05, Offshore Currency Committed Loans may
not be converted into, or continued as, Committed Loans in a different
Applicable Currency.
(e) Any Borrower shall be entitled to request that Committed Loans
hereunder also be permitted to be made in any other lawful currency, in addition
to the currency specified in the definition of "Offshore Currency" herein, that
in the opinion of all Banks is at such time freely traded in the offshore
interbank foreign exchange markets and is freely transferable and freely
convertible into Dollars (an "Agreed Alternative Currency"). Such Borrower
shall deliver to the Administrative Agent any request for designation of an
Agreed Alternate Currency in
23
<PAGE>
accordance with Section 11.02, to be received by the Administrative Agent not
later than 10:00 a.m. (San Francisco time) at least ten Business Days in advance
of the date of any Committed Borrowing hereunder proposed to be made in such
Agreed Alternate Currency. Upon receipt of any such request, the Administrative
Agent will promptly notify the Banks thereof, and each Bank will use its best
efforts to respond to such request within two Business Days of receipt thereof.
Each Bank may grant or accept such request in its sole discretion. The
Administrative Agent will promptly notify the Borrowers of the acceptance or
rejection of any such request.
(f) From and after the Euro Commencement Date, each obligations
under this Agreement of a party hereto which has been denominated in a Euro
National Currency Unit shall be redenominated into the euro unit in accordance
with EMU Legislation and applicable state law, provided that, if and to the
extent that any EMU Legislation provides that amounts denominated in the euro
unit or in a Euro National Currency Unit may be paid within that country in such
Euro National Currency Unit by crediting an account of the creditor, each party
to this Agreement shall be entitled to pay or repay any such amounts in either
the euro unit or such Euro National Currency Unit.
(g) Any Offshore Currency Committed Loans denominated in a Euro
National Currency, which are made, continued or converted on or after the Euro
Commencement Date shall be made, continued or converted in the euro unit;
provided, however, that the Borrower may request that Offshore Currency
Committed Loans be made, continued or converted in the Euro National Currency
Unit of such Euro Participating Member State with respect to Loans having
Interest Periods ending before January 1, 2002.
(h) Any Offshore Currency Committed Loans denominated in a Euro
National Currency Unit which were made prior to the Euro Commencement Date but
which have Interest Periods ending after the Euro Commencement Date shall, for
purposes of this Agreement, remain denominated in such Euro National Currency
Unit provided that such Loans may be repaid either in the euro or in such Euro
National Currency Unit after the Euro Commencement Date and provided further
that from and after January 1, 2002 all such amounts shall be deemed to be in
euro units.
(i) Subject to any EMU Legislation, references in this Agreement to
a minimum amount (or integral multiple thereof) in a Euro National Currency Unit
to be paid to or by a party hereto shall, from and after the Euro Commencement
Date, be deemed to be a reference to such reasonably comparable and convenient
amount (or an integral multiple thereof) in the euro unit as the Administrative
Agent may from time to time specify.
(j) Provisions of this Agreement shall be subject to such further
reasonable changes and/or interpretation as the Administrative Agent may from
time to time in its reasonable discretion specify to be necessary or appropriate
to reflect the changeover to the euro in Euro Participating Member States. The
Administrative Agent shall notify the parties hereto of any such changes.
(k) Subject to Section 4.04, if on any Computation Date the
Administrative Agent shall have determined that the aggregate Equivalent Amount
in principal amount of all Loans then outstanding exceeds the combined
Commitments of the Banks due to a change in
24
<PAGE>
applicable rates of exchange between Dollars and Offshore Currencies, then the
----
Administrative Agent shall give notice to the Borrowers that a prepayment is
required under this Section, and the Borrowers agree thereupon to make
prepayments of Loans such that, after giving effect to such prepayment the
aggregate Equivalent Amount of all Loans does not exceed the combined
Commitments.
(l) Bid Loans may be requested in Dollars only.
2.06 Bid Borrowings. In addition to Committed Borrowings pursuant to
--------------
Section 2.01, each Bank severally agrees that any Borrower may, as set forth in
Section 2.07, from time to time request the Banks prior to the Termination Date
to submit offers to make Bid Loans to the Requesting Borrower; provided,
--------
however, that the Banks may, but shall have no obligation to, submit such offers
- -------
and the Requesting Borrower may, but shall have no obligation to, accept any
such offers; and provided, further, that at no time shall the Effective Amount
-------- -------
of all Credit Extensions at any one time hereunder exceed the combined
Commitments and at no time shall the aggregate amount of all outstanding Bid
Loans exceed the Bid Loan Sublimit.
2.07 Procedure for Bid Borrowing.
---------------------------
(a) When a Requesting Borrower wishes to request the Banks to submit
offers to make Bid Loans hereunder, it shall transmit to the Administrative
Agent by telephone call followed promptly by facsimile transmission a notice in
substantially the form of Exhibit G (a "Competitive Bid Request") so as to be
--------- -----------------------
received no later than 9:00 a.m. (San Francisco time) (x) four Business Days
prior to the date of a proposed Bid Borrowing in the case of a LIBOR Auction, or
(y) one Business Day prior to the date of a proposed Bid Borrowing in the case
of an Absolute Rate Auction, specifying:
(i) the date of such Bid Borrowing, which shall be a Business
Day;
(ii) the aggregate amount of such Bid Borrowing, which shall be a
minimum amount of $5,000,000 or in multiples of $1,000,000 in excess
thereof;
(iii) whether the Competitive Bids requested are to be for LIBOR
Bid Loans or Absolute Rate Bid Loans or both; and
(iv) the duration of the Interest Period applicable thereto,
subject to the provisions of the definition of "Interest Period" herein.
Subject to subsection 2.07(c), the Borrowers may not request Competitive
Bids for more than two Interest Periods in a single Competitive Bid Request or
request Competitive Bids more than once in any period of 10 Business Days.
(b) Upon receipt of a Competitive Bid Request, the Administrative
Agent will promptly send to the Banks by facsimile transmission an Invitation
for Competitive Bids, which shall constitute an invitation by the Requesting
Borrower to each Bank to submit Competitive Bids offering to make the Bid Loans
to which such Competitive Bid Request relates in accordance with this Section
2.07.
25
<PAGE>
(c) (i) Each Bank may at its discretion submit a Competitive Bid
containing an offer or offers to make Bid Loans in response to any Invitation
for Competitive Bids. Each Competitive Bid must comply with the requirements of
this subsection 2.07(c) and must be submitted to the Administrative Agent by
facsimile transmission at the Administrative Agent's office for notices set
forth in Schedule 11.02 hereto not later than (1) 7:00 a.m. (San Francisco time)
--------------
three Business Days prior to the proposed date of Borrowing, in the case of a
LIBOR Auction or (2) 7:00 a.m. (San Francisco time) on the proposed date of
Borrowing, in the case of an Absolute Rate Auction; provided that Competitive
--------
Bids submitted by BofA (or any Affiliate of BofA) in the capacity of a Bank may
be submitted, and may only be submitted, if BofA or such Affiliate notifies the
Requesting Borrower of the terms of the offer or offers contained therein not
later than (A) 6:45 a.m. (San Francisco time) three Business Days prior to the
proposed date of Borrowing, in the case of a LIBOR Auction or (B) 6:45 a.m. (San
Francisco time) on the proposed date of Borrowing, in the case of an Absolute
Rate Auction.
(ii) Each Competitive Bid shall be in substantially the form of
Exhibit H, specifying therein:
---------
(A) the proposed date of Borrowing;
(B) the principal amount of each Bid Loan for which such
Competitive Bid is being made, which principal amount (x) may be equal
to, greater than or less than the Commitment of the quoting Bank, (y)
must be $5,000,000 or in multiples of $1,000,000 in excess thereof,
and (z) may not exceed the principal amount of Bid Loans for which
Competitive Bids were requested;
(C) in case the Requesting Borrower elects a LIBOR
Auction, the margin above or below LIBOR (the "LIBOR Bid Margin")
----------------
offered for each such Bid Loan, expressed as a percentage (rounded to
the nearest 1/100th of 1%) to be added to or subtracted from the
applicable LIBOR and the Interest Period applicable thereto;
(D) in case the Requesting Borrower elects an Absolute
Rate Auction, the rate of interest per annum (rounded upward to the
nearest 1/100th of 1%) (the "Absolute Rate") offered for each such Bid
-------------
Loan and the Interest Period applicable thereto;
(E) the identity of the quoting Bank, and
(F) the aggregate amount of Bid Loans for which
Competitive Bids are being offered.
A Competitive Bid may contain up to three separate offers by the quoting
Bank with respect to each Interest Period specified in the related invitation
for Competitive Bids.
(iii) Any Competitive Bid shall be disregarded if it:
26
<PAGE>
(A) is not substantially in conformity with Exhibit H or
---------
does not specify all of the information required by subsection (c)(ii) of
this Section;
(B) contains qualifying, conditional or similar language;
(C) proposes terms other than or in addition to those set
forth in the applicable Invitation for Competitive Bids; or
(D) arrives after the time set forth in subsection (c)(i).
(iv) Notwithstanding anything to the contrary contained in this
subsection 2.07(c), a Competitive Bid by any Bank may contain, and will not
be disregarded if it does contain, a restriction on the use of proceeds
thereof.
(d) Promptly on receipt and not later than 7:30 a.m. (San Francisco
time) three Business Days prior to the proposed date of Borrowing in the case of
a LIBOR Auction, or 7:30 a.m. (San Francisco time) on the proposed date of
Borrowing, in the case of an Absolute Rate Auction, the Administrative Agent
will notify the Requesting Borrower of the terms (i) of any Competitive Bid
submitted by a Bank that is in accordance with subsection 2.07(c), and (ii) of
any Competitive Bid that amends, modifies or is otherwise inconsistent with a
previous Competitive Bid submitted by such Bank with respect to the same
Competitive Bid Request. Any such subsequent Competitive Bid shall be
disregarded by the Administrative Agent unless such subsequent Competitive Bid
is submitted solely to correct a manifest error in such former Competitive Bid
and only if received within the times set forth in subsection 2.07(c). The
Administrative Agent's notice to the Requesting Borrower shall specify (1) the
aggregate principal amount of Bid Loans for which offers have been received for
each Interest Period specified in the related Competitive Bid Request; and (2)
the respective principal amounts and LIBOR Bid Margins or Absolute Rates, as the
case may be, so offered. Subject only to the provisions of Sections 4.02, 4.05
and 5.02 hereof and the provisions of this subsection (d), any Competitive Bid
shall be irrevocable except with the written consent of the Administrative Agent
given on the written instructions of the Requesting Borrower.
(e) Not later than 8:00 a.m. (San Francisco time) three Business
Days prior to the proposed date of Borrowing, in the case of a LIBOR Auction, or
8:00 a.m. (San Francisco time) on the proposed date of Borrowing, in the case of
an Absolute Rate Auction, the Requesting Borrower shall notify the
Administrative Agent of its acceptance or nonacceptance of the offers so
notified to it pursuant to subsection 2.07(d). The Requesting Borrower shall be
under no obligation to accept any offer and may choose to reject all offers. In
the case of acceptance, such notice shall specify the aggregate principal amount
of offers for each Interest Period that is accepted. The Requesting Borrower may
accept any Competitive Bid in whole or in part; provided that:
--------
(i) the aggregate principal amount of each Bid Borrowing may
not exceed the applicable amount set forth in the related Competitive Bid
Request;
(ii) the principal amount of each Bid Borrowing must be
$5,000,000 or in any multiple of $1,000,000 in excess thereof,
27
<PAGE>
(iii) acceptance of offers may only be made on the basis of
ascending LIBOR Bid Margins or Absolute Rates within each Interest Period,
as the case may be; and
(iv) the Requesting Borrower may not accept any offer that is
described in subsection 2.07(c)(iii) or that otherwise fails to comply with
the requirements of this Agreement, including the requirements set forth in
Section 2.06.
(f) If offers are made by two or more Banks with the same LIBOR Bid
Margins or Absolute Rates, as the case may be, for a greater aggregate principal
amount than the amount in respect of which such offers are accepted for the
related Interest Period, the principal amount of Bid Loans in respect of which
such offers are accepted shall be allocated by the Administrative Agent among
such Banks as nearly as possible (in such multiples, not less than $1,000,000,
as the Administrative Agent may deem appropriate) in proportion to the aggregate
principal amounts of such offers. Determination by the Administrative Agent of
the amounts of Bid Loans shall be conclusive in the absence of manifest error.
(g) (i) The Administrative Agent will promptly notify each Bank
having submitted a Competitive Bid if its offer has been accepted and, if its
offer has been accepted, of the amount of the Bid Loan or Bid Loans to be made
by it on the date of the Bid Borrowing.
(ii) Each Bank, which has received notice pursuant to subsection
2.07(g)(i) that its Competitive Bid has been accepted, shall make the
amounts of such Bid Loans available to the Administrative Agent for the
account of the Requesting Borrower at the Administrative Agent's Payment
Office, by 11:00 a.m. (San Francisco time) in the case of Absolute Rate Bid
Loans, and by 11:00 a.m. (San Francisco time) in the case of LIBOR Bid
Loans, on such date of Bid Borrowing, in funds immediately available to the
Administrative Agent for the account of the Requesting Borrower at the
Administrative Agent's Payment Office.
(iii) Promptly following each Bid Borrowing, the Administrative
Agent shall notify each Bank of the ranges of bids submitted and the
highest and lowest Bids accepted for each Interest Period requested by the
Requesting Borrower and the aggregate amount borrowed pursuant to such Bid
Borrowing.
(iv) From time to time, the Borrowers and the Banks shall
furnish such information to the Administrative Agent as the Administrative
Agent may request relating to the making of Bid Loans, including the
amounts, interest rates, dates of borrowings and maturities thereof, for
purposes of the allocation of amounts received from the Borrowers for
payment of all amounts owing hereunder.
(h) If, on or prior to the proposed date of Borrowing, the
Commitments have not been terminated and if, on such proposed date of Borrowing
all applicable conditions to funding referenced in Sections 4.02, 4.05 and 5.02
hereof are satisfied, the Bank or Banks whose offers the Requesting Borrower has
accepted will fund each Bid Loan so accepted. Nothing in this Section 2.07 shall
be construed as a right of first offer in favor of the Banks or to otherwise
limit the ability of any Borrower to request and accept credit facilities from
any Person
28
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(including any of the Banks), provided that no Default or Event of Default would
otherwise arise or exist as a result of any Borrower executing, delivering or
performing under such credit facilities.
2.08 Voluntary Termination or Reduction of Commitments. The Company
-------------------------------------------------
may, upon not less than five Business Days' prior notice to the Administrative
Agent, terminate the Commitments, or permanently reduce the Commitments by an
aggregate minimum amount of $10,000,000 or any multiple of $ 1,000,000 in excess
thereof, unless, after giving effect thereto and to any prepayments of Committed
Loans made on the effective date thereof, the then-outstanding principal
Equivalent Amount of the Loans would exceed the amount of the combined
Commitments then in effect. Once reduced in accordance with this Section, the
Commitments may not be increased. Any reduction of the Commitments shall be
applied to each Bank according to its Pro Rata Share. All accrued facility fees
to, but not including the effective date of any reduction or termination of
Commitments. shall be paid on the effective date of such reduction or
termination.
2.09 Optional Prepayments.
--------------------
(a) A Borrower may, at any time or from time to time, upon not less
than five (5) Business Days, in the case of an Offshore Rate Loan or an Offshore
Currency Committed Loan, and the same Business Day, in the case of Base Rate
Loans, upon irrevocable notice to the Administrative Agent, ratably prepay
Committed Loans made to such Borrower in whole or in part in minimum Equivalent
Amounts of $5,000,000 or any multiple Equivalent Amount of $1,000,000 in excess
thereof subject to the payment of amounts pursuant to Section 4.04, if any. Such
notice of prepayment shall specify the date and amount of such prepayment and
the Type(s) of Committed Loans to be prepaid. The Administrative Agent will
promptly notify each Bank of its receipt of any such notice, and of such Bank's
Pro Rata Share of such prepayment. If such notice is given by any Borrower, such
Borrower shall make such prepayment and the payment amount specified in such
notice shall be due and payable on the date specified therein, together with
accrued interest on Offshore Rate Loans to each such date on the amount prepaid
and any amounts required pursuant to Section 4.04.
(b) Bid Loans may not be voluntarily prepaid.
2.10 Repayment. The Borrowers shall repay to the Banks in full on the
---------
Termination Date the aggregate principal amount of Loans outstanding on such
date. Each Borrower shall repay each of its Bid Loan on the last day of the
relevant Interest Period.
2.11 Interest.
--------
(a) Each Committed Loan shall bear interest on the outstanding
principal amount thereof from the applicable Borrowing Date at a rate per annum
equal to the Offshore Rate or the Base Rate, as the case may be (and subject to
the Borrowers' right to convert to other Types of Loans under Section 2.04),
plus the Applicable Margin. Each Bid Loan shall bear interest on the outstanding
- ----
principal amount thereof from the relevant Borrowing Date at a rate per annum
equal to LIBOR plus (or minus) the LIBOR Bid Margin, or at the Absolute Rate, as
the case may be.
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(b) Interest on each Loan shall be paid in arrears on each Interest
Payment Date. Interest shall also be paid on the date of any prepayment of
Committed Loans pursuant to Section 2.09 for the portion of the Loans so prepaid
and upon payment (including prepayment) in full thereof and, during the
existence of any Event of Default, interest shall be paid on demand of the
Administrative Agent at the request or with the consent of the Majority Banks.
(c) Notwithstanding subsection (a) of this Section, while any Event
of Default exists or after acceleration, interest (after as well as before entry
of judgment thereon to the extent permitted by law) shall be payable on the
principal amount of all outstanding Loans, at a rate per annum which is
determined by adding 2% per annum to the Applicable Margin then in effect for
such Loans or, if no Applicable Margin applies, by adding 2% per annum to the
rate otherwise in effect; provided, however, that, on and after the expiration
-------- -------
of any Interest Period applicable to any Offshore Rate Loan outstanding on the
date of occurrence of such Event of Default or acceleration, the principal
amount of such Loan shall, during the continuation of such Event of Default or
after acceleration, bear interest at a rate per annum equal to the Base Rate
plus 2%.
(d) Anything herein to the contrary notwithstanding, the obligations
of the Borrowers to any Bank hereunder shall be subject to the limitation that
payments of interest shall not be required for any period for which interest is
computed hereunder, to the extent (but only to the extent) that contracting for
or receiving such payment by such Bank would be contrary to the provisions of
any law applicable to such Bank limiting the highest rate of interest that may
be lawfully contracted for, charged or received by such Bank, and in such event
the Borrowers shall pay such Bank interest at the highest rate permitted by
applicable law.
2.12 Fees. In addition to the fees described in Section 3.07:
----
(a) Arrangement, Agency Fees. The Borrowers shall pay to the
------------------------
Administrative Agent and the Lead Arranger, for such parties' own accounts, from
time to time such fees as may be required by the letter agreement between the
Company, the Lead Arranger and the Administrative Agent dated December 2, 1998
(as amended, extended and replaced from time to time, the "Fee Letter").
