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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-K
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ____________
Commission file number 0-17124
GRANITE CONSTRUCTION INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 77-0239383
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
585 WEST BEACH STREET, WATSONVILLE, CALIFORNIA 95076
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (831) 724-1011
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, $0.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[ ]
The aggregate market value of voting and non-voting stock held by non-affiliates
of the registrant was approximately $557,675,310 as of March 19, 1999 based upon
the average of the high and low sales prices per share of the registrant's
Common Stock as reported on the New York Stock Exchange on such date. Shares of
Common Stock held by each executive officer and director and by each person who
owns 5% or more of the outstanding Common Stock have been excluded in that such
persons may be deemed to be affiliates. This determination of affiliate status
is not necessarily a conclusive determination for other purposes.
At March 19, 1999, 27,243,811 shares of Common Stock, par value $0.01 of the
registrant were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The information called for by Part III is incorporated by reference to the
definitive Proxy Statement for the Annual Meeting of Stockholders of the Company
to be held May 24, 1999, which will be filed with the Securities and Exchange
Commission not later than 120 days after December 31, 1998.
This report, including all exhibits and attachments, contains 241 pages. The
exhibit index is on pages 27-29.
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TABLE OF CONTENTS
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Page
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No.
PART I................................................................................................3
Item 1. BUSINESS................................................................................3
Item 2. PROPERTIES.............................................................................10
Item 3. LEGAL PROCEEDINGS......................................................................10
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS....................................10
PART II..............................................................................................12
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS....................................................................12
Item 6. SELECTED CONSOLIDATED FINANCIAL DATA...................................................12
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS..................................................................14
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.............................20
Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...............................21
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURES..............................................................22
PART III.............................................................................................23
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.....................................23
Item 11. EXECUTIVE COMPENSATION.................................................................23
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.........................23
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.........................................23
PART IV..............................................................................................24
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K........................24
</TABLE>
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PART I
ITEM 1. BUSINESS
FORWARD LOOKING DISCLOSURE
This report contains forward-looking statements; such as
statements related to the impact of government regulations on the
Company's operations, the adequacy of the Company's aggregate reserves,
1998 backlog expected to be completed in 1999, the existence of bidding
opportunities, the costs of planned year 2000 modifications and expected
dates of year 2000 plan completion, the most reasonably likely worst
case year 2000 scenario, and the impact of legislation, availability of
highway funds and economic conditions on the Company's future results.
Additionally, forward-looking statements include statements that can be
identified by the use of forward-looking terminology such as "believes,"
"expects," "may," "will," "should," or "anticipates" or the negative
thereof or comparable terminology, or by discussions of strategy.
All such forward looking statements are subject to risks and
uncertainties that could cause actual results of operations and
financial condition and other events to differ materially from those
expressed or implied in such forward-looking statements. Specific risk
factors include, without limitation, changes in the composition of
applicable federal and state legislation appropriation committees;
federal and state appropriation changes for infrastructure spending; the
general state of the economy; competition and pricing pressures; and
state referendums and initiatives. Forward-looking statements related to
the Company's aggregate reserves and completion of backlog carry risk
factors which include, without limitation, changes in estimates of
existing reserves and estimates of the Company's need for those reserves
and delays in the progress of work in the 1998 backlog. Additionally,
forward-looking statements regarding the year 2000 issue carry risk
factors which include, without limitation, the availability and cost of
personnel trained in these areas; the ability to locate and correct all
relevant computer codes; changes in consulting fees and costs to
remediate or replace hardware and software; changes in non-incremental
costs resulting from redeployment of internal resources; timely
responses to and corrections by third parties such as significant
customers and suppliers; and similar uncertainties.
INTRODUCTION
Granite Construction Incorporated, the "Company" or "Granite," was
incorporated in Delaware in January 1990 as the holding company for Granite
Construction Company, which was incorporated in California in 1922. Therefore,
references herein to the "Company" or "Granite" in the context of operations
should be read to mean Granite Construction Company and Granite Construction
Incorporated's other subsidiaries.
The Company is one of the largest heavy civil construction contractors
in the United States and operates nationwide. Its focus is primarily in the
west, southwest, and southeast serving both public and private sector clients.
Within the public sector, the Company concentrates on infrastructure projects;
including the construction of roads, highways, bridges, dams, tunnels, canals,
mass transit facilities and airports. Within the private sector, the Company
performs site preparation services for buildings, plants, subdivisions and other
facilities. Granite's participation in both the public and private sectors and
its diverse mix of project types and sizes have contributed to the Company's
revenue growth and profitability in various economic environments.
The Company owns and leases substantial aggregate reserves and owns 108
construction materials processing plants. The Company also owns one of the
largest heavy construction contractor equipment fleets in the United States. The
Company believes that the ownership of these assets enables it to compete more
effectively by ensuring availability of these resources at a favorable cost.
OPERATING STRUCTURE
The principal operating company, Granite Construction Company, is
organized into two business segments, the Branch Division and the Heavy
Construction Division. The Branch Division is comprised of branch offices which
serve local markets, while the Heavy Construction Division pursues major
infrastructure projects throughout the nation. The Heavy Construction Division
("HCD") generally builds large heavy civil projects with contract amounts in
excess of $15 million and contract durations greater than two years, while the
Branch Division projects are typically smaller in size and shorter in duration.
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The two divisions complement each other in a variety of ways. The Heavy
Construction Division is a major user of large construction equipment and
employs sophisticated techniques on complex projects. The branches draw on these
resources which are generally not available to smaller, local competitors.
Conversely, the Branch Division has greater knowledge of local markets and
provides the Heavy Construction Division with valuable information regarding
larger projects in the branches' areas. The two divisions sometimes jointly
perform projects when a project in a particular region exceeds the local
branch's capabilities.
As decentralized profit centers, the branch offices and the Heavy
Construction Division independently estimate, bid and complete contracts. Both
divisions are supported by centralized functions, including finance, accounting,
tax, human resources, labor relations, safety, legal, insurance, surety and
management information services. The Company believes that centralized support
for decentralized profit centers results in a more market responsive business
with effective controls and reduced overhead.
In addition to cost and profitability estimates, Granite considers the
availability of estimating and project building personnel as key factors when
determining whether to bid on a project. Other factors considered include the
client, the geographic location, Granite's competitive advantages and
disadvantages relative to likely competitors for the project, current and
projected workload, and the likelihood of follow-up work. Both operating
divisions use a proprietary computer-based project estimating system that
reflects Granite's significant accumulated experience. Granite believes that an
exhaustive, detailed approach to a project's estimate and bid is important in
order to best identify the project's risks and opportunities. The Company's
estimates are comprehensive in nature, sometimes totaling hundreds of pages of
analysis. Each project is broken into phases and line items, for which separate
labor, equipment and material estimates are made. Once a project begins, the
estimate provides Granite with a budget against which actual project cost is
regularly measured, enabling Granite to manage its projects more effectively.
Information about the Company's business segments for the years ended
December 31, 1998, 1997 and 1996 is incorporated in Note 14 of the "Notes to the
Consolidated Financial Statements," located on page F-17 of this Annual Report
on Form 10K.
The Branch Division. In 1998, Branch Division contract revenue and sales of
aggregate products were $945.9 million (77.1% of Company revenue) as compared
with $831.9 million (80.9% of Company revenue) in 1997. The Branch Division has
both public and private sector clients. Public sector activities include both
new construction and improvement of streets, roads, highways and bridges. For
example, the branches widen and re-pave roads and modify and replace bridges.
Major private sector contracts include site preparation for housing, including
excavation; grading and street paving; and installation of curbs, gutters,
sidewalks and underground utilities.
The Company currently has 11 branch offices with 14 satellite operations.
The Company's branch offices in California are located in Bakersfield, Hanford
(Central Valley), Monterey Bay Area, Palm Springs (Southern California Region),
Sacramento, San Jose, Santa Barbara and Stockton. The Company's branch offices
outside of California are located in Arizona, Nevada and Utah. Each branch
effectively operates as a local or regional construction company and its
management is encouraged to participate actively in the local community. While
individual branch revenues vary from year to year, in 1998 these revenues ranged
from $41 million to $187 million.
As part of the Company's strategy, many of Granite's branches mine
aggregates and operate plants which process aggregates into construction
materials for internal use and for sale to others. These activities provide both
a source of profits and a competitive advantage to the Company's construction
business. Close to half of the aggregate products are used in the Company's
construction projects. The remainder is sold to unaffiliated parties and
accounted for $141.7 million of revenue in 1998, representing 11.6% of the
Company's total 1998 revenue. The Company has significant aggregate reserves
which it has acquired by ownership in fee or through long-term leases. It is the
Company's objective to continue to own or lease adequate aggregate reserves.
Heavy Construction Division. In 1998, revenue from HCD was $280.2 million
(22.9% of Company revenue) as compared with $196.3 million (19.1% of Company
revenue) in 1997. HCD projects are usually larger and more complex than those
performed by the Branch Division. The Division has completed projects throughout
the nation; including mass transit projects in the metropolitan areas of
Atlanta, Baltimore, Los Angeles, San Francisco and Washington, D.C., and 27
major dam and tunnel projects in eight states.
HCD builds infrastructure projects; including major highways, large dams,
mass transit facilities, bridges, pipelines, canals, tunnels, waterway locks and
dams and airport runways, and has engaged in contract mine stripping and
reclamation and large site preparation. It also performs activities such as
demolition, clearing, excavation, de-watering, drainage, embankment fill,
structural concrete, concrete and asphalt paving, and tunneling.
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The Division markets, estimates, bids and provides management overview of
its projects from its Watsonville, California headquarters and satellite
estimating offices in Texas, Georgia, Florida and Maryland. Project staff
located at job sites have the managerial, technical, and clerical capacity to
meet on-site project management requirements. HCD has the ability, if
appropriate, to process locally sourced aggregates into construction materials
using its own portable crushing, concrete and asphalt processing plants.
HCD participates in joint ventures with other large construction companies
from time to time. Joint ventures are used for large, technically complex
projects, including design/build projects, where it is desirable to share risk
and resources. Joint ventures provide independently prepared estimates, and
shared financing, equipment and expertise.
Design/build projects have emerged as an expanding market for HCD. Unlike
traditional projects where owners first hire a design firm and then put the
plans out to bid to find a contractor, design/build projects provide the owner
with a single point of responsibility and a single contact. Past design/build
projects have included the SR-91 Tollway which was completed in 1995 and the San
Joaquin Hills Transportation Corridor which was completed in 1996. Ongoing
projects include the I-15 rebuild in Salt Lake City, Utah, the Atlantic
City/Brigantine Connector in New Jersey and a recently awarded I-17 rebuild
project in Phoenix, Arizona. Design/build projects have historically been bid
with the Company as part of a joint venture team. While design/build is being
used considerably more in the private sector, the public sector is expanding its
use.
INVESTMENT IN T.I.C. HOLDINGS, INC.
The Company holds a 30% minority interest in T.I.C. Holdings, Inc. ("TIC")
as part of its diversification strategy (See Business Strategy). TIC, founded in
1974, is one of the leading merit shop general heavy industrial contractors in
the U.S. TIC performs all major disciplines including civil, structural steel
erection, heavy mechanical, process piping and electrical/instrumentation. TIC
has offices in Colorado, Georgia, California, Texas, Louisiana, Kansas, Nevada,
Oregon and Wyoming. TIC operates both nationally and internationally. TIC had
annual revenue of $534 million in 1998. By market sector 52% of its 1998 revenue
came from industrial/petrochemical projects, 26% from water/sewer/wastewater
projects, 18% from power-related projects and the remaining 4% from
transportation-related and other work.
BUSINESS STRATEGY
Granite's fundamental objective is to increase long-term shareholder value
by focusing on consistent profitability from carefully managed revenue growth.
Shareholder value is measured by the appreciation of the value of Granite stock
over a period of years, and to some degree, a return from dividends. Further, it
is a specific measure of the Company's financial success to achieve a Return on
Net Assets ("RONA") greater than the cost of capital, creating "Granite Value
Added." To accomplish these objectives, Granite employs the following
strategies:
Heavy/Highway Construction Focus - Granite concentrates its core
competencies on this segment of the construction industry which includes
the building of roads, highways, bridges, dams and tunnels, mass transit
facilities and site preparation. This focus emphasizes the Company's
specialized strengths which include earth moving, grading, paving and
concrete structures.
Vertical Integration of Aggregate Materials into Construction - Granite
owns aggregate reserves and processing plants and thus, by ensuring
availability of these resources at favorable cost, it believes it has
significant bidding advantages in many of its markets.
Selective Bidding - Once Granite selects a job that meets its bidding
criteria, the project is estimated using a highly detailed method with a
proprietary estimating system which applies both contingency cost and
margin to achieve the appropriate profit margin for the risk assumed.
Diversification - To mitigate the risks inherent in construction and
general economic factors, Granite pursues projects (i) in both the public
and private sectors; (ii) for a wide range of customers within each sector
(from the federal government to small municipalities and from large
corporations to individual homeowners); (iii) in diverse geographic
markets; (iv) of various sizes, durations and complexity; and (v) in the
heavy industrial market segment.
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Decentralized Profit Centers - Granite addresses each selected market with
a highly customer responsive organization through its decentralized
structure. Each of Granite's branches and the Heavy Construction Division
are individual profit centers.
Management Incentives - The Company compensates its profit center managers
with lower-than-market fixed salaries coupled with a substantial variable
cash and restricted stock incentive element based on the annual profit
performance of their respective profit centers.
Ownership of Construction Equipment - By owning and carefully maintaining a
large fleet of heavy construction equipment, Granite essentially operates
an internal leasing company and therefore competes more effectively by
ensuring availability of these resources at favorable cost.
Controlled Expansion - The Company intends to continue its geographic
expansion by selectively adding branches in the western United States,
pursuing major infrastructure projects throughout the nation and expanding
into other construction market segments through acquisitions.
Accident Prevention - Granite believes that the prevention of accidents is
both a moral obligation and good business. By identifying and preventing
potential accidents, the Company continues to significantly reduce the
costs associated with accidents.
Environmental Affairs - Granite believes it benefits everyone to maintain
environmentally responsible operations. The Company is committed to
effective air quality control measures and reclamation at its plant sites
and to waste reduction and recycling of the environmentally sensitive
products used in its operations.
Quality and High Ethical Standards - Granite emphasizes the importance of
performing high quality work and maintaining high ethical standards through
an established code of conduct and an effective corporate compliance
program.
CUSTOMERS
The Company has customers in both the public and private sectors. The
Branch Division's principal customers are state departments of transportation in
California, Utah, Nevada, and Arizona and the US Army Corp. of Engineers. In
1998, contracts with the California Department of Transportation represented
11.6% of the Company's revenue. Other Branch Division clients include county and
city public works departments and developers and owners of industrial,
commercial and residential sites. The principal clients of the Heavy
Construction Division are in the public sector and currently include the U.S.
Bureau of Reclamation and the State Departments of Highways and Public
Transportation in Utah, Texas, Florida, and New Jersey. Total Company contracts
(including the Company's share of a construction joint venture) with the Utah
Department of Transportation represented 11.3% of the Company's revenue in 1998.
(See Note 2 of Notes to Consolidated Financial Statements).
A breakdown of the Company's revenues for the last three years by market
sector is as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
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Amount Percent Amount Percent Amount Percent
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<S> <C> <C> <C> <C> <C> <C>
Contract revenues
Federal agencies ........ $ 44,844 3.7% $ 38,789 3.8% $ 32,825 3.5%
State agencies .......... 516,485 42.1 449,727 43.6 345,505 37.2
Local public agencies ... 274,657 22.4 238,141 23.2 278,917 30.0
Private sector .......... 248,447 20.2 174,479 17.0 178,053 19.2
Construction materials sales 141,667 11.6 127,069 12.4 93,499 10.1
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Total ...................... $1,226,100 100.0% $1,028,205 100.0% $ 928,799 100.0%
===========================================================================================
</TABLE>
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BACKLOG
The Company's backlog (anticipated revenue from uncompleted portions of
existing contracts) was $901.6 million at December 31, 1998, down from $909.8
million at December 31, 1997, and was $597.9 million at December 31, 1996.
Approximately $260 million of the December 31, 1998 backlog is expected to
remain at December 31, 1999. The Company includes a construction project in its
backlog at such time as a contract is awarded or a firm letter of commitment is
obtained and funding is in place. (See "Management's Discussion and Analysis of
Financial Condition and Results of Operations.") The Company believes its
backlog figures are firm, subject only to the cancellation and modification
provisions contained in various contracts. Substantially all of the contracts in
the backlog may be canceled or modified at the election of the client. However,
the Company has not been materially adversely affected by contract cancellations
or modifications in the past. (See "Business-Contract Provisions and
Subcontracting.") A sizeable percentage of the Company's anticipated revenue in
any year is not reflected in its backlog at the start of the year due to the
short duration of smaller Branch Division projects that are initiated and
completed during such year ("Turn Business"). The following is a breakdown of
backlog as of December 31, 1998, 1997 and 1996 (in millions):
<TABLE>
<CAPTION>
1998 1997 1996
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Amount Percent Amount Percent Amount Percent
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<S> <C> <C> <C> <C> <C> <C>
By Geographic Area:
California ................ $ 192.1 21.3% $ 214.4 23.6% $ 247.5 41.4%
West (excluding California) 312.0 34.7 379.5 41.7 72.6 12.1
South/East ................ 397.5 44.0 315.9 34.7 277.8 46.5
---------------------------------------------------------------------
$ 901.6 100.0% $ 909.8 100.0% $ 597.9 100.0%
=====================================================================
By Market Sector:
Federal agencies .......... $ 22.6 2.5% $ 29.7 3.3% $ 28.7 4.8%
State agencies ............ 635.8 70.5 674.9 74.2 374.8 62.7
Local public agencies ..... 133.1 14.8 144.9 15.9 123.0 20.6
Private sector ............ 110.1 12.2 60.3 6.6 71.4 11.9
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$ 901.6 100.0% $ 909.8 100.0% $ 597.9 100.0%
=====================================================================
</TABLE>
EQUIPMENT
The Company purchases and maintains many pieces of equipment; including
cranes, bulldozers, scrapers, graders, loaders, trucks, pavers, rollers, and
construction materials processing plants. In 1998 and 1997, the Company spent
approximately $41.2 million and $45.4 million, respectively, for construction
equipment, plants and vehicles. The breakdown of the Company's construction
equipment, plants and vehicles at December 31, 1998 is as follows:
<TABLE>
<S> <C>
Heavy construction equipment ........................ 2,349 units
Trucks, truck-tractors and trailers and vehicles .... 2,965 units
Aggregate crushing plants ........................... 38 plants
Asphalt concrete plants ............................. 43 plants
Portland cement concrete batch plants ............... 25 plants
Thermal Soil Remediation Plants ..................... 2 plants
</TABLE>
The Company believes that ownership of equipment is preferable to leasing
because ownership ensures the equipment is available as needed and normally
results in lower equipment costs. The Company attempts to keep its equipment as
fully utilized as possible by pooling equipment for use by both the Branch
Division and the Heavy Construction Division. From time to time, the Company
leases or rents equipment on a short-term basis.
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EMPLOYEES
On December 31, 1998, Granite employed 1,101 salaried employees, who work
in management, estimating and clerical capacities, and 2,760 hourly employees.
The total number of hourly personnel employed by the Company is subject to the
volume of construction in progress. During 1998, the number of hourly employees
ranged from 2,254 to 4,357 and averaged approximately 3,388. The Company's
wholly owned subsidiary, Granite Construction Company, is a party to craft
collective bargaining agreements in many areas in which it is working.
The Company believes its employees are its most valuable resource and that
its workforce possesses a strong dedication to and pride in the Company. Among
salaried and non-union hourly employees, this dedication is reinforced by 32%
equity ownership through the Employee Stock Ownership Plan ("ESOP") and
performance-based incentive compensation arrangements. The Company's 371
managerial and supervisory personnel have an average of 11 years of service with
Granite.
COMPETITION
Factors influencing the Company's competitiveness are price, reputation for
quality, the availability of aggregate materials, machinery and equipment,
financial strength, knowledge of local markets and conditions, and estimating
abilities. The Company believes that it competes favorably on the basis of the
foregoing factors. Branch Division competitors range from small local
construction companies to large regional construction companies. While the
market areas of these competitors overlap with several of the markets served by
the Company's branches, few, if any, compete in all of the Company's market
areas. The Heavy Construction Division normally competes with large regional and
national construction companies. Although the construction business is highly
competitive, particularly for competitively bid projects in the public sector,
the Company believes it is well positioned to compete effectively.
CONTRACT PROVISIONS AND SUBCONTRACTING
The Company's revenue is substantially derived from contracts that are
"fixed unit price" contracts under which the Company is committed to provide
materials or services required by a project at fixed unit prices (for example,
dollars per cubic yard of concrete or cubic yards of earth excavated). While the
fixed unit price contract shifts the risk of estimating the quantity of units
required for a particular project to the customer; any increase in the Company's
unit cost over the unit price bid, whether due to inflation, inefficiency,
faulty estimates or other factors, is borne by the Company unless otherwise
provided in the contract. The Company's contracts are obtained primarily through
competitive bidding in response to advertisements by federal, state and local
government agencies and private parties.
All federal government contracts and many of the Company's other contracts
provide for termination of the contract for the convenience of the party
contracting with the Company. In addition, many of the Company's contracts are
subject to certain completion schedule requirements with liquidated damages in
the event schedules are not met. The Company has not been materially adversely
affected by these provisions in the past.
The Company acts as prime contractor on most of the construction projects
it undertakes. The Company accomplishes the majority of its projects with its
own resources and subcontracts specialized activities such as electrical and
mechanical work. As prime contractor the Company is responsible for the
performance of the entire contract, including subcontract work. Thus, the
Company is subject to increased costs associated with the failure of one or more
subcontractors to perform as anticipated. The Company's subcontractors generally
furnish bonds which provide an additional measure of security of their
performance. Disadvantaged business enterprise regulations require the Company
to use its best efforts to subcontract a specified portion (historically ranging
up to 25%) of contract work done for governmental agencies to certain types of
subcontractors. Some of these subcontractors may not be able to obtain surety
bonds. The Company has not incurred any material loss or liability on work
performed by subcontractors to date.
INSURANCE AND BONDING
The Company maintains general and excess liability, construction equipment,
and workers' compensation insurance; all in amounts consistent with industry
practices. Management believes its insurance programs are adequate.
In connection with its business, the Company generally is required to
provide various types of surety bonds which provide an additional measure of
security of its performance under certain public and private sector contracts.
The Company's ability to obtain surety bonds depends upon its capitalization,
working capital, past performance, management expertise and other factors.
Surety companies consider such factors in light of the amount of surety bonds
then outstanding for the Company and their current underwriting
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standards, which may change from time to time. The Company has been bonded by
the same surety for more than 60 years and has never been refused a bond.
GOVERNMENT REGULATIONS
The Company's operations are subject to compliance with regulatory
requirements of federal, state, and municipal agencies and authorities;
including regulations concerning labor relations, affirmative action and the
protection of the environment. While compliance with applicable regulatory
requirements has not adversely affected the Company's operations in the past
relative to its competitive position within its industry sector, there can be no
assurance that these requirements will not change and that compliance will not
adversely affect the Company's operations. In addition, the aggregate materials
operations of the Company require operating permits granted by governmental
agencies. The Company believes that tighter regulations for the protection of
the environment and other factors will make it increasingly difficult to obtain
new permits and renewal of existing permits may be subject to more restrictive
conditions than currently exist.
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ITEM 2. PROPERTIES
The Company owns and leases real property for use in its construction and
aggregate mining and processing activities. The Company owns approximately
394,300 square feet of office and shop space and leases, pursuant to leases
expiring between January 1999 and April 2003, an additional 44,800 square feet
of office and shop space. The Company owns approximately 10,700 acres of land of
which 1,600 acres are un-permitted reserves available for future use and leases
approximately 4,636 additional acres of land at sites in California, Nevada,
Arizona and Utah. A majority of the land owned or leased by the Company is
intended to serve as aggregate reserves. There are no significant encumbrances
against owned property. The Company's leases for aggregate reserves generally
limit the Company's interest in the reserves to the right to mine the reserves.
These leases range from month-to-month leases to leases with expiration dates
ranging from January 1999 to January 2016. The Company considers its available
and future aggregate reserves adequate to meet operating needs. The Company
pursues a plan of acquiring new sources of aggregate reserves to replenish those
depleted and to assure future growth.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to a number of legal proceedings. The Company
believes that the nature and number of these proceedings are typical for a
construction firm of its size and scope and that none of these proceedings is
material to the Company's financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company has not submitted any matters to a vote of security holders
during the fourth quarter of the year ended December 31, 1998.
EXECUTIVE OFFICERS OF THE REGISTRANT.
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Age Position
--- --------
<S> <C> <C>
David H. Watts 60 President, Chief Executive Officer and Director
William G. Dorey 54 Executive Vice President and Chief Operating Officer
William E. Barton 54 Vice President and Chief Financial Officer
Patrick M. Costanzo 60 Senior Vice President and Manager, Heavy Construction Division
Mark E. Boitano 50 Senior Vice President and Manager, Branch Division
</TABLE>
Granite Construction Incorporated was incorporated in Delaware in January
1990 as the holding company for Granite Construction Company, which was
incorporated in California in 1922. All dates of service for the executive
officers of the registrant include the periods in which they served for Granite
Construction Company.
Mr. Watts joined the Company in 1987 as President and Chief Executive
Officer and has served as a director since 1988. In 1997, Mr. Watts became a
director of TIC Holdings, Inc., in which Granite Construction Incorporated owns
a 30% interest. From 1984 until 1987, Mr. Watts served as President, Chief
Executive Officer and a director of Ford, Bacon & Davis, Inc., an industrial
engineering and construction firm. From 1965 until 1984, Mr. Watts was employed
by an underwater services and construction firm in various capacities, including
as President and Chief Operating Officer. He received a B.A. degree in economics
from Cornell University in 1960.
10
<PAGE> 11
Mr. Dorey has been an employee of the Company since 1968 and has served in
various capacities, including Executive Vice President and Chief Operating
Officer since 1998, Senior Vice President and Manager, Branch Division from 1987
to 1998, and as Vice President and Assistant Manager, Branch Division from 1983
to 1987. In 1997, Mr. Dorey became a director of TIC Holdings, Inc., in which
Granite Construction Incorporated owns a 30% interest. He received a B.S. degree
in construction engineering from Arizona State University in 1967.
Mr. Barton has been an employee of the Company since 1980 and has served in
various capacities, including Vice President and Chief Financial Officer since
1990, Controller in 1989, Treasurer in 1988 and Cash Manager from 1980 until
1988. In 1997, Mr. Barton became a director of TIC Holdings, Inc., in which
Granite Construction Incorporated owns a 30% interest. He received a B.S. degree
in accounting and finance from San Jose State University in 1967 and an M.B.A.
degree from the University of Santa Clara in 1973.
Mr. Costanzo has been an employee of the Company since 1970 and has served
in various capacities, including Senior Vice President and Manager, Heavy
Construction Division, since 1990, Vice President and Assistant Manager, Heavy
Construction Division, from 1988 to 1989, and an Area or Project Manager with
the Heavy Construction Division from 1971 to 1987. In 1997, Mr. Costanzo became
a director of TIC Holdings, Inc., in which Granite Construction Incorporated
owns a 30% interest. He received a B.S. degree in civil engineering from the
University of Connecticut in 1960 and a M.S. degree in civil engineering from
Stanford University in 1961.
Mr. Boitano has been an employee of the Company since 1977 and has served
in various capacities, including Senior Vice President and Manager, Branch
Division since 1998, Assistant Branch Division Manager from 1987 to 1998, Branch
Manager, Arizona operations from 1983 to 1987, Assistant Manager, Arizona
operations from 1980 to 1983, Assistant Manager, Salinas Branch in 1980, and
Project Manager Estimator from 1977 to 1980. He received a B.S. degree in Civil
Engineering from Santa Clara University in 1971 and an M.B.A. degree from
California State University, Fresno in 1977.
11
<PAGE> 12
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
On April 25, 1997, the Company commenced trading its common stock on the
New York Stock Exchange under the ticker symbol GVA. The Company's move from
NASDAQ Stock Market to the New York Stock Exchange was intended to improve
trading efficiencies and liquidity in an effort to promote enhanced shareholder
value. See Quarterly Results in Item 7 for a two-year summary of quarterly
dividends and high and low sales prices of the Company's stock.
The Company expects to pay a quarterly cash dividend of $0.07 plus a
special dividend of $0.12 per share of common stock to stockholders of record as
of March 31, 1999 payable on April 16, 1999 (See Note 15 of Notes to
Consolidated Financial Statements). Declaration and payment of dividends is
within the sole discretion of the Company's Board of Directors, subject to
limitations imposed by Delaware law, and will depend on the Company's earnings,
capital requirements, financial conditions and such other factors as the Board
of Directors deems relevant. As of March 19, 1999 there were 27,243,811 shares
of common stock outstanding held by approximately 334 stockholders of record.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The selected Operations and Balance Sheet data set forth below have been
derived from Consolidated Financial Statements of the Company, which have been
audited by PricewaterhouseCoopers LLP, independent accountants.
12
<PAGE> 13
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
=============================================================================================================================
YEARS ENDED DECEMBER 31, 1998 1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING SUMMARY
Revenue $1,226,100 $1,028,205 $ 928,799 $ 894,796 $ 693,388 $ 570,379
Gross profit 153,092 111,730 110,655 111,963 89,988 50,743
As a percent of revenue 12.5% 10.9% 11.9% 12.5% 13.0% 8.9%
General and administrative expenses 83,834 73,593 71,587 69,610 62,795 47,107
As a percent of revenue 6.8% 7.2% 7.7% 7.8% 9.1% 8.3%
Income before cumulative effect of change
in accounting principle * 46,507 27,832 27,348 28,542 19,488 3,492
Net income 46,507 27,832 27,348 28,542 19,488 4,492
As a percent of revenue 3.8% 2.7% 2.9% 3.2% 2.8% 0.8%
Income per share before cumulative effect
of change in accounting principle: **
Basic $ 1.75 $ 1.05 $ 1.04 $ 1.10 $ 0.75 $ 0.13
Diluted 1.70 1.03 1.02 1.08 0.74 0.13
Net income per share:
Basic 1.75 1.05 1.04 1.10 0.75 0.17
Diluted 1.70 1.03 1.02 1.08 0.74 0.17
Weighted average shares of common and
common stock equivalents outstanding:**
Basic 26,559 26,397 26,207 25,916 25,884 25,875
Diluted 27,339 26,942 26,748 26,474 26,289 26,133
- -----------------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION SUMMARY
Total assets $ 626,571 $ 551,809 $ 473,045 $ 454,744 $ 349,098 $ 319,416
Cash, cash equivalents and short-term
investments 121,424 72,769 72,230 66,992 48,638 48,810
Working capital 142,448 103,910 92,542 77,179 65,537 64,619
Current maturities of long-term debt 10,787 12,921 10,186 13,948 10,070 10,060
Long-term debt 69,137 58,396 43,602 39,494 17,237 28,585
Stockholders' equity 301,282 257,434 233,605 209,905 182,692 164,338
Book value per share** 10.90 9.40 8.59 7.82 6.91 6.25
Dividends per share** $ 0.30 $ 0.24 $ 0.25 $ 0.19 $ 0.09 $ 0.09
Common shares outstanding** 27,649 27,400 27,189 26,828 26,433 26,301
- -----------------------------------------------------------------------------------------------------------------------------
BACKLOG $ 901,592 $ 909,793 $ 597,876 $ 590,075 $ 550,166 $ 659,738
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
===============================================================================================================
YEARS ENDED DECEMBER 31, 1992 1991 1990 1989 1988
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING SUMMARY
Revenue $ 518,312 $ 564,060 $ 557,996 $ 504,084 $ 437,230
Gross profit 50,578 69,502 70,646 60,837 55,614
As a percent of revenue 9.8% 12.3% 12.7% 12.1% 12.7%
General and administrative expenses 46,906 46,541 44,466 41,915 33,702
As a percent of revenue 9.0% 8.3% 8.0% 8.3% 7.7%
Income before cumulative effect of change
in accounting principle * 3,924 17,622 18,811 14,211 15,009
Net income 3,924 17,622 18,811 14,211 15,009
As a percent of revenue 0.8% 3.1% 3.4% 2.8% 3.4%
Income per share before cumulative effect
of change in accounting principle: **
Basic $ 0.15 $ 0.68 $ 0.76 $ 0.63 $ 0.67
Diluted 0.15 0.67 0.75 0.63 0.67
Net income per share:
Basic 0.15 0.68 0.76 0.63 0.67
Diluted 0.15 0.67 0.75 0.63 0.67
Weighted average shares of common and
common stock equivalents outstanding:**
Basic 25,875 25,875 24,863 22,500 22,500
Diluted 26,114 26,123 24,933 22,500 22,500
- ---------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION SUMMARY
Total assets $ 316,978 $ 277,426 $ 260,426 $ 245,880 $ 205,847
Cash, cash equivalents and short-term
investments 54,139 54,973 50,451 46,306 44,911
Working capital 66,329 55,186 52,352 34,902 39,656
Current maturities of long-term debt 15,469 7,669 7,887 14,228 12,497
Long-term debt 38,618 14,816 19,084 39,707 44,328
Stockholders' equity 158,594 153,159 131,026 86,552 69,033
Book value per share** 6.05 5.87 5.06 3.85 3.07
Dividends per share** $ 0.09 $ 0.09 $ 0.07 $ -- $ --
Common shares outstanding** 26,216 26,078 25,875 22,500 22,500
- ---------------------------------------------------------------------------------------------------------------
BACKLOG $ 245,234 $ 292,017 $ 368,384 $ 377,529 $ 231,338
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
* Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes".
** On July 6, 1998, the Company announced a three-for-two stock split in the
form of a 50% stock dividend payable on August 7, 1998. All per share
amounts are calculated on a post split basis.
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<PAGE> 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
Granite is one of the largest heavy civil contractors in the United
States and is engaged in the construction of highways, dams, airports, mass
transit facilities and other infrastructure-related projects. The Company has
offices in California, Texas, Georgia, Nevada, Arizona, Florida, Oregon,
Maryland and Utah.
The Company's contracts are obtained primarily through competitive
bidding in response to advertisements by federal, state and local agencies, and
private parties. The Company's bidding activity is affected by such factors as
backlog, current utilization of equipment and other resources, ability to obtain
necessary surety bonds and competitive considerations. Bidding activity, backlog
and revenue resulting from the award of new contracts to the Company may vary
significantly from period to period.
Revenue from construction contracts including construction joint
ventures is recognized using the percentage-of-completion method of accounting,
based upon costs incurred and projected costs. Revenue in an amount equal to
cost incurred is recognized prior to contracts reaching 25% completion. The
related earnings are not recognized until the period in which such percentage
completion is attained. Cost of revenue consists of direct costs on contracts;
including labor and materials, amounts payable to subcontractors, direct
overhead costs, equipment expense (primarily depreciation, maintenance and
repairs) and insurance costs. Depreciation is provided using accelerated methods
for construction equipment. Contracts frequently extend over a period of more
than one year and revisions in cost and profit estimates during construction are
reflected in the accounting period in which the facts that require the revision
become known. Losses on contracts, if any, are provided in total when
determined, regardless of the degree of project completion. Claims for
additional contract revenue are recognized in the period when it is probable
that the claim will result in additional revenue and the amount can be reliably
estimated. The foregoing as well as weather, stage of completion, and mix of
contracts at different margins may cause fluctuations in gross profit between
periods.
The Company's compensation strategy for selected management personnel is
to rely heavily on a variable cash and restricted stock performance-based
incentive element. Thus, the Company may experience an increase in general and
administrative expenses in a very profitable year and a decrease in less
profitable years. The Company's pension contribution in excess of the 401K
matching contributions is at the discretion of the Board of Directors based on
the Company reaching certain levels of profitability each year.
CURRENT YEAR
REVENUE AND BACKLOG. During the year ended December 31, 1998, revenue
increased $197.9 million (19.2%) to $1.226 billion. The Branch Division revenue
increased $114.0 million to $945.9 million in 1998, from $831.9 million in 1997.
The Branch Division increase is due primarily to improved market conditions
(particularly in the private sector), and to a lesser extent, contributions made
from flood related emergency work caused by severe winter weather conditions.
Heavy Construction Division (HCD) revenue increased $83.9 million to $280.2
million in 1998, from $196.3 million in 1997 which reflects increased revenue
from HCD's portion of the Company's Interstate - 15 rebuild project in Utah and
various projects added to backlog in 1998. The Company's revenue from public
sector contracts increased to $836.0 million in 1998 from $726.6 million in 1997
while decreasing to 68.2% of the Company's total revenue in 1998 from 70.6% in
1997. Revenue from private sector contracts increased $73.9 million to $248.4
million or 20.2% of total revenue in 1998, from $174.5 million or 17.0% of total
revenue in 1997.
The Company's backlog at December 31, 1998 was $901.6 million, down $8.2
million, or 0.9% from 1997. The relatively flat backlog in 1998 reflects new
awards which offset a reduction due to a full year's work on the Company's 23%
share of the I-15 Corridor Reconstruction project in Salt Lake City, Utah which
was awarded in the first quarter of 1997. Work on our $313 million portion of
the contract began during the second quarter of 1997 and was approximately 48%
complete at the end of 1998. Management believes that approximately 71% of the
work in the backlog at December 31, 1998 will be recognized as revenue during
1999. The Company believes its bidding opportunities in its major marketplaces
remain strong (see "Outlook").
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<PAGE> 15
GROSS PROFIT. For the year ended December 31, 1998, gross profit reached
$153.1 million, a $41.4 million increase from 1997. As a percentage of revenue,
gross profit increased in 1998 to 12.5% from 10.9% in 1997. The increased gross
profit margin reflects the current favorable market conditions as well as the
Company's Interstate- 15 rebuild project which reached the 25% completion
threshold for profit recognition during the second quarter of 1998. Revenue in
an amount equal to cost incurred is recognized prior to contracts reaching 25%
completion.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
include salaries, incentive compensation, retirement plans, costs associated
with the Company's estimating and bidding activities, and other administrative
costs. General and administrative expenses increased from $73.6 million in 1997
to $83.8 million in 1998 and decreased from 7.2% of revenue in 1997, to 6.8% of
revenue in 1998. The dollar increase is primarily due to higher profit sharing,
incentive compensation and other costs resulting from the Company's increased
revenue and bidding activities partially offset by the collection of a
previously written-off bad debt. The decrease as a percent of revenue is due to
the fixed nature of certain expenses and higher revenue from non-sponsored joint
venture contracts which do not create a corresponding level of administrative
expense.
OPERATING INCOME. The Branch Division's contribution to operating income
in 1998 increased over the 1997 contribution due primarily to improved market
conditions which increased both the volume of work and the profit margins the
Division was able to achieve. The Heavy Construction Division's contribution to
operating income also increased in 1998, primarily due to the impact of the I-15
project reaching the 25% completion threshold for profit recognition as
described above.
OTHER INCOME (EXPENSES). Other income decreased $0.2 million to $5.8
million in 1998. The decrease was due to an increase in interest expense
resulting from additional borrowings under long-term debt agreements and lower
gain on sale of property and equipment which was partially offset by higher
interest income due to higher short-term investments and cash and cash
equivalents.
OUTLOOK. As we enter 1999, the Company's fundamental business outlook
remains very favorable, based on record levels of public infrastructure funding
and healthy economic conditions in many of the Company's geographic
marketplaces.
TEA-21, as we have noted in the past, is the federal transportation bill
that will act as a flywheel to drive the various state highway programs for the
next five plus years. According to the U.S. Department of Transportation,
California, the Company's largest market, is expected to see a 45.6% increase in
funding during this period over the previous authorizing legislation for surface
transportation. Moreover, Texas and Florida, two additional states where we are
actively bidding and building work, anticipate funding increases of 60.7% and
57.3% during this period, respectively, also according to the U.S. Department of
Transportation. We should caution investors, however, that the opportunities
that TEA-21 will provide for contractors such as Granite are just beginning to
emerge. Because the cycle for federal money to progress from planning to design
to actual construction bids takes time, we most likely will not see any
significant increase in bidding opportunities until mid-1999 at the earliest.
Therefore, considering that profits on a job are not recognized until it is 25%
complete, we would not anticipate any meaningful boost to our bottom line from
TEA-21-funded projects until the year 2000 and beyond. However we believe there
will be ample bidding opportunities in the first half of the year from other
sources.
Increased public infrastructure funding is also getting renewed
attention in California, where leaders from both parties in both the Assembly
and the Senate have proposed a package of multi-billion-dollar bills ranging
from bond issues to dedicating a quarter cent of the existing sales tax toward
the renovation and construction of roads, bridges and other public facilities.
In fact, Governor Davis in early March appointed a select committee on
infrastructure, a major focus of which will be transportation.
Aside from increased bidding opportunities, we believe increased public
highway funding will help advance the design-build segment of our industry.
Highway departments are increasingly sensitive to the public demand to complete
projects in the shortest time possible. Mega design-build projects like HCD's
I-15 reconstruction joint venture in Salt Lake City, Utah give clients many cost
and time advantages and in return offer us the opportunity to earn higher than
normal gross profit margins, if we execute the work successfully. A further
example of the benefit to the Company is the recent award of a design-build
project in Arizona which allowed that state to expedite the use of available
TEA-21 monies.
Additionally, increased bidding opportunities fueled by additional
transportation dollars should give both of our divisions the increased latitude
to be more selective in targeting those bidding opportunities that meet the
Company's profitability objectives. Specifically, our Heavy Construction
Division has targeted several design-build projects to bid this year, including
a bridge replacement project in Florida, major wharf improvements in South
Carolina and a water storage project in Massachusetts. HCD will again be
actively bidding on transportation projects in its core markets of Texas and
Florida and plans to step up its bidding
15
<PAGE> 16
efforts in new markets including Pennsylvania and the Carolinas. HCD and TIC,
our strategic industrial partner, plan to joint venture a number of
opportunities this year, including merchant power and wastewater treatment
projects.
Looking ahead at the private component of our business, we are
encouraged by the underlying strength of California's economic base. According
to the Center for the Continuing Study of the California Economy, the state
added 400,000 new jobs in 1998. As a result, California's unemployment rate fell
to 5.7%, the lowest level since before the 1990 recession. Furthermore,
construction spending grew at double digit rates in 1998, the Center noted.
Housing markets continued to improve moderately in 1998, the economists noted,
although the 125,000 new units built in 1998 were still less than half of
mid-1980s building levels. To date, we have not seen any significant impact on
the California construction marketplace from the economic crisis afflicting Asia
and South America. We should remind investors that our business focus is the
domestic marketplace, thus we have no exposure to delays or cancellations of
overseas projects unlike some companies in our industry.
A healthy private and public California marketplace should provide a
strong bidding climate for our Branch Division. The California Department of
Transportation expects increased funding from TEA-21 to impact its bidding
schedules beginning this summer. Arizona has already seen an impact from TEA-21
funding. Private and public markets are also expected to stay strong in Nevada
and Utah in 1999.
We will not, however, benefit financially in 1999 from two separate
events that contributed to our success in 1998. Absent in 1999 will be a
one-time boost to earnings of the magnitude that the Company received when the
I-15 rebuild project in Utah reached the 25% completion threshold in the second
quarter of 1998. Secondly, the Company in 1999 will not benefit from emergency
work resulting from El Nino that helped the first and second quarters in 1998.
Finally, the Company remains focused on growth both internally and
externally. We believe we are working to carry out a strategic plan that puts us
in the right place at the right time to capitalize on the exciting opportunities
ahead of us. We will continue to work our plan, focusing on profitable growth
through expanding internal operations and strategic acquisitions in an effort to
provide an optimal level of value to our stockholders.
PRIOR YEARS
REVENUE AND BACKLOG. During the year ended December 31, 1997, revenue
increased $99.4 million (10.7%) to $1.028 billion. The increase in revenue is
associated with higher levels of bidding opportunities and awards in our Branch
Division. The Branch Division revenue increased $116.3 million to $831.9 million
in 1997, from $715.6 million in 1996. Heavy Construction Division (HCD) revenue
decreased $16.9 million to $196.3 million in 1997, from $213.2 million in 1996.
The Company's revenue from public sector contracts increased to $726.6 million,
or 70.6% of the Company's revenue in 1997, from $657.2 million, or 70.7% in
1996. Revenue from private sector contracts decreased $3.6 million to $174.5
million in 1997, and decreased from 19.2% of total revenue in 1996 to 17.0% of
total revenue in 1997.
During the year ended December 31, 1996 revenue increased $34.0 million
(3.8%) to $928.8 million due to higher levels of bidding opportunities and
awards in our Branch Division and a full year of Utah Branch activity in 1996.
The Company's backlog at December 31, 1997 was $909.8 million, up $311.9
million, or 52.2% over the same period in 1996.
GROSS PROFIT. For the year ended December 31, 1997, gross profit reached
$111.7 million, a $1.0 million increase from 1996. As a percentage of revenue,
gross profit decreased in 1997 to 10.9% from 11.9% in 1996, due in part to an
increase in revenue recognized for contracts that had not reached the 25%
completion threshold. Additionally, gross profit in 1997 reflected the absence
of the San Joaquin Hills Toll Road Project completed in late 1996 which carried
a higher than average gross profit margin.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased from $71.6 million, or 7.7% of revenue in 1996, to $73.6 million, or
7.2% of revenue in 1997. The increase reflects a higher level of costs to
support the Company's increased revenue and bidding activities and increased
personnel to support the Company's expansion into the South/East marketplace.
16
<PAGE> 17
OPERATING INCOME. The Branch Division's contribution to operating income
in 1997 increased over the 1996 contribution due primarily to increased revenue
driven by higher levels of bidding opportunities and awards. The Heavy
Construction Division's contribution to operating income decreased in 1997 as
compared to 1996, due in part to an increase in revenue recognized for contracts
that had not reached the 25% completion threshold. Additionally, HCD's operating
income in 1997 reflects the absence of the San Joaquin Hills Toll Road Project
completed in late 1996 which carried a higher than average gross profit margin.
OTHER INCOME (EXPENSES). Other income increased $1.7 million to $6.0
million in 1997. The increase was due to an increase in the Company's equity in
the earnings of its affiliates partially offset by higher interest expense
associated with higher debt levels and a decrease in gains on sales of property
and equipment.
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
---------------------------------------------------------------
Dollars in thousands 1998 1997 1996
---------------------------------------------------------------
<S> <C> <C> <C>
Cash and cash equivalents $ 62,470 $ 54,359 $ 38,663
Net cash provided (used) by:
Operating activities 96,030 63,798 61,424
Investing activities (87,194) (49,207) (37,548)
Financing activities (725) 1,105 (7,623)
Capital expenditures 52,462 48,448 46,139
Working Capital 142,448 103,910 92,542
---------------------------------------------------------------
</TABLE>
During 1998, cash provided from operations of $96.0 million was
primarily used to purchase $52.5 million of property and equipment, to purchase
short-term investments and to pay dividends of $7.7 million. Changes in cash
provided by operating activities primarily reflect profitability and normal
variations in the cash flow on contracts and payables.
The Company's practice has been to replace and replenish its equipment
fleet with cash generated from operations. Cash purchases of property and
equipment increased $4.1 million from 1997 to 1998 and $2.3 million from 1996 to
1997.
On March 19, 1998 the Company issued Senior Notes in the amount of $60
million to a group of institutional holders. The notes are due in nine equal
annual installments beginning in 2002 and bear interest at 6.54% per annum. The
Company used $39 million of the proceeds of the notes to retire its bank
revolving credit notes.
On March 17, 1999, the Board of Directors authorized the Company to
repurchase, at management's discretion, up to $35 million of its common stock on
the open market, exclusive of repurchases related to employee benefit plans.
This authorization amends an authorization previously made in March of 1997.
Through March 26, 1999 581,050 shares have been repurchased for a total purchase
price of $13.7 million, including 561,400 shares repurchased subsequent to
December 31, 1998. The remaining amount authorized of $21.3 million equates to
919,178 shares using the closing market price of $23.13 on March 25, 1999.
The Company has budgeted $58.0 million for capital expenditures in 1999,
which includes amounts for construction equipment, aggregate and asphalt plants,
buildings, leasehold improvements and the purchase of land and aggregate
reserves. The Company anticipates that cash generated internally and amounts
available under its existing credit facilities will be sufficient to meet its
capital and other requirements, including contributions to employee benefit
plans, for the foreseeable future. The Company currently has access to funds
under its revolving credit agreement which allow it to borrow up to $75.0
million, of which $71.5 million was available at December 31, 1998.
17
<PAGE> 18
SUBSEQUENT EVENTS. On March 17, 1999, the Board of Directors declared a
special dividend of $0.12 per share of common stock in addition to a $0.07 per
share quarterly dividend, payable on April 16, 1999 to stockholders of record as
of March 31, 1999. The quarterly dividend represents a $0.01 per share increase
over the dividends paid in the third and fourth quarter of 1998 of $0.06 per
share.
IMPACT OF THE YEAR 2000 ISSUE. The Year 2000 issue is the result of
computer programs being written using two digits rather than four to define the
applicable year. The issue arises if date-sensitive software recognizes a date
using "00" as the year 1900 rather than the year 2000. This could result in a
system failure or miscalculations causing disruptions of operations, including,
among other things, a temporary inability to process transactions, send
invoices, or engage in similar normal business activities.
The Company's information technology systems consist primarily of
hardware and software purchased from outside parties. The vendor for the
Company's enterprise-wide software has informed the Company that the version of
its software that the Company is currently utilizing is Year 2000 compliant and
the Company has substantially completed its testing to verify that this is the
case and will have its testing reviewed by a third party during the first half
of 1999. The Company is in the process of addressing the Year 2000 compliance of
other software and hardware, including embedded chips, being used in its
business. The Company is utilizing a seven step process in addressing compliance
of these other systems: (1) awareness; (2) inventory of all systems and
documentation; (3) assessment to identify any areas of noncompliance; (4)
remediation/renovation of any noncompliant systems; (5) verification of
compliance through testing and/or vendor certification; (6) implementation of
any necessary changes revealed during verifications; and (7) monitoring of the
results of implementation. The Company expects to have completed this process
for its non-enterprise software and hardware in mid 1999.
The Company has begun the process of identifying and making inquiries of
its significant suppliers and large public and private sector customers to
determine the extent to which the Company is vulnerable to those third parties'
failure to solve their own Year 2000 issues. The Company expects that the
process of making inquiries to these significant suppliers and customers will be
ongoing through the end of 1999. However, there can be no guarantee that the
systems of other companies or public agencies with which the Company does
business will be timely converted, or that failure to convert by another company
or public agency would not have a material adverse effect on the Company.
The Company's most reasonably likely worst case Year 2000 scenario would
be an interruption in work or cash flow resulting from unanticipated problems
encountered with the information systems of the Company, or of any of the
significant third parties with whom the Company does business. The Company
believes that the risk of significant business interruption due to unanticipated
problems with its own systems is low based on the progress of the Year 2000
project to date. If unforeseen internal disruptions occur, the Company believes
that its existing disaster recovery program, which includes the manual
processing of certain key transactions, would significantly mitigate the impact.
The Company's highest risk relates to significant suppliers or customers failing
to remediate their Year 2000 issues in a timely manner. Relating to its
suppliers, the Company has identified and will continue to identify alternative
suppliers. The Company's suppliers are generally locally or regionally based,
which tends to lessen the Company's exposure from the lack of readiness of any
single supplier. The risk relating to the Company's customers relates primarily
to any delay in receipt of payment due to a customer's unresolved Year 2000
issue. The Company's existing financial resources will help to mitigate such an
impact and the Company will continue to assess this risk as it receives
communications about the Year 2000 status of its customers.
The Company estimates that costs to address the Year 2000 issue will
total approximately $500,000, including costs already incurred. These estimated
costs include consulting fees and costs to remediate or replace hardware and
software as well as non-incremental costs resulting from redeployment of
internal resources. To date, approximately $420,000 has been incurred and
expensed related to the Year 2000 issue. The Company's Year 2000 costs will be
funded from its operating cash flows. The Company does not expect its Year 2000
efforts to have any significant impact on other information technology projects.
18
<PAGE> 19
QUARTERLY RESULTS
The following table sets forth selected unaudited financial information
for the Company for the eight quarters in the period ended December 31, 1998.
This information has been prepared on the same basis as the audited financial
statements and, in the opinion of management, contains all adjustments necessary
for a fair presentation thereof.
QUARTERLY FINANCIAL DATA
(Unaudited - In Thousands, Except for Per Share Data)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
1998 QUARTERS ENDED DEC. 31 SEPT. 30 JUNE 30 MARCH 31
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $ 338,000 $ 411,986 $ 292,792 $ 183,322
Gross profit 37,335 54,203 42,380 19,174
As a percent of revenue 11.1% 13.2% 14.5% 10.5%
Net income 10,059 20,521 14,545 1,382
As a percent of revenue 3.0% 5.0% 5.0% 0.8%
Net income per share:
Basic $ 0.38 $ 0.77 $ 0.55 $ 0.05
Diluted $ 0.36 $ 0.75 $ 0.54 $ 0.05
- -----------------------------------------------------------------------------------------------------
Dividends per share $ 0.06 $ 0.06 $ 0.05 $ 0.13
Market price
High $ 34.38 $ 33.50 $ 20.59 $ 19.68
Low $ 25.13 $ 19.68 $ 17.38 $ 14.26
- -----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
1997 QUARTERS ENDED DEC. 31 SEPT. 30 JUNE 30 MARCH 31
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $ 309,820 $ 328,988 $ 242,576 $ 146,821
Gross profit 26,008 38,882 30,990 15,850
As a percent of revenue 8.4% 11.8% 12.8% 10.8%
Net income 5,631 13,651 8,307 243
As a percent of revenue 1.8% 4.1% 3.4% 0.2%
Net income per share:
Basic $ 0.21 $ 0.51 $ 0.31 $ 0.01
Diluted $ 0.21 $ 0.51 $ 0.31 $ 0.01
- -----------------------------------------------------------------------------------------------------
Dividends per share $ 0.04 $ 0.04 $ 0.04 $ 0.13
Market price
High $ 16.01 $ 16.05 $ 14.17 $ 16.51
Low $ 13.55 $ 12.84 $ 11.84 $ 11.51
- -----------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 20
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to financial market risks due primarily to
changes in interest rates which it manages primarily by managing the maturities
in its investment portfolio. The Company does not use derivatives to alter the
interest characteristics of its investment securities or its debt instruments.
The Company has no holdings of derivative or commodity instruments and does not
transact business in foreign currencies.
The fair value of the Company's investment portfolio or related income
would not be significantly impacted by changes in interest rates since the
investment maturities are short and the interest rates are primarily fixed. The
Company's senior notes payable of $60.0 million at December 31, 1998 carry a
fixed interest rate of 6.54% per annum with principle payments due in nine equal
annual installments beginning in 2002. The Company's notes payable to bank of
$15.0 million carry a variable interest rate at primarily the IBOR rate plus
margin (5.91% at December 31, 1998) with principal payable semiannually through
June 2000.
The table below presents principal amounts and related weighted average
interest rates by year for the Company's cash and cash equivalents, short-term
investments and significant debt obligations:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Dollars in thousands ................ 1999 2000 2001 2002 2003 Thereafter Total
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Cash, cash equivalents and short-term
investments ......................... $120,396 $ -- $ 1,028 $ -- $ -- $ -- $121,424
Weighted average interest rate ...... 5.18% -- 5.0% -- -- --
Liabilities
Fixed rate debt
Senior notes payable ........... -- -- -- 6,667 6,667 46,666 60,000
Weighted average interest rate . -- -- -- 6.54% 6.54% 6.54% 6.54%
Variable rate debt (IBOR plus margin)
Notes payable to bank .......... 10,000 5,000 -- -- -- -- 15,000
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The estimated fair value of the Company's cash, cash equivalents and
short-term investments approximate the principal amounts reflected above based
on the short maturities of these financial instruments. The estimated fair value
of the Company's debt obligations approximates the principal amounts reflected
above based on rates currently available for debt with similar terms and
remaining maturities.
