UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[ ] 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 0-20704
ACX TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Colorado 84-1208699
(State of incorporation) (IRS Employer Identification No.)
4455 Table Mountain Drive, Golden, Colorado 80403
(Address of principal executive offices) (Zip Code)
(303) 215-4600
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
None
Name of each exchange on which registered
None
Securities registered pursuant to Section 12(g) of the Act:
$.01 par value Common Stock
(Title of class)
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. [ ]
As of March 22, 2000, there were 28,777,284 shares of common
stock outstanding. The aggregate market value of such shares,
other than shares held by persons who may be deemed affiliates of
the Registrant, was $67,594,023.
DOCUMENTS INCORPORATED BY REFERENCE
Registrant's Proxy Statement filed in connection with the 2000
Annual Meeting of Shareholders is incorporated by reference into
Part III.
ACX TECHNOLOGIES, INC.
Annual Report on Form 10-K
December 31, 1999
TABLE OF CONTENTS
Page
No.
PART I
Item 1. Business 3
Item 2. Properties 10
Item 3. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security
Holders 11
PART II
Item 5. Market for the Registrant's Common Stock
and Related Stockholder Matters 12
Item 6. Selected Financial Data 13
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 14
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk 27
Item 8. Financial Statements and Supplementary Data 28
Item 9. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure 60
PART III
Item 10. Directors and Executive Officers of the
Registrant 60
Item 11. Executive Compensation 60
Item 12. Security Ownership of Certain Beneficial
Owners and Management 60
Item 13. Certain Relationships and Related
Transactions 60
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K 61
ACX TECHNOLOGIES, INC.
Unless the context indicates otherwise, references herein to
the Company include ACX Technologies, Inc. (ACX Technologies) and
its subsidiaries, including Graphic Packaging Corporation and its
subsidiaries (collectively referred to as Graphic Packaging),
Golden Technologies Company, Inc. and its subsidiaries
(collectively referred to as Golden Technologies) and Golden
Aluminum Company and its subsidiaries (collectively referred to
as Golden Aluminum) included prior to March 1997, and from August
23 through November 5, 1999. On December 31, 1999, the Company
spun-off Coors Porcelain Company and its subsidiaries
(collectively referred to as CoorsTek). Unless otherwise noted,
references to the Company exclude CoorsTek.
PART I
ITEM 1. BUSINESS
(a) General Development of Business
The Company's principal executive offices are located at
4455 Table Mountain Drive, Golden, Colorado 80403. The Company's
telephone number is (303) 215-4600.
The Company, through its primary subsidiary Graphic
Packaging, is a manufacturer of packaging products used by
consumer product companies as primary packaging for their end-use
products. The Company's strategy is to maximize its competitive
position and growth opportunities in its core business, folding
cartons. Toward this end, over the past several years the
Company has acquired two significant folding carton businesses
and has disposed of several noncore businesses and under-
performing assets.
The Company was incorporated in Colorado in August 1992 as a
holding company for the packaging, ceramics, aluminum and
developmental businesses formerly owned by Adolph Coors Company
(ACCo). Effective December 27, 1992, ACCo distributed to its
shareholders all outstanding shares of the Company's stock. The
Company's initial years of operation included packaging,
ceramics, aluminum and various developmental businesses. Through
various acquisitions, divestitures, a spin-off and other
transactions, the Company is now strategically focused on the
folding carton segment of the packaging industry.
To better reflect the nature of the Company's new business
focus, the Company changed its ticker symbol on the New York
Stock Exchange to "GPK" and is asking shareholders to formally
change the Company's name to Graphic Packaging International
Corporation at its May 2000 annual shareholders' meeting.
CoorsTek Spin-Off
Effective December 31, 1999, ACX Technologies distributed to
its shareholders all the outstanding common stock of CoorsTek in
a tax-free spin-off transaction. One share of CoorsTek common
stock was distributed for every four shares of ACX Technologies
common stock owned. The tax basis allocation of costs for ACX
Technologies shares acquired pre-spin off is: ACX 55.56% and
CoorsTek 44.44%.
Recent Acquisitions
On August 2, 1999, the Company purchased the Fort James
packaging business, which included 12 folding carton converting
operations located throughout North America and a recycled
paperboard mill located in Kalamazoo, Michigan (the Kalamazoo
Mill) for approximately $849 million, including working capital
adjustments and acquisition costs. This business is a major
supplier of folding cartons to leading consumer product companies
for packaging food. The Kalamazoo Mill is currently being
offered for sale.
On January 14, 1998, the Company acquired Britton Group plc
(Britton) pursuant to a cash tender offer for approximately $420
million. Britton was an international packaging group operating
through two principal divisions: folding cartons and plastics.
The folding cartons division, Universal Packaging, is a
nonintegrated manufacturer of folding cartons in the United
States, with capabilities in design, printing and manufacturing
of multicolor folding cartons. The plastics division of Britton
(the Plastics Division), which was disposed of by the Company on
April 20, 1998, operated in the United Kingdom and included the
extrusion, conversion and printing of polyethylene into films and
bags for industrial customers. The Company realized
consideration of approximately $135 million on the sale of the
Plastics Division.
Recent Dispositions
On September 2, 1999, the Company sold its flexible
packaging plants for approximately $105 million in cash. On
August 3, 1999 the Company sold its interest in a solar energy
distribution business (Golden Genesis Company) for approximately
$21 million in cash, plus a $10 million repayment of intercompany
debt.
In 1996, the Board of Directors adopted a plan to dispose of
the Company's aluminum rigid container sheet business, Golden
Aluminum. On March 1, 1997, the sale of Golden Aluminum was
completed for $70.0 million, $10.0 million of which was received
at closing and $60.0 million of which was due by March 1999. As
part of the sale, the buyer had the right to return Golden
Aluminum to the Company in discharge of payment of the $60.0
million note. In December of 1998, the Company extended the due
date on the $60.0 million payment until September 1, 1999. The
initial payment of $10.0 million was nonrefundable. On August
23, 1999, the purchaser returned Golden Aluminum to the Company,
in accordance with the agreement, and the $60.0 million note was
cancelled. Golden Aluminum was subsequently sold to another
buyer on November 5, 1999 for approximately $41 million.
(b) Financial Information about Industry Segments, Foreign
Operations and Foreign Sales
Certain financial information for the Company's reportable
segments is included in the following summary. Discontinued
operations include the Kalamazoo Mill for the last five months of
1999 and CoorsTek for the years 1999, 1998 and 1997.
Depreciation
Net Operating And Capital
Sales Income Amortization Assets Expenditures
-------- --------- ------------ ---------- ------------
1999
Packaging $786,843 $38,992 $47,834 $1,156,385 $73,707
Other 44,562 2,103 618 19,699 1,568
-------- ------- ------- ---------- -------
Segment total 831,405 41,095 48,452 1,176,084 75,275
Corporate --- (10,479) 260 225,954 17
Discontinued
operations,
net assets --- --- 30,283 225,000 16,163
-------- ------- ------- ---------- -------
Consolidated
total 831,405 $30,616 $78,995 $1,627,038 $91,455
======== ======= ======= ========== =======
1998
Packaging $623,852 $38,232 $35,924 $539,039 $47,498
Other 67,925 (3,047) 1,270 56,905 3,384
-------- ------- ------- --------- -------
Segment total 691,777 35,185 37,194 595,944 50,882
Corporate --- (8,941) 336 101,359 690
Discontinued
operations,
net assets --- --- 19,977 148,719 26,891
-------- ------- ------- --------- -------
Consolidated
total $691,777 $26,244 $57,507 $846,022 $78,463
======== ======= ======= ========= =======
1997
Packaging $365,123 $42,655 $20,211 $210,024 $18,022
Other 61,138 (31,186) 3,451 81,443 9,068
-------- ------- ------- --------- -------
Segment total 426,261 11,469 23,662 291,467 27,090
Corporate --- (10,177) 337 148,258 311
Discontinued
operations,
net assets --- --- 18,664 203,155 28,812
-------- ------- ------- -------- -------
Consolidated
total $426,261 $1,292 $42,663 $642,880 $56,213
======== ======= ======= ========= =======
The results of the Company's Other business segment for
1997, 1998 and 1999 relate primarily to businesses which have
been sold as of December 31, 1999.
Corporate assets for 1999 consist primarily of a $200
million note receivable from CoorsTek as a result of the spin-
off, and debt issuance costs. In 1998 and 1997, corporate
assets include a $60 million note receivable from the sale of
Golden Aluminum, deferred taxes and certain properties.
Certain financial information regarding the Company's
domestic and foreign operations is included in the following
summary, which excludes discontinued operating segments. Long-
lived assets include plant, property and equipment, intangible
assets, and certain other non-current assets.
Net Long-Lived
(In thousands) Sales Assets
-------- ----------
1999
United States $779,527 $964,880
Canada 51,878 3,689
Other --- 2,694
-------- ----------
Total $831,405 $971,263
======== ==========
1998
United States $626,715 $401,579
Canada 57,079 34,807
Other 7,983 3,065
-------- ----------
Total $691,777 $439,451
======== ==========
1997
United States $357,795 $118,998
Canada 59,730 34,535
Other 8,736 3,732
-------- ----------
Total $426,261 $157,265
======== ==========
(c) Narrative Description of Operating Segments
Graphic Packaging
General: Graphic Packaging develops, manufactures and sells
value-added packaging products used by manufacturers as primary
packaging for their end-use products. Value-added packaging has
characteristics such as high-impact graphics; resistance to
abrasion, radiant heat and microwave management; and barriers to
moisture, gas penetration, solvent penetration and leakage.
Graphic Packaging began business with a single plant in 1974
as part of the vertical integration of Adolph Coors Company's
beer business operated through its subsidiary, Coors Brewing
Company. Since that time, Graphic Packaging has expanded its
product capabilities and geographic presence through plant
expansions and acquisitions. Sales to Coors Brewing Company
represented less than 13% of net sales in 1999.
Graphic Packaging acquired Universal Packaging in January
1998 followed by the acquisition of the Fort James packaging
business in August 1999. These two acquisitions added 18
converting facilities and the Kalamazoo Mill and complemented
Graphic Packaging's capabilities with processes such as web-fed
and sheet-fed printing, electron beam curing of inks and coatings
and rotary die cutting. The acquisitions have allowed Graphic
Packaging to expand into several new end-use markets and add to
its blue-chip customer list. Coincident with the acquisitions,
Graphic Packaging sold several noncore flexible packaging plants
in September 1999. As of December 31, 1999, Graphic Packaging
operated 23 converting facilities and the Kalamazoo Mill.
In December 1999, Graphic Packaging announced its intention
to offer the Kalamazoo Mill for sale as part of its plan to focus
on its core folding carton business. The Kalamazoo Mill is
included in discontinued operations. Also in December 1999,
Graphic Packaging announced the planned closure of two folding
carton facilities as part of its plan to reduce overhead without
impacting effective capacity. See related discussion regarding
asset impairment and restructuring charges in Management's
Discussion and Analysis of Financial Condition and Results of
Operations.
Markets and Products: The fiber-based product packaging
industry includes: paperboard packaging which consists of
corrugated products, folding cartons and rigid fiber boxes and
food service containers such as disposable clam-shells, plates
and cups, and flexible packaging such as printed and laminated
bags, overwraps and labels. Graphic Packaging competes in the
folding carton segment of the industry.
The U.S. folding carton industry is currently an estimated
$8 billion market that experienced an average annual growth rate
from 1987 to 1997 of 2%. Shipments from 1997 to 1998 declined 1%
and from 1998 to 1999 were flat. Over the last several years,
the major portion of Graphic Packaging's internal growth has come
from sales to Coors Brewing and customers in the detergent,
cereal, premium bar soap, quick service restaurant markets and
promotional packaging. In addition, the Universal Packaging and
the Fort James folding carton business acquisitions brought
Graphic Packaging significant positions in the dry and frozen
food markets.
In manufacturing value-added folding cartons, Graphic
Packaging uses an internally developed, patented composite
packaging technology, Composipac[TM] (Composipac), which provides
finished products with high quality graphics that have enhanced
abrasion protection and moisture, air or other special barrier
properties. Graphic Packaging's Composipac technology is
designed to meet the continuing specialized needs of its
beverage, powdered detergents, soap and promotional packaging
customers. This technology also provides Graphic Packaging with
the unique ability to cost effectively produce full web
lamination holographic cartons. Demand for holographic cartons
is growing in the toothpaste, promotional and other market
segments.
In addition, Graphic Packaging has been a leader in the
development and marketing of microwave packaging technology. The
Company's QwikWave[R] susceptor packaging provides browning and
crisping qualities for microwave foods. This is made possible
through the use of an ultra thin layer of aluminum that heats
directly when exposed to microwave power. Graphic Packaging has
added to the QwikWave[R] technology with packaging branded under
the MicroRite[R] name, which consists of a series of aluminum
circuits applied to paperboard that determine power distribution
in foods. Interactive foil technology allows controlled heating
that results in conventional oven quality in microwave time.
Strategy: Graphic Packaging's strategy is to maintain its
valued customer relationships and market leadership. It plans to
continue to do so by employing capital and resources to remain
the industry's low-cost producer of folding cartons while
continuing to invest in the future through research and
development. Leveraging its expanded sales force from the
acquisitions of Universal Packaging and the Fort James folding
carton business, Graphic Packaging emphasizes its ability to
provide innovative products with value-added characteristics that
stand out from its customers' competitors on the supermarket
shelves.
Manufacturing and Raw Materials: Graphic Packaging uses a
variety of raw materials such as paperboard, paper, inks,
aluminum foil, plastic films, plastic resins, adhesives and other
materials which are available from domestic and foreign
suppliers. Historically, Graphic Packaging has not experienced
difficulty in obtaining adequate supplies or raw materials and
difficulty is not anticipated in the future. While many sources
of each of these materials are available, Graphic Packaging
prefers to develop strategic long-standing alliances with
vendors, including the use of multi-year supply agreements, in
order to provide a guaranteed source of materials that satisfies
customer requirements while obtaining the best quality, service
and price. Business disruptions or financial difficulties of a
sole source supplier, which Graphic Packaging does not
anticipate, could have an adverse effect by increasing the cost
of these materials and causing delays in manufacturing while
other suppliers are being qualified.
Sales and Distribution: Products are sold primarily to well-
recognized consumer product manufacturers in North America.
Sales are made primarily through direct sales employees of
Graphic Packaging that work from offices located throughout the
United States and, to a lesser degree, through broker
arrangements with third parties. Graphic Packaging selling
activities are supported by its technical and development staff.
Sales to Kraft Foods, Inc. and affiliates under various
contracts accounted for approximately 20%, 15% and 4% of ACX
Technologies' consolidated sales for 1999, 1998 and 1997,
respectively. Approximately 13%, 17% and 27% of sales were to
Coors Brewing for the same years. A diverse customer base made
up of manufacturers of detergents, frozen and dry foods, soap,
tobacco producers and quick serve restaurants account for most of
the balance.
Most of Graphic Packaging's sales are made under sales
contracts at prices that are subject to periodic adjustment for
market price changes of raw materials and other costs. Products
are made in accordance with customer specifications. Graphic
Packaging had approximately $175 million in open orders in March
2000, as compared to approximately $122 million in March 1999.
The Company expects to ship most of the open orders by the end of
the second quarter of 2000. Total open orders and comparisons
vary because of a number of factors and are not necessarily
indicative of past or future operating results.
Competition: Graphic Packaging is subject to strong
competition in most markets it serves. The packaging industry
continues to experience intense pricing pressures. The
installation of state-of-the-art equipment by manufacturers has
intensified the competitive pricing situation. A relatively
small number of large competitors hold a significant portion of
the folding carton segment of the paperboard industry. Major
U.S. competitors include Smurfit-Stone Container Corporation,
Field Container Company L.P, The Mead Corporation, Gulf States
Paper Corporation, Westvaco, Rock-Tenn, Shorewood and
International Paper. Mergers and acquisitions have contributed
to a consolidation of the industry.
Product Development: Graphic Packaging's development staff
works directly with the sales and marketing personnel in meeting
with customers and pursuing new business. Graphic Packaging's
development efforts include, but are not limited to, extending
the shelf life of customers' products, reducing production costs,
enhancing the heat-managing characteristics of food packaging and
refining packaging appearance through new printing techniques and
materials. Potential new product development efforts are
expected to involve sift-proof cartons, linerless cartons, liquid
containment packaging, enhanced microwavable food containers and
other packaging innovations.
Other Businesses
The Company's other businesses have generally been sold or
reduced to investment holdings. The primary areas of focus of
the other businesses has been distribution of solar electric
systems (Golden Genesis); real estate development (Golden
Equities); and corn-wet milling (Golden Technologies). The
Company's interest in Golden Genesis was sold on August 3, 1999,
Golden Equities has disposed of the majority of its real estate
holdings, and the corn-wet milling operation was sold in January
1999. Therefore, Other segment information generally represents
the final operating results of businesses disposed of before the
end of 1999.
Discontinued Operations
Discontinued operations consists of three businesses:
ceramics (CoorsTek); aluminum (Golden Aluminum); and the recycled
paperboard mill (Kalamazoo Mill).
CoorsTek (formerly known as Coors Ceramics Company)
develops, manufactures and sells advanced technical products
across a wide range of product lines for a variety of
applications. It has been in business since 1911 and is the
largest U.S. owned, independent manufacturer of advanced
technical ceramics. CoorsTek was spun off as a separate public
company effective December 31, 1999.
Golden Aluminum produces rigid container sheet used in
making can lids, tabs and bodies for the beverage and food can
industry and other flat-rolled aluminum products used principally
in the building industry. The assets of Golden Aluminum were
sold on November 5, 1999.
The Kalamazoo Mill was acquired on August 2, 1999 as a part
of the Fort James packaging acquisition. The Kalamazoo Mill is a
producer of high quality coated recycled paperboard and is
believed to be the largest scale, lowest cost and most efficient
recycled paperboard facility in North America. In December 1999,
the Board of Directors adopted a plan to offer the Kalamazoo Mill
for sale. The Company is pursuing the sale of the Kalamazoo
Mill, as well as evaluating other strategic alternatives.
Dependence on Major Customers
Sales to Kraft Foods, Inc. and affiliates under various long-
term contracts accounted for approximately 20%, 15% and 4% of the
Company's consolidated sales for 1999, 1998 and 1997,
respectively; however, future sales may vary from historical
levels. In 1999, Graphic Packaging entered into a new five-year
supply agreement with Kraft Foods whereby Graphic Packaging will
supply one hundred percent of their folding carton needs for
specified product lines.
Sales to Coors Brewing accounted for approximately 13%, 17%
and 27% of the Company's consolidated sales for 1999, 1998 and
1997, respectively; however, future sales may vary from
historical levels. In 1998, Graphic Packaging entered into a new
five-year supply agreement with Coors Brewing to supply packaging
products. The new agreement includes stated quantity commitments
and requires annual repricing. In addition, this contract
provides for a three-year extension to be negotiated by December
31, 2000. The Company also sold aluminum products and refined
corn starch to Coors Brewing until the disposition of these
businesses on March 1, 1997 and January 31, 1999, respectively.
The loss of Kraft Foods or Coors Brewing as a customer in
the foreseeable future would have a material effect on the
Company's results of operations.
Research and Development
The Company's ability to compete effectively in the value-
added packaging market depends significantly on its continued and
timely development of innovative technology, materials, products
and processes using advanced and cost-efficient manufacturing
processes. Total research and development expenditures for the
Company were $3.8 million, $3.7 million and $13.1 million for
1999, 1998 and 1997, respectively. The Company's research and
development expenditures from 1997 to 1998 decreased
significantly as a percentage of net sales due to the
dispositions of noncore developmental businesses. The Company
believes the remaining expenditures will be adequate to meet the
strategic objectives of its packaging business.
Patents, Proprietary Rights and Licenses
The Company holds a substantial number of patents and
pending patent applications in the U.S. and in foreign countries.
This portfolio primarily consists of microwave and barrier
protection packaging and manufacturing methods. The patents and
processes are significant to Graphic Packaging's operations and
are supported by trademarks such as QwikWave[R], MicroRite[R]
and Composipac[TM]. In addition, the Company licenses certain
technology from third parties to enhance its technical
capabilities. The Company's policy generally is to pursue patent
protection that it considers necessary or advisable for the
patentable inventions and technological improvements of its
business and to defend its portfolio against third party
infringers. The Company also relies significantly on its trade
secrets, technical expertise and know-how, continuing
technological innovations and other means such as confidentiality
agreements with employees, consultants and customers to protect
and enhance its competitive positions within its industry.
The Company believes that its subsidiaries own or have the
right to use the proprietary technology and other intellectual
property necessary to their operations. Except as noted above,
the Company does not believe that its success is materially
dependent on the existence or duration of any individual patent,
trademark or license or related group thereof.
Environmental Matters
The Company's operations are subject to extensive regulation
by various federal, state, provincial and local agencies
concerning compliance with environmental control statutes and
regulations. These regulations impose limitations, including
effluent and emission limitations, on the discharge of materials
into the environment, as well as require the Company to obtain
and operate in compliance with the conditions of permits and
other governmental authorizations. Future regulations could
materially increase the Company's capital requirements and
certain operating expenses in future years.
In the ordinary course of business the Company is
continually upgrading and replacing its emission control
equipment. The estimated capital expenditure for these types of
projects for 2000 and 2001 is $200,000 per year.
Some of the Company's operations have been notified that
they may be potentially responsible parties (PRPs) under the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980 or similar laws with respect to the remediation of
certain sites where hazardous substances have been released into
the environment. The Company cannot predict with certainty the
total costs of remediation, its share of the total costs, the
extent to which contributions will be available from other
parties, the amount of time necessary to complete the remediation
or the availability of insurance. However, based on the
investigations to date, the Company believes that any liability
with respect to these sites would not be material to the
financial condition or results of operations of the Company,
without consideration for insurance recoveries. There can be no
certainty, however, that the Company will not be named as a PRP
at additional sites or be subject to other environmental matters
in the future or that the costs associated with those additional
sites or matters would not be material.
In addition, the Company has received demands arising out of
alleged contamination of various properties currently or formerly
owned by the Company. In management's opinion, none of these
claims will result in liability that would materially affect the
Company's financial position or results of operations.
Employees
As of March 22, 2000, the Company had approximately 5,000
full-time employees. Management considers its employee relations
to be good.
ITEM 2. PROPERTIES
The Company believes that its facilities are well maintained
and suitable for their respective operations. The table below
lists the Company's plants and most other physical properties and
their locations and general character:
Facility Location Character
- --------------------- ----------------------------- ---------------------
ACX Technologies:
Company Headquarters Golden, Colorado(1)
Graphic Packaging:
Company Offices Golden, Colorado(1)
Manufacturing Golden, Colorado(1) Converting/Labels
Manufacturing Boulder, Colorado(2)(3)(5) Converting Operations
Manufacturing Lawrenceburg, Tennessee Converting Operations
Manufacturing Garden Grove, California Converting Operations
Manufacturing Mississauga, Ontario(3) Converting Operations
Manufacturing Portland, Oregon(2)(4) Converting Operations
Manufacturing Wausau, Wisconsin Converting Operations
Manufacturing Charlotte, North Carolina Converting Operations
Manufacturing Kalamazoo, Michigan(5) Paperboard Mill
Manufacturing Malvern, Pennsylvania Converting Operations
Manufacturing Richmond, Virginia Converting Operations
Manufacturing/Offices Bow, New Hampshire Converting Operations
Manufacturing Centralia, Illinois Converting Operations
Manufacturing Ft. Smith, Arkansas Converting Operations
Manufacturing Mitchell, South Dakota Converting Operations
Manufacturing Lumberton, North Carolina Converting Operations
Manufacturing Saratoga Springs, New York(5) Converting Operations
Manufacturing Gordonsville, Tennessee Converting Operations
Manufacturing Kendallville, Indiana Converting Operations
Manufacturing Kalamazoo, Michigan Converting Operations
Manufacturing Menasha, Wisconsin Converting Operations
Manufacturing Newnan, Georgia Converting Operations
Manufacturing Perrysburg, Ohio Converting Operations
Golden Technologies:
Offices Golden, Colorado(2)(3)
(1) The Company headquarters/Graphic Packaging offices and
Golden, Colorado manufacturing facility are
located in the same building.
(2) Two facilities.
(3) Leased facilities.
(4) Two facilities, including one leased facility.
(5) Plants for sale or other disposition in 2000.
The operating facilities of the Company are not constrained
by capacity issues. From time to time the Company also leases
additional warehouse space and sales offices throughout North
America, on an as-needed basis.
ITEM 3. LEGAL PROCEEDINGS
In the ordinary course of business, the Company's
subsidiaries are subject to various pending claims, lawsuits and
contingent liabilities, including claims by current or former
employees relating to employment, sexual harassment or
termination. In each of these cases, the Company is defending
against them. The Company does not believe that disposition of
these matters will have a material adverse effect on the
Company's consolidated financial position or results of
operations. For specific information regarding environmental
legal proceedings, see Environmental Matters.
In July 1999, Cinergy Resources, Inc. and the Cincinnati
Gas & Electric company sued Graphic Packaging in Warren County,
Ohio Court of Common Pleas claiming approximately $651,000, plus
interest, fees and costs, for gas supplied to Graphic Packaging's
Franklin, Ohio flexible packaging facility. Cinergy claims that,
due to an improperly installed meter, Graphic Packaging was not
billed for actual gas consumption. Graphic Packaging denies
liability claiming that it has paid for the gas, and any errors
are due to Cinergy's actions. Although this case is in the
discovery stage, the Company does not believe the disposition of
this matter will have a material adverse effect on the Company's
financial position or results of operation.
In February 1998, a subsidiary of Golden Technologies was
sued for breach of a supply agreement to purchase thermal energy
for the Johnstown, Colorado corn-wet mill. The Company sold the
Johnstown, Colorado corn-wet mill in January 1999. Trial has
been set for October 2000, but the Company does not believe the
disposition will have a material adverse effect on the Company's
financial position or results of operation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders
during the fourth quarter ended December 31, 1999.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The Company's common stock was quoted on the New York Stock
Exchange under the symbol ACX through February 2000 when its
symbol was changed to GPK. The historical range of the high and
low sales price per share for each quarter of 1999 and 1998 was
as follows:
1999 1998
------------------ -------------------
High Low High Low
--------- ------- -------- ---------
First Quarter $15 1/2 $11 1/4 $25 $22 1/2
Second Quarter $16 1/4 $11 1/2 $25 3/4 $21 1/16
Third Quarter $15 15/16 $ 9 1/2 $22 3/4 $12 7/16
Fourth Quarter $11 1/8 $ 7 5/8 $15 3/16 $ 9 13/16
As a result of the spin-off of CoorsTek on December 31,
1999, the market price of the Company's stock opened on January
3, 2000 at $5.875 per share, versus the closing price of $10.6875
per share on December 31, 1999.
During 1999 and 1998, no cash dividends were paid by the
Company. At this time, the Company anticipates that it will
retain any earnings and that the Company will not pay dividends
to its shareholders in the foreseeable future. Also, the
Company's credit facilities currently prohibit the payment of any
cash dividends, and the Company expects this limitation to remain
in effect through 2001.
On March 22, 2000 there were approximately 2,400
shareholders of record of the Company's common stock.
ITEM 6. SELECTED FINANCIAL DATA
Financial Highlights - Five Year Overview
In thousands, except
per share and
ratio data 1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
Summary of Operations
Net sales $831,405[a] $691,777[a] $426,261 $436,028 $389,976
-------- -------- -------- -------- --------
Gross profit $123,647 $124,244 $93,608 $80,393 $72,658
Selling, general and
administrative
expenses[b] $85,218 $76,609 $70,436 $57,319 $54,770
Asset impairment and
restructuring
charges[c] 7,813 21,391 21,880 34,642 2,297
-------- -------- -------- -------- --------
Operating income (loss) $30,616 $26,244 $1,292 ($11,568) $15,591
-------- -------- -------- -------- --------
Income (loss) from
continuing operations $21,518[f] $5,453 ($2,272)($13,793) $2,284
-------- -------- -------- -------- --------
Income (loss) from
discontinued
operations[d] $6,073 $15,812 $29,988 ($78,231) $21,587
-------- -------- -------- -------- --------
Extraordinary loss on
early extinguishment
of debt, net of tax ($2,332) --- --- --- ---
-------- -------- -------- -------- --------
Net income (loss) $25,259 $21,265 $27,716 ($92,024) $23,871
- -------------------------------------------------------------------------
Per basic share of
common stock:
Continuing
operations $0.76 $0.19 ($0.08) ($0.49) $0.09
Discontinued
operations $0.21 $0.56 $1.07 ($2.81) $0.80
Extraordinary loss ($0.08) --- --- --- ---
-------- -------- -------- -------- --------
Net income (loss) $0.89 $0.75 $0.99 ($3.30) $0.89
-------- -------- -------- -------- --------
Per diluted share of
common stock:
Continuing
operations $0.75 $0.19 ($0.08) ($0.49) $0.08
Discontinued
operations $0.21 $0.54 $1.04 ($2.81) $0.79
Extraordinary loss ($0.08) --- --- --- ---
-------- -------- -------- -------- --------
Net income (loss) $0.88 $0.73 $0.96 ($3.30) $0.87
- -------------------------------------------------------------------------
Financial Position
Working capital,
excluding current
maturities of debt $292,774 $238,844 $158,551 $154,626 $168,801
Total assets $1,627,038[e] $846,022 $642,880 $623,520 $726,676
Current maturities
of debt $400,000[e] $86,300 --- --- ---
Long-term debt $615,500 $183,000 $100,000 $100,000 $100,000
Shareholders' equity $423,310 $447,955 $430,531 $397,903 $488,374
- -------------------------------------------------------------------------
Other Information
Total debt to
capitalization 71% 38% 19% 20% 17%
Net book value per share
of common stock $14.81 $15.76 $15.17 $14.24 $18.14
- -------------------------------------------------------------------------
[a] Includes sales from ongoing Graphic Packaging business (i.e.,
excludes sales from the flexible packaging plants) of $708.2
million and $504.6 million in 1999 and 1998, respectively.
[b] Includes goodwill amortization of $11,533, $7,785, $3,209,
$2,224 and $2,162 for 1999, 1998, 1997, 1996 and 1995,
respectively.
[c] Asset impairment and restructuring charges resulted in a loss
per diluted share impact of $0.16, $0.44, $0.45, $0.73 and
$0.05 in 1999, 1998, 1997, 1996 and 1995, respectively.
[d] Discontinued operations include the spin-off of CoorsTek, the
Kalamazoo Mill and the sale of Golden Aluminum Company. The
income (loss) per diluted share for each business is as
follows:
1999 1998 1997 1996 1995
-------------------------------------
CoorsTek $0.54 $0.54 $1.04 $0.88 $1.06
Golden Aluminum Company ($0.22) --- --- ($3.63) ($0.27)
Kalamazoo Mill ($0.11) --- --- --- ---
[e] Reduced by $200 million on January 4, 2000 with proceeds from
the CoorsTek spin-off.
[f] Includes $30.2 million pre-tax gain (approximately $18 million,
net of tax) from sales of businesses.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General Overview
The Company, through its principal subsidiary Graphic
Packaging, is a manufacturer of packaging products used by
consumer product companies as primary packaging for their end-use
products. Over the past several years, and culminating with the
spin-off of CoorsTek on December 31, 1999, the Company has moved
from a diversified group of subsidiaries - each operating in
different markets - to a Company focused on the folding carton
segment of the packaging industry. By strategically disposing of
noncore businesses and underperforming assets; acquiring two
major businesses in the folding carton industry; and executing
rationalization plans, the Company has developed into a prominent
competitor in the folding carton industry.
The Selected Financial Data in Item 6 summarizes the
financial impact that the Company's acquisitions and dispositions
have had on consolidated operating results over the past five
years, and is primarily indicative of Graphic Packaging's results
after the recent dispositions and spin-off of CoorsTek and the
announcement of the intent to offer the Kalamazoo Mill for sale.
Detailed analysis of Graphic Packaging's contribution to the
Company's consolidated results over the past three years is
provided in the Results from Continuing Operations section below.
Net sales have more than doubled from 1995 to 1999 - with
the most pronounced increases occurring in 1998 (the year of the
Universal Packaging acquisition) and 1999 (the year of the Fort
James packaging business acquisition).
Gross profit margins, although reaching 22% in 1997,
averaged 18% in other years. Gross profit fluctuations from year-
to-year are generally due to integration issues when adding new
plant locations and customers; changes in product mix; changing
raw material costs; and pricing pressure due to increased
competition in the folding carton industry.
Selling, general and administrative expenses, excluding
goodwill amortization, have declined from 13% of sales in 1995 to
9% of sales in 1999. This is a reflection of the Company's
higher revenue base and restructuring efforts, particularly the
reduction of staff levels and administrative facilities. See
further discussion of the Company's restructuring activities for
the past three years below.
The Company has achieved operating income before asset
impairment and restructuring charges of approximately 5% of net
sales for the last five years despite the significant structural
changes taking place in the packaging industry and a change in
the Company's strategic focus. Income from continuing
operations, again after adding back asset impairment and
restructuring charges, has also remained consistent from year-to-
year at approximately 4-5% of net sales. A long-term goal of the
Company is to achieve operating income of 10% of net sales.
The Company's financial position and liquidity are discussed
in detail below. Generally, the Company's cash flow from
operations have sustained restructuring costs, capital
expenditures and debt service from year-to-year. Interest and
principal from additional borrowings used to finance the
acquisitions of Universal Packaging in 1998 and the Fort James
packaging business in 1999 will be reduced by cash generated from
operations and from future asset sales, including the sale or
other disposition of the Kalamazoo Mill.
This financial review presents the Company's operating
results for each of the three years in the period ended December
31, 1999, and its financial condition at December 31, 1999 and
1998. This review should be read in connection with the
information presented in the Consolidated Financial Statements
and the related notes thereto.
Results from Continuing Operations
Consolidated
Net Sales
Net sales for 1999 totaled $831.4 million, an increase of
$139.6 million or 20%, over 1998 sales of $691.8 million. Sales
from Graphic Packaging's ongoing businesses increased $203.6
million to $708.2 million in 1999. The August 2, 1999
acquisition of the Fort James packaging business provided the
increase in sales, which was partially offset by the sale of the
flexible packaging plants on September 2, 1999. Net sales for
1998 totaled $691.8 million, an increase of $265.5 million or
62%, over 1997 sales of $426.3 million. The January 14, 1998
acquisition of Universal Packaging accounted for the increase in
1998 net sales.
Net sales to Coors Brewing totaled $107.6 million in 1999, a
decrease of $12.3 million or 10%, over net sales of $119.9
million in 1998. The decrease is due to the disposition of the
Company's corn starch business in early 1999 and the five-year
packaging supply agreement that was renegotiated in 1998. Net
sales to Coors Brewing totaled $119.9 million in 1998, an
increase of $6.6 million or 6%, over net sales of $113.3 million
in 1997, due primarily to volume increases.
The Company had sales to customers outside the United
States, primarily in Canada, which accounted for 6%, 9% and 16%
of total sales during 1999, 1998 and 1997, respectively. The
decrease in foreign sales as a percentage of total sales in 1999
is attributable to the sale of several flexible packaging plants
in Canada during 1999. The decrease in foreign sales as a
percentage of total sales during 1998 is due to the acquisition
of Universal Packaging, which sells principally in the United
States.
Net sales of the Company's Other segment totaled $44.6
million, $67.9 million and $61.1 million in 1999, 1998 and 1997,
respectively. These sales accounted for approximately 5%, 10%
and 14% of the Company's consolidated sales for the same years.
The decreasing sales of the Other segment are due to the
Company's divestiture of the majority of these businesses. Sales
of the Other businesses are not expected to be material in 2000
and beyond.
Gross Profit
Consolidated gross profit was 15%, 18% and 22% of net sales
in 1999, 1998 and 1997, respectively. The decreases in 1999 and
1998 reflect recent trends in the packaging industry in terms of
changing raw material costs, coupled with pricing pressures due
to increased competition. The decrease in 1999 also reflects the
integration costs associated with the Fort James packaging
business acquisition. As discussed below, future improvements in
gross profit will depend upon management's ability to improve
cost efficiencies and to maintain profitable, long-term customer
relationships.
Selling, General and Administrative Expenses
Selling, general and administrative expenses, excluding
goodwill amortization, for 1999, 1998 and 1997 were $73.7
million, $68.8 million and $67.2 million, which represented 9%,
10% and 16% of net sales, respectively. The percentage decrease
in 1999 mainly reflects cost savings realized as a result of the
Company's restructuring efforts over the past three years and the
increased revenue base resulting from the Fort James packaging
business and Universal Packaging acquisitions. The decrease in
1998 is due to operating efficiencies gained with the Universal
Packaging acquisition and lower research and development costs
associated with the dispositions of the developmental businesses
held by ACX Technologies.
Operating Income
Consolidated operating income for 1999, excluding asset
impairment and restructuring charges, decreased to $38.4 million,
a decrease of 19% over 1998 operating income of $47.6 million
before asset impairment and restructuring charges. The principal
reasons for the decrease are the increased goodwill amortization
and integration costs associated with the Fort James packaging
business acquisition and declining gross profit margins.
Consolidated operating income, on the same basis, increased to
$47.6 million in 1998, a 105% increase from $23.2 million in
1997. This increase is due primarily to the January 1998
acquisition of Universal Packaging.
Operating Income from Continuing Operations by Segment
(In millions)
1999 1998 1997
----- ----- -----
Before asset impairment and
restructuring charges:
Graphic Packaging $46.8 $59.5 $44.8
Other businesses 2.1 (2.9) (11.4)
Corporate (10.5) (8.9) (10.2)
----- ----- -----
Operating income before asset
impairment and restructuring charges 38.4 47.7 23.2
Asset impairment and restructuring
charges:
Graphic Packaging (7.8) (21.3) (2.1)
Other businesses --- (0.1) (19.8)
----- ----- -----
Operating income after asset
impairment and restructuring
charges $30.6 $26.3 $1.3
===== ===== =====
Asset Impairment Charges
The Company recorded a total of $5.9 million, $19.4 million
and $16.6 million in asset impairment charges in 1999, 1998 and
1997, respectively. Goodwill impairment of $5.5 million was
included in the 1998 charge. The remainder of the 1998 charge
consisted of fixed asset impairments. The 1999 and 1997 charges
consisted entirely of fixed asset impairments as described below.
1999: Graphic Packaging recorded $5.9 million of asset
impairment charges in 1999 due to decisions to close its Boulder,
Colorado and Saratoga Springs, New York plants in 2000. The
Boulder, Colorado plant has been replaced by a new manufacturing
facility in Golden, Colorado which will use advanced equipment to
improve the production process. The Company expects to close the
Boulder plant in the third quarter of 2000. The Saratoga Springs
plant operates at higher overhead levels than other plants and
uses gravure press technology. Therefore, the decision was made
to sell the Saratoga Springs building; move the business to other
folding carton plants; and dispose of the gravure technology
presses at Saratoga Springs. Boulder writedowns totaled $2.9
million and Saratoga Springs writedowns totaled $3.0 million.
1998: Graphic Packaging recorded $18.5 million in asset
impairment charges in 1998. Deterioration of the performance at
certain flexible packaging facilities and increased competitive
conditions led management to review the carrying amounts of long-
lived assets and goodwill in conjunction with an overall
restructuring plan. Specifically, forecasted operating cash
flows did not support the carrying amount of certain long-lived
assets and goodwill at Graphic Packaging's Franklin, Ohio
operation. In addition, management decided to offer for sale
Graphic Packaging's Vancouver, British Columbia operation and
close a divisional office in North Carolina. Therefore, the long-
lived assets and related goodwill were written down to their
estimated market values.
The Company recorded net asset impairment charges of $0.9
million in its Other businesses during 1998. These charges
included a $1.0 million asset impairment charge to write down
long-lived assets of Solartec, S.A., a solar electric subsidiary
in Argentina. Since acquiring Solartec in November 1996,
operating cash flows were below original expectations. As a
result, the Company recorded this impairment to reduce the
carrying value of its investment in Solartec to its estimated
fair market value. In addition, the Company recorded a $0.4
million asset impairment charge related to the consolidation and
outsourcing of certain manufacturing activities at Golden
Genesis. As a result, certain long-lived assets became impaired
and were written down to their estimated market value. Also
during 1998, the Company sold certain equipment formerly used in
a biodegradable polymer project for approximately $0.5 million.
These assets had been previously written off as an asset
impairment, so the resulting gain on sale of these assets was
netted against the 1998 asset impairment charge.
1997: During 1997, the Company recorded a $16.6 million
asset impairment charge in its Other businesses when it adopted a
plan to limit future funding for a biodegradable polymer project.
This decision reduced expected future cash flows for this
activity to a level below the carrying value of the manufacturing
and intangible assets of this project.
Restructuring Charges
The Company recorded restructuring charges totaling $1.9
million, $2.0 million and $5.3 million in 1999, 1998 and 1997,
respectively. The following table summarizes accruals related to
these restructuring charges:
Corn
Biodegradable Syrup Graphic Graphic
Polymer Exit Exit Packaging Packaging
(In millions) Plan Plan Corporate Operations Other Total
------------- ----- --------- ---------- ----- -----
Balance,
December 31, 1996 $--- $--- $--- $--- $1.8 $1.8
1997 restructuring
charges 0.9 2.3 2.1 --- --- 5.3
Cash paid (0.5) (1.4) (0.2) --- (1.8) (3.9)
Non-cash expenses --- --- (0.2) --- --- (0.2)
----- ----- ---- ----- ---- -----
Balance,
December 31, 1997 0.4 0.9 1.7 --- --- 3.0
1998 restructuring
charges --- (0.8) --- 2.8 --- 2.0
Cash paid (0.4) (0.1) (1.7) (1.0) --- (3.2)
----- ----- ---- ----- ---- -----
Balance,
December 31, 1998 --- --- --- 1.8 --- 1.8
1999 restructuring
charges --- --- --- 1.9 --- 1.9
Cash paid --- --- --- (1.8) --- (1.8)
----- ----- ---- ----- ---- -----
Balance,
December 31, 1999 $--- $--- $--- $1.9 $--- $1.9
===== ===== ===== ====== ===== =====
1999: Graphic Packaging recorded a $1.9 million
restructuring charge pursuant to a plant rationalization plan
approved by the Company's Board of Directors in the fourth
quarter. The Company has instituted this plan to further its
goal of refining its focus on folding carton packaging and to
reduce headcount. All of the 1999 charge relates to severance,
primarily at the Lawrenceburg, Tennessee manufacturing plant. In
total, 14 administrative and 59 plant positions will be
eliminated at the Lawrenceburg, Tennessee plant at an estimated
cost of $1.9 million. Severance packages have been offered
commensurate with employees' positions and tenure with the
Company. The Company paid $0.2 million in the fourth quarter of
1999 and expects to make the remaining cash outlays and complete
this restructuring plan in 2000. The Company expects to record
additional restructuring charges of approximately $3.4 million,
primarily in the first quarter of 2000, when severance packages
are communicated to employees at the Saratoga Springs plant.
1998: During 1998, the Company instituted a restructuring
plan related to certain Graphic Packaging operations and recorded
$2.8 million in restructuring charges. This plan included the
consolidation and realignment of certain administrative functions
within the flexible operations and the downsizing of its
Franklin, Ohio operation. This plan resulted in the elimination
of approximately 20 administrative and 65 manufacturing positions
with related severance costs of approximately $2.5 million. This
plan also included approximately $0.3 million in other exit costs
related to the closure of the flexible divisional office in North
Carolina. The Company paid $1.0 million of the costs in the
fourth quarter of 1998 and $1.6 million during 1999.
1997: In December 1997, the Company recorded a $2.1
million charge related to the closure of the Graphic Packaging
corporate offices in Wayne, Pennsylvania. This closure resulted
in severance and outplacement costs of $1.1 million for
approximately 22 administrative employees. The Company made
cash payments of $1.7 million and $0.2 million related to this
plan in 1998 and 1997, respectively.
The Company eliminated 40 research and administrative
positions and recorded approximately $0.9 million in severance
and outplacement costs related to the biodegradable polymer
project in 1997. The Company made cash outlays of approximately
$0.4 million and $0.5 million related to this plan in 1998 and
1997, respectively.
The Company adopted a plan to exit the high-fructose corn
syrup business in 1997. As a result, the Company eliminated
approximately 70 manufacturing and administrative positions and
recorded $2.3 million in severance and other exit costs. The
Company made approximately $0.1 million and $1.4 million in cash
outlays related to this plan in 1998 and 1997, respectively. In
the fourth quarter of 1998, the Company determined that the
liability remaining for this exit plan was not required.
Accordingly, the remaining liability was reversed and netted
against the 1998 restructuring charges.
In connection with the Fort James packaging business
acquisition, the Company is continuing to evaluate
rationalization opportunities within the folding carton
converting operations to reduce overall operating costs while
maintaining capacity. This includes evaluation of the capacity
of the Company's web press facilities and evaluation of the
opportunity to transfer business among the various web press
facilities. The Company expects additional costs of
approximately $2 million may be incurred in connection with
further plant rationalizations, related primarily to severance
and other plant shutdown costs. The Company expects to finalize
its rationalization plan by June 30, 2000. Costs related to
shutting down a facility acquired in the Fort James packaging
business acquisition will be accounted for as a cost of the
acquisition, with a resultant adjustment to goodwill.
Gain from Sale of Businesses
The Company disposed of two businesses during 1999, for
which the following gains were recognized:
Flexible Golden
(In thousands) Plants Genesis Total
-------- -------- --------
Cash proceeds $105,000 $20,800 $125,800
Net book value, less costs (82,300) (13,264) (95,564)
-------- -------- --------
Gain recognized $22,700 $7,536 $30,236
======== ======== ========
Interest Expense and Interest Income
Interest expense for 1999, 1998 and 1997 was $28.6 million,
$22.0 million and $8.6 million, respectively. The increase in
1999 is due to additional financing to acquire the Fort James
packaging business. The increase in 1998 is due to additional
financing to acquire Universal Packaging, along with interest on
debt assumed in the acquisition.
Interest expense of approximately $8 million was allocated
to the discontinued operations of the Kalamazoo Mill in 1999,
based upon an estimated fair value of $225 million. Interest
expense of $16.0 million, $3.6 million and $0.1 million was
allocated to the discontinued operations of CoorsTek in 1999,
1998 and 1997, respectively, based upon CoorsTek's $200 million
allocation of total consolidated debt at the time of the spin-off
for 1999 and $50 million of outstanding intercompany debt for
1998.
The Company capitalized interest of $2.0 million, $0.3
million and $0.4 million in 1999, 1998 and 1997, respectively.
The increase in capitalized interest during 1999 is attributable
to the construction of Graphic Packaging's new Golden, Colorado
facility.
Interest income for 1999, 1998 and 1997 was $2.6 million,
$5.4 million and $5.6 million, respectively. The decreases in
1999 and 1998 relate directly to the use of funds to acquire the
Fort James packaging business and Universal Packaging.
See related discussions about Financial Condition and
Liquidity below.
Income Taxes
The consolidated effective tax rate for the Company in 1999
was 40% compared to 47% in 1998 and (10%) in 1997. The higher
tax rate in 1998 resulted from a lower earnings base, which
increased the impact of non-deductible items. The negative rate
in 1997 was a result of no tax benefit taken for built-in losses
on a subsidiary experiencing tax losses and for capital losses
that may not be deductible due to a lack of offsetting capital
gains. The Company expects to maintain its effective tax rate
for future years at the historical rate of approximately 40%.
Graphic Packaging
1999 was a transitional year for Graphic Packaging as the
Company took steps to better position itself in the folding
carton industry. At the beginning of 1999, Graphic Packaging
was producing both folding carton and flexible packaging
products. A strategic decision was made to focus entirely on
folding cartons and dispose of the flexible packaging plants
during 1999. The steps taken were necessary to establish
Graphic Packaging as a leader in the folding carton industry.
On August 2, 1999, Graphic Packaging purchased the Fort
James packaging business, which included the Kalamazoo Mill and
12 folding carton plants throughout the United States and Canada.
At the same time, a sale of the Company's flexible packaging
plants was effected and closed on September 2, 1999. After these
two transactions, Graphic Packaging had 23 plants, primarily
producing folding cartons; the paperboard mill in Michigan; and a
focus toward the future in the folding carton industry.
Management has announced its plan to sell the Kalamazoo Mill and
the Saratoga Springs, New York plant building in the year 2000.
Management also expects to close another folding carton plant at
a location to be determined in 2000.
Graphic Packaging has recently completed the construction of
a new production and office facility in Golden, Colorado that
will soon take over all of the current Boulder, Colorado
operations and a significant portion of the Lawrenceburg,
Tennessee operations. These operations primarily serve Coors
Brewing. Graphic Packaging has capitalized interest of $1.2
million related to the construction of this new facility and
recognized a restructuring expense of $1.9 million in 1999 for
staffing reductions primarily in Lawrenceburg, Tennessee.
Folding Carton Industry
The U.S. packaging industry is a mature industry that has
experienced approximately 2% growth per year. Recent trends
include rising paperboard costs; consolidation of competitors;
and pricing pressures. Management mitigates rising paperboard
costs through long-term contracting with suppliers and, as
available, cost pass-throughs to customers. Acquisitions of
Universal Packaging in 1998 and the Fort James packaging business
in 1999 have kept Graphic Packaging in a competitive position in
a consolidating industry; however, management's challenge will be
to control costs of production against overall resistance to
price increases in the folding carton market.
Net Sales
Graphic Packaging's net sales increased 26% in 1999 to
$786.8 million as compared to $623.9 in 1998. The significant
increase was due to the Fort James packaging business
acquisition. Sales of ongoing business (excluding flexible
plants sold in 1999) were $708.2 million, a 40% increase over
sales on the same basis of $504.6 million in 1998.
Graphic Packaging's net sales for 1998 were $623.9 million,
an increase of $258.8 million, or 71%, over 1997 sales of $365.1
million. The increase is attributable to the January 1998
acquisition of Universal Packaging. These gains were partially
offset by significant pricing pressures for flexible packaging
and volume declines in the tobacco market.
Graphic Packaging acquired long-standing customer
relationships with the acquisition of the Fort James packaging
business in 1999 and Universal Packaging in 1998. Maintaining
these relationships at a profitable level is key to Graphic
Packaging's future growth.
Gross Profit
Graphic Packaging's major task during 1999 was to integrate
the Fort James plants into current operations with the primary
focus on customer service and retention. In 2000, the Company
will focus on rationally allocating production to maximize
capacity in a cost-effective manner. The 3.5% decline in Graphic
Packaging's gross profit percentage from 1998 to 1999 is due
primarily to integration inefficiencies and increased costs
associated with the Fort James acquisition in 1999 and pricing
pressures in the fourth quarter of 1999. Inherent in the
rationalization process are one-time transitional costs that
management expects to eliminate in the latter half of 2000. The
decrease in gross profit in 1998, as compared to 1997, is a
reflection of the industry trends toward higher costs and lower
pricing due to competition and the acquisition of Universal
Packaging, which had lower comparative margins.