----------
(b) Facility Fee. The Borrowers shall pay a facility fee to the
------------
Administrative Agent for the ratable account of the Banks in an amount equal to
the Applicable Facility Fee Percentage times the total Commitments (regardless
of usage), payable quarterly in arrears on the first Business Day of each fiscal
quarter commencing and accruing from the Closing Date to the Termination Date.
2.13 Computation of Fees and Interest.
--------------------------------
(a) All computations of interest for Base Rate Committed Loans shall
be made on the basis of a year of 365 or 366 days, as the case may be, and
actual days elapsed. All other computations of fees and interest shall be made
on the basis of a 360-day year and actual days elapsed (which results in more
interest being paid than if computed on the basis of a 365-day year). Interest
and fees shall accrue during each period during which interest or such fees are
computed from the first day thereof to the last day thereof.
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(b) Each determination of an interest rate or a Equivalent Amount by
the Administrative Agent shall be binding on the Borrowers and the Banks in the
absence of manifest error. The Administrative Agent will, at the request of any
Borrower or any Bank, deliver to such Borrower or the Bank, as the case may be,
a statement showing the quotations used by the Administrative Agent in
determining any interest rate or a Equivalent Amount, which shall constitute
prima facie evidence as to such determination.
2.14 Payments by the Borrowers.
-------------------------
(a) All payments to be made by the Borrowers shall be made without
setoff, recoupment or counterclaim. Except as otherwise expressly provided
herein, all payments by the Borrowers shall be made to the Administrative Agent
for the account of the Banks at the Administrative Agent's Payment Office, and,
with respect to principal of, interest on, and any other amounts relating to,
any Offshore Currency Committed Loan, shall be made in the Offshore Currency in
which such Loan is denominated or payable, and, with respect to all other
amounts payable hereunder, shall be made in Dollars. Such payments shall be made
in like funds received, and (i) in the case of Offshore Currency payments, no
later than such time on the dates specified herein as may be determined by the
Administrative Agent to be necessary for such payment to be credited on such
date in accordance with normal banking procedures in the place of payment, and
(ii) in the case of any Dollar payments, no later than 9:00 a.m. (San Francisco
time) on the date specified herein. The Administrative Agent will promptly
distribute to each Bank its Pro Rata Share (or other applicable share as
expressly provided herein) of such principal, interest, fees or other amounts,
in like funds as received. Any payment which is received by the Administrative
Agent later than 9:00 a.m. (San Francisco time), or later than the time
specified by the Administrative Agent as provided in clause (i) above (in the
case of Offshore Currency payments), shall be deemed to have been received on
the following Business Day and any applicable interest or fee shall continue to
accrue.
(b) Subject to the provisions set forth in the definition of
"Interest Period" herein, whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and such
extension of time shall in such case be included in the computation of interest
or fees, as the case may be.
(c) Unless the Administrative Agent receives notice from a Borrower
prior to the date on which any payment is due to the Banks that such Borrower
will not make such payment in full as and when required, the Administrative
Agent may assume that the Borrowers have made such payment in full to the
Administrative Agent on such date in immediately available funds and the
Administrative Agent may (but shall not be so required), in reliance upon such
assumption, distribute to each Bank on such due date an amount equal to the
amount then due such Bank. If and to the extent the Borrowers have not made such
payment in full to the Administrative Agent, each Bank shall repay to the
Administrative Agent on demand such amount distributed to such Bank, together
with interest thereon at the Federal Funds Rate or, in the case of a payment in
an Offshore currency, the Overnight Rate, for each day from the date such amount
is distributed to such Bank until the date repaid.
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2.15 Payments by the Banks to the Administrative Agent.
-------------------------------------------------
(a) Unless the Administrative Agent receives notice from a Bank on
or prior to the Closing Date or, with respect to any Borrowing after the Closing
Date, at least one Business Day prior to the date of such Committed Borrowing,
that such Bank will not make available as and when required hereunder to the
Administrative Agent for the account of the Company the amount of that Bank's
Pro Rata Share of the Committed Borrowing, the Administrative Agent may assume
that each Bank has made such amount available to the Administrative Agent in
immediately available funds on the Borrowing Date and the Administrative Agent
may (but shall not be so required), in reliance upon such assumption, make
available to any Borrower on such date a corresponding amount. If and to the
extent any Bank shall not have made its full amount available to the
Administrative Agent in immediately available funds and the Administrative Agent
in such circumstances has made available to any Borrower such amount, that Bank
shall on the Business Day following such Borrowing Date make such amount
available to the Administrative Agent, together with interest at the Federal
Funds Rate or, in the case of any Committed Borrowing consisting of Offshore
currency Committed Loans, the Overnight Rate, for each day during such period. A
notice of the Administrative Agent submitted to any Bank with respect to amounts
owing under this subsection (a) shall be conclusive, absent manifest error. If
such amount is so made available, such payment to the Administrative Agent shall
constitute such Bank's Loan on the date of Borrowing for all purposes of this
Agreement. If such amount is not made available to the Administrative Agent on
the Business Day following the Borrowing Date, the Administrative Agent will
notify the Borrowers of such failure to fund and, upon demand by the
Administrative Agent, the Borrowers shall pay such amount to the Administrative
Agent for the Administrative Agent's account, together with interest thereon for
each day elapsed since the date of such Committed Borrowing, at a rate per
annum, equal to the interest rate applicable at the time to the Committed Loans
comprising such Committed Borrowing.
(b) The failure of any Bank to make any Committed Loan on any
Borrowing Date shall not relieve any other Bank of any obligation hereunder to
make a Committed Loan on such Borrowing Date, but no Bank shall be responsible
for the failure of any other Bank to make the Committed Loan to be made by such
other Bank on any Borrowing Date.
2.16 Sharing of Payments, Etc. If, other than as expressly provided
-------------------------
elsewhere herein, any Bank shall obtain on account of Loans made by it any
payment (whether voluntary, involuntary, through the exercise of any right of
setoff, or otherwise) in excess of its Pro Rata Share, such Bank shall
immediately (a) notify the Administrative Agent of such fact, and (b) purchase
from the other Banks such participations in the Committed Loans made by them as
shall be necessary to cause such purchasing Bank to share the excess payment pro
rata with each of them; provided, however, that if all or any portion of such
-------- -------
excess payment is thereafter recovered from the purchasing Bank, such purchase
shall to that extent be rescinded and each other Bank shall repay to the
purchasing Bank the purchase price paid therefor, together with an amount equal
to such paying Bank's ratable share (according to the proportion of (i) the
amount of such paying Bank's required repayment to (ii) the total amount so
recovered from the purchasing Bank) of any interest or other amount paid or
payable by the purchasing Bank in respect of the total amount so recovered.
Each Borrower agrees that any Bank so purchasing a participation from another
Bank may, to the fullest extent permitted by law, exercise all its rights of
payment (including the right of setoff, but subject to Section 11.09) with
respect to such participation as fully as if such Bank were the direct creditor
of the Borrowers in the amount of
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<PAGE>
such participation. The Administrative Agent will keep records (which shall be
conclusive and binding in the absence of manifest error) of participations
purchased under this Section and will in each case notify the Banks following
any such purchases or repayments. Any Bank having outstanding both Committed
Loans and Bid Loans at any time a right of setoff is exercised by such Bank
shall apply the proceeds of such setoff first to such Bank's Committed Loans,
until its Committed Loans are reduced to zero, and thereafter to its Bid Loans.
2.17 Designation of Additional Subsidiary Borrowers. Following the
----------------------------------------------
Closing Date the Company may from time to time request that additional Wholly-
Owned Subsidiaries of the Company become Subsidiary Borrowers hereunder by
submitting such request to the Administrative Agent in writing accompanied by
such financial and other information respecting such Subsidiaries as the
Administrative Agent may require. In the event the Administrative Agent, in its
sole and absolute discretion, elects to consent to the addition of any such
Subsidiary as an additional Subsidiary Borrower hereunder, it shall so notify
the Company and each of the Banks in writing, setting forth the proposed
effective date thereof (the "Inclusion Date"). On the subject Inclusion Date
--------------
and as conditions precedent to the inclusion of the Subsidiary as an additional
Subsidiary Borrower hereunder, such Subsidiary shall execute and deliver to the
Administrative Agent: (a) an Accession Agreement in the form of that attached
hereto as Exhibit I (an "Accession Agreement"), (b) Notes, to the extent
--------- -------------------
requested by any Bank, (c) a Guaranty, and (d) a Guarantor Subordination
Agreement in the form of that attached hereto as Exhibit K (a "Guarantor
--------- ---------
Subordination Agreement"), accompanied by such corporate resolutions, incumbency
- -----------------------
certificates, opinions of counsel and other documents, instruments and
agreements as the Administrative Agent may require.
2.18 Additional Guaranties by Material Subsidiaries. On or before the
----------------------------------------------
Closing Date each Initial Material Subsidiary of the Company shall execute and
deliver to the Adminsitrative Agent: (a) a Guaranty, and (b) a Guarantor
Subordination Agreement. Following the Closing Date the Company shall promptly
notify the Administrative Agent of any Subsidiary which has become a Material
Subsidiary and of each newly formed or acquired Subsidiary which is a Material
Subsidiary and shall cause such Subsidiary to execute and deliver to the
Administrative Agent: (a) a Guaranty, and (b) a Guarantor Subordination
Agreement, accompanied by such corporate resolutions, incumbency certificates,
opinions of counsel and other documents, instruments and agreements as the
Administrative Agent may require.
2.19 Joint Borrower Provisions.
-------------------------
(a) Each Initial Subsidiary Borrower and each future Subsidiary
Borrower, by executing and delivering an Accession Agreement, hereby irrevocably
designates, appoints and authorizes the Company as its agent and attorney-in-
fact to take actions under this Agreement and any other Loan Document, together
with such powers as are reasonably incidental thereto. The Administrative Agent,
the Issuing Bank and the Banks shall be entitled to rely, and shall be fully
protected in relying, upon any communication from or to the Company, on behalf
of any Subsidiary Borrower. In its discretion, the Administrative Agent, the
Issuing Bank and the Banks may fail or refuse to take any action under this
Agreement or any other Loan Document based on communications from any Subsidiary
Borrower. Any action taken by the Company or any Subsidiary Borrower under this
Agreement and any other Loan Document shall be binding upon all of the other
Borrowers.
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<PAGE>
(b) Without limiting any rights, powers and remedies of the
Administrative Agent on behalf of the Issuing Bank and the Banks under the
Guaranties, each Borrower agrees that it is jointly and severally liable to the
Administrative Agent, the Issuing Bank and the Banks for the payment of all
Obligations and that such liability is independent of the Obligations of the
other Borrowers, whether due or not due, absolute or contingent, liquidated or
unliquidated or whether such Obligations otherwise become unenforceable. Any
payment by a Borrower shall not reduce its Obligations hereunder. A separate
action or actions may be brought and prosecuted against one or more of the
Borrowers whether action is brought against any other Borrower or whether other
Borrowers are joined in such action or actions. Each Borrower authorizes the
Administrative Agent, on behalf of the Banks and the Issuing Bank, without
notice or demand and without affecting its liability hereunder, from time to
time, to (i) receive and hold security for the payment of the Obligations and
exchange, enforce, waive, release, fail to perfect, sell or otherwise dispose of
any such security, (ii) apply such security and direct the order or manner of
sale thereof as the Administrative Agent in its discretion may determine, and
(iii) release or substitute any one or more of the endorsers, guarantors, or co-
obligors.
(c) Each Borrower waives any right to require the Administrative
Agent, the Issuing Bank or the Banks to (i) proceed against any other Borrower,
(ii) proceed against or exhaust any security, or (iii) pursue any other remedy
in the Administrative Agent's, the Issuing Bank's or the Banks' power
whatsoever. Each Borrower waives any defense arising by reason of any disability
or other defense of any Borrower, or the cessation from any cause whatsoever of
the liability of any Borrower, or any claim that any Borrower's Obligations
exceed or are more burdensome than those of any other Borrower. Until the
Obligations shall have been paid in full, each Borrower waives any right of
subrogation, reimbursement, indemnification or contribution (contractual,
statutory, or otherwise) including, without limitation, any claim or right of
subrogation under the Bankruptcy Code (Title 11, United States Code) or any
successor statute, arising from the existence or performance of this Agreement,
and each Borrower waives any right to enforce any remedy which the
Administrative Agent, the Issuing Bank and the Banks now have or may hereafter
have against any Borrower and waives any benefit of, and any right to
participate in, any security now or hereafter held by the Administrative Agent,
on behalf of the Issuing Banks and the Banks. Each Borrower waives all
presentments, demands for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor, and notices of acceptance of this
Agreement and of the existence, creation or incurring of new or addition
Obligations by any Borrower.
(d) Each Borrower acknowledges and agrees that it will have the sole
responsibility for obtaining from each other Borrower such information
concerning such other Borrower's financial conditions or business operations as
such Borrower may require, and that the Administrative Agent, the Issuing Bank
and the Banks have no duty at any time to disclose to any Borrower any
information relating to the business operations or financial condition of any
other Borrower.
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ARTICLE III
THE LETTERS OF CREDIT
3.01 The Letter of Credit Commitment.
-------------------------------
(a) On the terms and conditions set forth herein (i) the Issuing
Bank agrees, (A) from time to time on any Business Day during the period from
the Closing Date to the Termination Date to issue Letters of Credit for the
account of the Borrowers, and to amend or renew Letters of Credit previously
issued by it, in accordance with subsections 3.02(d) and 3.02(e), and (B) to
honor drafts under the Letters of Credit; and (ii) the Banks severally agree to
participate in Letters of Credit Issued for the account of the Borrowers;
provided, that the Issuing Bank shall not be obligated to Issue, and no Bank
shall be obligated to participate in, any Letter of Credit if as of the date of
Issuance of such Letter of Credit (the "Issuance Date") (1) the Effective Amount
-------------
of all L/C Obligations plus the Effective Amount of all Loans exceeds the
combined Commitments, or (2) the participation of any Bank in (A) the Effective
Amount of all L/C Obligations plus (B) the Effective Amount of the Loans of such
Bank (excluding any Bid Loans) plus (C) such Bank's Pro Rata Share of all
outstanding Bid Loans exceeds such Bank's Commitment. Letters of Credit may be
issued in Dollars or in Offshore Currencies. Within the foregoing limits, and
subject to the other terms and conditions hereof, the Borrowers' ability to
obtain Letters of Credit shall be fully revolving, and, accordingly, the
Borrowers may, during the foregoing period, obtain Letters of Credit to replace
Letters of Credit which have expired or which have been drawn upon and
reimbursed.
(b) The Issuing Bank is under no obligation to Issue any Letter of
Credit if:
(i) any order, judgment or decree of any Governmental Authority
or arbitrator shall by its terms purport to enjoin or restrain the Issuing
Bank from Issuing such Letter of Credit, or any Requirement of Law
applicable to the Issuing Bank or any request or directive (whether or not
having the force of law) from any Governmental Authority with jurisdiction
over the Issuing Bank shall prohibit, or request that the Issuing Bank
refrain from, the Issuance of letters of credit generally or such Letter of
Credit in particular or shall impose upon the Issuing Bank with respect to
such Letter of Credit any restriction, reserve or capital requirement (for
which the Issuing Bank is not otherwise compensated hereunder) not in
effect on the Closing Date, or shall impose upon the Issuing Bank any
unreimbursed loss, cost or expense which was not applicable on the Closing
Date and which the Issuing Bank in good faith deems material to it;
(ii) the Issuing Bank has received written notice from any
Bank, the Administrative Agent or the Borrowers, on or prior to the
Business Day prior to the requested date of Issuance of such Letter of
Credit, that one or more of the applicable conditions contained in Article
V is not then satisfied;
(iii) the expiry date of any requested Letter of Credit is
after the Termination Date, unless all of the Banks have approved such
expiry date in writing;
(iv) the expiry date of any requested Letter of Credit is prior
to the maturity date of any financial obligation to be supported by the
requested Letter of Credit;
(v) any requested Letter of Credit does not provide for drafts,
or is not
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<PAGE>
otherwise in form and substance acceptable to the Issuing Bank, or the
Issuance of a Letter of Credit shall violate any applicable policies of the
Issuing Bank;
(vi) any standby Letter of Credit is for the purpose of
supporting the issuance of any letter of credit by any other Person; or
(vii) such Letter of Credit is in a face amount less than
$1,000,000 or to be denominated in a currency other than Dollars, unless
such currency is mutually acceptable to the Borrowers, the Administrative
Agent and the Issuing Bank.
3.02 Issuance, Amendment and Renewal of Letters of Credit.
----------------------------------------------------
(a) Each Letter of Credit shall be issued upon the irrevocable
written request of the Requesting Borrower received by the Issuing Bank (with a
copy sent by the Requesting Borrower to the Administrative Agent) at least (i)
in the case of Dollars, at least four Business Days, or (ii) in the case of an
Offshore Currency, at least four Business Days, or (iii) in the case of an
Agreed Alternative Currency, at least six Business Days (or, in each case, such
shorter time as the Issuing Bank may agree in a particular instance in its sole
discretion) prior to the proposed date of issuance. Each such request for
issuance of a Letter of Credit shall be by facsimile, confirmed immediately in
an original writing, in the form of an L/C Application, and shall specify in
form and detail satisfactory to the Issuing Bank: (i) the proposed date of
issuance of the Letter of Credit (which shall be a Business Day); (ii) the face
amount of the Letter of Credit; (iii) the expiry date of the Letter of Credit;
(iv) the name and address of the beneficiary thereof; (v) the documents to be
presented by the beneficiary of the Letter of Credit in case of any drawing
thereunder; (vi) the full text of any certificate to be presented by the
beneficiary in case of any drawing thereunder; and (vii) such other matters as
the Issuing Bank may require.
(b) A Requesting Borrower shall be entitled to request that Letters
of Credit hereunder also be permitted to be Issued in any Agreed Alternative
Currency. Such Requesting Borrower shall deliver to the Issuing Bank and the
Agent any request for designation of an Agreed Alternative Currency by not later
than 9:00 a.m. (San Francisco time) at least six Business Days prior to the
Issuance of any Letter of Credit proposed to be Issued in such Agreed
Alternative Currency. The Issuing Bank will notify such Requesting Borrower and
the Agent of the acceptance or rejection of any such request within two Business
Days.
(c) If a Letter of Credit is requested to be denominated in an
Offshore Currency, including an Agreed Alternative Currency, the Administrative
Agent shall promptly notify each Bank thereof. Such Letter of Credit shall not
be issued if the Issuing Bank notifies the Administrative Agent that it has
determined that it cannot pay under a Letter of Credit denominated in such
Offshore Currency or Agreed Alternative Currency. If any Bank or the
Administrative Agent cannot reimburse or provide funds to the Issuing Bank
pursuant to subsection 3.03(c) below in the Offshore Currency or the Agreed
Alternative Currency of such Letter of Credit, then such Bank or the
Administrative Agent, as the case may be, shall make such payment in the
Equivalent Amount thereof on the date such payment is required to be made.