20
<PAGE> 21
ITEM 8.CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of the Registrant and
auditor's report are included in Item 8 and appear following Item 14:
Report of Independent Accountants
Consolidated Balance Sheets - At December 31, 1998 and 1997
Consolidated Statements of Income - Years Ended
December 31, 1998, 1997 and 1996
Consolidated Statements of Stockholders' Equity - Years Ended
December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows - Years Ended
December 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
Additionally, a two-year Summary of Quarterly Results is included in
Item 7 under "Quarterly Results."
21
<PAGE> 22
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
Not applicable.
22
<PAGE> 23
PART III
Certain information required by Part III is omitted from this Report in
that the Company will file its definitive proxy statement (the "Proxy
Statement") pursuant to Regulation 14A not later than 120 days after the end of
the fiscal year covered by this report, and certain information included therein
is incorporated herein by reference.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to the directors of the Company is set forth under the
caption "Information about Granite - Management, Directors" in the Company's
definitive Proxy Statement in connection with the Annual Meeting of Stockholders
to be held May 24, 1999. Such information is incorporated herein by reference.
Information relating to the executive officers of the Company is set forth in
Part I of this report under the caption "Executive Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION
Information relating to executive compensation is set forth under the
caption "Information about Granite - Compensation of Directors and Executive
Officers" in the Company's definitive Proxy Statement in connection with the
Annual Meeting of Stockholders to be held May 24, 1999. Such information is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information relating to ownership of equity securities of the Company by
certain beneficial owners and Management is set forth under the caption
"Information about Granite Stock Ownership of Certain Beneficial Owners and
Management" in the Company's definitive Proxy Statement in connection with the
Annual Meeting of Stockholders to be held May 24, 1999. Such information is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information relating to certain relationships and related transactions is
set forth under the caption "Information about Granite - Management, Certain
Transactions with Management" in the Company's definitive Proxy Statement in
connection with the Annual Meeting of Stockholders to be held May 24, 1999. Such
information is incorporated herein by reference.
23
<PAGE> 24
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
The following documents are filed as part of this Report:
(a) 1. FINANCIAL STATEMENTS. The following consolidated financial
statements are filed as part of this Report:
<TABLE>
<CAPTION>
Form 10-K
Pages
-----------
<S> <C>
Report of Independent Accountants.................................. F-1
Consolidated Balance Sheets at December 31, 1998 and 1997.......... F-2
Consolidated Statements of Income for the Years Ended
December 31, 1998, 1997 and 1996................................ F-3
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1998, 1997 and 1996.................... F-4
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996................................ F-5
Notes to the Consolidated Financial Statements..................... F-6 to F-18
</TABLE>
2. FINANCIAL STATEMENT SCHEDULE. The following financial statement
schedule of Granite Construction Incorporated for the years ended
December 31, 1998, 1997 and 1996 is filed as part of this Report and
should be read in conjunction with the consolidated financial
statements of Granite Construction Incorporated.
<TABLE>
<CAPTION>
Form 10-K
Pages
-----------
<S> <C>
Report of Independent Accountants on Financial Statement Schedule...... S-1
Schedule
Schedule II - Schedule of Valuation and Qualifying Accounts....... S-2
</TABLE>
Schedules not listed above have been omitted because the required
information is not applicable or is shown in the financial statements
or notes.
3. EXHIBITS. The Exhibits listed in the accompanying Exhibit Index are
filed or incorporated by reference as part of this Report.
(b) REPORTS ON FORM 8-K. The registrant was not required to file any
reports on Form 8-K during the fourth quarter of fiscal 1998.
24
<PAGE> 25
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
Granite Construction Incorporated:
Watsonville, California
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of Granite
Construction Incorporated and its subsidiaries at December 31, 1998 and 1997,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles. 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 of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
San Jose, California
February 12, 1999, except
Note 15, as to which the date is
March 26, 1999
F-1
<PAGE> 26
GRANITE CONSTRUCTION INCORPORATED
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
===============================================================================================
DECEMBER 31, 1998 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 62,470 $ 54,359
Short-term investments 58,954 18,410
Accounts receivable 174,748 168,968
Costs and estimated earnings in excess of billings 14,677 22,585
Inventories 12,773 12,251
Deferred income taxes 15,397 13,365
Equity in construction joint ventures 20,020 12,951
Other current assets 11,769 11,394
-----------------------
Total current assets 370,808 314,283
- -----------------------------------------------------------------------------------------------
Property and equipment 205,737 194,339
- -----------------------------------------------------------------------------------------------
Other assets 50,026 43,187
- -----------------------------------------------------------------------------------------------
$ 626,571 $ 551,809
===============================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 10,787 $ 12,921
Accounts payable 88,194 80,809
Billings in excess of costs and estimated earnings 50,619 51,573
Accrued expenses and other current liabilities 78,760 65,070
-----------------------
Total current liabilities 228,360 210,373
- -----------------------------------------------------------------------------------------------
Long-term debt 69,137 58,396
- -----------------------------------------------------------------------------------------------
Deferred income taxes 27,792 25,606
- -----------------------------------------------------------------------------------------------
Commitments and contingencies -- --
- -----------------------------------------------------------------------------------------------
Stockholders' equity
Preferred stock, $0.01 par value, authorized 3,000,000 shares,
none outstanding -- --
Common stock, $0.01 par value, authorized 50,000,000 shares;
issued and outstanding 27,648,961 shares in 1998
and 27,399,563 in 1997 277 274
Additional paid-in capital 45,080 39,745
Retained earnings 262,517 223,498
-----------------------
307,874 263,517
Unearned compensation (6,592) (6,083)
-----------------------
301,282 257,434
- -----------------------------------------------------------------------------------------------
$ 626,571 $ 551,809
===============================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
<PAGE> 27
GRANITE CONSTRUCTION INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
====================================================================================================
YEARS ENDED DECEMBER 31, 1998 1997 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue $ 1,226,100 $ 1,028,205 $ 928,799
Cost of revenue 1,073,008 916,475 818,144
-------------------------------------------
GROSS PROFIT 153,092 111,730 110,655
General and administrative expenses 83,834 73,593 71,587
-------------------------------------------
OPERATING INCOME 69,258 38,137 39,068
- ----------------------------------------------------------------------------------------------------
Other income (expense)
Interest income 9,856 7,941 6,330
Interest expense (9,551) (7,515) (4,367)
Gain on sales of property and equipment 1,819 2,463 3,458
Other, net 3,629 3,152 (1,080)
-------------------------------------------
5,753 6,041 4,341
- ----------------------------------------------------------------------------------------------------
INCOME BEFORE PROVISION FOR INCOME TAXES 75,011 44,178 43,409
Provision for income taxes 28,504 16,346 16,061
- ----------------------------------------------------------------------------------------------------
NET INCOME $ 46,507 $ 27,832 $ 27,348
====================================================================================================
Net income per share
Basic $ 1.75 $ 1.05 $ 1.04
Diluted $ 1.70 $ 1.03 $ 1.02
Weighted average shares of common and
common stock equivalents outstanding
Basic 26,559 26,397 26,207
Diluted 27,339 26,942 26,748
Dividends per share $ 0.30 $ 0.24 $ 0.25
====================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 28
GRANITE CONSTRUCTION INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
==========================================================================================================================
ADDITIONAL
COMMON PAID-IN RETAINED UNEARNED
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998 STOCK CAPITAL EARNINGS COMPENSATION TOTAL
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCES, DECEMBER 31, 1995 $ 270 $ 32,409 $ 180,341 $ (3,115) $ 209,905
Net income -- -- 27,348 -- 27,348
Restricted stock issued - 273,134 shares, net 1 3,993 -- (3,994) --
Amortized restricted stock -- -- -- 1,968 1,968
Employee stock options exercised and
related tax benefit- 89,025 shares 2 934 -- -- 936
Repurchase of common stock - 161,412 shares -- (2,076) -- -- (2,076)
Common stock contributed to ESOP - 120,000 shares -- 1,550 -- -- 1,550
Cash dividends on common stock -- -- (6,760) -- (6,760)
Tax benefit from ESOP dividends -- -- 734 -- 734
- --------------------------------------------------------------------------------------------------------------------------
BALANCES, DECEMBER 31, 1996 273 36,810 201,663 (5,141) 233,605
Net income -- -- 27,832 -- 27,832
Restricted stock issued - 234,396 shares, net 1 3,240 -- (3,241) --
Amortized restricted stock -- -- -- 2,299 2,299
Employee stock options exercised and
related tax benefit- 32,850 shares -- 350 -- -- 350
Repurchase of common stock - 251,163 shares -- (3,011) (126) -- (3,137)
Common stock contributed to ESOP - 195,000 shares -- 2,356 -- -- 2,356
Cash dividends on common stock -- -- (6,578) -- (6,578)
Tax benefit from ESOP dividends -- -- 707 -- 707
- --------------------------------------------------------------------------------------------------------------------------
BALANCES, DECEMBER 31, 1997 274 39,745 223,498 (6,083) 257,434
Net income -- -- 46,507 -- 46,507
Restricted stock issued - 213,926 shares, net 2 3,793 -- (3,795) --
Amortized restricted stock -- -- -- 3,286 3,286
Employee stock options exercised and
related tax benefit- 81,405 shares 1 1,402 -- -- 1,403
Repurchase of common stock - 107,733 shares -- (2,440) -- -- (2,440)
Common stock contributed to ESOP - 61,800 shares -- 1,580 -- -- 1,580
Cash dividends on common stock -- -- (8,288) -- (8,288)
Tax benefit from ESOP dividends and other -- 1,000 800 -- 1,800
- --------------------------------------------------------------------------------------------------------------------------
BALANCES, DECEMBER 31, 1998 $ 277 $ 45,080 $ 262,517 $ (6,592) $ 301,282
==========================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 29
GRANITE CONSTRUCTION INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
===========================================================================================================
YEARS ENDED DECEMBER 31, 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net income $ 46,507 $ 27,832 $ 27,348
Add (deduct) noncash items included in net income:
Depreciation, depletion and amortization 38,124 38,219 37,775
Gain on sales of property and equipment (1,819) (2,463) (3,458)
Deferred income taxes 154 726 3,962
Decrease in unearned compensation 3,286 2,299 1,968
Common stock contributed to ESOP 1,580 2,356 1,550
Equity in (gain) loss of affiliates (2,728) (733) 1,648
Cash provided by (used in):
Accounts and notes receivable (10,715) (43,072) 15,990
Inventories (522) 1,242 (3,313)
Equity in construction joint ventures (7,069) (7,580) (5,161)
Other assets 189 864 (277)
Accounts payable 7,385 16,751 (3,998)
Billings in excess of costs and estimated earnings, net 6,954 13,130 (9,739)
Accrued expenses 14,704 14,227 (2,871)
----------------------------------
Net cash provided by operating activities 96,030 63,798 61,424
- -----------------------------------------------------------------------------------------------------------
Investing Activities
Additions to property and equipment (52,462) (48,448) (46,139)
Proceeds from sales of property and equipment 5,357 4,688 8,027
Investment in affiliates (385) (13,689) (8,566)
Additions to notes receivable (173) (203) (874)
Repayments of notes receivable 502 720 618
Sales of (additions to) investments and other assets 511 (7,432) (1,629)
Purchases of short-term investments (91,090) (27,351) (45,639)
Maturities of short-term investments 50,546 42,508 56,654
----------------------------------
Net cash used by investing activities (87,194) (49,207) (37,548)
- -----------------------------------------------------------------------------------------------------------
Financing Activities
Additions to long-term debt 60,000 27,046 15,000
Repayments of long-term debt (51,392) (16,480) (14,654)
Employee stock options exercised 832 246 673
Repurchase of common stock (2,440) (3,137) (2,076)
Dividends paid (7,725) (6,570) (6,566)
----------------------------------
Net cash provided (used) by financing activities (725) 1,105 (7,623)
- -----------------------------------------------------------------------------------------------------------
Increase in cash and cash equivalents 8,111 15,696 16,253
Cash and cash equivalents at beginning of year 54,359 38,663 22,410
----------------------------------
Cash and cash equivalents at end of year $ 62,470 $ 54,359 $ 38,663
===========================================================================================================
Supplementary Information Cash paid during the year for:
Interest $ 4,857 $ 5,180 $ 3,464
Income taxes 22,294 10,172 10,258
Noncash financing and investing activity:
Restricted stock issued for services $ 3,795 $ 3,241 $ 3,994
Dividends accrued but not paid 1,659 1,096 1,088
Financed acquisition of property and equipment -- 6,963 --
===========================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 30
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
-----------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS: The Company is a heavy civil
contractor engaged in the construction of highways, dams, airports,
mass transit facilities, real estate site developments and other
infrastructure related projects. The Company has offices in
California, Texas, Georgia, Nevada, Arizona, Utah, Maryland and
Florida.
PRINCIPLES OF CONSOLIDATION: The consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries. All significant intercompany transactions and accounts
have been eliminated. The Company uses the equity method of
accounting for companies where its ownership is between 20% and 50%
and for other ventures and partnerships in which less than a
controlling interest is held. The Company's proportionate share of
construction joint venture revenue, cost of revenue and other income
is included in the consolidated statements of income.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL
STATEMENTS: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
CONSTRUCTION CONTRACTS: Earnings on construction contracts
including construction joint ventures are recognized on the
percentage of completion method in the ratio of costs incurred to
estimated final costs. Revenue in an amount equal to cost incurred is
recognized prior to contracts reaching 25% completion. The related
earnings are not recognized until the period in which such percentage
completion is attained. Revisions in contract revenue and cost
estimates are reflected in the accounting period when known.
Provision for the entire amount of estimated losses on uncompleted
contracts is made in the period such losses are determined. Claims
for additional contract revenue are recognized if it is probable that
the claim will result in additional revenue and the amount can be
reliably estimated.
BALANCE SHEET CLASSIFICATIONS: The Company includes in
current assets and liabilities amounts receivable and payable under
construction contracts which may extend beyond one year. A one-year
time period is used as the basis for classifying all other current
assets and liabilities.
CASH AND CASH EQUIVALENTS: Cash equivalents are securities
held for cash management purposes having maturities of three months
or less from the date of purchase.
SHORT-TERM INVESTMENTS: Short-term investments that are
deemed by management to be held-to-maturity are reported at amortized
cost. Short-term investments that are considered available-for-sale
are carried at fair value. Unrealized gains and losses, if material,
are reported net of tax as a separate component of stockholders'
equity until realized. Realized gains and losses, if any, are
determined using the specific identification method.
FINANCIAL INSTRUMENTS: The carrying value of short-term
investments approximates their fair value as determined by market
quotes. All significant debt obligations carry variable interest
rates or interest rates that approximate market and their carrying
value is considered to approximate fair value. The carrying value of
receivables and other amounts arising out of normal contract
activities, including retentions, which may be settled beyond one
year, is estimated to approximate fair value.
INVENTORIES: Inventories consist primarily of quarry
products valued at the lower of average cost or market.
F-6
<PAGE> 31
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
-----------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
PROPERTY AND EQUIPMENT: Property and equipment are stated
at cost. Depreciation is provided using accelerated methods over
lives ranging from four to ten years for construction equipment and
the straight-line method over lives from three to twenty years for
the remaining depreciable assets. Depletion of quarry property is
based on the usage of depletable reserves. The cost and accumulated
depreciation or depletion of property sold or retired are removed
from the accounts and gains or losses, if any, are reflected in
earnings for the period.
INTANGIBLE ASSETS: Intangible assets consist primarily of
covenants not to compete amortized on a straight-line basis over five
years.
INCOME TAXES: Deferred taxes are provided on a liability
method whereby deferred tax assets are recognized for deductible
temporary differences and operating loss carryforwards and deferred
tax liabilities are recognized for taxable temporary differences.
Temporary differences are the differences between the reported
amounts of assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and
rates on the date of enactment.
COMPUTATION OF EARNINGS PER SHARE: Basic earnings per share
is computed by dividing income available to common stockholders by
the weighted average number of common shares outstanding, excluding
restricted common stock. Diluted earnings per share is computed
giving effect to all dilutive potential common shares that were
outstanding during the period. Dilutive potential common shares
consist of the incremental common shares issuable upon the exercise
of stock options, warrants and upon the vesting of restricted common
stock.
STOCK SPLIT: On July 6, 1998, the Company announced that
its Board of Directors approved a three-for-two stock split in the
form of a 50% stock dividend payable on August 7, 1998 to
stockholders of record on July 17, 1998. All references in the
financial statements to number of shares and per share amounts of the
Company's common stock have been retroactively restated to reflect
the increased number of shares outstanding.
RECLASSIFICATIONS: Certain financial statement items have
been reclassified to conform to the current year's format. These
reclassifications had no impact on previously reported net income.
COMPREHENSIVE INCOME: In the first quarter of 1998 the
Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income," which specifies the computation,
presentation and disclosure requirements for comprehensive income.
There was no impact on the Company's financial position, results of
operations or cash flows as a result of adoption. Comprehensive
income and net income are the same.
F-7
<PAGE> 32
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
-----------------------------------------------
2. DISCLOSURE OF SIGNIFICANT RISKS AND UNCERTAINTIES
DISCLOSURE OF SIGNIFICANT ESTIMATES - REVENUE RECOGNITION:
As outlined in the Summary of Significant Accounting Policies, the
Company's construction revenue is recognized on the percentage of
completion basis. Consequently, construction revenue and gross margin
for each reporting period is determined on a contract by contract
basis by reference to estimates by the Company's engineers of
expected costs to be incurred to complete each project. These
estimates include provisions for known and anticipated cost overruns,
if any exist or are expected to occur. These estimates may be subject
to revision in the normal course of business.
DISCLOSURE OF SIGNIFICANT ESTIMATES - LITIGATION: The
Company has been named as a defendant in legal proceedings wherein
substantial damages are claimed. Such proceedings are not uncommon in
the Company's business and usually involve claims against multiple
defendants who were involved in the project which is the subject of
the proceeding. Historically, the Company has been successful in
defending such actions or has settled them within insured limits.
CONCENTRATIONS: The Company maintains the majority of cash
balances and all of its short-term investments with several financial
institutions. The Company invests with high credit quality financial
institutions, and, by policy, limits the amount of credit exposure to
any financial institution. A significant portion of the Company's
labor force is subject to collective bargaining agreements.
Collective bargaining agreements covering 26.6% of the Company's
unionized labor force at December 31, 1998 will expire during 1999.
Revenue received from federal, state and local government
agencies amounted to $835,986 (68.2%) in 1998, $726,657 (70.6%) in
1997, and $657,247 (70.7%) in 1996. California Department of
Transportation represented $142,008 (11.6%) in 1998, $139,300 (13.5%)
in 1997, and $104,171 (11.2%) in 1996 of total revenue. Utah
Department of Transportation, including the Company's portion of a
construction joint venture, represented $138,077 (11.3%) of total
revenue in 1998. At December 31, 1998, 1997 and 1996 the Company had
significant amounts receivable from these agencies. The Company
performs ongoing credit evaluations of its customers and generally
does not require collateral, although the law provides the Company
the ability to file mechanics liens on real property improved for
private customers in the event of non-payment by such customers. The
Company maintains reserves for potential credit losses and such
losses have been within management's expectations. The Company has no
foreign operations.
F-8
<PAGE> 33
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
-----------------------------------------------
3. SHORT-TERM INVESTMENTS
The carrying and market values of short-term investments
are as follows at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
Held-To-Maturity Held-To-Maturity
December 31, 1998 December 31, 1997
Carrying Unrealized Unrealized Fair Carrying Unrealized Unrealized Fair
Value Gains Losses Value Value Gains Losses Value
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government and Agency
Obligations $ 19,271 $ 10 $ -- $ 19,281 $ 1,998 $ -- $ -- $ 1,998
Commercial Paper 25,721 2 (4) 25,719 -- -- -- --
Municipal Bonds 5,022 12 -- 5,034 5,019 -- -- 5,019
Domestic Banker's Acceptance 4,921 -- (3) 4,918 3,450 -- -- 3,450
----------------------------------------------------------------------------------------------
54,935 24 (7) 54,952 10,467 -- -- 10,467
----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Available-For-Sale Available-For-Sale
December 31, 1998 December 31, 1997
Carrying Unrealized Unrealized Fair Carrying Unrealized Unrealized Fair
Value Gains Losses Value Value Gains Losses Value
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government and Agency
Obligations 2,991 7 -- 2,998 2,984 -- -- 2,984
Municipal Bonds 1,028 4 -- 1,032 4,959 44 -- 5,003
-------- -------- -------- -------- ---------- ------ ------ --------
4,019 11 -- 4,030 7,943 44 -- 7,987
-------- -------- -------- -------- ---------- ------ ------ --------
Total Short-Term Investments $ 58,954 $ 35 $ (7) $ 58,982 $ 18,410 $ 44 $ -- $ 18,454
======== ======== ======== ======== ========== ====== ====== ========
</TABLE>
There were no sales of investments classified as
available-for-sale for the years ended December 31, 1998, 1997 and
1996. Unrealized gains and losses were considered immaterial for both
1998 and 1997 and, thus, not recorded as a separate item in
stockholders' equity. At December 31, 1998, scheduled maturities of
investments are as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Held-To- Available-
Maturity For-Sale Total
------------------------------------------------------------------------------
<S> <C> <C> <C>
Within one year $54,935 $ 2,991 $57,926
After one year through five years -- 1,028 1,028
------------------------------------------------------------------------------
$54,935 $ 4,019 $58,954
==============================================================================
</TABLE>
For the years ended December 31, 1998 and 1997, purchases and
maturities were as follows:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
--------------------------------------- ------------------------------------------
Held-To- Available- Held-To- Available-
Maturity For-Sale Total Maturity For-Sale Total
--------------------------------------- ------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Purchases $83,968 $ 7,122 $91,090 $ 16,566 $ 10,785 $ 27,351
Maturities 39,500 11,046 50,546 26,500 16,008 42,508
--------------------------------------- ------------------------------------------
Net change $44,468 $ (3,924) $40,544 $ (9,934) $ (5,223) $(15,157)
======================================= ==========================================
</TABLE>
F-9
<PAGE> 34
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
-----------------------------------------------
4. ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
DECEMBER 31, 1998 1997
------------------------------------------------------------------------------
<S> <C> <C>
Construction Contracts
Completed and in progress $ 96,895 $ 94,482
Retentions 56,774 55,041
------------------------------------------------------------------------------
153,669 149,523
Construction material sales 19,554 17,383
Other 2,224 2,753
------------------------------------------------------------------------------
175,447 169,659
Less allowance for doubtful accounts 699 691
------------------------------------------------------------------------------
$174,748 $168,968
==============================================================================
</TABLE>
The balances billed but not paid by customers pursuant to
retainage provisions in construction contracts generally
become due upon completion of the contracts and acceptance
by the owners. Retainage amounts at December 31, 1998 are
expected to be collected as follows: $50,912 in 1999; $5,603
in 2000, zero in 2001 and $259 in 2002.
5. EQUITY METHOD INVESTMENTS
The Company participates in various construction joint venture
partnerships. Generally, each construction joint venture is formed to
accomplish a specific project and is dissolved upon completion of the
project. The combined assets, liabilities and net assets of these
ventures are as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
DECEMBER 31, 1998 1997
--------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Total $245,071 $276,038
Less other venturers' interest 183,701 208,830
--------------------------------------------------------------------------------------------
Company's interest 61,370 67,208
--------------------------------------------------------------------------------------------
Liabilities
Total 162,476 223,711
Less other venturers' interest 121,126 169,454
--------------------------------------------------------------------------------------------
Company's interest 41,350 54,257
--------------------------------------------------------------------------------------------
Company's interest in net assets $ 20,020 $ 12,951
============================================================================================
</TABLE>
F-10
<PAGE> 35
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
-----------------------------------------------
5. EQUITY METHOD INVESTMENTS, CONTINUED
The revenue and costs of revenue of construction joint
ventures are as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 1998 1997 1996
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue
Total $649,042 $326,895 $234,824
Less other venturers' interest 497,407 248,028 164,676
----------------------------------------------------------------------------------------------------
Company's interest 151,635 78,867 70,148
----------------------------------------------------------------------------------------------------
Cost of Revenue
Total 578,608 287,705 160,056
Less other venturers' interest 443,123 220,497 112,313
----------------------------------------------------------------------------------------------------
Company's interest 135,485 67,208 47,743
----------------------------------------------------------------------------------------------------
$ 16,150 $ 11,659 $ 22,405
====================================================================================================
</TABLE>
Additionally, the Company has investments in affiliates that
are accounted for on the equity method. The most significant of
these investments is a 30% interest in T.I.C. Holdings, Inc. and a
22.2% limited partnership interest in a partnership which
constructed and operates a private toll road. At December 31, 1998
the Company had a commitment supported by a letter of credit of
$2,044 related to its limited partnership interest. The summarized
unaudited financial information below represents an aggregation of
the Company's nonsubsidiary affiliates:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 1998 1997 1996
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance sheet data
Assets $ 328,496 $275,685
Liabilities 267,397 216,512
Net assets 61,099 59,173
-------------------------------------------------------------------------------------------------
Company's equity investment in affiliates 29,515 25,008
-------------------------------------------------------------------------------------------------
Earnings data
Revenue 561,568 434,389 $ 6,719
Gross profit 50,452 41,137 (3,104)
Earnings (loss) before taxes 7,510 1,891 (7,446)
-------------------------------------------------------------------------------------------------
Company's equity in earnings (loss) $ 2,728 $ 733 $ (1,648)
-------------------------------------------------------------------------------------------------
</TABLE>
F-11
<PAGE> 36
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
-----------------------------------------------
6. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
DECEMBER 31, 1998 1997
------------------------------------------------------------------------------
<S> <C> <C>
Land $ 30,195 $ 20,654
Quarry property 35,862 35,862
Buildings and leasehold improvements 20,595 17,175
Equipment and vehicles 443,095 416,073
Office furniture and equipment 4,835 5,467
------------------------------------------------------------------------------
534,582 495,231
Less accumulated depreciation,
depletion and amortization 328,845 300,892
------------------------------------------------------------------------------
$205,737 $194,339
==============================================================================
</TABLE>
7. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
DECEMBER 31, 1998 1997
----------------------------------------------------------------------------
<S> <C> <C>
Payroll and related employee benefits $34,829 $24,374
Accrued insurance 26,487 25,882
Income taxes 2,542 3,129
Other 14,902 11,685
----------------------------------------------------------------------------
$78,760 $65,070
============================================================================
</TABLE>
8. LONG-TERM DEBT AND CREDIT ARRANGEMENTS
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
DECEMBER 31, 1998 1997
-----------------------------------------------------------------------------
<S> <C> <C>
Bank revolving credit notes $ -- $39,000
Senior notes payable 60,000 --
Notes payable to bank 15,000 25,000
Other notes payable 4,924 7,317
-----------------------------------------------------------------------------
79,924 71,317
Less current maturities 10,787 12,921
-----------------------------------------------------------------------------
$69,137 $58,396
=============================================================================
</TABLE>
The aggregate minimum principal maturities of long-term debt
for each of the five years following December 31, 1998 are
as follows: 1999 - $10,787; 2000 - $6,539; 2001 - $1,290;
2002 - $6,851; 2003 - $6,863 and beyond 2003 - $47,594.
The Company has a bank revolving line of credit of $75,000
which allows for unsecured borrowings for up to five years through
June 30, 2000, with interest rate options. Outstanding borrowings
under the revolving line of credit are at the IBOR interest rate
plus margin with principal payable semiannually beginning December
2000 through June 2005 and interest payable quarterly. There were
no amounts outstanding at December 31, 1998.
The Company has standby letters of credit totaling
approximately $5,542 outstanding at December 31, 1998 of which
$3,498 reduces the amount available under the revolving line of
credit and $2,044 supports the commitment by the Company related
to its investment in a limited partnership. The unused and
available portion of the line of credit at December 31, 1998 was
approximately $71,500.
F-12
<PAGE> 37
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
-----------------------------------------------
8. LONG-TERM DEBT AND CREDIT ARRANGEMENTS, CONTINUED
On March 19, 1998 the Company issued Senior Notes Payable
in the amount of $60 million to a group of institutional holders. The
notes are due in nine equal annual installments beginning in 2002 and
bear interest at 6.54% per annum. The Company used $39 million of the
proceeds of the notes to retire its bank revolving credit notes.
Notes payable to bank are unsecured with principal payable
semiannually and interest payable quarterly at primarily the IBOR
rate plus margin (5.91% at December 31, 1998) through June 2000.
Restrictive covenants under the terms of debt agreements
include the maintenance of certain levels of working capital and cash
flow. Other covenants prohibit capital expenditures in excess of
specified limits and require the maintenance of tangible net worth
(as defined) of approximately $211,000.
Other notes payable are comprised primarily of notes
incurred in connection with the purchase of property and equipment,
and other assets. These notes are collateralized by the assets
purchased and bear interest at 6.5% per annum with principal and
interest payable in installments through 2007.
9. EMPLOYEE BENEFIT PLANS
EMPLOYEE STOCK OWNERSHIP PLAN: The Company's Employee Stock
Ownership Plan ("ESOP") covers all employees not included in
collective bargaining agreements. As of December 31, 1998, the ESOP
owned 7,641,422 shares of the Company's common stock. Dividends on
shares held by the ESOP are charged to retained earnings and all
shares held by the ESOP are treated as outstanding in computing the
Company's earnings per share.
Contributions to the ESOP are at the discretion of the
Board of Directors. Contributions for the years ended December 31,
1998, 1997 and 1996 were approximately $1,957, $1,812 and $2,094,
respectively.
PROFIT SHARING AND 401K PLAN: The Profit Sharing and 401k
Plan is a defined contribution plan covering all employees not
included in collective bargaining agreements. Each employee can elect
to have up to 6% of gross pay contributed to the plan on a before-tax
basis. The plan allows for Company matching and additional
contributions at the discretion of the Board of Directors.
Contributions to the Profit Sharing and 401K Plan for the
years ended December 31, 1998, 1997 and 1996 were $8,402, $4,706 and
$4,064, respectively. Included in the contributions were 401K
matching contributions of $1,990, $1,807 and 1,647, respectively.
OTHER: The Company`s wholly owned subsidiary, Granite
Construction Company, also contributes to various multi-employer
pension plans on behalf of union employees. Contributions to these
plans for the years ended December 31, 1998, 1997 and 1996 were
approximately $13,498, $11,972 and $10,406, respectively.
10. STOCKHOLDERS' EQUITY
1990 OMNIBUS STOCK AND INCENTIVE PLAN: Under the Company's
1990 Omnibus Stock and Incentive Plan (the "Stock Plan") a total of
1,000,000 shares of the Company's common stock are reserved to grant
key employees of the Company restricted common stock, incentive and
nonqualified stock options, performance units and performance shares.
Restricted common stock is issued for services to be rendered and may
not be sold, transferred or pledged for such period as determined by
the compensation committee.
F-13
<PAGE> 38
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
-----------------------------------------------
10. STOCKHOLDERS' EQUITY, CONTINUED
Restricted shares outstanding under the Plan at December
31, 1998 were 1,024,717 shares. Unearned compensation is amortized
over the restriction periods of generally five years. Compensation
expense related to restricted shares for the years ended December 31,
1998, 1997 and 1996 was $3,286, $2,299 and $1,968, respectively.
The exercise price for incentive and nonqualified stock
options granted under the Stock Plan may not be less than 100% and
85%, respectively, of the fair market value at the date of the grant.
Options granted will be exercisable at such times and be subject to
such restrictions and conditions as determined by the compensation
committee, but no option shall be exercisable later than ten years
from the date of grant. Options generally vest one third after 3 years
of service from the date of grant and one third during each of the
following two years. Stock option transactions during 1998, 1997 and
1996 are summarized as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
December 31, 1998 1997 1996
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding, beginning of year 157,125 189,975 279,000
Options exercised (81,405) (32,850) (89,025)
Options forfeited (5,095) -- --
----------------------------------------------------------------------------------------
Options outstanding, end of year 70,625 157,125 189,975
----------------------------------------------------------------------------------------
</TABLE>
At December 31, 1998 all options are 100% vested. All
options were granted in 1990 and will expire in the year 2000 and were
granted, exercised and canceled at $7.56 per share.
OTHER: The Company has issued a warrant to purchase 450,000
shares of its common stock at an exercise price of $13.37 per share.
The warrant is exercisable after July 25, 1999 and expires on
July 25, 2002.
F-14
<PAGE> 39
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
-----------------------------------------------
11. EARNINGS PER SHARE
In accordance with the disclosure requirements of SFAS 128, a
reconciliation of the numerator and denominator of basic and diluted
earnings per share is provided as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 1998 1997 1996
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NUMERATOR - BASIC AND DILUTED EARNINGS PER SHARE
Net income $46,507 $27,832 $27,348
==========================================================================================================
DENOMINATOR - BASIC EARNINGS PER SHARE
Common stock outstanding 27,570 27,375 27,099
Less restricted stock outstanding 1,011 978 892
----------------------------------------------------------------------------------------------------------
TOTAL 26,559 26,397 26,207
----------------------------------------------------------------------------------------------------------
Basic earnings per share $ 1.75 $ 1.05 $ 1.04
==========================================================================================================
DENOMINATOR - DILUTED EARNINGS PER SHARE
Denominator - Basic Earnings per Share 26,559 26,397 26,207
Effect of Dilutive Securities:
Warrants 175 -- --
Common stock options 64 74 99
Restricted stock 541 471 442
----------------------------------------------------------------------------------------------------------
TOTAL 27,339 26,942 26,748
----------------------------------------------------------------------------------------------------------
Diluted earnings per share $ 1.70 $ 1.03 $ 1.02
==========================================================================================================
</TABLE>
12. INCOME TAXES
<TABLE>
<CAPTION>
Provision for income taxes:
----------------------------------------------------------------------------------------------------------
Years Ended December 31, 1998 1997 1996
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal
Current $ 23,592 $ 12,964 $ 9,727
Deferred 138 646 3,470
----------------------------------------------------------------------------------------------------------
23,730 13,610 13,197
----------------------------------------------------------------------------------------------------------
State
Current 4,758 2,656 2,372
Deferred 16 80 492
----------------------------------------------------------------------------------------------------------
4,774 2,736 2,864
----------------------------------------------------------------------------------------------------------
$ 28,504 $ 16,346 $ 16,061
==========================================================================================================
Reconciliation of statutory to effective
tax rate:
----------------------------------------------------------------------------------------------------------
Years Ended December 31, 1998 1997 1996
----------------------------------------------------------------------------------------------------------
Federal statutory tax rate 35.0% 35.0% 35.0%
State taxes, net of federal tax benefit 4.1 4.0 4.3
Percentage depletion deduction (1.1) (2.0) (1.3)
Other -- -- (1.0)
----------------------------------------------------------------------------------------------------------
38.0% 37.0% 37.0%
==========================================================================================================
</TABLE>
F-15
<PAGE> 40
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
-----------------------------------------------
12. INCOME TAXES, CONTINUED
Deferred tax assets and liabilities:
<TABLE>
<CAPTION>
----------------------------------------------------------------------
DECEMBER 31, 1998 1997
----------------------------------------------------------------------
<S> <C> <C>
Deferred Tax Assets:
Accounts receivable $ 915 $ 2,280
Inventory 1,556 1,520
Property and equipment 1,755 2,508
Insurance accruals 9,849 8,301
Deferred compensation 3,014 2,144
Other accrued liabilities 4,341 3,113
Other 936 621
Valuation allowance -- --
----------------------------------------------------------------------
22,366 20,487
----------------------------------------------------------------------
Deferred Tax Liabilities:
Property and equipment 29,697 28,837
Contract recognition 1,532 1,207
TIC basis difference 3,053 1,355
Other 479 1,329
----------------------------------------------------------------------
34,761 32,728
----------------------------------------------------------------------
$(12,395) $(12,241)
======================================================================
</TABLE>
13. LEASES
Minimum rental commitments under all noncancellable operating
leases, primarily quarry property and construction equipment, in
effect at December 31, 1998 were:
<TABLE>
<CAPTION>
Years Ending December 31,
<S> <C>
1999 $ 4,418
2000 3,793
2001 1,936
2002 1,483
2003 1,487
Later years (through 2016) 5,142
--------------------------------------------------------------------
Total minimum rental commitment $18,259
====================================================================
</TABLE>
Operating lease rental expense was $4,628 in 1998, $4,414 in
1997, and $3,593 in 1996.
F-16
<PAGE> 41
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
-----------------------------------------------
14. BUSINESS SEGMENT INFORMATION
The Company has two reportable segments: the Branch
Division and the Heavy Construction Division (HCD). The Branch
Division is comprised of branch offices that serve local markets,
while HCD pursues major infrastructure projects throughout the nation.
HCD generally has large heavy civil projects with contract amounts in
excess of $15 million and contract durations greater than two years,
while the Branch Division projects are typically smaller in size and
shorter in duration. HCD has been the primary participant in the
Company's construction joint ventures. Substantially all of the
revenue from these joint ventures is included in HCD's revenues from
external customers (Note 5).
The accounting policies of the segments are the same as
those described in the summary of significant accounting policies
(Note 1). The Company evaluates performance based on operating profit
or loss which does not include income taxes, interest income, interest
expense or other income (expense).
INFORMATION ABOUT PROFIT OR LOSS AND ASSETS
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
HCD BRANCH TOTAL
-------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1998
Revenues from external customers $ 305,856 $920,244 $1,226,100
Intersegment revenue transfer (25,668) 25,668 --
--------------------------------------------
Net revenue 280,188 945,912 1,226,100
Depreciation and amortization 7,396 27,292 34,688
Operating income 12,139 86,688 98,827
Property and equipment 26,618 167,540 194,158
-------------------------------------------------------------------------------------------
1997
Revenues from external customers $ 208,094 $820,111 $1,028,205
Intersegment revenue transfer (11,831) 11,831 --
--------------------------------------------
Net revenue 196,263 831,942 1,028,205
Depreciation and amortization 7,364 27,513 34,877
Operating income 3,394 54,679 58,073
Property and equipment 26,995 159,057 186,052
-------------------------------------------------------------------------------------------
1996
Revenues from external customers $ 213,212 $715,587 $ 928,799
Intersegment revenue transfer -- -- --
--------------------------------------------
Net revenue 213,212 715,587 928,799
Depreciation and amortization 6,852 27,462 34,314
Operating income 19,400 38,400 57,800
Property and equipment 21,245 149,470 170,715
-------------------------------------------------------------------------------------------
</TABLE>
F-17
<PAGE> 42
14. BUSINESS SEGMENT INFORMATION, CONTINUED
RECONCILIATION OF SEGMENT PROFIT OR LOSS AND ASSETS TO THE COMPANY'S
CONSOLIDATED TOTALS:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
1998 1997 1996
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Profit or Loss:
Total profit or loss for reportable segments $ 98,827 $ 58,073 $ 57,800
Other income 5,753 6,041 4,341
Unallocated other corporate expenses (29,569) (19,936) (18,732)
-----------------------------------------------------------------------------------------------
Income before provision for income taxes $ 75,011 $ 44,178 $ 43,409
===============================================================================================
Assets:
Total assets for reportable segments $194,158 $186,052
Assets not allocated to segments:
Cash and cash equivalents 62,470 54,359
Short-term investments 58,954 18,410
Deferred income taxes 15,397 13,365
Other current assets 233,987 228,149
Property and equipment 11,579 8,287
Other assets 50,026 43,187
-----------------------------------------------------------------------------------------------
Consolidated Total $626,571 $551,809
===============================================================================================
</TABLE>
15. SUBSEQUENT EVENTS
On March 17, 1999 the Board of Directors declared a cash
dividend of $0.07 per common share plus a special cash dividend of
$0.12 per share of common stock to stockholders of record as of March
31, 1999, payable on April 16, 1999.
Subsequent to December 31, 1998 and through March 26, 1999
the Company repurchased and retired 561,400 shares of its common stock
for a total price of $13,470.
F-18
<PAGE> 43
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Granite Construction Incorporated on Form S-8 (File No. 33-36482 and 33-36485)
of our report dated February 12, 1999 (except Note 15, as to which the date is
March 26, 1999) on our audits of the consolidated financial statements and the
financial statement schedule of Granite Construction Incorporated, as of
December 31, 1998 and 1997, and the years ended December 31, 1998, 1997 and
1996, which report is included in the Annual Report on Form 10-K on Page F-1.
PricewaterhouseCoopers LLP
San Jose, California
March 30, 1999
25
<PAGE> 44
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: March 26, 1999 GRANITE CONSTRUCTION INCORPORATED
By: /s/ William E. Barton
--------------------------------------
[William E. Barton, Vice President and
Chief Financial Officer]
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below on March 26, 1999, by the following persons in the
capacities indicated.
/s/ Richard C. Solari
- ------------------------------- Chairman of the Board
[Richard C. Solari] and Director
/s/ David H. Watts
- ------------------------------- President, Chief Executive Officer,
[David H. Watts] and Director
/s/ William E. Barton Vice President and
- ------------------------------- Chief Financial Officer
[William E. Barton] Principal Accounting and
Financial Officer
/s/ Joseph J. Barclay Director
- -------------------------------
[Joseph J. Barclay]
/s/ Richard M. Brooks Director
- -------------------------------
[Richard M. Brooks]
/s/ Brian C. Kelly Director
- -------------------------------
[Brian C. Kelly]
/s/ Rebecca A. McDonald Director
- -------------------------------
[Rebecca A. McDonald]
/s/ Raymond E. Miles Director
- -------------------------------
[Raymond E. Miles]
/s/ George B. Searle Director
- -------------------------------
[George B. Searle]
26
<PAGE> 45
INDEX TO FORM 10-K EXHIBITS
<TABLE>
<CAPTION>
Exhibit Page
No. Description No.
- ------- ----------- ----
<S> <C> <C>
3.1 Certificate of Incorporation of Granite Construction Incorporated [a]
3.1.a Amendment to the Certificate of Incorporation of Granite
Construction Incorporated --
3.1.b Certificate of Incorporation of Granite Construction Incorporated
as Amended and Restated (Effective May 22, 1998) --
3.2 Bylaws of Granite Construction Incorporated (as amended and
restated effective February 27, 1991) [b]
10.1 Amendment to and Restatement of the Granite Construction
Incorporated Employee Stock Ownership Plan adopted November 16,
1998 and effective January 1, 1998 --
10.1.a Granite Construction Incorporated Employee Stock Ownership Trust Agreement [b]
10.1.b Amendment 1 to the Granite Construction Incorporated Employee
Stock Ownership Plan Trust Agreement adopted December 19, 1995,
effective January 1, 1996 [e]
10.2 Amendment to and Restatement of the Granite Construction Company
Profit Sharing and 401K Plan adopted December 15, 1994 and
effective January 1, 1995 [c]
10.2.a Amendment to and Restatement of Granite Construction Incorporated
Profit Sharing and 401K Plan and Trust Agreement adopted and
effective as of December 15, 1994 [c]
10.2.b Amendment 2 to the Granite Construction Incorporated Profit
Sharing and 401K Plan and Trust Agreement adopted March 20, 1995
and effective January 1, 1996 [e]
10.2.c Amendment 3 to the Granite Construction Incorporated Profit
Sharing and 401K Plan adopted August 23, 1996 and effective
January 1, 1997 [f]
10.2.d Amendment 4 to the Granite Construction Incorporated Profit
Sharing and 401K Plan adopted July 24, 1997 and effective January
1, 1995, January 1, 1997, February 3, 1997 and January 1, 1998
[g]
10.2.e Amendment 5 to the Granite Construction Incorporated Profit
Sharing and 401K Plan adopted December 29, 1997 and effective
January 1, 1997 and January 1, 1998 [g]
10.2.f Amendment 6 to the Granite Construction Incorporated Amended and
Restated Profit Sharing and 401K Plan and Trust Agreement adopted
March 30, 1998 and effective April 1, 1998 --
10.3 Credit Agreement dated and effective June 30, 1997 [g]
10.3.a First Amendment to the Credit Agreement entered into January 16,
1998 [g]
10.3.b Second Amendment to the Credit Agreement entered into June 30,
1998 --
10.4 Form of Director and Officer Indemnification Agreement [a]
10.5 Form of Executive Officer Employment Agreement [a]
</TABLE>
27
<PAGE> 46
<TABLE>
<S> <C> <C>
10.6 Stock Purchase Agreement among Granite Construction Incorporated,
Gibbons Company and all of the Shareholders of Gibbons Company,
dated March 17, 1995 [d]
10.7 Restated Gibbons Company Profit Sharing and Retirement Plan
adopted December 30, 1994 and effective January 1, 1989 [f]
10.7.a First Amendment to the Restated Gibbons Company Profit Sharing
and Retirement Plan adopted March 29, 1995 and effective January
1, 1989 [f]
10.7.b Second Amendment to the Restated Gibbons Company Profit Sharing
and Retirement Plan adopted April 27, 1995 and effective May 8,
1995 and May 31, 1995 [f]
10.7.c Third Amendment to the Restated Gibbons Company Profit Sharing
and Retirement Plan adopted June 23, 1995 and effective July 1,
1995 [f]
10.7.d Fourth Amendment to the Restated Gibbons Company Profit Sharing
and Retirement Plan adopted December 1, 1995 [f]
10.7.e Fifth Amendment to the Restated Gibbons Company Profit Sharing
and Retirement Plan adopted July 16, 1996 and effective January
1, 1995 [f]
10.7.f Sixth Amendment to the Restated Gibbons Company Profit Sharing
and Retirement Plan adopted May 30, 1997 and effective January 1,
1989 and July 1, 1993 [g]
10.7.g Seventh Amendment to the Restated Gibbons Company Profit Sharing
and Retirement Plan adopted February 27, 1998 and effective April
1, 1998 --
10.8 Amendment to and Restatement of the Granite Construction
Incorporated Key Management Deferred Compensation Plan adopted
and effective January 1, 1998 --
10.9 Amendment to and Restatement of the Granite Construction
Incorporated Key Management Deferred Incentive Compensation Plan
adopted and effective January 1, 1998 --
10.10 Stock Purchase Agreement between Granite Construction
Incorporated and TIC Holdings, Inc. dated December 23, 1996 [g]
10.11 Note Purchase Agreement between Granite Construction Incorporated
and certain purchasers dated March 1, 1998 --
10.12 Subsidiary Guaranty Agreement from the Subsidiaries of Granite
Construction Incorporated as Guarantors of the Guaranty of Notes
and Note Agreement and the Guaranty of Payment and Performance
dated March 1, 1998 --
</TABLE>
28
<PAGE> 47
<TABLE>
<S> <C> <C>
21.1 List of Subsidiaries of Granite Construction Incorporated [f]
24.1 Consent of PricewaterhouseCoopers LLP is contained on page 25 of
this Report
27.1 SEC Filing - Financial Data Table, Article 5 of Regulation S-X
</TABLE>
[a] Incorporated by reference to the exhibits filed with the Company's
Registration Statement on Form S-1 (No. 33-33795).
[b] Incorporated by reference to the exhibits filed with the Company's
Form 10-K for the year ended December 31, 1991.
[c] Incorporated by reference to the exhibits filed with the Company's
10-K for the year ended December 31, 1994.
[d] Incorporated by reference to the exhibits filed with the Company's
8-K dated May 8, 1995.
[e] Incorporated by reference to the exhibits filed with the Company's
10-K for the year ended December 31, 1995.
[f] Incorporated by reference to the exhibits filed with the Company's
10-K for the year ended December 31, 1996.
[g] Incorporated by reference to the exhibits filed with the Company's
10-K for the year ended December 31, 1997.
29
<PAGE> 48
Report of Independent Accountants on Financial Statement Schedule
To the Stockholders and Board of Directors
Granite Construction Incorporated:
Our audits of the consolidated financial statements referred to in our report
dated February 12, 1999, except for Note 15 as to which the date is March 26,
1999 appearing on page F-1 of this Form 10-K also included an audit of the
financial statement schedule listed in Item14(a)(2) of this Form 10-K. In our
opinion, this financial statement schedule presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements.
PricewaterhouseCoopers LLP
San Jose, CA
February 12, 1999, except
Note 15 as to which the date is
March 26, 1999
S-1
<PAGE> 49
SCHEDULE II
GRANITE CONSTRUCTION INCORPORATED
SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Additions
---------------------------
Balance at Adjustments Balance at
Beginning Bad Debt and End of
Description of Year Expense Collections Deductions(1) Period
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1998
Allowance for doubtful accounts ......... $691 $(2,628) $3,538 $ (902) $699
======================================================================
Allowance for notes receivable .......... $ 68 $ -- $ -- $ -- $ 68
======================================================================
YEAR ENDED DECEMBER 31, 1997
Allowance for doubtful accounts ......... $693 $ 759 $1,162 $(1,923) $691
======================================================================
Allowance for notes receivable .......... $ 68 $ -- $ -- $ -- $ 68
======================================================================
YEAR ENDED DECEMBER 31, 1996
Allowance for doubtful accounts ......... $898 $ 3,614 $1,576 $(5,395) $693
======================================================================
Allowance for notes receivable .......... $ 68 $ -- $ -- $ -- $ 68
======================================================================
</TABLE>
(1) Accounts deemed to be uncollectible
S-2
<PAGE> 1
EXHIBIT 3.1.a
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
GRANITE CONSTRUCTION INCORPORATED
Granite Construction Incorporated, a corporation organized and existing
under and by virtue of the General Corporation Law of the Stare of Delaware
(hereinafter the "Corporation"), DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of the Corporation held
on March 26, 1998 resolutions were duly adopted setting forth a proposed
amendment to the Certificate of Incorporation of the Corporation, declaring said
amendment to be advisable and to be considered by the Stockholders of the
Corporation at the next annual meeting of stockholders. The resolution setting
forth the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this Corporation be
amended by changing the Article thereof numbered "FOURTH" so that, as
amended said Article shall be and read as follows:
"FOURTH:
A. Capitalization. The total number of shares of all classes of
stock which the Corporation shall have authority to issue is
fifty-three million (53,000,000):
(1) Three million (3,000,000) shares of Preferred Stock, par
value one cent ($0.01) per share (the "Preferred Stock"); and
(2) Fifty million (50,000,000) shares of Common Stock, par value
one cent ($0.01) per share (the "Common Stock")."
SECOND: That thereafter, pursuant to resolution of its Board of Directors,
an annual meeting of the stockholders of the Corporation was duly called and
held on May 18, 1998, upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware at which meeting the necessary number
of shares as required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of
<PAGE> 2
Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said Granite Construction Incorporated has caused this
certificate to be signed by Michael Futch, its Secretary, this 19th day of May,
1998.
By: /s/ Michael Futch
------------------------
Michael Futch
Secretary
<PAGE> 3
PAGE 1
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "GRANITE CONSTRUCTION INCORPORATED", FILED IN THIS OFFICE ON THE
TWENTY-SECOND DAY OF MAY, A.D. 1998, AT 1 O'CLOCK P.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT COUNTY
RECORDER OF DEEDS.
[NOTARY SEAL] /s/ EDWARD J. FREEL
-----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 9098344
DATE: 05-22-98
<PAGE> 1
EXHIBIT 3.1.b
CERTIFICATE OF INCORPORATION
OF
GRANITE CONSTRUCTION INCORPORATED
AS AMENDED AND RESTATED
(EFFECTIVE MAY 22, 1998)
FIRST: The name of the Corporation is Granite Construction
Incorporated (hereinafter sometimes referred to as the "Corporation").
SECOND: The address of the registered office of the Corporation in
the State of Delaware is Incorporating Services, Ltd., 15 East North Street, in
the City of Dover, County of Kent. The name of the registered agent at that
address is Incorporating Services, Ltd.
THIRD: The purpose of the Corporation is to engage in any lawful
act or activity for which a corporation may be organized under the General
Corporation Law of Delaware.
FOURTH:
A. Capitalization. The total number of shares of all
classes of stock which the Corporation shall have authority to issue is
fifty-three million (53,000,000):
(1) Three million (3,000,000) shares of Preferred Stock,
par value one cent ($0.01) per share (the "Preferred Stock"); and
(2) Fifty million (50,000,000) shares of Common Stock,
par value one cent ($0.01) per share (the "Common Stock").
B. Series of Preferred Stock. The Board of Directors is
authorized, subject to any limitations prescribed by law, to provide for the
issuance of the shares of Preferred Stock in series, and by filing a certificate
pursuant to the applicable law of the State of Delaware, to establish from time
to time the number of shares to be included in each such series, and to fix the
designation, powers, preferences, and rights of the shares of each such series
and any qualifications, limitations or restrictions thereof.
FIFTH: The following provisions are inserted for the management
of the business and the conduct of the affairs of the Corporation, and for
further definition, limitation and regulation of the powers of the Corporation
and of its directors and stockholders:
A. Powers of Directors. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors. In addition to the powers and
1
<PAGE> 2
authority expressly conferred upon them by statute or by this Certificate of
Incorporation or the Bylaws of the Corporation, the directors are hereby
empowered to exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation.
B. Ballot Unnecessary. The directors of the Corporation need
not be elected by written ballot unless the Bylaws so provide.
C. Stockholders Must Meet to Act. Any action required or
permitted to be taken by the stockholders of the Corporation must be effected at
a duly called annual or special meeting of stockholders of the Corporation and
may not be effected by any consent in writing by such stockholders.
D. Call of Special Meeting of Stockholders. Special meetings
of stockholders of the Corporation may be called only (1) by the Board of
Directors pursuant to a resolution adopted by a majority of the total number of
authorized directors (whether or not there exist any vacancies in previously
authorized directorships at the time any such resolution is presented to the
Board for adoption) or (2) by the holders of not less than ten percent (10%) of
all of the shares entitled to cast votes at the meeting. The procedure for
calling a special meeting of stockholders will be as set forth in this
Certificate of Incorporation or the Bylaws.
SIXTH:
A. Classification of Directors. The directors shall be
divided into three classes, as nearly equal in number as reasonably possible,
with the term of office of the first class to expire at the 1991 annual meeting
of stockholders, the term of office of the second class to expire at the 1992
annual meeting of stockholders and the term of office of the third class to
expire at the 1993 annual meeting of stockholders. At each annual meeting of
stockholders following such initial classification and election, directors shall
be elected to succeed those directors whose terms expire for a term of office to
expire at the third succeeding annual meeting of stockholders after their
election. All directors shall hold office until the expiration of the term for
which elected, and until their respective successors are elected, except in the
case of the death, resignation, or removal of any director.
B. Filling Vacancies on the Board. Subject to the rights of
the holders of any series of Preferred Stock then outstanding, newly created
directorships resulting from any increase in the authorized number of directors
or any vacancies in the Board of Directors resulting from death, resignation,
retirement, removal from office, disqualification or other cause may be filled
only by a majority vote of the directors then in office, though less than a
quorum, and directors so chosen shall hold office for a term expiring at the
annual meeting of stockholders at which the term of office of the class to which
they have been elected expires.
C. Removal of Directors. Subject to the rights of the holders
of any series of Preferred Stock then outstanding, any directors, or the entire
Board of Directors, may be removed
2
<PAGE> 3
from office at any time, but only for cause and only by the affirmative vote of
the holders of at least a majority of the voting power of all of the then
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single class.
SEVENTH: Power to Amend Bylaws. The Board of Directors is expressly
empowered to adopt, amend or repeal Bylaws of the Corporation. Any adoption,
amendment or repeal of Bylaws of the Corporation by the Board of Directors shall
require the approval of a majority of the total number of authorized directors
(whether or not there exist any vacancies in previously authorized directorships
at the time any resolution providing for adoption, amendment or repeal is
presented to the Board). The stockholders shall also have power to adopt, amend
or repeal the Bylaws of the Corporation. In addition to any vote of the holders
of any class or series of stock of this Corporation required by law or by this
Certificate of Incorporation, the affirmative vote of the holders of at least
66-2/3 percent of the combined voting power of the outstanding shares of stock
of all classes and series of the Corporation entitled to vote generally in the
election of directors, voting together as a single class, shall be required to
adopt, amend or repeal any provision of the Bylaws of the Corporation.
