SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000
OR
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 1-475
A.O. SMITH CORPORATION
Delaware 39-0619790
(State of Incorporation) (IRS Employer ID Number)
P. O. Box 23972, Milwaukee, Wisconsin 53223-0972
Telephone: (414) 359-4000
Securities registered pursuant to Section 12(b) of the Act:
Shares of Stock Outstanding Name of Each Exchange on
Title of Each Class January 31, 2001 Which Registered
- ------------------- --------------------------- ------------------------
Class A Common Stock 8,687,425 American Stock Exchange
(par value $5.00 per share)
Common Stock 14,861,714 New York Stock Exchange
(par value $1.00 per share)
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of voting stock held by nonaffiliates of the
registrant was $10,077,811 for Class A Common Stock and $188,286,466 for Common
Stock as of January 31, 2001.
Documents Incorporated by Reference:
1. Portions of the company's definitive Proxy Statement for the 2001 Annual
Meeting of Stockholders (to be filed with the Securities and Exchange
Commission under Regulation 14A within 120 days after the end of the
registrant's fiscal year and, upon such filing, to be incorporated by
reference in Part III).
PART 1
ITEM 1 - BUSINESS
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A. O. Smith Corporation serves customers worldwide and consists of two segments,
Electric Motor Technologies and Water Systems Technologies. The company's
Electric Motors business is one of North America's largest manufacturers of
fractional horsepower, integral horsepower Alternating Current (A/C) and Direct
Current (D/C), and hermetic electric motors. The Water Systems business is a
leading manufacturer of residential and commercial gas and electric water
heating equipment and copper tube boilers.
On December 8, 2000 A. O. Smith sold its fiberglass products business to Varco
International Corporation. On January 10, 2001, the company sold its engineered
storage products business to CST Industries. The sale of these two businesses
completed the divestiture of the company's Storage and Fluid Handling business
segment announced in January 2000. Net cash proceeds from the divestitures will
total approximately $62 million. The operating results of the fiberglass
products and the engineered storage products businesses have been reported
separately as discontinued operations in the accompanying financial statements.
See Note 3 to the Consolidated Financial Statements, entitled "Discontinued
Operations" which appears elsewhere herein.
The following table summarizes sales by segment for the company's operations.
This segment summary and all other information presented in this section should
be read in conjunction with the Consolidated Financial Statements and the Notes
thereto, which appear elsewhere herein.
Years Ended December 31 (dollars in millions)
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Electric Motor Technologies $ 902.4 $ 735.0 $487.4 $397.7 $343.2
Water Systems Technologies 345.5 335.3 313.4 305.4 310.8
----- ----- ----- ----- -----
Total Continuing Operations $1,247.9 $1,070.3 $800.8 $703.1 $654.0
======= ======== ====== ====== ======
ELECTRIC MOTOR TECHNOLOGIES
Segment sales increased $167 million or 23 percent in 2000 to $902 million and
represented 72 percent of total sales from continuing operations. The increase
in sales in 2000 was due to the acquisition of the MagneTek, Inc. (MagneTek)
electric motor business in August 1999.
A. O. Smith Electrical Products Company manufactures hermetic motors that are
sold worldwide to manufacturers of air conditioning and commercial refrigeration
compressors; fractional horsepower fan motors used in furnaces, air
conditioners, and blowers; fractional horsepower motors for pumps for home water
systems, swimming pools, hot tubs, and spas; and fractional horsepower motors
used in other consumer products (such as garage door openers); and integral
horsepower A/C and D/C motors for industrial and commercial applications. Sales
to the heating, ventilating, air conditioning, and refrigeration market account
for approximately 60 percent of segment sales.
2
A. O. Smith Electrical Products Company sells directly to original equipment
manufacturers (OEMs) and also markets its products through a distributor
network, which sells to smaller OEMs and the after-market. The company estimates
that approximately 60 percent of the market is derived from the less cyclical
replacement business with the remainder being impacted by general business
conditions in the new construction market.
The segment's principal products are sold in competitive markets with its major
competitors being Emerson Electric, General Electric, Fasco, Jakel, and
vertically integrated customers.
WATER SYSTEMS TECHNOLOGIES
A. O. Smith Water Products Company had 2000 sales of $346 million, approximately
three percent higher than 1999 sales of $335 million and represented 28 percent
of total sales from continuing operations.
Domestic residential water heater sales in 2000 were $176 million or
approximately 51 percent of segment revenues. The company markets residential
gas and electric water heaters through a network of plumbing wholesalers in the
United States and Canada. The majority of the company's sales are in the less
cyclical replacement market, although the new housing market is also an
important portion of the business. The residential water heater market remains
highly competitive. A. O. Smith competes with four other manufacturers in
supplying over 90 percent of market requirements. The principal competitors of
the Water Products business are Rheem Manufacturing, State Industries, The
American Water Heater Group, and Bradford-White.
The company also markets commercial water heating equipment through a network of
plumbing wholesalers in the United States and Canada. A. O. Smith's Water
Products business is the largest manufacturer of storage commercial water
heaters in North America. Commercial water heaters are used in a wide range of
applications including schools, nursing homes, hospitals, prisons, hotels,
motels, laundries, restaurants, stadiums, amusement parks, car washes, and other
large users of hot water. The commercial market is characterized by competition
from a broader range of products and competitors than occurs in the residential
market. The majority of commercial sales are derived from the less cyclical
replacement market with the remainder being impacted by general business
conditions in the commercial construction market.
In 1995, Water Products established a joint venture in China to manufacture
instantaneous and storage type heaters for the Chinese market. A. O. Smith
acquired its partner's interest during the fourth quarter of 1998 and began
reporting the Chinese subsidiary's financial results on a consolidated basis
effective January 1, 1999. Sales in China have grown to $25 million in 2000
compared with sales of $13 million in 1999.
3
RAW MATERIAL
Raw materials for the company's operations, which consist primarily of steel,
copper, and aluminum are generally available from several sources in adequate
quantities. The company hedges the majority of its annual copper purchases to
protect against price volatility.
SEASONALITY
There is no significant seasonal pattern to the company's consolidated quarterly
sales and earnings.
RESEARCH AND DEVELOPMENT, PATENTS, AND TRADEMARKS
In order to improve competitiveness by generating new products and processes,
the company conducts research and development at its Corporate Technology Center
in Milwaukee, Wisconsin as well as at its operating units. Research and
development costs for continuing operations in 2000, 1999, and 1998, were
approximately $24.5, $23.9, and $19.4 million, respectively.
The company owns and uses in its businesses various trademarks, trade names,
patents, trade secrets, and licenses. While a number of these are important to
the company, it does not consider a material part of its business to be
dependent on any one of them.
EMPLOYEES
The company and its subsidiaries employed approximately 13,800 persons in its
continuing operations as of December 31, 2000.
BACKLOG
Normally, none of the company's operations sustain significant backlogs.
ENVIRONMENTAL LAWS
The company's operations are governed by a variety of federal, state, and local
laws intended to protect the environment. While environmental considerations are
a part of all significant capital expenditures, compliance with the
environmental laws has not had a material effect and is not expected to have a
material effect upon the capital expenditures, earnings, or competitive position
of the company. See Item 3 - Legal Proceedings.
FOREIGN SALES
Total U. S. export sales from continuing operations were $62 million, $46
million, and $39 million in 2000, 1999, and 1998, respectively.
4
ITEM 2 - PROPERTIES
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The company manufactures its products in 37 plants worldwide. These facilities
have an aggregate floor space of 5,321,799 square feet, consisting of 3,501,746
square feet owned by the company and 1,820,053 square feet of leased space.
Twenty-two of the company's facilities are foreign plants with 2,125,077 square
feet of space, of which 1,187,313 square feet are leased.
Excluded from the above totals are 1,132,000 square feet of domestic and 25,000
square feet of foreign space occupied by the company's Storage & Fluid Handling
Technologies businesses, which the company has announced as sold in January
2001. The manufacturing plants presently operated by the company's continuing
operations are listed below by industry segment.
United States Foreign
------------- -------
Electric Motor Alta Vista, VA Acuna, Mexico;
Technologies McMinnville, TN; Mebane, NC; Bray, Ireland;
(3,672,707 sq. ft.) Monticello, IN; Mt. Sterling, KY; Budapest, Hungary;
Owosso, MI; Paoli, IN; Gainsborough, England;
Ripley, TN; Scottsville, KY; Juarez, Mexico (11);
Tipp City, OH; Upper Sandusky, OH Monterrey, Mexico(2)
Water Systems El Paso, TX; Florence, KY; Juarez, Mexico;
Technologies McBee, SC; Renton, WA Nanjing, People's
(1,649,092 sq. ft.) Republic of China;
Stratford, Canada(2);
Veldhoven,
The Netherlands
The principal equipment at the company's facilities consist of presses, welding,
machining, slitting, and other metal fabricating equipment, winding machines,
and furnace and painting equipment. The company regards its plants and equipment
as well-maintained and adequate for its needs. Multishift operations are used
where necessary.
In addition to its manufacturing facilities, the company's World Headquarters
and Corporate Technology Center are located in Milwaukee, Wisconsin. The company
also has offices in Alsip, Illinois; El Paso, Texas; Irving, Texas; London,
England; St. Louis, Missouri; and Singapore.
ITEM 3 - LEGAL PROCEEDINGS
- --------------------------
The company is involved in various unresolved legal actions, administrative
proceedings, and claims in the ordinary course of its business involving product
liability, property damage, insurance coverage, patents, and environmental
matters including the disposal of hazardous waste. Although it is not possible
to predict with certainty the outcome of these unresolved legal actions or the
range of possible loss or recovery, the company believes these unresolved legal
actions will not have a material effect on its financial position or results of
operations. A more detailed discussion of these matters appears in Note 12 of
the Notes to Consolidated Financial Statements.
5
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
No matters were submitted to a vote of the security holders during the fourth
quarter of 2000.
EXECUTIVE OFFICERS OF THE COMPANY
- ---------------------------------
Pursuant to General Instruction of G(3) of Form 10-K, the following is a list of
the current executive officers which is included as an unnumbered Item in Part I
of this report in lieu of being included in the company's Proxy Statement for
its 2001 Annual Meeting of Stockholders.
ROBERT J. O'TOOLE
- -----------------
Chairman of the Board of Directors, President and Chief Executive Officer
Mr. O'Toole, 60, became chairman of the board of directors in March 1992. He
is a member of the Investment Policy Committee of the board of directors. He
was elected chief executive officer in March 1989. He was elected president,
chief operating officer, and a director in 1986. Mr. O'Toole joined the
company in 1963. He is a director of Briggs & Stratton Corporation and Factory
Mutual Insurance Company.
GLEN R. BOMBERGER
- -----------------
Executive Vice President
Mr. Bomberger, 63, has been a director and executive vice president of the
company since 1986. He was chief financial officer from 1986 through August
2000. He is a member of the Investment Policy Committee of the board of
directors. Mr. Bomberger joined A. O. Smith in 1960. He is currently a
director of Smith Investment Company and Firstar Funds, Inc.
JOHN A. BERTRAND
- ----------------
Senior Vice President and President - A. O. Smith Electrical Products Company
Mr. Bertrand, 62, has been president of A. O. Smith Electrical Products
Company, a division of the company, since 1986. He was elected senior vice
president in October 1999. Mr. Bertrand joined the company in 1960.
CHARLES J. BISHOP
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Vice President - Corporate Technology
Dr. Bishop, 59, has been vice president-corporate technology since 1985. Dr.
Bishop joined the company in 1981.
MICHAEL J. COLE
- ---------------
Vice President - Asia
Mr. Cole, 56, was elected vice president-Asia in March 1996. Previously he was
vice president-emerging markets of Donnelly Corporation, an automotive
supplier.
6
JOHN J. KITA
- ------------
Vice President, Treasurer and Controller
Mr. Kita, 45, was elected vice president, treasurer and controller in April
1996. From 1995 to 1996 he was treasurer and controller. Prior thereto, he
served as assistant treasurer since he joined the company in 1988.
KENNETH W. KRUEGER
- ------------------
Senior Vice President and Chief Financial Officer
Mr. Krueger, 44, became senior vice president and chief financial officer in
August 2000. Previously he was a group vice president, finance and business
planning at Eaton Corporation. Prior to Eaton, he was vice president, finance
for Rockwell Automation, where he worked from 1983 to 1999.
RONALD E. MASSA
- ---------------
Senior Vice President and President - A. O. Smith Water Products Company
Mr. Massa, 51, became president of A. O. Smith Water Products Company, a
division of the company, in February 1999. He was elected senior vice
president in June 1997. He served as the president of A. O. Smith Automotive
Products Company, a former division of the company, from June 1996 to April
1997. He was the president of A. O. Smith Water Products Company from 1995 to
June 1996 and held other management positions in the Water Products Company
prior thereto. He joined the company in 1976.
ALBERT E. MEDICE
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Vice President - Europe
Mr. Medice, 58, was elected vice president-Europe in 1995. Previously, from
1990 to 1995, he was the general manager of A. O. Smith Electric Motors
(Ireland) Ltd., a subsidiary of the company. Mr. Medice joined A. O. Smith in
1986 as vice president-marketing for its Electrical Products Company division.
EDWARD J. O'CONNOR
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Vice President - Human Resources and Public Affairs
Mr. O'Connor, 60, has been vice president-human resources and public affairs
for the company since 1986. He joined A. O. Smith in 1970.
STEVE W. RETTLER
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Vice President - Business Development
Mr. Rettler, 46, was elected vice president-business development in July 1998.
Previously he was vice president and general manager of Brady Precision Tape
Co., a manufacturer of specialty tape products for the electronics market.
W. DAVID ROMOSER
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Vice President, General Counsel and Secretary
Mr. Romoser, 57, was elected vice president, general counsel and secretary in
March 1992.
7
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
- --------------------------------------------------------------------------
MATTERS
- -------
(a) Market Information. The Common Stock is listed on the New York Stock
Exchange. The Class A Common Stock of A. O. Smith Corporation is listed on
the American Stock Exchange. The symbols for these classes of the company's
stock are: AOS for the Common Stock and SMCA for the Class A Common Stock.
Wells Fargo Bank Minnesota, N.A., P. O. Box 64854, St. Paul, Minnesota
55164-0854 serves as the registrar, stock transfer agent, and the dividend
reinvestment agent for both classes of the company's common stock.
Quarterly Common Stock Price Range
2000 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
---- -------- -------- -------- ---------
Common Stock
High 23-1/8 22-13/16 21-3/8 17-1/4
Low 14-15/16 17-13/16 11-3/16 12-1/2
Class A Common
High 22 22-7/16 17-1/4 16-7/8
Low 15-1/2 17-7/8 12 12-3/4
1999 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
---- -------- -------- -------- ---------
Common Stock
High 26-7/16 28 32 31-9/16
Low 19 19 25-1/2 18-13/16
Class A Common
High 25-11/16 25-9/16 31-1/2 31
Low 19-5/16 19-3/16 26-1/8 19-3/16
(b) Holders. As of January 31, 2001, the number of shareholders of record
of Common Stock and Class A Common Stock were 1,205 and 522
respectively.
(c) Dividends. Dividends paid on the common stock are shown in Note 14 to
the Consolidated Financial Statements appearing elsewhere herein. The
company's credit agreements contain certain conditions and provisions
which restrict the company's payment of dividends. Under the most
restrictive of these provisions, retained earnings of $62.3 million
were unrestricted as of December 31, 2000.
(d) Stock Repurchase Authority. As of February 20, 2001, approximately 8.5
million shares of Class A Common Stock and Common Stock had been
repurchased for $212.5 million under three stock repurchase
authorizations granted by the Board of Directors in 1997.
8
ITEM 6 - SELECTED FINANCIAL DATA
- --------------------------------
(Dollars in Thousands, except per share amounts)
Years ended December 31(1)
--------------------------------------------------------------------------------------
2000 1999 (2) 1998 (3) 1997 (4) 1996
------ ---- ---- ----- ----
Net sales - continuing operations $ 1,247,945 $ 1,070,339 $ 800,803 $ 703,050 $ 654,040
Earnings
Continuing operations 41,656 50,270 40,656 32,065 19,933
Discontinued operations:
Operating earnings (loss) - (890) 3,835 20,719 45,484
Gain (loss) on disposition (11,903) (6,958) - 101,046 -
------------ ---------- ---------- ---------- ----------
Earnings (11,903) (7,848) 3,835 121,765 45,484
------------ ---------- ---------- ---------- ----------
Net earnings $ 29,753 $ 42,422 $ 44,491 $ 153,830 $ 65,417
============ ========== ========== ========== ==========
Basic earnings (loss) per share
of common stock
Continuing operations $ 1.78 $ 2.17 $ 1.73 $ 1.16 $ .64
Discontinued operations (0.51) (.34) .16 4.41 1.45
------------ ---------- ---------- ---------- ----------
Net earnings $ 1.27 $ 1.83 $ 1.89 $ 5.57 $ 2.09
============ ========== ========== ========== ==========
Diluted earnings (loss) per share
of common stock
Continuing operations $ 1.76 $ 2.11 $ 1.68 $ 1.14 $ .63
Discontinued operations (0.50) (.33) .16 4.32 1.43
------------ ---------- ---------- ---------- ----------
Net earnings $ 1.26 $ 1.78 $ 1.84 $ 5.46 $ 2.06
============ ========== ========== ========== ==========
Cash dividends per common share $ .50 $ .48 $ .47 $ .45 $ .44
December 31
--------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Total assets $ 1,059,176 $ 1,063,986 $ 736,570 $ 682,789 $ 845,199
Long-term debt 316,372 351,251 131,203 100,972 238,446
Total stockholders' equity 448,395 431,084 401,093 399,705 424,639
- --------------------------------------------------------------------------------------------------------------------------
1 The company has accounted for the fiberglass piping, liquid and dry bulk storage and automotive businesses as
discontinued operations in the consolidated financial statements. On December 8, 2000, the company sold its
fiberglass piping business and on January 10, 2001, the company sold its liquid and dry bulk storage business. On
April 18, 1997, the company sold its automotive products business, exclusive of its Mexican automotive affiliate,
and on October 1, 1997, the company sold its 40 percent interest in its Mexican affiliate. See Note 3 to the
consolidated financial statements which appears elsewhere herein.
2 On August 2, 1999, the company acquired the assets of MagneTek, Inc.'s domestic electric motor business and six
wholly owned foreign subsidiaries for $244.6 million. See Note 2 to the consolidated financial statements included
elsewhere herein.
3 On July 1, 1998, the company acquired certain assets of General Electric Company's domestic compressor motor
business for $125.6 million. See Note 2 to the consolidated financial statements included elsewhere herein.
4 On March 31, 1997, the company acquired UPPCO, Incorporated, a manufacturer of subfractional C-frame electric
motors, for $60.9 million.
9
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------------------------------------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
FINANCIAL REVIEW
A. O. Smith Corporation recorded earnings from continuing operations of $41.7
million or $1.76 per share in 2000 compared with $50.3 million or $2.11 per
share in 1999. The Electric Motor Technologies and Water Systems Technologies
segments established new sales records in 2000, and the Water Systems
Technologies segment achieved record earnings. Details of individual segment
performance will be discussed later in the section.
Working capital for continuing operations at December 31, 2000 was $213.0
million compared with $209.8 million and $140.0 million at December 31, 1999 and
1998, respectively. The modest increase in 2000 was due to higher inventories as
a result of weaker HVAC markets. The increase to working capital in 1999 was due
to the acquisition of the assets associated with MagneTek's worldwide motor
operations and higher inventory in anticipation of customer demand in the first
quarter 2000 at Electric Motor Technologies.
Capital expenditures were $40.5 million in 2000 versus $32.8 million in 1999 and
$18.5 million in 1998. The increase in capital spending during 2000 and 1999
occurred in the company's electric motors operation. The company is projecting
2001 capital expenditures of approximately $40 to $45 million. Cash flow during
2001 is expected to adequately cover these capital expenditures.
Long-term debt decreased $34.9 million from $351.3 million at December 31, 1999,
to $316.4 million at December 31, 2000. Likewise, the company's leverage, as
measured by total debt to total capital, fell to 42.2 percent at the end of 2000
compared with 45.6 percent at the end of 1999. In 2000, the company renewed its
$100 million, 364-day revolving credit facility with a group of nine banks.
Barring any acquisitions, the company expects the combination of 2001 cash flow
and the proceeds from the divestiture of its Engineered Storage Products
business will result in a significantly lower leverage ratio at the end of 2001.
A. O. Smith Corporation has paid dividends for 61 consecutive years. The company
paid a total of $.50 per share in 2000 versus $.48 per share in 1999.
RESULTS OF OPERATIONS
Sales from continuing operations in 2000 were $1.25 billion, surpassing 1999
sales of $1.07 billion by $178 million or 17 percent. The increase in sales
resulted from an additional seven months of sales from the August 1999
acquisition of MagneTek motors, or approximately $190 million; and a near
doubling, or an additional $12 million in sales, from the company's Chinese
water heater operation. These increases were partially offset by lower sales in
the company's underlying electric motor business, compared with 1999. Sales in
1999 increased by $270 million compared with 1998, with $210 million of that
increase attributable to electric motor acquisitions in 1998 and 1999. In
addition, $13 million of the increase in 1999 was due to the inclusion of sales
from the Chinese water heater operation, which became wholly owned in December
1998.
The company's gross profit margin for 2000 was 19.9 percent, compared with 21.6
percent and 22.2 percent achieved in 1999 and 1998, respectively. The decline in
gross margin over the three-year period was due largely to the aforementioned
acquisitions, and the inclusion of the Chinese water heater operation, all of
which carried lower margins compared with their respective base businesses. The
gross margin in 2000 was also adversely affected by less favorable cost
absorption associated with declining volumes in the latter half of the year.
Sales in the Electric Motor Technologies segment in 2000 increased $167 million
or 23 percent to $902 million from 1999 sales of $735 million. Sales in 1998
were $487 million. The incremental seven months of ownership of the MagneTek
motor business in 2000 added approximately $190 million in sales. Excluding
MagneTek, sales in the underlying motor business declined 5 percent due mostly
to a reduction in demand from heating and air conditioning customers confronted
with record levels of finished product inventory. Most of the sales increase
from 1998 to 1999 was the result of the August 1999 MagneTek motor acquisition,
coupled with a full
10
year of sales from the July 1998 acquisition of General Electric's compressor
motor business. Sales in 1999 also benefited from favorable market conditions
for fractional and hermetic motors for heating, ventilating and air conditioning
applications.
Earnings for the Electric Motor Technologies segment in 2000 were $75.5 million
or $3.4 million lower than 1999 operating earnings of $78.9 million. Earnings in
1998 were $56.5 million. The decline in earnings from 1999 to 2000 was due
primarily to the previously mentioned high level of air conditioning
inventories, which adversely affected demand in the last half of the year.
Margins were adversely affected by under-absorbed costs associated with
significant reductions in manufacturing volumes. The 40 percent increase in
earnings from 1998 to 1999 resulted primarily from the higher sales volume due
to acquisitions and growth in the underlying electric motor business.
Sales for Water Systems Technologies increased approximately three percent from
$335 million in 1999 to $346 million in 2000. Sales in 1998 were $313 million.
The increase in 2000 sales was attributable to the Chinese water heater
operation where sales almost doubled over 1999, contributing an additional $12
million. The increase in sales from 1998 to 1999 resulted from the inclusion of
$13 million of sales from the Chinese operation, which became wholly owned in
December 1998, as well as higher commercial and other international sales.
Earnings for Water Systems Technologies were $34.9 million in 2000 reflecting
modest improvement over 1999 earnings of $33.8 million and resulted from
improved performance in China. The earnings improvement from $30 million in 1998
to $33.8 million in 1999 was due to higher gross margins associated with
favorable cost performance in 1999.
On January 21, 2000, the company announced its decision to exit the storage tank
and fiberglass pipe markets, consistent with the company's strategy to expand
its presence in the electric motor and water products markets and to be a
consolidator in those industries. On December 8, 2000, the company sold the
fiberglass piping business, operated as Smith Fiberglass Products Company to
Varco International Corporation. The transaction took the form of the sale of
the majority of the fiberglass piping domestic assets and the sale of the
company's equity interest in its Chinese operation. On January 10, 2001, the
company sold substantially all of the assets of its storage tank business,
Engineered Storage Products Company, to CST Industries. The sale of these
businesses will result in net after-tax proceeds of approximately $62 million.
After-tax losses associated with discontinued operations amounted to $11.9
million and $7.8 million in 2000 and 1999, respectively, and consist mostly of
losses associated with the disposition of these businesses. The 2000 loss also
included an after-tax charge of $4 million related to revised estimates on
certain claims that arose out of the sale of its automotive business in April
1997. Earnings from discontinued operations in 1998 were $3.8 million and
reflect the after-tax earnings from operations of the fiberglass pipe and
storage tank businesses.
Selling, general and administrative (SG&A) expense in 2000 was $154 million, $18
million more than the $136 million recorded in 1999. The increase was due to the
additional SG&A associated with a full year of operating the MagneTek motor
business. SG&A in 1999 increased $31 million over 1998 due to the MagneTek
acquisition and the initial consolidation of the Chinese water products
operation. Relative to sales, SG&A has demonstrated a modestly declining trend
over the last three years.
Interest expense, net of the amount allocated to discontinued operations, was
$22.1 million in 2000 compared with $12.8 million and $5.9 million in 1999 and
1998, respectively. The increases over the three-year period were due primarily
to acquisition-related financings.
Amortization of intangibles has increased steadily to $6.9 million in 2000 from
$5.2 million and $2.5 million in 1999 and 1998, respectively, in connection with
the company's acquisitions in 1998 and 1999.
Other expense in 2000 was $0.3 million and compares with other income of $0.6
million and $2.9 million in 1999 and 1998, respectively. The reduction of income
from 1998 to 1999 and recognition of expense in 2000
11
reflects a decrease in interest income as marketable securities were liquidated
to fund the company's acquisitions.
The company's effective tax rate was 36.0 percent in 2000, 34.8 percent in 1999,
and 34.7 percent in 1998. The rate increased in 2000 as a result of fewer
research tax credits available in 2000 compared with 1999 and 1998.
Outlook
While the HVAC industry has reduced finished goods inventories going into the
new year, it is still too early to know if market demand will materialize as the
cooling season of 2001 begins. The company also believes the slowing domestic
economy and diminished consumer confidence may adversely affect motor sales to
the ventilation and appliance markets as well as its residential water heating
business.
Consequently, the company expects first-half sales and earnings in 2001 will not
reach the record levels generated during the first half of last year. A. O.
Smith is projecting first quarter earnings to range between $.30 and $.40 per
share and believes sales and earnings comparisons to 2000 results should improve
during the second half of the year, enabling it to exceed its 2000 performance.
With the Storage & Fluid Handling divestiture concluded, the company has
completed the transition begun in 1997 of making A. O. Smith into a more
focused, consistently profitable business. The company now consists of two very
competitive business units, and is confident it can continue to expand its size,
scope, and profitability.
OTHER MATTERS
Environmental
The company's operations are governed by a number of federal, state, and local
environmental laws concerning the generation and management of hazardous
materials, the discharge of pollutants into the environment, and remediation of
sites owned by the company or third parties. The company has expended financial
and managerial resources complying with such laws. Expenditures related to
environmental matters were not material in 2000 and are not expected to be
material in any single year. Although the company believes that its operations
are substantially in compliance with such laws and maintains procedures designed
to maintain compliance, there are no assurances that substantial additional
costs for compliance will not be incurred in the future. However, since the same
laws govern the company's competitors, the company should not be placed at a
competitive disadvantage.
Market Risk
The company is exposed to various types of market risks, primarily currency and
certain commodities. The company monitors its risks in such areas on a
continuous basis and generally enters into forward and futures contracts to
minimize such exposures for periods of less than one year. The company does not
engage in speculation in its derivatives strategies. Further discussion
regarding derivative instruments is contained in Note 1 to the Consolidated
Financial Statements.
Commodity risks include raw material price fluctuations. The company uses
futures contracts to fix the cost of its expected needs with the objective of
reducing price risk. Futures contracts are purchased over time periods and at
volume levels which approximate expected usage. At December 31, 2000, the
company had commodity futures contracts amounting to approximately $43 million
of commodity purchases. A hypothetical 10 percent change in the underlying
commodity price of such contracts would have a potential impact of $4.3 million.
It is important to note that gains and losses from the company's futures
contract activities will be offset by gains and losses in the underlying
commodity purchase transactions being hedged.
In addition, the company enters into foreign currency forward contracts to
minimize the effect of fluctuating foreign currencies. At December 31, 2000, the
company had net foreign currency contracts outstanding of
12
approximately $57 million. Assuming a hypothetical 10 percent movement in the
respective currencies, the potential foreign exchange gain or loss associated
with the change in rates would amount to $5.7 million. It is important to note
that gains and losses from the company's forward contract activities will be
offset by gains and losses in the underlying transactions being hedged.
The company's earnings exposure related to movements in interest rates is
primarily derived from outstanding floating rate debt instruments that are
determined by short-term money market rates. At December 31, 2000, the company
had $219 million in outstanding floating rate debt with a weighted average
interest rate of 7.0 percent at year end. A hypothetical 10 percent annual
increase or decrease in the year-end average cost of the company's outstanding
floating rate debt would result in a change in annual pre-tax interest expense
of approximately $1.5 million.
Forward-Looking Statements
Certain statements in this report are "forward-looking statements." These
forward-looking statements can generally be identified as such because the
context of the statement will include words such as the company "believes,"
"anticipates," "estimates," "expects," "projects," or words of similar import.
Although the company believes that its expectations are based upon reasonable
assumptions within the bounds of its knowledge of its business, there can be no
assurance that the results expressed in forward-looking statements will be
realized. Although a significant portion of the company's sales are derived from
the replacement of previously installed product, and such sales are therefore
less volatile, numerous factors may affect actual results and cause results to
differ materially from those expressed in forward-looking statements made by, or
on behalf of, the company. The company considers most important among such
factors, the stability in its electric motor and water products markets, the
timely and proper integration of the MagneTek motors acquisition, and the
implementation of associated cost reduction programs.
All subsequent written and oral forward-looking statements attributable to the
company, or persons acting on its behalf, are expressly qualified in their
entirety by these cautionary statements.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- --------------------------------------------------------------------
See "Market Risk" above.