(d) At least two Business Days prior to the Issuance of any Letter
of Credit,
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<PAGE>
the Issuing Bank will confirm with the Administrative Agent (by telephone or in
writing) that the Administrative Agent has received a copy of the L/C
Application or L/C Amendment Application from the Requesting Borrower and, if
not, the Issuing Bank will provide the Administrative Agent with a copy thereof.
Unless the Issuing Bank has received notice on or before the Business Day
immediately preceding the date the Issuing Bank is to issue a requested Letter
of Credit from the Administrative Agent (A) directing the Issuing Bank not to
issue such Letter of Credit because such issuance is not then permitted under
subsection 3.01(a) as a result of the limitations set forth in clauses (1) or
(2) thereof or subsection 3.01(b)(ii); or (B) that one or more conditions
specified in Article V are not then satisfied; then, subject to the terms and
conditions hereof, the Issuing Bank shall, on the requested date, issue a Letter
of Credit for the account of the Requesting Borrower in accordance with the
Issuing Bank's usual and customary business practices.
(e) From time to time while a Letter of Credit is outstanding and
prior to the Termination Date, the Issuing Bank will, upon the written request
of the Requesting Borrower received by the Issuing Bank (with a copy sent by the
Requesting Borrower to the Administrative Agent) at least five days (or such
shorter time as the Issuing Bank may agree in a particular instance in its sole
discretion) prior to the proposed date of amendment, amend any Letter of Credit
issued by it. Each such request for amendment of a Letter of Credit shall be
made by facsimile, confirmed immediately in an original writing, made in the
form of an L/C Amendment Application and shall specify in form and detail
satisfactory to the Issuing Bank: (i) the Letter of Credit to be amended; (ii)
the proposed date of amendment of the Letter of Credit (which shall be a
Business Day); (iii) the nature of the proposed amendment; and (iv) such other
matters as the Issuing Bank may require. The Issuing Bank shall be under no
obligation to amend any Letter of Credit if: (A) the Issuing Bank would have no
obligation at such time to issue such Letter of Credit in its amended form under
the terms of this Agreement; or (B) the beneficiary of any such Letter of Credit
does not accept the proposed amendment to the Letter of Credit. The
Administrative Agent will promptly notify the Banks of the receipt by it of any
L/C Application or L/C Amendment Application.
(f) The Issuing Bank and the Banks agree that, while a Letter of
Credit is outstanding and prior to the Termination Date, at the option of the
Requesting Borrower and upon the written request of the Requesting Borrower
received by the Issuing Bank (with a copy sent by the Requesting Borrower to the
Administrative Agent) at least five days (or such shorter time as the Issuing
Bank may agree in a particular instance in its sole discretion) prior to the
proposed date of notification of renewal, the Issuing Bank shall be entitled to
authorize the renewal of any Letter of Credit issued by it. Each such request
for renewal of a Letter of Credit shall be made by facsimile, confirmed
immediately in an original writing, in the form of an L/C Amendment Application,
and shall specify in form and detail satisfactory to the Issuing Bank: (i) the
Letter of Credit to be renewed; (ii) the proposed date of notification of
renewal of the Letter of Credit (which shall be a Business Day); (iii) the
revised expiry date of the Letter of Credit; and (iv) such other matters as the
Issuing Bank may require. The Issuing Bank shall be under no obligation so to
renew any Letter of Credit if: (A) the Issuing Bank would have no obligation at
such time to issue or amend such Letter of Credit in its renewed form under the
terms of this Agreement; or (B) the beneficiary of any such Letter of Credit
does not accept the proposed renewal of the Letter of Credit. If any outstanding
Letter of Credit shall provide that it shall be automatically renewed unless the
beneficiary thereof receives notice from the Issuing Bank that
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<PAGE>
such Letter of Credit shall not be renewed, and if at the time of renewal the
Issuing Bank would be entitled to authorize the automatic renewal of such Letter
of Credit in accordance with this subsection 3.02(e) upon the request of the
Requesting Borrower but the Issuing Bank shall not have received any L/C
Amendment Application from the Requesting Borrower with respect to such renewal
or other written direction by the Requesting Borrower with respect thereto, the
Issuing Bank shall nonetheless be permitted to allow such Letter of Credit to
renew, and the Requesting Borrower and the Banks hereby authorize such renewal,
and, accordingly, the Issuing Bank shall be deemed to have received an L/C
Amendment Application from the Requesting Borrower requesting such renewal.
(g) The Issuing Bank may, at its election (or as required by the
Administrative Agent at the direction of the Majority Banks), deliver any
notices of termination or other communications to any Letter of Credit
beneficiary or transferee, and take any other action as necessary or
appropriate, at any time and from time to time, in order to cause the expiry
date of such Letter of Credit to be a date not later than the Termination Date.
(h) This Agreement shall control in the event of any conflict with
any L/C-Related Document (other than any Letter of Credit).
(i) The Issuing Bank will also deliver to the Administrative Agent,
concurrently or promptly following its delivery of a Letter of Credit, or
amendment to or renewal of a Letter of Credit, to an advising bank or a
beneficiary, a true and complete copy of each such Letter of Credit or amendment
to or renewal of a Letter of Credit.
3.03 Risk Participations, Drawings and Reimbursements.
------------------------------------------------
(a) Immediately upon the Issuance of each Letter of Credit each Bank
shall be deemed to, and hereby irrevocably and unconditionally agrees to,
purchase from the Issuing Bank a participation in such Letter of Credit and each
drawing thereunder in an amount equal to the product of (i) the Pro Rata Share
of such Bank, times (ii) the maximum amount available to be drawn under such
Letter of Credit and the amount of such drawing, respectively. For purposes of
subsection 2.01, each Issuance of a Letter of Credit shall be deemed to utilize
the Commitment of each Bank by an amount equal to the amount of such
participation.
(b) In the event of any request for a drawing under a Letter of
Credit by the beneficiary or transferee thereof, the Issuing Bank will promptly
notify the relevant Borrower. The Issuing Bank shall be reimbursed prior to
10:00 a.m. (San Francisco time), on each date that any amount is paid by the
Issuing Bank under any Letter of Credit (each such date, an "Honor Date"), in an
----- ----
amount equal to the amount so paid by the Issuing Bank or, if such Letter of
Credit was Issued in an Offshore Currency or an Agreed Alternative Currency, in
an Equivalent Amount. In the event the Issuing Bank is not reimbursed for the
full amount of any drawing under any Letter of Credit by 10:00 a.m. (San
Francisco time) on the Honor Date, the Issuing Bank will promptly notify the
Administrative Agent and the Administrative Agent will promptly notify each Bank
thereof, and the relevant Borrower shall be deemed to have requested that Base
Rate Loans Committed be made by the Banks to be disbursed on the Honor Date
under such Letter of Credit, subject to the amount of the unutilized portion of
the Commitments and subject to the conditions set forth in Section 5.02. Any
notice given by the Issuing Bank or the
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Administrative Agent pursuant to this subsection 3.03(b) may be oral if
immediately confirmed in writing (including by facsimile); provided that the
lack of such an immediate confirmation shall not affect the conclusiveness or
binding effect of such notice.
(c) Each Bank shall upon any notice pursuant to subsection 3.03(b)
make available to the Administrative Agent for the account of the relevant
Issuing Bank an amount or an Equivalent Amount, as the case may be, in Dollars
and in immediately available funds equal to its Pro Rata Share of the amount of
the drawing, whereupon the participating Banks shall (subject to subsection
3.03(d)) each be deemed to have made a Loan consisting of a Base Rate Committed
Loan to the Borrowers in that amount. If any Bank so notified fails to make
available to the Administrative Agent for the account of the Issuing Bank the
amount of such Bank's Pro Rata Share of the amount of the drawing by no later
than 12:00 noon (San Francisco time) on the Honor Date, then interest shall
accrue on such Bank's obligation to make such payment, from the Honor Date to
the date such Bank makes such payment, at a rate per annum equal to the Federal
Funds Rate in effect from time to time during such period. The Administrative
Agent will promptly give notice of the occurrence of the Honor Date, but failure
of the Administrative Agent to give any such notice on the Honor Date or in
sufficient time to enable any Bank to effect such payment on such date shall not
relieve such Bank from its obligations under this Section 3.03.
(d) With respect to any unreimbursed drawing that is not converted
into Loans consisting of Base Rate Committed Loans to the Borrowers in whole or
in part, because of the Borrowers' failure to satisfy the conditions set forth
in Section 5.02 or for any other reason, the Borrowers shall be deemed to have
incurred from the Issuing Bank an L/C Borrowing in the amount, or in the
Equivalent Amount, as the case may be, of such drawing, which L/C Borrowing
shall be due and payable on demand (together with interest) and shall bear
interest at a rate per annum equal to the Base Rate plus 2% per annum, and each
Bank's payment to the Issuing Bank pursuant to subsection 3.03(c) shall be
deemed payment in respect of its participation in such L/C Borrowing and shall
constitute an L/C Advance from such Bank in satisfaction of its participation
obligation under this Section 3.03.
(e) Each Bank's obligation in accordance with this Agreement to make
the Loans or L/C Advances, as contemplated by this Section 3.03, as a result of
a drawing under a Letter of Credit, shall be absolute and unconditional and
without recourse to the Issuing Bank and shall not be affected by any
circumstance, including (i) any set-off, counterclaim, recoupment, defense or
other right which such Bank may have against the Issuing Bank, the Borrowers or
any other Person for any reason whatsoever; (ii) the occurrence or continuance
of a Default, an Event of Default or a Material Adverse Effect; or (iii) any
other circumstance, happening or event whatsoever, whether or not similar to any
of the foregoing; provided, however, that each Bank's obligation to make Loans
under this Section 3.03 is subject to the conditions set forth in Section 5.02.
3.04 Repayment of Participations.
---------------------------
(a) Upon (and only upon) receipt by the Administrative Agent for the
account of the Issuing Bank of immediately available funds from a Borrower (i)
in reimbursement of any payment made by the Issuing Bank under the Letter of
Credit with respect to which any Bank
39
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has paid the Administrative Agent for the account of the Issuing Bank for such
Bank's participation in the Letter of Credit pursuant to Section 3.03 or (ii) in
payment of interest thereon, the Administrative Agent will pay to each Bank, in
the same funds as those received by the Administrative Agent for the account of
the Issuing Bank, the amount of such Bank's Pro Rata Share of such funds, and
the Issuing Bank shall receive the amount of the Pro Rata Share of such funds of
any Bank that did not so pay the Administrative Agent for the account of the
Issuing Bank.
(b) If the Administrative Agent or the Issuing Bank is required at
any time to return to any Borrower, or to a trustee, receiver, liquidator,
custodian, or any official in any Insolvency Proceeding, any portion of the
payments made by such Borrower to the Administrative Agent for the account of
the Issuing Bank pursuant to subsection 3.04(a) in reimbursement of a payment
made under the Letter of Credit or interest or fee thereon, each Bank shall, on
demand of the Administrative Agent, forthwith return to the Administrative Agent
or the Issuing Bank the amount of its Pro Rata Share of any amounts so returned
by the Administrative Agent or the Issuing Bank plus interest thereon from the
date such demand is made to the date such amounts are returned by such Bank to
the Administrative Agent or the Issuing Bank, at a rate per annum equal to the
Federal Funds Rate in effect from time to time.
3.05 Role of the Issuing Bank.
------------------------
(a) Each Bank and the Borrowers agree that, in paying any drawing
under a Letter of Credit, the Issuing Bank shall not have any responsibility to
obtain any document (other than any sight draft and certificates expressly
required by the Letter of Credit) or to ascertain or inquire as to the validity
or accuracy of any such document or the authority of the Person executing or
delivering any such document.
(b) No Agent-Related Person nor any of the respective
correspondents, participants or assignees of the Issuing Bank shall be liable to
any Bank for: (i) any action taken or omitted in connection herewith at the
request or with the approval of the Banks (including the Majority Banks, as
applicable); (ii) any action taken or omitted in the absence of gross negligence
or willful misconduct; or (iii) the due execution, effectiveness, validity or
enforceability of any L/C-Related Document.
(c) The Borrowers hereby assume all risks of the acts or omissions
of any beneficiary or transferee with respect to their use of any Letter of
Credit; provided, however, that this assumption is not intended to, and shall
not, preclude the Borrowers' pursuing such rights and remedies as it may have
against the beneficiary or transferee at law or under any other agreement. No
Agent-Related Person, nor any of the respective correspondents, participants or
assignees of the Issuing Bank, shall be liable or responsible for any of the
matters described in clauses (i) through (vii) of Section 3.06; provided,
however, anything in such clauses to the contrary notwithstanding, that the
Borrowers may have a claim against the Issuing Bank, and the Issuing Bank may be
liable to the Borrowers, to the extent, but only to the extent, of any direct,
as opposed to consequential or exemplary, damages suffered by the Borrowers
which the Borrowers prove were caused by the Issuing Bank's willful misconduct
or gross negligence or the Issuing Bank's willful failure to pay under any
Letter of Credit after the presentation to it by the beneficiary of a sight
draft and certificate(s) strictly complying with the terms and conditions
40
<PAGE>
of a Letter of Credit. In furtherance and not in limitation of the foregoing:
(i) the Issuing Bank may accept documents that appear on their face to be in
order, without responsibility for further investigation, regardless of any
notice or information to the contrary; and (ii) the Issuing Bank shall not be
responsible for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign a Letter of Credit or the rights
or benefits thereunder or proceeds thereof, in whole or in part, which may prove
to be invalid or ineffective for any reason.
3.06 Obligations Absolute. The obligations of the Borrowers under this
--------------------
Agreement and any L/C-Related Document to reimburse the Issuing Bank for a
drawing under a Letter of Credit, and to repay any L/C Borrowing and any drawing
under a Letter of Credit converted into Base Rate Committed Loans, shall be
unconditional and irrevocable, and shall be paid strictly in accordance with the
terms of this Agreement and each such other L/C-Related Document under all
circumstances, including the following:
(i) any lack of validity or enforceability of this Agreement or
any L/C-Related Document;
(ii) any change in the time, manner or place of payment of, or
in any other term of, all or any of the obligations of the Borrowers in
respect of any Letter of Credit or any other amendment or waiver of or any
consent to departure from all or any of the L/C-Related Documents;
(iii) the existence of any claim, set-off, defense or other
right that the Borrowers may have at any time against any beneficiary or
any transferee of any Letter of Credit (or any Person for whom any such
beneficiary or any such transferee may be acting), the Issuing Bank or any
other Person, whether in connection with this Agreement, the transactions
contemplated hereby or by the L/C-Related Documents or any unrelated
transaction;
(iv) any draft, demand, certificate or other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect; or any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under any
Letter of Credit;
(v) any payment by the Issuing Bank under any Letter of Credit
against presentation of a draft or certificate that does not strictly
comply with the terms of any Letter of Credit; or any payment made by the
Issuing Bank under any Letter of Credit to any Person purporting to be a
trustee in bankruptcy, debtor-in-possession, assignee for the benefit of
creditors, liquidator, receiver or other representative of or successor to
any beneficiary or any transferee of any Letter of Credit, including any
arising in connection with any Insolvency Proceeding;
(vi) any exchange, release or non-perfection of any collateral,
or any release or amendment or waiver of or consent to departure from any
other guarantee, for all or any of the obligations of the Borrowers in
respect of any Letter of Credit; or
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(vii) any other circumstance or happening whatsoever, whether
or not similar to any of the foregoing, including any other circumstance
that might otherwise constitute a defense available to, or a discharge of,
the Borrowers or a guarantor.
3.07 Letter of Credit Fees.
---------------------
(a) The Borrowers shall pay to the Administrative Agent for the
account of each of the Banks a letter of credit fee with respect to Financial
Letters of Credit equal to the Applicable L/C Fee Percentage for Financial
Letters of Credit times the actual daily maximum amount available to be drawn of
the outstanding Financial Letters of Credit. The Borrowers shall pay to the
Administrative Agent for the account of each of the Banks a letter of credit fee
with respect to Performance Letters of Credit equal to the Applicable L/C Fee
Percentage for Performance Letters of Credit times the actual daily maximum
amount available to be drawn of the outstanding Performance Letters of Credit.
The Borrowers shall pay to the Administrative Agent for the account of each of
the Banks a letter of credit fee with respect to Documentary Letters of Credit
equal to such percentage as the Administrative Agent may establish from time to
time times the actual daily maximum amount available to be drawn of the
outstanding Documentary Letters of Credit. Such fees shall be computed on a
quarterly basis in arrears on the last Business Day of each calendar quarter
based upon Letters of Credit outstanding for that quarter as calculated by the
Administrative Agent. Such letter of credit fees shall be due and payable
quarterly in arrears within two Business Days of the last Business Day of each
calendar quarter during which Letters of Credit are outstanding, commencing on
the first such quarterly date to occur after the Closing Date, through the
Termination Date (or such later date upon which the outstanding Letters of
Credit shall expire), with the final payment to be made on the Termination Date.
(b) The Borrowers shall pay to the Administrative Agent for the
account of the Issuing Bank a letter of credit fronting fee for each Letter of
Credit Issued by the Issuing Bank computed at the rate of 0.10% per annum
against the face amount (or increased face amount, as the case may be) of such
Letter of Credit (with a minimum quarterly fronting fee of $100 per Letter of
Credit). Such Letter of Credit fronting fee shall be computed on a quarterly
basis in arrears on the last Business Day of each calendar quarter based upon
Letters of Credit outstanding for that quarter as calculated by the
Administrative Agent. Such letter of credit fees shall be due and payable
quarterly in arrears within two Business Days of the last Business Day of each
calendar quarter during which Letters of Credit are outstanding, commencing on
the first such quarterly date to occur after the Closing Date, through the
Termination Date, with the final payment to be made on the Termination Date.
(c) Notwithstanding Subsection (a) of this Section, while any Event
of Default exists or after acceleration, the Borrowers shall pay Letter of
Credit fees on all outstanding Letters of Credit (after as well as before entry
of judgment thereon to the extent permitted by law) at a rate per annum which is
determined by adding 2% per annum to the fee then in effect therefor.
3.08 Issuance Fee and Documentary and Processing Charges Payable to
--------------------------------------------------------------
Issuing Bank. The Borrowers shall pay to the Issuing Bank from time to time
- ------------
on demand the normal issuance,
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presentation, amendment and other processing fees, and other standard costs and
charges, of the Issuing Bank relating to letters of credit as from time to time
in effect.
3.09 Uniform Customs and Practice. The Uniform Customs and Practice for
----------------------------
Documentary Credits as published by the International Chamber of Commerce most
recently at the time of issuance of any Letter of Credit shall (unless otherwise
expressly provided in the Letters of Credit) apply to the Letters of Credit.
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY
4.01 Taxes.
-----
(a) Any and all payments by any Borrower to each Bank or the
Administrative Agent under this Agreement and any other Loan Document shall be
made free and clear of, and without deduction or withholding for any Taxes. In
addition, the Borrowers shall pay all Other Taxes.