Selling, General and Administrative Expenses
Graphic Packaging's selling, general and administrative
expenses for 1999, 1998 and 1997 were $55.8 million, $50.5
million and $38.8 million, which represented 7%, 8% and 11% of
net sales, respectively. The decreased percentage of selling,
general and administrative expenses to net sales in 1999 and 1998
reflect the addition of Universal Packaging, which operates with
lower overhead expenses, and the effects of rationalization
programs carried out by the end of 1999.
Other Segment
Net sales for the Other business segment in 1999 totaled
$44.6 million, a decrease of $23.3 million, or 34%, from 1998 net
sales of $67.9 million. The decrease in net sales is directly
due to the disposition of virtually all the assets and related
businesses of the Other group of ACX Technologies during 1999.
Net sales for the Other business in 1998 totaled $67.9 million,
an increase of $6.8 million, or 11%, over 1997 net sales of $61.1
million. The 1998 increase reflected higher sales volumes due to
the acquisitions of certain solar electric distributors by Golden
Genesis.
The Other businesses reported operating income of $2.1
million in 1999, a favorable increase over the operating losses
of $3.0 million and $31.2 million in 1998 and 1997, respectively.
The improvements were directly due to the Company's decisions to
dispose of the noncore, underperforming businesses operating in
this segment.
As of December 31, 1999, the Company had disposed of
substantially all operating businesses in the Other segment.
Discontinued Operations
Coincident with the Company's strategic folding carton
acquisitions, several noncore businesses and underperforming
assets were selected for sale or other disposition by ACX
Technologies during 1999.
CoorsTek Spin-off
On December 31, 1999, the Company distributed 100% of
CoorsTek's shares of common stock to the ACX Technologies
shareholders in a tax-free transaction. Shareholders received
one share of CoorsTek stock for every four shares of ACX
Technologies stock held. CoorsTek issued a promissory note to
ACX Technologies on December 31, 1999 totaling $200.0 million in
satisfaction of outstanding intercompany obligations at the time
of the spin-off and as a special one-time dividend. The note was
paid in full in January 2000. No gain or loss was recognized by
ACX Technologies as a result of the spin-off transaction. The
tax basis allocation of costs for ACX Technologies' shares
acquired pre-spin off is: ACX 55.56% and CoorsTek 44.44%.
Golden Aluminum
In 1996, the Board of Directors adopted a plan to dispose of
the Company's aluminum rigid container sheet business operated by
Golden Aluminum. In conjunction with this decision, the Company
recorded pre-tax charges of $155.0 million for anticipated losses
upon the disposition and estimated operating losses of the
business through the disposition date. In March of 1997, Golden
Aluminum was sold for $70.0 million, of which $10.0 million was
paid at closing and $60.0 million was due within two years. In
December of 1998, the Company extended the due date on the $60.0
million payment until September 1, 1999. In accordance with the
purchase agreement, the purchaser exercised its right to return
Golden Aluminum to the Company on August 23, 1999 in discharge of
the $60.0 million obligation. The initial payment of $10.0
million was nonrefundable. The Company subsequently sold the
assets of Golden Aluminum to another buyer for approximately $41
million on November 5, 1999. An additional pre-tax charge of
$10.0 million was recorded in 1999 related to the ultimate
disposition of Golden Aluminum.
Kalamazoo Mill
The Company purchased the Kalamazoo Mill on August 2, 1999
as part of the acquisition of the Fort James packaging business.
The Kalamazoo Mill produces recycled paperboard. In December
1999, the Board of Directors approved a plan to offer the
Kalamazoo Mill for sale. An estimated fair value of $225 million
has been ascribed to the net assets of the Kalamazoo Mill at
December 31, 1999, which includes approximately $106 million of
goodwill. The goodwill allocation between the Kalamazoo Mill and
the continuing operations of the Fort James packaging business
acquisition is subject to change upon disposition of the
Kalamazoo Mill. As a result, no gain or loss will be recorded
upon sale or other disposition of the Kalamazoo Mill. The
Company allocated approximately $8 million of interest expense to
the Kalamazoo Mill for the period August 2, 1999 through December
31, 1999. The Company expects to finalize the sale or other
disposition of the Kalamazoo Mill in the second or third quarter
of 2000.
Financial Data - Discontinued Operations
Financial data for CoorsTek, Golden Aluminum and the
Kalamazoo Mill for the years ended December 31, in thousands,
except for per share information, are summarized as follows:
Golden Kalamazoo
CoorsTek Aluminum Mill[a] Total
-------- -------- --------- --------
1999
Net Sales $365,061 $--- $18,750 $383,811
======== ======== ======== ========
Income (loss) from
operations before
income taxes $25,117 $--- ($5,208) $19,909
Income tax expense
(benefit) 9,480 --- (2,100) 7,380
-------- -------- -------- --------
Income (loss) from
operations 15,637 --- (3,108) 12,529
Income (loss) from
disposal, before
taxes --- (10,000) --- (10,000)
Income tax benefit
(expense) --- 3,544 --- 3,544
-------- -------- -------- --------
Net income (loss) $15,637 ($6,456) ($3,108) $6,073
======== ======== ======== ========
Per basic share of
common stock:
Income (loss) from
operations $0.55 $--- ($0.11) $0.44
Income (loss) on
disposal --- (0.23) --- (0.23)
-------- -------- -------- --------
Net income (loss) per
basic share $0.55 ($0.23) ($0.11) $0.21
======== ======== ======== ========
Per diluted share of
common stock:
Income (loss) from
operations $0.54 $--- ($0.11) $0.43
Income (loss) on
disposal --- (0.22) --- (0.22)
-------- -------- -------- --------
Net income (loss) per
diluted share $0.54 ($0.22) ($0.11) $0.21
======== ======== ======== ========
Current assets --- --- $18,449 $18,449
Current liabilities --- --- (13,948) (13,948)
-------- -------- -------- --------
Net current assets --- --- $4,501 $4,501
Noncurrent assets --- --- $224,619 $224,619
Noncurrent liabilities --- --- (4,120) (4,120)
-------- -------- -------- --------
Net noncurrent assets --- --- $220,499 $220,499
======== ======== ======== ========
[a] Represents five months operating results.
Golden Kalamazoo
CoorsTek Aluminum Mill[a] Total
-------- -------- --------- --------
1998
Net Sales $296,614 $--- $--- $296,614
======== ======== ======== ========
Income from operations
before income taxes $25,361 $--- $--- $25,361
Income tax expense 9,549 --- --- 9,549
-------- -------- -------- --------
Income from operations 15,812 --- --- 15,812
Net income $15,812 $--- $--- $15,812
======== ======== ======== ========
Net income per basic share $0.56 $--- $--- $0.56
======== ======== ======== ========
Net income per diluted share $0.54 $--- $--- $0.54
======== ======== ======== ========
Current assets $105,508 --- --- $105,508
Current liabilities (33,600) --- --- (33,600)
-------- -------- -------- --------
Net current assets $71,908 --- --- $71,908
======== ======== ======== ========
Noncurrent assets $158,394 --- --- $158,394
Noncurrent liabilities (81,583) --- --- (81,583)
-------- -------- -------- --------
Net noncurrent assets $76,811 --- --- $76,811
======== ======== ======== ========
Golden Kalamazoo
CoorsTek Aluminum Mill[a] Total
-------- -------- --------- --------
1997
Net Sales $304,824 $38,995 $--- $343,819
======== ======== ======== ========
Income from operations
before income taxes $48,180 $--- $--- $48,180
Income tax expense 18,192 --- --- 18,192
-------- -------- -------- --------
Income from operations 29,988 --- --- 29,988
Net income $29,988 $--- $--- $29,988
======== ======== ======== ========
Net income per basic share $1.07 $--- $--- $1.07
======== ======== ======== ========
Net income per diluted share $1.04 $--- $--- $1.04
======== ======== ======== ========
Financial Resources and Liquidity
The Company's liquidity is generated from both internal and
external sources and is used to fund short-term working capital
needs, capital expenditures and acquisitions. During 1999,
internally generated liquidity is measured by net cash from
operations, as discussed below, and the sale of non-strategic
assets.
On August 2, 1999, the Company entered into a $1.3 billion
revolving credit and term loan agreement (the Credit Agreement)
with a group of lenders, with Bank of America, N.A. as agent.
Subsequent to December 31, 1999, the Company reduced the amount
available under the Credit Agreement by $50.0 million. The
Credit Agreement is comprised of four senior credit facilities
including a $125 million 180-day term facility, a $400 million
one-year facility, a $325 million five-year term loan facility
and a $400 million five-year revolving credit facility
(collectively, the Senior Credit Facilities). Proceeds from the
Senior Credit Facilities were used to finance the $849 million
acquisition of the Fort James packaging business and to prepay
the Company's other outstanding borrowings. The additional cost
of prepaying the Company's other outstanding borrowings was $3.6
million before tax and $2.3 million after tax and is shown in the
Consolidated Income Statement as an extraordinary loss from the
early extinguishment of debt.
After approximately $200 million of repayments made from the
Company's cash flow from operations, the sale of Golden Aluminum,
the sale of the Company's flexible packaging plants and the sale
of the solar electric businesses, total borrowings under the
Senior Credit Facilities were $1,015.5 million as of December 31,
1999. On January 4, 2000, the Company repaid an additional $200
million of debt with the proceeds of a note receivable from
CoorsTek as a result of the spin-off. Borrowings under the
revolving credit facility on March 22, 2000 were approximately
$339 million, leaving $61 million available for future borrowing
needs.
Amounts borrowed under the Senior Credit Facilities bear
interest under various pricing alternatives plus a spread
depending on the Company's leverage ratio. The various pricing
alternatives include (i) LIBOR, or (ii) the higher of the Federal
Funds Rate plus .5% or the prime rate. In addition, the Company
pays a commitment fee that varies based upon the Company's
leverage ratio and the unused portion of the revolving credit
facility. Mandatory prepayments under the Senior Credit
Facilities are required from the proceeds of any significant
asset sale or from the issuance of any debt or equity securities.
In addition, the five-year term loan is due in quarterly
installments beginning with the first quarter of 2000. Total
installments for 2000 through 2004, respectively, are $25
million, $50 million, $70 million, $80 million and $100 million.
The Senior Credit Facilities are secured with first priority
liens on all material assets of the Company and all of its
domestic subsidiaries. The Credit Agreement currently limits the
Company's ability to pay dividends and imposes limitations on the
incurrence of additional debt, acquisitions and the sale of
assets.
In February, the Company determined that certain covenants
in its Senior Credit Facilities relating to leverage and interest
coverage should be changed to reflect anticipated operating
results for the Company in 2000. In March 2000, the Company and
its lenders amended the Senior Credit Facilities to reset certain
financial covenants including maximum debt to EBITDA, the ratio
between EBITDA and interest, and debt to capitalization and to
impose additional restrictions on capital expenditures and
acquisitions. The interest rate spread from certain base indices
was increased by .25 to .50 percent depending upon the Company's
leverage. The Company anticipates paying an aggregate of
approximately $2 million in fees in connection with the
amendment.
At December 31, 1999, the Company was in compliance with the
financial covenants. As revised in March 2000, quarterly
financial covenant levels in 2000 and beyond are stringent.
Although there can be no assurance that all of these covenants
will be met, management believes that the Company will remain in
compliance with the revised covenants based upon the Company's
expected performance and debt repayment forecasts. In the event
of a default under the Credit Agreement, the lenders would have
the right to call the Senior Credit Facilities immediately due
and refrain from making further advances to the Company. If the
Company is unable to pay the accelerated payments, the lenders
could elect to proceed against the collateral in order to satisfy
the Company's obligations.
The Company has entered into contracts to hedge the
underlying interest rate on $175 million of anticipated long-term
borrowings. These contracts lock an average risk-free rate of
approximately 6% and expire on May 1, 2000. The anticipated
borrowings will be used to extend the maturity of the Company's
current capital structure, thereby reducing exposure to short-
term interest rates. As of December 31, 1999, the unrecognized
gain associated with these hedge contracts was approximately $6
million. In addition, the Company has entered into interest rate
swap arrangements to hedge $100 million of its borrowings under
the Senior Credit Facilities. Under these agreements, the
Company pays interest at an average fixed rate of 5.94%. During
2000, the Company expects to enter into additional interest rate
swap transactions in accordance with the requirements of the
Credit Agreement.
The Consolidated Statement of Cash Flows includes the cash
generated or used by the operations shown in the income statement
as discontinued operations, namely Golden Aluminum Company,
CoorsTek and the Kalamazoo Mill. On this basis, net cash
provided by operations was $135.1 million, $97.3 million and
$117.4 million for 1999, 1998 and 1997, respectively.
During 1999, 1998 and 1997, net cash from operations was
used to fund capital requirements and acquisitions. Over this
three-year period, total capital expenditures for the Company
were $226.2 million, as follows:
(In millions) 1999 1998 1997
----- ----- -----
Graphic Packaging $73.7 $47.5 $18.0
Other businesses and Corporate 1.6 4.1 9.4
Discontinued Operations 16.2 26.9 28.8
----- ----- -----
$91.5 $78.5 $56.2
===== ===== =====
Capital spending at Graphic Packaging during 1999 was
primarily for an expansion of the Golden, Colorado manufacturing
facility, the initial payment to begin the installation of an
enterprise resource planning system (ERP) and equipment that
improves productivity, increases capacity and reduces costs. The
Company expects its capital expenditures for 2000 to be
approximately $60 million, primarily related to the ERP system
and manufacturing productivity improvements. There are no
significant capital expenditures expected for the Other
businesses in 2000.
Acquisitions during 1999 included the acquisition of Fort
James packaging business for approximately $849 million as well
as acquisitions by CoorsTek for approximately $56 million in cash
primarily in the semiconductor industry. Acquisitions in 1998
utilized $300.8 million in cash, primarily for the acquisition of
Britton. The Company currently has no plans in 2000 to pursue
acquisitions as a growth vehicle. Instead, the Company is
focused on further integrating its recent acquisitions and
utilizing cash flow to reduce its debt.
Asset sales during 1999 generated $170.5 million in
proceeds. These sales included the final disposition of Golden
Aluminum Company, the sale of the Company's flexible packaging
plants and the sale of the solar electric business. During the
second or third quarter of 2000, the Company expects to sell or
otherwise dispose of the Kalamazoo Mill, generating proceeds
required to repay the remaining balance of the one-year facility.
The Company currently expects that cash flows from
operations, the sale of certain assets, and borrowings under its
current credit facilities will be adequate to meet the Company's
needs for working capital, temporary financing for capital
expenditures and debt repayments. The Company's working capital
position as of December 31, 1999 was a negative $107.2 million.
Proceeds from the sale or other disposition of the Kalamazoo Mill
will be applied to current maturities of debt.
The impact of inflation on the Company's financial position
and results of operations has been minimal and is not expected to
adversely affect future results.
Environmental
Some of the Company's operations have been notified that
they may be potentially responsible parties (PRPs) under the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980 or similar laws with respect to the remediation of
certain sites where hazardous substances have been released into
the environment. The Company cannot predict with certainty the
total costs of remediation, its share of the total costs, the
extent to which contributions will be available from other
parties, the amount of time necessary to complete the remediation
or the availability of insurance. However, based on the
investigations to date, the Company believes that any liability
with respect to these sites would not be material to the
financial condition or results of operations of the Company,
without consideration for insurance recoveries. There can be no
certainty, however, that the Company will not be named as a PRP
at additional sites or be subject to other environmental matters
in the future or that the costs associated with those additional
sites or matters would not be material.
In addition, the Company has received demands arising out of
alleged contamination of various properties currently or formerly
owned by the Company. In management's opinion, none of these
claims will result in liability that would materially affect the
Company's financial position or results of operations.
Year 2000 Disclosure
The Company has experienced no material additional expense
or business interruption related to the Year 2000 issue.
The Year 2000 issue arose because many existing computer
programs use only the last two digits to refer to a year.
Therefore, these computer programs did not properly recognize a
year that begins with "20" instead of the familiar "19". If not
corrected, many computer applications could fail or create
erroneous results disrupting normal business operations.
The Company's management implemented an enterprise-wide
program to prepare the Company's financial, manufacturing and
other critical systems and applications for the year 2000. The
program included a task force established in March 1998 that had
the support and participation of upper management and included
individuals with expertise in risk management, legal and
information technologies. The Board of Directors monitored the
progress of the program on a quarterly basis. The task force met
its objective to ensure an uninterrupted transition to the year
2000 by assessing, testing and modifying all information
technology (IT) and non-IT systems, interdependent systems and
third parties such as suppliers and customers.
Through December 31, 1999, the Company spent approximately
$1.2 million related to the Year 2000 issue. These costs
included the costs incurred for external consultants and
professional advisors and the costs for software and hardware.
The Company has not separately tracked internal costs such as
payroll related costs for its information technologies group and
other employees working on the Year 2000 project. The Company
expensed all costs related to the Year 2000 issue as incurred.
These costs were funded through operating cash flows.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Interest Rate Risk
As of March 22, 2000, the Company's capital structure
includes approximately $832 million of debt that bears interest
with an underlying rate based upon short-term interest rates.
The Company has entered into interest rate swap agreements that
lock in a risk free interest rate of 5.94% on $100 million of the
borrowings. The Company has also entered into contracts to hedge
the underlying interest rate on $175 million of anticipated long-
term borrowings. These contracts lock an average risk-free rate
of approximately 6% and expire on May 1, 2000. As a result,
interest on approximately $732 million of debt is subject to the
volatility in short term interest rates. At these levels, a 1%
change in interest rates could impact annual pre-tax results by
approximately $7.3 million. During 2000, the Company expects to
enter into additional interest rate swap transactions in order to
reduce its susceptibility to potential interest rate
fluctuations.
Factors That May Affect Future Results
Certain statements in this document constitute "forward-
looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors
that may cause the actual results, performance or achievements of
the Company to be materially different from any future results,
performance or achievements expressed or implied by the forward-
looking statements. Specifically, 1) the ability of the Company
to remain in compliance with its debt convenants is dependent
upon, among other things, the sale or other disposition of the
Kalamazoo Mill at a satisfactory price and the Company meeting
its financial plan; 2) future years' revenue growth is dependent
on numerous factors, including the continued strength of the U.S.
economy, the actions of competitors and customers, possible
future governmental regulations, the Company's ability to execute
its marketing plans and the ability of the Company to maintain or
increase sales to existing customers and capture new business; 3)
future improvements in margins will depend upon management's
ability to improve cost efficiencies and maintain profitable long-
term customer relationships; 4) the benefits of the integration
to be realized in 2000 and 2001 are uncertain because of possible
increases in costs and delays; 5) expected savings in selling,
general and administrative expenses might not be realized due to
the need for additional people, further support services or
increased labor costs; 6) the sale or other disposition of the
Kalamazoo Mill and related timing and amount of proceeds is
dependent on finding a buyer or other arrangement on satisfactory
terms; 7) revenues may be affected by plant closures if
customers find alternative suppliers or if the Company is not
able to efficiently move business or to qualify at other
facilities; 8) operating margins might decrease in 2000 and 2001
due to competitive pricing of products sold and increases in
costs, including costs for raw materials such as paperboard and
variances and timing of cost increases, and the ability of the
Company to pass through such increases; and 9) the Company's
ability to maintain its effective tax rate at 40% depends on the
current and future tax laws, the Company's ability to identify
and use its tax credits and other factors.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements
Consolidated Financial Statements: Page(s)
Report of Independent Accountants 29
Consolidated Income Statement for the years
ended December 31, 1999, 1998 and 1997 30-31
Consolidated Statement of Comprehensive Income
for the years ended December 31, 1999,
1998 and 1997 31
Consolidated Balance Sheet at December 31,
1999 and 1998 32
Consolidated Statement of Cash Flows for the
years ended December 31, 1999, 1998
and 1997 33
Consolidated Statement of Shareholders' Equity
for the years ended December 31, 1999, 1998
and 1997 34
Notes to Consolidated Financial Statements 35-58
Schedule II - Valuation and Qualifying Accounts
for the years ended December 31, 1999,
1998 and 1997 59
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of ACX Technologies,
Inc.
In our opinion, the consolidated financial statements listed
in the accompanying index present fairly, in all material
respects, the financial position of ACX Technologies, Inc. and
its subsidiaries at December 31, 1999 and 1998, and the results
of their operations and their cash flows for each of the three
years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States.
In addition, in our opinion, the financial statement schedule
listed in the accompanying index presents fairly in all material
respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
These financial statements and the financial statement schedule
are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial
statements and the financial statement schedule based on our
audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the
United States, 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
Denver, Colorado
March 1, 2000
MANAGEMENT'S REPORT TO SHAREHOLDERS
The preparation, integrity and objectivity of the financial
statements and all other financial information included in this
annual report are the responsibility of the management of ACX
Technologies, Inc. The financial statements have been prepared
in accordance with generally accepted accounting principles,
applying estimates based on management's best judgment where
necessary. Management believes that all material uncertainties
have been appropriately accounted for and disclosed.
The established system of accounting procedures and related
internal controls provide reasonable assurance that the assets
are safeguarded against loss and that the policies and procedures
are implemented by qualified personnel.
PricewaterhouseCoopers LLP, the Company's independent
accountants, provides an objective, independent audit of the
consolidated financial statements. Their accompanying report is
based upon an examination conducted in accordance with generally
accepted auditing standards, including tests of accounting
procedures and records.
The Board of Directors, operating through its Audit
Committee composed of outside directors, monitors the Company's
accounting control systems and reviews the results of the
auditing activities. The Audit Committee meets at least
quarterly, either separately or jointly, with representatives of
management, the Company's independent accountants and internal
auditors. To ensure complete independence, the Company's
independent accountants and internal auditors have full and free
access to the Audit Committee and may meet with or without the
presence of management.
GAIL A. CONSTANCIO JOHN S. NORMAN
Chief Financial Officer Corporate Controller
ACX TECHNOLOGIES, INC.
CONSOLIDATED INCOME STATEMENT
(In thousands, except per share data)
Year Ended December 31,
1999 1998 1997
-------- -------- --------
Sales $723,760 $571,899 $312,938
Sales to Coors Brewing Company 107,645 119,878 113,323
-------- -------- --------
Total sales 831,405 691,777 426,261
Cost of goods sold 707,758 567,533 332,653
-------- -------- --------
Gross profit 123,647 124,244 93,608
Selling, general and
administrative expense 73,685 68,824 67,227
Goodwill amortization 11,533 7,785 3,209
Asset impairment and
restructuring charges 7,813 21,391 21,880
-------- -------- --------
Operating income 30,616 26,244 1,292
Gain from sale of businesses 30,236 --- ---
Other income (expense) - net 618 576 (407)
Interest expense (28,550) (21,978) (8,556)
Interest income 2,643 5,362 5,606
-------- -------- --------
Income (loss) from continuing
operations before income taxes
and extraordinary loss 35,563 10,204 (2,065)
Income tax expense 14,045 4,751 207
-------- -------- --------
Income (loss) from continuing
operations before extraordinary
loss 21,518 5,453 (2,272)
Discontinued operations, net of tax
Income from discontinued
operations of CoorsTek 15,637 15,812 29,988
Loss on disposal of Golden
Aluminum (6,456) --- ---
Loss from discontinued operations
of Kalamazoo Mill (3,108) --- ---
-------- -------- --------
6,073 15,812 29,988
-------- -------- --------
Income before extraordinary item 27,591 21,265 27,716
Extraordinary loss on early
extinguishment of
debt, net of tax of $1,312 (2,332) --- ---
-------- -------- --------
Net income $25,259 $21,265 $27,716
======== ======== ========
ACX TECHNOLOGIES, INC.
CONSOLIDATED INCOME STATEMENT
(In thousands, except per share data)
Year Ended December 31,
1999 1998 1997
-------- -------- --------
Net income per basic share of
common stock:
Continuing operations $0.76 $0.19 ($0.08)
Discontinued operations 0.21 0.56 1.07
Extraordinary loss (0.08) --- ---
-------- -------- --------
Net income per basic share $0.89 $0.75 $0.99
======== ======== ========
Weighted average shares
outstanding - basic 28,475 28,504 28,118
======== ======== ========
Net income per diluted share of
common stock:
Continuing operations $0.75 $0.19 ($0.08)
Discontinued operations 0.21 0.54 1.04
Extraordinary loss (0.08) --- ---
-------- -------- --------
Net income per diluted share $0.88 $0.73 $0.96
======== ======== ========
Weighted average shares
outstanding - diluted 28,767 29,030 28,885
======== ======== ========
See Notes to Consolidated Financial Statements.
ACX TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(In thousands)
Year Ended December 31,
1999 1998 1997
-------- -------- --------
Net income $25,259 $21,265 $27,716
-------- -------- --------
Other comprehensive income:
Foreign currency translation
adjustments:
Adjustments arising during the
period 1,686 (3,218) (3,127)
Reclassifications for amounts
already included
in net income 3,362 --- ---
Minimum pension liability
adjustment, net
of tax of $354 in 1999 and
$459 in 1998 531 (688) ---
-------- -------- --------
Other comprehensive income (loss) 5,579 (3,906) (3,127)
-------- -------- --------
Comprehensive income $30,838 $17,359 $24,589
======== ======== ========
See Notes to Consolidated Financial Statements.
ACX TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEET
(In thousands, except share data)
December 31,
1999 1998
---------- --------
ASSETS
Current assets
Cash and cash equivalents $15,869 $26,196
Accounts receivable, less allowance for
doubtful accounts of $2,153 in 1999
and $2,140 in 1998 66,414 51,635
Accounts receivable from Coors Brewing 2,348 2,084
Notes receivable 200,000 60,568
Inventories 119,389 92,329
Deferred income taxes 18,026 12,095
Other assets 7,418 7,740
Net current assets of discontinued
operations 4,501 71,908
---------- --------
Total current assets 433,965 324,555
Properties, net 427,489 242,367
Goodwill, net 490,558 194,733
Other assets 54,527 7,556
Net noncurrent assets of discontinued
operations 220,499 76,811
---------- --------
Total assets $1,627,038 $846,022
========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $400,000 $86,300
Accounts payable 56,165 34,403
Accrued salaries and vacation 10,608 5,988
Accrued expenses and other liabilities 74,418 45,320
---------- --------
Total current liabilities 541,191 172,011
Long-term debt 615,500 183,000
Accrued postretirement benefits 17,405 17,177
Other long-term liabilities 24,492 12,500
---------- --------
Total liabilities 1,198,588 384,688
Minority interest 5,140 13,379
Commitments and contingencies (Note 14) --- ---
Shareholders' equity
Preferred stock, nonvoting, $0.01 par
value, 20,000,000 shares authorized
and no shares issued or outstanding --- ---
Common stock, $0.01 par value
100,000,000 shares authorized;
28,576,771 and 28,415,000 issued
and outstanding at December 31,
1999 and 1998 286 284
Paid-in capital 422,885 451,401
Retained earnings --- 1,710
Accumulated other comprehensive income
(loss) 139 (5,440)
---------- --------
Total shareholders' equity 423,310 447,955
---------- --------
Total liabilities and shareholders'
equity $1,627,038 $846,022
========== ========
See Notes to Consolidated Financial Statements.
ACX TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
Year Ended December 31,
1999 1998 1997
------- ------- -------
Cash flows from operating
activities:
Net income $25,259 $21,265 $27,716
Adjustments to reconcile net
income to net cash provided
by operating activities:
Asset impairment and
restructuring charges 7,813 34,488 21,880
Gain on sale of businesses
and other assets (30,236) --- (391)
Loss on disposal of Golden
Aluminum 10,000 --- ---
Depreciation 63,602 48,764 38,597
Amortization 15,393 8,743 4,066
Change in net deferred
income taxes (908) 7,305 12,335
Change in current assets
and current liabilities,
net of effects from
acquisitions
Accounts receivable 3,757 2,865 11,603
Inventories 5,664 (1,232) 17,769
Other assets (6,866) 5,369 7,349
Accounts payable 29,237 (18,151) (1,462)
Accrued expenses and
other liabilities 20,392 (12,300) (22,229)
Change in deferred items
and other (7,969) 178 179
-------- ------- --------
Net cash provided by operating
activities 135,138 97,294 117,412
Cash flows used in investing
activities:
Additions to properties (91,455) (78,463) (56,213)
Acquisitions, net of cash
acquired (905,069) (300,774) (44,718)
Proceeds from sale of assets 170,526 131,899 13,594
Other 13,812 (369) (4,283)
-------- -------- --------
Net cash used in investing
activities (812,186) (247,707) (91,620)
Cash flows from financing
activities:
Proceeds from issuance of
debt 1,613,400 126,800 ---
Repayment of debt (957,200) --- ---
Stock issuance and other 10,521 454 7,892
--------- ------- -------
Net cash provided by financing
activities 666,721 127,254 7,892
Cash and cash equivalents:
Net increase (decrease) in
cash and cash equivalents (10,327) (23,159) 33,684
Balance at beginning of year 26,196 49,355 15,671
--------- ------- -------
Balance at end of year $15,869 $26,196 $49,355
========= ======= =======
Cash flows from discontinued operations have not been excluded
from the Consolidated Statement of Cash Flows.
See Notes to Consolidated Financial Statements.
ACX TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(In thousands)
Accumulated
Retained Other
Common Paid-in Earnings Comprehensive
Stock Capital (Deficit) Income (Loss) Total
------ -------- --------- ------------- --------
Balance at
December 31, 1996 $279 $443,302 ($47,271) $1,593 $397,903
Exercise of stock
options 4 5,168 --- --- 5,172
Tax benefit of
option exercise --- 1,359 --- --- 1,359
Issuance of common
stock 1 1,507 --- --- 1,508
Net income --- --- 27,716 --- 27,716
Cumulative
translation
adjustment --- --- --- (3,127) (3,127)
---- -------- -------- ------ --------
Balance at
December 31, 1997 284 451,336 (19,555) (1,534) 430,531
Exercise of stock
options 1 875 --- --- 876
Tax benefit of
option exercise --- 480 --- --- 480
Issuance of common
stock 1 1,097 --- --- 1,098
Share repurchase
program (2) (2,387) --- --- (2,389)
Net income --- --- 21,265 --- 21,265
Minimum pension
liability
adjustment --- --- --- (688) (688)
Cumulative
translation
adjustment --- --- --- (3,218) (3,218)
---- ------- -------- ------ --------
Balance at
December 31, 1998 284 451,401 1,710 (5,440) 447,955
Issuance of common
stock 2 3,816 --- --- 3,818
Net income --- --- 25,259 --- 25,259
CoorsTek dividend --- (32,332) (26,969) --- (59,301)
Minimum pension
liability
adjustment --- --- --- 531 531
Cumulative
translation
adjustment --- --- --- 5,048 5,048
---- -------- -------- ------ --------
Balance at
December 31, 1999 $286 $422,885 $--- $139 $423,310
==== ======== ======== ====== ========
See Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
Nature of Operations: ACX Technologies, Inc. (the Company),
through its principal subsidiary Graphic Packaging, is a
manufacturer of packaging products used by consumer product
companies as primary packaging for their end-use products. The
Company's strategy is to maximize its competitive position and
growth opportunities in its core business, folding cartons.
Toward this end, over the past several years the Company has
acquired two significant folding carton businesses and has
disposed of several noncore businesses and under-performing
assets.
CoorsTek (formerly known as Coors Ceramics Company)
develops, manufactures and sells advanced technical products
across a wide range of product lines for a variety of
applications. On December 31, 1999, the Company distributed 100%
of CoorsTek's shares of common stock to the ACX Technologies
shareholders in a tax-free transaction. Shareholders received
one share of CoorsTek stock for every four shares of ACX
Technologies stock held. CoorsTek issued a promissory note to
ACX Technologies on December 31, 1999 totaling $200.0 million in
satisfaction of outstanding intercompany obligations at the time
of the spin-off and as a one-time, special dividend. The note
was paid in full on January 4, 2000. No gain or loss was
recognized by ACX Technologies as a result of the spin-off
transaction.
Amounts included in the notes to the consolidated financial
statements pertain to continuing operations only, except where
otherwise noted.
Consolidation: The consolidated financial statements
include the accounts of the Company and its wholly owned and
majority owned subsidiaries. All material intercompany
transactions have been eliminated.
Use of Estimates: The consolidated financial statements
have been prepared in conformity with generally accepted
accounting principles, using management's best estimates and
judgments where appropriate. Management has made significant
estimates with respect to asset impairment charges,
restructuring charges and the estimated sales price and related
preliminary goodwill allocation for the Kalamazoo Mill. Actual
results could differ from these estimates making it reasonably
possible that a change in these estimates could occur in the
near term.
Reclassifications: Certain 1998 and 1997 amounts have been
reclassified to conform to the 1999 presentation.
Concentration of Credit Risk: Approximately 33% of the
Company's 1999 net sales consist of sales to two customers.
Revenue Recognition: Revenue is generally recognized when
goods are shipped.
Inventories: Inventories are stated at the lower of cost or
market. Cost is determined by the first-in, first-out (FIFO)
method.
The classification of inventories, in thousands, at Decem-
ber 31, was as follows:
1999 1998
-------- -------
Finished $ 55,451 $40,594
In process 20,466 15,409
Raw materials 43,472 36,326
-------- -------
Total inventories $119,389 $92,329
======== =======
Properties: Land, buildings, equipment and purchased
software are stated at cost. Real estate properties are non-
operating properties held for sale. For financial reporting
purposes, depreciation is recorded principally on the straight-
line method over the estimated useful lives of the assets as
follows:
Buildings 30 years
Machinery and equipment 3 to 15 years
Building and leasehold improvements The shorter of the
useful life, lease
term or 15 years
The cost of properties and related accumulated deprecia-
tion, in thousands, at December 31, consisted of the following:
1999 1998
-------- --------
Land and improvements $11,926 $13,577
Buildings and improvements 102,405 71,508
Machinery and equipment 373,085 265,516
Real estate properties 5,944 10,251
Construction in progress 78,785 17,212
-------- --------
572,145 378,064
Less accumulated depreciation 144,656 135,697
-------- --------
Net properties $427,489 $242,367
======== ========
Accelerated depreciation methods are generally used for
income tax purposes. Expenditures for new facilities and
improvements that substantially extend the capacity or useful
life of an asset are capitalized. Ordinary repairs and
maintenance are expensed as incurred.
Impairment of Long-Lived Assets and Identifiable
Intangibles: The Company periodically reviews long-lived assets,
identifiable intangibles and goodwill for impairment whenever
events or changes in business circumstances indicate the carrying
amount of the assets may not be fully recoverable. Measurement
of the impairment loss is based on fair value of the asset, which
is generally determined by the discounting of future estimated
cash flows.
Start-Up Costs: Start-up costs that are unrelated to
construction and associated with manufacturing facilities are
expensed as incurred.
Goodwill: Goodwill is amortized on a straight-line basis
over the estimated future periods to be benefited (30 years).
Goodwill was $514.0 million at December 31, 1999 and $210.7
million at December 31, 1998, less accumulated amortization of
$23.4 million and $16.0 million, respectively. Additional
goodwill of approximately $106 million, less accumulated
amortization of approximately $2 million, has been preliminarily
allocated to the Kalamazoo Mill discontinued operations.
Share Repurchase Program: On September 3, 1998, the Board
of Directors authorized the repurchase of up to 5% of the
Company's outstanding common shares on the open market. During
1998, the Company repurchased 181,200 shares for approximately $2
million under this share repurchase program. No shares were
repurchased in 1999. The Credit Agreement entered into in 1999
currently prohibits additional share repurchases.
Hedging Transactions: The Company periodically enters into
forward exchange contracts to hedge transactions and firm
commitments denominated in foreign currencies. Gains and losses
on foreign exchange contracts are deferred and recognized in the
basis of the transaction when completed. Through January 1999,
the Company also periodically entered into forward, future and
option contracts for commodities to hedge its exposure to price
fluctuations. The gains and losses on qualified hedge contracts
are deferred and recognized in cost of goods sold as part of the
product cost. In addition, the Company has entered into
contracts to hedge the underlying interest rate on $175.0 million
of anticipated long-term borrowings. Gains and losses on the
contracts are deferred and will be recognized in the effective
interest rate of the transaction when completed. The Company has
also entered into interest rate swap agreements for $100.0
million of its short-term borrowings. (See Note 7.)
Earnings per Share: Following is a reconciliation between
basic and diluted earnings per common share for each of the three
years ended December 31, (in thousands, except per share
information):
Per
Share
Income Shares Amount
1999 ------- ------ ------
Income (loss) from continuing
operations -- basic EPS $21,518 28,475 $0.76
Other dilutive equity
instruments 292
------- ------ -----
Income (loss) from continuing
operations -- diluted EPS $21,518 28,767 $0.75
======= ====== =====
1998
Income (loss) from continuing
operations -- basic EPS $5,453 28,504 $0.19
Other dilutive equity
instruments 526
------- ------ -----
Income (loss) from continuing
operations -- diluted EPS $5,453 29,030 $0.19
======= ====== =====
1997
Income (loss) from continuing
operations -- basic EPS $2,272 28,118 ($0.08)
Other dilutive equity
instruments 767
------- ------ -----
Income (loss) from continuing
operations -- diluted EPS $2,272 28,885 ($0.08)
======= ====== =====
Statement of Cash Flows: The Company defines cash
equivalents as highly liquid investments with original maturities
of 90 days or less. Income taxes paid were $2.8 million, $8.7
million and $5.2 million in 1999, 1998 and 1997, respectively.
Interest incurred, capitalized, expensed and paid, in
thousands, for the years ended December 31, were as follows:
1999 1998 1997
------- ------- ------
Total interest costs $30,523 $22,308 $9,016
Interest capitalized 1,973 330 460
Interest expense 28,550 21,978 8,556
Interest paid 25,320 19,454 8,536
Non-cash investing and financing activities in 1999 include
the receipt of a $200 million short-term note in connection with
the CoorsTek spin-off, cancellation of a $60.0 million note
receivable when Golden Aluminum was returned to the Company, and
the issuance of shares of common stock valued at $3.2 million in
exchange for compensation and other services.
Environmental Expenditures and Remediation Liabilities:
Environmental expenditures that relate to current operations are
expensed or capitalized as appropriate. Expenditures that relate
to an existing condition caused by past operations, and which do
not contribute to current or future revenue generation, are
expensed. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable and the costs
can be reasonably estimated.
New Accounting Standard: Statement of Financial Accounting
Standards (SFAS) No. 133, "Accounting for Derivative Instruments
and Hedging Activities," was issued in June 1998. This statement
establishes accounting and reporting standards for derivative
instruments and for hedging activities. It requires the
recognition of all derivatives as either assets or liabilities in
the statement of financial position at fair value. This
statement is effective for the Company's financial statements for
the year ending December 31, 2001 and the adoption of this
standard is not expected to have a material effect on the
Company's financial statements.
Note 2. Discontinued Operations
The historical operating results and losses on the sale of
the following business segments have been segregated as
discontinued operations on the accompanying Consolidated Income
Statement for the years ended December 31, 1999, 1998 and 1997.
Net assets from these discontinued operations are similarly
segregated on the face of the accompanying Consolidated Balance
Sheet as of December 31, 1999 and 1998. Discontinued operations
have not been segregated on the Consolidated Statement of Cash
Flows. Asset and business dispositions which do not constitute
the discontinuation of a business segment are discussed in Note 4.
CoorsTek Spin-off
On December 31, 1999, the Company distributed 100% of
CoorsTek's shares of common stock to the ACX Technologies
shareholders in a tax-free transaction. Shareholders received
one share of CoorsTek stock for every four shares of ACX
Technologies stock held. CoorsTek issued a promissory note to
ACX Technologies on December 31, 1999 totaling $200.0 million in
satisfaction of outstanding intercompany obligations at the time
of the spin-off and as a one-time, special dividend. The note
was paid in full on January 4, 2000. No gain or loss was
recognized by ACX Technologies as a result of the spin-off
transaction. Interest expense of $16.0 million, $3.6 million and
$0.1 million was allocated to the discontinued operations of
CoorsTek in 1999, 1998 and 1997, respectively, based upon
intercompany debt, plus CoorsTek's allocation of total
consolidated debt at the time of the spin-off in 1999.
Golden Aluminum
In 1996, the Board of Directors adopted a plan to dispose of
the Company's aluminum rigid container sheet business operated by
Golden Aluminum. In conjunction with this decision, the Company
recorded pre-tax charges of $155.0 million for anticipated losses
upon the disposition and estimated operating losses of the
business through the disposition date. In March of 1997, Golden
Aluminum was sold for $70.0 million, of which $10.0 million was
paid at closing and $60.0 million was due within two years. In
December of 1998, the Company extended the due date on the $60.0
million payment until September 1, 1999. In accordance with the
purchase agreement, the purchaser exercised its right to return
Golden Aluminum to the Company on August 23, 1999 in discharge of
the $60.0 million obligation. The initial payment of $10.0
million was nonrefundable. The Company subsequently sold the
assets of Golden Aluminum to another buyer for approximately $41
million on November 5, 1999. An additional pre-tax charge of
$10.0 million was recorded in 1999 related to the ultimate
disposition of Golden Aluminum.
Kalamazoo Mill
The Company purchased the Kalamazoo Mill on August 2, 1999
as part of the acquisition of the Fort James packaging business.
See related discussion of this acquisition in Note 3. The
Kalamazoo Mill produces recycled paperboard. In December 1999,
the Board of Directors approved a plan to offer the Kalamazoo
Mill for sale. The Company is pursuing the sale of the Kalamazoo
Mill, as well as evaluating other strategic alternatives. An
estimated fair value of $225 million has been ascribed to the net
assets of the Kalamazoo Mill at December 31, 1999, which includes
approximately $106 million of goodwill allocated from the
continuing operations of the Fort James packaging business
acquisition. The amount of preliminary goodwill allocated to the
Kalamazoo Mill is subject to change upon sale or other
disposition of the Kalamazoo Mill. As a result, no gain or loss
will be recorded upon the sale. The Company allocated
approximately $8 million of interest expense to the Kalamazoo
Mill for the period August 2, 1999 through December 31, 1999
based upon the estimated fair value of $225 million. The Company
expects to finalize the sale or other disposition of the
Kalamazoo Mill in the second or third quarter of 2000.
Financial Data - Discontinued Operations
Financial data for CoorsTek, Golden Aluminum and the
Kalamazoo Mill for the years ended December 31, in thousands, are
summarized as follows:
Golden Kalamazoo
CoorsTek Aluminum Mill[a] Total
-------- -------- --------- --------
1999
Net Sales $365,061 $--- $18,750 $383,811
======== ======== ======== ========
Income (loss) from
operations before
income taxes $25,117 $--- ($5,208) $19,909
Income tax expense
(benefit) 9,480 --- (2,100) 7,380
-------- -------- -------- --------
Income (loss) from
operations 15,637 --- (3,108) 12,529
Income (loss) from
disposal, before
taxes --- (10,000) --- (10,000)
Income tax benefit
(expense) --- 3,544 --- 3,544
-------- -------- -------- --------
Net income (loss) $15,637 ($6,456) ($3,108) $6,073
======== ======== ======== ========
Per basic share of
common stock:
Income (loss) from
operations $0.55 $--- ($0.11) $0.44
Income (loss) on
disposal --- (0.23) --- (0.23)
-------- -------- -------- --------
Net income (loss) per
basic share $0.55 ($0.23) ($0.11) $0.21
======== ======== ======== ========
Per diluted share of
common stock:
Income (loss) from
operations $0.54 $--- ($0.11) $0.43
Income (loss) on
disposal --- (0.22) --- (0.22)
-------- -------- -------- --------
Net income (loss) per
diluted share $0.54 ($0.22) ($0.11) $0.21
======== ======== ======== ========
Current assets --- --- $18,449 $18,449
Current liabilities --- --- (13,948) (13,948)
-------- -------- -------- --------
Net current assets --- --- $4,501 $4,501
Noncurrent assets --- --- $224,619 $224,619
Noncurrent liabilities --- --- (4,120) (4,120)
-------- -------- -------- --------
Net noncurrent assets --- --- $220,499 $220,499
======== ======== ======== ========
[a] Represents five months operating results.
Golden Kalamazoo
CoorsTek Aluminum Mill[a] Total
-------- -------- --------- --------
1998
Net Sales $296,614 $--- $--- $296,614
======== ======== ======== ========
Income from operations
before income taxes $25,361 $--- $--- $25,361
Income tax expense 9,549 --- --- 9,549
-------- -------- -------- --------
Income from operations 15,812 --- --- 15,812
Net income $15,812 $--- $--- $15,812
======== ======== ======== ========
Net income per basic share $0.56 $--- $--- $0.56
======== ======== ======== ========
Net income per diluted share $0.54 $--- $--- $0.54
======== ======== ======== ========
Current assets $105,508 --- --- $105,508
Current liabilities (33,600) --- --- (33,600)
-------- -------- -------- --------
Net current assets $71,908 --- --- $71,908
======== ======== ======== ========
Noncurrent assets $158,394 --- --- $158,394
Noncurrent liabilities (81,583) --- --- (81,583)
-------- -------- -------- --------
Net noncurrent assets $76,811 --- --- $76,811
======== ======== ======== ========
Golden Kalamazoo
CoorsTek Aluminum Mill[a] Total
-------- -------- --------- --------
1997
Net Sales $304,824 $38,995 $--- $343,819
======== ======== ======== ========
Income from operations
before income taxes $48,180 $--- $--- $48,180
Income tax expense 18,192 --- --- 18,192
-------- -------- -------- --------
Income from operations 29,988 --- --- 29,988
Net income $29,988 $--- $--- $29,988
======== ======== ======== ========
Net income per basic share $1.07 $--- $--- $1.07
======== ======== ======== ========
Net income per diluted share $1.04 $--- $--- $1.04
======== ======== ======== ========
Note 3. Acquisitions
1999 Acquisitions
On August 2, 1999, the Company acquired the assets and
liabilities of the packaging manufacturing business of Fort James
Corporation for cash consideration of approximately $849 million,
including a working capital price adjustment and transaction
costs. The Fort James acquisition, which included 12 converting
operations located throughout North America and a recycled
paperboard mill located in Kalamazoo, Michigan (the Kalamazoo
Mill) has been accounted for under the purchase method.
Accordingly, the excess of the purchase price over the fair value
of the assets and liabilities acquired of approximately $448
million is being amortized using the straight-line method over 30
years. Approximately $342 million of goodwill has been
preliminarily allocated to the folding carton converting
operations and approximately $106 million has been preliminarily
allocated to the Kalamazoo Mill discontinued operations. The
folding carton business of Fort James was a major supplier of
folding cartons to leading consumer product companies for
packaging food. The folding carton business of Fort James has
been included in the Company's results since August 2, 1999.
In December 1999, the Board of Directors adopted a plan to
offer the Kalamazoo Mill for sale in order to focus on the
Company's core folding carton business. The Kalamazoo Mill was
included in the August 2, 1999 Fort James packaging business
acquisition. The operating results and net assets of the
Kalamazoo Mill have been segregated as discontinued operations in
the Consolidated Income Statement and Balance Sheet.
Discontinued operations have not been segregated on the
Consolidated Statement of Cash Flows. Accordingly, the
Consolidated Statement of Cash Flows includes sources and uses of
cash for the Kalamazoo Mill for the year ended December 31, 1999.
In connection with the Fort James packaging business
acquisition, the Company is continuing to evaluate
rationalization opportunities within the folding carton
converting operations to reduce overall operating costs while
maintaining capacity. This includes evaluation of the capacity
of the Company's web press facilities and evaluation of the
opportunity to transfer business among the various web press
facilities. The Company expects additional costs of
approximately $2 million may be incurred in connection with
further plant rationalizations, related primarily to severance
and other plant shutdown costs. The Company expects to finalize
its rationalization plan by June 30, 2000. Costs related to
shutting down a facility acquired in the Fort James packaging
business acquisition will be accounted for as a cost of the
acquisition, with a resultant adjustment to goodwill.
The following unaudited pro forma information for ACX
Technologies has been prepared assuming that the Fort James
packaging business acquisition had occurred on January 1, 1998.
The pro forma information includes adjustments for (1)
amortization of goodwill, (2) increased interest expense related
to new borrowings at applicable rates for the purchase, and (3)
the net tax effect of pro forma adjustments at the statutory
rate. The Kalamazoo Mill, CoorsTek and Golden Aluminum are
reflected as discontinued operations in the unaudited pro forma
financial information. The unaudited pro forma financial
information is presented for informational purposes only and may
not be indicative of the results of operations as they would have
been had the transaction actually occurred on January 1, 1998 nor
is it necessarily indicative of the results of operations which
may occur in the future.
Pro Forma Pro Forma
Year Ended Year Ended
December 31, December 31,
1999 1998
(Unaudited) (Unaudited)
(In thousands, except per ------------ ------------
share data)
Net sales $1,144,855 $1,239,547
========== ==========
Income (loss) from continuing
operations, before
extraordinary loss $3,933 ($25,795)
========== ==========
Net income (loss) $3,982 ($15,107)
========== ==========
Income (loss) from continuing
operations, before
extraordinary loss per basic
share of common stock $0.14 ($0.90)
========== ==========
Income (loss) from continuing
operations, before
extraordinary loss per diluted
share of common stock $0.14 ($0.90)
========== ==========
Net income (loss) per basic share
of common stock $0.14 ($0.53)
========== ==========
Net income (loss) per diluted
share of common stock $0.14 ($0.53)
========== ==========
On March 12, 1999, the Company acquired the net assets of
Precision Technologies for approximately $22 million in cash and
300,000 warrants to receive shares of the Company's common stock
at an exercise price equal to the fair market value at the date
of closing. These warrants were converted into warrants to
purchase shares of CoorsTek stock following the spin-off. The
warrants were recorded as an increase in the purchase price at
their estimated fair value on the date of acquisition using the
Black-Sholes pricing model. The acquisition has been accounted
for under the purchase method of accounting. Accordingly, the
excess of the purchase price over the fair value of net assets
acquired of $20.2 million is being amortized using the straight-
line method over 20 years. Precision Technologies, located in
Livermore, California, manufactures precision-machined parts for
the semiconductor, medical and aircraft industries. The results
of Precision Technologies since March 12, 1999 are included in
the discontinued operations of CoorsTek.
On March 1, 1999, the Company acquired all of the
outstanding shares of Edwards Enterprises for approximately $18
million. The acquisition has been accounted for under the
purchase method. Accordingly, the excess of the purchase price
over the fair value of net assets acquired of $4.2 million is
being amortized using the straight-line method over 20 years.
Edwards Enterprises, located in Newark, California, manufactures
precision-machined parts for the semiconductor industry. The
results of Edwards Enterprises since March 1, 1999 are included
in the discontinued operations of CoorsTek.