13
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------
Index to Financial Statements: Form 10-K
Page Number
-----------
Report of Independent Auditors...............................................15
Consolidated Balance Sheets at December 31, 2000 and 1999....................16
For each of the three years in the period ended December 31, 2000:
- Consolidated Statement of Earnings.....................................17
- Consolidated Statement of Comprehensive Income.........................17
- Consolidated Statement of Cash Flows...................................18
- Consolidated Statement of Stockholders' Equity.........................19
Notes to Consolidated Financial Statements................................20-36
14
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
The Board of Directors and Stockholders
A. O. Smith Corporation
We have audited the accompanying consolidated balance sheets of A. O. Smith
Corporation as of December 31, 2000 and 1999, and the related consolidated
statements of earnings, comprehensive income, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 2000. Our
audits also included the financial statement schedule listed in the index at
Item 14(a). These financial statements and schedule are the responsibility of
the company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of A. O. Smith
Corporation at December 31, 2000 and 1999, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2000, in conformity with accounting principles generally accepted
in the United States. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
Ernst & Young LLP
Milwaukee, Wisconsin
January 19, 2001
15
CONSOLIDATED BALANCE SHEETS
December 31 (dollars in thousands)
- ------------------------------------------------------------------------------------------------------------------
2000 1999
- ------------------------------------------------------------------------------------------------------------------
Assets
Current Assets
Cash and cash equivalents $ 15,287 $ 14,761
Receivables 169,117 179,395
Inventories 169,630 163,443
Deferred income taxes 7,215 11,323
Other current assets 22,199 9,300
Net current assets - discontinued operations 22,651 10,405
---------- ----------
Total Current Assets 406,099 388,627
Net property, plant, and equipment 282,835 283,493
Net goodwill and other intangibles 244,821 251,085
Prepaid pension 81,958 64,281
Other assets 25,970 24,709
Net long-term assets - discontinued operations 17,493 51,791
---------- ----------
Total Assets $1,059,176 $1,063,986
========== ==========
Liabilities
- ------------------------------------------------------------------------------------------------------------------
Current Liabilities
Trade payables $ 91,780 $ 81,221
Accrued payroll and benefits 27,388 32,272
Accrued liabilities 26,865 27,301
Product warranty 11,574 10,847
Income taxes 1,695 7,170
Long-term debt due within one year 11,129 9,629
---------- ----------
Total Current Liabilities 170,431 168,440
Long-term debt 316,372 351,251
Product warranty 17,631 17,475
Post-retirement benefit obligation 18,012 18,523
Deferred income taxes 62,122 48,675
Other liabilities 26,213 28,538
---------- ----------
Total Liabilities 610,781 632,902
Commitments and contingencies (Notes 7 and 12)
Stockholders' Equity
- ------------------------------------------------------------------------------------------------------------------
Preferred Stock - -
Class A Common Stock (shares issued 8,722,720 and 8,722,920) 43,614 43,615
Common Stock (shares issued 23,826,642 and 23,826,442) 23,827 23,826
Capital in excess of par value 53,521 53,026
Retained earnings 549,237 531,204
Accumulated other comprehensive loss (5,438) (3,238)
Treasury stock at cost (216,366) (217,349)
---------- ----------
Total Stockholders' Equity 448,395 431,084
---------- ----------
Total Liabilities and Stockholders' Equity $1,059,176 $1,063,986
========== ==========
See accompanying notes which are an integral part of these statements.
16
CONSOLIDATED STATEMENT OF EARNINGS
Years ended December 31 (dollars in thousands, except per share amounts)
- -------------------------------------------------------------------------------------------------------------------
2000 1999 1998
- -------------------------------------------------------------------------------------------------------------------
Continuing Operations
Net sales $1,247,945 $1,070,339 $800,803
Cost of products sold 999,821 839,572 623,173
---------- ---------- --------
Gross profit 248,124 230,767 177,630
Selling, general, and administrative expenses 153,695 136,304 105,214
Interest expense 22,102 12,821 5,914
Amortization of intangibles 6,932 5,162 2,514
Other (income) expense - net 307 (612) (2,933)
---------- ---------- --------
65,088 77,092 66,921
Provision for income taxes 23,432 26,822 23,189
---------- ---------- --------
Earnings before equity in loss
of joint venture 41,656 50,270 43,732
Equity in loss of joint venture - - (3,076)
---------- ---------- --------
Earnings from Continuing Operations 41,656 50,270 40,656
Discontinued Operations
Earnings (loss) from discontinued operations less related income tax
(benefit) 2000 - $(7,772), 1999 - $(5,017),
and 1998 - $2,020 (11,903) (7,848) 3,835
---------- ---------- --------
Net Earnings $ 29,753 $ 42,422 $ 44,491
========== ========== ========
Basic Earnings (Loss) Per Share of Common Stock
Continuing Operations $1.78 $2.17 $1.73
Discontinued Operations (.51) (.34) .16
------ ------ ------
Net Earnings $1.27 $1.83 $1.89
==== ==== ====
Diluted Earnings (Loss) Per Share of Common Stock
Continuing Operations $1.76 $2.11 $1.68
Discontinued Operations (.50) (.33) .16
------ ------ ------
Net Earnings $1.26 $1.78 $1.84
==== ==== ====
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Years ended December 31 (dollars in thousands)
- -------------------------------------------------------------------------------------------------------------------
2000 1999 1998
- -------------------------------------------------------------------------------------------------------------------
Net earnings $ 29,753 $ 42,422 $ 44,491
Foreign currency translation adjustments (2,200) (1,750) 91
---------- ---------- --------
Comprehensive Income $ 27,553 $ 40,672 $ 44,582
========== ========== ========
See accompanying notes which are an integral part of these statements.
17
CONSOLIDATED STATEMENT OF CASH FLOWS
Years ended December 31 (dollars in thousands)
- -------------------------------------------------------------------------------------------------------------------
2000 1999 1998
- -------------------------------------------------------------------------------------------------------------------
Continuing
Operating Activities
Earnings from continuing operations $ 41,656 $ 50,270 $ 40,656
Adjustments to reconcile earnings from continuing
operations to cash provided by operating activities:
Depreciation 36,582 30,769 22,952
Amortization 8,477 6,546 3,514
Equity in loss of joint venture - - 3,076
Net change in current assets and liabilities (2,707) (27,378) (7,543)
Net change in noncurrent assets and liabilities (9,073) (11,481) 1,769
Other 1,680 856 1,198
---------- ---------- --------
Cash Provided by Operating Activities 76,615 49,582 65,622
Investing Activities
Acquisition of businesses - (244,592) (126,273)
Capital expenditures (40,516) (32,807) (18,511)
Investment in joint venture - - (7,224)
Other (1,439) (1,767) (1,705)
---------- ---------- --------
Cash Used in Investing Activities (41,955) (279,166) (153,713)
Financing Activities
Long-term debt incurred - 229,677 30,028
Long-term debt retired (33,379) (4,629) (5,590)
Purchase of treasury stock - (2,773) (33,288)
Net proceeds from common stock and option activity 816 1,149 271
Dividends paid (11,720) (11,172) (11,051)
---------- ---------- --------
Cash Provided by (Used in) Financing Activities (44,283) 212,252 (19,630)
Cash Flow Provided by (Used in) Discontinued Operations 10,149 (5,573) (509)
---------- ---------- --------
Net increase (decrease) in cash and cash equivalents 526 (22,905) (108,230)
Cash and cash equivalents--beginning of year 14,761 37,666 145,896
---------- ---------- --------
Cash and Cash Equivalents--End of Year $ 15,287 $ 14,761 $ 37,666
========== ========== ========
See accompanying notes which are an integral part of these statements.
18
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Years ended December 31 (dollars in thousands)
- ------------------------------------------------------------------------------------------------------------------
2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------
Class A Common Stock
Balance at beginning of year $ 43,615 $ 43,688 $ 43,782
Conversion of Class A Common Stock (1) (73) (94)
----------- ---------- ---------
Balance at end of year $ 43,614 $ 43,615 $ 43,688
---------- ---------- ---------
Common Stock
Balance at beginning of year $ 23,826 $ 23,812 $ 23,793
Conversion of Class A Common Stock 1 14 19
---------- ---------- ---------
Balance at end of year $ 23,827 $ 23,826 $ 23,812
---------- ---------- ---------
Capital in Excess of Par Value
Balance at beginning of year $ 53,026 $ 51,121 $ 50,020
Conversion of Class A Common Stock - 59 75
Exercise of stock options (84) (182) 344
Tax benefit from exercise of stock options 404 1,797 168
Stock incentives and directors' compensation 175 231 561
Other - - (47)
---------- ---------- ----------
Balance at end of year $ 53,521 $ 53,026 $ 51,121
---------- ---------- ---------
Retained Earnings
Balance at beginning of year $ 531,204 $ 499,954 $ 466,514
Net earnings 29,753 42,422 44,491
Cash dividends on common stock (11,720) (11,172) (11,051)
----------- ---------- ---------
Balance at end of year $ 549,237 $ 531,204 $ 499,954
---------- ---------- ---------
Accumulated Other Comprehensive Loss
Balance at beginning of year $ (3,238) $ (1,488) $ (1,579)
Foreign currency translation adjustments (2,200) (1,750) 91
---------- ---------- ---------
Balance at end of year $ (5,438) $ (3,238) $ (1,488)
---------- ---------- ---------
Treasury Stock
Balance at beginning of year $ (217,349) $ (215,994) $(182,825)
Purchase of treasury stock - (2,773) (33,497)
Exercise of stock options 901 1,330 183
Stock incentives and directors' compensation 82 88 145
---------- ---------- ---------
Balance at end of year $ (216,366) $ (217,349) $(215,994)
---------- ---------- ---------
Total Stockholders' Equity $ 448,395 $ 431,084 $ 401,093
========== ========== =========
See accompanying notes which are an integral part of these statements.
19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Significant Accounting Policies
Organization. A. O. Smith Corporation is a manufacturer serving customers
worldwide. The company's major product lines include fractional and integral
horsepower Alternating Current (A/C), Direct Current (D/C) and hermetic electric
motors, as well as residential and commercial water heaters. The company's
products are manufactured and marketed primarily in North America. Electric
motors are sold principally to original equipment manufacturers. Water heaters
are distributed principally through a diverse network of plumbing wholesalers.
Consolidation and basis of presentation. The consolidated financial statements
include the accounts of the company and its wholly owned subsidiaries. As
discussed in Note 3, the company's fiberglass piping systems and liquid and dry
storage systems are classified as discontinued operations.
Investment in joint ventures. In December 1998 and January 1999, the company
bought out its partner in its water heater joint venture and its partner in its
fiberglass piping joint venture, both in the People's Republic of China, and
accordingly, the company consolidated these entities since the acquisition
dates. The fiberglass piping joint venture is classified as a discontinued
operation (see note 3).
Use of estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the accompanying financial
statements and notes. Actual results could differ from those estimates.
Fair values. The carrying amounts of cash and cash equivalents, receivables,
trade payables, and long-term debt approximated fair value as of December 31,
2000 and 1999.
Foreign currency translation. For all subsidiaries outside the United States
with the exception of Mexico, the company uses the local currency as the
functional currency. For these operations, assets and liabilities are translated
into U.S. dollars at year-end exchange rates, and revenues and expenses are
translated at weighted-average exchange rates. The resulting translation
adjustments are recorded as a separate component of stockholders' equity. Gains
and losses from foreign currency transactions are included in net earnings.
Cash and cash equivalents. The company considers all highly liquid investments,
generally with a maturity of three months or less when purchased, to be cash
equivalents.
Inventory valuation. Inventories are carried at lower of cost or market. Cost is
determined on the last-in, first-out (LIFO) method for substantially all
domestic inventories. Inventories of foreign subsidiaries and supplies are
determined using the first-in, first-out (FIFO) method.
Property, plant, and equipment. Property, plant, and equipment are stated at
cost. Depreciation is computed primarily by the straight-line method. The
estimated service lives used to compute depreciation are generally 25 to 50
years for buildings and 5 to 20 years for equipment. Maintenance and repair
costs are expensed as incurred.
Goodwill and other intangibles. Goodwill and other intangibles are stated at
cost and are amortized on a straight-line basis over the estimated periods
benefited ranging from 5 to 40 years.
20
1. Organization and Significant Accounting Policies (continued)
December 31 (dollars in thousands) 2000 1999
- -------------------------------------------------------------------------------
Goodwill, at cost $ 248,925 $ 248,257
Other intangibles, at cost 11,424 11,424
------ ---------
260,349 259,681
Less accumulated amortization 15,528 8,596
---------- ---------
$ 244,821 $ 251,085
========= ========
Impairment of long-lived and intangible assets. Property, plant, equipment,
goodwill, and other intangibles are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. If the sum of the expected undiscounted cash flows is less than the
carrying value of the related asset or group of assets, a loss is recognized for
the difference between the fair value and carrying value of the asset or group
of assets. Such analyses necessarily involve significant judgment.
Derivative instruments. The company enters into futures contracts to fix the
cost of certain raw material purchases, principally copper, with the objective
of minimizing changes in inventory cost due to market price fluctuations.
Through December 31, 2000 differences between the company's fixed price and
current market prices are included as part of the inventory cost when the
contracts mature. Beginning January 1, 2001, upon adoption of Statement of
Financial Accounting Standard (SFAS) No. 133 as amended by SFAS No. 138, the
effective portion of the gain or loss on the futures contract is reported as a
component of other comprehensive income and reclassified into earnings in the
same period during which the inventory is sold. The remaining gain or loss on
the futures contract, if any, is recognized in current earnings during the
period of changes. As of December 31, 2000, the company had contracts covering
the majority of its expected copper requirements for 2001. These futures
contracts limit the impact from both favorable and unfavorable price changes.
The company and its subsidiaries conduct business in various foreign currencies.
To minimize the effect of fluctuating foreign currencies on its income, the
company enters into foreign currency forward contracts. The contracts are used
to hedge known foreign currency transactions on a continuing basis for periods
consistent with the company's exposures. Beginning January 1, 2001, upon
adoption of SFAS No. 133 as amended by SFAS No. 138, the effective portion of
the gain or loss on the foreign currency forward contract is reported as a
component of other comprehensive income and reclassified into earnings in the
same period during which the hedged transaction affects earnings. The remaining
gain or loss on the futures contract, if any, is recognized in current earnings
during the period of changes.
The company does not engage in speculation. The difference between market and
contract rates is recognized in the same period in which gains or losses from
the transactions being hedged are recognized. The contracts, which are executed
with major financial institutions, generally mature within one year with no
credit loss anticipated for failure of the counterparties to perform.
The following table summarizes, by currency, the contractual amounts of the
company's forward exchange contracts.
December 31 (dollars in thousands) 2000 1999
- -------------------------------------------------------------------------------
Buy Sell Buy Sell
----------- ------------ ---------- -------
U.S. dollar $ 1,840 $ 12,400 $ 1,400 $ 8,100
British pound 1,515 1,532 477 1,391
Hungarian forint 3,135 - - -
Mexican peso 64,901 - 35,516 -
--------- -------- -------- ------
Total $ 71,391 $ 13,932 $ 37,393 $ 9,491
========= ====== ======== ======
21
1. Organization and Significant Accounting Policies (continued)
The forward contracts in place at December 31, 2000, amounted to approximately
75 percent of the company's 2001 anticipated foreign currency requirements.
Revenue recognition. The company recognizes revenue upon transfer of title of
product, generally upon shipment to the customer.
Compensated absences. In the second quarter, the company changed its vacation
policy for certain employees so that vacation pay is earned ratably throughout
the year. The accrual for compensated absences was reduced by $2.3 million to
eliminate vacation pay no longer required to be accrued under the current
policy.
Research and development. Research and development costs are charged to
operations as incurred and amounted to $24.5, $23.9, and $19.4 million for
continuing operations during 2000, 1999, and 1998, respectively.
Environmental costs. The company accrues for losses associated with
environmental obligations when such losses are probable and reasonably
estimable. Costs of estimated future expenditures are not discounted to their
present value. Recoveries of environmental costs from other parties are recorded
as assets when their receipt is considered probable. The accruals are adjusted
as facts and circumstances change.
Earnings per share of common stock. The numerator for the calculation of basic
and diluted earnings per share is net earnings. The following table sets forth
the computation of basic and diluted weighted-average shares used in the
earnings per share calculations:
2000 1999 1998
- -------------------------------------------------------------------------------
Denominator for basic earnings per share--
weighted-average shares 23,396,210 23,220,813 23,583,790
Effect of dilutive stock options 294,932 566,540 600,114
---------- ---------- ----------
Denominator for diluted earnings per share 23,691,142 23,787,353 24,183,904
========== ========== ==========
Reclassification. Certain amounts in the 1999 and 1998 financial statements, as
previously reported, have been reclassified to conform to the 2000 presentation.
Sales and cost of products sold have been increased to reflect a
reclassification of gross freight costs. In addition, product research and
development expenses have been reclassified from cost of products sold to
selling, general, and administrative expenses.
New accounting standards. In June 1998, the Financial Accounting Standards Board
issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" (the Statement), which was amended by SFAS No. 138. This new
standard became effective for the company on January 1, 2001, and will require
the company to recognize all derivatives in the balance sheet at fair value. Any
fair value changes will be recorded in net income or comprehensive income.
The initial adoption of this statement will not have a material effect on the
company's net earnings or statement of position.
22
2. Acquisitions
On August 2, 1999, the company acquired the assets of MagneTek, Inc.'s
(MagneTek) domestic electric motor business and six wholly owned foreign
subsidiaries for $244.6 million. On July 1, 1998, the company acquired certain
assets of General Electric Company's domestic compressor motor business
(Scottsville) for $125.6 million. Both of the acquisitions were accounted for
using the purchase method of accounting, and accordingly, the financial
statements include the operating results of the acquired businesses from their
respective dates of acquisition. The purchase prices have been allocated to the
assets acquired and the liabilities assumed based upon their respective fair
values at the date of acquisition. The excess of the purchase prices over the
fair values of net assets acquired, $104.3 and $92.6 million for MagneTek and
Scottsville, respectively, have been recorded as goodwill. Other intangibles
acquired in connection with the MagneTek and Scottsville acquisitions, including
assembled workforce, customer list, patents, and trademarks, were assigned fair
values aggregating $11.4 million and are being amortized over periods of 5 to 30
years.
In connection with the MagneTek acquisition, additional purchase liabilities of
$17.9 million were recorded which included employee severance and relocation, as
well as certain facility exit costs. Costs incurred and charged against the
liability to date totaled $3.6 million. The company estimates that approximately
$10.0 million of the reserved liability will be expended during fiscal 2001.
The company purchased its partner's interest in its water systems joint venture
in China December 1998. The excess of the consideration, including the
distribution to the partner of certain inventories and equipment over the fair
values of the assets acquired, amounted to $5.3 million and has been recorded as
goodwill.
On a pro forma basis, the unaudited consolidated results from continuing
operations assuming the acquisition of MagneTek occurred on January 1, 1999,
follows:
Years ended December 31 (dollars in thousands) 1999
- -----------------------------------------------------------------------------
Net sales $1,306,566
Earnings 42,379
Earnings per share:
Basic 1.83
Diluted 1.78
The pro forma results have been prepared for informational purposes only and
include adjustments to depreciation expense of acquired plant and equipment,
amortization of goodwill, increased interest expense on acquisition debt, and
certain other adjustments, together with related income tax effects of all such
adjustments. Anticipated efficiencies from the consolidation of certain
manufacturing and commercial activities and anticipated lower material costs
related to the consolidation of purchasing have been excluded from the pro forma
operating results. These pro forma results do not purport to be indicative of
the results of operations that would have occurred had the purchases been made
as of the beginning of the periods presented or of the results of operations
that may occur in the future.
3. Divestitures and Discontinued Operations
On January 17, 2000, the company, with the approval of its Board of Directors,
decided to divest the company's fiberglass piping and liquid and dry bulk
storage businesses. Net sales of the fiberglass piping and liquid and dry
storage businesses were $129.3, $118.6, and $144.0 million in fiscal 2000, 1999,
and 1998, respectively.
23
3. Divestitures and Discontinued Operations (continued)
On December 8, 2000, the company sold the fiberglass piping business, operated
as Smith Fiberglass Products Company. The transaction took the form of the sale
of the majority of the fiberglass piping domestic assets, and the sale of the
company's equity interest in its China operations. In addition, the company sold
its Engineered Storage Products Company on January 10, 2001. Both transactions
are subject to final purchase price adjustments. When finalized, the after-tax
cash proceeds are expected to approximate $62 million. The company recognized a
combined after-tax loss on the sales of approximately $7.9 million (net of tax
benefit of $5.2 million) in fiscal 2000. In fiscal 1999, the company recognized
after-tax loss from operations of $0.9 million (net of a tax benefit of $0.5
million) and an after-tax loss on sale of $7.0 million (net of tax benefit of
$4.5 million). Discontinued after tax earnings from operations were $3.8 million
in 1998 (net of income taxes of $2.0 million). Certain expenses have been
allocated to the operations of the discontinued businesses, including interest
expense, which was allocated based on the ratio of net assets of the
discontinued businesses to the total consolidated capital of the company.
During 2000, the company recorded after-tax charges of $4.0 million (net of tax
benefit of $2.6 million) relating to revised estimates on certain reserves and
settlement of claims which arose out of the sale of its automotive business in
April 1997.
The components of the net assets of discontinued operations included in the
consolidated balance sheets are as follows:
December 31 (dollars in thousands) 2000 1999
- ------------------------------------------------------------------------------
Current Assets
Receivables $ 25,915 $ 23,644
Inventories 4,138 11,636
Other current assets 8,737 5,048
Trade payables (3,090) (6,410)
Accrued payroll and benefits (2,908) (5,410)
Other (10,141) (18,103)
-------- ----------
Net current assets $ 22,651 $ 10,405
========== ==========
Long-Term Assets
Net property, plant, and equipment $ 18,266 $ 47,376
Other assets 5,130 14,724
Long-term liabilities (5,903) (10,309)
----------- ----------
Net long-term assets $ 17,493 $ 51,791
========== ==========
4. Statement of Cash Flows
Supplemental cash flow information is as follows:
Years ended December 31 (dollars in thousands) 2000 1999 1998
- ----------------------------------------------------------------------------------------------------------------
Change in current assets and liabilities:
Receivables $ 10,278 $ (7,726) $ 3,068
Inventories (6,187) (20,158) (10,190)
Other current assets (10,740) (3,655) (922)
Trade payables 10,559 6,654 (5,855)
Accrued liabilities, including payroll and benefits (3,091) (1,979) 6,614
Income taxes (3,526) (514) (258)
---------- ---------- -----------
$ (2,707) $ (27,378) $ (7,543)
========== ========== ===========
24
5. Inventories
December 31 (dollars in thousands) 2000 1999
- ------------------------------------------------------------------------------
Finished products $ 109,702 $ 99,335
Work in process 37,186 40,197
Raw materials 40,191 41,997
Supplies 860 1,322
---------- ----------
Inventories, at FIFO cost 187,939 182,851
Allowance to state inventories at LIFO cost 18,309 19,408
---------- ----------
$ 169,630 $ 163,443
========== ==========
6. Property, Plant, and Equipment
December 31 (dollars in thousands) 2000 1999
- ------------------------------------------------------------------------------
Land $ 6,690 $ 6,690
Buildings 99,888 91,417
Equipment 435,440 420,634
---------- ----------
542,018 518,741
Less accumulated depreciation 259,183 235,248
---------- ----------
$ 282,835 $ 283,493
========== ==========
In 2000 and 1999, there was no capitalized interest on borrowed funds during
construction within the company's continuing operations. Capitalized interest
was $1.5 million in 1998.
7. Long-Term Debt and Lease Commitments
December 31 (dollars in thousands) 2000 1999
- -------------------------------------------------------------------------------------------------------------------
Bank credit lines, average year-end interest rate of
6.6 % for 2000 and 6.1% for 1999 $ 37,770 $ 19,944
Commercial paper, average year-end interest rate of
7.1% for 2000 and 6.3% for 1999 124,945 134,522
Revolver borrowings, average year-end interest rate of
7.2% for 2000 and 6.9% for 1999 50,000 82,000
Long-term notes with insurance companies, expiring through
2018, average year-end interest rate of 7.0% for 2000 and 1999 102,286 106,914
Other notes, expiring through 2012, average year-end
interest rate of 4.5 % for 2000 and 4.7% for 1999 12,500 17,500
---------- ----------
327,501 360,880
Less amount due within one year 11,129 9,629
---------- ----------
$ 316,372 $ 351,251
========== ==========
The company has a $350 million revolving credit agreement with a group of nine
banks of which $100 million expires July 27, 2001, and $250 million expires
August 2, 2004. At its option, the company maintains either cash balances or
pays fees for bank credit and services.
The company's credit agreement and term notes contain certain conditions and
provisions which restrict the company's payment of dividends. Under the most
restrictive of these provisions, retained earnings of $62.3 million were
unrestricted as of December 31, 2000.
25
7. Long-Term Debt and Lease Commitments (continued)
Borrowings under the bank credit lines and in the commercial paper market are
supported by the long-term portion of the revolving credit agreement, and
accordingly, such borrowings have been classified as long-term. It has been the
company's practice to renew or replace the revolving credit agreement so as to
maintain the availability of debt on a long-term basis and to provide 100
percent backup for its borrowings in the commercial paper market.
Long-term debt, maturing within each of the five years subsequent to December
31, 2000, is as follows: 2001-$11.1; 2002-$13.3; 2003-$11.7; 2004-$8.6;
2005-$8.6 million.
Future minimum payments under noncancelable operating leases for continuing
operations total $52.5 million and are due as follows: 2001-$10.3; 2002-$8.5;
2003-$7.8; 2004-$6.6; 2005-$4.8; and thereafter-$14.5 million. Rent expense for
continuing operations, including payments under operating leases, was $18.3,
$15.3, and $12.9 million in 2000, 1999, and 1998, respectively.
Interest paid by the company for continuing and discontinued operations, was
$24.6, $13.8, and $6.4 million in 2000, 1999, and 1998, respectively.
8. Stockholders' Equity
The company's authorized capital consists of 3 million shares of Preferred Stock
$1 par value, 14 million shares of Class A Common Stock $5 par value, and 60
million shares of Common Stock $1 par value. The Common Stock has equal dividend
rights with Class A Common Stock and is entitled, as a class, to elect 25
percent of the board of directors and has 1/10th vote per share on all other
matters.
During 2000, 1999, and 1998, 200, 14,655, and 19,914 shares, respectively, of
Class A Common Stock were converted into Common Stock. Regular dividends paid on
the Class A Common and Common Stock amounted to $.50, $.48, and $.47 per share
in 2000, 1999, and 1998, respectively.
On January 27, 1997, the company's board of directors approved the repurchase of
up to 3 million shares of Common Stock. On June 10, 1997, and December 9, 1997,
the board authorized the repurchase of up to $80 million and $50 million,
respectively, of additional Common Stock. During 1999 and 1998, the company
purchased 855 and 4,800 shares of Class A Common Stock and 128,396 and 1,183,650
shares of Common Stock, respectively. At December 31, 2000, 32,595 and 8,967,312
shares of Class A Common Stock and Common Stock, respectively, were held as
treasury stock. At December 31, 1999, 32,595 and 9,122,640 shares of Class A
Common Stock and Common Stock, respectively, were held as treasury stock.
9. Stock Options
The company has two Long-Term Executive Incentive Compensation Plans for
granting nonqualified and incentive stock options to key employees. The 1990
Plan has terminated except as to outstanding options. The 1999 Plan provides for
the issuance of 1.5 million stock options at fair value on the date of grant.
The options granted become exercisable one year from date of grant and, for
active employees, expire ten years after date of grant. The number of shares
available for granting of options at December 31, 2000, was 638,300.
26
9. Stock Options (continued)
Changes in option shares, all of which are Common Stock, were as follows:
Weighted-
Average
Per Share
Exercise Years Ended December 31
---------------------------------------------------
Price-2000 2000 1999 1998
--------------- ----- ---- ----
Outstanding at beginning of year $16.57 1,979,800 2,022,900 1,883,025
Granted
2000--$13.56 to $16.28 per share 13.68 632,000
1999--$29.03 per share 173,900
1998--$18.31 to $29.83 per share 277,350
Exercised
2000--$4.67 to $16.33 per share 5.76 (141,600)
1999--$4.67 to $16.67 per share (217,000)
1998--$5.79 to $18.33 per share (137,475)
Expired
2000--$18.00 to $27.25 per share 21.56 (21,700)
---------------------------------------------------
Outstanding at end of year
(2000--$5.63 to $29.83 per share) 12.87 2,448,500 1,979,800 2,022,900
========= ========= =========
Exercisable at end of year 14.57 1,816,500 1,805,900 1,745,550
========= ========= =========
During 1998, an executive elected to defer the gain related to the exercise of
107,100 options. As a result, the executive deferred the receipt of 79,870
shares of Common Stock for which the company's obligation to issue the shares is
included within Stockholders' Equity.
The following table summarizes weighted-average information by range of exercise
prices for stock options outstanding and exercisable at December 31, 2000:
Weighted-
Options Weighted- Options Weighted- Average
Outstanding at Average Exercisable at Average Remaining
Range of December 31, Exercise December 31, Exercise Contractual
Exercise Prices 2000 Price 2000 Price Life
---------------- ------------- ---------- -------------- --------- ------------
$5.63 206,250 $5.63 206,250 $ 5.63 1 year
$8.67 to $13.56 756,100 12.58 151,200 8.67 8 years
$16.28 to $18.33 1,136,300 17.28 1,109,200 16.90 6 years
$25.25 to $29.83 349,850 28.16 349,850 28.16 8 years
------- --------
2,448,500 1,816,500
========= =========
SFAS No. 123, "Accounting for Stock-Based Compensation," encourages, but does
not require companies to record compensation cost for stock-based employee
compensation plans at fair value. The company has chosen to continue applying
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for its stock option
plans. Accordingly, because the number of shares is fixed and the exercise price
of the stock options equals the market price of the underlying stock on the date
of grant, no compensation expense has been recognized.
27
9. Stock Options (continued)
Had compensation cost been determined based upon the fair value at the grant
date for awards under the plans based on the provisions of SFAS No. 123, the
company's pro forma earnings and earnings per share from continuing operations
would have been as follows:
Years ended December 31 (dollars in thousands,
except per share amounts) 2000 1999 1998
- -------------------------------------------------------------------------------
Earnings:
As reported $ 41,656 $ 50,270 $ 40,656
Pro forma 40,330 49,311 39,839
Earnings per share:
As reported:
Basic $ 1.78 $2.17 $1.73
Diluted 1.76 2.11 1.68
Pro forma:
Basic 1.72 2.12 1.69
Diluted 1.70 2.07 1.65
The weighted-average fair value per option at the date of grant during 2000,
1999, and 1998 using the Black-Scholes option-pricing model, was $4.73, $9.58,
and $5.30, respectively. Assumptions were as follows:
2000 1999 1998
- -------------------------------------------------------------------------------
Expected life (years) 5.0 4.0 4.0
Risk-free interest rate 5.0% 6.5% 4.6%
Dividend yield 2.2% 2.1% 2.1%
Expected volatility 39.9% 38.6% 35.2%
28
10. Pension and Other Post-retirement Benefits
The company provides retirement benefits for all United States employees. Plan
assets consist primarily of marketable equities and debt securities. The company
also has several foreign pension plans, none of which are material to the
company's financial position. In addition, the company has several unfunded
defined benefit post-retirement plans covering certain hourly and salaried
employees which provide medical and life insurance benefits from retirement to
age 65.
