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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarter Ended
FEBRUARY 26, 1999
Commission File Number 1-12054
[LOGO] MORRISON KNUDSEN CORPORATION
A Delaware Corporation
IRS Employer Identification No. 33-0565601
MORRISON KNUDSEN PLAZA, BOISE, IDAHO 83729
208 / 386-5000
At February 26, 1999, 53,121,753 shares of the registrant's $.01 par value
common stock were outstanding.
The registrant 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
has been subject to such filing requirements for the past 90 days.
[X] Yes [ ] No
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MORRISON KNUDSEN CORPORATION
QUARTERLY REPORT FORM 10-Q FOR THE
QUARTER ENDED FEBRUARY 26, 1999
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
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Item 1. Condensed Consolidated Financial Statements and Notes Thereto
Statements of Income for the Quarters Ended
February 26, 1999 and February 28, 1998 I-1
Balance Sheets at February 26, 1999 and November 30, 1998 I-2
Statements of Cash Flows for the Quarters Ended
February 26, 1999 and February 28, 1998 I-4
Notes to Financial Statements I-5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations I-11
Item 3. Quantitative and Qualitative Disclosures about Market Risk I-17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings II-1
Item 6. Exhibits and Reports on Form 8-K II-1
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SIGNATURES
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PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MORRISON KNUDSEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
QUARTERS ENDED FEBRUARY 26, 1999 AND FEBRUARY 28, 1998
(IN THOUSANDS EXCEPT SHARE DATA)
(UNAUDITED)
1999 1998
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Revenue $ 421,310 $ 385,041
Cost of revenue (400,525) (366,065)
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Gross profit 20,785 18,976
General and administrative expenses (7,974) (5,406)
Goodwill amortization (766) (887)
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Operating income 12,045 12,683
Investment income 1,092 2,288
Interest expense (167) (194)
Other income (expense), net 2,227 (4)
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Income before income taxes 15,197 14,773
Income tax expense (6,306) (6,551)
==============================================================================
Net income $ 8,891 $ 8,222
Income per share
Basic $.17 $.15
Diluted .17 .15
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Common shares used to compute income per share
Basic 53,239,651 54,225,848
Diluted 53,377,448 54,382,566
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The accompanying notes are an integral part of the financial statements.
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MORRISON KNUDSEN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
AT FEBRUARY 26, 1999 (UNAUDITED) AND NOVEMBER 30, 1998
(IN THOUSANDS EXCEPT SHARE DATA)
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ASSETS 1999 1998
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CURRENT ASSETS
Cash and cash equivalents $ 28,823 $ 67,054
Accounts receivable, including retentions of $18,078 and $18,627 156,714 175,513
Unbilled receivables 89,846 74,552
Refundable income taxes 569 780
Investments in and advances to construction joint ventures 82,748 70,855
Deferred income taxes 26,953 26,489
Other 9,606 12,479
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Total current assets 395,259 427,722
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INVESTMENTS AND OTHER ASSETS
Securities available for sale, at fair value 46,205 45,985
Investments in mining ventures 65,783 67,967
Assets held for sale 14,540 14,169
Cost in excess of net assets acquired, net of accumulated
amortization of $10,056 and $9,330 112,240 112,994
Deferred income taxes 30,068 30,965
Other 8,785 8,077
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Total investments and other assets 277,621 280,157
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PROPERTY AND EQUIPMENT, AT COST
Construction equipment 155,053 179,337
Land and improvements 6,993 6,993
Buildings and improvements 6,268 6,341
Equipment and fixtures 61,930 63,534
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Total property and equipment 230,244 256,205
LESS ACCUMULATED DEPRECIATION (151,146) (175,933)
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Property and equipment, net 79,098 80,272
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Total assets $ 751,978 $ 788,151
==========================================================================================
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The accompanying notes are an integral part of the financial statements.
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LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998
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CURRENT LIABILITIES
Accounts payable $ 44,135 $ 56,388
Subcontracts payable, including retentions of $21,978 and $22,843 46,378 59,857
Billings in excess of cost and estimated earnings on uncompleted contracts 40,757 40,959
Estimated costs to complete long-term contracts 40,890 49,228
Accrued salaries, wages and benefits 54,761 58,939
Income taxes payable 1,312 1,535
Other accrued liabilities 32,672 36,118
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Total current liabilities 260,905 303,024
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NON-CURRENT LIABILITIES
Postretirement benefit obligation 54,486 53,456
Accrued workers' compensation 39,550 39,625
Pension and deferred compensation liabilities 17,543 16,390
Environmental remediation obligations 4,589 4,753
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Total non-current liabilities 116,168 114,224
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CONTINGENCIES AND COMMITMENTS (Note 5)
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STOCKHOLDERS' EQUITY
Preferred stock, 10,000,000 shares authorized
Common stock, par value $.01, authorized 100,000,000 shares;
issued 54,355,889 and 54,334,898 544 544
Capital in excess of par value 248,525 248,277
Stock purchase warrants 6,554 6,555
Retained earnings 140,302 131,411
Treasury stock, 1,234,136 and 982,488 shares, at cost (15,352) (12,960)
Accumulated other comprehensive income:
Cumulative translation adjustments, net of income tax benefit (5,515) (3,050)
Unrealized net gain on securities available for sale, net of income tax liability 517 796
Minimum pension liability adjustment, net of income tax benefit (670) (670)
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Total stockholders' equity 374,905 370,903
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Total liabilities and stockholders' equity $751,978 $788,151
==========================================================================================================
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MORRISON KNUDSEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
QUARTERS ENDED FEBRUARY 26, 1999 AND FEBRUARY 28, 1998
(IN THOUSANDS)
(UNAUDITED)
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1999 1998
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OPERATING ACTIVITIES
Net income $ 8,891 $ 8,222
Adjustments to reconcile net income to net cash provided (used)
by operating activities:
Depreciation of property and equipment 4,957 6,930
Amortization of goodwill 766 887
Deferred income taxes 433 3,697
Equity in net income of mining ventures less dividends received (1,124) (2,920)
Other investments and assets, net 773 2,145
(Increase) decrease in net operating assets (46,132) 8,795
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Net cash provided (used) by operating activities (31,436) 27,756
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INVESTING ACTIVITIES
Property and equipment acquisitions (4,920) (6,752)
Property and equipment disposals 1,321 1,849
Purchases of securities available for sale (3,712) (5,734)
Sale and maturities of securities available for sale 3,041 2,793
Purchase of business - (3,663)
Other investing activities (505) -
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Net cash used in investing activities (4,775) (11,507)
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FINANCING ACTIVITIES
Purchase of treasury stock (2,220) (612)
Other 200 10
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Net cash used by financing activities (2,020) (602)
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Increase (decrease) in cash and cash equivalents (38,231) 15,647
Cash and cash equivalents at beginning of period 67,054 53,215
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Cash and cash equivalents at end of period $ 28,823 $ 68,862
========================================================================================
Supplemental disclosure of cash flow information:
Interest paid $ 257 $ 194
Income tax paid (refunded), net 1,189 (6,354)
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The accompanying notes are an integral part of the financial statements.
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MORRISON KNUDSEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS EXCEPT SHARE DATA)
1. UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements and related notes
of Morrison Knudsen Corporation and subsidiaries (the "Corporation") should be
read in conjunction with the audited consolidated financial statements and
related notes included in the Corporation's Annual Report on Form 10-K for the
year ended November 30, 1998. The comparative consolidated balance sheet and
related disclosures at November 30, 1998 have been derived from the audited
balance sheet and financial statement footnotes. The accompanying condensed
consolidated financial statements reflect all adjustments, consisting of normal
recurring adjustments, that in the opinion of management are necessary for a
fair presentation of the results of operations and cash flows for the interim
periods presented. The results of operations for the quarter ended February 26,
1999 are not necessarily indicative of the operating results to be expected for
the full year.
The preparation of the Corporation's consolidated financial statements in
conformity with generally accepted accounting principles necessarily requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the balance sheet dates and the reported amounts of revenue and cost during the
reporting periods. Actual results could differ in the near term from those
estimates. Due to uncertainties inherent in the process of estimating actual
amounts of revenue and costs on long-term contracts, results may vary from
estimates in the near term.
2. ADOPTION OF NEW FISCAL YEAR
The Corporation's fiscal year has historically ended on November 30. Effective
December 1, 1998, the Corporation adopted a 52/53 week fiscal year ending on the
Friday closest to November 30. The quarterly results of operations and cash
flows reported in the accompanying condensed financial statements for the
quarter ended February 26, 1999 includes the period from December 1, 1998
through February 26, 1999, and the quarter ended February 28, 1998 includes the
full three calendar months. The change in reporting period has not materially
affected comparability between the presented reporting periods.
3. COMPREHENSIVE INCOME
Effective December 1, 1998, the Corporation adopted Statement of Financial
Standards No. 130 Reporting Comprehensive Income ("SFAS No. 130"). SFAS No. 130
establishes standards for the reporting and display of comprehensive income and
its components but does not affect the principles currently used to measure
income. The standard requires disclosure of comprehensive income, which includes
all changes in stockholders' equity with the exception of additional investments
by stockholders or distributions to stockholders. Comprehensive income for the
Corporation includes net income, cumulative translation adjustments, unrealized
gains and losses on securities available for sale and minimum pension liability
adjustments. Comprehensive income for the quarter ended February 26, 1999 and
three months ended February 28, 1998 was as follows:
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COMPREHENSIVE INCOME (UNAUDITED) (UNAUDITED)
QUARTERS ENDED FEBRUARY 26, 1999 FEBRUARY 28, 1998
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Net income $ 8,891 $ 8,222
Other comprehensive income, before tax:
Foreign currency translation adjustments (4,019) (1,998)
Net unrealized gains (losses) on securities:
Net unrealized gains (losses) arising during the period (453) 159
Less: Reclassification adjustment for gains included in net income (2) -
Income tax benefit related to items of other comprehensive income 1,730 715
- --------------------------------------------------------------------------------------------------------------
Comprehensive income $ 6,147 $ 7,098
==============================================================================================================
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4. VENTURES
The Corporation's share of results of operations of construction joint
ventures and mining ventures presented below excludes any allocation of division
or group level indirect overhead cost. Such costs are included in cost of
revenue in the Corporation's consolidated statement of income.
CONSTRUCTION JOINT VENTURES:
The Corporation participates in joint ventures, generally as sponsor and
manager of the projects, which are formed to bid, negotiate and complete
specific projects. The size, scope and duration of joint-venture projects vary
among periods.
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(UNAUDITED)
COMBINED FINANCIAL POSITION OF CONSTRUCTION JOINT VENTURES FEBRUARY 26, 1999 NOVEMBER 30, 1998
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Current assets $ 319,216 $ 407,790
Property and equipment, net 50,440 52,698
Current liabilities (210,294) (269,813)
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Net assets $ 159,362 $ 190,675
=======================================================================================================
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COMBINED RESULTS OF OPERATIONS OF CONSTRUCTION JOINT VENTURES (UNAUDITED) (UNAUDITED)
QUARTERS ENDED FEBRUARY 26, 1999 FEBRUARY 28, 1998
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Revenue $ 251,156 $ 260,951
Cost of revenue (230,104) (214,581)
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Gross profit (excludes indirect overhead cost) $ 21,052 $ 46,370
=======================================================================================================
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CORPORATION'S SHARE OF RESULTS OF OPERATIONS OF
CONSTRUCTION JOINT VENTURES (UNAUDITED) (UNAUDITED)
QUARTERS ENDED FEBRUARY 26, 1999 FEBRUARY 28, 1998
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Revenue $ 98,527 $ 93,789
Cost of revenue (91,062) (78,879)
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Gross profit (excludes indirect overhead cost) $ 7,465 $ 14,910
========================================================================================
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MINING VENTURES:
At February 26, 1999, the Corporation had ownership interests in two mining
ventures, MIBRAG mbH (33%) and Westmoreland Resources, Inc. (20%). The
Corporation provides contract mining services to these ventures.
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(UNAUDITED)
COMBINED FINANCIAL POSITION OF MINING VENTURES FEBRUARY 26, 1999 NOVEMBER 30, 1998
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Current assets $ 262,579 $ 313,607
Non-current assets 97,064 123,286
Property and equipment, net 647,988 594,916
Current liabilities (109,016) (87,824)
Long-term debt (337,332) (356,767)
Other non-current liabilities (349,356) (369,823)
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Net assets $ 211,927 $ 217,395
=========================================================================================================
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COMBINED RESULTS OF OPERATIONS OF MINING VENTURES (UNAUDITED) (UNAUDITED)
QUARTERS ENDED FEBRUARY 26, 1999 FEBRUARY 28, 1998
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Revenue $ 104,066 $ 82,045
Cost of revenue (97,333) (70,664)
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Gross profit (excludes indirect overhead cost) $ 6,733 $ 11,381
=========================================================================================================
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CORPORATION'S SHARE OF RESULTS OF OPERATIONS OF MINING VENTURES (UNAUDITED) (UNAUDITED)
QUARTERS ENDED FEBRUARY 26, 1999 FEBRUARY 28, 1998
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Revenue $ 30,871 $ 25,576
Cost of revenue (27,488) (22,023)
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Gross profit (excludes indirect overhead cost) $ 3,383 $ 3,553
=========================================================================================================
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The Corporation received dividend distributions of $772 from mining ventures
during the quarter ended February 26, 1999.
I-7
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5. CONTINGENCIES AND COMMITMENTS
SUMMITVILLE ENVIRONMENTAL MATTERS:
From July 1985 to June 1989, a subsidiary of the Corporation performed certain
contract mining services at the Summitville mine near Del Norte, Colorado. The
United States Environmental Protection Agency (the "EPA") has notified the
Corporation and approximately 20 other parties that each is a potentially
responsible party ("PRP") with regard to hazardous substances generated or
disposed of at the Summitville Mine Superfund Site (the "Site"). The EPA has not
commenced any litigation or other proceedings against the Corporation. The
Corporation has had only preliminary discussions with the EPA but has been
informally advised that the EPA does not consider the Corporation eligible for a
de minimis settlement (the basis for settlement by several PRPs considered to
have contributed less than 3% volume and toxicity of the hazardous substances at
the Site).
According to a report published in August 1996, the EPA estimated that the
total remediation costs incurred and to be incurred at the Site will be
$120,000. The Corporation is not a party to any agreement regarding an
allocation of responsibility, and the EPA has not made an allocation of
responsibility among the PRPs. The Corporation's share, if any, of the aggregate
environmental liability associated with the Site is not presently determinable
and depends upon, among other things, the manner in which liability may be
allocated to or among the Corporation or other PRPs associated with the Site,
the efficacy of any defenses that the Corporation or such other PRPs may have to
any assertion of liability, the willingness and ability of such other PRPs to
discharge such liability as may be allocated to them and the outcome of any
negotiations or settlement discussions between the Corporation and the EPA
and/or such other PRPs. Accordingly, no remediation costs have been accrued at
November 30, 1998.
Management believes that the ultimate resolution of this matter could have a
material adverse effect on the Corporation's financial position and could
materially and adversely effect its results of operations and cash flows in one
or more periods.
CONTRACT-RELATED MATTERS:
In the fourth quarter of 1997, the Corporation assumed sponsorship of a large,
fixed-price joint-venture contract due to the bankruptcy of the previous sponsor
and recorded a $3,900 pretax loss due to uncertainties on the project, including
unpaid client-directed change orders and potential project claims. Management
believes that acceptable pricing will be achieved by further negotiation with
the client. The ultimate outcome cannot be currently determined with certainty
and may not occur in the near term.
LETTERS OF CREDIT:
In the normal course of business, the Corporation causes letters of credit to
be issued in connection with contract performance obligations which are not
reflected in the balance sheet. The Corporation is obligated to reimburse the
issuer of such letters of credit for any payments made thereunder. At February
26, 1999 and November 30, 1998 $32,755 and $37,157, respectively, in face amount
of such letters of credit were outstanding. The Corporation has pledged
securities available for sale as collateral for its reimbursement obligations in
respect to $3,000 in face amount of certain letters of credit that were
outstanding at February 26, 1999.
In connection with a 1989 sale of Old MK's ownership interest of a
shipbuilding subsidiary, the Corporation assumed a guarantee of port facility
bonds of $21,000 through 2002. The former subsidiary has collateralized the
bonds with certain assets and has established a sinking fund of $5,308 for the
bonds. No loss on the guarantee is probable and, accordingly, no accrual has
been made by the Corporation.
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OTHER:
In May 1998, Leucadia National Corporation filed an action against the
Corporation and certain officers and directors in The United States District
Court for the District of Utah, Civil Action Number 2:98CV-0327S. The complaint
alleges fraud in the sale of shares of MK Gold Corporation by Old MK to Leucadia
and seeks rescission of the sale and restitution of $22,500. Leucadia contends
that the Corporation knew or believed that a non-competition agreement between
the Corporation and MK Gold was unenforceable and failed to disclose that belief
to Leucadia. The non-competition agreement is the subject of separate litigation
between MK Gold and the Corporation. On January 5, 1999, the two cases were
consolidated for trial. Trial has been set for August 16, 1999.
Certain current and former officers, employees and directors of the
Corporation were named defendants in an action filed in the United States
District Court for the District of Idaho: John B. Blyler and Malcolm J. Corse v.
William J. Agee, et. al., Civil Action No. 97-0332-S-BLW. The complaint
alleges, among other things, that the defendants breached certain fiduciary
duties.
Although the ultimate outcome of these matters cannot be predicted with
certainty, management believes that the outcome of these actions, individually
or collectively, will not have a material adverse impact on the Corporation's
financial position, results of operations or cash flows.
In addition to the foregoing, there are other claims, lawsuits, disputes with
third parties, investigations and administrative proceedings against the
Corporation and its subsidiaries relating to matters in the ordinary course of
its business activities that are not expected to have a material adverse effect
on the Corporation's financial position, results of operations or cash flows.
6. SUBSEQUENT EVENTS
ACQUISITION OF WESTINGHOUSE BUSINESSES:
On March 22, 1999, the Corporation and British Nuclear Fuels, Ltd. ("BNFL")
acquired certain businesses (the "Westinghouse businesses") from CBS Corporation
(formerly known as Westinghouse Electric Corporation). The Westinghouse
businesses provide a wide range of products, services and technologies in the
government services and nuclear industries throughout the world.
The acquisition is valued at approximately $1,100,000, including $200,000 in
cash and assumption of approximately $900,000 in liabilities. The Corporation's
share, however, is approximately $121,000 in cash, which was funded from new
revolving credit facilities totaling $250,000. BNFL's share is approximately
$79,000 in cash and the assumption of approximately $900,000 in specified
liabilities, commitments and obligations.
Concurrent with the acquisition, the following three separate companies were
formed to acquire the operations of the Westinghouse businesses:
(1) Westinghouse Government Services Company, LLC ("WGS"), a limited liability
company that provides defense-related operations and management services
primarily for the U.S. Departments of Energy and Defense, including the
production of tritium for national weapons programs and high-level waste
solidification, and employs over 11,200 employees. The company is wholly-owned
by the Corporation. BNFL retains a 40% passive economic interest in the profits
and losses and cash flows of Westinghouse Government Services.
(2) Westinghouse Government Environmental Services Company, LLC ("WGES"), a
limited liability company that provides non-defense related governmental and
environmental services, including environmental remediation and waste management
services, and employs approximately 2,500 employees. This company is jointly
owned by the Corporation (60%) and BNFL (40%). The Corporation will have
management responsibility and control of WGS and WGES which will be organized
under the newly formed Westinghouse Government Services Group.
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(3) Westinghouse Electric Company, LLC ("WELCO"), a limited liability company
that provides commercial nuclear power technology with emphasis on service, fuel
and instrumentation and control technologies for operating nuclear power plants.
WELCO is also involved in the development of new plant technology and has
received final design approval from the Nuclear Regulatory Commission for its
advanced nuclear power plant, the AP600. Westinghouse Electric Company is
wholly-owned by BNFL and has approximately 4,000 employees. Subject to
governmental requirements and other applicable law, the Corporation will be the
preferred supplier to WELCO (and to WELCO's customers where WELCO has the right
to choose its customers' suppliers) for planning, constructing, demonstrating,
operating, maintaining, repairing and upgrading nuclear power generation
facilities and facilities in connection with WELCO's commercial nuclear and/or
steam operations.
CREDIT FACILITIES:
On March 19, 1999, the Corporation replaced its prior bank credit facility
with new uncollateralized revolving credit facilities providing an aggregate
amount of $250,000 of borrowing capacity available to acquire the Westinghouse
businesses, for general corporate purposes, to support working capital
requirements and to support letters of credit and other potential acquisitions.
The new credit facilities consist of a $150,000 five-year facility which
provides for both revolving borrowings and the issuance of letters of credit,
and a $100,000 one-year facility which provides for revolving borrowings which
may be converted, at the Corporation's option, to a term loan having a maturity
of one year after the then current expiration of such facility. The term of each
facility may be extended annually for an additional year by mutual agreement of
the banks and the Corporation. The facilities' covenants require the maintenance
of financial ratios, and place limitations on guarantees, liens, investments,
dividends and other matters.
The facilities provide for interest on loans, payable quarterly, at the
applicable LIBOR rate or the base rate, as defined, plus an additional margin.
The additional margin ranges from 1.25% to 2.00% for the LIBOR rate and 0.25% to
1.00% for the base rate, based on the ratio of earnings before interest, taxes,
depreciation and amortization to the Corporation's funded debt. On March 19,
1999, the Corporation paid $3,700 in underwriting fees to the banks and is
required to pay annual and quarterly commitment and letter of credit fees.
The Corporation borrowed $120,000 under the facilities on March 22, 1999 in
connection with its funding requirements for the Westinghouse acquisition.
I-10
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THIS QUARTERLY REPORT ON FORM 10-Q AND OTHER REPORTS AND STATEMENTS FILED BY
MORRISON KNUDSEN CORPORATION FROM TIME TO TIME WITH THE SECURITIES AND EXCHANGE
COMMISSION (COLLECTIVELY, "SEC FILINGS") CONTAIN OR MAY CONTAIN FORWARD-LOOKING
STATEMENTS. WHEN USED IN SEC FILINGS, THE WORDS "MAY," "WILL," "ANTICIPATE,"
"BELIEVE," "ESTIMATE," "EXPECT," "FUTURE," "INTEND," "PLAN," "COULD," "SHOULD,"
"POTENTIAL" OR "CONTINUE" OR THE NEGATIVE OR OTHER VARIATIONS THEREOF, AS WELL
AS OTHER STATEMENTS REGARDING MATTERS THAT ARE NOT HISTORICAL FACT, ARE OR MAY
CONSTITUTE FORWARD-LOOKING STATEMENTS. SUCH FORWARD-LOOKING STATEMENTS ARE
NECESSARILY BASED ON VARIOUS ASSUMPTIONS AND ESTIMATES AND ARE INHERENTLY
SUBJECT TO VARIOUS RISKS AND UNCERTAINTIES, INCLUDING, IN ADDITION TO ANY RISKS
AND UNCERTAINTIES DISCLOSED IN THE TEXT SURROUNDING SUCH STATEMENTS OR ELSEWHERE
IN THE SEC FILINGS, RISKS AND UNCERTAINTIES RELATING TO THE POSSIBLE INVALIDITY
OF THE UNDERLYING ASSUMPTIONS AND ESTIMATES AND POSSIBLE CHANGES OR DEVELOPMENTS
IN SOCIAL, ECONOMIC, BUSINESS, INDUSTRY, MARKET, LEGAL AND REGULATORY
CIRCUMSTANCES AND CONDITIONS AND ACTIONS TAKEN OR OMITTED TO BE TAKEN BY THIRD
PARTIES, INCLUDING THE CORPORATION'S CUSTOMERS, SUPPLIERS, BUSINESS PARTNERS AND
COMPETITORS AND LEGISLATIVE, REGULATORY, JUDICIAL AND OTHER GOVERNMENTAL
AUTHORITIES AND OFFICIALS. SHOULD THE CORPORATION'S ASSUMPTIONS OR ESTIMATES
PROVE TO BE INCORRECT, OR SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES
MATERIALIZE, ACTUAL AMOUNTS, RESULTS, EVENTS AND CIRCUMSTANCES MAY VARY
SIGNIFICANTLY FROM THOSE REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS.
RESULTS OF OPERATIONS
QUARTER ENDED FEBRUARY 26, 1999 COMPARED TO
THE QUARTER ENDED FEBRUARY 28, 1998
- -------------------------------------------------------
(IN MILLIONS) 1999 1998
- -------------------------------------------------------
Revenue $421.3 $385.0
Gross profit 20.8 19.0
General and administrative expenses (8.0) (5.4)
Goodwill amortization (.8) (.9)
Investment income 1.1 2.2
Interest expense (.2) (.2)
Other income (expense), net 2.2 -
Income tax expense (6.3) (6.6)
Net income 8.9 8.2
=======================================================
REVENUE AND GROSS PROFIT:
Revenue for the quarter ended February 26, 1999 increased 9% compared to the
quarter ended February 28, 1998. The MK Contractors Group experienced an
increase in revenue principally due to major bridge retrofit work and highway
construction from the Heavy Civil Division and increased coal production from
the Mining Division. Industrial/Process volume also increased in the MK
Engineers and Constructors Group.
Gross profit for the quarter ended February 26, 1999 increased $1.8 million
over the comparable period of 1998. The Corporation's gross profit as a percent
of revenue was 4.9% for the first quarter of 1999 and 1998. The gross profit of
MK Engineers and Constructors Group increased slightly over the first quarter of
1998 due to an increase in volume from the Industrial Process Division and a
decrease in group overhead resulting from staff and cost reductions related to
the reorganization and consolidation of the Environmental Group into MK
Engineers and Constructors in 1998. Gross profit from the MK Contractors Group
decreased primarily due to the impact of the milestone achievement for initial
profit recognition under the Corporation's accounting policies on a large
highway construction project in the first quarter of 1998. This decrease was
partially offset by the favorable resolution of royalty issues on certain mining
properties.
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<PAGE>
At February 26, 1999, backlog of $2,685 million was comprised of $922 million
(34%) of revenue from fee-type contracts and $1,763 million (66%) of revenue
from fixed-price contracts and the Corporation's share of revenue from mining
ventures.
GENERAL AND ADMINISTRATIVE EXPENSES:
General and administrative expense of $8.0 million for the quarter ended
February 26, 1999 increased $2.6 million from the comparable period in 1998
principally due to additional compensation expense of $1.7 million related to a
key executive retirement and a key executive recruitment, an increase in costs
related to the implementation of new computer systems and an increase in
professional expenses.
GOODWILL:
Goodwill amortization for the first quarter of 1999 decreased slightly to $.8
million from $.9 million in the first quarter of 1998 as a result of
management's resolution during the fourth quarter of 1998 of the likelihood of
the future realization of the tax benefits of deductible temporary differences
and net operating loss carryforwards relating to Old MK. This resolution
resulted in an increase in deferred tax assets, a decrease in recorded goodwill
associated with Old MK at November 30, 1998, and a related reduction of
subsequent annual goodwill amortization of $.5 million. In connection with the
Corporation's recent acquisition of the Westinghouse businesses, an adjustment
to deferred tax assets and related goodwill associated with Old MK of $40 to $50
million, and a related reduction in future annual goodwill amortization expense
of $1.1 to $1.4 million, is expected. The amount of goodwill related to the
Westinghouse acquisition has not been determined.
INVESTMENT INCOME:
The Corporation's investment income of $1.1 million in the first quarter of
1999 declined from $2.2 million in the first quarter of 1998, principally due to
interest recognized on claims for U.S. federal income tax refunds received in
January 1998 and a reduction in available corporate cash invested in a short-
term asset management account.
OTHER INCOME (EXPENSE):
Other income (expense) of $2.2 million for the quarter ended February 26, 1999
resulted principally from favorable resolution of certain contingencies relating
to the sale of a former subsidiary of Old MK.
INCOME TAX EXPENSE:
The effective tax rate for the first quarter of 1999 was 41.5% compared to 44%
in the first quarter of 1998, principally due to the eligibility of foreign tax
credits (as opposed to deductions) for use against U.S. federal income taxes and
a lower proportion of non-deductible expenses to pretax income. The effective
tax rate is higher than the U.S. federal statutory rate of 35% because of state
income taxes and non-deductible expenses. The Corporation may realize a further
reduction in the effective income tax rate for the remainder of 1999 as a result
of the March 22, 1999 acquisition of the Westinghouse businesses and any
resulting: (1) reduction of nondeductible goodwill amortization expense relating
to the acquisition of Old MK, (2) eligibility of foreign tax credits from prior
years, and (3) additional pretax income expected from the Westinghouse
businesses. Additional reductions, if any, will be reflected in quarters ending
after the acquisition date. The anticipated reduction in the effective tax rate
is subject to, among other things, the Corporation's ability to meet or exceed
estimated pretax earnings levels for 1999.
I-12
<PAGE>
FINANCIAL CONDITION
The Corporation has three principal sources of near-term liquidity: (1)
existing cash and cash equivalents; (2) cash generated by its operations; and
(3) revolving loan borrowings under its bank credit facilities. Management
believes the Corporation's liquidity and capital resources should be sufficient
to meet its reasonably foreseeable working capital, capital expenditure and
other anticipated cash requirements.
- ----------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES (IN THOUSANDS)
- ----------------------------------------------------------------------
FEBRUARY 26, 1999 FEBRUARY 28, 1998
- ----------------------------------------------------------------------
CASH AND CASH EQUIVALENTS:
Beginning of period $ 67,054 $ 53,215
End of period 28,823 68,862
- ----------------------------------------------------------------------
QUARTERS ENDED
FEBRUARY 26, 1999 FEBRUARY 28, 1998
- ----------------------------------------------------------------------
NET CASH PROVIDED (USED) IN:
Operating activities $(31,436) $ 27,756
Investing activities (4,775) (11,507)
Financing activities (2,020) (602)
- ----------------------------------------------------------------------
Cash and cash equivalents decreased $38.2 million to $28.8 million at February
26, 1999 from $67.0 million at November 30, 1998. Operating activities used
$31.4 million in cash during the quarter ended February 26, 1999 for additional
joint-venture investments, incentive and bonus plan payments and working capital
requirements relating to construction and engineering contracts which the
Corporation expects to recover within the next two quarters. Cash provided by
operating activities during the first quarter of 1998 included $25.2 million of
income tax refunds and interest thereon. Cash provided from or used in operating
activities from period to period is affected by the mix, stage of completion and
commercial terms of engineering and construction contracts which are reflected
in changes in net operating assets and liabilities. Cash flow for the quarter
ended February 26, 1999 also reflects $3.6 million of net purchases of property
and equipment, $.6 million of net purchases of securities held for sale in
connection with the Corporation's self-insured risk management program, and $2.2
million used for the repurchase of 251,600 shares of the Corporation's common
stock for treasury.
The Corporation received authorization in January 1998 to repurchase, in open
market transaction, block trades or otherwise up to 2 million shares of the
Corporation's outstanding common stock designed to counteract the dilutive
effect of the issuance of stock under its stock option plans, and up to 2.765
million of its warrants to purchase common stock. Since program inception,
1,224,700 shares of common stock have been repurchased. Subject to market
conditions and other factors, these purchases may be continued, discontinued and
resumed from time to time without prior notice. It is anticipated that future
purchases will be funded from available cash and equivalents and operating cash
flows.
The Corporation anticipates net capital expenditures for major construction
equipment of approximately $20 million during the remainder of 1999 for normal
replacement and to meet near-term equipment requirements for new work.
As discussed in Note 6. "Subsequent Events -- Acquisition of Westinghouse
businesses and Credit facilities" of NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS, ON MARCH 22, 1999 the Corporation and British Nuclear Fuels, Ltd.
("BNFL") acquired certain businesses from CBS Corporation (the "Westinghouse
businesses") which provide defense and non-defense related governmental and
environmental services. The Corporation's share of the purchase price was
approximately $121 million in cash, which was funded through borrowing under a
new $250
I-13
<PAGE>
million uncollateralized revolving credit agreement entered into with certain
financial institutions on March 19, 1999. The agreement provides for a five-year
$150 million revolving credit and letter of credit facility and a one-year $100
million revolving credit facility which may be converted at the Corporation's
option into a term loan maturing one year after the then current expiration date
of such facility (the "Facilities"). In addition to funding the acquisition of
the Westinghouse businesses, the Facilities are available to support working
capital requirements and for general corporate purposes. The Facilities replace
the Corporation's prior $200 million bank credit facility. Depending on
conditions in capital markets and other factors, the Corporation may consider
the possible issuance of other long-term debt or other securities.
The Corporation may, from time to time, pursue opportunities to complement
existing operations through business combinations and participation in ventures,
which may require additional financing and utilization of the Corporation's
capital resources.
BACKLOG
Backlog of all uncompleted contracts at February 26, 1999 was $2,685 million,
compared with $2,680 million at November 30, 1998. New work awarded in the
quarter ended February 26, 1999 totaled $425 million compared with $440 million
for the quarter ended November 30, 1998.
THE YEAR 2000 ISSUE
The Year 2000 issue results from the development of computer programs and
electronic circuitry that use two digits rather than four to define calendar
years. These programs may fail to properly differentiate between calendar years
in the twenty-first century and calendar years in the twentieth century (e.g.,
they may recognize a date using "00" as the year 1900 rather than the year
2000). If not corrected, the Year 2000 issue could result in complete system
failures or miscalculations causing significant disruption of normal business
activities. The Year 2000 issue affects virtually all companies and
organizations, including the Corporation.
The Corporation employs a number of information technology ("IT") systems in
its operations including, without limitation, computer networking systems,
financial systems and other similar systems. Throughout its operations, the
Corporation also employs numerous non-IT devices such as building security and
safety devices and other devices containing embedded electronic circuits. Both
IT systems and non-IT devices are subject to potential failure or error due to
the Year 2000 issue.
The Corporation has developed and implemented a strategic plan (the "Year 2000
Project") to achieve Year 2000 readiness. The Year 2000 Project's activities are
intended to remediate the Year 2000 issue in all major categories of systems and
electronic devices in use by the Corporation, including IT systems, non-IT
devices and supply chain relationships so that the Corporation may continue its
operations without interruption or with minimal disruption. It also includes
communication with critical third parties such as clients, vendors,
subcontractors and other business partners to determine the expected degree of
Year 2000 compliance of those parties, and to monitor their progress towards
Year 2000 readiness. The Year 2000 Project includes the following phases: (1)
awareness, (2) inventory, (3) assessment, (4) remediation, (5)
testing/validation, and (6) return to production. Progress reports on the Year
2000 Project are presented regularly to the Corporation's senior management and
periodically to the Audit Committee of the Board of Directors.
Because of the scope of its operations, the Corporation believes it is
impractical to seek to eliminate all potential Year 2000 problems before they
arise. As a result, the Corporation expects that its Year 2000 assessments and
corrections will include ongoing remedial efforts into the year 2000. The
Corporation is using a risk-based analysis of its operations to identify those
items that are critical to the Corporation and at risk. Critical items are being
identified through the "inventory" phase of the Year 2000 Project.
I-14
<PAGE>
The Corporation is in various "inventory," "assessment," "remediation" and
"testing/validation" phases with regard to its IT systems and non-IT devices. As
part of the Year 2000 Project regarding IT systems, the Corporation continues
implementing new or upgraded Year 2000 compliant systems for financial
information, human resources and payroll. These systems are expected to be
completed in July, 1999.
The Corporation is corresponding with its major clients and joint-venture and
other business partners, and with all vendors and subcontractors that have been
determined, through practical risk assessment techniques, to be critical to the
Corporation, in order to determine the Year 2000 readiness or progress of those
entities and to assess any related risks.
As part of the Year 2000 Project, the Corporation is exploring alternative
solutions and developing contingency plans to address the possibility that the
Corporation and third parties with whom it has material relationships will not
be fully Year 2000 ready on a timely basis. Such plans have not yet been fully
developed, and the Corporation will continue to develop them as necessary to
address each area of Year 2000 risk. Completion of the Year 2000 Project,
including the development of contingency plans, is expected by September 30,
1999.
The Corporation's Year 2000 Project utilizes both internal and external
resources. The total cost of the Corporation's activities to achieve Year 2000
readiness is currently estimated at approximately $21.6 million. As of February
26, 1999, the direct costs incurred by the Corporation to remediate Year 2000
issues were approximately $11.5 million.
Although the Corporation believes that its Year 2000 readiness efforts are
designed to appropriately identify and address those Year 2000 issues that are
within the Corporation's control, there can be no assurance that the
Corporation's efforts will be fully effective. The newness and complexity of the
issues presented and the Corporation's dependence on the technical skills and
preparedness of third parties are among the factors that could cause the
Corporation's efforts to be less than fully effective. Moreover, Year 2000
issues present many risks that are simply beyond the Corporation's control, such
as the potential effects of Year 2000 issues on the economy in general and on
the Corporation's business partners, vendors, subcontractors and customers in
particular.
While the Corporation believes that the impact of any individual Year 2000
failure will most likely be localized and limited to specific facilities or
operations, the Corporation is not yet able to assess the likelihood of
significant business interruptions occurring in one or more of its operations
around the world. Such interruptions could prevent the Corporation, at least
temporarily, from delivering contractual services. Furthermore, it has been
widely reported that significant litigation is expected to occur related to
business interruptions caused by Year 2000 failures. It is uncertain whether, or
to what extent, the Corporation will be affected by such litigation. The failure
of the Corporation, its clients (including U.S. government agencies), vendors,
joint-venture partners or others upon whom the Corporation relies to achieve
Year 2000 readiness could adversely affect the Corporation's business
operations, which could have a material adverse effect on the Corporation's
business, financial condition and results of operations.
The foregoing disclosure is based upon the Corporation's current expectations,
estimates and projections, which could ultimately be found to be inaccurate.
Because of uncertainties and circumstances beyond the Corporation's control, the
actual effects of Year 2000 issues on the Corporation may be different than the
foregoing assessment. See "Note Regarding Forward-Looking Information."
ENVIRONMENTAL CONTINGENCY
The United States Environmental Protection Agency has notified the Corporation
and approximately 20 other parties that each is a potentially responsible party
with regard to hazardous substances generated or disposed of at the Summitville
Mine Superfund Site. See Note 5. "Contingencies and Commitments -- Summitville
environmental matters" of Notes to Condensed Consolidated Financial Statements.
I-15
<PAGE>
ADOPTION OF ACCOUNTING PRINCIPLE
Effective December 1, 1998, the Corporation adopted Statement of Financial
Accounting Standards No. 130 Reporting Comprehensive Income ("SFAS No. 130")
which establishes standards for the reporting and display of comprehensive
income and its components. SFAS No. 130 requires the reporting of total
comprehensive income in condensed financial statements of interim periods and
more expanded disclosures at year end. See Note 3. "Comprehensive Income" of
Notes to Condensed Consolidated Financial Statements.
I-16
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
(IN THOUSANDS)
The Corporation's exposure to market risk for changes in interest rates
relates primarily to the Corporation's short-and long-term investment portfolio
and debt obligations. The Corporation's short-term investment portfolio consists
primarily of highly liquid instruments with maturities of one month or less. The
Corporation's long-term investment portfolio consists primarily of high-quality
debt instruments with maturities under 10 years and an average maturity of 3.5
years. These long-term instruments are held to fund potential workers
compensation obligations of the Corporation. The Corporation seeks to match the
maturities of these instruments as closely as possible with its anticipated
workers compensation obligations and to hold these instruments to maturity in
order to minimize market risk exposure. As of February 26, 1999, the Corporation
had $11,873 of short-term investments classified as cash equivalents and $46,205
in its long-term investment portfolio.
The Corporation may from time to time effect borrowings under its bank credit
facility for general corporate purposes, including working capital requirements,
capital expenditures and acquisitions. Borrowings under the bank credit facility
bear interest at the applicable LIBOR or base rate and, therefore, the
Corporation is subject to fluctuations in interest rates. As of February 26,
1999, the Corporation had no outstanding debt obligations.
I-17
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information regarding legal proceedings set forth under the caption "Other"
in Note 5. "Contingencies and Commitments" of Notes to Condensed Consolidated
Financial Statements is incorporated by reference in response to this Item 1.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Filed in Part I
None
Filed in Part II
The Exhibits to this Quarterly Report on Form 10-Q are listed in the
Exhibit Index contained elsewhere in this Quarterly Report.
(b) Reports on Form 8-K
No reports on Form 8-K were filed in the first quarter of 1999.
All other items required under Part II are omitted because they are not
applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MORRISON KNUDSEN CORPORATION
/S/Anthony S. Cleberg
----------------------------------------------------
Executive Vice President and Chief Financial Officer,
in his respective capacities as such
Date: March 31, 1999
II-1
<PAGE>
MORRISON KNUDSEN CORPORATION
EXHIBIT INDEX
COPIES OF EXHIBITS WILL BE SUPPLIED UPON REQUEST. EXHIBITS WILL BE PROVIDED AT
A FEE OF $.25 PER PAGE REQUESTED.
Exhibits marked with an asterisk are filed herewith, the remainder
of the exhibits have heretofore been filed with the Commission and
are incorporated by reference.
EXHIBIT
NUMBER EXHIBITS
- ------ --------
10.1* Five-Year Credit Agreement dated as of March 19, 1999 among the
registrant, Bank of Montreal and NationsBanc Montgomery Securities,
Inc., Bank of America National Trust and Savings Association and the
Lenders which are or may become parties thereto.
10.2* 364-Day Credit Agreement dated as of March 19, 1999 among the
registrant, Bank of Montreal and NationsBanc Montgomery Securities,
Inc., Bank of America National Trust and Savings Association and the
Lenders which are or may become parties thereto.
10.3* Amended and Restated Consortium Agreement between the registrant's
wholly-owned subsidiary, Morrison Knudsen Corporation, an Ohio
corporation, and BNFL USA Group, Inc.
27.* Financial Data Schedule.
E-1
<PAGE>
EXHIBIT 10.1
================================================================================
FIVE-YEAR
CREDIT AGREEMENT
Dated as of March 19, 1999,
by and among
MORRISON KNUDSEN CORPORATION,
THE GUARANTORS FROM TIME TO TIME PARTIES HERETO,
BANK OF MONTREAL,
as Administrative Agent,
BANK OF MONTREAL AND NATIONSBANC MONTGOMERY SECURITIES LLC,
as Lead Arrangers, Book Managers and Syndication Agents,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
as Documentation Agent,
and
the Lenders
which are or may become parties hereto
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Description Page
<S> <C>
Section 1. Definitions; Interpretation of Agreement................ 1
Section 1.1. Definitions............................................. 1
Section 1.2. Accounting Terms........................................ 13
Section 2. The Revolving Credit.................................... 14
Section 2.1. General Terms........................................... 14
Section 2.2. The Loans............................................... 14
Section 2.3. Letters of Credit....................................... 14
Section 2.4. Manner of Borrowing..................................... 19
Section 3. Interest................................................ 20
Section 3.1. Options................................................. 20
Section 3.2. Base Rate Portion....................................... 20
Section 3.3. LIBOR Portions.......................................... 20
Section 3.4. Computation............................................. 21
Section 3.5. Manner of Rate Selection................................ 21
Section 3.6. Funding Indemnity....................................... 22
Section 3.7. Change of Law........................................... 22
Section 3.8. Unavailability of Deposits or Inability to
Ascertain, or Inadequacy of, LIBOR................... 23
Section 3.9. Increased Cost and Reduced Return....................... 23
Section 3.10. Lending Offices......................................... 24
Section 3.11. Discretion of Banks as to Manner of Funding............. 24
Section 4. Fees, Payments, Reductions, Applications, Notations
and Extensions....................................... 24
Section 4.1. Commitment Fee.......................................... 24
Section 4.2. Letter of Credit Fees................................... 24
Section 4.3. Administrative Agent's Fees............................. 25
Section 4.4. Underwriting Fees....................................... 25
Section 4.5. Payments................................................ 25
Section 4.6. Terminations............................................ 25
Section 4.7. Place and Application................................... 26
Section 4.8. Notations and Requests.................................. 27
Section 4.9. Capital Adequacy........................................ 27
Section 4.10. Withholding Taxes....................................... 27
Section 4.11. Increase in Commitments................................. 29
Section 4.12. Extensions of Commitments............................... 29
Section 4.13. Substitution of Lenders................................. 30
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Section 5. Guaranties.............................................. 31
Section 5.1. Guaranty................................................ 31
Section 6. Representations and Warranties.......................... 31
Section 6.1. Organization and Power.................................. 31
Section 6.2. Subsidiaries............................................ 32
Section 6.3. Use of Proceeds; Regulation U........................... 32
Section 6.4. Financial Statements.................................... 32
Section 6.5. Litigation and Taxes.................................... 33
Section 6.6. Burdensome Contracts with Affiliates.................... 33
Section 6.7. ERISA................................................... 33
Section 6.8. Full Disclosure......................................... 33
Section 6.9. Compliance with Law..................................... 34
Section 6.10. Governmental Authority and Licensing.................... 34
Section 6.11. Investment Company; Public Utility Holding Company...... 34
Section 6.12. Year 2000 Compliance.................................... 34
Section 6.13. Purchase Agreement...................................... 35
Section 6.14. Hazardous Materials Risk Management..................... 36
SECTION 7. Conditions Precedent.................................... 36
Section 7.1. All Advances............................................ 36
Section 7.2. Initial Advance......................................... 36
Section 7.3. Legal Matters........................................... 37
Section 8. Covenants............................................... 38
Section 8.1. Maintenance of Business................................. 38
Section 8.2. Maintenance............................................. 39
Section 8.3. Taxes................................................... 39
Section 8.4. Insurance............................................... 39
Section 8.5. Financial Reports....................................... 39
Section 8.6. Compliance with Laws.................................... 41
Section 8.7. Nature of Business...................................... 41
Section 8.8. Liens................................................... 41
Section 8.9. Indebtedness............................................ 43
Section 8.10. Acquisitions, Investments, Loans, Advances and
Guarantees............................................ 44
Section 8.11. Dividends and Certain Other Restricted Payments......... 47
Section 8.12. Mergers................................................. 47
Section 8.13. Sale of Assets.......................................... 47
Section 8.14. Burdensome Contracts with Affiliates.................... 47
Section 8.15. No Change in Fiscal Year................................ 48
Section 8.16. Maintenance of Material Subsidiaries.................... 48
Section 8.17. No Restriction on Subsidiary Dividends.................. 48
Section 8.18. Year 2000 Assessment.................................... 48
Section 8.19. Use of Loan Proceeds.................................... 48
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
Section 8.20. Senior Debt............................................. 48
Section 8.21. Consolidated Total Indebtedness Debt/Capital Ratio...... 49
Section 8.22. Leverage Ratio.......................................... 49
Section 8.23. Fixed Charge Coverage Ratio............................. 49
Section 8.24. Hazardous Materials Risk Management..................... 49
Section 9. Events of Default and Remedies.......................... 50
Section 10. The Administrative Agent and Issuing Banks.............. 52
Section 10.1. Appointment and Authorization........................... 52
Section 10.2. Rights as a Lender...................................... 53
Section 10.3. Standard of Care........................................ 53
Section 10.4. Costs and Expenses...................................... 54
Section 10.5. Indemnity............................................... 54
Section 10.6. Issuing Bank............................................ 54
Section 10.7. Designation of Additional Agent......................... 55
Section 11. Guaranty................................................ 55
Section 11.1. The Guaranty............................................ 55
Section 11.2. Guarantee Unconditional................................. 55
Section 11.3. Discharge Only Upon Payment in Full; Reinstatement
in Certain Circumstances.............................. 56
Section 11.4. Subrogation............................................. 56
Section 11.5. Waivers................................................. 57
Section 11.6. Limit on Recovery....................................... 57
Section 11.7. Stay of Acceleration.................................... 57
Section 12. Miscellaneous........................................... 57
Section 12.1. Waiver of Rights........................................ 57
Section 12.2. Non-Business Day........................................ 57
Section 12.3. Documentary Taxes....................................... 57
Section 12.4. Survival of Representations............................. 57
Section 12.5. Set-off Sharing......................................... 58
Section 12.6. Notices................................................. 58
Section 12.7. Counterparts............................................ 58
Section 12.8. Successors and Assigns.................................. 58
Section 12.9. Participants............................................ 59
Section 12.10. Costs and Expenses...................................... 59
Section 12.11. Construction............................................ 60
Section 12.12. Assignments............................................. 60
Section 12.13. Amendments.............................................. 61
Section 12.14. Entire Agreement........................................ 62
Section 12.15. Headings................................................ 62
Section 12.16. Confidentiality......................................... 62
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Section 12.17. Currency................................................ 62
Section 12.18. Excess Interest......................................... 63
Section 12.19. Lender's Obligations Several............................ 63
Section 12.20. Governing Law........................................... 63
Section 12.21. Submission to Jurisdiction; Waiver of Jury Trial........ 63
Signature Page.............................................................. 1
</TABLE>
Exhibit A -- Aggregate Commitments
Exhibit B -- Note
Exhibit C -- Additional Guarantor Supplement
Exhibit D -- Assignment and Acceptance
Exhibit E -- Outstanding Letters of Credit
Schedule 1.1 -- Lines of Business
Schedule 6.2 -- Subsidiaries
Schedule 6.4 -- Contingent Liabilities
Schedule 8.8 -- Permitted Existing Liens
Schedule 8.9 -- Permitted Existing Indebtedness
Schedule 8.10(l) -- Existing Investments in, and loans, advances and
guaranties relating to, Unrestricted
Subsidiaries and other Persons
Schedule 8.10(m) -- Existing Investment in GESCO Subsidiaries
Schedule 8.10(n) -- Permitted Guaranties Outside of Eligible Lines
of Business
-iv-
<PAGE>
FIVE-YEAR CREDIT AGREEMENT
This Five-Year Credit Agreement, dated as of March 19, 1999, is being entered
into by and among Morrison Knudsen Corporation, a Delaware corporation (the
"Company"), certain Subsidiaries of the Company from time to time becoming
parties hereto, as Guarantors, Bank of Montreal, a chartered bank of Canada
acting through its Chicago branch, as Administrative Agent, Bank of Montreal and
NationsBanc Montgomery Securities LLC, as Lead Arrangers, Book Managers and
Syndication Agents, Bank of America National Trust and Savings Association, as
Documentation Agent, and the Lenders who are or may hereafter become a party to
this Agreement.
PRELIMINARY STATEMENTS
A. The Company has requested, and the Lenders have agreed to extend,
certain credit facilities to be made available to or for the account of the
Company on the terms and conditions set forth in this Agreement.
B. The Guarantors are Subsidiaries of the Company and will benefit
directly and indirectly from the extension of such credit facilities to the
Company. As a condition to extending credit to the Company under this
Agreement, the Lenders have required that the Guarantors guaranty the payment of
the Obligations on the terms and conditions set forth in this Agreement.
Now, therefore, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. Definitions; Interpretation of Agreement.
Section 1.1. Definitions. The following terms when used herein shall
have the following meanings, such terms to be equally applicable to both the
singular and the plural of the terms defined:
"Acquired Assets" means the assets and property of the Government
Services and Government Environmental Services businesses of CBS Corporation
acquired, directly or indirectly, by the Company.
"Acquired Business" means the entity or assets acquired by the Company
or a Subsidiary in an Acquisition, whether before or after the date hereof.
"Acquisition " means any transaction or series of related transactions
for the purpose of or resulting, directly or indirectly, in (a) the acquisition
of all or substantially all of the assets of a Person, or of any business or
division of a Person, (b) the acquisition of in excess of 50% of the capital
stock, partnership interests, membership interests or equity of any Person, or
otherwise causing any Person to become a Subsidiary, or (c) a merger or
consolidation or any other
<PAGE>
combination with another Person (other than a Person that is a Subsidiary)
provided that the Company or a Subsidiary of the Company is the surviving
entity.
"Adjusted LIBOR" means a rate per annum determined in accordance with the
following formula:
LIBOR
---------------------------------
Adjusted LIBOR = 1--Eurodollar Reserve Percentage
"LIBOR" means, with respect to an Interest Period, (a) the LIBOR Index
Rate for such Interest Period, if such rate is available, and (b) if the
LIBOR Index Rate cannot be determined, the arithmetic average of the rates
of interest per annum (rounded upwards, if necessary, to the nearest 1/100
of 1%) at which deposits in U.S. Dollars in immediately available funds are
offered to the Administrative Agent at 11:00 a.m. (London, England time)
two (2) Business Days before the beginning of such Interest Period by three
(3) or more major banks in the interbank eurodollar market selected by the
Administrative Agent for delivery on the first day of and for a period
equal to such Interest Period and in an amount equal or comparable to the
principal amount of the share of the LIBOR Portion scheduled to be made by
the Administrative Agent as part of the relevant Borrowing.
"Eurodollar Reserve Percentage" means, for any day during an Interest
Period, the rate at which reserves (including, without limitation, any
supplemental, marginal and emergency reserves) are imposed on such day by
the Board of Governors of the Federal Reserve System (or any successor) on
"eurocurrency liabilities", as defined in such Board's Regulation D (or in
respect of any other category of liabilities that includes deposits by
reference to which the interest rate on LIBOR Portions is determined on any
category of extension of credit or other assets that includes loans by non-
United States offices of any bank to United States residents), subject to
any amendments of such reserve requirement by such Board or its successor,
taking into account any transitional adjustments thereto. For purposes of
this definition, the LIBOR Portions shall be deemed to be eurocurrency
liabilities as defined in Regulation D without benefit or credit for any
prorations, exemptions or offsets under Regulation D. The Adjusted LIBOR
shall automatically be adjusted as of the date of any change in the
Eurodollar Reserve Percentage.
"LIBOR Index Rate" means, for any Interest Period, the rate per annum
(rounded upwards, if necessary, to the next higher one hundred-thousandth
of a percentage point) for deposits in U.S. Dollars for a period equal to
such Interest Period, which appears on the Telerate Page 3750 as of 11:00
a.m. (London, England time) on the day two (2) Business Days before the
commencement of such Interest Period.
"Telerate Page 3750" means the display designated as "Page 3750" on
the Dow Jones Telerate Service (or such other page as may replace Page 3750
on that service or such other service as may be nominated by the British
Bankers' Association as the
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<PAGE>
information vendor for the purpose of displaying British Bankers'
Association Interest Settlement Rates for U.S. Dollar deposits).
"Administrative Agent" means Bank of Montreal, and its successors
pursuant to Section 10.1 hereof.
"Affiliate" means any Person (i) which directly or indirectly through
one or more intermediaries controls, or is controlled by, or is under common
control with, another Person, (ii) which beneficially owns or holds 5% or more
of any class of the Voting Stock of another Person, or (iii) more than 5% of the
Voting Stock (or in the case of a Person which is not a corporation, 5% or more
of the equity interest) of which is beneficially owned or held by another
Person. The term "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of Voting Stock, by contract or otherwise.