In December 1999, CoorsTek acquired all of the outstanding
shares of Doo Young Semitek Co., Ltd. for $3.6 million. The name
of Doo Young Semitek Co., Ltd. was subsequently changed to
CoorsTek-Korea. The acquisition has been accounted for under the
purchase method of accounting and goodwill of $2.5 million is
being amortized over 15 years. CoorsTek-Korea, located in
Kyungbook, South Korea, manufactures technical ceramic parts for
the semiconductor industry. The results of CoorsTek-Korea since
December 1999 are included in the discontinued operations of
CoorsTek.
1998 Acquisitions
On January 14, 1998, the Company acquired Britton Group plc
pursuant to a cash tender offer for approximately $420 million.
The Britton acquisition has been accounted for under the purchase
method. Accordingly, the estimated excess of purchase price over
the fair value of net assets acquired of approximately $164
million is being amortized using the straight-line method over 30
years. Britton was an international packaging group operating
through two principal divisions: folding cartons and plastics.
The folding cartons division, Universal Packaging, is a
nonintegrated manufacturer of folding cartons in the United
States, with capabilities in design, printing and manufacturing
of multicolor folding cartons. The plastics division of Britton
(Plastics Division), which was disposed of by the Company on
April 20, 1998, operated in the United Kingdom and included the
extrusion, conversion and printing of polyethylene into films and
bags for industrial customers. The results of Universal
Packaging are reflected in the accounts of the Company beginning
January 14, 1998. The Plastics Division was reflected as a
discontinued operation through the April 20, 1998 disposal date.
On August 17, 1998, the Company acquired the assets and
business of Filpac, Inc. a flexible packaging company located in
Montreal, Canada for $4.8 million in cash. The acquisition has
been accounted for under the purchase method of accounting and
has been included in the accounts of the Company since the
acquisition date. No goodwill resulted from this acquisition.
Filpac was included in the Company's September 2, 1999 sale of
certain flexible packaging plants.
1997 Acquisition
In order to broaden its material base, CoorsTek acquired
Tetrafluor, Inc. for $15.8 million in August 1997. Tetrafluor
manufactures Teflon[R] fluoropolymer sealing systems and compo-
nents for use in the aerospace, industrial and transportation
industries. The acquisition was accounted for under the purchase
method of accounting and, accordingly, the discontinued
operations of CoorsTek include the results of Tetrafluor since
the acquisition date. The excess of the purchase price over the
estimated fair market values of the net assets acquired was $10.7
million, which is being amortized over 15 years on a straight-
line basis.
Note 4. Dispositions
1999 Dispositions
Flexible Packaging Plants
On September 2, 1999, the Company sold its flexible
packaging plants to Sonoco Products Company for approximately
$105 million in cash. The Company used the proceeds from the
sale, less transaction costs, to reduce debt associated with its
recent acquisition of the packaging business of Fort James. The
Company recorded a pre-tax gain of $22.7 million and after-tax
gain of $13.6 million or $0.48 per share on a basic basis and
$0.47 per share on a diluted basis.
Solar Electric Business
On August 3, 1999, the Company sold its majority interest in
a group of solar electric distribution companies to Kyocera
International, Inc., a wholly owned subsidiary of Kyocera
Corporation. The Company realized $30.8 million in cash of which
$20.8 million was consideration for the Company's equity position
and $10.0 million was for the repayment of certain debt owed to
the Company. The Company used the proceeds from the sale, less
transaction costs, to reduce debt associated with its recent
acquisition of the packaging business of Fort James. The pre-tax
gain recorded in conjunction with this transaction totaled $7.5
million while the post-tax gain was $4.5 million. Resultant
earnings per share on a basic and diluted basis for the gain on
this sale were $0.16.
1998 Dispositions
Britton Group Plastics Division
On April 20, 1998, the Company sold the Plastics Division
for approximately pounds 82 million, or $135.0 million, including
pounds 80 million in cash and a pounds 2 million, 5% note
receivable due in 2007 or upon change in control. The majority
of the sale price, less transaction costs, was used to pay down
debt incurred by the Company for the Britton acquisition.
Subsequent to the acquisition date of Britton, the Company
accounted for the Plastics Division as a discontinued operation
held for sale. Therefore, the disposition of the Plastics
Division did not have an impact on the Company's results of
operations. The Plastics Division had net sales for the period
January 14, 1998 through April 20, 1998 of $40.9 million, with
breakeven operating results. The Company allocated $1.8 million
of interest expense related to the acquisition of Britton to the
Plastics Division during the period January 14, 1998 through
April 20, 1998.
Note 5. Asset Impairment and Restructuring Charges
Asset Impairment Charges
The Company recorded a total of $5.9 million, $19.4 million
and $16.6 million in asset impairment charges in 1999, 1998 and
1997, respectively. Goodwill impairment of $5.5 million was
included in the 1998 charge. The remainder of the 1998 charge
consisted of fixed asset impairments. The 1999 and 1997 charges
consisted entirely of fixed asset impairments as described below.
1999: Graphic Packaging recorded $5.9 million of asset
impairment charges in 1999 due to decisions to close its Boulder,
Colorado and Saratoga Springs, New York plants in 2000. The
Boulder, Colorado plant has been replaced by a new manufacturing
facility in Golden, Colorado, which will use advanced equipment
to improve the production process. The Company expects to close
the Boulder plant in the third quarter of 2000. The Saratoga
Springs plant operates at higher overhead levels than other
plants and uses gravure press technology. Therefore, the
decision was made to sell the Saratoga Springs building; move the
business to other folding carton plants; and dispose of the
gravure technology presses at Saratoga Springs. Boulder
writedowns totaled $2.9 million and Saratoga Springs writedowns
totaled $3.0 million.
1998: Graphic Packaging recorded $18.5 million in asset
impairment charges in 1998. Deterioration of the performance at
certain flexible packaging facilities and increased competitive
conditions led management to review the carrying amounts of long-
lived assets and goodwill in conjunction with an overall
restructuring plan. Specifically, forecasted operating cash
flows did not support the carrying amount of certain long-lived
assets and goodwill at Graphic Packaging's Franklin, Ohio
operation. In addition, management decided to offer for sale the
Vancouver, British Columbia operation and close a flexible
divisional office in North Carolina. Therefore, the long-lived
assets and related goodwill were written down to their estimated
market values.
The Company recorded net asset impairment charges of $0.9
million in its Other businesses during 1998. These charges
included a $1.0 million asset impairment charge to write down
long-lived assets of Solartec, S.A., a solar electric subsidiary
in Argentina. Since acquiring Solartec in November 1996,
operating cash flows were below original expectations. As a
result, the Company recorded this impairment to reduce the
carrying value of its investment in Solartec to its estimated
fair market value. In addition, the Company recorded a $0.4
million asset impairment charge related to the consolidation and
outsourcing of certain manufacturing activities at Golden
Genesis. As a result, certain long-lived assets became impaired
and were written down to their estimated market value. Also
during 1998, the Company sold certain equipment formerly used in
a biodegradable polymer project for approximately $0.5 million.
These assets had been previously written off as an asset
impairment, so the resulting gain on sale of these assets was
netted against the 1998 asset impairment charge.
1997: During 1997, the Company recorded a $16.6 million
asset impairment charge when it adopted a plan to limit future
funding for a biodegradable polymer project. This decision
reduced expected future cash flows for this activity to a level
below the carrying value of the manufacturing and intangible
assets of this project.
Restructuring Charges
The Company recorded restructuring charges totaling $1.9
million, $2.0 million and $5.3 million in 1999, 1998 and 1997,
respectively. The following table summarizes accruals related to
these restructuring charges:
Corn
Biodegradable Syrup Graphic Graphic
Polymer Exit Exit Packaging Packaging
(In millions) Plan Plan Corporate Operations Other Total
------------- ----- --------- ---------- ----- -----
Balance,
December 31, 1996 $--- $--- $--- $--- $1.8 $1.8
1997 restructuring
charges 0.9 2.3 2.1 --- --- 5.3
Cash paid (0.5) (1.4) (0.2) --- (1.8) (3.9)
Non-cash expenses --- --- (0.2) --- --- (0.2)
----- ----- ---- ----- ---- -----
Balance,
December 31, 1997 0.4 0.9 1.7 --- --- 3.0
1998 restructuring
charges --- (0.8) --- 2.8 --- 2.0
Cash paid (0.4) (0.1) (1.7) (1.0) --- (3.2)
----- ----- ---- ----- ---- -----
Balance,
December 31, 1998 --- --- --- 1.8 --- 1.8
1999 restructuring
charges --- --- --- 1.9 --- 1.9
Cash paid --- --- --- (1.8) --- (1.8)
----- ----- ---- ----- ---- -----
Balance,
December 31, 1999 $--- $--- $--- $1.9 $--- $1.9
===== ===== ===== ====== ===== =====
1999: Graphic Packaging recorded a $1.9 million
restructuring charge pursuant to a plant rationalization plan
approved by the Company's Board of Directors in the fourth
quarter. The Company has instituted this plan to further its
goal of refining its focus on folding carton packaging and to
reduce headcount. All of the 1999 charge relates to severance,
primarily at the Company's Lawrenceburg, Tennessee manufacturing
plant. In total, 14 administrative and 59 plant positions will
be eliminated at an estimated cost of $1.9 million. Severance
packages have been offered commensurate with employees' positions
and tenure with the Company. The Company paid $0.2 million in
the fourth quarter of 1999 and expects to make the remaining cash
outlays and complete this restructuring plan in 2000. The
Company expects to record additional restructuring charges of
approximately $3.4 million, primarily in the first quarter of
2000, when severance packages are communicated to employees at
the Saratoga Springs plant.
1998: During 1998, the Company instituted a restructuring
plan related to certain Graphic Packaging operations and recorded
$2.8 million in restructuring charges. This plan included the
consolidation and realignment of certain administrative functions
and the downsizing of its Franklin, Ohio operation. This plan
resulted in the elimination of approximately 20 administrative
and 65 manufacturing positions with related severance costs of
approximately $2.5 million. This plan also included
approximately $0.3 million in other exit costs related to the
closure of a divisional office in North Carolina. The Company
made cash payments of $1.0 million in the fourth quarter of 1998
and $1.6 million during 1999.
1997: In December 1997, the Company recorded a $2.1 million
charge related to the closure of the Graphic Packaging corporate
offices in Wayne, Pennsylvania. This closure resulted in
severance and outplacement costs of $1.1 million for
approximately 22 administrative employees. The Company made cash
payments of $1.7 million and $0.2 million related to this plan in
1998 and 1997, respectively.
The Company eliminated 40 research and administrative
positions and recorded approximately $0.9 million in severance
and outplacement costs related to the biodegradable polymer
project in 1997. The Company made cash outlays of approximately
$0.4 million and $0.5 million related to this plan in 1998 and
1997, respectively.
The Company adopted a plan to exit the high-fructose corn
syrup business in 1997. As a result, the Company eliminated
approximately 70 manufacturing and administrative positions and
recorded $2.3 million in severance and other exit costs. The
Company made approximately $0.1 million and $1.4 million in cash
outlays related to this plan in 1998 and 1997, respectively. In
the fourth quarter of 1998, the Company determined that the
liability remaining for this exit plan was not required.
Accordingly, the remaining liability was reversed and netted
against the 1998 restructuring charges.
Note 6. Indebtedness
Long-term debt, in thousands, consisted of the following as
of December 31:
1999 1998
-------- --------
One year term loan due August 1, 2000,
interest at Eurodollar rate $375,000 $---
Five year term loan due August 2, 2004,
interest at Eurodollar rate 325,000 ---
$400 million revolving credit
facility due August 2, 2004,
interest at Eurodollar rate 315,500 ---
7.8% unsecured notes due November 1,
1999 --- 70,000
8.1% unsecured notes due November 1,
2001 --- 30,000
7.2% unsecured notes due 2000
through 2006 --- 45,000
7.0% unsecured notes due 1999
through 2003 --- 47,500
Revolving credit facilities due
through 2000 --- 126,800
--------- --------
Total debt 1,015,500 319,300
Less current maturities 400,000 86,300
Less long-term debt allocated to
CoorsTek --- 50,000
--------- --------
Total long-term debt $615,500 $183,000
========= ========
On August 2, 1999, the Company entered into a $1.3 billion
revolving credit and term loan agreement (the Credit Agreement),
which established three term loans and one revolving credit
facility (collectively, the Senior Credit Facilities). A 180-day
term loan was fully repaid on November 5, 1999, leaving a balance
of $1,015.5 million in debt outstanding on December 31, 1999.
Proceeds from the Senior Credit Facilities were used to finance
the $849.0 million acquisition of the Fort James packaging
business and to prepay the Company's outstanding borrowings from
the 1998 facilities described above. The Company and its
subsidiaries have pledged all material assets as collateral for
the Senior Credit Facilities.
The five-year term loan is due in quarterly installments
beginning with the first quarter of 2000. Total installments for
2000 through 2003, respectively, are $25.0 million, $50.0
million, $70.0 million and $80.0 million with $50.0 million due
in the first half of 2004 and a final balance of $50.0 million
due on August 2, 2004. The one-year term loan is due on August
1, 2000 and any remaining borrowings under the revolving credit
facility are due on August 2, 2004. Mandatory prepayments under
the Senior Credit Facilities are required from the proceeds of
any significant asset sale or from the issuance of any debt or
equity securities.
Amounts borrowed under the Senior Credit Facilities bear
interest under various pricing alternatives plus a spread
depending on the Company's leverage ratio. The various pricing
alternatives include (i) LIBOR, or (ii) the higher of the Federal
Funds Rate plus .5% or the prime rate. Based on this formula,
the interest rate on the Senior Credit Facilities at December 31,
1999 was 8.98%. In addition, the Company pays a commitment fee
that varies based upon the Company's leverage ratio and the
unused portion of the revolving credit facility. Debt issuance
costs of approximately $30 million are included in other assets
on the Consolidated Balance Sheet and are being amortized over
the term of the Senior Credit Facilities as a component of
interest expense.
The financial covenants under the Credit Agreement include
maximum leverage, minimum interest coverage, minimum net worth
and maximum debt to capitalization tests. At December 31, 1999,
the Company was in compliance with the financial covenants.
Subsequent to year end, the Company amended the Credit Agreement
primarily to relax the quarterly financial covenants through
March 31, 2001. In addition, the Credit Agreement limits the
Company's ability to pay dividends and imposes limitations on the
incurrence of additional debt, acquisitions and the sale of
assets. In the event of a default under the Credit Agreement,
the lenders would have the right to call the Senior Credit
Facilities immediately due and refrain from making further
advances to the Company. If the Company is unable to pay the
accelerated payments, the lenders could elect to proceed against
the collateral in order to satisfy the Company's obligations.
Interest expense of approximately $8 million was allocated
to the discontinued operations of the Kalamazoo Mill in 1999,
based upon an estimated fair value of $225 million. Interest
expense of $16.0 million, $3.6 million and $0.1 million was
allocated to the discontinued operations of CoorsTek in 1999,
1998 and 1997, respectively, based upon CoorsTek's $200 million
allocation of total consolidated debt at the time of the spin-off
for 1999, $50 million of outstanding intercompany debt for 1998,
and intercompany interest charges or payments for the usage or
generation of cash from operations for 1998 and 1997.
Subsequent to December 31, 1999, the Company repaid $200.0
million of the one-year term loan facility with the proceeds from
the spin off of CoorsTek. In addition, the Company reduced the
revolving credit facility by $50 million to $400 million.
Proceeds from the sale or other disposition of the Kalamazoo Mill
will be applied to current maturities of debt.
The Company incurred debt extinguishment costs in August
1999 of $3.6 million when existing debt instruments were repaid
in connection with the purchase of the Fort James packaging
business through the issuance of new credit facilities.
Note 7. Fair Value of Financial Instruments
The fair value of cash and cash equivalents, notes
receivable and current maturities of long-term debt approximates
carrying value because of the short maturity of these
instruments. For 1999 and 1998, the fair value of the Company's
long-term debt is estimated based on the current rates offered to
the Company for debt of the same remaining maturity and credit
quality. Because the interest rates on the long-term debt as of
December 31, 1999 are reset monthly, the carrying value
approximates the fair value of long-term debt. The carrying
amount and fair value of the Company's long-term debt, in
thousands, at December 31 is as follows:
1999 1998
Carrying value of long-term debt $615,500 $183,000
Estimated fair value of long-term debt $615,500 $187,000
The Company has entered into interest rate swap agreements
to hedge the underlying interest rates on $100.0 million of short-
term borrowings at an average fixed interest rate of 5.94%.
In addition, the Company has entered into contracts to hedge
the underlying interest rate on $175.0 million of anticipated
long-term borrowings at an average risk-free rate of
approximately 5.9%. These contracts expire on May 1, 2000, by
which time the Company expects to complete the anticipated
borrowings or extend the maturity of the hedging contracts. The
Company has accounted for the contracts as hedges of an
anticipatory borrowing and, as such, the contracts are not marked
to market and any gain or loss upon settlement will be netted
with the underlying cost of borrowing. As of December 31, 1999,
the unrecognized gain associated with these contracts was
approximately $6.0 million based upon a valuation performed by
the banks issuing the contracts. The Company is exposed to
credit loss in the event of nonperformance by the commercial
banks that issued the interest rate contracts. However, the
Company does not anticipate nonperformance by these banks.
The Company utilizes foreign exchange contracts to hedge
transactions and firm commitments denominated in foreign
currencies. Gains and losses on foreign exchange contracts are
deferred and recognized in the basis of the transaction when
completed. There were no contracts outstanding as of December
31, 1999 and the unrecognized loss related to foreign currency
contracts at December 31, 1998 was $0.2 million.
Note 8. Operating Leases
The Company leases a variety of facilities, warehouses,
offices, equipment and vehicles under operating lease agreements
that expire in various years. Future minimum lease payments, in
thousands, required as of December 31, 1999, under noncancelable
operating leases with terms exceeding one year, are as follows:
2000 $2,424
2001 1,960
2002 1,102
2003 723
2004 and thereafter 551
------
Total $6,760
======
Operating lease rentals for warehouse, production, office
facilities and equipment amounted to $4.3 million in 1999, $2.6
million in 1998 and $4.2 million in 1997.
Note 9. Income Taxes
The sources of income, in thousands, from continuing
operations before income taxes and extraordinary loss were:
Year Ended December 31,
1999 1998 1997
------- ------- -------
Domestic $30,468 $12,649 ($8,234)
Foreign 5,095 (2,445) 6,169
------- ------- -------
Income from continuing
operations before income
taxes and extraordinary loss $35,563 $10,204 ($2,065)
======= ======= =======
The total provision for income taxes, in thousands, included
the following:
Year Ended December 31,
1999 1998 1997
------- ------- -------
Current provision:
Federal $13,940 $2,781 $---
State 1,741 2,826 2,723
Foreign 4,347 2,671 3,727
------- ------- -------
Total current tax expense $20,028 $8,278 $6,450
======= ======= =======
Deferred provision:
Federal $800 $8,568 $10,965
State 704 (931) 1,278
Foreign (4,963) (1,615) (294)
------- ------- -------
Total deferred tax
expense (benefit) (3,459) 6,022 11,949
------- ------- -------
Total income tax expense $16,569 $14,300 $18,399
======= ======= =======
The total provision for income taxes, in thousands, is
included in the Consolidated Income Statement as follows:
Year Ended December 31,
1999 1998 1997
------- ------- -------
Continuing operations $14,045 $4,751 $207
Discontinued operations 3,836 9,549 18,192
Extraordinary loss (1,312) --- ---
------- ------- -------
Total expense $16,569 $14,300 $18,399
======= ======= =======
Temporary differences that gave rise to a significant
portion of deferred tax assets (liabilities), in thousands, at
December 31 were as follows:
1999 1998
Depreciation and other
property related ($32,823) ($27,869)
Amortization of intangibles (36) 4,732
Pension and employee benefits 9,123 9,201
Tax credits 15,152 7,133
Capitalized book interest (894) 283
Inventory 1,524 1,509
Accruals 12,928 11,258
Net operating loss and
contribution carryovers 1,524 3,989
All other 108 (377)
------- -------
Gross deferred tax asset 6,606 9,859
Less valuation allowance 123 4,284
------- -------
Net deferred tax asset $6,483 $5,575
======= =======
The valuation allowance for deferred tax assets was
decreased by $4.2 million in 1999 and decreased by $1.3 million
in 1998. The decrease in the valuation allowance for 1999
resulted primarily from the transfer of deferred tax assets and
associated valuation allowances on the sale of a subsidiary. The
remaining valuation allowance relates primarily to uncertainty
surrounding the ultimate deductibility of the remaining foreign
net operating loss carryforward.
The principal differences between the effective income tax
rate, attributable to continuing operations, and the U.S.
statutory federal income tax rate, were as follows:
Year Ended
December 31,
1999 1998 1997
----- ----- ------
Expected tax rate 35.0% 35.0% 35.0%
State income taxes (net of
federal benefit) 2.9 5.8 (33.1)
Nondeductible expenses and
losses 2.0 31.2 (32.5)
Effect of foreign investments (2.9) (0.3) (11.6)
Change in deferred tax asset
valuation allowance 0.3 5.8 (26.0)
Benefit of Foreign Sales
Corporation --- (4.4) ---
Research and development and
other tax credits --- (30.8) 95.5
Other - net 2.2 4.3 (37.3)
----- ------ ------
Effective tax rate 39.5% 46.6% (10.0%)
===== ====== ======
The Internal Revenue Service (IRS) has completed its
examination of the Company's federal income tax returns through
1995. The IRS currently is completing its review of the federal
income tax returns for 1996 through 1998. In the opinion of
management, adequate accruals have been provided for all income
tax matters and related interest.
As a result of certain restructuring, the undistributed
earnings of foreign subsidiaries previously considered as being
permanently reinvested have been distributed to the U.S. as a
dividend. Foreign tax credits are expected to be available to
eliminate the resulting U.S. income tax liability on the
dividend.
The Company and CoorsTek have executed a tax sharing
agreement that defines the parties' rights and obligations with
respect to deficiencies and refunds of Federal, state and other
taxes relating to the CoorsTek business for tax years prior to
the spin-off and with respect to certain tax attributes of
CoorsTek after the spin-off. In general, the Company will be
responsible for filing consolidated Federal and combined or
consolidated state tax returns and paying the associated taxes
for periods through December 31, 1999. CoorsTek will reimburse
the Company for the portion of such taxes relating to the
CoorsTek business. CoorsTek is responsible for filing returns
and paying taxes related to the CoorsTek business for periods
after December 31, 1999.
The tax sharing agreement is designed to preserve the status
of the spin-off as a tax-free distribution. CoorsTek has agreed
that it will refrain from engaging in certain transactions during
the two-year period following the spin-off unless it first
provides the Company with a ruling from the IRS or an opinion of
tax counsel acceptable to the Company that the transaction will
not adversely affect the tax-free nature of the spin-off. In
addition, CoorsTek has indemnified the Company against any tax
liability or other expense it may incur if the spin-off is
determined to be taxable as a result of CoorsTek's breach of any
covenant or representation contained in the tax sharing agreement
or CoorsTek's action in effecting such transactions. By its
terms, the tax sharing agreement will terminate when the statutes
of limitations under applicable tax laws expire.
Note 10. Stock Compensation
The Company has an equity incentive plan that provides for
the granting of nonqualified stock options and incentive stock
options to certain key employees. The equity incentive plan also
provides for the granting of restricted stock, bonus shares,
stock units and offers to officers of the Company to purchase
stock. The number of shares made available for award under the
plan was equal to 4.8 million shares and is being increased
annually by 2% of the Company's outstanding shares on each
preceding December 31 beginning with 1997 and ending with 2001.
Generally, options outstanding under the Company's equity
incentive plan are subject to the following terms: (1) grant
price equal to 100% of the fair value of the stock on the date of
grant; (2) ratable vesting over either a three-year or four-year
service period; and (3) maximum term of ten years from the date
of grant. Officers' 1999 options generally provide for vesting
upon attainment of certain stock prices, but vest completely
after five years.
In conjunction with the spin-off of CoorsTek at December 31,
1999, the Company cancelled options held by CoorsTek employees
and adjusted the remaining options outstanding to reflect the new
ratio of exercise price to market price of the Company's stock
immediately prior and subsequent to the spin-off. The changes
consisted of reducing the exercise price relative to the new
market price and increasing the number of shares underlying the
outstanding options, so as to restore the option holder to the
economic position that existed immediately prior to the spin-off.
Stock option activity for the three years ended December 31,
was as follows (shares in thousands):
1999 1998 1997
--------------- --------------- ---------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ -------- ------ -------- ------ --------
Options outstanding
at January 1 2,672 $17.80 2,616 $16.78 2,788 $15.96
Granted 1,912 $13.43 476 $23.19 404 $20.92
Exercised --- --- (148) $15.33 (375) $14.83
Expired or forfeited (177) $17.62 (272) $18.94 (201) $17.31
------ -------- ------ -------- ------- -------
Options outstanding
at December 31,
before CoorsTek
spin-off 4,407 $15.91 2,672 $17.80 2,616 $16.78
Cancellation of
CoorsTek employee
options (2,036) $15.63 --- --- --- ---
ACX employee options
conversion 1,910 --- --- --- --- ---
------ -------- ------ -------- ------- -------
Options outstanding
at December 31,
after CoorsTek
spin-off 4,281 $8.86 --- --- --- ---
====== ======== ====== ======== ======= ======
Exercisable 2,262 $9.41 1,964 $16.37 1,731 $15.75
====== ======== ====== ======== ======= ======
Available for
future grant 664 1,529 1,173
====== ====== =======
The following table summarizes information about stock
options outstanding at December 31, 1999 (shares in thousands):
Options Outstanding Options Exercisable
- -------------------------------------------------- --------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Options Contractual Exercise Options Exercise
Exercise Prices Outstanding Life Price Exercisable Price
- ---------------- ----------- ----------- --------- ----------- --------
$5.57 to $7.56 2,388 6.9 years $7.36 643 $7.00
$8.18 to $10.65 1,481 4.6 years $10.03 1,441 $10.01
$11.05 to $13.74 412 7.9 years $13.30 178 $13.25
- ---------------- ----------- ----------- --------- ----------- --------
$5.57 to $13.74 4,281 6.4 years $8.86 2,262 $9.41
================ =========== =========== ========= =========== ========
The Company applies Accounting Principles Board Opinion No.
25 and related interpretations in accounting for its stock-based
compensation plans. Accordingly, no compensation expense has
been recognized for its equity incentive plan and employee stock
purchase plan. If the Company had elected to recognize
compensation cost based on the fair value of the stock options at
grant date as allowed by Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation,"
compensation expense of $3.5 million, $2.0 million and $1.7
million would have been recorded for 1999, 1998 and 1997,
respectively. Net income and earnings per share would have been
reduced to the pro forma amounts indicated below:
1999 1998 1997
------- ------- -------
Net income in
thousands:
As reported $25,259 $21,265 $27,716
Pro forma $23,159 $20,065 $26,696
Earnings per share -
basic:
As reported $0.89 $0.75 $0.99
Pro forma $0.81 $0.70 $0.95
Earnings per share -
diluted:
As reported $0.88 $0.73 $0.96
Pro forma $0.81 $0.69 $0.92
The fair value of each option grant is estimated on the date
of grant using the Black-Scholes option pricing model with the
following assumptions: (1) dividend yield of 0%; (2) expected
volatility of 30.8% in 1999, 28.1% in 1998 and 23.2% in 1997; (3)
risk-free interest rate ranging from 5.7% to 6.7% in 1999, 4.7%
to 5.2% in 1998 and 5.3% to 5.7% in 1997; and (4) expected life
of 3 to 6.36 years in 1999 and 1998, and 3 to 6.23 years in 1997.
The weighted average per-share fair value of options granted
during 1999, 1998 and 1997 was $6.82, $7.42 and $6.47,
respectively.
Note 11. Defined Benefit Plans
The Company maintains several defined benefit pension plans
for the majority of the Company's employees. Benefits are based
on years of service and average base compensation levels over a
period of years. Plan assets consist primarily of equity and
interest-bearing investments. The Company's funding policy is to
contribute annually not less than the minimum funding standards
required by the internal revenue code nor more than the maximum
amount that can be deducted for federal income tax purposes.
Retirement health care and life insurance benefits are
provided to certain employees hired prior to 1999 and eligible
dependents. Eligible employees may receive these benefits after
reaching age 55 with 10 years of service. Prior to reaching age
65, eligible retirees may receive certain health care benefits
identical to those available to active employees. The amount the
retiree pays is based on age and service at the time of
retirement. These plans are not funded.
In connection with the acquisition of the Fort James
packaging business, the Company assumed an $18.5 million prepaid
pension asset and an $11.3 million postretirement benefit
liability for the Fort James hourly employees as of August 2,
1999. Approximately $4.2 million of the prepaid pension asset
and $2.6 million of the postretirement benefit liability have
been allocated to the Kalamazoo Mill.
After final reconciliations, pension assets of approximately
$62 million will be transferred into an ACX Technologies defined
benefit pension plan established for the benefit of the former
Fort James hourly employees for the service period up to August
2, 1999.
The following assets (liabilities), in thousands, were
recognized for the combined, defined benefit plans at December
31:
Pension Benefits [c] Other Benefits [c]
1999 1998 1999 1998
-------- -------- -------- --------
Change in benefit
obligation
Benefit obligation at
beginning of year $156,662 $130,853 $20,131 $19,816
Settlements [a] (107,540) --- (13,897) ---
Service cost 3,707 4,668 336 569
Interest cost 5,466 10,105 693 1,301
Amendments 2,088 --- --- (520)
Actuarial loss (gain) (15,845) 5,448 --- (5)
Acquisitions [b] 49,576 10,188 6,603 ---
Change in actuarial
assumptions --- --- (977) ---
Benefits paid (729) (4,600) (639) (1,030)
-------- -------- -------- --------
Benefit obligation at end
of year 93,385 156,662 12,250 20,131
-------- -------- -------- --------
Change in plan assets
Fair value of plan assets
at beginning of year 120,519 112,630 --- ---
Settlements [a] (91,029) --- --- ---
Actual return on plan assets 6,767 2,217 --- ---
Acquisitions [b] 62,945 9,411 --- ---
Company contributions --- 543 --- ---
Benefits paid (729) (4,282) --- ---
-------- -------- -------- --------
Fair value of plan assets
at end of year 98,473 120,519 --- ---
-------- -------- -------- --------
Funded status 5,088 (36,143) (12,250) (20,131)
Unrecognized actuarial loss
(gain) (2,168) 18,172 (3,045) (3,914)
Unrecognized prior service
cost 3,597 5,834 (2,110) (3,607)
Unrecognized transition
(asset) liability (141) --- --- ---
-------- -------- -------- --------
Net prepaid (accrued)
benefit cost $6,376 ($12,137) ($17,405)($27,652)
======== ======== ======== ========
Weighted average
assumptions at year end
Discount rate 7.75% 6.80% 7.75% 6.80%
Expected return on plan
assets 9.75% 9.75% --- ---
Rate of compensation
increase 5.25% 4.30% --- ---
[a] Reflects the spin-off of CoorsTek and the allocation of
obligations and assets to the Kalamazoo Mill.
[b] Reflects the acquisition of the Fort James packaging business
in 1999 and Universal Packaging in 1998.
[c] Includes CoorsTek assets and obligations in 1998.
It is the Company's policy to amortize unrecognized gains
and losses in excess of 10% of the larger of plan assets and the
projected benefit obligation (PBO) over the expected service of
active employees (12-15 years). However, in cases where the
accrued benefit liability exceeds the actual unfunded liability
by more than 20% of the PBO, the amortization period is reduced
to 5 years.
For measurement purposes, a 7.0% and 7.5% annual rate of
increase in the per capita cost of covered health care benefits
was assumed for 1999 and 1998, respectively. The rate was
assumed to decrease by 0.5% per annum to 3.80% and remain at that
level thereafter.
The following, in thousands, excludes the Kalamazoo Mill
from 1999 and CoorsTek from 1999, 1998 and 1997:
Pension Benefits Other Benefits
1999 1998 1997 1999 1998 1997
------ ------ ------ ----- ----- -------
Components of net
periodic
benefit cost
Service cost $3,707 $2,378 $2,267 $336 $231 $475
Interest cost 5,466 3,666 5,150 693 409 737
Expected return
on plan assets (1,805) (1,249) (9,902) --- --- ---
Amortization of
prior service
cost 262 20 352 (703) (704) (248)
Recognized
actuarial loss
(gain) (4,958) (2,382) 5,623 (385) (639) (2,090)
Transition asset (69) --- --- --- --- ---
------ ------ ------ ----- ----- -------
Net periodic
benefit cost
(gain) $2,603 $2,433 $3,490 ($59) ($703) ($1,126)
====== ====== ====== ===== ===== =======
Assumed health care cost trend rates have a significant
effect on the amounts reported for the health care plans. A one-
percentage-point change in assumed health care cost trend rates
would have the following effects, in thousands:
1% 1%
Point Point
Increase Decrease
-------- --------
Effect on total of service and
interest cost components $135 $113
Effect on postretirement benefit
obligation $1,000 $900
Note 12. Defined Contribution Plan
The Company provides a defined contribution, profit sharing
plan for the benefit of its employees, the ACX Technologies, Inc.
Savings and Investment Plan (the Plan). The Plan and its
associated trust are intended to comply with the provisions of
the Internal Revenue Code and ERISA, to qualify as a profit
sharing plan for all purposes of the Code, and to provide a cash
or deferred arrangement that is qualified under Code Section
401(k). Generally, employees expected to complete at least
1,000 hours of service per year are immediately eligible to
participate in the Plan upon employment. The Plan generally
provided for Company matching of 50% of participant
contributions, up to 2.5% of participant annual compensation
through December 31, 1999. Company expenses related to the
matching provisions of the Plan totaled approximately $2.4
million, $1.7 million and $1.2 million in 1999, 1998 and 1997,
respectively. Effective January 1, 2000, Company matching shall
be denominated in the Company's common stock. Due to various
collective bargaining agreements and certain provisions in the
purchase agreement related to the former Fort James packaging
business, the Company provided matching in common stock to former
Fort James employees during the final five months of 1999
approximating $1.0 million. The Plan also provides for
discretionary matching. The Company did not elect to provide
discretionary matching under this provision in 1999, 1998 or
1997.
Note 13. Related Party Transactions
On December 28, 1992, the Company was spun off from Adolph
Coors Company (ACCo) and since that time ACCo has had no
ownership interest in the Company. However, certain Coors family
trusts have significant interests in both the Company and ACCo.
At the time of spin-off from ACCo, the Company entered into
agreements with Coors Brewing Company, a subsidiary of ACCo, for
the sale of packaging, aluminum, starch products and the resale
of brewery byproducts. The initial agreements had a stated term
of five years and have resulted in substantial revenues to the
Company. The Company continues to sell packaging products to
Coors Brewing. Additionally, the Company sold aluminum products
and refined corn starch to Coors Brewing until the disposition of
these businesses on March 1, 1997 and January 31, 1999,
respectively.
In 1998, the supply agreement between Graphic Packaging and
Coors Brewing was renegotiated. The new five-year agreement
includes stated quantity commitments and requires annual
repricing. In addition, this contract provides for a three-year
extension to be negotiated by December 31, 2000.
Sales of packaging products and refined corn starch to Coors
Brewing accounted for approximately 13%, 17% and 27% of the
Company's consolidated net sales for 1999, 1998 and 1997,
respectively. Included in the 1997 results of discontinued
operations are sales of aluminum products to Coors Brewing of
$3.2 million. Sales were at terms comparable to those that could
have been obtained on an arms-length basis between unaffiliated
parties. The loss of Coors Brewing as a customer in the
foreseeable future could have a material effect on the Company's
results of operations.
In connection with the spin-off of CoorsTek at December 31,
1999, ACX Technologies and CoorsTek entered into contracts
governing certain relationships between them following the spin-
off, including a tax-sharing agreement, a transitional services
agreement and certain other agreements. CoorsTek and ACX
Technologies believe that these agreements are at fair market
value and are on terms comparable to those that would have been
reached in arm's-length negotiations had the parties been
unaffiliated at the time of the negotiations.
Note 14. Commitments and Contingencies
It is the policy of the Company generally to act as a self-
insurer for certain insurable risks consisting primarily of
employee health insurance programs. With respect to workers'
compensation, the Company uses a variety of fully or partially
self-funded insurance vehicles. The Company maintains certain
stop-loss and excess insurance policies that reduce overall risk
of financial loss.
In the ordinary course of business, the Company's
subsidiaries are subject to various pending claims, lawsuits and
contingent liabilities, including claims by current or former
employees relating to employment, sexual harassment or
termination. In each of these cases, the Company is defending
against them. The Company does not believe that disposition of
these matters will have a material adverse effect on the
Company's consolidated financial position or results of
operations.
In February 1998, a subsidiary of the Company was sued for
breach of a supply agreement to purchase thermal energy for the
Johnstown, Colorado corn-wet mill. The Company sold the
Johnstown, Colorado corn-wet mill in January 1999. Trial has
been set for October 2000, but the Company does not believe the
disposition will have a material adverse effect on the Company's
financial position or results of operations.
Some of the Company's operations have been notified that
they may be potentially responsible parties (PRPs) under the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980 or similar state laws with respect to the remediation
of certain sites where hazardous substances have been released
into the environment. The Company cannot predict with certainty
the total costs of remediation, its share of the total costs, the
extent to which contributions will be available from other
parties, the amount of time necessary to complete the remediation
or the availability of insurance. However, based on the
investigations to date, the Company believes that any liability
with respect to these sites would not be material to the
financial condition or results of operations of the Company,
without consideration for insurance recoveries. There can be no
certainty, however, that the Company will not be named as a PRP
at additional sites or be subject to other environmental matters
in the future or that the costs associated with those additional
sites or matters would not be material.
In addition, the Company has received demands arising out of
alleged contamination of various properties currently or formerly
owned by the Company. In management's opinion, none of these
claims will result in liability that would materially affect the
Company's financial position or results of operations.
In connection with the sale of various businesses, the
Company has periodically agreed to guarantee the collectibility
of accounts receivable and indemnify purchasers for certain
liabilities for a specified period of time. Such liabilities
include, but are not limited to, environmental matters and the
indemnification periods generally last for 2 to 15 years.
Note 15. Segment Information
The Company's reportable segments are based on its method of
internal reporting, which is based on product category. Thus,
the Company's reportable segments are Packaging and Other. The
packaging segment consists of the operations of Graphic
Packaging. The Company's Other segment includes a real estate
development partnership, a majority interest in a group of solar
electric distribution companies prior to their August 3, 1999
sale and, prior to March 1999, several technology-based
businesses.
The accounting policies of the segments are the same as
those described in Note 1 and there are generally no intersegment
transactions. The Company evaluates the performance of its
segments and allocates resources to them based primarily on
operating income.
The table below summarizes information, in thousands, about
reportable segments as of and for the years ended December 31.
Discontinued operations include the Kalamazoo Mill in 1999 and
CoorsTek in 1999, 1998 and 1997.
Depreciation
Net Operating And Capital
Sales Income Amortization Assets Expenditures
-------- --------- ------------ ---------- ------------
1999
Packaging $786,843 $38,992 $47,834 $1,156,385 $73,707
Other 44,562 2,103 618 19,699 1,568
-------- ------- ------- ---------- -------
Segment total 831,405 41,095 48,452 1,176,084 75,275
Corporate --- (10,479) 260 225,954 17
Discontinued
operations,
net assets --- --- 30,283 225,000 16,163
-------- ------- ------- ---------- -------
Consolidated
total 831,405 $30,616 $78,995 $1,627,038 $91,455
======== ======= ======= ========== =======
1998
Packaging $623,852 $38,232 $35,924 $539,039 $47,498
Other 67,925 (3,047) 1,270 56,905 3,384
-------- ------- ------- --------- -------
Segment total 691,777 35,185 37,194 595,944 50,882
Corporate --- (8,941) 336 101,359 690
Discontinued
operations,
net assets --- --- 19,977 148,719 26,891
-------- ------- ------- --------- -------
Consolidated
total $691,777 $26,244 $57,507 $846,022 $78,463
======== ======= ======= ========= =======
1997
Packaging $365,123 $42,655 $20,211 $210,024 $18,022
Other 61,138 (31,186) 3,451 81,443 9,068
-------- ------- ------- --------- -------
Segment total 426,261 11,469 23,662 291,467 27,090
Corporate --- (10,177) 337 148,258 311
Discontinued
operations,
net assets --- --- 18,664 203,155 28,812
-------- ------- ------- -------- -------
Consolidated
total $426,261 $1,292 $42,663 $642,880 $56,213
======== ======= ======= ========= =======
Corporate assets for 1999 consist primarily of a $200
million note receivable from CoorsTek as a result of the spin-
off, and debt issuance costs. In 1998 and 1997, corporate
assets include a $60 million note receivable from the sale of
Golden Aluminum, deferred taxes and certain properties.
Certain financial information regarding the Company's
domestic and foreign operations is included in the following
summary, which excludes discontinued operating segments. Long-
lived assets include plant, property and equipment, intangible
assets, and certain other non-current assets.
Net Long-Lived
(In thousands) Sales Assets
-------- ----------
1999
United States $779,527 $964,880
Canada 51,878 3,689
Other --- 2,694
-------- ----------
Total $831,405 $971,263
======== ==========
1998
United States $626,715 $401,579
Canada 57,079 34,807
Other 7,983 3,065
-------- ----------
Total $691,777 $439,451
======== ==========
1997
United States $357,795 $118,998
Canada 59,730 34,535
Other 8,736 3,732
-------- ----------
Total $426,261 $157,265
======== ==========
Note 16. Quarterly Financial Information (Unaudited)
The following information summarizes selected quarterly
financial information, in thousands except per share data, for
each of the two years in the period ended December 31, 1999,
which excludes discontinued operations.
1999 First Second Third Fourth Year
-------- -------- -------- -------- --------
Net sales $165,976 $163,595 $236,381 $265,453 $831,405
Cost of goods sold 136,362 132,322 205,970 233,104 707,758
-------- -------- -------- -------- --------
Gross profit 29,614 31,273 30,411 32,349 123,647
Selling, general and
administrative expenses 18,697 19,480 22,353 24,688 85,218
Asset impairment and
restructuring charges --- --- --- 7,813 7,813
-------- -------- -------- -------- --------
Operating income (loss) 10,917 11,793 8,058 (152) 30,616
Other income (expense):
Gain from sale of
businesses --- --- 30,236 --- 30,236
Interest expense (1,776) (1,908) (8,992) (15,874) (28,550)
Interest income 553 487 1,072 531 2,643
Other-net 93 (77) 350 252 618
-------- -------- -------- -------- --------
Income (loss) from
continuing operations
before income taxes and
extraordinary loss 9,787 10,295 30,724 (15,243) 35,563
Income tax expense
(benefit) 4,059 3,846 13,239 (7,099) 14,045
-------- -------- -------- -------- --------
Income (loss) from
continuing operations
before extraordinary
loss 5,728 6,449 17,485 (8,144) 21,518
Income (loss) from
discontinued operations,
net of tax 3,990 4,813 (2,004) (726) 6,073
Extraordinary loss, net of
tax --- --- (2,332) --- (2,332)
-------- -------- -------- -------- --------
Net income (loss) $9,718 $11,262 $13,149 ($8,870) $25,259
======== ======== ======== ======== ========
Net income (loss) per
basic share:
Continuing operations $0.20 $0.23 $0.61 ($0.28) $0.76
Discontinued operations 0.14 0.17 (0.07) (0.03) 0.21
Extraordinary loss --- --- (0.08) --- (0.08)
-------- -------- -------- -------- --------
Net income (loss) per
basic share $0.34 $0.40 $0.46 ($0.31) $0.89
======== ======== ======== ======== ========
Net income (loss) per
diluted share:
Continuing operations $0.20 $0.22 $0.61 ($0.28) $0.75
Discontinued operations 0.14 0.17 (0.07) (0.03) 0.21
Extraordinary loss --- --- (0.08) --- (0.08)
-------- -------- -------- -------- --------
Net income (loss) per
diluted share $0.34 $0.39 $0.46 ($0.31) $0.88
======== ======== ======== ======== ========
1998 First Second Third Fourth Year
-------- -------- -------- -------- --------
Net sales $155,788 $177,904 $177,996 $180,089 $691,777
Cost of goods sold 126,947 144,200 150,597 145,789 567,533
-------- -------- -------- -------- --------
Gross profit 28,841 33,704 27,399 34,300 124,244
Selling, general and
administrative expenses 19,857 19,394 18,345 19,013 76,609
Asset impairment and
restructuring charges 1,001 --- 19,900 490 21,391
-------- -------- -------- -------- --------
Operating income (loss) 7,983 14,310 (10,846) 14,797 26,244
Other income (expense):
Interest expense (4,555) (5,730) (5,917) (5,776) (21,978)
Interest income 1,236 1,456 1,457 1,213 5,362
Other-net (147) 207 508 8 576
-------- -------- -------- -------- --------
Income (loss) from
continuing operations
before income taxes and
extraordinary loss 4,517 10,243 (14,798) 10,242 10,204
Income tax expense
(benefit) 1,514 4,127 (5,291) 4,401 4,751
-------- -------- -------- -------- --------
Income (loss) from
continuing operations
before extraordinary
loss 3,003 6,116 (9,507) 5,841 5,453
Income (loss)from
discontinued operations,
net of tax 2,436 6,439 2,001 4,936 15,812
-------- -------- -------- -------- --------
Net income (loss) $5,439 $12,555 ($7,506) $10,777 $21,265
======== ======== ======== ======== ========
Net income (loss) per basic
share:
Continuing operations $0.10 $0.21 ($0.33) $0.21 $0.19
Discontinued operations 0.09 0.23 0.07 0.17 0.56
Extraordinary loss --- --- --- --- ---
-------- -------- -------- -------- --------
Net income (loss) per basic
share $0.19 $0.44 ($0.26) $0.38 $0.75
======== ======== ======== ======== ========
Net income (loss) per
diluted share:
Continuing operations $0.10 $0.21 ($0.33) $0.21 $0.19
Discontinued operations 0.08 0.22 0.07 0.17 0.54
Extraordinary loss --- --- --- --- ---
-------- -------- -------- -------- --------
Net income (loss) per
diluted share $0.18 $0.43 ($0.26) $0.38 $0.73
======== ======== ======== ======== ========
See Note 5 for detail on asset impairment and restructuring
charges in 1999 and 1998.
SCHEDULE II
ACX TECHNOLOGIES, INC.
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Allowance for doubtful receivables
(deducted from accounts receivable)
Balance Additions
at charged to Balance
Beginning costs and Other Deductions at end
of Year expenses (1) (2) of year
--------- ---------- ------ ---------- -------
Year Ended
December 31,
1997 $1,753 $351 $--- ($996) $1,108
1998 $1,108 $1,111 $1,232 ($1,311) $2,140
1999 $2,140 $503 $1,143 ($1,633) $2,153
(1) The effect of translating foreign subsidiaries' financial
statements into U.S. dollars, the 1998 acquisition of
Universal Packaging and the 1999 acquisition of the Fort
James packaging business.
(2) Write off of uncollectible accounts.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Within the last two years there have been no changes in the
Company's independent accountants or disagreements on accounting
and financial statement disclosure matters.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information regarding the Registrant's Directors is
incorporated by reference to the Proxy Statement in connection
with the 2000 Annual Meeting of Shareholders.
The following executive officers of the Company serve at the
pleasure of the Board:
Jed J. Burnham, 55, Executive Vice President--Finance of the
Company since January 2000; Chief Financial Officer of the
Company from March 1995 to December 1999; Treasurer of the
Company from August 1992 to December 1999; Chief Credit Officer
for non-metro Denver banks at Norwest Bank from 1990 to 1992.
Gail A. Constancio, 39, Chief Financial Officer of the
Company since January 2000; Chief Financial Officer of Graphic
Packaging since November 1997; Controller and Principal
Accounting Officer of the Company from May 1994 to November 1997.
Jeffrey H. Coors, 55, President of the Company since its
formation in August 1992. President of Graphic Packaging since
June 1997 and Chairman of Graphic Packaging since 1985; Executive
Vice President of ACCo from 1991 to 1992; President of Coors
Technology Companies from 1989 to 1992; President of ACCo from
1985 to 1989.
David W. Scheible, 43, Chief Operating Officer of the
Company since January 2000 and of Graphic Packaging since June
1999. Vice President and General Manager of the Specialty Tape
Division from 1995 to 1999, and Vice President and General
Manager of the Automotive Division from 1993 to 1995, of Avery
Dennison Corporation.
Jill B. W. Sisson, 52, General Counsel and Secretary of the
Company since September 1992; Of Counsel to the Denver law firm
of Bearman Talesnick & Clowdus Professional Corporation from 1984
to 1992.
ITEM 11. EXECUTIVE COMPENSATION
This information is incorporated by reference to the Proxy
Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
This information is incorporated by reference to the Proxy
Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information is incorporated by reference to the Proxy
Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a)
Exhibit
Number Document Description
2.1 Recommended Cash Offers by Baring Brothers International
Limited on behalf of ACX (UK) Limited, a wholly-owned
subsidiary of ACX Technologies, Inc. for Britton Group
plc. (Incorporated by reference to Form 8-K filed on
January 29, 1998)
2.2 Asset Purchase Agreement between ACX Technologies and
Fort James Corporation. (Incorporated by reference to
Form 8-K filed August 17, 1999)
2.3 Asset Purchase Agreement between Golden Aluminum Company
and Alcoa Inc, dated November 5, 1999.
2.4 Distribution Agreement between ACX Technologies, Inc.
and CoorsTek, Inc.
3.1 Articles of Incorporation of Registrant. (Incorporated
by reference to Form 10 filed on October 6, 1992, file
No. 0-20704)
3.1A Articles of Amendment to Articles of Incorporation of
Registrant. (Incorporated by reference to Form 8 filed
on December 3, 1992, file No. 0-20704)
3.2 Bylaws of Registrant, as amended and restated March 2,
2000.
4 Form of Stock Certificate of Common Stock. (Incorporated
by reference to Form 10-K filed March 7, 1996, file
No. 0-20704)
10.0 Credit Agreement among ACX Technologies, Inc., Bank of
America, as agent, and other financial institutions
party thereto. (Incorporated by reference to Form 8-K
filed on August 17, 1999)
10.1 Supply Agreement between Graphic Packaging Corporation
and Coors Brewing Company, dated January 1, 1997.
(Incorporated by reference to Form 10-K filed on
March 24, 1997) (Confidential treatment has been
granted for portions of the Exhibit)
10.2 Credit Agreement among ACX Technologies, Inc., Wachovia
Bank, N.A., as agent, and other financial institutions
party thereto. (Incorporated by reference to Form 8-K
filed on December 23, 1998.)
10.3 Asset Purchase Agreement between ACX Technologies and
Sonoco Products Company. (Incorporated by reference
to Form 8-K filed on September 17, 1999.)
10.4 Tax Sharing Agreement between ACX Technologies, Inc.
and CoorsTek, Inc.
10.5 Environmental Responsibility Agreement between ACX
Technologies, Inc. and CoorsTek, Inc.