The following tables present the changes in benefit obligations, plan assets,
funded status, and major assumptions used to determine these amounts for
domestic pension and post-retirement plans and components of net periodic
benefit costs including amounts for discontinued operations.
Pension Benefits Post-retirement Benefits
------------------------------------- -------------------------------
Years ended December 31 (dollars in thousands) 2000 1999 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------
Change in benefit obligations
Benefit obligation at beginning of year $ (530,658) $ (527,597) $ (17,477) $ (16,312)
Service cost (6,631) (4,890) (271) (338)
Interest cost (40,926) (36,314) (1,267) (1,195)
Participant contributions - - (264) (261)
Plan amendments - (125) - -
Acquisitions - (33,136) - (1,770)
Actuarial gains (losses) including
assumption changes (23,084) 33,072 79 152
Benefits paid 39,528 38,332 2,023 2,247
---------- ---------- -------- ---------
Benefit obligation at end of year $ (561,771) $ (530,658) $ (17,177) $ (17,477)
========== ========== ======== =========
Change in plan assets
Fair value of plan assets at beginning of year $ 755,487 $ 628,856 $ - $ -
Actual return on plan assets 21,160 134,902 - -
Contribution by the company - - 1,759 1,986
Participant contributions - - 264 261
Acquisitions - 30,061 - -
Benefits paid (39,528) (38,332) (2,023) (2,247)
---------- ---------- --------- ------
Fair value of plan assets at end of year $ 737,119 $ 755,487 $ - $ -
========== ========== ======== =========
Funded status $ 175,348 $ 224,829 $ (17,177) $ (17,477)
Unrecognized net actuarial gain (97,503) (163,361) (1,845) (1,848)
Unrecognized net transition asset (499) (1,437) - -
Unrecognized prior service cost (credit) 4,612 4,250 (677) (829)
---------- ---------- --------- ---------
Prepaid pension asset (accrued cost) $ 81,958 $ 64,281 $ (19,699) $ (20,154)
========== ========== ======== =========
Major assumptions as of December 31
Discount rate 7.50% 7.75% 7.50% 7.75%
Expected return on plan assets 10.25% 10.25% n/a n/a
Rate of compensation increase 4.00% 4.00% 4.00% 4.00%
29
10. Pension and Other Post-retirement Benefits (continued)
Pension Benefits Post-retirement Benefits
-------------------------------------- ------------------------------------
Years ended December 31 (dollars in thousands) 2000 1999 1998 2000 1999 1998
- -------------------------------------------------------------------------------------------------------------------------
Components of net periodic benefit cost
Service cost $ 6,631 $ 4,890 $ 4,368 $ 271 $ 338 $ 194
Interest cost 40,926 36,314 35,761 1,267 1,195 1,026
Expected return on plan assets (64,854) (56,598) (53,100) - - -
Amortization of prior service cost (credit) 559 502 346 (152) (152) (152)
Amortization of transition asset (939) (939) (939) - - -
Amortization of net actuarial gain - - - (82) (59) (162)
---------- --------- ---------- -------- -------- --------
Defined benefit plan cost (income) $ (17,677) $ (15,831) $ (13,564) $ 1,304 $ 1,322 $ 906
======== ======== ========
Various U.S. defined contribution
plan cost 3,559 5,087 4,282
---------- --------- ----------
$ (14,118) $ (10,744) $ (9,282)
========== ========= ==========
Net periodic benefit cost is determined using the assumptions as of the
beginning of the year. The funded status is determined using the assumptions as
of the end of the year.
The company has a defined contribution profit sharing and retirement plan
covering the majority of its salaried nonunion employees which provides for
annual company contributions of 35 percent to 140 percent of qualifying
contributions made by participating employees. The amount of the company's
contribution in excess of 35 percent is dependent upon the company's
profitability. In connection with the acquisition of MagneTek, the company
established a defined contribution plan that provides for matching company
contributions of 2 percent of the first 6 percent of qualified employee
contributions up to an annual maximum contribution that is consistent with the
plan provided by the previous employer.
The company does not provide post-retirement health care benefits beyond age 65.
Certain hourly employees retiring after January 1, 1996, are subject to a
maximum annual benefit and salaried employees hired after December 31, 1993, are
not eligible for post-retirement medical benefits. As a result, a one percentage
point change in the health care cost trend rate would not have a significant
effect on the amounts reported. The post-retirement benefit obligation was
determined using an assumed healthcare cost trend rate of 10 percent in 2000
trending down to 6 percent in 2004 and thereafter.
Accrued post-retirement benefit cost is included in the consolidated balance
sheet in the accounts shown below:
December 31 (dollars in thousands) 2000 1999
- --------------------------------------------------------------------------------
Accrued liabilities $ 1,687 $ 1,631
Post-retirement benefit obligation 18,012 18,523
------- -------
Accrued post-retirement benefit cost $ 19,699 $ 20,154
======= =======
30
11. Income Taxes
The components of the provision for income taxes for continuing operations
consisted of the following:
Years ended December 31 (dollars in thousands) 2000 1999 1998
- --------------------------------------------------------------------------------
Current:
Federal $ 3,964 $ 11,810 $ 14,286
State 428 2,399 1,330
International 3,581 1,339 718
Deferred 15,459 11,274 6,855
-------- ------- -------
$ 23,432 $ 26,822 $ 23,189
======== ======= =======
The provision for income taxes for continuing operations differs from the U.S.
federal statutory rate due to the following items:
Years ended December 31 2000 1999 1998
- --------------------------------------------------------------------------------
Provision at U.S. federal statutory rate 35.0% 35.0% 35.0%
International income tax rate differential (1.1) (1.8) (1.0)
State income and franchise taxes 3.0 3.6 2.3
Research tax credits (0.1) (1.8) (1.1)
Other (0.8) (0.2) (0.5)
---- ---- ----
36.0% 34.8% 34.7%
==== ==== ====
Components of earnings from continuing operations before income taxes were as
follows:
Years ended December 31 (dollars in thousands) 2000 1999 1998
- --------------------------------------------------------------------------------
United States $ 57,845 $ 76,201 $ 62,449
International 7,243 891 4,472
-------- ------- -------
$ 65,088 $ 77,092 $ 66,921
======== ======= =======
Total taxes paid by the company for continuing and discontinued operations
amounted to $13.1, $11.6, and $6.5 million in 2000, 1999, and 1998,
respectively.
No provision for U.S. income taxes or foreign taxes has been made on the
undistributed earnings of foreign subsidiaries as such earnings are considered
to be permanently invested. At December 31, 2000, the undistributed earnings
amounted to $36.6 million. Determination of the amount of unrecognized deferred
tax liability on the undistributed earnings is not practicable. In addition, no
provision or benefit for U. S. income taxes have been made on foreign currency
translation gains or losses.
31
11. Income Taxes (continued)
The tax effects of temporary differences of assets and liabilities between
income tax and financial reporting for continuing operations are as follows:
December 31 (dollars in thousands)
- --------------------------------------------------------------------------------
2000 1999
--------------------- ---------------------
Assets Liabilities Assets Liabilities
- --------------------------------------------------------------------------------
Employee benefits $ 19,261 $ 33,791 $ 17,365 $ 26,895
Product liability and warranty 11,814 - 10,107 -
Receivables - 4,697 1,022 -
Depreciation differences - 27,781 - 25,252
Amortization differences - 13,094 - 7,151
All other - 6,619 - 6,548
-------- -------- ------- --------
$ 31,075 $ 85,982 $ 28,494 $ 65,846
======== ======== ======= ========
Net liability $ 54,907 $ 37,352
======== ========
These deferred tax assets and liabilities are classified in the balance sheet as
current or long-term based on the balance sheet classification of the related
assets and liabilities as follows:
December 31 (dollars in thousands) 2000 1999
- --------------------------------------------------------------------------------
Current deferred income tax assets $ 7,215 $ 11,323
Long-term deferred income tax liabilities (62,122) (48,675)
--------- ---------
Net liability $ 54,907 $ 37,352
======== =========
12. Litigation and Insurance Matters
The company is involved in various unresolved legal actions, administrative
proceedings, and claims in the ordinary course of its business involving product
liability, property damage, insurance coverage, patents, and environmental
matters including the disposal of hazardous waste. Although it is not possible
to predict with certainty the outcome of these unresolved legal actions or the
range of possible loss or recovery, the company believes these unresolved legal
actions will not have a material effect on its financial position or results of
operations. The following paragraphs summarize noteworthy actions and
proceedings.
On July 16, 1999, a class action lawsuit was filed in the United States District
Court, Western District of Missouri, by individuals on behalf of themselves and
all persons throughout the United States who have owned or currently own a water
heater manufactured by Rheem Manufacturing Company, A. O. Smith Corporation,
Bradford White Company, American Water Heater Company, Lochinvar Corporation,
and State Industries, Inc. (the "water heater manufacturers") that contains a
dip tube manufactured, designed, supplied, or sold by Perfection Corporation
between August 1993 and October 1996. A dip tube is a plastic tube in a
residential water heater that brings the cold water supply to the bottom area of
the tank to be heated.
32
12. Litigation and Insurance Matters (continued)
The plaintiffs and defendants reached a settlement of the claims of this
litigation. On November 22, 1999, the United States District Court, Western
District of Missouri, entered an order giving preliminary approval to the
settlement. On May 1, 2000, the District Court, which oversees the dip tube
class action, gave final approval to the settlement. The final order approved
the remedial system provided for in the settlement agreement. The water heater
manufacturers are currently funding settlement claims and employ a third-party
to administer the processing of claims. The deadline for filing claims under the
class action settlement agreement was December 31, 2000. All other legal actions
brought against the water heater manufacturers respecting dip tube claims have
been dismissed as a result of the settlement of the class action.
Separately, the water heater manufacturers on September 29, 1999, filed a direct
action lawsuit in the Civil District Court for the Parish of Orleans, State of
Louisiana, against Perfection Corporation and American Meter Company, the parent
company of Perfection, and their insurers. This lawsuit seeks (1) recovery of
damages sustained by the water heater manufacturers related to the costs of the
class action settlement and the handling of dip tube claims outside of and prior
to the national class action settlement, (2) damages for the liability of the
water heater manufacturers assumed by Perfection Corporation by contract, and
(3) personal injuries suffered by the water heater manufacturers as a result of
the disparagement of their businesses. Also relating to the water heater
manufacturers' recovery efforts, the insurers of Perfection Corporation have
brought third-party claims against the water heater manufacturers in a state
court action in Cook County, Illinois. Perfection Corporation has also sued the
water heater manufacturers in a separate action in Cook County, Illinois. The
filing by Perfection Corporation is an attempt to preempt the Louisiana lawsuit.
As of December 31, 2000, the company has funded approximately $14.4 million
related to dip tube repair claims, administrative costs, legal fees and related
expenses. It is the company's expectation that all or a substantial portion of
its costs will be recovered from the insurers of Perfection and American Meter
Company, as well as the company's insurers.
The company is currently involved as a potentially responsible party ("PRP") in
judicial and administrative proceedings initiated on behalf of various state and
federal regulatory agencies seeking to clean up 13 sites which have been
environmentally impacted and to recover costs they have incurred or will incur
as to those sites. The company has also been designated a PRP with respect to a
former mine in Colorado which is being environmentally remediated by the U.S.
EPA. The U.S. EPA commenced a lawsuit against a former owner of a mining company
involved at the site, and that former owner commenced a third-party action
against the company and other parties for contribution. In the first quarter of
2001, the U.S. EPA and the former owner settled their respective claims against
each other, and upon final approval of the settlement, both parties will dismiss
their claims against each other. However, the former owner indicated he intends
to continue to pursue his contribution claim against the company. Following
notice of that settlement, the State of Colorado gave notice that it intends to
commence a legal action against the company to recover the remediation and
oversight costs it incurred at the site. The U.S. EPA has indicated that it does
not intend to pursue any claims against the company with respect to this site.
The company believes it has very good defenses to the claims of the former owner
and any potential claims that may be brought by the State of Colorado.
It is impossible at this time to estimate the total cost of remediation for the
sites or the company's ultimate share of those costs, primarily because the
sites are in various stages of the remediation process and issues remain open at
many sites concerning the selection and implementation of the final remedy, the
cost of that remedy, and the company's liability at a site relative to the
liability and viability of the other PRPs.
33
12. Litigation and Insurance Matters (continued)
The company has established reserves for these sites in a manner that is
consistent with generally accepted accounting principles for costs associated
with such cleanups when those costs are capable of being reasonably estimated.
To the best of the company's knowledge, the reserves it has established and
insurance proceeds that are available to the company are sufficient to cover the
company's liability. The company further believes its insurers have the
financial ability to pay any such covered claims, and there are viable PRPs at
each of the sites which have the financial ability to pay their respective
shares of liability at the sites.
With respect to non-environmental claims, the company has self-insured a portion
of its product liability loss exposure and other business risks for many years.
The company has established reserves which it believes are adequate to cover
incurred claims. For the year ended December 31, 2000, the company had $75
million of third-party product liability insurance for individual losses in
excess of $1.5 million and for aggregate annual losses in excess of $10 million.
The company reevaluates its exposure on claims periodically and makes
adjustments to its reserves as appropriate.
13. Operations by Segment
The company has two reportable segments: Electric Motor Technologies and Water
Systems Technologies. The Electric Motor Technologies segment manufactures
fractional and integral Alternating Current (A/C) and Direct Current (D/C)
motors used in fans and blowers in furnaces, air conditioners, and ventilating
systems; industrial applications such as material handling; as well as in other
consumer products such as home appliances and jet pump motors sold to
manufacturers of home water systems, swimming pools, hot tubs, and spas. In
addition, the Electric Motor Technologies segment manufactures hermetic motors
which are sold worldwide to manufacturers of compressors used in air
conditioning and refrigeration systems. The Water Systems Technologies segment
manufactures residential gas and electric water heaters as well as commercial
water heating equipment used in a wide range of applications including hotels,
laundries, car washes, factories, and large institutions. In addition, the Water
Systems Technologies segment manufactures copper tube boilers used in
large-volume hot water and hydronic heating applications.
The accounting policies of the reportable segments are the same as those
described in the "Summary of Significant Accounting Policies" outlined in Note
1. Intersegment sales have been excluded from segment revenues and are
immaterial. Earnings before interest and taxes is used to measure the
performance of the segments and allocate resources.
34
13. Operations by Segment (continued)
Operations by segment
Earnings before
Interest and Taxes Net Sales
-------------------------------- -----------------------------------
Years ended December 31 (dollars in millions) 2000 1999 1998 2000 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------
Electric Motor Technologies $ 75.5 $ 78.9 $ 56.5 $ 902.4 $ 735.0 $ 487.4
Water Systems Technologies 34.9 33.8 30.0 345.5 335.3 313.4
------ ------- ------ --------- -------- ------
Total Segments 110.4 112.7 86.5 $ 1,247.9 $ 1,070.3 $ 800.8
========= ======== ======
Corporate Expense (23.2) (22.8) (18.7)
Interest Expense (22.1) (12.8) (5.9)
------ ------ ------
Earnings from Continuing Operations
before Income Taxes 65.1 77.1 61.9
Provision for Income Taxes (23.4) (26.8) (21.2)
------ ------ ------
Earnings from Continuing Operations $ 41.7 $ 50.3 $ 40.7
====== ====== ======
Net sales of the Electric Motor Technologies segment includes sales to York
International Corporation of $182.9, $191.3, and $131.8 million in 2000, 1999,
and 1998, respectively.
Assets, depreciation, and capital expenditures by segment
Depreciation and Capital
Amortization Expenditures
Total Assets (Years ended (Years ended
(December 31) December 31) December 31)
- ------------------------------------------------------------------------------------------------------------------------
(dollars in millions) 2000 1999 1998 2000 1999 1998 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------
Electric Motor Technologies $ 700.6 $ 705.1 $ 378.5 $ 34.7 $ 27.3 $18.8 $ 35.6 $ 27.0 $ 14.0
Water Systems Technologies 182.8 177.4 168.1 9.0 8.8 6.7 4.6 5.6 4.2
-------- -------- ------- ------ ------ ---- ----- ----- ------
Total Segments 883.4 882.5 546.6 43.7 36.1 25.5 40.2 32.6 18.2
Corporate Assets 135.7 119.3 125.5 1.3 1.2 1.0 0.3 0.2 0.3
Discontinued Operations 40.1 62.2 64.5 5.6 5.3 4.7 1.5 5.1 9.4
-------- -------- ------- ------ ------ ---- ----- ----- ------
Total $1,059.2 $1,064.0 $ 736.6 $ 50.6 $ 42.6 $31.2 $ 42.0 $ 37.9 $ 27.9
======== ======== ======= ====== ====== ==== ===== ===== ======
Corporate assets consist primarily of cash and cash equivalents, deferred taxes,
and prepaid pension.
35
13. Operations by Segment (continued)
Net sales and long-lived assets by geographic location
The following data by geographic area includes net sales based on product
shipment destination and long-lived assets based on physical location.
Long-lived assets include net property, plant, equipment, prepaid pension, and
other long-term assets and exclude intangible assets and long-lived assets of
discontinued operations.
Long-Lived Assets Net Sales
------------------------------- ---------------------------------
(dollars in millions) 2000 1999 1998 (dollars in millions) 2000 1999 1998
- --------------------------------------------------------- ---------------------------------------------------------
United States $ 267.7 $ 252.3 $ 178.0 United States $ 1,108.9 $ 959.7 $ 726.7
Mexico 98.7 91.7 71.7 Foreign 139.0 110.6 74.1
--------- -------- ------
Other Foreign 24.4 28.5 26.1 Total $ 1,247.9 $ 1,070.3 $ 800.8
------ ------ ------ ======= ======= ======
Total $ 390.8 $ 372.5 $ 275.8
======= ===== =======
14. Quarterly Results of Operations (Unaudited)
(dollars in millions, except per share amounts)
- --------------------------------------------------------------------------------------------------------------------------
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
------------------ ---------------- ------------------- ----------------
2000 1999 2000 1999 2000 1999 2000 1999
- --------------------------------------------------------------------------------------------------------------------------
Net sales $ 344.6 $ 236.8 $ 341.3 $ 242.5 $ 290.8 $ 295.1 $ 271.2 $ 295.9
Gross profit 73.4 51.1 73.5 54.6 54.3 61.4 46.9 63.7
Earnings
Continuing 14.2 12.0 17.6 14.2 7.3 12.5 2.5 11.6
Discontinued 0.4 (0.6) - (0.3) 1.5 (0.1) (13.8) (6.9)
------- ------ ----- ------ ------ ------ ------- ------
Net Earnings 14.6 11.4 17.6 13.9 8.8 12.4 (11.3) 4.7
======= ====== ====== ====== ====== ====== ======= ======
Basic earnings per share
Continuing .61 .51 .75 .61 .31 .54 .11 .50
Discontinued .02 (.02) - (.01) .07 (.01) (.59) (.30)
------- ------ ------ ------ ------ ------ ------ -------
Net Earnings .63 .49 .75 .60 .38 .53 (.48) .20
======= ====== ====== ====== ====== ====== ====== ======
Diluted earnings per share
Continuing .60 .50 .74 .60 .31 .52 .11 .49
Discontinued .02 (.02) - (.01) .06 - (.58) (.29)
------- ------ ------ ------ ------ ------ ------ ------
Net Earnings .62 .48 .74 .59 .37 .52 (.47) .20
======= ====== ====== ====== ====== ====== ======= ======
Common dividends declared .12 .12 .12 .12 .13 .12 .13 .12
======= ====== ====== ====== ====== ====== ====== ======
Net earnings and dividends declared per share are computed separately for each
period and, therefore, the sum of such quarterly per share amounts may differ
from the total for the year.
See Note 7 for restrictions on the payment of dividends.
36
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information included under the heading "Election of Directors" in the
company's definitive Proxy Statement for the 2001 Annual Meeting of Stockholders
(to be filed with the Securities and Exchange Commission under Regulation 14A
within 120 days after the end of the registrant's fiscal year) is incorporated
herein by reference. The information required regarding Executive Officers of
the company is included in Part I of this Form 10-K under the caption "Executive
Officers of the company."
The information included under the heading "Compliance with Section 16(a) of the
Securities Exchange Act" in the company's definitive Proxy Statement for the
2001 Annual Meeting of Stockholders (to be filed with the Securities and
Exchange Commission under Regulation 14A within 120 days after the end of the
registrant's fiscal year) is incorporated herein by reference.
ITEM 11 - EXECUTIVE COMPENSATION
The information included under the heading "Executive Compensation" in the
company's definitive Proxy Statement for the 2001 Annual Meeting of Stockholders
(to be filed with the Securities and Exchange Commission under Regulation 14A
within 120 days after the end of the registrant's fiscal year) is incorporated
herein by reference, except for the information required by paragraphs (i), (k),
and (l) of Item 402(a)(8) of Regulation S-K.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information included under the headings "Principal Stockholders" and
"Security Ownership of Directors and Management" in the company's definitive
Proxy Statement for the 2001 Annual Meeting of Stockholders (to be filed with
the Securities and Exchange Commission under Regulation 14A within 120 days
after the end of the registrant's fiscal year) is incorporated herein by
reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information included under the headings and "Compensation Committee
Interlocks and Insider Participation" in the company's definitive Proxy
Statement for the 2001 Annual Meeting of Stockholders (to be filed with the
Securities and Exchange Commission under Regulation 14A within 120 days after
the end of the registrant's fiscal year) is incorporated herein by reference.
37
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES and REPORTS ON FORM 8-K
- -------------------------------------------------------------------------
(a) Financial Statements and Financial Statement Schedules
Form 10-K
Page Number
-----------
The following consolidated financial statements of
A. O. Smith Corporation are included in Item 8:
Consolidated Balance Sheets at December 31, 2000 and 1999...... 16
For each of the three years in the period ended
December 31, 2000:
- Consolidated Statement of Earnings.......................... 17
- Consolidated Statement of Comprehensive Income.............. 17
- Consolidated Statement of Cash Flows........................ 18
- Consolidated Statement of Stockholders' Equity.............. 19
Notes to Consolidated Financial Statements 20-36
The following consolidated financial statement schedule of
A. O. Smith Corporation is included in Item 14(d):
Schedule II - Valuation and Qualifying Accounts................ 39
All other schedules are omitted since the required information is not present or
is not present in amounts sufficient to require submission of the schedule, or
because the information required is included in the consolidated financial
statements or the notes thereto.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of 2000.
(c) Exhibits - see the Index to Exhibits on pages 44-45 of this report.
Pursuant to the requirements of Rule 14a-3(b)(10) of the Securities Exchange Act
of 1934, as amended, the company will, upon request and upon payment of a
reasonable fee not to exceed the rate at which such copies are available from
the Securities and Exchange Commission, furnish copies to its security holders
of any exhibits listed in the Index to Exhibits.
Management contracts and compensatory plans and arrangements required to be
filed as exhibits pursuant to Item 14(c) of Form 10-K are listed as Exhibits
10(a) through 10(h) in the Index to Exhibits.
38
A. O. SMITH CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(000 Omitted)
Years ended December 31, 2000, 1999, and 1998
Additions
-------------------------------
Balance at Charged to Charged Balance at
Beginning Costs and to Other End of
Description of Year Expenses1 Accounts Deductions2 Year
- ----------- -------------- ------------- ------------- ------------- -------------
2000:
Valuation allowance
for trade and notes
receivable $ 3,121 $ 2,023 $ - $ 2,155 $ 2,989
1999:
Valuation allowance
for trade and notes
receivable 2,523 1,159 - 561 3,121
1998:
Valuation allowance
for trade and notes
receivable 1,992 989 - 458 2,523
1Provision (credit) based upon estimated collection.
2Uncollectible amounts/expenditures charged against the reserve.
39
For the purposes of complying with the amendments to the rules governing Form
S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned
registrant hereby undertakes as follows, which undertaking shall be incorporated
by reference into registrant's Registration Statements on Form S-8 Nos. 2-72542
filed on May 26, 1981, Post-Effective Amendment No. 1, filed on May 12, 1983,
Post-Effective Amendment No. 2, filed on December 22, 1983, Post-Effective
Amendment No. 3, filed on March 30, 1987; 33-19015 filed on December 11, 1987;
33-21356 filed on April 21, 1988; Form S-8 No. 33-37878 filed November 16, 1990;
Form S-8 No. 33-56827 filed December 13, 1994; Form S-8 No. 333-05799 filed June
12, 1996, and 333-92329 filed December 8, 1999.
40
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on behalf
of the undersigned, thereunto duly authorized.
A. O. SMITH CORPORATION
By: /s/ Robert J. O'Toole
-------------------------------
Robert J. O'Toole
Chief Executive Officer
Date: February 20, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below as of February 20, 2001 by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
Name and Title Signature
ROBERT J. O'TOOLE /s/ Robert J. O'Toole
Chairman of the Board of Robert J. O'Toole
Directors, President and
Chief Executive Officer
KENNETH W. KRUEGER /s/ Kenneth W. Krueger
Senior Vice President and Kenneth W. Krueger
Chief Financial Officer
GLEN R. BOMBERGER /s/ Glen R. Bomberger
Director and Executive Vice President Glen R. Bomberger
JOHN J. KITA /s/ John J. Kita
Vice President, Treasurer and Controller John J. Kita
TOM H. BARRETT /s/ Tom H. Barrett
Director Tom H. Barrett
WILLIAM F. BUEHLER /s/ William F. Buehler
Director William F. Buehler
KATHLEEN J. HEMPEL /s/ Kathleen J. Hempel
Director Kathleen J. Hempel
AGNAR PYTTE /s/ Agnar Pytte
Director Agnar Pytte
ARTHUR O. SMITH /s/ Arthur O. Smith
Director Arthur O. Smith
BRUCE M. SMITH /s/ Bruce M. Smith
Director Bruce M. Smith
W. MICHAEL BARNES /s/ W. Michael Barnes
Director W. Michael Barnes
41
INDEX TO EXHIBITS
Exhibit
Number Description
(3)(i) Restated Certificate of Incorporation of the corporation as amended
April 5, 1995 incorporated by reference to the quarterly report on
Form 10-Q for the quarter ended March 31, 1995 and as further amended
on February 5, 1996 and incorporated by reference to the annual report
on Form 10-K for the year ended December 31, 1995
(3)(ii) By-laws of the corporation as amended October 7, 1997 incorporated by
reference to the quarterly report on Form 10-Q for the quarter ended
September 30, 1997
(4) (a) The corporation's outstanding long-term debt is described in Note
7 to the Consolidated Financial Statements. None of the long-term debt
is registered under the Securities Act of 1933. None of the debt
instruments outstanding at the date of this report exceeds 10 percent
of the corporation's total consolidated assets, except for the item
disclosed as exhibit 4(b) below. The corporation agrees to furnish to
the Securities & Exchange Commission, upon request, copies of any
instruments defining rights of holders of long-term debt described in
Note 7.