"Agreement" means this Five-Year Credit Agreement, as the same may be
amended, modified or restated from time to time in accordance with the terms
hereof.
"Applicable Margin" means the rate per annum specified below for the
type of Portion for which the Applicable Margin is being determined or for
Letter of Credit fees or for the commitment fee (as applicable):
(i) Level I. At any time on or after the Calculation Date, and
thereafter when the Leverage Ratio is less than 1:00 to 1:00, then:
<TABLE>
<CAPTION>
APPLICABLE MARGIN SHALL BE:
For Financial For
For LIBOR For Base Rate Letter of Credit For Non-Financial Commitment
Portions Portion Fee Letter of Credit Fee Fee
<S> <C> <C> <C> <C>
1.25% .25% 1.25% .625% .30%
</TABLE>
(ii) Level II. At any time when the Leverage Ratio is greater
than or equal to 1:00 to 1:00 but less than 2.00 to 1.00, and prior to
the Calculation Date when the Leverage Ratio is less than 2.00 to 1.00
then:
<TABLE>
<CAPTION>
APPLICABLE MARGIN SHALL BE:
For Financial For
For LIBOR For Base Rate Letter of Credit For Non-Financial Commitment
Portions Portion Fee Letter of Credit Fee Fee
<S> <C> <C> <C> <C>
1.50% .50% 1.50% .75% .375%
</TABLE>
-3-
<PAGE>
(iii) Level III. At any time when the Leverage Ratio is greater than
or equal to 2.00 to 1.00 but less than 3.00 to 1.00, then:
APPLICABLE MARGIN SHALL BE:
<TABLE>
<CAPTION>
For Financial For
For LIBOR For Base Rate Letter of Credit For Non-Financial Commitment
Portions Portion Fee Letter of Credit Fee Fee
<S> <C> <C> <C> <C>
1.75% .75% 1.75% .875% .40%
</TABLE>
(iv) Level IV. At any time when the Leverage Ratio is greater than or
equal to 3.00 to 1.00, then:
<TABLE>
<CAPTION>
APPLICABLE MARGIN SHALL BE:
For Financial For
For LIBOR For Base Rate Letter of Credit For Non-Financial Commitment
Portions Portion Fee Letter of Credit Fee Fee
<S> <C> <C> <C> <C>
2.00% 1.00% 2.00% 1.00% .50%
</TABLE>
provided, however that the foregoing rates per annum described in this
clause are subject to the following:
(x) the Applicable Margin shall be based on Level II from the
date hereof until the first determination of the Leverage Ratio
occurring after the date hereof as determined by clause (y) below:
(y) the Leverage Ratio shall be determined as of the last day of
each fiscal quarter of the Company (i.e., the last day of each
February, May, August and November), for the four fiscal quarters then
ended, with any adjustment in the Applicable Margins resulting from a
change in such Leverage Ratio to be effective upon the Administrative
Agent's receipt of the Company's quarterly compliance certificate
pursuant to Section 8.5 hereof; and
(z) if and so long as any Event of Default has occurred and is
continuing and notice of such Event of Default is delivered to the
Company by the Administrative Agent at the request of the Required
Lenders, the Applicable Margins as otherwise computed hereunder shall
be increased by adding the rate of 2% per annum thereto.
"Applications" is defined in Section 2.3(c) hereof.
"Assignment Agreements" is defined in Section 12.12 hereof.
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<PAGE>
"Authorized Representative" means those persons shown on the list of
officers provided by the Company pursuant to Section 7.2(a) hereof or on any
update of any such list provided by the Company to the Administrative Agent, or
any further or different officer of the Company so named by any Authorized
Representative of the Company in a written notice to the Administrative Agent.
"Available Foreign Currency" means any currency other than United
States Dollars, so long as such currency is freely transferable and convertible
into United States Dollars and is traded and readily available to the
Administrative Agent in the London interbank market.
"Base Rate" means, for any day, the greater of: (i) the rate of
interest publicly announced by the Administrative Agent from time to time as its
prime commercial rate for United States dollar loans made in the United States
(it being understood that such rate may not be the Administrative Agent's best
or lowest rate), with any change in the Base Rate resulting from a change in
said prime commercial rate to be effective as of the date of the relevant change
in said prime commercial rate; and (ii) the sum of (x) the rates quoted to the
Administrative Agent as the prevailing rates per annum (rounded upward, if
necessary, to the next higher 1/100 of 1%) bid at approximately 10:00 a.m.
(Chicago time) (or as soon thereafter as is practicable) on such day by two or
more New York Federal funds dealers of recognized standing selected by the
Administrative Agent for the purchase at face value of Federal funds in the
secondary market in an amount comparable to the principal amount owed to the
Administrative Agent for which such rate is being determined, or, if such rates
are not quoted to the Administrative Agent, the rate for that day set forth
opposite the caption "Federal Fund (Effective)" in the daily statistical release
designated as "Composite 3:30 p.m. Quotations for U.S. Government Securities",
or any successor publication, published by the Federal Reserve Bank of New York
plus (y) 1/2 of 1%, provided this clause (ii) shall be inapplicable to any Loan
which is outstanding for 15 days or more (for the foregoing purpose, repayment
of Loans shall be deemed applied to outstanding Loans in the same order in which
they were made).
"Base Rate Portion" is defined in Section 3.1 hereof.
"Borrowing" means the total of Loans of a single type advanced,
continued for an additional Interest Period, or converted from a different type
into such type by the Lenders on a single date and, if such Loans are to be part
of a LIBOR Portion, for a single Interest Period.
"Blue Diamond" means Blue Diamond Materials, Inc., a Nevada
corporation.
"Business Day" means any day other than a Saturday or Sunday on which
banks are open for business in Chicago, Illinois and, when used with reference
to LIBOR Portions, a day on which banks are also open for business and dealing
in United States Dollar deposits in London, England.
"Calculation Date" means the date which is the earlier of (i) twelve
months after the date hereof, and (ii) nine months after the date Loans are made
hereunder to fund the acquisition of the Acquired Assets after completion of the
primary syndication of the credit facilities as determined by the Administrative
Agent in its reasonable discretion.
-5-
<PAGE>
"Capital Expenditures" means, with respect to any Person for any
period, the aggregate amount of all expenditures (whether paid in cash or
accrued as a liability) by such Person during that period during which, in
accordance with GAAP, are or should be included as "additions to property, plant
or equipment" or similar items reflected in the statement of cash flows of such
Person.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitments" means $150,000,000, as such amount may be reduced from
time to time pursuant hereto or as such amount may be increased pursuant to
Section 4.11 hereof. The Commitment of each Lender shall be the amount
specified therefor on Exhibit A attached hereto and made part hereof (as the
same shall be deemed amended after giving effect to the Assignment Agreements
referred to in Section 12.12 hereof), as reduced from time to time pursuant
hereto.
"Company" is defined in the introductory paragraph of this Agreement.
"Consolidated Net Income" means, for any period, the gross revenues
from any source of the Company and its Subsidiaries for such period less all
expenses and other proper charges (including taxes on income), determined for
the Company and its Subsidiaries on a consolidated basis in accordance with
GAAP; provided that there shall be excluded from Consolidated Net Income (i) the
net income (or net loss) of any Person accrued prior to the date it becomes a
Subsidiary of, or has merged into or consolidated with, the Company or another
Subsidiary, (ii) the net income (or net loss) of any GESCO Subsidiary or of any
other Person who is not a Subsidiary in which the Company or any of its
Subsidiaries has an equity interest in, except to the extent of the amount of
dividends or other distributions actually paid to the Company during such period
and (iii) any after-tax extraordinary gains or losses.
"Consolidated Net Worth" means, as of any date, consolidated net worth
as computed in accordance with GAAP for the Company and its Subsidiaries on a
consolidated basis.
"Consolidated Total Capital" means, as of any time the same is to be
determined, the sum of (i) Consolidated Total Indebtedness at such time and (ii)
Consolidated Net Worth at such time.
"Consolidated Total Indebtedness" means and includes (but without
duplication) all obligations of the Company and each of its Subsidiaries of the
following types, all determined on a consolidated basis for the Company and its
Subsidiaries determined in accordance with GAAP: (i) obligations (whether
recourse or nonrecourse) for borrowed money or for the deferred purchase price
of, or which have been incurred in connection with the acquisition of, property
or assets other than current accounts payable, (ii) obligations of the type
described in clause (i) secured by any lien or other charge upon property or
assets owned by the Company or any Subsidiary, even though neither the Company
nor any Subsidiary has assumed or become liable for the payment of such
obligations, (iii) obligations payable over a period in excess of one year to
purchase any property or to obtain the services of another Person if the
contract requires that payment for such property or services be made regardless
of whether such property is delivered
-6-
<PAGE>
or such services are performed other than employment agreements for management
personnel, consulting agreements and contracts for construction services or
supplies entered into in the ordinary course of business of the Company and its
Subsidiaries, (iv) capitalized lease obligations, (v) obligations in respect of
financial letters of credit, and (vi) all liabilities referred to in clauses
(i), (ii), (iii), (iv) and (v) above which are directly or indirectly guaranteed
by the Company or any Subsidiary or which it has agreed (contingently or
otherwise) to purchase or otherwise acquire or in respect of which it has
otherwise assured a creditor against loss; provided, however, Consolidated Total
Indebtedness shall not include any such obligations of the GESCO Subsidiaries
except to the extent the Company or another Subsidiary is liable thereon
(whether as a guarantor or otherwise).
"Default" means any event or condition the occurrence of which would,
with the lapse of time or the giving of notice, or both, constitute an Event of
Default.
"Documentation Agent" means Bank of America National Trust and Savings
Association, and any other Lender, or affiliate thereof, so designated by the
Administrative Agent pursuant to Section 10.7 hereof.
"Earnings Before Interest, Taxes, Depreciation and Amortization"
means, with reference to any period, Consolidated Net Income for such period
plus all amounts deducted in arriving at such Consolidated Net Income in respect
of (i) Interest Expense, (ii) taxes imposed on or measured by income or excess
profits, and (iii) all charges for depreciation of fixed assets and amortization
of intangibles of the Company and its Subsidiaries; provided, however, that
amounts added back to Consolidated Net Income and referred to in clauses (i)-
(iii) above shall be computed exclusive of any such amounts related to the GESCO
Subsidiaries.
"Eligible Lines of Business" means the general nature of the business
and activities engaged in by the Company and its Subsidiaries (which exist as
Subsidiaries of the Company on the date of this Agreement after giving effect to
the acquisition of the Acquired Assets) on the date of this Agreement, and
shall, in any event, include businesses and activities consisting of engineering
and construction, earthmoving, mining, equipment leasing to Affiliates of such
Person, activities directly relating to the application of CF Systems
Corporation's extraction technologies to food processing, environmental
remediation (exclusive of owning a treatment, storage, or disposal facility for
solid, special, nuclear, or hazardous waste), industrial maintenance, site and
infrastructure development, and manufacturing construction materials all as more
fully described on Schedule 1.1 hereof.
"Event of Default" means any of the events specified in Section 9.1
hereof.
"Federal Funds Rate" means the fluctuating interest rate per annum
described in part (x) of clause (ii) of the definition of Base Rate.
"Fee and Structuring Letter" means that certain letter agreement dated
March 4, 1999, among the Company, the Administrative Agent, the Lead Arrangers,
Book Managers, and Syndication Agents, and the Documentation Agent, as the same
relates to the amount and payment of the underwriting, acceptance and ticking
fees provided for therein and the rights of
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<PAGE>
the Administrative Agent and Documentation Agent to adjust the pricing and
structure of the credit facilities provided for herein in connection with the
syndication thereof.
"Financial Letter of Credit" means a letter of credit classified as a
financial letter of credit for regulatory reporting purposes by the
Administrative Agent, which classification shall be conclusive and binding on
the Company and the Lenders if reasonably determined.
"Fixed Charges" means, with reference to any period, the sum of (i)
the aggregate amount of payments required to be made by the Company and its
Subsidiaries within 12 months of the last day of such period in respect of
principal on all indebtedness for borrowed money (whether at maturity, as a
result of mandatory sinking fund redemption, mandatory prepayment, acceleration
or otherwise, but excluding all payments of principal due under the 364-Day
Credit Agreement), plus (ii) Interest Expense for such period.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board that are applicable to the
circumstances as of the date of determination.
"GESCO Subsidiaries" means the Subsidiaries formed and/or acquired by
the Company to hold and/or operate the Acquired Assets or any part thereof,
including, without limitation, Westinghouse Government Services Company LLC and
Westinghouse Government Environmental Services Company LLC.
"Guaranteed Obligations" is defined in Section 11.1 hereof.
"Guarantor" and "Guarantors" each is defined in Section 5.1 hereof.
"Hazardous Materials" means any substance, chemical, compound,
product, solid, gas, liquid, waste, byproduct, pollutant, contaminant, or
material which is hazardous, toxic, explosive, or radioactive, and includes,
without limitation, (i) asbestos, polychlorinated biphenyls, petroleum, and
nuclear materials and (ii) any material classified or regulated as "hazardous"
or "toxic" or words of like import pursuant to health, safety, and environmental
laws and regulations.
"Hazardous Materials Liability" means any liability arising from the
handling or use of, or any abatement, removal, corrective or response action
with respect to, any Hazardous Materials or for any damage to persons or
property resulting from the radioactive, toxic, explosive or other hazardous
properties of nuclear materials, or arising from any health, safety, or
environmental laws or regulations relating thereto.
"Hostile Acquisition" means the acquisition of the capital stock or
other equity interests of a Person through a tender offer or similar
solicitation of the owners of such capital stock or other equity interests which
has not been approved (prior to such acquisition) by resolutions of the Board of
Directors of such Person or by similar action if such Person is not a
corporation, and as to which such approval has not been withdrawn.
-8-
<PAGE>
"ICC" means Industrial Construction Corp., a Montana corporation.
"Interest Expense" means, with reference to any period, all interest
charges (including amortization of debt discount and expense and imputed
interest on leases with an original term of one year or more) accrued for such
period, whether or not paid, all as computed on a consolidated basis for the
Company and its Subsidiaries in accordance with GAAP.
"Interest Period" means, with respect to any LIBOR Portion, the period
commencing on, as the case may be, the creation, continuation or conversion date
with respect to such LIBOR Portion and ending one (1), two (2), three (3) or six
(6) months thereafter as selected by the Company in its notice as provided
herein, or such other period of not less than 10 days and not more than 12
months as agreed to at the time by the Company, the Administrative Agent and
each of the Lenders; provided that, all of the foregoing provisions relating to
Interest Periods are subject to the following:
(i) if any Interest Period would otherwise end on a day which
is not a Business Day, that Interest Period shall be extended to the
next succeeding Business Day, unless the result of such extension
would be to carry such Interest Period into another calendar month in
which event such Interest Period shall end on the immediately
preceding Business Day;
(ii) no Interest Period may extend beyond the final maturity
date of the Notes;
(iii) the interest rate to be applicable to each LIBOR Portion
for each Interest Period shall apply from and including the first day
of such Interest Period to but excluding the last day thereof; and
(iv) no Interest Period may be selected if after giving effect
thereto the Company will be unable to make a principal payment
scheduled to be made during such Interest Period without paying part
of a LIBOR Portion on a date other than the last day of the Interest
Period applicable thereto.
For purposes of determining an Interest Period, a month means a period
starting on one day in a calendar month and ending on a numerically
corresponding day in the next calendar month, provided, however, if an Interest
Period begins on the last day of a month or if there is no numerically
corresponding day in the month in which an Interest Period is to end, then such
Interest Period shall end on the last Business Day of such month.
"Issuing Bank" means the Lender then acting as Administrative Agent or
the Documentation Agent; provided that, in the event a Letter of Credit issued
by the Administrative Agent or the Documentation Agent is not acceptable to the
beneficiary thereof, another Lender party to this Agreement acceptable to such
beneficiary may be the Issuing Bank with respect to such Letter of Credit if
agreed to by the Company and such Lender with prior notice to the Administrative
Agent.
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<PAGE>
"Lead Arrangers, Book Managers, and Syndication Agents" means Bank of
Montreal and NationsBanc Montgomery Securities LLC, and any other Lender, or
affiliate thereof, so designated by the Administrative Agent pursuant to Section
10.7 hereof.
"Lenders" means the parties signing this Agreement as Lenders and all
other banks and other financial institutions becoming parties hereto pursuant to
Section 12.12 hereof.
"Letters of Credit" means Financial Letters of Credit and Non-
Financial Letters of Credit issued for the account of the Company pursuant to
Section 2.3 hereof.
"Leverage Ratio" means, as of any time the same is to be determined,
the ratio of (a) Consolidated Total Indebtedness at such time to (b) Earnings
Before Interest, Taxes, Depreciation and Amortization for the most recently
completed four fiscal quarters of the Company then ended.
"LIBOR Portion" is defined in Section 3.1 hereof.
"Loan Documents" means this Agreement, the Notes, the Applications,
the Fee and Structuring Letter and each of the other instruments and documents
to be delivered hereunder or thereunder or otherwise in connection therewith.
"Loan" and "Loans" each is defined in Section 2.2 hereof.
"Material Adverse Effect" means a material adverse effect on or
material adverse change in (i) the business, Property, condition (financial or
otherwise), or results of operations of the Company and its Subsidiaries taken
as a whole, (ii) the ability of the Company or of the Company and the
Guarantors, taken as a whole, to perform their obligations under the Loan
Documents, or (iii) the validity or enforceability of any of the Loan Documents
or the rights or remedies of the Administrative Agent or of the Lenders
thereunder.
"Material Foreign Subsidiary" means each Unrestricted Subsidiary
(other than Blue Diamond, ICC, Pomeroy Corporation and the GESCO Subsidiaries),
except to the extent it has neither (a) assets with a book value at or in excess
of 5% of the Company's consolidated total assets nor (b) Earnings Before
Interest, Taxes, Depreciation and Amortization attributable to such Subsidiary
for the most recently completed calendar year at or in excess of 5% of Earnings
Before Interest, Taxes, Depreciation and Amortization for the Company and its
Subsidiaries on a consolidated basis for such year.
"Material Subsidiary" means each Restricted Subsidiary designated as a
Material Subsidiary on Schedule 6.2 hereof, and any other Restricted Subsidiary
except to the extent such other Restricted Subsidiary has neither (i) assets
with a book value at or in excess of 5% of the Company's consolidated total
assets nor (ii) Earnings Before Interest, Taxes, Depreciation and Amortization
attributable to such Subsidiary for the most recently completed calendar year at
or in excess of 5% of Earnings Before Interest, Taxes, Depreciation and
Amortization for the Company and its Subsidiaries on a consolidated basis for
such year.
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"MK-Ohio" means Morrison Knudsen Corporation, an Ohio corporation
"Moody's Rating" means the rating assigned by Moody's Investors
Service, Inc. to the outstanding senior unsecured non-credit enhanced long-term
indebtedness of the Company. Any reference in this Agreement to any specific
rating is a reference to such rating as currently defined by Moody's Investors
Service, Inc. and shall be deemed to refer to the equivalent rating if such
rating system changes.
"Non-Financial Letter of Credit" means a letter of credit classified
as a performance letter of credit or as a commercial letter of credit for
regulatory reporting purposes by the Administrative Agent, which classification
shall be conclusive and binding on the Company and the Lenders if reasonably
determined.
"Non-Recourse Debt" means indebtedness of any Person which expressly
provides that the source of repayment of such indebtedness is limited to the
property of such Person securing such indebtedness acquired with the proceeds of
such indebtedness, and that the holder of such indebtedness generally has no
recourse against the obligor thereon or any other Person.
"Note" and "Notes" each is defined in Section 2.2 hereof.
"Obligations" means all obligations of the Company to pay principal
and interest on the Loans, all reimbursement obligations with respect to Letters
of Credit owing hereunder and under the Applications, all fees and charges
payable hereunder, and all other payment obligations of the arising under or in
relation to any Loan Document, in each case whether now existing or hereafter
arising, due or to become due, direct or indirect, absolute or contingent, and
howsoever evidenced, held or acquired.
"Overnight Foreign Currency Rate" means, for any amount payable in a
currency other than U.S. Dollars, the rate of interest per annum as determined
by the Issuing Bank (rounded upwards, if necessary, to the nearest whole
multiple of one-sixteenth of one percent (1/16 of 1%)) at which overnight or
weekend deposits of the appropriate currency (or, if such amount due remains
unpaid more than 3 Business Days, then for such period of time not longer than 6
months as the Issuing Bank may elect in its absolute discretion) for delivery in
immediately available and freely transferable funds would be offered by the
Issuing Bank to major banks in the interbank market upon request of such major
banks for the applicable period as determined above and in an amount comparable
to the unpaid principal amount of the related obligation (or, if the Issuing
Bank is not placing deposits in such currency in the interbank market, then the
Issuing Bank's cost of funds in such currency for such period).
"Permitted Liens" is defined in Section 8.8 hereof.
"Person" means any individual, trust, partnership, firm, corporation,
limited liability company, association, unincorporated organization or any other
entity or organization, including a government or agency or political
subdivision thereof.
"Portion" is defined in Section 3.1 hereof.
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<PAGE>
"Prior Credit Agreement" means that certain Credit Agreement dated as
of October 8, 1996, as amended, by and among the Company, Bank of Montreal,
individually and as agent, and the other lenders party thereto.
"Required Lenders" means, as of the date of determination thereof,
Lenders whose outstanding Loans and interests in Letters of Credit and unused
Commitments, if any, constitute 51% or more of the outstanding Loans and
interests in Letters of Credit and unused Commitments then outstanding.
"Restricted Payments" is defined in Section 8.11 hereof.
"Restricted Subsidiary" means each Subsidiary other than an
Unrestricted Subsidiary.
"Revolving Credit" means the credit facility for making Loans and
issuing Letters of Credit described in Sections 2.1-2.3 hereof.
"S&P Rating" means the rating assigned by Standard & Poor's Ratings
Services Group, a division of The McGraw-Hill Companies, Inc., to the
outstanding senior unsecured non-credit enhanced long-term indebtedness of the
Company. Any reference in this Agreement to any specific rating is a reference
to such rating as currently defined by Standard & Poor's Ratings Group, a
division of The McGraw-Hill Companies, Inc., and shall be deemed to refer to the
equivalent rating if such rating system changes.
"Subsidiary" means any corporation or organization more than 50% of
the outstanding Voting Stock of which is at the time directly or indirectly
owned by the Company, by one or more of its Subsidiaries, or by the Company and
one or more of its Subsidiaries.
"Termination Date" means March 18, 2004, or such later date to which
the same may be extended pursuant to Section 4.12 hereof, or such earlier date
on which the Commitments are terminated in whole pursuant to Section 4.6,
Section 9.2 or Section 9.3 hereof.
"364-Day Credit Agreement" means that certain 364-Day Credit Agreement
dated of even date herewith by and among the Company, the guarantors from time
to time party thereto, Bank of Montreal, as administrative agent, Bank of
Montreal and NationsBanc Montgomery Securities LLC, as lead arrangers, book
managers and syndication agents, Bank of America National Trust and Savings
Association, as documentation agent, and the lenders which are or become party
thereto.
"Unrestricted Subsidiary" means Blue Diamond, ICC, Pomeroy
Corporation, the GESCO Subsidiaries and each other Subsidiary which (i) is
organized under the laws of a jurisdiction other than the United States of
America or any state thereof, (ii) conducts substantially all of its business
outside of the United States of America, and (iii) has substantially all of its
assets outside of the United States of America.
"U.S. Dollars" and "$" each means the lawful currency of the United
States of America.
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<PAGE>
"U.S. Dollar Equivalent" means the amount of U.S. Dollars which would
be realized by converting the relevant Available Foreign Currency into U.S.
Dollars in the spot market at the exchange rate quoted by the Issuing Bank, at
approximately 11:00 a.m. (London time) on the date on which a computation
thereof is required to be made, to major banks in the interbank foreign exchange
market for the purchase of U.S. Dollars with such foreign currency.
"Voting Stock" means securities of any class or classes of a Person,
the holders of which are ordinarily, in the absence of contingencies, entitled
to elect a majority of the corporate directors of such Person (or Persons
performing similar functions).
"Washington" means Washington Contractors Group, Inc., a Montana
corporation.
"Year 2000 Problem" means any significant risk that computer hardware,
software, or equipment containing embedded microchips essential to the business
or operations of the Company or any of its Subsidiaries will not, in the case of
dates or time periods occurring after December 31, 1999, function at least as
efficiently and reliably as in the case of times or time periods occurring
before January 1, 2000, including the making of accurate leap year calculations.
Capitalized terms defined in the other provisions of this Agreement
shall have the meanings so ascribed to them in all provisions of this Agreement.
Section 1.2. Accounting Terms. For purposes of this Agreement, all
accounting terms not otherwise defined herein shall have the meanings assigned
to such terms in conformity with GAAP. Financial statements and other
information furnished to the Administrative Agent pursuant to Section 8.5 shall
be prepared in accordance with GAAP (as in effect at the time of such
preparation) on a consistent basis. In the event any "Accounting Changes" (as
defined below) shall occur and such changes affect financial covenants,
standards or terms in this Agreement, then the Company, the Administrative Agent
and the Lenders agree to enter into negotiations in order to amend such
provisions of this Agreement so as to equitably reflect such Accounting Changes
with the desired result that the criteria for evaluating the financial condition
of the Company and its Subsidiaries shall be the same after such Accounting
Changes as if such Accounting Changes had not been made, and until such time as
such an amendment shall have been executed and delivered by the Company, the
Administrative Agent and the Required Lenders, (i) all financial covenants,
standards and terms in this Agreement shall be calculated and/or construed as if
such Accounting Changes had not been made and (ii) the Company shall prepare
footnotes to each compliance certificate and the financial statements required
to be delivered hereunder that show the differences between the financial
statements delivered (which reflect such Accounting Changes) and the basis for
calculating financial covenant compliance (without reflecting such Accounting
Changes). "Accounting Changes" means: (a) changes in accounting principles
required by GAAP and implemented by the Company and any of its Subsidiaries; (b)
changes in accounting principles recommended by certified public accountants of
the Company or any of its Subsidiaries; or (c) changes in carrying value of the
Company's (or any of its Subsidiaries') assets, liabilities or equity accounts
resulting from the application of purchase accounting principles.
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SECTION 2. THE REVOLVING CREDIT.
Section 2.1. General Terms. Subject to all of the terms and
conditions hereof, the Lenders agree to extend a Revolving Credit to the Company
which may be availed of by the Company from time to time, be repaid and used
again, during the period from the date hereof to and including the Termination
Date. The Revolving Credit may be utilized by the Company in the form of Loans
or Letters of Credit, all as more fully hereinafter set forth, provided that the
aggregate amount of Loans and Letters of Credit outstanding at any one time
shall not exceed the Commitments. The maximum amount of the Revolving Credit
which each Lender agrees to extend hereunder shall be as set forth opposite its
name on Exhibit A attached hereto and made a part hereof (as the same shall be
deemed amended after giving effect to the Assignment Agreements referred to in
Section 12.12 hereof). The obligations of the Lenders hereunder are several and
not joint and no Lender shall under any circumstance be obligated to extend
credit under the Revolving Credit in excess of its Commitment or its pro rata
share of the credit outstanding hereunder.
Section 2.2. The Loans. Subject to all of the terms and conditions
hereof, the Revolving Credit may be availed of by the Company in the form of
loans (individually a "Loan" and collectively the "Loans"). Each Borrowing
shall be in a minimum amount of $1,000,000 and thereafter in integral multiples
of $100,000 (with LIBOR Portions being in a minimum amount of $5,000,000 and
thereafter in integral multiples of $500,000) and shall be made pro rata from
the Lenders in accordance with the amounts of their Commitments, except that
Borrowings may be requested in the amount of any drawing made with respect to
any Letter of Credit issued hereunder in order to satisfy the reimbursement
obligation then due. All Loans made by each Lender shall be made against and
evidenced by a promissory note (individually a "Note" and collectively the
"Notes") in the form (with appropriate insertions) annexed hereto as Exhibit B.
Each Note shall be in the amount of the Commitment of the Lender to which it is
payable and shall mature on the Termination Date.
Section 2.3. Letters of Credit.
(a) General Terms. Subject to all of the terms and conditions
hereof, the Revolving Credit may be availed of by the Company in the form
of Letters of Credit issued to Persons other than Affiliates of the
Company, provided that the U.S. Dollar Equivalent of any such Letter of
Credit, when taken together with the U.S. Dollar Equivalent of all
outstanding Loans and Letters of Credit, shall not exceed the Commitments
then in effect. Notwithstanding anything to the contrary contained herein,
all letters of credit issued by Bank of Montreal and Bank of America
National Trust and Savings Association pursuant to the Prior Credit
Agreement (such letters of credit being generally described on Exhibit E
attached hereto) shall constitute "Letters of Credit" herein for all
purposes of this Agreement and all applications and reimbursement
agreements with respect to such letters of credit shall constitute
"Applications" herein for all purposes of this Agreement, in each case to
the same extent, and with the same force and effect, as if such Letters of
Credit and Applications therefor had been issued at the request of the
Company under this Agreement (without limiting the foregoing, from and
after the date hereof, all reimbursement obligations and fees with respect
to such letters of
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credit shall be paid as provided for in this Agreement). Subject to the
last sentence of this Section 2.3(a), the amount of any Letter of Credit
for all purposes of this Agreement shall be the maximum amount which could
be drawn thereunder under any circumstances and over any period of time
plus all unreimbursed drawings then outstanding with respect thereto. The
Issuing Bank shall issue the Letters of Credit for the account of the
Lenders and, accordingly, each Letter of Credit shall be deemed to utilize
a pro rata share of the Commitment of each Lender. In the event the Company
requests a letter of credit be issued in the name of a joint venture or
other Affiliate of the Company, as applicant, for which the Company intends
to be liable thereon for a fixed percentage of the reimbursement
obligations and other liabilities owed to the Issuing Bank in connection
therewith, such letter of credit may be issued hereunder provided that (i)
the issuance thereof shall be at the sole discretion of the Issuing Bank on
a case-by-case basis as and when any such letter of credit is requested,
(ii) any portion of the reimbursement obligations or other liabilities owed
to the Issuing Bank in connection therewith which are not assumed by the
Company shall be for the sole risk and benefit of the Issuing Bank (i.e.,
only the fixed percentage of such obligations and liabilities assumed by
the Company shall be risk-participated to the Lenders under Section 2.3(e)
below) and (iii) each such letter of credit shall constitute a "Letter of
Credit" hereunder only to the extent of the Company's liability thereon.
(b) General Characteristics. Each Letter of Credit issued hereunder
shall expire not later than the Termination Date then in effect. Each
Letter of Credit issued hereunder shall be payable in U.S. Dollars or in an
Available Foreign Currency, shall conform to the general requirements of
the Issuing Bank for the issuance of letters of credit as to form and
substance, and shall be a letter of credit which the Issuing Bank may
lawfully issue. If an Issuing Bank issues any Letter of Credit with an
expiration date that is automatically extended unless such Issuing Bank
gives notice that the expiration date will not so extend beyond its then
scheduled expiration date, such Issuing Bank will give notice of such non-
renewal before the time necessary to prevent such automatic extension if
before such required notice date (i) the expiration date of such Letter of
Credit if so extended would be after the Termination Date then in effect,
(ii) the Commitments have been terminated, or (iii) a Default or an Event
of Default exists and the Administrative Agent (acting with the consent or
at the direction of the Required Lenders) has given the Issuing Bank
instructions not to so permit the extension of the expiration date of such
Letter of Credit.
(c) Applications and Agreements. At the time the Company requests a
Letter of Credit to be issued (or prior to the first issuance of a Letter
of Credit, in the case of a continuing application), it shall execute and
deliver to the Issuing Bank an application for such Letter of Credit in the
form then prescribed by the Issuing Bank (the "Applications"). Anything
contained in the Applications to the contrary notwithstanding (aa) the
Company shall pay fees in connection with Letters of Credit only as set
forth in Section 4 hereof, (ab) in the event that the Issuing Bank is not
promptly reimbursed for the amount of any draft drawn under a Letter of
Credit issued hereunder after notice to the Company that such draft has
been received, the obligation of the Company to reimburse the Issuing Bank
for the amount of such draft shall bear interest (which the
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Company hereby promises to pay) from and after the date the draft is paid
at a fluctuating rate per annum equal to (x) in the case of a drawing under
a Letter of Credit denominated in U.S. Dollars or a Letter of Credit
denominated in an Available Foreign Currency as to which the Issuing Bank
has requested that the Company reimburse such drawing in U.S. Dollars, the
sum of 2% plus the Base Rate from time to time in effect, and (y) in the
case of a drawing under a Letter of Credit denominated in an Available
Foreign Currency as to which the Issuing Bank has requested that the
Company reimburse such drawing in the Available Foreign Currency in which
such Letter of Credit is denominated, the sum of 2% plus the Overnight
Foreign Currency Rate, and (ac) so long as no Event of Default has occurred
and is continuing, the Issuing Bank will not call for the funding of a
Letter of Credit prior to being presented with a draft or demand for
payment thereunder (or, in the event the draft is a time draft, prior to
its due date). The obligation of the Company to reimburse the Issuing Bank
for all drawings under a Letter of Credit issued hereunder shall be
governed by the Application related to such Letter of Credit, except that
(i) the reimbursement by the Company of draws made under a Letter of Credit
denominated in U.S. Dollars shall be made in U.S. Dollars, (ii) the
reimbursement by the Company of draws made under a Letter of Credit
denominated in an Available Foreign Currency shall be made by payment in
U.S. Dollars of the U.S. Dollar Equivalent thereof, calculated on the date
the Issuing Bank paid such draw, of the amount paid by the Issuing Bank
pursuant to such draw, or, if the Issuing Bank shall elect by notice to the
Company and the Administrative Agent by payment in the Available Foreign
Currency which was paid by the Issuing Bank pursuant to such drawing in an
amount equal to such drawing, and (iii) reimbursement in U.S. Dollars of a
drawing paid shall be made to the Issuing Bank (with notice to the
Administrative Agent) by no later than 1:00 p.m. (Chicago time) on the date
when such drawing is paid and reimbursement in an Available Foreign
Currency of a drawing paid shall be made to the Issuing Bank (with notice
to the Administrative Agent) by no later than 1:00 p.m. local time at the
place of payment or, if earlier, such local time as is necessary for such
funds to be received and transferred to the Issuing Bank for same day value
on the day such obligation is due; and any payment of a reimbursement
obligation relating to a Letter of Credit received after such time shall be
deemed to have been received by the Issuing Bank on the next Business Day.
Notwithstanding any provision of this Agreement or any Application, in the
event of any conflict or inconsistency between the terms of this Agreement
and any Application, the terms of this Agreement shall control (without
limiting the foregoing, the determination of the existence or non-existence
of any Event of Default shall be determined by reference to this Agreement
without regard to other events or circumstances which may be defined as
events of default under any such Application).
(d) Change in Laws. If the Issuing Bank or any Lender shall determine
in good faith that any applicable law, regulation or guideline (including,
without limitation, Regulation D of the Board of Governors of the Federal
Reserve System) or any interpretation of any of the foregoing by any
governmental authority charged with the administration thereof or any
central bank or other fiscal, monetary or other authority having
jurisdiction over the Issuing Bank or such Lender (whether or not having
the force of law) shall after the date hereof:
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(aa) impose, modify or deem applicable any reserve, special
deposit or similar requirements against the Letters of Credit or the
Issuing Bank's or such Lender's or the Company's liability with
respect thereto; or
(bb) impose on the Issuing Bank or such Lender any penalty
with respect to the foregoing or any other condition regarding this
Agreement, the Applications or the Letters of Credit;
and the Issuing Bank or such Lender shall determine in good faith that the
result of any of the foregoing is to increase the cost (whether by
incurring a cost or adding to a cost) to the Issuing Bank or such Lender of
issuing, maintaining or participating in the Letters of Credit hereunder
(without benefit of, or credit for, any prorations, exemptions, credits or
other offsets available under any such laws, regulations, guidelines or
interpretations thereof), then the Company shall pay within 30 days
following demand by the Issuing Bank or such Lender from time to time as
specified by the Issuing Bank or such Lender such additional amounts as the
Issuing Bank or such Lender shall in good faith determine are sufficient to
compensate and indemnify it for such increased cost. If the Issuing Bank
or any Lender makes such a claim for compensation, it shall provide to the
Company and the Administrative Agent a written explanation of the
circumstances giving rise to such claim and a certificate setting forth
such increased costs as a result of any event mentioned herein in
reasonable detail and such certificate shall be deemed prima facie correct.
Neither an Issuing Bank nor a Lender shall be entitled to compensation
under this Section 2.3(d) with respect to any imposition for any period
prior to the earlier of (i) the date it notifies the Company of the
imposition giving rise to the request for compensation or (ii) the date
which is 30 days prior to the date it becomes aware of the imposition
giving rise to the request for compensation if the Company is notified of
the adoption or change prior to the lapse of such 30-day period.
(e) Participations in Letters of Credit. Each Lender shall
participate on a pro rata basis in the Letters of Credit issued by the
Issuing Banks, which participation shall automatically arise upon the
issuance of each such Letter of Credit (such participations to ratably
count against the Commitments of the Lenders when the Letters of Credit are
issued). Each Lender unconditionally agrees that in the event an Issuing
Bank is not immediately reimbursed by the Company for the amount paid by
such Issuing Bank on any draft presented to it under a Letter of Credit
issued by it, then such Issuing Bank shall give prompt notice thereof to
each Lender and in that event each Lender shall thereafter pay to such
Issuing Bank (i) in the case of a reimbursement obligation payable in U.S.
Dollars, an amount equal to such Lender's pro rata share (based on the
percentage which its Commitment bears to the aggregate of the Commitments)
of such unpaid reimbursement obligation, such payment to be made in lawful
money in the United States, in immediately available funds at the Issuing
Bank's lending office designated on its signature page hereof (or on its
Assignment Agreement delivered pursuant to Section 12.12 hereof), together
with interest on such amount accrued from the date the related payment was
made by the Issuing Bank to the date of such payment by such participating
Lender at a rate per annum equal to (x) from the date the related payment
was made by the Issuing Bank to the date two (2) Business Days after
payment by such
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Lender is due hereunder, the Federal Funds Rate for each such day and (y)
from the date two (2) Business Days after the date such payment is due from
such Lender to the date such payment is made by such Lender, the Base Rate
in effect for each such day and (ii) in the case of a reimbursement
obligation payable in an Available Foreign Currency, an amount equal to
such Lender's pro rata share (based on the percentage which its Commitment
bears to the aggregate of the Commitments) of such unpaid reimbursement
obligation, such payment to be made in the U.S. Dollar Equivalent of such
Available Foreign Currency as then determined by the Issuing Bank, together
with interest on such amount accrued from the date the related payment was
made by the Issuing Bank to the date of such payment by the participating
Lender at a rate per annum equal to (x) from the date the related payment
was made by the Issuing Bank to the date two (2) Business Days after
payment by such Lender is due hereunder, the U.S. Dollar Equivalent of the
Overnight Foreign Currency Rate for each such day or, at the Issuing Bank's
election, the Federal Funds Rate and (y) from the date two (2) Business
Days after the date such payment is due from such Lender to the date such
payment is made by such Lender, the sum of 1% plus the U.S. Dollar
Equivalent of the Overnight Foreign Currency Rate for each such day or, at
the Issuing Bank's election, the Base Rate in effect for each such day.
Each such participating Lender shall thereafter be entitled to receive its
pro rata share of each payment received in respect of the relevant
reimbursement obligation and of interest paid thereon, with the Issuing
Bank retaining its pro rata share as a Lender hereunder. In the event that
any Lender fails to honor its obligation to reimburse an Issuing Bank for
its pro rata share of the amount of any such draft, then in that event (i)
the defaulting Lender shall have no right to participate in any recoveries
from the Company in respect of such draft and (ii) all amounts to which the
defaulting Lender would otherwise be entitled under the terms of this
Agreement shall first be applied to reimbursing the Issuing Bank for the
defaulting Lender's portion of the draft, together with interest thereon at
the rate provided for herein. Upon reimbursement to the Issuing Bank of the
amount advanced by the Issuing Bank in respect of the defaulting Lender's
share of the draft, together with interest thereon, the defaulting Lender
shall thereupon be entitled to its participation in such Issuing Bank's
rights of recovery against the Company in respect of the draft paid by the
Issuing Bank.
(f) Notices. Prior to the issuance of, or amendment to, any Letter of
Credit, the relevant Issuing Bank shall give prompt telephone, telex or
telecopy notice to the Administrative Agent of the proposed Letter of
Credit specifying the effective date of such Letter of Credit or amendment,
the amount, the beneficiary, and the expiration date of the proposed Letter
of Credit. The Administrative Agent shall promptly thereafter notify the
Issuing Bank by telephone, telex or telecopy as to whether the amount of
such Letter of Credit or expiry date with respect thereto would exceed any
restrictions in this Section 2.3 on the amount of Letters of Credit to be
issued hereunder or the expiry dates with respect thereto. Upon the
issuance of, or amendment to, any Letter of Credit hereunder, the relevant
Issuing Bank shall promptly notify the Administrative Agent and the
Administrative Agent shall thereafter promptly give telephone, telex or
telecopy notice to each of the other Lenders of the issuance of, or
amendment to, such Letters of Credit specifying the effective date of the
Letter of Credit or amendment, the amount, the beneficiary, and the
expiration date of the Letter of Credit, in each case as established
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originally or through the relevant amendment, as applicable, each Lender's
pro rata participation in such Letter of Credit, and whether the Issuing
Bank has classified the Letter of Credit as a Financial Letter of Credit or
a Non-Financial Letter of Credit for regulatory reporting purposes.
(g) Currency Determinations. The Issuing Bank shall determine the
U.S. Dollar Equivalent of each Letter of Credit and each obligation due
with respect thereto, and a determination thereof by the Issuing Bank shall
be conclusive and binding except in the case of manifest error. The U.S.
Dollar Equivalent of each reimbursement obligation with respect to a Letter
of Credit drawn upon shall be calculated on the date the Issuing Bank pays
on the drawing giving rise to such reimbursement obligation. The U.S.
Dollar Equivalent of each Letter of Credit shall be determined or
redetermined, as applicable, on the date of issuance, increase or extension
of such Letter of Credit and on the first day of each month thereafter, and
each Issuing Bank shall promptly notify the Administrative Agent of the
determination thereof. At the request of any Lender, the Issuing Bank
shall redetermine the U.S. Dollar Equivalent of any Letter of Credit at
such times, and from time to time, as may be requested.
Section 2.4. Manner of Borrowing. The Company shall give written or
telephonic notice to the Administrative Agent (which notice shall be irrevocable
once given and, if given by telephone, shall be promptly confirmed in writing)
by no later than 12:00 noon (Chicago time) on the date the Company requests that
any Borrowing of Loans be made to it under the Commitments, and the
Administrative Agent shall promptly notify each Lender of the Administrative
Agent's receipt of each such notice. Each such notice shall specify the date of
the Borrowing of Loans requested (which must be a Business Day, and which date
shall be at least three (3) Business Days subsequent to the date of such notice
in the case of any Borrowing of Loans constituting a LIBOR Portion) and the
amount of such Borrowing. Each Borrowing of Loans shall initially constitute
part of the applicable Base Rate Portion except to the extent the Company has
otherwise timely elected that such Borrowing constitute part of a LIBOR Portion
as provided in Section 3 hereof. The Company agrees that the Administrative
Agent may rely upon any written or telephonic notice given by any person the
Administrative Agent in good faith believes is an Authorized Representative
without the necessity of independent investigation and, in the event any
telephonic notice conflicts with the written confirmation, such telephonic
notice shall govern if the Administrative Agent and the Lenders have acted in
reliance thereon. The Lenders undertake to endeavor in good faith to honor on a
same day basis Borrowing requests received later than 12:00 noon (Chicago time)
but shall incur no liability to the Company if it is not reasonably practical
for them to honor such requests on a same day basis. Not later than 1:00 p.m.
(Chicago time) on the date specified for any Borrowing of Loans to be made
hereunder, each Lender shall make the proceeds of its Loan comprising part of
such Borrowing available to the
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Administrative Agent in Chicago, Illinois in immediately available funds.
Subject to the provisions of Section 7 hereof, the proceeds of each Loan shall
be made available to the Company at the principal office of the Administrative
Agent in Chicago, Illinois, in immediately available funds, upon receipt by the
Administrative Agent from each Lender of its pro rata share of such Borrowing.
Unless the Administrative Agent shall have been notified by a Lender prior to
1:00 p.m. (Chicago time) on the date a Borrowing is to be made hereunder that
such Lender does not intend to make its pro rata share of such Borrowing
available to the Administrative Agent, the Administrative Agent may assume that
such Lender has made such share available to the Administrative Agent on such
date and the Administrative Agent may (but shall not be obligated to) in
reliance upon such assumption make available to the Company a corresponding
amount. If such corresponding amount is not in fact made available to the
Administrative Agent by such Lender and the Administrative Agent has made such
amount available to the Company, the Administrative Agent shall be entitled to
receive such amount from such Lender forthwith upon its demand, together with
interest thereon in respect of each day during the period commencing on the date
such amount was made available to the Company and ending on but excluding the
date the Administrative Agent recovers such amount at a rate per annum equal to
(x) from the date the related payment was due to the Administrative Agent to the
date two (2) Business Days after the date such payment was due, the Federal
Funds Rate for such day (or in the case of a day which is not a Business Day,
then for the preceding day) and (y) thereafter until payment of such amount is
received by the Administrative Agent from such Lender, the Base Rate in effect
for each such day.
SECTION 3. INTEREST.
Section 3.1. Options. Subject to all of the terms and conditions of
this Section 3, portions of the principal indebtedness evidenced by the Notes
(all of the indebtedness evidenced by the Notes bearing interest at the same
rate for the same period of time being hereinafter referred to as a "Portion")
shall, at the option of the Company, bear interest with reference to the Base
Rate (the "Base Rate Portions") or with reference to the Adjusted LIBOR ("LIBOR
Portions"), and Portions shall be convertible from time to time from one basis
to the other. All of the indebtedness evidenced by the Notes which is not part
of a LIBOR Portion shall constitute a single Base Rate Portion. All of the
indebtedness evidenced by the Notes which bears interest with reference to a
particular Adjusted LIBOR for a particular Interest Period shall constitute a
single LIBOR Portion. Anything contained herein to the contrary
notwithstanding, there shall not be more than eight (8) LIBOR Portions
applicable to any Note outstanding at any one time and each Lender shall have a
ratable interest in each Portion based on its Commitment percentage thereof.
The Company promises to pay interest on each Portion at the rates and times
specified in this Section 3.
Section 3.2. Base Rate Portion. Each Base Rate Portion shall bear
interest (which the Company promises to pay at the times herein provided) at the
rate per annum determined by adding the Applicable Margin to the Base Rate as in
effect from time to time. Interest on the Base Rate Portions shall be payable
quarterly in arrears on the first day of each March, June, September and
December in each year and at maturity of the applicable Notes, and interest
after maturity shall be due and payable upon demand.
Section 3.3. LIBOR Portions. Each LIBOR Portion shall bear interest
(which the Company promises to pay at the times herein provided) for each
Interest Period selected therefor at a rate per annum equal to the Adjusted
LIBOR for such Interest Period plus the Applicable Margin. Interest on each
LIBOR Portion shall be due and payable on the last day of each Interest Period
applicable thereto and, if an Interest Period is longer than three (3) months,
then at the end of each three (3)-month period and at the end of such Interest
Period, and interest after maturity shall be due and payable upon demand. The
Company shall give written or telephonic notice to
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the Administrative Agent (which notice shall be irrevocable once given and, if
given by telephone, shall be promptly confirmed in writing) on or before 12:00
noon (Chicago time) on the third Business Day preceding the end of an Interest
Period applicable to a LIBOR Portion whether such LIBOR Portion is to continue
as a LIBOR Portion, in which event the Company shall notify the Administrative
Agent of the new Interest Period selected therefor, and in the event the Company
shall fail to so notify the Administrative Agent, such LIBOR Portion shall
automatically be converted into and added to the Base Rate Portion as of and on
the last day of such Interest Period. The Administrative Agent shall promptly
notify each Lender of each notice received from the Company pursuant to the
foregoing provisions. Anything contained herein to the contrary notwithstanding,
the obligation of the Lenders to create or continue any LIBOR Portion or to
convert any part of the Base Rate Portion into a LIBOR Portion shall be
conditioned upon the fact that at the time no Default or Event of Default shall
have occurred and be continuing, except that during the existence of a Default
(but not an Event of Default) the Company may request the continuation of any
LIBOR Portion into another LIBOR Portion with an Interest Period not in excess
of one (1) month.
Section 3.4. Computation. All interest on the Notes and all fees,
charges and commissions due hereunder shall be computed on the basis of a year
of 360 days for the actual number of days elapsed, except that interest on the
Base Rate Portion and reimbursement obligations with respect to Letters of
Credit shall be computed on the basis of a year of 365 or 366 days (as the case
may be) for the actual number of days elapsed.
Section 3.5. Manner of Rate Selection. The Company shall notify the
Administrative Agent by 12:00 noon (Chicago time) at least three (3) Business
Days prior to the date upon which it requests that any LIBOR Portion be created
or that any part of the Base Rate Portion be converted into a LIBOR Portion
(such notice to specify in each instance the amount thereof and the Interest
Period selected therefor) and the Administrative Agent shall promptly advise
each Lender of each such notice. If any request is made to convert a LIBOR
Portion into the Base Rate Portion, such conversion shall only be made so as to
become effective as of the last day of the Interest Period applicable thereto.
All requests for the creation, continuance or conversion of Portions under this
Agreement shall be irrevocable. Such requests may be written or telephonic
(provided that if such notice is given by telephone, the Company shall promptly
confirm such notice to the Administrative Agent in writing), and the
Administrative Agent is hereby authorized to honor telephonic requests for
creations, continuances and conversions received by it from any person the
Administrative Agent reasonably believes to be an Authorized Representative, the
Company hereby indemnifying the Administrative Agent and the Lenders from any
liability or loss ensuing from so acting. The Company acknowledges that, in
connection with acknowledgment agreements entered into pursuant to Section 4.11
hereof and Assignment Agreements entered into pursuant to Section 12.12(a)
hereof entered into at any time prior to the earlier of (i) 30 days after the
close of the primary syndication as reasonably determined and established by the
Administrative Agent and (ii) six (6) months after the date hereof, any LIBOR
Portions which are required to be prepaid by the Administrative Agent in
connection therewith (in order for Loans and credit risks with respect to
Letters of Credit then outstanding to be shared ratably by the Lenders in
accordance with their adjusted Commitments) shall be accompanied by any payments
required to be paid to the Lenders under Section 3.6 hereof.
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Section 3.6. Funding Indemnity. In the event any Lender shall incur any
loss, cost or expense (including, without limitation, any loss, cost or expense
incurred by reason of the liquidation or re-employment of deposits or other
funds acquired by such Lender to fund or maintain any LIBOR Portion or the
relending or reinvesting of such deposits or amounts paid or prepaid to such
Lender, but excluding any loss of profit) as a result of:
(a) any payment or prepayment of a LIBOR Portion on a date other than
the last day of its Interest Period for any reason, whether before or after
default, and whether or not such payment is required by any of the
provisions of this Agreement;
(b) any failure (because of a failure to meet the conditions of
Section 7 hereof or otherwise) by the Company to create, borrow, continue
or effect by conversion a LIBOR Portion on the date specified in a notice
given pursuant to this Agreement hereof; or
(c) any failure by the Company to make any payment of principal on any
LIBOR Portion when due (whether by acceleration, mandatory prepayment or
otherwise),
then, upon the demand of such Lender, the Company shall pay to such Lender such
amount as will reimburse such Lender for such loss, cost or expense. If any
Lender makes such a claim for compensation, it shall provide to the Company a
certificate executed by an officer of such Lender setting forth the amount of
such loss, cost or expense in reasonable detail (including an explanation of the
basis for and the computation of such loss, cost or expense) and such
certificate shall be deemed prima facie correct.
Section 3.7. Change of Law. Notwithstanding any other provisions of this
Agreement or any Note, if at any time any change in applicable law or regulation
or in the official interpretation thereof makes it unlawful for any Lender to
make or continue to maintain LIBOR Portions or to give effect to its obligations
to make LIBOR Portions available as contemplated hereby, such Lender shall
promptly give notice thereof to the Company and the Administrative Agent and
such Lender's obligations to make or maintain LIBOR Portions under this
Agreement shall be suspended until it is no longer unlawful for such Lender to
make or maintain LIBOR Portions. To the extent it is unlawful for any such
Lender to maintain any such LIBOR Portions, the Company shall prepay on demand
the outstanding principal amount of any such affected LIBOR Portions, together
with all interest accrued thereon and all other amounts then due and payable to
such Lender under this Agreement; provided, however, subject to all of the terms
and conditions of this Agreement, the Company may then elect to convert the
principal amount of the affected LIBOR Portion from such Lender into the Base
Rate Portion from such Lender that shall not be made ratably by the Lenders but
only from such affected Lender. During the period when it is unlawful for any
Lender to make LIBOR Portions, Loans shall continue to be made in such a manner
so that the percentage of each Lender's Commitment in use is identical, but the
Lenders affected by such illegality shall make their share of each Borrowing
which has been requested in the form of a LIBOR Portion available in the form of
a Base Rate Portion. Each Lender agrees (to the extent consistent with its
internal policies) to designate a different lending office if such designation
would avoid the illegality described in this Section 3.7; provided, however,
that such designation need not be made if it would result in any additional
costs, expenses or risks to such
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Lender that are not reimbursed by the Company pursuant hereto or would, in the
reasonable judgment of such Lender, be otherwise disadvantageous to such Lender.
Section 3.8. Unavailability of Deposits or Inability to Ascertain, or
Inadequacy of, LIBOR. If on or prior to the first day of any Interest Period for
any LIBOR Portion the Administrative Agent determines that deposits in United
States Dollars (in the applicable amounts) are not being offered to it or to
banks generally in the offshore eurodollar market for such Interest Period, then
the Administrative Agent shall forthwith give notice thereof to the Company and
the Lenders, whereupon until the Administrative Agent notifies the Company that
the circumstances giving rise to such suspension no longer exist, the
obligations of the Lenders to make any further LIBOR Portions available shall be
suspended.