(b) Each Borrower agrees to indemnify and hold harmless each Bank
and the Administrative Agent for the full amount of Taxes or Other Taxes
(including any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section) paid by the Bank or the Administrative Agent and
any, liability (including penalties, interest, additions to tax and expenses)
arising therefrom or with respect thereto, whether or not such Taxes or Other
Taxes were correctly or legally asserted. Payment under this indemnification
shall be made within 30 days after the date the Bank or the Administrative Agent
makes written demand therefor.
(c) If any Borrower shall be required by law to deduct or withhold
any Taxes or Other Taxes from or in respect of any sum payable hereunder to any
Bank or the Administrative Agent, then:
(i) the sum payable shall be increased as necessary so that
after making all required deductions and withholdings (including deductions
and withholdings applicable, additional sums payable under this Section)
such Bank or the Administrative Agent, as the case may be, receives an
amount equal to the sum it would have received had no such deductions or
withholdings been made;
(ii) such Borrower shall make such deductions and withholdings;
(iii) such Borrower shall pay the full amount deducted or
withheld to the relevant taxing authority or other authority in accordance
with applicable law; and
(iv) such Borrower shall also pay to each Bank or the
Administrative Agent for the account of such Bank, at the time interest is
paid, all additional amounts which the respective Bank specifies as
necessary to preserve the after-tax yield the Bank would have received if
such Taxes or Other Taxes had not been imposed.
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(d) Within 30 days after the date of any payment by any Borrower of
Taxes or Other Taxes, such Borrower shall furnish the Administrative Agent the
original or a certified copy of a receipt evidencing payment thereof, or other
evidence of payment satisfactory to the Administrative Agent.
(e) If any Borrower is required to pay additional amounts to any
Bank or the Administrative Agent pursuant to subsection (c) of this Section,
then such Bank shall use reasonable efforts (consistent with legal and
regulatory restrictions) to change the jurisdiction of its Lending Office so as
to eliminate any such additional payment by such Borrower which may thereafter
accrue, if such change in the judgment of such Bank is not otherwise
disadvantageous to such Bank.
4.02 Illegality.
----------
(a) If any Bank reasonably determines that the introduction of any
Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, has made it
unlawful, or that any central bank or other Governmental Authority has asserted
that it is unlawful for any Bank or its applicable Lending Office to make
Offshore Rate Loans, then, on notice thereof by the Bank to the Borrowers
through the Administrative Agent, any obligation of that Bank to make Offshore
Rate Loans (including Offshore Rate Committed Loans in any Applicable Currency
and in respect of any LIBOR Bid Loan as to which any Borrower has accepted such
Bank's Competitive Bid, but as to which the Borrowing Date has not arrived)
shall be suspended until the Bank notifies the Administrative Agent and the
Borrowers that the circumstances giving rise to such determination no longer
exist.
(b) If any Bank reasonably determines that it is unlawful to
maintain any Offshore Rate Loan, the Borrowers shall, upon its receipt of notice
of such fact and demand from such Bank (with a copy to the Administrative
Agent), prepay in full such Offshore Rate Loans of that Bank then outstanding,
together with interest accrued thereon and amounts required under Section 3.04,
either on the last day of the Interest Period thereof, if the Bank may lawfully
continue to maintain such Offshore Rate Loans to such day, or immediately, if
the Bank may not lawfully continue to maintain such Offshore Rate Loan. If any
Borrower is required to so prepay any Offshore Rate Committed Loan, then
concurrently with such prepayment, the Company shall borrow from the affected
Bank, in the amount of such repayment, a Base Rate Committed Loan.
(c) If the obligation of any Bank to make or maintain Offshore Rate
Committed Loans has been so terminated or suspended, the Borrowers may elect, by
giving notice to the Bank through the Administrative Agent that all Loans which
would otherwise be made by the Bank as Offshore Rate Committed Loans shall be
instead Base Rate Committed Loans.
(d) Before giving any notice to the Administrative Agent under this
Section, the affected Bank shall designate a different Lending Office with
respect to its Offshore Rate Loans if such designation will avoid the need for
giving such notice or making such demand and will not, in the judgment of the
Bank, be illegal or otherwise disadvantageous to the Bank.
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4.03 Increased Costs and Reduction of Return.
---------------------------------------
(a) If any Bank reasonably determines that, due to either (i) the
introduction of or any change in or in the interpretation of any law or
regulation or (ii) the compliance by that Bank with any guideline or request
from any central bank or other Governmental Authority (whether or not having the
force of law), there shall be any increase in the cost to such Bank of agreeing
to make or making, funding or maintaining any Offshore Rate Loans, then the
Borrowers shall be liable for, and shall from time to time, upon demand (with a
copy of such demand to be sent to the Administrative Agent), pay to the
Administrative Agent for the account of such Bank, additional amounts as are
sufficient to compensate such Bank for such increased costs.
(b) If any Bank reasonably shall have determined that (i) the
introduction of any Capital Adequacy Regulation, (ii) any change in any Capital
Adequacy Regulation, (iii) any change in the interpretation or administration of
any Capital Adequacy Regulation by any central bank or other Governmental
Authority charged with the interpretation or administration thereof, or (iv)
compliance by the Bank (or its Lending Office) or any corporation controlling
the Bank with any Capital Adequacy Regulation, affects or would affect the
amount of capital required or expected to be maintained by the Bank or any
corporation controlling the Bank and (taking into consideration such Bank's or
such corporation's policies with respect to capital adequacy and such Bank's
desired return on capital) determines that the amount of such capital is
increased as a consequence of its Commitment, loans, credits or obligations
under this Agreement, then, upon demand of such Bank to the Borrowers through
the Administrative Agent, the Borrowers shall pay to the Bank, from time to time
as specified by the Bank, additional amounts sufficient to compensate the Bank
for such increase.
4.04 Funding Losses. The Borrowers shall reimburse each Bank and hold
--------------
each Bank harmless from any loss or expense which the Bank may sustain or incur
as a consequence of:
(a) the failure of any Borrower to make on a timely basis any
payment of principal of any Offshore Rate Loan;
(b) the failure of any Borrower to borrow, continue or convert a
Committed Loan after any Borrower has given (or is deemed to have given) a
Notice of Borrowing or a Notice of Conversion/Continuation;
(c) the failure of any Borrower to make any prepayment of any
Committed Loan in accordance with any notice delivered under Section 2.09;
(d) the prepayment (including pursuant to Section 2.09 or 2.10) or
other payment (including after acceleration thereof) of any Offshore Rate Loan
or Absolute Rate Bid Loan on a day that is not the last day of the relevant
Interest Period; or
(e) the automatic conversion under Section 2.04 of any Offshore Rate
Committed Loan to a Base Rate Committed Loan on a day that is not the last day
of the relevant Interest Period;
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including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Offshore Rate Loans or from fees payable
to terminate the deposits from which such funds were obtained or from losses or
expenses relating to any Offshore Currency Committed Loan. For purposes of
calculating amounts payable by the Borrowers to the Banks under this Section and
under Section 4.03(a), (i) each Offshore Rate Committed Loan made by a Bank (and
each related reserve, special deposit or similar requirement) shall be
conclusively deemed to have been funded at LIBOR used in determining the
Offshore Rate for such Offshore Rate Loan by a matching deposit or other
borrowing in the Applicable Currency in the interbank eurodollar market for a
comparable amount and for a comparable period, whether or not such Offshore Rate
Loan is in fact so funded.
4.05 Inability to Determine Rates. If the Administrative Agent
----------------------------
determines that for any reason adequate and reasonable means do not exist for
determining the Offshore Rate for any requested Interest Period with respect to
a proposed Offshore Rate Loan, or that the LIBOR applicable pursuant to
subsection 2.11(a) for any requested Interest Period with respect to a proposed
Offshore Rate Loan does not adequately and fairly reflect the cost to the Banks
of funding such Loan, the Administrative Agent will promptly so notify the
Borrowers and each Bank. Thereafter, the obligation of the Banks to make or
maintain Offshore Rate Loans, as the case may be, hereunder shall be suspended
until the Administrative Agent upon the instruction of the Majority Banks
revokes such notice in writing. Upon receipt of such notice, any Borrower may
revoke any Notice of Borrowing or Notice of Conversion/ Continuation then
submitted by it. If any Borrower does not revoke such Notice, the Banks shall
make, convert or continue the Committed Loans, as proposed by such Borrower, in
the amount specified in the applicable notice submitted by such Borrower, but
such Committed Loans shall be made, converted or continued as Base Rate
Committed Loans instead of Offshore Rate Committed Loans, as the case may be.
In the case of any Offshore Currency Committed Loans, the Committed Borrowing or
continuation shall be in an aggregate amount equal to the Equivalent Amount of
the originally requested Committed Borrowing or continuation in the Offshore
Currency, and to that end any outstanding Offshore Currency Committed Loans
which are the subject of any continuation shall be redenominated and converted
into Base Rate Loans in Dollars with effect from the last day of the Interest
Period with respect to any such Offshore Currency Committed Loans.
4.06 Certificates of Banks.
---------------------
(a) Any Bank claiming reimbursement or compensation under this
Article IV shall deliver to the Borrowers (with a copy to the Administrative
Agent) a certificate setting forth in reasonable detail the amount payable to
the Bank hereunder and such certificate shall be binding on the Borrowers and
constitute prima facie evidence with respect to such claim.
(b) Any Bank claiming reimbursement or compensation under this
Article IV shall use its reasonable efforts to notify the Borrowers promptly
thereof, including the nature of any such tax, requirement of law or other
grounds for such claim.
4.07 Survival. The agreements and obligations of the Borrowers in this
--------
Article IV shall survive the payment of all other Obligations.
ARTICLE V
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CONDITIONS PRECEDENT
5.01 Conditions of Initial Loans. The obligation of each Bank to make
---------------------------
its initial Credit Extension hereunder, and to receive through the
Administrative Agent the initial Competitive Bid Request, is subject to the
condition that the Administrative Agent has received on or before the Closing
Date all of the following, in form and substance satisfactory to the
Administrative Agent, the Lead Arranger and each Bank, and in sufficient copies
for each Bank:
(a) Credit Agreement and Note. This Agreement and any Notes
-------------------------
requested by any Bank prior to closing executed by each party thereto.
(b) Guaranties. From each of the Company, the Initial Subsidiary
----------
Borrowers and the Initial Material Subsidiaries, a duly executed Guaranty and a
duly executed Guarantor Subordintion Agreement.
(c) Resolutions; Incumbency.
-----------------------
(i) Copies of the resolutions of the board of directors of the
Company, each Initial Subsidiary Borrower and each Initial Material
Subsidiary authorizing the transactions contemplated hereby, certified as
of the Closing Date by the Secretary or an Assistant Secretary of such
Person; and
(ii) A certificate of the Secretary or Assistant Secretary of
each of the Company, each Initial Subsidiary Borrower and each Initial
Material Subsidiary certifying the names and true signatures of the
officers of such Person authorized to execute, deliver and perform, as
applicable, this Agreement and all other Loan Documents to be delivered by
it hereunder.
(d) Organization Documents; Good Standing. Each of the following
-------------------------------------
documents:
(i) the articles or certificate of incorporation and the bylaws
of the Company, each Initial Subsidiary Borrower and each Initial Material
Subsidiary as in effect on the Closing Date, certified by the Secretary or
Assistant Secretary of such Person as of the Closing Date; and
(ii) a good standing and tax good standing certificate for each
the Company, each Initial Subsidiary Borrower and each Initial Material
Subsidiary from the Secretary of State (or similar, applicable Governmental
Authority) of its state of incorporation and the State of California,
together with a bring-down certificate by facsimile, dated the Closing
Date.
(e) Legal Opinion. An opinion of Barton, Klugman & Oetting, counsel
-------------
to the Company and its Subsidiaries and addressed to the Administrative Agent
and the Banks, substantially in the form of Exhibit D.
---------
(f) Payment of Fees. Evidence of payment by the Company of all
---------------
accrued
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<PAGE>
and unpaid fees, costs and expenses to the extent then due and payable on the
Closing Date pursuant to the Loan Documents, together with Attorney Costs of
BofA to the extent invoiced prior to or on the Closing Date, plus such
additional amounts of Attorney Costs as shall constitute BofA's reasonable
estimate of Attorney Costs incurred or to be incurred by it through the closing
proceedings (provided that such estimate shall not thereafter preclude final
settling of accounts between the Company and BofA); including any such costs,
fees and expenses arising under the Fee Letter or otherwise referenced in
Sections 2.12 and 11.04.
(g) Certificate. A certificate signed by a Responsible Officer,
-----------
dated as of the Closing Date, stating that:
(i) the representations and warranties contained in Article VI
are true and correct on and as of such date, as though made on and as of
such date;
(ii) no Default or Event of Default exists or would result from
the initial Borrowing; and
(iii) there has occurred since September 30, 1998 no event or
circumstance that has resulted or could reasonably be expected to result in
a Material Adverse Effect.
(h) Copies of Certain Acquisition Documents. Copies of the purchase
---------------------------------------
agreement (including all schedules and exhibits thereto) relating to the
Acquisition, certified as being true, correct and complete on and as of the
Closing Date by the Secretary or Assistant Secretary of the Company and which
includes terms satisfactory to the Administrative Agent in its sole discretion,
including, but not limited to, terms which reflect the following (i) an
aggregate purchase price for the equity of the Acquired Company not in excess of
$259,000,000; and (ii) the total amount of debt assumed by the Company in
connection with the Acquisition not in excess of $55,000,000. The Administrative
Agent shall also be satisfied that there shall exist no order, decree, judgment,
ruling or injunction which restrains the consummation of the Acquisition in the
manner contemplated by the purchase agreement and all documents related thereto.
(i) Other Indebtedness. Evidence of the repayment in full of all
------------------
obligations under the Existing Credit Agreement, and the cancellation of such
agreement;
(j) Evidence of Satisfactory Insurance. A certificate of an
----------------------------------
independent insurance broker stating that each Borrower has in force and effect,
with financially sound and reputable independent insurers, insurance with
respect to its properties and business against loss or damage of the kinds, in
covering such types of risks, and in such amounts, and with deductibles, as are
appropriate in consideration of such Borrower's properties and business in the
exercise of such broker's independent professional judgment;
(k) Financial Statements. Copies of pro-forma financial statements
--------------------
for the Company and the Company's financial projections for each fiscal year
from and including 1999 through 2003;
(l) Capital and Ownership Structure. Evidence of, and the consent
--------------------------------
of the
48
<PAGE>
Administrative Agent to, the corporate capital and ownership structure of the
Company and its Subsidiaries (after giving effect to the Acquisition);
(m) Other Documents. Such other approvals, opinions, documents or
---------------
materials as the Administrative Agent or any Bank may request.
5.02 Conditions to All Borrowing. The obligation of each Bank to make
---------------------------
any Committed Loan to be made by it, or any Bid Loan as to which a Borrower has
accepted the relevant Competitive Bid (including its initial Loan) and the
obligation of the Issuing Bank to Issue any Letter of Credit (including the
initial Letter of Credit), is subject to the satisfaction of the following
conditions precedent on the relevant Borrowing Date or Issuance Date:
(a) Notice of Borrowing; L/C Application. As to any Committed Loan,
------------------------------------
the Administrative Agent shall have received (with, in the case of the initial
Loan only, a copy for each Bank) a Notice of Borrowing or a Notice of
Conversion/Continuation, as applicable, or in the case of any Issuance of any
Letter of Credit, the Issuing Bank and the Administrative Agent shall have
received an L/C Application;
(b) Continuation of Representations and Warranties. The
----------------------------------------------
representations and warranties in Article VI shall be true and correct on and as
of such Borrowing Date with the same effect as if made on and as of such
Borrowing Date except to the extent such representations and warranties
expressly refer to an earlier date, in which case they shall be true and correct
as of such earlier date); and
(c) No Existing Default. No Default or Event of Default shall exist
-------------------
or shall result from such Borrowing.
Each Notice of Borrowing, Competitive Bid Request and L/C Applications
submitted by any Borrower hereunder shall constitute a representation and
warranty by all of the Borrowers hereunder, as of the date of each such notice
or request and as of each Borrowing Date, that the conditions in Section 5.02
are satisfied.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
Each Borrower represents and warrants to the Administrative Agent and each
Bank that:
6.01 Corporate Existence and Power. Each Borrower and each of its
-----------------------------
Subsidiaries:
(a) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation;
(b) has the power and authority and all governmental licenses,
authorizations, consents and approvals (including, without limitation,
professional licenses) to own its assets, carry on its business, and to execute,
deliver, and perform its obligations under the Loan Documents;
49
<PAGE>
(c) is duly qualified as a foreign corporation and is licensed and
in good standing under the laws of each jurisdiction where its ownership, lease
or operation of property or the conduct of its business requires such
qualification or license; and
(d) is in compliance with all Requirements of Law;
except, in each case referred to in clause (c) or clause (d) above, to the
extent that the failure to do so could not reasonably be expected to have a
Material Adverse Effect.
6.02 Corporate Authorizations; No Contravention. The execution,
------------------------------------------
delivery and performance by each Borrower of this Agreement and each other Loan
Document to which such Borrower is a party, have been duly authorized by all
necessary corporate action, and do not and will not:
(a) contravene the terms of any of the Borrowers' Organization
Documents;
(b) conflict with or result in any breach or contravention of, or
the creation of any Lien under any document evidencing any Contractual
Obligation to which any Borrower is a party or any order, injunction, writ or
decree of any Governmental Authority to which any Borrower or its property is
subject; or
(c) violate any Requirement of Law.
6.03 Governmental Authorization. No approval, consent, exemption,
--------------------------
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, each Borrower or
any of its Subsidiaries of the Agreement or any other Loan Document.
6.04 Binding Effect. This Agreement and each other Loan Document to
--------------
which any Borrower is a party constitute the legal, valid and binding
obligations of such Borrower, enforceable against such Borrower in accordance
with their respective terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, or similar laws affecting the enforcement of
creditors' rights generally or by equitable principles relating to
enforceability.
6.05 Litigation. Except as disclosed on Schedule 6.05, there are no
---------- -------------
actions, suits, proceedings, claims or disputes pending, or to the best
knowledge of each Borrower, threatened or contemplated, at law, in equity, in
arbitration or before any Governmental Authority, against any Borrower, or its
Subsidiaries or any of their respective properties which:
(a) purport to affect or pertain to this Agreement or any other Loan
Document, or any of the transactions contemplated hereby or thereby; or
(b) is reasonably likely to be adversely determined and which if
determined adversely to any Borrower or its Subsidiaries, would reasonably be
expected to have a Material Adverse Effect. No injunction, writ, temporary
restraining order or any order of any nature has been issued by any court or
other Governmental Authority purporting to enjoin or restrain the execution,
delivery or performance of this Agreement or any other Loan Document, or
directing that the transactions provided for herein or therein not be
consummated as herein or therein provided.
50
<PAGE>
6.06 No Default. No Default or Event of Default exists or would result
----------
from the incurring of any Obligations by any Borrower. As of the Closing Date,
no Borrower nor any Subsidiaries of the Borrowers are in default under or with
respect to any Contractual Obligation in any respect which, individually or
together with all such defaults, could reasonably be expected to have a Material
Adverse Effect, or that would, if such default had occurred after the Closing
Date, create an Event of Default under subsection 9.01 (e).