10.6 Master Transition Materials and Services Agreement
between ACX Technologies, Inc. and CoorsTek, Inc.
10.7* Description of Officers' Life Insurance Program.
(Incorporated by reference to Form 10-K filed on
March 24, 1997.)
10.8* Form of Officers' Salary Continuation Agreement, as
amended. (Incorporated by reference to Form 10-K
filed on March 20, 1995, file No. 0-20704)
10.9* ACX Technologies, Inc. Equity Incentive Plan, as
amended. (Incorporated by reference to Form 10-K
filed on March 7, 1996, file No. 0-20704)
10.10* ACX Technologies, Inc. Equity Compensation Plan for
Non-Employee Directors, as amended. (Incorporated
by reference to the Proxy Statement filed in
connection with the May 17, 1994, Annual Meeting
of Shareholders)
10.11* ACX Technologies, Inc. Phantom Equity Plan.
(Incorporated by reference to Form 8 filed on
November 19, 1992, file No. 0-20704)
10.15* ACX Technologies, Inc. Deferred Compensation Plan, as
amended. (Incorporated by reference to Form 10-K
filed on March 7, 1996, file No. 0-20704)
10.16* ACX Technologies, Inc. Executive Incentive Plan.
(Incorporated by reference to Form 10-K filed on
March 7, 1996, file No. 0-20704)
21 Subsidiaries of Registrant
23 Consent of PricewaterhouseCoopers LLP
27 Financial Data Schedule
* Management contracts or compensatory plans,
contracts or arrangements required to be filed as an
Exhibit pursuant to Item 14(c).
The Registrant will furnish to a requesting security holder
any Exhibit requested upon payment of the Registrant's reasonable
copying charges and expenses in furnishing the Exhibit.
(b) Reports on Form 8-K.
On October 18, 1999, the Company filed a Current Report on
Form 8-K including the required pro forma financial information
of the Fort James packaging business acquired August 2, 1999.
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.
ACX TECHNOLOGIES, INC.
Date: March 27, 2000 By /s/ Jeffrey H. Coors
--------------------------
Jeffrey H. Coors
President and Chief
Executive Officer
Date: March 27, 2000 By /s/ Gail A. Constancio
--------------------------
Gail A. Constancio
Chief Financial Officer
Date: March 27, 2000 By /s/ John S. Norman
--------------------------
John S. Norman
Corporate Controller
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the date indicated.
Date: March 27, 2000 By /s/ William K. Coors
--------------------------
William K. Coors
Chairman of the Board of
Directors and Director
Date: March 27, 2000 By /s/ John D. Beckett
--------------------------
John D. Beckett
Director
Date: March 27, 2000 By /s/ Jeffrey H. Coors
--------------------------
Jeffrey H. Coors
President, Chief Executive
Officer and Director
Date: March 27, 2000 By /s/ John H. Mullin, III
--------------------------
John H. Mullin, III
Director
Date: By
--------------------------
James K. Peterson
Director
Date: March 27, 2000 By /s/ John Hoyt Stookey
--------------------------
John Hoyt Stookey
Director
Exhibit 2.3
Execution Copy 11/5/99
ASSET PURCHASE AGREEMENT
BETWEEN
GOLDEN ALUMINUM COMPANY, AS SELLER
AND
ALCOA INC., AS BUYER
Dated as of November 5, 1999
Table of Contents
Page
Article I Certain Definitions 1
Article II The Transaction 4
Section 2.1 Covenant of Purchase and Sale; Assets 4
Section 2.2 Excluded Assets 5
Section 2.3 Assumed Obligations and Liabilities 5
Section 2.4 Excluded Liabilities 6
Section 2.5 Consideration for Purchased Assets 7
Section 2.6 Accounts Receivable and Inventory Adjustment 7
Section 2.7 Closing 8
Article III Deliveries at Closing 8
Section 3.1 Items to be Delivered at Closing by Seller 8
Section 3.2 Items to be Delivered at Closing by Buyer 8
Section 3.3 Cooperation and Assignments 8
Article IV Representations and Warranties of Seller 9
Section 4.1 Organization 9
Section 4.2 Capitalization and Ownership; Power and
Authority 9
Section 4.3 Subsidiaries 9
Section 4.4 Qualification; Location of Business 9
Section 4.5 Corporate Power; Authorization;
Enforceability 10
Section 4.6 No Conflicts 10
Section 4.7 Consents 10
Section 4.8 Brokers' and Finders' Fees 10
Section 4.9 No Liabilities 11
Section 4.10 No Material Adverse Change 11
Section 4.11 Compliance with Law: Authorizations 11
Section 4.12 Transactions with Related Parties 12
Section 4.13 Litigation 12
Section 4.14 Title: Condition of Assets 12
Section 4.15 Insurance 12
Section 4.16 Contracts: Compliance 13
Section 4.17 Labor Matters 13
Section 4.18 Employee Benefit Plans and Arrangements 13
Section 4.19 Patents and Intellectual Property Rights 13
Section 4.20 Real Property 14
Section 4.21 Disclosure 14
Section 4.22 Year 2000 Compliance 14
Section 4.23 Customers and Suppliers of Colorado Mill 15
Article V Representations And Warranties Of Buyer 15
Section 5.1 Corporate Existence 15
Section 5.2 Corporate Power; Authorization;
Enforceability 15
Section 5.3 No Conflicts 15
Section 5.4 Consents 16
Section 5.5 Ability to Purchase 16
Section 5.6 Brokers' and Finders' Fees 16
Article VI Certain Obligations of The Parties 16
Section 6.1 Agreements of Seller Pending the Closing 16
Section 6.2 Employee Matters 17
Section 6.3 License of Block Caster Technology 19
Section 6.4 Non-Solicitation 19
Section 6.5 Non-Compete 19
Section 6.6 Real Estate Matters 19
Section 6.7 Transfer Taxes 20
Section 6.8 Section 338(h)(10) Election 20
Section 6.9 Colorado Mill Baghouse 20
Article VII Environmental Indemnification 20
Section 7.1 Definitions 20
Section 7.2 Environmental Indemnification and Remediation
Activities 21
Article VIII Survival of Representations and Warranties 22
Article IX Indemnification 22
Section 9.1 Indemnification By Seller 22
Section 9.2 Indemnification by Buyer 23
Section 9.3 Indemnification Procedures 24
Article X Conditions Precedent to the Closing 25
Section 10.1 Conditions Precedent to the Obligations of
Buyer 25
Section 10.2 Conditions Precedent to the Obligations of
Seller 26
Article XI Termination 27
Section 11.1 Termination 27
Section 11.2 Effect of Termination 27
Article XII Miscellaneous 27
Section 12.1 Expenses 27
Section 12.2 Contents of Agreement; Parties in Interest 28
Section 12.3 Assignment and Binding Effect 28
Section 12.4 Notices 28
Section 12.5 Governing Law 29
Section 12.6 No Benefit to Others 29
Section 12.7 Headings, Gender and "Person." 29
Section 12.8 Publicity 30
Section 12.9 Severability 30
Section 12.10 Counterparts 30
Schedules and exhibits
Schedule Title
1.1(a) Colorado Employees
1.1(b) Texas Employees
2.1 Fixed Asset Listing
2.2 Excluded Assets
2.3 Assumed Liabilities
4.3 Organizational Regulations of Golden Engineering AG
4.4 Qualifications
4.9 Liabilities
4.10 Material Adverse Changes
4.11 Authorizations
4.12 Related Party Transactions
4.13 Litigation
4.15 Insurance
4.16 Contracts
4.17 Labor Matters
4.19 Intellectual Property Rights
4.20 Real Property
4.22 Year 2000 Compliance
4.23 Customers and Suppliers of Colorado Mill
6.2 Texas Employees for Reimbursement
6.10 Colorado Mill Baghouse Repairs
Exhibits
Exhibit A Bill of Sale, Assignment, Assumption Agreement
Exhibit B Form of Owner's Affidavit
Exhibit C Guaranty
Exhibit D Consent Decree
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is dated as of November 5,
1999, between Golden Aluminum Company, a Colorado corporation
("Seller") and Alcoa Inc., a Pennsylvania corporation ("Buyer").
Recitals
A. Seller is in the business of manufacturing and selling
aluminum rigid container sheet and flat rolled aluminum products
produced through a continuous cast mini-mill process (the
"Business"). Seller operates the Business primarily at two
aluminum rolling mills located at Fort Lupton, Colorado (the
"Colorado Mill") and San Antonio, Texas (the "Texas Mill"). As
of August 23, 1999, Seller has substantially ceased operation of
the Texas Mill. The Business also includes the following wholly-
owned subsidiaries of Seller: GAC Technology Company, a Colorado
corporation, and Golden Engineering AG, a Swiss corporation (the
"Subsidiaries"). Seller and the Subsidiaries are collectively
referred to as the "Company."
B. Seller desires to sell to Buyer, and Buyer desires to
purchase from Seller, the business, assets and properties of the
Company, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained
herein, and for other good and valuable consideration, the
receipt and sufficiency of which are acknowledged, the parties
agree as follows:
Article I
Certain Definitions
As used in this Agreement, the following terms (whether
used in singular or plural forms) shall have the following
meanings:
"Affiliate" means any person, directly or indirectly,
controlling, controlled by, or under common control with a party
(excluding, with respect to Seller, Coors Brewing Company and
Adolph Coors Company). Without limiting the generality of the
foregoing, a person is considered to be in control of or to be
controlled by another person if such person holds 50% or more of
the outstanding voting equity interest in such other person or
such other person holds 50% or more of its outstanding voting
equity interest.
"Assets" is defined in Section 2.1.
"Assumed Liabilities" is defined in Section 2.3.
"Buyer" is defined in the introductory paragraph of this
Agreement.
"Closing" is defined in Section 2.6.
"Closing Date" is defined in Section 2.6.
"Code" means the Internal Revenue Code of 1986, as amended.
"Colorado Employees" means all of the salaried and hourly
employees of the Colorado Mill who are actively employed
(including those employees currently on an authorized leave of
absence, but excluding any employee on layoff status) by Seller
as of the day before the Closing identified on Schedule 1.1(a).
"Crown Cork Ownership Period" means the period of time from
March 1, 1997 through August 22, 1999, during which period Seller
was owned by Crown Cork & Seal Company, Inc.
"Damages" means losses, liabilities, claims, obligations,
damages, deficiencies, costs, expenses and fees, including
without limitation, legal fees, reasonable expert witness fees
and reasonable costs of investigation incurred in defending
against any assertion of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" means (i) any corporation included with a
person in a controlled group of corporations within the meaning
of Section 414(b) of the Code; (ii) any trade or business
(whether or not incorporated) which is under common control with
a person within the meaning of Section 414(c) of the Code;
(iii) any member of an affiliated service group of which a person
is a member within the meaning of Section 414(m) of the Code; or
(iv) any other person or entity treated as an affiliate of a
person under Section 414(o) of the Code; provided that with
respect to Seller, Coors Brewing Company and Adolph Coors Company
shall not be deemed an ERISA Affiliate.
"Excluded Assets" is defined in Section 2.2.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Indemnified Party" is defined in Section 9.3(a).
"Indemnifying Party" is defined in Section 9.3(a).
"Intellectual Property Rights" means all patents, license
and sublicenses, intellectual property, trademarks, trade names,
services marks, service names, logos, copyrights, inventions,
technology, formulae, technical information, know-how, trade
secrets, drawings, blueprints, designs, design protocols,
specifications for materials, specifications for parts and
devices, safety procedures for the handling of materials and
substances, quality assurance and control procedures, design
tools and simulation capability, and all manuals and technical
data Seller provides to its own employees, customers, suppliers,
agents or licensees used in the Business.
"Inventory" means all inventories of raw materials, work in
process and finished goods of the Business.
"Liens" means liens, claims, security interests, pledges,
charges, equities, options, restrictions and encumbrances.
"Litigation Conditions" is defined in Section 9.3(b).
"Material Adverse Effect" means any change in, or effect on,
the Business, as currently conducted by Seller that is materially
adverse to the assets, liabilities, results of operations or the
financial condition of the Business.
"Permitted Liens" means (i) liens for current real or
personal property taxes not yet due and payable; (ii) liens
disclosed in Schedule 4.20; (iii) statutory liens arising by
mandatory provisions of law securing obligations in the ordinary
course of business which are not yet due or which are being
contested in good faith; and (iv) liens, encumbrances and
restrictions such as easements, licenses and rights-of-way that
do not materially detract from the value of the Real Property
used in the Business or materially interfere with the present use
of the Real Property by the Business.
"Related Party" means ACX Technologies, Inc., any of the
officers or directors of the Company, any Affiliate of the
Company (excluding Coors Brewing Company and Adolph Coors
Company), or any business or entity in which the Company, or any
Affiliate of any such person, has any direct or material indirect
interest.
"Seller" is defined in the introductory paragraph of this
Agreement.
"Seller Benefit Plans" means each (i) "employee benefit
plan," as defined in Section 3(3) of ERISA (including any
"multiemployer plan" as defined in Section 3(37) of ERISA);
(ii) all other pension, retirement, supplemental retirement,
deferred compensation, excess benefit, profit sharing, bonus,
incentive, stock purchase, stock ownership, stock option, stock
appreciation right, employment, severance, salary continuation,
termination, change-of-control, health, life, disability, group
insurance, vacation, holiday and fringe benefit plan, program,
contract, or arrangement (whether written or unwritten, qualified
or nonqualified, funded or unfunded and including any that have
been frozen or terminated) maintained, contributed to, or
required to be contributed to, by Seller or any ERISA Affiliate
of Seller for the benefit of any employee or former employee of
Seller, director, officer or independent contractor of Seller or
under which Seller or any ERISA Affiliate of Seller has any
liability with respect to any employee, former employee,
director, officer or independent contractor of Seller.
"Subsidiaries" is defined in Recital A.
"Texas Employees" means all of the salaried and hourly
employees of the Texas Mill who are actively employed (including
those employees currently on an authorized leave of absence, but
excluding any employee on layoff status) by Seller as of the day
before the Closing identified on Schedule 1.1(b).
"Third Party Claim" is defined in Section 9.3(a).
"Working Capital Value" means the value of the Inventory,
calculated in accordance with Section 2.5(b), plus the value of
the accounts receivable of the Business as of the Closing Date,
minus the accounts payable of the Business as of the Closing
Date.
Article II
The Transaction
Section 2.1 Covenant of Purchase and Sale; Assets. Subject
to the terms and conditions set forth in this Agreement, and
except as otherwise provided in Section 2.2, at the Closing,
Seller shall sell, convey, assign, transfer and deliver to Buyer,
all of Seller's title and interest in all of the properties,
assets, and rights of any kind, where ever located, whether
tangible or intangible, real or personal, used by Seller in its
operation of the Business (the "Assets"), including without
limitation the following:
(a) all of the issued and outstanding capital stock of
each of the Subsidiaries;
(b) all cash on hand as of the Closing Date, all
accounts receivable and all prepaid expenses and security
deposits of the Company;
(c) all of the Intellectual Property Rights;
(d) the Real Property, as set forth in Schedule 4.20;
(e) the leases, contracts and commitments set forth in
Schedule 4.16 including without limitation the Nitrogen Lease and
Ground Lease described therein;
(f) all of the Authorizations, as defined in Section
4.11.
(g) all of Seller's technical information and data,
customer lists, machinery and equipment warranties, maps, com-
puter disks and tapes, plans, diagrams, blueprints and schematics
relating to the Colorado Mill and the Texas Mill;
(h) all machinery, equipment (including all trans-
portation and office equipment), fixtures, trade fixtures, and
furniture located at the Colorado Mill or the Texas Mill or in
any other space owned, leased or occupied by Seller;
(i) the Inventory;
(j) the fixed assets, in the listing attached as
Schedule 2.1 and the stores inventory, in the listing previously
provided by Seller to Buyer;
(k) all claims (but not tax refund claims), causes of
action, choses in action, right of recovery and rights of set-off
of any kind, except those retained by Seller as excluded assets;
(l) the right to receive mail, accounts receivable
payments and other communications addressed to the Company;
(m) all books and records relating to the Business or
the operations of the Company, provided that Seller shall have
the right to have such records made available to it for a reason-
able period after the Closing Date for reasonable tax reporting
purposes;
(n) all goodwill and going concern value generated by
Seller with respect to the Business; and
(o) all intangible assets of the Company relating to
the Business not specifically described above.
Section 2.2 Excluded Assets. Notwithstanding the provisions
of Section 2.1, the Assets shall not include the following, which
shall be retained by Seller (the "Excluded Assets"):
(a) Seller's minute books and stockholder and stock
transfer records;
(b) bonds, letters of credit, surety instruments, and
other similar items;
(c) All employee benefit plans of the Company, includ-
ing without limitation, employee pension, profit sharing, 401(k),
medical benefit or health plans and trusts and related trust
accounts, funds, investments or other assets.
(d) all claims, rights and interests in and to any
refunds for Taxes or fees for periods prior to the Closing Date;
(e) all rights under judgment and rights of recovery
related to operation of the Business prior to the Closing Date;
and
(f) all rights, assets, and properties described in
Schedule 2.2.
Section 2.3 Assumed Obligations and Liabilities. After the
Closing Date, Buyer shall assume, pay, discharge, and perform the
following (the "Assumed Liabilities"):
(a) those obligations and liabilities attributable to
periods after the Closing Date under the contracts, licenses
and commitments transferred to Buyer at closing, including with-
out limitation Seller's obligations under the material agreements
listed on Schedule 4.16, and further including all contingent
liabilities under the Tax Abatement Agreement between Seller and
the City of San Antonio, dated July 27, 1989 ("Abatement
Agreement"), with respect to refund of tax abatements for failure
to operate the Texas Mill for one year.;
(b) those liabilities and obligations set forth on
Schedule 2.3; and
(c) all obligations and liabilities arising out of
Buyer's ownership of the Assets or operation of the Business
after the Closing Date.
Section 2.4 Excluded Liabilities. Other than the Assumed
Liabilities, Buyer does not assume and will not be responsible
for, and Seller will retain and remain responsible for, any and
all obligations and liabilities of the Company and the Business
of any nature whatsoever, whether past, current or future,
whether accrued, contingent, known or unknown, including without
limitation third party claims for personal injury filed after the
Closing Date to the extent such claims relate to actions or
inactions of the Company prior to the Closing Date. Without
limiting the foregoing and by way of example only, Buyer may not
be deemed to assume any liabilities relating to or arising out
of:
(a) all accrued liabilities, and accrued expenses,
including accrued wages, performance pay, incentive compensation,
salary, and sick pay in respect of employees of the Company;
(b) contributions to or other obligations arising
under the employee benefit plans of the Company;
(c) any short or long-term debt of the Company;
(d) all amounts payable (fixed, contingent or other-
wise) by the Company to an Affiliate of the Company;
(e) all warranty claims and all claims for injury or
damage attributable to the design, manufacture or sale of any
product produced by the Company prior to the Closing Date;
(f) all taxes assessed, accrued or attributable to the
Company for periods prior to the Closing Date and related
penalties and interest, if any, excluding all liabilities under
the Abatement Agreement assumed by Buyer under Section 2.3(a);
(g) any complaint, suit, action, arbitration or regu-
latory, administrative or governmental proceeding or investiga-
tion which relates to the Business conducted on or prior to the
Closing Date including, without limitation, the items of
litigation set forth on Schedule 4.13; and
(h) all amounts due as of the Closing Date under the
accounts payable between Seller and ACX Technologies, Inc. cover-
ing advances by ACX Technologies, Inc. to Seller for product
included in the Inventory and being acquired by Buyer, which as
of October 29, 1999, was $14,300,000.
Section 2.5 Consideration for Purchased Assets.
(a) As consideration for the Assets, Buyer will pay
Seller $41,000,000 ("Asset Value"), plus the Working Capital
Value (the Asset Value and the Working Capital Value collec-
tively the "Purchase Price"). Buyer will pay the Asset Value to
Seller by wire transfer of immediately available funds to an
account designated in writing by Seller no later than 1:00 p.m.
EST on the Closing Date. Within five business days after the
Closing, Seller and Buyer will jointly determine the value
of the Inventory in accordance with Section 2.5(b) and will value
the accounts receivable and accounts payable based on the book
value as of the Closing Date, which values will be used to cal-
culate the Working Capital Value as of the Closing Date (the
"Final WC Value"). If the accounts receivable included within
the Final WC Value ("Receivables") and the value of the Inventory
exceed the accounts payable included within the Final WC Value
("Payables"), then Buyer will pay Seller within five business
days following determination of the Final WC Value, by wire
transfer in immediately available funds, the amount of such
excess. If the Receivables and the value of the Inventory are
less than the Payables, then Seller will pay Buyer within five
business days following determination of the Final WC Value, by
wire transfer in immediately available funds, the amount of such
deficiency.
(b) For purposes of calculating the Purchase Price,
the value of the Inventory will be determined as follows:
(i) Raw materials inventory will be valued at
market price;
(ii) Work in process inventory will be valued at
raw material costs plus standard cost build-up; and
(iii) Finished goods inventory will be valued at
the price established under the customer contracts covering the
inventory, less freight to the extent freight is already included
in the customer contract price.
Section 2.6 Accounts Receivable and Inventory Adjustment.
If, within 90 days of the Closing Date, any of the Receivables
has not been collected in full, or any of the finished goods
inventory has been returned by the customer to Buyer, Seller will
repurchase such uncollected Receivables and inventory from Buyer.
Seller also will reimburse Buyer for new back-up rolls to be
purchased by Buyer for the cold mills of the Business in the
amount of $275,000. Buyer and Seller will cooperate to finalize
the amount for reimbursement so that Seller may pay Buyer for
such repurchased Receivables and inventory, as well as the back-
up rolls, within 100 days of the Closing Date by wire transfer of
immediately available funds.
Section 2.7 Closing. The closing of the sale of the Assets
(the "Closing") shall be held at 11:00 a.m. at the offices of
Holland & Hart, LLP, 555 17th Street, Suite 3200, Denver,
Colorado, on November 5, 1999, or on another date mutually agreed
upon in writing by the parties (the "Closing Date"), and shall be
effective as of 11:59 p.m. EST on the Closing Date.
Article III
Deliveries at Closing
Section 3.1 Items to be Delivered at Closing by Seller. At
the Closing, subject to the terms and conditions of this
Agreement, Seller shall deliver to Buyer:
(a) a fully executed Bill of Sale, Assignment and
Assumption Agreement in substantially the form of Exhibit A (the
"Bill of Sale"), and any general warranty deeds, assignments of
leases and all other instruments of conveyance which are
necessary or reasonably requested by Buyer to effect the transfer
of the Assets to Buyer; and
(b) the agreements, documents and instruments required
by Section 10.1.
Section 3.2 Items to be Delivered at Closing by Buyer. At
the Closing, subject to the terms and conditions of this Agree-
ment, Buyer shall deliver to Seller:
(a) the Asset Value in accordance with Section 2.5;
(b) an executed counterpart of the Bill of Sale;
(c) any agreements, documents and instruments required
by Section 10.2; and
(d) any assumption or other documents which are
necessary or reasonably requested by Seller to effect the assump-
tion of the Assumed Liabilities by Buyer.
Section 3.3 Cooperation and Assignments. After the Closing
Date, Seller and Buyer will cooperate so that Buyer may secure
all necessary consents, approvals, authorizations, exemptions and
waivers from third parties, including all permits, licenses and
other authorizations from governmental agencies, required to
enable Buyer to obtain the benefit of the transactions
contemplated hereby.
Article IV
Representations and Warranties of Seller
Seller represents and warrants to Buyer the following:
Section 4.1 Organization. Seller is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Colorado. Seller has all requisite power and
authority to own or lease its properties and assets as now owned
or leased and to carry on its business as and where now being
conducted.
Section 4.2 Capitalization and Ownership; Power and
Authority. Seller's authorized capital stock consists solely of
100 shares of common stock, par value $1.00 per share, 100 shares
of which are issued and outstanding and owned by ACX Technologies,
Inc. The authorized capital stock of each of the Subsidiaries
consists of the following: with respect to GAC Technology
Company, 1,000 shares of common stock, par value $0.01, all of
which are issued and outstanding and owned by Seller, and, with
respect to Golden Engineering AG, 100 shares of common stock, par
value $0.01, all of which are issued and outstanding, 97 of which
are owned by Seller and three of which are held of record by
directors of such Subsidiary. There are no other outstanding
voting securities of the Subsidiaries except for the above
described capital stock. There are no outstanding options,
warrants, rights, agreements, calls, commitments or demands of
any character relating to the capital stock of the Subsidiaries
and no securities convertible into or exchangeable for any
of such capital stock of the Subsidiaries. All of the capital
stock of the Subsidiaries is owned free of Liens.
Section 4.3 Subsidiaries. Except for the Subsidiaries,
Seller does not, directly or indirectly, own any stock of, or any
other interest in, any other corporation, joint venture, partner-
ship, trust or other business entity. Each of the Subsidiaries
is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation
and has full corporate power and authority to carry on its busi-
ness as it is now being conducted and to own, operate and
lease its properties and assets. The Organizational Regulations
attached as Schedule 4.3 are a true and correct copy of the
Organizational Regulations of Golden Engineering AG and are in
full force and effect.
Section 4.4 Qualification; Location of Business. Seller
and the Subsidiaries are duly authorized to do business in the
jurisdictions set forth on Schedule 4.4. The jurisdictions set
forth on Schedule 4.4 are the only jurisdictions where the
character of the properties owned or leased or the nature of
activities conducted by Seller or the Subsidiaries make such
qualification necessary.
Section 4.5 Corporate Power; Authorization; Enforceability.
Seller has the corporate power, authority and legal right to
execute, deliver and perform this Agreement. The execution,
delivery and performance of this Agreement by Seller have been
duly authorized by all necessary corporate action and shareholder
action. This Agreement and all the other agreements and
instruments required to be executed and delivered by Seller in
connection with this Agreement have been duly executed and
delivered by Seller and constitute the legal, valid and binding
obligation of the Company, enforceable in accordance with its
terms, except as such enforceability may be limited by
bankruptcy, insolvency, moratorium, reorganization and similar
laws affecting creditors' rights generally and general principles
of equity.
Section 4.6 No Conflicts. The execution and delivery of this
Agreement by Seller does not, and the consummation of the
transactions contemplated by this Agreement and the compliance
with the terms, conditions, and provisions of this Agreement by
Seller will not: (a) contravene any provision of the Company's
articles of incorporation, bylaws or other governing instruments;
or (b) conflict with or result in a breach of or constitute a
default (or an event which, with the passage of time or the
giving of notice or both, constitute a default) under any of the
terms, conditions or provisions of any material indenture,
mortgage, loan or credit agreement or any other material
authorization agreement or instrument to which the Company or
Seller is a party or by which any of them or any of their assets
may be bound or affected, or any judgment or order of any court
or governmental department, commission, board, agency or
instrumentality, domestic or foreign, affecting the Company, or
any applicable Regulation; (c) result in the creation or
imposition of any Liens of any nature whatsoever upon any of the
Assets or the stock of the Subsidiaries or give to others any
interests or rights in the Assets or such stock; (d) result in
the maturation or acceleration of any of the Assumed Liabilities
(or give others the right to cause such a maturation or
acceleration); (e) result in the termination of or loss of any
material right (or give others the right to cause such a ter
mination or loss) under any agreement or contract to which the
Company is a party or under which the Company may be a
beneficiary.
Section 4.7 Consents. Except as required under the HSR Act,
no material consent, approval or authorization of, or
registration or filing with any governmental authority or other
regulatory agency, is required in connection with the execution,
delivery and performance of this Agreement by Seller.
Section 4.8 Brokers' and Finders' Fees. Seller represents
and warrants to Buyer that all negotiations relative to this
Agreement have been carried on by it directly without the
intervention of any person who may be entitled to any brokerage
or finder's fee or other commission in respect of this Agreement
or the consummation of the transactions contemplated hereby.
Section 4.9 No Liabilities. To Seller's knowledge, except as
disclosed on Schedule 4.9, the Company has no liability or
obligation of any nature whatsoever, secured or unsecured, known
or unknown, whether due or to become due, absolute, accrued,
contingent or otherwise.
Section 4.10 No Material Adverse Change. Except as set forth
on Schedule 4.10 and the fact that the Business has been held for
sale, and operations at the Texas Mill have substantially ceased,
since August 23, 1999, the Business has been conducted in the
ordinary course consistent with past practice (including with
respect to the collection of receivables, payment of payables and
other liabilities, sales practices, capital expenditures and
inventory levels) and there has not occurred with respect to the
Business:
(a) any event, occurrence or development which,
individually or in the aggregate, has had a Material Adverse
Effect;
(b) any damage, destruction or loss to the Company
not covered by insurance that would have a Material Adverse
Effect;
(c) Any sale or other disposition of any capital
asset or Intellectual Property Right having a book value in
excess of $25,000 used in the Business;
(d) Any increase in the wage, salary, commission or
other compensation (other than routine increases granted in the
ordinary course of business and consistent with past practice)
payable or to become payable by the Company to any of its
employees, or any change in any existing, or creation of any new,
insurance or other plan under which the Company provides benefits
to such employees; or
(e) Any release or waiver by Seller or the Company of
any material claim or right of the Company.
Section 4.11 Compliance with Law: Authorizations. The
Company has complied in all material respects with and is in
compliance in all material respects with each law, ordinance,
or governmental or regulatory rule or regulation, whether federal,
state, cantonal, local or foreign ("Regulation"), to which the
Company's business, operations, assets or properties is subject.
The Company owns, holds, possesses or lawfully uses in the
operation of its business all material franchises, licenses,
permits, approvals, filings, registrations and other
authorizations from any governmental or regulatory official body
or authority ("Authorizations") that are required to conduct the
Business and such Authorizations are in full force and effect.
The Company is in compliance in all material respects with the
terms of the Authorizations and Regulations. To Seller's
knowledge, no notice, citation, summons or order has been issued,
no complaint has been filed, no penalty has been assessed and no
investigation or review is pending or threatened by any
governmental entity with respect to any alleged violation by the
Company of any Regulation or with respect to any alleged failure
by the Company to have any Authorization required in connection
with the Business. All Authorizations are listed in
Schedule 4.11.
Section 4.12 Transactions with Related Parties. Except as
disclosed on Schedule 4.12 and below, no Related Party:
(a) has borrowed money from or loaned money to the
Company that has not been repaid;
(b) has any contractual or other claim of any kind
whatsoever against the Company;
(c) has had, since March 1, 1997, any interest in any
Intellectual Property Rights used in the Business; or
(d) has been engaged, since March 1, 1997, in any other
transaction (or series of transactions) involving in excess of
$50,000 in any fiscal year with the Company.
Section 4.13 Litigation. Except as set forth on Schedule
4.13, no litigation, including any arbitration, investigation or
other proceeding of or before any court, arbitrator or govern-
mental or regulatory official, body or authority is pending or,
to Seller's knowledge, threatened against the Company which
relates to the assets of the Company, the stock of the Sub-
sidiaries or the transactions contemplated by this Agreement.
The Company is not a party to or subject to, and the assets of
the Company and the stock of the Subsidiaries, are not subject to,
the provisions of any judgment, order, writ, injunction, decree
or award of any court, arbitrator or governmental or regulatory
official, body or authority.
Section 4.14 Title: Condition of Assets. The Company has
good and valid title to the Assets, free and clear of all Liens
of whatsoever nature except Permitted Liens, and subject only to
minor imperfections of title, none of which, individually or in
the aggregate, materially impairs the use of the affected
property or materially impairs any operations of the Business.
All of the Assets are in the Company's possession and control,
are in good working order and operating condition and repair
(ordinary wear and tear and routine maintenance excepted), are
suitable for the purposes for which they are used in the
Business, and are structurally sound and free from material
defects. Since August 23, 1999, Seller has not removed any of
the Assets from the Business.
Section 4.15 Insurance. All policies of general liability
and property insurance under which the Company is listed as an
additional insured or a beneficiary are listed on Schedule 4.15.
All such policies are in full force and effect in accordance with
their terms, no notice of cancellation or non-renewal has been
received, and there is no existing default or event which, with
the giving of notice or lapse of time or both, would constitute a
default under such policies. All premiums to date have been paid
in full.
Section 4.16 Contracts: Compliance. Schedule 4.16 contains
a complete and accurate list of all material written leases,
licenses, contracts or commitments of any kind, formal or
informal, to which the Company is a party to or bound by. All
material leases, contracts and other commitments to which the
Company is a party or by which it is bound are in full force and
effect. For purposes of this Section 4.16, "material" means any
lease, license, contract or commitment involving a payment in
excess of $100,000 in any 12-month period or having a term of 12
months or greater. To Seller's knowledge, (a) all parties to
such leases, licenses, contracts and other commitments have
complied with the provisions thereof; (b) no such party is in
default under any of the terms thereof; and (c) no event has
occurred that with the passage of time or the giving of notice or
both would constitute a default by any party under any provision
thereof.
Section 4.17 Labor Matters. Except as disclosed on
Schedule 4.17: (a) no employee of the Company is represented by
any union or other labor organization; (b) there is no unfair
labor practice complaint against the Company pending or, to
Seller's knowledge, threatened before the National Labor
Relations Board; (c) there is no labor strike, dispute, slow down
or stoppage pending or, to Seller's knowledge, threatened against
the Company; and (d) no grievance against the Company which might
have a Material Adverse Effect on the Company or the conduct of
its business is pending; (e) no private agreement restricts the
Company from relocating, closing or terminating any of its
operations or facilities; (f) to Seller's knowledge, the Company
in the past three years has not experienced any work stoppage or
other labor difficulty or committed any unfair labor practice;
and (g) there are no efforts in progress by any union or other
labor organization to organize any employees of the Company. For
purposes of this Section 4.17 only, "Seller's knowledge" is
defined as the personal knowledge of Joe Toscano, the plant
manager of the Colorado Mill.
Section 4.18 Employee Benefit Plans and Arrangements.
Seller's execution of, and performance of the transactions con-
templated by this Agreement will not constitute an event under
any Seller Benefit Plan that will result in any payment (whether
as severance pay or otherwise), acceleration, vesting or increase
in benefits with respect to any employee for which Buyer would
be responsible. No Seller Benefit Plan provides for "parachute
payments" within the meaning of Section 280G of the Code.
Section 4.19 Patents and Intellectual Property Rights.
Schedule 4.19 contains a complete and accurate list and
description (including the name and owner thereof) of the
Intellectual Property Rights. Seller is the registered and
beneficial owner of all of the Intellectual Property Rights free
and clear of any royalty claims or other Liens except as stated
on Schedule 4.19. To Seller's knowledge, the operation of the
Business as currently conducted or conducted in the past does not
conflict with or infringe on the rights of any other person, and
Seller has not received any claim or notice from any person to
such effect. To Seller's knowledge, no other person is
infringing the Intellectual Property Rights. Except as set forth
on Schedule 4.19, the Company owns or is licensed or otherwise
has the exclusive use of all Intellectual Property Rights
necessary for the operation of the Business as it is currently
conducted.
Section 4.20 Real Property.
(a) For purposes of this Agreement, "Real Property"
will mean all interests in and rights to the real property and
the related improvements which are owned, leased or otherwise
subject to a right of use, occupancy or license by the Company
and are used in connection with the Business. All such Real
Property is listed on Schedule 4.20.
(b) With respect to the Real Property owned by the
Company, the Company has good and marketable title, including all
legal, equitable and beneficial interests, to the lots and
parcels of land listed on Schedule 4.20 together with the
buildings, structures and other improvements, with all easements,
rights and other privileges appurtenant thereto, free and clear
of all mortgages, liens, encumbrances, ground rents, leases,
tenancies, licenses, reservations or other rights of occupancy or
use for all or any portion of the Real Property, options,
security interests, covenants, conditions, restrictions, rights-
of-way, easements, encroachments and any other matter affecting
title except Permitted Liens.
(c) With respect to the Real Property leased by the
Company, each lease is in full force and effect and has not been
assigned, modified, supplemented or amended and neither the
Company nor, to the Company's knowledge, the landlord or subland-
lord under any lease is in default under any of the leases, and
no circumstance presently exists which, with the giving of notice
or passage of time, or both, would permit the landlord or sub-
landlord under any lease to terminate any lease.
Section 4.21 Disclosure. No representation or warranty by
Seller in this Agreement, and no exhibit, document, statement,
certificate or schedule furnished or to be furnished to Buyer
pursuant to this Agreement, or in connection with the
transactions contemplated hereby, contains or will contain any
untrue statement of a material fact, or omits or will omit to
state a material fact necessary to make the statements or facts
contained herein or therein not misleading, taken as a whole, and
in light of the circumstances under which they were made.
Section 4.22 Year 2000 Compliance. To Seller's knowledge,
except as disclosed on Schedule 4.22, the Business is in all
material respects Year 2000 Compliant in that no products,
facilities, machinery, equipment, business systems and
operational infrastructure are or will be affected in performance
or functionality by dates prior to, during and after the year
2000.
Section 4.23 Customers and Suppliers of Colorado Mill.
Seller is not required to provide bonding or any other
security arrangements in connection with any transactions
with any customers or suppliers for the Colorado Mill. Schedule
4.23 contains, with respect to the nine-month period ending Sep-
tember 30, 1999, a true and complete list of the (i) ten
largest customers (in dollar volume of purchases) of the Colorado
Mill of Seller and (ii) the five largest suppliers (in dollar
volume of sales) to the Colorado Mill of Seller. Except as
disclosed on Schedule 4.23, to the knowledge of Seller, no such
supplier or customer intends or has threatened to terminate or
modify its respective relationships with Seller.
Article V
Representations And Warranties Of Buyer
Section 5.1 Corporate Existence. Buyer is a corporation
duly organized, validly existing and in good standing under the
laws of the Commonwealth of Pennsylvania.
Section 5.2 Corporate Power; Authorization; Enforceability.
Buyer has the corporate power, authority and legal right to
execute, deliver and perform this Agreement. The execution,
delivery and performance of this Agreement by Buyer have been
duly authorized by all necessary corporate and shareholder
action. This Agreement and all the other agreements and
instruments required to be executed and delivered by Buyer in
connection with or pursuant hereto have been duly executed and
delivered by Buyer and constitute the legal, valid and binding
obligation of Buyer, enforceable in accordance with its terms
except as such enforceability may be limited by bankruptcy, insol
vency, moratorium, reorganization and similar laws affecting
creditors' rights generally and general principles of equity.
Section 5.3 No Conflicts. The execution and delivery of
this Agreement by Buyer do not, and the consummation of
the transactions contemplated by this Agreement and the compli-
ance with the terms, conditions and provisions of this Agreement
by Buyer will not (a) contravene any provision of Buyer's
articles of incorporation or bylaws; or (b) conflict with or
result in a breach of or constitute a default (or an event which
might, with the passage of time or the giving of notice or both,
constitute a default) under any of the terms, conditions or
provisions of any material indenture, mortgage, loan or credit
agreement or any other material agreement or instrument to which
Buyer is a party or by which it or any of its assets may be bound
or affected, or any judgment or order of any court or governmen-
tal department, commission, board, agency or instrumentality,
domestic or foreign, or any applicable regulation.
Section 5.4 Consents. Except as required under the HSR Act,
no consent, approval or authorization of, or registration or
filing with any governmental authority or other regulatory
agency, is required in connection with the execution, delivery
and performance of this Agreement by Buyer.
Section 5.5 Ability to Purchase. Buyer has the requisite
financial ability to purchase the Assets and to consummate the
transactions hereunder.
Section 5.6 Brokers' and Finders' Fees. Buyer represents
and warrants that all negotiations relative to this Agreement
have been carried on by it directly without the intervention of
any person who may be entitled to any brokerage or finder's fee
or other commission in respect of this Agreement or the consum-
mation of the transactions contemplated hereby.
Article VI
Certain Obligations of The Parties
Section 6.1 Agreements of Seller Pending the Closing.
Seller agrees that, pending the Closing and except as otherwise
agreed to in writing by Buyer:
(a) Maintenance of Insurance. The Company shall main-
tain in full force adequate insurance policies.
(b) Maintenance of Authorizations and Permits. The
Company will maintain in full force and effect all Authorizations
necessary for the conduct of the Business.
(c) Compliance with Laws. The Company will comply in
all material respects with all laws, ordinances, rules, regula-
tions and orders applicable to the Business.
(d) Fulfillment of Agreements. Seller will use its
best efforts to cause all of the conditions to the obligations of
Buyer under Section 6.1 of this Agreement to be satisfied on or
prior to the Closing.
(e) Access. Seller will give to Buyer's officers,
employees, counsel, accountants and other representatives access
to and the right to inspect, upon reasonable notice and during
normal business hours, all of the premises, properties, assets,
records, contracts and other documents relating to the Business
and will permit them to consult with the officers of the Company,
Seller and accountants, counsel and agents of the Company for the
purpose of making such investigation of the Business as Buyer
shall reasonably desire to make; provided, however, that such
investigation shall not unreasonably interfere with the operation
of the Business.
(f) Assets. The Company will not remove any of the
Assets from the Business except in the ordinary course of busi-
ness.
(g) Supplier/Customer Relations. The Company will use
its best efforts to maintain the existing relationships of the
Business with the Company's suppliers and customers so that they
will be preserved after the Closing.
(h) Confidentiality. If the transactions contemplated
by this Agreement are not consummated, Buyer will, at its option,
return to Seller or destroy all written materials and all copies
thereof that were supplied to Buyer by Seller and that contain
any confidential data or information and Buyer will and will
cause its agents to hold in confidence any confidential data or
information made available to Buyer in connection with this
Agreement with respect to the Business.
(i) Employee Relations. The Company will use its
reasonable best efforts to retain its present employees of the
Business so that they will be available to provide service to the
Business after the Closing, but not grant any compensation or
benefits increases outside the ordinary course (except for reten-
tion bonuses, if any, granted by Seller to be paid by Seller for
employment prior to the Closing Date).
Section 6.2 Employee Matters. Buyer agrees to give each
Transferred Texas Employee of Seller credit for time worked at
Seller (including during the Crown Cork Ownership Period) for
purposes of eligibility and vesting, but not benefit accrual,
with respect to all applicable employee benefit plans to be
provided by Buyer to the Transferred Texas Employees, and to
treat each such employee the same as similarly situated employees
of Buyer pursuant to each of its employee benefits plans.
(a) Comparable Employment. Buyer will offer employment
to all of the Colorado Employees and Texas Employees actively at
work at the Business on the date of the Closing on comparable
terms and conditions to those terms and conditions at which
they were employed at the Closing. Nothing contained herein
prohibits Buyer from terminating, discharging or laying off any
Colorado Employees or Texas Employees after the Closing Date.
Those Colorado Employees and Texas Employees accepting such offer
prior to the Closing Date will become employees of Buyer as of
the Closing Date (individually respectively the "Transferred
Colorado Employees" and the "Transferred Texas Employees" and
collectively the "Transferred Employees"). In the event that
any Colorado Employees or Texas Employees decline or do not
respond prior to the Closing Date to such offer of employment of
Buyer, Buyer will have no obligation of any kind to such
employees. Seller will be responsible for all liabilities, obli-
gations and claims of the Transferred Employees who are employed
by Buyer which (i) arise, within the meaning of any existing
Seller Benefit Plan for the employees of the Business, prior
to the date of the Closing (including without limitation claims
for benefits filed after the Closing Date that Buyer can
reasonably demonstrate relate to incidents that occurred prior
to the Closing Date) and (ii) are payable under the terms and
conditions of such Seller Benefit Plan on or prior to the Closing
Date.
(b) Texas Mill Benefits. Effective on the Closing Date,
each Transferred Texas Employee who is an active participant in
the Seller Benefit Plans will cease to be an active participant
in such plans. Buyer will provide to the Transferred Texas
Employees, effective on the Closing Date, employee benefit plans,
programs and arrangements, which are comparable in the aggregate
to those Seller had provided immediately prior to the Closing
Date. Buyer may choose to pay COBRA premiums on behalf of Trans-
ferred Texas Employees, while it establishes a health care plan.
(c) Colorado Mill Benefits. Effective on the Closing
Date, each Transferred Colorado Employee who is an active parti-
cipant in the Seller Benefit Plans will cease to be an active
participant in such plans, except as provided below. Buyer will
provide to the Transferred Colorado Employees, effective on the
Closing Date, employee benefit plans, programs and arrangements,
which are comparable in the aggregate to those Seller had pro-
vided immediately prior to the Closing Date. After the
Closing Date and for a period not to exceed 180 days, Seller will
provide health care coverage (including health, prescription
drug, dental and life insurance) under COBRA for all Transferred
Colorado Employees. In providing such health care coverage,
Seller will comply with all applicable laws, including ERISA.
Buyer will reimburse Seller for all costs incurred by Seller for
such coverage. Buyer will notify Seller when the Transferred
Colorado Employees will cease to be active participants in
Seller's health care plan. Seller will invoice Buyer by the 10th
day of each month for costs incurred during the prior month by
Buyer for the Transferred Colorado Employees. Buyer will pay
such invoices within 30 days of receipt.
(d) No Liability for Seller Benefit Plans. Except as
expressly provided in this Section 6.2, Buyer will not assume or
be responsible for any liability under any of Seller's Benefit
Plans, which are payable at any time to, or in respect of, any
former or present employee of the Business after the Closing.
(e) Workers' Compensation and Short-Term Disability.
Seller retains all obligations for workers' compensation claims
which may be made by a Transferred Employee on or after the
Closing Date with respect to events occurring prior to the
Closing Date that give rise to such claims. Seller will satisfy
all obligations and make all payments with respect to such claims
in accordance with Seller's policies in effect as of the Closing
Date. Seller also retains all obligations for short-term dis-
ability benefits due to Transferred Employees for all events
occurring prior to the Closing Date that give rise to such
benefits, including, without limitation, all medical and related
payments, in accordance with Seller's policies in effect as of
the Closing Date.
(f) Reimbursement for Employment of Texas Employees.
Buyer will reimburse Seller for all reasonable compensation and
benefits costs incurred by Seller since August 23, 1999, in
employing the Texas Employees identified on Schedule 6.2.
Section 6.3 Cooperation and Access. After the Closing Date
as either party may from time to time reasonably request, the
other party will provide the requesting party with such
information regarding the Company and the Business as such party
reasonably requires. But, neither party will be obligated to
provide the other party with any information of a commercially
sensitive nature, relating to trade secrets or in violation
of the applicable law, rule or regulation or any contractual
provision prohibiting disclosure.
Section 6.4 License of Block Caster Technology. Buyer
agrees that, if within two years of the date of this Agreement,
Buyer elects to remove the block caster equipment, which includes
the blocks and the frames but does not include any of the ancil-
lary equipment, such as the block heaters or the water
system ("Caster") from the Texas Mill, Buyer will (i) offer to
sell the Caster to ACX Technologies, Inc. or a designated affil-
iate of ACX Technologies, Inc. for $1.00 on an "as is, where is"
basis; and (ii) if Seller elects to buy the Caster, which
election must be made within 30 days of Buyer's offer to sell
the Caster, convey to ACX Technologies, Inc. or its designated
affiliate purchaser a non-exclusive, non-transferable, fully
paid-up, perpetual license without right of sublicense under
the terms of a license agreement to be negotiated to the
mutual satisfaction of the parties within 60 days of the Closing
Date to use the Caster in the United States, to make use and
sell can sheet body stock under all Intellectual Property
Rights that have been used to operate the Caster at the Texas
Mill. ACX Technologies, Inc. or its affiliate will have 60 days
from the date it elects to buy the Caster to remove the Caster
from Buyer's facility and will be responsible for all costs of
removing the Caster from Buyer's facility. In removing the
Caster from Buyer's facility, ACX Technologies Inc. will not,
or will ensure that its designated affiliate will not, unreason-
ably interfere with Buyer's operation of the facility.
Section 6.5 Non-Solicitation. Seller covenants and agrees
that for a period of two years from the Closing Date, Seller will
not solicit, hire or otherwise engage as an employee, any person
who continues to be employed by the Company or the Business,
except when the employee responds, unsolicited, to a public
advertisement or with the prior written consent of Buyer.
Section 6.6 Non-Compete. Seller covenants and agrees that
for a period of two years from the Closing Date Seller will
not directly or indirectly engage in or become associated as an
employee, consultant, partner, owner, agent, stockholder, member,
officer or director of, any person or entity engaged in, or about
to become engaged in, the design, development, operation,
marketing or selling of aluminum can sheet in competition with
the Business, except as expressly permitted under any license
agreement entered into by the parties in accordance with
Section 6.4.
Section 6.7 Real Estate Matters. Seller will arrange, pay
for and deliver to Buyer an as-built survey of all of the owned
Real Property within 30 days after the Closing Date. At
Closing, Seller will provide an Owner's Affidavit in the form of
Exhibit B related to such owned Real Property.
Section 6.8 Transfer Taxes. All Taxes, fees, and assess-
ments arising from or payable in connection with the transfer of
the Assets shall be paid by Buyer, except Colorado real estate
documentary and transfer taxes, which will be split equally by
Buyer and Seller.
Section 6.9 Section 338(h)(10) Election. It is understood
by the parties that, in connection with the acquisition of the
shares of Seller by ACX Technologies, Inc. from Crown Cork & Seal
on August 23, 1999, ACX Technologies, Inc. and Crown Cork & Seal
agreed that one Section 338(h)(10) election would occur with
respect to those shares. Under that agreement, ACX Technologies,
Inc. and Crown Cork & Seal will agree upon an allocation of the
purchase price to the assets acquired. As that allocation will
have a direct bearing on the allocation to be agreed upon as
between Buyer and Seller, Seller will cause ACX Technologies,
Inc. to include Buyer's representatives as a party to the
allocation negotiations with Crown Cork & Seal. Seller and Buyer
will each report all transactions pursuant to this Agreement in a
manner that is consistent with such election and will take no
position contrary thereto unless required to do so pursuant to a
"determination" within the meaning of Section 1313 of the Code.
Section 6.10 Colorado Mill Baghouse. Seller will make the
repair described in Schedule 6.10 to correct damage at the
Colorado Mill baghouse.
Article VII
Environmental Indemnification
Section 7.1 Definitions.
(a) Hazardous Substance. For purposes of this Article,
"Hazardous Substance" means any substance, chemical or waste that
is listed or defined as hazardous, toxic, or dangerous under
Applicable Law (defined below).
(b) Applicable Law. For purposes of this Article,
"Applicable Law" means any and all federal, state and local laws
concerning the protection of human health and the environment,
including but not limited to the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C.
9601 et seq; the Resource Conservation and Recovery Act ("RCRA"),
42 U.S.C. 6901, et seq.; the Federal Water Pollution Control Act,
33 U.S.C. 1251 et seq.; the Clean Air Act, 42 U.S.C. 7401, et
seq.; the Hazardous Materials Transportation Act, 49 U.S.C. 1471,
et seq.; the Toxic Substances Control Act, 15 U.S.C. 2601 through
2629; and the Safe Drinking Water Act, 42 U.S.C. 300f through
300j; each, as amended from time to time, or any successor laws
thereto, together with the rules and regulations promulgated
thereunder, together with any and all environmental or land use
laws, rules, ordinances, or regulations.