Section 3.9. Increased Cost and Reduced Return. If, on or after the date
hereof, the adoption of any applicable law, rule or regulation, or any change
therein, or any change in the official interpretation or administration thereof
by any governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by any Lender (or
its lending office) with any request or directive (whether or not having the
force of law) of any such authority, central bank or comparable agency:
(a) shall subject any Lender (or its lending office) to any charges of
any kind (other than Withholding Taxes covered by Section 4.10 hereof) with
respect to its interest in the LIBOR Portions, its Note or its obligation
to make LIBOR Portions available, or shall change the basis of taxation of
payments to any Lender (or its lending office) of the principal of or
interest on LIBOR Portions or any other amounts due under this Agreement in
respect of its LIBOR Portions or its obligation to make LIBOR Portions; or
(b) shall impose, modify or deem applicable any reserve, special
deposit or similar requirements (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve
System, but excluding any such requirement included in an applicable
Eurodollar Reserve Percentage) against assets of, deposits with or for the
account of, or credit extended by, any Lender (or its lending office) or
shall impose on any Lender (or its lending office) or the offshore
interbank market any other condition affecting LIBOR Portions, its Note or
its obligation to make LIBOR Portions available;
and the result of any of the foregoing is to increase the cost to such Lender
(or its lending office) of making or maintaining any LIBOR Portion, or to reduce
the amount of any sum received or receivable by such Lender (or its lending
office) under this Agreement or under its Note with respect thereto, by an
amount deemed by such Lender to be material, then, within 30 days after demand
by such Lender (with a copy to the Administrative Agent), the Company shall pay
to such Lender such additional amount or amounts as will compensate such Lender
for such increased cost or reduction. A certificate of any Lender claiming
compensation under this Section 3.9 and setting forth the additional amount or
amounts in reasonable detail (including an explanation of the basis therefor and
the computation of such amount) to be paid to it hereunder shall be deemed prima
facie correct. In determining such amount, such Lender may use reasonable
averaging and attribution methods. A Lender shall not be entitled to
compensation
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under this Section 3.9 with respect to any adoption or change for any period
prior to the earlier of (i) the date it notifies the Company of the adoption or
change giving rise to the request for compensation or (ii) the date which is 30
days prior to the date it becomes aware of the adoption or change giving rise to
the request for compensation if the Company is notified of the adoption or
change prior to the lapse of such 30-day period.
Section 3.10. Lending Offices. Each Lender may, at its option, elect to
make its Loans hereunder at the branch, office or affiliate specified on the
appropriate signature page hereof (each a "lending office") or at such other of
its branches, offices or affiliates as it may from time to time elect and
designate in a notice to the Company and the Administrative Agent (but such
funds shall in any event be made available to the Company at the office of the
Administrative Agent as herein provided for).
Section 3.11. Discretion of Banks as to Manner of Funding. Notwithstanding
any other provision of this Agreement, each Lender shall be entitled to fund and
maintain its funding of all or any part of its Loans in any manner it sees fit,
it being understood, however, that for the purposes of this Agreement all
determinations under this Agreement (including, without limitation, calculations
under Sections 3.6 and 3.9 hereof) shall be made as if each Lender had actually
funded and maintained its interest in each LIBOR Portion through the purchase of
deposits in the offshore interbank market having a maturity corresponding to
such LIBOR Portion's Interest Period and bearing an interest rate equal to LIBOR
for such Interest Period.
Section 4. Fees, Payments, Reductions, Applications, Notations and Extensions.
Section 4.1. Commitment Fee. For the period from the date hereof to and
including the Termination Date, the Company shall pay to the Administrative
Agent for the ratable account of the Lenders a commitment fee at the Applicable
Margin on the average daily unused amount of the Commitments hereunder (provided
that, if the average daily unused amount of the Commitments for the most
recently completed three (3) month period (or such shorter period from the date
of this Agreement through the first payment date thereof) plus the daily unused
amount of the commitments available under the 364-Day Credit Agreement for such
period is greater than 50% of the Commitments available hereunder and the
commitments available under the 364-Day Credit Agreement for such period, then
such fee shall be paid at .125% plus the Applicable Margin for the commitment
fee), such fee to be payable quarterly in arrears on the first day of each
March, June, September and December in each year to and including, and on, the
Termination Date.
Section 4.2. Letter of Credit Fees.
(a) Shared Fees. The Company shall pay to the Administrative Agent for the
ratable account of the Lenders a letter of credit fee computed at the Applicable
Margin on the maximum amount of the Letters of Credit from time to time
outstanding, such fee to be paid quarterly in arrears on the first day of each
March, June, September and December in each year to and including, and on, the
Termination Date.
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(b) Issuing Bank Fronting Fees. On the date of issuance of each
Letter of Credit, and as a condition thereto, the Company shall pay to the
relevant Issuing Bank a non-refundable letter of credit issuance fee in the
amount equal to .10% of the amount of the relevant Letter of Credit to be
issued. In addition, the Company further agrees to pay each Issuing Bank for
its own account such amendment, processing and transaction fees and charges as
the Issuing Bank from time to time customarily imposes in connection with any
amendment, cancellation, negotiation and/or payment of Letters of Credit issued
by such Issuing Bank and draft drawn thereunder.
Section 4.3. Administrative Agent's Fees. On the date hereof, and on
the date occurring on each anniversary of the date hereof (excluding the
Termination Date) when any credit or commitment to extend credit is outstanding
hereunder, the Company shall pay to the Administrative Agent, for its own use
and benefit, such fees as set forth in the administrative agent's fee letter
dated the date hereof, as such fees may be amended by the Company and the
Administrative Agent from time to time.
Section 4.4. Underwriting Fees. The Company shall pay to the Lead
Arrangers, Book Managers, and Syndication Agents such underwriting, acceptance
and ticking fees as set forth in the Fee and Structuring Letter.
Section 4.5. Payments. (a) Maturity. The Company shall repay all
Loans in full on the Termination Date, together with all accrued but unpaid
interest thereon.
(b) Mandatory Prepayments. In the event that at any time the
aggregate U.S. Dollar Equivalent of Letters of Credit and Loans then outstanding
exceeds the Commitments then in effect, the Company shall immediately upon
demand pay over the amount of the excess to the Administrative Agent to be
applied against the Loans until paid in full with any excess to be held as
collateral security for the Letters of Credit and the obligations of the Company
with respect thereto.
(c) Optional Prepayments. The Company shall have the privilege of
prepaying without premium or penalty and in whole or in part (but, if in part,
then in an amount not less than $1,000,000) (or such lesser amount as will
prepay the Loans in full) the Notes at any time, each such prepayment to be made
by the payment of the principal amount to be prepaid, any amount due the Lenders
under Section 3.6 hereof (any failure of the Administrative Agent or the Lenders
to require payment of any amount due under Section 3.6 not to preclude a later
demand that the amount so due be paid) and, in the case of a prepayment which
prepays the Notes in full after which the Commitments are no longer outstanding,
accrued interest thereon to the date fixed for prepayment.
Section 4.6. Terminations. The Company shall have the privilege at
any time and from time to time upon five (5) Business Days prior notice to the
Administrative Agent (which shall promptly notify the Lenders) to ratably
terminate the Commitments in whole or in part (but, if in part, then in a
minimum amount of $1,000,000), provided that the Commitments may not be reduced
to an amount less than the aggregate principal amount of Loans and Letters of
Credit then outstanding. No termination of the Commitments may be reinstated
unless otherwise agreed to in writing by the Lenders.
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Section 4.7. Place and Application. Except as otherwise provided in
Section 2.3 with respect to Letters of Credit issued by a Lender other than the
Administrative Agent, all payments of principal, interest and fees shall be made
to the Administrative Agent at its office at 115 South LaSalle Street, Chicago,
Illinois (or at such other place as the Administrative Agent may specify) in
immediately available and freely transferable funds at the place of payment.
All payments due from the Company hereunder shall be made without set-off or
counterclaim and without reduction for, and free from, any and all present or
future taxes, levies, imposts, duties, fees, charges, deductions, withholdings,
restrictions or conditions of any nature imposed by any government or political
subdivision or taxing authority thereof. Except as otherwise provided in
Section 2.3 with respect to Letters of Credit, payments received by the
Administrative Agent after 1:00 p.m. (Chicago time) shall be deemed received as
of the opening of business on the next Business Day. Except as otherwise
provided in this Agreement, all payments shall be received by the Administrative
Agent for the ratable account of the Lenders, and shall be promptly distributed
by the Administrative Agent ratably to the Lenders except that payments which
pursuant to the terms hereof are for the use and benefit of the Administrative
Agent shall be retained by it for its own account and payments received to
reimburse an Issuing Bank or a Lender for a fee or cost peculiar to that Issuing
Bank or Lender, as the case may be, shall be remitted to it. Unless the Company
otherwise directs, principal payments on the Notes shall be first applied to the
Base Rate Portion and then to the LIBOR Portions in the order in which their
Interest Periods expire. Reimbursements of drawings under Letters of Credit
shall be promptly remitted to the relevant Issuing Bank except to the extent the
Lenders have previously reimbursed the Issuing Bank for the drawing in question.
Anything contained herein to the contrary notwithstanding, all
payments and collections received in respect of the indebtedness evidenced by
the Notes or the Applications by the Administrative Agent or any of the Lenders
after an Event of Default has occurred and is continuing shall be distributed as
follows:
(a) first, to the payment of any outstanding costs and expenses
incurred by the Administrative Agent in protecting, preserving or
enforcing rights under the Loan Documents and in any event including
all costs and expenses of a character which the Company has agreed to
pay under Section 12.10 hereof (such funds to be retained by the
Administrative Agent for its own account unless it has previously been
reimbursed for such costs and expenses by the Lenders, in which event
such amounts shall be remitted to the Lenders to reimburse them for
payments theretofore made to the Administrative Agent); and
(b) second, to the remaining Obligations (including amounts be
held as collateral security for the Letters of Credit in an amount
equal to the aggregate undrawn balance thereof, with the funds so held
to, if the Company so requests, be invested in short-term high-grade
debt securities, acceptable to and held by and pledged to the
Administrative Agent (it being understood that the balance of such
investments and any earnings attributable thereto shall, after the
payment and satisfaction in full of any and all obligations owing to
the Administrative Agent and the Lenders hereunder and under the other
Loan Documents and after the expiration of all Letters of Credit, be
returned to the
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Company or to whoever may be lawfully entitled thereto)), ratably in
accordance with the amounts owed to or for the account of the
Administrative Agent and the Lenders.
Section 4.8. Notations and Requests. All advances made against the
Notes shall be recorded by the Lenders on their books or, at their option in any
instance, endorsed on the reverse side of the Notes and the unpaid principal
balances so recorded or endorsed by the Lenders shall be prima facie evidence in
any court or other proceeding brought to enforce the Notes of the principal
amount remaining unpaid thereon. Prior to any negotiation of any Note, the
Lender holding such Note shall endorse thereon the principal amount remaining
unpaid thereon.
Section 4.9. Capital Adequacy. If any Lender shall determine that
any applicable law, rule or regulation regarding capital adequacy, or any change
therein, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof or compliance by such Lender (or its
lending office) with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on such Lender's capital as a consequence of its obligations hereunder or the
Letters of Credit or credit extended by it hereunder to a level below that which
such Lender could have achieved but for such law, rule, regulation, change or
compliance (taking into consideration such Lender's policies with respect to
capital adequacy) by an amount deemed by such Lender to be material, then from
time to time as specified by such Lender the Company shall pay such additional
amount or amounts as will compensate such Lender for such reduction in rate of
return. A certificate of any Lender claiming compensation under this Section
and setting forth the additional amount or amounts to be paid to it hereunder in
reasonable detail shall be deemed prima facie correct. In determining such
amount, such Lender may use any reasonable averaging and attribution methods. A
Lender shall not be entitled to compensation under this Section with respect to
any change, adoption or interpretation (a "Change") for any period prior to the
earlier of (i) the date it notifies the Company of the Change or (ii) the date
which 30 days prior to the date such Lender obtains actual knowledge of the
Change giving rise to the request for compensation if the Company is notified of
the Change prior to the lapse of such 30-day period. Each Lender and the
Administrative Agent shall use reasonable efforts to minimize the cost imposed
on the Company in respect of any such increased capital requirement and shall
compute the assessment of any such cost related to such increased capital on a
nondiscriminatory basis among the Company, on the one hand, and other borrowers
to which it applies, on the other hand, and neither such Lender nor any
corporation controlling such Lender nor the Administrative Agent shall be
entitled to demand compensation or be compensated for any increased capital
requirement from the Company hereunder in excess of the amount so computed.
Section 4.10. Withholding Taxes. (a) Payments Free of Withholding.
Except as otherwise required by law and subject to Section 4.10(b) hereof, each
payment by the Company under this Agreement or the other Loan Documents shall be
made without withholding for or on account of any present or future taxes (other
than overall net income taxes on the recipient) imposed by or within the
jurisdiction in which the Company is domiciled, any jurisdiction from which the
Company makes any payment, or (in each case) any political subdivision or taxing
authority thereof or therein; provided, however, that the Company shall not be
required to indemnify or
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gross up the payments to any Lender under this Section 4.10(a) in respect of
United States federal withholding tax to the extent that the obligation to
indemnify or gross up such payments would not have arisen but for such Lender's
failure to comply with Section 4.10(b). If any such withholding is so required,
the Company shall make the withholding, pay the amount withheld to the
appropriate governmental authority before penalties attach thereto or interest
accrues thereon and forthwith pay such additional amount as may be necessary to
ensure that the net amount actually received by each Lender and the
Administrative Agent free and clear of such taxes (including such taxes on such
additional amount) is equal to the amount which that Lender or the
Administrative Agent (as the case may be) would have received had such
withholding not been made. If the Administrative Agent or any Lender pays any
amount in respect of any such taxes, penalties or interest, the Company shall
reimburse the Administrative Agent or such Lender for that payment on demand in
the currency in which such payment was made. If the Company pays any such taxes,
penalties or interest, it shall deliver official tax receipts evidencing that
payment or certified copies thereof to the Lender or Administrative Agent on
whose account such withholding was made (with a copy to the Administrative Agent
if not the recipient of the original) on or before the thirtieth day after
payment.
(b) U.S. Withholding Tax Exemptions. Each Lender that is not a United
States person (as such term is defined in Section 7701(a)(30) of the Code) shall
submit to the Company and the Administrative Agent on or before the date the
initial Loans are is made hereunder or, if later, the date such financial
institution becomes a Lender hereunder, two duly completed and signed copies of
(i) either Form 1001 (relating to such Lender and entitling it to a complete
exemption from withholding under the Code on all amounts to be received by such
Lender, including fees, pursuant to the Loan Documents and the Obligations) or
Form 4224 (relating to all amounts to be received by such Lender, including
fees, pursuant to the Loan Documents and the Obligations) of the United States
Internal Revenue Service or (ii) solely if such Lender is claiming exemption
from United States withholding tax under Section 871(h) or 881(c) of the Code
with respect to payments of "portfolio interest", a Form W-8, or any successor
form prescribed by the Internal Revenue Service, and a certificate representing
that such Lender is not a bank for purposes of Section 881(c) of the Code, is
not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the
Code) of the Company and is not a controlled foreign corporation related to the
Company (within the meaning of Section 864(d)(4) of the Code). Thereafter and
from time to time, each Lender shall submit to the Company and the
Administrative Agent such additional duly completed and signed copies of one or
the other of such Forms (or such successor forms as shall be adopted from time
to time by the relevant United States taxing authorities) and such other
certificates as may be (i) requested by the Company in a written notice,
directly or through the Administrative Agent, to such Lender and (ii) required
under then-current United States law or regulations to avoid or reduce United
States withholding taxes on payments in respect of all amounts to be received by
such Lender, including fees, pursuant to the Loan Documents or the Obligations.
Upon the request of the Company or the Administrative Agent, each Lender that is
a United States person (as such term is defined in Section 7701(a)(30) of the
Code) shall submit to the Company and the Administrative Agent a certificate to
the effect that it is such a United States person.
(c) Inability of Lender to Submit Forms. If any Lender determines, as
a result of any change in applicable law, regulation or treaty, or in any
official application or interpretation
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thereof, that it is unable to submit to the Company or the Administrative Agent
any form or certificate that such Lender is obligated to submit pursuant to
subsection (b) of this Section 4.10 or that such Lender is required to withdraw
or cancel any such form or certificate previously submitted or any such form or
certificate otherwise becomes ineffective or inaccurate, such Lender shall
promptly notify the Company and Administrative Agent of such fact and the Lender
shall to that extent not be obligated to provide any such form or certificate
and will be entitled to withdraw or cancel any affected form or certificate, as
applicable.
Section 4.11. Increase in Commitments. At any time prior to 30 days
after the close of the primary syndication as reasonably determined and
established by the Administrative Agent, in the event that sufficient
commitments are received from banks and other financial institutions (other than
Bank of Montreal and Bank of America National Trust and Savings Association
(herein, the "Initial Lenders")), such that the Initial Lenders' remaining
Commitments, after giving effect to the syndication of the credit facilities
provided for herein, are at their desired initial hold levels, and the aggregate
Commitments hereunder and commitments under the 364-Day Credit Agreement exceed
$250,000,000 (such excess being referred to herein as the "Overage"), then in
that event the Administrative Agent shall notify the Company of the Overage, and
the Company may request that the aggregate Commitments hereunder be increased by
the lesser of $30,000,000 and 60% of the Overage by offering such increase to
one or more banks or other financial institutions (each such bank or financial
institution being hereinafter referred to as an "Additional Lender") selected by
the Company and acceptable to the Lead Arrangers, Book Managers, and Syndication
Agents and the Administrative Agent. Such increase in the Commitments shall
also be subject to the satisfaction of the following conditions: (a) each such
increase shall be at least $3,000,000 or such greater amount which is an
integral multiple $1,000,000; (b) the Administrative Agent shall have received
an acknowledgement agreement providing for such increase in form and substance
satisfactory to it executed by the Company, the Administrative Agent, and the
relevant Additional Lender; and (c) the Administrative Agent shall have received
a Note duly executed by the Company in favor of the relevant Additional Lender.
Upon the satisfaction of such conditions, effective as of the date set forth
above in such acknowledgement agreement, each such Additional Lender shall
thereafter be a "Lender" party to this Agreement and shall be entitled to all
rights, benefits and privileges afforded a Lender hereunder and subject to the
obligations of a Lender hereunder to the extent of its Commitment and Exhibit A
shall be deemed amended reflecting the increase in the aggregate Commitments
caused by the inclusion of the Commitment of the Additional Lender.
Concurrently with the effectiveness of such increase, each Additional Lender
shall fund its percentage of the outstanding Loans and overdue reimbursement
obligations with respect to Letters of Credit, if any, to the Administrative
Agent so that after giving effect thereto each Lender, including the Additional
Lender, holds a pro rata share (in accordance with its Commitment percentage) of
the outstanding Loans and credit risks with respect to Letters of Credit and the
Company shall pay to each Lender all amounts due under Section 3.6 hereof as a
result of any prepayment of any outstanding LIBOR Portions of the Loans.
Section 4.12. Extensions of Commitments. Not less than 45 days nor
more than 60 days prior to each anniversary of the date hereof, the Company may
advise the Administrative Agent in writing of its desire to extend the
Termination Date for an additional 12 months and the Administrative Agent shall
promptly notify the Lenders of each such request; provided not more
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than one such request for the extension of the Termination Date may be made in
any one calendar year. The Lenders shall notify the Administrative Agent in
writing not later than 30 days before the anniversary date hereof following such
request whether such Lender agrees to the requested extension. No Lender shall
be under any obligation or commitment to extend such date and no such obligation
or commitment on the part of any Lender shall be inferred from the provisions of
this Section (it being understood that any Lender may accept or decline such a
request in its sole discretion and on such terms as such Lender may elect).
Failure on the part of any Lender to respond to such a request by the required
date set forth above shall be deemed to be a denial of such request by such
Lender. The requested extension shall not be granted unless Lenders holding
Commitments aggregating at least 80% of the aggregate Commitments in effect at
such time shall have consented in writing to such extension. If Lenders holding
100% of the aggregate Commitments consent to such extension, the Termination
Date will be automatically extended for an additional 12 months. If Lenders
holding Commitments aggregating less than 100%, but equal to or greater than
80%, of the aggregate Commitments consent to such extension, the Company may
elect by written notice to the Administrative Agent prior to the anniversary
date hereof following the original request to (i) rescind the original request,
in which case there shall be no extension of the Termination Date pursuant to
this Section, (ii) continue the credit facilities provided for herein for such
additional period with respect to the Commitments of the consenting Lenders,
with the Commitment of any Lender who has not consented to such extension
(herein a "Non-Consenting Lender") to be terminated on such anniversary date (at
which time all Obligations of such Non-Consenting Lender shall be paid and
satisfied in full by the Company) or (iii) require any such Non-Consenting
Lender to transfer and assign its Commitment and its other interests, rights,
and obligations under the Loan Documents to another bank or financial
institution willing to provide such extended financing in accordance with
Section 4.13 hereof. The Administrative Agent shall provide prompt notice to the
Company and the Lenders in writing as to whether the requested extension has
been granted and, if applicable, the list of Non-Consenting Lenders. In the
event the Administrative Agent requests, the Company and the Lenders shall
execute and deliver such documents as the Administrative Agent may deem
necessary or appropriate to relect any such extension, and all costs and
expenses incurred by the Administrative Agent in connection therewith shall be
paid by the Company.
Section 4.13. Substitution of Lenders. Upon the receipt by the Company of
(a) a claim from any Lender for compensation under Sections 2.3(d), 3.9, 4.9, or
4.10 hereof, (b) notice by any Lender to the Company of any illegality pursuant
to Section 3.7 hereof, or (c) notice from the Administrative Agent that a Lender
or Lenders have not approved an extension of the Termination Date pursuant to
Section 4.12 hereof (any such Lender referred to in clause (a), (b), or (c)
above being hereinafter referred to as an "Affected Lender"), the Company may
require, at its expense, any such Affected Lender to assign, at par plus accrued
interest and fees, without recourse, all of its interest, rights and obligations
hereunder (including all of its Commitment, Loans and credit risks with respect
to Letters of Credit and other amounts at any time owing to it hereunder and the
other Loan Documents) to a bank or financial institution specified by the
Company, provided that (i) such assignment shall not conflict with or violate
any law, rule, or regulation or order of any court or other governmental
authority, (ii) the Company shall have received the written consent of the
Administrative Agent, which consent shall not be unreasonably withheld, to such
assignment, (iii) the Company shall have paid to the Affected
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Lender all monies (together with amounts due such Affected Lender under Section
3.6 hereof as if the Loans owing it were prepaid rather than assigned), other
than such principal, interest and fees accrued and owing to it hereunder, and
(iv) the assignment is entered into in accordance with the other requirements of
Section 12.12 hereof.
SECTION 5. GUARANTIES.
Section 5.1. Guaranty. Payment of the Obligations hereunder and under the
other Loan Documents shall at all times be jointly and severally guaranteed
pursuant to Section 11 hereof by MK-Ohio and Washington and from time to time
such other Restricted Subsidiaries (the "Necessary Parties") so that as of the
end of each fiscal quarter of the Company the assets of the Company, MK-Ohio,
Washington and the Necessary Parties are not less than 90% of the assets of the
Company and all of its Restricted Subsidiaries taken as a whole at such time.
The Company shall cause each Necessary Party to execute a supplement to the
guaranty provided in Section 11 hereof pursuant to which such Restricted
Subsidiary joins in and becomes obligated as a guarantor hereunder, which
supplement shall be in the form attached hereto as Exhibit C or in such other
form satisfactory to the Administrative Agent (MK-Ohio, Washington and the from
time to time Necessary Parties are herein collectively referred to as the
"Guarantors" and each individually as a "Guarantor"). The Company shall also
cause such Guarantor to execute and deliver, at the Company's cost and expense,
such other instruments, documents, certificates and opinions required by the
Administrative Agent in connection therewith.
SECTION 6. REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants to the Lenders as follows:
Section 6.1. Organization and Power. The Company is duly organized and
existing under the laws of the state of its incorporation, and is duly licensed
or qualified to do business in each state where the nature of the assets owned
or leased by it or business conducted by it requires such licensing or
qualification and in which the failure to be so licensed or qualified would have
a Material Adverse Effect and has all necessary corporate power to carry on its
present business. The Company has full right, power and authority to enter into
this Agreement, to make the borrowings herein provided for, to issue the Notes
in evidence thereof, to execute and deliver the Applications and the other Loan
Documents executed and delivered or to be executed and delivered by it, and to
perform each and all of the matters and things herein and therein provided for.
Each Guarantor has full right, power and authority to enter into the Loan
Documents executed by it and to perform each and all of the matters and things
therein provided for. The Loan Documents do not, nor will the performance or
observance by the Company or any Subsidiary of any of the matters and things
herein or therein provided for, contravene any provision of law or any charter
or by-law provision of the Company or any such Subsidiary or constitutes a
breach or default under any covenant, indenture or agreement of or affecting the
Company or any such Subsidiary where such breach or default would have a
Material Adverse Effect.
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Section 6.2. Subsidiaries. Each Subsidiary is duly organized and existing
under the laws of the jurisdiction of its incorporation or organization, and is
duly licensed or qualified to do business in each state or other jurisdiction
where the nature of the assets owned or leased by it or business conducted by it
requires such licensing or qualification and in which the failure to be so
licensed or qualified would have a Material Adverse Effect and has all necessary
power to carry on its present business. Schedule 6.2 hereto identifies each
Subsidiary, the jurisdiction of its incorporation or organization, the
percentage of issued and outstanding shares of each class of its capital stock
or other equity interests owned by the Company and the Subsidiaries and, if such
percentage is not 100% (excluding directors' qualifying shares as required by
law), a description of each class of its authorized capital stock or other
equity interests and the number of shares of each class issued and outstanding,
together with a designation of those Subsidiaries which are Restricted
Subsidiaries (including a designation of those which are Material Subsidiaries)
and those which are Unrestricted Subsidiaries. All of the outstanding shares of
capital stock or other equity interests of each Subsidiary are validly issued
and outstanding and fully paid and nonassessable, and all shares of each
Subsidiary indicated on Schedule 6.2 as owned by the Company or a Subsidiary are
owned, beneficially and of record, by the Company or such Subsidiary free and
clear of all liens, security interests, charges and encumbrances. There are no
outstanding commitments or other obligations of any Subsidiary to issue, and no
options, warrants or other rights of any Person to acquire, any shares of any
class of capital stock or other equity interests of any Subsidiary, except for
options granted in the ordinary course to officers and employees of non-Material
Subsidiaries or of Unrestricted Subsidiaries which, as to any Subsidiary, do
not, if exercised, aggregate 10% or more of the capital stock of any such
Subsidiary.
Section 6.3. Use of Proceeds; Regulation U. The Company shall use proceeds
of the Loans and other extensions of credit made available hereunder solely for
the purpose of refinancing existing debt of the Company and its Subsidiaries,
for the acquisition of the Acquired Assets, and for its working capital and
other general corporate purposes. Neither the Company nor any Subsidiary is
engaged in the business of extending credit for the purpose of purchasing or
carrying margin stocks (within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System), and no part of the proceeds of any
loan or extension of credit hereunder will be used to purchase or carry any
margin stock or extend credit to others for the purpose of purchasing or
carrying any margin stock if as a result thereof such loan or other extension of
credit would violate Regulation U or any interpretation thereof.
Section 6.4. Financial Statements. (a) The financial statements of the
Company and its Subsidiaries for the year ended November 30, 1998, including an
audited consolidated balance sheet as of November 30, 1998, and an audited
consolidated statement of profit and loss and statement of cash flows for the
twelve months ended said date, prepared by the Company, and heretofore furnished
to the Lenders, truly and accurately reflect the financial condition of the
Company and its Subsidiaries taken as a whole as at said date and the results of
operations and cash flows for the period covered thereby. Except as disclosed on
Schedule 6.4 hereof, the Company and its Subsidiaries have no contingent
liabilities which are material to them other than as indicated on said financial
statements and, since the date of such financial statements, there have been no
material adverse changes in the condition, financial or otherwise, business or
operations of the Company or its Subsidiaries taken as a whole.
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(b) The unaudited pro forma combined, condensed, and consolidated balance
sheet and combined, condensed, and consolidated statements of operations for the
Company and its Subsidiaries heretofore delivered to the Lenders fairly present
(subject to the qualifications and assumptions set forth in the notes attached
thereto) the combined financial condition of the Company and its Subsidiaries as
at the dates thereof and for the periods covered thereby.
Section 6.5. Litigation and Taxes. Except as disclosed on Schedule 6.4
hereof, there is no litigation or governmental proceeding pending, nor to the
knowledge of the Company threatened, against the Company or any Subsidiary which
could reasonably be expected to result in a Material Adverse Effect. The income
tax returns of the Company and its Subsidiaries for the taxable year ended
November 30, 1998 and for all taxable years ended prior to said date, have been
filed or extended with the appropriate governmental or taxing authorities, and
any additional assessments in connection with any such years have been paid or
the applicable statute of limitations therefor has expired. No objections to or
controversies in respect of the income tax returns of the Company or any
Subsidiary are pending or threatened which could reasonably be expected to
result in a Material Adverse Effect. No authorization, consent, license, or
exemption from, or filing or registration with, any court or governmental
department, agency or instrumentality, is or will be necessary to the valid
execution, delivery or performance by the Company or any Subsidiary of any Loan
Document to be executed and delivered by it.
Section 6.6. Burdensome Contracts with Affiliates. Neither the Company nor
any Subsidiary is a party to any material contracts or agreements with any of
its Affiliates on terms and conditions which are materially less favorable to
the Company or such Subsidiary than would be usual and customary in similar
contracts or agreements between Persons not affiliated with each other.
Section 6.7. ERISA. The Company and each Subsidiary are each in compliance
in all material respects with the Employee Retirement Income Security Act of
1974, as amended ("ERISA") to the extent applicable to it and has received no
notice to the contrary from the Pension Benefit Guaranty Corporation ("PBGC"),
and, in the event of the Company's or any Subsidiary's partial or complete
withdrawal from any pension plans or multiemployer pension plans subject to
Title IV of ERISA or termination of any other pension plans subject to Title IV
of ERISA, the liability of the Company and its Subsidiaries for any unfunded
vested benefits thereunder could not reasonably be expected to result in a
Material Adverse Effect.
Section 6.8. Full Disclosure. The statements and information furnished to
the Lenders in connection with the negotiation of this Agreement and the
commitments by the Lenders to provide all or part of the financing contemplated
hereby do not, taken as a whole, contain any untrue statement of a material fact
or omit a material fact necessary to make the material statements contained
therein or herein not misleading, except for such thereof as were corrected in
subsequent written statements furnished the Lenders (the Lenders acknowledging
that as to any projections furnished to the Lenders, the Company only represents
that the same were prepared on the basis of information and estimates it
believes to be reasonable). There is no fact peculiar to the Company or any
Subsidiary which the Company has not disclosed to the Lenders in writing which
materially adversely affects nor, so far as the Company now can reasonably
foresee, is reasonably likely to have a Material Adverse Effect.
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Section 6.9. Compliance with Law. (a) Except as disclosed on Schedule 6.4
hereof, neither the Company nor any Subsidiary is (i) in default in any material
respect with respect to any order, writ, injunction or decree of any court or
(ii) in default in any material respect under any law, ordinance, order,
regulation, license or demand (including ERISA, the Occupational Safety and
Health Act of 1970 and laws and regulations establishing quality criteria and
standards for air, water, land and toxic waste) of any federal, state, municipal
or other governmental agency, default with respect to or under which is
reasonably likely to result in a Material Adverse Effect; and (b) the Company
and each Subsidiary are each in compliance with all applicable state and federal
environmental, health and safety statutes and regulations, including, without
limitation, regulations promulgated under the Resource Conservation and Recovery
Act of 1976, 42 U.S.C. (S)(S)6901 et seq., except where failure to be in
compliance is reasonably likely not to have a Material Adverse Effect, and, to
the Company's knowledge, neither the Company nor any Subsidiary will have
acquired, incurred or assumed, directly or indirectly, any contingent liability
in connection with the release of any toxic or hazardous waste or substance into
the environment which is reasonably likely to have a Material Adverse Effect.
Insofar as known to the responsible officers of the Company, neither the Company
nor any Subsidiary is liable, in whole or in part, for, nor are any of the
assets or property of the Company or any Subsidiary subject to a lien in favor
of any governmental entity for any material liability arising from or in any way
relating to, the costs of cleaning up, remediating or responding to a release of
hazardous substances (including, without limitation, petroleum, its by-products
or derivatives, or other hydrocarbons) except as specifically disclosed in the
10-K Statement of the Company dated November 30, 1998.
Section 6.10. Governmental Authority and Licensing. The Company and its
Subsidiaries have received all licenses, permits, and approvals of all Federal,
state, local, and foreign governmental authorities, if any, necessary to conduct
their business, in each case where the failure to obtain or maintain the same is
reasonably likely to have a Material Adverse Effect. No investigation or
proceeding which, if adversely determined, is reasonably likely to result in
revocation or denial of any material license, permit, or approval is pending or,
to the knowledge of the Company, threatened.
Section 6.11. Investment Company; Public Utility Holding Company. Neither
the Company nor any Subsidiary is an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or a "public utility holding company" within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
Section 6.12. Year 2000 Compliance. The information contained in this
Section 6.12 is a YEAR 2000 READINESS DISCLOSURE. The Company (a) is conducting
a comprehensive review and assessment of the computer applications of the
Company and its Subsidiaries and is making inquiries of its material suppliers,
service vendors (including data processors) and customers, with respect to any
defect in computer software, data bases, hardware, controls and peripherals
related to the occurrence of the year 2000 or the use at any time of any date
which is before, on and after December 31, 1999, in connection therewith, (b)
has developed a plan and timeline for addressing Year 2000 Problems on a timely
basis, and (c) is implementing the plan referred to in clause (b) above in
accordance with the timetable referred to therein. The completion of the
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inventory phase of the plan has exceeded the original target timetable; however,
the Company believes that the project completion target date remains achievable.
Based upon the results of its comprehensive review and assessment to date, the
Company is not aware of any Year 2000 Problem that could reasonably be expected
to have a Material Adverse Effect.
Section 6.13. Purchase Agreement. The Company has entered into one or more
agreements and instruments (collectively, the "Purchase Agreement") relating to
its acquisition of the Acquired Assets from CBS Corporation and/or one of more
of its affiliates (herein, the "Seller"), which Purchase Agreement is on terms
and conditions substantially the same as disclosed to the Lenders in the
Company's January 1999 Rating Agency Presentation (the "Rating Agency
Presentation") or otherwise disclosed to the Lenders in writing on or prior to
the date hereof. The Purchase Agreement has not been amended or modified in any
material respect and no material condition to the effectiveness thereof or the
obligations of the Company or the Seller thereunder has been waived except to
the extent disclosed in writing to the Lenders on or prior to the date hereof.
The Company has all necessary right, power, and authority to consummate the
transactions contemplated by the Purchase Agreement and to perform all of its
obligations thereunder. The Purchase Agreement has been duly authorized,
executed, and delivered by the Company and constitutes the valid and binding
obligation of the Company enforceable against it in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance or similar laws affecting creditors' rights generally and general
principles of equity (regardless of whether the application of such principles
is considered in a proceeding in equity or at law); and the Purchase Agreement
does not, nor does the observance or performance by the Company of any of the
matters and things therein provided for, (a) contravene or constitute a default
under any provision of law or any judgment, injunction, order, or decree binding
upon the Company or any provision of the articles of incorporation or by-laws of
the Company, (b) contravene or constitute a default under any covenant,
indenture, or agreement of or affecting the Company or any of its Property where
such contravention or default is reasonably likely to have a Material Adverse
Effect, (c) result in the creation or imposition of any lien, charge, or
encumbrance on any of the Company's Property. No authorization, consent,
license, or exemption from, or filing or registration with, any court or
governmental department, agency, or instrumentality, nor any approval or consent
of any other Person, is or will be necessary to the valid execution, delivery,
or performance by the Company of the Purchase Agreement or of any other
instrument or document executed and delivered in connection therewith, except
for such thereof that have heretofore been obtained and remain in full force and
effect and those the failure of which to obtain or make would not materially
impair the ability of the Company to perform its obligations under the Purchase
Agreement. The Company is not in default in any material respect of its
obligations under the Purchase Agreement. Upon the funding of the purchase price
under the Purchase Agreement, the Company shall have acquired the Acquired
Assets free and clear of all liens, charges and encumbrances. Neither the
Company nor any Subsidiary (including any GESCO Subsidiary) will incur or assume
any material direct or contingent liabilities in connection with the purchase of
the Acquired Assets (including, without limitation, any liabilities for
environmental clean up and liabilities for unfunded pension and welfare plan
obligations) except as disclosed in writing to the Lenders on or prior to the
date hereof.
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Section 6.14. Hazardous Materials Risk Management. The Company and its
Subsidiaries manage the risks associated with handling Hazardous Materials in
the ordinary course and any Hazardous Materials Liability associated therewith
in a manner consistent with prudent business practices and similar to companies
similarly situated and operating like businesses, including, without limitation,
protecting the Company and its Subsidiaries from potential Hazardous Materials
Liability where reasonably possible and appropriate through contractual
indemnifications from governmental agencies and authorities (including, without
limitation, the United States Department of Energy) and other third parties,
maintaining hazardous liability insurance and, with respect to Hazardous
Materials Liability relating to radioactive or other nuclear materials,
statutory limitations of liabilities imposed under the Price-Anderson Act, as
amended.
SECTION 7. CONDITIONS PRECEDENT.
Section 7.1. All Advances. The obligation of the Lenders to make any
Borrowing under the Revolving Credit (including the first advance) or of the
Issuing Bank to issue any Letter of Credit shall be subject to the provisions of
Sections 9.2 and 9.3 hereof and shall also be subject to the satisfaction of the
following conditions precedent at the time of the making of each Borrowing or
issuance of a Letter of Credit under the Revolving Credit:
(a) each of the representations and warranties set forth herein and
in the other Loan Documents shall be true and correct, as of the date of
such advance or issuance (except that the representations and warranties
made in Section 6.4 hereof shall be deemed to refer to the most recent
financial statements delivered to the Lenders pursuant to Section 8.5
hereof);
(b) no material adverse change shall have occurred in the financial
condition, business or operations of the Company and its Subsidiaries taken
as a whole; and
(c) no Default or Event of Default shall have occurred and be
continuing.
Any request made by the Company to the Administrative Agent for a Borrowing or
to an Issuing Bank for a Letter of Credit hereunder shall be deemed to
constitute a representation and warranty that the foregoing statements are true
and correct. In addition, in the case of the issuance of a Letter of Credit, the
Issuing Bank shall have received a properly completed Application therefor.
Section 7.2. Initial Advance. At or prior to the time of the initial
Borrowing under the Revolving Credit or the issuance of the initial Letter of
Credit, the following conditions precedent shall also have been satisfied:
(a) The Administrative Agent shall have received the following for
the account of the Lenders (each to be properly executed and completed) and
the same shall have been approved as to form and substance by the Lenders:
(i) this Agreement;
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(ii) the Notes;
(iii) copies (executed or certified as may be appropriate) for
each Lender of the Articles of Incorporation and By-laws of the
Company and each Guarantor and of all legal documents or proceedings
taken in connection with the execution and delivery of the Loan
Documents to the extent the Administrative Agent or its counsel may
reasonably request, including, without limitation, resolutions of the
Board of Directors of each such corporation authorizing the execution,
delivery and performance of the Loan Documents to be executed by it
and certificates as to the incumbency and authority of, and setting
forth a specimen signature of, each officer who is to sign any Loan
Document and request extensions of credit hereunder; and
(iv) the Administrative Agent shall have received evidence
that the Company shall have received a Moody's Rating of Baa3 or
higher or an S&P Rating of BBB- or higher.
(b) The Administrative Agent shall have received good standing
certificates for the Company and each Guarantor from the office of the
Secretary of the State in the state of its incorporation dated as of a date
no later than 30 days prior to the date hereof;
(c) The Administrative Agent shall have received for the account of
itself and the Lead Arrangers, Book Managers, and Syndication Agents and
Documentation Agent the fees referred to in Sections 4.3 and 4.4 hereof;
(d) The Administrative Agent and the Lenders shall have received such
information and agreements relating to the Company's purchase of the
Acquired Assets as they may reasonably request, including, without
limitation, copies of all indemnity agreements being entered into in favor
of the Company and relating to the Seller's and/or British Nuclear Fuels
PLC's indemnification of the Company and its Subsidiaries for
environmental, pension and nuclear fuel related liabilities, and the same
shall be in form and substance satisfactory to the Administrative Agent;
(e) The Administrative Agent have received pro forma financial
projections for the next five years satisfactory in form and substance to
the Administrative Agent;
(f) The Prior Credit Agreement shall have been terminated and all
amounts payable thereunder shall be paid in full or otherwise provided for
on or prior to the date hereof; and
(g) The Administrative Agent shall have received for the account of
the Lenders such other agreements, instruments, documents, certificates and
opinions as the Administrative Agent or the Required Lenders make
reasonably request.
Section 7.3. Legal Matters. Legal matters incident to the execution and
delivery of the Loan Documents and the other instruments and documents
contemplated hereby shall be
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satisfactory to the Administrative Agent and its counsel, and the Lenders shall
have received the favorable written opinions of acceptable internal and outside
counsel for the Company and each Guarantor currently party to the Loan
Documents, in form and substance satisfactory to the Administrative Agent and
its counsel, with respect to:
(a) the due organization and existence of the Company and each
Guarantor and the due licensing or qualification of the Company and each
Guarantor in all jurisdictions where the nature of the assets owned or
leased by them or business conducted by them requires such licensing or
qualification and in which the failure to be so licensed or qualified would
materially and adversely affect the business, properties or operations of
the Company and its Subsidiaries taken as a whole;
(b) the power and authority of the Company and each Guarantor to enter
into the Loan Documents and to perform and observe all the matters and
things herein and therein provided for and the fact that the execution and
delivery of the Loan Documents will not, nor will the observance or
performance of any of the matters or things therein or herein provided for,
contravene any provision of law or of the charter or by-laws of the Company
or any Guarantor or constitutes a material breach of or default under any
provision of any material covenant, indenture or agreement binding upon the
Company or any Guarantor or affecting any of their properties or assets;
(c) the due authorization for and the validity and enforceability of
the Loan Documents;
(d) the fact that no governmental authorization or consent is required
with respect to the lawful execution, delivery and performance of the Loan
Documents or, if any such consent is necessary, that the same been obtained
and is in full force and effect;
(e) the lack, to the knowledge of such counsel, of any legal or
administrative proceedings pending or threatened against, the Company or
any Guarantor which, if adversely determined, would result in a material
adverse change in the financial condition or properties, business or
operations of the Company and its Subsidiaries taken as a whole; and
(f) such other matters as the Administrative Agent or its counsel may
reasonably require.
SECTION 8. COVENANTS.
The Company agrees that, so long as any credit is available to or in use by
the Company hereunder, except to the extent compliance in any case or cases is
waived in writing by the Required Lenders:
Section 8.1. Maintenance of Business. The Company will, and will cause
each Subsidiary to, preserve and keep in force and effect all licenses and
permits necessary to the
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proper conduct of their respective businesses expect where the failure to do so
would not result in a Material Adverse Effect.
Section 8.2. Maintenance. The Company will, and will cause each Subsidiary
to, maintain, preserve and keep their plant, properties and equipment (other
than obsolete or worn out equipment held for sale or disposition) in good
repair, working order and condition (ordinary wear and tear excepted) and the
Company will, and will cause each Subsidiary to, from time to time make all
needful and proper repairs, renewals, replacements, additions and betterments
thereto so that at all times the efficiency thereof shall be substantially
preserved and maintained, in each case where the failure to do so is reasonably
likely to have a Material Adverse Effect.
Section 8.3. Taxes. The Company will, and will cause each Subsidiary to,
duly pay and discharge all taxes, rates, assessments, fees and governmental
charges upon or against any of them or against their respective Properties, in
each case before the same become delinquent and before penalties accrue thereon,
unless and to the extent that the same are being contested in good faith and by
appropriate proceedings, in each case where the failure to do so is reasonably
likely to have a Material Adverse Effect.
Section 8.4. Insurance. The Company will, and will cause each Subsidiary
to, insure and keep insured, in good and responsible insurance companies, all
insurable property owned by them which is of a character usually insured by
companies similarly situated and operating like properties; and the Company
will, and will cause each Subsidiary to, insure such other hazards and risks
(including employers' and public liability risks) in good and responsible
insurance companies as and to the extent usually insured by companies similarly
situated and conducting similar businesses. The Company will upon request of the
Administrative Agent furnish a certificate setting forth in summary form the
nature and extent of the insurance maintained pursuant to this Section.
Section 8.5. Financial Reports. The Company will, and will cause each
Subsidiary to, maintain a standard and modern system of accounting in accordance
with sound accounting practice and will furnish to the Lenders and their duly
authorized representatives such information respecting the business and
financial condition of the Company and its Subsidiaries as the Administrative
Agent may reasonably request; and without any request, will furnish to the
Lenders:
(a) within 45 days after the close of each quarterly fiscal period of
the Company (except the last such period in each fiscal year), (i) a copy
of the balance sheet, statement of earnings and statement of changes in
cash flow of the Company and its Subsidiaries for such period, prepared on
a consolidated basis in accordance with GAAP, and the notes thereto, and
(ii) a copy of the balance sheet, statement of earnings and statement of
changes in cash flows of the GESCO Subsidiaries for such period, prepared
in accordance with GAAP with sufficient detail to enable the Lenders to
compute the financial covenants provided for in this Agreement, all
certified to by the Company's chief financial officer or such other officer
of the Company reasonably acceptable to the Administrative Agent;
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(b) within 90 days after the close of each fiscal year of the Company,
(i) a copy of the audit report for such year and accompanying financial
statements, including balance sheet, statement of earnings and statement of
cash flow on a consolidated and consolidating basis for the Company and its
Subsidiaries in accordance with GAAP, and the notes thereto, with the
consolidated statements certified by independent public accountants of
recognized standing selected by the Company and satisfactory to the
Required Lenders and (ii) a copy of the balance sheet, statement of
earnings and statement of changes in cash flows of the GESCO Subsidiaries
for such period, prepared in accordance with GAAP with sufficient detail
(and, if available, the notes thereto) to enable the Lenders to compute the
financial covenants provided for in this Agreement, certified to by the
Company's chief financial officer or such other officer of the Company
reasonably acceptable to the Administrative Agent;
(c) within the periods provided in paragraphs (a) and (b) above, a
certificate of an authorized financial officer of the Company stating that
such officer has reviewed the provisions of this Agreement and setting
forth: (aa) the information and computations (in sufficient detail)
required in order to compute the Leverage Ratio and to establish whether
the Company was in compliance with the requirements of Sections 5.1,
8.10(l), 8.10(m), 8.11, 8.21, 8.22 and 8.23 hereof at the end of the period
covered by the financial statements then being furnished, and (ab) to the
best such officer's knowledge, whether there exists on the date of the
certificate or existed at any time during the period covered by such
financial statement any Default or Event of Default and, if any such
condition or event exists on the date of the certificate or existed during
such period, specifying the nature and period of existence thereof and the
action the Company is taking, has taken or proposes to take with respect
thereto;
(d) promptly upon the filing thereof, copies of all registration
statements, Form 10-K, Form 10-Q and Form 8-K reports and proxy statements
which the Company or any of its Subsidiaries file with the Securities and
Exchange Commission; and
(e) promptly after knowledge thereof shall have come to the attention
of any responsible officer of the Company, written notice of any threatened
or pending litigation or governmental proceeding or assessment against the
Company or any Subsidiary which is reasonably like to have a Material
Adverse Effect or of any Event of Default.
The Company will, and will cause each Subsidiary to, permit representatives
of any Lender, upon reasonable notice and during normal business hours, to
examine and make extracts from the books and records of the Company and its
Subsidiaries and to examine their assets and access thereto shall be permitted
for such purpose. The Administrative Agent and each Lender agree to maintain in
confidence and not disclose to any Person any non-public information relating to
the Company or its Subsidiaries made available to the Administrative Agent or
such Lenders pursuant to this Section 8.5; provided that the Administrative
Agent and each Lender may make such disclosures as are permitted by Section
12.16 hereof or as shall be required by law or to such Person's auditors or
legal counsel who the Administrative Agent or such Lender, as applicable, agrees
will maintain the information so disclosed in confidence. Upon notice from the
Company, the Administrative Agent and the Lenders shall take such steps as may
be
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reasonably requested by the Company to enable the Company or any Subsidiary to
comply with the Foreign Ownership Control or Influence requirements of the
United States Government imposed from time to time, provided that (i) nothing
herein shall obligate the Administrative Agent or any Lender to take any action
which would adversely affect the validity or enforceability of any of the Loan
Documents or any rights or remedies of the Administrative Agent or the Lenders
thereunder or of the Company's or any Guarantor's obligations thereunder and
(ii) neither the Administrative Agent nor any Lender shall be liable to the
Company or any Subsidiary as a result of any act or failure to act hereunder
taken or omitted to be taken in good faith.
Section 8.6. Compliance with Laws. The Company will, and will cause each
Subsidiary to, comply with all laws, ordinances or governmental rules and
regulations to which they are subject, including, without limitation, the
Occupational Safety and Health Act of 1970, as amended, ERISA, and all laws,
ordinances, governmental rules and regulations relating to environmental
protection in all applicable jurisdictions, the violation of which is reasonably
likely to have a Material Adverse Effect or could reasonably be expected to
result in any lien or charge upon any Property of the Company or any Subsidiary
which is not a Permitted Lien.
Section 8.7. Nature of Business. The Company will not, nor will it permit
any Subsidiary to, engage in any business or activity if, as a result, the
general nature of the business which would then be engaged in by the Company and
its Subsidiaries taken as a whole would be substantially changed from Eligible
Lines of Business existing as of the date of this Agreement.
Section 8.8. Liens. The Company will not, nor will it permit any
Restricted Subsidiary to, pledge, mortgage or otherwise encumber or subject to,
or permit to exist upon or be subjected to, any lien, security interest or
charge upon, any assets or property of any kind or character at any time owned
by the Company or any Restricted Subsidiary; provided, however, that nothing in
this Section contained shall operate to prevent any of the following
(collectively, "Permitted Liens"):
(a) liens, pledges or deposits in connection with workmen's
compensation, unemployment insurance, social security obligations, taxes,
assessments, statutory obligations or other similar charges (other than
liens arising under ERISA), good faith deposits in connection with tenders,
contracts or leases to which the Company or any of its Restricted
Subsidiaries is a party or other deposits required to be made in the
ordinary course of business and not in connection with borrowing money or
obtaining advances or credit; provided in each case that the obligation or
liability arises in the ordinary course of business and is not overdue, or
if overdue, is being contested in good faith by appropriate proceedings
which prevent enforcement of the matter under contest and adequate reserves
have been established therefor to the extent required by GAAP;
(b) inchoate statutory, construction, common carrier's, materialmen's,
landlord's, warehousemen's, mechanics, producers' or operator's liens
securing obligations not overdue, or if overdue, being contested in good
faith by appropriate proceedings which prevent enforcement of the matter
under contest and adequate reserves have been established therefor to the
extent required by GAAP;
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(c) liens given to secure the payment of the purchase price or the
financing thereof incurred in connection with the acquisition of fixed
assets, including liens existing on such assets at the time of acquisition
thereof, provided that (i) the lien shall attach solely to the property
acquired or purchased and (ii) the indebtedness secured by such lien does
not exceed 100% of the lesser of the cost or fair value of the property
financed;
(d) attachment or judgment liens individually or in the aggregate not
in excess of $1,000,000 (exclusive of (i) any amounts that are duly bonded
to the reasonable satisfaction of the Administrative Agent or (ii) any
amount adequately covered by insurance as to which the insurance company
has not disclaimed or disputed in writing its obligations for coverage or
has not otherwise failed to pay when due);
(e) liens for taxes, assessments or other governmental charges not yet
due and payable or which are being diligently contested in good faith by
the Company or its applicable Restricted Subsidiary by appropriate
proceedings, provided that in any such case an adequate reserve is being
maintained by the Company or such Restricted Subsidiary for the payment of
same;
(f) deposits or pledges to secure bids, tenders, contracts (other than
contracts for the payment of money), leases, statutory obligations, surety
and appeal bonds and other obligations of like nature arising in the
ordinary course of business;
(g) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not materially
detract from the value of the property subject thereto or materially
interfere with the ordinary conduct of the business of the Company or any
Restricted Subsidiary;
(h) liens on assets owned by newly acquired Subsidiaries who become
Restricted Subsidiaries hereunder existing at the time of acquisition and
not incurred in contemplation of such acquisition;
(i) liens described on Schedule 8.8 attached hereto, encumbering the
assets noted thereon opposite the description of the indebtedness or
obligation secured thereby;
(j) liens securing indebtedness permitted by Section 8.9 hereof not to
exceed $5,000,000 in the aggregate at any time; and
(k) extensions and renewals of the foregoing Permitted Liens, provided
that the aggregate amount of such liabilities secured by such extended or
renewed lien is not increased and such extended or renewed liabilities
secured by such lien are on terms and conditions no more restrictive than
the terms and conditions of the same being extended or renewed.
Section 8.9. Indebtedness. The Company will not, nor will it permit any
Restricted Subsidiary to, issue, incur, assume, create, or have outstanding any
indebtedness for borrowed
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money (including as such for all purposes of this Agreement any indebtedness
representing the deferred purchase price of property (accounts payable for the
purchase of goods on ordinary trade terms shall not be deemed indebtedness for
the deferred purchase price of property for purposes of this Agreement), any
liability in respect to banker's acceptances, any indebtedness, whether or not
assumed, secured by liens on property acquired by the Company or any Restricted
Subsidiary existing at the time of the acquisition thereof, and the liability of
the Company or any Restricted Subsidiary under any lease which should be
capitalized under GAAP); provided, however, that the foregoing provisions shall
not restrict nor operate to prevent:
(a) with respect to the Company and the Guarantors, so long as the
Company has and retains a Moody's Rating of Baa3 or higher or an S&P Rating
of BBB- or higher:
(i) any and all indebtedness owing to the Issuing Banks and
the Lenders under the Loan Documents;
(ii) indebtedness described on Schedule 8.9 attached hereto;
and
(iii) any and all other indebtedness so long as at the time of,
and after giving effect to, the incurrence of any such indebtedness no
Default or Event of Default exists;
(b) with respect to the Company and the Guarantors, at any time when
clause (a) above is not in effect:
(i) any and all indebtedness owing to the Issuing Banks and
the Lenders under the Loan Documents;
(ii) purchase money indebtedness;
(iii) indebtedness described on Schedule 8.9 attached hereto;
(iv) indebtedness arising from the issuance of letters of
credit in the ordinary course of business;
(v) indebtedness issued in accordance with clause (a) above
outstanding at the time when clause (a) is no longer in effect as
reduced from time to time by payments made thereon; and
(vi) additional indebtedness not otherwise permitted by this
clause (b) in an aggregate amount not to exceed $50,000,000 at any one
time outstanding, provided that such amount shall be reduced (but not
below zero) dollar-for-dollar by the amount of indebtedness permitted
under clause (b)(v) above which exceeds $150,000,000;
(c) with respect to any Restricted Subsidiaries that are not
Guarantors:
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(i) purchase money indebtedness;
(ii) indebtedness of any Restricted Subsidiary owing to the
Company or any other Subsidiary arising in the ordinary course of
business;
(iii) indebtedness of any newly-acquired Restricted Subsidiary
existing at the time of the acquisition and not incurred in
contemplation of such acquisition;
(iv) indebtedness described on Schedule 8.9 attached hereto;
(v) indebtedness arising from the issuance of letters of
credit in the ordinary course of business;
(vi) Non-Recourse Debt of any Restricted Subsidiary; and
(vii) indebtedness not otherwise permitted by this clause (c)
aggregating not more than $10,000,000 at any one time outstanding.