EIGHTH: Vote Required for Certain Business Combinations. In
addition to any affirmative vote required by law, any other provisions of this
Certificate of Incorporation or otherwise, none of the following transactions
shall be consummated unless and until such transaction shall have been approved
by the affirmative vote of the holders of at least 66-2/3 percent of the
combined voting power of the outstanding shares of stock of all classes and
series of the Corporation entitled to vote generally in the election of
directors:
(1) any merger, reorganization or consolidation of or
share exchange made by the Corporation or any of its subsidiaries into or with
any other person, in each case irrespective of whether the Corporation or its
subsidiary is the surviving entity, provided, however, that the holders of a
majority of the combined voting power of the outstanding shares of all classes
and series of the Corporation entitled to vote generally in the election of
directors may approve any transaction, including a merger or consolidation, in
which the Corporation pays less than $20,000,000 in cash, assets or securities
(including securities of the Corporation) for the assets or securities of a
third party; or
(2) except in the ordinary course of business, any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with any
other person (in a single transaction or a series of related transactions) of
all or a Substantial Part (as hereinafter defined) of the assets of the
Corporation (including without limitation any securities of a subsidiary); or
(3) except in the ordinary course of business, any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
Corporation or to or with any of its subsidiaries (in a single transaction or
series of related transactions) of the assets or securities of any other person
if the fair market value of such assets or securities would constitute a
3
<PAGE> 4
Substantial Part of the assets of the Corporation; or
(4) any agreement, contract or other arrangement providing
for any of the transactions described in this definition of Business
Combination. Anything in the foregoing to the contrary notwithstanding, the term
"Business Combination" shall not be deemed to include any of the transactions
contemplated by that certain Credit Agreement or that certain Business Loan
Agreement, both dated as of February 27, 1985, between the Corporation and Bank
of America N.T. & S.A., or any renewals, extensions or refundings thereof; or
(5) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation.
The term "Substantial Part" shall mean more than 20% of the fair market
value of the total consolidated assets of the Corporation and its subsidiaries
taken as a whole, as determined by two-thirds of the members of the Board of
Directors of such person in good faith, as of the end of its most recent fiscal
year ending prior to the time the determination is being made.
The terms "Business Combination" as used in this Article EIGHTH shall
mean any transaction or proposed transaction which is referred to in any one or
more of the foregoing subparagraphs (1) through (5) of this paragraph A of this
Article EIGHTH.
NINTH: Board Discretion Regarding Certain Transactions. The
Board of Directors of the Corporation (the "Board"), when evaluating any offer
to another party (a) to make a tender or exchange offer for any capital stock of
the Corporation or (b) to effect any merger, consolidation, or sale of all or
substantially all of the assets of the Corporation, shall, in connection with
the exercise of its judgment in determining what is in the best interests of the
Corporation as a whole, be authorized to give due consideration to such factors
as the Board determines to be relevant, including, without limitation:
(i) the interests of the Corporation's stockholders;
(ii) whether the proposed transaction might violate federal or
state laws;
(iii) not only the consideration being offered in the proposed
transaction, in relation to the then current market price for the outstanding
capital stock of the Corporation, but also in relation to the market price for
the capital stock of the Corporation over a period of years, the estimated price
that will be achieved in a negotiated sale of the Corporation as a whole or in
part or through orderly liquidation, the premiums over market price for the
securities of other corporations in similar transactions, current political,
economic and other factors bearing on securities prices and the Corporation's
financial condition and future prospects; and
(iv) the social, legal and economic effects upon employees,
suppliers, customers and others having similar relationships with the
Corporation, and the communities in which the
4
<PAGE> 5
Corporation conducts its business.
In connection with any such evaluation, the Board is authorized to
conduct such investigations and to engage in such legal proceedings as the Board
may determine.
TENTH: Elimination of Monetary Liability. The liability of the
directors of the Corporation for monetary damages shall be eliminated to the
fullest extent permissible under Delaware law.
Any repeal or modification of the foregoing provisions of this Article
TENTH by the stockholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at the time of
such repeal or modification.
ELEVENTH: Future Amendments. The Corporation reserves the right to
amend or repeal any provision contained in this Certificate of Incorporation in
the manner prescribed by the laws of the State of Delaware and all rights
conferred upon stockholders are granted subject to this reservation; provided,
however, that, notwithstanding any other provision of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any vote of the holders of any class or series of
the stock of this Corporation required by law or by this Certificate of
Incorporation, the affirmative vote of the holders of at least 66-2/3 percent of
the combined voting power of the outstanding shares of stock of all classes and
series of the Corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be required to amend, repeal
or adopt any provision inconsistent with Article FIFTH (except Section D
thereof), SIXTH (except Section C thereof), SEVENTH, EIGHTH, NINTH, TENTH or
this Article ELEVENTH.
TWELFTH: The name and mailing address of the sole incorporator is
as follows:
Name Mailing Address
David H. Watts 585 West Beach St.
Watsonville, CA 95076
I, THE UNDERSIGNED, being the incorporator, for the purpose of forming a
corporation under the laws of the State of Delaware, do make, file and record
this Amended Certificate of Incorporation, do certify that the facts herein
stated are true and, accordingly, have hereto set my hand this 19th day of May,
1998.
------------------------------------
David H. Watts
5
<PAGE> 1
EXHIBIT 10.1
GRANITE CONSTRUCTION
EMPLOYEE STOCK OWNERSHIP PLAN
As Amended and Restated as of January 1, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C> <C>
1. Nature of the Plan .................................................... 1
2. Definitions ........................................................... 2
3. Eligibility and Participation ......................................... 8
4. Employer Contributions ................................................ 10
5. Investment of Trust Assets ............................................ 12
6. Allocations to Participants' Accounts ................................. 14
7. Allocation Limitations ................................................ 18
8. Voting or Tender of Stock ............................................. 21
9. Disclosure to Participants ............................................ 23
10. Vesting and Forfeitures ............................................... 24
11. Years of Vesting Service and Break in Service ......................... 25
12. When Capital Accumulation Will Be Distributed ......................... 27
13. In-Service Distributions .............................................. 29
14. How Capital Accumulation Will Be Distributed .......................... 32
15. No Assignment of Benefits ............................................. 35
16. Administration ........................................................ 35
17. Claims Procedure ...................................................... 39
18. Limitation on Participants' Rights .................................... 40
19. Future of the Plan .................................................... 41
20. "Top-Heavy" Contingency Provisions .................................... 42
21. Governing Law ......................................................... 44
22. Execution ............................................................. 44
</TABLE>
<PAGE> 3
GRANITE CONSTRUCTION
EMPLOYEE STOCK OWNERSHIP PLAN
As Amended and Restated as of January 1, 1998
Section 1. Nature of the Plan.
The purpose of this Plan is to enable participating Employees to
share in the growth and prosperity of Granite Construction Incorporated (the
"Company") and to provide Participants with an opportunity to accumulate capital
for their future economic security. The Plan is intended to do this without any
deductions from Participants' paychecks and without requiring them to invest
their personal savings. The primary purpose of the Plan is to enable
Participants to acquire stock ownership interests in the Company. Therefore, the
Trust established under the Plan is designed to invest primarily in Stock.
The Plan is also designed to be available as a technique of
corporate finance to the Company. Accordingly, it may be used to accomplish the
following objectives:
(a) To meet general financing requirements of the Company, including
capital growth and transfers in the ownership of Stock;
(b) To provide Participants with beneficial ownership of Stock,
substantially in proportion to their relative Compensation,
without requiring any cash outlay, any reduction in pay or other
personal investment on the part of Participants; and
(c) To receive loans (or other extensions of credit) to finance the
acquisition of Stock, with such loans to be repaid by Employer
Contributions to the Trust and dividends received on such Stock.
The Plan (originally adopted as the Granite Construction Company
Employee Stock Ownership Plan effective as of January 1, 1984, and subsequently
amended and restated
<PAGE> 4
effective as of January 1, 1987, and April 20, 1990) is hereby amended and
restated as of January 1, 1998. The Plan is a stock bonus plan under Section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and an
employee stock ownership plan under Section 4975(e)(7) of the Code. To satisfy
applicable requirements of the Code, as amended by the Small Business Job
Protection Act of 1996, the fourth sentence of Section 3(c) is amended effective
as of December 12, 1994, and the definitions of "Compensation" and "Highly
Compensated Employee" in Section 2 and the second and third sentences of Section
12(c) are amended effective as of January 1, 1997.
All Trust Assets held under the Plan will be administered,
distributed, forfeited and otherwise governed by the provisions of this Plan and
the related Trust Agreement. The Plan is administered by an Administrative
Committee for the exclusive benefit of Participants (and their Beneficiaries).
Section 2. Definitions.
In this Plan, whenever the context so indicates, the singular or
plural number and the masculine, feminine or neuter gender shall be deemed to
include the other, the terms "he," "his" and "him" shall refer to a Participant,
and the capitalized terms shall have the following meanings:
<TABLE>
<S> <C>
Account ........................ One of two accounts maintained to record the interest
of a Participant under the Plan. See Section 6.
Affiliate ...................... Any corporation which is a member of a controlled
group of corporations (within the meaning of
</TABLE>
-2-
<PAGE> 5
<TABLE>
<S> <C>
Section 414(b) of the Code) of which the
Company is also a member or any trade or
business (whether or not incorporated) which is
under common control with the Company (within
the meaning of Section 414(c) of the Code).
Allocation Date ................ December 31st of each year (the last day of the Plan
Year).
Beneficiary .................... The person (or persons) entitled to receive any benefit
under the Plan in the event of a Participant's death.
See Section 14(b).
Board of Directors ............. The Board of Directors of the Company.
Break in Service ............... A Plan Year in which an Employee is not credited
with more than 500 Hours of Service as a result of his
termination of Service. See Section 11(b).
Capital Accumulation ........... A Participant's vested, nonforfeitable interest in his
Accounts under the Plan. Each Participant's Capital
Accumulation shall be determined in accordance with
the provisions of Section 10 and distributed as
provided in Sections 12, 13 and 14.
Code ........................... The Internal Revenue Code of 1986, as amended.
Committee ...................... The Administrative Committee appointed by the
Board of Directors to administer the Plan. See
Section 16.
Company ........................ Granite Construction Incorporated, a Delaware
corporation.
Compensation ................... For Plan Years beginning after December 31, 1997,
the Statutory Compensation paid to an Employee by
his Employer, but excluding (1) reimbursements or
other expense allowances (including travel expense
allowances), (2) fringe benefits (cash and noncash),
(3) moving expenses, (4) welfare benefits, (5) any
amount in excess of $160,000 (as adjusted
periodically after 1998 for increases in the cost of
living pursuant to
</TABLE>
-3-
<PAGE> 6
<TABLE>
<S> <C>
Section 401(a)(17) of the Code) and
(6) any amount paid to an Employee pursuant to the
terms of a collective bargaining agreement.
For the Plan Year ending December 31, 1997,
only, Statutory Compensation shall include the
amount of an Employee's 401(k) Contributions
under the Profit Sharing Plan and any amounts
that are contributed by an Employer on his
behalf that are not included in gross income
under Section 125 of the Code.
Disability ....................... Any mental or physical incapacity of an Employee
that, in the opinion of a licensed physician selected by
the Company, renders the Employee totally and
permanently incapable of performing his assigned
duties with an Employer and results in his termination
of Service.
Employee ......................... Any individual who is treated by an Employer as a
common-law employee. A leased employee, as
described in Section 414(n) of the Code, is not an
Employee for purposes of this Plan.
Employer ......................... The Company and each Affiliate which is designated
as an Employer by the Board of Directors and which
adopts the Plan for the benefit of its Employees.
Employer Contributions ........... Payments made to the Trust by an Employer. See
Section 4.
ERISA ............................ The Employee Retirement Income Security Act of
1974, as amended.
Fair Market Value ................ The fair market value of Stock, as determined by the
Committee for all purposes under the Plan based upon
prices quoted on the New York Stock Exchange.
Financed Shares .................. Shares of Stock acquired by the Trust with the
proceeds of a Loan.
</TABLE>
-4-
<PAGE> 7
<TABLE>
<S> <C>
Forfeiture ....................... The portion of a Participant's Accounts which does
not become a part of his Capital Accumulation and
which is forfeited under Section 10(b).
Highly Compensated
Employee ......................... An Employee who (1) was a "5% owner" at any time
during the Plan Year or preceding Plan Year, or (2)
received Statutory Compensation in excess of $80,000
in the preceding Plan Year and was a member of the
top-paid 20% group of Employees for such preceding
Plan Year. The $80,000 amount shall be adjusted
after 1997 for increases in the cost of living pursuant
to Section 414(q)(1) of the Code.
Hour of Service .................. Each hour of Service for which an Employee is
credited under the Plan, as described in Section 3(d).
Loan ............................. A loan (or other extension of credit) used by the Trust
to finance the acquisition of Stock, which loan may
constitute an extension of credit to the Trust from a
party in interest (as defined in ERISA). See Section
5(b).
Nonstock Account ................. The Account which reflects each Participant's interest
under the Plan attributable to Trust Assets other than
Stock. See Section 6.
Participant ...................... Any Employee or former Employee who has met the
applicable eligibility requirements of Section 3 and
who has not yet received a complete distribution of
his Capital Accumulation.
Plan ............................. The Granite Construction Employee Stock Ownership
Plan, which includes this Plan and the Trust
Agreement.
Plan Year ........................ The 12-month period ending on each Allocation Date
(and coinciding with each calendar year, which is the
taxable year of the Company).
</TABLE>
-5-
<PAGE> 8
<TABLE>
<S> <C>
Profit Sharing Plan .............. The Granite Construction Company Profit Sharing
and 401(k) Plan, a profit sharing plan under Section
401(a) of the Code that includes a "cash or deferred
arrangement" under Section 401(k) of the Code.
Retirement ....................... Termination of Service on or after attaining age 55 or,
if later, the completion of ten Years of Vesting
Service (but not later than the date he attains age 65
or, if later, the fifth anniversary of the date he became
a Participant).
Service .......................... Employment with the Company and or any Affiliate.
For any corporation or other business entity which is
designated as an Employer whose Employees are
eligible to participate in the Plan and for the
employees of any other business substantially all the
assets of which are acquired by an Employer, the
Board of Directors may grant the Employees of such
entity credit for their years of service with such entity
(prior to the date that such entity became an Affiliate)
for purposes of eligibility and vesting under the Plan.
Such grant shall be evidenced by action of the Board
of Directors and attached to and made a part of this
Plan.
Statutory Compensation ........... For Plan Years beginning after December 31, 1997,
the total remuneration paid to an Employee by an
Employer during the Plan Year for personal services
rendered, plus the amount of his 401(k) Contributions
under the Profit Sharing Plan and any amounts that
are contributed by an Employer on his behalf that are
not included in gross income under Section 125 of the
Code, but excluding employer contributions to a plan
of deferred compensation, amounts realized in
connection with stock options and amounts which
receive special tax benefits.
For the Plan Year ending December 31, 1997,
only, Statutory Compensation shall not include
the amount of an Employee's 401(k) Contributions
</TABLE>
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<PAGE> 9
<TABLE>
<S> <C>
under the Profit Sharing Plan and any amounts
that are contributed by an Employer on his
behalf that are not included in gross income
under Section 125 of the Code (except for
purposes of determining whether an Employee is a
Highly Compensated Employee for such Plan Year).
Stock ............................. Shares of common stock issued by the Company.
Stock Account ..................... The Account which reflects each Participant's interest
in Stock held under the Plan. See Section 6.
Trust ............................. The Granite Construction Employee Stock Ownership
Trust, created by the Trust Agreement entered into
between the Company and the Trustee.
Trust Agreement ................... The Agreement between the Company and the Trustee
establishing the Trust and specifying the duties of the
Trustee.
Trust Assets ...................... The Stock (and other assets) held in the Trust for the
benefit of Participants. See Section 5.
Trustee ........................... The Trustee (and any successor Trustee) appointed by
the Board of Directors to hold the Trust Assets.
Valuation Date .................... The Allocation Date of each Plan Year or the last day
of such interim period as the Committee, in its
discretion, may prescribe.
Year of Vesting Service ........... Each Plan Year in which an Employee is credited with
at least 1000 Hours of Service. See Section 11(a).
</TABLE>
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<PAGE> 10
Section 3. Eligibility and Participation.
(a) Each Employee who was a Participant on December 31, 1997, shall
continue as a Participant. Each other Employee shall become a Participant as of
Allocation Date of the Plan Year in which his Service began if he is credited
with at least 1000 Hours of Service during that Plan Year and is still an
Employee on the Allocation Date; provided, however, that an Employee who incurs
a Disability during that Plan Year while an Employee shall become a Participant
on the date of Disability and an Employee who dies during that Plan Year while
an Employee shall become a Participant on the day prior to his date of death.
Each other Employee who does not become a Participant pursuant to the preceding
sentence shall become a Participant as of the June 30th or December 31st
coinciding with or next following the date on which he is credited with at least
1000 Hours of Service over a period that does not exceed 12 consecutive months,
provided that he is still an Employee on such June 30th or December 31st. For
this purpose, the eligibility computation period for determining the 1,000 Hours
of Service requirement in the preceding sentence shall initially be the period
of 12 consecutive months beginning on the Employee's initial date of Service and
thereafter shall be the period of 12 consecutive months beginning on the
anniversary date of the Employee's initial date of Service.
Employees whose terms of employment are covered by a collective
bargaining agreement shall not be eligible to participate in the Plan unless the
collective bargaining agreement specifically provides for such Employees to
participate in the Plan. Employees who are nonresident aliens who receive no
earned income from the Company or an Affiliate that constitutes income from
sources within the United States shall not be eligible to participate in the
Plan. An Employee who ceases to be ineligible to participate in the Plan shall
become a
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<PAGE> 11
Participant as of the later of the date he ceases to be ineligible or
the date described in the preceding paragraph.
(b) A Participant is entitled to share in the allocation of Employer
Contributions and Forfeitures under Section 6(a) for each Plan Year in which he
is credited with at least 1000 Hours of Service and in which he is an Employee
on the Allocation Date. A Participant is also entitled to share in the
allocation of Employer Contributions and Forfeitures for the Plan Year of his
Retirement, Disability or death.
(c) A former Participant who is reemployed by an Employer shall
become a Participant as of the date of his reemployment. A former Employee who
is reemployed by an Employer and who previously satisfied the service
requirement described in Section 3(a) shall become a Participant as of the later
of the date of his reemployment or the date described in Section 3(a).
Notwithstanding any provision of the Plan to the contrary, contributions,
benefits and service credit with respect to qualified military service will be
provided in accordance with Section 414(u) of the Code.
(d) Hours of Service - For purposes of determining the Hours of
Service to be credited to an Employee under the Plan, the following rules shall
be applied:
(1) Hours of Service shall include each hour of
Service for which an Employee is paid (or
entitled to payment) for the performance of
duties; each hour of Service for which an
Employee is paid (or entitled to payment)
for a period during which no duties are
performed (irrespective of whether Service
has terminated) due to vacation, holiday,
illness, incapacity (including Disability),
layoff, jury duty, military duty or paid
leave of absence; and each additional hour
of Service for which back pay is either
awarded or agreed to (irrespective of
mitigation of damages); provided, however,
that not more than 501 Hours of Service
shall be credited for a single continuous
period during which an Employee does
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<PAGE> 12
not perform any duties (whether or not such
period occurs in a single Plan Year or 12 month
period, with respect to an Employee's initial
eligibility computation period).
(2) The crediting of Hours of Service shall be
determined in accordance with the rules set
forth in paragraphs (b) and (c) of Section
2530.200b-2 of the regulations prescribed by
the Department of Labor, which rules shall
be consistently applied with respect to all
Employees within the same job
classification.
(3) Hours of Service shall not be credited to an
Employee for a period during which no duties
are performed if payment is made or due
under a plan maintained solely for the
purpose of complying with applicable
worker's compensation, unemployment
compensation or disability insurance laws,
and Hours of Service shall not be credited
on account of any payment made or due an
Employee solely in reimbursement of medical
or medically-related expenses.
(4) Hours of Service that are credited for the
performance of duties shall be determined
from records maintained by the Employer;
provided, however, that, in the case of an
Employee whose Compensation is not
determined on the basis of certain amounts
for each hour worked and whose hours are not
required to be counted and recorded by any
Federal law (such as the Fair Labor
Standards Act), such Employee's Hours of
Service need not be determined from
employment records, and such Employee shall
be credited with ten Hours of Service for
each day in which he would be credited with
any Hours of Service. Hours of Service that
are credited for periods during which no
duties are performed or for back pay shall
be credited on the basis of 40 Hours of
Service for each week or eight Hours of
Service for each day.
Section 4. Employer Contributions.
(a) Employer Contributions shall be paid to the Trustee for each
Plan Year in such amounts (or under such formula) as may be determined by the
Board of Directors; provided, however, that the amount of Employer Contributions
must be at least sufficient to enable the Plan to make payments of principal
and/or interest on an outstanding Loan and that Employer
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<PAGE> 13
Contributions shall not be made for any Plan Year in amounts which can be
allocated to no Participant's Accounts by reason of the allocation limitation
described in Section 7(a) or in amounts which are not deductible under Section
404(a) of the Code.
(b) Employer Contributions for each Plan Year shall be paid to the
Trustee not later than the due date (including extensions) for filing the
Company's Federal income tax return for that Plan Year. Employer Contributions
may be paid in cash and/or in shares of Stock, as determined by the Board of
Directors; provided, however, that the Board of Directors may determine that
Employer Contributions may be paid as provided in Section 5(c) with notice to
the Committee and the Trustee. The amount of any Employer Contributions that are
paid in the form of shares of Stock shall be based upon Fair Market Value as of
the date such shares are issued to the Trust.
(c) Any Employer Contributions which are not deductible under
Section 404(a) of the Code may be returned to the Employer by the Trustee (upon
the direction of the Company) within one year after the deduction is disallowed
or after it is determined that the deduction is not available. In the event that
Employer Contributions are paid to the Trust by reason of a mistake of fact,
such Employer Contributions may be returned to the Employer by the Trustee (upon
the direction of the Company) within one year after the payment to the Trust.
(d) No Participant shall be required or permitted to make
contributions to the Trust.
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<PAGE> 14
Section 5. Investment of Trust Assets.
(a) In General - Trust Assets will be invested by the Trustee
primarily (or exclusively) in Stock in accordance with directions from the
Committee. Employer Contributions (and other Trust Assets) may be used to
acquire shares of Stock through open-market purchases, from any Company
shareholder in a privately-negotiated transaction or from the Company. The
Trustee may also invest Trust Assets in such other prudent investments as the
Committee deems to be desirable for the Trust, or Trust Assets may be held
temporarily in cash. All purchases of Stock by the Trustee shall be made only as
directed by the Committee and all purchases from a party in interest (as defined
in ERISA) shall be made only at prices which do not exceed Fair Market Value.
The Committee may direct the Trustee to invest and hold up to 100% of the Trust
Assets in Stock.
(b) Loans - With the approval of the Board of Directors, the
Committee may direct the Trustee to incur Loans from time to time to finance the
acquisition of Stock (Financed Shares) or to repay a prior Loan. An installment
obligation incurred in connection with the purchase of Stock shall be treated as
a Loan, and all indebtedness incurred in connection with a single acquisition of
Stock shall be treated as one Loan. A Loan shall be for a specific term, shall
bear a reasonable rate of interest and shall not be payable on demand except in
the event of default. A Loan may be secured by a pledge of the Financed Shares
so acquired (or acquired with the proceeds of a prior Loan which is being
refinanced). No other Trust Assets may be pledged as collateral for a Loan, and
no lender shall have recourse against Trust Assets except for Financed Shares
remaining pledged to the lender. Any pledge of Financed Shares must provide for
the release of the shares so pledged as payments on the Loan are made by the
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<PAGE> 15
Trustee and such Financed Shares are allocated to Participants' Stock Accounts
under Section 6(b). If the lender is a party in interest (as defined in ERISA),
any pledge of Financed Shares must provide for a transfer of Trust Assets to the
lender on default only upon and to the extent of the failure of the Trust to
meet the payment schedule of the Loan.
(c) Loan Payments - Payments of principal and/or interest on any Loan
shall be made by the Trustee (as directed by the Committee) only from Employer
Contributions paid in cash to enable the Trust to repay such Loan, from earnings
attributable to such Employer Contributions and from any cash dividends received
by the Trust on the Financed Shares (whether allocated or unallocated) purchased
with the proceeds of such Loan; and the payments made with respect to a Loan for
a Plan Year must not exceed the sum of such Employer Contributions, earnings and
dividends for that Plan Year (and prior Plan Years), less the amount of such
payments for prior Plan Years. If the Company is the lender with respect to a
Loan, Employer Contributions may be paid in the form of cancellation of
indebtedness under the Loan. If the Company is not the lender with respect to a
Loan, the Company may elect to make payments on the Loan directly to the lender
and to treat such payments as Employer Contributions.
(d) Sales of Stock - Subject to the approval of the Board of Directors
or except as otherwise provided in Section 8(b), the Committee may direct the
Trustee to sell shares of Stock to any person (including the Company), provided
that any such sale must be made at a price not less favorable to the Plan than
Fair Market Value as of the date of the sale and may be made only in compliance
with Federal and state securities laws. Notwithstanding the provisions of
Section 5(c), the Committee may direct the Trustee to apply the proceeds from
the sale of
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<PAGE> 16
unallocated Financed Shares (in the Loan Suspense Account described in Section
6(b)) to repay the Loan (incurred to finance the purchase of such Financed
Shares) in the event of the merger, consolidation or sale of all or
substantially all of the assets of the Company or sale of all or substantially
all of the Stock of the Company or the termination of the Plan or if the Plan
ceases to be an employee stock ownership plan under Section 4975(e)(7) of the
Code. Any decision by the Committee to direct the Trustee to sell Stock under
this Section 5(d) must comply with the fiduciary duties applicable Section
404(a)(1) of ERISA and with the primary benefit rule of Section 408(b)(3)(A) of
EPISA and Section 4975(d)(3)(A) of the Code, if applicable.
Section 6. Allocations to Participants' Accounts.
A Stock Account and a Nonstock Account shall be maintained to
reflect the interest of each Participant under the Plan.
Stock Account - The Stock Account maintained for each Participant
will be credited annually with his allocable share of Stock (including
fractional shares) purchased and paid for by the Trust or contributed in kind to
the Trust as an Employer Contribution, with any Forfeitures of Stock and with
any stock dividends on Stock allocated to his Stock Account.
Nonstock Account - The Nonstock Account maintained for each
Participant will be credited annually with his allocable share of Employer
Contributions that are not in the form of Stock, with any Forfeitures from
Nonstock Accounts, with any cash dividends on Stock allocated to his Stock
Account (other than currently distributed dividends) and any net income (or
loss) of the Trust. Such Account will be debited for the Participant's share of
any cash
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<PAGE> 17
payments made by the Trustee for the acquisition of Stock or for the
payment of any principal and/or interest on a Loan.
The allocations to Participants' Accounts for each Plan Year will be
made as follows:
(a) Employer Contributions and Forfeitures - Employer Contributions
under Section 4(a) and Forfeitures under Section 10(b) for each Plan Year shall
be allocated as of the Allocation Date among the Accounts of Participants so
entitled under Section 3(b) in the ratio that the Compensation of each such
Participant bears to the total Compensation of all such Participants, subject to
the allocation limitations described in Section 7.
(b) Financed Shares - Any Financed Shares acquired by the Trust
shall initially be credited to a "Loan Suspense Account" and will be allocated
to the Stock Accounts of Participants only as payments on the Loan are made by
the Trustee. The number of Financed Shares to be released from the Loan Suspense
Account for allocation to Participants' Stock Accounts for each Plan Year shall
be determined by the Committee (as of each Allocation Date) as follows:
(1) Principal/Interest Method - The number of Financed
Shares held in the Loan Suspense Account immediately before the release for the
current Plan Year shall be multiplied by a fraction. The numerator of the
fraction shall be the amount of principal and/or interest paid on the Loan for
that Plan Year. The denominator of the fraction shall be the sum of the
numerator plus the total payments of principal and interest on that Loan
projected to be paid for all future Plan Years. For this purpose, the interest
to be paid in future years is to be computed by using the interest rate in
effect as of the current Allocation Date.
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<PAGE> 18
(2) Principal Only Method - The Committee may elect (as
to each Loan) or the provisions of the Loan may provide for the release of
Financed Shares from the Loan Suspense Account based solely on the ratio that
the payments of principal for each Plan Year bear to the total principal amount
of the Loan. This method may be used only to the extent that: (A) the Loan
provides for annual payments of principal and interest at a cumulative rate that
is not less rapid at any time than level annual payments of such amounts for ten
years; (B) interest included in any payment on the Loan is disregarded only to
the extent that it would be determined to be interest under standard loan
amortization tables; and (C) the entire duration of the Loan repayment period
does not exceed ten years, even in the event of a renewal, extension or
refinancing of the Loan.
In each Plan Year in which Trust Assets are applied to make payments
on a Loan, the Financed Shares released from the Loan Suspense Account in
accordance with the provisions of this Section 6(b) shall be allocated among the
Stock Accounts of Participants in the manner determined by the Committee based
upon the source of funds (Employer Contributions, earnings attributable to such
Employer Contributions and cash dividends on Financed Shares allocated to
Participants' Stock Accounts or cash dividends on Financed Shares credited to
the Loan Suspense Account) used to make the payments on the Loan. If cash
dividends on Financed Shares allocated to a Participant's Stock Account are used
for payments on a Loan, Financed Shares (representing that portion of such
payments and whose Fair Market Value is at least equal to the amount of such
dividends) released from the Loan Suspense Account shall be allocated to that
Participant's Stock Account.
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<PAGE> 19
(c) Net Income (or Loss) of the Trust - The net income (or loss) of the
Trust for each Plan Year will be determined as of the Valuation Date. Prior to
the allocation of Employer Contributions and Forfeitures for the Plan Year, each
Participant's share of any net income (or loss) will be allocated to his
Nonstock Account in the ratio that the balance of his Nonstock Account on the
preceding Valuation Date (reduced by any distribution of Capital Accumulation
from such Account since the preceding Valuation Date) bears to the sum of such
Account balances for all Participants as of that date. The net income (or loss)
of the Trust includes the increase (or decrease) in the fair market value of
Trust Assets (other than Stock), interest income, dividends and other income and
gains (or losses) attributable to Trust Assets (other than any dividends on
allocated Stock) since the preceding Valuation Date, reduced by any expenses
charged to the Trust Assets since the preceding Valuation Date. The
determination of the net income (or loss) of the Trust shall not take into
account any interest paid by the Trust under a Loan.
(d) Dividends on Stock - Any cash dividends received on shares of Stock
allocated to Participants' Stock Accounts will be allocated to the respective
Nonstock Accounts of such Participants. Any cash dividends received on
unallocated shares of Stock (including any Financed Shares credited to the Loan
Suspense Account) shall be included in the computation of the net income (or
loss) of the Trust. Any stock dividends received on Stock shall be credited to
the Accounts (including the Loan Suspense Account) to which such Stock was
allocated. Any cash dividends which are currently distributed to Participants
(or their Beneficiaries) under Section 13(a) shall not be credited to their
Nonstock Accounts.
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<PAGE> 20
(e) Accounting for Allocations - The Committee shall establish
accounting procedures for the purpose of making the allocations to Participants'
Accounts provided for in this Section 6. The Committee shall maintain adequate
records of the aggregate cost basis of Stock allocated to each Participant's
Stock Account. The Committee shall also keep separate records of Financed Shares
acquired with the proceeds of each Loan and of Employer Contributions (and any
earnings thereon) made for the purpose of enabling the Trust to repay any Loan.
From time to time, the Committee may modify the accounting procedures for the
purposes of achieving equitable and nondiscriminatory allocations among the
Accounts of Participants in accordance with the general concepts of the Plan,
the provisions of this Section 6 and the requirements of the Code and ERISA.
Section 7. Allocation Limitations.
(a) Limitation on Annual Additions - The Annual Additions for each
Plan Year with respect to any Participant may not exceed the lesser of:
(1) 25% of his Statutory Compensation; or
(2) $30,000, as may be adjusted for increases in
the cost of living pursuant to Section
4l5(d)(l)(C) of the Code.
For this purpose, "Annual Additions" shall be the total of the Employer
Contributions and Forfeitures (including any income attributable to Forfeitures)
allocated to the Accounts of a Participant for the Plan Year, excluding any
Employer Contributions which are used by the Trust (not later than the due date,
including extensions, for filing the Company's Federal income
-18-
<PAGE> 21
tax return for that Plan Year) to pay interest on a Loan and any Financed Shares
which are allocated as Forfeitures, plus any employer contributions (including
401(k) contributions) and forfeitures allocated to him under the Profit Sharing
Plan for the Plan Year. In determining such Annual Additions, Forfeitures of
Stock shall be included at the Fair Market Value as of the Allocation Date and
Employer Contributions in the form of Stock shall be included at the Fair Market
Value as of the date such shares are issued to the Trust.
If the aggregate amount that would be allocated to the accounts of a
Participant under this Plan and the Profit Sharing Plan in the absence of this
limitation would exceed the amount set forth in this limitation, then, to the
extent necessary, the Participant's Annual Additions for the Plan Year shall be
reduced and reallocated to the Accounts of Participants not affected by this
limitation for the Plan Year in the following order: (1) any profit sharing
contributions under the Profit Sharing Plan made on the Participant's behalf for
the Plan Year shall be reduced, (2) any "additional 401(k) contributions" made
on a Participant's behalf for the Plan Year under the Profit Sharing Plan shall
be returned to the Participant as Compensation (together with any income
attributable thereto), (3) any 401(k) contributions (other than "additional
401(k) contributions") under the Profit Sharing Plan made on the Participant's
behalf for the Plan Year shall be returned to the Participant as Compensation
(together with any income attributable thereto), (4) any matching contributions
under the Profit Sharing Plan made on the Participant's behalf for the Plan Year
shall be reduced and (5) any Employer Contributions under this Plan made on the
Participant's behalf for the Plan Year shall be reduced.
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<PAGE> 22
If, after such reductions, there are any Forfeitures which can be
allocated to no Participant's Accounts by reason of this limitation, such
Forfeitures shall be credited to a "Forfeiture Suspense Account" and allocated
as Forfeitures under Section 6(a) for the next succeeding Plan Year (prior to
the allocation of Employer Contributions for such succeeding Plan Year).
(b) Limitations on Highly Compensated Employees - Not more than
one-third of the Employer Contributions for the Plan Year applied to pay
principal and/or interest on a Loan may be allocated to Participants who are
Highly Compensated Employees. The Committee shall reallocate Employer
Contributions to the extent necessary to satisfy this special rule. The Annual
Additions under Section 7(a) with respect to Financed Shares released from the
Loan Suspense Account (by reason of Employer Contributions used for payments on
a Loan) and allocated to Participants' Stock Accounts shall be based upon the
lesser of (A) the amount of such Employer Contributions (as determined after
application of the preceding sentence); or (B) the Fair Market Value of such
allocated Financed Shares as of the Allocation Date. Annual Additions shall not
include any allocation attributable to proceeds from the sale of Financed Shares
by the Trust or to appreciation (realized or unrealized) in the Fair Market
Value of Stock.
(c) Limitation on Electing Shareholder - If a shareholder of Granite
Construction Company sold stock of Granite Construction Company to the Trust on
or before October 22, 1986, and elected nonrecognition of gain under Section
1042 of the Code, no portion of the stock purchased in any such transaction (or
any dividends or other income attributable thereto) may be allocated to the
Accounts of:
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(1) any Participant who has made an election
under Section 1042 of the Code;
(2) any Participant who is such selling
shareholder's spouse, brother or sister
(whether by the whole or half blood),
ancestor or lineal descendant (except as to
certain lineal descendants, to the extent
provided in Section 409(n)(3)(A) of the Code),
or any other person who bears a relationship to
such selling shareholder that is described in
Section 267(b) of the Code; or
(3) any Participant owning (as determined under
Section 318(a) of the Code)
more than 25% in value of such stock.
To the extent that a Participant is subject to the allocation
limitation described in this Section 7(c) for a Plan Year, he shall not share in
the allocation of Employer Contributions and Forfeitures.
Section 8. Voting or Tender of Stock.
(a) Voting Stock - All shares of Stock held by the Trust shall be
voted by the Trustee only in accordance with the provisions of this Section
8(a). Each Participant (or Beneficiary) will be entitled to direct the Trustee
as to the manner in which shares of Stock then allocated to his Stock Account
will be voted. Each Participant (or Beneficiary) will also be entitled to
separately direct the Trustee as to the manner in which a portion of the shares
of Stock not then allocated to Participants' Stock Accounts will be voted. The
portion of the unallocated shares of Stock with respect to which a Participant
(or Beneficiary) may give voting instructions to the Trustee shall be the total
number of unallocated shares of Stock held by the Trust multiplied by a
fraction, the numerator of which is the number of shares of Stock then allocated
to his Stock Account and the denominator of which is the total number of shares
allocated to Participants'
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<PAGE> 24
Stock Accounts. Each Participant (or Beneficiary) who is entitled to direct the
Trustee as to the manner in which shares of Stock will be voted shall be
provided with the proxy statement and other materials provided to Company
shareholders in connection with each shareholder meeting, together with a form
or forms upon which the Participant (or Beneficiary) shall have the right to
give confidential voting instructions to the Trustee separately for the
allocated and the unallocated shares. A Participant (or Beneficiary) who does
not give instructions to the Trustee shall be treated as having authorized the
Committee to direct the Trustee as to the voting of his shares.
(b) Tender Offer - In the event that there should be a tender or
exchange offer for Stock, the response to such offer by the Trustee shall be
only in accordance with the provisions of this Section 8(b). Each Participant
(or Beneficiary) will be entitled to direct the Trustee as to the manner in
which to respond to such offer with respect to shares of Stock then allocated to
his Stock Account. Each Participant (or Beneficiary) will also be entitled to
separately direct the Trustee as to the manner in which to respond to such offer
with respect to a portion of the shares of Stock not then allocated to
Participants' Stock Accounts. The portion of the unallocated shares of Stock
with respect to which a Participant (or Beneficiary) may give instructions to
the Trustee shall be the total number of unallocated shares of Stock held by the
Trust multiplied by a fraction, the numerator of which is the number of shares
of Stock then allocated to his Stock Account and the denominator of which is the
total number of shares allocated to Participants' Stock Accounts. Each
Participant (or Beneficiary) who is entitled to direct the Trustee as to the
manner in which the Trustee will respond to any such offer shall be provided
with the tender offer materials and the Participant (or Beneficiary) shall have
the right
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<PAGE> 25
to provide confidential instructions to the Trustee as to the manner
in which to respond to such offer with respect to the shares of Stock then
allocated to his Stock Account and separately with respect to a portion of the
shares of Stock not then allocated to Participants' Stock Accounts. A
Participant (or Beneficiary) who does not give instructions to the Trustee shall
be treated as having directed the Trustee not to tender.
(c) Participant as Named Fiduciary - Each Participant (or
Beneficiary) shall be a named fiduciary of the Plan for the purpose of providing
directions as to the voting of the shares of Stock allocated to his Stock
Account and a portion of the shares of Stock not then allocated to Participants'
Stock Accounts pursuant to Section 8(a) and as to the tendering of such shares
of Stock pursuant to Section 8(b).
Section 9. Disclosure to Participants.
(a) Summary Plan Description - Each Participant shall be furnished
with the summary plan description of the Plan required by Sections 102(a)(l) and
104(b)(l) of ERISA. Such summary plan description shall be updated from time to
time as required under ERISA and Department of Labor regulations thereunder.
(b) Summary Annual Report - Within two months after the due date for
filing the annual return/report (Form 5500) for the Plan with the Internal
Revenue Service, each Participant shall be furnished with the summary annual
report of the Plan required by Section 104(b)(3) of ERISA, in the form
prescribed in regulations of the U. S. Department of Labor.
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<PAGE> 26
(c) Annual Statement - Following each Allocation Date, each
Participant shall be furnished with a statement reflecting the following
information:
(1) The balances (if any) in his Accounts as of
the beginning of the Plan Year.
(2) The amount of Employer Contributions and
Forfeitures allocated to his Accounts for
that Plan Year.
(3) The adjustments to his Accounts to reflect
his share of dividends (if any) on Stock and
any net income (or loss) of the Trust for
that Plan Year.
(4) The new balances in his Accounts, including
the number of shares of Stock allocated to
his Stock Account and the Fair Market Value
as of that Allocation Date.
(5) His number of Years of Vesting Service and
his vested percentage in his Account
balances (under Sections 10 and 11) as of
that Allocation Date.
(d) Additional Disclosure - The Company shall make available for
examination by any Participant copies of the Plan, the Trust Agreement and the
latest annual report of the Plan filed (on Form 5500) with the Internal Revenue
Service. Upon written request of any Participant, the Company shall furnish
copies of such documents and may make a reasonable charge to cover the cost of
furnishing such copies, as provided in regulations of the U. S. Department of
Labor.
Section 10. Vesting and Forfeitures.
(a) Vesting - A Participant's interest in his Accounts shall become
100% vested and nonforfeitable without regard to his Years of Vesting Service if
he (A) is eligible for Retirement
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<PAGE> 27
(whether or not he actually terminates Service), (B) terminates Service by
reason of Disability, (C) dies while employed by the Company or an Affiliate, or
(0) completes five Years of Vesting Service.
(b) Forfeitures - Any portion of the final balances in a
Participant's Accounts which is not vested (and does not become part of his
Capital Accumulation) will become a Forfeiture as of the Allocation Date of the
Plan Year in which he incurs a five-consecutive-year Break in Service (or in
which he dies, if earlier). Forfeitures shall first be charged against a
Participant's Nonstock Account, with any balance charged against his Stock
Account (at Fair Market Value). Financed Shares shall be forfeited only after
other shares of Stock have been forfeited. All Forfeitures will be reallocated
to the Accounts of remaining Participants, as provided in Section 6(a), as of
the Allocation Date of the Plan Year in which a five-consecutive-year Break in
Service occurs (or in which the Participant dies, if earlier).
Section 11. Years of Vesting Service and Break in Service.
(a) Years of Vesting Service - An Employee's Years of Vesting
Service shall be the number of Plan Years in which he is credited with at least
1000 Hours of Service. Years of Vesting Service shall include such Service with
the Company or any Affiliate.
(b) Break in Service - A one-year Break in Service shall occur in a
Plan Year in which an Employee is not credited with more than 500 Hours of
Service as a result of his termination of Service. A five-consecutive-year Break
in Service shall be five consecutive one-year Breaks in Service.
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For purposes of determining whether a Break in Service has occurred,
if an Employee begins a maternity/paternity absence described in Section
411(a)(6)(E)(i) of the Code or a leave covered under the Family and Medical
Leave Act of 1993, the computation of his Hours of Service shall include the
Hours of Service that would have been credited if they had not been so absent
(or eight Hours of Service for each normal work day of such absence if the
actual Hours of Service cannot be determined). For purposes of this Section
11(b), a maternity/paternity absence means an absence from work (i) by reason of
the pregnancy of the Employee, (ii) by reason of the birth of a child of the
Employee, (iii) by reason of the placement of a child with the Employee in
connection with the adoption of such child by the Employee, or (iv) for purposes
of caring for such child for a period beginning immediately following such birth
or placement. An Employee shall be credited for such Hours of Service (up to a
maximum of 501 Hours of Service) in the Plan Year in which such absence begins
(if such crediting will prevent him from incurring a Break in Service in such
Plan Year) or in the next following Plan Year.
In addition, if an Employee is eligible for and is granted leave
pursuant to the Company's family care leave plan, a Break in Service shall not
occur if the Employee returns to Service with an Employer, without any
intervening employment with another employer, immediately following the
expiration of such leave and remains employed for a period of 90 days
thereafter. The Employee shall be credited with the Hours of Service that would
have been credited if he had not been so absent (or eight Hours of Service for
each normal work day of such absence if the actual Hours of Service cannot be
determined) up to a maximum of 501 Hours of Service for each Plan Year during
the period of such absence (if such crediting will prevent him from incurring a
Break in Service for any such Plan Year).
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(c) Reemployment - If a former Employee is reemployed after a
one-year Break in Service, the following special rules shall apply in
determining his Years of Vesting Service:
(1) New Accounts may be established to reflect
his interest in the Plan attributable to
Service after the Break in Service.
(2) If he is reemployed after the occurrence of
a five-consecutive-year Break in Service,
Years of Vesting Service after the Break in
Service will not increase his vested
interest in his Accounts attributable to
Service prior to the Break in Service.
(3) After he completes one Year of Vesting
Service following reemployment, his Years of
Vesting Service will include his Years of
Vesting Service accumulated prior to the
Break in Service.
Section 12. When Capital Accumulation Will Be Distributed.
(a) Except as otherwise provided in Sections 12(c) and 13, a
Participant's Capital Accumulation will be distributed following his termination
of Service, but only at the time and in the manner determined by the Committee.
If the value of a Participant's Capital Accumulation at the time distribution
would otherwise commence under this Section 12 exceeds $5,000, no portion of his
Capital Accumulation may be distributed to him before he attains age 65 without
his written consent.
(b) In the event of a Participant's Retirement, Disability or death,
distribution of his Capital Accumulation shall occur during the Plan Year
following the Plan Year in which his Retirement, Disability or death occurs. If
a Participant's Service terminates for any other reason, distribution of his
Capital Accumulation shall occur during the Plan Year in which the third
anniversary of his termination of Service occurs (or, if earlier, during the
Plan Year following
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the Plan Year in which he would be eligible for Retirement (as a result of
attaining the requisite age and having previously completed the requisite number
of Years of Vesting Service), incurs a Disability or dies).
(c) Distribution of a Participant's Capital Accumulation shall
commence not later than 60 days after the Allocation Date coinciding with or
next following the latest of (l) the date of his 65th birthday, (2) the l0th
anniversary of the date he became a Participant, or (3) the date he terminates
Service. The distribution of the Capital Accumulation of any Participant who
attains age 70 1/2 in a calendar year and either has (1) terminated Service or
(2) is a "5% owner" (as defined in Section 416(i)(l)(B)(i) of the Code) must
occur not later than April 1st of the next calendar year and must be made in
accordance with the regulations under Section 401(a)(9) of the Code, including
Section 1.40l(a)(9)-2. Distributions shall be offered to any other Participant
who attains age 70 1/2 before January 1, 1999, to the extent required under
Sections 401(a)(9) and 41l(d)(6) of the Code and the regulations issued
thereunder. If the amount of a Participant's Capital Accumulation cannot be
determined (by the Committee) by the date on which a distribution is to occur,
or if the Participant cannot be located, distribution of his Capital
Accumulation shall commence within 60 days after the date on which his Capital
Accumulation can be determined or after the date on which the Committee locates
the Participant.
(d) If a Participant's Capital Accumulation is retained in the Trust
after his Service ends, his Accounts will continue to be treated as described in
Section 6. However, except as otherwise provided in Section 3(b), such Accounts
shall not be credited with any additional Employer Contributions and
Forfeitures. If the distribution of a Participant's Capital
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Accumulation does not occur during the Plan Year following the Plan Year in
which his Service terminates, his entire Capital Accumulation may be segregated
and invested in assets other than Stock (as determined by the Committee).
(e) Notwithstanding any other provision of this Plan, all or a
portion of a Participant's Capital Accumulation may be distributed at any time
to the Participant's former spouse or other alternate payee, even prior to the
Participant's "earliest retirement age" (as defined in Section 414(p) of the
Code), if such distribution is made pursuant to and in accordance with the terms
of a "qualified domestic relations order" ("QDRO"), including QDROs which were
received prior to January 1, 1999. Such distribution will occur in a single lump
sum in the manner described in Section 14(a) as soon as practicable following
the date that the Committee determines that the order constitutes a QDRO. If the
value of a Participant's Capital Accumulation exceeds $5,000 (at the time a
distribution to the Participant's former spouse or other alternate payee would
otherwise be available under this Section 12(e)), no portion of such Capital
Accumulation may be distributed to his former spouse or other alternate payee,
without the written consent of such former spouse or other alternate payee.
Section 13. In-Service Distributions.
(a) Cash Dividends - If so determined by the Board of Directors, any
cash dividends payable on Stock allocated to the Stock Accounts of Participants
may be paid currently (or within 90 days after the end of the Plan Year in which
the dividends are paid to the Trust) in cash by the Trustee to such Participants
(or their Beneficiaries) on a nondiscriminatory basis, or the Company may pay
such dividends directly to the Participants (or Beneficiaries). Such
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<PAGE> 32
distribution (if any) of cash dividends may be limited to Participants who are
still Employees, may be limited to dividends on shares of Stock which are then
vested or may be applicable to cash dividends on all shares allocated to
Participants' Stock Accounts.
(b) Withdrawals - A Participant who has attained age 55 and
completed at least ten Years of Participation in the Plan shall be notified of
his right to elect to (1) withdraw in cash a portion of the balance in his Stock
Account attributable to shares of Stock acquired by the Trust after December 31,
1986, or (2) have a portion of his Stock Account transferred to the Profit
Sharing Plan, as provided in Section 401(a)(28)(B) of the Code. An election to
make a withdrawal or transfer must be made on the prescribed form and filed with
the Committee within the 90-day period immediately following the Allocation Date
of a Plan Year in the Election Period. For purposes of this Section 13(b),
"Years of Participation" includes only those Plan Years in which the Participant
is eligible to receive an allocation of Employer Contributions and Forfeitures
pursuant to Section 3(b), and the "Election Period" means the period of six
consecutive Plan Years beginning with the Plan Year in which the Participant
first becomes eligible to make a withdrawal or transfer.
For each of the first five Plan Years in the Election Period, the
Participant may elect to withdraw or transfer an amount which does not exceed
25% of the number of shares of Stock allocated to his Stock Account, less all
amounts previously withdrawn or transferred under this Section 13(b). In the
case of the sixth Plan Year in the Election Period, the Participant may elect to
withdraw or transfer an amount which does not exceed 50% of the number of shares
of Stock allocated to his Stock Account, less all amounts previously withdrawn
or transferred under this Section 13(b). No election shall be permitted if the
balance in a Participant's Stock
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Account as of the Allocation Date of the first Plan Year in the Election Period
has a Fair Market Value of $500 or less, unless and until the balance in his
Stock Account as of a subsequent Allocation Date in the Election Period exceeds
$500. Any withdrawal or transfer under this Section 13(b) shall be made within
90 days after the 90-day period in which the election may be made. A withdrawal
shall be treated as a distribution which is subject to the provisions of
Sections 14(c) and (e).
(c) Hardship Withdrawals -
(1) A Participant who is an Employee and who is not subject to
the provisions of Section 16 of the Securities Exchange Act of 1934, as amended,
may request a hardship withdrawal of a portion of his Capital Accumulation if he
needs funds for the following reasons:
(i) costs directly related to the purchase of a
principal residence for the
Participant (excluding mortgage payments);
(ii) reimbursement of tuition and
related educational fees,
including room and board and the
cost of textbooks, for
post-secondary education of the
Participant, his spouse, his
children or his dependents (as
defined in Section 152 of the
Code); or
(iii) payments necessary to prevent
the eviction of the Participant
from his principal residence or
foreclosure on the mortgage on
that residence.
(2) A withdrawal of less than $1,000 will not be permitted, and no
more than two withdrawals will be permitted in each Plan Year. The determination
of the amount of funds needed by the Participant may include any amounts
necessary to pay any Federal, state or local income taxes or penalties
reasonably anticipated to result from the withdrawal. The maximum
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<PAGE> 34
aggregate amount that may be withdrawn under this Section 13(c) is the lesser of
(l) 40% of the Participant's Capital Accumulation or (2) $200,000 (less any
amount withdrawn under the Profit Sharing Plan). A withdrawal shall be disbursed
proportionately from the Participant's Stock Account and Nonstock Account and,
within the Participant's Stock Account, proportionately from shares of Stock
acquired by the Trust prior to January 1, 1987, and shares of Stock acquired by
the Trust after December 31, 1986. Any withdrawal under this Section 13(c) shall
be requested and effected in accordance with such rules and procedures as may be
established from time to time by the Committee.
Section 14. How Capital Accumulation Will Be Distributed.
(a) The Trustee will make distributions from the Trust only as
directed by the Committee. Distribution of a Participant's Capital Accumulation
will be made in a single lump sum in whole shares of Stock, cash or a
combination of both, as determined by the Committee; provided, however, that
(except as provided in Section 13(b)), the Committee shall notify the
Participant of his right to demand distribution of his Capital Accumulation
entirely in whole shares of Stock (with only the value of any fractional share
paid in cash).
(b) Distribution of a Participant's Capital Accumulation will be
made to the Participant if living, and if not, to his Beneficiary. In the event
of a Participant's death, his Beneficiary shall be his surviving spouse, or if
none, his estate. A Participant (with the written consent of his spouse, if any,
acknowledging the effect of the consent and witnessed by a notary public or Plan
representative) may designate a different Beneficiary (and contingent
Beneficiaries) from time to time by filing a written designation with the
Committee. A
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<PAGE> 35
deceased Participant's entire Capital Accumulation shall be distributed to his
Beneficiary in a single lump sum as soon as practicable (but in no event later
than the December 3 1st of the calendar year that includes the fifth anniversary
of his death), whether or not such distribution has previously commenced.
(c) The Company shall furnish the recipient of a distribution with
the tax consequences explanation required by Section 402(f) of the Code and
shall comply with the withholding requirements of Section 3405 of the Code and
of any applicable state law with respect to distributions from the Trust (other
than any dividend distributions under Section 13(a)). If the Committee so elects
for a Plan Year, distributions to Participants may commence less than 30 days
after the notice required under Section 1.411(a)-11(c) of the regulations under
the Code is given; provided, however, that no such distribution to a Participant
shall be made unless (1) the Participant is informed that he has the right for a
period of at least 30 days after receiving the notice to consider whether or not
to consent to a distribution (or a particular distribution option), and (2) the
Participant affirmatively elects to receive a distribution after receiving the
notice.
(d) All shares of Stock distributed under the Plan will be readily
tradable on an established market; provided, however, that shares of Stock held
or distributed by the Plan may include such legend restrictions on
transferability as the Company may reasonably require in order to assure
compliance with applicable Federal and state securities laws. Except as
otherwise provided in this Section 14(d), no shares of Stock held or distributed
by the Trustee may be subject to a put, call or other option, or buy-sell or
similar arrangement. The provisions
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of this Section 14(d) shall continue to be applicable to Stock even if the Plan
ceases to be an employee stock ownership plan under Section 4975(e)(7) of the
Code.
(e) If a distribution of a Participant's Capital Accumulation is not
the minimum amount required to be distributed pursuant to the second and third
sentences of Section 12(c), the Committee shall notify the Participant (or any
spouse or former spouse who is his alternate payee under a "qualified domestic
relations order" (as defined in Section 414(p) of the Code)) of his right to
elect to have the "eligible rollover distribution" paid directly to an "eligible
retirement plan" (within the meaning of Section 401(a)(31) of the Code) that is
an individual retirement account described in Section 408(a) of the Code, an
individual retirement annuity described in Section 408(b) of the Code, a
qualified trust described in Section 401(a) of the Code or a qualified annuity
plan described in Section 403(a) of the Code that accepts "eligible rollover
distributions." If such an "eligible rollover distribution" is to be made to the
Participant's surviving spouse, the Committee shall notify the surviving spouse
of his right to elect to have the distribution paid directly to an "eligible
retirement plan" that is either an individual retirement account described in
Section 408(a) of the Code or an individual retirement annuity described in
Section 408(b) of the Code. Any election under this Section 14(e) shall be made
and effected in accordance with such rules and procedures as may be established
from time to time by the Committee in order to comply with Section 401(a)(31) of
the Code.