(c) Cleanup. For purposes of this Article, "Cleanup"
means all actions required to: (i) clean up, remove, treat or
remediate any Hazardous Substance in the indoor or outdoor
environment; (ii) prevent the Release of Hazardous Substances so
that they do not migrate, endanger or threaten to endanger public
health or welfare or the indoor or outdoor environment; (iii)
perform pre-remedial studies and investigations and post-remedial
monitoring and care; or (v) respond to any government requests
for information or documents in any way relating to cleanup,
removal, treatment or remediation of the indoor or outdoor
environment.
(d) Release. For purposes of this Article, "Release"
means any release, spill, emission, discharge, leaking, pumping,
injection, deposit, disposal, dispersal, leaching or migration
into the indoor or outdoor environment (including, without
limitation, ambient air, surface water, groundwater and surface
or subsurface strata) or into or out of any property, including
the movement of any Hazardous Substance through or in the air,
soil, surface water, groundwater or property.
(e) Environmental Liabilities. For purposes of this
Article, "Environmental Liabilities" means all losses, liabil-
ities, claims, obligations, damages, deficiencies, costs,
expenses and fees, including costs of Cleanup (excluding all
employment and benefit costs of Buyer's employees), incurred or
required to be paid as a result of or arising out of:
(i) Hazardous Substances that are or were at,
upon, in or under the Real Property prior to the Closing,
(ii) Hazardous Substances Released at anytime at
any location other than the Real Property (including Hazardous
Substances emanating from the Real Property) if such Hazardous
Substances were generated, stored, disposed of, recycled,
Released, used or transported, by or on behalf of Seller or the
Subsidiaries prior to the Closing; or
(iii) acts, omissions or any noncompliance with
any Applicable Law prior to the Closing.
Section 7.2 Environmental Indemnification and Remediation
Activities.
(a) Environmental Indemnification. Seller will indem-
nify, defend and hold Buyer and Affiliates of Buyer harmless from
and against any and all Environmental Liabilities, except for
Environmental Liabilities arising due to a post-closing change in
Applicable Law. The express indemnification set forth in this
Section 7.2(a) will remain in full force and effect for a period
of 15 years from the Closing Date. After ten years, Seller's
liability under this express indemnification will decrease by 20%
each year for the remaining five years. The limitations to
Seller's indemnification set forth in Section 9.1(b) will not
apply to this Article 7.
(b) Remediation Activities. Seller agrees to assume
monetary responsibility for the remediation activities described
below to the extent Buyer undertakes these activities after the
Closing Date and provided such remediation activities are com-
pleted in accordance with the remediation plans established by
Buyer and agreed to by Seller as set forth below. Seller will
reimburse Buyer for the costs and expenses incurred by Buyer (ex-
cluding all compensation and benefit costs of Buyer's employees)
in completing the following remedial actions:
(i) 50% of the anticipated total cost of $275,000
of obtaining new operating permits and associated testing, up to
a maximum of $137,500.
(ii) 80% of the anticipated total cost of $400,000
of (i) removal of beryllium from interior wall areas and from
overhead steel rafters and certain horizontal surfaces existing
on the Closing Date at the Colorado Mill, and (ii) final closure
of a disposal trench at the Colorado Mill, up to a maximum of
$320,000 for the remediation activities set forth in this Section
7.2(b)(2).
Article VIII
Survival of Representations and Warranties
All of the representations and warranties set forth in this
Agreement or in any exhibit, schedule, document or other
instrument delivered under this Agreement will (unless waived in
writing by the party for whose benefit such representation or
warranty was made) remain in full force and effect regardless of
any investigation, verification or approval by or on behalf of
any party hereto, and will survive the Closing Date for a period
of two years, except that all representations made related to
title of the Assets or the stock of the Subsidiaries will survive
for the applicable statute of limitations.
Article IX
Indemnification
Section 9.1 Indemnification By Seller.
(a) Extent of Indemnity. Seller agrees to indemnify,
defend and hold harmless Buyer from and against:
(i) any Damages of Buyer resulting from any mis-
representation or breach of representation or warranty of Seller
in this Agreement or in any agreement or statement or certificate
furnished by Seller to Buyer pursuant hereto or in connec-
tion with the transactions contemplated hereby;
(ii) any Damages of Buyer arising out of or
resulting from any breach of any covenant or agreement of Seller
in this Agreement or in any agreement or statement or certificate
furnished by Seller to Buyer pursuant hereto or in connection
with the transactions contemplated hereby;
(iii) the failure of Seller to discharge in full
any liability or obligation of Seller or Company related to the
Business that existed or occurred prior to the Closing Date,
which was not expressly assumed as an Assumed Liability by the
Buyer under this Agreement; and
(iv) any actions, judgments, costs and expenses
(including reasonable attorneys' fees and all other expenses
incurred in investigating, preparing or defending any liti-
gation or proceeding, commenced or threatened) incident to any
of the foregoing or the enforcement of this Section by Seller.
(b) Limitations on Liability. Seller shall not be
liable to Buyer under Section 9.1(a)(i) unless the cumulative
total of Damages indemnified under this Section exceeds
$1,000,000 (the "Basket"), in which event Buyer shall be
entitled to indemnification only to the extent that such
Damages exceed the Basket. Seller's aggregate liability under
Section 9.1(a)(i) shall in no event exceed $7,500,000 (the
"Cap"). No Basket or Cap will apply to indemnification by Seller
under Sections 9.1(a)(ii) through 9.1(a)(iv). The right to
indemnification provided under Section 9.1(a)(i) shall be the
exclusive remedy of Buyer against Seller for breach of a
representation or warranty.
Section 9.2 Indemnification by Buyer.
(a) Extent of Indemnity. Buyer agrees to indemnify,
defend and hold harmless Seller from and against:
(i) any Damages of Seller arising out of or
resulting from any material misrepresentation or breach of
representation or warranty of Buyer in this Agreement or in any
agreement or statement or certificate furnished by Buyer to
Seller in connection with the transactions contemplated hereby;
(ii) any Damages of Seller arising out of or
resulting from any breach or nonfulfillment of any covenant or
agreement of Buyer in this Agreement or in any agreement or
statement or certificate furnished by Buyer to Seller in con-
nection with the transactions contemplated hereby;
(iii) any Damages of Seller arising out of or
resulting from any assertion against Seller of any liability or
obligation included in the Assumed Liabilities; and
(iv) any actions, judgments, costs and expenses
(including reasonable attorneys' fees and all other expenses
incurred in investigating, preparing or defending any litigation
or proceeding, commenced or threatened) incident to any of the
foregoing or the enforcement of this Section by Buyer.
Section 9.3 Indemnification Procedures.
(a) A party seeking indemnification pursuant to this
Agreement (an "Indemnified Party") shall give prompt notice to
the party from whom such indemnification is sought (the "Indemni-
fying Party") of the assertion of any claim, or the commencement
of any action, suit or proceeding by a third party which is
not an Affiliate of any party hereto in respect of which indem-
nity may be sought hereunder (a "Third Party Claim"), and will
give the Indemnifying Party such information with respect thereto
as the Indemnifying Party may reasonably request, but failure to
give such notice shall not relieve the Indemnifying Party of
any liability except to the extent that the Indemnifying Part
is actually prejudiced thereby.
(b) The Indemnifying Party shall have the right,
exercisable by written notice to the Indemnified Party within 30
days of receipt of notice from the Indemnified Party of the
commencement or assertion of any Third Party Claim, to assume and
conduct the defense of such Third Party Claim with counsel
selected by the Indemnifying Party and reasonably acceptable to
the Indemnified Party; provided that (i) the defense of such
Third Party Claim by the Indemnifying Party will not, in the
reasonable judgment of the Indemnified Party, have a Material
Adverse Effect on the Indemnified Party; and (ii) the Indemnify-
ing Party has sufficient financial resources, in the reasonable
judgment of the Indemnified Party, to satisfy the amount of any
adverse monetary judgment that is reasonably likely to result;
and (iii) the Third Party Claim solely seeks (and continues to
seek) monetary damages (the conditions set forth in clauses (i)
through (iii) are collectively referred to as the "Litigation
Conditions"). If the Indemnifying Party does not assume the
defense of such Third Party Claim in accordance with this Section
9.3, the Indemnified Party may continue to defend the Third Party
Claim. If the Indemnifying Party has assumed the defense of a
Third Party Claim as provided in this Section 9.3, the Indemnify-
ing Party will not be liable for any legal expenses subsequently
incurred by the Indemnified Party in connection with the defense
thereof; provided, however, that if (i) the Litigation Conditions
cease to be met, or (ii) the Indemnifying Party fails to take
reasonable steps necessary to defend diligently such Third Party
Claim, the Indemnified Party may assume its own defense, and the
Indemnifying Party will be liable for all reasonable costs or
expenses paid or incurred in connection therewith.
(c) The Indemnifying Party or the Indemnified Party,
as the case may be, shall have the right to participate in (but
not control), at its own expense, the defense of any Third Party
Claim which the other is defending as provided in this Agreement.
(d) No settlement of a Third Party Claim may be made
without the prior written consent of the Indemnifying Party and
the Indemnified Party, which consents may not be unreasonably
withheld, conditioned or delayed. Consent is presumed in the
case of settlement of $50,000 or less where the other party has
not responded to the proposal to settle within 10 business days
of notice of a proposed settlement.
(e) Amounts payable in respect of indemnification
obligations of the parties shall be treated as an adjustment to
the Purchase Price. Whether or not the Indemnifying Party
chooses to defend or prosecute any Third Party Claim, all the
parties hereto shall cooperate in the defense or prosecution
thereof and shall furnish such records, information and testimony,
and attend such conferences, discovery proceedings, hearings,
trials and appeals, as may be reasonably requested in connection
therewith.
Article X
Conditions Precedent to the Closing
Section 10.1 Conditions Precedent to the Obligations of
Buyer. All obligations of Buyer under this Agreement are, at its
sole option, subject to the fulfillment or satisfaction, prior to
or at the Closing, of each of the following conditions precedent:
(a) Representations and Warranties. The representations
and warranties of Seller contained in this Agreement (i) quali-
fied as to materiality must have been true and correct in all
respects when made and must be true and correct in all respects
at and as of the Closing Date, and (ii) not qualified as to
materiality must have been true and correct in all material
respects when made and must be true and correct in all material
respects at and as of the Closing Date.
(b) Compliance with this Agreement. Seller shall have
performed and complied in all respects with all agreements and
conditions required by this Agreement to be performed or complied
with by it prior to or at the Closing.
(c) No Pending Litigation. On the Closing Date, no
suit, action or other proceeding, or injunction or final judgment
relating thereto, shall be pending before any court or governmen-
tal or regulatory official, body or authority in which it is
sought to restrain or prohibit or to obtain damages or other
relief in connection with this Agreement or the consummation of
the transactions contemplated hereby.
(d) HSR Act. The waiting period under the HSR Act
shall have expired or been terminated.
(e) Satisfactory Instruments. All instruments and
documents required on Seller's part to effectuate and consummate
the transactions contemplated hereby shall be delivered to Buyer
and shall be in form and substance reasonably satisfactory to
Buyer and its counsel.
(f) Consents. Seller shall have delivered to Buyer at
Closing copies of all consents to assignment of all material
contracts, agreements and arrangements.
(g) Guaranty. Seller shall have caused ACX
Technologies, Inc. its parent corporation, to deliver to Buyer at
Closing a Guaranty of all of Seller's indemnity obligations here-
under, in substantially the form of Exhibit C.
(h) Owner's Affidavit. Seller shall have delivered to
Buyer the Owner's Affidavit described in Section 6.7.
(i) Consent Decree. The Final Judgment, Hold Separate
Stipulation and Order in the matter United States of America v.
Alcoa Inc., ACX Technologies, Inc., and Golden Aluminum Company
shall have been filed in the United States District Court for the
District of Columbia in the form attached hereto as Exhibit D, or
as modified with the prior written consent of Buyer and ACX
Technologies, Inc.
Section 10.2 Conditions Precedent to the Obligations of
Seller. All obligations of Seller under this Agreement are, at
its sole option, subject to the fulfillment or satisfaction,
prior to or at the Closing, of each of the following conditions
precedent:
(a) Representations and Warranties. The representations
and warranties of Buyer contained in this Agreement shall be
true and correct in all material respects on the Closing Date,
with the same force and effect as though such representations
and warranties had been made on the Closing Date.
(b) Compliance with this Agreement. Buyer shall have
performed and complied in all material respects with all agree-
ments and conditions required by this Agreement to be performed
or complied with by it prior to or at the Closing.
(c) No Pending Litigation. On the Closing Date, no
suit, action or other proceeding, or injunction or final judgment
relating thereto, shall be pending before any court or governmen-
tal or regulatory official, body or authority in which it is
sought to restrain or prohibit or to obtain damages or other
relief in connection with this Agreement or the consummation of
the transactions contemplated hereby.
(d) HSR Act. The waiting period under the HSR Act
shall have expired or been terminated.
(e) Satisfactory Instruments. All instruments and
documents required on the part of Buyer to effectuate and consum-
mate the transactions contemplated hereby shall be delivered to
Seller and shall be in form and substance reasonably satisfactory
to Seller and its counsel.
(f) Consent Decree. The Final Judgment, Hold Separate
Stipulation and Order in the matter United States of America v.
Alcoa Inc., ACX Technologies, Inc., and Golden Aluminum Company
shall have been filed in the United States District Court for the
District of Columbia in the form attached hereto as Exhibit D, or
as modified with the prior written consent of Buyer and ACX
Technologies, Inc.
Article XI
Termination
Section 11.1 Termination. This Agreement may be terminated
by either Seller or Buyer at any time prior to the Closing:
(a) by mutual written consent of Seller and Buyer;
(b) by either Seller or Buyer (by written notice to
the other) if the Closing shall not have occurred on or before
November 15, 1999, provided that no termination right under this
Section shall be available to any party whose failure to fulfill
any obligation under this Agreement has been the cause of the
failure of the Closing to occur on or prior to such date; or
(c) by either Seller or Buyer (by written notice to
the other) if any court of competent jurisdiction in the United
States or federal or state governmental or regulatory body in the
United States shall have issued an order, decree or ruling or
taken such other action that permanently restrains, enjoins or
otherwise prohibits the transactions contemplated hereby and such
order, decree, ruling or other action shall have become final and
non-appealable;
Section 11.2 Effect of Termination. Upon of the termination
of this Agreement in accordance with the provisions of Section
11.1, this Agreement shall become null and void and have
no further effect without any liability on the part of any of the
parties, except as follows:
(a) if the termination results from the willful failure
to perform its obligations under this Agreement, such nonperform-
ing party shall be fully liable for any and all damages, cost
and expenses (including, without limitation, reasonable
attorney's fees) sustained or incurred by such other party; or
(b) if the termination results, not as a result of
willful failure of any party to perform its obligations here-
under, but as the result of the material breach by such party of
a representation, warranty, or covenant hereunder, such breaching
party shall be liable to the other party for all costs and
expenses of the other party in connection with the preparation,
negotiation, execution and performance of this Agreement.
Article XII
Miscellaneous
Section 12.1 Expenses. Each of the parties to this Agree-
ment will bear all the expenses incurred by it in connection with
the negotiation and preparation of this Agreement and the
consummation of the transactions contemplated by this Agreement
regardless of whether this Agreement is terminated. Except as
otherwise provided in this Agreement, the following taxes,
charges and payments ("Charges") will be prorated on a per diem
basis as indicated and apportioned between Seller and Buyer as of
the date of the Closing: real property (daily), use (monthly),
intangible taxes (monthly), utility charges (monthly), rental or
lease charges (term of lease), license fees (term of lease),
general assessments (taxable year), and franchise, national or
cantonal or other income taxes (daily) imposed with respect to
the Assets and employee payrolls (monthly). Seller will be
liable for that portion of the Charges relating to, or arising in
respect of, the period on or prior to the date of the Closing and
Buyer will be liable for that portion of the Charges relating to,
or arising in respect of, any periods after the date of the
Closing.
Section 12.2 Contents of Agreement; Parties in Interest.
This Agreement sets forth the entire understanding of Buyer and
Seller with respect to the transactions contemplated hereby.
This Agreement shall not be amended or modified except by
written instrument duly executed by Buyer and Seller. Any and
all previous agreements and understandings between Buyer and
Seller regarding the subject matter hereof, whether written or
oral, are superseded by this Agreement.
Section 12.3 Assignment and Binding Effect. Except as
provided below, this Agreement may not be assigned by Buyer or
Seller without the prior written consent of the other party,
which consent may not be unreasonably withheld. Buyer may assign
its rights and may delegate its duties under Sections 6.5 and 6.6
of this Agreement, in whole or in part as Buyer deems appropriate,
to a buyer of the Colorado Mill. Subject to the foregoing, all
of the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the
successors and permitted assigns of Seller and Buyer.
Section 12.4 Notices. Any notice, request, demand, waiver,
consent, approval or other communication which is required or
permitted hereunder shall be in writing and shall be deemed given
only if delivered personally or sent by facsimile or by
registered or certified mail, postage prepaid, as follows:
If to Buyer, to:
Alcoa Inc.
Alcoa Corporate Center
201 Isabella Street
Pittsburgh, PA 15212-5858
Attention: Lawrence R. Purtell, General Counsel
Facsimile: (412) 553-3200
If to Seller, to:
Golden Aluminum Company
16000 Table Mountain Parkway
Golden, CO 80403
Attention: Jed J. Burnham
Facsimile: (303) 271-7055
With a required copy to:
Golden Aluminum Company
16000 Table Mountain Parkway
Golden, CO 80403
Attention: Jill B. W. Sisson, General Counsel
Facsimile: (303) 271-7055
With an additional required copy to:
Holland & Hart LLP
Suite 3200
555 Seventeenth Street
Denver, CO 80202
Attention: Betty C. Arkell, Esq.
Facsimile: (303) 295-8261
or to such other address as the addressee may have specified in a
notice duly given to the sender as provided herein. Such notice,
request, demand, waiver, consent, approval or other communication
will be deemed to have been given as of the date so delivered,
sent by facsimile (with confirmation of receipt) or three days
after deposited with the United States Post Office.
Section 12.5 Governing Law. This Agreement shall be
governed by and interpreted and enforced in accordance with the
laws of the State of Colorado without regard to conflicts
of law principles.
Section 12.6 No Benefit to Others. The representations,
warranties, covenants and agreements contained in this Agreement
are for the sole benefit of the parties hereto and their
successors and assigns, and they shall not be construed as
conferring any rights on any other persons.
Section 12.7 Headings, Gender and "Person." All section
headings contained in this Agreement are for convenience of
reference only, do not form a part of this Agreement and shall
not affect in any way the meaning or interpretation of this Agree
ment. Words used herein, regardless of the number and gender
specifically used, shall be deemed and construed to include any
other number, singular or plural, and any other gender,
masculine, feminine, or neuter, as the context requires. Any
reference to a "person" herein shall include an individual, firm,
corporation, partnership, trust, governmental authority or body,
association, unincorporated organization or any other entity.
Section 12.8 Publicity. No press release, notice, disclo-
sure or other publicity concerning the transactions contemplated
by this Agreement shall be issued, given, made or other-
wise disseminated by Buyer or Seller without the prior approval
of the other party, unless required by law.
Section 12.9 Severability. Any provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall be
ineffective to the extent of such invalidity or unenforceability
without invalidating or rendering unenforceable the remaining
provisions hereof, and any such invalidity or unenforceability in
any jurisdiction shall not invalidate or render unenforceable
such provision in any other jurisdiction.
Section 12.10 Counterparts. This Agreement may be executed
in any number of counterparts, and Buyer and Seller may execute
any such counterpart, each of which when executed and delivered
shall be deemed to be an original and all of which counterparts
taken together shall constitute one and the same instrument.
This Agreement shall become binding when one or more counter-
parts taken together shall have been executed and delivered by
Buyer and Seller.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement on the date first written.
BUYER:
ALCOA INC.
By:_____________________________
Name:___________________________
Title:__________________________
SELLER:
GOLDEN ALUMINUM COMPANY
By:_____________________________
Name:___________________________
Title:__________________________
Exhibit 2.4
FORM OF
DISTRIBUTION AGREEMENT
BETWEEN
ACX TECHNOLOGIES, INC.
AND
COORSTEK, INC.
December 1, 1999
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS 1
ARTICLE II PRE-DISTRIBUTION TRANSACTIONS 5
2.01 Transferred Assets and Assumed Liabilities 5
2.02 Financing Arrangements 5
2.03 Related Agreements 6
2.04 ACX Approval 6
2.05 Securities Law Actions 6
ARTICLE III ASSUMPTION AND RETENTION OF LIABILITIES 6
3.01 Assumed Liabilities 6
3.02 Retained Liabilities 7
ARTICLE IV THE DISTRIBUTION 7
4.01 The Distribution 7
4.02 Fractional Shares 7
4.03 ACX Board Action 7
ARTICLE V SURVIVAL, INDEMNIFICATION, CLAIMS AND OTHER MATTERS 8
5.01 Survival of Agreements 8
5.02 Indemnification 8
5.03 Procedure for Indemnification 9
5.04 Direct Claims 10
5.05 Adjustment of Indemnifiable Losses 11
5.06 No Third Party Beneficiaries 12
5.07 Joint Defense Agreements 12
5.08 Special Notices 12
ARTICLE VI CERTAIN ADDITIONAL MATTERS 13
6.01 Construction of Agreements 13
6.02 No Representations or Warranties; Exceptions 13
6.03 Further Assurances 14
6.04 Consents, etc. 14
6.05 Officers and Directors 14
6.06 Existing Intercompany Arrangements 14
6.07 Intercompany Accounts 14
6.08 Transfer Taxes 14
6.09 Proration of Taxes, Lease and Utility Payments 15
ARTICLE VII ACCESS TO INFORMATION AND SERVICES 15
7.01 Provision of Corporate Records 15
7.02 Access to Information 15
7.03 Production of Witnesses and Individuals 16
7.04 Retention of Records 16
7.05 Confidentiality 16
7.06 Privileged Matters 17
ARTICLE VIII INSURANCE 18
8.01 General 18
8.02 Certain Insured Claims 19
ARTICLE IX DISPUTE RESOLUTION 19
9.01 Initiation 19
9.02 Mediation 19
9.03 Arbitration 20
9.04 Cost of Arbitration 20
ARTICLE X MISCELLANEOUS 20
10.01 Complete Agreement 20
10.02 Expenses 21
10.03 Governing Law 21
10.04 Notices 21
10.05 Amendment and Modification 21
10.06 Termination 21
10.07 Successors and Assigns 22
10.08 No Third Party Beneficiaries 22
10.09 Counterparts 22
10.10 Interpretation 22
10.11 Schedules, Etc. 22
10.12 Legal Enforceability 22
SCHEDULE I - TRANSFERRED ASSETS AND ASSUMED LIABILITIES
SCHEDULE II - INTERCOMPANY DEBT
EXHIBIT A - FORM OF PROMISSORY NOTE
EXHIBIT B - FORM OF ENVIRONMENTAL RESPONSIBILITY
AGREEMENT
EXHIBIT C - FORM OF TRANSITIONAL SERVICES AGREEMENT
EXHIBIT D - FORM OF TAX SHARING AGREEMENT
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT (this "Distribution Agreement"
or this "Agreement"), dated as of December 1, 1999, is between
ACX Technologies, Inc., a Colorado corporation ("ACX"), and
COORSTEK, INC., a Colorado corporation and a wholly-owned
subsidiary of ACX (together with its subsidiaries, "CTI").
RECITALS
1. ACX conducts its business through its subsidiaries,
Graphic Packaging Holdings Inc. and its subsidiaries, ACX
International Sales Corp. and CTI.
2. The Board of Directors of ACX (the "Board") has
authorized a plan that, if completed as contemplated herein,
will separate CTI from ACX's business by distributing the CTI
common stock (the "CTI Common Stock"), to the holders of
the common stock of ACX (the "ACX Common Stock"), on a pro rata
basis.
3. ACX and CTI have determined that it is necessary and
desirable to establish the principal corporate transactions
required to separate CTI's business from ACX and distribute the
CTI Common Stock, and to agree on certain other matters, all as
provided in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements contained herein, ACX and CTI
agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, capitalized terms shall have the
following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
ACX Group: ACX and its Affiliates immediately following the
Distribution.
Action: any action, claim, suit, arbitration, inquiry,
subpoena, discovery request, proceeding or investigation by or
before any court or grand jury, any governmental or other
regulatory or administrative agency or commission or any
arbitration tribunal.
Affiliate: with respect to any specified person, a person
that, directly or indirectly, through one or more intermediaries,
controls, or is controlled by, or is under common control with,
such specified person; provided that ACX (and its subsidiaries)
shall not be deemed to be Affiliates of CTI (and its
subsidiaries), and vice versa, for purposes of this Agreement;
further provided, that neither ACX nor CTI (and their respective
subsidiaries) shall be deemed to be Affiliates of Adolph Coors
Company (and its subsidiaries), or vice versa, for purposes of
this Agreement.
Agent: Norwest Bank Minnesota, NA, the distribution agent
appointed by ACX to distribute the CTI Common Stock.
Assumed Liabilities: collectively, the Liabilities and
other obligations of ACX related to CTI that are described or
listed on Schedule 1 hereto.
Bill of Sale, Assignment and Assumption Agreements: one or
more bills of sale, assignments and assumption agreements to be
entered into between ACX and CTI on or after the date of this
Distribution Agreement pursuant to which ACX transfers the
Transferred Assets to CTI and CTI assumes the Assumed
Liabilities, as and when contemplated by Section 2.01 of this
Distribution Agreement.
Board: as defined in the Recitals to this Agreement.
Books and Records: the books and records (including
computerized books and records) of ACX or its Affiliates that
relate principally to CTI, all books and records relating to
Employees; and all files relating to any Action being assumed by
CTI as part of the Assumed Liabilities or any Action in which, as
between the parties hereto or their Affiliates, CTI is the
principal party in interest.
CTI Group: CTI and its Affiliates immediately following the
Distribution.
Code: the Internal Revenue Code of 1986, as amended.
Conveyancing and Assumption Instruments: collectively, the
Bill of Sale, Assignment and Assumption Agreements and any other
agreements, instruments and other documents to be entered into in
order to effect the transfer to CTI of the Transferred Assets and
the assumption by CTI of the Assumed Liabilities.
Distribution: the distribution as a dividend to holders of
ACX Common Stock of CTI Common Stock on the basis provided in
Article IV hereof, which shall be made on the date specified by
the Board.
Distribution Date: the date of the Distribution as
determined by the Board.
Distribution Ratio: as determined by the Board, the ratio
of the number of shares (or fraction thereof) of CTI Common Stock
to be distributed to the holders of each share of ACX Common Stock
on the Record Date.
Dividend: the special cash dividend in an amount equal to
$200 million less the Intercompany Debt to be paid by CTI to ACX
on the Distribution Date.
Employee: any employee of ACX or any of its subsidiaries
other than CTI who is assigned to CTI on or prior to the
Distribution Date, including but not limited to any such employee
who was laid off, on leave of absence or on disability leave as
of the Distribution Date.
Environmental Responsibility Agreement: the agreement,
substantially in the form of Exhibit B hereto, pursuant to which
ACX and CTI will provide for responsibility for potential
environmental matters.
Exchange Act: the Securities Exchange Act of 1934, as
amended.
Final Determination: as defined in the Tax Sharing
Agreement.
Form 10: the registration statement on Form 10, as amended
from time to time, filed by CTI with the SEC to register the CTI
Common Stock pursuant to the Exchange Act.
Indemnifiable Loss Deduction: as defined in
Section 5.05(b).
Indemnifiable Losses: with respect to any claim by an
Indemnitee for indemnification authorized pursuant to Article V
hereof, any and all losses, liabilities, claims, damages,
obligations, payments, costs and expenses (including, without
limitation, the costs and expenses of any and all Actions,
demands, assessments, judgments, settlements and compromises
relating thereto and reasonable attorneys' fees and expenses in
connection therewith) suffered by such Indemnitee with respect to
such claim.
Indemnifying Party: any party who is required to pay any
other person pursuant to Article V hereof.
Indemnity Return: as defined in Section 5.05.
Indemnitee: any party who is entitled to receive payment
from an Indemnifying Party pursuant to Article V hereof.
Indemnity Payment: the amount an Indemnifying Party is
required to pay an Indemnitee pursuant to Article V hereof.
Information Statement: the definitive information
statement, substantially in compliance with Schedule 14C under
the Exchange Act, to be mailed to the holders of ACX Common Stock
in connection with the Distribution.
Insurance Effective Time: as defined in Section 8.03(a).
Insurance Program: collectively, the series of policies as
of the date of this Agreement pursuant to which various insurance
carriers provide or have provided insurance coverage to ACX and
its Affiliates.
Intercompany Debt: the aggregate intercompany debt owed to
ACX by CTI set forth on Schedule II hereto. In no event shall
trade payables incurred in the ordinary course of business
between ACX and CTI or their Affiliates be considered Intercompany
Debt for purposes of this definition.
Intercompany Debt Methodology: the financial methodology
heretofore approved by the Board to split the consolidated debt
of ACX between ACX and CTI prior to the Distribution.
Liabilities: any and all debts, liabilities and
obligations, whether accrued, contingent or reflected on a
balance sheet, known or unknown, including, without limitation,
those arising under any law, rule, regulation, Action, order or
consent decree of any governmental entity or any judgment of any
court of any kind or award of any arbitrator of any kind, and
those arising under any contract, commitment or undertaking.
New Debt: shall mean at least $205 million principal amount
of debt to be incurred by CTI prior to the Distribution Date.
Notice: as defined in Section 9.01.
Policy Termination Date: as defined in Section 8.01(a).
Privilege: as defined in Section 7.06(a).
Privileged Information: as defined in Section 7.06(a).
Promissory Note: as defined in Section 2.02.
Record Date: the date determined by the Board as the record
date for the Distribution.
Recovery: the amount obtained pursuant to a claim under an
insurance policy in the Insurance Program.
Related Agreements: the Environmental Responsibility
Agreement, Transitional Services Agreement, Tax Sharing
Agreement, any joint defense agreement, the Conveyancing and
Assumption Instruments, all other agreements referred to in
Section 2.04 and any other agreement entered into by ACX or one
or more of its Affiliates, and CTI and one or more of its
Affiliates pursuant to this Agreement or otherwise in
connection with the Distribution.
Restated Tax Saving Amount: as defined in Section 5.05(b).
Retained Liabilities: collectively, all Liabilities and
obligations of ACX that are not Assumed Liabilities.
SEC: the Securities and Exchange Commission.
Tax Ruling: the ruling by the Internal Revenue Service that
the Distribution will be tax free to ACX and ACX stockholders
under Section 355 of the Code.
Tax Saving Amount: as defined in Section 5.05.
Tax Sharing Agreement: the agreement substantially in the
form of Exhibit D hereto, pursuant to which ACX and CTI will
provide for certain tax matters.
Third Party Claim: as defined in Section 5.03(b).
Transferred Assets: Collectively, all assets of ACX being
transferred to CTI that are described or listed on Schedule I
hereto.
Transfer Taxes: as defined in Section 6.08.
Transitional Services Agreement: the agreement,
substantially in the form of Exhibit C hereto, pursuant to which
ACX and CTI, or their Affiliates, will provide certain
transitional services to each other.
ARTICLE II
PRE-DISTRIBUTION TRANSACTIONS
Section 2.01 Transferred Assets and Assumed Liabilities.
Certain Transferred Assets to be transferred and certain Assumed
Liabilities to be assumed pursuant to this Agreement are to be
transferred and assumed on or before December 15, 1999. Certain
other Transferred Assets to be transferred and Assumed
Liabilities to be assumed are to be transferred and assumed as of
the close of business on the Distribution Date. Schedule I
hereto sets forth the Transferred Assets and Assumed Liabilities
and their respective transfer and assumption dates. ACX and CTI
agree to execute such Bill of Sale, Assignment and Assumption
Agreements as necessary or desirable to effect such transfers and
assumptions in accordance with this Agreement and such Schedule.
Section 2.02 Financing Arrangements. ACX and CTI shall
use their respective best efforts to cause the following to occur
on or before the close of business on the Distribution Date:
(a) the incurrence by CTI of the New Debt;
(b) the repayment by CTI from the proceeds of the New
Debt of the Intercompany Debt; and
(c) the payment by CTI of the Dividend to ACX from the
proceeds of the New Debt.
ACX and CTI agree that if CTI shall not have received the
proceeds of the New Debt on or before the close of business on
the Distribution Date, then CTI shall make the payments in
subsections (b) and (c) above by issuing to ACX on the
Distribution Date a promissory note substantially in the form of
Exhibit A hereto, which shall be due on January 4, 1999 subject to
extension to a later date by mutual agreement of the parties. ACX
and CTI further agree that CTI shall indemnify ACX pursuant to
Article V for any payment or fee ACX is required to pay or any
other expense ACX may incur in respect of the New Debt.
Section 2.03 Related Agreements. ACX and CTI shall use
their best efforts to cause, on or before the Distribution Date,
the execution and delivery by ACX and CTI, or their respective
Affiliates, of the Transitional Services Agreement, Environmental
Responsibility Agreement, any Joint Defense Agreement, Tax
Sharing Agreement, and other agreements deemed necessary or
desirable by the applicable parties to establish and govern their
post-Distribution relationships.
Section 2.04 ACX Approval. ACX, as the sole shareholder
of CTI, shall approve or ratify any actions that are reasonably
necessary or desirable to be taken by CTI to effectuate the
transactions contemplated by this Agreement in a manner
consistent with the terms of this Agreement, including, without
limitation, approval of appropriate equity or other plans,
agreements and arrangements for Employees and non-Employee
members of CTI's Board of Directors.
Section 2.05 Securities Law Actions. ACX and CTI shall
have prepared and filed with the SEC, the Form 10, which shall
include or incorporate by reference the Information Statement
setting forth appropriate disclosure concerning CTI, the
Distribution and any other appropriate matters required to be
stated therein. ACX and CTI shall update, supplement and amend
this information and shall use reasonable efforts to cause the
Form 10 to become effective under the Exchange Act, and
thereafter ACX shall mail the Information Statement to holders of
ACX Common Stock as of the Record Date.
(b) ACX and CTI shall take all such action as may be
necessary or appropriate under the securities or blue sky laws of
states or other political subdivisions of the United States in
connection with the Distribution.
(c) CTI shall prepare and file an application and
shall pursue inclusion of its Common Stock in the Nasdaq National
Market System.
ARTICLE III
ASSUMPTION AND RETENTION OF LIABILITIES
Section 3.01 Assumed Liabilities. Upon the terms and
subject to the conditions set forth in this Agreement and the
Bill of Sale, Assignment and Assumption Agreements, CTI hereby
agrees with ACX to assume, pay, perform and discharge in due
course any and all Assumed Liabilities.
Section 3.02 Retained Liabilities. Upon the terms and
subject to the conditions set forth in this Agreement and the
Bill of Sale, Assignment and Assumption Agreements, ACX hereby
agrees with CTI to pay, perform and discharge in due course any
and all Retained Liabilities.
ARTICLE IV
THE DISTRIBUTION
Section 4.01 The Distribution. Prior to the Distribution
Date, ACX shall deliver to CTI the certificate for 200,000
shares of CTI Common Stock held by ACX and representing all of
the outstanding CTI Common Stock, and CTI shall cancel such
certificate and issue and deliver to ACX in exchange therefor
an omnibus stock certificate representing that number of shares
of CTI Common Stock equal to the product of (i) the number of
shares of ACX Common Stock outstanding on the Record Date
multiplied by (ii) the Distribution Ratio. ACX shall then
deliver such omnibus certificate to the Agent and shall
instruct the Agent to distribute, beginning on the Distribution
Date, to holders of ACX Common Stock on the Record Date, the
appropriate number of shares of CTI Common Stock based on the
Distribution Ratio, and, as soon thereafter as reasonably
practicable, cash, if applicable, in lieu of fractional shares
obtained in the manner provided in Section 4.02 hereof. CTI
agrees to provide to the Agent sufficient certificates in such
denominations as the Agent may request in order to effect the
Distribution. All of the shares of CTI Common Stock issued in
the Distribution shall be fully paid, nonassessable and free of
preemptive rights. ACX shareholders shall not be required to pay
cash or other consideration for the CTI Common Stock received in
the Distribution.
Section 4.02 Fractional Shares. No certificate or scrip
representing fractional shares of CTI Common Stock shall be
issued as part of the Distribution. In lieu of receiving
fractional shares, each holder of ACX Common Stock who would
otherwise be entitled to receive a fractional share of CTI Common
Stock pursuant to the Distribution will receive cash for such
fractional share. ACX shall instruct the Agent to determine the
number of whole shares and fractional shares of CTI Common Stock
allocable to each holder of record of ACX Common Stock on the
Record Date, to aggregate all such fractional shares into whole
shares and sell the whole shares obtained thereby in the open
market at then prevailing prices on behalf of holders who
otherwise would be entitled to receive fractional share interests
and to distribute to each such holder such holder's ratable share
of the total proceeds (net of total selling expenses) of such
sale; provided however that the Agent shall have sole discretion
to determine when, how, through which broker-dealer and at what
price to make its sales; further provided that the broker-dealer
shall not be an affiliate of ACX or CTI.
Section 4.03 ACX Board Action.
(a) The Board, in its discretion, shall establish the
Record Date, the Distribution Date, the Distribution Ratio and
all appropriate procedures in connection with the Distribution.
(b) In its sole discretion for any reason, (including
failure to receive confirmation (if requested) of the Tax Ruling)
the Board may refuse to declare the Distribution; and after the
declaration and until the Distribution, the Board may postpone or
rescind the Distribution. In any event, the Board shall refuse
to declare the Distribution until and unless the following
conditions have been satisfied:
(i) the Tax Ruling shall have been obtained and
shall continue to be in effect;
(ii) CTI Common Stock shall have been approved for
inclusion in the Nasdaq National Market.
ARTICLE V
SURVIVAL, INDEMNIFICATION, CLAIMS
AND OTHER MATTERS
Section 5.01 Survival of Agreements.
(a) The obligations of CTI with respect to the Assumed
Liabilities and the obligations of ACX with respect to the
Retained Liabilities, and the related indemnification rights
under this Agreement, shall survive indefinitely. Except as
specifically provided for herein or in any Related Agreement, all
other obligations of ACX and CTI shall terminate and be of no
further force and effect on the tenth anniversary of the
Distribution Date.
(b) The obligations of ACX and CTI under this
Agreement shall survive the sale or other transfer by either of
them of any assets or businesses or the assignment by either of
them of any Liabilities. To the extent that ACX transfers any of
the Retained Liabilities (except for such amounts of Retained
Liabilities that are not material individually or in the
aggregate), ACX shall cause the transferee of such Retained
Liabilities to assume specifically its obligations with respect
thereto under this Agreement and to fulfill its obligations
related to such Retained Liabilities. To the extent that CTI
transfers any of the Assumed Liabilities (except for such amounts
of Assumed Liabilities that are not material individually or in
the aggregate), CTI shall cause the transferee of such Assumed
Liabilities to assume specifically its obligations with respect
thereto under this Agreement and to fulfill its obligations
related to such Assumed Liabilities. No such transfer shall
relieve either ACX or CTI from its respective obligations under
this Agreement or the Related Agreements.
Section 5.02 Indemnification.
(a) ACX shall indemnify, defend and hold harmless the
CTI Group, and each of their respective directors, officers,
employees and agents from and against any and all Indemnifiable
Losses incurred or suffered by the CTI Group in connection with
any Action or threatened Action and arising out of or due to,
directly or indirectly, (i) any of the Retained Liabilities, or
(ii) any failure to perform, or violation of, any provision of
this Agreement or any Related Agreement that is to be performed
or complied with by ACX or its Affiliate.
(b) CTI shall indemnify, defend and hold harmless the
ACX Group, and each of their respective directors, officers,
employees and agents from and against any and all Indemnifiable
Losses incurred or suffered by the ACX Group in connection with
any Action or threatened Action and arising out of or due to,
directly or indirectly, (i) any of the Assumed Liabilities, (ii)
any payment, fee or other expense incurred by ACX in respect of
the New Debt, or (iii) any failure to perform, or violation of,
any provision of this Agreement or any Related Agreement that is
to be performed or complied with by CTI or its Affiliates.
Section 5.03 Procedure for Indemnification.
(a) The following procedures shall apply to any claim
for indemnification made by the ACX Group or the CTI Group
pursuant to the indemnities provided in Section 5.02 of this
Agreement and pursuant to any indemnities provided in any Related
Agreement unless such Related Agreement establishes other
procedures with respect to indemnities thereunder.
(b) If ACX or CTI shall receive notice of any Action
by any third party, or any fact or allegation upon which such
Action could be based (hereinafter a "Third Party Claim"), with
respect to which the other party is or may be obligated to make
an Indemnity Payment, it shall give such other party prompt
notice thereof (including any pleadings relating thereto),
specifying in reasonable detail the nature of such Third Party
Claim and the amount or estimated amount thereof to the extent
then feasible (which estimate shall not be conclusive of the
final amount of such Indemnity Payment); provided, however, that
the failure of a party to give notice as provided in this
Section 5.03 shall not relieve the other party of its
indemnification obligations under this Article V, except to the
extent that such other party is actually prejudiced by such
failure to give notice.
(c) For any Third Party Claim upon which notice is
required to be given under paragraph (b) of this Section 5.03,
the Indemnifying Party shall defend such Third Party Claim at its
sole cost and expense and through counsel employed by the
Indemnifying Party and reasonably acceptable to the Indemnitee.
Within 30 days of receipt of the notice of Third Party Claim
received under paragraph (b), the Indemnifying Party shall give
notice of its intent to defend or objection to the claim of
indemnification specifying in reasonable detail the grounds
therefore. Failure to provide such notice within such 30-day
period shall be deemed acknowledgment by the Indemnifying Party
of its indemnity obligation for the Third Party Claim.
(d) The Indemnifying Party's right to defend any Third
Party Claim includes the right to control, manage and direct the
defense of the Third Party Claim and to compromise, settle or
consent to the entry of any judgment or determination of
liability concerning such Third Party Claim; provided, however,
that the Indemnifying Party shall not compromise, settle or
consent to the entry of judgment or determination of liability
against the Indemnitee without prior written approval by the
Indemnitee, which approval shall not be unreasonably withheld;
provided, however, that if the Indemnifying Party shall seek the
approval of the Indemnitee to a settlement for monetary damages
for which the Indemnifying Party accepts responsibility and if
the Indemnitee shall withhold approval of such settlement, then
the obligation of the Indemnifying Party shall be limited to the
amount of the proposed and unapproved settlement, plus attorney's
fees and costs to the date of the proposed settlement, and the
Indemnitee shall be solely responsible for any additional amount.
(e) The Indemnitee may participate in the Indemnifying
Party's defense of any Third Party Claim in which the Indemnitee
has an interest and be represented by counsel of its own choosing
at the Indemnitee's sole cost and expense.
(f) If the Indemnifying Party fails to defend a Third
Party Claim, the Indemnitee may defend and may compromise and
settle or consent to an entry of judgment or a determination of
liability concerning such Third Party Claim at the sole cost and
expense of the Indemnifying Party.
(g) Regardless of the party that defends a Third Party
Claim, the other shall make available to the Indemnifying Party
all employees, Books and Records, communications, and documents,
within its possession or control that are necessary,
appropriate or reasonably deemed relevant with respect to such
defense, and otherwise shall reasonably cooperate in the defense
of the Third Party Claim.
(h) With respect to any Third Party Claim, neither
party to this Agreement shall enter into any compromise or
settlement or consent to the entry of any judgment that does
not include as an unconditional term thereof the giving by the
third party of a release, from all further liability concerning
such Third Party Claim, of the other party to this Agreement.
(i) Upon final judgment after exhaustion of all
appeals, settlement, compromise or other final resolution of any
Third Party Claim, and unless otherwise agreed by the parties,
the Indemnifying Party shall pay promptly on behalf of the
Indemnitee, or to the Indemnitee in reimbursement of any amount
theretofore required to be paid by it, the amount so determined
by final judgment after exhaustion of all appeals, settlement,
compromise or final resolution. Upon the payment in full by the
Indemnifying Party of such amount, the Indemnifying Party shall
succeed to the rights of such Indemnitee, to the extent not
waived in settlement, against any third party.
Section 5.04 Direct Claims. Any claim for indemnity
pursuant to Section 5.02 on account of an Indemnifiable Loss made
directly by the Indemnitee against the Indemnifying Party and
does not result from a Third Party Claim shall be asserted by
written notice from the Indemnitee to the Indemnifying Party.
Such Indemnifying Party shall have a period of 90 days (or such
shorter time period as may be required by law as indicated by the
Indemnitee in the written notice) within which to respond
thereto. If such Indemnifying Party does not respond within such
90-day (or lesser period), such Indemnifying Party shall be
deemed to have accepted responsibility to make payment and shall
have no further right to contest the validity of such claim. If
such Indemnifying Party does respond within such 90-day (or
lesser) period and rejects such claim in whole or in part, such
Indemnitee shall be free to pursue resolution as provided in
Article IX.
Section 5.05 Adjustment of Indemnifiable Losses.
(a) The amount which an Indemnifying Party is required
to pay to an Indemnitee pursuant to Section 5.02(a) or
Section 5.02(b) shall be reduced (including, without limitation,
retroactively) by any insurance proceeds and other amounts
actually recovered by such Indemnitee in reduction of the related
Indemnifiable Loss. If an Indemnitee shall have received an
Indemnity Payment in respect of an Indemnifiable Loss and shall
subsequently actually receive insurance proceeds or other amounts
in respect of such Indemnifiable Loss, then such Indemnitee shall
pay to such Indemnifying Party a sum equal to the lesser of the
amount of such insurance proceeds or other amounts actually
received or the net amount of Indemnity Payments actually
received previously. The Indemnitee agrees that (i) it shall use
commercially reasonable efforts to recover all insurance proceeds
that may be available, and (ii) the Indemnifying Party shall be
subrogated to such Indemnitee under any insurance policy.
(b) (i) If an Indemnitee receives a tax saving by
reason of having incurred an Indemnifiable Loss for which such
Indemnitee shall have received an Indemnity Payment from an
Indemnifying Party, then such Indemnitee shall pay to such
Indemnifying Party an amount equal to such tax saving. For
purposes of this Section 5.05(b), an Indemnitee shall be deemed
to have received a tax saving with respect to an Indemnifiable
Loss if, upon the filing of a Federal, state or local income tax
return for a taxable year ending on or after the Distribution
Date (the "Indemnity Return"), an amount attributable to an
Indemnifiable Loss is deductible by the Indemnitee or any of its
Affiliates and the amount of the related Indemnity Payment that
is includible in gross income by the Indemnitee or any of its
Affiliates is less than the amount of such tax deduction. The
amount, if any, by which such deduction exceeds the amount of the
related gross income is referred to herein as the "Indemnifiable
Loss Deduction." Both ACX and CTI shall consult with each other
and act in good faith to coordinate tax return filing positions
with respect to Indemnity Payments for the periods that include
an Indemnity Payment.
(ii) In the event that an Indemnitee will receive
a tax saving by reason of an Indemnifiable Loss, such Indemnitee
shall pay the Indemnifying Party within 30 days after the filing
of an Indemnity Return, a sum equal to the Indemnifiable Loss
Deduction multiplied by an amount equal to A + [(1 - A) x .05)],
where A equals the highest marginal corporate Federal income tax
rate applicable to corporations taxable under Subchapter C of the
Code on the date the Indemnity Return is filed (the "Tax Saving
Amount").
(iii) In the event that an Indemnitee may
receive a tax saving by reason of an Indemnifiable Loss, such
Indemnitee shall adopt, in good faith, a reasonable tax return
filing position so as to report the Indemnifiable Loss Deduction
on such returns. The Indemnitee shall have the sole
responsibility for the preparation of its tax returns and
reporting thereon such Indemnifiable Loss Deduction. If a
dispute arises between the Indemnitee and the Indemnifying Party
as to the reasonableness of an Indemnity Return filing position
with respect to an Indemnifiable Loss Deduction, such dispute
shall be resolved by a mutually agreed upon party selected and
approved by both the Indemnitee and Indemnifying Party. The cost
of retaining such mutually agreed upon party shall be shared by
the parties equally, and the decision shall be binding on the
parties.
(iv) There shall be an adjustment to any Tax
Saving Amount calculated under Section 5.05(b)(ii) hereof in the
event of an audit or other proceeding that results in a Final
Determination that increases or decreases the amount of the
Indemnifiable Loss Deduction (the "Restated Indemnifiable Loss
Deduction") reported on the Indemnity Tax Return by the
Indemnitee. The Indemnitee shall promptly inform the
Indemnifying Party of any such audit or proceeding and shall
attempt in good faith to sustain the tax saving at issue. Upon
receiving a written notice of a Final Determination in respect of
a Restated Indemnifiable Loss Deduction, the Indemnitee shall
redetermine the Tax Saving Amount attributable to the Restated
Indemnifiable Loss Deduction under the tax saving calculation of
Section 5.05(b) (ii) hereof substituting the Restated
Indemnifiable Loss Deduction for the Indemnifiable Loss
Deduction, taking into account the Final Determination (the
"Restated Tax Saving Amount"). If the Restated Tax Saving Amount
is greater than the Tax Saving Amount, the Indemnitee shall pay
the Indemnifying Party a sum equal to the difference between such
amounts, within 30 days after receiving written notice of the
Final Determination. If the Restated Tax Saving Amount is less
than the Tax Saving Amount, then the Indemnifying Party shall pay
the Indemnitee, within 30 days of receiving written notice from
the Indemnitee of the Final Determination, an amount equal to the
sum of (1) the difference between such amounts, plus (2) any
interest assessed against the Indemnitee by a tax authority which
is attributable to any tax assessed as a result of a reduction in
the Indemnifiable Loss Deduction effected by the Final
Determination.
Section 5.06 No Third Party Beneficiaries. Except to the
extent expressly provided otherwise in this Article V, the
indemnification provided for by this Article V shall not inure to
the benefit of any third party or parties and shall not relieve
any insurer or other third party who would otherwise be obligated
to pay any claim of the responsibility with respect thereto or,
solely by virtue of the indemnification provisions hereof,
provide any subrogation rights with respect thereto, and each
party agrees to waive such rights against the other to the
fullest extent permitted.
Section 5.07 Joint Defense Agreements. Except as
otherwise provided in this Agreement, for any Third Party Claim
in which both ACX (or its Affiliate) and CTI (or its Affiliate)
share an actual or potential material interest, ACX and CTI or
their respective Affiliates shall enter into a Joint Defense
Agreement. Unless an Indemnifying Party is the sole indemnifying
party or the parties otherwise specifically agree in writing in a
Joint Defense Agreement, each party shall pay its proportionate
share (as provided in the Joint Defense Agreement) of all costs
and expenses reasonably incurred in connection with the defense
of such Third Party Claim.