Section 8.10. Acquisitions, Investments, Loans, Advances and Guarantees.
The Company will not, nor will it permit any Restricted Subsidiary to, directly
or indirectly, make, retain or have outstanding any interest or investments
(whether through purchase of stock or obligations or otherwise) in, or loans or
advances to, any other Person, or acquire all or any substantial part of the
assets or business of any other Person, or guarantee any indebtedness,
obligation or liability of any other Person or otherwise enter into any
arrangement designed to assure another Person against loss or subordinate any
claim or demand it may have to the claim or demand of any other Person;
provided, however, that the foregoing provisions shall not apply to nor operate
to prevent:
(a) investments by the Company or any Restricted Subsidiary in direct
obligations of the United States of America or of any agency or
instrumentality thereof whose obligations constitute full faith and credit
obligations of the United States of America, provided that any such
obligations shall mature within fifteen months from the date the same are
acquired by the Company or such Restricted Subsidiary;
(b) investments by the Company or any Restricted Subsidiary in
certificates of deposit or time deposits issued by any Lender, or by any
United States commercial bank having capital and surplus of not less than
$100,000,000 and having a maturity of fifteen months or less;
(c) investments by the Company or any Restricted Subsidiary in
commercial paper maturing 270 days or less from the date of issuance which
at the time of acquisition is rated A-2 or better by Standard & Poor's
Ratings Services Group, a division of The McGraw-Hill Companies, Inc., and
P-2 or better by Moody's Investors Service, Inc.;
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(d) investments by the Company or any Restricted Subsidiary in debt
securities issued by U.S. corporations or states of the United States
maturing within fifteen months from the date of acquisition thereof if at
the time of acquisition the investment in question has a rating of not less
than BBB from Standard & Poor's Ratings Services Group, a division of The
McGraw-Hill Companies, Inc. and/or Baa2 from Moody's Investors Services,
Inc.;
(e) investments by the Company or any Restricted Subsidiary in
preferred stock of any corporation organized under the laws of any state of
the United States which is subject to a remarketing undertaking at
intervals not exceeding fifteen months issued by any substantial broker and
which is rated BBB or better by Standard & Poor's Ratings Services Group, a
division of The McGraw-Hill Companies, Inc. and/or Baa2 or better by
Moody's Investors Services, Inc.;
(f) the Company's acquisition of the Acquired Assets on or about the
date hereof in accordance with the terms and conditions described by the
Company in its Rating Agency Presentation dated January 1999, and other
Acquisitions with respect to which all of the following conditions have
been satisfied: (i) the Acquisition is not a Hostile Acquisition, (ii) not
less than 66 2/3% of both (i) the assets or (ii) historical Earnings Before
Interest, Taxes, Depreciation and Amortization (computed for the Acquired
Business) for the most recently completed fiscal year of the Acquired
Business arise out of an Eligible Line of Business, (iii) after giving
effect to the Acquisition, no Default or Event of Default shall exists,
including with respect to the financial covenants contained in Section 8 of
this Agreement on a pro forma basis, and (iv) if the Total Consideration
paid in connection with the Acquisition equals or exceeds $50,000,000, then
prior to consummating any such Acquisition the Company shall have notified
the Administrative Agent and the Lenders in writing of the proposed
Acquisition in reasonable detail (including sources and uses of funds
therefor) and furnished to the Administrative Agent and the Lenders
historic and pro forma financial information and compliance calculations
reasonably satisfactory to the Required Lenders demonstrating no Default or
Event of Default exists or, on a pro forma basis, would occur after giving
effect to such transaction;
(g) ordinary course of business investments in, directly or
indirectly, joint ventures with other Persons formed to provide services in
an Eligible Line of Business and loans and guaranties (made ratably with
the other venturers) to such joint ventures;
(h) investments in, and loans and advances to, Restricted
Subsidiaries;
(i) one or more unsecured guaranties issued by the Company or any
Restricted Subsidiary guaranteeing indebtedness and obligations of Blue
Diamond outstanding from time to time in an aggregate principal not to
exceed $6,000,000 at any one time;
(j) the guaranties issued by the Guarantors pursuant to Section 11
hereof in favor of the Administrative Agent and the Lenders;
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(k) investments held by any Restricted Subsidiary acquired after the
date of this Agreement existing at the time of its acquisition by the
Company or other existing Restricted Subsidiary and not acquired by such
Restricted Subsidiary in contemplation of such acquisition;
(l) existing investments in, loans and advances to, and guaranties of
the obligations of, Unrestricted Subsidiaries (excluding the GESCO
Subsidiaries) and other Persons (other than Subsidiaries) that are engaged
in an Eligible Line of Business and which investments, loans, advances and
guaranties are disclosed on Schedule 8.10(l) attached hereto and made a
part hereof; and additional investments in, loans and advances to, and
guaranties of the obligations of, Unrestricted Subsidiaries (excluding the
GESCO Subsidiaries except as provided in Section 8.10(m) below) and other
Persons (other than Subsidiaries) that are engaged in an Eligible Line of
Business not so disclosed on Schedule 8.10(l) provided that at the time of
making any such additional investment, loan, advance or guaranty the
aggregate amount of such additional investments, loans, advances, and
guaranties, when taken together with the aggregate amount of Restricted
Payments made after the date hereof, does not exceed the sum of (i)
$75,000,000, plus (ii) 75% of the net cash proceeds received by the Company
after the date hereof in connection with the sale of any of its capital
stock, plus (iii) 100% of the net cash proceeds received by the Company
after the date hereof in connection with the exercise of its convertible
warrants outstanding on the date hereof, plus (or minus) (iv) 50% of
Consolidated Net Income for the period from the date hereof through the
date of the making of the relevant investment, loan, advance, or guaranty
(measured as a single accounting period);
(m) existing investments in the GESCO Subsidiaries disclosed on
Schedule 8.10(m) attached hereto; and additional investments in, and short-
term loans and advances made by the Company in the ordinary course of its
business to finance the working capital requirements of, the GESCO
Subsidiaries, provided that (i) additional investments made after the date
hereof by the Company in the GESCO Subsidiaries shall not exceed
$30,000,000 in the aggregate during the term of this Agreement and (ii)
additional investments made by the Company in, and short-term working
capital loans and advances made by the Company in the ordinary course of
its business to, the GESCO Subsidiaries shall not exceed $30,000,000 in the
aggregate at any one time outstanding, except for such amounts in excess
thereof which constitute short-term working capital loans and advances made
by the Company in the ordinary course of its business to the GESCO
Subsidiaries which are included in, and otherwise count against the limits
provided for in, Section 8.10(l) above and the Company is in compliance
with Section 8.10(l) after giving effect to any such loan or advance;
(n) guaranties not otherwise permitted above existing on the date
hereof described on, and supporting the obligations set forth on, Schedule
8.10(n) hereof;
(o) performance guaranties supporting performance obligations of
Subsidiaries arising under contracts in Eligible Lines of Business; and
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(p) other investments in, loans and advances to, and guaranties of the
obligations of Persons (other than Subsidiaries) not otherwise permitted by
this Section aggregating not more than $2,500,000 at any one time
outstanding.
In determining the amount of investments, loans and advances permitted under
this Section, investments shall always be taken at the original cost thereof,
regardless of any subsequent appreciation (including retained earnings) or
depreciation therein, and loans and advances shall be taken at the principal
amount thereof then remaining unpaid.
Section 8.11. Dividends and Certain Other Restricted Payments. The Company
will not declare or pay any dividends on any class of its capital stock (other
than dividends payable solely in its capital stock) or directly or indirectly
purchase, redeem or otherwise acquire or retire any of its capital stock (each a
"Restricted Payment" and collectively the "Restricted Payments"); provided that
the Company may make Restricted Payments so long as (a) no Default or Event of
Default then exists or would arise after giving effect thereto and (b) the
amount of Restricted Payments, when taken together with the aggregate amount of
Restricted Payments previously paid during the term of this Agreement, shall not
exceed the sum of (i) $25,000,000, plus (ii) 50% of the net cash proceeds
received by the Company after the date hereof in connection with the sale of any
of its capital stock, plus (iii) 100% of the net cash proceeds received by the
Company after the date hereof in connection with the exercise of its convertible
warrants outstanding on the date hereof, plus (or minus) (iv) 25% of
Consolidated Net Income for the period from the date hereof through the date of
the payment of any such Restricted Payment (measured as a single accounting
period).
Section 8.12. Mergers. The Company will not, nor will it permit any
Restricted Subsidiary to, consolidate or be a party to a merger with any other
Person, except that so long as no Default or Event of Default has occurred and
is continuing or would arise as a result thereof (i) any Restricted Subsidiary
of the Company may merge with and into the Company if the Company is the
surviving corporation and (ii) the Company or any Restricted Subsidiary may
engage in a merger with another Person if the Company or such Restricted
Subsidiary is the surviving corporation.
Section 8.13. Sale of Assets. The Company will not, nor will it permit any
Restricted Subsidiary to, sell, lease or otherwise dispose of all or any
substantial part of its Property or assets (including any disposition of
property as part of a sale and leaseback transaction, but excluding the leasing
of Property by WCG Leasing, Inc., a Montana corporation, made in the ordinary
course of its business) or in any event sell or discount, with or without
recourse, any of its notes or accounts receivable; provided, that nothing
contained therein shall prohibit (i) sales of inventory in the ordinary course
of business; (ii) sales or dispositions of obsolete or worn out property
disposed of in the ordinary course of business; (iii) sales of the assets of or
equity interests in Pomeroy Corporation and Blue Diamond, and the assets of
National Projects, Inc. constituting its Pro Builders division; and (iv) sales
of other assets with a book value of less than $15,000,000 in the aggregate
during any fiscal year.
Section 8.14. Burdensome Contracts with Affiliates. The Company will not,
nor will it permit any Restricted Subsidiary to, enter into or be a party to any
contract or agreement with an
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Affiliate on terms and conditions materially less favorable to the Company or
such Restricted Subsidiary than would be usual and customary in similar
contracts or agreements between Persons not affiliated with each other.
Section 8.15. No Change in Fiscal Year. The Company will not, nor will it
permit any Restricted Subsidiary to, change its fiscal year, provided that the
Lenders shall not unreasonably withhold their consent to such a change if in
connection therewith the provisions of this Agreement measuring covenant
compliance with reference to fiscal periods are renegotiated in a manner
reasonably acceptable to them.
Section 8.16. Maintenance of Material Subsidiaries. The Company will not,
nor will it permit any Subsidiary to, directly or indirectly, sell, transfer, or
otherwise dispose of its equity interest in any Material Subsidiary.
Section 8.17. No Restriction on Subsidiary Dividends. Neither the Company
nor any Subsidiary (excluding majority-owned joint ventures referred to in
Section 8.10(g) hereof) is a party to, nor will the Company or any Subsidiary
(excluding majority-owned joint ventures referred to in Section 8.10(g) hereof)
become a party to, any agreement prohibiting or otherwise restricting the
declaration or payment of any dividends by any such Subsidiary.
Section 8.18. Year 2000 Assessment. The information contained in this
Section 8.18 is a YEAR 2000 READINESS DISCLOSURE. The Company will take all
actions it deems necessary and commit resources it deems adequate to assure that
its electronic information and communication systems (and those of all
Subsidiaries) are able to effectively process dates, including dates before, on
and after January 1, 2000 without experiencing any Year 2000 Problem that could
reasonably be expected to cause a Material Adverse Effect. At the request of the
Administrative Agent, the Company will provide the Lenders with written
assurances and substantiations (including, but not limited to, the results of
internal or external audit reports otherwise prepared in the ordinary course of
business) reasonably acceptable to the Administrative Agent as to the capability
of the Company and its Subsidiaries to conduct its and their businesses and
operations before, on and after January 1, 2000, without experiencing a Year
2000 Problem causing a Material Adverse Effect. Without request, the Company
will provide the Administrative Agent and the Lenders a status report of its
current Year 2000 Problems and a summary of its implementation plan and timeline
therefor no later than June 30, 1999. The Company will promptly notify the
Administrative Agent and the Lenders in the event the Company discovers or
determines that any other Year 2000 Problem exists with respect to any computer
application (including those of its suppliers and vendors) that could reasonably
be expected to have a Material Adverse Effect.
Section 8.19. Use of Loan Proceeds. The Company will use the credit
extended under this Agreement solely for the purposes set forth in, or otherwise
permitted by, Section 6.3 hereof.
Section 8.20. Senior Debt. The Company will at all times ensure that (a)
the claims of the Lenders in respect of the Obligations of the Company and the
Guaranteed Obligations of the Guarantors will not be subordinate to, and will in
all respects at least rank pari passu with, the claims of every other senior
unsecured creditor of the Company and the relevant Guarantor, and
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(b) any indebtedness subordinated in any manner to the claims of any other
senior unsecured creditor of the Company or the relevant Guarantor will be
subordinated in a like manner to such claims of the Lenders.
Section 8.21. Consolidated Debt/Total Capital Ratio. As of the last day of
each fiscal quarter of the Company, the Company shall maintain the ratio of
Consolidated Total Indebtedness to Consolidated Total Capital at not more than
.5 to 1.0.
Section 8.22. Leverage Ratio. As of the last day of each fiscal quarter of
the Company ending during the periods specified below, the Company shall not
permit the Leverage Ratio to be more than:
LEVERAGE RATIO SHALL
FROM AND INCLUDING TO AND INCLUDING NOT BE MORE THAN:
The date hereof November 30, 2000 3.5 to 1.0
December 1, 2000 and at all times thereafter 3.25 to 1.0
Section 8.23. Fixed Charge Coverage Ratio. As of the last day of each
fiscal quarter of the Company ending during the periods specified below, the
Company shall not permit the ratio of (a) the difference of (i) Earnings Before
Interest, Taxes, Depreciation and Amortization for the four most recently
completed fiscal quarters of the Company, minus (ii) Capital Expenditures of the
Company and its Subsidiaries (excluding Capital Expenditures of the GESCO
Subsidiaries) during the same four fiscal quarters to (b) Fixed Charges for the
same four fiscal quarters then ended (the "Fixed Charge Coverage Ratio") to be
less than:
FIXED CHARGE
COVERAGE RATIO SHALL
FROM AND INCLUDING TO AND INCLUDING NOT BE LESS THAN:
The date hereof November 30, 1999 1.75 to 1.0
December 1, 1999 and at all times thereafter 2.00 to 1.0
; provided, however, for any fiscal quarter ending on or after December 1, 1999,
so long as the Company has a Moody's Rating of Baa3 or higher or an S&P Rating
of BBB- or higher, then the required Fixed Charge Coverage Ratio for the period
then ended shall be reduced to 1.75 to 1.0.
Section 8.24. Hazardous Materials Risk Management. The Company will, and
will cause each Subsidiary to, assess and manage on an on-going basis the risks
associated with the handling of Hazardous Materials in the ordinary course of
business in a manner consistent with prudent business practices and similar to
companies similarly situated and operating like businesses.
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SECTION 9. EVENTS OF DEFAULT AND REMEDIES.
Section 9.1. Any one or more of the following shall constitute an "Event
of Default" hereunder:
(a) default in the payment when due of any principal on any Note or
Application, whether at the stated maturity thereof or at any other time
provided for in this Agreement; or default in the payment when due of any
interest on any Note or Application or fee, charge or other amount payable
by the Company hereunder or under any other Loan Document and the
continuance of such default for 2 Business Days after notice thereof to the
Company from the Administrative Agent or any Lender;
(b) default in the observance or performance of any covenant set forth
in Sections 8.10, 8.11, 8.12 or 8.13 hereof;
(c) default in the observance or performance of any other provision
hereof or any of the other Loan Documents which is not remedied within 20
days after written notice thereof to the Company by the Administrative
Agent or any Lender or by the holder of any Note;
(d) default shall occur in the payment when due (whether by lapse of
time, acceleration or otherwise) of any indebtedness (including as such all
obligations included in Consolidated Total Indebtedness as such term is
defined herein) aggregating in excess of $10,000,000 issued, assumed or
guaranteed by the Company or any Subsidiary or any other event of default
shall occur with respect to any such indebtedness beyond any period of
grace provided therefor if the effect thereof is to permit the maturity of
such indebtedness to be accelerated or to permit the holders thereof to
elect a majority of the Board of Directors of the Company;
(e) any representation or warranty made herein or in any of the other
Loan Documents or in any statement or certificate furnished pursuant hereto
or thereto, or in connection with any advance or issuance made hereunder or
by any person in connection with the transactions contemplated hereby,
proves untrue in any material respect as of the date of the issuance or
making thereof, and shall not be made good within 30 days after notice
thereof to the Company by the Administrative Agent;
(f) any judgment or judgments, writ or writs or warrant or warrants or
attachment, or any similar process or processes in an aggregate amount in
excess of $15,000,000 more than the amount, if any, covered by insurance
(as to which the insurer has not disclaimed or disputed in writing its
obligations for coverage or otherwise failed to pay when due) shall be
entered or filed against the Company or any Subsidiary or against any of
the property or assets of any of them and remains undischarged, unvacated,
unbonded or unstayed for a period of 30 days;
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(g) any event occurs or condition exists which is specified as an
event of default under any of the other Loan Documents after the expiration
of any applicable notice or grace periods;
(h) any of the Loan Documents shall for any reason not be or shall
cease to be in full force and effect, or any of the Loan Documents is
declared to be null and void, or the Company or any Guarantor takes any
action for the purpose of repudiating or rescinding any Loan Document
executed by it or the obligations of such Person thereunder;
(i) 50% or more of the issued and outstanding Voting Stock of the
Company is owned or controlled, either legally or beneficially, by any
Person or by any group of Persons affiliated with each other or acting in
concert (Persons shall not be deemed to have acted in concert merely as a
result of voting the same way or taking the same position if the decision
to vote or to take a position were made independently and without prior
consultation) other than Dennis R. Washington and/or his wife and/or his
descendants and/or trusts or estates for the benefit of his wife and/or
descendants;
(j) the Company or any Material Subsidiary or any Material Foreign
Subsidiary becomes insolvent or bankrupt or bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other proceedings for
relief under any bankruptcy law or laws for the relief of debtors are
instituted against the Company or any Material Subsidiary or any Material
Foreign Subsidiary and are not dismissed within 60 days after such
institution or a decree or order of a court having jurisdiction in the
premises for the appointment of a trustee or receiver or custodian for the
Company or any Material Subsidiary or any Material Foreign Subsidiary or
for the major part of any of their property is entered and the trustee or
receiver or custodian appointed pursuant to such decree or order is not
discharged within 60 days after such appointment; or
(k) the Company or any Material Subsidiary or any Material Foreign
Subsidiary shall institute bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings or other proceedings for relief under
any bankruptcy law or laws for the relief of debtors or shall consent to
the institution of such proceedings against it by others or to the entry of
any decree or order adjudging it bankrupt or insolvent or approving as
filed any petition seeking reorganization under any bankruptcy or similar
law or shall apply for or shall consent to the appointment of a receiver or
trustee or custodian for it or for the major part of its property or shall
make an assignment for the benefit of creditors or shall admit in writing
its inability to pay its debts as they mature or shall take any corporate
action in contemplation or in furtherance of any of the foregoing purposes;
or
(l) any event occurs or condition exists which is specified as an
"Event of Default" under the 364-Day Credit Agreement.
Section 9.2. When any Event of Default described in subsections 9.1(a) to
9.1(i), both inclusive, or subsection 9.1(l) has occurred and is continuing, the
Administrative Agent may (and
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shall, upon request of the Required Lenders), by notice to the Company, take any
or all of the following actions:
(a) terminate the obligation of the Lenders to extend any further
credit hereunder on the date (which may be the date thereof) stated in such
notice (such termination shall be effective upon verbal notification, the
Administrative Agent hereby agreeing to provide written notification
thereof to the Company as soon as practical thereafter);
(b) declare the principal of and the accrued interest on the Notes to
be forthwith due and payable and thereupon the Notes, including both
principal and interest, and all fees, charges, commissions and other
Obligations payable under the Loan Documents, shall be and become
immediately due and payable without further demand, presentment, protest or
notice of any kind;
(c) demand that the Company immediately provide to the Administrative
Agent cash collateral for the full amount of each Letter of Credit and the
Company agrees to immediately provide such cash collateral and acknowledges
and agrees that the Lenders would not have an adequate remedy at law for
failure by the Company to honor any such demand and that the Lenders shall
have the right to require the Company to specifically perform such
undertaking whether or not any draws have been made under the Letters of
Credit, with the funds so paid to, if the Company so requests, be invested
in short-term high-grade debt securities, acceptable and pledged to and
held by the Administrative Agent in accordance with Section 4.7 hereof; and
(d) enforce any and all rights and remedies available under the Loan
Documents or applicable law.
Section 9.3. When any Event of Default described in subsections 9.1(j) or
(k) has occurred and is continuing, then (a) the then unpaid balance of the
Notes, including both principal and interest, and all fees, charges, commissions
and other Obligations payable under the Loan Documents, shall immediately become
due and payable without presentment, demand, protest or notice of any kind, (b)
the obligation of the Lenders to extend further credit pursuant to any of the
terms hereof shall immediately and automatically terminate, (c) the Company
shall immediately provide to the Administrative Agent cash collateral for the
full amount of all Letters of Credit, whether or not draws have been made
thereon, the Company acknowledging that the Lenders would not have an adequate
remedy at law for failure by the Company to honor any such demand, and the
Lenders shall have the right to require the Company to specifically perform such
undertaking whether or not any draws have been made under the Letters of Credit,
and (d) the Administrative Agent may exercise all remedies available to it under
the Loan Documents or applicable law.
Section 10. The Administrative Agent and Issuing Banks.
Section 10.1. Appointment and Authorization. Each Lender hereby appoints
and authorizes the Administrative Agent to take such action as agent on its
behalf and to exercise
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such powers hereunder and under the Loan Documents as are designated to the
Administrative Agent by the terms hereof and thereof together with such powers
as are reasonably incidental thereto. The Lenders expressly agree that the
Administrative Agent is not acting as a fiduciary of the Lenders in respect of
the Loan Documents, the Company or otherwise, and nothing herein or in any of
the other Loan Documents shall result in any duties or obligations on the
Administrative Agent or any Lenders except as expressly set forth herein. The
Administrative Agent may resign at any time by sending 20 days prior written
notice to the Company and the Lenders and may be removed by the Required Lenders
upon 20 days prior written notice to the Company and the Lenders. In the event
of any such resignation or removal the Required Lenders may appoint a new agent,
which shall succeed to all the rights, powers and duties of the Administrative
Agent hereunder and under the Loan Documents, such new Administrative Agent to
be subject to the reasonable consent of the Company unless a Default or Event of
Default has occurred and is continuing. Any resigning or removed Administrative
Agent shall be entitled to the benefit of all the protective provisions hereof
with respect to its acts as an agent hereunder, but no successor Administrative
Agent shall in any event be liable or responsible for any actions of its
predecessor. If the Administrative Agent resigns or is removed and no successor
is appointed, the rights and obligations of such Administrative Agent shall be
automatically assumed by the Required Lenders and (i) the Company shall be
directed to make all payments due each Lender hereunder directly to such Lender
and (ii) the Administrative Agent's rights in the Loan Documents shall be
assigned without representation, recourse or warranty to the Lenders as their
interests may appear.
Section 10.2. Rights as a Lender. The Administrative Agent has and reserves
all of the rights, powers and duties hereunder and under the other Loan
Documents as any Lender may have and may exercise the same as though it were not
the Administrative Agent and the terms "Lender" or "Lenders" as used herein and
in all of such documents shall, unless the context otherwise expressly
indicates, include the Administrative Agent in its individual capacity as a
Lender. The Administrative Agent reserves the right to engage in other business
transactions with the Company, the Subsidiaries and their Affiliates.
Section 10.3. Standard of Care. The Lenders acknowledge that they have
received and approved copies of the Loan Documents, and such other information
and documents concerning the transactions contemplated and financed hereby as
they have requested to receive and/or review. The Administrative Agent makes no
representations or warranties of any kind or character to the Lenders with
respect to the validity, enforceability, genuineness, perfection, value, worth
or collectibility hereof or of the other Loan Documents or of the liens, if any,
provided for thereby or of any other documents called for hereby or thereby or
of the collateral, if any. The Administrative Agent need not verify the worth or
existence of any collateral, or any other Property, and may rely exclusively on
reports provided by the Company. The Lenders agree that neither the
Administrative Agent nor any director, officer employee, agent or representative
thereof (including any security trustee therefor) shall in any event be liable
for any clerical errors or errors in judgment, inadvertence or oversight, or for
action taken or omitted to be taken by it or them hereunder or under the Loan
Documents or in connection herewith or therewith except for its or their own
gross negligence or willful misconduct. The Administrative Agent shall incur no
liability under or in respect of this Agreement or the other Loan Documents by
acting upon any notice, certificate, warranty, instruction or statement (oral or
written) of
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anyone (including anyone in good faith believed by it to be authorized to act on
behalf of the Company), unless it has actual knowledge of the untruthfulness of
same. The Administrative Agent agrees to use the same care in protecting the
interests of the Lenders in the Loans and Letters of Credit as it uses for
similar loans or extensions of credit held by it solely for its own account. The
Administrative Agent shall be entitled to assume that no Default or Event of
Default exists, absent actual knowledge thereof, unless notified to the contrary
by a Lender. The Administrative Agent shall in all events be fully protected in
acting or failing to act in accord with the instructions of the Required
Lenders. Upon the occurrence of an Event of Default hereunder, the
Administrative Agent shall take such action with respect to the enforcement of
its rights and remedies hereunder and under any collateral and the preservation
and protection thereof as it shall be directed to take by the Required Lenders
(and shall consult with the Lenders as to actions to be taken) but unless and
until the Required Lenders have given such direction the Administrative Agent
shall take or refrain from taking such actions as it deems appropriate and in
the best of interest of all Lenders. The Administrative Agent shall in all cases
be fully justified in failing or refusing to act hereunder unless it shall be
indemnified to its reasonable satisfaction by the Lenders against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Administrative Agent may treat the owner
of any Note as the holder thereof until written notice of transfer shall have
been filed with it as provided in Section 12.12 hereof signed by such owner in
form satisfactory to the Administrative Agent. Each Lender acknowledges that it
has independently and without reliance on the Administrative Agent or any other
Lender and based upon such information, investigations and inquiries as it deems
appropriate made its own credit analysis and decision to extend credit to the
Company. It shall be the responsibility of each Lender to keep itself informed
as to the creditworthiness of the Company and each Subsidiary and the
Administrative Agent shall have no liability to any Lender with respect thereto.
Section 10.4. Costs and Expenses. Each Lender agrees to reimburse the
Administrative Agent for all out-of-pocket costs and expenses suffered or
incurred by the Administrative Agent or any security trustee in performing its
duties hereunder and under the other Loan Documents or in the exercise of any
right or power imposed or conferred upon the Administrative Agent hereby or
thereby, to the extent that the Administrative Agent is not promptly reimbursed
for same by the Company or out of any collateral, all such costs and expenses to
be borne by the Lenders ratably in accordance with the amounts of their
respective Commitments.
Section 10.5. Indemnity. The Lenders shall ratably indemnify and hold the
Administrative Agent, and each of its directors, officers, employees, agents or
representatives (including as such any security trustee therefor), harmless from
and against any liabilities, losses, costs or expenses suffered or incurred by
them under this Agreement or any of the other Loan Documents or in connection
with the transactions contemplated hereby or thereby, regardless of when
asserted or arising, except to the extent they are promptly reimbursed for the
same by the Company or out of any collateral and except to the extent that any
event giving rise to a claim was caused by the gross negligence or willful
misconduct of the party seeking to be indemnified.
Section 10.6. Issuing Bank. The Issuing Bank shall act on behalf of the
Lenders with respect to any Letters of Credit issued by it and the documents
associated therewith. The Issuing Bank shall have all of the benefits and
immunities (i) provided to the Administrative Agent in
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this Section 10 with respect to any acts taken or omissions suffered by the
Issuing Bank in connection with Letters of Credit issued by it or proposed to be
issued by it and the Applications pertaining to such Letters of Credit as fully
as if the term "Administrative Agent", as used in this Section 10, included
Issuing Bank with respect to such acts or omissions and (ii) as additionally
provided in this Agreement with respect to such Issuing Bank.
Section 10.7. Designation of Additional Agent. The Administrative Agent
shall have the continuing right, for purposes hereof, at any time or from time
to time to designate one or more Lenders (and/or its or their Affiliates) as
"Documentation Agents," "Lead Arrangers, Book Managers, and Syndication Agents,"
"Arrangers" or otherwise for purposes hereto, but such designations shall have
no substantive effect, and such Lenders and their Affiliates shall have no
additional powers, duties, or responsibilities as a result thereof.
Section 11. Guaranty.
Section 11.1. The Guaranty. To induce the Lenders to provide the credits
described herein and in consideration of benefits expected to accrue to the
Company by reason of the Commitments and for other good and valuable
consideration, receipt of which is hereby acknowledged, each Guarantor hereby
unconditionally and irrevocably guarantees jointly and severally to the
Administrative Agent, the Lenders, and each other holder of any of the Notes,
the due and punctual payment of all present and future indebtedness of the
Company evidenced by or arising out of the Loan Documents, including, but not
limited to, the due and punctual payment of principal of and interest on the
Notes, obligations related to the Applications, and the due and punctual payment
of all other Obligations now or hereafter owed by the Company under the Loan
Documents as and when the same shall become due and payable, whether at stated
maturity, by acceleration or otherwise, according to the terms hereof and
thereof (the "Guaranteed Obligations"). In case of failure by the Company
punctually to pay any indebtedness or other obligations guaranteed hereby (after
giving effect to any applicable cure periods), each Guarantor hereby
unconditionally agrees jointly and severally to make such payment or to cause
such payment to be made punctually as and when the same shall become due and
payable, whether at stated maturity, by acceleration or otherwise, and as if
such payment were made by the Company.
Section 11.2. Guarantee Unconditional. The obligations of each Guarantor as
a guarantor under this Section 11 shall be unconditional and absolute and,
without limiting the generality of the foregoing, shall not be released,
discharged or otherwise affected by:
(a) any extension, renewal, settlement, compromise, waiver or release
in respect of any obligation of the Company or of any other guarantor under
this Agreement or any other Loan Document or by operation of law or
otherwise;
(b) any modification or amendment of or supplement to this Agreement
or any other Loan Document;
(c) any change in the existence, structure or ownership of, or any
insolvency, bankruptcy, reorganization or other similar proceeding
affecting, the Company, any other
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guarantor, or any of their respective assets, or any resulting release or
discharge of any obligation of the Company or of any other guarantor
contained in any Loan Document;
(d) the existence of any claim, set-off or other rights which the
Company or any other guarantor may have at any time against the
Administrative Agent, any Lender or any other Person, whether or not
arising in connection herewith;
(e) any failure to assert, or any assertion of, any claim or demand or
any exercise of, or failure to exercise, any rights or remedies against the
Company, any other guarantor or any other Person or Property;
(f) any application of any sums by whomsoever paid or howsoever
realized to any obligation of the Company, regardless of what obligations
of the Company remain unpaid;
(g) any invalidity or unenforceability relating to or against the
Company or any other guarantor for any reason of this Agreement or of any
other Loan Document or any provision of applicable law or regulation
purporting to prohibit the payment by the Company or any other guarantor of
the principal of or interest on any Note or any other amount payable under
the Loan Documents; or
(h) any other act or omission to act or delay of any kind by the
Administrative Agent, any Lender or any other Person or any other
circumstance whatsoever that might, but for the provisions of this
paragraph, constitute a legal or equitable discharge of the obligations of
any Guarantor under this Section 11.
Section 11.3. Discharge Only Upon Payment in Full; Reinstatement in Certain
Circumstances. Each Guarantor's obligations under this Section 11 shall remain
in full force and effect until the Commitments are terminated, all Letters of
Credit have expired, and the principal of and interest on the Notes and all
other amounts payable by the Company under this Agreement and all other Loan
Documents shall have been paid in full. If at any time any payment of the
principal of or interest on any Note or any other amount payable by the Company
under the Loan Documents is rescinded or must be otherwise restored or returned
upon the insolvency, bankruptcy or reorganization of the Company or of any
guarantor, or otherwise, each Guarantor's obligations under this Section 11 with
respect to such payment shall be reinstated at such time as though such payment
had become due but had not been made at such time.
Section 11.4. Subrogation. Each Guarantor agrees it will not exercise any
rights which it may acquire by way of subrogation by any payment made hereunder,
or otherwise, until all the Guaranteed Obligations shall have been paid in full
subsequent to the termination of all the Commitments and expiration or
defeasance in full of all Letters of Credit. If any amount shall be paid to a
Guarantor on account of such subrogation rights at any time prior to the later
of (x) the payment in full of the Guaranteed Obligations and all other amounts
payable by the Company hereunder and the other Loan Documents and (y) the
termination of the Commitments and expiration of all Letters of Credit, such
amount shall be held in trust for the benefit of the Administrative Agent and
the Lenders and shall forthwith be paid to the Administrative Agent
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for the benefit of the Lenders or be credited and applied upon the Guaranteed
Obligations, whether matured or unmatured, in accordance with the terms of this
Agreement.
Section 11.5. Waivers. Each Guarantor irrevocably waives acceptance hereof,
presentment, demand, protest and any notice not provided for herein, as well as
any requirement that at any time any action be taken by the Administrative
Agent, any Lender or any other Person against the Company, another guarantor or
any other Person.
Section 11.6. Limit on Recovery. Notwithstanding any other provision
hereof, the right of recovery against any Guarantor under this Section 11 shall
not exceed $1.00 less than the lowest amount which would render such Guarantor's
obligations under this Section 11 void or voidable under applicable law,
including without limitation fraudulent conveyance law.
Section 11.7. Stay of Acceleration. If acceleration of the time for payment
of any amount payable by the Company under this Agreement or any other Loan
Document is stayed upon the insolvency, bankruptcy or reorganization of the
Company, all such amounts otherwise subject to acceleration under the terms of
this Agreement or the other Loan Documents shall nonetheless be payable jointly
and severally by the Guarantors hereunder forthwith on demand by the
Administrative Agent made at the request of the Required Lenders.
Section 12. Miscellaneous.
Section 12.1. Waiver of Rights. No delay or failure on the part of any
Lender or the holder or holders of any Note in the exercise of any power or
right shall operate as a waiver thereof or as an acquiescence in any default,
nor shall any single or partial exercise thereof or the exercise of any other
power or right preclude any other right or the further exercise of any other
rights. The rights and remedies hereunder of the Company, the Administrative
Agent, the Lenders and of the holder or holders of any Note are cumulative to,
and not exclusive of, any rights or remedies which any of them would otherwise
have.
Section 12.2. Non-Business Day. If any payment of principal shall fall due
on a day which is not a Business Day, interest at the rate such principal bears
for the period prior to maturity shall continue to accrue on such principal from
the stated due date thereof to and including the next succeeding Business Day on
which the same is payable.
Section 12.3. Documentary Taxes. The Company agrees to pay any documentary,
stamp or similar taxes payable in respect to this Agreement or any other Loan
Document, including interest and penalties, in the event any such taxes are
assessed irrespective of when such assessment is made and whether or not any
credit is then in use or available hereunder.
Section 12.4. Survival of Representations. All representations and
warranties made in the Loan Documents or pursuant thereto or in certificates
given pursuant hereto or thereto shall survive the execution and delivery of
this Agreement and of the other Loan Documents, and shall continue in full force
and effect with respect to the date as of which they were made as long as any
credit is in use or available hereunder.
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Section 12.5. Set-off Sharing. Each Lender agrees with each other Lender a
party hereto that in the event such Lender shall receive and retain any payment,
whether by set-off or application of deposit balances or otherwise, on or in
respect of any Note or other Obligation outstanding under this Agreement in
excess of its ratable share of payments on all Notes and other Obligations then
outstanding to the Lenders, then such Lender shall purchase for cash at face
value, but without recourse, ratably from each of the other Lenders such amount
of the Notes or other Obligations held by each such other Lender (or interest
therein) as shall be necessary to cause such Lender to share such excess payment
ratably with all the other Lenders; provided, however, that if any such purchase
is made by any Lender, and if such excess payment or part thereof is thereafter
recovered from such purchasing Lender, the related purchases from the other
Lenders shall be rescinded ratably and the purchase price restored as to the
portion of such excess payment so recovered, but without interest.
Section 12.6. Notices. Except as otherwise specified herein, all notices
hereunder and under the other Loan Documents shall be in writing (including,
without limitation, notice by telecopy) and shall be given to the relevant party
at its address or telecopier number set forth below, or such other address or
telecopier number as such party may hereafter specify by notice to the
Administrative Agent and the Company given by courier, by United States
certified or registered mail, by telecopy or by other telecommunication device
capable of creating a written record of such notice and its receipt. Notices
under the Loan Documents to the Lenders and the Administrative Agent shall be
addressed to their respective addresses or telecopier numbers set forth on the
signature pages hereof, and to the Company to:
Morrison Knudsen Corporation
720 Park Boulevard
Boise, Idaho 83712
Attention: Vice President and Treasurer
Telephone: (208) 386-5887
Telecopy: (208) 386-0220
Each such notice, request or other communication shall be effective (i) if given
by telecopier, when such telecopy is transmitted to the telecopier number
specified in this Section or on the signature pages hereof and a confirmation of
such telecopy has been received by the sender, (ii) if given by mail, 5 days
after such communication is deposited in the mail, certified or registered with
return receipt requested, addressed as aforesaid or (iii) if given by any other
means, when delivered at the addresses specified in this Section or on the
signature pages hereof; provided that any notice given pursuant to Sections 2
and 3 hereof shall be effective only upon receipt.
Section 12.7. Counterparts. This Agreement may be executed in any number of
counterparts, and by the different parties on different counterparts, each of
which when executed shall be deemed an original, but all such counterparts taken
together shall constitute one and the same instrument.
Section 12.8. Successors and Assigns. This Agreement shall be binding upon
the Company and its successors and assigns, and shall be binding upon and inure
to the benefit of the
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Administrative Agent, the Lead Arrangers, Book Managers, and Syndication Agents,
the Documentation Agent and the Lenders and their respective successors and
assigns permitted pursuant to Section 12.12 hereof, including any subsequent
holder of any Note. The Company may not assign its rights or obligations
hereunder without the prior written consent of the Lenders.
Section 12.9. Participants. Each Lender shall have the right at its own
cost to grant participations (to be evidenced by one or more agreements or
certificates of participation) in the Loans made by such Lender and credit risks
in Letters of Credit held by such Lender at any time and from time to time to
one or more other financial institutions, provided that no such participant
shall have any rights under this Agreement or any other Loan Document (the
participant's rights against the Lender granting its participation to be those
set forth in the participation agreement between the participant and such
Lender); provided, further, that no Lender shall transfer or grant any
participation under which the participant shall have rights to approve any
amendment to or waiver of this Agreement or any other loan Document except to
the extent such amendment or waiver would extend the final scheduled maturity of
any Loan, Note or Letter of Credit (unless such Letter of Credit is not extended
beyond the Termination Date) in which such participant is participating, or
reduce the rate or extend the time of payment of interest or fees thereon
(except in connection with a waiver of applicability of any post-default
increase in interest rates) or reduce the principal amount thereof, or increase
the amount of the participant's participation over the amount thereof then in
effect (it being understood that a waiver of any Default or Event of Default or
of a mandatory reduction in the Commitment or of a mandatory prepayment shall
not constitute a change in the terms of such participation, and that an increase
in any Commitment or Loan shall be permitted without the consent of any
participant if the participant's participation is not increased as a result
thereof. Each such Lender selling a participation shall be entitled to the
benefits of Sections 2.3(d), 3 and 4.9 hereof to the extent such Lender would
have been so entitled had no such participation been sold.
Section 12.10. Costs and Expenses. The Company agrees to pay within 10 days
of demand all reasonable costs and expenses of the Administrative Agent, Lead
Arrangers, Book Managers, and Syndication Agents and Documentation Agent in
connection with the preparation, negotiation, syndication, and administration of
the Loan Documents, including, without limitation, the reasonable fees and
disbursements of counsel to the Administrative Agent, in connection with the
preparation and execution of the Loan Documents, and any amendment, waiver or
consent related thereto, whether or not the transactions contemplated herein are
consummated. The Company further agrees to indemnify the Administrative Agent,
Lead Arrangers, Book Managers, and Syndication Agents, Documentation Agent, each
Lender, and their respective directors, officers and employees, against all
losses, claims, damages, penalties, judgments, liabilities and expenses
(including, without limitation, all reasonable expenses of litigation or
preparation therefor, whether or not the indemnified Person is a party thereto,
or any settlement arrangement arising from or relating to any such litigation)
which any of them may pay or incur arising out of or relating to any Loan
Document or any of the transactions contemplated thereby or the direct or
indirect application or proposed application of the proceeds of any Loan or
Letter of Credit, other than those which arise from the gross negligence or
willful misconduct of the party claiming indemnification. The Company, upon
demand by the Administrative Agent, Lead Arrangers, Book Managers, and
Syndication Agents, Documentation
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Agent or a Lender at any time, shall reimburse the Agent, Lead Arrangers, Book
Managers, and Syndication Agents, Documentation Agent or such Lender for any
legal or other expenses incurred in connection with investigating or defending
against any of the foregoing (including any settlement costs relating to the
foregoing) except if the same is directly due to the gross negligence or willful
misconduct of the party to be indemnified. The obligations of the Company under
this Section shall survive the termination of this Agreement.
Section 12.11. Construction. The parties hereto acknowledge and agree that
this Agreement shall not be construed more favorably in favor of one than the
other based upon which party drafted the same, it being acknowledged that all
parties hereto contributed substantially to the negotiation of this Agreement.
Section 12.12. Assignments. (a) Each Lender may, from time to time, with
the consent of the Administrative Agent and the Documentation Agent and, so long
as no Event of Default exists, the Company, which consent will not be
unreasonably withheld, assign to other financial institutions part of the
indebtedness evidenced by the Notes and credit risks with respect to Letters of
Credit then owned by it together with an equivalent proportion of its obligation
to make Loans and participate in Letters of Credit hereunder pursuant to written
agreements executed by the assignor, the assignees, the Administrative Agent,
the Documentation Agent and, so long as no Event of Default exists, the Company,
which agreements shall specify in each instance the portion of the indebtedness
evidenced by the Notes and Applications which is to be assigned to each such
assignee and the portion of the Commitment of the assignor to be assumed by it
and shall be substantially in the form attached hereto as Exhibit D (the
"Assignment Agreements"); provided, however, that (i) each such assignment shall
be of a constant, and not a varying, percentage of the assigning Lender's rights
and obligations under this Agreement and the assignment shall cover the same
percentage of such Lender's Commitment, Loans, Note, and credit risk with
respect to Letters of Credit; (ii) unless the Administrative Agent, the
Documentation Agent and the Company otherwise consent, the aggregate amount of
the Commitment, Loans, Note, and credit risk with respect to Letters of Credit
of the assigning Lender being assigned pursuant to each such Assignment
Agreement (determined as of the effective date of the relevant Assignment
Agreement) shall in no event be less than $3,000,000 and, unless the assigning
Lender shall have assigned all of its Commitment, Loans, Note, and credit risk
with respect to Letters of Credit, the aggregate amount of the Commitment,
Loans, Note and credit risk with respect to Letters of Credit retained by the
assigning Lender shall in no event be less than $3,000,000; and (iii) the
assigning Lender must pay to the Administrative Agent a processing and
recordation fee of $3,500 and any out-of-pocket attorney's fees and expenses
incurred by the Administrative Agent in connection with each such Assignment
Agreement. Upon the execution of each Assignment Agreement by the assignor, the
assignee, the Administrative Agent, the Documentation Agent and, if applicable,
the Company (i) such assignee shall thereupon become a "Lender" for all purposes
of this Agreement with a Commitment in the amount set forth in such Assignment
Agreement (and Exhibit A hereto shall be deemed amended to reflect the aggregate
Commitments of the Lenders after giving effect thereto) and with all the rights,
powers and obligations afforded a Lender hereunder, provided that the assigning
Lender shall retain the benefit of all indemnities of the Company with respect
to matters arising prior to the effective date of such Assignment Agreement,
which shall survive and inure to the benefit of the assigning Lender, (ii) such
assigning Lender shall have no further
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liability for funding the portion of its Commitment assumed by such other Lender
and (iii) the address for notices to such Lender shall be as specified in the
Assignment Agreement executed by it. Concurrently with the execution and
delivery of such Assignment Agreement by the assignor, the assignee, the
Administrative Agent, the Documentation Agent and, if applicable, the Company
shall execute and deliver a Note to the assignee Lender in the amount of its
Commitment and a new Note to such assigning Lender in the amount of its
Commitment after giving effect to the reduction occasioned by such assignment,
all such notes to constitute "Notes" for all purposes of this Agreement.
(b) Any Lender may at any time pledge or grant a security interest in all
or any portion of its rights under this Agreement to secure obligations of such
Lender, including any such pledge or grant to a Federal Reserve Bank, and this
Section shall not apply to any such pledge or grant of a security interest;
provided that no such pledge or grant of a security interest shall release a
Lender from any of its obligations hereunder or substitute any such pledgee or
secured party for such Lender as a party hereto; provided further, however, the
right of any such pledgee or grantee (other than any Federal Reserve Bank) to
further transfer all or any portion of the rights pledged or granted to it,
whether by means of foreclosure or otherwise, shall be at all times subject to
the terms of this Agreement.
Section 12.13. Amendments. Any provision of this Agreement or the other
Loan Documents may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by (a) the Company, (b) the Required Lenders,
and (c) if the rights or duties of the Administration Agent or an Issuing Bank
are affected thereby, the Administration Agent or such Issuing Bank, as
applicable; provided that:
(i) no amendment or waiver pursuant to this Section 12.13 shall (A)
increase any Commitment of any Lender without the consent of such Lender or
(B) reduce the amount of or postpone the date for any scheduled payment of
any principal of or interest on any Loan or of any reimbursement obligation
with respect to the Letter of Credit or of any fee payable hereunder
without the consent of the Lender to which such payment is owing or which
has committed to make such Loan or Letter of Credit (or participate
therein) hereunder; and
(ii) no amendment or waiver pursuant to this Section 12.13 shall,
unless signed by each Lender, increase the aggregate Commitments hereunder
(exclusive of increases permitted by Section 4.11 hereof), change the
definitions of Termination Date or Required Lenders, change the provisions
of this Section 12.13, Section 7, or Section 9, release any Guarantor, or
affect the number of Lenders required to take any action hereunder or under
any other Loan Document;
it being understood that waivers or modifications of covenants, Defaults or
Events of Default (other than those set forth in Section 9.1(j) and (k) hereof)
or of a mandatory reduction in the Commitments or of a mandatory prepayment may
be made at the discretion of the Required Lenders and shall not constitute an
increase of the Commitment of any Lender, and that any resulting increase in the
available portion of any Commitment of any Lender shall not constitute
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an increase in the Commitment of such Lender, and any waiver of applicability of
any post-default increase in interest rates may be made at the discretion of the
Required Lenders.
Section 12.14. Entire Agreement. This Agreement and the Loan Documents
constitute the entire understanding of the parties with respect to the subject
matter hereof and any prior agreements, whether written or oral, with respect
thereto are superseded hereby.
Section 12.15. Headings. Section headings used in this Agreement are for
reference only and shall not affect the construction of this Agreement.
Section 12.16. Confidentiality. (a) Any information disclosed by the
Company or any of its Subsidiaries to the Administrative Agent or any of the
Lenders shall be used solely for purposes of this Agreement and for the purpose
of determining whether or not to extend other credit or financial accommodations
to the Company or its Subsidiaries and, if such information is not otherwise in
the public domain, shall not be disclosed by the Administrative Agent or such
Lender to any other Person except (i) to its independent accountants and legal
counsel (it being understood that the Persons to whom such disclosure is made
will be informed of the confidential nature of such information and instructed
to keep such information confidential), (ii) pursuant to statutory and
regulatory requirements, (iii) pursuant to any mandatory court order, subpoena
or other legal process, (iv) to the Administrative Agent or any other Lender,
(v) pursuant to any agreement heretofore or hereafter made between such Lender
and the Company which permits such disclosure, (vi) in connection with the
exercise of any right or remedy under the Loan Documents, provided that such
Lender or the Administrative Agent, as applicable, shall give the Company prior
written notice of any such disclosure or (vii) subject to an agreement
containing provisions substantially the same as those of this Section, to any
participant in or assignee of, or prospective participant in or assignee of, any
obligation or Commitment.
(b) The Administrative Agent and the Lenders acknowledge that the
Company and its Subsidiaries perform classified contracts funded by and/or for
the benefit of the United States Government and, accordingly, neither the
Company nor any Subsidiary will be obligated to release, disclose or otherwise
make available to the Administrative Agent or any Lender any classified or
special nuclear material to any parties not in possession of a valid security
clearance and authorized by the appropriate agency of the United States
Government to receive such material. The Administrative Agent and the Lenders
agree that in connection with any exercise of a right or remedy the United
States Government may remove classified information or government-issued
property prior to any remedial action implicating such classified information or
government-issued property. Upon notice from the Company, the Administrative
Agent and the Lenders shall take such steps in accordance with this Agreement as
may be reasonably requested by the Company to enable the Company or any
Subsidiary to comply with the Foreign Ownership Control or Influence
requirements of the United States Government imposed from time to time.
Section 12.17. Currency. Each reference in this Agreement to U.S. Dollars
or to an Available Foreign Currency (the "relevant currency") is of the essence.
To the fullest extent permitted by law, the obligation of the Company in respect
of any amount due in the relevant currency under this Agreement shall,
notwithstanding any payment in any other currency
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(whether pursuant to a judgment or otherwise), be discharged only to the extent
of the amount in the relevant currency that the Administrative Agent or Lender
entitled to receive such payment may, in accordance with normal banking
procedures, purchase with the sum paid in such other currency (after any premium
and costs of exchange) on the Business Day immediately following the day on
which such party receives such payment. If the amount in the relevant currency
so purchased for any reason falls short of the amount originally due in the
relevant currency, the Company shall pay such additional amounts, in the
relevant currency, as may be necessary to compensate for the shortfall. Any
obligations of the Company not discharged by such payment shall, to the fullest
extent permitted by applicable law, be due as a separate and independent
obligation and, until discharged as provided herein, shall continue in full
force and effect.
Section 12.18. Excess Interest. Notwithstanding any provision to the
contrary contained herein or in any other Loan Document, no such provision shall
require the payment or permit the collection of any amount in excess of the
maximum amount of interest permitted by applicable law to be charged for the use
or detention, or the forbearance in the collection, of all or any portion of the
Loans or other Obligations outstanding under this Agreement or any other Loan
Document ("Excess Interest"). If any Excess Interest is provided for, or is
adjudicated to be provided for, herein or in any other Loan Document, then in
such event (a) the provisions of this Section shall govern and control; (b)
neither the Company nor any guarantor or endorser shall be obligated to pay any
Excess Interest; (c) any Excess Interest that the Administrative Agent or any
Lender may have received hereunder shall, at the option of the Administrative
Agent, be (i) applied as a credit against the then outstanding principal amount
of Loans hereunder, accrued and unpaid interest thereon (not to exceed the
maximum amount permitted by applicable law) and any other Obligations, or all of
the foregoing; (ii) refunded to the Company, or (iii) any combination of the
foregoing; (d) the interest rate payable hereunder or under any other Loan
Document shall be automatically subject to reduction to the maximum lawful
contract rate allowed under applicable usury laws, and this Agreement and the
other Loan Documents shall be deemed to have been, and shall be, reformed and
modified to reflect such reduction in the relevant interest rate; and (e)
neither the Company nor any guarantor or endorser shall have any action against
the Administrative Agent or any Lender for any damages whatsoever arising out of
the payment or collection of any Excess Interest.
Section 12.19. Lender's Obligations Several. The obligations of the Lenders
hereunder are several and not joint. Nothing contained in this Agreement and no
action taken by the Lenders pursuant hereto shall be deemed to constitute the
Lenders a partnership, association, joint venture or other entity.
Section 12.20. Governing Law. This Agreement and the Notes, and the rights
and duties of the parties hereto, shall be construed and determined in
accordance with the laws of the State of Illinois, without regard to principles
of conflicts of laws.
Section 12.21. Submission to Jurisdiction; Waiver of Jury Trial. The
Company and each Guarantor hereby submits to the nonexclusive jurisdiction of
the United States District Court for the Northern District of Illinois and of
any Illinois State court sitting in the City of Chicago for purposes of all
legal proceedings arising out of or relating to this Agreement, the other Loan
Documents or the transactions contemplated hereby or thereby. The Company and
each
-63-
<PAGE>
Guarantor irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum. The Company,
the Guarantors, the Administration Agent, the Lead Arrangers, Book Managers, and
Syndication Agents, the Documentation Agent and each Lender hereby irrevocably
waive any and all right to trial by jury in any legal proceeding arising out of
or relating to any Loan Document or the transactions contemplated thereby.
[Signature Pages to Follow]
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<PAGE>
This Agreement is entered into between us for the purposes hereinabove
set forth as of the date first above written.