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Section 15. No Assignment of Benefits.
A Participant's Capital Accumulation may not be anticipated,
assigned (either at law or in equity), alienated or subject to attachment,
garnishment, levy, execution or other legal or equitable process, except in
accordance with a "qualified domestic relations order" (as defined in Section
414(p) of the Code).
Section 16. Administration.
(a) Administrative Committee - The Plan will be administered by an
Administrative Committee composed of not fewer than three individuals appointed
by the Board of Directors to serve at its pleasure and without compensation. The
members of the Committee shall be the named fiduciaries with authority to
control and manage the operation and administration of the Plan. Members of the
Committee need not be Employees or Participants. Any Committee member may
resign by giving notice, in writing, to the Board of Directors.
(b) Committee Action - Committee action will be by vote of a
majority of the members at a meeting or in writing by all the members without a
meeting. A Committee member who is a Participant shall not vote on any question
relating specifically to himself.
The Committee shall choose from its members a Chairman and a
Secretary. The Chairman or the Secretary of the Committee shall be authorized to
execute any certificate or other written direction on behalf of the Committee.
The Secretary shall keep a record of the Committee's proceedings and of all
dates, records and documents pertaining to the administration of the Plan.
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<PAGE> 38
(c) Powers and Duties of the Committee - The Committee shall have
all powers necessary to enable it to administer the Plan and the Trust Agreement
in accordance with their provisions, including without limitation the following:
(1) resolving all questions relating to the
eligibility of Employees to become
Participants;
(2) determining the appropriate allocations to
Participants' Accounts pursuant to Section
6;
(3) determining the amount of benefits payable
to a Participant (or Beneficiary), and the
time and manner in which such benefits are
to be paid;
(4) authorizing and directing all disbursements
of Trust Assets by the Trustee;
(5) establishing procedures in accordance with
Section 414(p) of the Code to determine the
qualified status of domestic relations
orders and to administer distributions under
such qualified orders;
(6) engaging any administrative, legal,
accounting, clerical or other services that
it may deem appropriate;
(7) construing and interpreting the Plan and the
Trust Agreement and adopting rules for
administration of the Plan that are
consistent with the terms of the Plan
documents and of ERISA and the Code;
(8) compiling and maintaining all records it
determines to be necessary, appropriate or
convenient in connection with the
administration of the Plan;
(9) reviewing the performance of the Trustee
with respect to the Trustee's administrative
duties, responsibilities and obligations
under the Plan and Trust Agreement; and
(10) executing agreements and other documents on behalf
of the Plan and Trust.
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The Committee shall be responsible for directing the Trustee as to
the investment of Trust Assets. The Committee may delegate to the Trustee the
responsibility for investing Trust Assets other than Stock. The Committee shall
establish a funding policy and method for directing the Trustee to acquire Stock
(and for otherwise investing the Trust Assets) in a manner that is consistent
with the objectives of the Plan and the requirements of ERISA.
The Committee shall perform its duties under the Plan and the Trust
Agreement solely in the interests of the Participants (and their Beneficiaries).
Any discretion granted to the Committee under any of the provisions of the Plan
or the Trust Agreement shall be exercised only in accordance with rules and
policies established by the Committee which shall be applicable on a
nondiscriminatory basis. The Committee shall have the full and exclusive
discretion to interpret and administer the Plan. All actions, interpretations
and decisions of the Committee are conclusive and binding on all persons, and
shall be given the maximum possible deference allowed by law.
(d) Expenses - All reasonable expenses of administering the Plan and
Trust shall be charged to and paid out of the Trust Assets. The Company may,
however, pay all or any portion of such expenses directly, and payment of
expenses by the Company shall not be deemed to be Employer Contributions.
(e) Information to be Submitted to the Committee - To enable the
Committee to perform its functions, the Company shall supply full and timely
information to the Committee on all matters as the Committee may require, and
shall maintain such other records as the Committee may determine are necessary
or appropriate in order to determine the benefits due or which may become due to
Participants (or Beneficiaries) under the Plan.
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(f) Delegation of Fiduciary Responsibility - The Committee from time
to time may allocate to one or more of its members and/or may delegate to any
other persons or organizations any of its rights, powers, duties and
responsibilities with respect to the operation and administration of the Plan
that are permitted to be so delegated under ERISA; provided, however, that
responsibility for investment of the Trust Assets may not be allocated or
delegated other than as provided in Section 16(c). Any such allocation or
delegation shall be made in writing, shall be reviewed periodically by the
Committee and shall be terminable upon such notice as the Committee in its
discretion deems reasonable and proper under the circumstances.
(g) Bonding, Insurance and Indemnity - To the extent required under
Section 412 of ERISA, the Company shall secure fidelity bonding for the
fiduciaries of the Plan.
The Company (in its discretion) or the Trustee (as directed by the
Committee) may obtain a policy or policies of insurance for the Committee (and
other fiduciaries of the Plan) to cover liability or loss occurring by reason of
the act or omission of a fiduciary. If such insurance is purchased with Trust
Assets, the policy must permit recourse by the insurer against the fiduciary in
the case of a breach of a fiduciary obligation by such fiduciary. The Company
hereby agrees, to the maximum extent permitted by law, to indemnify and hold
harmless the Committee and each of its designees under Section 16(f), who is an
officer, director or employee of any Employer, against any and all claims, loss,
damages, liability, expenses, including legal fees, costs, judgments, fines,
settlements and other amounts actually and reasonably incurred, including in
connection with any proceeding, arising by reason of the fact that such person
is or was acting in such capacity.
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(h) Notices, Statements and Reports - The Company shall be the "Plan
Administrator" (as defined in Section 3(16)(A) of ERISA and Section 414(g) of
the Code) for purposes of the reporting and disclosure requirements of ERISA and
the Code. The Committee shall assist the Company, as requested, in complying
with such reporting and disclosure requirements. The Company shall be the
designated agent of the Plan for the service of legal process.
Section 17. Claims Procedure.
A Participant (or Beneficiary) who does not receive a distribution
of benefits to which he believes he is entitled may present a claim to the
Committee. The claim for benefits must be in writing and addressed to the
Committee or to the Company. If the claim for benefits is denied, the Committee
shall notify the Participant (or Beneficiary) in writing within 90 days after
the Committee initially received the benefit claim. If there are special
circumstances which require an extension of time for processing the claim for
benefits, the Committee's decision shall be rendered not later than 180 days
after receipt of a claim. Any notice of a denial of benefits shall advise the
Participant (or Beneficiary) of the basis for the denial, any additional
material or information necessary for the Participant (or Beneficiary) to
perfect his claim and the steps which the Participant (or Beneficiary)
must take to have his claim for benefits reviewed.
Each Participant (or Beneficiary) whose claim for benefits has been
denied may file a written request for a review of his claim by the Committee.
The request for review must be filed by the Participant (or Beneficiary) within
60 days after he receives the written notice denying his claim. The decision of
the Committee will be made within 60 days after receipt of a
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request for review and shall be communicated in writing to the claimant. Such
written notice shall set forth the basis for the Committee's decision. If there
are special circumstances (such as the need to hold a hearing) which require an
extension of time for completing the review, the Committee's decision shall be
rendered not later than 120 days after receipt of a request for review. All
decisions and interpretations of the Committee under this Section 17 shall be
conclusive and binding upon all persons with an interest in the Plan and shall
be given the greatest deference permitted by law.
Section 18. Limitation on Participants' Rights.
A Participant's Capital Accumulation will be based solely upon his
vested interest in his Accounts and will be paid only from the Trust Assets. An
Employer, the Committee or the Trustee shall not have any duty or liability to
furnish the Trust with any funds, securities or other assets, except as
expressly provided in the Plan.
The adoption and maintenance of the Plan shall not be deemed to
constitute a contract of employment or otherwise between an Employer and any
Employee, or to be a consideration for, or an inducement or condition of, any
employment. Nothing contained in this Plan shall be deemed to give an Employee
the right to be retained in the Service of an Employer or to interfere with the
right of an Employer to discharge, with or without cause, any Employee at any
time.
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<PAGE> 43
Section 19. Future of the Plan.
The Company reserves the right to amend or terminate the Plan (in
whole or in part) and the Trust Agreement at any time, by action of the Board of
Directors. Neither amendment nor termination of the Plan shall retroactively
reduce the vested rights of Participants or permit any part of the Trust Assets
to be diverted to or used for any purpose other than for the exclusive benefit
of the Participants (and their Beneficiaries).
The Company specifically reserves the right to amend the Plan and
the Trust Agreement retroactively in order to satisfy any applicable
requirements of the Code and ERISA.
If the Plan is terminated (or partially terminated), participation
of Participants affected by the termination will end. If Employer Contributions
are not replaced by contributions to a comparable plan which satisfies the
requirements of Section 401(a) of the Code, the Accounts of only those
Participants who are Employees on the effective date of termination will become
nonforfeitable as of that date. A complete discontinuance of Employer
Contributions shall be deemed to be a termination of the Plan for this purpose.
The Capital Accumulation of those Participants whose Service terminated prior to
the effective date of Plan termination will continue to be determined pursuant
to Section 10(a); and, to the extent that such Participants are not vested, the
nonvested balances in their Accounts will become Forfeitures to be reallocated
as of the effective date of Plan termination (even if they have not incurred a
five-consecutive-year Break in Service).
After termination of the Plan, the Trust will be maintained until
the Capital Accumulations of all Participants have been distributed. Capital
Accumulations may be
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distributed following termination of the Plan or
distributions may be deferred as provided in Section 12, as the Company shall
determine.
In the event of the merger or consolidation of this Plan with
another plan, or the transfer of Trust Assets (or liabilities) to another plan,
the Account balances of each Participant immediately after such merger,
consolidation or transfer must be at least as great as immediately before such
merger, consolidation or transfer (as if the Plan had then terminated).
Section 20. "Top-Heavy" Contingency Provisions.
(a) The provisions of this Section 20 are included in the Plan
pursuant to Section 401(a)(10)(B)(ii) of the Code and shall become applicable
only if the Plan becomes a "top-heavy plan" under Section 416(g) of the Code for
any Plan Year.
(b) The determination as to whether the Plan becomes "top-heavy" for
any Plan Year shall be made as of the Allocation Date of the immediately
preceding Plan Year by considering the Plan together with the Profit Sharing
Plan and any other tax-qualified plan maintained by an Affiliate in which a "key
employee" participates. The Plan and the Profit Sharing Plan (and any other plan
required to be aggregated with the Plan) shall be "top-heavy" only if the total
of the account balances under the Plan and the Profit Sharing Plan and such
other plan for "key employees" as of the determination date exceeds 60% of the
total of the account balances for all Participants. For such purpose, account
balances shall be computed and adjusted pursuant to Section 416(g) of the Code.
"Key employees" shall be certain Participants (who are officers or shareholders
of the Company) and Beneficiaries described in Section 416(i)(1) or (5) of the
Code.
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(c) For any Plan Year in which the Plan is "top-heavy," each
Participant who is an Employee on the Allocation Date (and who is not a "key
employee") shall receive a minimum allocation of Employer Contributions and
Forfeitures which is equal to the lesser of:
(1) 3% of his Statutory Compensation; or
(2) the same percentage of his Statutory
Compensation as the allocation to the "key
employee" for whom the percentage is the
highest for that Plan Year. 401(k)
Contributions under the Profit Sharing Plan
made by key employees during a Plan Year
shall be included in determining the "key
employee" with the highest percentage for
such Plan Year.
For this purpose, Statutory Compensation of each Employee shall not take into
account any amount in excess of $160,000 (as adjusted periodically after 1998
for increases in the cost of living).
(d) As of the first day of any Plan Year in which the Plan has
become "top-heavy," the applicable vesting schedule in Section 10(a)(2) shall be
amended (with respect to any Employee who is credited with at least one Hour of
Service after the Plan has become "top-heavy") to provide for vesting upon
completion of at least three Years of Vesting Service; provided, however, that
such vesting schedule described in this Section 20(d) is more favorable than the
applicable schedule described in Section 10(a)(2) with respect to such affected
Employee.
If the Plan ceases to be "top-heavy," the Capital Accumulation of a
Participant who, at that time, has less than three years of Service shall
thereafter be determined under the applicable vesting schedule in Section
10(a)(2), instead of the vesting schedule in this Section 20(d), except that his
nonforfeitable percentage shall not be reduced below the nonforfeitable
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percentage that he had at the time the Plan ceased to be "top-heavy." If the
Plan ceases to be "top-heavy," the Capital Accumulation of a Participant who, at
that time, has three or more years of Service shall continue to be determined
under the vesting schedule in this Section 20(d).
Section 21. Governing Law.
The provisions of this Plan and the Trust Agreement shall be
construed, administered and enforced in accordance with the laws of the State of
California, to the extent such laws are not superseded by ERISA.
Section 22. Execution.
To record this amendment and restatement of the Plan, the Company
has caused this document to be executed on this _____ day of________________ 199
.
GRANITE CONSTRUCTION INCORPORATED
By:
------------------------------------------
Its: David H. Watts, President & CEO
By:
------------------------------------------
Its: Michael Futch, Secretary
<PAGE> 1
EXHIBIT 10.2.f
GRANITE CONSTRUCTION
PROFIT SHARING AND 401(k) PLAN
Amendment No. 6 to Amended and Restated Plan
WHEREAS, Granite Construction, Incorporated ("Granite") maintains the
Granite Construction Profit Sharing and 401(k) Plan (the "Plan") for the benefit
of the eligible employees of Granite and its subsidiaries;
WHEREAS, it is desirable to amend the Plan to provide for the transfer of
certain "elective deferral accounts" from the Gibbons Company Profit Sharing and
Retirement Plan (the "Gibbons Plan") into the Plan, effective as of April 1,
1998; and
WHEREAS, in connection with the termination of the Gibbons Plan, effective
as of March 31, 1998, it is desirable to amend the Plan to provide for the
transfer of the remaining portion of affected participants' benefits from the
Gibbons Plan into this Plan, in the event that such affected participants fail
to consent to distributions from the Gibbons Plan;
NOW, THEREFORE, the Plan is hereby amended by adding Appendix A thereto,
effective as of April 1, 1998:
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Appendix A
Frozen Gibbons Plan Accounts
This Appendix A shall apply to "elective deferral accounts" transferred
from the Gibbons Company Profit Sharing and Retirement Plan (the "Gibbons Plan")
to the Plan on April 1, 1998, for the benefit of individuals who became
Employees upon the Company's acquisition of the Gibbons Company and its
affiliates ("Gibbons Employees"). This Appendix A shall also apply to the other
accounts of Gibbons Employees that are transferred from the Gibbons Plan to the
Plan because Gibbons Employees failed to consent to distributions of those
accounts upon the termination of the Gibbons Plan. Except as specifically noted
in this Appendix A, the Plan will be administered in accordance with the other
provisions of the Plan.
(a) Transferred Accounts.
(1) Frozen Elective Deferral Account. The balance in a Gibbons
Employee's "elective deferral account" under the Gibbons Plan as of March 31,
1998, will be transferred to this Plan, effective as of April 1, 1998, and will
be maintained as his Frozen Elective Deferral Account. The interest of each
Gibbons Employee in his Frozen Elective Deferral Account shall be fully vested
at all times.
(2) Frozen General Account. A Frozen General Account shall be
maintained for a Gibbons Employee in this Plan in the event that he fails to
consent to a distribution of his "rollover account", "employer matching
contribution account," "employer profit-sharing contribution account" and
"Davis-Bacon account" under the
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Gibbons Plan after its termination and within the 30-day period after being
informed that distributions are available. A Gibbons Employee's Frozen General
Account shall be credited initially with his balance in the Gibbons Plan prior
to the date of the transfer which is attributable to his "rollover account",
"employer matching contribution account," "employer profit-sharing contribution
account" and "Davis-Bacon account;" provided, however, that the after-tax
voluntary contributions made by a Gibbons Employee to the Gibbons Plan prior
January 1, 1987, and earnings thereon, shall be held in the Gibbons Employee's
Frozen Voluntary Account. The interest of each Gibbons Employee in his Frozen
General Account shall be fully vested at all times.
(3) Frozen Voluntary Account. A Frozen Voluntary Account shall be
maintained for a Gibbons Employee in this Plan in the event that he fails to
consent to a distribution of his "voluntary account" from the Gibbons Plan after
its termination and within the 30-day period after being informed that
distributions are available. A Gibbons Employee's Frozen Voluntary Account shall
be credited initially with the balance in his (i) "voluntary account" under the
Gibbons Plan prior to the date of the transfer, and (ii) the subaccount of his
"employer profit-sharing contribution account" that held the after-tax voluntary
contributions that he made to the Gibbons Plan prior January 1, 1987, and
earnings thereon. The interest of each Gibbons Employee in his Frozen Voluntary
Account shall be fully vested at all times.
(b) Distributions. All distributions from a Gibbons Employee's Frozen
Elective Deferral Account, Frozen General Account and Frozen Voluntary Account
(collectively referred to as "Frozen Accounts") shall be subject to the
provisions of
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Section 12, except as otherwise provided in this Appendix A. For purposes of
Section 12(c), distribution to a Gibbons Employee from his Frozen Accounts shall
commence no later than the date provided in the first sentence in Section 12,
unless a Gibbons Employee elects to maintain his Frozen Accounts in the Plan
until they are required to be distributed under the second and third sentences
of Section 12(c). For this purpose, failure to submit a claim for a distribution
shall be deemed such an election. A Gibbons Employee may elect to receive his
Frozen Accounts in one or a combination of the following forms:
(i) A single lump sum cash payment.
(ii) Substantially equal monthly, quarterly or annual cash
installments over a period not exceeding the life expectancy
of the Gibbons Employee and the Gibbons Employee's spouse.
The minimum installment amount, regardless of the periodic
method chosen, must be at least $100.00.
If a Gibbons Employee fails to elect to a form of payment, payment shall be made
as a single lump sum cash payment.
(c) In-Service Withdrawals.
(1) Frozen General Account and Frozen Voluntary Account. Each Gibbons
Employee may request a withdrawal of all or a portion of his Frozen General
Account and Frozen Voluntary Account at any time in accordance with such rules
as may be prescribed by the Committee. A Gibbons Employee is entitled to make
only one
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such withdrawal from such Frozen Accounts in any Plan Year. Such withdrawals
shall be distributed in the manner described in Appendix A(b).
(2) Frozen Elective Deferral Account. Each Gibbons Employee may
request a withdrawal of all or a portion of his Frozen Elective Deferral Account
at any time after he attains age 59 1/2 in accordance with such rules as may be
prescribed by the Committee. A Gibbons Employee is entitled to make only one
such withdrawal from his Frozen Elective Deferral Account in any Plan Year. Such
withdrawals shall be distributed in the manner described in Appendix A(b).
To record the adoption of this Amendment No. 6 to the amended and restated
Plan, Granite has caused it to be executed this 30 day of March, 1998.
GRANITE CONSTRUCTION
INCORPORATED
By: /s/ David H. Watts
------------------------------------
David H. Watts, President and CEO
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EXHIBIT 10.3.b
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (the "Amendment"), dated
as of June 30, 1998, is entered into by and among GRANITE CONSTRUCTION
INCORPORATED, a Delaware corporation (the "Company"), BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION, as Issuing Bank, and as agent for itself and the
Banks (in such capacity, the "Agent"), and the several financial institutions
party to the Credit Agreement (collectively, the "Banks").
RECITALS
A. The Company, the Banks, the Issuing Bank and the Agent are
parties to a Credit Agreement dated as of June 30, 1997, as amended by a First
Amendment to the Credit Agreement dated as of January 16, 1998 (as so amended,
the "Prior Credit Agreement"). The Prior Credit Agreement, as amended by this
Amendment, is herein referred to as the "Credit Agreement".
B. Pursuant to the Prior Credit Agreement, the Banks have extended
and are continuing to extend certain credit facilities to the Company.
C. The Company has requested that the Banks agree to certain
amendments of the Prior Credit Agreement.
D. The Banks are willing to amend the Prior Credit Agreement,
subject to the terms and conditions of this Amendment.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, capitalized terms
used herein shall have the meanings, if any, assigned to them in the Prior
Credit Agreement.
2. Amendments to Prior Credit Agreement
(a) Section 1.01 of the Prior Credit Agreement shall be amended
by adding the following defined term in appropriate alphabetical order:
"Material Subsidiary" means any Subsidiary which
meets any of the following conditions: (a) such
Subsidiary's total net revenues for the period of the
immediately preceding four fiscal quarters is equal to or
greater than 10% of the consolidated total net revenues of
the Company and its Subsidiaries for such period determined
in accordance with GAAP, in each case as reflected in the
most recent annual or quarterly financial statements of the
Company and its Subsidiaries; or (b) such
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Subsidiary's total assets, as of the last day of the
immediately preceding fiscal quarter, is equal to or
greater than 10% of consolidated total assets of the
Company and its Subsidiaries as of such date determined in
accordance with GAAP, in each case as reflected in the most
recent annual or quarterly financial statements of the
Company and its Subsidiaries.
(b) Section 1.01 of the Prior Credit Agreement shall be amended
by adding the following defined term in appropriate alphabetical order:
"Non-Guarantor Subsidiary" has the meaning specified
in Section 2.14.
(c) Section 1.01 of the Prior Credit Agreement shall be amended
by amending and restating the defined term "Interest Payment Date" to read as
follows:
"Interest Payment Date" means, with respect to any CD Rate
Loan or Eurodollar Loan, the last Business Day of each
Interest Period applicable to such Loan and, with respect
to Reference Rate Loans, the last Business Day of each
calendar quarter and the date on which the final payment of
Revolving Loans is due hereunder, provided, however, that
if any Interest Period for a CD Rate Loan or Eurodollar
Rate Loan exceeds 90 days or three months, respectively,
"Interest Payment Date" with respect to such Loans shall
include the date which falls 90 days or three months after
the beginning of such Interest Period, respectively.
(d) Section 1.01 of the Prior Credit Agreement shall be amended
at the defined term "Interest Period" by deleting the date "June 30, 2002" in
clause (iii) thereof and inserting the phrase "the last Business Day of June,
2005" in lieu thereof.
(e) Section 1.01 of the Prior Credit Agreement shall be amended
by amending and restating the defined term "Revolving Termination Date" to read
as follows.
"Revolving Termination Date" means the earlier to occur of:
(a) June 30, 2000; and
(b) The date on which the Commitments shall
terminate in accordance with the provisions of this
Agreement.
Subject to clause (b) of this definition, the term
"Revolving Termination Date" shall be deemed to refer to
any such Revolving Termination Date as extended from time
to time pursuant to, and subject to the conditions of,
Section 2.15.
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<PAGE> 3
(f) Section 2.06 of the Prior Credit Agreement shall be
amended by amending and restating the fourth sentence thereof to read as
follows:
If such notice is given, the Company 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 to each such
date on the amount of Eurodollar Rate Loans prepaid and
the amounts required pursuant to Section 4.04.
(g) Subsection 2.07(b) of the Prior Credit Agreement
shall be amended and restated in its entirety to read as follows:
(b) The Revolving Credit. The Company
agrees to repay the principal amount outstanding as of the Revolving
Termination Date of the Revolving Loans in ten equal semi-annual
installments (i) beginning on the last Business Day in December, 2000 (as
such date may be extended pursuant to the terms of and subject to the
conditions of subsection 2.15(b)), and (ii) thereafter on the last
Business Day of June and December of each year thereafter, through and
including the last Business Day of June, 2005 (as such date may be
extended pursuant to the terms of and subject to the conditions of
subsection 2.15(b)).
(h) Section 2.08 of the Prior Credit Agreement shall be
amended by amending and restating the second sentence thereof to read as
follows:
Interest shall also be payable on the date of any
payment or prepayment of Eurodollar Rate Loans pursuant
to Sections 2.06 and 2.07 for the portion of the
Eurodollar Rate Loans so prepaid and upon payment
(including prepayment) in full thereof and, after the
occurrence and during the continuance of any Event of
Default, interest shall be payable on demand.
(i) Subsection 2.09(b) of the Prior Credit Agreement
shall be amended by deleting the word "average" and inserting the word "actual"
in lieu thereof.
(j) Section 2.14 of the Prior Credit Agreement shall be
amended and restated in its entirety to read as follows:
2.14 Guaranty of Obligations. The
Obligations shall be jointly and severally guaranteed by the Guarantors pursuant
to one or more Guaranties. Promptly after the date that any Subsidiary or other
Person becomes a Material Subsidiary of the Company, and, in any event, within
ten Business Days following receipt by the Company from the Agent of a request
therefor, the Company will cause such Material Subsidiary to execute and deliver
to the Agent and the Banks a guaranty of the Obligations in substantially the
form of the Guaranty. In addition, promptly after any date that the total
revenues or total assets of all Subsidiaries which are not Guarantors (each, a
"Non-Guarantor Subsidiary") together exceed 20% of the total revenues or total
assets, as the case may be, of the Company and its Subsidiaries measured on a
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<PAGE> 4
consolidated basis, and, in any event, within ten Business Days following
receipt by the Company from the Agent of a request therefor, the Company
will cause one or more Non-Guarantor Subsidiaries to execute and deliver
to the Agent and the Banks a guaranty or guarantees of the Obligations in
substantially the form of the Guaranty, such that after delivery of such
guaranty or guarantees, the total revenues or total assets of all
remaining Non-Guarantor Subsidiaries together are less than 20% of the
total revenues or total assets, as the case may be, of the Company and
its Subsidiaries measured on a consolidated basis. The Company shall in
each case deliver or cause to be delivered such other items as may be
reasonably requested by the Agent, at the request of any Bank, in
connection with the foregoing, including resolutions, incumbency and
officers certificates and opinions of counsel.
(k) Subsection 2.15(a) of the Prior Credit Agreement
shall be amended and restated in its entirety to read as follows:
(a) Not earlier than April 30, 1999 and
not later than April 28, 2000, and, if the Revolving Termination Date has
previously been extended pursuant to this Section 2.15, not earlier than the
April 30 of the year immediately prior to the year in which the Revolving
Termination Date then occurs, and not later than the April 30 of the year in
which the Revolving Termination Date then occurs, the Company may, at its
option, request that all the Banks extend the Revolving Termination Date by one
year by means of a letter, addressed to the Agent and each Bank, substantially
in the form of Exhibit I; provided, however, that notwithstanding the foregoing,
the Revolving Termination Date shall occur on the date that the Commitments
terminate pursuant to Section 9.02 or the Revolving Commitments are terminated
pursuant to Section 2.05. The Revolving Termination Date shall be extended by
one year if all of the Banks consent (in each Bank's sole and absolute
discretion) to such extension, such consent to be given by executing and
delivering to the Agent, no later than 15 Business Days after its receipt of
such letter, a counterpart of such letter; provided, that, if, one or more Banks
decline to consent to the extension of the Revolving Termination Date, any
Bank's consent to such extension shall be nullified, and the Revolving
Termination Date shall not be extended. If any Bank fails to execute and deliver
such letter on or before the expiration of the aforesaid 15 Business Day period,
such Bank shall be deemed to have declined to consent to extend the Revolving
Termination Date, and the Revolving Termination Date shall not be extended.
(1) Subsection 7.03(i) of the Prior Credit Agreement
shall be amended and restated in its entirety to read as follows:
(i) within three Business Days after
the date of such occurrence, if (A) any Person shall become a Subsidiary of the
Company, (B) any Subsidiary or other Person shall become a Material Subsidiary
of the Company, or (C) the total revenues or total assets of all Non-Guarantor
Subsidiaries shall at any time together exceed 20% of the total revenues or
total assets, as the case may be of the Company and its Subsidiaries measured on
a consolidated basis; and
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<PAGE> 5
3. Representations and Warranties. The Company hereby
represents and warrants to the Agent and the Banks as follows:
(a) Both before and after giving effect to this
Amendment, no Default or Event of Default has occurred and is continuing.
(b) The execution, delivery and performance by the
Company of this Amendment and by the Guarantors of their acknowledgment and
consent to this Amendment have been duly authorized by all necessary corporate,
partnership and other action and do not and will not require any registration
with, consent or approval of, notice to or action by, any Person (including any
Governmental Approvals) in order to be effective and enforceable. Each of the
Prior Credit Agreement as amended by this Amendment, the Guaranty and the other
Loan Documents to which the Company or any of its Subsidiaries is a party
constitutes and continues to constitute the legal, valid and binding obligations
of the Company and such Subsidiary party thereto, enforceable against the
Company and such Subsidiaries in accordance with their respective terms, without
defense, counterclaim or offset.
(c) All representations and warranties of the Company
contained in the Prior Credit Agreement are true and correct and will be true
and correct on the Effective Date.
(d) The Company is entering into this Amendment on the
basis of its own investigation and for its own reasons, without reliance upon
the Agent and the Banks or any other Person.
4. Effective Date. This Amendment will become effective the
date first above written (the "Effective Date"), provided that each of the
following conditions precedent is satisfied:
(a) The Agent has received in sufficient number for each
Bank, duly executed originals (or, if elected by the Agent, an executed
facsimile copy):
(i) of this Amendment, executed by the
Company and each of the Banks; and
(ii) of the Guarantors' Acknowledgment and
Consent in the form attached hereto,
executed by each Guarantor; and
(b) The Agent has received from the Company and each
Guarantor a copy of a resolution passed by the board of directors (or similar
governing body) of each such Person or its general partner, certified by the
Secretary or an Assistant Secretary of such corporation as being in full force
and effect on the date hereof, authorizing the execution, delivery and
performance of this Amendment or the Guarantors' Acknowledgment and Consent, as
applicable.
5. Reservation of Rights. The Company acknowledges and agrees that
the execution and delivery by the Agent and the Banks of this Amendment shall
not be deemed to
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<PAGE> 6
create a course of dealing or otherwise obligate the Agent or
the Banks to execute similar amendments under the same or similar circumstances
in the future.
6. Miscellaneous.
(a) Except as herein expressly amended, all terms, covenants and
provisions of the Prior Credit Agreement are and shall remain in full force and
effect and all references therein and in the other Loan Documents to such Credit
Agreement shall henceforth refer to the Prior Credit Agreement as amended by
this Amendment. This Amendment shall be deemed incorporated into, and a part of,
the Credit Agreement. This Amendment is one of the Loan Documents.
(b) This Amendment shall be binding upon and inure to the
benefit of the parties hereto and thereto and their respective successors and
assigns. No third party beneficiaries are intended in connection with this
Amendment.
(c) This Amendment shall be governed by and construed in
accordance with the law of the State of California.
(d) This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument. Each of
the parties hereto understands and agrees that this document (and any other
document required herein) may be delivered by any party thereto either in the
form of an executed original or an executed original sent by facsimile
transmission to be followed promptly by delivery of a hard copy original, and
that receipt by the Agent of a facsimile transmitted document purportedly
bearing the signature of a Bank or the Company or any Guarantor shall bind such
Bank, the Company, or such Guarantor, respectively, with the same force and
effect as the delivery of a hard copy original. Any failure by the Agent to
receive the hard copy executed original of such document shall not diminish the
binding effect of receipt of the facsimile transmitted executed original of such
document of the party whose hard copy page was not received by the Agent.
(e) This Amendment, together with the Credit Agreement, contains
the entire and exclusive agreement of the parties hereto with reference to the
matters discussed herein and therein. This Amendment supersedes all prior drafts
and communications with respect thereto. This Amendment may not be amended
except in accordance with the provisions of Section 11.01 of the Credit
Agreement.
(f) If any term or provision of this Amendment shall be deemed
prohibited by or invalid under any applicable law, such provision shall be
invalidated without affecting the remaining provisions of this Amendment or the
Prior Credit Agreement, respectively.
(g) Each of the provisions set forth in Article XI of the Prior
Credit Agreement is incorporated herein by this reference and made applicable to
this Amendment.
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(h) The Company covenants to pay to or reimburse the Agent,
upon demand, for all costs and expenses (including allocated costs of in-house
counsel) incurred in connection with the development, preparation, negotiation,
execution and delivery of this Amendment.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Amendment as of the date first above written.
GRANITE CONSTRUCTION INCORPORATED
By: /s/ WILLIAM E. BARTON
--------------------------------------
Title: William E. Barton
Vice President
By: /s/ R.C. ALLBRITTON
--------------------------------------
Title: RC Allbritton
Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
By: /s/ [SIG ILLEGIBLE]
--------------------------------------
Title: Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a Bank
and as Issuing Bank
By: /s/ [SIG ILLEGIBLE]
--------------------------------------
Title: Vice President
BANQUE NATIONALE DE PARIS
By: /s/ DEBRA WRIGHT
--------------------------------------
Title: Debra Wright
Vice President
By: /s/ KATHERINE WOLFE
--------------------------------------
Title: Katherine Wolfe
Vice President
7
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UNION BANK OF CALIFORNIA, N.A.
By: /s/ DAVID TAYLOR
--------------------------------------
Title: David E. Taylor
Vice President
8
<PAGE> 9
GUARANTORS' ACKNOWLEDGMENT AND CONSENT
Each of the undersigned Guarantors hereby acknowledges the foregoing
Second Amendment to Credit Agreement (the "Amendment"), consents (without
implying the need for any such acknowledgment or consent) to its terms, and
represents and warrants to the Agent and the Banks that, both before and after
giving effect to the Amendment, its Guaranty remains in full force and effect as
an enforceable obligation of the Guarantor, except as limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws of general applicability
affected the enforceability of creditor rights. Each Guarantor further
represents that the execution, delivery and performance by such Guarantor of
this Acknowledgment and Consent have been duly authorized by all necessary
corporate, partnership and other action and do not and will not require any
registration with, consent or approval of, notice to or action by, any Person
(including any Governmental Approvals) in order to be effective and enforceable.
Each Guarantor remakes as of the Effective Date (as defined in the Amendment)
all of the representations and warranties made by it pursuant to the Guaranty.
Capitalized terms used herein and not otherwise defined have the respective
meanings defined in the Credit Agreement (as defined in the Amendment).
IN WITNESS WHEREOF, each Guarantor has executed this Acknowledgment
and Consent by its duly authorized officers as of this 30th day of June, 1998.
GRANITE CONSTRUCTION COMPANY DESERT AGGREGATES, INC.
By: /s/ WILLIAM E. BARTON By: /s/ DAVID J. BRUNTON
------------------------------- ----------------------------------
Name: William E. Barton Name: David J. Brunton
----------------------------- ---------------------------------
Title: Vice President & CFO Title: CFO and Assistant Secretary
----------------------------- ---------------------------------
By: /s/ R.C. ALLBRITTON By: /s/ KATHLEEN KENAN
------------------------------- ----------------------------------
Name: R.C. Allbritton Name: Kathleen Kenan
----------------------------- ---------------------------------
Title: Vice President & Treasurer Title: Assistant Secretary
----------------------------- ---------------------------------
GRANITE SR91 CORPORATION GG&R, INC.
By: /s/ DAVID H. WATTS By: /s/ DAVID H. WATTS
------------------------------- ----------------------------------
Name: David H. Watts Name: David H. Watts
----------------------------- ---------------------------------
Title: President & CEO Title: President & CEO
----------------------------- ---------------------------------
By: /s/ WILLIAM E. BARTON By: /s/ WILLIAM E. BARTON
------------------------------- ----------------------------------
Name: William E. Barton Name: William E. Barton
----------------------------- ---------------------------------
Title: Vice President & CFO Title: Vice President & CFO
----------------------------- ---------------------------------
1
<PAGE> 10
WILCOTT CORPORATION INTERMOUNTAIN SLURRY SEAL, INC.
By: /s/ DAVID H. WATTS By: /s/ DAVID J. BRUNTON
------------------------------- ----------------------------------
Name: David H. Watts Name: David J. Brunton
----------------------------- ---------------------------------
Title: President & CEO Title: CFO & Assistant Secretary
----------------------------- ---------------------------------
By: /s/ WILLIAM E. BARTON By: /s/ KATHLEEN KENAN
------------------------------- ----------------------------------
Name: William E. Barton Name: Kathleen Kenan
----------------------------- ---------------------------------
Title: Vice President & CFO Title: Assistant Secretary
----------------------------- ---------------------------------
BEAR RIVER CONTRACTORS GILC, L.P.
By: GILC, INCORPORATED
sole general partner
By: /s/ DAVID J. BRUNTON By: /s/ WILLIAM E. BARTON
------------------------------- ----------------------------------
Name: David J. Brunton Name: William E. Barton
----------------------------- ---------------------------------
Title: Chief Financial Officer Title: President & CEO
----------------------------- ---------------------------------
By: /s/ KATHLEEN KENAN By: /s/ R.C. ALLBRITTON
------------------------------- ----------------------------------
Name: Kathleen Kenan Name: R.C. Allbritton
----------------------------- ---------------------------------
Title: Assistant Secretary Title: Vice President& CFO
----------------------------- ---------------------------------
POZZOLAN PRODUCTS COMPANY GRANITE SR91, L.P.
(P.P.C.) By: GRANITE SR91 CORPORATION
sole general partner
By: /s/ DAVID J. BRUNTON By: /s/ DAVID H. WATTS
------------------------------- ----------------------------------
Name: David J. Brunton Name: David H. Watts
----------------------------- ---------------------------------
Title: CEO & Assistant Secretary Title: President & CEO
----------------------------- ---------------------------------
By: /s/ KATHLEEN KENAN By: /s/ WILLIAM E. BARTON
------------------------------- ----------------------------------
Name: Kathleen Kenan Name: William E. Barton
----------------------------- ---------------------------------
Title: Assistant Secretary Title: Vice President & CFO
----------------------------- ---------------------------------
GILC INCORPORATED GTC, INC.
By: /s/ WILLIAM E. BARTON By: /s/ WILLIAM E. BARTON
------------------------------- ----------------------------------
Name: William E. Barton Name: William E. Barton
----------------------------- ---------------------------------
Title: President & CEO Title: President & Treasurer
----------------------------- ---------------------------------
By: /s/ R.C. ALLBRITTON By: /s/ R.C. ALLBRITTON
------------------------------- ----------------------------------
Name: R.C. Allbritton Name: R.C. Allbritton
----------------------------- ---------------------------------
Title: Vice President & CEO Title: Vice President & Asst Secretary
----------------------------- ---------------------------------
2
<PAGE> 1
EXHIBIT 10.7.g
SEVENTH AMENDMENT TO
THE GIBBONS COMPANY PROFIT SHARING
AND RETIREMENT PLAN
This Seventh Amendment to the Gibbons Company Profit Sharing
and Retirement Plan (the "Plan") is made and entered into this 27th day of
February, 1998, by G.G.&R., Inc.
("GG&R"), the Sponsoring Employer of the Plan.
WITNESSETH:
WHEREAS, GG&R has heretofore established the Plan (which Plan
has been amended and restated in its entirety effective for all Plan Years
commencing on or after January 1, 1989);
WHEREAS, GG&R has reserved the right to amend the Plan in
whole or in part;
WHEREAS, it is desirable to amend the Plan to transfer
participants' Elective Deferral Accounts to the Granite Construction Profit
Sharing and 401(k) Plan, effective as of April 1, 1998;
WHEREAS, GG&R previously amended the Plan to cease all
Employer Davis-Bacon Contributions (for any period beginning after May 31, 1995)
and all Elective Deferrals, Matching Contributions and rollover contributions
(for plan years beginning after December 31, 1995); and
<PAGE> 2
WHEREAS, GG&R desires to amend the Plan to terminate all
portions of the Plan (other than the portion attributable to participants'
Elective Deferral Accounts), effective as of March 31, 1998, and amend the Plan
to incorporate the applicable provisions of the Internal Revenue Code of 1986,
in effect as of the date of termination, as amended by the Small Business Job
Protection Act of 1996 and the Taxpayer Relief Act of 1997.
NOW, THEREFORE, in consideration of the foregoing premises,
GG&R amends the following Sections of the Plan (or portions thereof) as follows:
1. Section 2.07 is amended by deleting the last paragraph from
the definition of "Compensation" thereof effective as of January 1, 1997.
2. Section 2 is amended by deleting the definition of "Family
Member" in Section 2.23, effective as of January 1, 1997.
3. Section 2.27 is restated to read as follows, effective as
of January 1, 1997:
2.27 "HIGHLY COMPENSATED EMPLOYEE" shall
mean, for any Plan Year, an Employee, other than a
non-resident alien receiving no earned income from the
Employer from sources within the United States, who, during
such year or the preceding year (a) was at any time a Five
Percent Owner (as defined in Section 19.02(c)); or (b)
received Compensation from the Employer in excess of eighty
thousand dollars ($80,000) in the preceding Plan Year and was
in the group consisting of the top twenty percent (20%) of the
Employees when ranked on the basis of Compensation paid during
such Plan Year.
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<PAGE> 3
A former Employee who was a Highly Compensated Employee upon
separation from service or at any time after attaining age
fifty-five (55) shall be treated as a Highly Compensated
Employee.
For purposes of the above, Compensation is defined as in
Section 7.01(b) of this Plan, but shall include contributions
made by the Employer to a plan of deferred compensation
otherwise excluded in Section 7.01(b). The dollar amount in
(b) above shall be adjusted at the same time and in the same
manner as the benefit limitation for defined benefit plans
under Code Section 415(b)(l)(A).
For purposes of determining the number of Employees in the
top-paid group in (b) above, the following shall be excluded:
Employees who have not completed six (6) months of service;
Employees who normally work less than seventeen and one-half
(17-1/2) hours per week; Employees who normally work not more
than six (6) months per year; Employees who have not attained
age twenty-one (21); and Employees described in Section
2.22(a), except as provided in Regulations issued under Code
Section 414(q).
4. Section 2.33 is amended by restating the first sentence in
the first paragraph thereof effective as of January 1, 1997:
"LEASED EMPLOYEE" shall mean any person, who, pursuant to an
agreement between the Gibbons Employer and any other person or
organization (leasing organization), has performed services
for the Employer (or for the Gibbons Employer and related
persons) determined in accordance with Code Section 414(n)(6))
on a substantially full time basis for a period of at least
one (1) year and such services are performed under the primary
direction or control by the Gibbons Employer.
5. Section 2.41 is restated to read as follows, effective as
of January 1, 1997:
2.41 "NON-HIGHLY COMPENSATED EMPLOYEE" shall
mean an Employee who is not a Highly Compensated Employee.
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<PAGE> 4
6. Section 3.04(e) is restated to read as follows, effective
as of August 5, 1993:
(e) For Plan Years beginning after December 31,
1984, in the case of an Employee who is
absent from work for any period:
(1) By reason of the pregnancy of the Employee;
(2) By reason of the birth of a child of the Employee;
(3) By reason of the placement of a child with the
Employee in connection with the adoption of such
child by such Employee;
(4) For purposes of caring for such child for a period
beginning immediately following such birth or
placement; or
(5) By reason of any unpaid leave covered by the Family
and Medical Leave Act of 1993 ("FMLA").
Hours of Service shall include the Hours of Service which
otherwise would normally have been credited to such
Employee but for such absence; or in any case in which the
Plan is unable to determine the Hours of Service to be
credited, eight (8) Hours of Service for each regularly
scheduled work day of such absence. The total number of
hours treated as Hours of Service under this Section by
reason of any pregnancy, placement or unpaid leave covered
by FMLA shall not exceed five hundred and one (501) hours
less the number of Hours of Service credited to an
Employee pursuant to Subsections (a) through (d) above,
for an absence described in this Subsection (e). The hours
described in this Subsection (e) shall be treated as Hours
of Service only in the computation period in which the
absence from work begins, if an Employee would be
prevented from incurring a One-Year Break in Service in
such computation period solely because the period of
absence is treated as Hours of Service as provided herein;
or in any other case, in the immediately following
computation period. Notwithstanding the foregoing, no
credit will be given pursuant to this Subsection (e)
unless the Employee furnishes to the Plan Administrator
such timely information as the Plan Administrator may
reasonably require to establish that the absence from work
is for reasons referred to herein, and the number of days
for which there was such an absence.
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<PAGE> 5
7. Section 3.05(c) is amended by adding the following sentence at the
end thereof, effective as of December 12, 1994:
Notwithstanding any provision of the Plan to the contrary,
contributions, benefits and service credit with respect to
qualified military service will be provided in accordance with
Section 414(u) of the Code.
8. Section 4.01 is amended by adding the following subsection (f) after
subsection (e) thereof effective as of December 31, 1997:
(f) Notwithstanding anything to the contrary in this Section
4.01, no Employee shall become a Participant after December 31, 1997,
for purposes of being eligible to receive an allocation of Employer
Profit Sharing Contributions for any Plan Year beginning after December
31, 1997.
9. Section 5.07 is amended by adding the following sentence at the end
of the second paragraph thereof effective as of December 31, 1997:
Notwithstanding anything to the contrary in this Section 5.07,
no Employer Profit Sharing Contributions shall be made to the
Plan for any Plan Year beginning after December 31, 1997.
10. Section 9.03 is amended by restating the second paragraph thereof
effective as of January 1, 1997:
If a Participant fails to elect a form of payment, payment of
the Participant's benefits shall be in a single lump sum in
accordance with (a) above. Except as provided in Section 9.04,
no payment shall be made to a Participant prior to his Normal
Retirement Age unless the Participant consents in writing to
the payment not more than ninety (90)
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<PAGE> 6
days prior to his Annuity Starting Date. If the Plan Administrator so
elects for any Plan Year, payment to a Participant (other than that
portion of benefit which is attributable to his Annuity Eligible Accrued
Benefit, as defined in Section 9.06) may commence less than 30 days
after the notice required under Section 1.411(a)-11(c) of the
regulations of the Code is given; provided, however, that no such
payment to a Participant shall be made unless (1) the Participant is
informed that he has the right for a period of at least 30 days after
receiving the notice to consider whether or not to consent to the
payment (or a particular payment option), and (2) the Participant
affirmatively elects to receive a payment after receiving the notice.
11. Section 9.03 is further amended by restating the first sentence in
the third paragraph thereof effective as of January 1, 1998:
If the lump sum amount that would be payable to a disabled Participant
is not more than five thousand dollars ($5,000) and the amount in the
Participant's Account has never exceeded that amount at the time of any
prior distribution, the benefit shall be paid as a single lump sum
payment as soon as administratively feasible following the end of the
calendar month in which his Termination of Employment occurs without
regard to any Participant consent requirement or the requirements of
Section 9.06.
12. Section 9.05 is amended by restating the first paragraph thereof to
read as follows, effective as of January 1, 1997:
9.05 REQUIRED DISTRIBUTIONS: Notwithstanding any other
provisions of this Article and except as provided in this Section 9.05,
in no event shall payments commence later than April 1st of the calendar
year following the Plan Year in which the Participant attains Age 70 1/2
and is either (1) a 5% owner (as defined in Section 19.02(c)) or (2) has
incurred a Termination of Employment. If payment of the Participant's
Accrued Benefit commences under this Section 9.05, it shall be
distributed to the Participant (consistent with the Participant's
election and the requirements of Section 9.03):
(a) In the form of a cash lump sum payment; or
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<PAGE> 7
(b) In the form of cash installment payments over a period not
extending beyond the life expectancy of the Participant, or the joint
life expectancy of the Participant and his Beneficiary.
13. Section 9.06(b) is amended by restating the second paragraph
thereof, effective as of January 1, 1997:
The notification shall also inform the Participant that a
specific written explanation in non-technical language of the
terms and conditions of the Automatic Qualified Joint and
Survivor Annuity and the financial effect upon the particular
Participant's benefits of making an election against the
Automatic Qualified Joint and Survivor Annuity is available
upon written request by the Participant. The notification
shall be provided within a reasonable period before the
Annuity Starting Date (or after such date, if so elected by
the Plan Administrator, provided, however, that such period
shall not end before the 30th day following the date on which
the notification was provided to a Participant). If the
Participant requests a specific written explanation of all or
any portion of the notification, the explanation shall be
provided within thirty (30) days of the Participant's request.
The Plan Administrator need not comply with more than one such
request made by a particular Participant.
14. Section 9.06(b) is further amended by restating the third paragraph
thereof, effective as of January 1, 1997:
During the Joint and Survivor Election Period, as hereinafter
defined, a Participant eligible to make the election to waive
the Automatic Qualified Joint and Survivor Annuity of
Subsection (a) shall be eligible to elect to receive his
benefits as provided in Section 9.03. The election shall be in
writing and may be revoked at any time during the Joint and
Survivor Election Period. New elections and revocations may be
made any number of times during the Joint and Survivor
Election Period after a previous election or revocation. For
purposes of this paragraph, the term "Joint and Survivor
Election Period" shall mean the ninety (90) day period ending
on the Annuity Starting Date (or ending after such date, if so
elected by the Plan Administrator, provided such period shall
not end before the 30th day following the date on which the
notification described in this Section 9.06(b) was provided to
a Participant). If the Plan Administrator so elects for any
Plan Year, payment to a Participant of that the portion of his
benefit which is
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<PAGE> 8
attributable to his Annuity Eligible Accrued Benefit may
commence less than 30 days after notification described in this
Section 9.06(b) is given, provided that the following conditions
are satisfied:
(i) The Plan Administrator clearly informs the Participant that he
has the right to a period of at least 30 days after receiving
the notification described in this Section 9.06(b) to consider
the election to waive the Qualified Joint and Survivor Annuity
form of payment;
(ii) After receiving the notification, the Participant affirmatively
elects a form of payment (with any applicable spousal consent);
(iii) A Participant is permitted to revoke his payment elections until
the later of (a) his Annuity Starting Date, or (2) seven days
after receiving the notification described in this Section
9.06(b); and
(iv) Payments are made after the end of the revocation period
described in Subsection (iii) above.
15. Section 9.06(c)(3) is restated to read as follows, effective
as of January 1, 1998:
(3) The lump sum benefit otherwise payable to the Participant is
less than five thousand dollars ($5,000) and a lump sum payment
will be made pursuant to Section 9.03.
16. Section 10.03 is amended by restating the first sentence of
the second paragraph thereof to read as follows, effective as of
January 1, 1998:
If the lump sum benefit otherwise payable to the Beneficiary
is not more than five thousand dollars ($5,000) and payment of
benefits to the deceased Participant has not previously
commenced, the benefit shall be paid as a single lump sum
payment.
-8-
<PAGE> 9
17. Section 10.05(i) is restated to read as follows, effective
as of January 1, 1998:
(i) If the lump sum amount of the Qualified Pre-retirement
Survivor Annuity otherwise payable to the surviving
spouse is less than five thousand dollars ($5,000), such
benefit shall be paid as a single lump sum payment.
18. Section 11.02 is amended by restating the last sentence in
the second paragraph thereof to read as follows, effective as of
January 1, 1998.
However, if the lump sum amount that would be payable to a
Participant is not more than five thousand dollars ($5,000)
and the amount in the Participant's Account has never exceeded
that amount at the time of any prior distribution, then the
benefit shall be paid as a single lump sum payment, subject to
the limitations of this Section 11.02, as though the
Participant had elected immediate distribution.
19. Section 16.05 is amended by adding the following sentence at
the end of the first paragraph thereof effective as of April 1, 1998:
The Trustee will transfer the balance in a Participant's (or
Former Participant's) Elective Deferral Account as of March
31, 1998, to the Granite Construction Profit Sharing and
401(k) Plan (the "401(k) Plan"), a qualified defined
contribution plan under Code Section 401(a), effective as of
April 1, 1998. Any optional forms of distribution or other
rights with respect to such assets which are required to be
preserved under Section 17.03 of the Plan and Code Section
411(d)(6) shall be provided under the 401(k) Plan.
20. Section 17.01 is amended by adding the following sentence at
the end thereof effective as of March 31, 1998:
The Plan is terminated effective as of March 31, 1998, with
respect to that portion of the Plan which does not include
Participants' (or Former Participants') Elective Deferral
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<PAGE> 10
Accounts. Participants' (or Former Participants') Elective
Deferral Accounts will be transferred to the 401(k) Plan on
April 1, 1998, in the manner described in Section 16.05.
Distribution of each Participant's and Former Participant's
remaining Accrued Benefit in the Plan shall be offered to each
Participant and Former Participant, in accordance with the
provisions of Articles IX, X and XI, as soon as practicable
after March 31, 1998. If a Participant (or Former Participant)
fails to select a form of distribution within the 30-day
period after being informed that distributions are available,
his remaining Accrued Benefit in the Plan shall be transferred
to the 401(k) Plan as soon as practicable thereafter in the
manner described in Section 16.05.
IN WITNESS WHEREOF, GG&R, has caused this Amendment No. 7 to the Plan to
be duly executed as of the date and year first above written.
"EMPLOYER"
G. G. & R., Inc.
By /s/ DAVID H. WATTS
-------------------------
David H. Watts
Its President
------------------------
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<PAGE> 1
EXHIBIT 10.8
GRANITE CONSTRUCTION INCORPORATED
KEY MANAGEMENT DEFERRED COMPENSATION PLAN
<PAGE> 2
GRANITE CONSTRUCTION INCORPORATED
KEY MANAGEMENT DEFERRED COMPENSATION PLAN
1. Introduction. The Company hereby amends and restates the Plan,
effective as of January 1, 1998. The purpose of the Plan is to provide deferred
compensation to a select group of executive employees of the Company in
recognition of their contributions to the Company and its subsidiaries. This
document constitutes the written instrument under which the Plan is maintained.
2. Definitions.
(a) "Account" means as to any Participant the separate account
established and maintained by the Company in order to reflect his or her
interest in the Plan. Each Participant's Account will reflect the allocations
and earnings credited (or debited) thereto in accordance with Section 5.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" means the Compensation Committee of the Company's
Board of Directors.
(d) "Company" means Granite Construction Incorporated, a Delaware
corporation, and any other affiliated entity that is designated from time to
time by the board of directors of Granite Construction Incorporated. As to a
particular Participant, "Company" refers to the corporate entity which is his or
her employer. For purposes of Sections 2(c), 5 and 10, "Company" refers only to
Granite Construction Incorporated.
(e) "Compensation" means "compensation" (as defined in the Company's
tax-qualified retirement plans) in excess of$150,000 (as indexed under section
401(a)(17) of the Code) but not in excess of $250,000 (as indexed from time to
time by the Committee).
(f) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
(g) "Participant" means each employee of the Company who is
designated as such from time to time by the Committee.
(h) "Plan" means the Granite Construction Incorporated Key Management
Deferred Compensation Plan, as set forth in this instrument and as hereafter
amended.
(i) "Plan Year" means the calendar year.
<PAGE> 3
3. Eligibility To Participate. The Committee will, from time to time,
designate Company employees to be Participants. Each Participant selected by the
Committee must belong to a select group of management and highly compensated
employees of the Company.
4. Vesting. Each Participant will always be 100% vested in his or her
Account; provided, however, that if a Participant is terminated "for cause" (as
such term is defined in the Company's Ethics Policy Statement), the Participant
will forfeit all amounts other than his or her own Compensation deferrals.
5. Additions To Accounts.
(a) Participant Compensation Deferrals. Each Participant may annually
elect to defer the receipt of a whole percentage (up to 3% or such other
percentage as may be determined by the Company's board of directors) of his or
her Compensation.
(b) Dividend Switchback Deferrals. Under rules established by the
Committee, each Participant may elect to defer an additional portion of the
Participant's Compensation equal to the full amount of the quarterly cash
dividends that are paid to the Participant under Section 13(a) of the Granite
Construction Employee Stock Ownership Plan.
(c) Company Matching Contributions. The Company will annually credit
each Participant's Account with an amount equal to a percentage of the
Compensation deferred by the Participant under Section 5(a), which percentage
will equal the matching contribution percentage determined under the Granite
Construction Profit Sharing and 401(k) Plan for such Plan Year.
(d) Discretionary Contributions. Each Plan Year the Company will
credit each Participant's Account with an amount equal to a percentage of the
Participant's Compensation that is equal to the total discretionary contribution
percentage determined by the Company's board of directors with respect to such
year for the Granite Construction Profit Sharing and 401(k) Plan and the Granite
Construction Employee Stock Ownership Plan.