(b) Credit Agreement dated as of August 2, 1999
(c) 364 Day Credit Agreement dated as of August 2, 1999
(d) A. O. Smith Corporation Restated Certificate of Incorporation as
amended April 5, 1995 [incorporated by reference to Exhibit (3)(i)
above]
(10) Material Contracts
(a) 1990 Long-Term Executive Incentive Compensation Plan, as amended,
incorporated by reference to the Form S-8 Registration Statement filed
by the corporation on December 13, 1994, (Reg. No. 33-56827)
(b) Long-Term Executive Incentive Compensation Plan incorporated by
reference to the Form S-8 Registration Statement filed by the
corporation on December 8, 1999, (Reg. No. 333-92329)
(c) Executive Incentive Compensation Plan, as amended, incorporated by
reference to Exhibit A to the Proxy Statement dated April 21, 1997 for
a May 21, 1997 Annual Meeting of Stockholders
(d) Supplemental Benefit Plan, as amended, incorporated by reference
to the Annual Report on Form 10-K for the fiscal year ended December
31, 1992
(e) Executive Life Insurance Plan, incorporated by reference to the
Annual Report on Form 10-K for the fiscal year ended December 31, 1992
(f) Corporate Directors' Deferred Compensation Plan, as amended,
incorporated by reference to the Annual Report on Form 10-K for the
fiscal year ended December 31, 1992
42
INDEX TO EXHIBITS (continued)
- -----------------
Exhibit
Number Description
(21) Subsidiaries [Page 40]
(23) Consent of Independent Auditors [Page 41]
43
================================================================================
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
Dated as of August 2, 1999
among
A.O. SMITH CORPORATION,
VARIOUS FINANCIAL INSTITUTIONS,
THE FIRST NATIONAL BANK OF CHICAGO,
as Syndication Agent,
and
BANK OF AMERICA, N.A.,
as Agent
BANC OF AMERICA SECURITIES LLC
Lead Arranger and Sole Book Manager
================================================================================
- --------------------------------------------------------------------------------
TABLE OF CONTENT
Page
SECTION 1 DEFINITIONS
1.1 Certain Defined Terms.................................................1
1.2 Other Interpretive Provisions........................................14
1.3 Accounting Principles................................................14
SECTION 2 THE CREDITS
2.1 Amounts and Terms of Commitments.....................................15
2.2 Loan Accounts........................................................15
2.3 Procedure for Committed Borrowing....................................16
2.4 Conversion and Continuation Elections for Committed Borrowings.......16
2.5 Bid Borrowings.......................................................17
2.6 Procedure for Bid Borrowings.........................................18
2.7 Termination or Reduction of Commitments..............................21
2.8 Prepayments...........................................................21
2.9 Repayment...........................................................22
2.10 Interest............................................................22
2.11 Fees................................................................23
(a) Arrangement and Agency Fees...............................23
(b) Facility Fees.............................................23
(c) Utilization Fees..........................................24
2.12 Computation of Fees and Interest....................................24
2.13 Payments by the Company.............................................24
2.14 Payments by the Lenders to the Agent................................25
2.15 Sharing of Payments, Etc............................................25
2.16 Limitation on Interest Periods......................................26
2.17 Optional Increase in Commitments....................................26
SECTION 3 TAXES, YIELD PROTECTION AND ILLEGALITY
3.1 Taxes................................................................27
3.2 Illegality...........................................................28
3.3 Increased Costs and Reduction of Return..............................28
3.4 Funding Losses.......................................................29
3.5 Inability to Determine Rates.........................................30
3.6 Certificates of Lenders..............................................30
3.7 Substitution of Lenders..............................................30
3.8 Survival.............................................................31
SECTION 4 CONDITIONS PRECEDENT
4.1 Conditions of Initial Loans..........................................31
(a) Notes..................................................31
(b) Resolutions; Incumbency................................31
i
(c) Good Standing Certificate..............................31
(d) Legal Opinions.........................................31
(e) Payment of Fees........................................31
(f) Certificate............................................31
(g) Other Documents........................................32
4.2 Conditions to All Loans..............................................32
(a) Notice.................................................32
(b) Continuation of Representations and Warranties.........32
(c) No Existing Default....................................32
SECTION 5 REPRESENTATIONS AND WARRANTIES
5.1 Corporate Existence and Power........................................32
5.2 Authorization; No Contravention......................................33
5.3 Governmental Authorization...........................................33
5.4 Binding Effect.......................................................33
5.5 Litigation...........................................................33
5.6 No Default...........................................................34
5.7 ERISA Compliance.....................................................34
5.8 Use of Proceeds; Margin Regulations..................................35
5.9 Title to Properties..................................................35
5.10 Taxes...............................................................35
5.11 Financial Condition.................................................35
5.12 Environmental Matters...............................................35
5.13 Regulated Entities..................................................36
5.14 No Burdensome Restrictions..........................................36
5.15 Subsidiaries........................................................36
5.16 Insurance...........................................................36
5.17 Full Disclosure.....................................................36
5.18 Year 2000 Problem...................................................36
SECTION 6 AFFIRMATIVE COVENANTS
6.1 Financial Statements.................................................37
6.2 Certificates; Other Information......................................37
6.3 Notices..............................................................38
6.4 Preservation of Corporate Existence, Etc.............................39
6.5 Insurancex...........................................................39
6.6 Compliance with Laws.................................................39
6.7 Compliance with ERISA................................................39
6.8 Inspection of Property and Books and Records.........................39
6.9 Payment of Taxes.....................................................40
6.10 Use of Proceeds.....................................................40
6.11 Availability........................................................40
ii
SECTION 7 NEGATIVE COVENANTS
7.1 Limitation on Liens..................................................40
7.2 Consolidations and Mergers...........................................42
7.3 Sales of Assets......................................................42
7.4 Operating Leases.....................................................42
7.5 Transactions with Affiliates.........................................42
7.6 Use of Proceeds......................................................43
7.7 ERISA ...............................................................43
7.8 Maximum Leverage Ratio...............................................43
7.9 Minimum Consolidated Net Worth.......................................43
7.10 Limitation on Subsidiary Debt.......................................43
7.11 Business Activities.................................................43
7.12 Hedging Obligations.................................................43
SECTION 8 EVENTS OF DEFAULT
8.1 Event of Default.....................................................44
(a) Non-Payment............................................44
(b) Representation or Warranty.............................44
(c) Specific Defaults......................................44
(d) Other Defaults.........................................44
(e) Cross-Default..........................................44
(f) Insolvency; Voluntary Proceedings......................44
(g) Involuntary Proceedings................................44
(h) ERISA..................................................45
(i) Monetary Judgments or Settlements......................45
(j) Non-Monetary Judgments.................................45
(k) Change of Control......................................45
8.2 Remedies.............................................................46
8.3 Rights Not Exclusive.................................................46
SECTION 9 THE AGENT
9.1 Appointment and Authorization........................................46
9.2 Delegation of Duties.................................................46
9.3 Liability of Agent...................................................47
9.4 Reliance by Agent....................................................47
9.5 Notice of Default....................................................47
9.6 Credit Decision......................................................48
9.7 Indemnification of Agent.............................................48
9.8 Agent in Individual Capacity.........................................48
9.9 Successor Agent......................................................49
9.10 Withholding Tax.....................................................49
9.11 Syndication Agent...................................................50
iii
SECTION 10 MISCELLANEOUS
10.1 Amendments and Waivers..............................................51
10.2 Notices.............................................................51
10.3 No Waiver; Cumulative Remedies......................................52
10.4 Costs and Expenses..................................................52
10.5 Company Indemnification.............................................52
10.6 Payments Set Aside..................................................53
10.7 Successors and Assigns..............................................53
10.8 Assignments, Participations, etc....................................53
10.9 Confidentiality.....................................................55
10.10 Set-off............................................................55
10.11 Notification of Addresses, Lending Offices, Etc....................55
10.12 Counterparts.......................................................56
10.13 Severability.......................................................56
10.14 No Third Parties Benefited.........................................56
10.15 Governing Law and Jurisdiction.....................................56
10.16 Entire Agreement...................................................56
iv
Page
v
Page
vi
Page
vii
SCHEDULES
Schedule 1.1 Pricing Schedule
Schedule 2.1 Commitments and Pro Rata Shares
Schedule 5.5 Litigation
Schedule 5.7 ERISA
Schedule 5.11 Permitted Liabilities
Schedule 5.12 Environmental Matters
Schedule 5.15 Subsidiaries
Schedule 7.1 Existing Liens
Schedule 10.2 Eurodollar and Domestic Lending Offices; Addresses for Notices
EXHIBITS
Exhibit A Form of Notice of Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Competitive Bid Request
Exhibit D Form of Invitation for Competitive Bids
Exhibit E Form of Competitive Bid
Exhibit F Form of Legal Opinion of Counsel to the Company
Exhibit G Form of Assignment and Acceptance
Exhibit H Form of Note
Exhibit I Form of Compliance Certificate
Exhibit J Form of Request for Increase
viii
CREDIT AGREEMENT
This CREDIT AGREEMENT is entered into as of August 2, 1999 among A.O.
SMITH CORPORATION, a Delaware corporation (the "Company"), the several financial
institutions from time to time party to this Agreement (collectively the
"Lenders"; individually each a "Lender"), THE FIRST NATIONAL BANK OF CHICAGO, as
Syndication Agent, and BANK OF AMERICA, N.A., as Agent.
WHEREAS, the Lenders have agreed to make available to the Company a
revolving credit facility upon the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
SECTION 1 DEFINITIONS
1.1 Certain Defined Terms. The following terms have the following
meanings:
Absolute Rate - see subsection 2.6(c)(ii)(C).
Affected Lender - see Section 3.7.
Affiliate means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. A Person shall be deemed to control
another Person if the controlling Person possesses, directly or
indirectly, the power to direct or cause the direction of the
management and policies of such other Person, whether through the
ownership of voting securities or membership interests, by contract, or
otherwise.
Agent means BofA in its capacity as agent for the Lenders
hereunder, and any successor agent arising under Section 9.9.
Agent-Related Persons means the Agent and any successor
thereto in such capacity hereunder, together with its Affiliates, and
the officers, directors, employees, agents and attorneys-in-fact of
such Persons and Affiliates.
Agent's Payment Office means the address for payments to the
Agent set forth on Schedule 10.2 or such other address as the Agent may
from time to time specify.
Aggregate Commitment Amount means $250,000,000, as such amount
may be increased pursuant to Section 2.17 or decreased pursuant to
Section 2.7.
Agreement means this Credit Agreement.
Applicable Margin means, at any time, the percentage set forth
in Schedule 1.1 opposite the then-current Leverage Ratio.
Arranger means Banc of America Securities LLC.
Assignee - see subsection 10.8(a).
Attorney Costs means and includes all reasonable fees and
disbursements of any law firm or other external counsel, the reasonable
allocated cost of internal legal services (without duplication) and all
reasonable disbursements of internal counsel.
Base Rate means, for any day, the higher of: (a) 0.50% per
annum above the latest Federal Funds Rate; and (b) the rate of interest
in effect for such day as publicly announced from time to time by BofA
at its principal office in the United States as its "reference rate."
(The "reference rate" is a rate set by BofA based upon various factors
including BofA's costs and desired return, general economic conditions
and other factors, and is used as a reference point for pricing some
loans, which may be priced at, above or below such announced rate.) Any
change in the reference rate announced by BofA shall take effect at the
opening of business on the day specified in the public announcement of
such change.
Base Rate Loan means a Committed Loan that bears interest
based on the Base Rate.
Bid Borrowing means a Borrowing hereunder consisting of one or
more Bid Loans made on the same day by one or more Lenders.
Bid Loan means a Loan by a Lender to the Company under Section
2.6.
BofA means Bank of America, N.A., a national banking
association.
Borrowing means a Bid Borrowing or a Committed Borrowing.
Borrowing Date means any date on which a Borrowing occurs
under Section 2.3 or 2.6.
2
Business Day means any day other than a Saturday, Sunday or
other day on which commercial banks in New York City, Charlotte,
Chicago or San Francisco are authorized or required by law to close
and, if the applicable Business Day relates to a Eurodollar Loan, means
such a day on which dealings are carried on in the London interbank
eurodollar market.
Capital Adequacy Regulation means any guideline, request or
directive of any central bank or other Governmental Authority, or any
other law, rule or regulation, whether or not having the force of law,
in each case, regarding capital adequacy of any bank or of any Person
controlling a bank.
Capital Lease means, at any time, a lease with respect to
which the lessee is required concurrently to recognize the acquisition
of an asset and the incurrence of a liability in accordance with GAAP.
Capitalized Lease Obligations means, with respect to any
Person, all outstanding obligations of such Person in respect of
Capital Leases, taken at the capitalized amount thereof accounted for
as indebtedness in accordance with GAAP.
Change of Control means any of the following events:
(a) any Person or group (within the meaning of Rule 13d-5 of
the SEC under the Exchange Act as in effect on the date hereof), other
than Permitted Holders, shall become the Beneficial Owner (as defined
in Rule 13d-3 of the SEC under the Exchange Act as in effect on the
date hereof) of 20% or more (by number of votes) of the Voting Stock of
the Company and more of such Voting Stock than the Permitted Holders;
(b) a majority of the members of the Board of Directors of
the Company shall cease to be Continuing Members; or
(c) any event or condition relating to a change of control of
the Company shall occur which requires, or permits the holder or
holders (or any agent or trustee therefor) of any Debt of the Company
or any Subsidiary to require, the purchase or repurchase prior to its
expressed maturity of any Debt of the Company or any Subsidiary.
Closing Date means the date on which all conditions precedent
set forth in Section 4.1 are satisfied or waived by all Lenders (or, in
the case of subsection 4.1(e), waived by the Person entitled to receive
the applicable payment).
Code means the Internal Revenue Code of 1986.
3
Commitment means, with respect to any Lender, such Lender's
commitment to make Committed Loans hereunder. The initial amount of
each Lender's Commitment is set forth on Schedule 2.1 (and such amount
may be adjusted by any applicable increase pursuant to Section 2.17,
any reduction of the combined Commitments pursuant to Section 2.7 and
any assignment pursuant to Section 10.8).
Committed Borrowing means a Borrowing hereunder consisting of
Committed Loans of the same Type made by the Lenders on the same day
ratably according to their respective Pro Rata Shares.
Committed Loan means a Loan by a Lender to the Company under
Section 2.1, which may be a Eurodollar Loan or a Base Rate Loan (each a
"Type" of Committed Loan).
Company - see the Preamble.
Competitive Bid means an offer by a Lender to make a Bid Loan
in accordance with subsection 2.6(b).
Competitive Bid Request - see subsection 2.6(a).
Compliance Certificate means a certificate substantially in
the form of Exhibit I.
Consolidated Net Earnings means, for any period, (a) the
consolidated net income of the Company and its Subsidiaries for such
period (considered as a single accounting period), but excluding any
equity of the Company or any Subsidiary in the undistributed earnings
of any Person which is not a Subsidiary minus (b) the aggregate amount
of all dividends paid by the Company on its preferred stock during such
period.
Consolidated Net Worth means, at any date, the consolidated
stockholders' equity of the Company and its Subsidiaries.
Continuing Member means a member of the Board of Directors of
the Company who either (a) was a member of the Company's Board of
Directors on the Effective Date and has been such continuously
thereafter or (b) became a member of such Board of Directors after the
Effective Date and whose election or nomination for election was
approved by a vote of the majority of the Continuing Members then
members of the Company's Board of Directors.
Contractual Obligation means, as to any Person, any provision
of any security issued by such Person or of any agreement, undertaking,
contract, indenture, mortgage,
4
deed of trust or other instrument, document or agreement to which such
Person is a party or by which it or any of its property is bound.
Conversion/Continuation Date means any date on which, under
Section 2.4, the Company (a) converts Committed Loans of one Type to
the other Type or (b) continues as Eurodollar Loans, but with a new
Interest Period, Eurodollar Loans having an Interest Period expiring on
such date.
Debt of any Person means, without duplication, (a) all
indebtedness of such Person for borrowed money and all mandatory
purchase, redemption or other retirement obligations of such Person in
respect of its mandatorily redeemable preferred stock; (b) all
obligations issued, undertaken or assumed by such Person as the
deferred purchase price of property or services (other than trade
payables arising in the ordinary course of business); (c) all
reimbursement or payment obligations of such Person with respect to
letters of credit; (d) all obligations of such Person evidenced by
notes, bonds, debentures or similar instruments; (e) all indebtedness
of such Person created or arising under any conditional sale or other
title retention agreement, or incurred as financing, in either case
with respect to property acquired by such Person (even though the
rights and remedies of the seller or lender under such agreement in the
event of default are limited to repossession or sale of such property);
(f) all Capitalized Lease Obligations of such Person; (g) all
indebtedness of the types referred to in clauses (a) through (f) above
secured by (or for which the holder of such indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien
upon or in property (including accounts and contracts rights) owned by
such Person, even though such Person has not assumed or become liable
for the payment of such Debt, provided that the amount of any such Debt
shall be deemed to be the lesser of the face principal amount thereof
and the fair market value of the property subject to such Lien; (h) all
Hedging Obligations of such Person; and (i) all Guaranty Obligations of
such Person in respect of indebtedness or obligations of others.
Disposition - see Section 7.3.
Dollars and $ each mean lawful money of the United States.
Effective Date means the date on which the Agent has received
counterparts of this Agreement executed by the parties hereto.
Eligible Assignee means: (a) a commercial bank organized under
the laws of the United States, or any state thereof, and having a
combined capital and surplus of at least $1,000,000,000; (b) a
commercial bank organized under the laws of any other country which is
a member of the Organization for Economic Cooperation and Development
(the "OECD"), or a political subdivision of such country, and having a
combined capital and
5
surplus of at least $1,000,000,000, provided that such bank is acting
through a branch or agency located in the United States; (c) a Person
that is primarily engaged in the business of commercial banking and
that is (i) a Lender, (ii) a Subsidiary of a Lender, (iii) a Subsidiary
of a Person of which a Lender is a Subsidiary or (iv) a Person of which
a Lender is a Subsidiary; or (d) any other Person approved by the Agent
and, unless an Event of Default or Unmatured Event of Default has
occurred and is continuing at the time any assignment is effected in
accordance with Section 10.8, the Company, such approvals not to be
unreasonably withheld or delayed; provided that neither the Company nor
an Affiliate of the Company shall qualify as an Eligible Assignee.
Environmental Claims means all claims, however asserted, by
any Governmental Authority or other Person alleging potential liability
or responsibility for violation of any Environmental Law, or for
release or injury to the environment.
Environmental Laws means all Federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes,
together with all administrative orders, directed duties, requests,
licenses, authorizations and permits of, and agreements with, any
Governmental Authorities, in each case relating to environmental and
land use matters.
ERISA means the Employee Retirement Income Security Act of
1974.
ERISA Affiliate means any trade or business (whether or not
incorporated) under common control with the Company within the meaning
of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of
the Code for purposes of provisions relating to Section 412 of the
Code).
ERISA Event means: (a) a Reportable Event with respect to a
Pension Plan; (b) a withdrawal by the Company or any ERISA Affiliate
from a Pension Plan subject to Section 4063 of ERISA during a plan year
in which it was a substantial employer (as defined in Section
4001(a)(2) of ERISA) or a substantial cessation of operations which is
treated as such a withdrawal; (c) a complete or partial withdrawal by
the Company or any ERISA Affiliate from a Multiemployer Plan or
notification that a Multiemployer Plan is in reorganization; (d) the
filing of a notice of intent to terminate, the treatment of a Pension
Plan amendment as a termination under Section 4041 or 4041A of ERISA,
or the commencement of proceedings by the PBGC to terminate a Pension
Plan or Multiemployer Plan; (e) an event or condition which might
reasonably be expected to constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan or Multiemployer Plan; or (f) the
imposition of any liability under Title IV of ERISA, other than PBGC
premiums due but not delinquent under Section 4007 of ERISA, upon the
Company or any ERISA Affiliate.
6
Eurodollar Loan means any Committed Loan which bears interest
by reference to the Eurodollar Rate.
Eurodollar Rate means, for any Interest Period, with respect
to Eurodollar Loans comprising part of the same Borrowing, the rate of
interest per annum determined by the Agent as the rate (rounded upward,
if necessary to an integral multiple of 1/100 of 1%) at which Dollar
deposits in the approximate amount of the Eurodollar Loan of BofA for
such Interest Period would be offered by BofA's London office (or such
other office as may be designated for such purpose by BofA), to major
banks in the eurodollar interbank market at their request at
approximately 11:00 a.m. (London time) two Business Days prior to the
commencement of such Interest Period.
Event of Default - see Section 8.1.
Exchange Act means the Securities Exchange Act of 1934.
Facility Fee Rate means the percentage set forth in Schedule
1.1 opposite the then-current Leverage Ratio.
Federal Funds Rate means, for any day, the rate set forth in
the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Bank of New
York (including any such successor, "H.15(519)") on the immediately
preceding Business Day opposite the caption "Federal Funds
(Effective)"; or, if for any relevant day such rate is not so published
on any such immediately preceding Business Day, the rate for such day
will be the arithmetic mean as determined by the Agent of the rates for
the last transaction in overnight Federal funds arranged prior to 9:00
a.m. (New York City time) on that day by each of three leading brokers
of Federal funds transactions in New York City selected by the Agent.
FRB means the Board of Governors of the Federal Reserve
System, and any Governmental Authority succeeding to any of its
principal functions.
Funded Debt means, at any time, the sum (determined on a
consolidated basis and without duplication) of (i) all Debt of the
Company and its Subsidiaries of the types described in clauses (a),
(b), (d), (e), (f) and (g) of the definition of Debt, (ii) all
non-contingent obligations of the Company and its Subsidiaries with
respect to letters of credit, (iii) all contingent obligations of the
Company and its Subsidiaries with respect to letters of credit issued
for the account of the Company or any Subsidiary to support, and all
Guaranty Obligations of the Company and its Subsidiaries in respect of,
Funded Debt of any Person other than the Company or a Subsidiary and
(iv) to the extent not included in the definition of Debt, the
aggregate outstanding investment or claim held at such time by
purchasers, assignees or other transferees of (or of interests in)
receivables or other rights
7
to payment of the Company and its Subsidiaries in connection with any
Securitization Transaction (regardless of the accounting treatment of
such Securitization Transaction).
GAAP means generally accepted accounting principles set forth
from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date
of determination.
Governmental Authority means any nation or government, any
state or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
Guaranty Obligation means, as to any Person, any direct or
indirect liability of such Person, with or without recourse, with
respect to any Debt, lease, dividend, letter of credit or other
obligation (the "primary obligations") of another Person (the "primary
obligor"), including any obligation of such Person (i) to purchase,
repurchase or otherwise acquire such primary obligations or any
security therefor, (ii) to advance or provide funds for the payment or
discharge of any such primary obligation, or to maintain working
capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency or any balance sheet item, level of
income or financial condition of the primary obligor, (iii) to purchase
property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation or (iv) otherwise to
assure or hold harmless the holder of any such primary obligation
against loss in respect thereof. The amount of any Guaranty Obligation
shall be deemed equal to the stated or determinable amount of the
primary obligation in respect of which such Guaranty Obligation is made
or, if not stated or if indeterminable, the maximum reasonably
anticipated liability in respect thereof.
Hedging Obligations means, with respect to any Person, all
liabilities of such Person under interest rate, currency and commodity
swap agreements, cap agreements and collar agreements, and all other
agreements or arrangements designed to protect such Person against
fluctuations in interest rates, currency exchange rates or commodity
prices.
Indemnified Liabilities - see Section 10.5.
Indemnified Person - see Section 10.5.
Independent Auditor - see subsection 6.1(a).
8
Insolvency Proceeding means, with respect to any Person, (a)
any case, action or proceeding with respect to such Person before any
court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution,
winding-up or relief of debtors or (b) any general assignment for the
benefit of creditors, composition, marshalling of assets for creditors,
or other, similar arrangement in respect of its creditors generally or
any substantial portion of its creditors, undertaken under U.S.
Federal, state or foreign law, including the U.S. Bankruptcy Code.
Interest Payment Date means, as to any Loan other than a Base
Rate Loan, the last day of each Interest Period applicable to such Loan
and, as to any Base Rate Loan, the last Business Day of each calendar
quarter, provided that (a) if any Interest Period for a Eurodollar Loan
exceeds three months, each three month anniversary of the beginning of
such Interest Period shall also be an Interest Payment Date and (b) as
to any Bid Loan, such intervening dates prior to the maturity thereof
as may be specified by the Company and agreed to by the applicable
Lender in the applicable Competitive Bid also shall be Interest Payment
Dates.
Interest Period means, (a) as to any Eurodollar Loan, the
period commencing on the Borrowing Date of such Loan or on the
Conversion/Continuation Date on which the Loan is converted into or
continued as a Eurodollar Loan, and ending on the date one, two, three
or six months thereafter as selected by the Company in its Notice of
Borrowing or Notice of Conversion/Continuation, as the case may be; and
(b) as to any Bid Loan, a period of not less than 7 days and not more
than 183 days as selected by the Company in the applicable Competitive
Bid Request; provided that:
(i) if any Interest Period would otherwise end on a
day that is not a Business Day, such Interest Period shall be
extended to the following Business Day unless, in the case of
a Eurodollar Loan, the result of such extension would be to
carry such Interest Period into another calendar month, in
which event such Interest Period shall end on the preceding
Business Day;
(ii) any Interest Period for a Eurodollar Loan that
begins on a day for which there is no numerically
corresponding day in the calendar month at the end of such
Interest Period shall end on the last Business Day of the
calendar month at the end of such Interest Period; and
(iii) no Interest Period for any Loan shall extend
beyond the Termination Date.
Invitation for Competitive Bids means a solicitation for
Competitive Bids substantially in the form of Exhibit D.
9
IRS means the Internal Revenue Service, and any Governmental
Authority succeeding to any of its principal functions under the Code.
Lender - see the Preamble.
Lending Office means, as to any Lender, the office or offices
of such Lender specified as its "Lending Office" or "Domestic Lending
Office" or "Eurodollar Lending Office", as the case may be, on Schedule
10.2, or such other office or offices as such Lender may from time to
time notify the Company and the Agent.
Leverage Ratio means at any time the ratio of (a) Funded Debt
to (b) the sum of Funded Debt plus Consolidated Net Worth.
Lien means any security interest, mortgage, deed of trust,
pledge, hypothecation, assignment, charge or deposit arrangement,
encumbrance, lien (statutory or other) or preferential arrangement of
any kind or nature whatsoever in respect of any property (including
those created by, arising under or evidenced by any conditional sale or
other title retention agreement), the interest of a lessor under a
capital lease, or any financing lease having substantially the same
economic effect as any of the foregoing, but not including the interest
of a lessor under an operating lease.
Loan means an extension of credit by a Lender to the Company
under Section 2. A Loan may be a Committed Loan or a Bid Loan.
Margin Stock means "margin stock" as such term is defined in
Regulation T, U or X of the FRB.
Material Adverse Effect means (a) a material adverse change
in, or a material adverse effect upon, the operations, business,
properties, condition (financial or otherwise) or prospects of the
Company and its Subsidiaries taken as a whole; or (b) a material
impairment of the ability of the Company to perform its obligations
hereunder.
Material Financial Obligations means Debt, Guaranty
Obligations or Hedging Obligations of the Company or any Subsidiary, or
obligations of the Company or any Subsidiary in respect of any
Securitization Transaction, in an aggregate principal amount (for all
applicable Debt, Guaranty Obligations, Hedging Obligations and
obligations in respect of Securitization Transactions) equal to
$10,000,000 or more.
Multiemployer Plan means a "multiemployer plan", within the
meaning of Section 4001(a)(3) of ERISA, with respect to which the
Company or any ERISA Affiliate may have any liability.
10
Net Cash Proceeds means, with respect to any Disposition, the
aggregate cash proceeds (including cash proceeds received by way of
deferred payment of principal pursuant to a note, installment
receivable or otherwise, but only as and when received) received by the
Company or any Subsidiary pursuant to such Disposition, net of (i)
direct costs relating to such Disposition (including sales commissions
and legal, accounting and investment banking fees), (ii) taxes paid or
reasonably estimated by the Company to be payable as a result thereof
(after taking into account any available tax credits or deductions and
any tax sharing arrangements) and (iii) amounts required to be applied
to the repayment of any Debt secured by a Lien on the asset subject to
such Disposition (other than the Loans).
Note means a promissory note executed by the Company in favor
of a Lender pursuant to subsection 2.2(b), in substantially the form of
Exhibit H.
Notice of Borrowing means a notice in substantially the form
of Exhibit A.
Notice of Conversion/Continuation means a notice in
substantially the form of Exhibit B.
Obligations means all advances, debts, liabilities,
obligations, covenants and duties arising under this Agreement owing by
the Company to any Lender, the Agent or any Indemnified Person, whether
direct or indirect (including those acquired by assignment), absolute
or contingent, due or to become due, or now existing or hereafter
arising.
Organization Documents means (i) for any corporation, the
certificate of incorporation, the bylaws, any certificate of
determination or instrument relating to the rights of preferred
shareholders of such corporation, any shareholder rights agreement, and
all applicable resolutions of the board of directors (or any committee
thereof) of such corporation, (ii) for any partnership or joint
venture, the partnership or joint venture agreement and any other
organizational document of such entity, (iii) for any limited liability
company, the certificate or articles of organization, the operating
agreement and any other organizational document of such limited
liability company, (iv) for any trust, the declaration of trust, the
trust agreement and any other organizational document of such trust and
(v) for any other entity, the document or agreement pursuant to which
such entity was formed and any other organizational document of such
entity.
Other Taxes means any present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies
which arise from any payment made hereunder or from the execution,
delivery, performance, enforcement or registration of, or otherwise
with respect to, this Agreement or any Note.
Participant - see subsection 10.8(c).
11
PBGC means the Pension Benefit Guaranty Corporation, or any
Governmental Authority succeeding to any of its principal functions
under ERISA.
Pension Plan means a pension plan (as defined in Section 3(2)
of ERISA) subject to Title IV of ERISA with respect to which the
Company or any ERISA Affiliate may have any liability but not including
any Multiemployer Plan.
Permitted Holders means Arthur O. Smith and Lloyd B. Smith,
their respective spouses, their respective lineal descendants and the
spouses of such descendants, trusts for the benefit of or controlled by
the foregoing and any corporation controlled by any of the foregoing.
Person means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust,
unincorporated association, joint venture or Governmental Authority.
Plan means an employee benefit plan (as defined in Section
3(3) of ERISA) with respect to which the Company may have any
liability.
Pro Rata Share means, as to any Lender at any time, the
percentage equivalent (expressed as a decimal, rounded to the ninth
decimal place) at such time of (i) prior to termination of the
Commitments, the amount of such Lender's Commitment divided by the
combined Commitments of all Lenders and (ii) after termination of the
Commitments, the unpaid principal amount of such Lender's Loans divided
by the then aggregate unpaid amount of the Loans of all Lenders.
Replacement Lender - see Section 3.7.
Reportable Event means any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder, other than any such
event for which the 30-day notice requirement under ERISA has been
waived in regulations issued by the PBGC.
Required Lenders means (a) prior to the Termination Date,
Lenders holding more than 50% of the Commitments, and (b) thereafter,
Lenders holding more than 50% of the then aggregate unpaid principal
amount of the Loans.
Requirement of Law means, as to any Person, any law (statutory
or common), treaty, rule or regulation or determination of an
arbitrator (under binding arbitration) or of a Governmental Authority,
in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.
12
Responsible Officer means the chief executive officer or the
president of the Company, or any other officer having substantially the
same authority and responsibility; or, with respect to compliance with
financial covenants, the chief financial officer, the secretary or the
treasurer of the Company, or any other officer having substantially the
same authority and responsibility.
SEC means the Securities and Exchange Commission, or any
Governmental Authority succeeding to any of its principal functions.
Securitization Transaction means any sale, assignment or other
transfer by the Company or any Subsidiary of accounts receivable, lease
receivables or other payment obligations owing to the Company or such
Subsidiary or any interest in any of the foregoing, together in each
case with any collections and other proceeds thereof, any collection or
deposit accounts related thereto, and any collateral, guaranties or
other property or claims in favor of the Company or such Subsidiary
supporting or securing payment by the obligor thereon of, or otherwise
related to, any such receivables.
Subsidiary of a Person means any corporation, association,
partnership, limited liability company, joint venture or other business
entity of which more than 50% of the voting stock, membership interests
or other equity interests (in the case of Persons other than
corporations), is owned or controlled directly or indirectly by the
Person, or one or more of the Subsidiaries of the Person, or a
combination thereof. Unless the context otherwise clearly requires,
references herein to a "Subsidiary" refer to a Subsidiary of the
Company.
Taxes means any and all present or future taxes, levies,
assessments, imposts, duties, deductions, charges or withholdings,
fees, withholdings or similar charges, and all liabilities with respect
thereto, excluding, in the case of each Lender and the Agent, such
taxes (including income taxes or franchise taxes) as are imposed on or
measured by its net income by the jurisdiction (or any political
subdivision thereof) under the laws of which such Lender or the Agent,
as the case may be, is organized or maintains a lending office.
Termination Date means the earlier to occur of (a) August 2,
2004 or (b) the date on which the Commitments terminate in accordance
with the provisions of this Agreement.
364-Day Commitment Amount means the "Aggregate Commitment
Amount" under and as defined in the 364-Day Credit Agreement.
364-Day Credit Agreement means the 364-Day Credit Agreement
dated as of the date hereof among the Company, various financial
institutions and BofA, as agent.
13
Total Commitment Amount means at any time the sum of the
Aggregate Commitment Amount and the 364-Day Commitment Amount.
Type has the meaning specified in the definition of "Committed
Loan."
Unfunded Pension Liability means the excess of a Pension
Plan's accrued benefit liabilities under Section 4001(a)(16) of ERISA
over the current value of that Plan's assets, determined in accordance
with the assumptions used for funding the Pension Plan pursuant to
Section 412 of the Code for the applicable plan year.
United States and U.S. each means the United States of
America.
Unmatured Event of Default means any event or circumstance
which, with the giving of notice, the lapse of time, or both, would (if
not cured or otherwise remedied during such time) constitute an Event
of Default.
Voting Stock means, as to any Person, all outstanding
securities of all classes of such Person ordinarily (and apart from
rights accruing under special circumstances) having the right to elect
directors of such Person.
Wholly-Owned Subsidiary means any Subsidiary in which (other
than directors' qualifying shares required by law) 100% of the Voting
Stock, and 100% of the capital stock of every other class, in each
case, at the time as of which any determination is being made, is
owned, beneficially and of record, by the Company, or by one or more of
the other Wholly-Owned Subsidiaries, or both.
Year 2000 Problem means the risk that computer applications
and embedded microchips in non-computing devices may be unable to
recognize and perform properly date-sensitive functions involving
certain dates prior to and any date after December 31, 1999.
1.2 Other Interpretive Provisions.
(a) The meanings of defined terms are equally applicable to
the singular and plural forms of the defined terms.
(b) Section, subsection, Article, Schedule and Exhibit
references are to this Agreement unless otherwise specified.
(c) The term "including" is not limiting and means "including
without limitation."