"Company"
Morrison Knudsen Corporation, a Delaware
corporation
By
Name___________________________________
Title__________________________________
"Guarantors"
Morrison Knudsen Corporation, an Ohio
corporation
By
Name___________________________________
Title__________________________________
Washington Contractors Group, Inc., a
Montana corporation
By
Name___________________________________
Title__________________________________
<PAGE>
Bank of Montreal, individually as a Lender
and as Administrative Agent and as a Lead
Arranger, Book Manager and Syndication
Agent
By
Name___________________________________
Title__________________________________
Mailing Address:
Los Angeles Representative Office
601 South Figueroa Street, Suite 4900
Los Angeles, California 90017
Attention: Director
Telephone: (213) 239-0635
Telecopy: (213) 239-0680
Lending Office:
Bank of Montreal
115 South LaSalle Street
Chicago, Illinois 60603
Attention: Manager-Loan Operations
Telephone: (312) 750-3827
Telecopy: (312) 750-3456
<PAGE>
Bank of America National Trust and
Savings Association,individually as a Len der and as
By
Robert W. Troutman
Managing Director
Mailing Address:
Bank of America National Trust & Savings
Association
555 S. Flower Street -- 11th Floor
Credit Products #5618
Los Angles, California 90071
Attention: Charlie Lilygren
Telephone: (213) 228-2636
Telecopy: (213) 623-1959
Lending Office:
Bank of America National Trust & Savings
Association
1850 Gateway Boulevard
Global Client Services #5693
Concord, California 94520
Attention: Paula Steeves
Telephone: (925) 6757347
Telecopy: (925) 675-7531
<PAGE>
NationsBanc Montgomery Securities LLC,
as a Lead Arranger, Book Manager and
Syndication Agent
By
William M. Lau
Managing Director
Mailing Address:
NationsBanc Montgomery Securities LLC
555 California Street -- 12th Floor
San Francisco, California 94104
Attention: William M. Lau
Telephone: (415) 953-4143
Telecopy: (415) 953-1873
<PAGE>
EXHIBIT A
AGGREGATE COMMITMENTS
Bank Commitment
Bank of Montreal $ 75,000,000
Bank of America National Trust and Savings $ 75,000,000
Association ------------
Total $150,000,000
------------
<PAGE>
EXHIBIT B
NOTE
Chicago, Illinois
$______________ _____________, ______
For value received, the undersigned, Morrison Knudsen Corporation, a
Delaware corporation (the "Company"), hereby promises to pay to the order of
_______________________ (the "Lender"), at the principal office of the
Administrative Agent in Chicago, Illinois (i) the principal sum of
_________________________________ Dollars ($_________), or (ii) such lesser
amount as may at the time of the maturity hereof, whether by acceleration or
otherwise, be the aggregate unpaid principal amount of all Loans owing from the
Company to the Lender under the Revolving Credit provided for in the Credit
Agreement hereinafter mentioned on the Termination Date.
This Note evidences indebtedness constituting the "Base Rate Portion"
and "LIBOR Portions", as such terms are defined in that certain Five-Year Credit
Agreement dated as of March 19, 1999, by and among the Company, the Guarantors
referred to therein, Bank of Montreal and NationsBanc Montgomery Securities LLC,
as Lead Arrangers, Book Managers and Syndication Agents, Bank of Montreal,
individually and as Administrative Agent, Bank of America National Trust and
Savings Association, individually and as Documentation Agent, and certain
lenders which are or may from time to time become parties thereto (the "Credit
Agreement"), made and to be made to the Company by the Lender under the
Revolving Credit provided for under the Credit Agreement and the Company hereby
promises to pay interest at the office specified above on each Loan evidenced
hereby at the rates and times specified therefor in the Credit Agreement.
Capitalized terms used herein without definition shall have the meanings
ascribed to them in the Credit Agreement, and this Note is subject to the terms
of the Credit Agreement.
Each Loan made under the Revolving Credit provided for in the Credit
Agreement by the Lender to the Company against this Note, any repayment of
principal hereon, the status of each such loan from time to time as part of the
Base Rate Portion or a LIBOR Portion and the interest rates and interest periods
applicable thereto shall be endorsed by the holder hereof on the reverse side of
this Note or recorded on the books and records of the holder hereof (provided
that such entries shall be endorsed on the reverse side hereof prior to any
negotiation hereof); and the Company agrees that in any action or proceeding
instituted to collect or enforce collection of this Note, the entries so
endorsed on the reverse side hereof or recorded on the books and records of the
Lender shall be prima facie evidence of the unpaid balance of this Note and the
status of each loan from time to time as part of a Base Rate Portion or a LIBOR
Portion and the interest rates and interest periods applicable thereto.
<PAGE>
This Note is issued by the Company under the terms and provisions of
the Credit Agreement, and this Note and the holder hereof are entitled to all of
the benefits and security provided for thereby or referred to therein, to which
reference is hereby made for a statement thereof. This Note may be declared to
be, or be and become, due prior to its expressed maturity upon the occurrence of
an Event of Default specified in the Credit Agreement and voluntary prepayments
may be made hereon, all in the events, on the terms and with the effects
provided in the Credit Agreement.
This Note shall be construed in accordance with, and governed by, the
internal laws of the State of Illinois without regard to principles of conflict
of law.
The Company hereby waives presentment for payment.
Morrison Knudsen Corporation
By
Name _________________________________
Title ________________________________
<PAGE>
EXHIBIT C
ADDITIONAL GUARANTOR SUPPLEMENT
______________, _____
Bank of Montreal, as Administrative Agent for the Lenders named in the Five-Year
Credit Agreement dated as of March 19, 1999, among Morrison Knudsen Corporation,
the Guarantors referred to therein, the Lenders from time to time party thereto,
Bank of Montreal, as Administrative Agent, Bank of America National Trust and
Savings Association, as Documentation Agent, and Bank of Montreal and
NationsBanc Montgomery Securities LLC, as a Lead Arranger, Book Manager and
Syndication Agents (the "Credit Agreement")
Ladies and Gentlemen:
Reference is made to the Credit Agreement described above. Terms not
defined herein which are defined in the Credit Agreement shall have for the
purposes hereof the meaning provided therein.
The undersigned, [NAME OF SUBSIDIARY GUARANTOR], a [JURISDICTION OF
INCORPORATION OR ORGANIZATION] hereby elects to be a "Guarantor" for all
purposes of the Credit Agreement, effective from the date hereof. The
undersigned confirms that the representations and warranties set forth in
Section 6 of the Credit Agreement are true and correct as to the undersigned as
of the date hereof.
Without limiting the generality of the foregoing, the undersigned
hereby agrees to perform all the obligations of a Guarantor under, and to be
bound in all respects by the terms of, the Credit Agreement, including without
limitation Section 11 thereof, to the same extent and with the same force and
effect as if the undersigned were a signatory party thereto.
<PAGE>
This Agreement shall be construed in accordance with and governed by
the internal laws of the State of Illinois.
Very truly yours,
[NAME OF SUBSIDIARY GUARANTOR]
By
Name _______________________
Title_______________________
<PAGE>
EXHIBIT D
ASSIGNMENT AND ACCEPTANCE
Dated _____________, _____
Reference is made to the Five-Year Credit Agreement dated as of March 19,
1999 (the "Credit Agreement") among Morrison Knudsen Corporation, the Guarantors
party thereto, the Lenders party thereto, Bank of Montreal, as Administrative
Agent, Bank of America National Trust and Savings Association, as Documentation
Agent, and Bank of Montreal and NationsBanc Montgomery Securities LLC as Lead
Arrangers, Book Managers and Syndication Agents. Terms defined in the Credit
Agreement are used herein with the same meaning.
_____________________________________________________ (the "Assignor") and
_________________________ (the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, a _________% interest
in and to all of the Assignor's rights and obligations under the Credit
Agreement as of the Effective Date (as defined below), including, without
limitation, such percentage interest in the Assignor's Commitment as in effect
on the Effective Date and the Loans, if any, owing to the Assignor on the
Effective Date and of any outstanding obligations on the Effective Date in
connection with Letters of Credit.
2. The Assignor (i) represents and warrants that as of the date hereof
(A) its Commitment is $_____________, (B) the aggregate outstanding principal
amount of Loans made by it under the Credit Agreement that have not been repaid
is $____________ and a description of the interest rates and interest periods of
such Loans is attached as Annex I hereto, and (C) the aggregate principal amount
of Assignor's percentage of obligations in connection with Letters of Credit is
$____________; (ii) represents and warrants that it is the legal and beneficial
owner of the interest being assigned by it hereunder and that such interest is
free and clear of any adverse claim, lien, or encumbrance of any kind; (iii)
makes no representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in connection with
the Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement or any other
instrument or document furnished pursuant thereto; and (iv) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Company or any Subsidiary or the performance or
observance by the Company or any Subsidiary of any of their respective
obligations under the Credit Agreement or any other instrument or document
furnished pursuant thereto.
3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the most recent financial statements
delivered to the Lenders pursuant to Section 8.5(a) and (b) thereof and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into this Assignment and Acceptance; (ii)
agrees that it will, independently and without reliance upon the Administrative
<PAGE>
Agent, the Assignor or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Credit Agreement;
(iii) appoints and authorizes the Administrative Agent to take such action as
Administrative Agent on its behalf and to exercise such powers under the Credit
Agreement and the other Loan Documents as are delegated to the Administrative
Agent by the terms thereof, together with such powers as are reasonably
incidental thereto; (iv) agrees that it will perform in accordance with their
terms all of the obligations which by the terms of the Credit Agreement are
required to be performed by it as a Lender; and (v) specifies as its lending
office (and address for notices) the offices set forth beneath its name on the
signature pages hereof.
4. As consideration for the assignment and sale contemplated in Section 1
hereof, the Assignee shall pay to the Assignor on the Effective Date in Federal
funds an amount equal to $________________*. It is understood that commitment
and/or letter of credit fees accrued to the Effective Date with respect to the
interest assigned hereby are for the account of the Assignor and such fees
accruing from and including the date hereof are for the account of the Assignee.
Each of the Assignor and the Assignee hereby agrees that if it receives any
amount under the Credit Agreement which is for the account of the other party
hereto, it shall receive the same for the account of such other party to the
extent of such other party's interest therein and shall promptly pay the same to
such other party.
5. The effective date for this Assignment and Acceptance shall be
_____________, ____ (the "Effective Date"). Following the execution of this
Assignment and Acceptance, it will be delivered to the Administrative Agent for
acceptance and recording by the Administrative Agent and the Documentation Agent
and, if required, acceptance by the Company.
6. Upon such acceptance and recording, as of the Effective Date, (i) the
Assignee shall be a party to the Credit Agreement and, to the extent provided in
this Assignment and Acceptance, have the rights and obligations of a Lender
thereunder and (ii) the Assignor shall, to the extent provided in this
Assignment and Acceptance, relinquish its rights and be released from its
obligations under the Credit Agreement.
7. Upon such acceptance and recording, from and after the Effective Date,
the Administrative Agent shall make all payments under the Credit Agreement in
respect of the interest assigned hereby (including, without limitation, all
payments of principal, interest and commitment fees with respect thereto) to the
Assignee. The Assignor and Assignee shall make all appropriate adjustments in
payments under the Credit Agreement for periods prior to the Effective Date
directly between themselves.
8. In accordance with Section 12.12 of the Credit Agreement, the Assignor
and the Assignee request and direct that the Administrative Agent prepare and
deliver to the Company
____________________
* Amount should combine principal together with accrued interest and breakage
compensation, if any, to be paid by the Assignee, net of any portion of any
upfront fee to be paid by the Assignor to the Assignee. It may be preferable in
an appropriate case to specify these amounts generically or by formula rather
than as a fixed sum.
-2-
<PAGE>
for execution and delivery to the Assignee a Note payable to the Assignee in the
amount of its Commitment (or assigned principal amounts, as applicable) and a
new Note to the Assignor in the amount of its Commitment (or remaining principal
amounts, as applicable) after giving effect to this assignment.
9. This Assignment and Acceptance shall be governed by, and construed in
accordance with, the laws of the State of Illinois.
[Assignor Lender]
By /s/
----------------------------------------
Name
Title
[Assignee Lender]
By /s/
----------------------------------------
Name
Title
Lending office (and address for notices):
Accepted and consented this
____ day of ___________, ____
MORRISON KNUDSEN CORPORATION
By /s/
---------------------------------
Name _____________________________
Title ____________________________
Accepted and consented to by the Administrative Agent
this _______ day of ___________, _____
BANK OF MONTREAL, as Administrative Agent
By /s/
---------------------------------
Name _____________________________
Title ____________________________
Accepted and consented to by the Documentation Agent
this _______ day of ___________, _____
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
as Documentation Agent
By /s/
---------------------------------
-3-
<PAGE>
Name __________________________
Title _________________________
Name __________________________
Title _________________________
-4-
<PAGE>
EXHIBITS AND SCHEDULES
THE REGISTRANT AGREES TO PROVIDE THE SECURITIES AND EXCHANGE COMMISSION,
UPON REQUEST, WITH COPIES OF THE EXHIBITS AND SCHEDULES HERETO.
<PAGE>
EXHIBIT 10.2
================================================================================
364-DAY
CREDIT AGREEMENT
Dated as of March 19, 1999,
by and among
MORRISON KNUDSEN CORPORATION,
THE GUARANTORS FROM TIME TO TIME PARTIES HERETO,
BANK OF MONTREAL,
as Administrative Agent,
BANK OF MONTREAL and NATIONSBANC MONTGOMERY SECURITIES LLC,
as Lead Arrangers, Book Managers and Syndication Agents,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
as Documentation Agent,
and
the Lenders
which are or may become parties hereto
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION DESCRIPTION PAGE
<S> <C>
SECTION 1. DEFINITIONS; INTERPRETATION OF AGREEMENT............................................ 1
Section 1.1. Definitions......................................................................... 1
Section 1.2. Accounting Terms.................................................................... 12
SECTION 2. THE REVOLVING CREDIT................................................................ 13
Section 2.1. General Terms....................................................................... 13
Section 2.2. The Loans........................................................................... 13
Section 2.3. Term Conversion Option.............................................................. 13
Section 2.4. Manner of Borrowing................................................................. 13
SECTION 3. INTEREST............................................................................ 14
Section 3.1. Options............................................................................. 14
Section 3.2. Base Rate Portion................................................................... 15
Section 3.3. LIBOR Portions...................................................................... 15
Section 3.4. Computation......................................................................... 15
Section 3.5. Manner of Rate Selection............................................................ 16
Section 3.6. Funding Indemnity................................................................... 16
Section 3.7. Change of Law....................................................................... 17
Section 3.8. Unavailability of Deposits or Inability to Ascertain, or Inadequacy of, LIBOR....... 17
Section 3.9. Increased Cost and Reduced Return................................................... 17
Section 3.10. Lending Offices..................................................................... 18
Section 3.11. Discretion of Banks as to Manner of Funding......................................... 18
SECTION 4. FEES, PAYMENTS, REDUCTIONS, APPLICATIONS, NOTATIONS AND EXTENSIONS.................. 19
Section 4.1. Commitment Fee...................................................................... 19
Section 4.2. Administrative Agent's Fees......................................................... 19
Section 4.3. Underwriting Fees................................................................... 19
Section 4.4. Payments............................................................................ 19
Section 4.5. Terminations........................................................................ 20
Section 4.6. Place and Application............................................................... 20
Section 4.7. Notations and Requests.............................................................. 21
Section 4.8. Capital Adequacy.................................................................... 21
Section 4.9. Withholding Taxes................................................................... 22
Section 4.10. Increase in Commitments............................................................. 23
Section 4.11. Extensions of Commitments........................................................... 24
Section 4.12. Substitution of Lenders............................................................. 24
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
SECTION 5. GUARANTIES.......................................................................... 25
Section 5.1. Guaranty............................................................................ 25
SECTION 6. REPRESENTATIONS AND WARRANTIES...................................................... 25
Section 6.1. Organization and Power.............................................................. 25
Section 6.2. Subsidiaries........................................................................ 26
Section 6.3. Use of Proceeds; Regulation U....................................................... 26
Section 6.4. Financial Statements................................................................ 27
Section 6.5. Litigation and Taxes................................................................ 27
Section 6.6. Burdensome Contracts with Affiliates................................................ 27
Section 6.7. ERISA............................................................................... 27
Section 6.8. Full Disclosure..................................................................... 28
Section 6.9. Compliance with Law................................................................. 28
Section 6.10. Governmental Authority and Licensing................................................ 28
Section 6.11. Investment Company; Public Utility Holding Company.................................. 29
Section 6.12. Year 2000 Compliance................................................................ 29
Section 6.13. Purchase Agreement.................................................................. 29
Section 6.14. Hazardous Materials Risk Management................................................. 30
SECTION 7. CONDITIONS PRECEDENT................................................................ 30
Section 7.1. All Advances........................................................................ 30
Section 7.2. Initial Advance..................................................................... 31
Section 7.3. Legal Matters....................................................................... 32
SECTION 8. COVENANTS........................................................................... 33
Section 8.1. Maintenance of Business............................................................. 33
Section 8.2. Maintenance......................................................................... 33
Section 8.3. Taxes............................................................................... 33
Section 8.4. Insurance........................................................................... 33
Section 8.5. Financial Reports................................................................... 34
Section 8.6. Compliance with Laws................................................................ 35
Section 8.7. Nature of Business.................................................................. 35
Section 8.8. Liens............................................................................... 36
Section 8.9. Indebtedness........................................................................ 37
Section 8.10. Acquisitions, Investments, Loans, Advances and Guarantees........................... 39
Section 8.11. Dividends and Certain Other Restricted Payments..................................... 41
Section 8.12. Mergers............................................................................. 42
Section 8.13. Sale of Assets...................................................................... 42
Section 8.14. Burdensome Contracts with Affiliates................................................ 42
Section 8.15. No Change in Fiscal Year............................................................ 42
Section 8.16. Maintenance of Material Subsidiaries................................................ 42
Section 8.17. No Restriction on Subsidiary Dividends.............................................. 43
Section 8.18. Year 2000 Assessment................................................................ 43
Section 8.19. Use of Loan Proceeds................................................................ 43
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Section 8.20. Senior Debt......................................................................... 43
Section 8.21. Consolidated Total Indebtedness Debt/Capital Ratio.................................. 43
Section 8.22. Leverage Ratio...................................................................... 44
Section 8.23. Fixed Charge Coverage Ratio......................................................... 44
Section 8.24. Hazardous Materials Risk Management................................................. 44
SECTION 9. EVENTS OF DEFAULT AND REMEDIES...................................................... 44
SECTION 10. THE ADMINISTRATIVE AGENT AND ISSUING BANKS.......................................... 47
Section 10.1. Appointment and Authorization....................................................... 47
Section 10.2. Rights as a Lender.................................................................. 48
Section 10.3. Standard of Care.................................................................... 48
Section 10.4. Costs and Expenses.................................................................. 49
Section 10.5. Indemnity........................................................................... 49
Section 10.6. Designation of Additional Agent..................................................... 49
SECTION 11. GUARANTY............................................................................ 49
Section 11.1. The Guaranty........................................................................ 49
Section 11.2. Guarantee Unconditional............................................................. 50
Section 11.3. Discharge Only Upon Payment in Full; Reinstatement in Certain Circumstances......... 51
Section 11.4. Subrogation......................................................................... 51
Section 11.5. Waivers............................................................................. 51
Section 11.6. Limit on Recovery................................................................... 51
Section 11.7. Stay of Acceleration................................................................ 51
SECTION 12. MISCELLANEOUS....................................................................... 52
Section 12.1. Waiver of Rights.................................................................... 52
Section 12.2. Non-Business Day.................................................................... 52
Section 12.3. Documentary Taxes................................................................... 52
Section 12.4. Survival of Representations......................................................... 52
Section 12.5. Set-off Sharing..................................................................... 52
Section 12.6. Notices............................................................................. 52
Section 12.7. Counterparts........................................................................ 53
Section 12.8. Successors and Assigns.............................................................. 53
Section 12.9. Participants........................................................................ 53
Section 12.10. Costs and Expenses.................................................................. 54
Section 12.11. Construction........................................................................ 54
Section 12.12. Assignments......................................................................... 54
Section 12.13. Amendments.......................................................................... 56
Section 12.14. Entire Agreement.................................................................... 56
Section 12.15. Headings............................................................................ 56
Section 12.16. Confidentiality..................................................................... 56
Section 12.17. Excess Interest..................................................................... 57
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Section 12.18. Lender's Obligations Several........................................................ 57
Section 12.19. Governing Law....................................................................... 58
Section 12.20. Submission to Jurisdiction; Waiver of Jury Trial.................................... 58
Signature Page.......................................................................................... 1
</TABLE>
Exhibit A -- Aggregate Commitments
Exhibit B -- Note
Exhibit C -- Additional Guarantor Supplement
Exhibit D -- Assignment and Acceptance
Schedule 1.1 -- Lines of Business
Schedule 6.2 -- Subsidiaries
Schedule 6.4 -- Contingent Liabilities
Schedule 8.8 -- Permitted Existing Liens
Schedule 8.9 -- Permitted Existing Indebtedness
Schedule 8.10(l) -- Existing Investments in, and loans, advances and
guaranties relating to, Unrestricted Subsidiaries and
other Persons
Schedule 8.10(m) -- Existing Investment in GESCO Subsidiaries
Schedule 8.10(n) -- Permitted Guaranties outside of Eligible Lines of
Business
-iv-
<PAGE>
364-DAY CREDIT AGREEMENT
This 364-Day Credit Agreement, dated as of March 19, 1999, is being entered
into by and among Morrison Knudsen Corporation, a Delaware corporation (the
"Company"), certain Subsidiaries of the Company from time to time becoming
parties hereto, as Guarantors, Bank of Montreal, a chartered bank of Canada
acting through its Chicago branch, as Administrative Agent, Bank of Montreal and
NationsBanc Montgomery Securities LLC, as Lead Arrangers, Book Managers and
Syndication Agents, and Bank of America National Trust and Savings Association,
as Documentation Agent, and the Lenders who are or may hereafter become a party
to this Agreement.
PRELIMINARY STATEMENTS
A. The Company has requested, and the Lenders have agreed to extend,
certain credit facilities to be made available to or for the account of the
Company on the terms and conditions set forth in this Agreement.
B. The Guarantors are Subsidiaries of the Company and will benefit
directly and indirectly from the extension of such credit facilities to the
Company. As a condition to extending credit to the Company under this
Agreement, the Lenders have required that the Guarantors guaranty the payment of
the Obligations on the terms and conditions set forth in this Agreement.
Now, therefore, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. Definitions; Interpretation of Agreement .
Section 1.1. Definitions. The following terms when used herein shall have
the following meanings, such terms to be equally applicable to both the singular
and the plural of the terms defined:
"Acquired Assets" means the assets and property of the Government Services
and Government Environmental Services businesses of CBS Corporation acquired,
directly or indirectly, by the Company.
"Acquired Business" means the entity or assets acquired by the Company or a
Subsidiary in an Acquisition, whether before or after the date hereof.
"Acquisition " means any transaction or series of related transactions for
the purpose of or resulting, directly or indirectly, in (a) the acquisition of
all or substantially all of the assets of a Person, or of any business or
division of a Person, (b) the acquisition of in excess of 50% of the capital
stock, partnership interests, membership interests or equity of any Person, or
otherwise causing any Person to become a Subsidiary, or (c) a merger or
consolidation or any other
<PAGE>
combination with another Person (other than a Person that is a Subsidiary)
provided that the Company or a Subsidiary of the Company is the surviving
entity.
"Adjusted LIBOR" means a rate per annum determined in accordance with the
following formula:
LIBOR
--------------------------------
Adjusted LIBOR = 1--Eurodollar Reserve Percentage
"LIBOR" means, with respect to an Interest Period, (a) the LIBOR Index
Rate for such Interest Period, if such rate is available, and (b) if the
LIBOR Index Rate cannot be determined, the arithmetic average of the rates
of interest per annum (rounded upwards, if necessary, to the nearest 1/100
of 1%) at which deposits in U.S. Dollars in immediately available funds are
offered to the Administrative Agent at 11:00 a.m. (London, England time)
two (2) Business Days before the beginning of such Interest Period by three
(3) or more major banks in the interbank eurodollar market selected by the
Administrative Agent for delivery on the first day of and for a period
equal to such Interest Period and in an amount equal or comparable to the
principal amount of the share of the LIBOR Portion scheduled to be made by
the Administrative Agent as part of the relevant Borrowing.
"Eurodollar Reserve Percentage" means, for any day during an Interest
Period, the rate at which reserves (including, without limitation, any
supplemental, marginal and emergency reserves) are imposed on such day by
the Board of Governors of the Federal Reserve System (or any successor) on
"eurocurrency liabilities", as defined in such Board's Regulation D (or in
respect of any other category of liabilities that includes deposits by
reference to which the interest rate on LIBOR Portions is determined on any
category of extension of credit or other assets that includes loans by non-
United States offices of any bank to United States residents), subject to
any amendments of such reserve requirement by such Board or its successor,
taking into account any transitional adjustments thereto. For purposes of
this definition, the LIBOR Portions shall be deemed to be eurocurrency
liabilities as defined in Regulation D without benefit or credit for any
prorations, exemptions or offsets under Regulation D. The Adjusted LIBOR
shall automatically be adjusted as of the date of any change in the
Eurodollar Reserve Percentage.
"LIBOR Index Rate" means, for any Interest Period, the rate per annum
(rounded upwards, if necessary, to the next higher one hundred-thousandth
of a percentage point) for deposits in U.S. Dollars for a period equal to
such Interest Period, which appears on the Telerate Page 3750 as of 11:00
a.m. (London, England time) on the day two (2) Business Days before the
commencement of such Interest Period.
"Telerate Page 3750" means the display designated as "Page 3750" on
the Dow Jones Telerate Service (or such other page as may replace Page 3750
on that service or such other service as may be nominated by the British
Bankers' Association as the
-2-
<PAGE>
information vendor for the purpose of displaying British Bankers'
Association Interest Settlement Rates for U.S. Dollar deposits).
"Administrative Agent" means Bank of Montreal, and its successors pursuant
to Section 10.1 hereof.
"Affiliate" means any Person (i) which directly or indirectly through one
or more intermediaries controls, or is controlled by, or is under common control
with, another Person, (ii) which beneficially owns or holds 5% or more of any
class of the Voting Stock of another Person, or (iii) more than 5% of the Voting
Stock (or in the case of a Person which is not a corporation, 5% or more of the
equity interest) of which is beneficially owned or held by another Person. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of Voting Stock, by contract or otherwise.
"Agreement" means this Five-Year Credit Agreement, as the same may be
amended, modified or restated from time to time in accordance with the terms
hereof.
"Applicable Margin" means the rate per annum specified below for the type
of Portion for which the Applicable Margin is being determined or for Letter of
Credit fees or for the commitment fee (as applicable):
(i) Level I. At any time on or after the Calculation Date, and
thereafter when the Leverage Ratio is less than 1:00 to 1:00, then:
For LIBOR Portions For Base Rate Portion For Commitment Fee
1.25% .25% .20%
(ii) Level II. At any time when the Leverage Ratio is greater than
or equal to 1:00 to 1:00 but less than 2.00 to 1.00, and prior to the
Calculation Date when the Leverage Ratio is less than 2.00 to 1.00 then:
For LIBOR Portions For Base Rate Portion For Commitment Fee
1.50% .50% .25%
(iii) Level III. At any time when the Leverage Ratio is greater
than or equal to 2.00 to 1.00 but less than 3.00 to 1.00, then:
For LIBOR Portions For Base Rate Portion For Commitment Fee
1.75% .75% .30%
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(iv) Level IV. At any time when the Leverage Ratio is greater than or
equal to 3.00 to 1.00, then:
For LIBOR Portions For Base Rate Portion For Commitment Fee
2.00% 1.00% .35%
provided, however that the foregoing rates per annum described in this
clause are subject to the following:
(w) the Applicable Margin for LIBOR Portions and the Base Rate
Portion shall be increased by .25% for any Loans outstanding on or
after the Termination Date under the Term Credit;
(x) the Applicable Margin shall be based on Level II from the
date hereof until the first determination of the Leverage Ratio
occurring after the date hereof as determined by clause (y) below;
(y) the Leverage Ratio shall be determined as of the last day
of each fiscal quarter of the Company (i.e., the last day of each
February, May, August and November), for the four fiscal quarters then
ended, with any adjustment in the Applicable Margins resulting from a
change in such Leverage Ratio to be effective upon the Administrative
Agent's receipt of the Company's quarterly compliance certificate
pursuant to Section 8.5 hereof; and
(z) if and so long as any Event of Default has occurred and is
continuing and notice of such Event of Default is delivered to the
Company by the Administrative Agent at the request of the Required
Lenders, the Applicable Margins as otherwise computed hereunder shall
be increased by adding the rate of 2% per annum thereto.
"Assignment Agreements" is defined in Section 12.12 hereof.
"Authorized Representative" means those persons shown on the list of
officers provided by the Company pursuant to Section 7.2(a) hereof or on any
update of any such list provided by the Company to the Administrative Agent, or
any further or different officer of the Company so named by any Authorized
Representative of the Company in a written notice to the Administrative Agent.
"Base Rate" means, for any day, the greater of: (i) the rate of interest
publicly announced by the Administrative Agent from time to time as its prime
commercial rate for United States dollar loans made in the United States (it
being understood that such rate may not be the Administrative Agent's best or
lowest rate), with any change in the Base Rate resulting from a change in said
prime commercial rate to be effective as of the date of the relevant change in
said prime commercial rate; and (ii) the sum of (x) the rates quoted to the
Administrative
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Agent as the prevailing rates per annum (rounded upward, if necessary, to the
next higher 1/100 of 1%) bid at approximately 10:00 a.m. (Chicago time) (or as
soon thereafter as is practicable) on such day by two or more New York Federal
funds dealers of recognized standing selected by the Administrative Agent for
the purchase at face value of Federal funds in the secondary market in an amount
comparable to the principal amount owed to the Administrative Agent for which
such rate is being determined, or, if such rates are not quoted to the
Administrative Agent, the rate for that day set forth opposite the caption
"Federal Fund (Effective)" in the daily statistical release designated as
"Composite 3:30 p.m. Quotations for U.S. Government Securities", or any
successor publication, published by the Federal Reserve Bank of New York plus
(y) 1/2 of 1%, provided this clause (ii) shall be inapplicable to any Loan which
is outstanding for 15 days or more (for the foregoing purpose, repayment of
Loans shall be deemed applied to outstanding Loans in the same order in which
they were made).
"Base Rate Portion" is defined in Section 3.1 hereof.
"Borrowing" means the total of Loans of a single type advanced, continued
for an additional Interest Period, or converted from a different type into such
type by the Lenders on a single date and, if such Loans are to be part of a
LIBOR Portion, for a single Interest Period.
"Blue Diamond" means Blue Diamond Materials, Inc., a Nevada corporation.
"Business Day" means any day other than a Saturday or Sunday on which banks
are open for business in Chicago, Illinois and, when used with reference to
LIBOR Portions, a day on which banks are also open for business and dealing in
United States Dollar deposits in London, England.
"Calculation Date" means the date which is the earlier of (i) twelve months
after the date hereof, and (ii) nine months after the date Loans are made
hereunder to fund the acquisition of the Acquired Assets after completion of the
primary syndication of the credit facilities as determined by the Administrative
Agent in its reasonable discretion.
"Capital Expenditures" means, with respect to any Person for any period,
the aggregate amount of all expenditures (whether paid in cash or accrued as a
liability) by such Person during that period during which, in accordance with
GAAP, are or should be included as "additions to property, plant or equipment"
or similar items reflected in the statement of cash flows of such Person.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitments" means $100,000,000, as such amount may be reduced from time
to time pursuant hereto or as such amount may be increased pursuant to Section
4.10 hereof. The Commitment of each Lender shall be the amount specified
therefor on Exhibit A attached hereto and made part hereof (as the same shall be
deemed amended after giving effect to the Assignment Agreements referred to in
Section 12.12 hereof), as reduced from time to time pursuant hereto.
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"Company" is defined in the introductory paragraph of this Agreement.
"Consolidated Net Income" means, for any period, the gross revenues from
any source of the Company and its Subsidiaries for such period less all expenses
and other proper charges (including taxes on income), determined for the Company
and its Subsidiaries on a consolidated basis in accordance with GAAP; provided
that there shall be excluded from Consolidated Net Income (i) the net income (or
net loss) of any Person accrued prior to the date it becomes a Subsidiary of, or
has merged into or consolidated with, the Company or another Subsidiary, (ii)
the net income (or net loss) of any GESCO Subsidiary or of any other Person who
is not a Subsidiary in which the Company or any of its Subsidiaries has an
equity interest in, except to the extent of the amount of dividends or other
distributions actually paid to the Company during such period and (iii) any
after-tax extraordinary gains or losses.
"Consolidated Net Worth" means, as of any date, consolidated net worth as
computed in accordance with GAAP for the Company and its Subsidiaries on a
consolidated basis.
"Consolidated Total Capital" means, as of any time the same is to be
determined, the sum of (i) Consolidated Total Indebtedness at such time and (ii)
Consolidated Net Worth at such time.
"Consolidated Total Indebtedness" means and includes (but without
duplication) all obligations of the Company and each of its Subsidiaries of the
following types, all determined on a consolidated basis for the Company and its
Subsidiaries determined in accordance with GAAP: (i) obligations (whether
recourse or nonrecourse) for borrowed money or for the deferred purchase price
of, or which have been incurred in connection with the acquisition of, property
or assets other than current accounts payable, (ii) obligations of the type
described in clause (i) secured by any lien or other charge upon property or
assets owned by the Company or any Subsidiary, even though neither the Company
nor any Subsidiary has assumed or become liable for the payment of such
obligations, (iii) obligations payable over a period in excess of one year to
purchase any property or to obtain the services of another Person if the
contract requires that payment for such property or services be made regardless
of whether such property is delivered or such services are performed other than
employment agreements for management personnel, consulting agreements and
contracts for construction services or supplies entered into in the ordinary
course of business of the Company and its Subsidiaries, (iv) capitalized lease
obligations, (v) obligations in respect of financial letters of credit, and (vi)
all liabilities referred to in clauses (i), (ii), (iii), (iv) and (v) above
which are directly or indirectly guaranteed by the Company or any Subsidiary or
which it has agreed (contingently or otherwise) to purchase or otherwise acquire
or in respect of which it has otherwise assured a creditor against loss;
provided, however, Consolidated Total Indebtedness shall not include any such
obligations of the GESCO Subsidiaries except to the extent the Company or
another Subsidiary is liable thereon (whether as a guarantor or otherwise).
"Default" means any event or condition the occurrence of which would, with
the lapse of time or the giving of notice, or both, constitute an Event of
Default.
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"Documentation Agent" means Bank of America National Trust and Savings
Association, and any other Lender, or affiliate thereof, so designated by the
Administrative Agent pursuant to Section 10.6 hereof.
"Earnings Before Interest, Taxes, Depreciation and Amortization" means,
with reference to any period, Consolidated Net Income for such period plus all
amounts deducted in arriving at such Consolidated Net Income in respect of (i)
Interest Expense, (ii) taxes imposed on or measured by income or excess profits,
and (iii) all charges for depreciation of fixed assets and amortization of
intangibles of the Company and its Subsidiaries; provided, however, that amounts
added back to Consolidated Net Income and referred to in clauses (i)-(iii) above
shall be computed exclusive of any such amounts related to the GESCO
Subsidiaries.
"Eligible Lines of Business" means the general nature of the business and
activities engaged in by the Company and its Subsidiaries (which exist as
Subsidiaries of the Company on the date of this Agreement and after giving
effect to the acquisition of the Acquired Assets) on the date of this Agreement,
and shall, in any event, include businesses and activities consisting of
engineering and construction, earthmoving, mining, equipment leasing to
Affiliates of such Person, activities directly relating to the application of CF
Systems Corporation's extraction technologies to food processing, environmental
remediation (exclusive of owning a treatment, storage, or disposal facility for
solid, special, nuclear or hazardous waste), industrial maintenance, site and
infrastructure development, and manufacturing construction materials all as more
fully described on Schedule 1.1 hereof.
"Event of Default" means any of the events specified in Section 9.1 hereof.
"Federal Funds Rate" means the fluctuating interest rate per annum
described in part (x) of clause (ii) of the definition of Base Rate.
"Fee and Structuring Letter" means that certain letter agreement dated
March 4, 1999, among the Company, the Administration Agent, the Lead Arrangers,
Book Managers, and Syndication Agents, and the Documentation Agent, as the same
relates to the amount and payment of the underwriting, acceptance, and ticking
fees provided for therein and the rights of the Administrative Agent and
Documentation Agent to adjust the pricing and structure of the credit facilities
provided for herein in connection with the syndication thereof.
"Five-Year Credit Agreement" means that certain Five-Year Credit Agreement
dated of even date herewith by and among the Company, the guarantors from time
to time party thereto, Bank of Montreal, as administrative agent, Bank of
Montreal and NationsBanc Montgomery Securities LLC, as lead arrangers, book
managers and syndication agents, Bank of America National Trust and Savings
Association, as documentation agent, and the lenders which are or become party
thereto.
"Fixed Charges" means, with reference to any period, the sum of (i) the
aggregate amount of payments required to be made by the Company and its
Subsidiaries within 12 months of the last day of such period in respect of
principal on all indebtedness for borrowed money (whether at maturity, as a
result of mandatory sinking fund redemption, mandatory prepayment,
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acceleration or otherwise, but excluding all payments of principal due under
this Agreement), plus (ii) Interest Expense for such period.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board that are applicable to the
circumstances as of the date of determination.
"GESCO Subsidiaries" means the Subsidiaries formed and/or acquired by the
Company to hold and/or operate the Acquired Assets or any part thereof,
including, without limitation, Westinghouse Government Services Company LLC and
Westinghouse Government Environmental Services Company LLC.
"Guaranteed Obligations" is defined in Section 11.1 hereof.
"Guarantor" and "Guarantors" each is defined in Section 5.1 hereof.
"Hazardous Materials" means any substance, chemical, compound, product,
solid, gas, liquid, waste, byproduct, pollutant, contaminant, or material which
is hazardous, toxic, explosive, or radioactive, and includes, without
limitation, (i) asbestos, polychlorinated biphenyls, petroleum, and nuclear
materials and (ii) any material classified or regulated as "hazardous" or
"toxic" or words of like import pursuant to health, safety, and environmental
laws and regulations.
"Hazardous Materials Liability" means any liability arising from the
handling or use of, or any abatement, removal, corrective or response action
with respect to, any Hazardous Materials or for any damage to persons or
property resulting from the radioactive, toxic, explosive or other hazardous
properties of nuclear materials, or arising from any health, safety, or
environmental laws or regulations relating thereto.
"Hostile Acquisition" means the acquisition of the capital stock or other
equity interests of a Person through a tender offer or similar solicitation of
the owners of such capital stock or other equity interests which has not been
approved (prior to such acquisition) by resolutions of the Board of Directors of
such Person or by similar action if such Person is not a corporation, and as to
which such approval has not been withdrawn.
"ICC" means Industrial Construction Corp., a Montana corporation.
"Interest Expense" means, with reference to any period, all interest
charges (including amortization of debt discount and expense and imputed
interest on leases with an original term of one year or more) accrued for such
period, whether or not paid, all as computed on a consolidated basis for the
Company and its Subsidiaries in accordance with GAAP.
"Interest Period" means, with respect to any LIBOR Portion, the period
commencing on, as the case may be, the creation, continuation or conversion date
with respect to such LIBOR Portion and ending one (1), two (2), three (3) or six
(6) months thereafter as selected by the
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Company in its notice as provided herein, or such other period of not less than
10 days and not more than 12 months as agreed to at the time by the Company, the
Administrative Agent and each of the Lenders; provided that, all of the
foregoing provisions relating to Interest Periods are subject to the following:
(i) if any Interest Period would otherwise end on a day which is not
a Business Day, that Interest Period shall be extended to the next
succeeding Business Day, unless the result of such extension would be to
carry such Interest Period into another calendar month in which event such
Interest Period shall end on the immediately preceding Business Day;
(ii) no Interest Period may extend beyond the final maturity date of
the Notes;
(iii) the interest rate to be applicable to each LIBOR Portion for
each Interest Period shall apply from and including the first day of such
Interest Period to but excluding the last day thereof; and
(iv) no Interest Period may be selected if after giving effect
thereto the Company will be unable to make a principal payment scheduled to
be made during such Interest Period without paying part of a LIBOR Portion
on a date other than the last day of the Interest Period applicable
thereto.
For purposes of determining an Interest Period, a month means a period
starting on one day in a calendar month and ending on a numerically
corresponding day in the next calendar month, provided, however, if an Interest
Period begins on the last day of a month or if there is no numerically
corresponding day in the month in which an Interest Period is to end, then such
Interest Period shall end on the last Business Day of such month.
"Lead Arrangers, Book Managers, and Syndication Agents" means Bank of
Montreal and NationsBanc Montgomery Securities LLC, and any other Lender, or
affiliate thereof, so designated by the Administrative Agent pursuant to Section
10.6 hereof.
"Lenders" means the parties signing this Agreement as Lenders and all other
banks and other financial institutions becoming parties hereto pursuant to
Section 12.12 hereof.
"Leverage Ratio" means, as of any time the same is to be determined, the
ratio of (a) Consolidated Total Indebtedness at such time to (b) Earnings Before
Interest, Taxes, Depreciation and Amortization for the most recently completed
four fiscal quarters of the Company then ended.
"LIBOR Portion" is defined in Section 3.1 hereof.
"Loan Documents" means this Agreement, the Notes, the Fee and Structuring
Letter and each of the other instruments and documents to be delivered hereunder
or thereunder or otherwise in connection therewith.
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"Loan" and "Loans" each is defined in Section 2.2 hereof, including Loans
which remain outstanding under the Term Credit provided for in Section 2.3
hereof.
"Material Adverse Effect" means a material adverse effect on or material
adverse change in (i) the business, Property, condition (financial or
otherwise), or results of operations of the Company and its Subsidiaries taken
as a whole, (ii) the ability of the Company or of the Company and the
Guarantors, taken as a whole, to perform their obligations under the Loan
Documents, or (iii) the validity or enforceability of any of the Loan Documents
or the rights or remedies of the Administrative Agent or of the Lenders
thereunder.
"Material Foreign Subsidiary" means each Unrestricted Subsidiary (other
than Blue Diamond, ICC, Pomeroy Corporation and the GESCO Subsidiaries), except
to the extent it has neither (a) assets with a book value at or in excess of 5%
of the Company's consolidated total assets nor (b) Earnings Before Interest,
Taxes, Depreciation and Amortization attributable to such Subsidiary for the
most recently completed calendar year at or in excess of 5% of Earnings Before
Interest, Taxes, Depreciation and Amortization for the Company and its
Subsidiaries on a consolidated basis for such year.
"Material Subsidiary" means each Restricted Subsidiary designated as a
Material Subsidiary on Schedule 6.2 hereof, and any other Restricted Subsidiary
except to the extent such other Restricted Subsidiary has neither (i) assets
with a book value at or in excess of 5% of the Company's consolidated total
assets nor (ii) Earnings Before Interest, Taxes, Depreciation and Amortization
attributable to such Subsidiary for the most recently completed calendar year at
or in excess of 5% of Earnings Before Interest, Taxes, Depreciation and
Amortization for the Company and its Subsidiaries on a consolidated basis for
such year.
"MK-Ohio" means Morrison Knudsen Corporation, an Ohio corporation.
"Moody's Rating" means the rating assigned by Moody's Investors Service,
Inc. to the outstanding senior unsecured non-credit-enhanced long-term
indebtedness of the Company. Any reference in this Agreement to any specific
rating is a reference to such rating as currently defined by Moody's Investors
Service, Inc. and shall be deemed to refer to the equivalent rating if such
rating system changes.
"Non-Recourse Debt" means indebtedness of any Person which expressly
provides that the source of repayment of such indebtedness is limited to the
property of such Person securing such indebtedness acquired with the proceeds of
such indebtedness, and that the holder of such indebtedness generally has no
recourse against the obligor thereon or any other Person.
"Note" and "Notes" each is defined in Section 2.2 hereof.
"Obligations" means all obligations of the Company to pay principal and
interest on the Loans, all fees and charges payable hereunder, and all other
payment obligations of the arising under or in relation to any Loan Document, in
each case whether now existing or hereafter arising, due or to become due,
direct or indirect, absolute or contingent, and howsoever evidenced, held or
acquired.
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"Permitted Liens" is defined in Section 8.8 hereof.
"Person" means any individual, trust, partnership, firm, corporation,
limited liability company, association, unincorporated organization or any other
entity or organization, including a government or agency or political
subdivision thereof.
"Portion" is defined in Section 3.1 hereof.
"Prior Credit Agreement" means that certain Credit Agreement dated as of
October 8, 1996, as amended, by and among the Company, Bank of Montreal,
individually and as agent, and the other lenders party thereto.
"Required Lenders" means, as of the date of determination thereof, Lenders
whose outstanding Loans and unused Commitments, if any, constitute 51% or more
of the outstanding Loans and unused Commitments then outstanding.
"Restricted Payments" is defined in Section 8.11 hereof.
"Restricted Subsidiary" means each Subsidiary other than an Unrestricted
Subsidiary.
"Revolving Credit" means the credit facility for making Loans described in
Sections 2.1-2.2 hereof.
"S&P Rating" means the rating assigned by Standard & Poor's Ratings
Services Group, a division of The McGraw-Hill Companies, Inc., to the
outstanding senior unsecured non-credit-enhanced long-term indebtedness of the
Company. Any reference in this Agreement to any specific rating is a reference
to such rating as currently defined by Standard & Poor's Ratings Group, a
division of The McGraw-Hill Companies, Inc., and shall be deemed to refer to the
equivalent rating if such rating system changes.
"Subsidiary" means any corporation or organization more than 50% of the
outstanding Voting Stock of which is at the time directly or indirectly owned by
the Company, by one or more of its Subsidiaries, or by the Company and one or
more of its Subsidiaries.
"Term Credit" means the credit facility for Loans which remain outstanding
on and after the Termination Date pursuant to the terms of Section 2.3 hereof.
"Term Credit Final Maturity Date" means the date occurring one (1) year
after the Termination Date.
"Termination Date" means March 18, 2000, or such later date to which the
same may be extended pursuant to Section 4.11 hereof, or such earlier date on
which the Commitments are terminated in whole pursuant to Section 4.5, Section
9.2 or Section 9.3 hereof.
"Unrestricted Subsidiary" means Blue Diamond, ICC, Pomeroy Corporation, the
GESCO Subsidiaries and each other Subsidiary which (i) is organized under the
laws of a
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jurisdiction other than the United States of America or any state thereof, (ii)
conducts substantially all of its business outside of the United States of
America, and (iii) has substantially all of its assets outside of the United
States of America.
"U.S. Dollars" and "$" each means the lawful currency of the United States
of America.
"Voting Stock" means securities of any class or classes of a Person, the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors of such Person (or Persons
performing similar functions).
"Washington" means Washington Contractors Group, Inc., a Montana
corporation.
"Year 2000 Problem" means any significant risk that computer hardware,
software, or equipment containing embedded microchips essential to the business
or operations of the Company or any of its Subsidiaries will not, in the case of
dates or time periods occurring after December 31, 1999, function at least as
efficiently and reliably as in the case of times or time periods occurring
before January 1, 2000, including the making of accurate leap year calculations.
Capitalized terms defined in the other provisions of this Agreement shall
have the meanings so ascribed to them in all provisions of this Agreement.
Section 1.2. Accounting Terms. For purposes of this Agreement, all
accounting terms not otherwise defined herein shall have the meanings assigned
to such terms in conformity with GAAP. Financial statements and other
information furnished to the Administrative Agent pursuant to Section 8.5 shall
be prepared in accordance with GAAP (as in effect at the time of such
preparation) on a consistent basis. In the event any "Accounting Changes" (as
defined below) shall occur and such changes affect financial covenants,
standards or terms in this Agreement, then the Company, the Administrative Agent
and the Lenders agree to enter into negotiations in order to amend such
provisions of this Agreement so as to equitably reflect such Accounting Changes
with the desired result that the criteria for evaluating the financial condition
of the Company and its Subsidiaries shall be the same after such Accounting
Changes as if such Accounting Changes had not been made, and until such time as
such an amendment shall have been executed and delivered by the Company, the
Administrative Agent and the Required Lenders, (i) all financial covenants,
standards and terms in this Agreement shall be calculated and/or construed as if
such Accounting Changes had not been made and (ii) the Company shall prepare
footnotes to each compliance certificate and the financial statements required
to be delivered hereunder that show the differences between the financial
statements delivered (which reflect such Accounting Changes) and the basis for
calculating financial covenant compliance (without reflecting such Accounting
Changes). "Accounting Changes" means: (a) changes in accounting principles
required by GAAP and implemented by the Company and any of its Subsidiaries; (b)
changes in accounting principles recommended by certified public accountants of
the Company or any of its Subsidiaries; or (c) changes in carrying value of the
Company's (or any of its Subsidiaries') assets, liabilities or equity accounts
resulting from the application of purchase accounting principles.
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Section 2. The Revolving Credit.
Section 2.1. General Terms. Subject to all of the terms and conditions
hereof, the Lenders agree to extend a Revolving Credit to the Company which may
be availed of by the Company from time to time, be repaid and used again, during
the period from the date hereof to and including the Termination Date. The
Revolving Credit may be utilized by the Company in the form of Loans, all as
more fully hereinafter set forth, provided that the aggregate amount of Loans
outstanding at any one time shall not exceed the Commitments. The maximum amount
of the Revolving Credit which each Lender agrees to extend hereunder shall be as
set forth opposite its name on Exhibit A attached hereto and made a part hereof
(as the same shall be deemed amended after giving effect to the Assignment
Agreements referred to in Section 12.12 hereof). The obligations of the Lenders
hereunder are several and not joint and no Lender shall under any circumstance
be obligated to extend credit under the Revolving Credit in excess of its
Commitment or its pro rata share of the credit outstanding hereunder.
Section 2.2. The Loans. Subject to all of the terms and conditions
hereof, the Revolving Credit may be availed of by the Company in the form of
loans (individually a "Loan" and collectively the "Loans"). Each Borrowing shall
be in a minimum amount of $1,000,000 and thereafter in integral multiples of
$100,000 (with LIBOR Portions being in a minimum amount of $5,000,000 and
thereafter in integral multiples of $500,000) and shall be made pro rata from
the Lenders in accordance with the amounts of their Commitments. All Loans made
by each Lender shall be made against and evidenced by a promissory note
(individually a "Note" and collectively the "Notes") in the form (with
appropriate insertions) annexed hereto as Exhibit B. Each Note shall be in the
amount of the Commitment of the Lender to which it is payable and shall mature
on the Termination Date.
Section 2.3. Term Conversion Option. Subject to the terms and conditions
hereof, so long as no Default or Event of Default then exists, the Company shall
have the option on the Termination Date to maintain all or any part of the Loans
then outstanding on a non-revolving basis through the Term Credit Final Maturity
Date. The Company shall give the Administrative Agent not less than 5 Business
Days prior written notice of its election to exercise the Term Credit option
provided for herein, and the Administrative Agent shall thereafter promptly
notify the Lenders of such election. If the Company fails to give such notice,
or if a Default or Event of Default then exists, the Term Credit option shall be
unavailable to the Company and all Obligations shall be due and payable in full
on the Termination Date. If the Term Credit option is elected, and the
conditions thereto satisfied, no new Loans shall be made after the Termination
Date (at which time the Commitments of the Lenders to make new Loans shall
expire) and the Loans then outstanding shall remain outstanding and evidenced by
the Note through the Term Credit Final Maturity Date, at which time all
Obligations shall be due and payable in full
Section 2.4. Manner of Borrowing. The Company shall give written or
telephonic notice to the Administrative Agent (which notice shall be irrevocable
once given and, if given by telephone, shall be promptly confirmed in writing)
by no later than 12:00 noon (Chicago time) on the date the Company requests that
any Borrowing of Loans be made to it under the Commitments, and the
Administrative Agent shall promptly notify each Lender of the Administrative
Agent's receipt of each such notice. Each such notice shall specify the date of
the
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Borrowing of Loans requested (which must be a Business Day, and which date shall
be at least three (3) Business Days subsequent to the date of such notice in the
case of any Borrowing of Loans constituting a LIBOR Portion) and the amount of
such Borrowing. Each Borrowing of Loans shall initially constitute part of the
applicable Base Rate Portion except to the extent the Company has otherwise
timely elected that such Borrowing constitute part of a LIBOR Portion as
provided in Section 3 hereof. The Company agrees that the Administrative Agent
may rely upon any written or telephonic notice given by any person the
Administrative Agent in good faith believes is an Authorized Representative
without the necessity of independent investigation and, in the event any
telephonic notice conflicts with the written confirmation, such telephonic
notice shall govern if the Administrative Agent and the Lenders have acted in
reliance thereon. The Lenders undertake to endeavor in good faith to honor on a
same day basis Borrowing requests received later than 12:00 noon (Chicago time)
but shall incur no liability to the Company if it is not reasonably practical
for them to honor such requests on a same day basis. Not later than 1:00 p.m.
(Chicago time) on the date specified for any Borrowing of Loans to be made
hereunder, each Lender shall make the proceeds of its Loan comprising part of
such Borrowing available to the Administrative Agent in Chicago, Illinois in
immediately available funds. Subject to the provisions of Section 7 hereof, the
proceeds of each Loan shall be made available to the Company at the principal
office of the Administrative Agent in Chicago, Illinois, in immediately
available funds, upon receipt by the Administrative Agent from each Lender of
its pro rata share of such Borrowing. Unless the Administrative Agent shall have
been notified by a Lender prior to 1:00 p.m. (Chicago time) on the date a
Borrowing is to be made hereunder that such Lender does not intend to make its
pro rata share of such Borrowing available to the Administrative Agent, the
Administrative Agent may assume that such Lender has made such share available
to the Administrative Agent on such date and the Administrative Agent may (but
shall not be obligated to) in reliance upon such assumption make available to
the Company a corresponding amount. If such corresponding amount is not in fact
made available to the Administrative Agent by such Lender and the Administrative
Agent has made such amount available to the Company, the Administrative Agent
shall be entitled to receive such amount from such Lender forthwith upon its
demand, together with interest thereon in respect of each day during the period
commencing on the date such amount was made available to the Company and ending
on but excluding the date the Administrative Agent recovers such amount at a
rate per annum equal to (x) from the date the related payment was due to the
Administrative Agent to the date two (2) Business Days after the date such
payment was due, the Federal Funds Rate for such day (or in the case of a day
which is not a Business Day, then for the preceding day) and (y) thereafter
until payment of such amount is received by the Administrative Agent from such
Lender, the Base Rate in effect for each such day.
Section 3. Interest.
Section 3.1. Options. Subject to all of the terms and conditions of this
Section 3, portions of the principal indebtedness evidenced by the Notes (all of
the indebtedness evidenced by the Notes bearing interest at the same rate for
the same period of time being hereinafter referred to as a "Portion") shall, at
the option of the Company, bear interest with reference to the Base Rate (the
"Base Rate Portions") or with reference to the Adjusted LIBOR ("LIBOR
Portions"), and Portions shall be convertible from time to time from one basis
to the other. All of the indebtedness evidenced by the Notes which is not part
of a LIBOR Portion shall constitute
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a single Base Rate Portion. All of the indebtedness evidenced by the Notes which
bears interest with reference to a particular Adjusted LIBOR for a particular
Interest Period shall constitute a single LIBOR Portion. Anything contained
herein to the contrary notwithstanding, there shall not be more than eight (8)
LIBOR Portions applicable to any Note outstanding at any one time and each
Lender shall have a ratable interest in each Portion based on its Commitment
percentage thereof. The Company promises to pay interest on each Portion at the
rates and times specified in this Section 3.