(e) Hypothetical Investment Experience. For each Plan Year, the
balance of each Participant's Account will be credited quarterly with
hypothetical earnings equal to one-quarter of the sum of the 30-day average of
the Lehman Brothers long term bond index (as published in the Wall Street
Journal) determined as of the December 1 of the prior Plan Year, plus 100 basis
points, or as determined by the Committee.
6. Deferral Elections. Each Participant must complete a deferral form for
each Plan Year with respect to which he or she wishes to defer the receipt of
Compensation. To be effective, each such deferral form must satisfy the
following rules:
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<PAGE> 4
(a) Content And Form Requirements. The deferral form must be signed
and dated by the Participant, and must specify the method for distribution of
the Participant's Account. A Participant's election to defer Compensation will
be irrevocable and cannot be modified or amended by the Participant.
(b) Timing Of Deferral Forms. In general, a Participant's deferral
form must be received by the Committee before the beginning of the Plan Year for
which the Compensation is payable. However, in the case of Compensation payable
with respect to the initial Plan Year, the deferral form must be received by the
Committee both (i) within 30 days of the later of the date that the Company
adopts the Plan or the date on which the employee is notified of his or her
eligibility to participate, and (ii) before the date on which the Compensation
subject to the deferral election would otherwise be paid.
7. Distribution Of Accounts.
(a) Form Of Distributions. Subject to Sections 7(b), 7(d), 7(g) and
10, each Participant will receive a distribution of the balance of his or her
Account in the form specified in the Participant's election form, which may be a
lump sum cash payment, or annual installments of substantially equal amounts
payable over a period of years certain not to exceed ten.
(b) Rules For Installment Distributions. If, at any time after
installment distributions have begun, the amount of any installment would be
less than $1,000, the remainder of the Participant's Account will he distributed
in a lump sum. The Committee may, in its sole discretion, accelerate the
installment distribution of any Account for any reason. Participant Accounts
will continue to be credited with hypothetical earnings under Section 5(e) while
they are in pay status.
(c) Timing Of Distributions. Subject to Sections 7(d), 7(g) and 10,
the distribution of the balance of a Participant's Account will be made or begin
as soon as practicable following the earliest of the following events:
o The Participant's disability, as determined under the Company's
Long Term Disability Plan;
o The Participant's "retirement" under the Company's tax-qualified
retirement plans; or
o The Participant's death.
(d) Special Rule for "For Cause" Terminations. If a Participant is
terminated "for cause" (as such term is defined in the Company's Ethics Policy
Statement), and the Participant forfeits all amounts other than his or her own
Compensation deferrals, then notwithstanding Sections 6, 7(a) or 7(c),
distribution of the vested portion of such Participant's
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<PAGE> 5
\
Account will be made in a lump sum cash payment as soon as practicable following
his or her termination of Company employment.
(e) Timing Of Distribution To A Beneficiary. If a Participant dies
before receiving the distribution of his or her Account, the distribution of
such Account to his or her beneficiary will made as previously elected by the
Participant.
(f) Beneficiary Designation. Each Participant must designate a
beneficiary to receive a distribution of his or her Account if the Participant
dies before it is distributed to him or her. A beneficiary designation form must
be signed, dated and delivered to the Committee to become effective. In the
absence of a valid or effective beneficiary designation, the Participant's
surviving spouse will be his or her beneficiary or, if there is no surviving
spouse, the Participant's estate will be his or her beneficiary.
(g) Hardship Distributions. In the event of an unforeseeable
emergency, a Participant may apply to the Committee for a distribution of part
or all of his or her Account prior to the date that it would otherwise be
distributed under this Section 7. If the Committee approves such an application,
it will make such distribution as a lump sum cash payment.
8. Withholding. The Company will withhold from any Plan distribution all
required federal, state, local and other taxes and any other payroll deductions
required. Each Participant agrees as a condition of participation in the Plan to
have withheld annually from his or her salary such amounts as are necessary to
satisfy his or her FICA withholding requirements.
9. Administration. The Plan is administered and interpreted by the
Committee. The Committee has delegated to the Company's Vice President and
Director of Human Resources its responsibilities under the Plan. The Committee
(and its delegatee) have the full and exclusive discretion to interpret and
administer the Plan. All actions, interpretations and decisions of the Committee
(and its delegatee) are conclusive and binding on all persons, and will be given
the maximum possible deference allowed by law. The Company agrees to indemnify
and hold harmless the members of the Committee and any employee to whom the
Committee delegates any responsibility under the Plan.
10. Amendment Or Termination. The Company reserves the right, in its sole
and unlimited discretion, to amend or terminate the Plan at any time, without
prior notice to any Participant or beneficiary. Upon Plan termination, the
Account of each Participant will be distributed as a lump sum cash payment as
soon as practicable, without regard to Section 7 or the Participant's deferral
election.
11. Claims Procedure. Any person who believes that he or she is entitled
to any payment under the Plan may submit a claim in writing to the Committee. If
the claim is denied (either in full or in part), the claimant will be provided a
written notice explaining the specific reasons for the denial and referring to
the provisions of the Plan on which the denial is based.
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<PAGE> 6
The notice will describe any additional information needed to support the claim.
The denial notice will be provided within 90 days after the claim is received.
If special circumstances require an extension of time (up to 90 days), written
notice of the extension will be given within the initial 90-day period.
12. Appeal Procedure. If a claimant's claim is denied, the claimant (or
his or her authorized representative) may apply in writing to the Committee for
a review of the decision denying the claim. The claimant (or representative)
then has the right to review pertinent documents and to submit issues and
comments in writing. The Committee will provide written notice of its decision
on review within 60 days after it receives a review request. If additional time
(up to 60 days) is needed to review the request, the claimant will be given
written notice of the reason for the delay.
13. Source Of Payments.
(a) No Plan Assets. Subject to Section 13(b), all payments under the
Plan will be paid in cash from the general funds of the Company, no separate
fund will be established under the Plan, and the Plan will have no assets. Any
right of any person to receive any payment under the Plan is no greater than the
right of any other unsecured creditor of the Company. The Plan constitutes a
mere promise by the Company to pay benefit payments in the future and is
unfunded for purposes of both Title I of ERISA and the Code.
(b) Rabbi Trust. The Company will (i) establish a trust, (ii) fund
such trust in the event that it determines that a "change in control" (as
defined in the trust agreement) is imminent, and (iii) arrange to have such
trust assume its obligations to pay benefits under the Plan. Any trust created
by the Company to assist it in meeting its obligations under the Plan will
conform to the terms of the model trust as described in Revenue Ruling 92-64.
14. Inalienability. A Participant's rights to benefits under the Plan are
not subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, attachment, or garnishment by creditors of the
Participant or the Participant's beneficiary.
15. Applicable Law. The provisions of the Plan will be construed,
administered and enforced in accordance with ERISA and, to the extent
applicable, the laws of the State of California.
16. Severability. If any provision of the Plan is held invalid or
unenforceable, its invalidity or unenforceability will not affect any other
provision of the Plan, and the Plan will be construed and enforced as if such
provision had not been included.
17. No Employment Rights. Neither the adoption or maintenance of the Plan
will be deemed to constitute a contract of employment between the Company and
any employee, or to be a consideration for, or an inducement or condition of,
any employment. Nothing contained
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<PAGE> 7
in this Plan will be deemed to give an employee the right to be retained in the
service of the Company or to interfere with the right of the Company to
discharge, with or without cause, any employee at any time.
18. Status Of Plan As ERISA "Top Hat" Plan. The Plan is intended to be an
unfunded plan maintained primarily for the purpose of providing deferred
compensation for a select group of management and highly compensated employees
and will be administered and construed to effectuate this intent. Accordingly,
the Plan is subject to Title I of ERISA, but is exempt from Parts 2, 3 and 4 of
such Title.
Execution
IN WITNESS WHEREOF, Granite Construction Incorporated, by its duly
authorized officers, has executed the Plan on the date(s) indicated below.
GRANITE CONSTRUCTION
INCORPORATED
By /s/ DAVID H. WATTS
------------------------------------
Its David H. Watts, President & CEO
Dated 9/17/98
---------------------------------
By /s/ MICHAEL FUTCH
------------------------------------
Its Michael Futch, Secretary
Dated 9/17/98
---------------------------------
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<PAGE> 1
EXHIBIT 10.9
GRANITE CONSTRUCTION INCORPORATED
KEY MANAGEMENT DEFERRED INCENTIVE COMPENSATION PLAN
<PAGE> 2
GRANITE CONSTRUCTION INCORPORATED
KEY MANAGEMENT DEFERRED INCENTIVE COMPENSATION PLAN
1. Introduction. The Company hereby amends and restates the Plan,
effective as of January 1, 1998. The purpose of the Plan is to provide deferred
compensation to a select group of executive employees of the Company in
recognition of their contributions to the Company and its subsidiaries. This
document constitutes the written instrument under which the Plan is maintained.
2. Definitions.
(a) "Account" means as to any Participant the separate account
established and maintained by the Company in order to reflect his or her
interest in the Plan. Each Participant's Account will reflect the allocations
and earnings credited (or debited) thereto in accordance with Section 5.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" means the Compensation Committee of the Company's
Board of Directors.
(d) "Company" means Granite Construction Incorporated, a Delaware
corporation, and any other affiliated entity that is designated from time to
time by the board of directors of Granite Construction Incorporated. As to a
particular Participant, "Company" refers to the corporate entity which is his or
her employer. For purposes of Sections 2(c) and 10, "Company" refers only to
Granite Construction Incorporated.
(e) "Compensation" means the annual cash incentive compensation
payable to a Participant.
(f) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
(g) "Participant" means each employee of the Company who is
designated as such from time to time by the Committee.
(h) "Plan" means the Granite Construction Incorporated Key
Management Deferred Incentive Compensation Plan, as set forth in this instrument
and as hereafter amended.
(i) "Plan Year" means the calendar year.
<PAGE> 3
3. Eligibility To Participate. The Committee will, from time to
time, designate Company employees to be Participants. Each Participant selected
by the Committee must belong to a select group of management and highly
compensated employees of the Company.
4. Vesting. Each Participant will always be 100% vested in his or
her Account; provided, however, that if a Participant is terminated "for cause"
(as such term is defined in the Company's Ethics Policy Statement), the
Participant will forfeit all amounts other than his or her own Compensation
deferrals.
5. Additions To Accounts.
(a) Participant Compensation Deferrals. Each Participant may
annually elect to defer the receipt of up to and including 100% of his or her
Compensation.
(b) Hypothetical Investment Experience. For each Plan Year, the
balance of each Participant's Account will be credited quarterly with
hypothetical earnings equal to one-quarter of the sum of the 30-day average of
the Lehman Brothers long term bond index (as published in the Wall Street
Journal) determined as of the December 1 of the prior Plan Year, plus 100 basis
points, or as determined by the Committee.
6. Deferral Elections. Each Participant must complete a deferral form
for each Plan Year with respect to which he or she wishes to defer the receipt
of Compensation. To be effective, each such deferral form must satisfy the
following rules:
(a) Content And Form Requirements. The deferral form must be
signed and dated by the Participant, and must specify the payment date and
method for distribution of the Participant's Account. Each annual deferral must
be for a minimum amount of at least $1,000, and must be for a period of at least
five years. A Participant may extend (but not reduce) the length of his or her
deferral period for one-year periods, so long as such extensions are made at
least 12 months prior to an otherwise scheduled distribution date. A
Participant's election to defer Compensation will be irrevocable and cannot be
modified or amended by the Participant.
(b) Timing Of Deferral Forms. In general, a Participant's
deferral form must be received by the Committee before the beginning of the Plan
Year in which the Compensation is payable. However, in the case of Compensation
payable with respect to the initial Plan Year, the deferral form must be
received by the Committee both (i) within 30 days of the later of the date that
the Company adopts the Plan or the date on which the employee is notified of his
or her eligibility to participate, and (ii) before the date on which the
Compensation subject to the deferral election would otherwise be paid.
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<PAGE> 4
7. Distribution Of Accounts.
(a) Form Of Distributions. Subject to Sections 7(b), 7(d), 7(g)
and 10, each Participant will receive a distribution of the balance of his or
her Account in the form specified in the Participant's election form, which may
be a lump sum cash payment, or annual installments of substantially equal
amounts payable over a period of years certain not to exceed ten years.
(b) Rules For Installment Distributions. If, at any time after
installment distributions have begun, the amount of any installment would be
less than $1,000, the remainder of the Participant's Account will be distributed
in a lump sum. The Committee may, in its sole discretion, accelerate the
installment distribution of any Account for any reason. Participant Accounts
will continue to be credited with hypothetical earnings under Section 5(b) while
they are in pay status.
(c) Timing Of Distributions. Subject to Sections 7(d), 7(f) and
10, the distribution of the balance of a Participant's Account will be made or
begin as soon as practicable following the earliest of the following events:
- Occurrence of the date set forth in the Participant's
deferral form;
- The Participant's disability, as determined under the
Company's Long Term Disability Plan;
- The Participant's "retirement" under the Company's
tax-qualified retirement plans; or
- The Participant's death.
(d) Special Rule for "For Cause" Terminations. If a Participant
is terminated "for cause" (as such term is defined in the Company's Ethics
Policy Statement), and the Participant forfeits all amounts other than his or
her own Compensation deferrals, then notwithstanding Sections 6, 7(a) or 7(c),
distribution of the vested portion of such Participant's Account will be made as
a lump sum cash payment as soon as practicable following his or her termination
of Company employment.
(e) Timing Of Distribution To A Beneficiary. If a Participant
dies before receiving the distribution of his or her Account, the distribution
of such Account to his or her beneficiary will made as previously elected by the
Participant.
(f) Beneficiary Designation. Each Participant must designate a
beneficiary to receive a distribution of his or her Account if the Participant
dies before it is distributed to him or her. A beneficiary designation form must
be signed, dated and delivered to the
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<PAGE> 5
Committee to become effective. In the absence of a valid or effective
beneficiary designation, the Participant's surviving spouse will be his or her
beneficiary or, if there is no surviving spouse, the Participant's estate will
be his or her beneficiary.
(g) Hardship Distributions. In the event of an unforeseeable
emergency, a Participant may apply to the Committee for a distribution of part
or all of his or her Account prior to the date that it would otherwise be
distributed under this Section 7. If the Committee approves such an application,
it will make such distribution as a lump sum cash payment.
8. Withholding. The Company will withhold from any Plan distribution
all required federal, state, local and other taxes and any other payroll
deductions required. Each Participant agrees as a condition of participation in
the Plan to have withheld annually from his or her salary such amounts as are
necessary to satisfy his or her FICA withholding requirements.
9. Administration. The Plan is administered and interpreted by the
Committee. The Committee has delegated to the Company's Vice President and
Director of Human Resources its delegable responsibilities under the Plan. The
Committee (and its delegatee) have the full and exclusive discretion to
interpret and administer the Plan. All actions, interpretations and decisions of
the Committee (and its delegatee) are conclusive and binding on all persons, and
will be given the maximum possible deference allowed by law. The Company agrees
to indemnify and hold harmless the members of the Committee and any employee to
whom the Committee delegates any responsibility under the Plan.
10. Amendment Or Termination. The Company reserves the right, in its
sole and unlimited discretion, to amend or terminate the Plan at any time,
without prior notice to any Participant or beneficiary. Upon Plan termination,
the Account of each Participant will be distributed as a lump sum cash payment
as soon as practicable, without regard to Section 7 or the Participant's
deferral election.
11. Claims Procedure. Any person who believes that he or she is
entitled to any payment under the Plan may submit a claim in writing to the
Committee. If the claim is denied (either in full or in part), the claimant will
be provided a written notice explaining the specific reasons for the denial and
referring to the provisions of the Plan on which the denial is based. The notice
will describe any additional information needed to support the claim. The denial
notice will be provided within 90 days after the claim is received. If special
circumstances require an extension of time (up to 90 days), written notice of
the extension will be given within the initial 90-day period.
12. Appeal Procedure. If a claimant's claim is denied, the claimant
(or his or her authorized representative) may apply in writing to the Committee
for a review of the decision denying the claim. The claimant (or representative)
then has the right to review pertinent documents and to submit issues and
comments in writing. The Committee will provide written notice of its decision
on review within 60 days after it receives a review request. If additional
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<PAGE> 6
time (up to 60 days) is needed to review the request, the claimant will be given
written notice of the reason for the delay.
13. Source Of Payments.
(a) No Plan Assets. All payments under the Plan will be paid in
cash from the general funds of the Company, no separate fund will be established
under the Plan, and the Plan will have no assets. Any right of any person to
receive any payment under the Plan is no greater than the right of any other
unsecured creditor of the Company. The Plan constitutes a mere promise by the
Company to pay benefit payments in the future and is unfunded for purposes of
both Title I of ERISA and the Code.
(b) Rabbi Trust. The Company will (i) establish a trust, (ii)
fund such trust in the event that it determines that a "change in control" (as
defined in the trust agreement) is imminent, and (iii) arrange to have such
trust assume its obligations to pay benefits under the Plan. Any trust created
by the Company to assist it in meeting its obligations under the Plan will
conform to the terms of the model trust as described in Revenue Ruling 92-64.
14. Inalienability. A Participant's rights to benefits under the
Plan are not subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, attachment, or garnishment by creditors of the
Participant or the Participant's beneficiary.
15. Applicable Law. The provisions of the Plan will be construed,
administered and enforced in accordance with ERISA and, to the extent
applicable, the laws of the State of California.
16. Severability. If any provision of the Plan is held invalid or
unenforceable, its invalidity or unenforceability will not affect any other
provision of the Plan, and the Plan will be construed and enforced as if such
provision had not been included.
17. No Employment Rights. Neither the adoption or maintenance of the
Plan will be deemed to constitute a contract of employment between the Company
and any employee, or to be a consideration for, or an inducement or condition
of, any employment. Nothing contained in this Plan will be deemed to give an
employee the right to be retained in the service of the Company or to interfere
with the right of the Company to discharge, with or without cause, any employee
at any time.
18. Status Of Plan As ERISA "Top Hat" Plan. The Plan is intended to
be an unfunded plan maintained primarily for the purpose of providing deferred
compensation for a select group of management and highly compensated employees
and will be administered and construed to effectuate this intent. Accordingly,
the Plan is subject to Title I of ERISA, but is exempt from Parts 2, 3 and 4 of
such Title.
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Execution
IN WITNESS WHEREOF, Granite Construction Incorporated, by its
duly authorized officers, has executed the Plan on the date(s) indicated below.
GRANITE CONSTRUCTION INCORPORATED
By: /s/ DAVID H. WATTS
---------------------------------------
David H. Watts, President and CEO
Dated: 9/17/98
------------------------------------
By: /s/ MICHAEL FUTCH
---------------------------------------
Michael Futch, Secretary
Dated: 9/17/98
------------------------------------
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<PAGE> 1
EXHIBIT 10.11
CONFORMED COPY
================================================================================
GRANITE CONSTRUCTION INCORPORATED
$60,000,000 6.54% Senior Notes due March 15, 2010
--------------------------------
NOTE PURCHASE AGREEMENT
--------------------------------
Dated as of March 1, 1998
================================================================================
THE INFORMATION SET FORTH ON SCHEDULES 5.15, 5.16 AND 5.18 TO THIS NOTE PURCHASE
AGREEMENT IS "CONFIDENTIAL INFORMATION" SUBJECT TO THE REQUIREMENTS OF SECTION
20 HEREOF.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION HEADING PAGE
<S> <C> <C>
SECTION 1. AUTHORIZATION OF NOTES........................................... 1
SECTION 2. SALE AND PURCHASE OF NOTES; GUARANTY............................. 1
Section 2.1 Sale and Purchase of Notes....................................... 1
Section 2.2. Guaranty of Notes................................................ 1
SECTION 3. CLOSING.......................................................... 2
SECTION 4. CONDITIONS TO CLOSING............................................ 2
Section 4.1. Representations and Warranties................................... 2
Section 4.2. Performance; No Default.......................................... 2
Section 4.3. Compliance Certificates.......................................... 3
Section 4.4. Guaranty Agreement............................................... 3
Section 4.5. Opinions of Counsel.............................................. 3
Section 4.6. Purchase Permitted by Applicable Law, Etc........................ 4
Section 4.7. Payment of Special Counsel Fees.................................. 4
Section 4.8. Private Placement Number......................................... 4
Section 4.9. Changes in Corporate Structure................................... 4
Section 4.10. Proceedings and Documents........................................ 4
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................... 5
Section 5.1. Organization; Power and Authority................................ 5
Section 5.2. Authorization, Etc............................................... 5
Section 5.3. Disclosure........................................... 5
Section 5.4. Organization and Ownership of Shares of Subsidiaries............. 5
Section 5.5. Financial Statements............................................. 6
Section 5.6. Compliance with Laws, Other Instruments, Etc..................... 6
Section 5.7. Governmental Authorizations, Etc................................. 7
Section 5.8. Litigation; Observance of Agreements, Statutes and Orders........ 7
Section 5.9. Taxes............................................................ 7
Section 5.10. Title to Property; Leases........................................ 7
Section 5.11. Licenses, Permits, Etc........................................... 8
Section 5.12. Compliance with ERISA............................................ 8
Section 5.13. Private Offering by the Company.................................. 9
Section 5.14. Use of Proceeds; Margin Regulations.............................. 9
Section 5.15. Existing Debt.................................................... 9
Section 5.16. Existing Investments............................................. 10
Section 5.17. Status under Certain Statutes.................................... 10
Section 5.18. Environmental Matters............................................ 10
</TABLE>
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<TABLE>
<S> <C> <C>
Section 5.19. Foreign Assets Control Regulations, Etc.......................... 10
SECTION 6. REPRESENTATIONS OF THE PURCHASERS................................ 10
Section 6.1. Purchase for Investment.......................................... 10
Section 6.2. Source of Funds.................................................. 11
SECTION 7. INFORMATION AS TO COMPANY........................................ 12
Section 7.1. Financial and Business Information............................... 12
Section 7.2. Officer's Certificate............................................ 15
Section 7.3. Inspection....................................................... 16
SECTION 8. PREPAYMENT OF THE NOTES.......................................... 16
Section 8.1. Required Prepayments............................................. 16
Section 8.2. Optional Prepayments with Make-Whole Amount...................... 16
Section 8.3. Allocation of Partial Prepayments................................ 17
Section 8.4. Maturity; Surrender, Etc......................................... 17
Section 8.5. Purchase of Notes................................................ 17
Section 8.6. Make-Whole Amount................................................ 18
SECTION 9. AFFIRMATIVE COVENANTS............................................ 19
Section 9.1. Compliance with Law.............................................. 19
Section 9.2. Insurance........................................................ 19
Section 9.3. Maintenance of Properties........................................ 20
Section 9.4. Payment of Taxes and Claims...................................... 20
Section 9.5. Corporate Existence, Etc......................................... 20
Section 9.6. Additional Guarantors............................................ 20
SECTION 10. NEGATIVE COVENANTS............................................... 21
Section 10.1. Nature of Business............................................... 22
Section 10.2. Consolidated Net Worth........................................... 22
Section 10.3. Incurrence of Debt............................................... 22
Section 10.4. Restricted Subsidiary Debt....................................... 22
Section 10.5. Liens............................................................ 23
Section 10.6. Restrictions on Dividends of Subsidiaries, Etc................... 25
Section 10.7. Mergers, Consolidations, Etc..................................... 25
Section 10.8. Sale of Assets, Etc.............................................. 26
Section 10.9. Disposal of Ownership of a Restricted Subsidiary................. 27
Section 10.10.Sale-and-Leasebacks.............................................. 27
Section 10.11.Transactions with Affiliates..................................... 28
Section 10.12.Designation of Restricted and Unrestricted Subsidiaries.......... 28
SECTION 11. EVENTS OF DEFAULT............................................... 28
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 12. REMEDIES ON DEFAULT, ETC....................................... 31
Section 12.1. Acceleration................................................... 31
Section 12.2. Other Remedies................................................. 31
Section 12.3. Rescission..................................................... 31
Section 12.4. No Waivers or Election of Remedies, Expenses, Etc.............. 32
SECTION 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.................. 32
Section 13.1. Registration of Notes.......................................... 32
Section 13.2. Transfer and Exchange of Notes................................. 32
Section 13.3. Replacement of Notes........................................... 33
SECTION 14. PAYMENTS ON NOTES.............................................. 33
Section 14.1. Place of Payment............................................... 33
Section 14.2. Home Office Payment............................................ 34
SECTION 15. EXPENSES, ETC.................................................. 34
Section 15.1. Transaction Expenses........................................... 34
Section 15.2. Survival....................................................... 35
SECTION 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT...................................................... 35
SECTION 17. AMENDMENT AND WAIVER........................................... 35
Section 17.1. Requirements................................................... 35
Section 17.2. Solicitation of Holders of Notes............................... 35
Section 17.3. Binding Effect, Etc............................................ 36
Section 17.4. Notes Held by Company, Etc..................................... 36
SECTION 18. NOTICES........................................................ 36
SECTION 19. REPRODUCTION OF DOCUMENTS...................................... 37
SECTION 20. CONFIDENTIAL INFORMATION....................................... 37
SECTION 21. SUBSTITUTION OF A PURCHASER.................................... 38
SECTION 22. MISCELLANEOUS.................................................. 39
Section 22.1. Successors and Assigns......................................... 39
Section 22.2. Payments Due on Non-Business Days.............................. 39
Section 22.3. Severability................................................... 39
</TABLE>
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<PAGE> 5
<TABLE>
<S> <C> <C>
Section 22.4. Construction................................................... 39
Section 22.5. Counterparts................................................... 39
Section 22.6. Governing Law.................................................. 39
</TABLE>
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<PAGE> 6
ATTACHMENTS TO THE NOTE PURCHASE AGREEMENT:
SCHEDULE A - Information Relating to Purchasers
SCHEDULE B - Defined Terms
SCHEDULE 4.9 - Changes in Corporate Structure
SCHEDULE 5.3 - Disclosure Materials
SCHEDULE 5.4 - Subsidiaries of the Company and Ownership of Subsidiary
Stock
SCHEDULE 5.5 - Financial Statements
SCHEDULE 5.8 - Certain Litigation
SCHEDULE 5.11 - Patents, Etc.
SCHEDULE 5.14 - Use of Proceeds
SCHEDULE 5.15 - Existing Debt
SCHEDULE 5.16 - Existing Investments
SCHEDULE 5.18 - Environmental Matters
EXHIBIT 1 - Form of 6.54% Senior Note due March 15, 2010 Agreement
EXHIBIT 2 - Form of Guaranty
EXHIBIT 4.5(a) - Form of Opinion of Special Counsel for the Company and the
Guarantors
EXHIBIT 4.5(b) - Form of Opinion of Special Counsel for the Purchasers
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<PAGE> 7
GRANITE CONSTRUCTION INCORPORATED
585 West Beach Street
Watsonville, California 95076
6.54% Senior Notes due March 15, 2010
Dated as of
March 1, 1998
TO THE PURCHASERS LISTED IN
THE ATTACHED SCHEDULE A:
Ladies and Gentlemen:
GRANITE CONSTRUCTION INCORPORATED, a Delaware corporation (the
"Company"), agrees with the Purchasers listed in the attached Schedule A as
follows:
SECTION 1. AUTHORIZATION OF NOTES.
The Company will authorize the issue and sale of $60,000,000
aggregate principal amount of its 6.54% Senior Notes due March 15, 2010 (the
"Notes", such term to include any such notes issued in substitution therefor
pursuant to Section 13 of this Agreement (as hereinafter defined)). The Notes
shall be substantially in the form set out in Exhibit 1, with such changes
therefrom, if any, as may be approved by each Purchaser and the Company. Certain
capitalized terms used in this Agreement are defined in Schedule B; references
to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule
or an Exhibit attached to this Agreement.
SECTION 2. SALE AND PURCHASE OF NOTES; GUARANTY.
Section 2.1. Sale and Purchase of Notes. Subject to the terms and
conditions of this Agreement, the Company will issue and sell to each Purchaser
and each Purchaser will purchase from the Company, at the Closing provided for
in Section 3, Notes in the principal amount specified opposite such Purchaser's
name in Schedule A at the purchase price of 100% of the principal amount
thereof. The obligations of each Purchaser hereunder are several and not joint
obligations and each Purchaser shall have no obligation and no liability to any
Person for the performance or nonperformance by any other Purchaser thereunder.
Section 2.2. Guaranty of Notes. The payment by the Company of all
amounts due with respect to the Notes and the performance by the Company of its
obligations under this Agreement are fully and unconditionally guaranteed by
Granite Construction Company, a California corporation, Wilcott Corporation, a
Colorado corporation, Desert Aggregates Incorporated, a California corporation,
Granite SR 91 Corporation, a California corporation, Intermountain Slurry Seal,
Inc., a Utah corporation, Pozzolan Products
<PAGE> 8
Company, a Utah corporation, GILC Incorporated, a California corporation,
Granite SR 91, L.P., a California limited partnership, Bear River Contractors, a
Wyoming corporation, GILC, L.P., a California limited partnership, G.G.&R.,
Inc., a Utah corporation, and GTC, Inc., a Texas corporation, and each other
from time to time Material Subsidiary (collectively, the "Guarantors") pursuant
to that certain Subsidiary Guaranty Agreement dated as of March 1, 1998 (the
"Guaranty Agreement") from the initial Guarantors to each Purchaser and each
other from time to time holder of Notes substantially in the form attached
hereto as Exhibit 2.
SECTION 3. CLOSING.
The sale and purchase of the Notes to be purchased by each Purchaser
shall occur at the offices of Chapman and Cutler, 111 West Monroe Street,
Chicago, Illinois 60603, at 10:00 a.m. Chicago time, at a closing on March 19,
1998 (the "Closing"). At the Closing, the Company will deliver to each Purchaser
the Notes to be purchased by such Purchaser in the form of a single Note (or
such greater number of Notes in denominations of at least $1,000,000 as such
Purchaser may request) dated the date of the Closing and registered in such
Purchaser's name (or in the name of such Purchaser's nominee), against delivery
by such Purchaser to the Company or its order of immediately available funds in
the amount of the purchase price therefor by wire transfer of immediately
available funds for the account of the Company to account number 12334-16946 at
Bank of America National Trust and Savings Association Bank, NAD Corporate
Service Center #1233, ABA No. 121000358. If at the Closing the Company shall
fail to tender such Notes to any Purchaser as provided above in this Section 3,
or any of the conditions specified in Section 4 shall not have been fulfilled to
any Purchaser's satisfaction, such Purchaser shall, at such Purchaser's
election, be relieved of all further obligations under this Agreement, without
thereby waiving any rights such Purchaser may have by reason of such failure or
such nonfulfillment.
SECTION 4. CONDITIONS TO CLOSING.
The obligation of each Purchaser to purchase and pay for the Notes
to be sold to such Purchaser at the Closing is subject to the fulfillment to
such Purchaser's satisfaction, prior to or at the Closing, of the following
conditions:
Section 4.1. Representations and Warranties. (a) The representations
and warranties of the Company in this Agreement shall be correct when made and
at the time of the Closing.
(b) The representations and warranties of each Guarantor in the
Guaranty Agreement shall be correct when made and at the time of the Closing.
Section 4.2. Performance; No Default. The Company shall have
performed and complied with all agreements and conditions contained in this
Agreement required to he performed or complied with by it prior to or at the
Closing, and after giving effect to the
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<PAGE> 9
issue and sale of the Notes (and the application of the proceeds thereof as
contemplated by Schedule 5.14), no Default or Event of Default shall exist.
Section 4.3. Compliance Certificates.
(a) Officer's Certificate. (1) The Company shall have
delivered to such Purchaser an Officer's Certificate, dated the date
of the Closing, certifying that the conditions specified in Sections
4.1, 4.2 and 4.9 have been fulfilled.
(2) Each Guarantor shall have delivered to such
Purchaser a certificate of an authorized officer, dated the date of
the Closing, certifying that the condition specified in Section
4.1(b) has been fulfilled.
(b) Secretary's Certificate. (1) The Company shall have
delivered to such Purchaser a certificate certifying as to the
resolutions attached thereto and other corporate proceedings
relating to the authorization, execution and delivery of the Notes
and this Agreement.
(2) Each Guarantor shall have delivered to such
Purchaser a certificate certifying as to the resolutions attached
thereto and the other corporate or partnership proceedings relating
to the authorization, execution and delivery of the Guaranty
Agreement.
(c) ERISA Certificate. If such Purchaser shall have made
the disclosures referred to in Section 6.2(b), (c) or (e), such
Purchaser shall have received the certificate from the Company
described in the penultimate paragraph of Section 6.2 and such
certificate shall state that (1) the Company is neither a "party in
interest" nor a "disqualified person" (as defined in Section
4975(e)(2) of the Code), with respect to any plan identified
pursuant to Section 6.2(b) or (e) or (2) with respect to any plan,
identified pursuant to Section 6.2(c), neither the Company nor any
"affiliate" (as defined in Section V(c) of the QPAM Exemption) has,
at such time or during the immediately preceding one year, exercised
the authority to appoint or terminate the QPAM as manager of the
assets of any plan identified in writing pursuant to Section 6.2(c)
or to negotiate the terms of said QPAM's management agreement on
behalf of any such identified plans.
Section 4.4. Guaranty Agreement. The Guaranty Agreement shall have
been duly authorized, executed and delivered by each Guarantor and shall be in
full force and effect.
Section 4.5 Opinions of Counsel. Such Purchaser shall have received
opinions in form and substance satisfactory to such Purchaser, dated the date of
the Closing (a) from Gray Cary Ware & Freidenrich, special counsel for the
Company and the Guarantors, covering the matters set forth in Exhibit 4.5(a) and
covering such other matters incident to the transactions contemplated hereby as
such Purchaser or such Purchaser's counsel may reasonably request (and the
Company hereby instructs its counsel to deliver such opinion to such Purchaser)
and (b) from Chapman and Cutler, such Purchaser's special counsel in
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<PAGE> 10
connection with such transactions, substantially in the form set forth in
Exhibit 4.5(b) and covering such other matters incident to such transactions as
such Purchaser may reasonably request.
Section 4.6. Purchase Permitted by Applicable Law, Etc. On the date
of the Closing, such Purchaser's purchase of Notes shall (a) be permitted by the
laws and regulations of each jurisdiction to which such Purchaser is subject,
without recourse to provisions (such as Section 1405(a)(8) of the New York
Insurance Law) permitting limited investments by insurance companies without
restriction as to the character of the particular investment, (b) not violate
any applicable law or regulation (including, without limitation, Regulation G, T
or X of the Board of Governors of the Federal Reserve System) and (c) not
subject such Purchaser to any tax, penalty or liability under or pursuant to any
applicable law or regulation, which law or regulation was not in effect on the
date hereof. If requested by such Purchaser, such Purchaser shall have received
an Officer' s Certificate certifying as to such matters of fact as such
Purchaser may reasonably specify to enable such Purchaser to determine whether
such purchase is so permitted.
Section 4.7. Payment of Special Counsel Fees. Without limiting the
provisions of Section 15.1, the Company shall have paid on or before the Closing
the fees, charges and disbursements of Chapman and Cutler, the Purchasers'
special counsel referred to in Section 4.5 and the only counsel retained by the
Purchasers in connection with the preparation, negotiation, execution and
delivery of this Agreement, to the extent reflected in a statement of such
counsel rendered to the Company at least one Business Day prior to the Closing.
Section 4.8. Private Placement Number. A Private Placement Number
issued by Standard & Poor's CUSIP Service Bureau (in cooperation with the
Securities Valuation Office of the National Association of Insurance
Commissioners) shall have been obtained for the Notes.
Section 4.9. Changes in Corporate Structure. Except as specified in
Schedule 4.9, the Company shall not have changed its jurisdiction of
incorporation or been a party to any merger or consolidation and shall not have
succeeded to all or any substantial part of the liabilities of any other entity,
at any time following the date of the most recent financial statements referred
to in Schedule 5.5.
Section 4.10. Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated by this Agreement
and all documents and instruments incident to such transactions shall be
satisfactory to such Purchaser and such Purchaser's special counsel, and such
Purchaser and such Purchaser's special counsel shall have received all such
counterpart originals or certified or other copies of such documents as such
Purchaser or such Purchaser' s special counsel may reasonably request.
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<PAGE> 11
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each Purchaser that:
Section 5.1. Organization; Power and Authority. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, and is duly qualified as a foreign
corporation and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to which the
failure to be so qualified or in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. The Company
has the corporate power and authority to own or hold under lease the properties
it purports to own or hold under lease, to transact the business it transacts
and proposes to transact, to execute and deliver this Agreement and the Notes
and to perform the provisions hereof and thereof.
Section 5.2. Authorization, Etc. This Agreement and the Notes have
been duly authorized by all necessary corporate action on the part of the
Company, and this Agreement constitutes, and upon execution and delivery thereof
each Note will constitute, a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and (b) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
Section 5.3. Disclosure. The Company, through its agent, BancAmerica
Robertson Stephens, has delivered to each Purchaser a copy of a Private
Placement Memorandum, dated January 1998 (the "Memorandum"), relating to the
transactions contemplated hereby. The Memorandum fairly describes, in all
material respects, the general nature of the business and principal properties
of the Company and its Subsidiaries. This Agreement, the Memorandum, the
documents, certificates or other writings identified in Schedule 5.3 and the
financial statements listed in Schedule 5.5, taken as a whole, do not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading in light of the
circumstances under which they were made. Except as disclosed in the Memorandum
or as expressly described in Schedule 5.3, or in one of the documents,
certificates or other writings identified therein, or in the financial
statements listed in Schedule 5.5, since December 31, 1996, there has been no
adverse Material change in the financial condition, operations, business,
properties or prospects of the Company or any of its Subsidiaries, taken as a
whole.
Section 5.4. Organization and Ownership of Shares of Subsidiaries;
Affiliates. (a) Schedule 5.4 contains (except as noted therein) complete and
correct lists (1) of the Company's Subsidiaries, showing, as to each Subsidiary,
the correct name thereof, the jurisdiction of its organization, and the
percentage of shares of each class of its capital stock or similar equity
interests outstanding owned by the Company and each other Subsidiary, (2) of the
Company's Affiliates, other than Subsidiaries and (3) of the Company's directors
and senior officers.
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(b) All of the outstanding shares of capital stock or similar equity
interests of each Restricted Subsidiary shown in Schedule 5.4 as being owned by
the Company and its Subsidiaries have been validly issued, are fully paid and
nonassessable and are owned by the Company or another Subsidiary free and clear
of any Lien (except as otherwise disclosed in Schedule 5.4).
(c) Each Restricted Subsidiary identified in Schedule 5.4 is a
corporation or other legal entity duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, and is duly
qualified as a foreign corporation or other legal entity and is in good standing
in each jurisdiction in which such qualification is required by law, other than
those jurisdictions as to which the failure to be so qualified or in good
standing could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. Each such Restricted Subsidiary has the
corporate or other power and authority to own or hold under lease the properties
it purports to own or hold under lease and to transact the business it transacts
and proposes to transact.
(d) No Restricted Subsidiary is a party to, or otherwise subject to,
any legal restriction or any agreement or instrument (other than this Agreement,
the agreements listed on Schedule 5.4 and customary limitations imposed by
corporate law statutes) restricting the ability of such Restricted Subsidiary to
pay dividends out of profits or make any other similar distributions of profits
to the Company or any of its Restricted Subsidiaries that own outstanding shares
of capital stock or similar equity interests of such Restricted Subsidiary.
Section 5.5. Financial Statements. The Company has delivered to each
Purchaser copies of the financial statements of the Company and its Subsidiaries
listed on Schedule 5.5. All of said financial statements (including in each case
the related schedules and notes) fairly present in all material respects the
consolidated financial position of the Company and its Subsidiaries as of the
respective dates specified in such financial statements and the consolidated
results of their operations and cash flows for the respective periods so
specified and have been prepared in accordance with GAAP consistently applied
throughout the periods involved except as set forth in the notes thereto
(subject, in the case of any interim financial statements, to normal year-end
adjustments).
Section 5.6. Compliance with Laws, Other instruments, Etc. The
execution, delivery and performance by the Company of this Agreement and the
Notes will not (a) contravene, result in any breach of, or constitute a default
under, or result in the creation of any Lien in respect of any property of the
Company or any Restricted Subsidiary under, any indenture, mortgage, deed of
trust, loan, purchase or credit agreement, lease, corporate charter or by-laws,
or any other agreement or instrument to which the Company or any Restricted
Subsidiary is bound or by which the Company or any Restricted Subsidiary or any
of their respective properties may be bound or affected, (b) conflict with or
result in a breach of any of the terms, conditions or provisions of any order,
judgment, decree, or ruling of any court, arbitrator or Governmental Authority
applicable to the Company or any Restricted Subsidiary or (c) violate any
provision of any statute or other rule or regulation of any Governmental
Authority applicable to the Company or any Restricted Subsidiary.
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Section 5.7. Governmental Authorizations, Etc. No consent, approval
or authorization of, or registration, filing or declaration with, any
Governmental Authority is required in connection with the execution, delivery or
performance by the Company of this Agreement or the Notes.
Section 5.8. Litigation; Observance of agreements, Statutes and
Orders. (a) Except as disclosed in Schedule 5.8, there are no actions, suits or
proceedings pending or, to the knowledge of the Company, threatened against or
affecting the Company or any Restricted Subsidiary or any property of the
Company or any Restricted Subsidiary in any court or before any arbitrator of
any kind or before or by any Governmental Authority that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default under any
term of any agreement or instrument to which it is a party or by which it is
bound, or any order, judgment, decree or ruling of any court, arbitrator or
Governmental Authority or is in violation of any applicable law, ordinance, Rule
or regulation (including without limitation Environmental Laws) of any
Governmental Authority, which default or violation, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
Section 5.9. Taxes. The Company and its Subsidiaries have filed all
income tax returns that are required to have been filed in any jurisdiction, and
have paid all taxes shown to be due and payable on such returns and all other
taxes and assessments payable by them, to the extent such taxes and assessments
have become due and payable and before they have become delinquent, except for
any taxes and assessments (a) the amount of which is not individually or in the
aggregate Material or (b) the amount, applicability or validity of which is
currently being contested in good faith by appropriate proceedings and with
respect to which the Company or a Subsidiary, as the case may be, has
established adequate reserves in accordance with GAAP. The Company knows of no
basis for any other tax or assessment that could reasonably be expected to have
a Material Adverse Effect. The charges, accruals and reserves on the books of
the Company and its Subsidiaries in respect of Federal, state or other taxes for
all fiscal periods are adequate. The Federal income tax liabilities of the
Company and its Subsidiaries have been determined by the Internal Revenue
Service and paid for all fiscal years up to and including the fiscal year ended
December 31, 1991.
Section 5.10. Title to Property; Leases. The Company and its
Restricted Subsidiaries have good and sufficient title to their respective
properties that individually or in the aggregate are Material, including all
such properties reflected in the most recent audited balance sheet referred to
in Section 5.5 or purported to have been acquired by the Company or any
Restricted Subsidiary after said date (except as sold or otherwise disposed of
in the ordinary course of business), in each case free and clear of Liens
prohibited by this Agreement. All leases that individually or in the aggregate
are Material are valid and subsisting and are in full force and effect in all
material respects.
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Section 5.11. Licenses, Permits, Etc. Except as disclosed in
Schedule 5.11,
(a) the Company and its Restricted Subsidiaries own or possess all
Material licenses, permits, franchises, authorizations, patents, copyrights,
service marks, trademarks and trade names, or rights thereto;
(b) to the best knowledge of the Company, no product of the Company
or any Restricted Subsidiary infringes in any material respect any license,
permit, franchise, authorization, patent, copyright, service mark, trademark,
trade name or other right with respect thereto owned by any other Person; and
(c) to the best knowledge of the Company, there is no Material
violation by any Person of any right of the Company or any of its Restricted
Subsidiaries with respect to any patent, copyright, service mark, trademark,
trade name or other right with respect thereto owned or used by the Company or
any of its Restricted Subsidiaries.
Section 5.12. Compliance with ERISA. (a) The Company and each ERISA
Affiliate have operated and administered each Plan in compliance with all
applicable laws in all material respects. Neither the Company nor any ERISA
Affiliate has incurred any Material liability pursuant to Title I or IV of ERISA
or the penalty or excise tax provisions of the Code relating to employee benefit
plans (as defined in Section 3 of ERISA), and no event, transaction or condition
has occurred or exists that could reasonably be expected to result in the
Incurrence of any such Material liability by the Company or any ERISA Affiliate,
or in the imposition of any Material Lien on any of the rights, properties or
assets of the Company or any ERISA Affiliate, in either case pursuant to Title I
or IV of ERISA or to such penalty or excise tax provisions or to Section
401(a)(29) or 412 of the Code.
(b) The present value of the aggregate benefit liabilities under
each of the Plans (other than Multiemployer Plans), determined as of the end of
such Plan's most recently ended plan year on the basis of the actuarial
assumptions specified for funding purposes in such Plan's most recent actuarial
valuation report, did not exceed the aggregate current value of the assets of
such Plan allocable to such benefit liabilities by more than $5,000,000 in the
aggregate for all Plans. The term "benefit liabilities" has the meaning
specified in Section 4001 of ERISA and the terms "current value" and "present
value" have the meanings specified in Section 3 of ERISA.
(c) The Company and its ERISA Affiliates have not incurred Material
withdrawal liabilities (and are not subject to Material contingent withdrawal
liabilities) under Section 4201 or 4204 of ERISA in respect of Multiemployer
Plans.
(d) The expected postretirement benefit obligation (determined as of
the last day of the Company's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by Section 4980B of
the Code) of the Company and its Restricted Subsidiaries is not Material.
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<PAGE> 15
(e) The execution and delivery of this Agreement and the issuance
and sale of the Notes hereunder will not involve any transaction that is subject
to the prohibitions of Section 406 of ERISA or in connection with which a tax
could be imposed pursuant to Section 4975(c)(1)(A)-(D) of the Code. The
representation by the Company in the first sentence of this Section 5.12(e) is
made in reliance upon and subject to the accuracy of each Purchaser's
representation in Section 6.2 as to the source of the funds to be used to pay
the purchase price of the Notes to be purchased by such Purchaser.
Section 5.13. Private Offering by the Company. Neither the Company
nor anyone acting on its behalf has offered the Notes or the Guaranty Agreement
or any similar Securities for sale to, or solicited any offer to buy any of the
same from, or otherwise approached or negotiated in respect thereof with, any
Person other than the Purchasers and not more than 41 other Institutional
Investors, each of which has been offered the Notes and the Guaranty Agreement
at a private sale for investment pursuant to an exemption from the registration
requirements under the Securities Act. Neither the Company nor anyone acting on
its behalf has taken, or will take, any action that would subject the issuance
or sale of the Notes or the delivery of the Guaranty Agreement to the
registration requirements of Section 5 of the Securities Act.
Section 5.14. Use of Proceeds; Margin Regulations. The Company will
apply the proceeds of the sale of the Notes as set forth in Schedule 5.14. No
part of the proceeds from the sale of the Notes hereunder will be used, directly
or indirectly, for the purpose of buying or carrying any margin stock within the
meaning of Regulation G of the Board of Governors of the Federal Reserve System
(12 CFR 207), or for the purpose of buying or carrying or trading in any
Securities under such circumstances as to involve the Company in a violation of
Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a
violation of Regulation T of said Board (12 CFR 220). The Company does not own
any margin stock and the Company does not have any present intention to acquire
any margin stock; provided, however, that, pursuant to the Bank Credit
Agreement, the Company may acquire margin stock in an amount not to exceed 25%
of the value of the consolidated assets of the Company and its Subsidiaries. As
used in this Section, the terms "margin stock" and "purpose of buying or
carrying" shall have the meanings assigned to them in said Regulation G.
Section 5.15. Existing Debt. Except as described therein, Schedule
5.15 sets forth a complete and correct list of all outstanding Debt of the
Company and its Restricted Subsidiaries as of December 31, 1997, since which
date there has been no Material change in the amounts, interest rates, sinking
funds, installment payments or maturities of the Debt of the Company or its
Subsidiaries. Neither the Company nor any Restricted Subsidiary is in default
and no waiver of default is currently in effect, in the payment of any principal
or interest on any Debt of the Company or such Restricted Subsidiary and no
event or condition exists with respect to any Debt of the Company or any
Restricted Subsidiary that would permit (or that with notice or the lapse of
time, or both, would permit) one or more Persons to cause such Debt to become
due and payable before its stated maturity or before its regularly scheduled
dates of payment.
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<PAGE> 16
Section 5.16. Existing Investments. Schedule 5.16 sets forth a
complete and correct list of all outstanding Investments of the Company and its
Restricted Subsidiaries as of December 31, 1997, since which date there has been
no Material change in the amounts of such Investments.
Section 5.17. Status under Certain Statutes. Neither the Company nor
any Restricted Subsidiary is an "investment company" registered or required to
be registered under the Investment Company Act of 1940, as amended, or is
subject to regulation under the Public Utility Holding Company Act of 1935, as
amended, the ICC Termination Act of 1995, as amended, or the Federal Power Act,
as amended.
Section 5.18. Environmental Matters. Neither the Company nor any
Restricted Subsidiary has knowledge of any Material claim or has received any
notice of any Material claim, and no proceeding has been instituted raising any
Material claim against the Company or any of its Restricted Subsidiaries or any
of their respective real properties now or formerly owned, leased or operated by
any of them or other assets, alleging any damage to the environment or violation
of any Environmental Laws. Except as otherwise disclosed in Schedule 5.18:
(a) neither the Company nor any Restricted Subsidiary
has knowledge of any facts which would give rise to any Material
claim, public or private, or Material violation of Environmental
Laws or damage to the environment emanating from, occurring on or in
any way related to real properties now or formerly owned, leased or
operated by any of them or to other assets or their use;
(b) neither the Company nor any of its Restricted
Subsidiaries (1) has stored any Hazardous Materials on real
properties now or formerly owned, leased or operated by any of them
or (2) has disposed of any Hazardous Materials in a manner contrary
to any Environmental Laws; in each case in any manner that could
reasonably be expected to result in a Material Adverse Effect; and
(c) all buildings on all real properties now owned,
leased or operated by the Company or any of its Subsidiaries are in
material compliance with applicable Environmental Laws.
Section 5.19. Foreign Assets Control Regulations, Etc. Neither the
sale of the Notes by the Company hereunder nor its use of the proceeds thereof
will violate the Trading with the Enemy Act, as amended, or any of the foreign
assets control regulations of the United States Treasury Department (31 CFR,
Subtitle B, Chapter V, as amended) or any enabling legislation or executive
order relating thereto.
SECTION 6. REPRESENTATIONS OF THE PURCHASERS.
Section 6.1. Purchase for Investment. Each Purchaser represents that
it is purchasing the Notes for its own account or for one or more separate
accounts maintained by it or for the account of one or more pension or trust
funds and not with a view to the
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<PAGE> 17
distribution thereof, provided that the disposition of such Purchaser's or such
pension or trust funds' property shall at all times be within such Purchaser's
or such pension or trust funds' control. Each Purchaser understands that the
Notes have not been registered under the Securities Act and may be resold only
if registered pursuant to the provisions of the Securities Act or if an
exemption from registration is available, except under circumstances where
neither such registration nor such an exemption is required by law, and that the
Company is not required to register the Notes.
Section 6.2. Source of Funds. Each Purchaser represents that at
least one of the following statements is an accurate representation as to each
source of funds (a "Source") to be used by it to pay the purchase price of the
Notes to be purchased by it hereunder:
(a) the Source is an "insurance company general account"
within the meaning of Department of Labor Prohibited Transaction
Exemption ("PTE") 95-60 (issued July 12, 1995) and, as of the date
of the Closing or as of the date of transfer, as applicable, there
is no employee benefit plan, treating as a single plan, all plans
maintained by the same employer or employee organization or
affiliate thereof, with respect to which the amount of the general
account reserves and liabilities for all contracts held by or on
behalf of such plan, exceeds 10% of the total reserves and
liabilities of such general account (exclusive of separate account
liabilities) plus surplus, as set forth in the NMC Annual Statement
filed with such Purchaser's state of domicile; or
(b) the Source is either (1) an insurance company pooled
separate account, within the meaning of PTE 90-1 (issued January 29,
1990), or (2) a bank collective investment fund, within the meaning
of the PTE 91-38 (issued July 12, 1991) and, as of the date of the
Closing or as of the date of transfer, as applicable, except as such
Purchaser has disclosed to the Company in writing pursuant to this
paragraph (b), no employee benefit plan or group of plans maintained
by the same employer or employee organization or affiliate thereof
beneficially owns more than 10% of all assets allocated to such
pooled separate account or collective investment fund; or
(c) the Source constitutes assets of an "investment
fund" (within the meaning of Part V of the QPAM Exemption) managed
by a "qualified professional asset manager" or "QPAM" (within the
meaning of Part V of the QPAM Exemption), no employee benefit plan's
assets that are included in such investment fund, when combined with
the assets of all other employee benefit plans established or
maintained by the same employer or by an affiliate (within the
meaning of Section V(c)(1) of the QPAM Exemption) of such employer
or by the same employee organization and managed by such QPAM,
exceed 20% of the total client assets managed by such QPAM, the
conditions of Part I(c) and (g) of the QPAM Exemption are satisfied,
neither the QPAM nor a Person controlling or controlled by the QPAM
(applying the definition of "control" in Section V(e) of the QPAM
Exemption) owns a 5% or more interest in the Company and (1) the
identity of such QPAM and (2) the names of all employee benefit
plans whose assets are included in such investment fund have been
disclosed to the Company in writing pursuant to this paragraph (c);
or
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<PAGE> 18
(d) the Source is a governmental plan; or
(e) the Source is one or more employee benefit plans, or
a separate account or trust fund comprised of one or more employee
benefit plans, each of which has been identified to the Company in
writing pursuant to this paragraph (e); or
(f) the Source does not include assets of any employee
benefit plan, other than a plan exempt from the coverage of ERISA.
If any Purchaser or any subsequent transferee of the Notes indicates
that such Purchaser or such transferee is relying on any representation
contained in paragraph (b), (c) or (e) above, the Company shall deliver on the
date of the Closing or on the date of transfer, as applicable, a certificate,
which shall state whether (i) it is a party in interest or a "disqualified
person" (as defined in Section 4975(e)(2) of the Internal Revenue Code of 1986,
as amended), with respect to any plan identified pursuant to paragraphs (b) or
(e) above, or (ii) with respect to any plan, identified pursuant to paragraph
(c) above, whether it or any "affiliate" (as defined in Section V(c) of the QPAM
Exemption) has at such time, and during the immediately preceding one year,
exercised the authority to appoint or terminate the QPAM as manager of any plan
identified in writing pursuant to paragraph (c) above or to negotiate the terms
of said QPAM's management agreement on behalf of any such identified plan.
As used in this Section 6.2, the terms "employee benefit plan,"
"governmental plan," "party in interest" and "separate account" shall have the
respective meanings assigned to such terms in Section 3 of ERISA.
SECTION 7. INFORMATION AS TO COMPANY.