Section 5.08 Special Notices.
(a) CTI shall notify ACX, in the manner specified in
subparagraph 5.03(b), concerning all Third Party Claims where
ACX is or could be named a party thereto or where, based on
information available to CTI at that time, there is a
reasonable likelihood that, based on the outcome of such Third
Party Claim, the reputation of ACX or any Affiliate of ACX
could be adversely affected, or ACX's or any Affiliate's
ability to conduct its business or to take certain actions with
respect thereto could be impaired as a result of any injunctive
relief sought, or ACX could be liable for the payment of monetary
damages. ACX or its Affiliate shall have the right to
participate in the development and execution of strategy for the
response to, preparation for and handling of such Third Party
Claim in addition to its rights under Section 5.03.
(a) ACX shall notify CTI, in the manner specified in
subparagraph 5.03(b), concerning all Third Party Claims where
CTI is or could be named a party thereto or where, based on
information available to ACX at that time, there is a
reasonable likelihood that, based on the outcome of such Third
Party Claim, the reputation of CTI or any Affiliate of CTI
could be adversely affected, or CTI's or any Affiliate's
ability to conduct its business or to take certain actions with
respect thereto could be impaired as a result of any injunctive
relief sought, or CTI could be liable for the payment of monetary
damages. CTI or its Affiliate shall have the right to
participate in the development and execution of strategy for the
response to, preparation for and handling of such Third Party
Claim in addition to its rights under Section 5.03.
ARTICLE VI
CERTAIN ADDITIONAL MATTERS
Section 6.01 Construction of Agreements. Notwithstanding
any other provisions in this Agreement to the contrary, in the
event and to the extent that there is a conflict between the
provisions of this Agreement (or any Conveyancing and Assumption
Instrument) and the provisions of any Related Agreement, the
provisions of such Related Agreement shall control.
Section 6.02 No Representations or Warranties; Exceptions.
CTI understands and agrees that ALL OF THE TRANSFERRED ASSETS ARE
BEING TRANSFERRED "AS IS, WHERE IS" and that ACX is not, in this
Agreement or in any other agreement or document contemplated by
this Agreement, representing or warranting in any way (i) the
value or freedom from encumbrance of, or any other matter
concerning, any Transferred Assets or (ii) the legal sufficiency
to convey title to any Transferred Assets of the execution,
delivery and filing of the Conveyancing and Assumption
Instruments, and that CTI shall bear the economic and legal risk
that CTI's title to any such assets shall be other than good and
marketable and free from encumbrances. Similarly, CTI
understands and agrees that ACX is not in this Agreement, or in
any other agreement or document contemplated by this Agreement,
representing or warranting in any way that the obtaining of the
consents or approvals, the execution and delivery of any
amendatory agreements or the making of the filings and
applications contemplated by this Agreement shall satisfy the
provisions of all applicable agreements or the requirements of
all applicable laws or judgments, it being understood and agreed
that, subject to Section 6.04 hereof, CTI shall bear the economic
and legal risk that any necessary consents or approvals are not
obtained or that any requirements of law or judgments are not
complied with.
Section 6.03 Further Assurances. Each of ACX and CTI
shall execute and deliver such further instruments of conveyance,
transfer and assignment and shall take such other actions as each
of them may reasonably request of the other as may be necessary
or desirable to effect, perfect or confirm the record and
beneficial transfer of the Transferred Assets, the assumption of
the Assumed Liabilities and the purposes of this Agreement and to
carry out the terms hereof. Notwithstanding the foregoing, ACX
and CTI shall not be obligated, in connection with the foregoing,
to expend monies other than reasonable out-of-pocket expenses and
attorneys' fees.
Section 6.04 Consents, etc. ACX and CTI shall use their
best efforts to obtain any consent, approval or amendment
required to novate and/or assign all agreements, leases, licenses
and other rights of any nature whatsoever relating to the
Transferred Assets to CTI; provided, however, that ACX shall not
be obligated to pay any consideration therefor (except for filing
fees and other administrative charges) to the third party from
whom such consents, approvals and amendments are requested.
Section 6.05 Officers and Directors. On or before the
Distribution Date, CTI and ACX shall take all necessary actions
to elect or otherwise appoint individuals to be directors or
officers (or both) of CTI and to cause the resignations of
individuals as officers and directors of each so that there are
no common directors or officers except as described in the
Information Statement under the sections entitled "Management--
Directors" and "--Executive Officers."
Section 6.06 Existing Intercompany Arrangements. Except
as contemplated by this Agreement or any Related Agreement, all
material existing agreements relating to goods, rights or
services provided or licensed between ACX or any of its
Affiliates and CTI or any of its Affiliates shall be terminated
effective as of the close of business on the Distribution Date.
Until the Distribution Date, no such existing agreement shall
be deemed terminated, amended or otherwise affected by this
Agreement. After the Distribution Date, any such agreement
between ACX or any of its Affiliates and CTI or any of its
Affiliates shall be the result of arms-length negotiations
and on the basis of fair market pricing.
Section 6.07 Intercompany Accounts. Any intercompany
receivable, payable or loan between ACX or its Affiliates and CTI
or its Affiliates outstanding on the Distribution Date (other
than the Intercompany Debt) shall not be deemed altered, amended
or terminated as a result of this Agreement or the consummation
of the transactions contemplated hereby and shall be settled
between ACX or its Affiliates and CTI or its Affiliates in due
course following the Distribution Date.
Section 6.08 Transfer Taxes.
(a) CTI shall pay all federal, state and local sales
taxes, use taxes, documentary taxes, stock transfer taxes, real
property transfer taxes and any other transfer taxes or fees,
including any interest, penalties or additions to such taxes (the
"Transfer Taxes") with respect to the transactions described in
Section 2.01 hereof.
(b) ACX shall file timely all tax returns and reports
with respect to Transfer Taxes that it is required to file under
applicable law, and CTI shall reimburse ACX for any Transfer
Taxes due and paid with such returns and reports. CTI shall file
timely all returns and reports with respect to Transfer Taxes
that it is required to file under applicable law and shall pay
the taxes due with such returns and reports.
(c) The responsibility and authority for filing
amended returns and refund claims with respect to Transfer Taxes
and the overall coordination and administration of audits and any
dispute resolution proceedings related to Transfer Taxes shall be
as set forth in the Tax Sharing Agreement. CTI shall be
obligated for any additional Transfer Taxes that are payable, and
shall be entitled to all refunds of Transfer Taxes previously
paid, pursuant to these transactions.
Section 6.09 Proration of Taxes, Lease and Utility
Payments. All real property, personal property and similar taxes
and installments of general and special assessments, if any, with
respect to the Transferred Assets shall be prorated on the basis
of actual days elapsed between the commencement of the relevant
fiscal tax year and the date of transfer, based on a 365-day year
and the most recent tax statements or bills applicable thereto,
without later adjustment. Any installment of rental payments
with respect to leases that are part of the Transferred Assets,
or utility or similar periodic charges incurred by any entity
which are payable with respect to the current period in which the
transfer occurs shall be prorated between ACX and CTI on the
basis of actual days elapsed from the first day of the relevant
period to the date of transfer. ACX shall be responsible for all
such taxes, payments and charges allocable to all times prior to
and including the date of transfer and CTI shall be responsible
for all such taxes, payments and charges allocable to all times
after the date of transfer. Following the date of this
Agreement, each party shall, upon request of the other party,
immediately reimburse the other party for any such taxes,
payments and charges or other expenses for which said party is
responsible but which have been paid by or are owed by the other
party and for collections made by one party on behalf of the
other party.
ARTICLE VII
ACCESS TO INFORMATION AND SERVICES
Section 7.01 Provision of Corporate Records. As soon as
practicable after the date of this Agreement, ACX shall deliver
to CTI all Books and Records. Such Books and Records shall be
the property of CTI, but shall be retained and made available
readily to ACX for review and duplication until the earlier of
notice from ACX that such records are no longer needed by ACX or
the tenth anniversary of the Distribution Date. Notwithstanding
the foregoing provisions of this Section 7.01, those Books and
Records relating to any Action that is the subject matter of a
Joint Defense Agreement shall be handled as provided in such
Joint Defense Agreement.
Section 7.02 Access to Information. From and after the
Distribution Date, ACX and CTI shall afford to each other and to
each other's authorized accountants, counsel and other designated
representatives reasonable access and duplicating rights (with
copying costs to be borne by the requesting party) during normal
business hours to all Books and Records and documents,
communications, items and matters, including computer programs
and data within each other's knowledge, possession or control
relating to the Transferred Assets or the Employees, insofar as
such access is reasonably required by ACX or CTI, as the case may
be (and shall use reasonable efforts to cause persons or firms
possessing relevant items or information to give similar access).
Items or information may be requested under this Article VII for
any legitimate business purpose including, without limitation,
audit, accounting, claims, Actions, litigation and tax purposes,
as well as for purposes of fulfilling disclosure and reporting
obligations, but not for competitive purposes.
Section 7.03 Production of Witnesses and Individuals.
From and after the date of this Agreement, ACX and CTI shall use
reasonable efforts to make available to each other, upon written
request, its officers, directors, employees and agents for fact
finding, consultation and interviews and as witnesses to the
extent that any such person may reasonably be required in
connection with any Actions in which the requesting party may
from time to time be involved relating to the conduct of CTI
prior to the date of this Agreement. Except as otherwise agreed
between the parties or pursuant to a Joint Defense Agreement, ACX
and CTI agree to reimburse each other for reasonable out-of-
pocket expenses (but not labor charges or salary payments)
incurred by the other in connection with providing individuals
and witnesses pursuant to this Section 7.03.
Section 7.04 Retention of Records. Except when a longer
retention period is otherwise required by law, agreed to in
writing or specifically provided for herein or in any Related
Agreement, ACX and CTI shall retain, for a period of at least ten
years following the date of this Agreement, all material
Information relating to CTI. Notwithstanding the foregoing, in
lieu of retaining any specific information, ACX or CTI may offer
in writing to deliver such information to the other and, if such
offer is not accepted within 90 days, the offered information may
be destroyed or otherwise disposed of at any time. If a
recipient of such offer shall request in writing prior to the
scheduled date for such destruction or disposal that any of the
information proposed to be destroyed or disposed of be delivered
to such requesting party, the party proposing the destruction or
disposal shall promptly arrange for the delivery of such of the
information as was requested (at the cost of the requesting
party).
Section 7.05 Confidentiality. ACX and CTI shall hold, and
shall cause its directors, officers, employees, agents,
consultants and advisors to hold, in strict confidence, unless
compelled to disclose by judicial or administrative process or,
in the opinion of its independent legal counsel, by other
requirements of law, all information concerning the other party
furnished it by such other party or its representatives pursuant
to this Agreement (except to the extent that such information can
be shown to have been (a) available to such party on a non-
confidential basis prior to its disclosure by the other party,
(b) in the public domain through no fault of such party or
(c) later lawfully acquired from other sources by the party to
which it was furnished), and neither party shall release or
disclose such information to any other person, except its
auditors, attorneys, financial advisors, bankers and other
consultants and advisors who shall be bound by the provisions of
this Section 7.05. Each party shall be deemed to have satisfied
its obligation to hold confidential information concerning or
supplied by the other party if it exercises the same care as it
takes to preserve confidentiality for its own similar
information.
Section 7.06 Privileged Matters.
(a) The parties each agree that they will maintain,
preserve and assert all privileges, including without limitation
privileges arising under or relating to the attorney-client
relationship (which shall include without limitation the attorney-
client and work product privileges), that relate directly or
indirectly to such party for any period prior to the Distribution
Date ("Privilege" or "Privileges"). Neither party shall not
waive any Privilege that could be asserted under applicable law
without the prior written consent of the other party. The rights
and obligations created by this paragraph shall apply to all
information as to which, but for the Distribution, a party would
have been entitled to assert or did assert the protection of a
Privilege ("Privileged Information"), including but not limited
to (i) any and all information generated prior to the
Distribution Date but which, after the Distribution, is in the
possession of the other party; (ii) all communications subject
to a Privilege occurring prior to the Distribution Date between
counsel for such party and any person who, at the time of the
communication, was an employee of such party, regardless of
whether such employee is or becomes an employee of the other
party; and (iii) all information generated, received or arising
after the Distribution Date that refers or relates to Privileged
Information generated, received or arising prior to the
Distribution Date.
(b) Upon receipt by a party or any of its Affiliates
of any subpoena, discovery or other request that arguably calls
for the production or disclosure of Privileged Information or
if such party or any of its Affiliates obtains knowledge that
any current or former employee of such party or any of its
Affiliates has received any subpoena, discovery or other
request which arguably calls for the production or disclosure
of Privileged Information, such party shall promptly notify
the other party of the existence of the request and shall
provide the other party a reasonable opportunity to review the
information and to assert any rights it may have under this
Section 7.06 or otherwise to prevent the production or
disclosure of Privileged Information. Neither party will
produce or disclose any information arguably covered by a
Privilege under this Section 7.06 unless (a) the other party
has provided its express written consent to such production
or disclosure, or (b) a court of competent jurisdiction has
entered a final, non-appealable order finding that the
information is not entitled to protection under any
applicable privilege.
(c) ACX's transfer of Books and Records and other
information to CTI, and each party's agreement to permit
the other to possess Privileged Information occurring or
generated prior to the date of this Agreement, are made in
reliance on such other party's agreement, as set forth in
this Section 7.06, to maintain the confidentiality of
Privileged Information and to assert and maintain all
applicable Privileges. The access to information being
granted pursuant to Section 7.02 hereof, the agreement to
provide witnesses and individuals pursuant to Section 7.03
hereof and transfer of Privileged Information pursuant to
this Agreement shall not be deemed a waiver of any
Privilege that has been or may be asserted under this
Section 7.06 or otherwise. Nothing in this Distribution
Agreement shall operate to reduce, minimize or condition
the rights granted to, or the obligations imposed upon
either party by this Section 7.06.
(d) If there is a reasonable likelihood that the
waiver by either party of any Privilege could expose the
other party or any of its Affiliates to liability or could
otherwise adversely affect the other party or any of its
Affiliates, such party will notify the other party prior
to such waiver, and, at the other party's request, such
party will assert or preserve the Privilege, as applicable,
if such party's interests will not be adversely affected
by its assertion or preservation of the Privilege.
ARTICLE VIII
INSURANCE
Section 8.01 General.
(a) ACX shall use its best efforts to keep in effect
all policies under its Insurance Program that are in effect as of
the date of this Agreement insuring the Transferred Assets and
CTI until the next termination date of each policy occurring on
or after the Distribution Date. If ACX's insurers will not
provide continued coverage, ACX shall assist CTI in obtaining
such insurance to be effective on the Distribution Date.
Premiums for such continued policies and any applicable interest
charges for such policies shall be allocated between ACX and CTI
in accordance with the methods employed by ACX for the allocation
of such premiums among ACX, its Affiliates and CTI as of the date
of this Agreement. The date and time as of which each ACX policy
issued under its Insurance Program will, pursuant to this
provision, cease covering the Transferred Assets or CTI will be
referred to herein as the "Policy Termination Date" for that
policy. CTI understands that ACX will be terminating coverage
under each policy issued under its Insurance Program with respect
to the Transferred Assets and CTI as of the Policy Termination
Date of each policy. After such date, ACX shall, if so requested
by CTI, use reasonable efforts to assist CTI in obtaining its own
insurance coverage, but shall not be obligated to obtain or pay
for such insurance, and if CTI is unable to obtain its own
policies, and if requested by CTI, ACX will use reasonable
efforts to obtain coverage for CTI, at CTI's expense.
(b) From the Distribution Date and until the Policy
Termination Date, CTI shall be responsible for reporting to ACX
any claims it or any of its Affiliates may have under any policy
continued under paragraph (a). From and after the Policy
Termination Date, CTI shall be responsible for notifying the
appropriate insurance carrier of any claims it or any of its
Affiliates may have.
(c) Each of ACX and CTI shall cooperate with and
assist the other party in making claims under insurance policies
relating to periods prior to the Policy Termination Date and
collecting Recoveries with respect thereto. ACX and CTI shall
each give the other periodic reports regarding claims arising
prior to the Policy Termination Date that are material or may
reasonably jeopardize the availability of coverage for the other
and shall give each other prompt notice of any dispute that is
anticipated to give rise to a claim against any insurance
carrier.
Section 8.02 Certain Insured Claims. ACX agrees that
with respect to claims made prior to the Policy Termination Date
that arise from or relate to the Transferred Assets or
Transferred Business, ACX or its Affiliate will, prior to the
Policy Termination Date, use its reasonable efforts to obtain
Recoveries for CTI and remit to CTI any Recovery obtained by ACX
pursuant to such claims. From and after the Policy Termination
Date, CTI shall be responsible for administering all claims
relating to the Transferred Assets or CTI, including those claims
initiated prior to the Policy Termination Date; provided,
however, that if a claim relates to both ACX or its Affiliates,
and CTI or its Affiliates, ACX or its Affiliate shall continue to
administer the claim, and CTI shall pay its proportionate share
of the costs of such administration, based on the reasonable
estimate of the proportionate amount of each party's claim, as
agreed to by the parties. If the amount of any Recovery is less
than the claims of ACX and CTI or their Affiliates to be paid
from such Recovery, the parties shall agree on the allocation of
the Recovery between the parties.
ARTICLE IX
DISPUTE RESOLUTION
Section 9.01 Initiation. Except with respect to matters
involving Section 7.06 hereof, if ACX or its Affiliate and CTI or
its Affiliate are unable to resolve any disagreement or dispute,
either party may refer the matter to the Chief Executive Officers
(CEOs) of the parties by giving the other party written notice
("Notice"). Within 20 days after delivery of Notice, or if the
CEOs fail to meet within 20 days after delivery of Notice, the
CEOs of both parties shall meet at a mutually acceptable time and
place to exchange relevant information and to attempt to resolve
the dispute. If the matter has not been resolved within 45 days
after delivery of Notice, or if the CEOs fail to meet within
20 days after delivery of Notice, either party may initiate
mediation and, if applicable, arbitration proceedings as set
forth herein. All negotiations pursuant to this Section 9.01
shall be confidential and shall be treated as compromise and
settlement negotiations for purposes of the Federal Rules of
Evidence and state rules of evidence.
Section 9.02 Mediation. In the event a dispute exists
between the parties and the respective CEOs are unable to resolve
the dispute, the parties agree to participate in a nonbinding
mediation procedure as follows:
(a) A mediator will be selected by having counsel for
each party agree on a person to act as mediator. The parties'
counsel as well as the CEOs of each party and not more than two
other participants from each party will appear before the
mediator at a time and place determined by the mediator, but not
more than 60 days after delivery of Notice. The fees of the
mediator and other costs of mediation shall be shared equally by
the parties.
(b) Each party's counsel will have 45 minutes to
present a review of the issues and arguments before the mediator.
After each counsel's presentation, the other counsel may present
specific counter-arguments not to exceed 10 minutes. The 45-
minute and 10-minute periods will be exclusive of the time
required to answer questions from the mediator or attendees.
(c) After both presentations, the CEOs may ask
questions of the other side. At the conclusion of both
presentations and the question periods, the CEOs and their
respective counsel will meet together to try and resolve the
dispute. The length of the meeting will be as agreed between the
parties. Either party may abandon the procedure at the end of
the presentations and question periods if they feel it is not
productive to go further. This mediation procedure shall not be
binding on either party.
(d) The duties of the mediator are to be sure that the
above set-out time periods are adhered to and to ask questions so
as to clarify the issues and understanding of the parties. The
mediator may also offer possible resolutions of the issue but has
no duty to do so.
Section 9.03 Arbitration. After applying the mediation
procedure set forth above, or if either party refuses to take
part in the mediation process, the parties hereby agree to submit
all controversies, claims and matters of difference that are
unresolved to arbitration in Denver, Colorado, according to the
rules and practices of the American Arbitration Association from
time to time in force, except that insofar as such rules and
practices are unenforceable under or are directly supplemented by
the Colorado Rules of Civil Procedure or any other provisions of
Colorado law then in force, such Colorado rules and provisions
shall govern. This submission and agreement to arbitrate shall
be specifically enforceable. Arbitration may proceed in
the absence of either party if notice of the proceedings has been
given to such party. The arbitrators are not empowered to award
damages in excess of compensatory damages, and each party hereby
irrevocably waives any damages in excess of compensatory damages.
The parties agree to abide by all awards rendered n such
proceedings. Such awards shall be final and binding on all
parties to the extent and in the manner provided by the Colorado
Rules of Civil Procedure. All awards may be filed with the clerk
of one or more courts, state or federal, having jurisdiction over
the party against whom such award is rendered or such party's
property as a basis of judgment and of the issuance of execution
for its collection.
Section 9.04 Cost of Arbitration. The costs of
arbitration shall be apportioned between ACX and CTI as
determined by the arbitrator in such manner as the arbitrator
deems reasonable taking into account the circumstances of the
case, the conduct of the parties during the proceeding, and the
result of the arbitration.
ARTICLE X
MISCELLANEOUS
Section 10.01 Complete Agreement. This Agreement,
including the Schedules and Exhibits and the agreements and other
documents referred to herein, shall constitute the entire
agreement between ACX and CTI with respect to the subject matter
hereof and shall supersede all previous negotiations, commitments
and writings with respect to such subject matter.
Section 10.02 Expenses. Except as otherwise expressly
provided in this Agreement, ACX and CTI shall each pay their own
costs and expenses incurred in connection with the Distribution
and the consummation of the transactions contemplated by this
Agreement.
Section 10.03 Governing Law. This Agreement shall be
governed by and construed and enforced in accordance with the
laws of the State of Colorado (regardless of the laws that might
otherwise govern under applicable principles of conflicts law) as
to all matters, including, without limitation, matters of
validity, construction, effect, performance and remedies.
Section 10.04 Notices. All notices, requests, demands and
other communications under this Agreement shall be in writing and
shall be deemed to have been duly given (i) on the date of
service if served personally on the party to whom notice is
given, (ii) on the day of transmission if sent via facsimile
transmission to the facsimile number given below, provided
telephonic confirmation of receipt is obtained promptly after
completion of transmission, (iii) on the business day after
delivery to an overnight courier service or the Express mail
service maintained by the United States Postal Service, provided
receipt of delivery has been confirmed, or (iv) on the fifth day
after mailing, provided receipt of delivery is confirmed, if
mailed to the party to whom notice is to be given, by registered
or certified mail, postage prepaid, properly addressed and return-
receipt requested, to the party as follows:
If to ACX: ACX Technologies, Inc.
Attn: Jill B.W. Sisson, General Counsel
4455 Table Mountain Drive
Golden, Colorado 80403
If to CTI: CoorsTek, Inc.
Attn: Katherine A. Resler, General Counsel
16000 Table Mountain Parkway
Golden, Colorado 80403
Any party may change its address by giving the other party
written notice of its new address in the manner set forth above.
Section 10.05 Amendment and Modification. This Agreement
may be amended, modified or supplemented only by written
agreement of the parties.
Section 10.06 Termination. This Agreement may be
terminated and the Distribution abandoned at any time prior to
the Distribution Date by and in the sole discretion of the Board
without the approval of CTI. In the event of such termination,
no party shall have any liability of any kind to any other party.
Section 10.07 Successors and Assigns. This Agreement and
all of the provisions hereof shall be binding upon and inure to
the benefit of the parties and their respective successors and
permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by
either party without the prior written consent of the other
party.
Section 10.08 No Third Party Beneficiaries. This Agreement
is solely for the benefit of the parties hereto and is not
intended to confer upon any other person except the parties
hereto any rights or remedies hereunder.
Section 10.09 Counterparts. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
Section 10.10 Interpretation. The Article and Section
headings contained in this Agreement are solely for the purpose
of reference, are not part of the agreement of the parties and
shall not in any way affect the meaning or interpretation of this
Agreement. As used in this Agreement, the term "person" shall
mean and include an individual, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a
government or any department or agency thereof. Whenever any
words are used herein in the masculine gender, they shall be
construed as though they were also used in the feminine gender in
all cases where they would so apply.
Section 10.11 Schedules, Etc.. The Schedules and Exhibits
shall be construed with and as an integral part of this Agreement
to the same extent as if the same had been set forth verbatim
herein.
Section 10.12 Legal Enforceability. Any provision of this
Agreement which 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. Any such
prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
* * * * *
IN WITNESS WHEREOF, the parties hereto have caused this
Distribution Agreement to be executed and delivered as of the day
and year first written above.
ACX TECHNOLOGIES, INC.
By: /s/ Jill B. W. Sisson
-----------------------------
Name: Jill B. W. Sisson
Title: General Counsel
and Secretary
COORSTEK, INC.
By: /s/ Katherine A. Resler
----------------------------
Name: Katherine A. Resler
Title: General Counsel
and Secretary
SCHEDULE I
Transferred Assets and Assumed Liabilities
Transferred Assets:
1. [Airplane]
2. [Sports tickets]
Assumed Liabilities:
[?]
SCHEDULE II
Intercompany Debt
[describe and schedule]
EXHIBIT A
FORM OF PROMISSORY NOTE
January 1, 2000 $ ____________
PROMISSORY NOTE
For value received, the undersigned, COORSTEK, INC., a
Delaware corporation and having its principal executive offices
in Colorado ("Maker"), hereby promises to pay to the order of
ACX TECHNOLOGIES, INC., a Colorado corporation, or its assigns
(the "Holder"), the principal amount of $______________, with
interest, compounded [daily/monthly/annually], accruing from the
date hereof at __% per annum, payable in full on January ___,
2000 or earlier upon demand.
This Promissory Note is an assignable, endorsable and
transferable note of Maker.
All payments due under this Promissory Note shall be
satisfied in lawful money of the United States at the offices of
Holder's agent located at 16000 Table Mountain Parkway, Golden,
Colorado 80403, or at such other place as Holder may designate.
This Promissory Note may be prepaid without premium or penalty,
in whole or in part, at any time and from time to time in each
case together with payment of all accrued, but unpaid interest on
the principal amount being prepaid.
Maker waives presentment, demand, protest and notice thereof
or of dishonor, and waives the right to be released by reason of
any extension of time or change in terms of payment or any
change, alteration or release of any security given for the
payment hereof. No waiver of any payment under this Promissory
Note shall operate as a waiver of any other payment. Maker
agrees to pay all reasonable out-of-pocket expenses, including
reasonable attorney fees, incurred by Holder in collecting any
amounts due hereunder, by litigation or otherwise. All principal
and interest and any other sums due hereunder can be made, unless
agreed otherwise between the Holder and the Maker, by way of set
off, recoupment or counterclaim.
If any provision of this Promissory Note shall be held
invalid, illegal or unenforceable in any jurisdiction, the
validity, legality or enforceability of any defective provision
shall not be in any way be affected or impaired in any other
jurisdiction. In the event that any interest payable hereunder
shall exceed the maximum lawful rate of interest in the State of
Colorado, the applicable interest rate shall be limited to the
lesser of such rates (the "Maximum Rate"), but only for such
period as the applicable interest rate hereunder exceeds the
Maximum Rate.
No delay or failure of Holder in the exercise of any
available right or remedy shall be deemed a waiver of such right
by Holder, and no exercise of any right or remedy shall be deemed
a waiver of any other right or remedy that Holder may have.
This Promissory Note is to be governed by and construed
according to the laws of the State of Colorado.
DATED as of the date first set forth above.
COORSTEK, INC.
By:
Name:
Title:
EXHIBIT B
FORM OF ENVIRONMENTAL RESPONSIBILITY AGREEMENT
EXHIBIT C
FORM OF TRANSITIONAL SERVICES AGREEMENT
EXHIBIT D
FORM OF TAX SHARING AGREEMENT
Exhibit 3.2
BYLAWS
OF
ACX TECHNOLOGIES, INC.
(As amended and restated March 2, 2000)
INDEX TO BYLAWS
OF
ACX TECHNOLOGIES, INC.
Page
ARTICLE I - Offices
Section 1.01 Business Offices 1
Section 1.02 Registered Office 1
ARTICLE II - Shareholders
Section 2.01 Annual Meeting... 1
Section 2.02 Special Meetings. 2
Section 2.03 Place of Meetings 2
Section 2.04 Notice of Meetings......... 2
Section 2.05 Waiver of Notice. 3
Section 2.06 Closing of Transfer Books or Fixing
of Record Date. 3
Section 2.07 Voting List........ 4
Section 2.08 Proxies 5
Section 2.09 Quorum and Manner of Acting 5
Section 2.10 Extraordinary Matters...... 5
Section 2.11 Voting of Shares. 6
Section 2.12 Voting of Shares by Certain Holders.. 6
Section 2.13 Unanimous Action Without a Meeting... 8
Section 2.14 Conduct of Meetings 8
Section 2.15 Nomination of Directors and
Presentation of Business at
Shareholder Meetings 11
Section 2.16 Advisory Shareholder Votes 14
ARTICLE III - Board of Directors
Section 3.01 General Powers... 14
Section 3.02 Number, Tenure and Qualifications.... 14
Section 3.03 Resignation...... 15
Section 3.04 Removal 15
Section 3.05 Vacancies........ 15
Section 3.06 Regular Meetings. 16
Section 3.07 Special Meetings. 16
Section 3.08 Meetings by Telephone 16
Section 3.09 Notice of Meetings......... 16
Section 3.10 Waiver of Notice. 17
Section 3.11 Presumption of Assent...... 17
Section 3.12 Quorum and Manner of Acting 18
Section 3.13 Action Without a Meeting 18
Section 3.14 Authorized Committees 18
Section 3.15 Executive Committee 19
Section 3.16 Audit Committee 20
Section 3.17 Compensation Committee 21
Section 3.18 Directors' Committee 23
Section 3.19 Compensation 24
Section 3.20 Organization 24
Section 3.21 Director Emeritus 24
ARTICLE IV - Officers
Section 4.01 Number and Qualifications 25
Section 4.02 Election and Term of Office 25
Section 4.03 Compensation 25
Section 4.04 Resignation 26
Section 4.05 Removal 26
Section 4.06 Vacancies 26
Section 4.07 Authority and Duties 26
Section 4.08 Surety Bonds 29
ARTICLE V - Stock
Section 5.01 Issuance of Shares 30
Section 5.02 Stock Certificates; Uncertificated
Shares 30
Section 5.03 Consideration for Shares 30
Section 5.04 Lost Certificates 31
Section 5.05 Transfer of Shares 31
Section 5.06 Holders of Record 31
Section 5.07 Shares Held for Account of Another 32
Section 5.08 Transfer Agents, Registrars and
Paying Agents 32
ARTICLE VI - Indemnification
Section 6.01 Definitions...... 32
Section 6.02 Right to Indemnification 33
Section 6.03 Advancement of Expenses 34
Section 6.04 Burden of Proof... 34
Section 6.05 Notification and Defense of Claim... 35
Section 6.06 Enforcement 36
Section 6.07 Proceedings by a Party 36
Section 6.08 Subrogation...... 36
Section 6.09 Other Payments...... 36
Section 6.10 Insurance..... 37
Section 6.11 Other Rights and Remedies 37
Section 6.12 Applicability; Effect...... 37
Section 6.13 Severability... 38
ARTICLE VII - Dividends
ARTICLE VIII - Conflicts of Interest
Section 8.01 Financial Interest 39
Section 8.02 Interested Directors 39
ARTICLE IX - Contracts, Loans, Checks and Deposits
Section 9.01 Contracts 40
Section 9.02 Loans 40
Section 9.03 Checks, Drafts, etc. 40
Section 9.04 Deposits 40
ARTICLE X - Miscellaneous
Section 10.01 Voting of Securities by the
Corporation 40
Section 10.02 Seal 41
Section 10.03 Fiscal Year 41
Section 10.04 Gender 41
Section 10.05 Amendments 41
BYLAWS
OF
ACX TECHNOLOGIES, INC.
ARTICLE I
Offices
Section 1.01 Business Offices. The corporation may
have such offices, either within or outside Colorado, as the
board of directors may from time to time determine or as the
business of the corporation may require.
Section 1.02 Registered Office. The registered office
of the corporation required by the Colorado Corporation Code to
be maintained in Colorado shall be as set forth in the articles
of incorporation, unless changed as provided by law.
ARTICLE II
Shareholders
Section 2.01 Annual Meeting. An annual meeting of the
shareholders shall be held at the time and place as may be
determined by the board of directors, beginning with the year
1994, for the purpose of electing directors and for the
transaction of such other business as may come before the
meeting. At the annual meeting, the shareholders shall elect by
a plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote the
election of directors, by ballot, a board of directors or
successors to directors whose terms expire at the annual meeting,
in accordance with the articles of incorporation of the
corporation. If the election of directors shall not be held on
the day designated herein for any annual meeting of the
shareholders, or at any adjournment thereof, the board of
directors shall cause the election to be held at a meeting of the
shareholders as soon thereafter as conveniently may be. Failure
to hold an annual meeting as required by these bylaws shall not
invalidate any action taken by the board of directors or officers
of the corporation.
Section 2.02 Special Meetings. Except as otherwise
required by law, and subject to the rights of the holders of any
class or series of shares issued by the corporation having a
preference over the common stock of the corporation as to
dividends or upon liquidation to elect directors upon certain
circumstances, special meetings of the shareholders of the
corporation may be called, for any purpose or purposes, only by
the board of directors pursuant to a resolution approved by the
affirmative vote of a majority of directors then in office.
Except as otherwise required by law, no shareholder may
submit a proposal for consideration at a special meeting of
shareholders, provided that, if the special meeting is called for
the purpose of electing directors, a shareholder may nominate a
candidate subject to the provisions of Section 2.15.
Section 2.03 Place of Meetings. Each meeting of the
shareholders shall be held at such place, either within or
outside Colorado, as may be designated in the notice of meeting,
or, if no place is designated in the notice, at the principal
office of the corporation if in Colorado, or if the principal
office is not located in Colorado, at the registered office of
the corporation in Colorado.
Section 2.04 Notice of Meetings. Except as otherwise
required by law, written notice of each meeting of the
shareholders stating the place, day and hour of the meeting and,
in the case of a special meeting, the purpose or purposes for
which the meeting is called shall be given, either personally
(including delivery by private courier) or by first class,
certified or registered mail, to each shareholder of record
entitled to notice of such meeting, not less than ten nor more
than 50 days before the date of the meeting, except that if the
authorized shares of the corporation are to be increased, at
least 30 days notice shall be given, and if the sale, lease,
exchange or other disposition of all or substantially all of the
property and assets of the corporation not in the usual and
regular course of business is to be voted on, at least 20 days
notice shall be given. Such notice shall be deemed to be given,
if personally delivered, when delivered to the shareholder, and,
if mailed, when deposited in the United States mail, addressed to
the shareholder at his address as it appears on the stock
transfer books of the corporation, with postage thereon prepaid,
but if three successive notices mailed to the last-known address
of any shareholder of record are returned as undeliverable no
further notices to such shareholder shall be necessary until
another address for such shareholder is made known to the
corporation. If a meeting is adjourned to another time or place,
notice need not be given if the time and place thereof are
announced at the meeting, unless the adjournment is for more than
30 days or if after the adjournment a new record date is fixed,
in either of which case notice of the adjourned meeting shall be
given to each shareholder of record entitled to vote at the
meeting in accordance with the foregoing provisions of this
Section 2.04.
Section 2.05 Waiver of Notice. Whenever notice is
required by law, the articles of incorporation or these bylaws to
be given to any shareholder, a waiver thereof in writing signed
by the shareholder entitled to such notice, whether before, at or
after the time stated therein, shall be equivalent to the giving
of such notice. By attending a meeting, a shareholder (a) waives
objection to lack of notice or defective notice of such meeting
unless the shareholder, at the beginning of the meeting, objects
to the holding of the meeting or the transacting of business at
the meeting, and (b) waives objection to consideration at such
meeting of a particular matter not within the purpose or purposes
described in the notice of such meeting unless the shareholder
objects to considering the matter when it is presented.
Section 2.06 Closing of Transfer Books or Fixing of
Record Date. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of the
shareholders or any adjournment thereof, or shareholders entitled
to receive payment of any dividend, or in order to make a
determination of shareholders for any other proper purpose, the
board of directors may provide that the stock transfer books
shall be closed for any stated period not exceeding 50days. In
lieu of closing the stock transfer books the board of directors
may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not
more than 50 days prior to the date on which the particular
action, requiring such determination of shareholders, is to be
taken. If the stock transfer books shall be closed or a record
date fixed for the purpose of determining shareholders entitled
to notice of or to vote at a meeting of the shareholders, such
books shall be closed for at least, or such record shall be fixed
not less than, ten days immediately preceding such meeting (30
days if the authorized stock is to be increased, 20 days if the
sale, lease, exchange or other disposition of all or
substantially all of the property and assets of the corporation
not in the usual and regular course of business is to be
considered). If the stock transfer books are not so closed or no
record date is so fixed, the date on which notice of the meeting
is mailed or the date on which the resolution of the board of
directors declaring the dividend is adopted, as the case may be,
shall be the record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any
meeting of the shareholders has been made as provided in this
Section, such determination shall apply to any adjournment
thereof except where the determination has been made through the
closing of the stock transfer books and the stated period of the
closing has expired. Notwithstanding the foregoing provisions of
this Section, the record date for determining shareholders
entitled to take action without a meeting as provided in Section
2.13 below shall be the date specified in such Section.
Section 2.07 Voting List. The officer or agent having
charge of the stock transfer books for shares of the corporation
shall make, at least ten days before each meeting of the
shareholders, a complete record of the shareholders entitled to
vote at such meeting or any adjournment thereof, arranged in
alphabetical order, with the address of and the number of shares
held by each. For a period of ten days before such meeting, this
record shall be kept on file at the principal office of the
corporation, whether within or outside Colorado, and shall be
subject to inspection by any shareholder for any purpose germane
to the meeting at any time during usual business hours. Such
record shall also be produced and kept open at the time and place
of the meeting and shall be subject to the inspection of any
shareholder for any purpose germane to the meeting during the
whole time of the meeting. The original stock transfer books
shall be prima facie evidence as to who are the shareholders
entitled to examine such record or transfer books or to vote at
any meeting of the shareholders.
Section 2.08 Proxies. At any meeting of the
shareholders, a shareholder may vote by proxy executed in writing
by the shareholder or his duly authorized attorney-in-fact. Such
proxy shall be filed with the secretary of the corporation before
or at the time of the meeting. No proxy shall be valid after
eleven months from the date of its execution, unless otherwise
provided in the proxy.
Section 2.09 Quorum and Manner of Acting. At all
meetings of shareholders, a majority of the outstanding shares of
the corporation entitled to vote, represented in person or by
proxy, shall constitute a quorum, except or otherwise required by
law. If a quorum is present, the affirmative vote of a majority
of the shares represented at the meeting and entitled to vote on
the subject matter shall be the act of the shareholders, unless
the vote of a greater proportion or number or voting by classes
is otherwise required by the laws of Colorado, the articles of
incorporation or these bylaws in which case the express provision
shall govern and control the decision on the subject matter in
question. In the absence of a quorum, a majority of the shares
so represented may adjourn the meeting from time to time for a
period not to exceed sixty days at any one adjournment. At any
such adjourned meeting, at which a quorum shall be present or
represented, any business may be transacted which might have been
transacted at the original meeting.
Section 2.10 Extraordinary Matters. Notwithstanding
the provisions of Section 2.09, the following actions shall
require the affirmative vote or concurrence of two-thirds of all
of the outstanding shares of the corporation (or of each class if
class voting is required by the laws of Colorado or the articles
of incorporation) entitled to vote thereon: (a) adopting an
amendment or amendments to the articles of incorporation, except
that the affirmative vote or concurrence of a majority of
outstanding shares is required to adopt an amendment to Article
One of the articles of incorporation, (b) lending money to,
guaranteeing the obligations of or otherwise assisting any of the
directors of the corporation or of any other corporation the
majority of whose voting capital stock is owned by the
corporation provided that no such loans or guaranties to
directors shall be made by the corporation secured by its shares,
(c) authorizing the sale, lease, exchange or other disposition of
all or substantially all of the property and assets of the
corporation, with or without its goodwill, not in the usual and
regular course of business, (d) approving a plan of merger,
consolidation or exchange that is required to be approved by the
shareholders, (e) adopting a resolution submitted by the board of
directors to dissolve the corporation, and (f) adopting a
resolution submitted by the board of directors to revoke
voluntary dissolution proceedings.
Section 2.11 Voting of Shares. Subject to the
provisions of Section 2.06, each outstanding share of record,
regardless of class, is entitled to one vote, and each
outstanding fractional share of record is entitled to a
corresponding fractional vote, on each matter submitted to a vote
of the shareholders either at a meeting thereof or pursuant to
Section 2.13, except to the extent that the voting rights of the
shares of any class or classes or series are limited or denied by
the articles of incorporation as permitted by the Colorado
Corporation Code. In the election of directors each record
holder of stock entitled to vote at such election shall have the
right to vote the number of shares owned by him for as many
persons as there are directors to be elected, and for whose
election he has the right to vote. Cumulative voting shall not
be allowed.
Section 2.12 Voting of Shares by Certain Holders.
(a) Shares Held or Controlled by the Corporation.
Neither treasury shares nor shares held by another corporation if
a majority of the shares entitled to vote for the election of
directors of such other corporation is held by this corporation,
shall be voted at any meeting or counted in determining the total
number of outstanding shares at any given time.
(b) Shares Held by Another Corporation. Shares
standing in the name of another corporation may be voted by such
officer, agent or proxy as the bylaws of such corporation may
prescribe or, in the absence of such provision, as the board of
directors of such corporation may determine.
(c) Shares Held by More Than One Person. Shares
standing of record in the names of two or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in
common, tenants by the entirety or otherwise, or if two or more
persons have the same fiduciary relationship respecting the same
shares, voting with respect to the shares shall have the
following effects: (i) if only one person votes, his act binds
all; (ii) if two or more persons vote, the act of the majority so
voting binds all; (iii) if two or more persons vote, but the vote
is evenly split on any particular matter, each faction may vote
the shares in question proportionally, or any person voting the
shares of a beneficiary, if any, may apply to any court of
competent jurisdiction in Colorado to appoint an additional
person to act with the persons so voting the shares, in which
case the shares shall be voted as determined by a majority of
such persons; and (iv) if a tenancy is held in unequal interests,
a majority or even split for the purposes of subparagraph (iii)
shall be a majority or even split in interest. The foregoing
effects of voting shall not be applicable if the secretary of the
corporation is given written notice of alternative voting
provisions and is furnished with a copy of the instrument or
order wherein the alternative voting provisions are stated.
(d) Shares Held in Trust or by a Personal
Representative. Shares held by an administrator, executor,
guardian, conservator or other personal representative may be
voted by him, either in person or by proxy, without a transfer of
such shares into his name. Shares standing in the name of a
trustee may be voted by him, either in person or by proxy, but no
trustee shall be entitled to vote shares held by him without a
transfer of such shares into his name.
(e) Shares Held by a Receiver. Shares standing in
the name of a receiver may be voted by such receiver and shares
held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his name if authority
so to do is contained in an appropriate order of the court by
which such receiver was appointed.
(f) Pledged Shares. A shareholder whose shares
are pledged shall be entitled to vote such shares until the
shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so
transferred.
(g) Redeemable Shares Called for Redemption.
Redeemable shares that have been called for redemption shall not
be entitled to vote on any matter and shall not be deemed
outstanding shares on and after the date on which written notice
of redemption has been mailed to shareholders and a sum
sufficient to redeem such shares has been deposited with a bank
or trust company with irrevocable instruction and authority to
pay the redemption price to the holders of the shares upon
surrender of certificates therefor.
Section 2.13 Unanimous Action Without a Meeting. Any
action required or permitted to be taken at a meeting of the
shareholders may be taken without a meeting, without prior notice
and without a vote, if a consent in writing, setting forth the
action so taken, shall be signed by all of the shareholders
entitled to vote with respect to the subject matter thereof.
Such consent (which may be signed in counterparts) shall have the
same force and effect as a unanimous vote of the shareholders and
may be stated as such in any document. Unless the consent
specifies a different effective date, action taken without a
meeting pursuant to a consent in writing as provided herein shall
be effective when all shareholders entitled to vote have signed
the consent. The record date for determining shareholders
entitled to take action without a meeting is the date the first
shareholder signs the consent. All consents signed pursuant to
this Section 2.13 shall be delivered to the secretary of the
corporation for inclusion in the minutes or for filing with the
corporate records.
Section 2.14 Conduct of Meetings.
(a) General. The chairman of the annual or any
special meeting of the shareholders shall be the chairman of the
board, if there is one, or, if there is not one or in his
absence, the vice-chairman, if there is one, or, if there is not
one or in his absence, the president, if there is only one, or,
if there are co-presidents, then one of the co-presidents, as
designated by a majority of the directors present, or, in the
absence of all co-presidents, then any person designated by a
majority of the directors present, unless and until a different
person is elected by a majority of the shares entitled to vote at
such meeting.
(b) Inspectors of Election. The corporation
shall, in advance of any meeting of shareholders, appoint one or
more inspectors to act at the meeting and make a written report
thereof. The corporation may designate one or more persons as
alternative inspectors to replace any inspector who fails to act.
If no inspector or alternative is able to act at a meeting of
shareholders, the person presiding at the meeting shall appoint
one or more inspectors to act at the meeting. Each inspector,
before entering upon the discharge of his duties, shall take and
sign an oath faithfully to execute the duties of inspector with
strict impartiality and according to the best of his ability.
The inspectors shall (i) ascertain the number of shares
outstanding and the voting power of each, (ii) determine the
shares represented at a meeting and the validity of proxies and
ballots, (iii) count all votes and ballots, (iv) determine and
retain for a reasonable period a determination by the inspectors,
and (v) certify their determination of the number of shares
represented at the meeting, and their count of all votes and
ballots. The inspectors may appoint or retain other persons or
entities to assist the inspectors in the performance of the
duties of the inspectors.
The date and time of the opening and the closing of the
polls for each matter upon which the shareholders will vote at a
meeting shall be announced at the meeting. No ballot, proxies or
votes, nor any revocations thereof or changes thereto, shall be
accepted by the inspectors after the closing of the polls unless
a court of competent jurisdiction upon application by a
shareholder shall determine otherwise.
In determining the validity and counting of proxies and
ballots, the inspectors shall be limited to an examination of the
proxies, any envelopes submitted with those proxies, any
information provided in accordance with applicable law, ballots
and the regular books and records of the corporation, except that
the inspectors may consider other reliable information for the
limited purpose of reconciling proxies and ballots submitted by
or on behalf of banks, brokers, their nominees or similar persons
which represent more votes than the holder of a proxy is
authorized by the record owner to case, or more more votes than
the shareholder holds of record. If the inspectors consider
other reliable information for the limited purpose permitted
herein, the inspectors at the time they make their certification
pursuant this section shall specify the precise information
considered by them including the person or persons from whom they
obtained the information, when the information was obtained, the
means by which the information was obtained and the basis for the
inspectors' belief that such information is accurate and
reliable.
(c) Rules of Conduct. Meetings of shareholders
shall be conducted in accordance with the following rules:
(i) The chairman of the meeting shall have
absolute authority over matters of procedure and there shall be
no appeal from the ruling of the chairman. If the chairman, in
his absolute discretion, deems it advisable to dispense with the
rules of parliamentary procedure as to any one meeting of
shareholders or part thereof, the chairman shall so state and
shall clearly state the rules under which the meeting or
appropriate part thereof shall be conducted.
(ii) If disorder should arise that prevents
continuation of the legitimate business of the meeting, the
chairman may quit the chair and announce the adjournment of the
meeting and upon his so doing the meeting is immediately
adjourned.
(iii) The chairman may ask or require that
anyone who is not a bona fide shareholder or proxy leave the
meeting.
Section 2.15 Nomination of Directors and Presentation
of Business at Shareholder Meetings.
(a) General. Nominations of persons for election
to the board of directors and the proposal of business to be
considered by the shareholders may be made at an annual meeting
of shareholders (i) pursuant to the corporation's notice of
meeting, (ii) by or at the direction of the board of directors or
(iii) by a shareholder who was a shareholder of record at the
time of the giving of notice provided for in this Section 2.15,
who is entitled to vote at the meeting and who complied with the
notice procedures set forth in this Section 2.15.
(b) Annual Meetings. Except as provided in the
last sentence of Section 2.15(f), for nominations or other
business to be properly brought before an annual meeting by a
shareholder pursuant to clause (iii) of paragraph (a) of this
Section 2.15, the shareholder must have given timely notice
thereof in writing to the secretary of the corporation. To be
timely, a shareholder's notice shall be delivered to the
secretary at the principal executive offices of the corporation
not less than 90 days before the anniversary of the date that the
corporation mailed its proxy material for the preceding annual
meeting.
(c) Special Meetings. Only such business shall be
conducted at a special meeting of shareholders as shall have been
brought before the meeting pursuant to the corporation's notice
of meeting or as otherwise required by law. Nominations of
persons for election to the board of directors may be made at a
special meeting of shareholders with regard to which the board of
directors has determined that directors are to be elected (i)
pursuant to the corporation's notice of meeting; (ii) by or at
the direction of the board of directors or (iii) by any
shareholder who is a shareholder of record at the time of the
giving of notice provided for in this Section 2.15, who shall be
entitled to vote for the election of directors at the meeting and
who complies with the notice procedures set forth in this Section
2.15. In the event the corporation calls a special meeting of
shareholders for the purpose of electing one or more directors to
the board, any such shareholder may nominate a person or persons
(as the case may be) for election to such position(s) as
specified in the corporation's notice of meeting, if the
shareholder's notice setting forth the information and complying
with the form described in paragraph (b) of this Section 2.15
shall be delivered to the Secretary at the principal executive
offices of the corporation not earlier than the 90th day prior to
such special meeting and not later than the close of business on
the later of (i) the 60th day prior to such special meeting or
(ii) the 10th day following the day on which public announcement
is first made of the date of the special meeting and of the
nominees proposed by the board of directors to be elected at such
meeting.
(d) Procedures. Only such persons who are
nominated in accordance with the procedure, set forth in this
Section 2.15 shall be eligible to serve as directors and only
such business shall be conducted at a meeting of shareholders as
shall have been brought before the meeting in accordance with the
procedures set forth in this Section 2.15. The chairman of the
meeting of shareholders shall have the power and duty to
determine whether a nomination or any business proposed to be
brought before the meeting was made in accordance with the
procedures set forth in this Section 2.15 and, if any proposed
nomination or business is not in compliance with this Section
2.15, to declare that such defective nominations or proposal
shall be disregarded.
(e) Public Announcement. For purposes of this
Section 2.15, "public announcement" shall mean disclosure of a
press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document
publicly filed by the corporation with the Securities and
Exchange Commission pursuant to Sections 13, 14 or 15(d) of the
Exchange Act.