6.07 ERISA Compliance.
----------------
(a) Except as specifically disclosed in Schedule 6.07, and to the
-------------
best knowledge of each Borrower after due investigation, each Plan is in
compliance in all material respects with the applicable provisions of ERISA, the
Code and other federal or state law. Each Plan which is intended to qualify
under Section 401 (a) of the Code has received a favorable determination letter
from the IRS and to the best knowledge of each Borrower, nothing has occurred
which would cause the loss of such qualification.
(b) There are no pending, or to the best knowledge of each Borrower,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan which has resulted or could reasonably be expected to
result in a Material Adverse Effect. There has been no prohibited transaction
or other violation of the fiduciary responsibility rule with respect to any Plan
which could reasonably result in a Material Adverse Effect.
(c) Except as specifically disclosed in Schedule 6.07, and to the
-------------
best knowledge of each Borrower after due investigation, no ERISA Event has
occurred or is reasonably expected to occur with respect to any Pension Plan.
(d) Except as specifically disclosed in Schedule 6.07, no Pension
-------------
Plan has any Unfunded Pension Liability.
(e) Except as specifically disclosed in Schedule 6.07, each Borrower
-------------
has not incurred, nor does it reasonably expect to incur, any liability under
Title IV of ERISA with respect to any Pension Plan (other than premiums due and
not delinquent under Section 4007 of ERISA).
(f) Except as specifically disclosed in Schedule 6.07, each Borrower
-------------
has not transferred any Unfunded Pension Liability to any Person or otherwise
engaged in a transaction that could be subject to Section 4069 of ERISA.
6.08 Use of Proceeds: Margin Regulations. The proceeds of the Loans are
-----------------------------------
to be used solely for the purposes set forth in and permitted by Section 7.11
and Section 8.07. No Borrower nor any Subsidiaries of the Borrowers are
generally engaged in the business of purchasing or selling Margin Stock or
extending credit for the purpose of purchasing or carrying Margin Stock.
6.09 Title to Properties. Each Borrower and each of its Subsidiaries
-------------------
have good record and marketable title in fee simple to, or valid leasehold
interests in, all real property necessary or used in the ordinary conduct of
their respective businesses, except for such defects in title as
51
<PAGE>
could not, individually or in the aggregate, have a Material Adverse Effect. As
of the Closing Date, the property of each Borrower and each of its Subsidiaries
is subject to no Liens, other than Permitted Liens.
6.10 Taxes. Each Borrower and each of its Subsidiaries have filed all
-----
Federal and other material tax returns and reports required to be filed, and
have paid all Federal and other material taxes, assessments, fees and other
governmental charges levied or imposed upon them or their properties, income or
assets otherwise due and payable, except those which are being contested in good
faith by appropriate proceedings and for which adequate reserves have been
provided in accordance with GAAP. There is no proposed tax assessment against
any Borrower or any Subsidiaries of the Borrowers that would, if made, have a
Material Adverse Effect.
6.11 Financial Condition.
-------------------
(a) The audited consolidated financial statements of the Company and
its Subsidiaries dated September 30, 1998, and the related consolidated
statements of income or operations, shareholders' equity and cash flows for the
fiscal year ended on that date:
(i) were prepared in accordance with GAAP consistently applied
throughout the period covered thereby, except as otherwise expressly noted
therein;
(ii) fairly present the financial condition of the Company and
its Subsidiaries as of the date thereof and results of operations for the
period covered thereby; and
(iii) except as specifically disclosed in Schedule 6.11, show
-------------
all material indebtedness and other liabilities, direct or contingent, of
the Company and its consolidated Subsidiaries as of the date thereof,
including liabilities for taxes, material commitments and Contingent
Obligations.
(b) Since September 30, 1998, there has been no Material Adverse
Effect.
6.12 Environmental Matters. Any Borrower conducts in the ordinary course
---------------------
of business a review of the effect of existing Environmental Laws and existing
Environmental Claims on its properties, and as a result thereof any Borrower has
reasonably concluded that, except as specifically disclosed in Schedule 6.12,
-------------
such Environmental Laws and Environmental Claims could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
6.13 Regulated Entities. None of the Borrowers, any Person controlling
------------------
the Borrowers, or any Subsidiary of the Borrowers, is an "Investment Company"
within the meaning of the Investment Company Act of 1940. The Borrowers are not
subject to regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act, the Interstate Commerce Act, any state public utilities code,
or any other Federal or state statute or regulation limiting its ability to
incur Indebtedness.
6.14 No Burdensome Restriction. Neither any Borrower nor any Subsidiaries
-------------------------
of any Borrower is a party to or bound by any Contractual Obligation, or subject
to any restriction in
52
<PAGE>
any Organization Document, or any Requirement of Law, which could reasonably be
expected to have a Material Adverse Effect.
6.15 Copyrights, Patents, Trademarks and Licenses, etc Each Borrower or
-------------------------------------------------
its respective Subsidiaries own or are licensed or otherwise have the right to
use all of the patents, trademarks, service marks, trade names, copyrights,
contractual franchises, authorizations and other rights that are reasonably
necessary for the operation of their respective businesses, without conflict
with the rights of any other Person. To the best knowledge of any Borrower, no
slogan or other advertising device, product, process, method, substance, part or
other material now employed, or now contemplated to be employed, by any Borrower
or any of its respective Subsidiaries infringes upon any rights held by any
other Person. Except as specifically disclosed in Schedule 6.05, no claim or
-------------
litigation regarding any of the foregoing is pending or threatened, and no
patent, invention, device, application, principle or any statute, law, rule,
regulation, standard or code is pending or, to the knowledge of any Borrower,
proposed, which, in either case, could reasonably be expected to have a Material
Adverse Effect.
6.16 Subsidiaries. As of the Closing Date, the Company has no
------------
Subsidiaries other than those specifically disclosed on Schedule 6.16 hereto.
-------------
6.17 Insurance. The properties of each Borrower and its Subsidiaries are
---------
insured with financially sound and reputable insurance companies not Affiliates
of the Borrowers, in such amounts, with such deductibles and covering such risks
as are customarily carried by companies engaged in similar businesses and owning
similar properties in localities where such Borrower or such Subsidiary
operates, or are self insured by such Borrower.
6.18 Year 2000. Borrowers have (a) initiated a review and assessment of
---------
all areas within their and each of their respective Subsidiaries' business and
operations (including those affected by suppliers and vendors) that could be
adversely affected by the Year 2000 Problem, (b) developed a plan and timeline
for addressing the Year 2000 Problem on a timely basis, and (c) to date,
implemented that plan in accordance with that timetable. Borrowers reasonably
believe that all computer applications (including those of its suppliers and
vendors) that are material to their or any of their respective Subsidiaries'
business and operations will on a timely basis be able to perform properly date-
sensitive functions for all dates before and after January 1, 2000 (that is, be
"Year 2000 compliant"), except to the extent that a failure to do so could not
reasonably be expected to have a Material Adverse Effect.
6.19 Full Disclosure. None of the representations or warranties made by
---------------
any Borrower or any Subsidiary in the Loan Documents as of the date such
representations and warranties are made or deemed made, and none of the
statements contained in any exhibit, report, statement or certificate furnished
by or on behalf of any Borrower or any Subsidiaries of the Borrowers in
connection with the Loan Documents (including the offering and disclosure
materials delivered by or on behalf of the Borrowers to the Banks prior to the
Closing Date), contains any untrue statement of a material fact or omits any
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they are made, not
misleading as of the time when made or delivered.
53
<PAGE>
6.20 Company's Authority to Act. The Company has, and at all times until
--------------------------
such time as the Obligations shall have been paid in full, all Letters of Credit
shall have expired unutilized, the Banks shall have no further obligation to
advance Loans and the Issuing Bank shall have no further obligation to issue
Letters of Credit hereunder shall have, the absolute and complete authority to
take action hereunder and under the other Loan Documents in the name of and for
the account of each of its Subsidiaries, including, without limitation, to
execute Guarantor Subordination Agreements and other Loan Documents on behalf
thereof, without further action by or the consent of any such Subsidiary;
provided, however, that nothing contained herein shall require the
Administrative Agent to accept action by the Company in lieu of any such
Subsidiary.
ARTICLE VII
AFFIRMATIVE COVENANTS
So long as any Bank or Issuing Bank shall have any Commitment hereunder, or
any Loan or other Obligation shall remain unpaid or unsatisfied, or any Letter
of Credit shall remain outstanding, unless the Majority Banks waive compliance
in writing:
7.01 Financial Statements. The Company shall deliver to the
--------------------
Administrative Agent with sufficient copies for each Bank:
(a) as soon as available, but not later than 120 days after the end
of each fiscal year (commencing with the fiscal year ended September 30,
1998), a copy of the audited consolidated balance sheet of the Company and
its Subsidiaries as at the end of such year and the related consolidated
statements of income or operations, stockholders' equity and cash flows for
such year, setting forth in each case in comparative form the figures for
the previous fiscal year, and accompanied by the opinion of the Independent
Auditor, which report shall state that such consolidated financial
statements present fairly the financial position for the periods indicated
in conformity with GAAP applied on a basis consistent with prior years.
Such opinion shall not be qualified or limited because of a restricted or
limited examination by the Independent Auditor of any material portion of
the Company's or any Subsidiary's records; and
(b) as soon as available, but not later than 60 days after the end of
each of the first three fiscal quarters of each fiscal year (commencing
with the fiscal quarter ended December 31, 1998), a copy of the unaudited
consolidated balance sheet of the Company and its Subsidiaries as of the
end of such quarter and the related consolidated statements of income and
cash flows for the period commencing on the first day and ending on the
last day of such quarter, and certified by a Responsible Officer as fairly
presenting, in accordance with GAAP (subject to ordinary, good faith
recurring adjustments), the financial position and the results of
operations of the Company and the Subsidiaries.
7.02 Certificates; Other Information. The Company shall furnish to the
-------------------------------
Administrative Agent, with sufficient copies for each Bank:
(a) concurrently with the delivery of the financial statements
referred to subsections 7.01 (a) and (b), a Compliance Certificate executed
by a Responsible Officer;
54
<PAGE>
(b) promptly, copies of all financial statements and reports that the
Company sends to its shareholders, and copies of all financial statements and
regular, periodical or special reports (including Forms 10K, 10Q and 8K) that
the Company or any Subsidiary may make to, or file with, the SEC; and
(c) promptly, such additional information regarding the business,
financial or corporate affairs of the Company or any Subsidiary as the
Administrative Agent, at the request of any Bank, may from time to time
reasonably request.
7.03 Notices. The Company shall promptly notify the Administrative Agent
-------
and each Bank:
(a) of the occurrence of any Default or Event of Default, and of the
occurrence or existence of any event or circumstance that foreseeably will
become a Default or Event of Default.
(b) of any matter that has resulted or will foreseeably result in a
Material Adverse Effect, including (i) breach or nonperformance of, or any
default under, a Contractual Obligation of any Borrower or any Subsidiaries of
any Borrower; (ii) any dispute, litigation, investigation, proceeding or
suspension between any Borrower or any Subsidiaries of any Borrower and any
Governmental Authority; or (iii) the commencement of, or any material
development in, any litigation or proceeding affecting any Borrower or any
Subsidiary of any Borrower, including pursuant to any applicable Environmental
Laws;
(c) of any of the following events affecting any Borrower, together
with a copy of any notice with respect to such event that may be required to be
filed with a Governmental Authority and any notice delivered by a Governmental
Authority to any Borrower with respect to such event:
(i) an ERISA Event;
(ii) if any of the representations and warranties in Section
6.07 ceases to be true and correct;
(iii) the adoption of any new Pension Plan or other Plan subject
to Section 412 of the Code;
(iv) the adoption of any amendment to a Pension Plan or other
Plan subject to Section 412 of the Code, if such amendment results in a
material increase in contributions or Unfunded Pension Liability; or
(v) the commencement of contributions to any Pension Plan or
other Plan subject to Section 412 of the Code; and
(d) of any material change in accounting policies or financial
reporting practices by any Borrower or any consolidated Subsidiaries of any
Borrower.
55
<PAGE>
Each notice under this Section shall be accompanied by a written statement
by a Responsible Officer setting forth details of the occurrence referred to
therein, and stating what action any Borrower or any affected Subsidiaries of
any Borrower proposes to take with respect thereto and at what time. Each
notice under subsection 7.03(a) shall describe with particularity any and all
clauses or provisions of this Agreement or other Loan Document that have been
(or foreseeably will be) breached or violated.
7.04 Preservation of Corporate Existence, Etc The Company shall, and
----------------------------------------
shall cause each of its Material Subsidiaries and each of the Subsidiary
Borrowers which is not a Material Subsidiary to:
(a) preserve and maintain in full force and effect its corporate
existence and good standing under the laws of its state or jurisdiction of
incorporation;
(b) preserve and maintain in full force and effect all governmental
rights, privileges, qualifications, permits, licenses and franchises necessary
or desirable in the normal conduct of its business (except in connection with
transactions permitted by Section 8.03 and sales of assets permitted by Section
8.02) if the failure to do so could reasonably be expected to have a Material
Adverse Effect;
(c) use reasonable efforts, in the ordinary course of business, to
preserve its business organization and goodwill; and preserve or renew all of
its registered patents, trademarks, trade names and service marks, the non-
preservation of which could reasonably be expected to have a Material Adverse
Effect.
7.05 Maintenance of Property. The Company shall, and shall cause each of
-----------------------
its Material Subsidiaries and each of the Subsidiary Borrowers which is not a
Material Subsidiary to, maintain and preserve all its property which is used or
useful in its business in good working order and condition, ordinary wear and
tear excepted and make all necessary repairs thereto and renewals and
replacements thereof except where the failure to do so could not reasonably be
expected to have a Material Adverse Effect. The Company and each such
Subsidiary shall use the standard of care typical in the industry in the
operation and maintenance of its facilities.
7.06 Insurance. The Borrowers shall, and shall cause each of their
---------
respective Subsidiaries to, maintain with financially sound and reputable
independent insurers not Affiliates of the Borrowers, insurance in such amounts,
with such deductibles, and covering such risks as are customarily carried by
companies engaged in similar businesses and owning similar properties in
localities where such Borrower or such Subsidiary operates, or shall self insure
and shall, upon reasonable request of the Administrative Agent, not more often
than annually, cause to be delivered to the Administrative Agent on behalf of
the Banks a certificate of the type described in Section 5.01(j) hereof.
7.07 Payment of Obligation. The Company shall, and shall cause each of
---------------------
its Material Subsidiaries and each of the Borrower Subsidiaries which is not a
Material Subsidiaries to, pay and discharge as the same shall become due and
payable, all their respective obligations and liabilities, including:
56
<PAGE>
(a) all tax liabilities, assessments and governmental charges or
levies upon it or its properties or assets, unless the same are being contested
in good faith by appropriate proceedings and adequate reserves in accordance
with GAAP are being maintained by such Borrower or such Subsidiary;
(b) all lawful claims which, if unpaid, would by law become a Lien
upon its property; and
(c) all indebtedness, as and when due and payable, but subject to any
subordination provisions contained in any instrument or agreement evidencing
such Indebtedness.
7.08 Compliance with Laws. The Borrowers shall, and shall cause each of
--------------------
their respective Subsidiaries to, comply, in all material respects, with all
Requirements of Law of any Governmental Authority having jurisdiction over it or
its business (including the Federal Fair Labor Standards Act), except such as
may be contested in good faith or as to which a bona fide dispute may exist, if
failure so to do could reasonably be expected to have a Material Adverse Effect.
7.09 Inspection of Property and Books and Records. The Borrowers shall,
--------------------------------------------
and shall cause each of their respective Subsidiaries to, maintain proper books
of record and account, in which full, true and correct entries in conformity
with GAAP consistently applied shall be made of all financial transactions and
matters involving the assets and business of any Borrower or such Subsidiary.
The Borrowers shall, and shall cause each of their respective Subsidiaries to,
permit representatives and independent contractors of the Administrative Agent
or any Bank to visit and inspect any of their respective properties, to examine
their respective corporate, financial and operating records, and make copies
thereof or abstracts therefrom, and to discuss their respective affairs,
finances and accounts with their respective directors, officers, and independent
public accountants, all at such reasonable times during normal business hours
and as often as may be reasonably desired, upon reasonable advance notice to
such Borrower; provided, however, when an Event of Default exists the
-------- -------
Administrative Agent or any Bank may do any of the foregoing at the expense of
the Borrowers at any time during normal business hours and without advance
notice.
7.10 Environmental Laws. The Borrowers shall, and shall cause each of
------------------
their respective Subsidiaries to, conduct its operations and keep and maintain
its property in compliance with all Environmental Laws.
7.11 Use of Proceeds. Each Borrower shall use the proceeds of the Loans
---------------
for (i) working capital and other general corporate purposes; or (ii) the
financing and costs of the Acquisition; or (iii) the refinancing of its (or the
Acquired Company's) existing Debt, in all cases, so long as such use is not in
contravention of any Requirement of Law or of any Loan Document.
7.12 Year 2000. The Borrowers shall, and shall cause each of their
---------
Subsidiaries to, perform all acts within their power as are reasonably necessary
to ensure that: (i) the Company and each of its Subsidiaries and any business
in which it holds a substantial interest, and (ii) all
57
<PAGE>
suppliers and vendors that are material to its or their business become Year
2000 Compliant in a timely manner. Such acts shall include, without limitation,
performing a comprehensive review and assessment of all of the Borrowers' and
their Subsidiaries' systems and adopting a detailed plan, with itemized budget,
for the remediation, monitoring and testing of such systems. The Company will
and will cause each of its Subsidiaries to promptly upon request of the
Administrative Agent provide to the Administrative Agent and the Banks such
certifications or other evidence of compliance with the terms of this Section
7.12 as the Administrative Agent may from time to time reasonably require.