Section 3.2. Base Rate Portion. Each Base Rate Portion shall bear
interest (which the Company promises to pay at the times herein provided) at the
rate per annum determined by adding the Applicable Margin to the Base Rate as in
effect from time to time. Interest on the Base Rate Portions shall be payable
quarterly in arrears on the first day of each March, June, September and
December in each year and at maturity of the applicable Notes, and interest
after maturity shall be due and payable upon demand.
Section 3.3. LIBOR Portions. Each LIBOR Portion shall bear interest
(which the Company promises to pay at the times herein provided) for each
Interest Period selected therefor at a rate per annum equal to the Adjusted
LIBOR for such Interest Period plus the Applicable Margin. Interest on each
LIBOR Portion shall be due and payable on the last day of each Interest Period
applicable thereto and, if an Interest Period is longer than three (3) months,
then at the end of each three (3) month period and at the end of such Interest
Period, and interest after maturity shall be due and payable upon demand. The
Company shall give written or telephonic notice to the Administrative Agent
(which notice shall be irrevocable once given and, if given by telephone, shall
be promptly confirmed in writing) on or before 12:00 noon (Chicago time) on the
third Business Day preceding the end of an Interest Period applicable to a LIBOR
Portion whether such LIBOR Portion is to continue as a LIBOR Portion, in which
event the Company shall notify the Administrative Agent of the new Interest
Period selected therefor, and in the event the Company shall fail to so notify
the Administrative Agent, such LIBOR Portion shall automatically be converted
into and added to the Base Rate Portion as of and on the last day of such
Interest Period. The Administrative Agent shall promptly notify each Lender of
each notice received from the Company pursuant to the foregoing provisions.
Anything contained herein to the contrary notwithstanding, the obligation of the
Lenders to create or continue any LIBOR Portion or to convert any part of the
Base Rate Portion into a LIBOR Portion shall be conditioned upon the fact that
at the time no Default or Event of Default shall have occurred and be
continuing, except that during the existence of a Default (but not an Event of
Default) the Company may request the continuation of any LIBOR Portion into
another LIBOR Portion with an Interest Period not in excess of one (1) month.
Section 3.4. Computation. All interest on the Notes and all fees, charges
and commissions due hereunder shall be computed on the basis of a year of 360
days for the actual number of days elapsed, except that interest on the Base
Rate Portion shall be computed on the basis of a year of 365 or 366 days (as the
case may be) for the actual number of days elapsed.
Section 3.5. Manner of Rate Selection. The Company shall notify the
Administrative Agent by 12:00 noon (Chicago time) at least 3 Business Days prior
to the date upon which it requests that any LIBOR Portion be created or that any
part of the Base Rate Portion be
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converted into a LIBOR Portion (such notice to specify in each instance the
amount thereof and the Interest Period selected therefor) and the Administrative
Agent shall promptly advise each Lender of each such notice. If any request is
made to convert a LIBOR Portion into the Base Rate Portion, such conversion
shall only be made so as to become effective as of the last day of the Interest
Period applicable thereto. All requests for the creation, continuance or
conversion of Portions under this Agreement shall be irrevocable. Such requests
may be written or telephonic (provided that if such notice is given by
telephone, the Company shall promptly confirm such notice to the Administrative
Agent in writing), and the Administrative Agent is hereby authorized to honor
telephonic requests for creations, continuances and conversions received by it
from any person the Administrative Agent reasonably believes to be an Authorized
Representative, the Company hereby indemnifying the Administrative Agent and the
Lenders from any liability or loss ensuing from so acting. The Company
acknowledges that, in connection with acknowledgment agreements entered into
pursuant to Section 4.10 hereof and Assignment Agreements entered into pursuant
to Section 12.12(a) hereof entered into at any time prior to the earlier of (i)
30 days after the close of the primary syndication as reasonably determined and
established by the Administrative Agent and (ii) six (6) months after the date
hereof, any LIBOR Portions which are required to be prepaid by the
Administrative Agent in connection therewith (in order for Loans and credit
risks with respect to Letters of Credit then outstanding to be shared ratably by
the Lenders in accordance with their adjusted Commitments) shall be accompanied
by any payments required to be paid to the Lenders under Section 3.6 hereof.
Section 3.6. Funding Indemnity. In the event any Lender shall incur any
loss, cost or expense (including, without limitation, any loss, cost or expense
incurred by reason of the liquidation or re-employment of deposits or other
funds acquired by such Lender to fund or maintain any LIBOR Portion or the
relending or reinvesting of such deposits or amounts paid or prepaid to such
Lender, but excluding any loss of profit) as a result of:
(a) any payment or prepayment of a LIBOR Portion on a date other
than the last day of its Interest Period for any reason, whether before or
after default, and whether or not such payment is required by any of the
provisions of this Agreement;
(b) any failure (because of a failure to meet the conditions of
Section 7 hereof or otherwise) by the Company to create, borrow, continue
or effect by conversion a LIBOR Portion on the date specified in a notice
given pursuant to this Agreement hereof; or
(c) any failure by the Company to make any payment of principal
on any LIBOR Portion when due (whether by acceleration, mandatory
prepayment or otherwise),
then, upon the demand of such Lender, the Company shall pay to such Lender such
amount as will reimburse such Lender for such loss, cost or expense. If any
Lender makes such a claim for compensation, it shall provide to the Company a
certificate executed by an officer of such Lender setting forth the amount of
such loss, cost or expense in reasonable detail (including an explanation of the
basis for and the computation of such loss, cost or expense) and such
certificate shall be deemed prima facie correct.
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Section 3.7. Change of Law. Notwithstanding any other provisions of this
Agreement or any Note, if at any time any change in applicable law or regulation
or in the official interpretation thereof makes it unlawful for any Lender to
make or continue to maintain LIBOR Portions or to give effect to its obligations
to make LIBOR Portions available as contemplated hereby, such Lender shall
promptly give notice thereof to the Company and the Administrative Agent and
such Lender's obligations to make or maintain LIBOR Portions under this
Agreement shall be suspended until it is no longer unlawful for such Lender to
make or maintain LIBOR Portions. To the extent it is unlawful for any such
Lender to maintain any such LIBOR Portions, the Company shall prepay on demand
the outstanding principal amount of any such affected LIBOR Portions, together
with all interest accrued thereon and all other amounts then due and payable to
such Lender under this Agreement; provided, however, subject to all of the terms
and conditions of this Agreement, the Company may then elect to convert the
principal amount of the affected LIBOR Portion from such Lender into the Base
Rate Portion from such Lender that shall not be made ratably by the Lenders but
only from such affected Lender. During the period when it is unlawful for any
Lender to make LIBOR Portions, Loans shall continue to be made in such a manner
so that the percentage of each Lender's Commitment in use is identical, but the
Lenders affected by such illegality shall make their share of each Borrowing
which has been requested in the form of a LIBOR Portion available in the form of
a Base Rate Portion. Each Lender agrees (to the extent consistent with its
internal policies) to designate a different lending office if such designation
would avoid the illegality described in this Section 3.7; provided, however,
that such designation need not be made if it would result in any additional
costs, expenses or risks to such Lender that are not reimbursed by the Company
pursuant hereto or would, in the reasonable judgment of such Lender, be
otherwise disadvantageous to such Lender.
Section 3.8. Unavailability of Deposits or Inability to Ascertain, or
Inadequacy of, LIBOR. If on or prior to the first day of any Interest Period for
any LIBOR Portion the Administrative Agent determines that deposits in United
States Dollars (in the applicable amounts) are not being offered to it or to
banks generally in the offshore eurodollar market for such Interest Period, then
the Administrative Agent shall forthwith give notice thereof to the Company and
the Lenders, whereupon until the Administrative Agent notifies the Company that
the circumstances giving rise to such suspension no longer exist, the
obligations of the Lenders to make any further LIBOR Portions available shall be
suspended.
Section 3.9. Increased Cost and Reduced Return. If, on or after the date
hereof, the adoption of any applicable law, rule or regulation, or any change
therein, or any change in the official interpretation or administration thereof
by any governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by any Lender (or
its lending office) with any request or directive (whether or not having the
force of law) of any such authority, central bank or comparable agency:
(a) shall subject any Lender (or its lending office) to any
charges of any kind (other than Withholding Taxes covered by Section 4.9
hereof) with respect to its interest in the LIBOR Portions, its Note or its
obligation to make LIBOR Portions available, or shall change the basis of
taxation of payments to any Lender (or its lending office) of the principal
of or interest on LIBOR Portions or any other amounts due under this
Agreement in respect of its LIBOR Portions or its obligation to make LIBOR
Portions; or
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(b) shall impose, modify or deem applicable any reserve, special
deposit or similar requirements (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve
System, but excluding any such requirement included in an applicable
Eurodollar Reserve Percentage) against assets of, deposits with or for the
account of, or credit extended by, any Lender (or its lending office) or
shall impose on any Lender (or its lending office) or the offshore
interbank market any other condition affecting LIBOR Portions, its Note or
its obligation to make LIBOR Portions available;
and the result of any of the foregoing is to increase the cost to such Lender
(or its lending office) of making or maintaining any LIBOR Portion, or to reduce
the amount of any sum received or receivable by such Lender (or its lending
office) under this Agreement or under its Note with respect thereto, by an
amount deemed by such Lender to be material, then, within 30 days after demand
by such Lender (with a copy to the Administrative Agent), the Company shall pay
to such Lender such additional amount or amounts as will compensate such Lender
for such increased cost or reduction. A certificate of any Lender claiming
compensation under this Section 3.9 and setting forth the additional amount or
amounts in reasonable detail (including an explanation of the basis therefor and
the computation of such amount) to be paid to it hereunder shall be deemed prima
facie correct. In determining such amount, such Lender may use reasonable
averaging and attribution methods. A Lender shall not be entitled to
compensation under this Section 3.9 with respect to any adoption or change for
any period prior to the earlier of (i) the date it notifies the Company of the
adoption or change giving rise to the request for compensation or (ii) the date
which is 30 days prior to the date it becomes aware of the adoption or change
giving rise to the request for compensation if the Company is notified of the
adoption or change prior to the lapse of such 30-day period.
Section 3.10. Lending Offices. Each Lender may, at its option, elect to
make its Loans hereunder at the branch, office or affiliate specified on the
appropriate signature page hereof (each a "lending office") or at such other of
its branches, offices or affiliates as it may from time to time elect and
designate in a notice to the Company and the Administrative Agent (but such
funds shall in any event be made available to the Company at the office of the
Administrative Agent as herein provided for).
Section 3.11. Discretion of Banks as to Manner of Funding. Notwithstanding
any other provision of this Agreement, each Lender shall be entitled to fund and
maintain its funding of all or any part of its Loans in any manner it sees fit,
it being understood, however, that for the purposes of this Agreement all
determinations under this Agreement (including, without limitation, calculations
under Sections 3.6 and 3.9 hereof) shall be made as if each Lender had actually
funded and maintained its interest in each LIBOR Portion through the purchase of
deposits in the offshore interbank market having a maturity corresponding to
such LIBOR Portion's Interest Period and bearing an interest rate equal to LIBOR
for such Interest Period.
Section 4. Fees, Payments, Reductions, Applications, Notations and Extensions.
Section 4.1. Commitment Fee. For the period from the date hereof to and
including the Termination Date, the Company shall pay to the Administrative
Agent for the ratable account of
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the Lenders a commitment fee at the Applicable Margin on the average daily
unused amount of the Commitments hereunder (provided that, if the average daily
unused amount of the Commitments for the most recently completed three (3)-month
period (or such shorter period from the date of this Agreement through the first
payment date thereof) plus the daily unused amount of the commitments available
under the Five-Year Credit Agreement for such period is greater than 50% of the
Commitments available hereunder and the commitments available under the Five-
Year Credit Agreement for such period, then such fee shall be paid at .125% plus
the Applicable Margin for the commitment fee), such fee to be payable quarterly
in arrears on the first day of each March, June, September and December in each
year to and including, and on, the Termination Date.
Section 4.2. Administrative Agent's Fees'. On the date hereof, and on the
date occurring on each anniversary of the date hereof (excluding the Termination
Date) when any credit or commitment to extend credit is outstanding hereunder,
the Company shall pay to the Administrative Agent, for its own use and benefit,
such fees as set forth in the administrative agent's fee letter dated the date
hereof, as such fees may be amended by the Company and the Administrative Agent
from time to time.
Section 4.3. Underwriting Fees. The Company shall pay to the Lead
Arrangers, Book Managers, and Syndication Agents such underwriting, acceptance
and ticking fees as set forth in the Fee and Structuring Letter.
Section 4.4. Payments. (a) Maturity. The Company shall repay all Loans in
full on the Termination Date, together with all accrued but unpaid interest
thereon, provided that, if the Term Credit option provided for in Section 2.3
hereof has been selected and all conditions to the effectiveness thereof
satisfied, the final maturity of the Loans shall be extended to the Term Credit
Final Maturity Date at which time the Company shall repay all Loans in full
together with accrued but unpaid interest thereon.
(b) Mandatory Prepayments. In the event that at any time the aggregate
amount of Loans then outstanding exceeds the Commitments then in effect, the
Company shall immediately upon demand pay over the amount of the excess to the
Administrative Agent to be applied against the Loans.
(c) Optional Prepayments. The Company shall have the privilege of prepaying
without premium or penalty and in whole or in part (but, if in part, then in an
amount not less than $1,000,000) (or such lesser amount as will prepay the Loans
in full) the Notes at any time, each such prepayment to be made by the payment
of the principal amount to be prepaid, any amount due the Lenders under Section
3.6 hereof (any failure of the Administrative Agent or the Lenders to require
payment of any amount due under Section 3.6 not to preclude a later demand that
the amount so due be paid) and, in the case of a prepayment which prepays the
Notes in full after which the Commitments are no longer outstanding, accrued
interest thereon to the date fixed for prepayment.
(d) Any amount of Loans outstanding under the Revolving Credit paid or
prepaid prior to the Termination Date may, subject to the terms and conditions
of this Agreement, be
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borrowed, repaid, and borrowed again. No amount of Loans paid or prepaid on or
after the Termination Date may be reborrowed.
Section 4.5. Terminations. The Company shall have the privilege at any
time and from time to time upon five (5) Business Days prior notice to the
Administrative Agent (which shall promptly notify the Lenders) to ratably
terminate the Commitments in whole or in part (but, if in part, then in a
minimum amount of $1,000,000), provided that the Commitments may not be reduced
to an amount less than the aggregate principal amount of Loans then outstanding
(except in connection with the Term Credit election pursuant to Section 2.3
hereof). No termination of the Commitments may be reinstated unless otherwise
agreed to in writing by the Lenders.
Section 4.6. Place and Application. All payments of principal, interest
and fees shall be made to the Administrative Agent at its office at 115 South
LaSalle Street, Chicago, Illinois (or at such other place as the Administrative
Agent may specify) in immediately available and freely transferable funds at the
place of payment. All payments due from the Company hereunder shall be made
without set-off or counterclaim and without reduction for, and free from, any
and all present or future taxes, levies, imposts, duties, fees, charges,
deductions, withholdings, restrictions or conditions of any nature imposed by
any government or political subdivision or taxing authority thereof. Payments
received by the Administrative Agent after 1:00 p.m. (Chicago time) shall be
deemed received as of the opening of business on the next Business Day. Except
as otherwise provided in this Agreement, all payments shall be received by the
Administrative Agent for the ratable account of the Lenders, and shall be
promptly distributed by the Administrative Agent ratably to the Lenders except
that payments which pursuant to the terms hereof are for the use and benefit of
the Administrative Agent shall be retained by it for its own account and
payments received to reimburse a Lender for a fee or cost peculiar to that
Lender shall be remitted to it. Unless the Company otherwise directs, principal
payments on the Notes shall be first applied to the Base Rate Portion and then
to the LIBOR Portions in the order in which their Interest Periods expire.
Anything contained herein to the contrary notwithstanding, all payments and
collections received in respect of the indebtedness evidenced by the Notes by
the Administrative Agent or any of the Lenders after an Event of Default has
occurred and is continuing shall be distributed as follows:
(a) first, to the payment of any outstanding costs and expenses
incurred by the Administrative Agent in protecting, preserving or enforcing
rights under the Loan Documents and in any event including all costs and
expenses of a character which the Company has agreed to pay under Section
12.10 hereof (such funds to be retained by the Administrative Agent for its
own account unless it has previously been reimbursed for such costs and
expenses by the Lenders, in which event such amounts shall be remitted to
the Lenders to reimburse them for payments theretofore made to the
Administrative Agent); and
(b) second, to the remaining Obligations.
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Section 4.7. Notations and Requests. All advances made against the Notes
shall be recorded by the Lenders on their books or, at their option in any
instance, endorsed on the reverse side of the Notes and the unpaid principal
balances so recorded or endorsed by the Lenders shall be prima facie evidence in
any court or other proceeding brought to enforce the Notes of the principal
amount remaining unpaid thereon. Prior to any negotiation of any Note, the
Lender holding such Note shall endorse thereon the principal amount remaining
unpaid thereon.
Section 4.8. Capital Adequacy. If any Lender shall determine that any
applicable law, rule or regulation regarding capital adequacy, or any change
therein, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof or compliance by such Lender (or its
lending office) with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on such Lender's capital as a consequence of its obligations hereunder or the
Letters of Credit or credit extended by it hereunder to a level below that which
such Lender could have achieved but for such law, rule, regulation, change or
compliance (taking into consideration such Lender's policies with respect to
capital adequacy) by an amount deemed by such Lender to be material, then from
time to time as specified by such Lender the Company shall pay such additional
amount or amounts as will compensate such Lender for such reduction in rate of
return. A certificate of any Lender claiming compensation under this Section and
setting forth the additional amount or amounts to be paid to it hereunder in
reasonable detail shall be deemed prima facie correct. In determining such
amount, such Lender may use any reasonable averaging and attribution methods. A
Lender shall not be entitled to compensation under this Section with respect to
any change, adoption or interpretation (a "Change") for any period prior to the
earlier of (i) the date it notifies the Company of the Change or (ii) the date
which 30 days prior to the date such Lender obtains actual knowledge of the
Change giving rise to the request for compensation if the Company is notified of
the Change prior to the lapse of such 30-day period. Each Lender and the
Administrative Agent shall use reasonable efforts to minimize the cost imposed
on the Company in respect of any such increased capital requirement and shall
compute the assessment of any such cost related to such increased capital on a
nondiscriminatory basis among the Company, on the one hand, and other borrowers
to which it applies, on the other hand, and neither such Lender nor any
corporation controlling such Lender nor the Administrative Agent shall be
entitled to demand compensation or be compensated for any increased capital
requirement from the Company hereunder in excess of the amount so computed.
Section 4.9. Withholding Taxes. (a) Payments Free of Withholding. Except
as otherwise required by law and subject to Section 4.9(b) hereof, each payment
by the Company under this Agreement or the other Loan Documents shall be made
without withholding for or on account of any present or future taxes (other than
overall net income taxes on the recipient) imposed by or within the jurisdiction
in which the Company is domiciled, any jurisdiction from which the Company makes
any payment, or (in each case) any political subdivision or taxing authority
thereof or therein; provided, however, that the Company shall not be required to
indemnify or gross up the payments to any Lender under this Section 4.9(a) in
respect of United States federal withholding tax to the extent that the
obligation to indemnify or gross up such payments would not have arisen but for
such Lender's failure to comply with Section 4.9(b). If any such
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withholding is so required, the Company shall make the withholding, pay the
amount withheld to the appropriate governmental authority before penalties
attach thereto or interest accrues thereon and forthwith pay such additional
amount as may be necessary to ensure that the net amount actually received by
each Lender and the Administrative Agent free and clear of such taxes (including
such taxes on such additional amount) is equal to the amount which that Lender
or the Administrative Agent (as the case may be) would have received had such
withholding not been made. If the Administrative Agent or any Lender pays any
amount in respect of any such taxes, penalties or interest, the Company shall
reimburse the Administrative Agent or such Lender for that payment on demand in
the currency in which such payment was made. If the Company pays any such taxes,
penalties or interest, it shall deliver official tax receipts evidencing that
payment or certified copies thereof to the Lender or Administrative Agent on
whose account such withholding was made (with a copy to the Administrative Agent
if not the recipient of the original) on or before the thirtieth day after
payment.
(b) U.S. Withholding Tax Exemptions. Each Lender that is not a United
States person (as such term is defined in Section 7701(a)(30) of the Code) shall
submit to the Company and the Administrative Agent on or before the date the
initial Loans are is made hereunder or, if later, the date such financial
institution becomes a Lender hereunder, two duly completed and signed copies of
(i) either Form 1001 (relating to such Lender and entitling it to a complete
exemption from withholding under the Code on all amounts to be received by such
Lender, including fees, pursuant to the Loan Documents and the Obligations) or
Form 4224 (relating to all amounts to be received by such Lender, including
fees, pursuant to the Loan Documents and the Obligations) of the United States
Internal Revenue Service or (ii) solely if such Lender is claiming exemption
from United States withholding tax under Section 871(h) or 881(c) of the Code
with respect to payments of "portfolio interest", a Form W-8, or any successor
form prescribed by the Internal Revenue Service, and a certificate representing
that such Lender is not a bank for purposes of Section 881(c) of the Code, is
not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the
Code) of the Company and is not a controlled foreign corporation related to the
Company (within the meaning of Section 864(d)(4) of the Code). Thereafter and
from time to time, each Lender shall submit to the Company and the
Administrative Agent such additional duly completed and signed copies of one or
the other of such Forms (or such successor forms as shall be adopted from time
to time by the relevant United States taxing authorities) and such other
certificates as may be (i) requested by the Company in a written notice,
directly or through the Administrative Agent, to such Lender and (ii) required
under then-current United States law or regulations to avoid or reduce United
States withholding taxes on payments in respect of all amounts to be received by
such Lender, including fees, pursuant to the Loan Documents or the Obligations.
Upon the request of the Company or the Administrative Agent, each Lender that is
a United States person (as such term is defined in Section 7701(a)(30) of the
Code) shall submit to the Company and the Administrative Agent a certificate to
the effect that it is such a United States person.
(c) Inability of Lender to Submit Forms. If any Lender determines, as a
result of any change in applicable law, regulation or treaty, or in any official
application or interpretation thereof, that it is unable to submit to the
Company or the Administrative Agent any form or certificate that such Lender is
obligated to submit pursuant to subsection (b) of this Section 4.9 or that such
Lender is required to withdraw or cancel any such form or certificate previously
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submitted or any such form or certificate otherwise becomes ineffective or
inaccurate, such Lender shall promptly notify the Company and Administrative
Agent of such fact and the Lender shall to that extent not be obligated to
provide any such form or certificate and will be entitled to withdraw or cancel
any affected form or certificate, as applicable.
Section 4.10. Increase in Commitments. At any time prior to 30 days after
the close of the primary syndication as reasonably determined and established by
the Administrative Agent, in the event that sufficient commitments are received
from banks and other financial institutions (other than Bank of Montreal and
Bank of America National Trust and Savings Association (herein, the "Initial
Lenders")), such that the Initial Lenders remaining Commitments, after giving
effect to the syndication of the credit facilities provided for herein, are at
their desired initial hold levels, and the aggregate Commitments hereunder and
commitments under the Five-Year Credit Agreement exceed $250,000,000 (such
excess being referred to herein as the "Overage"), then in that event the
Administrative Agent shall notify the Company of the Overage, and the Company
may request that the aggregate Commitments hereunder be increased by the lesser
of $20,000,000 and 40% of the Overage by offering such increase to one or more
banks or other financial institutions (each such bank or financial institution
being hereinafter referred to as an "Additional Lender") selected by the Company
and acceptable to the Lead Arrangers, Book Managers, and Syndication Agents and
the Administrative Agent. Such increase in the Commitments shall also be subject
to the satisfaction of the following conditions: (a) each such increase shall be
at least $2,000,000 or such greater amount which is an integral multiple
$1,000,000; (b) the Administrative Agent shall have received an acknowledgement
agreement providing for such increase in form and substance satisfactory to it
executed by the Company, the Administrative Agent, and the relevant Additional
Lender; and (c) the Administrative Agent shall have received a Note duly
executed by the Company in favor of the relevant Additional Lender. Upon the
satisfaction of such conditions, effective as of the date set forth above in
such acknowledgement agreement, each such Additional Lender shall thereafter be
a "Lender" party to this Agreement and shall be entitled to all rights, benefits
and privileges afforded a Lender hereunder and subject to the obligations of a
Lender hereunder to the extent of its Commitment and Exhibit A shall be deemed
amended reflecting the increase in the aggregate Commitments caused by the
inclusion of the Commitment of the Additional Lender. Concurrently with the
effectiveness of such increase, each Additional Lender shall fund its percentage
of the outstanding Loans to the Administrative Agent so that after giving effect
thereto each Lender, including the Additional Lender, holds a pro rata share (in
accordance with its Commitment percentage) of the outstanding Loans and the
Company shall pay to each Lender all amounts due under Section 3.6 hereof as a
result of any prepayment of any outstanding LIBOR Portions of the Loans.
Section 4.11. Extensions of Commitments. Not less than 45 days nor more
than 60 days prior to the Termination Date then in effect, the Company may
advise the Administrative Agent in writing of its desire to extend the
Termination Date for an additional 364 days from the Termination Date then in
effect and the Administrative Agent shall promptly notify the Lenders of each
such request. Each Lender shall notify the Administrative Agent in writing not
later than 30 days before the Termination Date then in effect whether such
Lender agrees to the requested extension. No Lender shall be under any
obligation or commitment to extend such date and no such obligation or
commitment on the part of any Lender shall be inferred from the provisions of
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this Section (it being understood that any Lender may accept or decline such a
request in its sole discretion and on such terms as such Lender may elect).
Failure on the part of any Lender to respond to such a request by the required
date set forth above shall be deemed to be a denial of such request by such
Lender. The requested extension shall not be granted unless Lenders holding
Commitments aggregating at least 80% of the aggregate Commitments in effect at
such time shall have consented in writing to such extension. If Lenders holding
100% of the aggregate Commitments consent to such extension, the Termination
Date will be automatically extended for an additional 364 day period. If Lenders
holding Commitments aggregating less than 100%, but equal to or greater than
80%, of the aggregate Commitments consent to such extension, the Company may
elect by written notice to the Administrative Agent prior to the current
Termination Date to (i) rescind the original request, in which case there shall
be no extension of the Termination Date pursuant to this Section (it being
understood that the Company may elect to exercise the Term Credit option in
accordance with the terms and conditions of Section 2.3 hereof), (ii) continue
the credit facilities provided for herein for such additional period with
respect to the Commitments of the consent Lenders, with the Commitment of any
Lender who has not consented to such extension (herein, a "Non-Consenting
Lender") to be terminated on the current Termination Date currently in effect
(at which time all Obligations of such Non-Consenting Lender shall be paid and
satisfied in full by the Company), or (iii) require any such Non-Consenting
Lender to transfer and assign its Commitment and its other interests, rights,
and obligations under the Loan Documents to another bank or financial
institution willing to provide such extended financing in accordance with
Section 4.12 hereof. The Administrative Agent shall provide prompt notice to the
Company and the Lenders in writing as to whether the requested extension has
been granted and, if applicable, the list of Non-Consenting Lenders. In the
event the Administrative Agent requests, the Company and the Lenders shall
execute and deliver such documents as the Administrative Agent may deem
necessary or appropriate to reflect any such extension, and all costs and
expenses incurred by the Administrative Agent in connection therewith shall be
paid by the Company.
Section 4.12. Substitution of Lenders. Upon the receipt by the Company of
(a) a claim from any Lender for compensation under Sections 3.9, 4.8, or 4.9
hereof, (b) notice by any Lender to the Company of any illegality pursuant to
Section 3.7 hereof, or (c) notice from the Administrative Agent that a Lender or
Lenders have not approved an extension of the Termination Date pursuant to
Section 4.11 hereof (any such Lender referred to in clause (a), (b), or (c)
above being hereinafter referred to as an "Affected Lender"), the Company may
require, at its expense, any such Affected Lender to assign, at par plus accrued
interest and fees, without recourse, all of its interest, rights and obligations
hereunder (including all of its Commitment, Loans and other amounts at any time
owing to it hereunder and the other Loan Documents) to a bank or financial
institution specified by the Company, provided that (i) such assignment shall
not conflict with or violate any law, rule, or regulation or order of any court
or other governmental authority, (ii) the Company shall have received the
written consent of the Administrative Agent, which consent shall not be
unreasonably withheld, to such assignment, (iii) the Company shall have paid to
the Affected Lender all monies (together with amounts due such Affected Lender
under Section 3.6 hereof as if the Loans owing it were prepaid rather than
assigned), other than such principal, interest and fees accrued and owing to it
hereunder, and (iv) the assignment is entered into in accordance with the other
requirements of Section 12.12 hereof.
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Section 5. Guaranties.
Section 5.1. Guaranty. Payment of the Obligations hereunder and under the
other Loan Documents shall at all times be jointly and severally guaranteed
pursuant to Section 11 hereof by MK-Ohio and Washington and from time to time
such other Restricted Subsidiaries (the "Necessary Parties") so that as of the
end of each fiscal quarter of the Company the assets of the Company, MK-Ohio,
Washington and the Necessary Parties are not less than 90% of the assets of the
Company and all of its Restricted Subsidiaries taken as a whole at such time.
The Company shall cause each Necessary Party to execute a supplement to the
guaranty provided in Section 11 hereof pursuant to which such Restricted
Subsidiary joins in and becomes obligated as a guarantor hereunder, which
supplement shall be in the form attached hereto as Exhibit C or in such other
form satisfactory to the Administrative Agent (MK-Ohio, Washington and the from
time to time Necessary Parties are herein collectively referred to as the
"Guarantors" and each individually as a "Guarantor"). The Company shall also
cause such Guarantor to execute and deliver, at the Company's cost and expense,
such other instruments, documents, certificates and opinions required by the
Administrative Agent in connection therewith.
Section 6. Representations and Warranties.
The Company represents and warrants to the Lenders as follows:
Section 6.1. Organization and Power. The Company is duly organized and
existing under the laws of the state of its incorporation, and is duly licensed
or qualified to do business in each state where the nature of the assets owned
or leased by it or business conducted by it requires such licensing or
qualification and in which the failure to be so licensed or qualified would have
a Material Adverse Effect and has all necessary corporate power to carry on its
present business. The Company has full right, power and authority to enter into
this Agreement, to make the borrowings herein provided for, to issue the Notes
in evidence thereof, to execute and deliver the other Loan Documents executed
and delivered or to be executed and delivered by it, and to perform each and all
of the matters and things herein and therein provided for. Each Guarantor has
full right, power and authority to enter into the Loan Documents executed by it
and to perform each and all of the matters and things therein provided for. The
Loan Documents do not, nor will the performance or observance by the Company or
any Subsidiary of any of the matters and things herein or therein provided for,
contravene any provision of law or any charter or by-law provision of the
Company or any such Subsidiary or constitutes a breach or default under any
covenant, indenture or agreement of or affecting the Company or any such
Subsidiary where such breach or default would have a Material Adverse Effect.
Section 6.2. Subsidiaries. Each Subsidiary is duly organized and existing
under the laws of the jurisdiction of its incorporation or organization, and is
duly licensed or qualified to do business in each state or other jurisdiction
where the nature of the assets owned or leased by it or business conducted by it
requires such licensing or qualification and in which the failure to be so
licensed or qualified would have a Material Adverse Effect and has all necessary
power to carry on its present business. Schedule 6.2 hereto identifies each
Subsidiary, the jurisdiction of its incorporation or organization, the
percentage of issued and outstanding shares of each class of its capital stock
or other equity interests owned by the Company and the Subsidiaries and, if such
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percentage is not 100% (excluding directors' qualifying shares as required
by law), a description of each class of its authorized capital stock or other
equity interests and the number of shares of each class issued and outstanding,
together with a designation of those Subsidiaries which are Restricted
Subsidiaries (including a designation of those which are Material Subsidiaries)
and those which are Unrestricted Subsidiaries. All of the outstanding shares of
capital stock or other equity interests of each Subsidiary are validly issued
and outstanding and fully paid and nonassessable, and all shares of each
Subsidiary indicated on Schedule 6.2 as owned by the Company or a Subsidiary are
owned, beneficially and of record, by the Company or such Subsidiary free and
clear of all liens, security interests, charges and encumbrances. There are no
outstanding commitments or other obligations of any Subsidiary to issue, and no
options, warrants or other rights of any Person to acquire, any shares of any
class of capital stock or other equity interests of any Subsidiary, except for
options granted in the ordinary course to officers and employees of non-Material
Subsidiaries or of Unrestricted Subsidiaries which, as to any Subsidiary, do
not, if exercised, aggregate 10% or more of the capital stock of any such
Subsidiary.
Section 6.3. Use of Proceeds; Regulation U. The Company shall use proceeds
of the Loans and other extensions of credit made available hereunder solely for
the purpose of refinancing existing debt of the Company and its Subsidiaries,
for the acquisition of the Acquired Assets, and for its working capital and
other general corporate purposes. Neither the Company nor any Subsidiary is
engaged in the business of extending credit for the purpose of purchasing or
carrying margin stocks (within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System), and no part of the proceeds of any
loan or extension of credit hereunder will be used to purchase or carry any
margin stock or extend credit to others for the purpose of purchasing or
carrying any margin stock if as a result thereof such loan or other extension of
credit would violate Regulation U or any interpretation thereof.
Section 6.4. Financial Statements. (a) The financial statements of the
Company and its Subsidiaries for the year ended November 30, 1998, including an
audited consolidated balance sheet as of November 30, 1998, and an audited
consolidated statement of profit and loss and statement of cash flows for the
twelve months ended said date, prepared by the Company, and heretofore furnished
to the Lenders, truly and accurately reflect the financial condition of the
Company and its Subsidiaries taken as a whole as at said date and the results of
operations and cash flows for the period covered thereby. Except as disclosed on
Schedule 6.4 hereof, the Company and its Subsidiaries have no contingent
liabilities which are material to them other than as indicated on said financial
statements and, since the date of such financial statements, there have been no
material adverse changes in the condition, financial or otherwise, business or
operations of the Company or its Subsidiaries taken as a whole.
(b) The unaudited pro forma combined, condensed, and consolidated balance
sheet and combined, condensed, and consolidated statements of operations for the
Company and its Subsidiaries heretofore delivered to the Lenders fairly present
(subject to the qualifications and assumptions set forth in the notes attached
thereto) the combined financial condition of the Company and its Subsidiaries as
at the dates thereof and for the periods covered thereby.
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Section 6.5. Litigation and Taxes. Except as disclosed on Schedule 6.4
hereof, there is no litigation or governmental proceeding pending, nor to the
knowledge of the Company threatened, against the Company or any Subsidiary which
could reasonably be expected to result in a Material Adverse Effect. The income
tax returns of the Company and its Subsidiaries for the taxable year ended
November 30, 1998 and for all taxable years ended prior to said date, have been
filed or extended with the appropriate governmental or taxing authorities, and
any additional assessments in connection with any such years have been paid or
the applicable statute of limitations therefor has expired. No objections to or
controversies in respect of the income tax returns of the Company or any
Subsidiary are pending or threatened which could reasonably be expected to
result in a Material Adverse Effect. No authorization, consent, license, or
exemption from, or filing or registration with, any court or governmental
department, agency or instrumentality, is or will be necessary to the valid
execution, delivery or performance by the Company or any Subsidiary of any Loan
Document to be executed and delivered by it.
Section 6.6. Burdensome Contracts with Affiliates . Neither the Company nor
any Subsidiary is a party to any material contracts or agreements with any of
its Affiliates on terms and conditions which are materially less favorable to
the Company or such Subsidiary than would be usual and customary in similar
contracts or agreements between Persons not affiliated with each other.
Section 6.7. ERISA. The Company and each Subsidiary are each in compliance
in all material respects with the Employee Retirement Income Security Act of
1974, as amended ("ERISA") to the extent applicable to it and has received no
notice to the contrary from the Pension Benefit Guaranty Corporation ("PBGC"),
and, in the event of the Company's or any Subsidiary's partial or complete
withdrawal from any pension plans or multiemployer pension plans subject to
Title IV of ERISA or termination of any other pension plans subject to Title IV
of ERISA, the liability of the Company and its Subsidiaries for any unfunded
vested benefits thereunder could not reasonably be expected to result in a
Material Adverse Effect.
Section 6.8. Full Disclosure. The statements and information furnished to
the Lenders in connection with the negotiation of this Agreement and the
commitments by the Lenders to provide all or part of the financing contemplated
hereby do not, taken as a whole, contain any untrue statement of a material fact
or omit a material fact necessary to make the material statements contained
therein or herein not misleading, except for such thereof as were corrected in
subsequent written statements furnished the Lenders (the Lenders acknowledging
that as to any projections furnished to Lenders, the Company only represents
that the same were prepared on the basis of information and estimates it
believes to be reasonable). There is no fact peculiar to the Company or any
Subsidiary which the Company has not disclosed to the Lenders in writing which
materially adversely affects nor, so far as the Company now can reasonably
foresee, is reasonably likely to have a Material Adverse Effect.
Section 6.9. Compliance with Law. (a) Except as disclosed on Schedule 6.4
hereof, neither the Company nor any Subsidiary is (i) in default in any material
respect with respect to any order, writ, injunction or decree of any court or
(ii) in default in any material respect under any law, ordinance, order,
regulation, license or demand (including ERISA, the Occupational Safety and
Health Act of 1970 and laws and regulations establishing quality criteria and
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standards for air, water, land and toxic waste) of any federal, state, municipal
or other governmental agency, default with respect to or under which is
reasonably likely to result in a Material Adverse Effect; and (b) the Company
and each Subsidiary are each in compliance with all applicable state and federal
environmental, health and safety statutes and regulations, including, without
limitation, regulations promulgated under the Resource Conservation and Recovery
Act of 1976, 42 U.S.C. (S)(S)6901 et seq., except where failure to be in
compliance is reasonably likely not to have a Material Adverse Effect, and, to
the Company's knowledge, neither the Company nor any Subsidiary will have
acquired, incurred or assumed, directly or indirectly, any contingent liability
in connection with the release of any toxic or hazardous waste or substance into
the environment which is reasonably likely to have a Material Adverse Effect.
Insofar as known to the responsible officers of the Company, neither the Company
nor any Subsidiary is liable, in whole or in part, for, nor are any of the
assets or property of the Company or any Subsidiary subject to a lien in favor
of any governmental entity for any material liability arising from or in any way
relating to, the costs of cleaning up, remediating or responding a release of
hazardous substances (including, without limitation, petroleum, its by-products
or derivatives, or other hydrocarbons) except as specifically disclosed in the
10-K Statement of the Company dated November 30, 1998.
Section 6.10. Governmental Authority and Licensing. The Company and its
Subsidiaries have received all licenses, permits, and approvals of all Federal,
state, local, and foreign governmental authorities, if any, necessary to conduct
their business, in each case where the failure to obtain or maintain the same is
reasonably likely to have a Material Adverse Effect. No investigation or
proceeding which, if adversely determined, is reasonably likely to result in
revocation or denial of any material license, permit, or approval is pending or,
to the knowledge of the Company, threatened.
Section 6.11. Investment Company; Public Utility Holding Company. Neither
the Company nor any Subsidiary is an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or a "public utility holding company" within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
Section 6.12. Year 2000 Compliance. The information contained in this
Section 6.12 is a YEAR 2000 READINESS DISCLOSURE. The Company (a) is conducting
a comprehensive review and assessment of the computer applications of the
Company and its Subsidiaries and is making inquiries of its material suppliers,
service vendors (including data processors) and customers, with respect to any
defect in computer software, data bases, hardware, controls and peripherals
related to the occurrence of the year 2000 or the use at any time of any date
which is before, on and after December 31, 1999, in connection therewith, (b)
has developed a plan and timeline for addressing Year 2000 Problems on a timely
basis, and (c) is implementing the plan referred to in clause (b) above in
accordance with the timetable referred to therein. The completion of the
inventory phase of the plan has exceeded the original target timetable; however,
the Company believes that the project completion target date remains achievable.
Based upon the results of its comprehensive review and assessment to date, the
Company is not aware of any Year 2000 Problem that could reasonably be expected
to have a Material Adverse Effect.
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Section 6.13. Purchase Agreement. The Company has entered into one or more
agreements and instruments (collectively, the "Purchase Agreement") relating to
its acquisition of the Acquired Assets from CBS Corporation and/or one of more
of its affiliates (herein, the "Seller"), which Purchase Agreement is on terms
and conditions substantially the same as disclosed to the Lenders in the
Company's January 1999 Rating Agency Presentation (the "Rating Agency
Presentation") or otherwise disclosed to the Lenders in writing on or prior to
the date hereof. The Purchase Agreement has not been amended or modified in any
material respect and no material condition to the effectiveness thereof or the
obligations of the Company or the Seller thereunder has been waived except to
the extent disclosed in writing to the Lenders on or prior to the date hereof.
The Company has all necessary right, power, and authority to consummate the
transactions contemplated by the Purchase Agreement and to perform all of its
obligations thereunder. The Purchase Agreement has been duly authorized,
executed, and delivered by the Company and constitutes the valid and binding
obligation of the Company enforceable against it in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance or similar laws affecting creditors' rights generally and general
principles of equity (regardless of whether the application of such principles
is considered in a proceeding in equity or at law); and the Purchase Agreement
does not, nor does the observance or performance by the Company of any of the
matters and things therein provided for, (a) contravene or constitute a default
under any provision of law or any judgment, injunction, order, or decree binding
upon the Company or any provision of the articles of incorporation or by-laws of
the Company, (b) contravene or constitute a default under any covenant,
indenture, or agreement of or affecting the Company or any of its Property where
such contravention or default is reasonably likely to have a Material Adverse
Effect, (c) result in the creation or imposition of any lien, charge, or
encumbrance on any of the Company's Property. No authorization, consent,
license, or exemption from, or filing or registration with, any court or
governmental department, agency, or instrumentality, nor any approval or consent
of any other Person, is or will be necessary to the valid execution, delivery,
or performance by the Company of the Purchase Agreement or of any other
instrument or document executed and delivered in connection therewith, except
for such thereof that have heretofore been obtained and remain in full force and
effect and those the failure of which to obtain or make would not materially
impair the ability of the Company to perform its obligations under the Purchase
Agreement. The Company is not in default in any material respect of its
obligations under the Purchase Agreement. Upon the funding of the purchase price
under the Purchase Agreement, the Company shall have acquired the Acquired
Assets free and clear of all liens, charges and encumbrances. Neither the
Company nor any Subsidiary (including any GESCO Subsidiary) will incur or assume
any material direct or contingent liabilities in connection with the purchase of
the Acquired Assets (including, without limitation, any liabilities for
environmental clean up and liabilities for unfunded pension and welfare plan
obligations) except as disclosed in writing to the Lenders on or prior to the
date hereof.
Section 6.14. Hazardous Materials Risk Management. The Company and its
Subsidiaries manage the risks associated with handling Hazardous Materials in
the ordinary course and any Hazardous Materials Liability associated therewith
in a manner consistent with prudent business practices and similar to companies
similarly situated and operating like businesses, including, without limitation,
protecting the Company and its Subsidiaries from potential Hazardous Materials
Liability where reasonably possible and appropriate through contractual
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indemnifications from governmental agencies and authorities (including, without
limitation, the United States Department of Energy) and other third parties,
maintaining hazardous liability insurance and, with respect to Hazardous
Materials Liability relating to radioactive or other nuclear materials,
statutory limitations of liabilities imposed under the Price-Anderson Act, as
amended.
Section 7. CONDITIONS PRECEDENT.
Section 7.1. All Advances. The obligation of the Lenders to make any
Borrowing under the Revolving Credit (including the first advance) shall be
subject to the provisions of Sections 9.2 and 9.3 hereof and shall also be
subject to the satisfaction of the following conditions precedent at the time of
the making of each Borrowing under the Revolving Credit:
(a) each of the representations and warranties set forth herein and
in the other Loan Documents shall be true and correct, as of the date of
such advance or issuance (except that the representations and warranties
made in Section 6.4 hereof shall be deemed to refer to the most recent
financial statements delivered to the Lenders pursuant to Section 8.5
hereof) ;
(b) no material adverse change shall have occurred in the financial
condition, business or operations of the Company and its Subsidiaries taken
as a whole; and
(c) no Default or Event of Default shall have occurred and be
continuing.
Any request made by the Company to the Administrative Agent for a Borrowing
hereunder shall be deemed to constitute a representation and warranty that the
foregoing statements are true and correct.
Section 7.2. Initial Advance. At or prior to the time of the initial
Borrowing under the Revolving Credit, the following conditions precedent shall
also have been satisfied:
(a) The Administrative Agent shall have received the following for
the account of the Lenders (each to be properly executed and completed) and
the same shall have been approved as to form and substance by the Lenders:
(i) this Agreement;
(ii) the Notes;
(iii) copies (executed or certified as may be appropriate)
for each Lender of the Articles of Incorporation and By-laws of the
Company and each Guarantor and of all legal documents or proceedings
taken in connection with the execution and delivery of the Loan
Documents to the extent the Administrative Agent or its counsel may
reasonably request, including, without limitation, resolutions of the
Board of Directors of each such corporation authorizing the execution,
delivery and performance of the Loan Documents to be executed by it
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and certificates as to the incumbency and authority of, and setting
forth a specimen signature of, each officer who is to sign any Loan
Document and request extensions of credit hereunder; and
(iv) the Administrative Agent shall have received evidence
that the Company shall have received a Moody's Rating of Baa3 or
higher or an S&P Rating of BBB- or higher.
(b) The Administrative Agent shall have received good standing
certificates for the Company and each Guarantor from the office of the
Secretary of the State in the state of its incorporation dated as of a date
no later than 30 days prior to the date hereof;
(c) The Administrative Agent shall have received for the account of
itself and the Lead Arrangers, Book Managers, and Syndication Agents and
Documentation Agent the fees referred to in Sections 4.2 and 4.3 hereof;
(d) The Administrative Agent and the Lenders shall have received
such information and agreements relating to the Company's purchase of the
Acquired Assets as they may reasonably request, including, without
limitation, copies of all indemnity agreements being entered into in favor
of the Company and relating to the Seller's and/or British Nuclear Fuels
PLC's indemnification of the Company and its Subsidiaries for
environmental, pension and nuclear fuel related liabilities, and the same
shall be in form and substance satisfactory to the Administrative Agent;
(e) The Administrative Agent have received pro forma financial
projections for the next five years satisfactory in form and substance to
the Administrative Agent;
(f) The Prior Credit Agreement shall have been terminated and all
amounts payable thereunder shall be paid in full or otherwise provided for
on or prior to the date hereof; and
(g) The Administrative Agent shall have received for the account of
the Lenders such other agreements, instruments, documents, certificates and
opinions as the Administrative Agent or the Required Lenders make
reasonably request.
Section 7.3. Legal Matters. Legal matters incident to the execution and
delivery of the Loan Documents and the other instruments and documents
contemplated hereby shall be satisfactory to the Administrative Agent and its
counsel, and the Lenders shall have received the favorable written opinions of
acceptable internal and outside counsel for the Company and each Guarantor
currently party to the Loan Documents, in form and substance satisfactory to the
Administrative Agent and its counsel, with respect to:
(a) the due organization and existence of the Company and each
Guarantor and the due licensing or qualification of the Company and each
Guarantor in all jurisdictions where the nature of the assets owned or
leased by them or business conducted by them requires such licensing or
qualification and in which the failure to be
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so licensed or qualified would materially and adversely affect the
business, properties or operations of the Company and its Subsidiaries
taken as a whole;
(b) the power and authority of the Company and each Guarantor to
enter into the Loan Documents and to perform and observe all the matters
and things herein and therein provided for and the fact that the execution
and delivery of the Loan Documents will not, nor will the observance or
performance of any of the matters or things therein or herein provided for,
contravene any provision of law or of the charter or by-laws of the Company
or any Guarantor or constitutes a material breach of or default under any
provision of any material covenant, indenture or agreement binding upon the
Company or any Guarantor or affecting any of their properties or assets;
(c) the due authorization for and the validity and enforceability of
the Loan Documents;
(d) the fact that no governmental authorization or consent is
required with respect to the lawful execution, delivery and performance of
the Loan Documents or, if any such consent is necessary, that the same been
obtained and is in full force and effect;
(e) the lack, to the knowledge of such counsel, of any legal or
administrative proceedings pending or threatened against, the Company or
any Guarantor which, if adversely determined, would result in a material
adverse change in the financial condition or properties, business or
operations of the Company and its Subsidiaries taken as a whole; and
(f) such other matters as the Administrative Agent or its counsel
may reasonably require.
Section 8. COVENANTS.
The Company agrees that, so long as any credit is available to or in use by
the Company hereunder, except to the extent compliance in any case or cases is
waived in writing by the Required Lenders:
Section 8.1. Maintenance of Business. The Company will, and will cause each
Subsidiary to, preserve and keep in force and effect all licenses and permits
necessary to the proper conduct of their respective businesses expect where the
failure to do so would not result in a Material Adverse Effect.
Section 8.2. Maintenance. The Company will, and will cause each Subsidiary
to, maintain, preserve and keep their plant, properties and equipment (other
than obsolete or worn out equipment held for sale or disposition) in good
repair, working order and condition (ordinary wear and tear excepted) and the
Company will, and will cause each Subsidiary to, from time to time make all
needful and proper repairs, renewals, replacements, additions and betterments
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thereto so that at all times the efficiency thereof shall be substantially
preserved and maintained, in each case where the failure to do so is
reasonably likely to have a Material Adverse Effect.
Section 8.3. Taxes. The Company will, and will cause each Subsidiary
to, duly pay and discharge all taxes, rates, assessments, fees and governmental
charges upon or against any of them or against their respective Properties, in
each case before the same become delinquent and before penalties accrue thereon,
unless and to the extent that the same are being contested in good faith and by
appropriate proceedings, in each case where the failure to do so is reasonably
likely to have a Material Adverse Effect.
Section 8.4. Insurance. The Company will, and will cause each Subsidiary
to, insure and keep insured, in good and responsible insurance companies, all
insurable property owned by them which is of a character usually insured by
companies similarly situated and operating like properties; and the Company
will, and will cause each Subsidiary to, insure such other hazards and risks
(including employers' and public liability risks) in good and responsible
insurance companies as and to the extent usually insured by companies similarly
situated and conducting similar businesses. The Company will upon request of the
Administrative Agent furnish a certificate setting forth in summary form the
nature and extent of the insurance maintained pursuant to this Section.
Section 8.5. Financial Reports. The Company will, and will cause each
Subsidiary to, maintain a standard and modern system of accounting in accordance
with sound accounting practice and will furnish to the Lenders and their duly
authorized representatives such information respecting the business and
financial condition of the Company and its Subsidiaries as the Administrative
Agent may reasonably request; and without any request, will furnish to the
Lenders:
(a) within 45 days after the close of each quarterly fiscal period
of the Company (except the last such period in each fiscal year), (i) a
copy of the balance sheet, statement of earnings and statement of changes
in cash flow of the Company and its Subsidiaries for such period, prepared
on a consolidated basis in accordance with GAAP, and the notes thereto, and
(ii) a copy of the balance sheet, statement of earnings and statement of
changes in cash flows of the GESCO Subsidiaries for such period, prepared
in accordance with GAAP with sufficient detail to enable the Lenders to
compute the financial covenants provided for in this Agreement, all
certified to by the Company's chief financial officer or such other officer
of the Company reasonably acceptable to the Administrative Agent;
(b) within 90 days after the close of each fiscal year of the
Company, (i) a copy of the audit report for such year and accompanying
financial statements, including balance sheet, statement of earnings and
statement of cash flow on a consolidated and consolidating basis for the
Company and its Subsidiaries in accordance with GAAP, and the notes
thereto, with the consolidated statements certified by independent public
accountants of recognized standing selected by the Company and satisfactory
to the Required Lenders and (ii) a copy of the balance sheet, statement of
earnings and statement of changes in cash flows of the GESCO Subsidiaries
for such period, prepared
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in accordance with GAAP with sufficient detail (and, if available, the
notes thereto) to enable the Lenders to compute the financial covenants
provided for in this Agreement, certified to by the Company's chief
financial officer or such other officer of the Company reasonably
acceptable to the Administrative Agent;
(c) within the periods provided in paragraphs (a) and (b) above, a
certificate of an authorized financial officer of the Company stating that
such officer has reviewed the provisions of this Agreement and setting
forth: (aa) the information and computations (in sufficient detail)
required in order to compute the Leverage Ratio and to establish whether
the Company was in compliance with the requirements of Sections 5.1,
8.10(l), 8.10(m), 8.11, 8.21, 8.22 and 8.23 hereof at the end of the period
covered by the financial statements then being furnished, and (ab) to the
best such officer's knowledge, whether there exists on the date of the
certificate or existed at any time during the period covered by such
financial statement any Default or Event of Default and, if any such
condition or event exists on the date of the certificate or existed during
such period, specifying the nature and period of existence thereof and the
action the Company is taking, has taken or proposes to take with respect
thereto;
(d) promptly upon the filing thereof, copies of all registration
statements, Form 10-K, Form 10-Q and Form 8-K reports and proxy statements
which the Company or any of its Subsidiaries file with the Securities and
Exchange Commission; and
(e) promptly after knowledge thereof shall have come to the attention
of any responsible officer of the Company, written notice of any threatened
or pending litigation or governmental proceeding or assessment against the
Company or any Subsidiary which is reasonably like to have a Material
Adverse Effect or of any Event of Default.
The Company will, and will cause each Subsidiary to, permit representatives
of any Lender, upon reasonable notice and during normal business hours, to
examine and make extracts from the books and records of the Company and its
Subsidiaries and to examine their assets and access thereto shall be permitted
for such purpose. The Administrative Agent and each Lender agree to maintain in
confidence and not disclose to any Person any non-public information relating to
the Company or its Subsidiaries made available to the Administrative Agent or
such Lenders pursuant to this Section 8.5; provided that the Administrative
Agent and each Lender may make such disclosures as are permitted by Section
12.16 hereof or as shall be required by law or to such Person's auditors or
legal counsel who the Administrative Agent or such Lender, as applicable, agrees
will maintain the information so disclosed in confidence. Upon notice from the
Company, the Administrative Agent and the Lenders shall take such steps as may
be reasonably requested by the Company to enable the Company or any Subsidiary
to comply with the Foreign Ownership Control or Influence requirements of the
United States Government imposed from time to time, provided that (i) nothing
herein shall obligate the Administrative Agent or any Lender to take any action
which would adversely affect the validity or enforceability of any of the Loan
Documents or any rights or remedies of the Administrative Agent or the Lenders
thereunder or of the Company's or any Guarantor's obligations thereunder and
(ii) neither the Administrative Agent nor any Lender shall be liable to the
Company or any
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Subsidiary as a result of any act or failure to act hereunder taken or omitted
to be taken in good faith.