14
(d) In the computation of periods of time from a specified
date to a later specified date, the word "from" means "from and including"; the
words "to" and "until" each mean "to but excluding", and the word "through"
means "to and including."
(e) Unless otherwise expressly provided herein, (i) references
to agreements (including this Agreement) and other contractual instruments shall
be deemed to include all subsequent amendments and other modifications thereto,
but only to the extent such amendments and other modifications are not
prohibited by the terms of this Agreement, and (ii) references to any statute or
regulation are to be construed as including all statutory and regulatory
provisions or rules consolidating, amending, replacing, supplementing,
interpreting or implementing such statute or regulation.
(f) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(g) This Agreement may use several different limitations,
tests or measurements to regulate the same or similar matters. All such
limitations, tests and measurements are cumulative and shall each be performed
in accordance with their terms.
(h) This Agreement is the result of negotiations among and has
been reviewed by counsel to the Agent, the Company and the Lenders, and is the
product of all parties. Accordingly, this Agreement shall not be construed
against the Lenders or the Agent merely because of the Agent's or Lenders'
involvement in its preparation.
1.3 Accounting Principles.
(a) Unless the context otherwise clearly requires, all
accounting terms not expressly defined herein shall be construed, and all
financial computations required under this Agreement shall be made, in
accordance with GAAP, consistently applied; provided that if the Company
notifies the Agent that the Company wishes to amend any covenant in Section 7 to
eliminate the effect of any change in GAAP on the operation of such covenant (or
if the Agent notifies the Company that the Required Lenders wish to amend
Section 7 for such purpose), then the Company's compliance with such covenant
shall be determined on the basis of GAAP in effect immediately before the
relevant change in GAAP became effective, until either such notice is withdrawn
or such covenant is amended in a manner satisfactory to the Company and the
Required Lenders.
(b) References herein to "fiscal year" and "fiscal quarter"
refer to such fiscal periods of the Company.
15
SECTION 2 THE CREDITS
2.1 Amounts and Terms of Commitments. Each Lender severally agrees, on
the terms and conditions set forth herein, to make Committed Loans to the
Company from time to time on any Business Day during the period from the Closing
Date to the Termination Date, in an aggregate amount not to exceed at any time
outstanding the amount of such Lender's Commitment; provided that the aggregate
principal amount of all outstanding Loans (whether Committed Loans or Bid Loans)
shall not at any time exceed the Aggregate Commitment Amount. Subject to the
foregoing and the other terms and conditions hereof, the Company may borrow
under this Section 2.1, prepay under Section 2.8 and reborrow under this Section
2.1.
2.2 Loan Accounts. (a) The Loans made by each Lender shall be evidenced
by one or more accounts or records maintained by such Lender in the ordinary
course of business. The accounts or records maintained by the Agent and each
Lender shall be conclusive (absent manifest error) of the amount of the Loans
made by the Lenders to the Company, and the interest and payments thereon. Any
failure so to record or any error in doing so shall not, however, limit or
otherwise affect the obligation of the Company hereunder to pay any amount owing
with respect to the Loans.
(b) Upon the request of any Lender made through the Agent, the
Loans made by such Lender may be evidenced by one or more Notes, instead of or
in addition to loan accounts. Each such Lender shall endorse on the schedules
annexed to its Note(s) the date, amount and maturity of each Loan made by it and
the amount of each payment of principal made by the Company with respect
thereto. Each such Lender is irrevocably authorized by the Company to endorse
its Note(s) and each Lender's record shall be conclusive absent manifest error;
provided that the failure of a Lender to make, or an error in making, a notation
thereon with respect to any Loan shall not limit or otherwise affect the
obligations of the Company hereunder or under any such Note to such Lender.
2.3 Procedure for Committed Borrowing. (a) Each Committed Borrowing
shall be made upon the Company's irrevocable written notice delivered to the
Agent in the form of a Notice of Borrowing, which notice must be received by the
Agent prior to 10:30 a.m. (Chicago time) (i) three Business Days prior to the
requested Borrowing Date, in the case of Eurodollar Loans, and (ii) on the
requested Borrowing Date, in the case of Base Rate Loans, specifying:
(A) the amount of the Committed Borrowing, which
shall be in an aggregate amount not less than $10,000,000 or a higher
integral multiple of $1,000,000 (provided that any Borrowing of Base
Rate Loans may be in an amount equal to the unused Aggregate Commitment
Amount);
(B) the requested Borrowing Date, which shall be a
Business Day;
16
(C) the Type of Loans comprising such Committed
Borrowing; and
(D) in the case of Eurodollar Loans, the duration of
the initial Interest Period therefor.
(b) The Agent will promptly notify each Lender of its receipt
of any Notice of Borrowing and of the amount of such Lender's Pro Rata Share of
such Borrowing.
(c) Each Lender will make the amount of its Pro Rata Share of
each Committed Borrowing available to the Agent for the account of the Company
at the Agent's Payment Office by 12:00 noon (Chicago time) on the Borrowing Date
requested by the Company in funds immediately available to the Agent. The
proceeds of all such Committed Loans will then be made available to the Company
by the Agent at such office by crediting the account of the Company on the books
of BofA with the aggregate of the amounts made available to the Agent by the
Lenders and in like funds as received by the Agent.
2.4 Conversion and Continuation Elections for Committed Borrowings. (a)
The Company may, upon irrevocable written notice to the Agent in accordance with
subsection 2.4(b):
(i) elect, as of any Business Day, in the case of
Base Rate Loans, or as of the last day of the applicable Interest
Period, in the case of Eurodollar Loans, to convert any such Committed
Loans (or any part thereof in an aggregate amount not less than
$5,000,000 or a higher integral multiple of $1,000,000) into Committed
Loans of the other Type; or
(ii) elect as of the last day of the applicable
Interest Period, to continue any Eurodollar Loans having Interest
Periods expiring on such day (or any part thereof in an amount not less
than $5,000,000 or a higher integral multiple of $1,000,000);
provided that if at any time the aggregate amount of Eurodollar Loans in respect
of any Borrowing is reduced, by payment, prepayment or conversion of part
thereof, to be less than $5,000,000, such Eurodollar Loans shall automatically
convert into Base Rate Loans.
(b) The Company shall deliver a Notice of
Conversion/Continuation to be received by the Agent not later than 10:30 a.m.
(Chicago time) at least (i) three Business Days in advance of the
Conversion/Continuation Date, if the Committed Loans are to be converted into or
continued as Eurodollar Loans and (ii) on the Conversion/Continuation Date, if
the Committed Loans are to be converted into Base Rate Loans, specifying:
(A) the proposed Conversion/Continuation Date;
17
(B) the aggregate amount of Committed Loans to be
converted or continued;
(C) the Type of Committed Loans resulting from the
proposed conversion or continuation; and
(D) in the case of conversions into Eurodollar Loans,
the duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable
to Eurodollar Loans, the Company has failed to select timely a new Interest
Period to be applicable to such Eurodollar Loans, the Company shall be deemed to
have elected to convert such Eurodollar Loans into Base Rate Loans effective as
of the expiration date of such Interest Period.
(d) The Agent will promptly notify each Lender of its receipt
of a Notice of Conversion/Continuation, or, if no timely notice is provided by
the Company, the Agent will promptly notify each Lender of the details of any
automatic conversion. All conversions and continuations shall be made ratably
according to the respective outstanding principal amounts of the Committed Loans
with respect to which the notice was given held by each Lender.
(e) Unless the Required Lenders otherwise consent, during the
existence of an Event of Default or Unmatured Event of Default, the Company may
not elect to have a Loan converted into or continued as a Eurodollar Loan.
2.5 Bid Borrowings. In addition to Committed Borrowings pursuant to
Section 2.3, each Lender severally agrees that the Company may, as set forth in
Section 2.6, from time to time request the Lenders prior to the Termination Date
to submit offers to make Bid Loans to the Company; provided that the Lenders
may, but shall have no obligation to, submit such offers and the Company may,
but shall have no obligation to, accept any such offers; and provided, further,
that the aggregate principal amount of all outstanding Loans (whether Bid Loans
or Committed Loans) shall not at any time exceed the Aggregate Commitment
Amount.
2.6 Procedure for Bid Borrowings.
(a) When the Company wishes to request the Lenders to submit
offers to make Bid Loans hereunder, it shall transmit to the Agent by telephone
call followed promptly by facsimile transmission a notice in substantially the
form of Exhibit C (a "Competitive Bid Request") so as to be received no later
than 9:00 a.m. (Chicago time) one Business Day prior to the date of such
proposed Bid Borrowing, specifying:
(i) the date of such Bid Borrowing, which shall be a
Business Day;
18
(ii) the aggregate amount of such Bid Borrowing,
which shall be a minimum amount of $5,000,000 or a higher integral
multiple of $1,000,000; and
(iii) the duration of the Interest Period applicable
thereto, subject to the provisions of the definition of "Interest
Period" herein.
The Company may not request Competitive Bids for more than three Interest
Periods in a single Competitive Bid Request and may not request Competitive Bids
more than once in any period of five Business Days.
(b) Upon receipt of a Competitive Bid Request, the Agent will
promptly send to the Lenders by facsimile transmission an Invitation for
Competitive Bids, which shall constitute an invitation by the Company to each
Lender to submit Competitive Bids offering to make the Bid Loans to which such
Competitive Bid Request relates in accordance with this Section 2.6.
(c) (i) Each Lender may at its discretion submit a Competitive
Bid containing an offer or offers to make Bid Loans in response to any
Invitation for Competitive Bids. Each Competitive Bid must comply with
the requirements of this subsection 2.6(c) and must be submitted to the
Agent by facsimile transmission at the Agent's office for notices not
later than 8:30 a.m. (Chicago time) on the proposed date of Borrowing;
provided that Competitive Bids submitted by the Agent (or any Affiliate
of the Agent) in the capacity of a Lender may be submitted, and may
only be submitted, if the Agent or such Affiliate notifies the Company
of the terms of the offer or offers contained therein not later than
8:15 a.m. (Chicago time) on the proposed date of Borrowing.
(ii) Each Competitive Bid shall be in substantially
the form of Exhibit E, specifying therein:
(A) the proposed date of Borrowing;
(B) the principal amount of each Bid Loan
for which such Competitive Bid is being made, which principal
amount (x) may be equal to, greater than or less than the
amount of the Commitment of the quoting Lender, (y) must be
$5,000,000 or a higher integral multiple of $1,000,000 and (z)
may not exceed the principal amount of Bid Loans for which
Competitive Bids were requested;
(C) the rate of interest per annum (which
shall be an integral multiple of 1/100th of 1%) (the "Absolute
Rate") offered for each such Bid Loan; and
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(D) the identity of the quoting Lender.
A Competitive Bid may contain up to three separate offers by the
quoting Lender with respect to each Interest Period specified in the
related Invitation for Competitive Bids.
(iii) Any Competitive Bid shall be disregarded if it:
(A) is not substantially in conformity with
Exhibit E or does not specify all of the information required
by subsection (c)(ii) of this Section;
(B) contains qualifying, conditional or
similar language (other than a maximum aggregate principal
amount of Competitive Bids which may be accepted thereunder);
(C) proposes terms other than or in addition
to those set forth in the applicable Invitation for
Competitive Bids; or
(D) arrives after the time set forth in
subsection (c)(i) of this Section.
(d) Promptly on receipt and not later than 9:00 a.m. (Chicago
time) on the proposed date of Borrowing, the Agent will notify the Company of
the terms (i) of any Competitive Bid submitted by a Lender that is in accordance
with subsection 2.6(c) and (ii) of any Competitive Bid that amends, modifies or
is otherwise inconsistent with a previous Competitive Bid submitted by such
Lender with respect to the same Competitive Bid Request. Any such subsequent
Competitive Bid shall be disregarded by the Agent unless such subsequent
Competitive Bid is submitted solely to correct a manifest error in such former
Competitive Bid and only if received within the time set forth in subsection
2.6(c). The Agent's notice to the Company shall specify (1) the aggregate
principal amount of Bid Loans for which offers have been received for each
Interest Period specified in the related Competitive Bid request; and (2) the
respective principal amounts and Absolute Rates so offered. Subject only to the
provisions of Sections 3.2 and 4.2 hereof and the provisions of this subsection
(d), any Competitive Bid shall be irrevocable except with the written consent of
the Agent given on the written instructions of the Company.
(e) Not later than 9:30 a.m. (Chicago time) on the proposed
date of a Bid Borrowing, the Company shall notify the Agent of its acceptance or
non-acceptance of the offers notified to it pursuant to subsection 2.6(d). The
Company shall be under no obligation to accept any offer and may choose to
reject all offers. In the case of acceptance, such notice shall specify the
aggregate principal amount of offers for each Interest Period that is accepted.
The Company may accept any Competitive Bid in whole or in part; provided that:
20
(i) the aggregate principal amount of each Bid
Borrowing may not exceed the applicable amount set forth in the related
Competitive Bid Request;
(ii) the principal amount of each Bid Borrowing must
be $5,000,000 or a higher integral multiple of $1,000,000;
(iii) acceptance of offers may only be made on the
basis of ascending Absolute Rates, within each Interest Period; and
(iv) the Company may not accept any offer that is
described in subsection 2.6(c)(iii) or that otherwise fails to comply
with the requirements of this Agreement.
(f) If offers are made by two or more Lenders with the same
Absolute Rate for a greater aggregate principal amount than the amount in
respect of which such offers are accepted for the related Interest Period, the
principal amount of Bid Loans in respect of which such offers are accepted shall
be allocated by the Agent among such Lenders as nearly as possible (in such
multiples, not less than $1,000,000, as the Agent may deem appropriate) in
proportion to the aggregate principal amounts of such offers. Determination by
the Agent of the amount of Bid Loans shall be conclusive in the absence of
manifest error.
(g) (i) The Agent will promptly notify each Lender having
submitted a Competitive Bid if its offer has been accepted and, if its
offer has been accepted, of the amount of the Bid Loan or Bid Loans to
be made by it on the date of the Bid Borrowing.
(ii) Each Lender which has received notice pursuant
to subsection 2.6(g)(i) that its Competitive Bid has been accepted
shall make the amounts of such Bid Loans available to the Agent for the
account of the Company at the Agent's Payment Office by 12:00 noon
(Chicago time) on such date of Bid Borrowing, in immediately available
funds.
(iii) Promptly following each Bid Borrowing, the
Agent shall notify each Lender of the ranges of bids submitted and the
highest and lowest Bids accepted for each Interest Period requested by
the Company and the aggregate amount borrowed pursuant to such Bid
Borrowing.
(h) If, on the proposed date of Borrowing, the Commitments
have not been terminated and all applicable conditions to funding referenced in
Sections 3.2 and 4.2 hereof are satisfied, the Lender or Lenders whose offers
the Company has accepted will fund each Bid Loan so accepted. Nothing in this
Section 2.6 shall be construed as a right of first offer in favor of the Lenders
or to otherwise limit the ability of the Company to request and accept credit
facilities from any Person (including any of the Lenders), provided that no
Event of Default or Unmatured Event of Default would otherwise arise or exist as
a result of the Company executing, delivering or performing under such credit
facilities.
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2.7 Termination or Reduction of Commitments.
(a) On each date on which the Aggregate Commitment Amount is
required to be reduced pursuant to Section 7.3, the Aggregate Commitment Amount
shall be reduced by the amount required pursuant to Section 7.3.
(b) The Company may, upon not less than four Business Days'
prior notice to the Agent, terminate the Commitments or permanently reduce the
Aggregate Commitment Amount to an amount which is not less than the aggregate
principal amount of all outstanding Loans; provided that, if the 364-Day Credit
Agreement is still in effect, the Company shall concurrently terminate or reduce
by a proportionate amount, as the case may be, the 364-Day Commitment Amount.
Any reduction pursuant to this subsection (b) shall reduce the Total Commitment
Amount by $10,000,000 or a higher integral multiple of $1,000,000 (provided that
if the 364-Day Credit Agreement has been terminated, any reduction shall be in
an amount which results in the Aggregate Commitment Amount being an integral
multiple of $1,000,000).
(c) Any reduction of the Aggregate Commitment Amount shall be
applied to reduce the amount of the Commitment of each Lender according to its
Pro Rata Share. All accrued facility fees to, but not including, the effective
date of any reduction or termination of Commitments shall be paid on the
effective date of such reduction or termination.
2.8 Prepayments.
(a) If, on any date on which the Aggregate Commitment Amount
is required to be reduced pursuant to subsection 2.7(a), the aggregate principal
amount of all outstanding Loans (whether Committed Loans or Bid Loans) would
exceed the Aggregate Commitment Amount after giving effect to such reduction,
then the Company shall make an immediate repayment of outstanding Committed
Loans in a principal amount equal to such excess (rounded upward, if necessary,
to an integral multiple of $1,000,000) or, if less, in the aggregate principal
amount of all outstanding Committed Loans. Any such prepayment shall be applied,
first, to prepay Base Rate Loans, and, second, to prepay Eurodollar Loans (in
such order as the Company shall specify). If after prepayment of all Committed
Loans, the aggregate principal amount of all outstanding Loans would exceed the
Aggregate Commitment Amount after giving effect to the applicable reduction, the
Company shall deposit with the Agent, to be held by the Agent as cash collateral
for the Obligations, an amount sufficient to eliminate such excess, and the
Agent shall apply such funds to repay Bid Loans as they mature or as otherwise
provided in Section 2.15.
(b) The Company may, from time to time, upon irrevocable
notice to the Agent not later than 10:30 a.m. (Chicago time) on the date of
prepayment, with respect to prepayments of Base Rate Loans, and one Business Day
prior to the proposed date of prepayment, with respect to Eurodollar Loans,
ratably prepay Committed Loans in whole or in
22
part, in minimum amounts of $5,000,000 or a higher integral multiple of
$1,000,000 (provided that the Company may make a prepayment of Base Rate Loans
in an amount which is not such an integral multiple if, after giving effect to
such prepayment, the outstanding principal amount of all Base Rate Loans will be
an integral multiple of $1,000,000). Such notice of prepayment shall specify the
date and amount of such prepayment and the Committed Loans to be prepaid. The
Agent will promptly notify each Lender of its receipt of any such notice, and of
such Lender's Pro Rata Share of such prepayment. If such notice is given by the
Company, the Company shall make such prepayment and the payment amount specified
in such notice shall be due and payable on the date specified therein.
(c) Any prepayment of Eurodollar Loans shall include accrued
interest to the date of prepayment on the amount prepaid and any amounts
required pursuant to Section 3.4.
(d) Bid Loans may not be voluntarily prepaid.
2.9 Repayment. The Company shall repay each Bid Loan on the last day of
each Interest Period therefor. The Company shall repay all Loans (including any
outstanding Bid Loan) on the Termination Date.
2.10 Interest. (a) Each Committed Loan shall bear interest on the
outstanding principal amount thereof from the applicable Borrowing Date at a
rate per annum equal to (i) in the case of a Eurodollar Loan, the Eurodollar
Rate for each applicable Interest Period plus the Applicable Margin as in effect
from time to time and (ii) in the case of a Base Rate Committed Loan, the Base
Rate as in effect from time to time. Each Bid Loan shall bear interest on the
outstanding principal amount thereof from the relevant Borrowing Date at a rate
per annum equal to the Absolute Rate.
(b) Interest on each Loan shall be paid in arrears on each
Interest Payment Date. Interest also shall be paid on each Eurodollar Loan on
the date of any conversion of such Eurodollar Loan under Section 2.4 and any
prepayment of such Eurodollar Loan under Section 2.8, in each case for the
portion of the Loan so prepaid.
(c) The Company shall pay to each Lender, at any time such
Lender is required under regulations of the FRB to maintain reserves with
respect to liabilities or assets consisting of or including Eurocurrency funds
or deposits (currently known as "Eurocurrency liabilities"), additional interest
on the unpaid principal amount of each Eurodollar Loan equal to the actual cost
of such reserves allocated to such Eurodollar Loan by such Lender (as determined
by such Lender in good faith, which determination shall be conclusive), payable
on each date on which interest is payable on such Eurodollar Loan, provided that
the Company shall have received at least 10 days' prior written notice (with a
copy to the Agent) of the amount of such additional interest from such Lender.
If a Lender fails to give notice 10 days prior to the relevant Interest Payment
Date, such additional interest shall be payable 10 days after receipt of such
notice.
23
(d) Notwithstanding the foregoing provisions of this Section,
upon notice to the Company from the Agent (acting at the request or with the
consent of the Required Lenders) during the existence of an Event of Default,
and for so long as such Event of Default continues, the Company shall pay
interest (after as well as before entry of judgment thereon to the extent
permitted by law) on the principal amount of all outstanding Loans and, to the
extent permitted by applicable law, on any other amount payable hereunder, at a
rate per annum equal to the rate otherwise applicable thereto pursuant to the
terms hereof (or, if no such rate is specified, the Base Rate) plus 2%. All such
interest shall be payable on demand.
(e) Anything herein to the contrary notwithstanding, the
obligations of the Company to any Lender hereunder shall be subject to the
limitation that payments of interest shall not be required for any period for
which interest is computed hereunder, to the extent (but only to the extent)
that contracting for or receiving such payment by such Lender would be contrary
to the provisions of any law applicable to such Lender limiting the highest rate
of interest that may be lawfully contracted for, charged or received by such
Lender, and in such event the Company shall pay such Lender interest at the
highest rate permitted by applicable law.
2.11 Fees.
(a) Arrangement and Agency Fees. The Company shall pay
arrangement fees to the Arranger for the Arranger's own account, and shall pay
an agency fee to the Agent for the Agent's own account, as agreed among the
Company, the Arranger and the Agent from time to time.
(b) Facility Fees. The Company shall pay to the Agent for the
account of each Lender a facility fee on the amount of such Lender's Commitment
(and, if any Loans remain outstanding after termination of such Commitment, on
the aggregate principal amount of such Lender's Loans) at the Facility Fee Rate.
Such facility fee shall accrue from the Closing Date to the Termination Date and
shall be due and payable quarterly in arrears on the last Business Day of each
calendar quarter through the Termination Date (or, if later, the date on which
all Loans are paid in full), with the final payment to be made on the
Termination Date (or such later date); provided that, in connection with any
reduction or termination of Commitments under Section 2.7, the accrued facility
fee calculated for the period ending on such date shall also be paid on the date
of such reduction or termination, with (in the case of a reduction) the
following quarterly payment being calculated on the basis of the period from
such reduction date to the quarterly payment date. The facility fees shall
accrue at all times after the Closing Date, including at any time during which
one or more conditions in Section 4 are not met.
(c) Utilization Fees. The Company shall pay to the Agent for
the account of each Lender a utilization fee on such Lender's Pro Rata Share of
the aggregate principal amount of all outstanding Committed Loans for any day on
which such aggregate principal amount plus the
24
aggregate principal amount of all outstanding "Committed Loans" under and as
defined in the 364-Day Credit Agreement exceeds 50% of the Total Commitment
Amount, computed at a rate per annum equal to 0.05%, or, at any time the
Leverage Ratio is greater than 0.55 to 1, 0.075%. Such utilization fee shall
accrue on each applicable day from the Closing Date to the Termination Date and
shall be due and payable quarterly in arrears on the last Business Day of each
calendar quarter through the Termination Date, with the final payment to be made
on the Termination Date.
2.12 Computation of Fees and Interest. (a) All computations of interest
for Base Rate Loans when the Base Rate is determined by BofA's "reference rate"
shall be made on the basis of a year of 365 or 366 days, as the case may be, and
actual days elapsed. All other computations of interest and fees shall be made
on the basis of a 360-day year and actual days elapsed. Interest and fees shall
accrue during each period during which such interest or such fees are computed
from the first day thereof to the last day thereof.
(b) Each determination of an interest rate by the Agent shall
be conclusive and binding on the Company and the Lenders in the absence of
manifest error. The Agent will, at the request of the Company or any Lender,
deliver to the Company or such Lender, as the case may be, a statement showing
the quotations used by the Agent in determining any interest rate and the
resulting interest rate.
2.13 Payments by the Company. (a) All payments to be made by the
Company shall be made without set-off, recoupment or counterclaim. Except as
otherwise expressly provided herein (including Section 10.11), all payments by
the Company shall be made to the Agent for the account of the Lenders at the
Agent's Payment Office, and shall be made in Dollars and in immediately
available funds, no later than 12:00 noon (Chicago time) on the date specified
herein. The Agent will promptly distribute to each Lender its Pro Rata Share (or
other applicable share as expressly provided herein) of such payment in like
funds as received. Any payment received by the Agent later than 12:00 noon
(Chicago time) shall be deemed to have been received on the following Business
Day and any applicable interest or fee shall continue to accrue.
(b) Whenever any payment is due on a day other than a Business
Day, such payment shall be made on the following Business Day (unless, in the
case of a Eurodollar Loan, the following Business Day is in another calendar
month, in which case such payment shall be made on the preceding Business Day),
and such extension of time shall in such case be included in the computation of
interest or fees, as the case may be.
(c) Unless the Agent receives notice from the Company prior to
the date on which any payment is due to the Lenders that the Company will not
make such payment in full as and when required, the Agent may assume that the
Company has made such payment in full to the Agent on such date in immediately
available funds and the Agent may (but shall not be so required), in reliance
upon such assumption, distribute to each Lender on such due date an
25
amount equal to the amount then due such Lender. If and to the extent the
Company has not made such payment in full to the Agent, each Lender shall repay
to the Agent on demand such amount distributed to such Lender, together with
interest thereon at the Federal Funds Rate for each day from the date such
amount is distributed to such Lender until the date repaid.
2.14 Payments by the Lenders to the Agent. (a) Unless the Agent
receives notice from a Lender on or prior to the Closing Date or, with respect
to any Committed Borrowing after the Closing Date, at least one Business Day
prior to the date of a Borrowing of Eurodollar Loans and prior to 11:30 a.m.
(Chicago time) on the date of a Borrowing of Base Rate Loans that such Lender
will not make available as and when required hereunder to the Agent for the
account of the Company the amount of such Lender's Pro Rata Share of such
Committed Borrowing, the Agent may assume that such Lender has made such amount
available to the Agent in immediately available funds on the Borrowing Date and
the Agent may (but shall not be so required), in reliance upon such assumption,
make available to the Company on such date a corresponding amount. If and to the
extent any Lender shall not have made its full amount available to the Agent in
immediately available funds and the Agent in such circumstances has made
available to the Company such amount, such Lender shall on the Business Day
following such Borrowing Date make such amount available to the Agent, together
with interest at the Federal Funds Rate for each day during such period. A
notice of the Agent submitted to any Lender with respect to amounts owing under
this subsection (a) shall be conclusive, absent manifest error. If such amount
is so made available, such payment to the Agent shall constitute such Lender's
Committed Loan on the date of Borrowing for all purposes of this Agreement. If
such amount is not made available to the Agent on the Business Day following the
Borrowing Date, the Agent will notify the Company of such failure to fund and,
upon demand by the Agent, the Company shall pay such amount to the Agent for the
Agent's account, together with interest thereon for each day elapsed since the
date of such Borrowing, at a rate per annum equal to the interest rate
applicable at the time to the Committed Loans comprising such Committed
Borrowing.
(b The failure of any Lender to make any Loan on any Borrowing
Date shall not relieve any other Lender of any obligation hereunder to make a
Loan on such Borrowing Date, but no Lender shall be responsible for the failure
of any other Lender to make the Loan to be made by such other Lender on any
Borrowing Date.
2.15 Sharing of Payments, Etc. If, other than as expressly provided
elsewhere herein, any Lender shall obtain on account of the Committed Loans made
by it any payment (whether voluntary, involuntary, through the exercise of any
right of set-off, or otherwise) in excess of its Pro Rata Share (or other share
contemplated hereunder), such Lender shall immediately (a) notify the Agent of
such fact and (b) purchase from the other Lenders such participations in the
Committed Loans made by them as shall be necessary to cause such purchasing
Lender to share the excess payment pro rata with each of them; provided that if
all or any portion of such excess payment is thereafter recovered from the
purchasing Lender, such purchase shall to that extent be rescinded and each
other Lender shall repay to the purchasing Lender the purchase price paid
26
therefor, together with an amount equal to such paying Lender's ratable share
(according to the proportion of (i) the amount of such paying Lender's required
repayment to (ii) the total amount so recovered from the purchasing Lender) of
any interest or other amount paid or payable by the purchasing Lender in respect
of the total amount so recovered. The Company agrees that any Lender so
purchasing a participation from another Lender may, to the fullest extent
permitted by law, exercise all its rights of payment (including the right of
set-off, but subject to Section 10.10) with respect to such participation as
fully as if such Lender were the direct creditor of the Company in the amount of
such participation. The Agent will keep records (which shall be conclusive and
binding in the absence of manifest error) of participations purchased under this
Section and will in each case notify the Lenders following any such purchases or
repayments.
2.16 Limitation on Interest Periods. After giving effect to any
Borrowing, and any conversion or continuation of Committed Loans, there may not
be more than eight different Interest Periods in effect for all Loans.
27
2.17 Optional Increase in Commitments. The Company may at any time (but
not more than once in any calendar year), by means of a letter to the Agent
substantially in the form of Exhibit J, request that the Aggregate Commitment
Amount be increased by (a) increasing the amount of the Commitment of one or
more Lenders which have agreed to such increase and/or (b) adding an Eligible
Assignee as a party hereto with a Commitment in an amount agreed to by such
Eligible Assignee; provided that (i) no Eligible Assignee shall be added as a
party hereto unless (A) such Eligible Assignee shall have been approved in
writing by the Agent (which approval shall not be unreasonably withheld) and (B)
if the 364-Day Credit Agreement is still in effect, such Eligible Assignee shall
concurrently become a party to the 364-Day Credit Agreement with a "Pro Rata
Share" under and as defined thereunder equal to its Pro Rata Share hereunder,
(ii) in no event shall the Aggregate Commitment Amount exceed $285,714,285.71
without the written consent of all Lenders, (iii) in no event shall the Total
Commitment Amount exceed $400,000,000, (iv) at the time of such increase, and
after giving effect thereto, no Event of Default or Unmatured Event of Default
shall exist and (v) both before and after giving effect to such increase, the
Company shall be in pro forma compliance with all financial covenants set forth
in Section 7. Any increase in the Aggregate Commitment Amount pursuant to this
Section 2.17 shall become effective three Business Days after the date on which
the Agent has received and accepted the applicable increase letter in the form
of Annex 1 to Exhibit J (in the case of an increase in the amount of the
Commitment of an existing Lender) or assumption letter in the form of Annex 2 to
Exhibit J (in the case of the addition of an Eligible Assignee as a new Lender)
or on such other date as is agreed among the Company, the Agent and the
increasing or new Lender. The Agent shall promptly notify the Company and the
Lenders of any increase in the amount of the Aggregate Commitment Amount
pursuant to this Section 2.17 and of the amount of the Commitment and Pro Rata
Share of each Lender after giving effect thereto. The Company acknowledges that,
in order to maintain Committed Loans in accordance with each Lender's Pro Rata
Share, a reallocation of the Commitments as a result of a non-pro-rata increase
in the Aggregate Commitment Amount may require prepayment of all or portions of
certain Committed Loans on the date of such increase (and any such prepayment
shall be subject to the provisions of Section 3.4).