ARTICLE VIII
NEGATIVE COVENANTS
So long as any Bank or the Issuing Bank shall have any Commitment
hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied,
or any Letter of Credit shall remain outstanding, unless the Majority Banks
waive compliance in writing:
8.01 Limitation on Liens. No Borrower shall, nor shall it permit or
-------------------
suffer any of its Subsidiaries to, directly or indirectly, make, create, incur,
assume or suffer to exist any Lien upon or with respect to any part of its
property, whether now owned or hereafter acquired, other than the following
("Permitted Liens"):
- -----------------
(a) any Lien existing on property of any Borrower or its Subsidiaries
on the Closing Date securing Indebtedness outstanding on such date, each such
Lien securing Indebtedness in an amount in excess of $500,000 being set forth on
Schedule 8.01 attached hereto;
- -------------
(b) any Lien created under any Loan Document;
(c) Liens for taxes, fees, assessments or other governmental charges
which are not delinquent or remain payable without penalty, or to the extent
that nonpayment thereof is permitted by Section 7.07, provided that no notice of
lien has been filed or recorded under the Code;
(d) carriers', warehousemen's, mechanics', landlords', materialmen's,
repairmen's or other similar Liens arising in the ordinary course of business
which are not delinquent or remain payable without penalty or which are being
contested in good faith and by appropriate proceedings, which proceedings have
the effect of preventing the forfeiture or sale of the property subject thereto;
(e) Liens (other than any Lien imposed by ERISA) consisting of
pledges or deposits required in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other social security
legislation;
(f) Liens on the property of any Borrower or any of its Subsidiaries
securing (i) the non-delinquent performance of bids, trade contracts (other than
for borrowed money), leases and statutory obligations, (ii) contingent
obligations on surety and appeal bonds, and
58
<PAGE>
(iii) other non-delinquent obligations of a like nature; in each case, incurred
in the ordinary course of business;
(g) Liens consisting of judgment or judicial attachment liens,
provided that the enforcement of such Liens is effectively stayed and all such
liens in the aggregate at any time outstanding for the Borrowers and their
Subsidiaries do not exceed $2,000,000;
(h) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or interfere
with the ordinary conduct of the businesses of any Borrower or any of its
Subsidiaries;
(i) Liens on assets of corporations which become Subsidiaries of any
Borrower after the date of this Agreement, provided, however, that such Liens
-------- -------
existed at the time the respective corporations became Subsidiaries and were not
created in anticipation thereof;
(j) purchase money security interests on any property acquired or
held by any Borrower or its Subsidiaries in the ordinary course of business,
securing Indebtedness incurred or assumed for the purpose of financing all or
any part of the cost of acquiring such property; provided that (i) any such
-------- ----
Lien attaches to such property concurrently with or within 20 days after the
acquisition thereof, (ii) such Lien attaches solely to the property so acquired
in such transaction, (iii) the principal amount of the debt secured thereby does
not exceed 100% of the cost of such property, and (iv) the principal amount of
the Indebtedness secured by any and all such purchase money security interests
shall not at any time exceed, $5,000,000;
(k) Liens securing obligations in respect of capital leases on assets
subject to such leases, provided that such capital leases are otherwise
permitted hereunder;
(l) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of setoff or similar rights and
remedies as to deposit accounts or other funds maintained with a creditor
depository institution; provided that (i) such deposit account is not a
-------- ----
dedicated cash collateral account and is not subject to restrictions against
access by any Borrower in excess of those set forth by regulations promulgated
by the FRB, and (ii) such deposit account is not intended by any Borrower or any
of its Subsidiaries to provide collateral to the depository institution.
8.02 Disposition of Assets. No Borrower shall, nor shall it permit or
---------------------
suffer any of its Subsidiaries to, directly or indirectly, sell, assign, lease,
convey, transfer or otherwise dispose of (whether in one or a series of
transactions) any property (including accounts and notes receivable, with or
without recourse) or enter into any agreement to do any of the foregoing,
except:
(a) dispositions of inventory, or used, worn-out or surplus
equipment, all in the ordinary course of business;
(b) the sale of equipment to the extent that such equipment is
exchanged for credit against the purchase price of similar replacement
equipment, or the proceeds of such sale are reasonably promptly applied to the
purchase price of such replacement equipment;
59
<PAGE>
(c) dispositions of real estate properties which are no longer useful
in or material to the continued operation of such Person's business for fair
market value;
(d) dispositions permitted pursuant to Sections 8.03(b) and 8.03(c);
(e) dispositions among the Company, the Subsidiary Borrowers and
Material Subsidiaries which are not Subsidiary Borrowers and dispositions by
Subsidiaries which are not Subsidiary Borrowers or Material Subsidiaries to the
Company, the Subsidiary Borrowers and Material Subsidiaries;
(f) dispositions by Subsidiaries to other Subsidiaries which are not
Subsidiary Borrowers or Material Subsidiaries for fair market value, which
dispositions do not involve property with a value in excess of $500,000
individually or $5,000,000 in the aggregate over the term of this Agreement;
(g) dispositions not otherwise permitted hereunder which are made for
fair market value; provided, that (i) at the time of any disposition, no Event
--------
of Default shall exist or shall result from such disposition, (ii) the aggregate
sales price from such disposition shall be paid in cash, and (iii) the aggregate
value of all assets so sold by the Borrowers and their Subsidiaries, together,
shall not exceed in any fiscal year $5,000,000; and
(h) dispositions described more particularly on Schedule 8.02.
-------------
8.03 Consolidations and Mergers. No Borrower shall, nor shall it permit
--------------------------
or suffer any of its Subsidiaries to, merge, consolidate with or into, or
convey, transfer, lease or otherwise dispose of (whether in one transaction or
in a series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to or in favor of any Person, except
(a) any Subsidiary may merge with any Borrower, provided that such
Borrower shall be the continuing or surviving corporation, or with any one or
more Subsidiaries, provided that if any transaction shall be between a
Subsidiary and a Wholly-Owned Subsidiary, the Wholly-Owned Subsidiary shall be
the continuing or surviving corporation;
(b) any Subsidiary may sell all or substantially all of its assets
(upon voluntary liquidation or otherwise), to any Borrower or another Wholly-
Owned Subsidiary; and
(c) any non-Domestic Subsidiary may consolidate with, merge into or
dispose of assets with any other non-Domestic Subsidiaries so long as both
before and after giving effect thereto there shall not exist a Default or an
Event of Default.
8.04 Loans and Investments. No Borrower shall, nor shall it permit or
---------------------
suffer any of its Subsidiaries to, purchase or acquire, or make any commitment
therefor, any capital stock, equity interest, or any obligations or other
securities of, or any interest in, any Person, or make or commit to make any
acquisitions, or make or commit to make any advance, loan, extension of credit
or capital contribution to or any other investment in, any Person including any
Affiliate of any Borrower, except for:
(a) investments in cash equivalents and short term marketable
securities;
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(b) extensions of credit in the nature of accounts receivable or
notes receivable arising from the sale or lease of goods or services in the
ordinary course of business;
(c) extensions of credit by any Borrower to any of its Wholly-Owned
Subsidiaries or by any of its Wholly-Owned Subsidiaries to another of its
Wholly-Owned Subsidiaries;
(d) investments incurred in order to consummate acquisitions
otherwise permitted herein, provided that (i) the book value (as to the
-------- ----
purchaser) of any such acquisition, together with such value of all prior
acquisitions undertaken by the Borrowers and their Subsidiaries after the
Closing Date, shall not exceed at the time of such investment 10% of
consolidated Tangible Net Worth as calculated immediately prior to such
acquisition, (ii) such acquisitions are undertaken in accordance with all
applicable Requirements of Law; and (iii) the prior, effective written consent
or approval to such acquisition of the board of directors or equivalent
governing body of the acquiree is obtained;
(e) investments in Joint Ventures permitted pursuant to Section 8.10
existing on the Closing Date;
(f) cash investments in and advances to Joint Ventures permitted
pursuant to Section 8.10 made following the Closing Date in an amount not to
exceed $5,000,000 for any single Joint Venture or $25,000,000 in the aggregate
for all such Joint Ventures;
(g) increased investments in Joint Ventures resulting from the
retention of earnings by such Joint Ventures;
(h) Advances to suppliers, subcontractors, and similar Persons, all
in the ordinary course of business, and not to exceed, in the aggregate,
$5,000,000;
(i) investments described on Schedule 8.04; and
-------------
(j) other investments pursuant to which any Borrower acquires an
interest not to exceed 20% of the equity of such entity; provided that such
investments shall not exceed, in the aggregate, $5,000,000.
8.05 Limitation on Indebtedness. No Borrower shall, nor shall it permit
--------------------------
or suffer any of its Subsidiaries to, create, incur, assume, suffer to exist, or
otherwise become or remain directly or indirectly liable with respect to, any
Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement;
(b) Indebtedness consisting of Contingent Obligations permitted
pursuant to Section 8.09;
(c) Indebtedness including, without duplication, commitments to
extend or maintain advances or lines of credit existing on the Closing Date,
each such item of Indebtedness in excess of $250,000 being set forth in Schedule
--------
8.05;
- ----
61
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(d) Indebtedness secured by Liens permitted pursuant to subsection
8.01 (i) and (j), which Indebtedness shall not in the aggregate exceed
$5,000,000 at any time outstanding; and
(e) other Indebtedness incurred in the ordinary course of business in
an aggregate amount not to exceed $5,000,000.
8.06 Transactions with Affiliates. No Borrower shall, nor shall it permit
----------------------------
or suffer any of its Subsidiaries to, enter into any transaction with any
Affiliate of any Borrower, except upon fair and reasonable terms no less
favorable to any Borrower or such Subsidiary of any Borrower than would be
obtained in a comparable arm's-length transaction with a Person not an Affiliate
of any Borrower or such Subsidiary of any Borrower.
8.07 Use of Proceeds. No Borrower shall, nor shall it permit or suffer
---------------
any of its Subsidiaries to, use any portion of the Loan proceeds, directly or
indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or otherwise
refinance indebtedness of any Borrower or others incurred to purchase or carry
Margin Stock, (iii) to extend credit for the purpose of purchasing or carrying
any Margin Stock, or (iv) to acquire any security in any transaction that is
subject to Section 13 or 14 of the Exchange Act.
8.08 Use of Proceeds Ineligible Securities. No Borrower shall, nor shall
--------------------------------------
it permit or suffer any of its Subsidiaries to, directly or indirectly, use any
portion of the Loan proceeds (i) knowingly to purchase Ineligible Securities
from a Section 20 Subsidiary during any period in which such Section 20
Subsidiary makes a market in such Ineligible Securities, (ii) knowingly to
purchase during the underwriting or placement period Ineligible Securities being
underwritten or privately placed by a Section 20 Subsidiary, or (iii) to make
payments of principal or interest on Ineligible Securities underwritten or
privately placed by a Section 20 Subsidiary and issued by or for the benefit of
any Borrower or any Affiliate of any Borrower. As used in this Section,
"Section 20 Subsidiary" means the Subsidiary of the bank holding company
- ----------------------
controlling any Bank, which Subsidiary has been granted authority by the Federal
Reserve Board to underwrite and deal in certain Ineligible Securities; and
"Ineligible Securities" means securities which may not be underwritten or dealt
- ----------------------
in by member banks of the Federal Reserve System under Section 16 of the Banking
Act of 1933 (as U.S.C. (S) 24, Seventh), as amended.
8.09 Contingent Obligation. No Borrower shall, nor shall it permit or
---------------------
suffer any of its Subsidiaries to, create, incur, assume or suffer to exist any
Contingent Obligations except:
(a) endorsements for collection or deposit in the ordinary course of
business;
(b) Swap Contracts entered into in the ordinary course of business;
(c) Contingent Obligations of any Borrower and its Subsidiaries
existing as of the Closing Date not exceeding $3,000,000 in the aggregate, each
such Contingent Obligation in excess of $500,000 being set forth in Schedule
--------
8.09;
- ----
(d) Contingent Obligations with respect to performance bonds or
performance letters of credit (or bank guarantees constituting the economic
equivalent of performance letters of credit) given with respect to contracts
entered into in the ordinary course of business; and
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<PAGE>
(e) other Contingent Obligations incurred in the ordinary course of
business not in excess of $500,000 individually or $5,000,000 in the aggregate
at any time outstanding.
8.10 Joint Ventures. No Borrower shall, nor shall it permit or suffer any
--------------
of its Subsidiaries to, enter into any Joint Venture other than in the ordinary
course of business as conducted on the Closing Date.
8.11 Lease Obligation. No Borrower shall, nor shall it permit or suffer
----------------
any of its Subsidiaries to, create or suffer to exist any obligations for the
payment of rent for any property under lease or agreement to lease, except for:
(a) leases of any Borrower and of its Subsidiaries in existence on
the Closing Date and any renewal, extension or refinancing thereof;
(b) operating leases entered into by any Borrower or any of its
Subsidiaries after the Closing Date in the ordinary course of business;
(c) capital leases other than those permitted under clause (a) of
this Section, entered into by any Borrower or any of its Subsidiaries after the
Closing Date to finance the acquisition of equipment; provided that the
--------
aggregate annual rental payments for all such capital leases shall not exceed in
any fiscal year $5,000,000.
8.12 Restricted Payments. No Borrower shall, nor shall it permit or
-------------------
suffer any of its Subsidiaries to, declare or make any dividend payment or other
distribution of assets, properties, cash, rights, obligations or securities on
account of any shares of any class of its capital stock, or purchase, redeem or
otherwise acquire for value any shares of its capital stock or any warrants,
rights or options to acquire such shares, now or hereafter outstanding; except
that the Company and any of its consolidated Subsidiaries may, so long as
immediately after giving effect to such proposed action no Default or Event of
Default would exist:
(a) declare and make dividend payments or other distributions payable
solely in its common stock;
(b) purchase, redeem or otherwise acquire shares of its common stock
or warrants or options to acquire any such shares with the proceeds received
from the substantially concurrent issue of new shares of its common stock;
(c) declare or pay cash dividends to its stockholders and purchase,
redeem or otherwise acquire shares of its capital stock or warrants, rights or
options to acquire any such shares for cash solely out of net income of any
Borrower and its Subsidiaries arising after the Closing Date and computed on a
cumulative consolidated basis; and
(d) declare or pay dividends and make redemptions as described on
Schedule 8.12.
- -------------
8.13 Change in Business. No Borrower shall, nor shall it permit or suffer
------------------
any of its Subsidiaries to, engage in any material line of business
substantially different from those lines of business carried on by such Borrower
and its Subsidiaries on the date hereof.
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<PAGE>
8.14 Accounting Changes. No Borrower shall, nor shall it permit or suffer
------------------
any of its Subsidiaries to, make any significant change in accounting treatment
or reporting practices, except as required by GAAP, or change the fiscal year of
any Borrower or of any of its Subsidiaries.
8.15 Fixed Charge Coverage Ratio. The Company shall maintain at all times
---------------------------
a minimum ratio of EBITDA minus capital expenditures to Fixed Charges of 1.25 to
1.00. The foregoing ratio shall be calculated on the basis of the immediately
preceding four fiscal quarters, including the most recently concluded fiscal
quarter. For purposes of the calculation of the foregoing ratio, EBITDA,
capital expenditures and Fixed Charges of the Acquired Company for the relevant
periods shall be included notwithstanding that such periods occurred prior to
the consummation of the Acquisition.
8.16 Tangible Net Worth. The Company shall maintain at all times
------------------
consolidated Tangible Net Worth of not less than the sum of (i) 85% of Tangible
Net Worth as determined on the Closing Date after giving effect to the
Acquisition and taking into consideration the obligations of the Company
incurred under the Acquisition Agreement, plus (ii) 50% of Consolidated Net
----
Income (without deduction for losses) and plus (iii) 100% of the proceeds of any
----
equity issuances by the Company following the Closing Date (other than issuances
in connection with the exercise of options on a non-cash, share for share basis)
and plus (iv) with respect to issuances of equity securities in connection with
----
the exercise of options on a non-cash, share for share basis, 100% of the net
proceeds of each such issuance.
8.17 Leverage Ratio. The Company shall maintain at all times a ratio of
--------------
Funded Debt (plus the aggregate face amount of all of the Financial Letters of
----
Credit outstanding for which the Company or any of its consolidated Subsidiaries
is obligated) to EBITDA of not greater than 2.50 to 1.00. The foregoing ratio
shall be calculated on the basis of the immediately preceding four fiscal
quarters, including the most recently concluded fiscal quarter. For purposes of
the calculation of the foregoing ratio, EBITDA of the Acquired Company for the
relevant periods shall be included notwithstanding that such periods occurred
prior to the consummation of the Acquisition.
8.18 Modification of Acquisition Agreement. The Company will not agree to
-------------------------------------
or enter into any modification of the Acquisition Agreement without the prior
written consent of the Administrative Agent.
ARTICLE IX
EVENTS OF DEFAULT
9.01 Event of Default. Any of the following shall constitute an "Event of
----------------
Default":
(a) Non-Payment. Any Borrower fails to pay, (i) when and as
-----------
required to be paid herein, any amount of principal of any Loan or any amount of
interest on any Bid Loan, or (ii) within 3 days after the same becomes due, any
interest, fee or any other amount payable hereunder or under any other Loan
Document; or
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<PAGE>
(b) Representation or Warranty. Any representation or warranty by
--------------------------
any Borrower or any of its Subsidiaries made or deemed made herein, in any other
Loan Document, or which is contained in any certificate, document or financial
or other statement by any Borrower, any of its Subsidiaries, or any Responsible
Officer, furnished at any time under this Agreement, or in or under any other
Loan Document, is incorrect in any material respect on or as of the date made or
deemed made; or
(c) Specific Defaults. Any Borrower fails to perform or observe any
-----------------
term, covenant or agreement contained in any of Sections 7.01, 7.02. 7.03 or
7.09 or in Article VIII; or
(d) Other Defaults. Any Borrower or any Material Subsidiary fails
--------------
to perform or observe any other term or covenant contained in this Agreement or
any other Loan Document to which it is party, and such default shall continue
unremedied for a period of 20 days after the earlier of (i) the date upon which
a Responsible Officer knew or reasonably should have known of such failure or
(ii) the date upon which written notice thereof is given to the Company by the
Administrative Agent or any Bank; or
(e) Cross-Default. Any Borrower or any of its Subsidiaries (i)
-------------
fails to make any payment in respect of any Indebtedness or Contingent
Obligation having an aggregate principal amount (including undrawn committed or
available amounts and including amounts owing to all creditors under any
combined or syndicated credit arrangement) of more than the Equivalent Amount of
$5,000,000 when due (whether by scheduled maturity, required prepayment,
acceleration, demand, or otherwise) and such failure continues after the
applicable grace or notice period, if any, specified in the relevant document on
the date of such failure; or (ii) fails to perform or observe any other
condition or covenant, or any other event shall occur or condition exist, under
any agreement or instrument relating to any such Indebtedness or Contingent
Obligation, and such failure continues after the applicable grace or notice
period, if any, specified in the relevant document on the date of such failure
if the effect of such failure, event or condition is to cause, or to permit the
holder or holders of such Indebtedness or beneficiary or beneficiaries of such
Indebtedness (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause such Indebtedness to be declared to be
due and payable prior to its stated maturity, or such Contingent Obligation to
become payable or cash collateral in respect thereof to be demanded; or
(f) Insolvency; Voluntary Proceedings. The Company, any of its
---------------------------------
Material Subsidiaries or any of the Borrower Subsidiaries which are not Material
Subsidiaries (i) ceases or falls to be solvent, or generally fails to pay, or
admits in writing its inability to pay, its debts as they become due, subject to
applicable grace periods, if any, whether at stated maturity or otherwise; (ii)
voluntarily ceases to conduct its business in the ordinary course; (iii)
commences any Insolvency Proceeding with respect to itself; or (iv) takes any
action to effectuate or authorize any of the foregoing; or
(g) Involuntary Proceedings. (i) Any involuntary Insolvency
-----------------------
Proceeding is commenced or filed against the Company, any of its Material
Subsidiaries or any of the Borrower Subsidiaries which are not Material
Subsidiaries, or any writ, judgment, warrant of attachment, execution or similar
process, is issued or levied against a substantial part of the Company's, any of
its Material Subsidiaries' or any of the Borrower Subsidiaries' which are not
65
<PAGE>
Material Subsidiaries properties, and any such proceeding or petition shall not
be dismissed, or such writ, judgment, warrant of attachment, execution or
similar process shall not be released, vacated or fully bonded within 60 days
after commencement, filing or levy; (ii) the Company, any of its Material
Subsidiaries or any of the Borrower Subsidiaries which are not Material
Subsidiaries admits the material allegations of a petition against it in any
Insolvency Proceeding, or an order for relief (or similar order under non-U.S.
law) is ordered in any Insolvency Proceeding; or (iii) the Company, any of its
Material Subsidiaries or any of the Borrower Subsidiaries which are not Material
Subsidiaries acquiesces in the appointment of a receiver, trustee, custodian,
conservator, liquidator, mortgagee in possession (or agent therefor), or other
similar Person for itself or a substantial portion of its property or business;
or
(h) ERISA. (i) An ERISA Event occurs with respect to a Pension Plan
-----
which has resulted or could reasonably be expected to result in liability of any
Borrower under Title IV of ERISA to the Pension Plan or the PBGC in an aggregate
amount in excess of $5,000,000; or (ii) the commencement or increase of
contributions to, or the adoption of or the amendment of a Pension Plan by any
Borrower which has resulted or could reasonably be expected to result in an
increase in Unfunded Pension Liability among all Pension Plans in an aggregate
amount in excess of $5,000,000 (provided, however, that an ERISA Event or
increase in Unfunded Pension Liability arising solely and directly under those
Pension Plans described at Items 1, 2 and 3 on Schedule 6.07 shall not
-------------
constitute an Event of Default under this subsection (h)); or
(i) Monetary Judgments. One or more non-interlocutory judgments,
------------------
non-interlocutory orders, decrees or arbitration awards is entered against any
Borrower or any of its Subsidiaries involving in the aggregate a liability (to
the extent not covered by independent third-party insurance as to which the
insurer does not dispute coverage) as to any single or related series of
transactions, incidents or conditions, of the Dollar Equivalent of $5,000,000 or
more, and the same shall remain unsatisfied, unvacated and unstayed pending
appeal for a period of 30 days after the entry thereof; or
(j) Non-Monetary Judgments. Any non-monetary judgment, order or
----------------------
decree is entered against any Borrower or any of its Subsidiaries which does or
would reasonably be expected to have a Material Adverse Effect, and there shall
be any period of 10 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be in
effect; or
(k) Change of Control. There occurs any Change of Control; or
-----------------
(l) Adverse Change. There occurs a Material Adverse Effect; or
--------------
(m) Guaranty Recission. Any Borrower or any Material Subsidiary
------------------
shall attempt to revoke or rescind its Guaranty, whether with respect to future
transactions or otherwise.