Section 7.1. Financial and Business Information. The Company shall
deliver to each holder of Notes that is an Institutional Investor:
(a) Quarterly Statements - within 60 days after the end
of each quarterly fiscal period in each fiscal year of the Company
(other than the last quarterly fiscal period of each such fiscal
year), duplicate copies of,
(1) a consolidated balance sheet of the
Company and its Subsidiaries as at the end of such
quarter, and
(2) consolidated statements of income,
stockholders' equity and cash flows of the Company and
its Subsidiaries, for such quarter and (in the case of
the second and third quarters) for the portion of the
fiscal year ending with such quarter,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP applicable to quarterly
financial statements generally, and certified by a
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Senior Financial Officer as fairly presenting, in all material respects, the
financial position of the companies being reported on and their results of
operations and cash flows, subject to changes resulting from year-end
adjustments, provided that delivery within the time period specified above of
copies of the Company's Quarterly Report on Form 10-Q prepared in compliance
with the requirements therefor and filed with the Securities and Exchange
Commission shall be deemed to satisfy the requirements of this Section 7.1(a);
(b) Annual Statements - within 105 days after the end of
each fiscal year of the Company, duplicate copies of,
(1) a consolidated balance sheet of the
Company and its Subsidiaries, as at the end of such
year, and
(2) consolidated statements of income,
stockholders' equity and cash flows of the Company and
its Subsidiaries, for such year,
setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail, prepared in
accordance with GAAP, and accompanied by
(i) an opinion thereon of independent
certified public accountants of recognized national
standing, which opinion shall state that such financial
statements present fairly, in all material respects, the
financial position of the companies being reported upon
and their results of operations and cash flows and have
been prepared in conformity with GAAP, and that the
examination of such accountants in connection with such
financial statements has been made in accordance with
generally accepted auditing standards, and that such
audit provides a reasonable basis for such opinion in
the circumstances, provided that the delivery within the
time period specified above of the Company's Annual
Report on Form 10-K for such fiscal year (together with
the Company's annual report to shareholders, if any,
prepared pursuant to Rule 14a-3 under the Exchange Act)
prepared in accordance with the requirements therefor
and filed with the Securities and Exchange Commission
shall be deemed to satisfy the requirements of this
Section 7.1(b), and
(ii) a certificate of such accountants
stating that they have reviewed this Agreement and
stating further whether, in making their audit, they
have become aware of any condition or event that then
constitutes a Default or an Event of Default, and, if
they are aware that any such condition or event then
exists, specifying the nature and period of the
existence thereof (it being understood that such
accountants shall not be liable, directly or indirectly,
for any failure to obtain knowledge of any Default or
Event of Default unless such accountants should have
obtained knowledge thereof in making an audit in
accordance with generally accepted auditing standards or
did not make such an audit);
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<PAGE> 20
(c) SEC and Other Reports - promptly upon their becoming
available, one copy of (1) each financial statement, report, notice
or proxy statement sent by the Company or any Subsidiary to public
Securities holders generally, (2) each regular or periodic report,
each registration statement that shall have become effective
(without exhibits except as expressly requested by such holder), and
each final prospectus and all amendments thereto filed by the
Company or any Subsidiary with the Securities and Exchange
Commission and (3) all press releases and other statements made
available generally by the Company or any Subsidiary to the public
concerning developments that are Material;
(d) Notice of Default or Event of Default - promptly,
and in any event within five Business Days after a Responsible
Officer becoming aware of the existence of any Default or Event of
Default, a written notice specifying the nature and period of
existence thereof and what action the Company is taking or proposes
to take with respect thereto;
(e) ERISA Matters - promptly, and in any event within
five Business Days after a Responsible Officer becoming aware of any
of the following, a written notice setting forth the nature thereof
and the action, if any, that the Company or an ERISA Affiliate
proposes to take with respect thereto:
(1) with respect to any Plan, any reportable
event, as defined in Section 4043(b) of ERISA and the
regulations thereunder, for which notice thereof has not
been waived pursuant to such regulations as in effect on
the date hereof; or
(2) the taking by the PBGC of steps to
institute, or the threatening by the PBGC of the
institution of, proceedings under Section 4042 of ERISA
for the termination of' or the appointment of a trustee
to administer, any Plan, or the receipt by the Company
or any ERISA Affiliate of a notice from a Multiemployer
Plan that such action has been taken by the PBGC with
respect to such Multiemployer Plan; or
(3) any event, transaction or condition that
could result in the incurrence of any liability by the
Company or any ERISA Affiliate pursuant to Title I or IV
of ERISA or the penalty or excise tax provisions of the
Code relating to employee benefit plans, or in the
imposition of any Lien on any of the rights, properties
or assets of the Company or any ERISA Affiliate pursuant
to Title I or IV of ERISA or such penalty or excise tax
provisions, if such liability or Lien, taken together
with any other such liabilities or Liens then existing,
would exceed $5,000,000 in the aggregate;
(f) Notices from Governmental Authority - promptly, and
in any event within 30 days of receipt thereof, copies of any notice
to the Company or any Subsidiary from any Federal or state
Governmental Authority relating to any order,
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<PAGE> 21
ruling, statute or other law or regulation that could reasonably be
expected to have a Material Adverse Effect;
(g) Unrestricted Subsidiaries - within 120 days after
the end of each fiscal year of the Company, duplicate copies of
financial statements of the character and for the dates and periods
as provided in paragraph (b) above covering each Unrestricted
Subsidiary (or groups of Unrestricted Subsidiaries on a consolidated
basis);
(h) Rule 144A - except at such times as the Company is a
reporting company under Section 13 or 15(d) of the Exchange Act or
has complied with the requirements for the exemption from
registration under the Exchange Act set forth in Rule 12g3-2(b)
under the Exchange Act, such financial or other information as any
holder of Notes or any Person designated by such holder may
reasonably determine is required to permit such holder to comply
with the requirements of Rule 144A promulgated under the Exchange
Act in connection with the resale by it of the Notes, in any such
case promptly after the same is requested; and
(i) Requested Information - with reasonable promptness,
such other data and information relating to the business,
operations, affairs, financial condition, assets or properties of
the Company or any of its Subsidiaries or relating to the ability of
the Company to perform its obligations hereunder and under the Notes
as from time to time may be reasonably requested by any such holder
of Notes.
Section 7.2. Officer's Certificate. Each set of financial statements
delivered to a holder of Notes pursuant to Section 7.1(a) or Section 7.1(b)
hereof shall be accompanied by a certificate of a Senior Financial Officer
setting forth:
(a) Covenant Compliance - the information (including
detailed calculations) required in order to establish whether the
Company was in compliance with the requirements of Section 10.2
through Section 10.5 hereof, inclusive, Section 10.8 and Section
10.10 during the quarterly or annual period covered by the
statements then being furnished (including with respect to each such
Section, where applicable, the calculations of the maximum or
minimum amount, ratio or percentage, as the case may be, permissible
under the terms of such Sections, and the calculation of the amount,
ratio or percentage then in existence); and
(b) Event of Default - a statement that such officer has
reviewed the relevant terms hereof and has made, or caused to be
made, under his or her supervision, a review of the transactions and
conditions of the Company and its Subsidiaries from the beginning of
the quarterly or annual period covered by the statements then being
furnished to the date of the certificate and that such review shall
not have disclosed the existence during such period of any condition
or event that constitutes a Default or an Event of Default or, if
any such condition or event existed or exists (including, without
limitation, any such event or condition resulting from the failure
of the Company or any Subsidiary to comply with any Environmental
Law),
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<PAGE> 22
specifying the nature and period of existence thereof and what
action the Company shall have taken or proposes to take with respect
thereto.
Section 7.3. Inspection. The Company shall permit the
representatives of each holder of Notes that is an Institutional Investor:
(a) No Default - if no Default or Event of Default then
exists, at the expense of such holder and upon reasonable prior
notice to the Company, to visit the principal executive office of
the Company, to discuss the affairs, finances and accounts of the
Company and its Subsidiaries with the Company's officers, and, with
the consent of the Company (which consent will not be unreasonably
withheld) to visit the other offices and properties of the Company
and each Subsidiary, all at such reasonable times and as often as
may be reasonably requested in writing; and
(b) Default - if a Default or Event of Default then
exists, at the expense of the Company, to visit and inspect any of
the offices or properties of the Company or any Subsidiary, to
examine all their respective books of account, records, reports and
other papers, to make copies and extracts therefrom, and to discuss
their respective affairs, finances and accounts with their
respective officers and independent public accountants (and by this
provision the Company authorizes said accountants to discuss the
affairs, finances and accounts of the Company and its Subsidiaries),
all at such times and as often as may be requested.
SECTION 8. PREPAYMENT OF THE NOTES.
Section 8.1. Required Prepayments. On March 15, 2002 and on each
March 15 thereafter to and including March 15, 2009 the Company will prepay
$6,666,666 principal amount (or such lesser principal amount as shall then be
outstanding) of the Notes at par and without payment of the Make-Whole Amount or
any premium, provided that upon any partial prepayment of the Notes pursuant to
Section 8.2 or purchase of the Notes permitted by Section 8.5 the principal
amount of each required prepayment of the Notes becoming due under this Section
8.1 on and after the date of such prepayment or purchase shall be reduced in the
same proportion as the aggregate unpaid principal amount of the Notes is reduced
as a result of such prepayment or purchase.
Section 8.2. Optional Prepayments with Make-Whole Amount. The
Company may, at its option, upon notice as provided below, prepay at any time
all, or from time to time any part of, the Notes, in an amount not less than
$1,000,000 in the case of a partial prepayment, at 100% of the principal amount
so prepaid, together with interest accrued thereon to the date of such
prepayment, plus the Make-Whole Amount determined for the prepayment date with
respect to such
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principal amount. The Company will give each holder of Notes written notice of
each optional prepayment under this Section 8.2 not less than 30 days and not
more than 60 days prior to the date fixed for such prepayment. Each such notice
shall specify such date, the aggregate principal amount of the Notes to be
prepaid on such date, the principal amount of each Note held by such holder to
be prepaid (determined in accordance with Section 8.3), and the interest to be
paid on the prepayment date with respect to such principal amount being prepaid,
and shall be accompanied by a certificate of a Senior Financial Officer as to
the estimated Make-Whole Amount due in connection with such prepayment
(calculated as if the date of such notice were the date of the prepayment),
setting forth the details of such computation. Five Business Days prior to such
prepayment, the Company shall deliver to each holder of Notes a certificate of a
Senior Financial Officer (the "Make-Whole Amount Calculation Certificate")
specifying the method of computation and the calculation of such Make-Whole
Amount in respect of such holder's Notes as of the specified prepayment date.
The method of computation of the Make-Whole Amount in respect of the Notes set
forth in the Make-Whole Amount Calculation Certificate shall be subject to the
review and approval of the holders of the Notes and, in the case of any
disagreement between the Required Holders and the Company with respect to such
method of computation, the conclusion of the Required Holders shall, in the
absence of manifest error, be deemed binding and conclusive. The calculation of
the Make-Whole Amount in respect of the Note or Notes set forth in a Make-Whole
Amount Calculation Certificate shall also be subject to the review and approval
of the holder of such Note or Notes and, in the case of any disagreement between
such holder and the Company with respect to such calculation, the conclusion of
such holder shall, in the absence of manifest error, be deemed binding and
conclusive. It is understood and agreed that the failure of any holder to
respond to the Make-Whole Amount Calculation Certificate in respect of its Notes
by the date fixed for prepayment shall be deemed to be a concurrence by such
holder to the method of computation and the calculation of the Make-Whole Amount
in respect of such Notes.
Section 8.3. Allocation of Partial Prepayments. In the case of each
partial prepayment of the Notes, the principal amount of the Notes to be prepaid
shall be allocated among all of the Notes at the time outstanding in proportion,
as nearly as practicable, to the respective unpaid principal amounts thereof not
theretofore called for prepayment.
Section 8.4. Maturity; Surrender, Etc. In the case of each
prepayment of Notes pursuant to this Section 8, the principal amount of each
Note to be prepaid shall mature and become due and payable on the date fixed for
such prepayment, together with interest on such principal amount accrued to such
date and the applicable Make-Whole Amount, if any. From and after such date,
unless the Company shall fail to pay such principal amount when so due and
payable, together with the interest and Make-Whole Amount, if any, as aforesaid,
interest on such principal amount shall cease to accrue. Any Note paid or
prepaid in full shall be surrendered to the Company and canceled and shall not
be reissued, and no Note shall be issued in lieu of any prepaid principal amount
of any Note.
Section 8.5. Purchase of Notes. The Company will not and will not
permit any Affiliate to purchase, redeem, prepay or otherwise acquire, directly
or indirectly, any of the outstanding Notes except (a) upon the payment or
prepayment of the Notes in accordance with the terms of this Agreement and the
Notes or (b) pursuant to an offer to purchase made by the Company or an
Affiliate pro rata to the holders of all Notes at the time outstanding upon the
same terms and conditions. Any such offer shall provide each holder with
sufficient information to enable it to make an informed decision with respect to
such offer, and shall remain open for at least 30 Business Days. If the holders
of more than 10% of the principal amount of the Notes then outstanding accept
such offer, the Company shall
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promptly notify the remaining holders of such fact and the expiration date for
the acceptance by holders of Notes of such offer shall be extended by the number
of days necessary to give each such remaining holder at least 30 Business Days
from its receipt of such notice to accept such offer. The Company will promptly
cancel all Notes acquired by it or any Affiliate pursuant to any payment,
prepayment or purchase of Notes pursuant to any provision of this Agreement and
no Notes may be issued in substitution or exchange for any such Notes.
Section 8.6. Make-Whole Amount. The term "Make-Whole Amount" means,
with respect to any Note, an amount equal to the excess, if any, of the
Discounted Value of the Remaining Scheduled Payments with respect to the Called
Principal of such Note over the amount of such Called Principal, provided that
the Make-Whole Amount may in no event be less than zero. For the purposes of
determining the Make-Whole Amount, the following terms have the following
meanings:
"Called Principal" shall mean, with respect to any Note,
the principal of such Note that is to be prepaid pursuant to Section
8.2 or has become or is declared to be immediately due and payable
pursuant to Section 12.1, as the context requires.
"Discounted Value" shall mean, with respect to the
Called Principal of any Note, the amount obtained by discounting all
Remaining Scheduled Payments with respect to such Called Principal
from their respective scheduled due dates to the Settlement Date
with respect to such Called Principal, in accordance with accepted
financial practice and at a discount factor (applied on the same
periodic basis as that on which interest on the Notes is payable)
equal to the Reinvestment Yield with respect to such Called
Principal.
"Reinvestment Yield" shall mean, with respect to the
Called Principal of any Note, 50% over the yield to maturity implied
by (a) the yields reported, as of 10:00 a.m. (New York City time) on
the fifth Business Day preceding the Settlement Date with respect to
such Called Principal, on the applicable "PX" page of the Bloomberg
Financial Market Service's Screen (or such other page as may replace
the applicable PX page of the Bloomberg Financial Market Service's
Screen) for actively traded U.S. Treasury Securities having a
maturity equal to the Remaining Average Life of such Called
Principal as of such Settlement Date, or (b) if such yields are not
reported as of such time or the yields reported as of such time are
not ascertainable, the Treasury Constant Maturity Series Yields
reported, for the latest day for which such yields have been so
reported as of the fifth Business Day preceding the Settlement Date
with respect to such Called Principal, in Federal Reserve
Statistical Release H.15 (519) (or any comparable successor
publication) for actively traded U.S. Treasury Securities having a
constant maturity equal to the Remaining Average Life of such Called
Principal as of such Settlement Date. Such implied yield in clauses
(a) and (b) above will be determined, if necessary, by (1)
converting U.S. Treasury bill quotations to bond-equivalent yields
in accordance with accepted financial practice and (2) interpolating
linearly between (i) the actively traded U.S. Treasury Security with
the maturity closest to and greater than the Remaining Average Life
and (2) the
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<PAGE> 25
actively traded U.S. Treasury Security with the maturity closest to
and less than the Remaining Average Life.
"Remaining Average Life" shall mean, with respect to any
Called Principal, the number of years (calculated to the nearest
one-twelfth year) obtained by dividing (a) such Called Principal
into (b) the sum of the products obtained by multiplying (1) the
principal component of each Remaining Scheduled Payment with respect
to such Called Principal by (2) the number of years (calculated to
the nearest one-twelfth year) that will elapse between the
Settlement Date with respect to such Called Principal and the
scheduled due date of such Remaining Scheduled Payment.
"Remaining Scheduled Payments" shall mean, with respect
to the Called Principal of any Note, all payments of such Called
Principal and interest thereon that would be due after the
Settlement Date with respect to such Called Principal if no payment
of such Called Principal were made prior to its scheduled due date,
provided that if such Settlement Date is not a date on which
interest payments are due to be made under the terms of the Notes,
then the amount of the next succeeding scheduled interest payment
will be reduced by the amount of interest accrued to such Settlement
Date and required to be paid on such Settlement Date pursuant to
Section 8.2 or 12.1.
"Settlement Date" shall mean, with respect to the Called
Principal of any Note, the date on which such Called Principal is to
be prepaid pursuant to Section 8.2 or has become or is declared to
be immediately due and payable pursuant to Section 12.1, as the
context requires.
SECTION 9. AFFIRMATIVE COVENANTS.
The Company covenants that so long as any of the Notes are
outstanding:
Section 9.1. Compliance with Law. The Company will, and will cause
each of its Subsidiaries to, comply with all laws, ordinances or governmental
rules or regulations to which each of them is subject, including, without
limitation, Environmental Laws, and will obtain and maintain in effect all
licenses, certificates, permits, franchises and other governmental
authorizations necessary to the ownership of their respective properties or to
the conduct of their respective businesses, in each case to the extent necessary
to ensure that non-compliance with such laws, ordinances or governmental rules
or regulations or failures to obtain or maintain in effect such licenses,
certificates, permits, franchises and other governmental authorizations could
not reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
Section 9.2. Insurance. The Company will, and will cause each of its
Restricted Subsidiaries to, maintain, with financially sound and reputable
insurers, insurance with respect to their respective properties and businesses
against such casualties and contingencies, of such types, on such terms and in
such amounts (including deductibles, co-insurance and self-insurance, if
adequate reserves are maintained with respect thereto) as is customary in
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the case of entities of established reputations engaged in the same or a similar
business and similarly situated.
Section 9.3. Maintenance of Properties. The Company will, and will
cause each of its Restricted Subsidiaries to, maintain and keep, or cause to be
maintained and kept, their respective properties in good repair, working order
and condition (other than ordinary wear and tear), so that the business carried
on in connection therewith may be properly conducted at all times, provided that
this Section shall not prevent the Company or any Restricted Subsidiary from
discontinuing the operation and the maintenance of any of its properties if such
discontinuance is desirable in the conduct of its business and the Company has
concluded that such discontinuance could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
Section 9.4. Payment of Taxes and Claims. The Company will, and will
cause each of its Subsidiaries to, file all tax returns required to be filed in
any jurisdiction and to pay and discharge all taxes shown to be due and payable
on such returns and all other taxes, assessments, governmental charges, or
levies imposed on them or any of their properties, assets, income or franchises,
to the extent such taxes and assessments have become due and payable and before
they have become delinquent and all claims for which sums have become due and
payable that have or might become a Lien on properties or assets of the Company
or any Subsidiary, provided that neither the Company nor any Subsidiary need pay
any such tax or assessment or claims if (a) the amount, applicability or
validity thereof is contested by the Company or such Subsidiary on a timely
basis in good faith and in appropriate proceedings, and the Company or a
Subsidiary has established adequate reserves therefor in accordance with GAAP on
the books of the Company or such Subsidiary or (b) the nonpayment of any such
taxes or assessments could not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
Section 9.5. Corporate Existence, Etc. The Company will at all times
preserve and keep in full force and effect its corporate existence. Subject to
Sections 10.7, 10.8 and 10.9, the Company will at all times preserve and keep in
full force and effect the corporate existence of each of its Subsidiaries
(unless merged into the Company or a Wholly-Owned Restricted Subsidiary) and all
rights and franchises of the Company and its Subsidiaries unless, in the good
faith judgment of the Company, the termination of or failure to preserve and
keep in full force and effect such corporate existence, right or franchise would
not, individually or in the aggregate, have a Material Adverse Effect.
Section 9.6. Additional Guarantors. (a) The Company shall promptly,
and in any event within three Business Days after (1) a Subsidiary becomes a
Material Subsidiary, (2) the formation or acquisition of a new Subsidiary that
is a Material Subsidiary or (3) the occurrence of any other event creating a new
Subsidiary that is a Material Subsidiary, cause such Material Subsidiary to
execute and deliver a supplement to the Guaranty Agreement in the form of
Exhibit A to the Guaranty Agreement.
(b) Concurrently with the execution and delivery by a Material
Subsidiary of a supplement to the Guaranty Agreement, the Company shall cause
such Material Subsidiary to
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deliver to each holder of Notes (1) such documents and evidence with respect to
such Material Subsidiary as any holder may reasonably request in order to
establish the existence and good standing of such Material Subsidiary and
evidence that the Board of Directors of such Material Subsidiary has adopted
resolutions authorizing the execution and delivery of a supplement to the
Guaranty Agreement, (2) evidence of compliance with such Material Subsidiary's
outstanding debt instruments in the form of (i) a compliance certificate from
such Material Subsidiary to the effect that such Material Subsidiary has
complied with all terms and conditions of its outstanding debt instruments, (ii)
consents or approvals of the holder or holders of any evidence of Debt or
Security, and/or (iii) amendments of agreements pursuant to which any evidence
of Debt or Security may have been issued, all as may be reasonably deemed
necessary by the holders of Notes to permit the execution and delivery of a
supplement to the Guaranty Agreement by such Material Subsidiary, (3) an opinion
of counsel to the effect that (i) such Material Subsidiary is a corporation or
other business entity, duly organized, validly existing and in good standing, if
applicable, under the laws of its jurisdiction of organization, has the power
and the authority to execute and deliver a supplement to the Guaranty Agreement
and to perform the Guaranty Agreement, (ii) the execution and delivery of a
supplement to the Guaranty Agreement and performance of the Guaranty Agreement
has been duly authorized by all necessary action on the part of such Material
Subsidiary, a supplement to the Guaranty Agreement has been duly executed and
delivered by such Material Subsidiary and the Guaranty Agreement constitutes the
legal, valid and binding contract of such Material Subsidiary enforceable
against such Material Subsidiary in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent conveyance or similar laws affecting
creditors' rights generally, and general principles of equity (regardless of
whether the application of such principles is considered in a proceeding in
equity or at law), (iii) the execution and delivery of a supplement to the
Guaranty Agreement and the performance by such Material Subsidiary of the
Guaranty Agreement do not conflict with or result in any breach of any of the
provisions of or constitute a default under or result in the creation of a Lien
upon any of the property of such Material Subsidiary pursuant to the provisions
of its charter documents or any agreement or other instrument known to such
counsel to which such Material Subsidiary is a party to or by which such
Material Subsidiary may be bound and (iv) no approval, consent or withholding of
objection on the part of, or filing, registration or qualification with, any
governmental body, Federal or state, is necessary in connection with the lawful
execution and delivery of a supplement to the Guaranty Agreement by such
Material Subsidiary or the performance of the Guaranty Agreement by such
Material Subsidiary, which opinion may contain such assumptions and
qualifications as are reasonably acceptable to the Required Holders, and (4) all
other documents and showings reasonably requested by the holders of Notes in
connection with the execution and delivery of a supplement to the Guaranty
Agreement, which documents shall be satisfactory in form and substance to such
holders and their special counsel, and each holder of Notes shall have received
a copy (executed or certified as may be appropriate) of all of the foregoing
legal documents.
SECTION 10. NEGATIVE COVENANTS.
The Company covenants that so long as any of the Notes are
outstanding:
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Section 10.1. Nature of Business. The Company will not, and will not
permit any Restricted Subsidiary to, engage in any business if, as a result
thereof, the general nature of the business, taken on a consolidated basis,
which would then be engaged in by the Company and its Restricted Subsidiaries
would be substantially changed from the general nature of the business engaged
in by the Company and its Restricted Subsidiaries on the date of the Closing.
Section 10.2. Consolidated Net Worth. The Company will not, at any
time, permit Consolidated Net Worth to be less than the sum of (a) $180,000,000,
plus (b) an aggregate amount equal to 50% of its Consolidated Net Income (but,
in each case, only if a positive number) for each completed fiscal quarter
beginning with the fiscal quarter ended March 31, 1998.
Section 10.3. Incurrence of Debt. The Company will not, and will not
permit any Restricted Subsidiary to, directly or indirectly, create, incur,
assume, guarantee, or otherwise become directly or indirectly liable with
respect to, any Debt, unless on the date the Company or such Restricted
Subsidiary becomes liable with respect to any such Debt and immediately after
giving effect thereto and the concurrent retirement of any other Debt,
(a) no Default or Event of Default exists, and
(b) Consolidated Total Debt does not exceed 55% of
Consolidated Total Capitalization.
For the purposes of this Section 10.3, any Person becoming a Restricted
Subsidiary after the date of the Closing shall be deemed, at the time it becomes
a Restricted Subsidiary, to have incurred all of its then outstanding Debt, and
any Person extending, renewing or refunding any Debt shall be deemed to have
incurred such Debt at the time of such extension, renewal or refunding.
Section 10.4. Restricted Subsidiary Debt. The Company will not at
any time permit any Restricted Subsidiary to, directly or indirectly, create,
incur, assume, guarantee, have outstanding, or otherwise become or remain
directly or indirectly liable with respect to, any Debt other than:
(a) Debt of a Restricted Subsidiary (1) outstanding on
the date of the Closing and disclosed in Schedule 5.15, provided
that such Debt may not be extended, renewed or refunded except as
otherwise permitted by this Agreement and (2) outstanding pursuant
to the Guaranty Agreement;
(b) Debt of a Restricted Subsidiary owed to the Company
or a Wholly-Owned Restricted Subsidiary;
(c) Debt of a Restricted Subsidiary outstanding at the
time such Restricted Subsidiary becomes a Restricted Subsidiary,
provided that (1) such Debt shall not have been incurred in
contemplation of such Restricted Subsidiary becoming a
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<PAGE> 29
Restricted Subsidiary and (2) immediately after such Restricted
Subsidiary becomes a Restricted Subsidiary no Default or Event of
Default would exist, and provided, further, that such Debt may not
be extended, renewed or refunded except as otherwise permitted by
this Agreement; and
(d) Debt of a Restricted Subsidiary in addition to that
otherwise permitted by the foregoing provisions of this Section
10.4, provided that on the date the Restricted Subsidiary incurs or
otherwise becomes liable with respect to any such additional Debt
and immediately after giving effect thereto and the concurrent
retirement of any other Debt,
(1) no Default or Event of Default exists,
and
(2) Priority Debt does not exceed 20% of
Consolidated Net Worth determined at such time.
Section 10. 5. Liens. The Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly create, incur, assume
or permit to exist (upon the happening of a contingency or otherwise) any Lien
on or with respect to any property or asset (including, without limitation, any
document or instrument in respect of goods or accounts receivable) of the
Company or any such Restricted Subsidiary, whether now owned or held or
hereafter acquired, or any income or profits therefrom, or assign or otherwise
convey any right to receive income or profits, except:
(a) Liens for taxes, assessments or other governmental
charges which are not yet due and payable or the payment of which is
not at the time required by Section 9.4;
(b) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other similar Liens, in
each case, incurred in the ordinary course of business for sums not
yet due and payable;
(c) Liens (other than any Lien imposed by ERISA)
incurred or deposits made in the ordinary course of business (1) in
connection with workers' compensation, unemployment insurance and
other types of social security or retirement benefits, or (2) to
secure (or to obtain letters of credit that secure) the performance
of tenders, statutory obligations, surety bonds, appeal bonds, bids,
leases (other than Capital Leases), performance bonds, purchase,
construction or sales contracts and other similar obligations, in
each case not incurred or made in connection with the borrowing of
money, the obtaining of advances or credit or the payment of the
deferred purchase price of property;
(d) any attachment or judgment Lien, unless the judgment
it secures shall not, within 60 days after the entry thereof, have
been discharged or execution thereof stayed pending appeal, or shall
not have been discharged within 60 days after the expiration of any
such stay;
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(e) leases or subleases granted to others, easements,
rights-of-way, restrictions and other similar charges or
encumbrances, in each case incidental to, and not interfering with,
the ordinary conduct of the business of the Company or any of its
Restricted Subsidiaries, provided that such Liens do not, in the
aggregate, materially detract from the value of such property;
(f) Liens on property or assets of the Company or any of
its Restricted Subsidiaries securing Debt owing to the Company or to
a Wholly-Owned Restricted Subsidiary;
(g) Liens existing on the date of the Closing and
securing the Debt of the Company and its Restricted Subsidiaries
referred to on Schedule 5.15;
(h) any Lien created to secure all or any part of the
purchase price, or to secure Debt incurred or assumed to pay all or
any part of the purchase price or cost of construction, of property
acquired or constructed by the Company or a Restricted Subsidiary
after the date of the Closing, provided that
(1) any such Lien shall extend solely to the
item or items of such property so acquired or
constructed,
(2) the principal amount of the Debt secured
by any such Lien shall at no time exceed an amount equal
to the lesser of (i) the cost to the Company or such
Restricted Subsidiary of the property so acquired or
constructed and (ii) the Fair Market Value (as
determined in good faith by the Board of Directors of
the Company) of such property at the time of such
acquisition or construction,
(3) any such Lien shall be created
contemporaneously with, or within 180 days after, the
acquisition or construction of such property, and
(4) immediately after giving effect the
creation of such Lien and giving effect thereto, (i) no
Default or Event of Default would exist and (ii) the
Company would be permitted by the provisions of Section
10.3(b) to incur at least $1.00 of additional Debt;
(i) any Lien existing on property of a Person
immediately prior to its being consolidated with or merged into the
Company or a Restricted Subsidiary, or any Lien existing on any
property acquired by the Company or any Restricted Subsidiary at the
time such property is so acquired (whether or not the Debt secured
thereby shall have been assumed), provided that (1) no such Lien
shall have been created or assumed in contemplation of such
consolidation or merger or such acquisition of property, (2) each
such Lien shall extend solely to the item or items of property so
acquired and (3) immediately after giving effect to the acquisition
of the property subject to such Lien and giving effect thereto, (i)
no Default or Event of Default would exist and
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(ii) the Company would be permitted by the provisions of Section
10.3(b) to incur at least $1.00 of additional Debt;
(j) any Lien renewing, extending or refunding any Lien
permitted by paragraphs (g), (h) or (i) of this Section 10.5,
provided that (1) the principal amount of Debt secured by such Lien
immediately prior to such extension, renewal or refunding is not
increased or the maturity thereof reduced, (2) such Lien is not
extended to any other property, and (3) immediately after such
extension, renewal or refunding no Default or Event of Default would
exist; and
(k) other Liens not otherwise permitted by paragraphs
(a) through (i), provided that, after giving effect thereto and to
the application of the proceeds of any Debt secured thereby,
Priority Debt does not exceed 20% of Consolidated Net Worth
determined at such time.
For the purposes of this Section 10.5, any Person becoming a
Restricted Subsidiary after the date of the Closing shall be deemed to have
incurred all of its then outstanding Liens at the time it becomes a Restricted
Subsidiary, and any Person extending, renewing or refunding any Debt secured by
any Lien shall be deemed to have incurred such Lien at the time of such
extension, renewal or refunding.
Section 10.6. Restrictions on Dividends of Subsidiaries, Etc. The
Company will not, and will not permit any of its Restricted Subsidiaries to,
enter into any agreement which would restrict any Restricted Subsidiary's
ability or right to pay dividends to, or make advances to or Investments in, the
Company or, if such Restricted Subsidiary is not directly owned by the Company,
the "parent" Subsidiary of such Restricted Subsidiary.
Section 10.7. Mergers, Consolidations, Etc. The Company will not,
and will not permit any Restricted Subsidiary to, consolidate with or merge with
any other corporation or convey, transfer or lease substantially all of its
assets in a single transaction or series of transactions to any Person; provided
that the foregoing restriction does not apply to:
(a) the consolidation or merger of a Restricted
Subsidiary with, or the conveyance, transfer or lease of
substantially all of the assets of a Restricted Subsidiary to, the
Company or a Wholly-Owned Restricted Subsidiary; or
(b) the consolidation or merger of a Restricted
Subsidiary with any Person other than the Company or a Wholly-Owned
Restricted Subsidiary; provided that such Restricted Subsidiary
shall be the surviving Person and immediately after giving effect to
such transaction (1) no Default or Event of the Default would exist,
(2) the Company would be permitted by the provisions of Section
10.3(b) to incur at least $1.00 of additional Debt, (3) such
Restricted Subsidiary would be permitted by the provisions of
Section 10.4(d)(2) to incur at least $1.00 of additional Priority
Debt and (4) the Company shall own the same percentage of the equity
or voting interests in such Restricted Subsidiary as the Company
owned in such Restricted Subsidiary immediately preceding such
transaction; or
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(c) the conveyance, transfer or lease of all of the
assets of a Restricted Subsidiary to a Person other than the Company
or a Wholly-Owned Restricted Subsidiary in compliance with the
provisions of Section 10.8 and Section 10.9; or
(d) the consolidation or merger of the Company with, or
the conveyance, transfer or lease of substantially all of the assets
of the Company in a single transaction or series of transactions to,
any Person so long as:
(1) the successor formed by such
consolidation or the survivor of such merger or the
Person that acquires by conveyance, transfer or lease
substantially all of the assets of the Company as an
entirety, as the case may be (the "Successor
Corporation"), shall be a solvent corporation organized
and existing under the laws of the United States of
America, any State thereof or the District of Columbia;
(2) if the Company is not the Successor
Corporation, (i) such corporation shall have executed
and delivered to each holder of the Notes its assumption
of the due and punctual performance and observance of
each covenant and condition of this Agreement and the
Notes (pursuant to such agreements and instruments as
shall be reasonably satisfactory to the Required
Holders), (ii) the Company shall have caused to be
delivered to each holder of the Notes an opinion of
nationally recognized independent counsel, or other
independent counsel reasonably satisfactory to the
Required Holders, to the effect that all agreements or
instruments effecting such assumption are enforceable in
accordance with their terms and comply with the terms
hereof and (iii) each Guarantor shall have delivered to
each holder of the Notes a certificate whereby such
Guarantor shall have reaffirmed its obligations under
the Guaranty Agreement; and
(3) immediately after giving effect to such
transaction (i) no Default or Event of Default would
exist and (ii) the Successor Corporation would be
permitted by the provisions of Section 10.3(b) to incur
at least $1.00 of additional Debt.
No such conveyance, transfer or lease of substantially all of the
assets of the Company shall have the effect of releasing the Company or any
Successor Corporation from its liability under this Agreement or the Notes.
Section 10.8. Sale of Assets, Etc. Except as permitted under Section
10.7., Section 10.9 and Section 10.10, the Company will not, and will not permit
any Restricted Subsidiary to, make any Asset Disposition unless:
(a) in the good faith opinion of the Company, the Asset
Disposition is in exchange for consideration having a Fair Market
Value at least equal to that of the property exchanged and is in the
best interest of the Company or such Restricted Subsidiary;
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(b) immediately after giving effect to the Asset
Disposition, no Default or Event of Default would exist; and
(c) immediately after giving effect to the Asset
Disposition, the Disposition Value of all property that was the
subject of any Asset Disposition occurring during the immediately
preceding 12 consecutive calendar month period would not exceed 15%
of Consolidated Total Assets determined as of the end of the then
most recently ended fiscal year of the Company.
If the Net Proceeds Amount for any Transfer is applied to a Debt
Prepayment Application or a Property Reinvestment Application within 180 days
after such Transfer, then such Transfer, only for the purpose of determining
compliance with subsection (c) of this Section 10.8 as of any date on or after
the Net Proceeds Amount is so applied, shall be deemed not to be an Asset
Disposition.
Section 10.9. Disposal of Ownership of a Restricted Subsidiary. The
Company will not, and will not permit any Restricted Subsidiary to, sell or
otherwise dispose of any shares of Restricted Subsidiary Stock, nor will the
Company permit any such Restricted Subsidiary to issue, sell or otherwise
dispose of any shares of its own Restricted Subsidiary Stock, provided that the
foregoing restrictions do not apply to:
(a) the issue of directors' qualifying shares by any
such Restricted Subsidiary;
(b) any such Transfer of Restricted Subsidiary Stock
constituting a Transfer described in clause (a) of the definition of
"Asset Disposition"; and
(c) the Transfer of all of the Restricted Subsidiary
Stock of a Restricted Subsidiary owned by the Company and its other
Subsidiaries if:
(1) such Transfer satisfies the requirements
of Section 10.8 hereof,
(2) in connection with such Transfer the
entire Investment (whether represented by stock, Debt,
claims or otherwise) of the Company and its other
Subsidiaries in such Restricted Subsidiary is sold,
transferred or otherwise disposed of to a Person other
than (i) the Company, (ii) another Subsidiary not being
simultaneously disposed of, or (iii) an Affiliate, and
(3) the Restricted Subsidiary being disposed
of has no continuing Investment in any other Subsidiary
of the Company not being simultaneously disposed of or
in the Company.
Section 10.10. Sale-and-Leasebacks. The Company will not, and will
not permit any Restricted Subsidiary to, enter into any Sale-and-Leaseback
Transaction unless, (a) the lease which is the subject of such
Sale-and-Leaseback Transaction is not a Long-Term Lease or (b) immediately after
giving effect to such Sale-and-Leaseback Transaction, the aggregate
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amount of Priority Debt does not exceed 20% of Consolidated Net Worth determined
at such time.
Section 10.11. Transactions with Affiliates. The Company will not,
and will not permit any Restricted Subsidiary to, enter into directly or
indirectly any Material transaction or Material group of related transactions
(including without limitation the purchase, lease, sale or exchange of
properties of any kind or the rendering of any service) with any Affiliate
(other than the Company or another Restricted Subsidiary), except upon fair and
reasonable terms no less favorable to the Company or such Restricted Subsidiary
than would be obtainable in a comparable arm's-length transaction with a Person
not an Affiliate.
Section 10.12. Designation of Restricted and Unrestricted
Subsidiaries. The Company may designate any Subsidiary to be a Restricted
Subsidiary and may designate any Restricted Subsidiary to be an Unrestricted
Subsidiary by giving written notice to each holder of Notes that the Board of
Directors of the Company has made such designation, provided, however, that no
Subsidiary may be designated a Restricted Subsidiary and no Restricted
Subsidiary may be designated an Unrestricted Subsidiary unless, at the time of
such action and after giving effect thereto, (a) solely in the case of a
Restricted Subsidiary being designated an Unrestricted Subsidiary, such
Restricted Subsidiary being designated an Unrestricted Subsidiary shall not have
any continuing Investment in the Company or any other Restricted Subsidiary and
(b) no Default or Event of Default shall exist. Any Restricted Subsidiary which
has been designated an Unrestricted Subsidiary and which has then been
redesignated a Restricted Subsidiary, in each case in accordance with the
provisions of the first sentence of this Section 10.12, shall not at any time
thereafter be redesignated an Unrestricted Subsidiary without the prior written
consent of the Required Holders. Any Unrestricted Subsidiary which has been
designated a Restricted Subsidiary and which has then been redesignated an
Unrestricted Subsidiary, in each case in accordance with the provisions of the
first sentence of this Section 10.12, shall not at any time thereafter be
redesignated a Restricted Subsidiary without the prior written consent of the
Required Holders.
SECTION 11. EVENTS OF DEFAULT.
An "Event of Default" shall exist if any of the following conditions
or events shall occur and be continuing:
(a) the Company defaults in the payment of any principal
or Make-Whole Amount, if any, on any Note when the same becomes due
and payable, whether at maturity or at a date fixed for prepayment
or by declaration or otherwise; or
(b) the Company defaults in the payment of any interest
on any Note for more than five Business Days after the same becomes
due and payable; or
(c) the Company defaults in the performance of or
compliance with any term contained in Sections 10.1 through 10.4,
inclusive, or Sections 10.6 through 10.12, inclusive; or
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(d) the Company defaults in the performance of or
compliance with any term contained herein (other than those referred
to in paragraphs (a), (b) and (c) of this Section 11) and such
default is not remedied within 30 days after the earlier of (1) a
Responsible Officer obtaining actual knowledge of such default and
(2) the Company receiving written notice of such default from any
holder of a Note (any such written notice to be identified as a
"notice of default" and to refer specifically to this paragraph (d)
of Section 11); or
(e) any representation or warranty made in writing by or
on behalf of the Company or any Guarantor or by any officer of the
Company or any Guarantor in this Agreement or in the Guaranty
Agreement, respectively, or in any writing furnished in connection
with the transactions contemplated hereby or thereby proves to have
been false or incorrect in any material respect on the date as of
which made; or
(f) (1) the Company or any Restricted Subsidiary is in
default (as principal or as guarantor or other surety) in the
payment of any principal of or premium or make-whole amount or
interest on any Debt that is outstanding in an aggregate principal
amount of at least $10,000,000 beyond any period of grace provided
with respect thereto, or (2) the Company or any Restricted
Subsidiary is in default in the performance of or compliance with
any term of any evidence of any Debt in an aggregate outstanding
principal amount of at least $10,000,000 or of any mortgage,
indenture or other agreement relating thereto or any other condition
exists, and as a consequence of such default or condition such Debt
has become, or has been declared due and payable before its stated
maturity or before its regularly scheduled dates of payment or (3)
as a consequence of the occurrence or continuation of any event or
condition (other than the passage of time or the right of the holder
of Debt to convert such Debt into equity interests), (i) the Company
or any Restricted Subsidiary has become obligated to purchase or
repay Debt before its regular maturity or before its regularly
scheduled dates of payment in an aggregate outstanding principal
amount of at least $10,000,000, or (ii) one or more Persons have the
right to require the Company or any Restricted Subsidiary so to
purchase or repay such Debt; or
(g) the Company or any Restricted Subsidiary (1) is
generally not paying, or admits in writing its inability to pay, its
debts as they become due, (2) files, or consents by answer or
otherwise to the filing against it of, a petition for relief or
reorganization or arrangement or any other petition in bankruptcy,
for liquidation or to take advantage of any bankruptcy, insolvency,
reorganization, moratorium or other similar law of any jurisdiction,
(3) makes an assignment for the benefit of its creditors, (4)
consents to the appointment of a custodian, receiver, trustee or
other officer with similar powers with respect to it or with respect
to any substantial part of its property, (5) is adjudicated as
insolvent or to be liquidated, or (6) takes corporate action for the
purpose of any of the foregoing; or
(h) a court or governmental authority of competent
jurisdiction enters an order appointing, without consent by the
Company or any of its Restricted
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Subsidiaries, a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any substantial
part of its property, or constituting an order for relief or
approving a petition for relief or reorganization or any other
petition in bankruptcy or for liquidation or to take advantage of
any bankruptcy or insolvency law of any jurisdiction, or ordering
the dissolution, winding-up or liquidation of the Company or any of
its Restricted Subsidiaries, or any such petition shall be filed
against the Company or any of its Restricted Subsidiaries and such
petition shall not be dismissed within 60 days; or
(i) a final judgment or judgments for the payment of
money aggregating in excess of $2,000,000 are rendered against one
or more of the Company and its Restricted Subsidiaries and which
judgments are not fully covered by insurance or, within 60 days
after entry thereof, bonded, discharged or stayed pending appeal, or
are not discharged within 60 days after the expiration of such stay;
or
(j) If (1) any Plan shall fail to satisfy the minimum
funding standards of ERISA or the Code for any plan year or part
thereof or a waiver of such standards or extension of any
amortization period is sought or granted under Section 412 of the
Code, (2) a notice of intent to terminate any Plan shall have been
or is reasonably expected to be filed with the PBGC or the PBGC
shall have instituted proceedings under ERISA Section 4042 to
terminate or appoint a trustee to administer any Plan or the PBGC
shall have notified the Company or any ERISA Affiliate that a Plan
may become a subject of any such proceedings, (3) the aggregate
"amount of unfunded benefit liabilities" (within the meaning of
Section 4001(a)(18) of ERISA) under all Plans, determined in
accordance with Title IV of ERISA, shall exceed $5,000,000, (4) the
Company or any ERISA Affiliate shall have incurred or is reasonably
expected to incur any liability pursuant to Title I or IV of ERISA
or the penalty or excise tax provisions of the Code relating to
employee benefit plans, (5) the Company or any ERISA Affiliate
withdraws from any Multiemployer Plan, or (6) the Company or any
ERISA Affiliate establishes or amends any employee welfare benefit
plan that provides post-employment welfare benefits in a manner that
would increase the liability of the Company or any ERISA Affiliate
thereunder; and any such event or events described in clauses (1)
through (6) above, either individually or together with any other
such event or events, would reasonably be expected to have a
Material Adverse Effect; or
(k) (1) default shall occur under the Guaranty Agreement
and such default shall continue beyond the period of grace, if any,
allowed with respect thereto, or (2) the Guaranty Agreement shall
cease to be in full force and effect for any reason whatsoever,
including, without limitation, a determination by any Governmental
Authority or court that such agreement is invalid, void or
unenforceable or any Guarantor shall contest or deny in writing the
validity or enforceability of any of its obligations under the
Guaranty Agreement.
As used in Section 11(j), the terms "employee benefit plan" and "employee
welfare benefit plan" shall have the respective meanings assigned to such terms
in Section 3 of ERISA.
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SECTION 12. REMEDIES ON DEFAULT, ETC.
Section 12.1. Acceleration. (a) If an Event of Default with respect
to the Company described in paragraph (g) or (h) of Section 11 (other than an
Event of Default described in clause (1) of paragraph (g) or described in clause
(6) of paragraph (g) by virtue of the fact that such clause encompasses clause
(1) of paragraph (g)) exists, all the Notes then outstanding shall automatically
become immediately due and payable.
(b) If any other Event of Default exists, any holder or holders of
more than 25% in principal amount of the Notes at the time outstanding may at
any time at its or their option, by notice or notices to the Company, declare
all the Notes then outstanding to be immediately due and payable.
(c) If any Event of Default described in paragraph (a) or (b) of
Section 11 exists, any holder or holders of Notes at the time outstanding
affected by such Event of Default may at any time, at its or their option, by
notice or notices to the Company, declare all the Notes held by it or them to be
immediately due and payable.
Upon any Note's becoming due and payable under this Section 12.1,
whether automatically or by declaration, such Note will forthwith mature and the
entire unpaid principal amount of such Note, plus (1) all accrued and unpaid
interest thereon and (2) the Make-Whole Amount determined in respect of such
principal amount (to the full extent permitted by applicable law), shall all be
immediately due and payable, in each and every case without presentment, demand,
protest or further notice, all of which are hereby waived. The Company
acknowledges, and the pasties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically provided for) and that the provision for payment
of a Make-Whole Amount by the Company in the event that the Notes are prepaid or
are accelerated as a result of an Event of Default, is intended to provide
compensation for the deprivation of such right under such circumstances.
Section 12.2. Other Remedies. If any Event of Default exists, and
irrespective of whether any Notes have become or have been declared immediately
due and payable under Section 12.1, the holder of any Note at the time
outstanding may proceed to protect and enforce the rights of such holder by an
action at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein or in any Note, or for an
injunction against a violation of any of the terms hereof or thereof, or in aid
of the exercise of any power granted hereby or thereby or by law or otherwise.
Section 12.3. Rescission. At any time after any Notes have been
declared due and payable pursuant to clause (b) or (c) of Section 12.1, the
holders of not less than 76% in principal amount of the Notes then outstanding,
by written notice to the Company, may rescind and annul any such declaration and
its consequences if (a) the Company has paid all overdue interest on the Notes,
all principal of and Make-Whole Amount, if any, on any Notes that are due and
payable and are unpaid other than by reason of such declaration, and all
interest on such overdue principal and Make-Whole Amount, if any, and (to the
extent
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permitted by applicable law) any overdue interest in respect of the Notes, at
the Default Rate, (b) all Events of Default and Defaults, other than non-payment
of amounts that have become due solely by reason of such declaration, have been
cured or have been waived pursuant to Section 17, and (c) no judgment or decree
has been entered for the payment of any monies due pursuant hereto or to the
Notes. No rescission and annulment under this Section 12.3 will extend to or
affect any subsequent Event of Default or Default or impair any right consequent
thereon.
Section 12.4. No Waivers or Election of Remedies, Expenses, Etc. No
course of dealing and no delay on the part of any holder of any Note in
exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such holder's rights, powers or remedies. No right, power or
remedy conferred by this Agreement or by any Note upon any holder thereof shall
be exclusive of any other right, power or remedy referred to herein or therein
or now or hereafter available at law. in equity, by statute or otherwise.
Without limiting the obligations of the Company under Section 15, the Company
will pay to the holder of each Note on demand such further amount as shall be
sufficient to cover all costs and expenses of such holder incurred in any
enforcement or collection under this Section 12, including, without limitation,
reasonable attorneys' fees, expenses and disbursements.
SECTION 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
Section 13.1. Registration of Notes. The Company shall keep at its
principal executive office a register for the registration and registration of
transfers of Notes. The name and address of each holder of one or more Notes,
each transfer thereof and the name and address of each transferee of one or more
Notes shall be registered in such register. Prior to due presentment for
registration of transfer, the Person in whose name any Note shall be registered
shall be deemed and treated as the owner and holder thereof for all purposes
hereof, and the Company shall not be affected by any notice or knowledge to the
contrary. The Company shall give to any holder of a Note that is an
Institutional Investor promptly upon request therefor, a complete and correct
copy of the names and addresses of all registered holders of Notes.
Section 13.2. Transfer and Exchange of Notes. Upon surrender of any
Note at the principal executive office of the Company for registration of
transfer or exchange (and in the case of a surrender for registration of
transfer, duly endorsed or accompanied by a written instrument of transfer duly
executed by the registered holder of such Note or its Attorney duly authorized
in writing and accompanied by the address for notices of each transferee of such
Note or part thereof), the Company shall execute and deliver, at the Company's
expense (except as provided below), one or more new Notes (as requested by the
holder thereof) in exchange therefor, in an aggregate principal amount equal to
the unpaid principal amount of the surrendered Note. Each such new Note shall be
payable to such Person as such holder may request and shall be substantially in
the form of Exhibit 1. Each such new Note shall be dated and bear interest from
the date to which interest shall have been paid on the surrendered Note or dated
the date of the surrendered Note if no interest shall have been paid thereon.
The Company may require payment of a sum sufficient to
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cover any stamp tax or governmental charge imposed in respect of any such
transfer of Notes. Notes shall not be transferred in denominations of less than
$1,000,000, provided that if necessary to enable the registration of transfer by
a holder of its entire holding of Notes, one Note may be in a denomination of
less than $1,000,000. Any transferee, by its acceptance of a Note registered in
its name (or the name of its nominee), shall be deemed to have made the
representation set forth in Section 6.2, provided, however, that, such
transferee will not be deemed to have chosen the options set forth in Section
6.2(b), (c) or (e) unless such transferee shall have made the disclosures
referred to therein at least five Business Days prior to its acceptance of such
Note and shall have received prior to such acceptance of such Note the
certificate provided for in the penultimate paragraph of Section 6.2 and such
certificate shall contain the statement set forth in either Section 4.3(c)(1) or
(2), as applicable; and provided, further, that, such transferee will not be
deemed to have chosen an option set forth in Section 6.2(a), (b) or (d) unless
the applicable Class Exemption referred to therein remains in effect at that
time or another similar Class Exemption is then available. The Company shall
exercise reasonable due diligence as is necessary to respond to any such
disclosure, provided that, if the Company shall not respond within five Business
Days following receipt of any such disclosure, it shall be deemed to have made
the statement set forth in either Section 4.3(c)(l) or (2), as applicable.
Section 13.3. Replacement of Notes. Upon receipt by the Company of
evidence reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Note (which evidence shall be, in the case of
an Institutional Investor, notice from such Institutional Investor of such
ownership and such loss, theft, destruction or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the holder of such Note is, or
is a nominee for, an original Purchaser or another holder of a Note with a
minimum net worth of at least $50,000,000, such Person's own unsecured agreement
of indemnity shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note, dated and bearing interest from the date to which interest shall have been
paid on such lost, stolen, destroyed or mutilated Note or dated the date of such
lost, stolen, destroyed or mutilated Note if no interest shall have been paid
thereon.
SECTION 14. PAYMENTS ON NOTES.
Section 14.1. Place of Payment. Subject to Section 14.2, payments of
principal, Make-Whole Amount, if any, and interest becoming due and payable on
the Notes shall be made in Chicago, Illinois at the principal office of Bank of
America in such jurisdiction. The Company may at any time, by notice to each
holder of a Note, change the place of payment of the Notes so long as such place
of payment shall be either the principal office of
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the Company in such jurisdiction or the principal office of a bank or trust
company in such jurisdiction.
Section 14.2. Home Office Payment. So long as any Purchaser or such
Purchaser's nominee shall be the holder of any Note, and notwithstanding
anything contained in Section 14.1 or in such Note to the contrary, the Company
will pay all sums becoming due on such Note for principal, Make-Whole Amount, if
any, and interest by the method and at the address specified for such purpose
below such Purchaser's signature at the foot of this Agreement, or by such other
method or at such other address as such Purchaser shall have from time to time
specified to the Company in writing for such purpose, without the presentation
or surrender of such Note or the making of any notation thereon, except that
upon written request of the Company made concurrently with or reasonably
promptly after payment or prepayment in full of any Note, such Purchaser shall
surrender such Note for cancellation, reasonably promptly after any such
request, to the Company at its principal executive office or at the place of
payment most recently designated by the Company pursuant to Section 14.1. Prior
to any sale or other disposition of any Note held by any Purchaser or such
Purchaser's nominee such Purchaser will, at its election, either endorse thereon
the amount of principal paid thereon and the last date to which interest has
been paid thereon or surrender such Note to the Company in exchange for a new
Note or Notes pursuant to Section 13.2. The Company will afford the benefits of
this Section 14.2 to any Institutional Investor that is the direct or indirect
transferee of any Note purchased by any Purchaser under this Agreement and that
has made the same agreement relating to such Note as such Purchaser has made in
this Section 14.2.
SECTION 15. EXPENSES, ETC.
Section 15.1. Transaction Expenses. Whether or not the transactions
contemplated hereby are consummated, the Company will pay all costs and expenses
(including reasonable attorneys' fees of a special counsel and, if reasonably
required, local or other counsel) incurred by each Purchaser or holder of a Note
in connection with such transactions and in connection with any amendments,
waivers or consents under or in respect of this Agreement, the Guaranty
Agreement or the Notes (whether or not such amendment, waiver or consent becomes
effective), including, without limitation: (a) the costs and expenses incurred
in enforcing or defending (or determining whether or how to enforce or defend)
any rights under this Agreement, the Guaranty Agreement or the Notes or in
responding to any subpoena or other legal process or informal investigative
demand issued in connection with this Agreement, the Guaranty Agreement or the
Notes, or by reason of being a holder of any Note or a beneficiary of the
Guaranty Agreement, and (b) the costs and expenses, including financial
advisors' fees, incurred in connection with the insolvency or bankruptcy of the
Company or any Subsidiary or in connection with any work-out or restructuring of
the transactions contemplated hereby, by the Guaranty Agreement and by the
Notes. The Company will pay, and will save each Purchaser and each other holder
of a Note harmless from, all claims in respect of any fees, costs or expenses if
any, of brokers and finders (other than those retained by such Purchaser or
holder).
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Section 15.2. Survival. The obligations of the Company under this
Section 15 will survive the payment or transfer of any Note, the enforcement,
amendment or waiver of any provision of this Agreement or the Notes, and the
termination of this Agreement.
SECTION 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive
the execution and delivery of this Agreement and the Notes, the purchase or
transfer by any Purchaser of any Note or portion thereof or interest therein and
the payment of any Note, and may be relied upon by any subsequent holder of a
Note, regardless of any investigation made at any time by or on behalf of such
Purchaser or any other holder of a Note. All statements contained in any
certificate or other instrument delivered by or on behalf of the Company
pursuant to this Agreement shall be deemed representations and warranties of the
Company under this Agreement. Subject to the preceding sentence, this Agreement
and the Notes embody the entire agreement and understanding between each
Purchaser and the Company and supersede all prior agreements and understandings
relating to the subject matter hereof.
SECTION 17. AMENDMENT AND WAVIER.