SECTION 3 TAXES, YIELD PROTECTION AND ILLEGALITY
3.1 Taxes. (a) Any and all payments by the Company to each Lender and
the Agent under this Agreement and any Note shall be made free and clear of, and
without deduction or withholding for, any Taxes. In addition, the Company shall
pay all Other Taxes.
(b If the Company shall be required by law to deduct or
withhold any Taxes or Other Taxes from or in respect of any sum payable
hereunder to any Lender or the Agent, then:
28
(i the sum payable shall be increased as necessary so
that, after making all required deductions and withholdings (including
deductions and withholdings applicable to additional sums payable under
this Section), such Lender or the Agent, as the case may be, receives
and retains an amount equal to the sum it would have received and
retained had no such deductions or withholdings been made;
(ii the Company shall make such deductions and
withholdings;
(iii the Company shall pay the full amount deducted
or withheld to the relevant taxing authority or other authority in
accordance with applicable law; and
(iv the Company shall also pay to the Agent for the
account of any applicable Lender or the Agent, at the time interest is
paid, all additional amounts which such Lender or such Agent specifies
as necessary to preserve the after-tax yield such Lender or the Agent
would have received if such Taxes or Other Taxes had not been imposed.
(c The Company agrees to indemnify and hold harmless each
Lender and the Agent for the full amount of Taxes or Other Taxes in the amount
that such Lender or the Agent specifies as necessary to preserve the after-tax
yield such Lender would have received if such Taxes or Other Taxes had not been
imposed, and any liability (including penalties, interest, additions to tax and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted. Payment under this
indemnification shall be made within 30 days after the date such Lender or the
Agent makes written demand therefor. The Company will not be obligated to
indemnify any Lender for any Other Taxes which are to be paid as a result of
such Lender's gross negligence or willful misconduct in failing to timely pay
such amounts when due.
(d Within 10 days after the date of any payment by the Company
of Taxes or Other Taxes, the Company shall furnish to each Lender and the Agent
the original or a certified copy of a receipt evidencing payment thereof, or
other evidence of payment satisfactory to such Lender or the Agent.
(e If the Company is required to pay any amount to any Lender
or the Agent pursuant to subsection (b) or (c) of this Section, then such Lender
or the Agent shall use reasonable efforts (consistent with legal and regulatory
restrictions) to change the jurisdiction of its Lending Office or other relevant
office so as to eliminate any such additional payment by the Company which may
thereafter accrue, if such change in the judgment of such Lender or the Agent is
not otherwise disadvantageous to such Lender or the Agent.
3.2 Illegality. (a) If any Lender determines that the introduction of
any Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any
29
Requirement of Law, has made it unlawful, or that any central bank or other
Governmental Authority has asserted that it is unlawful, for any Lender or its
applicable Lending Office to make Eurodollar Loans, then, on notice thereof by
the Lender to the Company through the Agent, any obligation of that Lender to
make Eurodollar Loans shall be suspended until the circumstances giving rise to
such determination no longer exist.
(b If a Lender determines that it is unlawful to maintain any
Eurodollar Loan, the Company shall, upon its receipt of notice of such fact and
demand from such Lender (with a copy to the Agent), prepay in full such
Eurodollar Loan, together with interest accrued thereon and amounts required
under Section 3.4, either on the last day of the Interest Period thereof or, if
earlier, on the date on which such Lender may no longer lawfully continue to
maintain such Eurodollar Loan. If the Company is required to so prepay any
Eurodollar Loan, then concurrently with such prepayment, the Company shall
borrow from the Affected Lender, in the amount of such repayment, a Base Rate
Loan.
(c If the obligation of any Lender to make or maintain
Eurodollar Loans has been so terminated or suspended, all Loans which would
otherwise be made by such Lender as Eurodollar Loans shall be instead Base Rate
Loans.
(d Before giving any notice to the Agent or demand upon the
Company under this Section, the Affected Lender shall designate a different
Lending Office with respect to its Eurodollar Loans if such designation will
avoid the need for giving such notice or making such demand and will not, in the
judgment of such Lender, be illegal or otherwise disadvantageous to such Lender.
3.3 Increased Costs and Reduction of Return. (a) If after the date
hereof any Lender determines that, due to either (i) the introduction of or any
change (other than any change by way of imposition of or increase in reserve
requirements included in the calculation of interest pursuant to Section
2.10(c)) in or in the interpretation of any law or regulation or (ii) the
compliance by that Lender with any guideline or request from any central bank or
other Governmental Authority (whether or not having the force of law), there
shall be any increase in the cost to such Lender of agreeing to make or making,
funding or maintaining any Eurodollar Loan, then the Company shall be liable
for, and shall from time to time, upon demand (with a copy of such demand to be
sent to the Agent), pay to the Agent for the account of such Lender, additional
amounts as are sufficient to compensate such Lender for such increased costs.
(b If after the date hereof any Lender shall have determined
that (i) the introduction of any Capital Adequacy Regulation, (ii) any change in
any Capital Adequacy Regulation, (iii) any change in the interpretation or
administration of any Capital Adequacy Regulation by any central bank or other
Governmental Authority charged with the interpretation or administration thereof
or (iv) compliance by the Lender (or its Lending Office) or any Person
controlling the Lender with any Capital Adequacy Regulation, affects or would
affect the amount
30
of capital required or expected to be maintained by the Lender or any Person
controlling the Lender and (taking into consideration such Lender's or such
corporation's policies with respect to capital adequacy and such Lender's
desired return on capital) determines that the amount of such capital is
increased as a consequence of its Commitment, Loans, credits or obligations
under this Agreement, then, upon demand of such Lender to the Company through
the Agent, the Company shall pay to the Lender, from time to time as specified
by the Lender, additional amounts sufficient to compensate the Lender for such
increase.
3.4 Funding Losses. The Company shall reimburse each Lender and hold
each Lender harmless from any loss or expense which such Lender may sustain or
incur as a consequence of:
(a the failure of the Company to make on a timely basis any
payment of principal of any Eurodollar Loan;
(b the failure of the Company to borrow, continue or convert a
Loan after the Company has given (or is deemed to have given) a Notice of
Borrowing, a Notice of Conversion/Continuation or accepted a Competitive Bid;
(c the failure of the Company to make any prepayment of a
Committed Loan in accordance with any notice delivered under Section 2.8;
(d the prepayment or other payment (including after
acceleration thereof) of a Eurodollar Loan on a day that is not the last day of
the relevant Interest Period; or
(e the automatic conversion under Section 2.4 of any
Eurodollar Loan to a Base Rate Loan on a day that is not the last day of the
relevant Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain any Eurodollar Loan or from fees payable to
terminate the deposits from which such funds were obtained. For purposes of
calculating amounts payable by the Company to the Lenders under this Section and
under subsection 3.3(a), each Eurodollar Loan made by a Lender (and each related
reserve, special deposit or similar requirement) shall be conclusively deemed to
have been funded at Eurodollar Rate for such Eurodollar Loan by a matching
deposit or other borrowing in the eurodollar interbank market for a comparable
amount and for a comparable period, whether or not such Eurodollar Loan is in
fact so funded.
3.5 Inability to Determine Rates. If the Agent determines that for any
reason adequate and reasonable means do not exist for determining the Eurodollar
Rate for any requested Interest Period with respect to a proposed Eurodollar
Loan, or if Lenders having 35% or more of the amount of the Commitments notify
the Agent that the Eurodollar Rate applicable pursuant to subsection 2.10(a) for
any requested Interest Period with respect to a proposed Eurodollar Loan does
not adequately and fairly reflect the cost to such Lenders of funding such Loan,
the Agent
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will promptly so notify the Company and each Lender. Thereafter, the obligation
of the Lenders to make or maintain Eurodollar Loans hereunder shall be suspended
until the Agent revokes such notice in writing. Upon receipt of such notice, the
Company may revoke any Notice of Borrowing or Notice of Conversion/Continuation
then submitted by it. If the Company does not revoke such Notice, the Lenders
shall make, convert or continue the Committed Loans, as proposed by the Company,
in the amount specified in the applicable notice submitted by the Company, but
such Loans shall be made, converted or continued as Base Rate Loans instead of
Eurodollar Loans.
3.6 Certificates of Lenders. Any Lender claiming reimbursement or
compensation under this Section 3 shall deliver to the Company (with a copy to
the Agent) a certificate setting forth in reasonable detail the amount payable
to the Lender hereunder and such certificate shall be conclusive and binding on
the Company in the absence of manifest error.
3.7 Substitution of Lenders. Upon the receipt by the Company from any
Lender of a claim for compensation under Section 3.1 or 3.3 or a notice under
Section 3.2, or a Lender declines or fails to respond to an Extension Request
(as defined in the 364-Day Credit Agreement pursuant to subsection 2.18(a) of
the 364-Day Credit Agreement) (each Lender making such a claim for compensation
or such a notice, or declining or failing to respond to such an Extension
Request, an "Affected Lender"), the Company may: (i) request one more of the
other Lenders to acquire and assume all or part of such Affected Lender's Loans
and Commitment; or (ii) designate a replacement bank or other financial
institution (a "Replacement Lender") to acquire and assume all or part of such
Affected Lender's Loans and Commitment. Any such designation of a Replacement
Lender shall be subject to the prior written consent of the Agent (which consent
shall not be unreasonably withheld). Any acquisition and assumption of Loans and
Commitments pursuant to this Section shall be governed by Sections 10.8(a) and
(b) and shall be for a purchase price equal to the outstanding principal amount
of the Loans payable to the Affected Lender plus any accrued but unpaid interest
on such Loans and accrued but unpaid fees in respect of such Lender's Commitment
and/or Loans plus any amount payable under Section 3.4 (assuming for purposes of
calculating such amount that each Eurodollar Loan (or the relevant portion
thereof) sold by such Affected Lender has been prepaid on the date of such
sale).
3.8 Survival. The agreements and obligations of the Company in this
Section 3 shall survive the payment of all other Obligations.
SECTION 4 CONDITIONS PRECEDENT
4.1 Conditions of Initial Loans. The obligation of each Lender to make
its initial Committed Loan, and to receive through the Agent the initial
Competitive Bid Request, is, in addition to the conditions precedent set forth
in Section 4.2, subject to the conditions that the Agent shall have received (i)
evidence that the Amended and Restated Credit Agreement dated as of February 26,
1993 among the Company, various financial institutions and The Chase
32
Manhattan Bank (formerly Chemical Bank) has been terminated and that all
outstanding loans thereunder have been paid in full and (ii) all of the
following, in form and substance satisfactory to the Agent and each Lender, and
in sufficient copies for each Lender:
(a Notes. A Note for each applicable Lender.
(b Resolutions; Incumbency.
(i Copies of resolutions of the board of directors of
the Company authorizing the transactions contemplated hereby, certified
as of the Closing Date by the Secretary or an Assistant Secretary of
the Company; and
(ii a certificate of the Secretary or Assistant
Secretary of the Company certifying the names and true signatures of
the officers of the Company authorized to execute and deliver this
Agreement and the Notes.
(c Good Standing Certificate. A copy of a good standing
certificate as of a recent date for the Company from the Secretary of State of
the State of Delaware.
(d Legal Opinions. An opinion of W. David Romoser, Vice
President, General Counsel and Secretary to the Company, substantially in the
form of Exhibit F.
(e Payment of Fees. Evidence of payment by the Company of all
accrued and unpaid fees, costs and expenses in respect hereof to the extent then
due and payable on the Closing Date.
(f Certificate. A certificate signed by a Responsible Officer,
dated as of the Closing Date, stating that:
(i the representations and warranties contained in
Section 5 are true and correct on and as of such date, as though made
on and as of such date;
(ii no Event of Default or Unmatured Event of Default
exists or would result from the initial Borrowing; and
(iii since December 31, 1998, no event or
circumstance has occurred that has resulted or could reasonably be
expected to result in a Material Adverse Effect.
(g Other Documents. Such other approvals, opinions, documents
or materials as the Agent or any Lender may reasonably request.
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4.2 Conditions to All Loans. The obligation of each Lender to make any
Committed Loan to be made by it, or any Bid Loan as to which the Company has
accepted the relevant Competitive Bid, is subject to the satisfaction of the
following conditions precedent on the relevant Borrowing Date:
(a Notice. As to any Committed Loan, the Agent shall have
received a Notice of Borrowing.
(b Continuation of Representations and Warranties. The
representations and warranties in Section 5 (other than subsection 5.11(b))
shall be true and correct on and as of such Borrowing Date with the same effect
as if made on and as of such Borrowing Date (except to the extent such
representations and warranties expressly refer to an earlier date, in which case
they shall be true and correct as of such earlier date).
(c No Existing Default. No Event of Default or Unmatured Event
of Default shall exist or shall result from such Borrowing.
Each Notice of Borrowing and Competitive Bid Request submitted by the Company
hereunder shall constitute a representation and warranty by the Company that, as
of the date of such notice or request and as of the applicable Borrowing Date,
the conditions in this Section 4.2 are satisfied.
SECTION 5 REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Agent and each Lender that:
5.1 Corporate Existence and Power. The Company and each of its
Subsidiaries:
(a is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation;
(b has the power and authority and all governmental licenses,
authorizations, consents and approvals to (i) own its assets, (ii) carry on its
business and (iii) execute, deliver and perform its obligations hereunder and
under the Notes;
(c is duly qualified as a foreign entity and is licensed and
in good standing under the laws of each jurisdiction where its ownership, lease
or operation of property or the conduct of its business requires such
qualification or license; and
(d is in compliance with all Requirements of Law;
34
except, in each case referred to in clause (a) (with respect to Subsidiaries),
clause (b)(i), clause (b)(ii), clause (c) or clause (d), to the extent that the
failure to do so could not reasonably be expected to have a Material Adverse
Effect.
5.2 Authorization; No Contravention. The execution, delivery and
performance by the Company of this Agreement and each Note have been duly
authorized by all necessary corporate action, and do not and will not:
(a contravene the terms of any of the Company's Organization
Documents;
(b conflict with or result in any breach or contravention of,
or the creation of any Lien under, any document evidencing any Contractual
Obligation to which the Company is a party or any order, injunction, writ or
decree of any Governmental Authority to which the Company or its property is
subject; or
(c violate any Requirement of Law.
5.3 Governmental Authorization. No approval, consent, exemption,
authorization or other action by, or notice to, or filing with, any Governmental
Authority is necessary or required in connection with the execution, delivery or
performance by, or enforcement against, the Company of this Agreement or any
Note.
5.4 Binding Effect. This Agreement has been, and upon execution and
delivery thereof by the Company each Note will be, duly executed and delivered
by the Company. This Agreement constitutes, and, upon the execution and delivery
thereof by the Company each Note will constitute, a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability.
5.5 Litigation. Except as specifically disclosed in Schedule 5.5, there
are no actions, suits, proceedings, claims or disputes pending or, to the
knowledge of the Company, threatened or contemplated, at law, in equity, in
arbitration or before any Governmental Authority, against the Company or its
Subsidiaries or any of their respective properties which:
(a purport to affect or pertain to this Agreement or any of
the transactions contemplated hereby; or
(b would reasonably be expected to have a Material Adverse
Effect.
No injunction, writ, temporary restraining order or other order of any nature
has been issued by any court or other Governmental Authority purporting to
enjoin or restrain the execution, delivery
35
or performance of this Agreement or directing that the transactions provided for
herein not be consummated as herein provided.
5.6 No Default. No Event of Default or Unmatured Event of Default
exists or would result from the incurring of any Obligations by the Company. As
of the Closing Date, neither the Company nor any Subsidiary is in default under
or with respect to any Contractual Obligation in any respect which, individually
or together with all other such defaults, could reasonably be expected to have a
Material Adverse Effect or that would, if such default had occurred after the
Closing Date, create an Event of Default under subsection 8.1(e).
5.7 ERISA Compliance. Except as specifically disclosed in Schedule 5.7:
(a) Each Plan is in compliance in all material respects with
the applicable provisions of ERISA, the Code and other Federal or state law.
Each Plan which is intended to qualify under Section 401(a) of the Code has
received a favorable determination letter from the IRS and to the best knowledge
of the Company, nothing has occurred which would cause the loss of such
qualification. The Company and each ERISA Affiliate has made all required
contributions to any Plan subject to Section 412 of the Code, and no application
for a funding waiver or an extension of any amortization period pursuant to
Section 412 of the Code has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of Company,
threatened claims, actions or lawsuits, or actions by any Governmental
Authority, with respect to any Plan which has resulted or could reasonably be
expected to result in a Material Adverse Effect. There has been no prohibited
transaction or violation of the fiduciary responsibility rules with respect to
any Plan which has resulted or could reasonably be expected to result in a
Material Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected
to occur; (ii) no contribution failure has occurred with respect to a Pension
Plan sufficient to give rise to a Lien under Section 302(f) of ERISA; (iii) no
Pension Plan has any Unfunded Pension Liability in excess of $10,000,000; (iv)
neither the Company nor any ERISA Affiliate has incurred, or reasonably expects
to incur, any liability under Title IV of ERISA with respect to any Pension Plan
(other than premiums due and not delinquent under Section 4007 of ERISA); (v)
neither the Company nor any ERISA Affiliate has incurred, or reasonably expects
to incur, any liability (and no event has occurred which, with the giving of
notice under Section 4219 of ERISA, would result in such liability) under
Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (vi)
neither the Company nor any ERISA Affiliate has engaged in a transaction that
could be subject to Section 4069 or 4212(c) of ERISA.
5.8 Use of Proceeds; Margin Regulations. The proceeds of the Loans are
to be used solely for the purposes set forth in and permitted by Section 6.10
and Section 7.6. Neither the
36
Company nor any Subsidiary is generally engaged in the business of purchasing or
selling Margin Stock or extending credit for the purpose of purchasing or
carrying Margin Stock. Margin Stock constitutes less than 25% of the
consolidated assets of the Company and its Subsidiaries which are subject to any
limitation on sale, pledge or other disposition hereunder.
5.9 Title to Properties. The Company and each Subsidiary have good
record and marketable title in fee simple to, or valid leasehold interests in,
all real property necessary or used in the ordinary conduct of their respective
businesses, except for such defects in title as could not, individually or in
the aggregate, have a Material Adverse Effect. The Company and its Subsidiaries
have good title to all their other respective material properties and assets. As
of each of the Effective Date and the Closing Date, the property of the Company
and its Subsidiaries is subject to no Liens other than Liens permitted by
Section 7.1.
5.10 Taxes. The Company and its Subsidiaries have filed all Federal and
other material tax returns and reports required to be filed, and have paid all
Federal and other material taxes, assessments, fees and other governmental
charges levied or imposed upon them or their properties, income or assets
otherwise due and payable, except those which are being contested in good faith
by appropriate proceedings and for which adequate reserves have been provided in
accordance with GAAP. There is no proposed tax assessment against the Company or
any Subsidiary that would, if made, have a Material Adverse Effect.
5.11 Financial Condition. (a) The audited consolidated financial
statements of the Company and its Subsidiaries dated December 31, 1998 and the
unaudited consolidated financial statements of the Company and its Subsidiaries
dated March 31, 1999 and the related consolidated statements of income or
operations, stockholders' equity and cash flows for the fiscal periods ended on
such dates:
(i were prepared in accordance with GAAP consistently
applied throughout the periods covered thereby, except as otherwise
expressly noted therein;
(ii fairly present the financial condition of the
Company and its Subsidiaries as of the dates thereof and results of
operations for the periods covered thereby; and
(iii except as specifically disclosed in Schedule
5.11, show all material indebtedness and other liabilities, direct or
contingent, of the Company and its consolidated Subsidiaries as of the
dates thereof.
(b Since December 31, 1998, there has been no Material Adverse
Effect.
5.12 Environmental Matters. Except as disclosed on Schedule 5.12, to
the best of the Company's knowledge, all existing Environmental Laws and
existing Environmental Claims on its
37
business, operations and properties, could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
5.13 Regulated Entities. Neither the Company nor any Subsidiary is an
"Investment Company" within the meaning of the Investment Company Act of 1940.
Neither the Company nor any Subsidiary is subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, any state public
utilities code, or any other Federal or state statute or regulation limiting its
ability to incur Debt.
5.14 No Burdensome Restrictions. Neither the Company nor any Subsidiary
is a party to or bound by any Contractual Obligation, or subject to any
restriction in any Organization Document or any Requirement of Law, which could
reasonably be expected to have a Material Adverse Effect.
5.15 Subsidiaries. As of the Closing Date, the Company has no
Subsidiaries other than those listed on Schedule 5.15.
5.16 Insurance. The properties of the Company and its Subsidiaries are
insured either by adequately reserved self-insurance or with financially sound
and reputable insurance companies, in such amounts, with such deductibles and
covering such risks as are customarily carried by companies engaged in similar
businesses and owning similar properties in localities where the Company or such
Subsidiary operates.
5.17 Full Disclosure. None of the representations or warranties made by
the Company in this Agreement as of the date such representations and warranties
are made or deemed made, and none of the statements contained in any exhibit,
report, statement or certificate furnished by or on behalf of the Company in
connection with this Agreement (including the offering and disclosure materials
delivered by or on behalf of the Company to the Lenders prior to the Closing
Date), contains any untrue statement of a material fact or omits any material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they are made, not misleading
as of the time when made or delivered.
5.18 Year 2000 Problem. The Company and its Subsidiaries (a) have
reviewed the areas within their business and operations which could be adversely
affected by, and have developed a program to address on a timely basis, the Year
2000 Problem and (b) have made appropriate inquiries as to the effect the Year
2000 Problem will have on their material suppliers and customers. Based on such
review, program and inquiries, the Company reasonably believes that the Year
2000 Problem will not have a Material Adverse Effect.
SECTION 6 AFFIRMATIVE COVENANTS
38
So long as any Lender shall have any Commitment hereunder, or any Loan
or other Obligation shall remain unpaid or unsatisfied, unless the Required
Lenders waive compliance in writing:
6.1 Financial Statements. The Company shall deliver to the Agent and
each Lender, in form and detail reasonably satisfactory to the Agent and the
Required Lenders:
(a As soon as available, but not later than 90 days after the
end of each fiscal year, a copy of the audited consolidated balance sheet of the
Company and its Subsidiaries as at the end of such year and the related
consolidated statements of income or operations, stockholders' equity and cash
flows for such year, setting forth in each case in comparative form the figures
for the previous fiscal year, and accompanied by the opinion of Ernst & Young or
another nationally-recognized independent public accounting firm ("Independent
Auditor") which report shall (x) state that such consolidated financial
statements present fairly the financial position for the periods indicated in
conformity with GAAP applied on a basis consistent with prior years and (y) not
be qualified or limited because of a restricted or limited examination by the
Independent Auditor of any material portion of the Company's or any Subsidiary's
records.
(b As soon as available, but not later than 45 days after the
end of each of the first three fiscal quarters of each fiscal year, a copy of
the unaudited consolidated balance sheet of the Company and its Subsidiaries as
of the end of such quarter and the related consolidated statements of income,
stockholders' equity and cash flows for such quarter and for the period
commencing on the first day of the then-current fiscal year and ending on the
last day of such quarter, certified by a Responsible Officer as fairly
presenting, in accordance with GAAP (subject to the absence of footnotes and to
ordinary year-end audit adjustments), the financial position and the results of
operations of the Company and its Subsidiaries.
6.2 Certificates; Other Information. The Company shall furnish to the
Agent and each Lender:
(a concurrently with the delivery of the financial statements
referred to in subsection 6.1(a) and each set of quarterly statements referred
to in subsection 6.1(b), a Compliance Certificate executed by a Responsible
Officer;
(b promptly, copies of all registration statements (other than
the exhibits thereto and any registration statements on Form S-8 or its
equivalent) and regular, periodic or special reports (including Forms 10K, 10Q
and 8K) that the Company or any Subsidiary may make to, or file with, the SEC;
(c promptly, such information or documentation as the Agent,
at the request of any Lender, may request from time to time regarding the
efforts of the Company and its Subsidiaries to address the Year 2000 Problem;
and
39
(d promptly, such additional information regarding the
business, financial or corporate affairs of the Company or any Subsidiary as the
Agent, at the request of any Lender, may from time to time reasonably request.
6.3 Notices. The Company shall promptly notify the Agent and each
Lender promptly after a Responsible Officer obtains knowledge of:
(a the occurrence of any Event of Default or Unmatured Event
of Default;
(b any of the following matters that has resulted or may
reasonably be expected to result in a Material Adverse Effect (i) any breach or
non-performance of, or any default under, a Contractual Obligation of the
Company or any Subsidiary, (ii) any dispute, litigation, investigation,
proceeding or suspension between the Company or any Subsidiary and any
Governmental Authority, (iii) the assertion of any Environmental Claim or (iv)
the commencement of, or any material development in, any litigation or
proceeding affecting the Company or any Subsidiary;
(c the occurrence of any of the following events affecting the
Company or any ERISA Affiliate:
(i) an ERISA Event;
(ii) a contribution failure with respect to a Pension
Plan sufficient to give rise to a Lien under Section 302(f) of ERISA;
(iii) a material increase in the Unfunded Pension
Liability of any Pension Plan;
(iv) the adoption of, or the commencement of
contributions to, any Plan subject to Section 412 of the Code by the
Company or any ERISA Affiliate; or
(v) the adoption of any amendment to a Plan subject
to Section 412 of the Code, if such amendment results in a material
increase in contributions or Unfunded Pension Liability; and
(d any material change in accounting policies or financial
reporting practices by the Company or any of its consolidated
Subsidiaries.
Each notice under this Section shall be accompanied by a
written statement by a Responsible Officer setting forth details of the
occurrence referred to therein, and stating what action the Company or any
affected Subsidiary proposes to take with respect thereto and at what time. Each
notice under subsection 6.3(a) shall describe with particularity all provisions
of this Agreement that have been breached or violated.
40
6.4 Preservation of Corporate Existence, Etc. Except as otherwise
expressly permitted under this Agreement, the Company shall, and shall cause
each Subsidiary to:
(a preserve and maintain in full force and effect its
corporate existence and good standing under the laws of its jurisdiction of
incorporation;
(b preserve and maintain in full force and effect all
governmental rights, privileges, qualifications, permits, licenses and
franchises necessary or desirable in the normal conduct of its business except
in connection with transactions permitted by Section 7.3 and sales of assets
permitted by Section 7.2;
(c use reasonable efforts, in the ordinary course of business,
to preserve its business organization and goodwill; and
(d preserve or renew all of its registered patents,
trademarks, trade names and service marks;
unless (with respect to any Subsidiary in the case of clause (a)) in the good
faith judgment of the Company, the failure to do any of the acts specified above
could not reasonably be expected to have a Material Adverse Effect.
6.5 Insurance. The Company shall, and shall cause each Subsidiary to,
maintain with financially sound and reputable insurers, insurance with respect
to its properties and business against loss or damage of the kinds customarily
insured against by Persons engaged in the same or similar business, of such
types and in such amounts as are customarily carried under similar circumstances
by such other Persons; provided that the Company and its Subsidiaries may remain
self-insured for such matters and in such amounts as the Company and its
Subsidiaries have been customarily self-insured.
6.6 Compliance with Laws. The Company shall, and shall cause each
Subsidiary to, comply in all material respects with all Requirements of Law
(including any Environmental Law) of any Governmental Authority having
jurisdiction over it or its business.
6.7 Compliance with ERISA. The Company shall, and shall cause each of
its ERISA Affiliates to: (a) maintain each Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code and other Federal or
state law; (b) cause each Plan which is qualified under Section 401(a) of the
Code to maintain such qualification; and (c) make all required contributions to
any Plan subject to Section 412 of the Code.
6.8 Inspection of Property and Books and Records. The Company shall,
and shall cause each Subsidiary to, maintain proper books of record and account,
in which full, true and correct entries sufficient to permit the preparation of
financial statements in conformity with GAAP shall
41
be made of all financial transactions and matters involving the assets and
business of the Company and such Subsidiary. The Company shall, and shall cause
each Subsidiary to, permit representatives and independent contractors of the
Agent or any Lender to visit and inspect any of their respective properties, to
examine their respective corporate, financial and operating records, and make
copies thereof or abstracts therefrom, and to discuss their respective affairs,
finances and accounts with their respective directors, officers and independent
public accountants, during normal business hours and at reasonable intervals
upon reasonable advance notice; provided that when an Event of Default exists,
no such notice shall be required. After the occurrence and during the
continuance of an Event of Default, any such inspection shall be at the
Company's expense.
6.9 Payment of Taxes. The Company shall, and shall cause each
Subsidiary to, pay when due all tax liabilities, assessments and governmental
charges upon it or its properties, unless the same are being contested in good
faith by appropriate proceedings and adequate reserves in accordance with GAAP
are being maintained with respect thereto.
6.10 Use of Proceeds. The Company shall use the proceeds of the Loans
for working capital and other general corporate purposes (including acquisitions
and repurchases of the Company's stock) not in contravention of any Requirement
of Law.
6.11 Availability. The Company shall maintain at all times unused
availability hereunder and under the Company's other unsecured committed credit
facilities (including the 364-Day Credit Agreement) in an amount which is not
less than the amount of all outstanding commercial paper issued by the Company.
SECTION 7 NEGATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder, or any Loan
or other Obligation shall remain unpaid or unsatisfied, unless the Required
Lenders waive compliance in writing:
7.1 Limitation on Liens. The Company shall not, and shall not suffer or
permit any Subsidiary to, directly or indirectly, make, create, incur, assume or
suffer to exist any Lien upon or with respect to any part of its property,
whether now owned or hereafter acquired, other than the following:
(a any Lien existing on property of the Company or any
Subsidiary on the Effective Date and set forth in Schedule 7.1 securing Debt
outstanding on such date, and any extension, renewal or replacement of any such
Lien so long as the principal amount secured thereby is not increased and the
scope of the property subject to such Lien is not extended;
42
(b Liens for taxes, fees, assessments or other governmental
charges which are not delinquent or remain payable without penalty, or to the
extent that non-payment thereof is permitted by Section 6.9, provided that no
notice of lien has been filed or recorded under the Code or any other
Requirement of Law;
(c carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the ordinary course
of business which are not delinquent or remain payable without penalty or which
are being contested in good faith and by appropriate proceedings, which
proceedings have the effect of preventing the forfeiture or sale of the property
subject thereto;
(d Liens (other than any Lien imposed by ERISA) consisting of
pledges or deposits required in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other social security
legislation;
(e Liens on the property of the Company or any Subsidiary
securing (i) the non-delinquent performance of bids, leases or statutory
obligations, (ii) surety bonds (excluding appeal bonds and other bonds posted in
connection with court proceedings or judgments) and (iii) other non-delinquent
obligations of a like nature, in each case incurred in the ordinary course of
business; provided all such Liens in the aggregate would not (even if enforced)
cause a Material Adverse Effect;
(f easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, individually or
in the aggregate, do not materially detract from the value of the property
subject thereto or interfere with the ordinary conduct of the businesses of the
Company and its Subsidiaries;
(g Liens securing obligations in respect of Capital Leases on
the assets subject to such Capital Leases;
(h) Liens arising solely by virtue of any statutory or common
law provision relating to banker's liens, rights of set-off or similar rights
and remedies as to deposit accounts or other funds maintained with a creditor
depository institution; provided that (i) such deposit account is not a
dedicated cash collateral account and is not subject to restrictions against
access by the Company or the applicable Subsidiary in excess of those set forth
by regulations promulgated by the FRB and (ii) such deposit account is not
intended by the Company or any Subsidiary to provide collateral to the
depository institution;
(i) Liens arising in connection with Securitization
Transactions; provided that the aggregate investment or claim held at any time
by all purchasers, assignees or other transferees of (or of interests in)
receivables and other rights to payment in all Securitization Transactions shall
not exceed $150,000,000; and
43
(j) any Lien not otherwise permitted by the foregoing clauses
of this Section; provided that the aggregate amount of all obligations of the
Company and its Subsidiaries secured by all Liens permitted by this clause (j)
does not exceed 15% of Consolidated Net Worth.