9.02 Remedies. If any Event of Default occurs, the Administrative Agent
--------
shall, at the request of, or may, with the consent of, the Majority Banks,
(a) declare the commitment of each Bank to make Committed Loans and
any obligation of the Issuing Bank to Issue Letters of Credit to be terminated,
whereupon such commitments and obligations shall be terminated;
66
<PAGE>
(b) declare an amount equal to the maximum aggregate amount that is
or at any time thereafter may become available for drawing under any outstanding
Letter of Credit (whether or not any beneficiary shall have presented, or shall
be entitled at such time to present, the drafts or other documents required to
draw under such Letters of Credit) to be immediately due and payable, and
declare the unpaid principal amount of all outstanding Loans, all interest
accrued and unpaid thereon, and all other amounts owing or payable hereunder or
under any other Loan Document to be immediately due and payable, without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by each Borrower; and
(c) exercise on behalf of itself and the Banks all rights and
remedies available to it and the Banks under the Loan Documents or applicable
law;
provided, however, that upon the occurrence of any event specified in subsection
- -------- -------
(f) or (g) of Section 9.01 (in the case of clause (i) of subsection (g) upon the
expiration of the 60-day period mentioned therein), the obligation of each Bank
to make Loans and any obligation of the Issuing Bank to Issue Letters of Credit
shall automatically terminate and the unpaid principal amount of all outstanding
Loans and all interest and other amounts as aforesaid shall automatically become
due and payable without further act of the Administrative Agent, the Issuing
Bank or any Bank.
9.03 Rights Not Exclusive. The rights provided for in this Agreement and
--------------------
the other Loan Documents are cumulative and are not exclusive of any other
rights, powers, privileges or remedies provided by law or in equity, or under
any other instrument, document or agreement now existing or hereafter arising.
ARTICLE X
THE AGENT
10.01 Appointment and Authorization.
-----------------------------
(a) Each Bank hereby irrevocably appoints, designates and authorizes
the Administrative Agent to take such action on its behalf under the provisions
of this Agreement and each other Loan Document and to exercise such powers and
perform such duties as are expressly delegated to it by the terms of this
Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
contained elsewhere in this Agreement or in any other Loan Document, the
Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth herein, nor shall the Administrative Agent have or be deemed
to have any fiduciary relationship with any Bank, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or any other Loan Document or otherwise exist against the
Administrative Agent.
(b) The Issuing Bank shall act on behalf of the Banks with respect to
any Letters of Credit Issued by it and the documents associated therewith until
such time and except for so long as the Administrative Agent may agree at the
request of the Majority Banks to act for
67
<PAGE>
such Issuing Bank with respect thereto; provided, however, that the Issuing Bank
-------- -------
shall have all of the benefits and immunities (i) provided to the Administrative
Agent in this Article 10 with respect to any acts taken or omissions suffered by
the Issuing Bank in connection with Letters of Credit Issued by it or proposed
to be Issued by it and the application and agreements for letters of credit
pertaining to the Letters of Credit as fully as if the term "Administrative
Agent", as used in this Section 10, included the Issuing Bank with respect to
such acts or omissions, and (ii) as additionally provided in this Agreement with
respect to the Issuing Bank.
10.02 Delegation of Duties. The Administrative Agent may execute any of
--------------------
its duties under this Agreement or any other Loan Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent
shall not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects with reasonable care.
10.03 Liability of Administrative Agent. None of the Agent-Related
---------------------------------
Persons shall (i) be liable for any action taken or omitted to be taken by any
of them under or in connection with this Agreement or any other Loan Document or
the transactions contemplated hereby (except for its own gross negligence or
willful misconduct), or (ii) be responsible in any manner to any of the Banks
for any recital, statement, representation or warranty made by any Borrower or
any Subsidiary or Affiliate of any Borrower, or any officer thereof, contained
in this Agreement or in any other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Administrative Agent under or in connection with, this Agreement or any other
Loan Document, or the validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Loan Document, or for any failure of
any Borrower or any other party to any Loan Document to perform its obligations
hereunder or thereunder. No Agent-Related Person shall be under any obligation
to any Bank to ascertain or to inquire as to the observance or performance of
any of the agreements contained in, or conditions of, this Agreement or any
other Loan Document, or to inspect the properties, books or records of any
Borrower or any of the Borrowers' Subsidiaries or Affiliates.
10.04 Reliance by Administrative Agent.
--------------------------------
(a) The Administrative Agent shall be entitled to rely, and shall be
fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to the
Borrowers), independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice or concurrence of the
Majority Banks as it deems appropriate and, if it so requests, it shall first be
indemnified to its satisfaction by the Banks against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action. The Administrative Agent shall in all cases be fully protected
in acting, or in refraining from acting, under this Agreement or any request and
any action taken or failure to act pursuant thereto shall be binding upon all of
the Banks.
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<PAGE>
(b) For purposes of determining compliance with the conditions
specified in Section 5.01, each Bank that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent by the Administrative Agent to such Bank
for consent, approval, acceptance or satisfaction, or required thereunder to be
consented to or approved by or acceptable or satisfactory to the Bank.
10.05 Notice of Default. The Administrative Agent shall not be deemed to
-----------------
have knowledge or notice of the occurrence of any Default or Event of Default,
except with respect to defaults in the payment of principal, interest and fees
required to be paid to the Administrative Agent for the account of the Banks,
unless the Administrative Agent shall have received written notice from a Bank
or any Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". The
Administrative Agent will notify the Banks of its receipt of any such notice.
The Administrative Agent shall take such action with respect to such Default or
Event of Default as may be requested by the Majority Banks in accordance with
Article IX; provided, however, that unless and until the Administrative Agent
-------- -------
has received any such request, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable or in the best
interest of the Banks.
10.06 Credit Decision. Each Bank acknowledges that none of the Agent-
---------------
Related Persons has made any representation or warranty to it, and that no act
by the Administrative Agent hereinafter taken, including any review of the
affairs of any Borrower and its Subsidiaries, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Bank. Each Bank
represents to the Administrative Agent that it has, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and
other condition and creditworthiness of the Borrowers and their Subsidiaries,
and all applicable bank regulatory laws relating to the transactions
contemplated hereby, and made its own decision to enter into this Agreement and
to extend credit to any Borrower hereunder. Each Bank also represents that it
will, independently and without reliance upon any Agent-Related Person and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to make
such investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of any Borrower. Except for notices, reports and other
documents expressly herein required to be furnished to the Banks by the
Administrative Agent, the Administrative Agent shall not have any duty or
responsibility to provide any Bank with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of any Borrower which may come into the possession
of any of the Agent-Related Persons.
10.07 Indemnification. Whether or not the transactions contemplated
---------------
hereby are consummated, the Banks shall indemnify upon demand the Agent-Related
Persons (to the extent not reimbursed by or on behalf of the Borrowers and
without limiting the obligation of the Borrowers to do so), pro rata, from and
against any and all Indemnified Liabilities; provided however, that no Bank
-------- -------
shall be liable for the payment to the Agent-Related Persons of any portion of
such Indemnified Liabilities resulting solely from such Person's gross
negligence or
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willful misconduct. Without limitation of the foregoing, each Bank shall
reimburse the Administrative Agent upon demand for its ratable share of any
reasonable costs or out-of-pocket expenses (including Attorney Costs) incurred
by the Administrative Agent in connection with the preparation, execution,
delivery, administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement, any other Loan
Document, or any document contemplated by or referred to herein, to the extent
that the Administrative Agent is not reimbursed for such expenses by or on
behalf of the Borrowers. The undertaking in this Section shall survive the
payment of all Obligations hereunder and the resignation or replacement of the
Administrative Agent.
10.08 Administrative Agent in Individual Capacity. BofA and its
-------------------------------------------
Affiliates may make loans to, issue letters of credit for the account of, accept
deposits from, acquire equity interests in and generally engage in any kind of
banking, trust, financial advisory, underwriting or other business with any
Borrower and its Subsidiaries and Affiliates as though BofA were not the
Administrative Agent hereunder and without notice to or consent of the Banks.
The Banks acknowledge that, pursuant to such activities, BofA or its Affiliates
may receive information regarding the Borrowers or their Affiliates (including
information that may be subject to confidentiality obligations in favor of the
Borrowers or such Affiliate) and acknowledge that the Administrative Agent shall
be under no obligation to provide such information to them. With respect to its
Loans, BofA shall have the same rights and powers under this Agreement as any
other Bank and may exercise the same as though it were not the Administrative
Agent, and the terms "Bank" and "Banks" include BofA in its individual capacity.
10.09 Successor Administrative Agent. The Administrative Agent may resign
------------------------------
as Administrative Agent upon 30 days' notice to the Banks. If the
Administrative Agent resigns under this Agreement, the Majority Banks shall
appoint from among the Banks a successor agent for the Banks which successor
agent shall be approved by the Borrowers. If no successor agent is appointed
prior to the effective date of the resignation of the Administrative Agent, the
Administrative Agent may appoint, after consulting with the Banks and the
Borrowers, a successor agent from among the Banks. Upon the acceptance of its
appointment as successor agent hereunder, such successor agent shall succeed to
all the rights, powers and duties of the retiring Administrative Agent and the
term "Administrative Agent" shall mean such successor agent and the retiring
Administrative Agent's appointment, powers and duties as Administrative Agent
shall be terminated. After any retiring Administrative Agent's resignation
hereunder as Administrative Agent, the provisions of this Article X and Sections
11.04 and 11.05 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Administrative Agent under this Agreement. If no
successor agent has accepted appointment as Administrative Agent by the date
which is 30 days following a retiring Administrative Agent's notice of
resignation, the retiring Administrative Agent's resignation shall nevertheless
thereupon become effective and the Banks shall perform all of the duties of the
Administrative Agent hereunder until such time, if any, as the Majority Banks
appoint a successor agent as provided for above. Notwithstanding the foregoing,
however, BofA may not be removed as the Administrative Agent at the request of
the Majority Banks unless BofA shall also simultaneously be replaced as "Issuing
Bank" hereunder pursuant to documentation in form and substance reasonably
satisfactory to BofA.
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10.10 Withholding Tax.
---------------
(a) If any Bank is a "foreign corporation, partnership or trust"
within the meaning of the Code and such Bank claims exemption from, or a
reduction of, U.S. withholding tax under Sections 1441 or 1442 of the Code, such
Bank agrees with and in favor of the Administrative Agent, to deliver to the
Administrative Agent:
(i) if such Bank claims an exemption from, or a reduction of,
withholding tax under a United States tax treaty, properly completed IRS
Forms 1001 and W8 before the payment of any interest in the first calendar
year and before the payment of any interest in each third succeeding
calendar year during which interest may be paid under this Agreement;
(ii) if such Bank claims that interest paid under this
Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such Bank,
two properly completed and executed copies of IRS Form 4224 before the
payment of any interest is due in the first taxable year of such Bank and
in each succeeding taxable year of such Bank during which interest may be
paid under this Agreement, and IRS Form W9; and
(iii) such other form or forms as may be required under the Code
or other laws of the United States as a condition to exemption from, or
reduction of, United States withholding tax.
Such Bank agrees to promptly notify the Administrative Agent of any change
in circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Bank claims exemption from, or reduction of, withholding
tax under a United States tax treaty by providing IRS Form 1001 and such Bank
sells, assigns, grants a participation in, or otherwise transfers all or part of
the Obligations of any Borrower to such Bank, such Bank agrees to notify the
Administrative Agent of the percentage amount in which it is no longer the
beneficial owner of Obligations of any Borrower to such Bank. To the extent of
such percentage amount, the Administrative Agent will treat such Bank's IRS Form
1001 as no longer valid.
(c) If any Bank claiming exemption from United States withholding tax
by filing IRS Form 4224 with the Administrative Agent sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations of any
Borrower to such Bank, such Bank agrees to undertake sole responsibility for
complying with the withholding tax requirements imposed by Sections 1441 and
1442 of the Code.
(d) If any Bank is entitled to a reduction in the applicable
withholding tax, the Administrative Agent may withhold from any interest payment
to such Bank an amount equivalent to the applicable withholding tax after taking
into account such reduction. If the forms or other documentation required by
subsection (a) of this Section are not delivered to the Administrative Agent,
then the Administrative Agent may withhold from any interest payment to such
Bank not providing such forms or other documentation an amount equivalent to the
applicable withholding tax.
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<PAGE>
(e) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that the Administrative Agent did
not properly withhold tax from amounts paid to or for the account of any Bank
(because the appropriate form was not delivered, was not properly executed, or
because such Bank failed to notify the Administrative Agent of a change in
circumstances which rendered the exemption from, or reduction of, withholding
tax ineffective, or for any other reason) such Bank shall indemnify the
Administrative Agent fully for all amounts paid, directly or indirectly, by the
Administrative Agent as tax or otherwise, including penalties and interest, and
including any taxes imposed by any jurisdiction on the amounts payable to the
Administrative Agent under this Section, together with all costs and expenses
(including Attorney Costs). The obligation of the Banks under this subsection
shall survive the payment of all Obligations and the resignation or replacement
of the Administrative Agent.
ARTICLE XI
MISCELLANEOUS
11.01 Amendment and Waivers. No amendment or waiver of any provision of
---------------------
this Agreement or any other Loan Document, and no consent with respect to any
departure by any Borrower or any applicable Subsidiary therefrom, shall be
effective unless the same shall be in writing and signed by the Majority Banks
(or by the Administrative Agent at the written request of the Majority Banks)
and the Borrowers and acknowledged by the Administrative Agent, and then any
such waiver and consent shall be effective only in the specific instance and for
the specific purpose for which given; provided, however, that no such waiver,
-------- -------
amendment, or consent shall, unless in writing and signed by all the Banks and
the Borrowers and acknowledged by the Administrative Agent, do any of the
following:
(a) increase or extend the Commitment of any Bank (or reinstate any
Commitment terminated pursuant to subsection 9.02(a));
(b) postpone or delay any date fixed by this Agreement or any other
Loan Document for any payment of principal, interest, fees or other amounts due
to the Banks (or any of them) hereunder or under any other Loan Document;
(c) reduce the principal of, or the rate of interest specified herein
on any Loan, or (subject to clause (ii) below) any fees or other amounts payable
hereunder or under any other Loan Document;
(d) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Loans which is required for the Banks or any of
them to take any action hereunder;
(e) release all or substantially all of any Person executing a
Guaranty pursuant to this Agreement; or
(f) amend this Section or any provision herein providing for consent
or other action by all Banks;
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and, provided further, that (i) no amendment, waiver or consent shall, unless in
-------- -------
writing and signed by the Issuing Bank in addition to the Majority Banks or all
the Banks, as the case may be, affect the rights or duties of the Issuing Bank
under this Agreement or any L/C-Related Document relating to any Letter of
Credit Issued or to be Issued by it, (ii) no amendment, waiver or consent shall,
unless in writing and signed by the Administrative Agent in addition to the
Majority Banks or all the Banks, as the case may be, affect the rights or duties
of the Administrative Agent under this Agreement or any other Loan Document, and
(iii) the Fee Letters may be amended, or rights or privileges thereunder waived,
in a writing executed by the parties thereto.
11.02 Notices.
-------
(a) All notices, requests and other communications shall be in
writing (including, unless the context expressly otherwise provides, by
facsimile transmission, provided that any matter transmitted by any Borrower by
facsimile (i) shall be immediately confirmed by a telephone call to the
recipient at the number specified on Schedule 11.02, and (ii) shall be followed
--------------
promptly by delivery of a hard copy original thereof) and mailed, faxed or
delivered, to the address or facsimile number specified for notices on Schedule
--------
11.02; or, as directed to the Company or the Administrative Agent, to such other
- -----
address as shall be designated by such party in a written notice to the other
parties, and as directed to any other party, at such other address as shall be
designated by such party in a written notice to the Borrowers and the
Administrative Agent.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the fourth Business Day after the date
deposited into the U.S. mail, or if delivered, upon delivery; except that
notices pursuant to Article II, III or XI shall not be effective until actually
received by the Administrative Agent, and notices pursuant to Article III to the
Issuing Bank shall not be effective until actually received by the Issuing Bank
at the address specified for the "Issuing Bank" on Schedule 11.02. A copy of
--------------
any notice sent to any Borrower Subsidiary or any Material Subsidiary shall be
concurrently sent to the Company; provided, that any notice sent to the Company
shall automatically be deemed given to all Borrowers and all Material
Subsidiaries.