(f) Special Procedures. Notwithstanding the
foregoing provisions of this Section 2.15, (i) if any class or
series of stock has the right, voting separately by class or
series, to elect directors at an annual or special meeting of
shareholders, such directors shall be nominated and elected
pursuant to the terms of such class or series of stock; and (ii)
a shareholder shall also comply with all applicable requirements
of the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth in this Section 2.15. Nothing
in this Section 2.15 shall be deemed to affect any rights of
shareholders to request inclusion of proposals in the
corporation's proxy statement pursuant to Rule 14a-8 under the
Exchange Act.
(g) Management Proposals. Nominations of persons
to stand for election at any annual or special meeting of
shareholders may be made at any time prior to the vote thereon by
the board of directors or a committee of the board. For any new
business proposed by management to be properly brought before the
annual meeting of shareholders, such new business shall be
approved by the board of directors, either directly or through
its approval by proxy solicitation materials related thereto, and
shall be stated in writing and filed with the secretary of the
corporation at least five days before the date of the annual
meeting, and all business so stated, proposed and filed shall be
considered at the annual meeting.
Section 2.16 Advisory Shareholder Votes. In order for
the shareholders to adopt or approve any proposal submitted to
them for the purpose of requesting the board of directors to take
specified action, a majority of the outstanding stock of the
corporation entitled to vote thereon must be voted for the
proposal.
ARTICLE III
Board of Directors
Section 3.01 General Powers. The business and affairs
of the corporation shall be managed by its board of directors,
except as otherwise provided in the Colorado Corporation Code,
the articles of incorporation or these bylaws.
Section 3.02 Number, Tenure and Qualifications. The
number of directors of the corporation shall be fixed from time
to time by resolution of the board of directors but in no event
fewer than the number required by law. Except as provided in
Sections 2.01 and 3.05, directors shall be elected at each annual
meeting of the shareholders. Each director shall hold office
until the annual meeting of the shareholders at which such
director's term expires and thereafter until his successor shall
have been elected and qualified, or until his earlier death,
resignation or removal. Directors must be at least eighteen
years old but need not be residents of Colorado or shareholders
of the corporation. The directors shall be divided into three
classes, in accordance with the articles of incorporation.
Section 3.03 Resignation. Any director may resign at
any time by giving written notice to the president or any co-
president or to the board of directors. A director's resignation
shall take effect at the time specified in the notice and, unless
otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
Section 3.04 Removal. At a meeting of shareholders
called expressly for that purpose, the entire board of directors
or any lesser number may be removed in accordance with law and
the articles of incorporation, by a vote of the holders of 80
percent of shares then generally entitled to vote at an election
of directors; except that if the holders of shares of any class
of stock are entitled to elect one or more directors by the
provisions of the articles of incorporation, the provisions of
this Section 3.04 shall apply, with respect to the removal of a
director or directors so elected by such class, to the vote of
the holders of the outstanding shares of that class and not to
the vote of the outstanding shares as a whole. Any reduction in
the authorized number of directors shall not have the effect of
shortening the term of any incumbent director unless such
director is also removed from office in accordance with this
Section 3.04.
Section 3.05 Vacancies. Unless otherwise required in
the articles of incorporation, any vacancy occurring in the board
of directors may be filled by the affirmative vote of a majority
of the remaining directors though less than a quorum, or by the
affirmative vote of two directors if there are only two directors
remaining, or by a sole remaining director, or by the
shareholders if there are no directors remaining. A director
elected by one or more directors to fill a vacancy shall, without
regard to the class of directors in which the vacancy occurred,
be elected until the next succeeding annual meeting of
shareholders and until his or her successor shall have been
elected and qualified. Any director elected by shareholders to
fill a vacancy shall be elected for the balance of the term or
the term of other directors of the same class.
Section 3.06 Regular Meetings. A regular meeting of
the board of directors shall be held immediately after and at the
same place as the annual meeting of the shareholders, or as soon
thereafter as conveniently may be, at the time and place, either
within or outside Colorado, determined by the board, for the
purpose of electing officers and for the transaction of such
other business as may come before the meeting. Failure to hold
such meeting, however, shall not invalidate any action taken by
any officer then or thereafter in office. The board of directors
may provide, by resolution, the time and place, either within or
outside Colorado, for the holding of additional regular meetings
without other notice than such resolution.
Section 3.07 Special Meetings. Special meetings of
the board of directors may be called by or at the request of the
chairman or any two directors. The person or persons authorized
to call special meetings of the board of directors may fix any
convenient place, either within or outside Colorado, as the place
for holding any special meeting of the board called by them.
Section 3.08 Meetings by Telephone. Unless otherwise
provided by the articles of incorporation, one or more members of
the board of directors may participate in a meeting of the board
by means of conference telephone or similar communications
equipment by which all persons participating in the meeting can
hear each other at the same time. Such participation shall
constitute presence in person at the meeting.
Section 3.09 Notice of Meetings. Notice of each
meeting of the board of directors (except those regular meetings
for which notice is not required) stating the place, day and hour
of the meeting shall be given to each director at least five days
prior thereto by the mailing of written notice by first class,
certified or registered mail, or at least two days prior thereto
by personal delivery (including delivery by private courier) of
written notice or by telephone, telegram, telex, cablegram or
other similar method, except that in the case of a meeting to be
held pursuant to Section 3.08 notice may be given by telephone
one day prior thereto. The method of notice need not be the same
to each director. Notice shall be deemed to be given when
deposited in the United States mail, with postage thereon
prepaid, addressed to the director at his business or residence
address, when delivered or communicated to the director or when
the telegram, telex, cablegram or other form of notice is
personally delivered to the director or delivered to the last
address of the director furnished by him to the corporation for
such purpose. Neither the business to be transacted at nor the
purpose of any meeting of the board of directors need be
specified in the notice or waiver of notice of such meeting
unless otherwise required by statute.
Section 3.10 Waiver of Notice. Whenever notice is
required by law, the articles of incorporation or these bylaws to
be given to the directors, a waiver thereof in writing signed by
the director entitled to such notice, whether before, at or after
the time stated therein, shall be equivalent to the giving of
such notice. By attending or participating in a meeting, a
director waives any required notice of such meeting unless, at
the beginning of the meeting, he objects to the holding of the
meeting or the transacting of business at the meeting.
Section 3.11 Presumption of Assent. A director of the
corporation who is present at a meeting of the board of directors
at which action on any corporate matter is taken shall be
presumed to have assented to the action taken unless he objects
at the beginning of the meeting to the holding of the meeting or
the transacting of business at the meeting, contemporaneously
requests that his dissent to the action taken be entered in the
minutes of such meeting or gives written notice of his dissent to
the presiding officer of such meeting before its adjournment or
to the secretary of the corporation immediately after adjournment
of such meeting. The right of dissent as to a specific action
taken at a meeting of the board is not available to a director
who votes in favor of such action.
Section 3.12 Quorum and Manner of Acting. Except as
otherwise may be required by law, the articles of incorporation
or these bylaws, a majority of the number of directors fixed in
accordance with these bylaws, present in person, shall constitute
a quorum for the transaction of business at any meeting of the
board of directors, and the vote of a majority of the directors
present at a meeting at which a quorum is present shall be the
act of the board of directors. If less than a quorum is present
at a meeting, a majority of the directors present may adjourn the
meeting from time to time without further notice other than an
announcement at the meeting, until a quorum shall be present. No
director may vote or act by proxy or power of attorney at any
meeting of directors.
Section 3.13 Action Without a Meeting. Any action
required or permitted to be taken at a meeting of the directors
may be taken without a meeting, without prior notice and without
a vote, if a consent in writing, setting forth the action so
taken, shall be signed by all of the directors. Such consent
(which may be signed in counterparts) shall have the same force
and effect as a unanimous vote of the directors and may be stated
as such in any document. Unless the consent specifies a
different effective date, action taken without a meeting pursuant
to a consent in writing as provided herein is effective when all
directors have signed the consent. All consents signed pursuant
to this Section 3.13 shall be delivered to the secretary of the
corporation for inclusion in the minutes or for filing with the
corporate records.
Section 3.14 Authorized Committees. The board of
directors, by resolution adopted by a majority of the full board,
may designate from among its members an executive committee and
one or more other committees, each of which, to the extent
provided in the resolution establishing such committee or in
these bylaws, shall have and may exercise all of the authority of
the board of directors in the management of the business and
affairs of the corporation, except that no such committee shall
have the power or authority to (a) declare dividends or
distributions, (b) approve, recommend or submit to the
shareholders actions or proposals required by law to be approved
by the shareholders, (c) fill vacancies on the board of directors
or any committee thereof, including any committee authorized by
this Section 3.14, (d) amend the bylaws, (e) approve a plan of
merger not requiring shareholder approval, (f) reduce earned or
capital surplus, (g) authorize or approve the reacquisition of
shares of the corporation, unless pursuant to a general formula
or method specified by the board of directors, or (h) authorize
or approve the issuance or sale of, or any contract to issue or
sell, shares of the corporation's stock or designate the terms of
a series of a class of shares.
The delegation of authority to any committee shall not
operate to relieve the board of directors or any member of the
board from any responsibility imposed by law. Subject to the
foregoing, the board of directors may provide such powers,
limitations and procedures for such committees as the board deems
advisable. To the extent the board of directors or such
committee does not establish other procedures, each committee
shall be governed by the procedures set forth in Sections 3.06
(except as they relate to an annual meeting) and 3.07 through
3.13 as if the committee were the board of directors. Each
committee shall keep regular minutes of its meetings, which shall
be reported to the board of directors when required and submitted
to the secretary of the corporation for inclusion in the
corporate records.
Section 3.15 Executive Committee. The board of
directors at the annual or any regular or special meeting of the
directors shall, by resolution adopted by a majority of the whole
board, designate and elect two or more directors to constitute an
Executive Committee and appoint one of the designees as the
chairman of the Executive Committee. Subject to applicable law
and these bylaws, the Executive Committee during intervals
between the meetings of the board shall exercise all powers and
have all authority of the board of directors.
The Executive Committee shall keep a record of its acts
and proceedings, which shall form a part of the records of the
corporation in the custody of the secretary, and all actions of
the Executive Committee shall be reported to the board of
directors at the next meeting of the board. The minute books of
the Executive Committee shall at all times be open to the
inspection of any director.
Section 3.16 Audit Committee.
(a) Membership. The board of directors at the
annual or any regular or special meeting of the directors shall,
by resolution adopted by a majority of the whole Board, designate
and elect two or more directors to constitute an Audit Committee
and appoint one of the directors so designated as the chairman of
the Audit Committee. A majority of the members on the Audit
Committee shall be directors who are not officers or employees of
the corporation and are free from any relationship that, in the
opinion of the board of directors, would interfere with the
exercise of independent judgment as a member of the committee.
Vacancies in the committee may be filled by the board of
directors at any meeting thereof. Each member of the committee
shall hold office until his successor has been duly elected, or
until his death, resignation or removal from the Audit Committee
by the board of directors, or until he otherwise ceases to be a
director. Any member of the Audit Committee may be removed from
the committee by resolution adopted by a majority of the whole
board of directors whenever in its judgment (1) that person is no
longer an independent director or free from any relationship with
the corporation or any of its officers prohibited by this
section, or (2) the best interests of the corporation would be
served thereby. The compensation, if any, of members of the
committee shall be established by resolution of the board of
directors.
(b) Responsibilities. The Audit Committee shall
be responsible for recommending to the board of directors the
appointment or discharge of independent auditors; reviewing with
the management and the independent auditors the terms of
engagement of independent auditors, including the fees, scope and
timing of the audit and any other services rendered by the
independent auditors; reviewing with the independent auditors and
management the corporation's policies and procedures with respect
to internal auditing, accounting and financial controls;
reviewing with the management, the independent auditors and the
internal auditors, the corporation's financial statements, audit
results and reports and the recommendations made by any of the
auditors with respect to changes in accounting procedures and
internal controls; reviewing the results of studies of the
corporation's system of internal accounting controls; performing
any other duties or functions required by any organization under
which the securities of the Company may be listed; and performing
such other duties deemed appropriate by the board of directors.
The committee shall have the powers and rights necessary or
desirable to fulfill these responsibilities, including the power
and right to consult with legal counsel and to rely upon the
opinion of legal counsel. The Audit Committee is authorized to
communicate directly with the corporation's financial officers
and employees, internal auditors and independent auditors as it
deems desirable and to have the internal auditors or independent
auditors perform any additional procedures as it deems
appropriate.
(c) Minutes. The Audit Committee shall keep a
record of its acts and proceedings, which shall form a part of
the records of the corporation in the custody of the secretary,
and all actions of the Audit Committee shall be reported to the
board of directors at the next meeting of the Board. The minute
books of the Audit Committee shall at all times be open to the
inspection of any director.
(d) Quorum. The Audit Committee shall meet at the
call of its chairman or of any two members of the committee. A
majority of the Audit Committee shall constitute a quorum for the
transaction of business and the act of a majority of those
present at any meeting at which a quorum is present shall
constitute the act of the committee.
Section 3.17. Compensation Committee.
(a) Members. The board of directors at the annual
or any regular or special meeting shall, by resolution adopted by
a majority of the whole Board, designate and elect two or more
directors to constitute a Compensation Committee and appoint one
of the directors so designated as the chairman of the
Compensation Committee. Membership on the Compensation Committee
shall be restricted to disinterested persons which for this
purpose shall mean any director who, during the time he is a
member of the Compensation Committee is not eligible, and has not
at any time within one year prior thereto been eligible, for
selection to participate (other than in a manner as to which the
Compensation Committee has no discretion) in any of the
compensation plans administered by the Compensation Committee.
Vacancies in the committee may be filled by the board of
directors at any meeting. Each member of the committee shall
hold office until his successor has been duly elected, or until
his death, resignation or removal from the Compensation Committee
by the board of directors, or until he otherwise ceases to be a
director or a disinterested person. Any member of the
Compensation Committee may be removed by resolution adopted by a
majority of the whole board of directors whenever (1) that person
is no longer a disinterested person or (2) in the judgment of the
board the best interests of the corporation would be served
thereby. The compensation, if any, of members of the committee
shall be established by resolution of the board of directors.
(b) Responsibilities. The Compensation Committee
shall, from time to time, recommend to the board of directors the
compensation and benefits of the executive officers of the
corporation. The Compensation Committee shall have the power and
authority vested in it by any benefit plan of the corporation.
(c) Minutes. The Compensation Committee shall
keep a record of its acts and proceedings, which shall form a
part of the records of the corporation in the custody of the
secretary, and all actions of the Compensation Committee shall be
reported to the board of directors at the next meeting of the
Board. The minute books of the Compensation Committee shall at
all times be open to the inspection of any directors.
(d) Quorum. The Compensation Committee shall meet
at the call of the chairman of the Compensation Committee or of
any two members of the committee. A majority of the Compensation
committee shall constitute a quorum for the transaction of
business and the act of a majority of those present at any
meeting at which a quorum is present shall be the act of the
committee.
Section 3.18 Directors' Committee.
(a) Membership. The board of directors at the annual
or any regular or special meeting of the directors shall, by
resolution adopted by a majority of the whole Board, designate
and elect two or more directors to constitute a Directors'
Committee and appoint one of the directors so designated as the
chairman of the Directors' Committee. Vacancies in the committee
may be filled by the board of directors at any meeting thereof.
Each member of the committee shall hold office until his
successor has been duly elected, or until his death, resignation
or removal from the Directors' Committee by the board of
directors, or until he otherwise ceases to be a director. Any
member of the Directors' Committee may be removed from the
committee by resolution adopted by a majority of the whole board
of directors whenever in its judgment the best interests of the
corporation would be served thereby. The compensation, if any,
of the members of the committee shall be established by
resolution of the board of directors.
(b) Responsibilities. The Directors' Committee shall
be responsible for recommending to the board of directors
nomination of new board members and the compensation, including
ownership amounts of the corporation's common stock, of the
members of the board of directors. The Directors' Committee
shall be responsible for orientation of new board members and
evaluation of performance of the board of directors.
(c) Minutes. The Directors' Committee shall keep a
record of its acts and proceedings, which shall form a part of
the records of the corporation in the custody of the secretary,
and all actions of the Directors' Committee shall be reported to
the board of directors at the next meeting of the Board. The
minute books of the Directors' Committee shall at all times be
open to the inspection of any directors.
(d) Quorum. The Directors' Committee shall meet at
the call of the chairman of the Directors' Committee or of any
two members of the committee. A majority of the Directors'
Committee shall constitute a quorum for the transaction of
business and the act of a majority of those present at any
meeting at which a quorum is present shall be the act of the
committee.
Section 3.19 Compensation. By resolution of the board
of directors, notwithstanding any personal interest of a director
in such action, the board shall determine and fix the
compensation, if any, and the reimbursement of expenses which
sall be allowed and paid to the directors. A director may be
reimbursed for the expenses of performing his duties, including
attendance at each meeting of the board of directors and each
meeting of any committee of the board of which he is a member and
may be paid a fixed sum for attendance at each such meeting or a
stated fee, or both a fixed sum and a stated fee. No such
payment shall preclude any director from serving the corporation
in any other capacity and receiving compensation therefor.
Section 3.20 Organization. The board of directors
shall elect a chairman of the board from among its members, who
may also be designated by the board as an officer of the
corporation. The board may also elect one or more vice-chairmen
from among its members to perform the duties of the chairman in
his absence and such other duties as the board may assign. At
each meeting of the board of directors, the chairman, or in his
absence, a vice-chairman chosen by a majority of the directors
present, or in the absence of any vice-chairman, a director
chosen by a majority of the directors present shall act as
chairman of the meeting. The secretary, or in his absence, the
assistant secretary, if there is one, or if there is not one or
in his absence, the person whom the chairman of the meeting shall
appoint, shall act as secretary of the meeting and keep the
minutes thereof.
Section 3.21 Director Emeritus. The board of
directors at any regular or special meeting may, by resolution
adopted by a majority of the whole Board, designate a retired
director as Director Emeritus. A Director Emeritus shall be a
director for all purposes except that he will not vote or be
counted for quorum purposes. Compensation for a Director
Emeritus shall be the same as disinterested directors, including
the reimbursement of expenses for the performance of his duties.
ARTICLE IV
Officers
Section 4.01 Number and Qualifications. The officers
of the corporation shall consist of a president or co-presidents,
a secretary, a treasurer and such other officers, including a
general counsel, one or more vice-presidents and a controller, as
may from time to time be elected or appointed by the board.
Unless specifically designated, the chairman of the board shall
not be an officer of the corporation. In addition, the board of
directors, the president or any co-president may elect or appoint
such assistant and other subordinate officers, including
assistant vice presidents, assistant secretaries and assistant
treasurers, as it or he shall deem necessary or appropriate. Any
number of offices may be held by the same person, except that no
person may simultaneously hold the offices of president or co-
president and secretary. All officers must be at least eighteen
years old.
Section 4.02 Election and Term of Office. Except as
provided in Sections 4.01 and 4.06, the officers of the
corporation shall be elected by the board of directors annually
at the first meeting of the board held after each annual meeting
of the shareholders as provided in Section 3.06. If the election
of officers shall not be held as provided herein, such election
shall be held as soon thereafter as conveniently may be. Each
officer shall hold office until his successor shall have been
duly elected and shall have qualified, or until the expiration of
his term in office if elected or appointed for a specified period
of time, or until his earlier death, resignation or removal.
Section 4.03 Compensation. Executive officers shall
receive such compensation for their services as shall be
recommended by the Compensation Committee and authorized or
ratified by the board of directors. The salaries and fees of the
other officers of the corporation shall be fixed from time to
time by the board of directors. No officer shall be prevented
from receiving compensation by reason of the fact that he is also
a director of the corporation. Election or appointment as an
officer shall not of itself create a contract or other right to
compensation for services performed as such officer.
Section 4.04 Resignation. Any officer may resign at
any time, subject to any rights or obligations under any existing
contracts between the officer and the corporation, by giving
written notice to the president or to the board of directors. An
officer's resignation shall take effect at the time specified in
such notice, and unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it
effective.
Section 4.05 Removal. Any officer may be removed at
any time by the board of directors, or, in the case of assistant
and other subordinate officers, by the board of directors or the
president or any co-president (whether or not such officer was
appointed by the president) whenever in its or his judgment, as
the case may be, the best interests of the corporation will be
served thereby, but such removal shall be without prejudice to
the contract rights, if any, of the person so removed. Election
or appointment of an officer shall not in itself create contract
rights.
Section 4.06 Vacancies. A vacancy in any office,
however occurring, may be filled by the board of directors, or,
if such office may be filled by the president as provided in
Section 4.01, by the president, for the unexpired portion of the
term.
Section 4.07 Authority and Duties. The officers of
the corporation shall have the authority and shall exercise the
powers and perform the duties specified below and as may be
additionally specified by the president, any co-president, the
board of directors or these bylaws (and in all cases where the
duties of any officer are not prescribed by the bylaws or by the
board of directors, such officer shall follow the orders and
instructions of the president or any co-president), except that
in any event each officer shall exercise such powers and perform
such duties as may be required by law.
(a) Office of the President, President, Co-
Presidents. The board of directors may from time to time
designate either a president or two or more co-presidents of the
corporation. Two or more co-presidents shall constitute and be
members of the Office of the President of the corporation.
The president or the Office of the President shall,
subject to the direction and supervision of the board of
directors, be or constitute the principal executive officer of
the corporation, shall have general and active control and charge
of the property, business and affairs of the corporation and
shall have general supervision of the corporation's officers,
agents and employees. The president or the Office of the
President shall see that all orders and resolutions of the board
are carried out and shall perform all other duties incident to
the office and such other duties as may from time to time be
assigned by the board of directors.
Members of the Office of the President shall confer
regularly in carrying out their duties as co-presidents and shall
divide the responsibilities of the Office of the President and
establish procedures for decision making as they may agree,
subject always to the general supervision of the board of
directors. Any authority, power or duty assigned by these bylaws
or by the board or the Executive Committee to the president or
the Office of the President may be exercised or performed by any
co-president and the act of any one of them shall constitute the
act of the Office of the President.
The president or any co-president may sign any and all
documents, mortgages, bonds, contracts, leases, deeds or other
instruments in the ordinary course of business with or without
the signature of a second corporate officer, may sign
certificates for shares of the corporation with the secretary or
assistant secretary of the corporation, and may sign any
documents which the board of directors has authorized to be
executed, except in cases where the signing and execution thereof
shall be expressly delegated by the board of directors or by
these bylaws to some other officer or agent of the corporation,
or shall be required by law to be otherwise signed or executed.
One member of the Office of the President shall be designated
from time to time as "president" for purposes of carrying out
duties required by Colorado or other applicable law to be
performed by the "president" of the corporation.
(b) Vice-Presidents. The vice-president, if any
(or if there is more than one then each vice-president), shall
assist the president and shall perform such duties as may be
assigned to him by the president, or co-president or by the board
of directors. The vice-president, if there is one (or if there
is more than one then the vice-president designated by the board
of directors, or if there be no such designation then the vice-
presidents in order of their election), shall, at the request of
the president or co-president, or in his absence or inability or
refusal to act, perform the duties of the president and when so
acting shall have all the powers of and be subject to all the
restrictions upon the president. Assistant vice-presidents, if
any, shall have such powers and perform such duties as may be
assigned to them by the president or by the board of directors.
(c) Secretary. The secretary shall: (i) keep the
minutes of the proceedings of the shareholders, the board of
directors and any committees of the board; (ii) see that all
notices are duly given in accordance with the provisions of these
bylaws or as required by law; (iii) be custodian of the corporate
records and of the seal of the corporation; (iv) keep at the
corporation's registered office or principal place of business
within or outside Colorado a record containing the names and
addresses of all shareholders and the number and class of shares
held by each, unless such a record shall be kept at the office of
the corporation's transfer agent or registrar; (v) have general
charge of the stock books of the corporation, unless the
corporation has a transfer agent; and (vi) in general, perform
all duties incident to the office of secretary and such other
duties as from time to time may be assigned to him by the
president or by the board of directors. Assistant secretaries,
if any, shall have the same duties and powers, subject to
supervision by the secretary.
(d) Treasurer. The treasurer shall: (i) have the
care and custody of all its funds, securities, evidences of
indebtedness and other personal property and deposit the same in
accordance with the instructions of the board of directors; (ii)
receive and give receipts and acquittances for moneys paid in on
account of the corporation, and pay out of the funds on hand all
bills, payrolls and other just debts of the corporation of
whatever nature upon maturity; (iii) unless there is a
controller, be the principal accounting officer of the
corporation and as such prescribe and maintain the methods and
systems of accounting to be followed, keep complete books and
records of account, prepare and file all local, state and federal
tax returns, prescribe and maintain an adequate system of
internal audit and prepare and furnish to the president and the
board of directors statements of account showing the financial
position of the corporation and the results of its operations;
(iv) upon request of the board, make such reports to it as may be
required at any time; and (v) perform all other duties incident
to the office of treasurer and such other duties as from time to
time may be assigned to him by the board of directors or the
president. Assistant treasurers, if any, shall have the same
powers and duties, subject to the supervision by the treasurer.
(e) Other Officers, Designations. Any officer who
is elected or appointed from time to time by the board of
directors and whose duties are not specified in these bylaws
shall perform the duties and have the powers or may be prescribed
from time to time by the board or any co-president. The board
may designate a principal financial officer of the corporation
and such other designation as the board, in its discretion, deems
appropriate.
Section 4.08 Surety Bonds. The board of directors may
require any officer or agent of the corporation to execute to the
corporation a bond in such sums and with such sureties as shall
be satisfactory to the board, conditioned upon the faithful
performance of his duties and for the restoration to the
corporation of all books, papers, vouchers, money and other
property of whatever kind in his possession or under his control
belonging to the corporation.
ARTICLE V
Stock
Section 5.01 Issuance of Shares. The issuance or sale
by the corporation of any shares of its authorized capital stock
of any class, including treasury shares, shall be made only upon
authorization by the board of directors, except as otherwise may
be provided by law. No shares shall be issued until full
consideration has been received therefor. Every issuance of
shares shall be recorded on the books maintained for such purpose
by or on behalf of the corporation.
Section 5.02 Stock Certificates; Uncertificated
Shares. The shares of stock of the corporation shall be
represented by certificates, except that the board of directors
may authorize the issuance of any class or series of stock of the
corporation without certificates as provided by law. If shares
are represented by certificates, such certificates shall be
signed in the name of the corporation by the chairman or vice-
chairman of the board of directors or by the president or a vice-
president and by the treasurer or an assistant treasurer or by
the secretary or an assistant secretary and sealed with the seal
of the corporation or with a facsimile thereof. The signatures
of the corporation's officers on any certificate may also be
facsimiles if the certificate is countersigned by a transfer
agent or registered by a registrar. In case any officer who has
signed or whose facsimile signature has been placed upon such
certificate shall have ceased to be such officer before such
certificate is issued, it may be issued by the corporation with
the same effect as if he were such officer at the date of its
issue. Certificates of stock shall be in such form consistent
with law as shall be prescribed or authorized by the board of
directors.
Section 5.03 Consideration for Shares. Shares shall
be issued for such consideration expressed in dollars (but not
less than the par value thereof) as shall be fixed from time to
time by the board of directors. Treasury shares shall be
disposed of for such consideration expressed in dollars as may be
fixed from time to time by the board. Such consideration may
consist, in whole or in part, of money, other property, tangible
or intangible, or labor or services actually performed for the
corporation, but neither the promissory note of a subscriber or
direct purchaser of shares from the corporation, nor the
unsecured or nonnegotiable promissory note of any other person,
nor future services shall constitute payment or part payment for
shares.
Section 5.04 Lost Certificates. In case of the
alleged loss, destruction or mutilation of a certificate of stock
the board of directors may direct the issuance of a new
certificate in lieu thereof upon such terms and conditions in
conformity with law as it may prescribe. The board of directors
may in its discretion require a bond in such form and amount and
with such surety as it may determine before issuing a new
certificate.
Section 5.05 Transfer of Shares. Upon presentation
and surrender to the corporation or to the corporation's transfer
agent of a certificate of stock duly endorsed or accompanied by
proper evidence of succession, assignment or authority to
transfer, payment of all transfer taxes, if any, and the
satisfaction of any other requirements of law, including inquiry
into and discharge of any adverse claims of which the corporation
has notice, the corporation or the transfer agent shall issue a
new certificate to the person entitled thereto, cancel the old
certificate and record the transfer on the books maintained for
such purpose by or on behalf of the corporation. No transfer of
shares shall be effective until it has been entered on such
books. The corporation or the corporation's transfer agent may
require a signature guaranty or other reasonable evidence that
any signature is genuine and effective before making any
transfer. Transfers of uncertificated shares shall be made in
accordance with applicable provisions of law.
Section 5.06 Holders of Record. The corporation shall
be entitled to treat the holder of record of any share of stock
as the holder in fact thereof, and accordingly shall not be bound
to recognize any equitable or other claim to or interest in such
share on the part of any other person whether or not it shall
have express or other notice thereof, except as may be required
by the laws of Colorado.
Section 5.07 Shares Held for Account of Another. The
board of directors, in the manner provided by the Colorado
Corporation Code, may adopt a procedure whereby a shareholder of
the corporation may certify in writing to the corporation that
all or a portion of the shares registered in the name of such
shareholder are held for the account of a specified person or
persons. Upon receipt by the corporation of a certification
complying with such procedure, the persons specified in the
certification shall be deemed, for the purpose or purposes set
forth therein, to be the holders of record of the number of
shares specified in place of the shareholder making the
certification.
Section 5.08 Transfer Agents, Registrars and Paying
Agents. The board of directors may at its discretion appoint one
or more transfer agents, registrars or agents for making payment
upon any class of stock, bond, debenture or other security of the
corporation. Such agents and registrars may be located either
within or outside Colorado. They shall have such rights and
duties and shall be entitled to such compensation as may be
agreed.
ARTICLE VI
Indemnification
Section 6.01 Definitions. For purposes of this
Article, the following terms shall have the meanings set forth
below:
(a) Code. The term "Code" means the Colorado
Corporation Code as it exists on the date of the adoption of this
Article and as it may hereafter be amended from time to time, but
in the case of any amendment, only to the extent that the
amendment permits the corporation to provide broader
indemnification rights than the Colorado Corporation Code
permitted the corporation to provide at the date of the adoption
of this Article and prior to the amendment.
(b) Corporation. The term "corporation" means the
corporation and, in addition to the resulting or surviving
corporation, any domestic or foreign predecessor entity of the
corporation in a merger, consolidation or other transaction in
which the predecessor's existence ceased upon consummation of the
transaction.
(c) Expenses. The term "expenses" means the
actual and reasonable expenses (including but not limited to
expenses of investigation and preparation and fees and
disbursements of counsel, accountants or other experts) incurred
by a party in connection with a proceeding.
(d) Liability. The term "liability" means the
obligation to pay a judgment, settlement, penalty, fine
(including an excise tax assessed with respect to an employee
benefit plan) or expense incurred with respect to a proceeding.
(e) Party. The term "party" means any individual
who was, is, or is threatened to be made, a named defendant or
respondent in a proceeding by reason of the fact that he is or
was a director, officer or employee of the corporation and any
individual who, while a director, officer or employee of the
corporation is or was serving at the request of the corporation
as a director, officer, partner, trustee, employee, fiduciary or
agent of any other foreign or domestic corporation or of any
partnership, joint venture, trust, other enterprise or employee
benefit plan. A party shall be considered to be serving an
employee benefit plan at the corporation's request if his duties
to the corporation also impose duties on or otherwise involve
services by him to the plan or to participants in or
beneficiaries of the plan.
(f) Proceeding. The term "proceeding" means any
threatened, pending or completed action, suit or proceeding, or
any appeal therein, whether civil, criminal, administrative,
arbitrative or investigative (including an action by or in the
right of the corporation), and whether formal or informal.
Section 6.02 Right to Indemnification. The
corporation shall indemnify any party to a proceeding against
liability incurred in, relating to or as a result of the
proceeding to the fullest extent permitted by law (including
without limitation in circumstances in which, in the absence of
this Section 6.02, indemnification would be (a) discretionary
under the Code or (b) limited or subject to particular standards
of conduct under the Code).
Section 6.03 Advancement of Expenses. In the event of
any proceeding in which a party is involved or which may give
rise to a right of indemnification under this Article, following
written request to the corporation by the party, the corporation
shall pay to the party, to the fullest extent permitted by law
(including without limitation in circumstances in which, in the
absence of this Section 6.02, advancement of expenses would be
(a) discretionary under the Code or (b) limited or subject to
particular standards of conduct under the Code), amounts to cover
expenses incurred by the party in, relating to or as a result of
such proceeding in advance of its final disposition.
Section 6.04 Burden of Proof. If under applicable law
the entitlement of a party to be indemnified or advanced expenses
hereunder depends upon whether a standard of conduct has been
met, the burden of proof of establishing that the party did not
act in accordance with such standard shall rest with the
corporation. A party shall be presumed to have acted in
accordance with such standard and to be entitled to
indemnification or the advancement of expenses (as the case may
be) unless, based upon a preponderance of the evidence, it shall
be determined that the party has not met such standard. Such
determination and any evaluation as to the reasonableness of
amounts claimed by a party shall be made by the board of
directors of the corporation or such other body or persons as may
be permitted by the Code. Subject to any express limitation of
the Code, if so requested by the party, such determination and
evaluation as to the reasonableness of the amounts claimed by the
party shall be made by independent counsel who is selected by the
party and approved by the corporation (which approval shall not
be unreasonably withheld). For purposes of this Article, unless
otherwise expressly stated, the termination of any proceeding by
judgment, order, settlement (whether with or without court
approval) or conviction, or upon a plea of nolo contendere or its
equivalent, shall not create a presumption that a party did not
meet any particular standard of conduct or have any particular
belief or that a court has determined that indemnification is not
permitted by applicable law.
Section 6.05 Notification and Defense of Claim.
Promptly after receipt by a party of notice of the commencement
of any proceeding, the party shall, if a claim in respect thereof
is to be made against the corporation under this Article, notify
the corporation in writing of the commencement thereof; provided,
however, that delay in so notifying the corporation shall not
constitute a waiver or release by the party of any rights under
this Article. With respect to any such proceeding: (a) the
corporation shall be entitled to participate therein at its own
expense; (b) any counsel representing the party to be indemnified
in connection with the defense or settlement thereof shall be
counsel mutually agreeable to the party and to the corporation;
and (c) the corporation shall have the right, at its option, to
assume and control the defense or settlement thereof, with
counsel satisfactory to the party. If the corporation assumes
the defense of the proceeding, the party shall have the right to
employ its own counsel, but the fees and expenses of such counsel
incurred after notice from the corporation of its assumption of
the defense of such proceeding shall be at the expense of the
party unless (i) the employment of such counsel has been
specifically authorized by the corporation, (ii) the party shall
have reasonably concluded that there may be a conflict of
interest between the corporation and the party in the conduct of
the defense of such proceeding, or (iii) the corporation shall
not in fact have employed counsel to assume the defense of such
proceeding. Notwithstanding the foregoing, if an insurance
carrier has supplied directors' and officers' liability insurance
covering a proceeding and is entitled to retain counsel for the
defense of such proceeding, then the insurance carrier shall
retain counsel to conduct the defense of such proceeding unless
the party and the corporation concur in writing that the
insurance carrier's doing so is undesirable. The corporation
shall not be liable under this Article for any amounts paid in
settlement of any proceeding effected without its written
consent. The corporation shall not settle any proceeding in any
manner that would impose any penalty or limitation on a party
without the party's written consent. Consent to a proposed
settlement of any proceeding shall not be unreasonably withheld
by either the corporation or the party.
Section 6.06 Enforcement. The right to
indemnification and advancement of expenses granted by this
Article shall be enforceable in any court of competent
jurisdiction if the corporation denies the claim, in whole or in
part, or if no disposition of such claim is made within 90 days
after the written request for indemnification or advancement of
expenses is received. If successful in whole or in part in such
suit, the party's expenses incurred in bringing and prosecuting
such claim shall also be paid by the corporation. Whether or not
the party has met any applicable standard of conduct, the court
in such suit may order indemnification or the advancement of
expenses as the court deems proper (subject to any express
limitation of the Code). Further, the corporation shall
indemnify a party from and against any and all expenses and, if
requested by the party, shall (within ten business days of such
request) advance such expenses to the party, which are incurred
by the party in connection with any claim asserted against or
suit brought by the party for recovery under any directors' and
officers' liability insurance policies maintained by the
corporation, regardless of whether the party is unsuccessful in
whole or in part in such claim or suit.
Section 6.07 Proceedings by a Party. The corporation
shall indemnify or advance expenses to a party in connection with
any proceeding (or part thereof) initiated by the party only if
such proceeding (or part thereof) was authorized by the board of
directors of the corporation.
Section 6.08 Subrogation. In the event of any payment
under this Article, the corporation shall be subrogated to the
extent of such payment to all of the rights of recovery of the
indemnified party, who shall execute all papers and do everything
that may be necessary to assure such rights of subrogation to the
corporation.
Section 6.09 Other Payments. The corporation shall
not be liable under this Article to make any payment in
connection with any proceeding against or involving a party to
the extent the party has otherwise actually received payment
(under any insurance policy, agreement or otherwise) of the
amounts otherwise indemnifiable hereunder. A party shall repay
to the corporation the amount of any payment the corporation
makes to the party under this Article in connection with any
proceeding against or involving the party, to the extent the
party has otherwise actually received payment (under any
insurance policy, agreement or otherwise) of such amount.
Section 6.10 Insurance. So long as any party who is
or was an officer or director of the corporation may be subject
to any possible proceeding by reason of the fact that he is or
was an officer or director of the corporation (or is or was
serving in any one or more of the other capacities covered by
this Article during his tenure as officer or director), if the
corporation maintains an insurance policy or policies providing
directors' and officers' liability insurance, such officer or
director shall be covered by such policy or policies in
accordance with its or their terms to the maximum extent of the
coverage applicable to any then current officer or director of
the corporation, or the corporation shall purchase and maintain
in effect for the benefit of such officer or director one or more
valid, binding and enforceable policy or policies of directors'
and officers' liability insurance providing, in all respects,
coverage at least comparable to that provided to any then current
officer or director at the corporation.
Section 6.11 Other Rights and Remedies. The rights to
indemnification and advancement of expenses provided in this
Article shall be in addition to any other rights to which a party
may have or hereafter acquire under any law, provision of the
articles of incorporation, any other or further provision of
these bylaws, vote of the shareholders or directors, agreement or
otherwise. The corporation shall have the right, but shall not
be obligated, to indemnify or advance expenses to any agent of
the corporation not otherwise covered by this Article in
accordance with and to the fullest extent permitted by the Code.
Section 6.12 Applicability; Effect. The rights to
indemnification and advancement of expenses provided in this
Article shall be applicable to acts or omissions that occurred
prior to the adoption of this Article, shall continue as to any
party during the period such party serves in any one or more of
the capacities covered by this Article, shall continue thereafter
so long as the party may be subject to any possible proceeding by
reason of the fact that he served in any one or more of the
capacities covered by this Article, and shall inure to the
benefit of the estate and personal representatives of each such
person. Any repeal or modification of this Article or of any
Section or provision hereof shall not affect any rights or
obligations then existing. All rights to indemnification under
this Article shall be deemed to be provided by a contract between
the corporation and each party covered hereby.
Section 6.13 Severability. If any provision of this
Article shall be held to be invalid, illegal or unenforceable for
any reason whatsoever (a) the validity, legality and
enforceability of the remaining provisions of this Article
(including without limitation, all portions of any Sections of
this Article containing any such provision held to be invalid,
illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall not in any way be affected or
impaired thereby, and (b) to the fullest extent possible, the
provisions of this Article (including, without limitation, all
portions of any Section of this Article containing any such
provision held to be invalid, illegal or unenforceable, that are
not themselves invalid, illegal or unenforceable) shall be
construed so as to give effect to the intent of this Article that
each party covered hereby is entitled to the fullest protection
permitted by law.
ARTICLE VII
Dividends
The board of directors may, from time to time, declare
and the corporation may pay dividends on its outstanding shares
in the manner, and upon the terms and conditions provided by law
and its articles of incorporation.
ARTICLE VIII
Conflicts of Interest
Section 8.01 Financial Interest.
(a) Conflicting Interest Transactions Not Void
or Voidable. No contract or transaction between the corporation
and one or more of its directors or officers or between the
corporation and any other corporation, partnership, association
or other organization in which one or more of its directors or
officers are directors or officers or have a financial interest
("Conflicting Interest Transaction") shall be void or voidable
solely for that reason; or solely because the director or
officer is present at or participates in the meeting of the
board or committee thereof which authorizes, approves or
ratifies the contract or transaction; or solely because his or
their votes are counted for such purpose, if:
(i) The material facts as to his
relationship or interest and as to the Conflicting Interest
Transaction are disclosed or are known to the board of directors
or the committee, and the board or committee in good faith
authorizes, approves or ratifies the contract or transaction by
the affirmative vote of a majority of the disinterested
directors, even though the disinterested directors are less than
a quorum; or
(ii) The material facts as to his
relationship or interest and as to the Conflicting Interest
Transaction are disclosed, or are known to the shareholders
entitled to vote thereon, and the contract or transaction is
specifically authorized, approved or ratified in good faith by
vote of the shareholders; or
(iii) The Conflicting Interest
Transaction was fair as to the corporation.
(b) Definition of Conflicting Interest
Transaction. The term "Conflicting Interest Transaction" shall
not include any transaction between the Company and another
entity that owns, directly or indirectly all of the outstanding
shares of the Company or all of the outstanding shares or other
equity interests of which are owned, directly or indirectly, by
the Company.
Section 8.02 Interested Directors. Common or
interested directors may be counted in determining the presence
of a quorum at a meeting of the board of directors or of a
committee which authorizes, approves or ratifies the contract or
transaction.
ARTICLE IX
Contracts, Loans, Checks and Deposits
Section 9.01 Contracts. The board of directors may
authorize any officer or officers, agent or agents, to enter into
any contract or execute and deliver any instrument in the name of
and on behalf of the corporation, and such authority may be
general or confined to specific instances.
Section 9.02 Loans. No loans shall be contracted on
behalf of the corporation and no evidence of indebtedness shall
be issued in its name unless authorized by the board of
directors. Such authority may be general or confined to specific
instances.
Section 9.03 Checks, Drafts, etc. All checks, drafts
or other orders for the payment of money, notes or other
evidences of indebtedness issued in the name of the corporation,
shall be signed by such officers, agent or agents of the
corporation and in such manner as shall from time to time be
determined by the board of directors.
Section 9.04 Deposits. All funds of the corporation
not otherwise employed shall be deposited from time to time to
the credit of the corporation in such banks, trust companies or
other depositories as the board of directors may select.
ARTICLE X
Miscellaneous
Section 10.01 Voting of Securities by the Corporation.
Unless otherwise provided by resolution of the board of
directors, on behalf of the corporation the president or any co-
president shall attend in person or by substitute appointed by
him, or shall execute written instruments appointing a proxy or
proxies to represent the corporation at, all meetings of the
shareholders of any other corporation, association or other
entity in which the corporation holds any stock or other
securities, and may execute written waivers of notice with
respect to any such meetings. At all such meetings and
otherwise, the president or any vice-president, in person or by
substitute or proxy as aforesaid, may vote the stock or other
securities so held by the corporation and may execute written
consents and any other instruments with respect to such stock or
securities and may exercise any and all rights and powers
incident to the ownership of said stock or securities, subject,
however, to the instructions, if any, of the board of directors.
Section 10.02 Seal. The corporate seal of the
corporation shall be in such form as authorized or adopted by the
board of directors, and any officer of the corporation may, when
and as required, affix or impress the seal, or a facsimile
thereof, to or on any instrument or document of the corporation.
Section 10.03 Fiscal Year. The fiscal year of the
corporation shall be as established by the board of directors.
Section 10.04 Gender. As used herein, pronouns in the
masculine gender include the feminine and, where applicable, the
neuter.
Section 10.05 Amendments. The board of directors shall
have the power to adopt, alter, amend or repeal the bylaws of the
corporation by vote of not less than a majority of the directors
then in office. The holders of shares of capital stock of the
corporation entitled at the time to vote for the election of
directors shall, to the extent such power is at the time
conferred on them by applicable law, also have the power to
adopt, alter, amend or repeal the bylaws of the corporation
provided, that any proposal by a shareholder to adopt, alter,
amend or repeal the bylaws shall require for adoption the
affirmative vote of the holders of at least 80 percent of the
outstanding shares of stock generally entitled to vote in the
election of directors, voting together as a single class.
(END)
Exhibit 10.4
TAX SHARING AGREEMENT
---------------------
This Agreement is entered into as of the 1st day of
December, 1999 between ACX Technologies, Inc. ("ACX"), a Colorado
corporation, and CoorsTek, Inc. ("CTI"), a Delaware corporation.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, ACX and CTI have entered into a Distribution
Agreement dated October [], 1999 (the "Distribution Agreement"),
providing for the distribution by ACX to its shareholders of all
of the common stock of CTI (the "Distribution");
WHEREAS, ACX and CTI desire to set forth their agreement on
the rights and obligations of ACX, CTI and their respective
Affiliates with respect to various Tax matters and the handling
and allocation of Federal, state, local and foreign Taxes
incurred in Taxable periods beginning prior to the Effective
Date;
NOW, THEREFORE, in consideration of the mutual covenants
and agreements hereinafter set forth, the parties agree as
follows:
1. Definitions
-----------
(a) As used in this Agreement:
"ACX Consolidated Group" shall mean, with respect to
any Taxable period, the corporations which are members of the
affiliated group of corporations of which ACX or its successor is
the common parent (within the meaning of Section 1504 of the
Code).
"ACX Group" shall mean the corporations which are
members of the ACX Consolidated Group during any Taxable period,
excluding the corporations which are the members of the CTI
Group.
"CTI Group" shall mean the corporations which are
members of the affiliated group of corporations of which CTI is
the common parent (within the meaning of Section 1504 of the
Code) immediately after the Distribution Date and any
predecessors or successors thereto (and to the extent applicable,
a corporation, sold prior to the Distribution, that was a
subsidiary of a member of the CTI Group).
"Affiliate" (and the correlative meaning,
"Affiliation") of any person shall mean any individual,
corporation, partnership or other entity directly or indirectly
controlling, controlled by or under common control with such
person. Notwithstanding the foregoing, (i) a member of the CTI
Group and a member of the ACX Group shall not be Affiliates, and
(ii) neither Adolph Coors Company nor any of its subsidiaries
shall be an Affiliate of any member of the ACX Group or any
member of the CTI Group.
"After-Tax Amount" shall mean an amount that, on an
"After-tax basis", is equal to the obligation amount hereunder.
"After-tax basis" shall reflect the hypothetical Tax consequences
resulting from (i) receipt or accrual of the required payment by
the recipient hereunder and (ii) any deduction for the payment
or accrual of the item giving rise to the obligation. References
to "after-Tax basis" and "hypothetical Tax consequences" refer to
calculations of Tax at the maximum statutory rate (or rates, in
the case of an item that affects more than one Tax) to the extent
applicable for the relevant year.
"Code" shall mean the Internal Revenue Code of 1986,
as amended, or any successor thereto.
"Consolidated State Tax" shall mean any income,
franchise or similar Tax (based on income) payable to any state
or local government as to which CTI or any of its Affiliates is
or may be liable for such Tax on a consolidated, combined or
unitary basis with ACX or any of its Affiliates. This term shall
specifically exclude any combined state Tax Returns filed with
CTI or any member of the CTI Group as the common parent. Such
combined state Tax Returns shall be treated similar to separate
company state Returns with responsibility being exclusive to the
filing entity.
"Distribution Date" shall mean the date on which ACX
distributes to its shareholders all of the common stock of CTI.
"Effective Date" shall mean ________.
"Federal Tax" shall mean any United States Federal
income, environmental, alternative or add-on minimum Tax.
"Final Determination" shall mean (i) with respect to
Federal Taxes, (A) a "determination" as defined in Section
1313(a) of the Code, or (B) the date of acceptance by or on
behalf of the Internal Revenue Service of Form 870-AD (or any
successor form thereto), as a final resolution of Tax liability
for any Taxable period, except that a Form 870-AD (or successor
form thereto) that reserves the right of the taxpayer to file a
claim for refund and/or the right of the Internal Revenue Service
to assert a further deficiency shall not constitute a Final
Determination with respect to the item or items so reserved; (ii)
with respect to Taxes other than Federal Taxes, any final
determination of liability in respect of a Tax provided for under
applicable law; (iii) any final disposition by reason of the
expiration of the applicable statute of limitations; and (iv) the
payment of Tax by ACX, CTI, or any Affiliate of ACX or CTI,
whichever is responsible for payment of such Tax under applicable
law, with respect to any item disallowed or adjusted by a Taxing
Authority, provided that the provisions of Section 8 hereof have
been complied with, or, if such section is inapplicable, that the
party responsible under the terms of this Agreement for such Tax
is notified by the party paying such Tax that it has determined
that no action should be taken to recoup such disallowed item,
and the other party agrees with such determination.
"Other Taxes," are defined in Section 4.
"Post-Effective Period" shall mean any Taxable period
beginning after the Effective Date.
"Pre-Effective Period" shall mean any Taxable period
ending on or before the Effective Date.
"Pre-Effective Tax Liability" shall mean (i) the
Federal Tax liability of ACX and each corporation included in the
ACX Consolidated Group for any period as to which a consolidated
Federal Tax Return is filed by ACX for such group for all Pre-
Effective Periods, and (ii) the Consolidated State Tax liability
for such group for all Pre-Effective Periods and for the portions
(up to the Effective Date) of any Taxable periods including but
not ending on the Effective Date, regardless of whether any such
liability has been previously assessed in whole or in part or is
assessed in whole or in part after the date hereof, or whether
such liability is or was imposed on the ACX Consolidated Group or
on any corporation included within any such Group separately.
"Prime" shall mean the rate of interest announced
from time to time as "prime" by the Bank of America, N.A.
"Referee" is defined in Section 16.
"Return" shall mean any Tax Return, statement, report
or form (including estimated Tax Returns and reports and
information Returns and reports) required to be filed with any
Taxing Authority.
"Tax" (and the correlative meaning, "Taxes," "Taxing"
and "Taxable") shall mean (A) any net income, alternative or add-
on minimum, gross income, gross receipts, sales, use, ad valorem,
franchise, profits, license, withholding, payroll, employment,
excise, transfer, recording, severance, stamp, occupation,
premium, property, environmental, custom duty, or other tax,
governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest and any penalty, addition
to tax or additional amount imposed by a Taxing Authority; (B)
any liability of ACX, CTI or any Affiliate of ACX or CTI (or, in
each case, any successor in interest thereto by merger or
otherwise), as the case may be, for the payment of any amounts of
the type described in clause (A) for any Taxable period resulting
from the application of Treasury Regulation Section 1.1502-6 or,
in the case of any Consolidated State Tax, any similar provision
applicable under state law; and (C) any liability of ACX, CTI or
any Affiliate of ACX or CTI (or, in each case, any successor in
interest thereto by merger or otherwise) for the payment of any
amounts described in clause (A) as a result of any express or
implied obligation to indemnify any other party.