7.2 Consolidations and Mergers. The Company shall not, and shall not
permit any Subsidiary to, be a party to any merger or consolidation, except for
any merger or consolidation of or by any Wholly-Owned Subsidiary into the
Company or into or with any other Wholly-Owned Subsidiary; provided that (a) the
Company may merge with another Person if (i) the Company is the acquiring and
surviving corporation, (ii) the holders of the capital stock of the Company
before such merger continue to own at least 75% of the capital stock of the
Company immediately after such merger and (iii) immediately after giving effect
to such merger, no Event of Default or Unmatured Event of Default shall have
occurred and be continuing; and (b) any Subsidiary may merge with and into the
Company or with any other Subsidiary.
7.3 Sales of Assets. The Company shall not, and shall not permit any
Subsidiary to, sell, transfer, convey or lease (any of the foregoing, a
"Disposition") all or any substantial part of its assets, except for (i) any
Disposition of inventory or obsolete equipment in the ordinary course of
business, (ii) any Disposition of or by any Wholly-Owned Subsidiary to the
Company or to any other Wholly-Owned Subsidiary and (iii) the sale, assignment
or other transfer of accounts receivable, lease receivables or other rights to
payment pursuant to any Securitization Transaction; provided that the aggregate
investment or claim held at any time by all purchasers, assignees or other
transferees of (or of interests in) such receivables or other rights to payment
shall not exceed $150,000,000. Notwithstanding the foregoing, (a) the Company
and its Subsidiaries may make Dispositions of any assets so long as the
aggregate book value of all assets disposed of in any fiscal year (in addition
to Dispositions permitted by the foregoing sentence) do not exceed 5% (or, if
neither the Company nor any Subsidiary is a party to any Securitization
Transaction, 10%) of Consolidated Net Worth; and (b) the Company and the
Subsidiaries may make additional Dispositions so long as 75% of the Net Cash
Proceeds for all Dispositions in any fiscal year (excluding any Disposition
permitted by the foregoing provisions of this Section 7.3) are applied to reduce
the Aggregate Commitment Amount hereunder and, if applicable, the 364-Day
Commitment Amount on a proportional basis.
7.4 Operating Leases. The Company shall not, and shall not permit any
Subsidiary to, incur or assume (whether pursuant to a Guaranty Obligation or
otherwise) any liability for rental payments under any lease (including any
lease resulting from a sale and leaseback transaction, but excluding Excluded
Leases as defined below) if, immediately after giving effect thereto, the
aggregate amount of lease payments that the Company and its Subsidiaries are
obligated to pay in any one fiscal year under all such leases will exceed, on a
consolidated basis, 10% of Consolidated Net Worth. As used in this Section,
"Excluded Leases" means (i) Capital Leases and (ii) leases of transportation and
data processing equipment.
44
7.5 Transactions with Affiliates. The Company shall not, and shall not
permit any Subsidiary to, enter into any material transaction with any Affiliate
of the Company (other than a Subsidiary), except upon fair and reasonable terms
no less favorable to the Company or such Subsidiary than would obtain in a
comparable arm's-length transaction with a Person not an Affiliate of the
Company.
7.6 Use of Proceeds. The Company shall not, and shall not permit any
Subsidiary to, use any portion of the Loan proceeds, directly or indirectly, (a)
to make any acquisition if the Person to be acquired (or its Board of Directors
or other equivalent governing body) has announced that it will oppose such
acquisition or commenced any litigation which alleges that such acquisition
violates or will violate any Requirement of Law or (b) for the purpose of (i)
purchasing or carrying Margin Stock, (ii) repaying or otherwise refinancing
indebtedness of the Company or others incurred to purchase or carry Margin Stock
or (iii) extending credit for the purpose of purchasing or carrying any Margin
Stock; provided that, so long as no Event of Default or Unmatured Event of
Default exists or will result therefrom, the Company may use the proceeds the
Loans to repurchase stock of the Company.
7.7 ERISA. The Company shall not, and shall not permit any of its ERISA
Affiliates to: (a) engage in a prohibited transaction or violation of the
fiduciary responsibility rules with respect to any Plan which has resulted or
could reasonably be expected to result in liability of the Company in an
aggregate amount in excess of $1,000,000; or (b) engage in a transaction that
could be subject to Section 4069 or 4212(c) of ERISA.
7.8 Maximum Leverage Ratio. The Company shall not at any time permit
the Leverage Ratio to exceed 0.6:1.0.
7.9 Minimum Consolidated Net Worth. The Company shall not permit
Consolidated Net Worth at any time to be less than the sum of (a) $350,000,000
plus (b) 50% of positive Consolidated Net Earnings (if any) for each fiscal year
ended after December 31, 1998 and, if financial statements therefor have been
delivered pursuant to subsection 6.1(b), for the completed portion of the
then-current fiscal year.
7.10 Limitation on Subsidiary Debt. The Company shall not permit the
aggregate amount of all Debt of Subsidiaries (other than Debt to the Company or
to another Subsidiary) to exceed 10% of Consolidated Net Worth.
7.11 Business Activities. The Company shall not, and shall not permit
any Subsidiary to, engage in any material line of business other than the
businesses engaged in by the Company and its Subsidiaries on the date of this
Agreement and businesses reasonably related thereto.
7.12 Hedging Obligations. The Company will not, and will not permit any
Subsidiary to, incur any Hedging Obligations other than in the ordinary course
of business for the purpose of directly mitigating risks associated with (a) raw
materials purchases, (b) interest or currency
45
exchange rates, (c) operating expenses or other anticipated obligations of such
Person, (d) other liabilities, commitments or assets held or reasonably
anticipated by such Person or (e) changes in the value of securities issued by
such Person in conjunction with a securities repurchase program not otherwise
prohibited hereunder.
SECTION 8 EVENTS OF DEFAULT
8.1 Event of Default. Any of the following shall constitute an "Event
of Default":
(a) Non-Payment. The Company fails to pay, (i) when and as
required to be paid herein, any amount of principal of any Loan, or (ii) within
five Business Days after the same becomes due, any interest, fee or any other
amount payable hereunder or under any Note.
(b) Representation or Warranty. Any representation or warranty
by the Company made or deemed made herein, or which is contained in any
certificate, document or financial or other statement by the Company or any
Responsible Officer furnished at any time under this Agreement, is incorrect in
any material respect on or as of the date made or deemed made.
(c) Specific Defaults. The Company fails to perform or observe
any term, covenant or agreement contained in any of Section 6.3(a) or Section 7.
(d) Other Defaults. The Company fails to perform or observe
any other term or covenant contained in this Agreement, and such default shall
continue unremedied for a period of 30 days after the earlier of (i) the date
upon which a Responsible Officer knew of such failure or (ii) the date upon
which written notice thereof is given to the Company by the Agent or any Lender.
(e) Cross-Default. The Company and its Subsidiaries (A) fail
(subject to any applicable grace period) to make any payment in respect of
Material Financial Obligations when due (whether by scheduled maturity, required
prepayment, acceleration, demand, or otherwise); or (B) fail to perform or
observe any other condition or covenant, or any other event shall occur or
condition shall exist, under one or more agreements or instruments relating to
Material Financial Obligations if the effect of such failure, event or condition
is to cause (or require), or to permit (subject to any applicable grace period)
the holder or holders of such Material Financial Obligations or the beneficiary
or beneficiaries of such Material Financial Obligations (or a trustee or agent
on behalf of such holder or holders or beneficiary or beneficiaries) to cause
(or require), such Material Financial Obligations to become due and payable (or
to be purchased, repurchased or defeased) prior to the stated maturity thereof.
(f) Insolvency; Voluntary Proceedings. The Company or any
Subsidiary: (i) ceases or fails to be solvent, or generally fails to pay, or
admits in writing its inability to pay, its
46
debts as they become due, subject to applicable grace periods, if any, whether
at stated maturity or otherwise; (ii) voluntarily ceases to conduct its business
in the ordinary course; (iii) commences any Insolvency Proceeding with respect
to itself; or (iv) takes any action to effectuate or authorize any of the
foregoing.
(g) Involuntary Proceedings. (i) Any involuntary Insolvency
Proceeding is commenced or filed against the Company or any Subsidiary, or any
writ, judgment, warrant of attachment, execution or similar process, is issued
or levied against a substantial part of the properties of the Company or any
Subsidiary, and any such proceeding or petition shall not be dismissed, or such
writ, judgment, warrant of attachment, execution or similar process shall not be
released, vacated or fully bonded within 60 days after commencement, filing or
levy; (ii) the Company or any Subsidiary admits the material allegations of a
petition against it in any Insolvency Proceeding, or an order for relief (or
similar order under non-U.S. law) is ordered in any Insolvency Proceeding; or
(iii) the Company or any Subsidiary acquiesces in the appointment of a receiver,
trustee, custodian, conservator, liquidator, mortgagee in possession (or agent
therefor), or other similar Person for itself or a substantial portion of its
property or business.
(h) ERISA. (i) An ERISA Event shall occur with respect to one
or more Pension Plans or Multiemployer Plans which has resulted or could
reasonably be expected to result in liability of the Company or any ERISA
Affiliate under Title IV of ERISA to one or more Pension Plans, Multiemployer
Plans or the PBGC in an aggregate amount in excess of $10,000,000; (ii) a
contribution failure shall have occurred with respect to a Pension Plan
sufficient to give rise to a Lien under Section 302(f) of ERISA; (iii) the
aggregate amount of Unfunded Pension Liability among all Pension Plans at any
time exceeds $10,000,000; or (iv) the Company or any ERISA Affiliate shall fail
to pay when due, after the expiration of any applicable grace period, any
installment payment with respect to its withdrawal liability under Section 4201
of ERISA under a Multiemployer Plan in an aggregate amount in excess of
$1,000,000.
(i) Monetary Judgments or Settlements. One or more judgments,
orders, decrees or arbitration awards is entered against the Company or any
Subsidiary involving in the aggregate a liability (to the extent not covered by
(x) third-party insurance as to which the insurer does not dispute coverage or
(y) a self-insurance reserve), as to any single or related series of
transactions, incidents or conditions, of $10,000,000 or more, and the same
shall remain unsatisfied, unvacated and unstayed pending appeal for a period of
30 days after the entry thereof, or the Company or any Subsidiary shall enter
into any agreement to settle or compromise any pending or threatened litigation
as to any single or related series of claims that would reasonably be expected
to have a Material Adverse Effect.
(j) Non-Monetary Judgments. Any non-monetary judgment, order
or decree is entered against the Company or any Subsidiary which has or would
reasonably be expected to have a Material Adverse Effect, and there shall be any
period of 30 consecutive days during which
47
a stay of enforcement of such judgment or order, by reason of a pending appeal
or otherwise, shall not be in effect.
(k) Change of Control. Any Change of Control occurs.
8.2 Remedies. If any Event of Default occurs, the Agent shall at the
request of, or may with the consent of, the Required Lenders, do any or all of
the following:
(a) declare the Commitment of each Lender to be terminated,
whereupon such Commitments shall be terminated;
(b) declare the unpaid principal amount of all outstanding
Loans, all interest accrued and unpaid thereon, and all other amounts owing or
payable hereunder to be immediately due and payable, without presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived by the Company; and
(c) exercise on behalf of itself and the Lenders all rights
and remedies available to it and the Lenders under this Agreement or applicable
law;
provided that upon the occurrence of any event specified in subsection (f) or
(g) of Section 8.1, the obligation of each Lender to make Loans shall
automatically terminate and the unpaid principal amount of all outstanding Loans
and all interest and other amounts as aforesaid shall automatically become due
and payable without further act of the Agent or any Lender, without presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived by the Company.
8.3 Rights Not Exclusive. The rights provided for in this Agreement and
the Notes are cumulative and are not exclusive of any other rights, powers,
privileges or remedies provided by law or in equity, or under any other
instrument, document or agreement now existing or hereafter arising.
SECTION 9 THE AGENT
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9.1 Appointment and Authorization. Each Lender hereby irrevocably
(subject to Section 9.9) appoints, designates and authorizes the Agent to take
such action on its behalf under the provisions of this Agreement and to exercise
such powers and perform such duties as are expressly delegated to it by the
terms of this Agreement, together with such powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary contained elsewhere in
this Agreement, the Agent shall not have any duties or responsibilities, except
those expressly set forth herein, nor shall the Agent have or be deemed to have
any fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or otherwise exist against the Agent. Without limiting the generality
of the foregoing sentence, the use of the term "agent" in this Agreement with
reference to the Agent is not intended to connote any fiduciary or other implied
(or express) obligations arising under agency doctrine of any applicable law.
Instead, such term is used merely as a matter of market custom, and is intended
to create or reflect only an administrative relationship between independent
contracting parties.
9.2 Delegation of Duties. The Agent may execute any of its duties under
this Agreement by or through agents, employees or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
The Agent shall not be responsible for the negligence or misconduct of any agent
or attorney-in-fact that it selects with reasonable care.
9.3 Liability of Agent. None of the Agent-Related Persons shall (i) be
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or the transactions contemplated hereby (except
for its own gross negligence or willful misconduct), or (ii) be responsible in
any manner to any of the Lenders for any recital, statement, representation or
warranty made by the Company or any Subsidiary or Affiliate of the Company, or
any officer thereof, contained in this Agreement or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Agent under or in connection with, this Agreement, or the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any Note, or for any failure of the Company or any other party hereto to perform
its obligations hereunder. No Agent-Related Person shall be under any obligation
to any Lender to ascertain or to inquire as to the observance or performance of
any of the agreements contained in, or conditions of, this Agreement, or to
inspect the properties, books or records of the Company or any of the Company's
Subsidiaries or Affiliates.
9.4 Reliance by Agent. The Agent shall be entitled to rely, and shall
be fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to the
Company), independent accountants and other experts selected by the Agent. The
Agent shall be fully justified in failing or refusing to take any action under
this Agreement unless it shall first receive such advice or concurrence of the
Required Lenders as it deems appropriate and, if it so requests, it shall first
be
49
indemnified to its 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 Agent shall in all cases be fully protected in acting, or
in refraining from acting, under this Agreement in accordance with a request or
consent of the Required Lenders and such request and any action taken or failure
to act pursuant thereto shall be binding upon all of the Lenders.
9.5 Notice of Default. The Agent shall not be deemed to have knowledge
or notice of the occurrence of any Event of Default or Unmatured Event of
Default, except with respect to defaults in the payment of principal, interest
and fees required to be paid to the Agent for the account of the Lenders, unless
the Agent shall have received written notice from a Lender or the Company
referring to this Agreement, describing such Event of Default or Unmatured Event
of Default and stating that such notice is a "notice of default". The Agent will
promptly notify the Lenders of its receipt of any such notice. The Agent shall
take such action with respect to such Event of Default or Unmatured Event of
Default as may be requested by the Required Lenders in accordance with Section
8; provided that unless and until the Agent has received any such request, the
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Event of Default or Unmatured Event of
Default as it shall deem advisable or in the best interest of the Lenders.
9.6 Credit Decision. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by the Agent hereafter taken, including any review of the affairs of the
Company and its Subsidiaries, shall be deemed to constitute any representation
or warranty by any Agent-Related Person to any Lender. Each Lender represents to
the Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of the
Company and its Subsidiaries, and all applicable bank regulatory laws relating
to the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to the Company hereunder. Each Lender also
represents that it will, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement,
and to make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Company. Except for notices, reports and other documents
expressly herein required to be furnished to the Lenders by the Agent, the Agent
shall not have any duty or responsibility to provide any Lender with any credit
or other information concerning the business, prospects, operations, property,
financial and other condition or creditworthiness of the Company which may come
into the possession of any of the Agent-Related Persons.
9.7 Indemnification of Agent. Whether or not the transactions
contemplated hereby are consummated, the Lenders shall indemnify upon demand the
Agent-Related Persons (to the extent
50
not reimbursed by or on behalf of the Company and without limiting the
obligation of the Company to do so), pro rata, from and against any and all
Indemnified Liabilities; provided that no Lender shall be liable for the payment
to any Agent-Related Person of any portion of the Indemnified Liabilities
resulting from such Person's gross negligence or willful misconduct. Without
limitation of the foregoing, each Lender shall reimburse the Agent upon demand
for its ratable share of any costs or out-of-pocket expenses (including Attorney
Costs) incurred by the Agent in connection with the preparation, execution,
delivery, administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement or any document
contemplated by or referred to herein, to the extent that the Agent is not
reimbursed for such expenses by or on behalf of the Company. The undertaking in
this Section shall survive the payment of all Obligations and the resignation or
replacement of the Agent.
9.8 Agent in Individual Capacity. BofA and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with the Company and its
Subsidiaries and Affiliates as though BofA were not the Agent hereunder and
without notice to or consent of the Lenders. The Lenders acknowledge that,
pursuant to such activities, BofA or its Affiliates may receive information
regarding the Company or its Affiliates (including information that may be
subject to confidentiality obligations in favor of the Company or such
Subsidiary) and acknowledge that the Agent shall be under no obligation to
provide such information to them. With respect to its Loans, BofA and any
Affiliate thereof shall have the same rights and powers under this Agreement as
any other Lender and may exercise the same as though BofA were not the Agent.
9.9 Successor Agent. The Agent may, and at the request of the Required
Lenders shall, resign as Agent upon 30 days' notice to the Lenders. If the Agent
resigns under this Agreement, the Required Lenders shall appoint from among the
Lenders a successor agent for the Lenders, which (so long as no Event of Default
exists) successor agent shall be reasonably acceptable to the Company. If no
successor agent is appointed prior to the effective date of the resignation of
the Agent, the Agent may appoint, after consulting with the Lenders and the
Company, a successor agent from among the Lenders, which (so long as no Event of
Default exists) successor agent shall be reasonably acceptable to the Company.
Upon the acceptance of its appointment as successor agent hereunder, such
successor agent shall succeed to all the rights, powers and duties of the
retiring Agent and the term "Agent" shall mean such successor agent and the
retiring Agent's appointment, powers and duties as Agent shall be terminated.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this Section 9 and Sections 10.4 and 10.5 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement. If no successor agent has accepted appointment as Agent by the date
which is 30 days following a retiring Agent's notice of resignation, the
retiring Agent's resignation shall nevertheless thereupon become effective and
the Lenders shall perform all of the duties of the Agent hereunder until such
time, if any, as the Required Lenders appoint a successor agent as provided for
above.
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9.10 Withholding Tax. (a) If any Lender is a "foreign corporation,
partnership or trust" within the meaning of the Code and such Lender claims
exemption from, or a reduction of, U.S. withholding tax under Sections 1441 or
1442 of the Code, such Lender agrees with and in favor of the Agent, to deliver
to the Agent:
(i) if such Lender claims an exemption from, or a
reduction of, withholding tax under a United States tax treaty,
properly completed IRS Forms 1001 and W-8 before the payment of any
interest in the first calendar year and before the payment of any
interest in each third succeeding calendar year during which interest
may be paid under this Agreement;
(ii) if such Lender claims that interest paid under
this Agreement is exempt from United States withholding tax because it
is effectively connected with a United States trade or business of such
Lender, two properly completed and executed copies of IRS Form 4224
before the payment of any interest is due in the first taxable year of
such Lender and in each succeeding taxable year of such Lender during
which interest may be paid under this Agreement, and IRS Form W-9; and
(iii) such other form or forms as may be required
under the Code or other laws of the United States as a condition to
exemption from, or reduction of, United States withholding tax.
Each such Lender agrees to promptly notify the Agent of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Lender claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001 and
such Lender sells, assigns, grants a participation in, or otherwise transfers
all or part of the Obligations of the Company to such Lender, such Lender agrees
to notify the Agent of the percentage amount in which it is no longer the
beneficial owner of Obligations of the Company to such Lender. To the extent of
such percentage amount, the Agent will treat such Lender's IRS Form 1001 as no
longer valid.
(c) If any Lender claiming exemption from United States
withholding tax by filing IRS Form 4224 with the Agent grants a participation in
all or part of the Obligations of the Company to such Lender, such Lender agrees
to undertake sole responsibility for complying with the withholding tax
requirements imposed by Sections 1441 and 1442 of the Code with respect to its
participant.
(d) If any Lender is entitled to a reduction in the applicable
withholding tax, the Agent may withhold from any interest payment to such Lender
an amount equivalent to the applicable withholding tax after taking into account
such reduction. If the forms or other
52
documentation required by subsection (a) of this Section are not delivered to
the Agent, then the Agent may withhold from any interest payment to such Lender
not providing such forms or other documentation an amount equivalent to the
applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the
United States or other jurisdiction asserts a claim that the Agent did not
properly withhold tax from amounts paid to or for the account of any Lender
(because the appropriate form was not delivered or was not properly executed, or
because such Lender failed to notify the Agent of a change in circumstances
which rendered the exemption from, or reduction of, withholding tax ineffective,
or for any other reason) such Lender shall indemnify the Agent fully for all
amounts paid, directly or indirectly, by the Agent as tax or otherwise,
including penalties and interest, and including any taxes imposed by any
jurisdiction on the amounts payable to the Agent under this Section, together
with all costs and expenses (including Attorney Costs). The obligation of the
Lenders under this subsection shall survive the payment of all Obligations and
the resignation or replacement of the Agent.
9.11 Syndication Agent. No Lender identified herein or in any related
document ads the "Syndication Agent" shall have any right, power, obligation,
liability, responsibility or duty under this Agreement other than those
applicable to all Lenders as such. Without limiting the foregoing, no Lender so
identified shall have or be deemed to have any fiduciary relationship with any
Lender. Each Lender acknowledges that it has not relied, and will not rely, on
any Lender so identified in deciding to enter into this Agreement or in taking
or not taking action hereunder.
SECTION 10 MISCELLANEOUS
10.1 Amendments and Waivers. No amendment or waiver of any provision of
this Agreement, and no consent with respect to any departure by the Company or
any Subsidiary therefrom, shall be effective unless the same shall be in writing
and signed by the Required Lenders (or by the Agent at the written request of
the Required Lenders) and the Company and acknowledged by the Agent, and then
any such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given; provided that no such waiver,
amendment or consent shall, unless in writing and signed by all Lenders and the
Company and acknowledged by the Agent, do any of the following:
(a) increase (except as permitted by Section 2.17) or extend
the Commitment of any Lender (or reinstate any Commitment terminated pursuant to
Section 8.2);
(b) postpone or delay any date fixed by this Agreement for any
payment of principal, interest, fees or other amounts due to the Lenders (or any
of them) hereunder;
(c) reduce the principal of, or the rate of interest specified
herein on, any Loan, or reduce any fees or other amounts payable hereunder;
53
(d) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans which is required for the Lenders
or any of them to take any action hereunder; or
(e) amend the definition of "Required Lenders," this Section
or Section 2.15, or any provision herein providing for consent or other action
by all Lenders;
and provided, further, that no amendment, waiver or consent shall, unless in
writing and signed by the Agent in addition to the Required Lenders or all
Lenders, as the case may be, affect the rights or duties of the Agent under this
Agreement.
10.2 Notices. (a) All notices, requests and other communications shall
be in writing (including, unless the context expressly otherwise provides, by
facsimile transmission, provided that any matter transmitted by the Company by
facsimile (i) shall be immediately confirmed by a telephone call to the
recipient and (ii) shall be followed promptly by delivery of a hard copy
original thereof) and mailed, faxed or delivered to the address or facsimile
number specified for notices on Schedule 10.2; or, as directed to the Company or
the Agent, to such other address as shall be designated by such party in a
written notice to the other parties, and as directed to any other party, at such
other address as shall be designated by such party in a written notice to the
Company and the Agent.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery or faxed, be effective when delivered or
transmitted in legible form by facsimile machine, respectively, or if mailed,
upon the third Business Day after the date deposited into the U.S. mail; except
that notices pursuant to Section 2 or 9 to the Agent shall not be effective
until actually received by the Agent.
(c) Any agreement of the Agent and the Lenders herein to
receive certain notices by telephone or facsimile is solely for the convenience
and at the request of the Company. The Agent and the Lenders shall be entitled
to rely on the authority of any Person purporting to be a Person authorized by
the Company to give such notice and the Agent and the Lenders shall not have any
liability to the Company or any other Person on account of any action taken or
not taken by the Agent or the Lenders in reliance upon such telephonic or
facsimile notice. The obligation of the Company to repay the Loans shall not be
affected in any way or to any extent by any failure by the Agent and the Lenders
to receive written confirmation of any telephonic or facsimile notice or the
receipt by the Agent and the Lenders of a confirmation which is at variance with
the terms understood by the Agent and the Lenders to be contained in the
telephonic or facsimile notice.
10.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Agent or any Lender, any right, remedy,
power or privilege hereunder, shall
54
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
10.4 Costs and Expenses. The Company shall:
(a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse the Agent and the Arranger within five Business
Days after demand (subject to subsection 4.1(e)) for all costs and expenses
(including Attorney Costs) incurred by the Agent in connection with the
development, preparation, delivery, administration and execution of, and any
amendment, supplement, waiver or modification to (in each case, whether or not
consummated), this Agreement and any other document prepared in connection
herewith, and the consummation of the transactions contemplated hereby; and
(b) pay or reimburse the Agent, the Arranger and each Lender
within five Business Days after demand, for all costs and expenses (including
Attorney Costs) incurred by them in connection with the enforcement, or
preservation of any rights or remedies under this Agreement during the existence
of an Event of Default (including in connection with any "workout" or
restructuring regarding the Loans, and including in any Insolvency Proceeding or
appellate proceeding).
10.5 Company Indemnification. Whether or not the transactions
contemplated hereby are consummated, the Company shall indemnify and hold the
Agent-Related Persons and each Lender and each of their respective officers,
directors, employees, counsel, agents and attorneys-in-fact (each an
"Indemnified Person") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses and disbursements (including Attorney Costs) of any kind or
nature whatsoever which may at any time (including at any time following
repayment of the Loans and the termination, resignation or replacement of the
Agent or replacement of any Lender) be imposed on, incurred by or asserted
against any such Person in any way relating to or arising out of this Agreement
or any document contemplated by or referred to herein, or the transactions
contemplated hereby or thereby, or any action taken or omitted by any such
Person under or in connection with any of the foregoing, including with respect
to any investigation, litigation or proceeding (including any Insolvency
Proceeding or appellate proceeding) related to or arising out of this Agreement
or the Loans or the use of the proceeds thereof, whether or not any Indemnified
Person is a party thereto (all the foregoing, collectively, the "Indemnified
Liabilities"); provided that the Company shall have no obligation hereunder to
any Indemnified Person with respect to Indemnified Liabilities resulting from
the gross negligence or willful misconduct of such Indemnified Person. The
agreements in this Section shall survive payment of all other Obligations.
10.6 Payments Set Aside. To the extent that the Company makes a payment
to the Agent or any Lender, or the Agent or any Lender exercises its right of
set-off, and such payment or the
55
proceeds of such set-off or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required (including
pursuant to any settlement entered into by the Agent or such Lender in its
discretion) to be repaid to a trustee or receiver, or any other party, in
connection with any Insolvency Proceeding or otherwise, then (a) to the extent
of such recovery the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such set-off had not occurred and (b) each Lender
severally agrees to pay to the Agent upon demand its pro rata share of any
amount so recovered from or repaid by the Agent.
10.7 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Company may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of the Agent and each Lender.
10.8 Assignments, Participations, etc. (a) Any Lender may, with the
written consent of the Company (at all times other than during the existence of
an Event of Default or Unmatured Event of Default) and the Agent, which consents
shall not be unreasonably withheld, at any time assign and delegate to one or
more Eligible Assignees (provided that no written consent of the Company or the
Agent shall be required in connection with any assignment and delegation by a
Lender to an Eligible Assignee that is an Affiliate of such Lender) (each an
"Assignee") all, or any ratable part of all, of the Committed Loans, the
Commitment and the other rights and obligations of such Lender hereunder;
provided that (i) if the 364-Day Credit Agreement is still in effect, such
Lender shall concurrently assign to the same Assignee a proportionate share of
such Lender's Committed Loans, Commitment and other rights and obligations under
the 364-Day Credit Agreement, (ii) except in the case of an assignment by a
Lender of all of its remaining rights and obligations hereunder and (if
applicable) under the 364-Day Credit Agreement, the sum of the amount of the
Commitment of such so assigned and the amount (if any) of the "Commitment" of
such Lender under and as defined in the 364-Day Credit Agreement concurrently
assigned to the same Assignee shall not be less than $5,000,000; and (iii) the
Company and the Agent may continue to deal solely and directly with such Lender
in connection with the interest so assigned to an Assignee until (x) written
notice of such assignment, together with payment instructions, addresses and
related information with respect to the Assignee, shall have been given to the
Company and the Agent by such Lender and the Assignee; (y) such Lender and its
Assignee shall have delivered to the Company and the Agent an Assignment and
Acceptance in the form of Exhibit G ("Assignment and Acceptance") and (z) the
assignor Lender or Assignee has paid to the Agent a processing fee in the amount
of $3,500 (which fee shall cover both the assignment hereunder and any
concurrent assignment under the 364-Day Credit Agreement).
(b) From and after the date that the Agent notifies the
assignor Lender that it has received and provided its consent (and received, if
applicable, the consent of the Company) with respect to an executed Assignment
and Acceptance and payment of the above-referenced processing fee, (i) the
Assignee thereunder shall be a party hereto and, to the extent that rights
56
and obligations hereunder have been assigned to it pursuant to such Assignment
and Acceptance, shall have the rights and obligations of a Lender hereunder, and
(ii) the assignor Lender shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish such rights and be released from such obligations.