(c) Any agreement of the Administrative Agent and the Banks herein to
receive certain notices by telephone or facsimile is solely for the convenience
and at the request of the Borrowers. The Administrative Agent and the Banks
shall be entitled to rely on the authority of any Person purporting to be a
Person authorized by the Borrowers to give such notice and the Administrative
Agent and the Banks shall not have any liability to any Borrower or other Person
on account of any action taken or not taken by the Administrative Agent or the
Banks in reliance upon such telephonic or facsimile notice. The obligation of
each Borrower to repay the Loans and L/C Obligations shall not be affected in
any way or to any extent by any failure by the Administrative Agent and the
Banks to receive written confirmation of any telephonic or facsimile notice or
the receipt by the Administrative Agent and the Banks of a confirmation which is
at variance with the terms understood by the Administrative Agent and the Banks
to be contained in the telephonic or facsimile notice.
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11.03 No Waiver; Cumulative Remedies. No failure to exercise and no delay
------------------------------
in exercising, on the part of the Administrative Agent or any Bank, any right,
remedy, power or privilege hereunder, shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege.
11.04 Costs and Expenses. The Borrowers shall:
------------------
(a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse BofA (including in its capacity as Administrative
Agent) and the Lead Arranger within five Business Days after demand (subject to
subsection 5.01(f)) for all costs and expenses incurred by BofA (including in
its capacity as Administrative Agent and Issuing Bank) and the Lead Arranger in
connection with the development, preparation, delivery, administration and
execution of, and any amendment, supplement, waiver or modification to (in each
case, whether or not consummated), this Agreement, any Loan Document and any
other documents prepared in connection herewith or therewith, and the
consummation of the transactions contemplated hereby and thereby, including
reasonable Attorney Costs incurred by BofA (including in its capacity as
Administrative Agent and the Issuing Bank) with respect thereto; and
(b) pay or reimburse the Administrative Agent and each Bank within
five Business Days after demand (subject to subsection 4.01(f)) for all costs
and expenses (including Attorney Costs) incurred by them in connection with the
enforcement, attempted enforcement, or preservation of any rights or remedies
under this Agreement or any other Loan Document during the existence of an Event
of Default or after acceleration of the Loans (including in connection with any
"workout" or restructuring regarding the Loans, and including in any Insolvency
Proceeding or appellate proceeding).
11.05 Indemnity. Whether or not the transactions contemplated hereby are
---------
consummated, the Borrowers shall indemnify and hold the Agent-Related Persons,
and each Bank and each of its respective officers, directors, employees,
counsel, agents and attorneys-in-fact (each, an "Indemnified Person") harmless
------------------
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, charges, expenses and disbursements
(including Attorney Costs) of any kind or nature whatsoever which may at any
time (including at any time following repayment of the Loans, the termination of
the Letters of Credit and the termination, resignation or replacement of the
Administrative Agent or replacement of any Bank) be imposed on, incurred by or
asserted against any such Person in any way relating to or arising out of this
Agreement or any document contemplated by or referred to herein, or the
transactions contemplated hereby, or any action taken or omitted by any such
Person under or in connection with any of the foregoing, including with respect
to any investigation, litigation or proceeding (including any Insolvency
Proceeding or appellate proceeding) related to or arising out of this Agreement
or the Loans or the Letters of Credit or the use of the proceeds thereof or
related to any Offshore Currency transactions entered into in connection
herewith, whether or not any Indemnified Person is a party thereto (all the
foregoing, collectively, the "Indemnified Liabilities"); provided, that the
----------------------- --------
Borrowers shall have no obligation hereunder to any Indemnified Person with
respect to Indemnified Liabilities resulting solely from
74
<PAGE>
the gross negligence or willful misconduct of such Indemnified Person. The
agreements in this Section shall survive payment of all other Obligations.
11.06 Payments Set Aside. To the extent that any Borrower makes a payment
------------------
to the Administrative Agent or the Banks, or the Administrative Agent or the
Banks exercise their right of setoff, and such payment or the proceeds of such
setoff or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required (including pursuant to any
settlement entered into by the Administrative Agent or such Bank in its
discretion) to be repaid to a trustee, receiver or any other party, in
connection with any Insolvency Proceeding or otherwise, then (a) to the extent
of such recovery the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such setoff had not occurred, and (b) each Bank
severally agrees to pay to the Administrative Agent upon demand its pro rata or
other applicable share of any amount so recovered from or repaid by the
Administrative Agent.
11.07 Successors and Assigns. The provisions of this Agreement shall be
----------------------
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that no Borrower may assign or transfer any of
its rights or obligations under this Agreement without the prior written consent
of the Administrative Agent and each Bank.
11.08 Assignments, Participations, etc
--------------------------------
(a) Any Bank may, with the written consent of the Company (at all
times other than during the existence of an Event of Default) and the
Administrative Agent, which consents shall not be unreasonably withheld, at any
time assign and delegate to one or more Eligible Assignees (each an "Assignee")
--------
all, or any ratable part of all, of the Loans, the Commitment, the L/C
Obligations and the other rights and obligations of such Bank under the Loan
Documents, in a minimum amount of $5,000,000 or, if less, the entirety of such
Bank's Loans, Commitment, L/C Obligations and other rights and obligations of
such Bank; provided, however, that the Borrowers and the Administrative Agent
-------- -------
may continue to deal solely and directly with such Bank in connection with the
interest so assigned to an Assignee until (i) written notice of such assignment,
together with payment instructions, addresses and related information with
respect to the Assignee, shall have been given to the Company and the
Administrative Agent by such Bank and the Assignee; (ii) such Bank and its
Assignee shall have delivered to the Company and the Administrative Agent an
Assignment and Acceptance substantially in the form of Exhibit E ("Assignment
--------- ----------
and Acceptance") and (iii) the assignor Bank or Assignee has paid to the
- --------------
Administrative Agent a processing fee in the amount of $3,500.
(b) From and after the date that the Administrative Agent notifies
the assignor Bank that it has received (and provided its consent with respect
to) an executed Assignment and Acceptance and payment of the above-referenced
processing fee, (i) the Assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, shall have the rights and obligations of a
Bank under the Loan Documents, and (ii) the assignor Bank shall, to the extent
that rights and obligations hereunder and under the other Loan Documents have
been assigned by it pursuant to such Assignment and Acceptance, relinquish its
rights and be released from its obligations under the Loan Documents.
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<PAGE>
(c) Within five Business Days after its receipt of notice by the
Administrative Agent that it has received an executed Assignment and Acceptance
and payment of the processing fee, (and provided that any consents to such
assignment required by Section 11.08(a) have been obtained), the Borrowers shall
execute and deliver to the Administrative Agent, any new Note evidencing such
Assignee's assigned Loans and Commitment and, if the assignor Bank has retained
a portion of its Loans and its Commitment, a replacement Note in the principal
amount of the Loans retained by the assignor Bank (such Notes to be in exchange
for, but not in payment of, the Note held by such Bank). Immediately upon each
Assignee's making its processing fee payment under the Assignment and
Acceptance, this Agreement shall be deemed to be amended to the extent, but only
to the extent, necessary to reflect the addition of the Assignee and the
resulting adjustment of the Commitments arising therefrom. The Commitment
allocated to each Assignee shall reduce such Commitments of the assigning Bank
pro tanto.
- ---------
(d) Any Bank may at any time sell to one or more commercial banks or
other Persons not Affiliates of the Borrowers (a "Participant") participating
-----------
interests in any Loans, the Commitment, the L/C Obligations and the other
interests of that Bank (the "originating Bank") hereunder and under the other
Loan Documents; provided, however, that (i) the originating Bank's obligations
-------- -------
under this Agreement shall remain unchanged, (ii) the originating Bank shall
remain solely responsible for the performance of such obligations, (iii) the
Borrowers, the Issuing Bank and the Administrative Agent shall continue to deal
solely and directly with the originating Bank in connection with the originating
Bank's rights and obligations under this Agreement and the other Loan Documents,
and (iv) no Bank shall transfer or grant any participating interest under which
the Participant has rights to approve any amendment to, or any consent or waiver
with respect to, this Agreement or any other Loan Document, except to the extent
such amendment, consent or waiver would require unanimous consent of the Banks
as described in the first proviso to Section 11.01. In the case of any such
-------------
participation the Participant shall have no rights under this Agreement, or any
of the other Loan Documents, and all amounts payable by the Borrowers hereunder
shall be determined as if such Bank had not sold such participation; provided,
--------
however, that (i) the Participant shall be entitled to the benefit of Sections
- -------
4.01, 4.03 and 11.05 as though it were also a Bank hereunder, if the originating
Bank is entitled to the benefit of such provisions, and (ii) if amounts
outstanding under this Agreement are due and unpaid, or shall have been declared
or shall have become due and payable upon the occurrence of an Event of Default,
each Participant shall be deemed to have the right of setoff in respect of its
participating interest in amounts owing under this Agreement to the same extent
as if the amount of its participating interest were owing directly to it as a
Bank under this Agreement.
(e) Each Bank agrees to take normal and reasonable precautions and
exercise due care to maintain the confidentiality of all information identified
as "confidential" or "secret" by the Borrowers and provided to it by the
Borrowers or any Subsidiary of the Borrowers, or by the Administrative Agent on
such Borrower's or Subsidiary's behalf, under this Agreement or any other Loan
Document, and neither it nor any of its Affiliates shall use any such
information other than in connection with or in enforcement of this Agreement
and the other Loan Documents; except to the extent such information (i) was or
becomes generally available to the public other than as a result of disclosure
by the Bank, or (ii) was or becomes available on a non-confidential basis from a
source other than the Borrowers, provided that such source is not bound by a
confidentiality agreement with the Borrowers known to the Bank; provided,
--------
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<PAGE>
however, that any Bank may disclose such information (A) at the request or
- -------
pursuant to any requirement of any Governmental Authority to which the Bank is
subject or in connection with an examination of such Bank by any such authority;
(B) pursuant to subpoena or other court process; (C) when required to do so in
accordance with the provisions of any applicable Requirement of Law; (D) to the
extent reasonably required in connection with any litigation or proceeding to
which the Administrative Agent, any Bank or their respective Affiliates may be
party; (E) to the extent reasonably required in connection with the exercise of
any remedy hereunder or under any other Loan Document; (F) to such Bank's
independent auditors and other professional advisors; (G) to any Affiliate of
such Bank, or to any Participant or Assignee, actual or potential, provided that
such Affiliate, Participant or Assignee agrees to keep such information
confidential to the same extent required of the Banks hereunder; and (H) as to
any Bank, as expressly permitted under the terms of any other document or
agreement regarding confidentiality to which the Borrowers are party or is
deemed party with such Bank.
(f) Notwithstanding any other provision in this Agreement, any Bank
may at any time create a security interest in, or pledge, all or any portion of
its rights under and interest in this Agreement in favor of any Federal Reserve
Bank in accordance with Regulation A of the FRB or U.S. Treasury Regulation 31
CFR (S) 203.14, and such Federal Reserve Bank may enforce such pledge or
security interest in any manner permitted under applicable law.
11.09 Setoff. In addition to any rights and remedies of the Banks
------
provided by law, if an Event of Default exists or the Loans have been
accelerated, each Bank is authorized at any time and from time to time, without
prior notice to any Borrower, any such notice being waived by any Borrower 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 by,
and other indebtedness at any time owing by, such Bank to or for the credit or
the account of the Borrowers against any and all Obligations owing to such Bank,
now or hereafter existing, irrespective of whether or not the Administrative
Agent or such Bank shall have made demand under this Agreement or any Loan
Document and although such Obligations may be contingent or unmatured. Each
Bank agrees promptly to notify the Borrowers and the Administrative Agent after
any such setoff and application made by such Bank; provided, however, that the
-------- -------
failure to give such notice shall not affect the validity of such setoff and
application.
11.10 Notification of Addresses, Lending Offices, Etc Each Bank shall
-----------------------------------------------
notify the Administrative Agent in writing of any changes in the address to
which notices to the Bank should be directed, of addresses of any Lending
Office, of payment instructions in respect of all payments to be made to it
hereunder and of such other administrative information as the Administrative
Agent shall reasonably request.
11.11 Counterparts. This Agreement may be executed in any number of
------------
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed to
constitute but one and the same instrument.
11.12 Severability. The illegality or unenforceability of any provision
------------
of this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.
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11.13 No Third Parties Benefited. This Agreement is made and entered into
--------------------------
for the sole protection and legal benefit of the Borrowers, the Banks, the
Administrative Agent and the Agent-Related Persons, and their permitted
successors and assigns, and no other Person shall be a direct or indirect legal
beneficiary of, or have any direct or indirect cause of action or claim in
connection with, this Agreement or any of the other Loan Documents.
11.14 Governing Law and Jurisdiction.
------------------------------
(a) THIS AGREEMENT AND THE NOTES, IF ANY, SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA; PROVIDED THAT
THE AGENT AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE UNITED STATES FOR
THE CENTRAL DISTRICT OF CALIFORNIA OR IN THE COURTS OF THE STATE OF CALIFORNIA
LOCATED IN SUCH DISTRICT, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH
OF THE BORROWERS, THE AGENT AND THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF
ITS PROPERTY TO THE NONEXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE
BORROWERS, THE AGENT AND THE BANKS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING
ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
---------
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR
- ----------
PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT
RELATED HERETO. THE BORROWERS, THE AGENT AND THE BANKS EACH WAIVE PERSONAL
SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY
OTHER MEANS PERMITTED BY CALIFORNIA LAW.
11.15 Waiver of Jury Trial. THE BORROWERS, THE BANKS AND THE AGENT EACH
--------------------
WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION,
PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST
ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER
WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE BORROWERS, THE
BANKS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE
TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED
BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF.
THIS WAIVER SHALL APPLY TO ANY
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<PAGE>
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS.
11.16 Entire Agreement. This Agreement, together with the other Loan
----------------
Documents, embodies the entire agreement and understanding among the Borrowers,
the Banks and the Administrative Agent, and supersedes all prior or
contemporaneous agreements and understandings of such Persons, verbal or
written, relating to the subject matter hereof and thereof.
11.17 Judgment. If, for the purposes of obtaining judgment in any court,
--------
it is necessary to convert a sum due hereunder or under any other Loan Document
in one currency into another currency, the rate of exchange used shall be that
at which in accordance with normal banking procedures the Administrative Agent
could purchase the first currency with such other currency on the Business Day
preceding that on which final judgment is given. The obligation of the
Borrowers in respect of any such sum due from it to the Administrative Agent
hereunder or under the other Loan Documents shall, notwithstanding any judgment
in a currency (the "Judgment Currency") other than that in which such sum is
denominated in accordance with the applicable provisions of this Agreement (the
"Agreement Currency"), be discharged only to the extent that on the Business Day
following receipt by the Administrative Agent of any sum adjudged to be so due
in the Judgment Currency, the Administrative Agent may in accordance with normal
banking procedures purchase the Agreement Currency with the Judgment Currency.
If the amount of the Agreement Currency so purchased is less than the sum
originally due to the Administrative Agent in the Agreement Currency, the
Borrowers agree, as a separate obligation and notwithstanding any such judgment,
to indemnify the Administrative Agent or the Person to whom such obligation was
owing against such loss. If the amount of the Agreement currency so purchased
is greater than the sum originally due to the Administrative Agent in such
currency,
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<PAGE>
the Administrative Agent agrees to return the amount of any excess to the
Borrowers (or to any other Person who may be entitled thereto under applicable
law).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in Los Angeles, California, by their proper and duly
authorized officers as of the day and year first above written.
JACOBS ENGINEERING GROUP INC.
By:___________________________________________
John W. Prosser, Jr.
Senior Vice President Finance and
Administration and Treasurer
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Administrative Agent
By:___________________________________________
Name:_________________________________________
Title:________________________________________
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Issuing Bank
By:___________________________________________
Name:_________________________________________
Title:________________________________________
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as a Bank
By:___________________________________________
Name:_________________________________________
Title:________________________________________
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<PAGE>
ABN AMRO BANK N.V., as a Managing Agent
and a Bank
By:___________________________________________
Name:_________________________________________
Title:________________________________________
THE FIRST NATIONAL BANK OF CHICAGO,
as a Managing Agent and a Bank
By:___________________________________________
Name:_________________________________________
Title:________________________________________
FIRST UNION NATIONAL BANK, as a
Managing Agent and a Bank
By:___________________________________________
Name:_________________________________________
Title:________________________________________
WELLS FARGO BANK, NATIONAL ASSOCIATION, as a
Managing Agent and a Bank
By:___________________________________________
Name:_________________________________________
Title:________________________________________
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<PAGE>
SCHEDULES AND EXHIBITS
<TABLE>
<CAPTION>
I. SCHEDULE DESCRIPTION
-------- -----------
- --------------------------------------------------------------------------------
<S> <C>
2.01 Commitments
- --------------------------------------------------------------------------------
6.05 Material Litigation, Including Intellectual
Property Related Litigation
- --------------------------------------------------------------------------------
6.07 ERISA Disclosures
- --------------------------------------------------------------------------------
6.11 Financial Statement Disclosures
- --------------------------------------------------------------------------------
6.12 Environmental Disclosures
- --------------------------------------------------------------------------------
6.16 Existing Subsidiaries
- --------------------------------------------------------------------------------
8.01 Existing Liens
- --------------------------------------------------------------------------------
8.02 Additional Permitted Dispositions
- --------------------------------------------------------------------------------
8.04 Additional Permitted Investments
- --------------------------------------------------------------------------------
8.05 Existing Indebtedness
- --------------------------------------------------------------------------------
8.09 Existing Contingent Obligations
- --------------------------------------------------------------------------------
8.12 Additional Permitted Dividends, Redemptions,
Etc.
- --------------------------------------------------------------------------------
11.02 Addresses for Notices, Lending Offices,
Including Domestic and Offshore Lending
Offices, Etc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<CAPTION>
II. EXHIBIT DESCRIPTION
------- -----------
- --------------------------------------------------------------------------------
<S> <C>
A Form of Notice of Borrowing
- --------------------------------------------------------------------------------
B Form of Notice of Conversion/Continuation
- --------------------------------------------------------------------------------
C Form of Compliance Certificate
- --------------------------------------------------------------------------------
D Form of Legal Opinion
- --------------------------------------------------------------------------------
E Form of Assignment and Acceptance Agreement
- --------------------------------------------------------------------------------
F Form of Invitation for Competitive Bids
- --------------------------------------------------------------------------------
G Form of Competitive Bid Request
- --------------------------------------------------------------------------------
H Form of Competitive Bid
- --------------------------------------------------------------------------------
I Form of Accession Agreement (for Future
Designated Subsidiary Borrowers)
- --------------------------------------------------------------------------------
J Form of Guaranty
- --------------------------------------------------------------------------------
K Form of Guarantor Subordination Agreement
- --------------------------------------------------------------------------------
L Form of Pricing Matrix
- --------------------------------------------------------------------------------
</TABLE>
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