Section 8.6. Compliance with Laws. The Company will, and will cause each
Subsidiary to, comply with all laws, ordinances or governmental rules and
regulations to which they are subject, including, without limitation, the
Occupational Safety and Health Act of 1970, as amended, ERISA, and all laws,
ordinances, governmental rules and regulations relating to environmental
protection in all applicable jurisdictions, the violation of which is reasonably
likely to have a Material Adverse Effect or could reasonably be expected to
result in any lien or charge upon any Property of the Company or any Subsidiary
which is not a Permitted Lien.
Section 8.7. Nature of Business. The Company will not, nor will it permit
any Subsidiary to, engage in any business or activity if, as a result, the
general nature of the business which would then be engaged in by the Company and
its Subsidiaries taken as a whole would be substantially changed from Eligible
Lines of Business existing as of the date of this Agreement.
Section 8.8. Liens. The Company will not, nor will it permit any Restr
icted Subsidiary to, pledge, mortgage or otherwise encumber or subject to, or
permit to exist upon or be subjected to, any lien, security interest or charge
upon, any assets or property of any kind or character at any time owned by the
Company or any Restricted Subsidiary; provided, however, that nothing in this
Section contained shall operate to prevent any of the following (collectively,
"Permitted Liens"):
(a) liens, pledges or deposits in connection with workmen's
compensation, unemployment insurance, social security obligations, taxes,
assessments, statutory obligations or other similar charges (other than
liens arising under ERISA), good faith deposits in connection with tenders,
contracts or leases to which the Company or any of its Restricted
Subsidiaries is a party or other deposits required to be made in the
ordinary course of business and not in connection with borrowing money or
obtaining advances or credit; provided in each case that the obligation or
liability arises in the ordinary course of business and is not overdue, or
if overdue, is being contested in good faith by appropriate proceedings
which prevent enforcement of the matter under contest and adequate reserves
have been established therefor to the extent required by GAAP;
(b) inchoate statutory, construction, common carrier's, materialmen's,
landlord's, warehousemen's, mechanics, producers' or operator's liens
securing obligations not overdue, or if overdue, being contested in good
faith by appropriate proceedings which prevent enforcement of the matter
under contest and adequate reserves have been established therefor to the
extent required by GAAP;
(c) liens given to secure the payment of the purchase price or the
financing thereof incurred in connection with the acquisition of fixed
assets, including liens existing on such assets at the time of acquisition
thereof, provided that (i) the lien shall attach solely to the property
acquired or purchased and (ii) the indebtedness secured by such lien does
not exceed 100% of the lesser of the cost or fair value of the property
financed;
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(d) attachment or judgment liens individually or in the aggregate
not in excess of $1,000,000 (exclusive of (i) any amounts that are duly
bonded to the reasonable satisfaction of the Administrative Agent or (ii)
any amount adequately covered by insurance as to which the insurance
company has not disclaimed or disputed in writing its obligations for
coverage or has not otherwise failed to pay when due);
(e) liens for taxes, assessments or other governmental charges not
yet due and payable or which are being diligently contested in good faith
by the Company or its applicable Restricted Subsidiary by appropriate
proceedings, provided that in any such case an adequate reserve is being
maintained by the Company or such Restricted Subsidiary for the payment of
same;
(f) deposits or pledges to secure bids, tenders, contracts (other
than contracts for the payment of money), leases, statutory obligations,
surety and appeal bonds and other obligations of like nature arising in the
ordinary course of business;
(g) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not materially
detract from the value of the property subject thereto or materially
interfere with the ordinary conduct of the business of the Company or any
Restricted Subsidiary;
(h) liens on assets owned by newly acquired Subsidiaries who become
Restricted Subsidiaries hereunder existing at the time of acquisition and
not incurred in contemplation of such acquisition;
(i) liens described on Schedule 8.8 attached hereto, encumbering the
assets noted thereon opposite the description of the indebtedness or
obligation secured thereby;
(j) liens securing indebtedness permitted by Section 8.9 hereof not
to exceed $5,000,000 in the aggregate at any time; and
(k) extensions and renewals of the foregoing Permitted Liens,
provided that the aggregate amount of such liabilities secured by such
extended or renewed lien is not increased and such extended or renewed
liabilities secured by such lien are on terms and conditions no more
restrictive than the terms and conditions of the same being extended or
renewed.
Section 8.9. Indebtedness. The Company will not, nor will it permit any
Restricted Subsidiary to, issue, incur, assume, create, or have outstanding any
indebtedness for borrowed money (including as such for all purposes of this
Agreement any indebtedness representing the deferred purchase price of property
(accounts payable for the purchase of goods on ordinary trade terms shall not be
deemed indebtedness for the deferred purchase price of property for purposes of
this Agreement), any liability in respect to banker's acceptances, any
indebtedness, whether or not assumed, secured by liens on property acquired by
the Company or any Restricted Subsidiary existing at the time of the acquisition
thereof, and the liability of the Company or any Restricted
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Subsidiary under any lease which should be capitalized under GAAP); provided,
however, that the foregoing provisions shall not restrict nor operate to
prevent:
(a) with respect to the Company and the Guarantors, so long as the
Company has and retains a Moody's Rating of Baa3 or higher or an S&P Rating
of BBB- or higher:
(i) any and all indebtedness owing to the Issuing Banks and
the Lenders under the Loan Documents;
(ii) indebtedness described on Schedule 8.9 attached hereto;
and
(iii) any and all other indebtedness so long as at the time of,
and after giving effect to, the incurrence of any such indebtedness no
Default or Event of Default exists;
(b) with respect to the Company and the Guarantors, at any time when
clause (a) above is not in effect:
(i) any and all indebtedness owing to the Issuing Banks and
the Lenders under the Loan Documents;
(ii) purchase money indebtedness;
(iii) indebtedness described on Schedule 8.9 attached hereto;
(iv) indebtedness arising from the issuance of letters of
credit in the ordinary course of business;
(v) indebtedness issued in accordance with clause (a) above
outstanding at the time when clause (a) is no longer in effect as
reduced from time to time by payments made thereon; and
(vi) additional indebtedness not otherwise permitted by this
clause (b) in an aggregate amount not to exceed $50,000,000 at any one
time outstanding, provided that such amount shall be reduced (but not
below zero) dollar-for-dollar by the amount of indebtedness permitted
under clause (b)(v) above which exceeds $150,000,000;
(c) with respect to any Restricted Subsidiaries that are not
Guarantors:
(i) purchase money indebtedness;
(ii) indebtedness of any Restricted Subsidiary owing to the
Company or any other Subsidiary arising in the ordinary course of
business;
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(iii) indebtedness of any newly-acquired Restricted Subsidiary
existing at the time of the acquisition and not incurred in
contemplation of such acquisition;
(iv) indebtedness described on Schedule 8.9 attached hereto;
(v) indebtedness arising from the issuance of letters of
credit in the ordinary course of business;
(vi) Non-Recourse Debt of any Restricted Subsidiary; and
(vii) indebtedness not otherwise permitted by this clause (c)
aggregating not more than $10,000,000 at any one time outstanding.
Section 8.10. Acquisitions, Investments, Loans, Advances and Guarantees.
The Company will not, nor will it permit any Restricted Subsidiary to, directly
or indirectly, make, retain or have outstanding any interest or investments
(whether through purchase of stock or obligations or otherwise) in, or loans or
advances to, any other Person, or acquire all or any substantial part of the
assets or business of any other Person, or guarantee any indebtedness,
obligation or liability of any other Person or otherwise enter into any
arrangement designed to assure another Person against loss or subordinate any
claim or demand it may have to the claim or demand of any other Person;
provided, however, that the foregoing provisions shall not apply to nor operate
to prevent:
(a) investments by the Company or any Restricted Subsidiary in direct
obligations of the United States of America or of any agency or
instrumentality thereof whose obligations constitute full faith and credit
obligations of the United States of America, provided that any such
obligations shall mature within fifteen months from the date the same are
acquired by the Company or such Restricted Subsidiary;
(b) investments by the Company or any Restricted Subsidiary in
certificates of deposit or time deposits issued by any Lender, or by any
United States commercial bank having capital and surplus of not less than
$100,000,000 and having a maturity of fifteen months or less;
(c) investments by the Company or any Restricted Subsidiary in
commercial paper maturing 270 days or less from the date of issuance which
at the time of acquisition is rated A-2 or better by Standard & Poor's
Ratings Services Group, a division of The McGraw-Hill Companies, Inc., and
P-2 or better by Moody's Investors Service, Inc.;
(d) investments by the Company or any Restricted Subsidiary in debt
securities issued by U.S. corporations or states of the United States
maturing within fifteen months from the date of acquisition thereof if at
the time of acquisition the investment in question has a rating of not less
than BBB from Standard & Poor's Ratings Services Group, a division of The
McGraw-Hill Companies, Inc. and/or Baa2 from Moody's Investors Services,
Inc.;
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(e) investments by the Company or any Restricted Subsidiary in
preferred stock of any corporation organized under the laws of any state of
the United States which is subject to a remarketing undertaking at
intervals not exceeding fifteen months issued by any substantial broker and
which is rated BBB or better by Standard & Poor's Ratings Services Group, a
division of The McGraw-Hill Companies, Inc. and/or Baa2 or better by
Moody's Investors Services, Inc.;
(f) the Company's acquisition of the Acquired Assets on or about the
date hereof in accordance with the terms and conditions described by the
Company in its Rating Agency Presentation dated January 1999, and other
Acquisitions with respect to which all of the following conditions have
been satisfied: (i) the Acquisition is not a Hostile Acquisition, (ii) not
less than 66 2/3% of both (i) the assets or (ii) historical Earnings Before
Interest, Taxes, Depreciation and Amortization (computed for the Acquired
Business) for the most recently completed fiscal year of the Acquired
Business arise out of an Eligible Line of Business, (iii) after giving
effect to the Acquisition, no Default or Event of Default shall exists,
including with respect to the financial covenants contained in Section 8 of
this Agreement on a pro forma basis, and (iv) if the Total Consideration
paid in connection with the Acquisition equals or exceeds $50,000,000, then
prior to consummating any such Acquisition the Company shall have notified
the Administrative Agent and the Lenders in writing of the proposed
Acquisition in reasonable detail (including sources and uses of funds
therefor) and furnished to the Administrative Agent and the Lenders
historic and pro forma financial information and compliance calculations
reasonably satisfactory to the Required Lenders demonstrating no Default or
Event of Default exists or, on a pro forma basis, would occur after giving
effect to such transaction;
(g) ordinary course of business investments in, directly or
indirectly, joint ventures with other Persons formed to provide services in
an Eligible Line of Business and loans and guaranties (made ratably with
the other venturers) to such joint ventures;
(h) investments in, and loans and advances to, Restricted
Subsidiaries;
(i) one or more unsecured guaranties issued by the Company or any
Restricted Subsidiary guaranteeing indebtedness and obligations of Blue
Diamond outstanding from time to time in an aggregate principal not to
exceed $6,000,000 at any one time;
(j) the guaranties issued by the Guarantors pursuant to Section 11
hereof in favor of the Administrative Agent and the Lenders;
(k) investments held by any Restricted Subsidiary acquired after the
date of this Agreement existing at the time of its acquisition by the
Company or other existing Restricted Subsidiary and not acquired by such
Restricted Subsidiary in contemplation of such acquisition;
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(l) existing investments in, loans and advances to, and guaranties of
the obligations of, Unrestricted Subsidiaries (excluding the GESCO
Subsidiaries) and other Persons (other than Subsidiaries) that are engaged
in an Eligible Line of Business and which investments, loans, advances and
guaranties are disclosed on Schedule 8.10(l) attached hereto and made a
part hereof; and additional investments in, loans and advances to, and
guaranties of the obligations of, Unrestricted Subsidiaries (excluding the
GESCO Subsidiaries except as provided in Section 8.10(m) below) and other
Persons (other than Subsidiaries) that are engaged in an Eligible Line of
Business not so disclosed on Schedule 8.10(l) provided that at the time of
making any such additional investment, loan, advance or guaranty the
aggregate amount of such additional investments, loans, advances, and
guaranties, when taken together with the aggregate amount of Restricted
Payments made after the date hereof, does not exceed the sum of (i)
$75,000,000, plus (ii) 75% of the net cash proceeds received by the Company
after the date hereof in connection with the sale of any of its capital
stock, plus (iii) 100% of the net cash proceeds received by the Company
after the date hereof in connection with the exercise of its convertible
warrants outstanding on the date hereof, plus (or minus) (iv) 50% of
Consolidated Net Income for the period from the date hereof through the
date of the making of the relevant investment, loan, advance, or guaranty
(measured as a single accounting period);
(m) existing investments in the GESCO Subsidiaries disclosed on
Schedule 8.10(m) attached hereto; and additional investments in, and short-
term loans and advances made by the Company in the ordinary course of its
business to finance the working capital requirements of, the GESCO
Subsidiaries, provided that (i) additional investments made after the date
hereof by the Company in the GESCO Subsidiaries shall not exceed
$30,000,000 in the aggregate during the term of this Agreement and (ii)
additional investments made by the Company in, and short-term working
capital loans and advances made by the Company in the ordinary course of
its business to, the GESCO Subsidiaries shall not exceed $30,000,000 in the
aggregate at any one time outstanding, except for such amounts in excess
thereof which constitute short-term working capital loans and advances made
by the Company in the ordinary course of its business to the GESCO
Subsidiaries which are included in, and otherwise count against the limits
provided for in, Section 8.10(l) above and the Company is in compliance
with Section 8.10(l) after giving effect to any such loan or advance;
(n) guaranties not otherwise permitted above existing on the date
hereof described on, and supporting the obligations set forth on, Schedule
8.10(n) hereof;
(o) performance guaranties supporting performance obligations of
Subsidiaries arising under contracts in Eligible Lines of Business; and
(p) other investments in, loans and advances to, and guaranties of
the obligations of Persons (other than Subsidiaries) not otherwise
permitted by this Section aggregating not more than $2,500,000 at any one
time outstanding.
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In determining the amount of investments, loans and advances permitted under
this Section, investments shall always be taken at the original cost thereof,
regardless of any subsequent appreciation (including retained earnings) or
depreciation therein, and loans and advances shall be taken at the principal
amount thereof then remaining unpaid.
Section 8.11. Dividends and Certain Other Restricted Payments. The Company
will not declare or pay any dividends on any class of its capital stock (other
than dividends payable solely in its capital stock) or directly or indirectly
purchase, redeem or otherwise acquire or retire any of its capital stock (each a
"Restricted Payment" and collectively the "Restricted Payments"); provided that
the Company may make Restricted Payments so long as (a) no Default or Event of
Default then exists or would arise after giving effect thereto and (b) the
amount of Restricted Payments, when taken together with the aggregate amount of
Restricted Payments previously paid during the term of this Agreement, shall not
exceed the sum of (i) $25,000,000, plus (ii) 50% of the net cash proceeds
received by the Company after the date hereof in connection with the sale of any
of its capital stock, plus (iii) 100% of the net cash proceeds received by the
Company after the date hereof in connection with the exercise of its convertible
warrants outstanding on the date hereof, plus (or minus) (iv) 25% of
Consolidated Net Income for the period from the date hereof through the date of
the payment of any such Restricted Payment (measured as a single accounting
period).
Section 8.12. Mergers. The Company will not, nor will it permit any
Restricted Subsidiary to, consolidate or be a party to a merger with any other
Person, except that so long as no Default or Event of Default has occurred and
is continuing or would arise as a result thereof (i) any Restricted Subsidiary
of the Company may merge with and into the Company if the Company is the
surviving corporation and (ii) the Company or any Restricted Subsidiary may
engage in a merger with another Person if the Company or such Restricted
Subsidiary is the surviving corporation.
Section 8.13. Sale of Assets. The Company will not, nor will it permit any
Restricted Subsidiary to, sell, lease or otherwise dispose of all or any
substantial part of its Property or assets (including any disposition of
property as part of a sale and leaseback transaction, but excluding the leasing
of Property by WCG Leasing, Inc., a Montana corporation, made in the ordinary
course of its business) or in any event sell or discount, with or without
recourse, any of its notes or accounts receivable; provided, that nothing
contained therein shall prohibit (i) sales of inventory in the ordinary course
of business; (ii) sales or dispositions of obsolete or worn out property
disposed of in the ordinary course of business; (iii) sales of the assets of or
equity interests in Pomeroy Corporation and Blue Diamond, and the assets of
National Projects, Inc. constituting its Pro Builders division; and (iv) sales
of other assets with a book value of less than $15,000,000 in the aggregate
during any fiscal year.
Section 8.14. Burdensome Contracts with Affiliates. The Company will not,
nor will it permit any Restricted Subsidiary to, enter into or be a party to any
contract or agreement with an Affiliate on terms and conditions materially less
favorable to the Company or such Restricted Subsidiary than would be usual and
customary in similar contracts or agreements between Persons not affiliated with
each other .
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Section 8.15. No Change in Fiscal Year. The Company will not, nor will it
permit any Restricted Subsidiary to, change its fiscal year, provided that the
Lenders shall not unreasonably withhold their consent to such a change if in
connection therewith the provisions of this Agreement measuring covenant
compliance with reference to fiscal periods are renegotiated in a manner
reasonably acceptable to them.
Section 8.16. Maintenance of Material Subsidiaries. The Company will not,
nor will it permit any Subsidiary to, directly or indirectly, sell, transfer, or
otherwise dispose of its equity interest in any Material Subsidiary.
Section 8.17. No Restriction on Subsidiary Dividends. Neither the Company
nor any Subsidiary (excluding majority-owned joint ventures referred to in
Section 8.10(g) hereof) is a party to, nor will the Company or any Subsidiary
(excluding majority-owned joint ventures referred to in Section 8.10(g) hereof)
become a party to, any agreement prohibiting or otherwise restricting the
declaration or payment of any dividends by any such Subsidiary.
Section 8.18. Year 2000 Assessment. The information contained in this
Section 8.18 is a Year 2000 Readiness Disclosure. The Company will take all
actions it deems necessary and commit resources it deems adequate to assure that
its electronic information and communication systems (and those of all
Subsidiaries) are able to effectively process dates, including dates before, on
and after January 1, 2000 without experiencing any Year 2000 Problem that could
reasonably be expected to cause a Material Adverse Effect. At the request of the
Administrative Agent, the Company will provide the Lenders with written
assurances and substantiations (including, but not limited to, the results of
internal or external audit reports otherwise prepared in the ordinary course of
business) reasonably acceptable to the Administrative Agent as to the capability
of the Company and its Subsidiaries to conduct its and their businesses and
operations before, on and after January 1, 2000, without experiencing a Year
2000 Problem causing a Material Adverse Effect. Without request, the Company
will provide the Administrative Agent and the Lenders a status report of its
current Year 2000 Problems and a summary of its implementation plan and timeline
therefor no later than June 30, 1999. The Company will promptly notify the
Administrative Agent and the Lenders in the event the Company discovers or
determines that any other Year 2000 Problem exists with respect to any computer
application (including those of its suppliers and vendors) that could reasonably
be expected to have a Material Adverse Effect.
Section 8.19. Use of Loan Proceeds. The Company will use the credit
extended under this Agreement solely for the purposes set forth in, or otherwise
permitted by, Section 6.3 hereof.
Section 8.20. Senior Debt. The Company will at all times ensure that (a)
the claims of the Lenders in respect of the Obligations of the Company and the
Guaranteed Obligations of the Guarantors will not be subordinate to, and will in
all respects at least rank pari passu with, the claims of every other senior
unsecured creditor of the Company and the relevant Guarantor, and (b) any
indebtedness subordinated in any manner to the claims of any other senior
unsecured creditor of the Company or the relevant Guarantor will be subordinated
in a like manner to such claims of the Lenders.
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Section 8.21. Consolidated Debt/Total Capital Ratio. As of the last day of
each fiscal quarter of the Company, the Company shall maintain the ratio of
Consolidated Total Indebtedness to Consolidated Total Capital at not more than
.5 to 1.0.
Section 8.22. Leverage Ratio. As of the last day of each fiscal quarter of
the Company ending during the periods specified below, the Company shall not
permit the Leverage Ratio to be more than:
Leverage Ratio Shall
From and Including To and Including more than:
The date hereof November 30, 2000 3.5 to 1.0
December 1, 2000 and at all times thereafter 3.25 to 1.0
Section 8.23. Fixed Charge Coverage Ratio. As of the last day of each
fiscal quarter of the Company ending during the periods specified below, the
Company shall not permit the ratio of (a) the difference of (i) Earnings Before
Interest, Taxes, Depreciation and Amortization for the four most recently
completed fiscal quarters of the Company, minus (ii) Capital Expenditures of the
Company and its Subsidiaries (excluding Capital Expenditures of the GESCO
Subsidiaries) during the same four fiscal quarters to (b) Fixed Charges for the
same four fiscal quarters then ended (the "Fixed Charge Coverage Ratio") to be
less than:
Fixed Charge Coverage Ratio
From and Including To and Including Shall not be less than:
The date hereof November 30, 1999 1.75 to 1.0
December 1, 1999 and at all times thereafter 2.00 to 1.0
; provided, however, for any fiscal quarter ending on or after December 1, 1999,
so long as the Company has a Moody's Rating of Baa3 or higher or an S&P Rating
of BBB- or higher, then the required Fixed Charge Coverage Ratio for the period
then ended shall be reduced to 1.75 to 1.0.
Section 8.24. Hazardous Materials Risk Management. The Company will, and
will cause each Subsidiary to, assess and manage on an on-going basis the risks
associated with the handling of Hazardous Materials in the ordinary course of
business in a manner consistent with prudent business practices and similar to
companies similarly situated and operating like businesses.
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Section 9. Events of Default and Remedies.
Section 9.1. Any one or more of the following shall constitute an "Event
of Default" hereunder:
(a) default in the payment when due of any principal on any Note
or Application, whether at the stated maturity thereof or at any other time
provided for in this Agreement; or default in the payment when due of any
interest on any Note or Application or fee, charge or other amount payable
by the Company hereunder or under any other Loan Document and the
continuance of such default for 2 Business Days after notice thereof to the
Company from the Administrative Agent or any Lender;
(b) default in the observance or performance of any covenant set
forth in Sections 8.10, 8.11, 8.12 or 8.13 hereof;
(c) default in the observance or performance of any other
provision hereof or any of the other Loan Documents which is not remedied
within 20 days after written notice thereof to the Company by the
Administrative Agent or any Lender or by the holder of any Note;
(d) default shall occur in the payment when due (whether by
lapse of time, acceleration or otherwise) of any indebtedness (including as
such all obligations included in Consolidated Total Indebtedness as such
term is defined herein) aggregating in excess of $10,000,000 issued,
assumed or guaranteed by the Company or any Subsidiary or any other event
of default shall occur with respect to any such indebtedness beyond any
period of grace provided therefor if the effect thereof is to permit the
maturity of such indebtedness to be accelerated or to permit the holders
thereof to elect a majority of the Board of Directors of the Company;
(e) any representation or warranty made herein or in any of the
other Loan Documents or in any statement or certificate furnished pursuant
hereto or thereto, or in connection with any advance or issuance made
hereunder or by any person in connection with the transactions contemplated
hereby, proves untrue in any material respect as of the date of the
issuance or making thereof, and shall not be made good within 30 days after
notice thereof to the Company by the Administrative Agent;
(f) any judgment or judgments, writ or writs or warrant or
warrants or attachment, or any similar process or processes in an aggregate
amount in excess of $15,000,000 more than the amount, if any, covered by
insurance (as to which the insurer has not disclaimed or disputed in
writing its obligations for coverage or otherwise failed to pay when due)
shall be entered or filed against the Company or any Subsidiary or against
any of the property or assets of any of them and remains undischarged,
unvacated, unbonded or unstayed for a period of 30 days;
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(g) any event occurs or condition exists which is specified as
an event of default under any of the other Loan Documents after the
expiration of any applicable notice or grace periods;
(h) any of the Loan Documents shall for any reason not be or
shall cease to be in full force and effect, or any of the Loan Documents is
declared to be null and void, or the Company or any Guarantor takes any
action for the purpose of repudiating or rescinding any Loan Document
executed by it or the obligations of such Person thereunder;
(i) 50% or more of the issued and outstanding Voting Stock of
the Company is owned or controlled, either legally or beneficially, by any
Person or by any group of Persons affiliated with each other or acting in
concert (Persons shall not be deemed to have acted in concert merely as a
result of voting the same way or taking the same position if the decision
to vote or to take a position were made independently and without prior
consultation) other than Dennis R. Washington and/or his wife and/or his
descendants and/or trusts or estates for the benefit of his wife and/or
descendants;
(j) the Company or any Material Subsidiary or any Material
Foreign Subsidiary becomes insolvent or bankrupt or bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or other
proceedings for relief under any bankruptcy law or laws for the relief of
debtors are instituted against the Company or any Material Subsidiary or
any Material Foreign Subsidiary and are not dismissed within 60 days after
such institution or a decree or order of a court having jurisdiction in the
premises for the appointment of a trustee or receiver or custodian for the
Company or any Material Subsidiary or any Material Foreign Subsidiary or
for the major part of any of their property is entered and the trustee or
receiver or custodian appointed pursuant to such decree or order is not
discharged within 60 days after such appointment; or
(k) the Company or any Material Subsidiary or any Material
Foreign Subsidiary shall institute bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings or other proceedings for relief under
any bankruptcy law or laws for the relief of debtors or shall consent to
the institution of such proceedings against it by others or to the entry of
any decree or order adjudging it bankrupt or insolvent or approving as
filed any petition seeking reorganization under any bankruptcy or similar
law or shall apply for or shall consent to the appointment of a receiver or
trustee or custodian for it or for the major part of its property or shall
make an assignment for the benefit of creditors or shall admit in writing
its inability to pay its debts as they mature or shall take any corporate
action in contemplation or in furtherance of any of the foregoing purposes;
or
(l) any event occurs or condition exists which is specified as
an "Event of Default" under the Five-Year Credit Agreement.
Section 9.2. When any Event of Default described in subsections 9.1(a) to
9.1(i), both inclusive, or subsection 9.1(l) has occurred and is continuing, the
Administrative Agent may (and
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shall, upon request of the Required Lenders), by notice to the Company, take any
or all of the following actions:
(a) terminate the obligation of the Lenders to extend any further
credit hereunder on the date (which may be the date thereof) stated in such
notice (such termination shall be effective upon verbal notification, the
Administrative Agent hereby agreeing to provide written notification
thereof to the Company as soon as practical thereafter);
(b) declare the principal of and the accrued interest on the Notes to
be forthwith due and payable and thereupon the Notes, including both
principal and interest, and all fees, charges, commissions and other
Obligations payable under the Loan Documents, shall be and become
immediately due and payable without further demand, presentment, protest or
notice of any kind; and
(c) enforce any and all rights and remedies available under the Loan
Documents or applicable law.
Section 9.3. When any Event of Default described in subsections 9.1(j) or
(k) has occurred and is continuing, then (a) the then unpaid balance of the
Notes, including both principal and interest, and all fees, charges, commissions
and other Obligations payable under the Loan Documents, shall immediately become
due and payable without presentment, demand, protest or notice of any kind, (b)
the obligation of the Lenders to extend further credit pursuant to any of the
terms hereof shall immediately and automatically terminate, and (c) the
Administrative Agent may exercise all remedies available to it under the Loan
Documents or applicable law.
SECTION 10. THE ADMINISTRATIVE AGENT AND ISSUING BANKS.
Section 10.1. Appointment and Authorization. Each Lender hereby appoints
and authorizes the Administrative Agent to take such action as agent on its
behalf and to exercise such powers hereunder and under the Loan Documents as are
designated to the Administrative Agent by the terms hereof and thereof together
with such powers as are reasonably incidental thereto. The Lenders expressly
agree that the Administrative Agent is not acting as a fiduciary of the Lenders
in respect of the Loan Documents, the Company or otherwise, and nothing herein
or in any of the other Loan Documents shall result in any duties or obligations
on the Administrative Agent or any Lenders except as expressly set forth herein.
The Administrative Agent may resign at any time by sending 20 days prior written
notice to the Company and the Lenders and may be removed by the Required Lenders
upon 20 days prior written notice to the Company and the Lenders. In the event
of any such resignation or removal the Required Lenders may appoint a new agent,
which shall succeed to all the rights, powers and duties of the Administrative
Agent hereunder and under the Loan Documents, such new Administrative Agent to
be subject to the reasonable consent of the Company unless a Default or Event of
Default has occurred and is continuing. Any resigning or removed Administrative
Agent shall be entitled to the benefit of all the protective provisions hereof
with respect to its acts as an agent hereunder, but no successor Administrative
Agent shall in any event be liable or responsible for any actions
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of its predecessor. If the Administrative Agent resigns or is removed and no
successor is appointed, the rights and obligations of such Administrative Agent
shall be automatically assumed by the Required Lenders and (i) the Company shall
be directed to make all payments due each Lender hereunder directly to such
Lender and (ii) the Administrative Agent's rights in the Loan Documents shall be
assigned without representation, recourse or warranty to the Lenders as their
interests may appear.
Section 10.2. Rights as a Lender. The Administrative Agent has and
reserves all of the rights, powers and duties hereunder and under the other Loan
Documents as any Lender may have and may exercise the same as though it were not
the Administrative Agent and the terms "Lender" or "Lenders" as used herein and
in all of such documents shall, unless the context otherwise expressly
indicates, include the Administrative Agent in its individual capacity as a
Lender. The Administrative Agent reserves the right to engage in other business
transactions with the Company, the Subsidiaries and their Affiliates.
Section 10.3. Standard of Care. The Lenders acknowledge that they have
received and approved copies of the Loan Documents, and such other information
and documents concerning the transactions contemplated and financed hereby as
they have requested to receive and/or review. The Administrative Agent makes no
representations or warranties of any kind or character to the Lenders with
respect to the validity, enforceability, genuineness, perfection, value, worth
or collectibility hereof or of the other Loan Documents or of the liens, if any,
provided for thereby or of any other documents called for hereby or thereby or
of the collateral, if any. The Administrative Agent need not verify the worth or
existence of any collateral, or any other Property, and may rely exclusively on
reports provided by the Company. The Lenders agree that neither the
Administrative Agent nor any director, officer employee, agent or representative
thereof (including any security trustee therefor) shall in any event be liable
for any clerical errors or errors in judgment, inadvertence or oversight, or for
action taken or omitted to be taken by it or them hereunder or under the Loan
Documents or in connection herewith or therewith except for its or their own
gross negligence or willful misconduct. The Administrative Agent shall incur no
liability under or in respect of this Agreement or the other Loan Documents by
acting upon any notice, certificate, warranty, instruction or statement (oral or
written) of anyone (including anyone in good faith believed by it to be
authorized to act on behalf of the Company), unless it has actual knowledge of
the untruthfulness of same. The Administrative Agent agrees to use the same care
in protecting the interests of the Lenders in the Loans as it uses for similar
loans or extensions of credit held by it solely for its own account. The
Administrative Agent shall be entitled to assume that no Default or Event of
Default exists, absent actual knowledge thereof, unless notified to the contrary
by a Lender. The Administrative Agent shall in all events be fully protected in
acting or failing to act in accord with the instructions of the Required
Lenders. Upon the occurrence of an Event of Default hereunder, the
Administrative Agent shall take such action with respect to the enforcement of
its rights and remedies hereunder and under any collateral and the preservation
and protection thereof as it shall be directed to take by the Required Lenders
(and shall consult with the Lenders as to actions to be taken) but unless and
until the Required Lenders have given such direction the Administrative Agent
shall take or refrain from taking such actions as it deems appropriate and in
the best of interest of all Lenders. The Administrative Agent shall in all cases
be fully justified in failing or refusing to act hereunder unless it shall be
indemnified to its reasonable satisfaction by the Lenders against any
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and all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Administrative Agent may treat the owner
of any Note as the holder thereof until written notice of transfer shall have
been filed with it as provided in Section 12.12 hereof signed by such owner in
form satisfactory to the Administrative Agent. Each Lender acknowledges that it
has independently and without reliance on the Administrative Agent or any other
Lender and based upon such information, investigations and inquiries as it deems
appropriate made its own credit analysis and decision to extend credit to the
Company. It shall be the responsibility of each Lender to keep itself informed
as to the creditworthiness of the Company and each Subsidiary and the
Administrative Agent shall have no liability to any Lender with respect thereto.
Section 10.4. Costs and Expenses. Each Lender agrees to reimburse the
Administrative Agent for all out-of-pocket costs and expenses suffered or
incurred by the Administrative Agent or any security trustee in performing its
duties hereunder and under the other Loan Documents or in the exercise of any
right or power imposed or conferred upon the Administrative Agent hereby or
thereby, to the extent that the Administrative Agent is not promptly reimbursed
for same by the Company or out of any collateral, all such costs and expenses to
be borne by the Lenders ratably in accordance with the amounts of their
respective Commitments.
Section 10.5. Indemnity. The Lenders shall ratably indemnify and hold the
Administrative Agent, and each of its directors, officers, employees, agents or
representatives (including as such any security trustee therefor), harmless from
and against any liabilities, losses, costs or expenses suffered or incurred by
them under this Agreement or any of the other Loan Documents or in connection
with the transactions contemplated hereby or thereby, regardless of when
asserted or arising, except to the extent they are promptly reimbursed for the
same by the Company or out of any collateral and except to the extent that any
event giving rise to a claim was caused by the gross negligence or willful
misconduct of the party seeking to be indemnified.
Section 10.6. Designation of Additional Agent. The Administrative Agent
shall have the continuing right, for purposes hereof, at any time or from time
to time to designate one or more Lenders (and/or its or their Affiliates) as
"Documentation Agents," "Lead Arrangers, Book Managers, Syndication Agents," and
"Arrangers" or otherwise for purposes hereto, but such designations shall have
no substantive effect, and such Lenders and their Affiliates shall have no
additional powers, duties, or responsibilities as a result thereof.
SECTION 11. GUARANTY.
Section 11.1. The Guaranty. To induce the Lenders to provide the credits
described herein and in consideration of benefits expected to accrue to the
Company by reason of the Commitments and for other good and valuable
consideration, receipt of which is hereby acknowledged, each Guarantor hereby
unconditionally and irrevocably guarantees jointly and severally to the
Administrative Agent, the Lenders, and each other holder of any of the Notes,
the due and punctual payment of all present and future indebtedness of the
Company evidenced by or arising out of the Loan Documents, including, but not
limited to, the due and punctual payment of principal of and interest on the
Notes and the due and punctual payment of all other Obligations now or hereafter
owed by the Company under the Loan Documents as and when the
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same shall become due and payable, whether at stated maturity, by acceleration
or otherwise, according to the terms hereof and thereof (the "Guaranteed
Obligations"). In case of failure by the Company punctually to pay any
indebtedness or other obligations guaranteed hereby (after giving effect to any
applicable cure periods), each Guarantor hereby unconditionally agrees jointly
and severally to make such payment or to cause such payment to be made
punctually as and when the same shall become due and payable, whether at stated
maturity, by acceleration or otherwise, and as if such payment were made by the
Company.
Section 11.2. Guarantee Unconditional. The obligations of each Guarantor as
a guarantor under this Section 11 shall be unconditional and absolute and,
without limiting the generality of the foregoing, shall not be released,
discharged or otherwise affected by:
(a) any extension, renewal, settlement, compromise, waiver or release
in respect of any obligation of the Company or of any other guarantor under
this Agreement or any other Loan Document or by operation of law or
otherwise;
(b) any modification or amendment of or supplement to this Agreement
or any other Loan Document;
(c) any change in the existence, structure or ownership of, or any
insolvency, bankruptcy, reorganization or other similar proceeding
affecting, the Company, any other guarantor, or any of their respective
assets, or any resulting release or discharge of any obligation of the
Company or of any other guarantor contained in any Loan Document;
(d) the existence of any claim, set-off or other rights which the
Company or any other guarantor may have at any time against the
Administrative Agent, any Lender or any other Person, whether or not
arising in connection herewith;
(e) any failure to assert, or any assertion of, any claim or demand or
any exercise of, or failure to exercise, any rights or remedies against the
Company, any other guarantor or any other Person or Property;
(f) any application of any sums by whomsoever paid or howsoever
realized to any obligation of the Company, regardless of what obligations
of the Company remain unpaid;
(g) any invalidity or unenforceability relating to or against the
Company or any other guarantor for any reason of this Agreement or of any
other Loan Document or any provision of applicable law or regulation
purporting to prohibit the payment by the Company or any other guarantor of
the principal of or interest on any Note or any other amount payable under
the Loan Documents; or
(h) any other act or omission to act or delay of any kind by the
Administrative Agent, any Lender or any other Person or any other
circumstance whatsoever that might, but for the provisions of this
paragraph, constitute a legal or equitable discharge of the obligations of
any Guarantor under this Section 11.
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Section 11.3. Discharge Only Upon Payment in Full; Reinstatement in
Certain Circumstances. Each Guarantor's obligations under this Section 11 shall
remain in full force and effect until the Commitments are terminated, and the
principal of and interest on the Notes and all other amounts payable by the
Company under this Agreement and all other Loan Documents shall have been paid
in full. If at any time any payment of the principal of or interest on any Note
or any other amount payable by the Company under the Loan Documents is rescinded
or must be otherwise restored or returned upon the insolvency, bankruptcy or
reorganization of the Company or of any guarantor, or otherwise, each
Guarantor's obligations under this Section 11 with respect to such payment shall
be reinstated at such time as though such payment had become due but had not
been made at such time.
Section 11.4. Subrogation. Each Guarantor agrees it will not exercise any
rights which it may acquire by way of subrogation by any payment made hereunder,
or otherwise, until all the Guaranteed Obligations shall have been paid in full
subsequent to the termination of all the Commitments. If any amount shall be
paid to a Guarantor on account of such subrogation rights at any time prior to
the later of (x) the payment in full of the Guaranteed Obligations and all other
amounts payable by the Company hereunder and the other Loan Documents and (y)
the termination of the Commitments, such amount shall be held in trust for the
benefit of the Administrative Agent and the Lenders and shall forthwith be paid
to the Administrative Agent for the benefit of the Lenders or be credited and
applied upon the Guaranteed Obligations, whether matured or unmatured, in
accordance with the terms of this Agreement.
Section 11.5. Waivers. Each Guarantor irrevocably waives acceptance
hereof, presentment, demand, protest and any notice not provided for herein, as
well as any requirement that at any time any action be taken by the
Administrative Agent, any Lender or any other Person against the Company,
another guarantor or any other Person.
Section 11.6. Limit on Recovery. Notwithstanding any other provision
hereof, the right of recovery against any Guarantor under this Section 11 shall
not exceed $1.00 less than the lowest amount which would render such Guarantor's
obligations under this Section 11 void or voidable under applicable law,
including without limitation fraudulent conveyance law.
Section 11.7. Stay of Acceleration. If acceleration of the time for
payment of any amount payable by the Company under this Agreement or any other
Loan Document is stayed upon the insolvency, bankruptcy or reorganization of the
Company, all such amounts otherwise subject to acceleration under the terms of
this Agreement or the other Loan Documents shall nonetheless be payable jointly
and severally by the Guarantors hereunder forthwith on demand by the
Administrative Agent made at the request of the Required Lenders.
SECTION 12. MISCELLANEOUS.
Section 12.1. Waiver of Rights. No delay or failure on the part of any
Lender or the holder or holders of any Note in the exercise of any power or
right shall operate as a waiver thereof or as an acquiescence in any default,
nor shall any single or partial exercise thereof or the exercise of any other
power or right preclude any other right or the further exercise of any other
rights. The rights and remedies hereunder of the Company, the Administrative
Agent, the
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Lenders and of the holder or holders of any Note are cumulative to, and not
exclusive of, any rights or remedies which any of them would otherwise have.
Section 12.2. Non-Business Day. If any payment of principal shall fall
due on a day which is not a Business Day, interest at the rate such principal
bears for the period prior to maturity shall continue to accrue on such
principal from the stated due date thereof to and including the next succeeding
Business Day on which the same is payable.
Section 12.3. Documentary Taxes. The Company agrees to pay any
documentary, stamp or similar taxes payable in respect to this Agreement or any
other Loan Document, including interest and penalties, in the event any such
taxes are assessed irrespective of when such assessment is made and whether or
not any credit is then in use or available hereunder.
Section 12.4. Survival of Representations. All representations and
warranties made in the Loan Documents or pursuant thereto or in certificates
given pursuant hereto or thereto shall survive the execution and delivery of
this Agreement and of the other Loan Documents, and shall continue in full force
and effect with respect to the date as of which they were made as long as any
credit is in use or available hereunder.
Section 12.5. Set-off Sharing. Each Lender agrees with each other Lender
a party hereto that in the event such Lender shall receive and retain any
payment, whether by set-off or application of deposit balances or otherwise, on
or in respect of any Note or other Obligation outstanding under this Agreement
in excess of its ratable share of payments on all Notes and other Obligations
then outstanding to the Lenders, then such Lender shall purchase for cash at
face value, but without recourse, ratably from each of the other Lenders such
amount of the Notes or other Obligations held by each such other Lender (or
interest therein) as shall be necessary to cause such Lender to share such
excess payment ratably with all the other Lenders; provided, however, that if
any such purchase is made by any Lender, and if such excess payment or part
thereof is thereafter recovered from such purchasing Lender, the related
purchases from the other Lenders shall be rescinded ratably and the purchase
price restored as to the portion of such excess payment so recovered, but
without interest.
Section 12.6. Notices. Except as otherwise specified herein, all notices
hereunder and under the other Loan Documents shall be in writing (including,
without limitation, notice by telecopy) and shall be given to the relevant party
at its address or telecopier number set forth below, or such other address or
telecopier number as such party may hereafter specify by notice to the
Administrative Agent and the Company given by courier, by United States
certified or registered mail, by telecopy or by other telecommunication device
capable of creating a written record of such notice and its receipt. Notices
under the Loan Documents to the Lenders and the Administrative Agent shall be
addressed to their respective addresses or telecopier numbers set forth on the
signature pages hereof, and to the Company to:
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Morrison Knudsen Corporation
720 Park Boulevard
Boise, Idaho 83712
Attention: Vice President and Treasurer
Telephone: (208) 386-5887
Telecopy: (208) 386-0220
Each such notice, request or other communication shall be effective (i) if given
by telecopier, when such telecopy is transmitted to the telecopier number
specified in this Section or on the signature pages hereof and a confirmation of
such telecopy has been received by the sender, (ii) if given by mail, 5 days
after such communication is deposited in the mail, certified or registered with
return receipt requested, addressed as aforesaid or (iii) if given by any other
means, when delivered at the addresses specified in this Section or on the
signature pages hereof; provided that any notice given pursuant to Sections 2
and 3 hereof shall be effective only upon receipt.
Section 12.7. Counterparts. This Agreement may be executed in any number
of counterparts, and by the different parties on different counterparts, each of
which when executed shall be deemed an original, but all such counterparts taken
together shall constitute one and the same instrument.
Section 12.8. Successors and Assigns. This Agreement shall be binding
upon the Company and its successors and assigns, and shall be binding upon and
inure to the benefit of the Administrative Agent, the Lead Arrangers, Book
Managers, and Syndication Agents, the Documentation Agent and the Lenders and
their respective successors and assigns permitted pursuant to Section 12.12
hereof, including any subsequent holder of any Note. The Company may not assign
its rights or obligations hereunder without the prior written consent of the
Lenders.
Section 12.9. Participants. Each Lender shall have the right at its own
cost to grant participations (to be evidenced by one or more agreements or
certificates of participation) in the Loans made by such Lender at any time and
from time to time to one or more other financial institutions, provided that no
such participant shall have any rights under this Agreement or any other Loan
Document (the participant's rights against the Lender granting its participation
to be those set forth in the participation agreement between the participant and
such Lender); provided, further, that no Lender shall transfer or grant any
participation under which the participant shall have rights to approve any
amendment to or waiver of this Agreement or any other loan Document except to
the extent such amendment or waiver would extend the final scheduled maturity of
Loan or Note in which such participant is participating, or reduce the rate or
extend the time of payment of interest or fees thereon (except in connection
with a waiver of applicability of any post-default increase in interest rates)
or reduce the principal amount thereof, or increase the amount of the
participant's participation over the amount thereof then in effect (it being
understood that a waiver of any Default or Event of Default or of a mandatory
reduction in the Commitment or of a mandatory prepayment shall not constitute a
change in the terms of such participation, and that an increase in any
Commitment or Loan shall be permitted without the consent of any participant if
the participant's participation is not increased as a result thereof.
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Each such Lender selling a participation shall be entitled to the benefits of
Sections 2.3(d), 3 and 4.9 hereof to the extent such Lender would have been so
entitled had no such participation been sold.
Section 12.10. Costs and Expenses. The Company agrees to pay within 10
days of demand all reasonable costs and expenses of the Administrative Agent,
Lead Arrangers, Book Managers, and Syndication Agents and Documentation Agent in
connection with the preparation, negotiation, syndication, and administration of
the Loan Documents, including, without limitation, the reasonable fees and
disbursements of counsel to the Administrative Agent, in connection with the
preparation and execution of the Loan Documents, and any amendment, waiver or
consent related thereto, whether or not the transactions contemplated herein are
consummated. The Company further agrees to indemnify the Administrative Agent,
Lead Arrangers, Book Managers, and Syndication Agents, Documentation Agent, each
Lender, and their respective directors, officers and employees, against all
losses, claims, damages, penalties, judgments, liabilities and expenses
(including, without limitation, all reasonable expenses of litigation or
preparation therefor, whether or not the indemnified Person is a party thereto,
or any settlement arrangement arising from or relating to any such litigation)
which any of them may pay or incur arising out of or relating to any Loan
Document or any of the transactions contemplated thereby or the direct or
indirect application or proposed application of the proceeds of any Loan, other
than those which arise from the gross negligence or willful misconduct of the
party claiming indemnification. The Company, upon demand by the Administrative
Agent, Lead Arrangers, Book Managers, and Syndication Agents, Documentation
Agent or a Lender at any time, shall reimburse the Agent, Lead Arrangers, Book
Managers, and Syndication Agents, Documentation Agent or such Lender for any
legal or other expenses incurred in connection with investigating or defending
against any of the foregoing (including any settlement costs relating to the
foregoing) except if the same is directly due to the gross negligence or willful
misconduct of the party to be indemnified. The obligations of the Company under
this Section shall survive the termination of this Agreement.
Section 12.11. Construction. The parties hereto acknowledge and agree
that this Agreement shall not be construed more favorably in favor of one than
the other based upon which party drafted the same, it being acknowledged that
all parties hereto contributed substantially to the negotiation of this
Agreement.
Section 12.12. Assignments. (a) Each Lender may, from time to time,
with the consent of the Administrative Agent and the Documentation Agent and, so
long as no Event of Default exists, the Company, which consent will
not be unreasonably withheld, assign to other financial institutions part of the
indebtedness evidenced by the Notes then owned by it together with an equivalent
proportion of its obligation to make Loans hereunder pursuant to written
agreements executed by the assignor, the assignees, the Administrative Agent,
the Documentation Agent and, so long as no Event of Default exists, the Company,
which agreements shall specify in each instance the portion of the indebtedness
evidenced by the Notes which is to be assigned to each such assignee and the
portion of the Commitment of the assignor to be assumed by it and shall be
substantially in the form attached hereto as Exhibit D (the "Assignment
Agreements"); provided, however, that (i) each such assignment shall be of a
constant, and not a varying, percentage of the assigning Lender's rights and
obligations under this Agreement and the assignment shall cover
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the same percentage of such Lender's Commitment, Loans and Note; (ii) unless the
Administrative Agent, the Documentation Agent and the Company otherwise consent,
the aggregate amount of the Commitment, Loans and Note of the assigning Lender
being assigned pursuant to each such Assignment Agreement (determined as of the
effective date of the relevant Assignment Agreement) shall in no event be less
than $2,000,000 and, unless the assigning Lender shall have assigned all of its
Commitment, Loans and Note, the aggregate amount of the Commitment, Loans, and
Note retained by the assigning Lender shall in no event be less than $2,000,000;
and (iii) the assigning Lender must pay to the Administrative Agent a processing
and recordation fee of $3,500 and any out-of-pocket attorney's fees and expenses
incurred by the Administrative Agent in connection with each such Assignment
Agreement. Upon the execution of each Assignment Agreement by the assignor, the
assignee, the Administrative Agent, the Documentation Agent and, if applicable,
the Company (i) such assignee shall thereupon become a "Lender" for all purposes
of this Agreement with a Commitment in the amount set forth in such Assignment
Agreement (and Exhibit A hereto shall be deemed amended to reflect the aggregate
Commitments of the Lenders after giving effect thereto) and with all the rights,
powers and obligations afforded a Lender hereunder, provided that the assigning
Lender shall retain the benefit of all indemnities of the Company with respect
to matters arising prior to the effective date of such Assignment Agreement,
which shall survive and inure to the benefit of the assigning Lender, (ii) such
assigning Lender shall have no further liability for funding the portion of its
Commitment assumed by such other Lender and (iii) the address for notices to
such Lender shall be as specified in the Assignment Agreement executed by it.
Concurrently with the execution and delivery of such Assignment Agreement by the
assignor, the assignee, the Administrative Agent, the Documentation Agent and,
if applicable, the Company shall execute and deliver a Note to the assignee
Lender in the amount of its Commitment and a new Note to such assigning Lender
in the amount of its Commitment after giving effect to the reduction occasioned
by such assignment, all such notes to constitute "Notes" for all purposes of
this Agreement.
(b) Any Lender may at any time pledge or grant a security interest in all
or any portion of its rights under this Agreement to secure obligations of such
Lender, including any such pledge or grant to a Federal Reserve Bank, and this
Section shall not apply to any such pledge or grant of a security interest;
provided that no such pledge or grant of a security interest shall release a
Lender from any of its obligations hereunder or substitute any such pledgee or
secured party for such Lender as a party hereto; provided further, however, the
right of any such pledgee or grantee (other than any Federal Reserve Bank) to
further transfer all or any portion of the rights pledged or granted to it,
whether by means of foreclosure or otherwise, shall be at all times subject to
the terms of this Agreement.
Section 12.13. Amendments. Any provision of this Agreement or the other
Loan Documents may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by (a) the Company, (b) the Required Lenders,
and (c) if the rights or duties of the Administration Agent or an Issuing Bank
are affected thereby, the Administration Agent or such Issuing Bank, as
applicable; provided that:
(i) no amendment or waiver pursuant to this Section 12.13 shall (A)
increase any Commitment of any Lender without the consent of such Lender or
(B) reduce the amount of or postpone the date for any scheduled payment of
any principal of or interest
-54-
<PAGE>
on any Loan or of any fee payable hereunder without the consent of the
Lender to which such payment is owing or which has committed to make such
Loan hereunder; and
(ii) no amendment or waiver pursuant to this Section 12.13 shall,
unless signed by each Lender, increase the aggregate Commitments hereunder
(exclusive of increases permitted by Section 4.10 hereof), change the
definitions of Termination Date or Required Lenders, change the provisions
of this Section 12.13, Section 7, or Section 9, release any Guarantor, or
affect the number of Lenders required to take any action hereunder or under
any other Loan Document;
it being understood that waivers or modifications of covenants, Defaults or
Events of Default (other than those set forth in Section 9.1(j) and (k) hereof)
or of a mandatory reduction in the Commitments or of a mandatory prepayment may
be made at the discretion of the Required Lenders and shall not constitute an
increase of the Commitment of any Lender, and that any resulting increase in the
available portion of any Commitment of any Lender shall not constitute an
increase in the Commitment of such Lender, and any waiver of applicability of
any post-default increase in interest rates may be made at the discretion of the
Required Lenders.
Section 12.14. Entire Agreement. This Agreement and the Loan Documents
constitute the entire understanding of the parties with respect to the subject
matter hereof and any prior agreements, whether written or oral, with respect
thereto are superseded hereby.
Section 12.15. Headings. Section headings used in this Agreement are for
reference only and shall not affect the construction of this Agreement.
Section 12.16. Confidentiality. (a) Any information disclosed by the
Company or any of its Subsidiaries to the Administrative Agent or any of the
Lenders shall be used solely for purposes of this Agreement and for the purpose
of determining whether or not to extend other credit or financial accommodations
to the Company or its Subsidiaries and, if such information is not otherwise in
the public domain, shall not be disclosed by the Administrative Agent or such
Lender to any other Person except (i) to its independent accountants and legal
counsel (it being understood that the Persons to whom such disclosure is made
will be informed of the confidential nature of such information and instructed
to keep such information confidential), (ii) pursuant to statutory and
regulatory requirements, (iii) pursuant to any mandatory court order, subpoena
or other legal process, (iv) to the Administrative Agent or any other Lender,
(v) pursuant to any agreement heretofore or hereafter made between such Lender
and the Company which permits such disclosure, (vi) in connection with the
exercise of any right or remedy under the Loan Documents, provided that such
Lender or the Administrative Agent, as applicable, shall give the Company prior
written notice of any such disclosure or (vii) subject to an agreement
containing provisions substantially the same as those of this Section, to any
participant in or assignee of, or prospective participant in or assignee of, any
obligation or Commitment.
(b) The Administrative Agent and the Lenders acknowledge that the Company
and its Subsidiaries perform classified contracts funded by and/or for the
benefit of the United States Government and, accordingly, neither the Company
nor any Subsidiary will be obligated to release, disclose or otherwise make
available to the Administrative Agent or any Lender any
-55-
<PAGE>
classified or special nuclear material to any parties not in possession of a
valid security clearance and authorized by the appropriate agency of the United
States Government to receive such material. The Administrative Agent and the
Lenders agree that in connection with any exercise of a right or remedy the
United States Government may remove classified information or government-issued
property prior to any remedial action implicating such classified information or
government-issued property. Upon notice from the Company, the Administrative
Agent and the Lenders shall take such steps in accordance with this Agreement as
may be reasonably requested by the Company to enable the Company or any
Subsidiary to comply with the Foreign Ownership Control or Influence
requirements of the United States Government imposed from time to time.
Section 12.17. Excess Interest. Notwithstanding any provision to the
contrary contained herein or in any other Loan Document, no such provision shall
require the payment or permit the collection of any amount in excess of the
maximum amount of interest permitted by applicable law to be charged for the use
or detention, or the forbearance in the collection, of all or any portion of the
Loans or other Obligations outstanding under this Agreement or any other Loan
Document ("Excess Interest"). If any Excess Interest is provided for, or is
adjudicated to be provided for, herein or in any other Loan Document, then in
such event (a) the provisions of this Section shall govern and control; (b)
neither the Company nor any guarantor or endorser shall be obligated to pay any
Excess Interest; (c) any Excess Interest that the Administrative Agent or any
Lender may have received hereunder shall, at the option of the Administrative
Agent, be (i) applied as a credit against the then outstanding principal amount
of Loans hereunder, accrued and unpaid interest thereon (not to exceed the
maximum amount permitted by applicable law) and any other Obligations, or all of
the foregoing; (ii) refunded to the Company, or (iii) any combination of the
foregoing; (d) the interest rate payable hereunder or under any other Loan
Document shall be automatically subject to reduction to the maximum lawful
contract rate allowed under applicable usury laws, and this Agreement and the
other Loan Documents shall be deemed to have been, and shall be, reformed and
modified to reflect such reduction in the relevant interest rate; and (e)
neither the Company nor any guarantor or endorser shall have any action against
the Administrative Agent or any Lender for any damages whatsoever arising out of
the payment or collection of any Excess Interest.