Section 17.1. Requirements. This Agreement and the Notes may be
amended, and the observance of any term hereof or of the Notes may be waived
(either retroactively or prospectively), with (and only with) the written
consent of the Company and the Required Holders, except that (a) no amendment or
waiver of any of the provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any
defined term (as it is used therein), will be effective as to any Purchaser
unless consented to by such Purchaser in writing, and (b) no such amendment or
waiver may, without the written consent of the holder of each Note at the time
outstanding affected thereby, (1) subject to the provisions of Section 12
relating to acceleration or rescission, change the amount or time of any
prepayment or payment of principal of, or reduce the rate or change the time of
payment or method of computation of interest or of the Make-Whole Amount on, the
Notes, (2) change the percentage of the principal amount of the Notes the
holders of which are required to consent to any such amendment or waiver, or (3)
amend any of Sections 8, 11(a), 11(b), 12, 17 or 20.
Section 17.2. Solicitation of Holders of Notes.
(a) Solicitation. The Company will provide each holder of the Notes
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and considered decision with respect to
any proposed amendment, waiver or consent in respect of any of the provisions
hereof or of the Notes. The Company will deliver executed or true and correct
copies of each amendment, waiver or consent effected pursuant to the provisions
of this Section 17 to each holder of outstanding Notes promptly following the
date on which it is executed and delivered by, or receives the consent or
approval of, the requisite holders of Notes.
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(b) Payment. The Company will not directly or indirectly pay or
cause to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security, to any holder of Notes as
consideration for or as an inducement to the entering into by any holder of
Notes of any waiver or amendment of any of the terms and provisions hereof
unless such remuneration is concurrently paid, or security is concurrently
granted, on the same terms, ratably to each holder of Notes then outstanding
even if such holder did not consent to such waiver or amendment.
Section 17.3. Binding Effect, Etc. Any amendment or waiver consented
to as provided in this Section 17 applies equally to all holders of Notes and is
binding upon them and upon each future holder of any Note and upon the Company
without regard to whether such Note has been marked to indicate such amendment
or waiver. No such amendment or waiver will extend to or affect any obligation,
covenant, agreement, Default or Event of Default not expressly amended or waived
or impair any right consequent thereon. No course of dealing between the Company
and the holder of any Note nor any delay in exercising any rights hereunder or
under any Note shall operate as a waiver of any rights of any holder of such
Note. As used herein, the term "this Agreement" and references thereto shall
mean this Agreement as it may from time to time be amended or supplemented.
Section 17.4. Notes Held by Company, Etc. Solely for the purpose of
determining whether the holders of the requisite percentage of the aggregate
principal amount of Notes then outstanding approved or consented to any
amendment, waiver or consent to be given under this Agreement or the Notes, or
have directed the taking of any action provided herein or in the Notes to be
taken upon the direction of the holders of a specified percentage of the
aggregate principal amount of Notes then outstanding, Notes directly or
indirectly owned by the Company or any of its Affiliates shall be deemed not to
be outstanding.
SECTION 18. NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent (a) by telefacsimile if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:
(1) if to a Purchaser or such Purchaser's nominee, to
such Purchaser or such Purchaser's nominee at the address specified
for such communications below such Purchaser's signature at the foot
of this Agreement, or at such other address as such Purchaser or
such Purchaser's nominee shall have specified to the Company in
writing,
(2) if to any other holder of any Note, to such holder
at such address as such other holder shall have specified to the
Company in writing, or
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(3) if to the Company, to the Company at its address set
forth at the beginning hereof to the attention of Chief Financial
Officer, or at such other address as the Company shall have
specified to the holder of each Note in writing.
Notices under this Section 18 will be deemed given only when actually received.
SECTION 19. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating hereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by each Purchaser at the Closing (except the
Notes themselves), and (c) financial statements, certificates and other
information previously or hereafter furnished to each Purchaser, may be
reproduced by such Purchaser by any photographic, photostatic, microfilm,
microcard, miniature photographic or other similar process and such Purchaser
may destroy any original document so reproduced. The Company agrees and
stipulates that, to the extent permitted by applicable law, any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by such Purchaser in the
regular course of business) and any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence. This
Section 19 shall not prohibit the Company or any other holder of Notes from
contesting any such reproduction to the same extent that it could contest the
original, or from introducing evidence to demonstrate the inaccuracy of any such
reproduction.
SECTION 20. CONFIDENTIAL INFORMATION.
For the purposes of this Section 20, "Confidential Information"
means information delivered to any Purchaser by or on behalf of the Company or
any Subsidiary in connection with the transactions contemplated by or otherwise
pursuant to this Agreement that is proprietary in nature and that was clearly
marked or labeled or otherwise adequately identified when received by such
Purchaser as being confidential information of the Company or such Subsidiary,
provided that such term does not include information that (a) was publicly known
or otherwise known to such Purchaser prior to the time of such disclosure, (b)
subsequently becomes publicly known through no act or omission by such Purchaser
or any Person acting on such Purchaser' s behalf, (c) otherwise becomes known to
such Purchaser other than through disclosure by the Company or any Subsidiary or
(d) constitutes financial statements delivered to such Purchaser under Section
7.1 that are otherwise publicly available. Each Purchaser will maintain the
confidentiality of such Confidential Information in accordance with procedures
adopted by such Purchaser in good faith to protect confidential information of
third parties delivered to such Purchaser, provided that such Purchaser may
deliver or disclose Confidential Information to (1) such Purchaser's directors,
trustees, officers, employees, agents, attorneys and affiliates (to the extent
such disclosure reasonably relates to the administration of the investment
represented by such Purchaser's Notes), (2) such Purchaser's financial advisors
and other professional advisors who agree to hold confidential the Confidential
Information substantially in
-37-
<PAGE> 44
accordance with the terms of this Section 20, (3) any other holder of any Note,
(4) any Institutional Investor to which such Purchaser sells or offers to sell
such Note or any part thereof or any participation therein (if such Person has
agreed in writing prior to its receipt of such Confidential Information to be
bound by the provisions of this Section 20), (5) any Person from which such
Purchaser offers to purchase any Security of the Company (if such Person has
agreed in writing prior to its receipt of such Confidential Information to be
bound by the provisions of this Section 20), (6) any Federal or state regulatory
authority having jurisdiction over such Purchaser, (7) the National Association
of Insurance Commissioners or any similar organization, or any nationally
recognized rating agency that requires access to information about such
Purchaser' s investment portfolio, or (8) any other Person to which such
delivery or disclosure may be necessary or appropriate (i) to effect compliance
with any law, Rule, regulation or order applicable to such Purchaser, (ii) in
response to any subpoena or other legal process, (iii) in connection with any
litigation to which such Purchaser is a party or (iv) if an Event of Default has
occurred and is continuing, to the extent such Purchaser may reasonably
determine such delivery and disclosure to be necessary or appropriate in the
enforcement or for the protection of the rights and remedies under such
Purchaser's Notes and this Agreement. Each holder of a Note, by its acceptance
of a Note, will be deemed to have agreed to be bound by and to be entitled to
the benefits of this Section 20 as though it were a party to this Agreement. On
reasonable request by the Company in connection with the delivery to any holder
of a Note of information required to be delivered to such holder under this
Agreement or requested by such holder (other than a holder that is a party to
this Agreement or its nominee), such holder will enter into an agreement with
the Company embodying the provisions of this Section 20.
SECTION 21. SUBSTITUTION OF A PURCHASER.
Each Purchaser shall have the right to substitute any one of such
Purchaser's Affiliates as the purchaser of the Notes that such Purchaser has
agreed to purchase hereunder, by written notice to the Company, which notice
shall be signed by both such Purchaser and such Purchaser's Affiliate, shall
contain such Affiliate's agreement to be bound by this Agreement and shall
contain a confirmation by such Affiliate of the accuracy with respect to it of
the representations set forth in Section 6. Upon receipt of such notice,
wherever the word "Purchaser" is used in this Agreement (other than in this
Section 21), such word shall be deemed to refer to such Affiliate in lieu of
such Purchaser. In the event that such Affiliate is so substituted as a
purchaser hereunder and such Affiliate thereafter transfers to such Purchaser
all of the Notes then held by such Affiliate, upon receipt by the Company of
notice of such transfer, wherever the word "Purchaser" is used in this Agreement
(other than in this Section 21), such word shall no longer be deemed to refer to
such Affiliate, but shall refer to such Purchaser, and such Purchaser shall have
all the rights of an original holder of the Notes under this Agreement.
-38-
<PAGE> 45
SECTION 22. MISCELLANEOUS.
Section 22.1. Successors and Assigns. All covenants and other
agreements contained in this Agreement by or on behalf of any of the parties
hereto bind and inure to the benefit of their respective successors and assigns
(including, without limitation, any subsequent holder of a Note) whether so
expressed or not.
Section 22.2. Payments Due on Non-Business Days. Anything in this
Agreement or the Notes to the contrary notwithstanding, any payment of principal
of or Make-Whole Amount or interest on any Note that is due on a date other than
a Business Day shall be made on the next succeeding Business Day without
including the additional days elapsed in the computation of the interest payable
on such next succeeding Business Day.
Section 22.3. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall (to the full extent permitted by law)
not invalidate or render unenforceable such provision in any other jurisdiction.
Section 22.4. Construction. Each covenant contained herein shall be
construed (absent express provision to the contrary) as being independent of
each other covenant contained herein, so that compliance with any one covenant
shall not (absent such an express contrary provision) be deemed to excuse
compliance with any other covenant. Where any provision herein refers to action
to be taken by any Person, or which such Person is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by such Person.
Where the character or amount of any asset or liability or item of
income or expense is required to be determined or any consolidation or other
accounting computation is required to be made for the purposes of this
Agreement, the same shall be done in accordance with GAAP, to the extent
applicable, except where such principles are inconsistent with the requirements
of this Agreement.
Section 22.5. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original but all of which
together shall constitute one instrument. Each counterpart may consist of a
number of copies hereof, each signed by less than all, but together signed by
all, of the parties hereto.
Section 22.6. Governing Law. This Agreement shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the law of the State of Illinois excluding choice-of-law principles of the law
of such State that would require the application of the laws of a jurisdiction
other than such State.
* * * *
-39-
<PAGE> 46
The execution hereof by the Purchasers shall constitute a contract
among the Company and the Purchasers for the uses and purposes hereinabove set
forth. This Agreement may be executed in any number of counterparts, each
executed counterpart constituting an original but all together only one
agreement.
Very truly yours,
GRANITE CONSTRUCTION INCORPORATED
By /s/ David H. Watts
---------------------------------
Its President and
Chief Executive Officer
By /s/ William E. Barton
---------------------------------
Its Vice President and
Chief Financial Officer
-40
<PAGE> 47
Accepted as of March 1, 1998:
ALLSTATE LIFE INSURANCE COMPANY
By /s/ Charles D. Mires
---------------------------------
Name: Charles D. Mires
By /s/ Ronald A. Mendel
---------------------------------
Name: Ronald A. Mendel
Authorized Signatories
ALLSTATE LIFE INSURANCE COMPANY
3075 Sanders Road, STE G3A
Northbrook, Illinois 60062-7127
Attention: Private Placements Department
Telecopier Number: (847) 402-3092
Telephone Number: (847) 402-4394
Payments
All payments on or in respect of the Notes to be made by Fedwire transfer of
immediately available funds (identifying each payment with name of the Issuer,
the Private Placement Number preceded by "DPP" and the payment as principal,
interest or premium) in the exact format as follows:
BBK = Harris Trust and Savings Bank
ABA #071000288
BNF = Allstate Life Insurance Company
Collection Account #168-117-0
ORG = Granite Construction Incorporated
OBI = DPP - 387328 A* 8 -
Payment Due Date (MM/DD/YY) -
P _______ (enter "P" and the amount of principal being
remitted, for example, P5000000.00) -
I _______ (enter "I" and the amount of
interest being remitted, for example, I225000.00)
Notices
All notices of scheduled payments and written confirmation of each such payment,
to be addressed:
-41-
<PAGE> 48
Allstate Insurance Company
Investment Operations-Private Placements
3075 Sanders Road, STE G4A
Northbrook, Illinois 60062-7127
Telephone: (847) 402-2769
Telecopy: (847) 326-5040
All financial reports, compliance certificates and all other written
communications, including notice of prepayments to be addressed as first
provided above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 36-2554642
-42-
<PAGE> 49
Accepted as of March 1, 1998:
UNITED OF OMAHA LIFE INSURANCE
COMPANY
By /s/ Edwin H. Garrison, Jr.
---------------------------------
Its First Vice President
UNITED OF OMAHA LIFE INSURANCE COMPANY
Mutual of Omaha Plaza
Omaha, Nebraska 68175-1011
Attention: Investment Division/Securities Accounting
Telecopier Number: (402) 351-2913
Telephone Number: (402) 351-2504
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Granite Construction Incorporated, 6.54% Senior Notes due March 15, 2010") to:
Chase Manhattan Bank
ABA #021000021
Private Income Processing
for credit to:
United of Omaha Life Insurance Company
Account Number 900-9000200
a/c: G07097
CUSIP/PPN: 387328 A* 8
Interest Amount:__________
Principal Amount:_________
Notices
All notices in respect of payment of principal and interest, corporate actions
and reorganization notifications to:
The Chase Manhattan Bank
4 New York Plaza - 13th Floor
New York, New York 10004
Attn: Income Processing - J. Piperatto
a/c: G07097
-43-
<PAGE> 50
All other communications to:
4-Investment Loan Administration
Mutual of Omaha Insurance Company
Mutual of Omaha Plaza
Omaha, Nebraska 68175-1011
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 47-0322111
-44-
<PAGE> 51
Accepted as of March 1, 1998:
MUTUAL OF OMAHA INSURANCE COMPANY
By /s/ Edwin H. Garrison Jr.
------------------------------------
Its First Vice President
MUTUAL OF OMAHA INSURANCE COMPANY
Mutual of Omaha Plaza
Omaha, Nebraska 68175-1011
Attention: Investment Division/Securities Accounting
Telecopier Number: (402) 351-2913
Telephone Number: (402) 351-2504
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Granite Construction Incorporated, 6.54% Senior Notes due March 15, 2010") to:
Chase Manhattan Bank
ABA #021000021
Private Income Processing
for credit to:
Mutual of Omaha Insurance Company
Account Number 900-9000200
a/c: G07096
CUSIP/PPN: 387328 A* 8
Interest Amount:_________
Principal Amount:________
Notices
All notices in respect of payment of principal and interest, corporate actions
and reorganization notifications to:
The Chase Manhattan Bank
4 New York Plaza - 13th Floor
New York, New York 10004
Attn: Income Processing - J. Piperatto
a/c: G07096
-45-
<PAGE> 52
All other notices and communications to:
4 - Investment Loan Administration
Mutual of Omaha Insurance Company
Mutual of Omaha Plaza
Omaha, Nebraska 68175-1011
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 47-0246511
-46-
<PAGE> 53
Accepted as of March 1, 1998:
COMPANION LIFE INSURANCE COMPANY
By /s/ Edwin H. Garrison Jr.
----------------------------------------
Its Assistant Treasurer
By /s/ Richard A. Witt
----------------------------------------
Its Second Vice President &
Assistant Treasurer
COMPANION LIFE INSURANCE COMPANY
Mutual of Omaha Plaza
Omaha, Nebraska 68175-1011
Attention: Investment Division/Securities Accounting
Telecopier Number: (402) 351-2913
Telephone Number: (402) 351-2504
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Granite Construction Incorporated, 6.54% Senior Notes due February 15, 2010")
to:
Companion Life Insurance Company
c/o The Bank of New York
ABA #021000018
Acct. No. 111566 Income Collection
Attention: P&I Department
For Payment on: Granite Construction Incorporated
Interest Amount:__________________
Principal Amount:_________________
Payable Date:_____________________
CLICO
Notices
All notices with respect to payments to:
Companion Life Insurance Company
Attention: Investment Securities Accounting
Mutual of Omaha Plaza
Omaha, Nebraska 68175
-47-
<PAGE> 54
with duplicate notice to:
Companion Life Insurance Company
Attention: Financial Division
401 Theodore Fremd Avenue
Rye, New York 10580-1493
All other notices and communications to:
Companion Life Insurance Company
Attention: Investment Division
Mutual of Omaha Plaza
Omaha, Nebraska 68175
with duplicate notice to:
Companion Life Insurance Company
Attention: Financial Division
401 Theodore Fremd Avenue
Rye, New York 10580-1493
Name of Nominee in which Notes are to be issued: HARE & CO.
Taxpayer I.D. Number: 13-6062916
-48-
<PAGE> 55
Accepted as of March 1, 1998:
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
By /s/ Shabnam B. Miglani
----------------------------------------
Its Counsel
By /s/ Sarah J. Pitts
----------------------------------------
Its Counsel
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
711 High Street
Des Moines, Iowa 50392-0800
Attention: Investment Department - Securities
Telecopier Number: (515) 248-2490
Telephone Number: (515) 248-3495
Payments (in respect of the Note in the original principal amount of
$7,400,000):
All payments on or in respect of such Notes to be by bank wire transfer of
Federal or other immediately available funds to:
ABA #073000228
Norwest Bank Iowa, N.A.
7th and Walnut Streets
Des Moines, Iowa 50309
For credit to Principal Mutual Life Insurance Company
Account No. 014752
OBI PFGSE (S) B0061391 ( ) Granite Construction Incorporated, 6.54%
Senior Notes due March 15, 2010
Bond Number: l-B-61391
With sufficient information (including interest rate, maturity date,
interest amount, principal amount and premium amount, if applicable)
to identify the source and application of such funds.
Payments (in respect of the Note in the original principal amount of
$5,600,000):
All payments on or in respect of such Notes to be by bank wire transfer of
Federal or other immediately available funds to:
-49-
<PAGE> 56
ABA #073000228
Norwest Bank Iowa, N.A.
7th and Walnut Streets
Des Moines, Iowa 50309
For credit to Principal Mutual Life Insurance Company
Account No. 032395
OBI PFGSE (S) B0061391 ( ) Granite Construction Incorporated, 6.54%
Senior Notes due March 15, 2010
Bond Number: 16-B-61391
With sufficient information (including interest rate, maturity date,
interest amount, principal amount and premium amount, if applicable) to
identify the source and application of such funds.
Notices
All notices with respect to payments to:
Principal Mutual Life Insurance Company
711 High Street
Des Moines, Iowa 50392-0960
Attention: Investment Accounting-Securities
Telecopier Number: (515) 248-2643
Telephone Number: (515) 247-0689
All other notices and communications to be addressed as first provided above.
Name of Nominee in which Notes are to be issued: None
Tax Identification No.: 42-0127290
-50-
<PAGE> 57
Accepted as of March 1, 1998:
LUTHERAN BROTHERHOOD
By /s/ Mark 0. Swenson
-------------------------------------
Its Assistant Vice President
LUTHERAN BROTHERHOOD
625 Fourth Avenue South, 10th Floor
Minneapolis, Minnesota 55415
Attention: Investment Division
Telecopier Number: (612) 340-5756
Telephone Number: (612) 340-5757
Payments
All payments of principal, interest and premium on the account of the Notes
shall be made by bank wire transfer (in immediately available funds) to:
Norwest Bank Minnesota, N.A.
ABA #091000019
For Credit to Trust Clearing Account #08-40-245
Attention: Sarah Corcoran
For credit to: Lutheran Brotherhood
Account Number 12651300
All payments must include the following information:
A/C Lutheran Brotherhood
Account No.: 12561300
Security Description
PPN Number
Reference Purpose of Payment
Interest and/or Principal Breakdown
Notices
All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 41-0385700
-51-
<PAGE> 58
<TABLE>
<CAPTION>
NAMES OF PURCHASERS PRINCIPAL AMOUNT OF NOTES
TO BE PURCHASED
<S> <C>
Allstate Life Insurance Company $10,000,000
Allstate Life Insurance Company 7,000,000
Allstate Life Insurance Company 5,000,000
United of Omaha Life Insurance Company 10,000,000
Mutual of Omaha Insurance Company 5,000,000
Companion Life Insurance Company 2,000,000
Principal Mutual Life Insurance Company 7,400,000
Principal Mutual Life Insurance Company 5,600,000
Lutheran Brotherhood 8,000,000
TOTAL $60,000,000
</TABLE>
SCHEDULE A
(to Note Purchase Agreement)
<PAGE> 59
DEFINED TERMS
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
"Affiliate" shall mean, at any time, and with respect to any Person,
(a) any other Person that at such time directly or indirectly through one or
more intermediaries Controls, or is Controlled by, or is under common Control
with, such first Person, (b) any other Person beneficially owning or holding,
directly or indirectly, 10% or more of any class of voting or equity interests
of such first Person or any other Person of which such first Person beneficially
owns or holds, in the aggregate, directly or indirectly, 10% or more of any
class of voting or equity interests, and (c) any officer or director of such
first Person and any Person fulfilling an equivalent function of an officer or
director; provided that "Affiliate," in relation to the Company, shall not
include any Restricted Subsidiary. As used in this definition, "Control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting Securities, by contract or otherwise. Unless the context
otherwise clearly requires, any reference to an "Affiliate" is a reference to an
Affiliate of the Company.
"Asset Disposition" shall mean any Transfer except:
(a) any
(1) Transfer from a Restricted Subsidiary to the
Company or to a Wholly-Owned Restricted Subsidiary; and
(2) Transfer from the Company to a Wholly-owned
Restricted Subsidiary.
so long as immediately before and immediately after the consummation
of any such Transfer and after giving effect thereto, no Default or
Event of Default would exist;
(b) any Transfer made in the ordinary course of business
and involving only property that is either (1) inventory held for
sale or (2) equipment, fixtures, supplies or materials no longer
required in the operation of the business of the Company or any of
its Restricted Subsidiaries or that is obsolete; and
(c) any Transfer in one lot of all of the voting
Securities of TIC, directly or indirectly, owned or held by the
Company to TIC pursuant to that certain Stock Purchase Agreement
dated as of December 23, 1996 between the Company and TIC, as
amended, supplemented, restated or otherwise modified from time to
time.
"Attributable Debt" shall mean, as to any particular Long-Term Lease
relating to a Sale-and-Leaseback Transaction, the present value of all Lease
Rentals required to be paid by the Company or any Restricted Subsidiary under
such lease during the remaining term
SCHEDULE B
(To Note Purchase Agreement)
B-1
<PAGE> 60
thereof (determined in accordance with generally accepted financial practice
using a discount factor equal to the interest rate implicit in such lease if
known or, if not known, of 12% per annum).
"Bank Credit Agreement" shall mean that certain Credit Agreement
dated as of June 30, 1997 among the Company, Bank of America National Trust and
Savings Association, as agent, and each of the financial institutions a party
thereto, as the same may be amended, supplemented, restated or otherwise
modified from time to time, and any credit agreement or other like agreement
entered into by the Company which is substantially similar to or replaces the
Credit Agreement.
"Business Day" shall mean (a) for the purposes of Section 8.6 only,
any day other than a Saturday, a Sunday or a day on which commercial banks in
New York City are required or authorized to be closed, and (b) for the purposes
of any other provision of this Agreement, any day other than a Saturday, a
Sunday or a day on which commercial banks in Chicago, Illinois or San Francisco,
California are required or authorized to be closed.
"Capital Lease" shall mean, at any time, a lease with respect to
which the lessee is required concurrently to recognize the acquisition of an
asset and the incurrence of a liability in accordance with GAAP.
"Capital Lease Obligation" shall mean, with respect to any Person
and a Capital Lease, the amount of the obligation of such Person as the lessee
under such Capital Lease which would, in accordance with GAAP, appear as a
liability on a balance sheet of such Person.
"Closing" is defined in Section 3.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the rules and regulations promulgated thereunder from time to
time.
"Company" shall mean Granite Construction Incorporated, a Delaware
corporation, and any Person who succeeds to all, or substantially all, of the
assets and business of Granite Construction Incorporated.
"Confidential information" is defined in Section 20.
"Consolidated Net Income" for any period shall mean the gross
revenues of the Company and its Restricted Subsidiaries for such period less all
expenses and other proper charges (including taxes on income), determined on a
consolidated basis after eliminating earnings or losses attributable to
outstanding Minority Interests, but excluding in any event:
(a) any gains or losses on the sale or other disposition
of Investments or fixed or capital assets (other than fixed or
capital assets sold or disposed of in the ordinary course of
business), and any taxes on such excluded gains and any tax
deductions or credits on account of any such excluded losses;
B-2
<PAGE> 61
(b) the proceeds of any life insurance policy;
(c) net earnings and losses of any Restricted Subsidiary
accrued prior to the date it became a Restricted Subsidiary:
(d) net earnings and losses of any corporation (other than
a Restricted Subsidiary), substantially all the assets of which have
been acquired in any manner by the Company or any Restricted
Subsidiary, realized by such corporation prior to the date of such
acquisition;
(e) net earnings and losses of any corporation (other than
a Restricted Subsidiary) with which the Company or a Restricted
Subsidiary shall have consolidated or which shall have merged into
or with the Company or a Restricted Subsidiary prior to the date of
such consolidation or merger;
(f) net earnings of any business entity (other than a
Restricted Subsidiary or a joint venture) in which the Company or
any Restricted Subsidiary has an ownership interest unless such net
earnings shall have actually been received by the Company or such
Restricted Subsidiary in the form of cash distributions;
(g) earnings resulting from any reappraisal, revaluation
or write-up of assets;
(h) any deferred or other credit representing any excess
of the equity in any Restricted Subsidiary at the date of
acquisition thereof over the amount invested in such Restricted
Subsidiary;
(i) any gain arising from the acquisition of any
Securities of the Company or any Restricted Subsidiary; and
(j) any other extraordinary gain or loss.
"Consolidated Net Worth" shall mean, as of the date of any
determination thereof,
(a) the sum of (1) the par value (or value stated on the
books of the corporation) of the capital stock (but excluding
treasury stock and capital stock subscribed and unissued) of the
Company and its Restricted Subsidiaries plus (2) the amount of the
paid-in capital and retained earnings of the Company and its
Restricted Subsidiaries, in each case as such amounts would be shown
on a consolidated balance sheet of the Company and its Restricted
Subsidiaries as of such time prepared in accordance with GAAP, minus
(b) unearned compensation, minus
(c) to the extent included in clause (a) above, all
amounts properly attributable to Minority Interests, if any, in the
stock and surplus of Restricted Subsidiaries, minus
B-3
<PAGE> 62
(d) the book value of all Restricted Investments of the
Company and its Restricted Subsidiaries acquired after the date of
the Closing in excess of an amount equal to 10% of the amount
determined pursuant to clauses (a), (b) and (c) of this definition.
"Consolidated Total Assets" shall mean, as of the date of any
determination thereof, (a) the total assets of the Company and its Restricted
Subsidiaries which would be shown as assets on a consolidated balance sheet of
the Company and its Restricted Subsidiaries as of such time prepared in
accordance with GAAP, after eliminating all amounts properly attributable to
Minority Interests, if any, in the stock and surplus of Restricted Subsidiaries.
"Consolidated Total Capitalization" shall mean, as the date of any
determination thereof, the sum of (a) Consolidated Net Worth and (b)
Consolidated Total Debt.
"Consolidated Total Debt" shall mean, as of the date of any
determination thereof, the total of all Debt of the Company and its Restricted
Subsidiaries outstanding on such date, after eliminating all offsetting debits
and credits between the Company and its Restricted Subsidiaries, and all other
items required to be eliminated in the course of the preparation of consolidated
financial statements of the Company and its Restricted Subsidiaries in
accordance with GAAP.
"Debt" shall mean, with respect to any Person, without duplication,
(a) its liabilities for borrowed money and its redemption
obligations in respect of mandatorily redeemable Preferred Stock;
(b) its liabilities for the deferred purchase price of
property acquired by such Person (excluding accounts payable arising
in the ordinary course of business but including, without
limitation, all liabilities created or arising under any conditional
sale or other title retention agreement with respect to any such
property);
(c) its Capitalized Lease Obligations;
(d) all liabilities for borrowed money secured by any Lien
with respect to any property owned by such Person (whether or not it
has assumed or otherwise become liable for such liabilities);
(e) all its liabilities in respect of letters of credit or
instruments serving a similar function issued or accepted for its
account by banks and other financial institutions (whether or not
representing obligations for borrowed money);
(f) Swaps of such Person;
(g) its recourse obligations under Receivables
Securitization Transactions;
B-4
<PAGE> 63
(h) in respect of the Company or any Restricted
Subsidiary, its Attributable Debt; and
(i) any Guaranty of such Person with respect to
liabilities of a type described in any of clauses (a) through (h)
hereof in an amount equal to the amount guaranteed.
Debt of any Person shall include all obligations of such Person of
the character described in clauses (a) through (i) to the extent such Person
remains legally liable in respect thereof notwithstanding that any such
obligation is deemed to be extinguished under GAAP.
"Debt Prepayment Application" shall mean, with respect to any
Transfer of property, the application by the Company or its Restricted
Subsidiaries of cash in an amount equal to the Net Proceeds Amount with respect
to such Transfer to pay Senior Debt (other than Senior Debt owing to the
Company, any of its Subsidiaries or any Affiliate).
"Default" shall mean an event or condition the occurrence or
existence of which would, with the lapse of time or the giving of notice or
both, become an Event of Default.
"Default Rate" shall mean that rate of interest that is the greater
of (a) 2% per annum above the rate of interest stated in clause (a) of the first
paragraph of the Notes and (b) 2% over the rate of interest publicly announced
by Bank of America in San Francisco, California as its "reference" rate.
"Disposition Value" shall mean, as of any date of determination,
with respect to any property
(a) in the case of property that does not constitute
Subsidiary Stock, the Fair Market Value thereof, valued at the time
of such disposition in good faith by the Company, and
(b) in the case of property that constitutes Subsidiary
Stock, an amount equal to that percentage of book value of the
assets of the Subsidiary that issued such stock as is equal to the
percentage that the book value of such Subsidiary Stock represents
of the book value of all of the outstanding capital stock of such
Subsidiary (assuming, in making such calculations, that all
Securities convertible into such capital stock are so converted and
giving full effect to all transactions that would occur or be
required in connection with such conversion) determined at the time
of the disposition thereof in good faith by the Company.
"Environmental Laws" shall mean any and all Federal, state, local,
and foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems.
B-5
<PAGE> 64
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the rules and regulations promulgated
thereunder from time to time in effect.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under Section 414 of the Code.
"Event of Default " is defined in Section 11.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" shall mean, as of any date of determination and
with respect to any property, the sale value of such property that would be
realized in an arm's-length sale at such time between an informed and willing
buyer and an informed and willing seller (neither being under a compulsion to
buy or sell).
"GAAP" shall mean generally accepted accounting principles as in
effect from time to time in the United States of America.
"Governmental Authority" shall mean
(a) the government of
(1) the United States of America or any State or other
political subdivision thereof, or
(2) any jurisdiction in which the Company or any
Subsidiary conducts all or any part of its business, or
which asserts jurisdiction over any properties of the
Company or any Subsidiary, or
(b) any entity exercising executive, legislative,
judicial, regulatory or administrative functions of, or pertaining
to, any such government.
"Guarantors" is defined in Section 2.2.
"Guaranty Agreement" is defined in Section 2.2.
"Guaranty" shall mean, with respect to any Person, any obligation
(except the endorsement in the ordinary course of business of negotiable
instruments for deposit or collection) of such Person guaranteeing or in effect
guaranteeing any Debt, dividend or other obligation of any other Person in any
manner, whether directly or indirectly, including (without limitation)
obligations incurred through an agreement, contingent or otherwise, by such
Person:
(a) to purchase such Debt or obligation or any property
constituting security therefor;
B-6
<PAGE> 65
(b) to advance or supply funds (1) for the purchase or
payment of such Debt or obligation, or (2) to maintain any working
capital or other balance sheet condition or any income statement
condition of any other Person or otherwise to advance or make
available funds for the purchase or payment of such Debt or
obligation;
(c) to lease properties or to purchase properties or
services primarily for the purpose of assuring the owner of such
Debt or obligation of the ability of any other Person to make
payment of the Debt or obligation; or
(d) otherwise to assure the owner of such Debt or
obligation against loss in respect thereof.
In any computation of the Debt or other liabilities of the obligor under any
Guaranty, the Debt or other obligations that are the subject of such Guaranty
shall be assumed to be direct obligations of such obligor.
"Hazardous Material" shall mean any and all pollutants, toxic or
hazardous wastes or any other substances that might pose a hazard to health or
safety, the removal of which may be required or the generation, manufacture,
refining, production, processing, treatment, storage, handling, transportation,
transfer, use, disposal, release, discharge, spillage, seepage, or filtration of
which is or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polychlorinated biphenyls).
"holder" shall mean, with respect to any Note, the Person in whose
name such Note is registered in the register maintained by the Company pursuant
to Section 13.1.
"Institutional Investor" shall mean (a) any original purchaser of a
Note, (b) any holder of a Note holding more than 5% of the aggregate principal
amount of the Notes then outstanding, and (c) any bank, trust company, savings
and loan association or other financial institution, any pension plan, any
investment company, any insurance company, any broker or dealer, or any other
similar financial institution or entity, regardless of legal form.
"Investment" shall mean any investment, made in cash or by delivery
of property, by the Company or any of its Restricted Subsidiaries (a) in any
Person, whether by acquisition of stock, Debt or other obligation or Security,
or by loan, Guaranty, advance, capital contribution or otherwise, or (b) in any
property.
"Lease Rentals" shall mean, with respect to any period, the sum of
the rental and other obligations required to be paid during such period by the
Company or any Restricted Subsidiary, as lessee, under all leases of real or
personal property (other than Capital Leases), excluding any amount required to
be paid by the lessee (whether or not therein designated as rental or additional
rental) on account of maintenance and repairs, insurance, taxes, assessments,
water rates and similar charges, provided that, if at the date of determination,
any such rental or other obligations (or portion thereof) are contingent or not
otherwise definitely determinable by the terms of the related lease, the amount
of such obligations (or such portion thereof) are contingent or not otherwise
definitely determinable by the terms of the related lease, the amount of such
B-7
<PAGE> 66
obligations (or such portion thereof) (1) shall be assumed to be equal to the
amount of such obligations for the period of 12 consecutive calendar months
immediately preceding the date of
determination or (2) if the related lease was not in effect during such
preceding 12-month period, shall be the amount estimated by a Senior Financial
Officer of the Company on a reasonable basis and in good faith.
"Lien" shall mean, with respect to any Person, any mortgage, lien,
pledge, charge, security interest or other encumbrance, or any interest or title
of any vendor, lessor, lender or other secured party to or of such Person under
any conditional sale or other title retention agreement or Capital Lease, upon
or with respect to any property or asset of such Person (including in the case
of stock, stockholder agreements, voting trust agreements and all similar
arrangements).
"Long-Term Lease" shall mean any lease of property having an
original term, including any period for which the lease may be renewed or
extended at the option of the lessee, of more than three years.
"Make-Whole Amount" is defined in Section 8.6.
"Make-Whole Amount Calculation Certificate" is defined in Section
8.2.
"Material" shall mean material in relation to the business,
operations, affairs, financial condition, assets, properties or prospects of the
Company and its Restricted Subsidiaries taken as a whole.
"Material Adverse Effect" shall mean a material adverse effect on
(a) the business, operations, affairs, financial condition, assets, properties
or prospects of the Company and its Restricted Subsidiaries taken as a whole, or
(b) the ability of the Company to perform its obligations under this Agreement
and the Notes, or (c) the validity or enforceability of this Agreement, the
Guaranty Agreement or the Notes.
"Material Subsidiary" shall mean each Subsidiary designated on
Schedule 5.4 as a Restricted Subsidiary (other than Granite Construction
International, a California corporation) and each other Restricted Subsidiary
which meets any of the following conditions:
(a) such Subsidiary's total net revenues for the period of
the immediately preceding four fiscal quarters is equal to or
greater than 10% of the consolidated total net revenues of the
Company and its Subsidiaries for such period determined in
accordance with GAAP, in each case as reflected in the most recent
annual or quarterly financial statements of the Company and its
Subsidiaries; or
(b) such Subsidiary's total assets, as of the last day of
the immediately preceding fiscal quarter, is equal to or greater
than 10% of consolidated total assets of the Company and its
Subsidiaries as of such date determined in accordance with
B-8
<PAGE> 67
GAAP, in each case as reflected in the most recent annual or
quarterly financial statements of the Company and its Subsidiaries; or
(c) such Subsidiary is an obligor or guarantor of any Debt
existing under the Bank Credit Agreement.
"Memorandum" is defined in Section 5.3.
"Minority Interests" shall mean any shares of stock of any class of
a Restricted Subsidiary (other than directors' qualifying shares as required by
law) that are not owned by the Company and/or one or more of its Restricted
Subsidiaries. Minority Interests shall be valued by valuing Minority Interests
constituting preferred stock at the voluntary or involuntary liquidating value
of such preferred stock, whichever is greater, and by valuing Minority Interests
constituting common stock at the book value of capital and surplus applicable
thereto adjusted, if necessary, to reflect any changes from the book value of
such common stock required by the foregoing method of valuing Minority Interests
in preferred stock.
"Multiemployer Plan" shall mean any Plan that is a "multiemployer
plan" (as such term is defined in Section 400l(a)(3) of ERISA).
"Net Proceeds Amount" shall mean, with respect to any Transfer of
any property by any Person, an amount equal to the difference of
(a) the aggregate amount of the consideration (valued at
the Fair Market Value of such consideration at the time of the
consummation of such Transfer) allocated to such Person in respect
of such Transfer, net of any applicable taxes incurred in connection
with such Transfer, minus
(b) all ordinary and reasonable out-of-pocket costs and
expenses actually incurred by such Person in connection with such
Transfer.
"Notes" is defined in Section 1.
"Officer's Certificate" shall mean a certificate of a Senior
Financial Officer or of any other officer of the Company whose responsibilities
extend to the subject matter of such certificate.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred
to and defined in ERISA or any successor thereto.
"Person" shall mean an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
B-9
<PAGE> 68
"Plan" shall mean an "employee benefit plan" (as defined in Section
3(3) of ERISA) that is or, within the preceding five years, has been established
or maintained, or to which contributions are or, within the preceding five
years, have been made or required to be made, by the Company or any ERISA
Affiliate or with respect to which the Company or any ERISA Affiliate may have
any liability.
"Preferred Stock" shall mean any class of capital stock of a
corporation that is preferred over any other class of capital stock of such
corporation as to the payment of dividends or the payment of any amount upon
liquidation or dissolution of such corporation.
"Priority Debt" shall mean the sum of (a) all Debt of the Company
secured by Liens permitted by Section 10.5(k), (b) all Debt of Restricted
Subsidiaries permitted by Section 10.4(d), and (c) all Attributable Debt of the
Company and its Restricted Subsidiaries permitted by Section 10. 10(b).
property" or "properties" shall mean, unless otherwise specifically
limited, real or personal property of any kind, tangible or intangible, choate
or inchoate.
"Property Reinvestment Application" shall mean, with respect to any
Transfer of property, the application of an amount equal to the Net Proceeds
Amount with respect to such Transfer to the acquisition by the Company or any
Restricted Subsidiary of operating assets of the Company or any Restricted
Subsidiary to be used in the principal business of such Person.
"PTE" is defined in Section 6.2(a).
"QPAM Exemption" shall mean Prohibited Transaction Class Exemption
84-14 issued by the United States Department of Labor.
"Receivables Securitization Transaction" shall mean any transaction
pursuant to which (a) accounts receivables are sold or transferred and (b) the
seller either (1) retains an interest in the receivables so sold or transferred
or (2) assumes any liability in connection with such sale or transfer.
"Required Holders" shall mean, at any time, the holders of at least
51% in principal amount of the Notes at the time outstanding (exclusive of Notes
then owned by the Company, any of its Subsidiaries, or any of its Affiliates).
"Responsible Officer" shall mean any Senior Financial Officer and
any other officer of the Company with responsibility for the administration of
the relevant portion of this Agreement.
"Restricted Investments" (a) shall mean all Investments except the
following:
(1) property to be used in the ordinary course of business
of the Company and its Restricted Subsidiaries;
B-10
<PAGE> 69
(2) current assets arising from the sale of goods and
services in the ordinary course of business of the Company and its
Restricted Subsidiaries;
(3) Investments in one or more Restricted Subsidiaries or
any Person that concurrently with such Investment becomes a
Restricted Subsidiary;
(4) Investments existing on the date of the Closing and
disclosed in Schedule 5.16;
(5) Investments permitted by the Company's "Investment
Policy Guidelines" as in effect on the date hereof set forth on
Exhibit 3 attached hereto and such additional Investments as may
from time to time be permitted under the Company's investment policy
guidelines; provided that the Required Holders shall have consented
to such additional Investments; and
(6) Investments in TIC made after the date of Closing in
an aggregate amount not to exceed $30,000,000.
(b) As of any date of determination, each Restricted Investment
shall be valued at the greater of:
(1) the amount at which such Restricted Investment is
shown on the books of the Company or any of its Restricted
Subsidiaries (or zero if such Restricted Investment is not shown on
any such books); and
(2) either
(i) in the case of any Guaranty of the obligation of
any Person, the amount which the Company or any of its
Restricted Subsidiaries has paid on account of such
obligation less any recoupment by the Company or such
Restricted Subsidiary of any such payments, or
(ii) in the case of any other Restricted Investment,
the excess of (A) the greater of (I) the amount originally
entered on the books of the Company or any of its
Restricted Subsidiaries with respect thereto and (II) the
cost thereof to the Company or its Restricted Subsidiary
over (B) any return of capital (after income taxes
applicable thereto) upon such Restricted Investment
through the sale or other liquidation thereof or part
thereof or otherwise.
(c) As used in this definition of "Restricted
Investments:"
"Acceptable Bank" shall mean any bank or trust company (1) which is
organized under the laws of the United States of America or any State thereof,
(2) which has capital, surplus and undivided profits aggregating at least
$250,000,000, and (3) whose long-term unsecured debt obligations (or the
long-term unsecured debt obligations of the bank holding company owning all of
the capital stock of such bank
B-11
<PAGE> 70
or trust company) are given one of the two highest ratings by
Moody's or S&P or another credit rating agency of recognized
national standing.
"Moody's" shall mean Moody's Investors Service, Inc.
"S&P" shall mean Standard & Poor's Ratings Services, a
division of The McGraw Hill Companies, Inc.
"United States Governmental Security" shall mean any
direct obligation of, or obligation guaranteed by, the United States
of America, or any agency controlled or supervised by or acting as
an instrumentality of the United States of America pursuant to
authority granted by the Congress of the United States of America,
so long as such obligation or guarantee shall have the benefit of
the full faith and credit of the United States of America which
shall have been pledged pursuant to authority granted by the
Congress of the United States of America.
"Restricted Subsidiary" shall mean any Subsidiary (a) of which more
than 80% of the equity or voting interests is beneficially owned either directly
or indirectly by the Company, (b)which is organized under the laws of the United
States or any state thereof, the District of Columbia, Canada or any Province
thereof or any member country of the European Union (other than Italy), (c)
which conducts substantially all of its business and has substantially all of
its assets within the United States, Canada or a member country of the European
Union (other than Italy) and (d) which is either (1) designated as a Restricted
Subsidiary in Schedule 5.4 or (2) designated a Restricted Subsidiary by the
Board of Directors of the Company in accordance with Section 10.12.
"Restricted Subsidiary Stock" shall mean the Subsidiary Stock of any
Restricted Subsidiary.
"Sale-and-Leaseback Transaction" shall mean a transaction or series
of transactions pursuant to which the Company or any Restricted Subsidiary shall
sell or transfer to any Person (other than the Company or a Restricted
Subsidiary) any property, whether now owned or hereafter acquired, and, as part
of the same transaction or series of transactions, the Company or any Restricted
Subsidiary shall, within 180 days of such sale or transfer, rent or lease, as
lessee, (other than pursuant to a Capital Lease), or similarly acquire the right
to possession or use of, such property or one or more properties which it
intends to use for the same purpose or purposes as such property.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"Security" has the meaning set forth in section 2(1) of the
Securities Act of 1933, as amended.
"Senior Debt" shall mean all Debt of the Company, other than
Subordinated Debt.
B-12
<PAGE> 71
"Senior Financial Officer" shall mean the chief financial officer,
principal accounting officer, treasurer or controller of the Company.
"Subordinated Debt" shall mean any Debt of the Company that is in
any manner subordinated in right of payment or security in any respect to the
Debt evidenced by the Notes.
"Source" is defined in Section 6.2.
"Subsidiary" shall mean, as to any Person, any corporation,
association or other business entity in which such Person or one or more of its
Subsidiaries or such Person and one or more of its Subsidiaries owns sufficient
equity or voting interests to enable it or them (as a group) ordinarily, in the
absence of contingencies, to elect a majority of the directors (or Persons
performing similar functions) of such entity, and any partnership or joint
venture if more than a 50% interest in the profits or capital thereof is owned
by such Person or one or more of its Subsidiaries or such Person and one or more
of its Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any reference to a
"Subsidiary" is a reference to a Subsidiary of the Company.
"Subsidiary Stock" shall mean, with respect to any Person, the stock
(or any options or warrants to purchase stock or other Securities exchangeable
for or convertible into stock) of any Subsidiary of such Person.
"Successor Corporation" is defined in Section 10.7(d).
"Swaps" shall mean, with respect to any Person, payment obligations
with respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Agreement, the amount of
the obligation under any Swap shall be the amount determined in respect thereof
as of the end of the then most recently ended fiscal quarter of such Person,
based on the assumption that such Swap had terminated at the end of such fiscal
quarter, and in making such determination, if any agreement relating to such
Swap provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the amount of such
obligation shall be the net amount so determined. For purposes of this
Agreement, any such interest rate swap, currency swap, or other similar
obligation which is or will be entered into and is being or will be used by such
Person in the ordinary course of its business to hedge an existing or future
risk or exposure of such Person in respect of its liabilities or assets (and not
for speculative purposes) shall not be deemed a "Swap" for purposes of this
definition.
"TIC" shall mean TIC Holdings, Inc., a Delaware corporation.
B-13
<PAGE> 72
"Transfer" shall mean, with respect to any Person, any transaction
in which such Person sells, conveys, transfers or leases (as lessor) any of its
property, including, without limitation, Subsidiary Stock. or purposes of
determining the application of the Net Proceeds Amount in respect of any
Transfer, the Company may designate any Transfer as one or more separate
Transfers each yielding a separate Net Proceeds Amount. n any such case, (a) the
Disposition Value of any property subject to each such separate Transfer and (b)
the amount of Consolidated Total Assets attributable to any property subject to
each such separate Transfer shall be determined by ratably allocating the
aggregate Disposition Value of, and the aggregate Consolidated Total Assets
attributable to, all property subject to all such separate Transfers to each
such separate Transfer on a proportionate basis.
"Unrestricted Subsidiary" shall mean any Subsidiary which is not a
Restricted Subsidiary.
"Wholly-Owned" when used in connection with any Subsidiary shall
mean, at any time, any Subsidiary one hundred percent (100%) of all of the
equity interests (except directors' qualifying shares) and voting interests of
which are owned by any one or more of the Company and the Company's other
Wholly-Owned Subsidiaries at such time.
B-14
<PAGE> 73
CHANGES IN CORPORATE STRUCTURE
NONE
SCHEDULE 4.9
(to Note Purchase Agreement)
<PAGE> 74
DISCLOSURE MATERIALS
NONE
SCHEDULE 5.3
(to Note Purchase Agreement)
<PAGE> 75
SUBSIDIARIES OF THE COMPANY AND
OWNERSHIP OF SUBSIDIARY STOCK*
1. Subsidiaries - Organization and Capital Structure
<TABLE>
<CAPTION>
JURISDICTION OF OWNERSHIP BY COMPANY
NAME ORGANIZATION CAPITAL STRUCTURE AND/OR SUBSIDIARIES
<S> <C> <C> <C>
Granite Construction California Corporation 100% wholly owned subsidiary of GCI
Company*
Wilcott Corporation* Colorado Corporation 100% wholly owned subsidiary of GCI
Desert Aggregates California Corporation 100% wholly owned subsidiary of GCI
Incorporated*
Granite SR 91 California Corporation 100% wholly owned subsidiary of GCI
Corporation*
Granite SR 91, L.P.* California Limited Partnership 99% limited partner of GCI and 1% general
partner of Granite SR 91 Corporation
GILC Incorporated* California Corporation 100% wholly owned subsidiary of GCI
GILC, L.P.* California Limited Partnership 99% limited partner of GCC and 1% general
partner of GILC Incorporated
G.G. & R., Inc.* Utah Corporation 100% wholly owned subsidiary of GCI
Intermountain Slurry Seal, Utah Corporation 100% wholly owned subsidiary of
Inc.* G.G. & R., Inc.
Bear River Contractors* Wyoming Corporation 100% wholly owned subsidiary of
G.G. & R., Inc.
Pozzolan Products Company* Utah Corporation 100% wholly owned subsidiary of
G.G. & R., Inc.
GTC., Inc.* Texas Corporation 100% wholly owned subsidiary of GCI
Granite Construction California Corporation 100% wholly owned subsidiary of GCI
International
</TABLE>
- -----------------
* Indicates a Restricted Subsidiary on the date of the Closing
SCHEDULE 5.4
(to Note Purchase Agreement)
<PAGE> 76
2. Affiliates - Organization and Capital Structure
<TABLE>
<CAPTION>
JURISDICTION OF OWNERSHIP BY COMPANY
NAME ORGANIZATION CAPITAL STRUCTURE AND/OR SUBSIDIARIES
<S> <C> <C> <C>
TIC HOLDINGS, INC. DELAWARE MINORITY INTEREST 30% INTEREST OWNED BY GCI
WATERS RIDGE II TEXAS LLP 69% INTEREST OWNED BY GCI
CPTC L.P. CALIFORNIA LLP 22% INTEREST OWNED BY GCI
YONKERS/GRANITE NEW JERSEY JOINT VENTURE 40% PARTNERSHIP INTEREST BY GCC
(ATLANTIC CITY)
WESTERN SUMMIT/ GEORGIA JOINT VENTURE 15% PARTNERSHIP INTEREST BY GCC
TIC/GRANITE (UTOY)
KIEWIT/GRANITE CALIFORNIA JOINT VENTURE 30% PARTNERSHIP INTEREST BY GCC
(TCA)
KIEWIT/GRANITE UTAH JOINT VENTURE 23% PARTNERSHIP INTEREST BY GCC
(WASATCH)
KIEWIT/ GRANITE CALIFORNIA JOINT VENTURE 25% PARTNERSHIP INTEREST BY GCC
(EAST DAM)
</TABLE>
3. The Company's Directors and Officers
<TABLE>
<CAPTION>
DIRECTORS OFFICERS
<S> <C>
Solari, Richard C. David H. Watts
Watts, David H. Costanzo, Patrick M.
Barclay, Joseph J. Dorey, William G.
Brooks, Richard M. Allbritton, R.C.
Kelly, Brian C. Barton, William E.
McDonald, Rebecca Boitano, Mark E.
McNear, Denmar K. Watts, David H.
Miles, Raymond E. Futch, Michael
Higdem, Garry M.
Nickerson, Arthur B.
Thomas, Michael L.
Grazian, David R.
</TABLE>
S-5.4-2
<PAGE> 77
4. Agreements Restricting Dividend Payments
NONE
S-5.4-3
<PAGE> 78
FINANCIAL STATEMENTS
1. SEC Form 10-Q for the quarter ended September 30, 1997.
2. SEC Form 10-Q for the quarter ended September 30, 1996.
3. SEC Form 10-K for the fiscal year ended December 31, 1996.
4. SEC Form 10-K for the fiscal year ended December 31, 1995.
5. SEC Form 10-K for the fiscal year ended December 31, 1994.
6. SEC Form 10-K for the fiscal year ended December 31, 1993.
7. SEC Form 10-K for the fiscal year ended December 31, 1992.
SCHEDULE 5.5
(to Note Purchase Agreement)
<PAGE> 79
CERTAIN LITIGATION
NONE
SCHEDULE 5.8
(to Note Purchase Agreement)
<PAGE> 80
PATENTS, ETC.
NONE
SCHEDULE 5.11
(to Note Purchase Agreement)
<PAGE> 81
USE OF PROCEEDS
The proceeds from the sale of the Notes Will be used to refinance
existing Debt and for general corporate purposes.
SCHEDULE 5.14
(to Note Purchase Agreement)
<PAGE> 82
EXISTING DEBT
<TABLE>
<CAPTION>
ITEM NO. LENDER'S NAME DESCRIPTION INTEREST MATURITY BALANCE
RATE 12/31/97
<S> <C> <C> <C> <C> <C>
1 Benna Investments Aggregate property 6.50% 04/14/02 2,638,387
2 Benna Investments Aggregate property 6.50% 04/14/02 788,091
3 Benna Investments Real Estate property 6.50% 12/01/07 1,936,904
4 Michael Hughes Aggregate property 0.00% 02/04/98 1,600,000
5 Bank of America Tarmac & Gibbons Various 06/30/02 25,000,000
Term Loans Acquisition
6 Bank of America Working Capital Various 06/30/00 39,000,000
Revolving Loans
7 Bank of America Self Insured 50 bps 04/30/98 3,585,430
Letter of Credit Worker's
Compensation
8 Bank of America SR 91, L.P. 50 bps 07/14/98 2,377,786
Letter of Credit
9 Small Business Acquisition 6.20% 01/04/99 93,021
Administration
10 Raymond Aggregate property 8.00% 06/30/00 260,000
Flaschbarth ----------
$77,279,619
===========
</TABLE>
SCHEDULE 5.15
(to Note Purchase Agreement)
<PAGE> 83
EXISTING DEBT (LEASES)
<TABLE>
<CAPTION>
ANNUAL
ITEM NO. LENDER'S NAME DESCRIPTION MATURITY PAYMENTS
<S> <C> <C> <C> <C>
11 Arizona State Labor Pit 01/31/00 21,318
Department
12 Associates Construction Equipment 09/30/98 145,152
13 Associates Construction Equipment 10/31/98 117,600
14 Associates Construction Equipment 12/31/98 300,348
15 Associates Construction Equipment 01/31/99 415,200
16 Associates Construction Equipment 04/30/99 234,000
17 Associates Construction Equipment 05/31/99 56,552
18 Associates Construction Equipment 06/30/99 240,000
19 Associates Construction Equipment 10/31/99 50,460
20 Associates Construction Equipment 03/31/00 341,340
21 Associates Construction Equipment 04/30/00 141,504
22 Associates Construction Equipment 06/30/00 55,264
23 Associates Construction Equipment 12/31/00 343,243
24 Associates Construction Equipment 12/31/00 203,310
25 Associates Leasing Construction Equipment 09/30/99 45,960
26 Athens Avenue-Steve Pit 06/16/99 1,170
Mehalaki
27 Centerpoint Plaza Office Building 05/30/99 60,000
28 Chemical Lime Co. Material Contract 10/31/07 433,333
of Arizona
29 CIT Construction Equipment 09/06/98 31,662
30 City of Calpatria Plant Property 06/30/98 600
31 Crawford Pit 12/31/99 40,000
32 GE Capital Modular Office Building 09/06/98 19,560
Space
33 Gibbons Realty Building 05/08/05 30,000
Company
34 Granite Rock Company Office & Yard 12/31/00 165,100
35 Hansen, Clarence Quarry Property 07/31/99 50,000
& Sinnott
36 Ingvart Christensen Pit 03/31/98 15,000
37 Jackling Aggregate Pit 12/31/05 72,000
Limited
38 Julia C. Matthews Pit 12/31/98 24,000
39 L.R. Peterson and E.W. Pit 01/02/06 70,000
McGah
40 Little Rock Sand Pit 04/30/01 173,472
& Gravel
</TABLE>
S-5.15-2
<PAGE> 84
<TABLE>
<CAPTION>
ANNUAL
ITEM NO. LENDER'S NAME DESCRIPTION MATURITY PAYMENTS
<S> <C> <C> <C> <C>
41 M.L. Hillcock Pit 01/31/01 13,438
& B.C. Hillcock
42 Maria Bazzi Pit 12/31/00 62,783
43 Mariposa Ranch Pit 09/30/99 12,500
Limited Part.