"Tax Asset" shall mean any net operating loss, net
capital loss, investment Tax credit, foreign Tax credit,
charitable deduction or any other credit or Tax attribute,
including additions to basis of property, which could reduce
Federal Taxes or Consolidated State Taxes, as the case may be,
including, without limitation, deductions or credits related to
alternative minimum Taxes.
"Taxing Authority" shall mean any governmental
authority responsible for the imposition of any Tax.
(b) Any term used in this Agreement which is not
defined in this Agreement shall, to the extent the context
requires, have the meaning assigned to it in the Code or the
applicable Treasury regulations thereunder.
2. Federal Taxes and Consolidated State Taxes--
Administrative and Compliance Matters.
(a) Sole Tax Sharing Agreement. The parties
acknowledge that there has not been a Final Determination of the
Pre-Effective Tax Liability, that the members of the CTI Group
are includible in the ACX Consolidated Group, and may be found to
be includible in certain State Consolidated Groups through the
Effective Date, that pursuant hereto any and all existing Tax
sharing agreements or arrangements, written or unwritten, between
the ACX Group and the CTI Group shall be terminated as of the
Effective Date, and that after the Effective Date this Agreement
shall constitute the sole Tax sharing agreement between the ACX
Group and the CTI Group. Any tax sharing agreements between
Adolph Coors Company and ACX will still be legally binding and
applicable to both ACX Group and CTI Group.
(b) Intent. Treasury regulations designate ACX as
the sole agent of all members of the ACX Consolidated Group with
respect to virtually all Federal Tax matters. Certain states have
corresponding provisions. Notwithstanding Section 2(d) hereof,
if the Internal Revenue Service District Director (or a
corresponding state official) deals directly with any member of
the CTI Group in respect of its Tax liability for a Pre-Effective
Period (as is the District Director's right), such member of the
CTI Group shall have full authority to act, provided, however,
that such actions do not cause a material detriment to the ACX
Group. It is the intent of ACX and CTI, as common parents of
their respective groups for Post-Effective Periods, that, since
each group is ultimately responsible for Federal Tax and
Consolidated State Tax liabilities allocable thereto hereunder,
each group, through its common parent, shall have the authority
to negotiate, resolve and settle its own Tax matters to the
extent such actions do not cause a material detriment to the
other group or are otherwise inconsistent with the specific
provisions of this Agreement.
(c) Designation of Agent. CTI and each member of
the CTI Group hereby irrevocably designate ACX as its agent,
coordinator, and administrator for the purpose of taking any and
all actions (including the execution of waivers of applicable
statutes of limitation) necessary or incidental to the filing of
any Federal or Consolidated State Tax Return, any amended Federal
or Consolidated State Tax Return or any claim for refund (even
where an item or Tax Asset giving rise to an amended Return or
refund claim arises in a Post-Effective Period), credit or offset
of Tax or any other proceedings relating to any Pre-Effective
Period. ACX, as agent, shall be responsible to see that all such
administrative matters relating thereto shall be handled promptly
and appropriately. ACX shall be CTI's agent with respect to
making payments to, or collecting Refunds from, any Taxing
Authority with respect to Pre-Effective Tax Liabilities. CTI will
then reimburse ACX, or ACX will reimburse CTI, as the case may
be, for the CTI share of the total pursuant to such agency. ACX
shall inform and consult with CTI prior to taking any action on
behalf of, or which will have any material impact on, any member
of the CTI Group, including, without limitation, strategies
relating to waivers of any statute of limitations.
(d) 1999 Returns. ACX will prepare and file the
consolidated Federal Tax Return and each Consolidated State Tax
Return for the taxable years ending on the Effective Date. ACX
will provide CTI with "packets" at a time and in a form similar
to prior years for CTI and each of its Affiliates for which data
is necessary for the Federal and Consolidated State Returns, and
CTI will complete and return such packets with respect to each
member of the CTI Group or relevant CTI Affiliate, pursuant to a
schedule mutually agreed upon by ACX and CTI, but in no event
later than June 1, 2000. CTI will have sole responsibility for
the technical propriety and accuracy of the packets relating to
members of the CTI Group and CTI Affiliates.
(e) Tax Assets. Tax Assets from any Pre-Effective
Period shall be computed and agreed upon by ACX and CTI after
the completion of the last ACX Consolidated Group Return
which includes CTI or any member of the CTI Group.
3. Federal Taxes and Consolidated State Taxes--
Allocation of Taxes.
(a) 1999 Federal and Consolidated State Income
Taxes. In its capacity as agent, ACX shall pay all Federal Taxes
and Consolidated State Taxes due in connection with the filing of
its 1999 Returns or with any request for extension of time within
which to file any such Return. Within 20 days of filing of any
such Returns, ACX shall send a statement to CTI showing the
amount of the unpaid or overpaid portion of the CTI Group's
allocated share of the total Federal Tax liability or
Consolidated State Tax liability as shown on such Returns as
filed.
(b) Carrybacks. ACX agrees to pay CTI the actual
benefits received by ACX from the use in any Pre-Effective Period
of any Tax Asset of CTI, a member of the CTI Group or a CTI
Affiliate arising in a Post-Effective Period. Such benefit shall
be considered equal to the excess of the actual amount of Federal
Taxes or Consolidated State Taxes that would have been payable by
the ACX Consolidated Group in the absence of such carryback over
the amount of Federal Taxes or Consolidated State Taxes actually
payable by the ACX Consolidated Group as a result of such
carryback or subsequent increase to such carryback. Payment of
the amount of such benefit shall be made within 30 days of (i)
receipt of the refund or (ii) the end of the Taxable year during
which ACX or the relevant ACX Affiliate receives the credit or
other offset attributable thereto.
(c) Subsequent Adjustments to Carrybacks. If, subse-
quent to the payment by ACX to CTI of any amount referred to in
Section 3(b) above, there shall be
(i) a Final Determination under applicable
law of a deficiency of Federal Taxes or Consolidated State
Taxes of the ACX Consolidated Group or the relevant State
Consolidated Group on the grounds that the Tax Asset giving rise
to such payment was in fact not available in whole or in part,
(ii) a Final Determination resulting from an
audit of any member of the CTI Group or any CTI Affiliate which
results in a reduction of any Tax Asset so carried back, or
(iii) the filing of a subsequent Return
reflecting a recapture by the ACX Consolidated Group or the
relevant State Consolidated Group of any Tax Asset so carried
back, then within 20 days of such event, ACX shall send a
statement to CTI setting forth an amount reflecting the amount
which would not have been payable to CTI pursuant to this Section
3 had the amount of the benefit been determined in light of such
event. In addition, CTI shall hold ACX and each of its Affiliates
harmless by paying an amount for any penalty or interest paid by
ACX or any such Affiliate as a result of any such decrease.
(d) Amended Returns with Amounts Due by CTI. If ACX
files an amended Return on behalf of the ACX Consolidated Group
or a State Consolidated Group for any Pre-Effective Period and
such Return results in an increase in the Pre-Effective Tax
Liability attributable to any member of the CTI Group or any CTI
Affiliate for such period, CTI shall pay to ACX the amount of
such increase, plus any applicable interest and penalties.
(e) Amended Returns with Refunds Due to CTI.
(i) CTI may request that ACX file an
amended Return or assert a claim for refund. ACX shall assert a
claim for refund or file an amended Return within 60 days of such
request, provided, however, that ACX shall have no obligation to
file such an amended Return or assert such a claim for a refund
if ACX reasonably determines in good faith after consulting with
CTI that the benefit of filing such Return or asserting such
claim to the members of the CTI Group or CTI Affiliates is
outweighed by the detriment to it or the members (or former
members) of the ACX Group. If CTI believes that ACX's
determination is unreasonable, the dispute shall be subject to
the procedures set forth in Section 16.
(ii) If ACX files an amended Return on
behalf of the ACX Consolidated Group for any Pre-Effective Period
that results in a decrease in the Pre-Effective Tax Liability
attributable to any member of the CTI Group or any CTI Affiliate
for such period, or if ACX asserts a claim for a refund of
Federal Taxes or Consolidated State Taxes which would be
attributable to any member of the CTI Group or any CTI Affiliate
in any audit or other proceeding, then ACX shall pay to CTI the
amount of any refund received resulting from such decrease or
claim for refund, plus any interest received by ACX attributable
thereto.
(f) Calculation and Payments of Amounts Due.
(i) Responsible Party. Calculations required
to be made pursuant to this Section 3 and the relevant portion of
Section 6(c) shall be made by ACX. Upon receipt of such
calculations, CTI shall have 10 days to review the computations
and to notify ACX of any disagreements. During CTI's review and
in the event that CTI has notified ACX of a disagreement, for an
additional 10 days both CTI and ACX shall make reasonable efforts
to resolve any questions or disputes. In the event the parties
cannot agree, their disputes will be resolved pursuant to Section
16.
(ii) Method of Calculation. Except as
otherwise provided, CTI's share of any Federal Tax, or
Consolidated State Tax shall be calculated pursuant to the method
described in Exhibit A hereto.
(iii) Payments Due. Except as otherwise
provided, all payments required by this Section 3 and the
relevant portions of Section 6(c) will be due 30 days after the
fixing of liability or the resolution of a dispute (as provided
for in 3(f)(i)).
(iv) Interest. Any amount not paid when due
under Section 3(f)(iii) shall bear interest at Prime plus 3%,
except that any amount not paid because of any good faith dispute
under Section 16 shall bear interest at Prime.
(v) After-Tax Amounts. ACX and CTI shall
discharge their obligations under this Section 3 and the relevant
portions of Section 6(c), other than payments required under
Section 3(b), by paying After-Tax Amounts.
(vi) Duplicative Payments Not Required.
Notwithstanding the foregoing, no payment shall be required under
any provision of this Agreement to the extent it is duplicative
of any payment required by any other provision of this Agreement.
(g) In the event that the Treasury Department
promulgates regulations under the Code that provide a method for
the allocation of a consolidated group's "minimum tax credit"
(within the meaning of Section 53 of the Code) among a group's
members, and, as a result of such regulations' mandatory
application, the ACX Consolidated Group is required to allocate
the maximum tax credit carried forward to any Post-Effective
Period from any federal income Tax Return for any Pre-Effective
Period, so that the amount originally allocated to members of the
CTI Group (the "Original CTI Allocation") is different from the
amount that is allocated under such regulations (the "Adjusted
CTI Allocation"), then, ACX shall pay CTI an amount equal to the
excess of the Original CTI Allocation over the Adjusted CTI
Allocation, or, if applicable, CTI shall pay ACX an amount equal
to the excess of the Adjusted CTI Allocation over the Original
CTI Allocation. Within 20 days of the effective date of such
regulations, ACX shall send a statement to CTI showing the amount
of the Adjusted CTI Allocation.
4. Other Taxes.
-----------
(a) Liability for all Taxes other than Federal
Taxes and Consolidated State Taxes ("Other Taxes"), attributable
to any member of the CTI Group, and the responsibility for filing
of all Returns relating to such other Taxes, shall be the sole
responsibility of the CTI Group. Liability for all Other Taxes,
attributable to any member of the ACX Group and the
responsibility for filing all Returns relating to such Other
Taxes, shall be the sole responsibility of the ACX Group. Each
party agrees to indemnify and hold the other harmless in
accordance with the undertakings contained in this Section 4(a).
(b) The CTI Group shall be entitled to all refunds
and credits of Other Taxes attributable to any member of the CTI
Group, and the ACX Group shall be entitled to all refunds and
credits of Other Taxes attributable to any member of the ACX
Group.
5. Certain Representations and Covenants.
-------------------------------------
(a) (I) CTI Representations. CTI represents and
agrees that, as of the date hereof, and covenants that on the
Distribution Date:
(i) There is no plan or intention (A)
to liquidate CTI or to merge or consolidate CTI with any other
person subsequent to the Distribution or (B) to sell or otherwise
dispose of any asset of CTI subsequent to the Distribution,
except in the ordinary course of business.
(ii) CTI will not take any action
inconsistent with the information and representations furnished
to the IRS in connection with the request for a private letter
ruling with respect to the spin-off, regardless of whether such
information and representations were included in the ruling or
pronouncement issued by the IRS.
(iii) CTI will not enter into any
negotiation, agreements or arrangements with respect to
transactions or events (including stock issuances, pursuant to
the exercise of options or otherwise, option grants, the adoption
of, or authorization of shares under, a stock option plan,
capital contributions, or acquisitions, but not including the
spin-off) which may cause the spin-off to (a) be treated as part
of a plan pursuant to which one or more persons acquire directly
or indirectly CTI stock representing a "50-percent or greater
interest" within the meaning of Section 355(d)(4) or the Code, or
(b) violate the "continuity of interest requirement" set forth in
Treasury Regulation 1.355- 2(c).
(II) CTI and ACX Representations. CTI and
ACX each represents that, as of the date hereof, and covenants
that on the Distribution Date:
(i) To the best of ACX's and CTI's
knowledge (as applicable), payments made in connection with all
continuing non-transitional transactions between any member of
the CTI Group and any member of the ACX Group occurring after the
Distribution will be for fair market value based on terms and
conditions arrived at by the parties bargaining at arm's length
and payments made in connection with certain transitional
services also will be provided for fair market value.
(ii) Neither CTI nor ACX (as
applicable) is aware of any plan or intention by the shareholders
of ACX to sell, exchange, transfer by gift, or otherwise dispose
of any of their stock in, or securities of, ACX or CTI subsequent
to the Distribution, except for any dispositions of ACX stock or
CTI stock through the 401(k) plans of ACX and CTI, respectively.
(b) CTI Covenants. CTI covenants to ACX and agrees
that during the two-year period following the Distribution Date:
(i) It will not liquidate, merge or
consolidate with any other person, or sell, exchange, distribute
or otherwise dispose of its assets other than in the ordinary
course of business, redeem or otherwise reacquire any of its
capital stock, other than through stock purchases meeting the
requirements of Section 4.05(1)(b) of Rev. Proc. 96-30.
(ii) CTI Group will continue the active
conduct of the historic business conducted by CTI Group
throughout the five year period prior to the spin-off.
(iii) CTI will not, nor will it permit any
member of the CTI Group to, take any action inconsistent with the
information and representations furnished to the IRS in
connection with the request for a private letter ruling with
respect to the spin-off, regardless of whether such information
and representations were included in the ruling or pronouncement
issued by the IRS.
(iv) During the applicable period provided
in Section 355(e)(2)(B) of the Code with respect to the spin-off,
CTI will not enter into any transaction or make any change in its
equity structure (including stock issuances, pursuant to the
exercise of options or otherwise, option grants, the adoption of,
or authorization of shares under, a stock option plan, capital
contributions, or acquisitions, but not including the spin-off)
which may cause the spin-off to (a) be treated as part of a plan
pursuant to which one or more persons acquire directly or
indirectly CTI stock representing a "50-percent or greater
interest" within the meaning of Section 355(d)(4) of the Code, or
(b) violate the "continuity of interest requirement" set forth in
Treasury Regulation 1.355-2(c).
(v) CTI will covenant that in the one-year
period after the spin-off, it will make the borrowings and
acquisitions described in the materials submitted to the IRS with
respect to the business purpose of the spin-off.
(c) Exceptions. Notwithstanding the foregoing, CTI
may take actions inconsistent with the covenants contained in
Section 5(b) above if:
(i) CTI obtains a ruling from the Internal
Revenue Service to the effect that such actions will not cause
either ACX or its shareholders to recognize Taxable income by
virtue of the Distribution; or
(ii) CTI obtains an opinion, acceptable to
ACX, from recognized counsel acceptable to ACX to the same effect
as in Section 5(c)(i).
6. Indemnities.
-----------
(a) CTI Indemnity. CTI and each member of the CTI
Group will jointly and severally indemnify ACX and each member of
the ACX Group against and hold them harmless from
(i) any Pre-Effective Tax Liability
assessed after the Distribution Date pursuant to a Final
Determination, which is attributable to any item of income, loss,
credit, deduction or other Tax attribute of any member of the CTI
Group, or a CTI Affiliate,
(ii) any liability (including any and all
Taxes) relating to the Distribution, in the event the
Distribution is Taxable due to a breach by CTI or any member of
the CTI Group of any agreement, representation or covenant made
by CTI herein; provided, however, that if the Distribution is
Taxable as a result, in part, of ACX's action, then CTI shall be
liable only for the proportionate amount of the liability
attributed to CTI's action, and
(iii) all liability for fees, costs and
expenses (including reasonable attorneys' fees) arising out of or
incident to any proceedings before any Taxing Authority, or any
judicial authority, with respect to any amount indemnifiable
under this Section 6(a).
(b) ACX Indemnity. ACX and each member of the ACX
Group will jointly and severally indemnify CTI and each member of
the CTI Group against and hold them harmless from
(i) any Pre-Effective Tax Liability, or Tax
liability resulting from the Distribution, other than any such
liabilities described in Sections 6(a)(i) and (ii) hereof,
(ii) any liability resulting from a breach
by ACX or any member of the ACX Group after the Distribution Date
of any covenant made by ACX herein, and
(iii) all liability for fees, costs and
expenses (including reasonable attorneys' fees) arising out of or
incident to any proceedings before any Taxing Authority, or any
judicial authority, with respect to any amount indemnifiable
under this Section 6(b).
(c) Discharge of Indemnity. CTI and each member of
the CTI Group, and ACX and each member of the ACX Group, shall
discharge their obligations under Sections 6(a)(ii), 6(a)(iii),
6(b)(i), 6(b)(ii) and 6(b)(iii) hereof, respectively, by paying
an After-Tax Amount within 30 days of demand therefore. Within
20 days of a Final Determination of an obligation of CTI and each
member of the CTI Group under Section 6(a)(i) ACX shall send a
statement to CTI showing the amount due thereunder. Calculation
and payment mechanics relating to items described in Section
6(a)(i) are set forth in Section 3(f). Notwithstanding the
foregoing, if either CTI or ACX disputes in good faith the fact
or the amount of its obligation under Section 6(a) or Section
6(b) (including, without limitation, any After-Tax Amount), then
no payment of the amount in dispute shall be required until any
such good faith dispute is resolved in accordance with Section 16
hereof; provided, however, that any amount not paid within 30
days of demand therefore shall bear interest as provided in
Section 3(f)(iv). Notwithstanding anything to the contrary
herein, any Final Determination relating to the applicability,
determination or calculation of the gross-up required to achieve
an After-Tax Amount under this Agreement shall be subject to
indemnity as if an indemnifiable Tax relating to a Pre-Effective
Period.
(d) Method of Calculation. Except as otherwise
provided, the amount of CTI's liability under Section 6(a)(i) and
ACX's liability under Section 6(b)(i), including the calculation
of any party's share of any Federal Tax or Consolidated State
Tax, shall be calculated pursuant to the method described in
Exhibit A hereto.
(e) Joint and Several Liability. The joint and
several liabilities of the members of the CTI Group under Section
6(a) shall become several liabilities (and not joint) with
respect to any member upon a disposition, causing a break in
Affiliation from the CTI Group, of such member to a third party
for fair value. The several liability responsibility of such
member shall equal the portion of the total liability multiplied
by a fraction, the numerator of which is the fair market value of
the member and the denominator of which is the fair market value
of the CTI Group immediately prior to the disposition.
7. Communication and Cooperation.
-----------------------------
(a) Consult and Cooperate. CTI and ACX shall consult
and cooperate (and shall cause each of their Affiliates to
cooperate) fully at such time and to the extent reasonably
requested by the other party in connection with all matters
subject to this Agreement. Such cooperation shall include,
without limitation,
(i) the retention and provision on
reasonable request of any and all information including all
books, records, documentation or other information, any necessary
explanations of information, and access to personnel, until the
expiration of the applicable statute of limitation (giving effect
to any extension, waiver, or mitigation thereof),
(ii) the execution of any document that may
be necessary or helpful in connection of any required Return or
in connection with any audit, proceeding, suit or action, and
(iii) the use of the parties' best efforts to
obtain any documentation from a governmental authority or a third
party that may be necessary or helpful in connection with the
foregoing.
(b) Provide Information. ACX and CTI shall keep each
other fully informed with respect to any development relating to
all matters subject to this Agreement.
(c) Tax Attribute Matters. ACX and CTI shall advise
and consult with each other with respect to any proposed Tax
adjustment relating to the ACX Consolidated Group or any State
Consolidated Group which are the subject of an Internal Revenue
Service or State Taxing Authority audit or investigation, or are
the subject of any proceeding or litigation, and which may affect
any Tax attribute of ACX, CTI or any Affiliate of ACX or CTI
(including, but not limited to, basis in an asset or the amount
of earnings and profits).
8. Audits and Contests.
-------------------
(a) Notice. ACX shall promptly notify CTI in writing
of any inquiries from the Internal Revenue Service or any other
Taxing Authority which relate or may relate to matters described
in Section 3(c) or 6(a). CTI shall promptly notify ACX in writing
of any inquiries from the Internal Revenue Service or other
Taxing Authority which relate or may relate to matters described
in Section 3(c) or 6(b). Each party shall forward to the other
party relevant portions of any reports or other communications
which relate to such matters.
(b) Settlement of Issues. No settlement of any
audit, examination, action, suit or other judicial or
administrative proceeding relating to matters described in
Section 6(a) for any Pre-Effective Period (or with respect to
matters relating to Section 6(a)(ii) for any Taxable period)
shall be accepted or entered into by or on behalf of the ACX
Consolidated Group or State Consolidated Group unless CTI has
consented thereto in writing (which consent shall not be
unreasonably withheld); provided, however, that in the event that
CTI does not consent and ACX believes that the withholding of
consent was unreasonable, the parties shall resolve their
disagreement under the procedures provided in Section 16. In the
process of resolving such a disagreement, the Referee (or other
applicable arbiter) shall consider the magnitude and size of the
item in question, the impact of the resolution on other CTI
Taxable periods and the likelihood of CTI's position ultimately
prevailing.
(c) Venue. In the event that a notice of deficiency
(or similar notice) is received from the Internal Revenue Service
or other Taxing Authority by the ACX Consolidated Group or State
Consolidated Group for a Pre-Effective Period (or, with respect
to a notice of deficiency relating to an item described in
Section 6(a)(ii), for any Taxable period) and such notice relates
in whole or in part to a matter described in Section 6(a), then
(i) ACX, upon receiving a written request from
CTI, which shall be given no later than a date reasonably
required to permit timely filing of a petition in the United
States Tax Court, (or, if applicable, similar State venue) for
redetermination of the deficiency, shall timely file such
petition; provided, however, that, notwithstanding such request,
after consultation with CTI, ACX shall have the option, if the
notice also relates to matters described in Section 6(b), to pay
the amount of the deficiency, to file a claim for the refund
thereof, and, if the claim is denied, to bring an action in a
court of competent jurisdiction seeking the refund of such Tax.
If a Final Determination does not provide for a refund of any
amount covered by Section 6(a) and contested under this Section,
CTI shall pay ACX such amount plus interest from the time ACX's
payment of the deficiency at a rate equal to Prime; or
(ii) If (A) CTI does not request ACX to file a
petition in the United States Tax Court (or, if applicable,
similar State venue) for redetermination of the deficiency
pursuant to Section 8(c)(i), (B) ACX does not, on its own
initiative, timely file such a petition, and (C) CTI requests
that ACX file a claim for refund, then ACX shall pay the
deficiency, file a claim for refund thereof, and, if the claim is
denied, bring an action in a court of competent jurisdiction
seeking such refund; provided that, in such case, CTI shall pay
to ACX, on or before the date on which the deficiency is paid by
ACX, the amount as if the notice of deficiency were a Final
Determination (that CTI would otherwise be responsible for with
respect to matters described in Section 6(a)) and any such
payment shall be credited against the payment required with
appropriate adjustment to be made promptly upon a Final
Determination with respect to such proceedings for refund.
Notwithstanding anything to the contrary herein, if as a result
of a Final Determination the amount due by CTI (the "Final
Liability") is less than the amount previously paid by CTI
pursuant hereto (the "Prepaid Amount"), ACX shall pay to CTI
within 30 days after such Final Determination an amount based
upon an amount equal to the excess or the Prepaid Amount over the
Final Liability, together with interest attributable to such
excess (reduced by the excess of any tax imposed on the receipt
of such interest over the amount of any Tax savings realized by
ACX upon any payment made to CTI pursuant to this sentence).
Notwithstanding the foregoing, no payment shall be required under
this provision to the extent it is duplicative of any payment
required by any other provision of this Agreement.
(d) Judicial Appeals. In the event that a judgment
of the United States Tax Court or other court of competent
jurisdiction results in an adverse determination with respect to
a matter described in Section 6(a) then:
(i) In the case an appeal of the adverse
determination involves no material issues other than matters
described in Section 6(a), CTI shall have the right to cause ACX
to appeal from such adverse determination if CTI delivers to ACX
an opinion from an independent tax counsel selected by CTI and
reasonably acceptable to ACX that such appeal has a reasonable
chance of success.
(ii) In the case of an appeal of any other
adverse determination which involves material issues other than
those described in Section 6(a), CTI shall have the right to
cause ACX to appeal from such adverse determination if CTI
delivers to ACX an opinion from an independent tax counsel
selected by CTI and reasonably acceptable to ACX that it is more
likely than not that such appeal will succeed.
(iii) In the case of an adverse determination
which involves matters described in Section 6(b) and within such
determination material matters described in Section 6(a) were
favorably disposed, CTI shall have the right to prevent ACX from
appealing from such adverse determination, unless ACX delivers to
CTI an opinion from an independent tax counsel selected by ACX
and reasonably acceptable to CTI that it is more likely than not
that such appeal will succeed.
(e) Participation and Closing.
(i) CTI and its representatives, at CTI's
expense, shall be entitled to participate in all conferences,
meetings, or proceedings with any Taxing Authority, the subject
matter of which is or includes matters described in Section
6(a); provided, however, that if (A) less than $200,000 of the
amount of the total of annual proposed adjustment is
attributable to matters described in Section 6(a) and the
proposed adjustments do not cause significant prejudice to the
CTI Group in other Taxable periods, and (B) ACX, in good faith
and in its sole discretion, determines that the commencement or
continuance of any such discussions or submissions by CTI would
extend the audit or review of the Tax Return of the ACX
Consolidated Group or State Consolidated Group for such Taxable
year beyond the period such audit or review would require but
for the commencement or continuance of such discussions or
submissions, then, upon receipt of notice by CTI from ACX to
such effect, CTI shall have no further right to commence or
continue such discussions or submissions with respect to the
audit or review for such Taxable year, and ACX shall have the
right to compromise such issues and cause such audit or review
to be closed.
(ii) If ACX suspends CTI's rights to
commence or continue discussions or submissions with respect to a
Taxable year under Section 8(e)(i) and compromises the proposed
adjustments thereunder, ACX will not be entitled to indemnity
under Section 6(a) for any such items if it is more likely than
not that any such item would have prevailed in a court of
competent jurisdiction. If ACX believes it is entitled to an
indemnity for such an item under Section 6(a) and CTI disagrees
(on the grounds that CTI believes that the item is more likely
than not to prevail) the parties shall resolve the disagreement
provided in Section 16.
(iii) CTI and its representatives, at CTI's
expense, shall be entitled to participate in all appearances
before any court, the subject matter of which includes matter
described in Section 6(a).
(iv) The participation referred to in
Sections 8(e)(i) and (iii) shall include the right to control the
submission and content of documentation, protests, memoranda of
fact and law and briefs, the conduct of oral arguments or
presentations, the selection of witnesses and the negotiation of
stipulations of fact, all as may be deemed appropriate by CTI,
but solely with respect to a matter described in Section 6(a).
(f) Taxability of the Distribution.
Notwithstanding anything to the contrary herein, to the extent
any issue is based on a theory which would, if true, result in
CTI being liable under Section 6(a)(ii) of this Agreement for any
Tax that might result from an adverse determination of such
issue, then ACX shall provide CTI with such notice and
information as would be required under Section 8(a) hereof, and
CTI shall have the right to be involved, at its own expense, in
the development and execution of strategy for the response to,
preparation of and defense of any contest relating to such issue.
In the case of any such issue which is based solely on such a
theory, ACX shall not settle such issue in a manner which would
be impermissible under Section 8(b).
9. Payments.
--------
All payments to be made hereunder shall be made in
immediately available funds. Payments shall be deemed made when
received.
10. Notices.
-------
Any notice, demand, claim, or other communication under
this Agreement shall be in writing and shall e deemed to have
been given upon the delivery or mailing hereof, as the case may
be, if delivered personally or sent by certified mail, Return
receipt requested, postage prepaid, to the parties at the
following addresses (or at such other address as a party may
specify by notice to the other):
If to ACX, to:
ACX Technologies, Inc.
4455 Table Mountain Parkway
Golden, CO 80403
Attn: Tax Director, ACX Technologies, Inc.
If to CTI, to:
CoorsTek, Inc.
16000 Table Mountain Parkway
Golden, CO 80403
Attn: Tax Manager, CoorsTek, Inc.
11. Costs and Expenses.
------------------
Except as expressly set forth in this Agreement, each
party shall bear its own costs and expenses incurred pursuant to
this Agreement.
12. Effectiveness; Termination and Survival.
---------------------------------------
This Agreement shall become effective upon the
consummation of the Distribution, provided, however, that this
Agreement will only become effective if consummation of the
Distribution occurs prior to the close of business on March 1,
2000. Notwithstanding anything in this Agreement to the contrary,
this Agreement shall remain in effect and its provisions shall
survive for the full period of all applicable statutes of
limitation (giving effect to any extension, waiver or mitigation
thereof).
13. Section Headings.
----------------
The headings contained in this Agreement are inserted for
convenience only and shall not constitute a part hereof or in any
way affect the meaning or interpretation of this Agreement.
14. Entire Agreement; Amendments and Waivers
----------------------------------------
(a) Entire Agreement. This Agreement contains the
entire understanding of the parties hereto with respect to the
subject matter contained herein. No alteration, amendment,
modification, or waiver of any of the terms of this Agreement
shall be valid unless made by an instrument signed by an
authorized officer of ACX and CTI, or in the case of a waiver, by
the party against whom the waiver is to be effective.
(b) Waiver. No failure or delay by any party in
exercising any right, power or privilege hereunder shall operate
as a waiver hereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the
exercise of any right, power or privilege.
15. Governing Law and Interpretation.
--------------------------------
This Agreement has been made in and shall be construed and
enforced in accordance with the laws of the State of Colorado.
16. Dispute Resolution.
------------------
(a) CEO's. If the parties hereto are unable to
resolve any disagreement or dispute, either party may refer the
matter to the Chief Executive Officers (CEOs) of the parties by
giving the other party written notice ("Notice"). Within 20 days
after delivery of Notice, the CEOs of both parties shall meet at
a mutually acceptable time and place to exchange relevant
information and attempt to resolve the dispute within 45 days
after delivery of Notice. All negotiations pursuant to this
Section 16(a) shall be confidential and shall be treated as
compromise and settlement negotiations for purposes of the
Federal Rules of Evidence and State Rules of Evidence.
(b) Referees. Except for disagreements relating to
Section (ii), any disagreement not resolved by mutual agreement
of the parties or under Section 16(a) shall be resolved by an
independent referee that is mutually acceptable to the parties
hereto (a "Referee"). In the event the parties cannot agree on a
Referee, each party shall select an independent nationally
recognized law firm or accounting firm expert in tax matters and
such firms shall jointly choose the Referee. A Referee so chosen
shall resolve any such disagreement within 30 days of appointment
pursuant to such procedures as it may deem advisable. Any such
resolution shall be binding on the parties hereto without further
recourse.
(c) Costs. The costs of any Referee shall be
apportioned between ACX and CTI as determined by such Referee in
such manner as the Referee deems reasonable taking into account
the circumstances of the dispute, the conduct of the parties and
the result of the dispute.
17. Counterparts.
------------
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
18. Assignments; Third Party Beneficiaries.
--------------------------------------
This Agreement shall be binding upon and shall inure only
to the benefit of the parties hereto and their respective
successors and assigns. This Agreement is not intended to benefit
any person other than the parties hereto and such successors and
assigns, and no such other person shall be a third party
beneficiary hereof.
EXHIBIT A
Allocated on a stand alone basis, consistent with prior years
with the exception of any 1999 pension plan contributions which
will be allocated to ACX.
The undersigned hereby irrevocably appoints ACX Technologies,
Inc. as its agent and true and lawful attorney in fact in the
name of the undersigned to execute on behalf of the undersigned
and bind it to a Tax Sharing Agreement (the "TSA") that ACX and
its Affiliates will enter into with CoorsTek, Inc. and its
Affiliates in order to enable ACX to effect the contemplated
Distribution of the shares of CTI to the shareholders of ACX. The
TSA sets forth the rights and obligations of the parties
(including the undersigned) with respect to certain Tax matters
and sets forth indemnification obligations of all parties (on a
joint and several basis).
ACX Technologies, Inc.
By /s/ Jill B. W. Sisson
------------------------------------
Title: General Counsel and Secretary
-----------------------------
The undersigned hereby irrevocably appoints CoorsTek, Inc. as its
agent and true and lawful attorney in fact in the name of the
undersigned to execute on behalf of the undersigned and bind it
to a Tax Sharing Agreement (the "TSA") that CTI and its
Affiliates will enter into with ACX Technologies, Inc. and its
Affiliates in order to enable ACX to effect the contemplated
Distribution of the shares of CTI to the shareholders of ACX. The
TSA sets forth the rights and obligations of the parties
(including the undersigned) with respect to certain Tax matters
and sets forth indemnification obligations of all parties (on a
joint and several basis).
CoorsTek, Inc.
By /s/ Katherine A. Resler
-------------------------------
Title: General Counsel and Secretary
-----------------------------
Exhibit 10.5
ENVIRONMENTAL RESPONSIBILITY AGREEMENT
This ENVIRONMENTAL RESPONSIBILITY AGREEMENT ("Agreement") is
made as of December 1, 1999, by and among ACX Technologies, Inc.
("ACX"), and its Affiliates, and CoorsTek, Inc. ("CTI"), and its
Affiliates, hereinafter collectively referred to as the "Parties."
RECITALS
As part of this Agreement, the Parties recite certain
background information, so that persons who may subsequently
read, interpret, and apply this Agreement may understand the
motives and intent of the Parties and be better able to interpret
and apply its provisions.
A. The Parties recognize that their historical operations
may give rise to certain environmental liabilities.
B. The Parties recognize that future situations may
involve both ACX Parties and CTI Parties as a result of
geographic proximity of operations and past inter-company
transactions and arrangements.
C. The Parties intend that each of them will be and remain
responsible for their own respective actions, practices,
operations, and wastes, including those that pre-date this
Agreement.
D. The Parties further recognize that providing for the
handling and resolution of environmental conditions involving ACX
Parties and CTI Parties is in their common interests.
E. In furtherance of their common interests, the Parties
may desire to exchange documents (as that term is used in Fed.
Rule Civ. P. 34) and/or information that may be privileged work
product or subject to federal and/or state privileges, including,
but not limited, to the attorney-client privilege.
F. By distributing any documents or information among
themselves under the terms and conditions as set forth herein,
the Parties intend to fully preserve and not to waive any
privilege or other protection that may be available with respect
to such documents or information.
G. In no event shall entering into this Agreement, or any
subsequent agreement relating to allocation of costs associated
with any Liability, be construed or used in any manner as an
admission of any responsibility or liability or any share thereof
by any Party, or as a waiver by any Party of any defenses or
claims relating to any Liability, except as expressly set forth
herein.
1. Definitions. Capitalized terms used and not otherwise
defined herein will have the definitions set forth in the
Distribution Agreement dated as of October __, 1999, between ACX
and CTI ("Distribution Agreement"). Other terms capitalized
herein shall have the following meanings:
"ACX" shall mean ACX and its successors and assigns.
"ACX Parties" shall mean ACX and its Affiliates.
"CTI" shall mean CTI and its successors and assigns.
"CTI Parties" shall mean CTI and its Affiliates.
"Environmental Liability(ies)" shall mean any demand,
claim, proceeding, cause of action, obligation, or liability
which arises, or allegedly arises, from a Party's use, storage,
generation, transportation, release, discharge, emission or
disposal of any material, waste, pollutant or contaminant at any
time, including all times prior to the effective date of this
Agreement.
"Parties(ies)" shall mean CTI Parties and ACX Parties.
"Shared Information" shall mean mental impressions,
client confidences, expert opinions, data bases, opinions, work
product, information, memoranda, reports, and other documents
shared by the Parties under this Agreement that are considered
confidential and/or privileged.
2. Term of Agreement. The Agreement shall be effective
commencing on January 1, 2000, and shall remain in effect for
fifty (50) years thereafter.
3. Indemnification.
(a) Each ACX Party shall severally indemnify, defend
and hold harmless each CTI Party and each of their respective
directors, officers, employees and agents from and against any
and all Environmental Liabilities incurred or suffered by such
CTI Party in connection with or arising out of or due to,
directly or indirectly, (i) any past, present or future actions,
practices, or operations of such ACX Party, or (ii) any failure
to perform, or violation of, any provision of this Agreement that
is to be performed or complied with by such ACX Party.
(b) Each CTI Party shall severally indemnify, defend
and hold harmless each ACX Party and each of their respective
directors, officers, employees and agents from and against any
and all Environmental Liabilities incurred or suffered by such
ACX Party in connection with or arising out of or due to,
directly or indirectly, (i) any past, present or future actions,
practices, or operations of such CTI Party, or (ii) any failure
to perform, or violation of, any provision of this Agreement that
is to be performed or complied with by such CTI Party.
4. Duty to Notify. If any ACX Party or CTI Party becomes
aware of (a) any potential or actual Environmental Liability with
respect to which the other is or could be named or (b) a
reasonable likelihood that Environmental Liabilities may be
asserted against such other Party, it shall promptly so notify
such Party.
5. Duty to Cooperate. The Party giving such notice and
the Party that has been so notified shall cooperate with each
other to coordinate the exchange of information (including access
to knowledgeable employees) related to the investigation, defense
or settlement of any Environmental Liability.
6. Confidentiality and Use of Information.
(a) Confidentiality of Shared Information. By
distributing any documents or information among themselves under
the terms and conditions of this Agreement, the Parties expressly
agree not to waive, and intend to fully preserve, any privilege
or other protection that may be available with respect to such
documents or information. Each Party agrees that all Shared
Information received from any other Party or its counsel pursuant
to this Agreement shall be held in strict confidence by the
receiving Party and that such information shall be used only in
connection with any Liability. The Shared Information may, but
need not, be marked "Confidential" or with a similar legend.
Distribution of Shared Information among the Parties shall not
constitute a waiver of the attorney-client or attorney-work
product privileges. Any Party receiving Shared Information
pursuant to this Agreement agrees to distribute the information
only in a manner consistent with the privileges protecting such
information. Each Party shall take all necessary and appropriate
measures to ensure that any person who is granted access to any
Shared Information or who in any manner participates in joint
projects, or who otherwise assists any counsel in connection with
the performance of this Agreement, is familiar with the terms of
this Agreement and complies with such terms as they relate to the
duties of such person.
(b) Intent, Duration, and Scope of Confidentiality
Provisions. The Parties intend to protect from disclosure all
Shared Information exchanged pursuant to this Agreement to the
greatest extent permitted by law regardless of whether the
information is marked "Confidential." The provisions of this
Agreement shall not apply to information that is now or hereafter
becomes public knowledge without violation of this Agreement or
which is sought and attained from a Party pursuant to discovery
procedures and not otherwise protected from disclosure. The
confidentiality obligations of the Parties shall survive the
termination of this Agreement and the resolution or settlement of
any Liability.
(c) Notification of Proposed Disclosure. If any Party
is subpoenaed or becomes the subject of any process that will
require or result in the disclosure of any confidential
information, that Party will promptly notify the other Parties.
7. Enforcement of Agreement/Dispute Resolution. If the
Parties are unable to resolve any disagreement or dispute arising
out of matters within the scope of this Agreement, then the
provisions in Article IX of the Distribution Agreement shall
apply. All negotiations pursuant to this clause are confidential
and shall be treated as compromise and settlement negotiations
for purposes of the federal and state rules of evidence.
8. Rights of Contribution. In circumstances in which the
indemnification provisions of this Agreement apply, such
provisions are in lieu of federal and state statutory and common
law rights of contribution. The rights created by the Agreement
are stipulated to be contractual in nature.
9. Reservation of Rights. Except as provided in Section
8, the Parties reserve any and all rights they may have under
other agreements or under any federal or state statutory or
common law.
10. Joint Defense Agreements. Except as otherwise provided
in the Distribution Agreement, for any Third Party Claim in which
both one or more ACX Parties and one or more CTI Parties share an
actual or potential material interest, the Parties affected
thereby shall enter into a Joint Defense Agreement. Unless an
Indemnifying Party is the sole indemnifying party or the parties
otherwise specifically agree in writing in a Joint Defense
Agreement, each party shall pay its proportionate share (as
provided in the Joint Defense Agreement) of all costs and
expenses reasonably incurred in connection with the defense of
such Third Party Claim.
11. Miscellaneous.
(a) Amendment. This Agreement may be amended at any
time by agreement of ACX and CTI. All amendments shall be in
writing and executed by ACX and CTI.
(b) No Admission. Nothing in this Agreement is
intended as, shall constitute, or shall be interpreted,
construed, or used as evidence of any admission by a Party of any
wrongdoing, liability, or fault (including comparative or
proportional fault or liability), a waiver of any defense, an
estoppel, or an admission as to any matter of law or fact, either
as among the Parties or with respect to any person or entity not
a Party to this Agreement; provided, however, that any Party
shall be entitled to use this Agreement as may become necessary
to enforce its terms.
(c) Entire Agreement. This Agreement constitutes the
entire Agreement and understanding among the Parties with respect
to the subject matter hereof and supersedes all prior and/or
contemporaneous written or oral agreements or understandings
relating to the subject matter of this Agreement.
(d) Counterparts. This Agreement may be executed in
multiple counterparts.
(e) Successors, Assigns and Additional Parties. This
Agreement shall be binding upon, inure to the benefit of, and be
enforceable by the successors and assigns of any of the Parties.
ACX and CTI shall cause their respective new Affiliates to be
bound by this Agreement.
(f) Partial Invalidity. If any portion of this
Agreement is declared invalid or unenforceable, the remainder of
this Agreement shall continue in full force and effect.
(g) No Other Beneficiaries. Except to the extent
expressly provided otherwise herein, this Agreement shall not
inure to the benefit of any third party or parties and shall not
relieve any insurer or other third party who would otherwise be
obligated to pay any claim of the responsibility with respect
thereto or, solely by virtue of the indemnification provisions
hereof, provide any subrogation rights with respect thereto, and
each party agrees to waive such rights against the other to the
fullest extent permitted.
(h) Governing Law. This Agreement shall be governed
by and shall be construed and enforced in accordance with the
laws of the State of Colorado, except for any conflict of laws
provisions in said laws of the State of Colorado that might
otherwise require the application of the laws of a jurisdiction
other than the State of Colorado.
(i) Headings. The headings contained in this
Agreement are for convenience only and are not intended to limit
the scope or affect the interpretation of any provision of this
Agreement.
(j) Joint Negotiation. The Parties acknowledge that
this Agreement is the result of joint negotiations among the
Parties and agree that neither this agreement nor any amendment
to the Agreement shall be construed or interpreted against any
Party on the grounds of sole or primary authorship.
(k) Relationship of Parties. Each Party reserves the
right to select and retain or employ its own legal counsel to
represent such Party in connection with this Agreement. Nothing
contained in this Agreement shall be deemed to create a
partnership, joint venture, agency, or other similar relationship
between or among any Parties.
Effective as of the 1st day of January, 2000.
ACX TECHNOLOGIES, INC. COORSTEK, INC.
By: /s/ Jill B. W. Sisson By: /s/ Katherine A. Resler
- ------------------------- ---------------------------
Name: Jill B. W. Sisson Name: Katherine A. Resler
Title: General Counsel and Title: General Counsel and
Secretary Secretary
Exhibit 10.6
MASTER TRANSITION MATERIALS AND SERVICES AGREEMENT
This Agreement is made as of December 1, 1999, by and
among ACX Technologies, Inc. ("ACX"), and its Affiliates, and
CoorsTek, Inc., ("CoorsTek"), and its Affiliates, hereinafter
collectively referred to as the "Parties."
1. Purpose. The purpose of this Agreement is to set forth
the terms and conditions pursuant to which ACX shall provide
materials and perform services for each other as described in
Attachment A, attached hereto and by this reference made a part
hereof.
2. Term. This Agreement shall be effective commencing on
January 1, 2000, and shall remain in effect for one (1) year
thereafter.
3. Independent Contractor. The parties expressly
understand and agree that ACX and CoorsTek, respectively are
acting as independents contractors unrelated to each other or any
of their respective subsidiaries or affiliated companies.
Nothing in this Agreement is intended to create a relationship,
express or implied, of employer-employee, principal-agent, or
joint venture between CoorsTek and ACX.
4. Consideration/Billing.
(a) Invoices for services will be sent to the
addresses designated on Attachment B. Best efforts will be made
to bill in a timely manner. The year-end invoice shall be sent
within 60 days after the close of the accounting year books with
an additional 30 days to be set aside for any dispute resolution
regarding billing.
(b) Remittance for services will be in the form of a
check and mailed to the party providing the service (the
"Provider") at the address set forth in Attachment B:
(c) Backup documentation for charges less than $50.00
may not be available.
(d) Additional requested services not listed in the
"Description of Service Provided" (Attachment A) will be charged
to the party receiving the material or service ("Receiving
Party").
5. Limitation of Liability. In no event shall either party
be responsible for incidental or consequential damages, including
lost profits, incurred by the other party in connection with this
Agreement, regardless of legal theory (including, without
limitation, contract, negligence, strict liability, tort or
warranty of any kind), even if advised of the possibility of such
damage.
In the event of a loss or claim resulting from work
performed pursuant to this Agreement, the Receiving Party shall
be responsible for responding to the loss or claim on behalf of
both parties to this Agreement until such time as legal liability
is established, at which time each party shall pay its pro rata
share of costs, expenses and judgments.
The Provider shall have the right to participate in the
response to the loss or claim and shall have the right to approve
any settlement provided, however, that such approval shall not be
unreasonably withheld.
6. Warranty. Each Party represents and warrants to the
other party that all materials provided and services performed by
each party hereunder will meet the other party's specifications
as set forth in Attachment A. THE PARTIES AGREE THAT THE
WARRANTY SET FORTH IN THIS PARAGRAPH 6 IS THE SOLE AND EXCLUSIVE
WARRANTY PROVIDED AND THAT THERE IS NO OTHER WARRANTY OF ANY KIND
WHATSOEVER, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY
IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE. ALL SUCH OTHER WARRANTIES ARE EXPRESSLY AND
SPECIFICALLY DISCLAIMED. IT IS EXPRESSLY UNDERSTOOD AND AGREED
THAT NEITHER PARTY ACCEPTS RESPONSIBILITY OR LIABILITY FOR THE
USE OF THE SERVICES PERFORMED OR MATERIALS PROVIDED HEREUNDER.
7. Designated Representative. The Designated
Representatives as set forth in Attachment A are responsible for
authorizing and coordinating the work under this Agreement. All
matters of a technical coordinating or project authorization
nature shall be directed to the Designated Representative. All
matters of an administrative or contractual nature, including but
not limited to the issuance of notices, amendments, time
extensions, request for changes, submission of Insurance
Certificates and any other contractual correspondence, including
exchange of signed copies of this Agreement, shall be directed to
the designated Purchasing Representative.
8. Miscellaneous.
(a) Amendment. This Agreement may not be amended
except in writing properly executed by the parties hereto.
(b) Assignment and Subcontracting. Neither party
shall have the right or power to assign or subcontract its rights
or obligations hereunder without the express written consent of
the other party. Any attempt to do so without such consent shall
be null and void and shall give the other party the right to
cancel and terminate this Agreement.
(c) Waiver. Any express waiver of a term of this
Agreement shall not be binding and effective unless made in
writing and properly executed.
(d) Severability. Any invalid or unenforceable
provision shall be deemed severed from this Agreement to the
extent of its invalidity or unenforceability, and this Agreement
shall be construed and enforced as if the Agreement did not
contain that particular provision to the extent of its invalidity
or unenforceability.
(e) Governing Law. The laws of the State of Colorado
shall govern any interpretations or constructions of this
Agreement. Any action pertaining to this Agreement shall be
commenced and prosecuted in the courts of Jefferson County,
Colorado, and each party submits to the jurisdiction of said
courts and waives the right to change venue.
(f) Entire Agreement. There are no understandings
between the parties hereto as to the subject matter of this
Agreement other than as set forth herein and in the documents
specifically incorporated herein.
BY SIGNING BELOW, both parties hereto accept this Agreement.
ACX TECHNOLOGIES, INC. COORSTEK, INC.
By: /s/ Jill B. W. Sisson By: /s/ Katherine A. Resler
- ------------------------- ---------------------------
Name: Jill B. W. Sisson Name: Jill B. W. Sisson
Title: General Counsel and Title: General Counsel and
Secretary Secretary
ATTACHMENT A
Transitional Services:
Liability/Property Insurance
Telecommunication Services
Courier and Transportation Services
Exhibit 21
ACX TECHNOLOGIES, INC. AND SUBSIDIARIES
SUBSIDIARIES OF REGISTRANT
The following table lists subsidiaries of the Registrant and
the respective jurisdictions of their incorporation as of
December 31, 1999. All subsidiaries are included in Registrant's
consolidated financial statements.
State/Country of
Name Incorporation
- ----------------------------------------------- ----------------
Graphic Packaging Holdings, Inc. Colorado
ACX (UK) Ltd. England
ACX Group, Ltd. Wales
NMC Group, Ltd. England
Graphic Packaging Corporation Delaware
Universal Packaging Corporation Delaware
Graphic Packaging Corporation of Virginia Virginia
GP Holdings, Inc. Colorado
Graphic Packaging Toronto Corporation Canada
Lauener Engineering Limited Delaware
Lauener Engineering, AG Switzerland
Kalamazoo Valley Group Michigan
Golden Technologies Company, Inc. Colorado
Golden Equities, Inc. Colorado
GEI Brokers, Inc. Colorado
Golden Properties Limited Colorado
Chronopol, Inc. Colorado
GTC Nutrition Company Colorado
Mecor, Inc. Colorado
Golden Aluminum Company Colorado
ACX International Sales, Inc. Barbados
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Registration Statements on Form S-8 (Nos. 33-55894 and 33-68898)
and Form S-3 (Nos. 33-94666 and 333-1988) of ACX Technologies,
Inc. of our report dated March 1, 2000 relating to the financial
statements and financial statement schedule, which appear in this
Form 10-K.
PricewaterhouseCoopers LLP
Denver, Colorado
March 27, 2000
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