Section 12.18. Lender's Obligations Several. The obligations of the
Lenders hereunder are several and not joint. Nothing contained in this
Agreement and no action taken by the Lenders pursuant hereto shall be deemed to
constitute the Lenders a partnership, association, joint venture or other
entity.
Section 12.19. Governing Law. This Agreement and the Notes, and the
rights and duties of the parties hereto, shall be construed and determined in
accordance with the laws of the State of Illinois, without regard to principles
of conflicts of laws.
Section 12.20. Submission to Jurisdiction; Waiver of Jury Trial.
The Company and each Guarantor hereby submits to the nonexclusive jurisdiction
of the United States District Court for the Northern District of Illinois and of
any Illinois State court sitting in the City of Chicago for purposes of all
legal proceedings arising out of or relating to this Agreement, the other Loan
Documents or the transactions contemplated hereby or thereby. The Company and
each
-56-
<PAGE>
Guarantor irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum. THE COMPANY,
THE GUARANTORS, THE ADMINISTRATION AGENT, THE LEAD ARRANGERS, BOOK MANAGERS, AND
SYNDICATION AGENTS, THE DOCUMENTATION AGENT AND EACH LENDER HEREBY IRREVOCABLY
WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO ANY LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY.
[SIGNATURE PAGES TO FOLLOW]
-57-
<PAGE>
This Agreement is entered into between us for the purposes hereinabove set
forth as of the date first above written.
"COMPANY"
MORRISON KNUDSEN CORPORATION, a Delaware corporation
By /s/
_____________________________________
Name _________________________________
Title ________________________________
"GUARANTORS"
MORRISON KNUDSEN CORPORATION, an Ohio corporation
By /s/
_____________________________________
Name _________________________________
Title ________________________________
WASHINGTON CONTRACTORS GROUP, INC., a
Montana corporation
By /s/
_____________________________________
Name _________________________________
Title ________________________________
<PAGE>
BANK OF MONTREAL, individually as a Lender
and as Administrative Agent and as a
Lead Arranger, Book Manager and Syndication
Agent
By /s/__________________________________
Name _________________________________
Title ________________________________
Mailing Address:
Los Angeles Representative Office
601 South Figueroa Street, Suite 4900
Los Angeles, California 90017
Attention: Director
Telephone: (213) 239-0635
Telecopy: (213) 239-0680
LENDING OFFICE:
Bank of Montreal
115 South LaSalle Street
Chicago, Illinois 60603
Attention: Manager-Loan Operations
Telephone: (312) 750-3827
Telecopy: (312) 750-3456
-2-
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, individually as a Lender
and as
By /s/
_____________________________
Robert W. Troutman
Managing Director
Mailing Address:
Bank of America National Trust & Savings
Association
555 S. Flower Street -- 11th Floor
Credit Products #5618
Los Angles, California 90071
Attention: Charlie Lilygren
Telephone: (213) 228-2636
Telecopy: (213) 623-1959
LENDING OFFICE:
Bank of America National Trust & Savings
Association
1850 Gateway Boulevard
Global Client Services #5693
Concord, California 94520
Attention: Paula Steeves
Telephone: (925) 675-7347
Telecopy: (925) 675-7531
-3-
<PAGE>
NATIONSBANC MONTGOMERY SECURITIES LLC,
as a Lead Arranger, Book Manager and
Syndication Agent
By /s/
_____________________________
William M. Lau
Managing Director
Mailing Address:
NationsBanc Montgomery Securities LLC
555 California Street --12th Floor
San Francisco, California 94104
Attention: William M. Lau
Telephone: (415) 953-4143
Telecopy: (415) 953-1873
-4-
<PAGE>
EXHIBITS AND SCHEDULES
THE REGISTRANT AGREES TO PROVIDE THE SECURITIES AND EXCHANGE COMMISSION,
UPON REQUEST, WITH COPIES OF THE EXHIBITS AND SCHEDULES HERETO.
-5-
<PAGE>
EXHIBIT 10.3
AMENDED AND RESTATED
CONSORTIUM AGREEMENT
BETWEEN
MORRISON KNUDSEN CORPORATION
AND
BNFL USA GROUP INC.
DATED AS OF
MARCH 19, 1999
<PAGE>
CONFIDENTIAL
AMENDED AND RESTATED
CONSORTIUM AGREEMENT
THIS AMENDED AND RESTATED CONSORTIUM AGREEMENT (this "AGREEMENT"), dated as
of March 19, 1999, by and between the following parties:
. MORRISON KNUDSEN CORPORATION, an Ohio corporation ("MK"), and
. BNFL USA GROUP INC., a Delaware corporation ("BNFL-USA").
WITNESSETH
WHEREAS:
1. MK and BNFL-USA entered into a Consortium Agreement, dated as of June
24, 1998 (the "ORIGINAL AGREEMENT"), pursuant to which they formed a
consortium for the purpose of acquiring the Energy Systems business
(the "ESBU BUSINESS") and the Government Operations business (the
"GESCO BUSINESS") of CBS Corporation ("CBS").
2. The Original Agreement set forth the agreement of MK and BNFL-USA
concerning the basis on which the ESBU and GESCO Businesses would be
owned, and the basis on which ownership, control and risk would be
shared after the acquisition.
3. On June 24, 1998 MK and BNFL-USA organized WGNH Acquisition, LLC, a
Delaware limited liability company ("WGNH"), for the purpose of
entering into asset purchase agreements with CBS for the acquisition
of the ESBU and GESCO Businesses and acting as a holding company for
MK and BNFL-USA's interests in the ESBU and GESCO Businesses. WGNH is
the entity referred to as "Wesco" in the Original Agreement and the
ownership, governance and management of WGNH are currently set forth
in the Original Agreement.
4. WGNH entered into an Asset Purchase Agreement, dated as of June 25,
1998 (as it may be amended from time to time, the "ESBU PURCHASE
AGREEMENT"), with CBS covering the acquisition by WGNH of the ESBU
Business, and (ii) an Asset Purchase
-1-
<PAGE>
CONFIDENTIAL
Agreement, dated as of June 25, 1998 (as it may be amended from time
to time, the "GESCO PURCHASE AGREEMENT"), with CBS covering the
acquisition by WGNH of the GESCO Business. The ESBU Purchase Agreement
and the GESCO Purchase Agreement are sometimes referred to
individually as an "ASSET PURCHASE AGREEMENT" or collectively as the
"ASSET PURCHASE AGREEMENTS".
5. Since the date of the Original Agreement (i) certain changes have
occurred with respect to the scope of the GESCO Business, and (ii) MK
and BNFL-USA have had further discussions with each other and with
representatives of the United States government and CBS concerning
certain issues relating to the ownership and control of certain
aspects of the ESBU and GESCO Businesses. As a result of these changes
and discussions WGNH will no longer act as a holding company for MK's
and BNFL-USA's interests in the ESBU and GESCO Businesses and either
by novation or assignment will transfer its rights and obligations
under the Asset Purchase Agreements to other entities organized by the
parties.
6. MK and BNFL-USA wish to amend and restate the Original Agreement in
its entirety as set forth in this Agreement so as to set forth their
revised agreement concerning the basis on which the ESBU and GESCO
Businesses will be owned, and the basis on which ownership, control
and risk will be shared after the acquisition.
7. MK and BNFL-USA intend to take certain actions and enter into certain
other agreements as contemplated by this Agreement.
8. BNFL-USA has organized a new wholly-owned subsidiary, BNFL Nuclear
Services, Inc., a Delaware corporation ("BNSI"), for the purpose of
holding BNFL-USA's interests in the GESCO and ESBU Businesses.
9. Morrison Knudsen Corporation, a Delaware corporation ("MK-DELAWARE")
which is the parent company of MK, and British Nuclear Fuels plc, a
public limited company organized under the laws of England ("BNFL")
which is the parent company of BNFL-USA, entered into guarantees of
the obligations of MK and BNFL-USA, respectively, under the Original
Agreement (the "ORIGINAL GUARANTEES") and wish to replace the Original
Guarantees with guarantees of the obligations of MK and BNFL-USA and
BNSI, respectively, under this Agreement in the form attached
following the signature pages to this Agreement.
NOW THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained in this Agreement, the Original Agreement,
including the Exhibits thereto, is hereby amended and restated to read in
its entirety as follows:
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<PAGE>
CONFIDENTIAL
1. FORMATION OF ADDITIONAL COMPANIES.
1.1 Interim Companies. MK and BNSI have organized the following limited
-----------------
liability companies (sometimes referred to individually as an "INTERIM
COMPANY" and collectively as the "INTERIM COMPANIES"):
(a) MK/BNFL GESCO LLC, a Delaware limited liability company ("INTERIM
GESCO"), the membership interests in which are owned on a 60/40
basis by MK and BNSI, respectively, as set forth in greater
detail in a limited liability company agreement dated as of
October 10, 1998.
(b) MK/BNFL Commercial Nuclear Services LLC, a Delaware limited
liability company ("INTERIM CNS"), the membership interests in
which are owned on a 60/40 basis by MK and BNSI, respectively, as
set forth in greater detail in a limited liability company
agreement dated as of October 10, 1998.
(c) MK WGS LLC, a Delaware limited liability company ("INTERIM WGS"),
the membership interests in which are wholly owned by MK, as set
forth in greater detail in a limited liability company agreement
dated as of December 30, 1998.
1.2 Organization. Promptly after the date of this Agreement the parties
------------
will organize the following corporations or limited liability
companies (sometimes referred to individually as a "COMPANY" and
collectively as the ("COMPANIES") under the names, to take effect from
the closing of the Asset Purchase Agreements, set forth below and,
prior to closing, under such other interim names as the parties may
agree:
(a) Westinghouse Government Services Company LLC, a Delaware limited
liability company ("WGS")
(b) Westinghouse Government Environmental Services Company LLC, a
Delaware limited liability company ("WGES")
(c) Westinghouse Electric Company LLC, a Delaware limited liability
company ("WELCO")
(d) Such other entities as the parties deem necessary or desirable to
carry out the intent of this Agreement but not otherwise in
contradiction of the terms of this Agreement.
-3-
<PAGE>
CONFIDENTIAL
If appropriate, the parties may reorganize Interim GESCO as WGES,
Interim CNS as WELCO, and Interim WGS as WGS in which case they will
transfer their membership interests and make such other changes in the
organizational documents of such companies as may be necessary to
conform to the terms of this Agreement. If any of the Interim
Companies is not reorganized as contemplated by the preceding sentence
the parties will cause it to be dissolved.
1.3 Operating Agreements. The ownership, management, operation, financing
--------------------
and other attributes of the Companies will be set forth in the
respective articles of incorporation, by-laws, limited liability
company agreements and related documents to be entered into with
respect to each of the Companies and other necessary documents which
will be consistent with the provisions of this Agreement.
2. WGNH.
----
2.1 Purpose. WGNH's purpose will be to assign its rights and obligations
-------
under the Asset Purchase Agreements as contemplated by Sections 6.2
------------
and 6.3 and to execute and deliver any appropriate amendments to the
---
Asset Purchase Agreements that may be necessary prior to the date of
such assignment. Promptly after the assignment has been achieved the
parties will cause WGNH to be dissolved.
2.2 General. The parties will cooperate with each other and take all
-------
necessary action to implement this Section 2.
---------
3. WGS.
---
3.1 Purpose. The purpose of WGS will be to pursue business opportunities
-------
related to the Defense Program missions of the U.S. Department of
Energy (the "DOE") and the U.S. Department of Defense (the "DOD").
With effect from the GESCO Closing (as defined in Section 6.1) WGS
-----------
will
(a) own and operate those portions of the GESCO Business that are
included in the WGS Operations (as defined in Section 6.1(a)),
--------------
(b) submit bids to the DOE and the DOD for new classified defense
programs to be awarded by the DOE or the DOD that are consistent
with the objectives of the WGS Operations, and
(c) own 60% of the outstanding membership interests in WGES.
-4-
<PAGE>
CONFIDENTIAL
3.2 Organization. MK will organize WGS as a Delaware limited liability
------------
company and will hold 100% of the membership interests of WGS.
3.3 BNFL Passive Economic Right and Obligations. BNSI will have
-------------------------------------------
(a) a passive economic right to receive a portion of the gains,
profits and losses of WGS and the WGS Operations, and
(b) an obligation to make additional contributions to WGS's funding
requirements, and to provide financial assurances with respect to
WGS,
in each case as set forth in an agreement (the "WGS AGREEMENT") in the
form attached as Exhibit B.
---------
3.4 Management.
----------
(a) Management by Managers. WGS will be managed by a board of
----------------------
directors or managers (the "BOARD") and by officers appointed by
the Board.
(b) Board. With effect from the GESCO Closing, WGS will have a Board
-----
of seven directors appointed by MK, one of whom will be nominated
by BNSI (the "BNFL DIRECTOR"). One of the MK appointed directors
will serve as Chairman of the Board. Not later than the GESCO
Closing Thomas Zarges will be appointed as Chairman. The parties
will develop a mutually acceptable policy on dividends and
distributions to be adopted by the WGS Board.
(c) Officers. The Board will appoint a President and other officers
--------
as desired from time to time. With effect from the GESCO Closing,
James Gallagher will be appointed as President. The officers will
have the authority, responsibilities and duties as are customary
for officers holding similar positions with respect to businesses
conducted in corporate form and such additional authority,
responsibilities and duties as the Board may delegate from time
to time. The BNFL Director will have no vote with respect to the
election, appointment or tenure of any officers.
(d) FOCI and National Security Issues. FOCI shall be addressed
---------------------------------
through a FOCI Negation Plan consisting of a Security Control
Agreement, as reviewed and approved by the DOE (and the DOD as
appropriate), and substantially in the form of Exhibit C (the
---------
"WGS SECURITY CONTROL AGREEMENT").
-5-
<PAGE>
CONFIDENTIAL
(e) Approval. All actions of the Board will be taken by majority vote
--------
except that, subject to the provisions of the WGS Security
Control Agreement, the following actions will require the
concurrence of the BNFL Director (except, in the case of clauses
(i), (iii), (iv), and (v), to the extent such actions relate to
the WGES Operations or to the proceeds of WGS's investment in
WGES and do not adversely affect the defense program business
conducted by WGS):
(i) disposition or financial encumbrance of all or
substantially all of the property and assets of WGS and its
subsidiaries;
(ii) dissolution, merger or consolidation of WGS or any of its
subsidiaries;
(iii) major financing, which for the purposes of this Agreement
shall mean the incurrence of indebtedness for borrowed
money by WGS or any of its subsidiaries of more than
$2,000,000 in any single transaction or $10,000,000 in the
aggregate; provided that the concurrence of the BNFL
Director shall not be required for the approval of any
refinancing of any financing previously approved under this
clause (iii) so long as the amount of the indebtedness is
not increased and the terms of the refinancing are no less
favorable to WGS or the applicable subsidiary than the
original financing;
(iv) commencement or settlement of major litigation by WGS or
any of its subsidiaries, which for the purposes of this
Agreement means any action or proceeding, whether involving
a court action, arbitration, mediation or other dispute
resolution process, (A) in which the amount in damages
payable by any party may reasonably be expected to exceed
$2,000,000 or (B) may reasonably be expected to result in
any order or other binding decision that would prevent WGS
or any of its subsidiaries from carrying on any material
part of the WGS Operations;
(v) material changes to the dividend and distribution policy of
WGS;
(vi) assumption of material additional liabilities or purchase
of material additional assets by WGS and its subsidiaries
through the submission of bids for new contracts or the
amendment of existing contracts;
-6-
<PAGE>
CONFIDENTIAL
(vii) material changes to the lines of business conducted by WGS
and its subsidiaries; or
(viii) such other matters as may be specified in the WGS
Agreement or the limited liability company agreement of
WGS.
Appropriate protections will be provided to ensure that funds are
not distributed to MK or its affiliates via contract or any other
mechanism that would frustrate or avoid BNSI's participation in
the gains, profits and losses of WGS and the WGS Operations as
contemplated by the WGS Agreement.
4. WGES.
----
4.1 Purpose. The purpose of WGES will be to pursue business opportunities
-------
related to environmental remediation and waste management activities,
including those of the DOE and the DOD. With effect from the GESCO
Closing, WGES will own and operate those portions of the GESCO
Business that are included in the WGES Operations (as defined in
Section 6.1(b)).
--------------
4.2 Members. WGES will have a single series of membership interests. The
-------
members and their membership interests in WGES will be:
WGS -- 60%
BNSI -- 40%
4.3 Management.
----------
(a) Management by Managers. WGES will be managed by a board of
----------------------
directors or managers (the "BOARD") selected by the members, and
by officers appointed by the Board.
(b) Board. With effect from the GESCO Closing Date, WGES will have a
-----
Board of five directors consisting of two individuals selected by
MK (the "MK DIRECTORS"), two individuals selected by BNSI (the
"BNFL DIRECTORS") and one individual appointed by MK with the
written approval of DOE (the "OUTSIDE REPRESENTATIVE") who,
absent DOE approval will have had no prior involvement with WGES,
MK, BNSI or their respective parent, subsidiary or affiliated
companies. The Outside Representative will be appointed by MK,
with the written approval of the DOE. Each director will serve
for a one-year term, and will be eligible for re-appointment in
accordance with this subsection (b), provided that MK and BNSI
shall have the right to replace
-7-
<PAGE>
CONFIDENTIAL
their respective appointees at any time subject to the provisions
of the Security Control Agreement referred to in subsection (d)
below. One of the MK Directors will serve as Chairman of the
Board and, not later than the GESCO Closing, Thomas Zarges will
be selected as Chairman. The parties will develop a mutually
acceptable policy on dividends and distributions to be adopted by
the WGES Board.
(c) Officers. The Board will appoint a President and other officers
--------
as desired from time to time. With effect from the GESCO Closing,
the Board will appoint James Gallagher as President. The officers
will have the authority, responsibilities and duties as are
customary for officers holding similar positions with respect to
businesses conducted in corporate form and such additional
authority, responsibilities and duties as the Board may delegate
from time to time. The BNFL Directors will have no vote with
respect to the election, appointment or tenure of any officers.
(d) FOCI and National Security Issues. FOCI shall be addressed
---------------------------------
through a FOCI Negation Plan consisting of a Security Control
Agreement, as reviewed and approved by the DOE (and the DOD as
appropriate), and substantially in the form of Exhibit D (the
"WGES SECURITY CONTROL AGREEMENT").
(e) Approval. All actions of the Board will be taken by majority vote
--------
except that, subject to the provisions of the WGS Security
Control Agreement, the following actions will require the
concurrence of the MK Directors and the BNFL Directors:
(i) disposition or financial encumbrance of all or
substantially all of the property and assets of WGES and
its subsidiaries;
(ii) dissolution, merger or consolidation of WGES or any of its
subsidiaries;
(iii) major financing, which for the purposes of this Agreement
shall mean the incurrence of indebtedness for borrowed
money of WGES and its subsidiaries of more than $2,000,000
in any single transaction or $10,000,000 in the aggregate
for WGES and its subsidiaries taken as a whole; provided
that the concurrence of the BNFL Directors shall not be
required for the approval of any refinancing of any
financing previously approved under this clause (iii) so
long as the amount of the indebtedness is not increased and
the terms of the refinancing are
-8-
<PAGE>
CONFIDENTIAL
no less favorable to WGES or the applicable subsidiary
than the original financing;
(iv) commencement or settlement of major litigation by WGES
or any of its subsidiaries, which for the purposes of
this Agreement means any action or proceeding, whether
involving a court action, arbitration, mediation or
other dispute resolution process, (A) in which the
amount in damages payable by any party may reasonably
be expected to exceed $2,000,000 or (B) may reasonably
be expected to result in any order or other binding
decision that would prevent WGES or any of its
subsidiaries from carrying on any material part of the
WGES Operations;
(v) capital stock transactions, which for the purposes of
this Agreement means transactions involving the
issuance or transfer of any membership interests or
other equity interests in WGES or any of its
subsidiaries or the admission of any other member;
(vi) material changes to the dividend and distribution
policy of WGES;
(vii) material increases in the liabilities of WGES and its
subsidiaries through the submission of bids for new
contracts or the amendment of existing contracts; or
(viii) material changes to the lines of business included in
the WGES Operations.
Appropriate protections will be provided to ensure that funds
are not distributed to MK or its affiliates via contract or
any other mechanism that would frustrate or avoid BNSI's
participation in the gains, profits and losses of WGES and the
WGES Operations as contemplated by this Agreement.
5. WELCO.
-----
5.1 Purpose. The purpose of WELCO will be to acquire and operate the
-------
ESBU Business and to pursue business opportunities related to
commercial nuclear businesses and related matters. With effect from
the ESBU Closing (as defined in Section 6.3(b)) WELCO will
(a) own and operate all properties and assets that constitute the
ESBU Business and are acquired by it under the ESBU Purchase
Agreement, and
-9-
<PAGE>
CONFIDENTIAL
(b) lease and operate those portions of the Science and Technology
Center that are related to the ESBU Business (the "STC"), as
contemplated by Section 5.22 of the ESBU Purchase Agreement.
5.2 Members. BNSI will be the sole member of WELCO. If Interim ESBU is
-------
reorganized as WELCO, MK will transfer to BNSI any membership
interest held by it in Interim ESBU for nominal consideration.
5.3 Management.
----------
(a) Management by Managers. WELCO will be managed by a Mboard of
----------------------
directors or managers (the "BOARD") elected by BNSI and by
officers appointed by the Board.
(b) Board. The size and composition of the Board will be
-----
determined by BNSI. The initial Chairman of the Board will be
John Taylor, the Chief Executive of BNFL.
(c) Officers. The Board will appoint a President and other
--------
officers as required from time to time. With effect from the
ESBU Closing Charles W. Pryor will be appointed as the
President. The officers will have the authority,
responsibilities and duties as are customary for officers
holding similar positions with respect to businesses conducted
in corporate form and such additional authority,
responsibilities and duties as the Board may delegate from
time to time.
(d) FOCI and National Security Issues. The following provisions
---------------------------------
will apply in order to address issues relating to national
security.
(i) WELCO will take appropriate steps to mitigate any FOCI
issues that arise from existing activities included in
the ESBU Operations, including activities at the STC.
If necessary, these steps will include the novation of
any classified contracts to WGS or WGES, as
appropriate.
(ii) WELCO will honor all existing commitments to the DOE
with respect to AP600 technology, including payment
commitments.
(iii) WELCO will comply with applicable U.S. Government
export regulations and will honor all commitments to
the Nuclear
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Regulatory Commission with respect to the nuclear materials
and other licenses currently held as part of the ESBU
Business.
(iv) There will be no common officers between WELCO and WGS.
6. ACQUISITION OF ESBU AND GESCO BUSINESSES.
----------------------------------------
6.1 Division of GESCO Operations. The parties acknowledge that effective
----------------------------
as of the Closing under and as defined in the GESCO Purchase Agreement
(the "GESCO CLOSING") the GESCO Business is to be divided into two
components as follows:
(a) WGS. All assets, properties, rights, obligations and liabilities
---
included in the GESCO Business (including the outstanding shares
of, or other equity interests in, any corporation or other legal
entity in which any of such assets, properties, rights,
obligations and liabilities are held) that arise from, relate to,
or are used in connection with
(i) the Savannah River Management and Operations contract (the
"SAVANNAH RIVER M&O CONTRACT"), including the outstanding
shares of, or other equity interests in, Westinghouse
Savannah River Company, Inc. or any successor entity,
(ii) the Electro-Mechanical Division (the "EMD"),
(iii) the Safety Management Solutions contracts and operations,
including the outstanding shares of, or other equity
interests in, Westinghouse Safety Management Solutions,
Inc. or any successor entity, or
(iv) any other part of the GESCO Business described in Section
------
6.1(b)(ii) below that would otherwise be a part of the WGES
----------
Operations (as defined in Section 6.1(b)) but only to the
--------------
extent that it involves classified defense activities
(collectively the "WGS OPERATIONS").
(b) WGES. All assets, properties, rights, obligations and liabilities
----
included in the GESCO Business (including the outstanding shares
of, or other equity interests in, any corporation or other legal
entity in which any of such assets, properties, rights,
obligations and liabilities are held) that arise from, relate to,
or are used in connection with
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(i) the Safe Sites, WIPP, Anniston, Government Technical
Services Division and West Valley contracts and operations,
or
(ii) any other part of the GESCO Business that is not
specifically identified as part of the WGS Operations and
is not described in clause (i) above but only to the extent
that it does not involve classified defense activities
(collectively the "WGES OPERATIONS").
6.2 Novation. MK and BNFL-USA will use commercially reasonable efforts to
--------
obtain the consent of CBS to a novation of the Asset Purchase
Agreements as follows:
(a) ESBU Purchase Agreement. The parties will implement a novation of
-----------------------
the ESBU Purchase Agreement so that (i) WELCO is substituted as a
party in lieu of WGNH and succeeds to all WGNH's rights and
obligations, (ii) WGNH is released from its obligations, and
(iii) the existing guarantees issued by MK-Delaware, MK, BNFL and
BNFL-USA remain in effect in support of WELCO's obligations.
(b) GESCO Purchase Agreement. The parties will implement a novation
------------------------
of the GESCO Purchase Agreement so that (i) WGS and WGES are
substituted as parties in lieu of WGNH and succeed to all WGNH's
rights and obligations in a manner that is consistent with the
division of the GESCO Business as outlined in Section 6.1, (ii)
-----------
WGNH is released from its obligations, and (iii) the existing
guarantees issued by MK-Delaware, MK, BNFL and BNFL-USA remain in
effect in support of WGS's and WGES's obligations.
6.3 Assignment. If the parties are unable to obtain the consent of CBS to
----------
a novation of the Asset Purchase Agreements as described in Section
-------
6.2 then they will cause WGNH to assign its rights and obligations
---
under the Asset Purchase Agreements as follows:
(a) GESCO Purchase Agreement. No later than the closing date under
------------------------
the GESCO Purchase Agreement (the "GESCO CLOSING DATE")
(i) WGS Operations. WGNH will assign to WGS all WGNH's rights
--------------
and obligations under the GESCO Purchase Agreement that
relate to the WGS Operations and (to the extent permitted
under the GESCO Purchase Agreement) the parties will cause
WGS to assume all such rights and obligations, including the
obligation to pay an appropriate
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portion of the Purchase Price, to accept the
assignment and transfer to it of all the Acquired
Assets, and to assume the Assumed Liabilities (each as
defined in GESCO Purchase Agreement ) that constitute
part of the WGS Operations.
(ii) WGES Operations. WGNH will assign to WGES all WGNH's
---------------
right and obligations under the GESCO Purchase
Agreement that relate to the WGES Operations and (to
the extent permitted under the GESCO Purchase
Agreement) the parties will cause WGES to assume all
such rights and obligations, including the obligation
to pay an appropriate portion of the Purchase Price,
to accept the assignment and transfer to it of all the
Acquired Assets, and to assume the Assumed Liabilities
(each as defined in GESCO Purchase Agreement) that
constitute part of the WGES Operations.
(b) ESBU Purchase Agreement. No later than the closing date
-----------------------
under the ESBU Asset Purchase Agreement (the "ESBU CLOSING
DATE") WGNH will assign to WELCO all WGNH's rights and
obligations under the ESBU Purchase Agreement, and all
personnel being taken and all technology being acquired from
the STC, and (to the extent permitted under the ESBU
Purchase Agreement and the GESCO Purchase Agreement) the
parties will cause WELCO to assume all such rights and
obligations, including the obligation to pay the Purchase
Price and to accept the assignment and transfer to it of all
the Acquired Assets, and to assume the Assumed Liabilities
(each as defined in ESBU Purchase Agreement); provided that,
if necessary, the parties will enter into appropriate
arrangements in order to address FOCI and national security
concerns with respect to any classified defense contracts
included in the STC operations that form part of the
Acquired Assets or the Assumed Liabilities, which
arrangements may involve the novation of those contracts to
WGS or WGES and corresponding financial arrangements to
preserve WELCO's economic interests in such contracts.
(c) Certain Rights. All of the rights, duties and obligations of
--------------
WGNH under the ESBU Purchase Agreement and the GESCO
Purchase Agreement that are not specifically addressed in
this Agreement will be shared equitably among the Companies
in a manner that is consistent with this Agreement.
(d) Closing Dates. MK and BNFL-USA anticipate that the closing
-------------
under the ESBU Purchase Agreement and the GESCO Purchase
Agreement will occur simultaneously. However, the parties
may by mutual agreement permit the closings to occur at
different times.
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6.4 Contribution of Purchase Price to WGS, WGES and WELCO.
-----------------------------------------------------
(a) Subject to the provisions of paragraph (b), no later than the day
before the GESCO Closing Date and the ESBU Closing Date,
respectively, MK and BNSI will provide funds to WGS, WGES and
WELCO to enable them to pay the purchase price under the GESCO
Purchase Agreement and the ESBU Purchase Agreement, as described
in Exhibit A.
---------
(b) All of the contributions contemplated by paragraph (a), and all
other contributions to be made to the Companies under Section 7
---------
or otherwise, are expressly conditioned on the expiration of any
and all applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act relating to the formation of the
Companies and to the acquisition of the ESBU Business or the
GESCO Business.
6.5 Other Actions. The parties will take all such other actions and will
-------------
cause their respective affiliates to take such other actions to cause
WGNH, WGS, WGES and WELCO to perform all obligations to be performed
by them under the GESCO Purchase Agreement or the ESBU Purchase
Agreement, as the case may be.
7. ADDITIONAL CONTRIBUTIONS. The obligations of the parties to make additional
------------------------
contributions to any of the Companies to meet the needs of the Companies for
funding are as follows:
7.1 WGS. MK and BNSI shall be responsible for the cash and other funding
---
requirements of WGS in accordance with the terms of the WGS Agreement.
7.2 WGES. Any contributions required to be made to WGES must be approved
----
by the representatives of both MK and BNSI on the WGES Board and will
be made in proportion to the respective membership interests of WGS
and BNSI, as set forth in Section 4.2.
-----------
7.3 WELCO. BNSI shall be solely responsible for the cash and other funding
-----
requirements of WELCO.
8. FINANCIAL ARRANGEMENTS.
----------------------
8.1 Replacement of Letters of Credit etc. The parties acknowledge that CBS
------------------------------------
and certain of its affiliates are presently obligated under certain
letters of credit, performance bonds and similar obligations issued in
connection with the ESBU Business and the GESCO Business (the
"OUTSTANDING LETTERS OF CREDIT AND BONDS"), and that WGNH is obligated
under the ESBU Purchase Agreement and the GESCO Purchase
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Agreement to replace the Outstanding Letters of Credit and Bonds with
substitute financial arrangements at closing. The responsibility of
the parties to accomplish this will be allocated as follows:
(a) WGS. MK and BNSI will jointly replace each of the Outstanding
---
Letters of Credit and Bonds that secure or support obligations
that arise from the WGS Operations with substitute financial
arrangements on or before the GESCO Closing Date and will provide
such credit support, including guarantees from MK and BNSI or
their respective affiliates, as may be necessary to put such
substitute financial arrangements into effect, in accordance with
the terms of the WGS Agreement.
(b) WGES. MK and BNSI will jointly replace each of the Outstanding
----
Letters of Credit and Bonds that secure or support obligations
that arise from the WGES Operations with substitute financial
arrangements on or before the GESCO Closing Date and will provide
such credit support, including guarantees from MK and BNSI or
their respective affiliates, as may be necessary to put such
substitute financial arrangements into effect; provided that the
costs and liabilities of such actions and arrangements shall be
shared between MK and BNSI on a 60/40 basis.
(c) WELCO. BNSI will replace each of the Outstanding Letters of
-----
Credit and Bonds that secure or support obligations that arise
from the ESBU Operations with substitute financial arrangements
on or before the ESBU Closing Date and will provide such credit
support, including guarantees from BNSI or its affiliates, as may
be necessary to put such substitute financial arrangements into
effect.
8.2 Support for Additional Financing. If any of WGS, WGES or WELCO wishes
--------------------------------
to incur any indebtedness from any third party and in order to obtain
such financing a guarantee or other form of credit support is required
then the responsibilities of the parties to provide such guarantees or
other support are as follows.
(a) WGS. MK and BNSI shall be responsible for providing guarantees or
---
other credit support for WGS, and for the costs and liabilities
of such actions and arrangements, in accordance with the terms of
the WGS Agreement.
(b) WGES. MK and BNSI shall be jointly responsible for providing
----
guarantees or other credit support for WGES, and any costs and
liabilities of such actions and arrangements shall be shared
between MK and BNSI on a 60/40 basis.
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(c) WELCO. BNSI shall be responsible for providing guarantees or
-----
other credit support for WELCO.
9. TEAMING.
-------
9.1 General. The parties recognize that each of them and their affiliates
-------
as well as the Companies have complementary strengths with respect to
the performance of services for the DOE and the DOD and that is in
their mutual interest to cooperate in order to enhance the position of
the Companies in bidding on DOE and DOD contracts.
9.2 Cooperation. Subject to national security requirements, export
-----------
controls, FOCI mitigation plans and contracting requirements (the
"GOVERNMENTAL REQUIREMENTS"), the parties will cause the Companies to
cooperate in order to ensure their ability to draw upon the full
portfolio of current resources in commercial, DOE, DOD, scientific and
technical consulting and laboratory services. In recognition of the
fact that WELCO may possess personnel and technology resources which
could benefit the implementation of existing and future WGS and WGES
contracts, such cooperation will include WELCO's commercially
reasonable efforts, in accordance with this Section 9 and with Section
--------- -------
10, to make available such personnel and technology resources to
--
support WGS and WGES and their subsidiaries and divisions in the
conduct of government business. It is the intention of the parties to
share lessons learned in operational know-how and technology
applications through personnel transfers, case studies and status
seminars in a manner that is consistent with the provisions of this
Agreement.
9.3 Certain Defense and Other Programs. WGS, WGES and WELCO will
----------------------------------
cooperate, subject to Governmental Requirements and pursuant to
appropriate commercial arrangements to be negotiated in good faith, to
support WELCO's participation in Defense Program initiatives.
9.4 Bidding. Subject to Governmental Requirements and other applicable
-------
law, WGS and WGES in the areas of business respectively assigned to
them will be the preferred vehicle for bidding primary Management and
Operations and Management and Integration contracts on DOE and DOD
sites with the objective of growing the value and enhancing the
competitiveness of WGS and WGES consistent with the interests of MK
and BNFL-USA. If MK and BNFL-USA agree that it would not be
advantageous or consistent with their interests to bid a specific
contract through WGS or WGES, as the case may be, they shall agree on
the appropriate vehicle for jointly bidding such contract, subject to
the following sentence. If either MK or BNFL-USA believes that jointly
bidding a specific contract (using any vehicle)
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would potentially have a material adverse impact on MK or BNFL-USA,
then and only after MK and BNFL have attempted to resolve and have
been unable to resolve any differences of opinion regarding the
potential for material adverse impact, will MK or BNFL-USA (or their
respective affiliates) be free to bid that contract directly or in
concert with a different partner or partners, and WGS and WGES will
not bid. Any disputes with respect to this Section 9.4 will be
-----------
resolved pursuant to the procedures set forth in Section 12.
----------
9.5 MK Preferred Provider of EPCM and Facilities O&M Services. Subject to
---------------------------------------------------------
Governmental Requirements and other applicable law, MK shall be the
preferred supplier to WELCO (and to WELCO's customers where WELCO has
the right to choose its customer's suppliers) for planning,
constructing, demonstrating, operating, maintaining, repairing, and
upgrading nuclear power generation facilities and facilities of any
kind in connection with WELCO's commercial nuclear and/or steam
operations to the extent WELCO intends to contract with any party for
such services (hereinafter referred to as "EPCM/O&M SERVICES").
Accordingly, WELCO will negotiate with MK in good faith (and will
recommend MK and seek to encourage its customers to so negotiate with
MK) to provide EPCM/O&M Services that MK is qualified to perform. If
WELCO desires to competitively bid EPCM/O&M Services and MK is
qualified to perform such EPCM/O&M Services, MK shall have the right
to perform such EPCM/O&M Services at the same price and subject to the
same terms and conditions as the terms and conditions of a bona fide
bid by a competitive bidder that WELCO would otherwise contract with
to perform such services. If WELCO does not believe MK is qualified to
perform such EPCM/O&M Services then the matter will be resolved
pursuant to the procedures set forth in Section 12. The foregoing
----------
provisions of this Section 9.5 do not apply to the extent such
-----------
EPCM/O&M Services are subject to statutory and/or regulatory
requirements mandating competitive bidding and prohibiting the
exercise by MK of such right. In addition, the arrangements between MK
and BNFL-USA provided for in this Section 9.5 are subject to
-----------
arrangements, existing on the Closing Date, of WELCO or its
predecessors or affiliates.
9.6 General and Administrative Services. It is the intention of the
-----------------------------------
parties that, subject to Governmental Requirements and pursuant to
appropriate commercial arrangements to be negotiated in good faith,
WGS, WGES and WELCO should share certain general and administrative
services in order to provide such services in the most efficient and
cost-effective manner.
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9.7 Employees.
---------
(a) The parties acknowledge that they have committed to the DOE not
to make any changes to the management teams of WGS or WGES except
as provided in a Transition Agreement to be entered into between
the Companies and the DOE (the "TRANSITION AGREEMENT").
(b) In order to support the performance of all DOD and DOE contracts,
MK and BNSI will promote the free transferability of employees
between the Companies, subject in all cases to applicable
Governmental Requirements and the reasonable commercial
requirements of the Companies and after consultation with the DOD
or the DOE, as the case may be.
(c) Subject to the provisions of the Transition Agreement, if
applicable, MK and BNSI will endeavor to keep the benefit
arrangements for employees of the Companies similar to each
other, portable and competitive.
(d) Subject at all times to the Governmental Requirements, WGS, WGES
and WELCO shall establish an advisory committee made up of
representatives chosen by each of the three Companies (the "HUMAN
RESOURCES COMMITTEE") to discuss and provide non-binding
recommendations to their respective presidents concerning the
availability of WELCO personnel to assist WGS and WGES, taking
into account the Governmental Requirements and the needs of the
Companies. The Human Resources Committee shall
(i) meet at least once each quarter, and at such other times as
they may mutually agree, for the purpose of discussing
anticipated personnel requirements and the availability of
such personnel for the ensuing 12 months, or for such other
periods as they may mutually agree,
(ii) make recommendations, if any, to their respective
presidents concerning the transfer or secondment of WELCO
personnel, subject to the Governmental Requirements, and
(iii) provide reports to the presidents of the Companies on such
personnel matters on at least a quarterly basis.
The Companies shall cooperate in carrying out such
recommendations of the Human Resources Committee as may be agreed
to by each respective affected Company, subject to such changes
as the Companies may agree upon and subject to the Governmental
Requirements. Notwithstanding the
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foregoing provisions of this Section 9.7(d) the recommendations
--------------
of the Human Resources Committee shall not be binding on the
Companies, and none of the Companies shall be required to
implement the recommended actions of the Human Resources
Committee if they are on terms that are commercially unreasonable
for that Company.
(e) Any personnel seconded to WGS or WGES pursuant to this Section 9
---------
shall be seconded on a cost pass-through basis, including a
reasonable allocation of overhead.
10. TECHNOLOGY SHARING ARRANGEMENTS.
-------------------------------
10.1 General. The parties recognize that the Companies and their
-------
subsidiaries have technology (including intellectual property) that
may be useful to, or complementary of, the technology of each other.
It is the intention of the parties that the full range of such
technology be reasonably available to the Companies in providing
services to their customers, particularly the DOE and the DOD, in
accordance with this Section 10 and the Governmental Requirements,
----------
including, without limitation, consistent with the technology
transfer mission of DOE and other restrictions and conditions on
licensing and technology transfer contained in the Covered Contracts
specified in the Transition Agreement.
10.2 Cooperation. Subject to the Governmental Requirements and pursuant
-----------
to appropriate commercial arrangements to be negotiated in good
faith, the parties will cause the Companies to cooperate to share
relevant technology to best serve their client interests and goals;
provided, however, that such sharing does not result in the
disclosure of protected technology or intellectual property rights
to third parties or the disclosure of classified information,
special nuclear material, Unclassified Controlled Nuclear
Information, Official Use Only, and/or export controlled data
entrusted to or held by any Company except as permissible pursuant
to the Governmental Requirements, including but not limited to the
NISD and applicable U.S. government laws and regulations. Specific
limitations on such interactions will be addressed in a Technology
Control Plan and Security Control Agreement to be mutually agreed by
the affected Companies and approved by the DOE and (as appropriate)
the DOD. To ensure that relevant technology residing in WELCO is
available to WGES and WGS in the performance of their business and
contractual obligations, WELCO technology will be made available in
accordance with the procedures set forth in Section 10.5.
------------
10.3. CBS Shared Technology Agreements. Subject to the Governmental
--------------------------------
Requirements, the parties and their affiliates will enter into one
or more technology sharing
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arrangements with CBS and certain of its affiliates, and certain
third parties in connection with the transactions contemplated by
the Asset Purchase Agreements (the "CBS SHARED TECHNOLOGY
AGREEMENTS"). In order for WGS, WGES, and WELCO to obtain the
benefit of the technology that is to be licensed thereunder, it will
be necessary for them to enter into appropriate arrangements for the
further sharing or licensing of such technology through sublicense
arrangements which may require the prior approval of CBS (which may
not be unreasonably withheld).
10.4 WELCO Technology. Recognizing that WELCO will possess technology and
----------------
related resources that could benefit the delivery of goods and
services under existing and future WGS and WGES contracts, BNSI
will, and will cause WELCO to, make reasonable efforts to make
available such technology (in compliance with the Governmental
Requirements, confidentiality restrictions, and pre-existing
contractual requirements) to support WGS and WGES, their
subsidiaries, divisions and controlled affiliates, in the
performance of U.S. government business. WELCO will own the AP600
technology (to the extent such technology is currently owned by CBS)
and will abide by all requirements of the existing contracts
regarding such technology that are assumed by WELCO pursuant to the
ESBU Asset Purchase Agreement.
10.5 Procedures for Technology Exchange. Upon specific request and in
----------------------------------
compliance with the Governmental Requirements, WELCO will make
available to WGS and WGES such technology as shall be deemed
reasonably necessary to support WGS or WGES in the performance of
U.S. government business. Likewise, upon specific request and in
compliance with the Governmental Requirements, WGS and WGES will
make available to WELCO such technology as shall be deemed
reasonably necessary to support WELCO's business activities,
including know-how that is or has been used by the EMD in the
manufacture of equipment in connection with the ESBU Business (the
"SPECIFIED EMD KNOW-HOW"). Such requests shall be made by the
applicable Company's representative on the Technology Exchange
Committee ("TEC"), which shall be comprised of designated
representatives from WGS, WGES, and WELCO. The TEC will meet at
least quarterly, or more frequently if requested by a designated
representative. Technology will be made available among the
Companies in accordance with arms-length commercial terms and the
Governmental Requirements and, in the case of the Specified EMD
Know-How, in accordance with the terms of a supplemental agreement
between the parties and together with as much instruction and
training as may reasonably be required to enable WELCO to understand
and utilize such know-how. In the event technology resources
requested are not reasonably available in WELCO or WGES, the members
of TEC will work cooperatively to obtain the desired technology on
acceptable commercial terms from other sources, consistent with the
business goals of the entities represented on TEC.
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WELCO or WGES will not be required to provide technology on
commercially unreasonable terms or contrary to their business
interests.
10.6 Agreements. MK and BNFL-USA will cause their affiliates, including
----------
the Companies, to enter into appropriate agreements to carry out the
purpose of this Section 10.
----------
11. INDEMNIFICATION.
---------------
11.1 Background. The parties acknowledge and agree that
----------
(a) It is their intention to segregate the GESCO Business (which is
in turn divided into the WGS Operations and the WGES
Operations), and the ESBU Business by allocating them to the
Companies as outlined in Section 6.
---------
(b) It is their intention that the exposure of MK, MK-Delaware and
their affiliates to liabilities arising from the GESCO Business
or the ESBU Business, and the exposure of BNFL, BNFL-USA , BNSI
and their affiliates to liabilities arising from the GESCO
Business be limited as set forth herein.
(c) In order to preserve the allocation of liabilities reflected by
such actions, the parties agree that each of the parties and
the Companies and their respective affiliates will be entitled
to indemnification as set forth below.
11.2 First and Second Tier Entities. For the purposes of this Section 11
------------------------------ ----------
(a) MK, BNFL-USA, BNSI and, if applicable, their parent companies
are referred to as "FIRST TIER ENTITIES" and
(b) WGNH, WGS, WGES and WELCO, and their respective subsidiaries,
are referred to as "SECOND TIER ENTITIES".
11.3 Indemnification. With respect to any liability or claim that arises
---------------
from the business or operations of any Second Tier Entity (or any
predecessor):
(a) WGS. In the case of any liability of any kind or nature
---
whatsoever (including liabilities existing on the GESCO Closing
Date) that arises from the business or operations of WGS, WGS
will indemnify and defend MK-Delaware, MK, their affiliates,
BNFL, BNFL-USA, BNSI and their affiliates, WGNH and any other
Second Tier Entities and their affiliates and hold them
harmless against any loss or expense arising from such
liability or claim (including
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reasonable attorneys' fees but excluding consequential damages)
("LOSSES"); provided that
(i) there shall be excluded from indemnification any Loss
that is reflected in a reduction in the value of any
equity interest in WGS held by MK or its affiliates or in
the amounts payable to BNSI under the WGS Agreement, and
(ii) the assets of WGS that are to be used to make any such
indemnification payments shall in any event exclude its
membership interest in WGES and any dividends,
distributions or other payments received by WGS, or
payable to WGS, with respect to such interest.
If the assets of WGS are insufficient to perform the required
indemnification and defense BNFL-USA and MK will make
appropriate payments to each other and their respective
affiliates such that MK and its affiliates, on the one hand,
and BNFL-USA and its affiliates, on the other hand, (taking
into account their economic participation in the Second Tier
Entities) share any Losses as provided in the WGS Agreement and
otherwise on a 60/40 basis.
(b) WGES. In the case of any liability of any kind or nature
----
whatsoever (including liabilities existing on the GESCO Closing
Date) arising from the business or operations of WGES, WGES
will indemnify and defend MK-Delaware, MK, their affiliates,
BNFL, BNFL-USA, BNSI and their affiliates, WGNH and any other
Second Tier Entities and their affiliates and hold them
harmless against any Losses, provided that there shall be
excluded from indemnification any Loss that is reflected in a
reduction in the value of any equity interest in WGES held by
MK or BNFL-USA, BNSI or their affiliates. If the assets of
WGES, as the case may be, are insufficient to perform the
required indemnification and defense, BNFL-USA and MK will make
appropriate payments to each other and their respective
affiliates such that MK and its affiliates, on the one hand,
and BNFL-USA and its affiliates, on the other hand, (taking
into account their economic participation in the Second Tier
Entities) share any Losses on a 60/40 basis.
(c) WELCO. In the case of any liability of any kind or nature
-----
whatsoever (including liabilities existing on the ESBU Closing
Date) that arises from the business or operations of WELCO,
WELCO will indemnify and defend MK-Delaware, MK, their
affiliates, WGNH and any other Second Tier Entities and their
affiliates and hold them harmless against any Losses. If the
assets of WELCO are insufficient to perform the required
indemnification
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and defense, BNFL-USA will indemnify, defend and hold harmless
MK-Delaware, MK, and their affiliates, and WGNH and any other
Second Tier Entities and their affiliates.
11.4 Limitations. The provisions of this Section 11 shall be perpetual.
----------- ----------
11.5 Notice and Cooperation. Any party that has, or believes that it may
----------------------
have, a claim for indemnification or other right to payment under
this Section 11 will give prompt written notice to the other party
----------
and other relevant parties of the event or circumstances giving rise
to such claim. The parties will cooperate with each other and their
affiliates in the investigation and defense of any liability or claim
that may be the subject of this Section 11. Any disputes will be
----------
resolved as provided in Section 12.
----------
12. DISPUTE RESOLUTION.
------------------
12.1 All disputes with respect to any matters that are the subject of this
Agreement will, In the first instance, be referred to the Chief
Executive Officers ("CEO'S") of MK-Delaware and BNFL as
representatives of their respective companies.
12.2 If the dispute cannot be resolved by the CEO's within 60 days after
it is referred to them, then either party may initiate mediation of
the dispute in accordance with the Center for Public Resources Model
Procedure for Mediation of Business Disputes.
12.3 If the dispute has not been resolved within 60 days after the
initiation of the mediation procedure, or if either party will not
participate in a mediation, it will then be subject to binding
arbitration under the rules of the International Chamber of Commerce
at a mutually agreeable venue. If MK and BNFL-USA are unable to agree
on a venue, the arbitration will take place at a neutral site other
than the United States or the United Kingdom.
13. TERMINATION. This Agreement will terminate automatically upon the
-----------
termination, for any reason, of the ESBU Purchase Agreement or the GESCO
Purchase Agreement. In addition, this Agreement, except for the provisions
of Sections 11, 12, 14, and 15 hereof, shall terminate on the earliest date
on which either BNFL or MK, directly or through one or more of their
respective Affiliates, (i) no longer holds an interest in WGS and (ii) no
longer holds an interest in WGES.
-23-
<PAGE>
CONFIDENTIAL
14. CONFIDENTIAL INFORMATION.
------------------------
14.1 The parties acknowledge that in order to carry out the purposes of
this Agreement it will be necessary for them to disclose to the other
party, and to its affiliates, confidential and proprietary
information of the disclosing party or its affiliates.
14.2 Each party will take reasonable actions to identify to the other
party any information that is confidential or proprietary, which will
include marking or identifying such information (in whatever form it
may be embodied) as "Confidential". All such information is referred
to as "CONFIDENTIAL INFORMATION".
14.3 Each party will treat the other party's Confidential Information as
confidential, will not disclose it to any other person (other those
of its and its affiliates' officers, directors and representatives
who need to know such information for the purpose of carrying out the
transactions contemplated by this Agreement) or use it for any
purpose other than carrying out the transactions contemplated by this
Agreement.
14.4 The restrictions imposed under this Section 14 shall remain in effect
----------
(a) with respect to any Confidential Information that constitutes a
"trade secret" (as defined under the laws of the State of New
York) of the disclosing party, so long as it remains a trade
secret,
(b) with respect to other Confidential Information, so long as the
parties jointly hold interests in any of the GESCO Business,
whether through their respective investments in any of the
Companies or otherwise and until the third anniversary of the
date on which any such joint ownership is terminated.
14.5 The restrictions imposed under this Section 14 shall not apply to
----------
any Confidential Information that
(a) at the time of disclosure is available in the public domain or
is known to the receiving party without breach of any
obligation of confidentiality,
(b) is subsequently disclosed by a third party to the receiving
party without any obligation of confidentiality, or
(c) is independently developed by the receiving party without
breach of any obligation of confidentiality.
-24-
<PAGE>
CONFIDENTIAL
15. MISCELLANEOUS.
-------------
15.1 Cooperation Prior to Closing. During the period between execution of
----------------------------
this Agreement and the ESBU and GESCO Closing Dates, MK and BNFL-USA
will consult regularly with respect to matters arising under the ESBU
Purchase Agreement and/or the GESCO Purchase Agreement. Initiating
formal disputes, challenges or allegations of breach against CBS
under such agreements will require the agreement of MK and BNFL-USA.
15.2 Integration. Reference is made to the limited liability company
-----------
agreements for WGS and WGES and the WGS Agreement, each dated as of
even date herewith and executed by the parties or their affiliates
(collectively, the "RELATED AGREEMENTS"). The parties acknowledge
that (a) this Agreement supersedes the Original Agreement and all
other prior understandings and agreements between them or their
parent companies with respect to the subject matter hereof, (b) the
Related Agreements are consistent with the intent and purpose of this
Agreement, and (c) to the extent that the provisions of this
Agreement conflict with the provisions of any of the Related
Agreements, the provisions of the Related Agreements shall control
the relationship between the parties to the Related Agreements.
15.3 Governing Law. This Agreement is governed by and shall be construed
-------------
in accordance with the law of the State of New York, without regard
to the principles of conflicts of laws.
15.4 Assignment. No party shall have the right to assign all or any part
----------
of its rights or obligations under this Agreement without the written
consent of the other party. This Agreement shall be binding upon and
enure to the benefit of the parties and their respective permitted
successors and assigns.
15.5 No Third Party Beneficiaries. Except for the Companies, this
----------------------------
Agreement is not intended to create any rights in any person that is
not a party to this Agreement.
15.6 No Partnership. The parties do not intend to create, and this
--------------
Agreement shall not be deemed to create, a partnership or agency
relationship or any fiduciary duties between MK and BNFL-USA or any
of their affiliates.
-25-
<PAGE>
CONFIDENTIAL
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers or agents, all as of
the day and year first above written.
MK MORRISON KNUDSEN CORPORATION
By: /s/
----------------------------
Name:
Title:
BNFL-USA BNFL USA GROUP INC.
By: /s/
-------------------------
Name:
Title:
-26-
<PAGE>
CONFIDENTIAL
EXHIBITS AND SCHEDULES
The Registrant agrees to provide the Securities and Exchange Commission,
upon request, with copies of Exhibits and or Schedules hereto.
-27-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ACCOMPANYING CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
FOOTNOTES OF MORRISON KNUDSEN CORPORATION FOR THE QUARTER ENDED FEBRUARY 26,
1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT FOOTNOTES.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-START> DEC-01-1998
<PERIOD-END> FEB-26-1999
<CASH> 28,823
<SECURITIES> 0
<RECEIVABLES> 164,342
<ALLOWANCES> (7,628)
<INVENTORY> 0
<CURRENT-ASSETS> 395,259
<PP&E> 230,244
<DEPRECIATION> (151,146)
<TOTAL-ASSETS> 751,978
<CURRENT-LIABILITIES> 260,905
<BONDS> 0
0
0
<COMMON> 544
<OTHER-SE> 374,361
<TOTAL-LIABILITY-AND-EQUITY> 751,978
<SALES> 0
<TOTAL-REVENUES> 421,310
<CGS> 0
<TOTAL-COSTS> (400,525)
<OTHER-EXPENSES> (8,740)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (167)
<INCOME-PRETAX> 15,197
<INCOME-TAX> (6,306)
<INCOME-CONTINUING> 8,891
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,891
<EPS-PRIMARY> .17
<EPS-DILUTED> .00
</TABLE>