44 Meredit, Parker, Key, Pit 12/31/98 271,261
Bath
45 Parc Center JV Office Building 11/30/00 271,969
46 Pebble Beach Pit 12/31/00 22,000
Corporation
47 Rae Barker Trust Associates to Pit 12/31/01 2,000
48 Raymond J. Fanchon/L. Pit 03/07/16 24,000
Muller
49 S.W. Souvall Company Office Building 03/31/99 23,484
50 Scach, Inc. Pit 03/31/02 30,900
51 Settlemeyer Ranch Pit 04/30/98 5,000
& Scarscelli
52 Standard Hill Mining Pit 02/28/98 4,500
Co.
53 State of Arizona Pit 03/01/99 13,624
54 State of Utah Office Building 08/01/38 14,504
55 State of Utah Office Building 11/01/38 16,500
56 Ted and Esther Devries Pit 01/31/99 18,900
57 Tejon Ranch Company Pit 10/31/99 24,000
58 Topo Ranch (Singleton Pit 06/30/07 22,500
Group)
59 Union Pacific Railroad Yard 12/31/07 12,000
Co.
60 Walker Development Pit 12/31/19 75,000
61 Wells Family Members Pit 12/31/01 25,000
62 Western Pacific Railroad Pit 06/01/01 50,000
Co.
63 William Barry Shannon Pit 02/29/06 7,200
64 Woodland - Reiff Pit 05/31/03 2,000
65 Woodland - Schneegas Pit 05/31/03 750
----------
$4,922,961
==========
</TABLE>
S-5.15-3
<PAGE> 85
EXISTING INVESTMENTS
<TABLE>
<CAPTION>
MARKET VALUE
COMPANY DESCRIPTIONS 12/31/97
<S> <C> <C>
Morrison-Knudsen Common Stock $ 975
Perini Corporation Common Stock 900
Guy F. Atkinson Common Stock 138
Calmat Company Common Stock 2,788
Cascade Corporation Common Stock 1,700
TIC Holdings, Inc. Minority Interest 23,636,354
Waters Ridge II LLP 5,991,385
CPTC L.P./SR9l L.P. Joint Venture 1,370,622
Yonkers/Granite (Atlantic City) Joint Venture 158,955
Western Summit/TIC/Granite Joint Venture 215,127
WS/TIC/Granite (UTOY Leasing) Joint Venture 359,978
Kiewit/Granite (TCA) Joint Venture 3,289,218
Kiewit/Granite (KG Leasing) Joint Venture 7,596,410
Kiewit/Granite (Wasatch) Joint Venture 3,728,174
Kiewit/Granite (E. Dam) Joint Venture 3,853,112
------------
$ 50,205,835
============
</TABLE>
SCHEDULE 5.16
(to Note Purchase Agreement)
<PAGE> 86
ENVIRONMENTAL MATTERS
Granite Construction in the normal course of business utilizes petroleum
(hydrocarbon) products which may be considered hazardous materials when
encountered at regulatory levels established by the Federal EPA or the Regional
State EPA. The utilization of these asphalt products, diesel, and gasoline over
the years has the potential of creating exposure to environmental clean up
requirements. All underground tanks meet current requirements. There is no
pending governmental ordered clean up. However, the following represents
estimates based on construction industry housekeeping practices as encountered
during our normal course of business. Except as indicated with an "*", these
costs do not represent actual identified exposures.
<TABLE>
<CAPTION>
LOCATIONS DESCRIPTION AMOUNT
<S> <C> <C>
Arvin, CA Asphalt Batch Plant $ 100,000
Arvin, CA Surface Spills 50,000
Bakersfield, CA Surface Spills 100,000
Bakersfield, CA Diesel Aboveground Storage Tanks 25,000
Bakersfield, CA Asphalt Batch Plant 100,000
Coalinga, CA Asphalt Batch Plant 50,000
Felton, CA Asphalt Batch Plant 200,000
French Camp, CA Diesel/Gasoline Underground Storage 100,000
Tanks
Gardnerville, NV Surface Spills 25,000
Gardnerville, NV Asphalt Batch Plant 50,000
Indio, CA Massey Shop/Smitty's Garage 50,000
Cleanup
Palmdale, CA Surface Spills 10,000
Palmdale, CA Asphalt Batch Plant 50,000
Patrick, NV Asphalt Batch Plant 75,000
Patrick, NV Surface Spills 50,000
Sacramento, CA Diesel/Gasoline Underground 50,000
Storage Tanks
Sacramento, CA Asphalt Batch Plant 300,000
Sacramento, CA Surface Spills 200,000
Sacramento, CA Diesel Aboveground 50,000
Storage Tanks
Sacramento, CA Shop Area Cleanup 50,000
Salinas, CA Surface Spills 250,000
</TABLE>
SCHEDULE 5.18
(to Note Purchase Agreement)
<PAGE> 87
<TABLE>
<CAPTION>
LOCATIONS DESCRIPTION AMOUNT
<S> <C> <C>
Santa Barbara, CA Surface Spills 200,000
Santa Barbara, CA Diesel/Gasoline Underground 75,000
Storage Tanks
Santa Barbara, CA Asphalt Batch Plant 50,000
Santa Cruz, CA Santa Cruz Yard Cleanup 250,000
Sparks, NV Diesel/Gasoline Underground 100,000
Storage Tanks
Tracy, CA Asphalt Batch Plant 75,000
Tracy, CA Surface Spills 25,000
Tucson, AZ Surface Spills 25,000
Tucson, AZ Diesel/Gasoline Underground 50,000
Storage Tanks
Watsonville, CA Diesel/Gasoline Underground 150,000
Storage Tanks
Watsonville, CA Surface Spills 50,000
Webb, UT * Asphalt Batch Plant 1,400,000
Whitehall, UT * Asphalt Batch Plant 55,000
Salt Lake City, UT * Concrete Batch Plant 250,000
Salt Lake County, UT * Surface Spills 30,000
Weber County, UT * Surface Spills 100,000
(Ogden)
Salt Lake County, UT * Aggregate and smelter site 1,250,000
(CPC)
Cahoon, UT * Surface Spills 100,000
Fireclay Battery, UT * Surface Spills 25,000
----------
$6,195,000
</TABLE>
S-5.18-2
<PAGE> 88
FORM OF NOTE
GRANITE CONSTRUCTION INCORPORATED
6.54% Senior Note due March 15, 2010
No. , 199
-------------------- ----------------------- --
$ PPN 387328 A* 8
-------------------------
FOR VALUE RECEIVED, the undersigned, GRANITE CONSTRUCTION
INCORPORATED (herein called the "Company"), a corporation organized and existing
under the laws of the State of Delaware, hereby promises to pay to
_________________________ or registered assigns, the principal sum of
______________ DOLLARS on March 15, 2010 with interest (computed on the basis of
a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the
rate of 6.54% per annum from the date hereof, payable semiannually, on the
fifteenth day of March and September in each year, commencing with the March 15
or September 15 next succeeding the date hereof, until the principal hereof
shall have become due and payable, and (b) to the extent permitted by law on any
overdue payment (including any overdue prepayment) of principal, any overdue
payment of interest and any overdue payment of any Make-Whole Amount (as defined
in the Note Purchase Agreement referred to below), payable semiannually as
aforesaid (or, at the option of the registered holder hereof, on demand), at a
rate per annum from time to time equal to the greater of (i) 8.54% or (ii) 2%
over the rate of interest publicly announced by Bank of America from time to
time in San Francisco, California as its "reference" rate.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at the principal office of Bank of America in Chicago, Illinois or at
such other place as the Company shall have designated by written notice to the
holder of this Note as provided in the Note Purchase Agreement referred to
below.
This Note is one of a series of Senior Notes (herein called the
"Notes") issued pursuant to that certain Note Purchase Agreement, dated as of
March 1, 1998 (as from time to time amended, the "Note Purchase Agreement"),
between the Company and each of the respective Purchasers named therein and is
entitled to the benefits thereof. Each holder of this Note will be deemed, by
its acceptance hereof, (i) to have agreed to the confidentiality provisions set
forth in Section 20 of the Note Purchase Agreement and (ii) to have made the
representation set forth in Section 6.2 of the Note Purchase Agreement to the
extent provided in Section 13.2 of the Note Purchase Agreement.
This Note is a registered Note and, as provided in the Note Purchase
Agreement, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
EXHIBIT 1
(to Note Purchase Agreement)
<PAGE> 89
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.
This Note and the holders hereof are entitled equally and ratably
with the holders of all other Notes to the rights and benefits provided pursuant
to the terms and provisions of the Guaranty Agreement (as such term is defined
in the Note Purchase Agreement). Reference is hereby made to the Guaranty
Agreement for a statement of the nature and extent of the benefits and security
for the Notes afforded thereby and the rights of the holders of the Notes and
the Company in respect thereof.
The Company will make required prepayments of principal on the dates
and in the amounts specified in the Note Purchase Agreement. This Note is also
subject to optional prepayment, in whole or from time to time in part, at the
times and on the terms specified in the Note Purchase Agreement, but not
otherwise.
If an Event of Default, as defined in the Note Purchase Agreement,
exists, the principal of this Note may be declared or otherwise become due and
payable in the manner, at the price (including any applicable Make-Whole Amount)
and with the effect provided in the Note Purchase Agreement.
This Note shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the law of the State of
Illinois, excluding choice-of-law principles of the law of such State that would
require the application of the laws of a jurisdiction other than such State.
GRANITE CONSTRUCTION INCORPORATED
By
--------------------------------------
Its
By
--------------------------------------
Its
E-1-2
<PAGE> 90
EXHIBIT 2
IS INCLUDED IN ITS ENTIRETY
AT TAB NO. 2
<PAGE> 91
FORM OF OPINION OF SPECIAL COUNSEL
TO THE COMPANY AND THE GUARANTORS
The closing opinion of Gray Cary Ware & Freidenrich, special counsel
for the Company and the Guarantors, which is called for by Section 4.5(a) of the
Agreement, shall be dated the date of the Closing and addressed to each
Purchaser, shall be satisfactory in scope and form to each Purchaser and shall
be to the effect that:
1. The Company is a corporation, duly incorporated,
validly existing and in good standing under the laws of the State of
Delaware, has the corporate power and the corporate authority to
execute and perform the Agreement and to issue the Notes and has the
full corporate power and the corporate authority to conduct the
activities in which it is now engaged and is duly licensed or
qualified and is in good standing as a foreign corporation in each
jurisdiction in which the character of the properties owned or
leased by it or the nature of the business transacted by it makes
such licensing or qualification necessary.
2. Each Restricted Subsidiary is a corporation or other
business entity duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization and is
duly licensed or qualified and is in good standing in each
jurisdiction in which the character of the properties owned or
leased by it or the nature of the business transacted by it makes
such licensing or qualification necessary and all of the issued and
outstanding shares of capital stock or other equity interests of
each such Restricted Subsidiary have been duly issued, are fully
paid and non-assessable and are owned by the Company, by one or more
Subsidiaries, or by the Company and one or more Subsidiaries.
3. The Agreement has been duly authorized by all
necessary corporate action on the part of the Company, has been duly
executed and delivered by the Company and constitutes the legal,
valid and binding contract of the Company enforceable in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent
conveyance and similar laws affecting creditors' rights generally,
and general principles of equity (regardless of whether the
application of such principles is considered in a proceeding in
equity or at law).
4. The Notes have been duly authorized by all necessary
corporate action on the part of the Company, have been duly executed
and delivered by the Company and constitute the legal, valid and
binding obligations of the Company enforceable in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent
conveyance and similar laws affecting creditors' rights generally,
and general principles of equity (regardless of whether the
application of such principles is considered in a proceeding in
equity or at law).
5. No approval, consent or withholding of objection on
the part of, or filing, registration or qualification with, any
governmental body, Federal or state, is
EXHIBIT 4.5(a)
(to Note Purchase Agreement)
<PAGE> 92
necessary in connection with the execution and delivery by the
Company of the Agreement or the Notes.
6. The issuance and sale of the Notes and the execution,
delivery and performance by the Company of the Agreement do not
conflict with or result in any breach of any of the provisions of or
constitute a default under or result in the creation or imposition
of any Lien upon any of the property of the Company pursuant to the
provisions of the Certificate of Incorporation or By-laws of the
Company or any agreement or other instrument known to such counsel
to which the Company is a party or by which the Company may be
bound.
7. Each Guarantor has the power and the authority to
execute, deliver and perform the Guaranty Agreement and has the full
power and the authority to conduct the activities in which it is now
engaged.
8. The Guaranty Agreement has been duly authorized by
all necessary action on the part of each Guarantor, has been duly
executed and delivered by each Guarantor and constitutes the legal,
valid and binding contract of each Guarantor enforceable in
accordance with its terms, subject to bankruptcy, insolvency,
fraudulent conveyance and similar laws affecting creditors' rights
generally, and general principles of equity (regardless of whether
the application of such principles is considered in a proceeding in
equity or at law).
9. No approval, consent or withholding of objection on
the part of, or filing, registration or qualification with, any
governmental body, Federal or state, is necessary in connection with
the execution and delivery by any Guarantor of the Guaranty
Agreement.
10. The execution, delivery and performance by each
Guarantor of the Guaranty Agreement do not conflict with or result
in any breach of any of the provisions of or constitute a default
under or result in the creation or imposition of any Lien upon any
of the property of such Guarantor pursuant to the provisions of the
charter documents or by-laws of such Guarantor or any agreement or
other instrument known to such counsel to which such Guarantor is a
party or by which such Guarantor may be bound.
11. The issuance, sale and delivery of the Notes and the
issuance and delivery of the Guaranty Agreement under the
circumstances contemplated by the Agreement do not, under existing
law, require the registration of the Notes or the Guaranty Agreement
under the Securities Act or the qualification of an indenture under
the Trust Indenture Act of 1939, as amended.
The opinion of Gray Cary Ware & Freidenrich shall cover such other
matters relating to the sale of the Notes as any Purchaser may reasonably
request. With respect to matters of fact on which such opinion is based, such
counsel shall be entitled to rely on appropriate certificates of public
officials and officers of the Company and the Guarantors.
E-4.5(a)-2
<PAGE> 93
FORM OF OPINION OF SPECIAL COUNSEL
TO THE PURCHASERS
The closing opinion of Chapman and Cutler, special counsel to the
Purchasers, called for by Section 4.5(b) of the Agreement, shall be dated the
date of the Closing and addressed to the Purchasers, shall be satisfactory in
form and substance to the Purchasers and shall be to the effect that:
1. The Company is a corporation, validly existing and in
good standing under the laws of the State of Delaware and has the
corporate power and the corporate authority to execute and deliver
the Agreement and to issue the Notes.
2. The Agreement has been duly authorized by all
necessary corporate action on the part of the Company, has been duly
executed and delivered by the Company and constitutes the legal,
valid and binding contract of the Company enforceable in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent
conveyance and similar laws affecting creditors' rights generally,
and general principles of equity (regardless of whether the
application of such principles is considered in a proceeding in
equity or at law).
3. The Notes have been duly authorized by all necessary
corporate action on the part of the Company, and the Notes being
delivered on the date hereof have been duly executed and delivered
by the Company and constitute the legal, valid and binding
obligations of the Company enforceable in accordance with their
terms, subject to bankruptcy, insolvency, fraudulent conveyance and
similar laws affecting creditors' rights generally, and general
principles of equity (regardless of whether the application of such
principles is considered in a proceeding in equity or at law).
4. The issuance, sale and delivery of the Notes under
the circumstances contemplated by the Agreement do not, under
existing law, require the registration of the Notes under the
Securities Act or the qualification of an indenture under the Trust
Indenture Act of 1939, as amended.
The opinion of Chapman and Cutler shall also state that the opinion
of Gray Cary Ware & Freidenrich is satisfactory in scope and form to Chapman and
Cutler and that, in their opinion, the Purchasers are justified in relying
thereon.
In rendering the opinion set forth in paragraph 1 above, Chapman and
Cutler may rely, as to matters referred to in paragraph 1, solely upon an
examination of the Certificate of Incorporation certified by, and a certificate
of good standing of the Company from, the Secretary of State of the State of
Delaware, the By-laws of the Company and the general business corporation law of
the State of Delaware. The opinion of Chapman and Cutler is limited to the
laws of the State of Illinois, the general business corporation law of the State
of Delaware and the Federal laws of the United States.
EXHIBIT 4.5(b)
(to Note Purchase Agreement)
<PAGE> 94
With respect to matters of fact upon which such opinion is based,
Chapman and Cutler may rely on appropriate certificates of public officials and
officers of the Company and upon representations of the Company and the
Purchasers delivered in connection with the issuance and sale of the Notes.
E-4.5(b)-2
<PAGE> 1
CONFORMED COPY EXHIBIT 10.12
================================================================================
SUBSIDIARY GUARANTY AGREEMENT
Dated as of March 1, 1998
Re: $60,000,000 6.54% Senior Notes
Due March 15, 2010
of
Granite Construction Incorporated
================================================================================
<PAGE> 2
TABLE OF CONTENTS
(Not a part of the Agreement)
<TABLE>
<CAPTION>
SECTION HEADING PAGE
<S> <C>
Parties ..................................................................... 1
Recitals ..................................................................... 1
SECTION 1. DEFINITIONS.................................................. 2
SECTION 2. GUARANTY OF NOTES AND NOTE AGREEMENT......................... 2
SECTION 3. GUARANTY OF PAYMENT AND PERFORMANCE.......................... 2
SECTION 4. GENERAL PROVISIONS RELATING TO THE GUARANTY.................. 3
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE GUARANTORS............. 8
SECTION 6. AMENDMENTS, WAIVERS AND CONSENTS............................. 12
SECTION 7. NOTICES...................................................... 13
Signature .................................................................... 15
</TABLE>
ATTACHMENTS TO SUBSIDIARY GUARANTY AGREEMENT:
Exhibit A - Subsidiary Guaranty Supplement
<PAGE> 3
SUBSIDIARY GUARANTY AGREEMENT
Re: $60,000,000 6.54% Senior Notes
Due March 15, 2010
of
Granite Construction Incorporated
-------------------------------------------
This SUBSIDIARY GUARANTY AGREEMENT dated as of March 1, 1998 (the or this
"Guaranty") is entered into on a joint and several basis by each of the
undersigned, together with any entity which may become a party hereto by
execution and delivery of a Subsidiary Guaranty Supplement in substantially the
form set forth as Exhibit A hereto (a "Guaranty Supplement") (which parties are
hereinafter referred to individually as a "Guarantor" and collectively as the
"Guarantors").
RECITALS
A. Each Guarantor is a subsidiary of Granite Construction Incorporated, a
Delaware corporation (the "Company"), and a Material Subsidiary (as defined in
the hereinafter defined Note Agreement).
B. In order to refinance existing Debt (as defined in the Note Agreement)
and for general corporate purposes, the Company has entered into that certain
Note Purchase Agreement dated as of March 1, 1998 (the "Note Agreement") between
the Company and each of the purchasers named on Schedule A attached to said Note
Agreement (the "Initial Note Purchasers," together with their successors and
assigns, the "Holders"), providing for, among other things, the issue and sale
by the Company to the Initial Note Purchasers of the Company's 6.54% Senior
Notes, due March 15, 2010 in the aggregate principal amount of $60,000,000 (the
"Notes").
C. The Initial Note Purchasers have required as a condition of their
purchase of the Notes that the Company cause each of the undersigned to enter
into this Guaranty and to cause each from time to time Material Subsidiary to
enter into a Guaranty Supplement, in each case as security for the Notes, and
the Company has agreed to cause each of the undersigned to execute this Guaranty
and to cause each from time to time Material Subsidiary to execute a Guaranty
Supplement, in each case in order to induce the Initial Note Purchasers to
purchase the Notes and thereby benefit the Company and its Subsidiaries (as
defined in the Note Agreement) by providing funds to enable the Company to
refinance existing Debt and to enable the Company and its Subsidiaries to have
funds available for general corporate purposes.
Now, THEREFORE, as required by Section 4.4 of the Note Agreement and in
consideration of the premises and other good and valuable consideration, the
receipt and sufficiency whereof are hereby acknowledged, each Guarantor does
hereby covenant and agree, jointly and severally, as follows:
<PAGE> 4
SECTION 1. DEFINITIONS.
Capitalized terms used herein shall have the meanings set forth in the Note
Agreement unless herein defined or the context shall otherwise require.
SECTION 2. GUARANTY OF NOTES AND NOTE AGREEMENT.
(a) Each Guarantor jointly and severally does hereby irrevocably,
absolutely and unconditionally guarantee unto the Holders: (1) the full and
prompt payment of the principal of, premium, if any, and interest on the Notes
from time to time outstanding, as and when such payments shall become due and
payable whether by lapse of time, upon redemption or prepayment, by extension or
by acceleration or declaration or otherwise (including (to the extent legally
enforceable) interest due on overdue payments of principal, premium, if any, or
interest at the rate set forth in the Notes) in Federal or other immediately
available funds of the United States of America which at the time of payment or
demand therefor shall be legal tender for the payment of public and private
debts, (2) the full and prompt performance and observance by the Company of each
and all of the obligations, covenants and agreements required to be performed or
owed by the Company under the terms of the Notes and the Note Agreement and (3)
the full and prompt payment, upon demand by any Holder of all costs and
expenses, legal or otherwise (including reasonable attorneys' fees), if any, as
shall have been expended or incurred in the protection or enforcement of any
rights, privileges or liabilities in favor of the Holders under or in respect of
the Notes, the Note Agreement or under this Guaranty or in any consultation or
action in connection therewith or herewith.
(b) The liability of each Guarantor under this Guaranty shall not exceed
an amount equal to a maximum amount as will, after giving effect to such maximum
amount and all other liabilities of such Guarantor, contingent or otherwise,
result in the obligations of such Guarantor hereunder not constituting a
fraudulent transfer, obligation or conveyance.
SECTION 3. GUARANTY OF PAYMENT AND PERFORMANCE.
This is a guarantee of payment and performance and each Guarantor hereby
waives, to the fullest extent permitted by law, any right to require that any
action on or in respect of any Note or the Note Agreement be brought against the
Company or any other Person or that resort be had to any direct or indirect
security for the Notes or for this Guaranty or any other remedy. Any Holder may,
at its option, proceed hereunder against any Guarantor in the first instance to
collect monies when due, the payment of which is guaranteed hereby, without
first proceeding against the Company or any other Person and without first
resorting to any direct or indirect security for the Notes or for this Guaranty
or any other remedy. The liability of each Guarantor hereunder shall in no way
be affected or impaired by any acceptance by any Holder of any direct or
indirect security for, or other guaranties of, any Debt, liability or obligation
of the Company or any other Person to any Holder or by any failure, delay,
neglect or omission by any Holder to realize upon or protect any such
guarantees, Debt, liability or obligation or any notes or other instruments
evidencing the
-2-
<PAGE> 5
same or any direct or indirect security therefor or by any approval, consent,
waiver, or other action taken, or omitted to be taken by any such Holder.
The covenants and agreements on the part of the Guarantors herein contained
shall take effect as joint and several covenants and agreements, and references
to the Guarantors shall take effect as references to each of them and none of
them shall be released from liability hereunder by reason of the guarantee
ceasing to be binding as a continuing security on any other of them.
SECTION 4. GENERAL PROVISIONS RELATING TO THE GUARANTY.
(a) Each Guarantor hereby consents and agrees that any Holder or Holders
from time to time, with or without any further notice to or assent from any
other Guarantor may, without in any manner affecting the liability of any
Guarantor under this Guaranty, and upon such terms and conditions as any such
Holder or Holders may deem advisable:
(1) extend in whole or in part (by renewal or otherwise), modify,
change, compromise, release or extend the duration of the time for the
performance or payment of any Debt, liability or obligation of the Company
or of any other Person secondarily or otherwise liable for any Debt,
liability or obligations of the Company on the Notes, or waive any Default
with respect thereto, or waive, modify, amend or change any provision of
any other agreement or waive this Guaranty; or
(2) sell, release, surrender, modify, impair, exchange or substitute
any and all property, of any nature and from whomsoever received, held by,
or for the benefit of, any such Holder as direct or indirect security for
the payment or performance of any Debt, liability or obligation of the
Company or of any other Person secondarily or otherwise liable for any
Debt, liability or obligation of the Company on the Notes; or
(3) settle, adjust or compromise any claim of the Company against any
other Person secondarily or otherwise liable for any Debt, liability or
obligation of the Company on the Notes.
Each Guarantor hereby ratifies and confirms any such extension, renewal,
change, sale, release, waiver, surrender, exchange, modification, amendment,
impairment, substitution, settlement, adjustment or compromise and that the same
shall be binding upon it, and hereby waives, to the fullest extent permitted by
law, any and all defenses, counterclaims or offsets which it might or could have
by reason thereof, it being understood that such Guarantor shall at all times be
bound by this Guaranty and remain liable hereunder.
(b) Each Guarantor hereby waives, to the fullest extent permitted by law:
(1) notice of acceptance of this Guaranty by the Holders or of the
creation, renewal or accrual of any liability of the Company, present or
future, or of the
-3-
<PAGE> 6
reliance of such Holders upon this Guaranty (it being understood that every
Debt, liability and obligation described in Section 2 hereof shall
conclusively be presumed to have been created, contracted or incurred in
reliance upon the execution of this Guaranty);
(2) demand of payment by any Holder from the Company or any other
Person indebted in any manner on or for any of the Debt, liabilities or
obligations hereby guaranteed; and
(3) presentment for the payment by any Holder or any other Person of
the Notes or any other instrument, protest thereof and notice of its
dishonor to any party thereto and to such Guarantor.
The obligations of each Guarantor under this Guaranty and the rights of any
Holder to enforce such obligations by any proceedings, whether by action at law,
suit in equity or otherwise, shall not be subject to any reduction, limitation,
impairment or termination, whether by reason of any claim of any character
whatsoever or otherwise and shall not be subject to any defense, set-off,
counterclaim (other than any compulsory counterclaim), recoupment or termination
whatsoever.
(c) The obligations of the Guarantors hereunder shall be binding upon the
Guarantors and their successors and assigns, and shall remain in full force and
effect irrespective of:
(1) the genuineness, validity, regularity or enforceability of the
Notes, the Note Agreement or any other agreement or any of the terms of any
thereof, the continuance of any obligation on the part of the Company or
any other Person on or in respect of the Notes or under the Note Agreement
or any other agreement or the power or authority or the lack of power or
authority of the Company to issue the Notes or the Company to execute and
deliver the Note Agreement or any other agreement or of any Guarantor to
execute and deliver this Guaranty or to perform any of its obligations
hereunder or the existence or continuance of the Company or any other
Person as a legal entity; or
(2) any default, failure or delay, willful or otherwise, in the
performance by the Company, any Guarantor or any other Person of any
obligations of any kind or character whatsoever under the Notes, the Note
Agreement, this Guaranty or any other agreement; or
(3) any creditors' rights, bankruptcy, receivership or other
insolvency proceeding of the Company, any Guarantor or any other Person or
in respect of the property of the Company, any Guarantor or any other
Person or any merger, consolidation, reorganization, dissolution,
liquidation, the sale of all or substantially all of the assets of or
winding up of the Company, any Guarantor or any other Person; or
-4-
<PAGE> 7
(4) impossibility or illegality of performance on the part of the
Company, any Guarantor or any other Person of its obligations under the
Notes, the Note Agreement, this Guaranty or any other agreements; or
(5) in respect of the Company or any other Person, any change of
circumstances, whether or not foreseen or foreseeable, whether or not
imputable to the Company or any other Person, or other impossibility of
performance through fire, explosion, accident, labor disturbance, floods,
droughts, embargoes, wars (whether or not declared), civil commotion, acts
of God or the public enemy, delays or failure of suppliers or carriers,
inability to obtain materials, action of any Federal or state regulatory
body or agency, change of law or any other causes affecting performance, or
any other force majeure, whether or not beyond the control of the Company
or any other Person and whether or not of the kind hereinbefore specified;
or
(6) any attachment, claim, demand, charge, Lien, order, process,
encumbrance or any other happening or event or reason, similar or
dissimilar to the foregoing, or any withholding or diminution at the
source, by reason of any taxes, assessments, expenses, Debt, obligations or
liabilities of any character, foreseen or unforeseen, and whether or not
valid, incurred by or against the Company, any Guarantor or any other
Person or any claims, demands, charges or Liens of any nature, foreseen or
unforeseen, incurred by the Company, any Guarantor or any other Person, or
against any sums payable in respect of the Notes or under the Note
Agreement or this Guaranty, so that such sums would be rendered inadequate
or would be unavailable to make the payments herein provided; or
(7) any order, judgment, decree, ruling or regulation (whether or not
valid) of any court of any nation or of any political subdivision thereof
or any body, agency, department, official or administrative or regulatory
agency of any thereof or any other action, happening, event or reason
whatsoever which shall delay, interfere with, hinder or prevent, or in any
way adversely affect, the performance by the Company, any Guarantor or any
other Person of its respective obligations under or in respect of the
Notes, the Note Agreement, this Guaranty or any other agreement; or
(8) the failure of any Guarantor to receive any benefit from or as a
result of its execution, delivery and performance of this Guaranty; or
(9) any failure or lack of diligence in collection or protection,
failure in presentment or demand for payment, protest, notice of protest,
notice of default and of nonpayment, any failure to give notice to any
Guarantor of failure of the Company, any Guarantor or any other Person to
keep and perform any obligation, covenant or agreement under the terms of
the Notes, the Note Agreement, this Guaranty or any other agreement or
failure to resort for payment to the Company, any Guarantor or to any other
Person or to any other guaranty or to any property, security, Liens or
other rights or remedies; or
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<PAGE> 8
(10) the acceptance of any additional security or other guaranty, the
advance of additional money to the Company or any other Person, the renewal
or extension of the Notes or amendments, modifications, consents or waivers
with respect to the Notes, the Note Agreement or any other agreement, or
the sale, release, substitution or exchange of any security for the Notes;
or
(11) any merger or consolidation of the Company, any Guarantor or any
other Person into or with any other Person or any sale, lease, transfer or
other disposition of any of the assets of the Company, any Guarantor or any
other Person to any other Person, or any change in the ownership of any
shares of the Company, any Guarantor or any other Person; or
(12) any defense whatsoever that: (i) the Company or any other Person
might have to the payment of the Notes (principal, premium, if any, or
interest), other than payment thereof in Federal or other immediately
available funds, or (ii) the Company or any other Person might have to the
performance or observance of any of the provisions of the Notes, the Note
Agreement or any other agreement, whether through the satisfaction or
purported satisfaction by the Company or any other Person of its debts due
to any cause such as bankruptcy, insolvency, receivership, merger,
consolidation, reorganization, dissolution, liquidation, winding-up or
otherwise; or
(13) any act or failure to act with regard to the Notes, the Note
Agreement, this Guaranty or any other agreement or anything which might
vary the risk of any Guarantor or any other Person; or
(14) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, any Guarantor or any other Person in
respect of the obligations of any Guarantor or other Person under this
Guaranty or any other agreement;
provided that the specific enumeration of the above-mentioned acts, failures or
omissions shall not be deemed to exclude any other acts, failures or omissions,
though not specifically mentioned above, it being the purpose and intent of this
Guaranty and the parties hereto that the obligations of each Guarantor shall be
absolute and unconditional and shall not be discharged, impaired or varied
except by the payment of the principal of, premium, if any, and interest on the
Notes in accordance with their respective terms whenever the same shall become
due and payable as in the Notes provided, at the place specified in and all in
the manner and with the effect provided in the Notes and the Note Agreement, as
each may be amended or modified from time to time. Without limiting the
foregoing, it is understood that repeated and successive demands may be made and
recoveries may be had hereunder as and when, from time to time, the Company
shall default under or in respect of the terms of the Notes or the Note
Agreement and that notwithstanding recovery hereunder for or in respect of any
given default or defaults by the Company under the Notes or the Note Agreement,
this Guaranty shall remain in full force and effect and shall apply to each and
every subsequent default.
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(d) All rights of any Holder may be transferred or assigned at any time
and shall be considered to be transferred or assigned at any time or from time
to time upon the transfer of such Note whether with or without the consent of or
notice to the Guarantors under this Guaranty or to the Company.
(e) To the extent of any payments made under this Guaranty, the Guarantors
shall be subrogated to the rights of the Holder or Holders upon whose Notes such
payment was made, but each Guarantor covenants and agrees that such right of
subrogation shall be junior and subordinate in right of payment to the prior
indefeasible final payment in cash in full of all amounts due and owing by the
Company with respect to the Notes and the Note Agreement and by the Guarantors
under this Guaranty, and the Guarantors shall not take any action to enforce
such right of subrogation, and the Guarantors shall not accept any payment in
respect of such right of subrogation, until all amounts due and owing by the
Company under or in respect of the Notes and the Note Agreement and all amounts
due and owing by the Guarantors hereunder have indefeasibly been finally paid in
cash in full. If any amount shall be paid to any Guarantor in violation of the
preceding sentence at any time prior to the later of the indefeasible payment in
cash in full of the Notes and all other amounts payable under the Notes, the
Note Agreement and this Guaranty, such amount shall be held in trust for the
benefit of the Holders and shall forthwith be paid to the Holders to be credited
and applied to the amounts due or to become due with respect to the Notes and
all other amounts payable under the Note Agreement and this Guaranty, whether
matured or unmatured.
(f) Each Guarantor agrees that to the extent the Company or any other
Person makes any payment on any Note, which payment or any part thereof is
subsequently invalidated, voided, declared to be fraudulent or preferential, set
aside, recovered, rescinded or is required to be retained by or repaid to a
trustee, receiver, or any other Person under any bankruptcy code, common law, or
equitable cause, then and to the extent of such payment, the obligation or the
part thereof intended to be satisfied shall be revived and continued in full
force and effect with respect to the Guarantors' obligations hereunder, as if
said payment had not been made. The liability of the Guarantors hereunder shall
not be reduced or discharged, in whole or in part, by any payment to any Holder
from any source that is thereafter paid, returned or refunded in whole or in
part by reason of the assertion of a claim of any kind relating thereto,
including, but not limited to, any claim for breach of contract, breach of
warranty, preference, illegality, invalidity, or fraud asserted by any account
debtor or by any other Person.
(g) No Holder shall be under any obligation: (1) to marshall any assets in
favor of the Guarantors or in payment of any or all of the liabilities of the
Company under or in respect of the Notes or the obligations of the Guarantors
hereunder or (2) to pursue any other remedy that the Guarantors may or may not
be able to pursue themselves and that may lighten the Guarantors' burden, any
right to which each Guarantor hereby expressly waives.
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SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE GUARANTORS.
Each Guarantor represents and warrants to each Holder that:
(a) Such Guarantor is a corporation or other legal entity duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization, and is duly qualified as a foreign corporation or other legal
entity and is in good standing in each jurisdiction in which such qualification
is required by law, other than those jurisdictions as to which the failure to be
so qualified or in good standing could not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on (1) the business,
operations, affairs, financial condition, assets, properties or prospects of
such Guarantor and its subsidiaries, taken as a whole, or (2) the ability of
such Guarantor to perform its obligations under this Guaranty, or (3) the
validity or enforceability of this Guaranty (herein in this Section 5, a
"Material Adverse Effect"). Such Guarantor has the power and authority to own or
hold under lease the properties it purports to own or hold under lease, to
transact the business it transacts and proposes to transact, to execute and
deliver this Guaranty and to perform the provisions hereof.
(b) Each subsidiary of such Guarantor is a corporation or other legal
entity duly organized, validly existing and in good standing under the laws of
its jurisdiction of organization, and is duly qualified as a foreign corporation
or other legal entity and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to which the
failure to be so qualified or in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. Each
subsidiary of such Guarantor has the power and authority to own or hold under
lease the properties it purports to own or hold under lease and to transact the
business it transacts and proposes to transact.
(c) This Guaranty has been duly authorized by all necessary action on the
part of such Guarantor, and this Guaranty constitutes a legal, valid and binding
obligation of such Guarantor enforceable against such Guarantor in accordance
with its terms, except as such enforceability may be limited by (1) applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and (2) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
(d) This Guaranty, the documents, certificates or other writings
identified in Schedule 5.3 to the Note Agreement and the financial statements
listed in Schedule 5.5 to the Note Agreement, taken as a whole, do not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading in light of the
circumstances under which they were made. Except as disclosed in the Memorandum
or as expressly described in Schedule 5.3 to the Note Agreement, or in one of
the documents, certificates or other writings identified therein, or in the
financial statements listed in Schedule 5.5 to the Note Agreement, since
December 31, 1996, there has been no adverse Material change in the financial
condition, operations, business, properties or prospects of such Guarantor or
any of its subsidiaries, taken as a whole.
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<PAGE> 11
(e) The execution, delivery and performance by such Guarantor of this
Guaranty will not (1) contravene, result in any breach of, or constitute a
default under, or result in the creation of any Lien in respect of any property
of such Guarantor or any of its subsidiaries under any indenture, mortgage, deed
of trust, loan, purchase or credit agreement, lease, charter document or by-law,
or any other agreement or instrument to which such Guarantor or any of its
subsidiaries is bound or by which such Guarantor or any of its subsidiaries or
any of their respective properties may be bound or affected, (2) conflict with
or result in a breach of any of the terms, conditions or provisions of any
order, judgment, decree, or ruling of any court, arbitrator or Governmental
Authority applicable to such Guarantor or any of its subsidiaries or (3) violate
any provision of any statute or other rule or regulation of any Governmental
Authority applicable to the such Guarantor or any of its subsidiaries.
(f) No consent, approval or authorization of, or registration, filing or
declaration with, any Governmental Authority is required in connection with the
execution, delivery or performance by such Guarantor of this Guaranty.
(g) (1) Except as disclosed in Schedule 5.8 to the Note Agreement, there
are no actions, suits or proceedings pending or, to the knowledge of such
Guarantor, threatened against or affecting such Guarantor or any of its
subsidiaries or any property of such Guarantor or any of its subsidiaries in any
court or before any arbitrator of any kind or before or by any Governmental
Authority that, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect.
(2) Neither such Guarantor nor any of its subsidiaries is in default
under any term of any agreement or instrument to which it is a party or by which
it is bound, or any order, judgment, decree or ruling of any court, arbitrator
or Governmental Authority or is in violation of any applicable law, ordinance,
Rule or regulation (including without limitation Environmental Laws) of any
Governmental Authority, which default or violation, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
(h) Such Guarantor and its subsidiaries have filed all income tax returns
that are required to have been filed in any jurisdiction, and have paid all
taxes shown to be due and payable on such returns and all other taxes and
assessments payable by them, to the extent such taxes and assessments have
become due and payable and before they have become delinquent, except for any
taxes and assessments (1) the amount of which is not individually or in the
aggregate material to the business, operations, affairs, financial condition,
assets, properties or prospects of such Guarantor and its subsidiaries taken as
a whole (herein in this Section 5, "Material") or (2) the amount, applicability
or validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which such Guarantor or one of its subsidiaries,
as the case may be, has established adequate reserves in accordance with GAAP.
Such Guarantor knows of no basis for any other tax or assessment that could
reasonably be expected to have a Material Adverse Effect. The charges, accruals
and reserves on the books of such Guarantor and its subsidiaries in respect of
Federal, state or other taxes for all fiscal periods are adequate. The Federal
income tax liabilities of such
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<PAGE> 12
Guarantor and its subsidiaries have been determined by the Internal Revenue
Service and paid for all fiscal years up to and including the fiscal year ended
December 31, 1992.
(i) Such Guarantor and its subsidiaries have good and sufficient title to
their respective properties that individually or in the aggregate are Material,
including all such properties reflected in the most recent audited balance sheet
referred to in Section 5.5 of the Note Agreement or purported to have been
acquired by such Guarantor or any of its subsidiaries after said date (except as
sold or otherwise disposed of in the ordinary course of business), in each case
free and clear of Liens prohibited by the Note Agreement. All leases that
individually or in the aggregate are Material are valid and subsisting and are
in full force and effect in all material respects.
(j) Except as disclosed in Schedule 5.11 to the Note Agreement,
(1) such Guarantor and its subsidiaries own or possess all Material
licenses, permits, franchises, authorizations, patents, copyrights, service
marks, trademarks and trade names, or rights thereto;
(2) to the best knowledge of such Guarantor, no product of such
Guarantor or any of its subsidiaries infringes in any material respect any
license, permit, franchise, authorization, patent, copyright, service mark,
trademark, trade name or other right with respect thereto owned by any other
Person; and
(3) to the best knowledge of such Guarantor, there is no Material
violation by any Person of any right of such Guarantor or any of its
subsidiaries with respect to any patent, copyright, service mark, trademark,
trade name or other right with respect thereto owned or used by such Guarantor
or any of its subsidiaries.
(k) (1) Such Guarantor and each ERISA Affiliate have operated and
administered each Plan in compliance with all applicable laws in all material
respects. Neither such Guarantor nor any ERISA Affiliate has incurred any
Material liability pursuant to Title I or IV of ERISA or the penalty or excise
tax provisions of the Code relating to employee benefit plans (as defined in
Section 3 of ERISA), and no event, transaction or condition has occurred or
exists that could reasonably be expected to result in the incurrence of any such
Material liability by such Guarantor or any ERISA Affiliate, or in the
imposition of any Material Lien on any of the rights, properties or assets of
such Guarantor or any ERISA Affiliate, in either case pursuant to Title I or IV
of ERISA or to such penalty or excise tax provisions or to Section 401(a)(29) or
412 of the Code.
(2) The present value of the aggregate benefit liabilities under each
of the Plans (other than Multiemployer Plans), determined as of the end of such
Plan's most recently ended plan year on the basis of the actuarial assumptions
specified for funding purposes in such Plan's most recent actuarial valuation
report, did not exceed the aggregate current value of the assets of such Plan
allocable to such benefit liabilities by more than $5,000,000 in the aggregate
for all Plans. The term "benefit liabilities" has the meaning
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specified in Section 4001 of ERISA and the terms "current value" and "present
value" have the meanings specified in Section 3 of ERISA.
(3) Such Guarantor and its ERISA Affiliates have not incurred
Material withdrawal liabilities (and are not subject to Material contingent
withdrawal liabilities) under Section 4201 or 4204 of ERISA in respect of
Multiemployer Plans.
(4) The expected postretirement benefit obligation (determined as of
the last day of such Guarantor's most recently ended fiscal year in accordance
with Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by Section 4980B of
the Code) of such Guarantor and its subsidiaries is not Material.
(5) The execution and delivery of this Guaranty will not involve any
transaction that is subject to the prohibitions of Section 406 of ERISA or in
connection with which a tax could be imposed pursuant to Section
4975(c)(l)(A)-(D) of the Code. The representation by such Guarantor in the first
sentence of this Section 5(k)(5) is made in reliance upon and subject to the
accuracy of each Holder's representation in Section 6.2 of the Note Agreement as
to the source of the funds to be used to pay the purchase price of the Notes to
be purchased by such Holder.
(l) Neither such Guarantor nor any of its subsidiaries is an "investment
company" registered or required to be registered under the Investment Company
Act of 1940, as amended, or is subject to regulation under the Public Utility
Holding Company Act of 1935, as amended, the ICC Termination Act of 1995, as
amended, or the Federal Power Act, as amended.
(m) Neither such Guarantor nor any of its subsidiaries has knowledge of
any Material claim or has received any notice of any Material claim, and no
proceeding has been instituted raising any Material claim against such Guarantor
or any of its subsidiaries or any of their respective real properties now or
formerly owned, leased or operated by any of them or other assets, alleging any
damage to the environment or violation of any Environmental Laws. Except as
otherwise disclosed in Schedule 5.18 to the Note Agreement:
(1) neither such Guarantor nor any of its subsidiaries has knowledge
of any facts which would give rise to any Material claim, public or
private, or Material violation of Environmental Laws or damage to the
environment emanating from, occurring on or in any way related to real
properties now or formerly owned, leased or operated by any of them or to
other assets or their use;
(2) neither the Company nor any of its subsidiaries (i) has stored
any Hazardous Materials on real properties now or formerly owned, leased or
operated by any of them or (ii) has disposed of any Hazardous Materials in
a manner contrary to any Environmental Laws; in each case in any manner
that could reasonably be expected to result in a Material Adverse Effect;
and
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<PAGE> 14
(3) all buildings on all real properties now owned, leased or
operated by such Guarantor or any of its subsidiaries are in material
compliance with applicable Environmental Laws.
(n) Such Guarantor, when viewed on a consolidated basis with the Company
and its other Subsidiaries, is solvent, has capital not unreasonably small in
relation to its business or any contemplated or undertaken transaction and has
assets having a value both at fair valuation and at present fair salable value
greater than the amount required to pay its debts as they become due and greater
than the amount that will be required to pay its probable liability on its
existing debts as they become absolute and matured. Such Guarantor does not
intend to incur, or believe or should have believed that it will incur, debts
beyond its ability to pay such debts as they become due. Such Guarantor, when
viewed on a consolidated basis with the Company and its other Subsidiaries, will
not be rendered insolvent by the execution and delivery of, and performance of
its obligations under, this Guaranty. Such Guarantor does not intend to hinder,
delay or defraud its creditors by or through the execution and delivery of, or
performance of its obligations under, this Guaranty.
SECTION 6. AMENDMENTS, WAIVERS AND CONSENTS.
(a) This Guaranty may be amended, and the observance of any term hereof
may be waived (either retroactively or prospectively), with (and only with) the
written consent of each Guarantor and the Required Holders, except that (1) no
amendment or waiver of any of the provisions of Sections 3, 4 or 5, or any
defined term (as it is used therein), will be effective as to any Holder unless
consented to by such Holder in writing, and (2) no such amendment or waiver may,
without the written consent of each Holder, (i) change the percentage of the
principal amount of the Notes the Holders of which are required to consent to
any such amendment or waiver, or (ii) amend Section 2 or this Section 6.
(b) The Guarantors will provide each Holder (irrespective of the amount of
Notes then owned by it) with sufficient information, sufficiently far in advance
of the date a decision is required, to enable such Holder to make an informed
and considered decision with respect to any proposed amendment, waiver or
consent in respect of any of the provisions hereof. The Guarantors will deliver
executed or true and correct copies of each amendment, waiver or consent
effected pursuant to the provisions of this Section 6 to each Holder promptly
following the date on which it is executed and delivered by, or receives the
consent or approval of, the requisite Holders.
(c) The Company will not directly or indirectly pay or cause to be paid
any remuneration, whether by way of fee or otherwise, or grant any security, to
any Holder as consideration for or as an inducement to the entering into by any
Holder of any waiver or amendment of any of the terms and provisions hereof
unless such remuneration is concurrently paid, or security is concurrently
granted, on the same terms, ratably to each Holder even if such Holder did not
consent to such waiver or amendment.
(d) Any amendment or waiver consented to as provided in this Section 6
applies equally to all Holders and is binding upon them and upon each future
holder and upon the
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<PAGE> 15
Guarantors. No such amendment or waiver will extend to or affect any obligation,
covenant or agreement not expressly amended or waived or impair any right
consequent thereon. No course of dealing between the Guarantors and any Holder
nor any delay in exercising any rights hereunder shall operate as a waiver of
any rights of any Holder. As used herein, the term "this Guaranty" and
references thereto shall mean this Guaranty as it may from time to time be
amended or supplemented.
(e) Solely for the purpose of determining whether the Holders of the
requisite percentage of the aggregate principal amount of Notes then outstanding
approved or consented to any amendment, waiver or consent to be given under this
Guaranty, Notes directly or indirectly owned by any Guarantor, the Company or
any of their respective subsidiaries or Affiliates shall be deemed not to be
outstanding.
SECTION 7. NOTICES.
All notices and communications provided for hereunder shall be in writing
and sent (a) by telefacsimile if the sender on the same day sends a confirming
copy of such notice by a recognized overnight delivery service (charges
prepaid), or (b) by registered or certified mail with return receipt requested
(postage prepaid), or (c) by a recognized overnight delivery service (with
charges prepaid). Any such notice must be sent:
(1) if to an Initial Note Purchaser or such Initial Note Purchaser's
nominee, to such Initial Note Purchaser or such Initial Note Purchaser's
nominee at the address specified for such communications below such Initial
Note Purchaser's signature at the foot of the Note Agreement, or at such
other address as such Initial Note Purchaser or such Initial Note
Purchaser's nominee shall have specified to any Guarantor or the Company in
writing,
(2) if to any other Holder, to such Holder at such address as such
Holder shall have specified to any Guarantor or the Company in writing, or
(3) if to any Guarantor, to such Guarantor c/o the Company at its
address set forth at the beginning of the Note Agreement to the attention
of Chief Financial Officer, or at such other address as such Guarantor
shall have specified to the Holders in writing.
Notices under this Section 7 will be deemed given only when actually received.
SECTION 8. MISCELLANEOUS.
(a) No remedy herein conferred upon or reserved to any Holder is intended
to be exclusive of any other available remedy or remedies, but each and every
such remedy shall be cumulative and shall be in addition to every other remedy
given under this Guaranty now or hereafter existing at law or in equity. No
delay or omission to exercise any right or power accruing upon any default,
omission or failure of performance hereunder shall
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<PAGE> 16
impair any such right or power or shall be construed to be a waiver thereof but
any such right or power may be exercised from time to time and as often as may
be deemed expedient. In order to entitle any Holder to exercise any remedy
reserved to it under the Guaranty, it shall not be necessary for such Holder to
physically produce its Note in any proceedings instituted by it or to give any
notice, other than such notice as may be herein expressly required.
(b) The Guarantors will pay all sums becoming due under this Guaranty by
the method and at the address specified for such purpose below each Holder's
signature at the foot of the Note Agreement, or by such other method or at such
other address as any Holder shall have from time to time specified to the
Guarantors in writing for such purpose, without the presentation or surrender of
this Guaranty or any Note.
(c) Any provision of this Guaranty that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
(d) If the whole or any part of this Guaranty shall be now or hereafter
become unenforceable against any one or more of the Guarantors for any reason
whatsoever or if it is not executed by any one or more of the Guarantors, this
Guaranty shall nevertheless be and remain fully binding upon and enforceable
against each other Guarantor as if it had been made and delivered only by such
other Guarantors.
(e) This Guaranty shall be binding upon each Guarantor and its successors
and assigns and shall inure to the benefit of each Holder and its successors and
assigns so long as its Notes remain outstanding and unpaid.
(f) This Guaranty may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
(g) This Guaranty shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the law of the State of Illinois
excluding choice-of-law principles of the law of such State that would require
the application of the laws of a jurisdiction other than such State.
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<PAGE> 17
IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be duly
executed by an authorized representative as of this nineteenth day of March,
1998.
GRANITE CONSTRUCTION COMPANY
By /s/ David H. Watts
Its President
By /s/ Michael Futch
Its Vice President
WILCOTT CORPORATION
By /s/ David H. Watts
Its President
By /s/ Michael Futch
Its Vice President
DESERT AGGREGATES INCORPORATED
By /s/ Raymond E. Johnson
Its President
By /s/ Michael L. Thomas
Its Vice President
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<PAGE> 18
GRANITE SR 91 CORPORATION
By /s/ David H. Watts
Its President
By /s/ Michael Futch
Its Vice President
INTERMOUNTAIN SLURRY SEAL, INC.
By /s/ James H. Roberts
Its President
By /s/ Michael L. Thomas
Its Vice President
POZZOLAN PRODUCTS COMPANY
By /s/James H. Roberts
Its President
By /s/ Michael L. Thomas
Its Vice President
GILC INCORPORATED
By /s/ William E. Barton
Its President
By /s/ Michael Futch
Its Vice President
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<PAGE> 19
GRANITE SR 91, L.P.
By: Granite SR 91 Corporation, its sole
General Partner
By /s/ David H. Watts
Its President
By /s/ Michael Futch
Its Vice President
BEAR RIVER CONTRACTORS
By /s/ James H. Roberts
Its President
By /s/ Michael L. Thomas
Its Vice President
GILC, L.P.
By: GILC Incorporated, its sole General
Partner
By /s/ William E. Barton
Its President
By /s/ Michael Futch
Its Vice President
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<PAGE> 20
G.G.&R., INC.
By /s/ David H. Watts
Its President
By /s/ Michael Futch
Its Vice President
GTC, INC.
By /s/ William E. Barton
Its President
By /s/ Michael Futch
Its Vice President
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<PAGE> 21
SUBSIDIARY GUARANTY SUPPLEMENT
To the Holders of the 6.54% Senior Notes
due March 15, 2010
of Granite Construction Incorporated
(the "Company")
Ladies and Gentlemen:
WHEREAS, in order to refinance existing indebtedness and for general
corporate purposes, the Company issued its 6.54% Senior Notes, due March 15,
2010 in the aggregate principal amount of $60,000,000 (the "Notes") pursuant to
that certain Note Purchase Agreement dated as of March 1, 1998 (the "Note
Agreement") between the Company and each of the purchasers named on Schedule A
attached to said Note Agreement (the "Initial Note Purchasers").
WHEREAS, as a condition precedent to their purchase of the Notes, the
Initial Note Purchasers required that certain from time to time subsidiaries of
the Company enter into a Subsidiary Guaranty Agreement as security for the Notes
(the "Subsidiary Guaranty").
Pursuant to Section 9.6 of the Note Agreement, the Company has agreed to
cause the undersigned, _____________, a corporation organized under the laws of
_______________ (the "Additional Guarantor"), to join in the Subsidiary
Guaranty. In accordance with the requirements of the Subsidiary Guaranty, the
Additional Guarantor desires to amend the definition of Guarantor (as the same
may have been heretofore amended) set forth in the Subsidiary Guaranty attached
hereto so that at all times from and after the date hereof, the Additional
Guarantor shall be jointly and severally liable as set forth in the Subsidiary
Guaranty for the obligations of the Company under the Note Agreement and Notes
to the extent and in the manner set forth in the Subsidiary Guaranty.
The undersigned is the duly elected _____________ of the Additional
Guarantor, a subsidiary of the Company, and is duly authorized to execute and
deliver this Guaranty Supplement to each of you. The execution by the
undersigned of this Guaranty Supplement shall evidence its consent to and
acknowledgment and approval of the terms set forth herein and in the Subsidiary
Guaranty and by such execution the Additional Guarantor shall be deemed to have
made in favor of the Holders the representations and warranties set forth in
Section 5 of the Subsidiary Guaranty.
Upon execution of this Subsidiary Guaranty Supplement, the Subsidiary
Guaranty shall be deemed to be amended as set forth above. Except as amended
herein, the terms and provisions of the Subsidiary Guaranty are hereby ratified,
confirmed and approved in all respects.
EXHIBIT A
(to Subsidiary Guaranty Agreement)
<PAGE> 22
Any and all notices, requests, certificates and other instruments
(including the Notes) may refer to the Subsidiary Guaranty without making
specific reference to this Subsidiary Guaranty Supplement, but nevertheless all
such references shall be deemed to include this Subsidiary Guaranty Supplement
unless the context shall otherwise require.
Dated: , 199 .
---------------------------- --
[NAME OF ADDITIONAL GUARANTOR]
By
------------------------------------
Its
A-2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED BALANCE SHEETS, CONDENSED CONSOLIDATED STATEMENTS OF INCOME, AND
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FORM 10-K, DECEMBER 31, 1998.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 62,470
<SECURITIES> 58,954
<RECEIVABLES> 175,447
<ALLOWANCES> 699
<INVENTORY> 12,773
<CURRENT-ASSETS> 370,808
<PP&E> 534,582
<DEPRECIATION> 328,845
<TOTAL-ASSETS> 626,571
<CURRENT-LIABILITIES> 228,360
<BONDS> 69,137
0
0
<COMMON> 277
<OTHER-SE> 301,005
<TOTAL-LIABILITY-AND-EQUITY> 626,571
<SALES> 1,226,100
<TOTAL-REVENUES> 1,226,100
<CGS> 1,073,008
<TOTAL-COSTS> 1,156,842
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,551
<INCOME-PRETAX> 75,011
<INCOME-TAX> 28,504
<INCOME-CONTINUING> 46,507
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 46,507
<EPS-PRIMARY> 1.75
<EPS-DILUTED> 1.70
</TABLE>