(c) Any Lender may at any time sell to one or more commercial
banks or other Persons not Affiliates of the Company (a "Participant")
participating interests in any Loan, the Commitment of such Lender and the other
interests of such Lender (the "originating Lender") hereunder; provided that (i)
the originating Lender's obligations under this Agreement shall remain
unchanged, (ii) the originating Lender shall remain solely responsible for the
performance of such obligations, (iii) the Company and the Agent shall continue
to deal solely and directly with the originating Lender in connection with the
originating Lender's rights and obligations under this Agreement and (iv) no
Lender shall transfer or grant any participating interest under which the
Participant has rights to approve any amendment to, or any consent or waiver
with respect to, this Agreement, except to the extent such amendment, consent or
waiver would require unanimous consent of the Lenders as described in the first
proviso to Section 10.1. Each Participant shall be entitled to the benefit of
Sections 3.1, 3.3 and 10.5 as though it were also a Lender hereunder, and if
amounts outstanding under this Agreement are due and unpaid, or shall have been
declared or shall have become due and payable upon the occurrence of an Event of
Default, each Participant shall be deemed to have the right of set-off in
respect of its participating interest in amounts owing under this Agreement to
the same extent as if the amount of its participating interest were owing
directly to it as a Lender under this Agreement.
(d) Notwithstanding any other provision in this Agreement, any
Lender may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement and any Note held by
it in favor of any Federal Reserve Bank in accordance with Regulation A of the
FRB or U.S. Treasury Regulation 31 CFR ss.203.14, and such Federal Reserve Bank
may enforce such pledge or security interest in any manner permitted under
applicable law.
10.9 Confidentiality. Each Lender agrees to take and to cause its
Affiliates to take normal and reasonable precautions and exercise due care to
maintain the confidentiality of all information identified as "confidential" or
"secret" by the Company and provided to it by the Company or any Subsidiary, or
by the Agent on the Company's or such Subsidiary's behalf, under this Agreement,
and neither such Lender nor any of its Affiliates shall use any such information
other than in connection with or in enforcement of this Agreement or in
connection with other business now or hereafter existing or contemplated with
the Company or any Subsidiary; except to the extent such information (i) was or
becomes generally available to the public other than as a result of disclosure
by such Lender, or (ii) was or becomes available on a non-confidential basis
from a source other than the Company, provided that such source is not bound by
a confidentiality agreement with the Company or any Subsidiary known to such
Lender; provided that any Lender may disclose such information (A) at the
request or pursuant to any requirement
57
of any Governmental Authority to which such Lender is subject or in connection
with an examination of such Lender by any such authority; (B) pursuant to
subpoena or other court process, unless it is prohibited from doing so by
applicable law, the applicable Lender shall give the Company written notice of
such subpoena or other court process so that the Company has a reasonable
opportunity to seek a protective order or other judicial relief prior to any
disclosure of confidential information; (C) when required to do so in accordance
with the provisions of any applicable Requirement of Law; (D) to the extent
reasonably required in connection with any litigation or proceeding to which the
Agent or any Lender or any of their respective Affiliates may be party; (E) to
the extent reasonably required in connection with the exercise of any remedy
hereunder or under any Note; (F) to such Lender's independent auditors and other
professional advisors; (G) to any Participant or Assignee, actual or potential,
provided that such Person agrees in writing to keep such information
confidential to the same extent required of the Lenders hereunder; (H) as to any
Lender or its Affiliate, as expressly permitted under the terms of any other
document or agreement regarding confidentiality to which the Company or any
Subsidiary is party or is deemed party with such Lender or such Affiliate; and
(I) to its Affiliates.
10.10 Set-off. In addition to any rights and remedies of the Lenders
provided by law, if an Event of Default exists, or the Loans have been
accelerated, each Lender is authorized at any time and from time to time,
without prior notice to the Company, any such notice being waived by the Company
to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held by, and other indebtedness at any time owing by, such Lender to or for the
credit or the account of the Company against any and all Obligations owing to
such Lender, now or hereafter existing, irrespective of whether or not the Agent
or such Lender shall have made demand under this Agreement and although such
Obligations may be contingent or unmatured. Each Lender agrees promptly to
notify the Company and the Agent after any such set-off and application made by
such Lender; provided that the failure to give such notice shall not affect the
validity of such set-off and application.
10.11 Notification of Addresses, Lending Offices, Etc. Each Lender
shall notify the Agent in writing of any change in the address to which notices
to such Lender should be directed, of addresses of any Lending Office, of
payment instructions in respect of all payments to be made to it hereunder and
of such other administrative information as the Agent shall reasonably request.
10.12 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of which taken together shall be deemed to constitute but one
and the same instrument.
10.13 Severability. The illegality or unenforceability of any provision
of this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or such instrument or agreement.
58
10.14 No Third Parties Benefited. This Agreement is made and entered
into for the sole protection and legal benefit of the Company, the Lenders, the
Agent and the Agent-Related Persons, and their permitted successors and assigns,
and no other Person shall be a direct or indirect legal beneficiary of, or have
any direct or indirect cause of action or claim in connection with, this
Agreement.
10.15 Governing Law and Jurisdiction. (a) THIS AGREEMENT AND ANY NOTES
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAW OF THE
STATE OF ILLINOIS; PROVIDED THAT THE AGENT AND THE LENDERS SHALL RETAIN ALL
RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY NOTE MAY BE BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS OR
OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF ILLINOIS, AND BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE AGENT AND THE LENDERS
CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE
JURISDICTION OF SUCH COURTS. EACH OF THE COMPANY, THE AGENT AND THE LENDERS
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT
OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE COMPANY, THE AGENT AND THE
LENDERS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS,
WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY ILLINOIS LAW.
10.16 Entire Agreement. This Agreement, together with the Notes and any
fee letter among the Company, the Agent and the Arranger, embodies the entire
agreement and understanding among the Company, the Lenders and the Agent, and
supersedes all prior or contemporaneous agreements and understandings of such
Persons, verbal or written, relating to the subject matter hereof and thereof.
59
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
A.O. SMITH CORPORATION
By:
Tit
BANK OF AMERICA, N.A.,
as Agent and as a Lender
By:____________________________________
Title:_________________________________
THE FIRST NATIONAL BANK OF CHICAGO, as
Syndication Agent and as a Lender
By:____________________________________
Title:_________________________________
S-1
THE BANK OF NEW YORK
By:____________________________________
Title:_________________________________
CITIBANK, N.A.
By:____________________________________
Title:_________________________________
S-2
FIRSTAR BANK MILWAUKEE, N.A.,
By:____________________________________
Title:_________________________________
M&I MARSHALL & ILSLEY BANK
By:____________________________________
Title:_________________________________
By:____________________________________
Title:_________________________________
S-3
NORWEST BANK WISCONSIN, N.A.
By:____________________________________
Title:_________________________________
U.S. BANK NATIONAL ASSOCIATION
By:____________________________________
Title:_________________________________
WACHOVIA BANK, N.A.
By:____________________________________
Title:_________________________________
S-4
SCHEDULE 1.1
PRICING SCHEDULE
The Applicable Margin and Facility Fee Rate shall be determined based
on the then-current Leverage Ratio as set forth below.
================================================================================
Applicable Facility
Leverage Ratio Margin Fee Rate
- --------------------------------------------------------------------------------
Less than or equal to 0.30 to 1 0.275% 0.100%
- --------------------------------------------------------------------------------
Greater than 0.3 to 1 but less than or equal to
0.4 to 1 0.350% 0.150%
- --------------------------------------------------------------------------------
Greater than 0.4 to 1 but less than or equal to
0.5 to 1 0.475% 0.150%
- --------------------------------------------------------------------------------
Greater than 0.5 to 1 but less than or equal to
0.55 to 1 0.575% 0.175%
- --------------------------------------------------------------------------------
Greater than 0.55 to 1 0.725% 0.200%
===============================================================================
Initially, the Applicable Margin and the Facility Fee Rate shall be
0.475% and 0.150%, respectively. The Applicable Margin and Facility Fee Rate
shall be adjusted, to the extent applicable, 45 days (or, in the case of the
last fiscal quarter of any fiscal year, 90 days) after the end of each fiscal
quarter (beginning with the fiscal quarter ending September 30, 1999) based on
the Leverage Ratio as of the last day of such fiscal quarter; it being
understood that if the Company fails to deliver the financial statements
required by subsection 6.1(a) or 6.1(b), as applicable, and the related
Compliance Certificate required by subsection 6.1(c) by the 45th day (or, if
applicable, the 90th day) after any fiscal quarter, the Applicable Margin shall
be 0.725% and the Facility Fee Rate shall be 0.200% until such financial
statements and Compliance Certificate are delivered.
SCHEDULE 2.1
COMMITMENTS AND PRO RATA SHARES
Amount of Pro Rata
Lender Commitment Share
------ ---------- --------
Bank of America, N.A. $42,857,142.86 17.142857143%
The First National Bank of Chicago 35,714,285.71 14.285714266
M&I Marshall & Ilsley Bank 28,571,428.57 11.428571429
Firstar Bank Milwaukee, N.A., 28,571,428.57 11.428571429
Norwest Bank Wisconsin, N.A. 28,571,428.57 11.428571429
U.S. Bank National Association 21,428,571.43 8.571428571
Citibank, N.A. 21,428,571.43 8.571428571
The Bank of New York 21,428,571.43 8.571428571
Wachovia Bank, N.A. 21,428,571.43 8.571428571
-------------- ------------
TOTAL $250,000,000 100%
S-3
SCHEDULE 5.5
LITIGATION
- None -
SCHEDULE 5.7
ERISA
- None -
SCHEDULE 5.11
PERMITTED LIABILITIES
- None -
SCHEDULE 5.12
ENVIRONMENTAL MATTERS
- None -
SCHEDULE 5.15
SUBSIDIARIES
A.O. Smith (China) Water Heater Co., Ltd.
A.O. Smith Electric Motors (Ireland) Ltd.
A.O. Smith Enterprises Ltd.
A.O. Smith Export, Ltd. (Barbados)
A.O. Smith Holdings (Ireland) Ltd.
A.O. Smith International Corporation
A.O. Smith L'Eau Chaude S.a.r.I.
A.O. Smith Warmwasser-Systemtechnik GmbH
A.O. Smith Water Products Company, B.V.
AOS Holding Company
Harbin A.O. Smith Fiberglass Products Company Limited (HSF)
Motores Electricos de Juarez, S.A. de C.V.
Motores Electricos de Monterrey, S.A. de C.V.
Productos de Agua, S.A. de C.V.
Productos Electricos Aplicados, S.A. de C.V.
SCHEDULE 7.1
EXISTING LIENS
Asset Name of Mortgage Date Lien Amount of Maturity Date
Description or Secured Party was Created Outstanding Debt -------------
- ----------- ---------------- ----------- ----------------
Florence, KY Morgan Guaranty 12/28/83 $6,000,000 12/1/08
Portion - Plant Trust Company
and Facilities
SCHEDULE 10.2
EURODOLLAR AND DOMESTIC LENDING OFFICES;
ADDRESSES FOR NOTICES
A.O. SMITH
Addresses for Notices:
Patricia K. Ackerman
A.O. Smith Corporation
Assistant Treasurer
11270 West Park Place
Milwaukee, WI 53224
Phone: (414) 359-4130
Fax: (414) 359-4180
e-mail: packerman@aosmith.com
BANK OF AMERICA, N.A.
as Agent
Notices:
Bank of America, N.A.
Agency Management Services
1850 Gateway Boulevard
5th Floor
Concord, CA 94520
Attention: Paul W. Ober
Telephone: (925) 675-8426
Facsimile: (925) 675-8500
Agent's Payment Office:
Bank of America, N.A.
Agency Management Services #5596
1850 Gateway Boulevard
Concord, California 94520
Attention: Paying & Receiving
Telephone: (510) 675-8724
Facsimile: (510) 675-7378
BANK OF AMERICA, N.A.
as a Lender
Domestic and Eurodollar Lending Office:
1850 Gateway Boulevard
Concord, California 94520
Notices (other than Borrowing notices and Notices of
Conversion/Continuation):
Bank of America, N.A.
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Meg Claggett
Facsimile: (312) 987-0303
2
THE FIRST NATIONAL BANK OF CHICAGO,
- ----------------------------------
as Syndication Agent
Domestic and Eurodollar Address:
One First National Plaza
Chicago, IL 60670
Credit Contact:
Scott Moreen
Vice President
Mail Code IL1-0364
Phone: (312) 732-6162
Fax: (312) 732-1117
e-mail: Scott_Moreen@em.fcnbd.com
Operations and Bid Contact:
Renee Williams
Client Service Associate
Mail Code IL1-0088
Phone: (312) 732-5091
Fax: (312) 732-2715
Letter of Credit Contact:
Marnetta Harris
300 South Riverside
Chicago, IL 60670
Mail Code IL1-0236
Phone: (312) 954-1948
Fax: (312) 954-6207
Documentation Contact:
Jenny Gilpin
Vice President
Mail Code IL1-0088
Phone: (312) 732-5867
Fax: (312) 732-1117
e-mail: Jenny_Gilpin@em.fcnbd.com
Legal Counsel:
Kyle Henderson
Mail Code IL1-0573
Phone: (312) 732-7351
Fax: (312) 732-5144
e-mail: Kyle_Henderson@em.fcnbd.com
3
LENDERS
THE BANK OF NEW YORK
Domestic and Eurodollar Address:
101 Barclay Street
New York, NY 10286
Notices:
Maxine Roach
One Wall Street
19th Floor
New York, NY 10286
Phone: (212) 635-8208
Fax: (212) 635-7923/4
4
CITIBANK N.A.
Domestic Address:
c/o Citicorp. N. America, Inc.
500 West Madison
Chicago, IL 60661
Credit and Documentation Contact:
Michael Ford
Vice President
7th Floor
Phone: (312) 627-3968
Fax: (312) 627-3990
e-mail: mike.ford@citicorp.com
Operations Contact:
Mark Waldron
Loan Administrator
Phone: (302) 894-6084
Fax: (302) 894-6120
Legal Counsel:
Craig Seledee
Phone: (212) 559-6051
Fax: (212) 793-6152
5
FIRSTAR BANK MILWAUKEE, N.A.
Domestic Address:
777 East Wisconsin Avenue
Milwaukee, WI 53202
Credit and Documentation Contact:
John Franceschi
Portfolio Manager
Phone: (414) 765-5656
Fax: (414) 765-5367
Operations Contact:
Brenda Luethy
1850 Osborn Avenue
Oshkosh, WI 54901
Phone: (920) 426-7604
Fax: (920) 426-7655
Bid Contact:
Brett Justman
Phone: (414) 765-5952
Fax: (414) 765-5062
Letter of Credit Contact:
Kay Bremser
International Department
Phone: (414) 765-5626
6
M&I MARSHALL & ILSLEY BANK
Domestic and Eurodollar Address:
770 North Water Street
Milwaukee, WI 53202
Credit and Bid Contact:
Scott Rank
Vice President
18th Floor
Phone: (414) 765-7630
Fax: (414) 765-7625
Operations Contact:
Nenita Yumang
401 North Executive Drive
Brookfield, WI 53005
Phone: (414) 938-8675
Fax: (414) 938-8684
Letter of Credit Contact:
Primary: Pat Seago
Vice President/Operations Manager
4th Floor
Phone: (414) 765-7691
Fax: (414) 765-7788
Secondary: Ermine DeYarmin
Import & Standby Production Manager
4th Floor
Phone: (414) 765-8158
Fax: (414) 765-7788
Documentation Contact:
Tom Bickelhaupt
Vice President
18th Floor
Phone: (414) 765-7630
Fax: (414) 765-7625
7
NORWEST BANK WISCONSIN, N.A.
Domestic Address:
100 East Wisconsin Avenue
Suite 1400
Milwaukee, WI 53202
Credit, Bid, Letter of Credit and Documentation Contact:
Jim Josten
Vice President
Phone: (414) 224-7408
Fax: (414) 224-7410
e-mail: James.Josten@Norwest.com
Operations Contact:
Kathy Herzog
Banking Assistant
Phone: (414) 224-7404
Fax: (414) 224-7410
8
U.S. BANK NATIONAL ASSOCIATION
Domestic and Eurodollar address:
201 West Wisconsin Avenue
Milwaukee, WI 53203
Credit, Bid and Documentation Contact:
Dennis Ciche
Assistant Vice President
Phone: (414) 227-5707
Fax: (414) 227-5881
e-mail: dennis.ciche@usbank.com
Operations Contact:
Leslie Wagner
Business Banking Associate
Phone: (414) 227-5923
Fax: (414) 227-5881
Letter of Credit Contact:
Susan Zube
International Banking Associate
Phone: (414) 227-5473
Fax: (414) 227-6008
9
WACHOVIA BANK, N.A.
Domestic and Eurodollar Address:
191 Peachtree Street, N.E.
Atlanta, GA 30303
Fax: (404) 332-6898
Documentation Contract:
Debra Coheley
Senior Vice President
Final Copies to:
James D. Heinz
Senior Vice President
Wachovia Corporate Services
70 West Madison
Suite 2440
Chicago, IL 60602
Phone: (312) 795-4343
Fax: (312) 853-0693
Administrative/Operations and Bid Contact:
Cynthia Comber
Phone: (312) 795-4335
Fax: (312) 853-0693
Letter of Credit Contacts:
Standby: Amy Walton
Phone: (336) 735-3371
Fax: (336) 735-0950
Back-up: Rhonda Sulier
Phone: (336) 735-3370
10
================================================================================
- --------------------------------------------------------------------------------
364-DAY CREDIT AGREEMENT
Dated as of August 2, 1999
among
A.O. SMITH CORPORATION,
VARIOUS FINANCIAL INSTITUTIONS,
THE FIRST NATIONAL BANK OF CHICAGO,
as Syndication Agent,
and
BANK OF AMERICA, N.A.,
as Agent
BANC OF AMERICA SECURITIES LLC
Lead Arranger and Sole Book Manager
================================================================================
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
SECTION 1 DEFINITIONS
1.1 Certain Defined Terms...............................................1
1.2 Other Interpretive Provisions......................................16
1.3 Accounting Principles..............................................16
SECTION 2 THE CREDITS
2.1 Amounts and Terms of Commitments...................................17
2.2 Loan Accounts......................................................17
2.3 Procedure for Committed Borrowing..................................18
2.4 Conversion and Continuation Elections for Committed Borrowings.....18
2.5 Bid Borrowings.....................................................20
2.6 Procedure for Bid Borrowings.......................................20
2.7 Termination or Reduction of Commitments............................24
2.8 Prepayments........................................................24
2.9 Repayment..........................................................25
2.10 Interest...........................................................25
2.11 Fees...............................................................26
(a) Arrangement and Agency Fees..............................26
(b) Facility Fees............................................26
(c) Utilization Fees.........................................27
2.12 Computation of Fees and Interest...................................27
2.13 Payments by the Company............................................28
2.14 Payments by the Lenders to the Agent...............................28
2.15 Sharing of Payments, Etc...........................................29
2.16 Limitation on Interest Periods.....................................30
2.17 Optional Increase in Commitments...................................30
SECTION 3 TAXES, YIELD PROTECTION AND ILLEGALITY
3.1 Taxes..............................................................31
3.2 Illegality.........................................................32
3.3 Increased Costs and Reduction of Return............................33
3.4 Funding Losses.....................................................33
3.5 Inability to Determine Rates.......................................34
3.6 Certificates of Lenders............................................34
3.7 Substitution of Lenders............................................35
3.8 Survival...........................................................35
SECTION 4 CONDITIONS PRECEDENT
i
4.1 Conditions of Initial Loans.........................................35
(a) Notes..................................................35
(b) Resolutions; Incumbency................................35
(c) Good Standing Certificate..............................36
(d) Legal Opinions.........................................36
(e) Payment of Fees........................................36
(f) Certificate............................................36
(g) Other Documents........................................36
4.2 Conditions to All Loans.............................................36
(a) Notice.................................................36
(b) Continuation of Representations and Warranties.........36
(c) No Existing Default....................................37
SECTION 5 REPRESENTATIONS AND WARRANTIES
5.1 Corporate Existence and Power.......................................37
5.2 Authorization; No Contravention.....................................37
5.3 Governmental Authorization..........................................38
5.4 Binding Effect......................................................38
5.5 Litigation..........................................................38
5.6 No Default..........................................................38
5.7 ERISA Compliance....................................................39
5.8 Use of Proceeds; Margin Regulations.................................39
5.9 Title to Properties.................................................40
5.10 Taxes...............................................................40
5.11 Financial Condition.................................................40
5.12 Environmental Matters...............................................41
5.13 Regulated Entities..................................................41
5.14 No Burdensome Restrictions..........................................41
5.15 Subsidiaries........................................................41
5.16 Insurance...........................................................41
5.17 Full Disclosure.....................................................41
5.18 Year 2000 Problem...................................................41
SECTION 6 AFFIRMATIVE COVENANTS
6.1 Financial Statements................................................42
6.2 Certificates; Other Information.....................................42
6.3 Notices.............................................................43
6.4 Preservation of Corporate Existence, Etc............................44
6.5 Insurance...........................................................44
6.6 Compliance with Laws................................................45
6.7 Compliance with ERISA...............................................45
6.8 Inspection of Property and Books and Records........................45
6.9 Payment of Taxes....................................................45
ii
6.10 Use of Proceeds....................................................45
6.11 Availability.......................................................46
SECTION 7 NEGATIVE COVENANTS
7.1 Limitation on Liens................................................46
7.2 Consolidations and Mergers.........................................47
7.3 Sales of Assets....................................................48
7.4 Operating Leases...................................................48
7.5 Transactions with Affiliates.......................................48
7.6 Use of Proceeds....................................................49
7.7 ERISA..............................................................49
7.8 Maximum Leverage Ratio.............................................49
7.9 Minimum Consolidated Net Worth.....................................49
7.10 Limitation on Subsidiary Debt......................................49
7.11 Business Activities................................................49
7.12 Hedging Obligations................................................50
SECTION 8 EVENTS OF DEFAULT
8.1 Event of Default...................................................50
(a) NonPayment............................................50
(b) Representation or Warranty............................50
(c) Specific Defaults........................................50
(d) Other Defaults........................................50
(e) CrossDefault..........................................50
(f) Insolvency; Voluntary Proceedings.....................51
(g) Involuntary Proceedings...............................51
(h) ERISA.................................................51
(i) Monetary Judgments or Settlements.....................52
(j) NonMonetary Judgments.................................52
(k) Change of Control.....................................52
8.2 Remedies...........................................................52
8.3 Rights Not Exclusive...............................................53
SECTION 9 THE AGENT
9.1 Appointment and Authorization......................................53
9.2 Delegation of Duties...............................................53
9.3 Liability of Agent.................................................53
9.4 Reliance by Agent..................................................54
9.5 Notice of Default..................................................54
9.6 Credit Decision....................................................55
9.7 Indemnification of Agent...........................................55
9.8 Agent in Individual Capacity.......................................56
9.9 Successor Agent....................................................56
iii
9.10 Withholding Tax....................................................56
9.11 Syndication Agent..................................................58
SECTION 10 MISCELLANEOUS
10.1 Amendments and Waivers.............................................58
10.2 Notices............................................................59
10.3 No Waiver; Cumulative Remedies.....................................60
10.4 Costs and Expenses.................................................60
10.5 Company Indemnification............................................60
10.6 Payments Set Aside.................................................61
10.7 Successors and Assigns.............................................61
10.8 Assignments, Participations, etc...................................61
10.9 Confidentiality....................................................63
10.10 Setoff............................................................64
10.11 Notification of Addresses, Lending Offices, Etc...................64
10.12 Counterparts......................................................64
10.13 Severability......................................................64
10.14 No Third Parties Benefited........................................65
10.15 Governing Law and Jurisdiction....................................65
10.16 Entire Agreement..................................................65
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SCHEDULES
Schedule 1.1 Pricing Schedule
Schedule 2.1 Commitments and Pro Rata Shares
Schedule 5.5 Litigation
Schedule 5.7 ERISA
Schedule 5.11 Permitted Liabilities
Schedule 5.12 Environmental Matters
Schedule 5.15 Subsidiaries
Schedule 7.1 Existing Liens
Schedule 10.2 Eurodollar and Domestic Lending Offices; Addresses for Notices
EXHIBITS
Exhibit A Form of Notice of Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Competitive Bid Request
Exhibit D Form of Invitation for Competitive Bids
Exhibit E Form of Competitive Bid
Exhibit F Form of Legal Opinion of Counsel to the Company
Exhibit G Form of Assignment and Acceptance
Exhibit H Form of Note
Exhibit I Form of Compliance Certificate
Exhibit J Form of Request for Increase
vii
364-DAY CREDIT AGREEMENT
This 364-DAY CREDIT AGREEMENT is entered into as of August 2, 1999
among A.O. SMITH CORPORATION, a Delaware corporation (the "Company"), the
several financial institutions from time to time party to this Agreement
(collectively the "Lenders"; individually each a "Lender"), THE FIRST NATIONAL
BANK OF CHICAGO, as Syndication Agent, and BANK OF AMERICA, N.A., as Agent.
WHEREAS, the Lenders have agreed to make available to the Company a
revolving credit facility upon the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
SECTION 1 DEFINITIONS
1.1 Certain Defined Terms. The following terms have the following
meanings:
Absolute Rate - see subsection 2.6(c)(ii)(C).
Affected Lender - see Section 3.7.
Affiliate means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. A Person shall be deemed to control
another Person if the controlling Person possesses, directly or
indirectly, the power to direct or cause the direction of the
management and policies of such other Person, whether through the
ownership of voting securities or membership interests, by contract, or
otherwise.
Agent means BofA in its capacity as agent for the Lenders
hereunder, and any successor agent arising under Section 9.9.
Agent-Related Persons means the Agent and any successor
thereto in such capacity hereunder, together with its Affiliates, and
the officers, directors, employees, agents and attorneys-in-fact of
such Persons and Affiliates.
Agent's Payment Office means the address for payments to the
Agent set forth on Schedule 10.2 or such other address as the Agent may
from time to time specify.
Aggregate Commitment Amount means as of the Closing Date,
$100,000,000, as such amount may be increased pursuant to Section 2.17
or decreased pursuant to Section 2.7.
Agreement means this 364-Day Credit Agreement.
Applicable Margin means, at any time, the percentage set forth
in Schedule 1.1 opposite the then-current Leverage Ratio.
Arranger means Banc of America Securities LLC.
Assignee - see subsection 10.8(a).
Attorney Costs means and includes all reasonable fees and
disbursements of any law firm or other external counsel, the reasonable
allocated cost of internal legal services (without duplication) and all
reasonable disbursements of internal counsel.
Base Rate means, for any day, the higher of: (a) 0.50% per
annum above the latest Federal Funds Rate; and (b) the rate of interest
in effect for such day as publicly announced from time to time by BofA
at its principal office in the United States as its "reference rate."
(The "reference rate" is a rate set by BofA based upon various factors
including BofA's costs and desired return, general economic conditions
and other factors, and is used as a reference point for pricing some
loans, which may be priced at, above or below such announced rate.) Any
change in the reference rate announced by BofA shall take effect at the
opening of business on the day specified in the public announcement of
such change.
Base Rate Loan means a Committed Loan that bears interest
based on the Base Rate.
Bid Borrowing means a Borrowing hereunder consisting of one or
more Bid Loans made on the same day by one or more Lenders.
Bid Loan means a Loan by a Lender to the Company under Section
2.6.
BofA means Bank of America, N.A., a national banking
association.
Borrowing means a Bid Borrowing or a Committed Borrowing.
Borrowing Date means any date on which a Borrowing occurs
under Section 2.3 or 2.6.
2
Business Day means any day other than a Saturday, Sunday or
other day on which commercial banks in New York City, Charlotte,
Chicago or San Francisco are authorized or required by law to close
and, if the applicable Business Day relates to a Eurodollar Loan, means
such a day on which dealings are carried on in the London interbank
eurodollar market.
Capital Adequacy Regulation means any guideline, request or
directive of any central bank or other Governmental Authority, or any
other law, rule or regulation, whether or not having the force of law,
in each case, regarding capital adequacy of any bank or of any Person
controlling a bank.
Capital Lease means, at any time, a lease with respect to
which the lessee is required concurrently to recognize the acquisition
of an asset and the incurrence of a liability in accordance with GAAP.
Capitalized Lease Obligations means, with respect to any
Person, all outstanding obligations of such Person in respect of
Capital Leases, taken at the capitalized amount thereof accounted for
as indebtedness in accordance with GAAP.
Change of Control means any of the following events:
(a) any Person or group (within the meaning of Rule 13d-5 of
the SEC under the Exchange Act as in effect on the date hereof), other
than Permitted Holders, shall become the Beneficial Owner (as defined
in Rule 13d-3 of the SEC under the Exchange Act as in effect on the
date hereof) of 20% or more (by number of votes) of the Voting Stock of
the Company and more of such Voting Stock than the Permitted Holders;
(b) a majority of the members of the Board of Directors of the
Company shall cease to be Continuing Members; or
(c) any event or condition relating to a change of control of
the Company shall occur which requires, or permits the holder or
holders (or any agent or trustee therefor) of any Debt of the Company
or any Subsidiary to require, the purchase or repurchase prior to its
expressed maturity of any Debt of the Company or any Subsidiary.
Closing Date means the date on which all conditions precedent
set forth in Section 4.1 are satisfied or waived by all Lenders (or, in
the case of subsection 4.1(e), waived by the Person entitled to receive
the applicable payment).
Code means the Internal Revenue Code of 1986.
3
Commitment means, with respect to any Lender, such Lender's
commitment to make Committed Loans hereunder. The initial amount of
each Lender's Commitment, as of the Closing Date, is set forth on
Schedule 2.1 (and such amount may be adjusted by any applicable
increase pursuant to Section 2.17, any reduction of the combined
Commitments pursuant to Section 2.7, any extension of the Termination
Date pursuant to Section 2.18 and any assignment pursuant to Section
10.8).
Committed Borrowing means a Borrowing hereunder consisting of
Committed Loans of the same Type made by the Lenders on the same day
ratably according to their respective Pro Rata Shares.
Committed Loan means a Loan by a Lender to the Company under
Section 2.1, which may be a Eurodollar Loan or a Base Rate Loan (each a
"Type" of Committed Loan).
Company - see the Preamble.
Competitive Bid means an offer by a Lender to make a Bid Loan
in accordance with subsection 2.6(b).
Competitive Bid Request - see subsection 2.6(a).
Compliance Certificate means a certificate substantially in
the form of Exhibit I.
Consolidated Net Earnings means, for any period, (a) the
consolidated net income of the Company and its Subsidiaries for such
period (considered as a single accounting period), but excluding any
equity of the Company or any Subsidiary in the undistributed earnings
of any Person which is not a Subsidiary minus (b) the aggregate amount
of all dividends paid by the Company on its preferred stock during such
period.
Consolidated Net Worth means, at any date, the consolidated
stockholders' equity of the Company and its Subsidiaries.
Continuing Member means a member of the Board of Directors of
the Company who either (a) was a member of the Company's Board of
Directors on the Effective Date and has been such continuously
thereafter or (b) became a member of such Board of Directors after the
Effective Date and whose election or nomination for election was
approved by a vote of the majority of the Continuing Members then
members of the Company's Board of Directors.
Contractual Obligation means, as to any Person, any provision
of any security issued by such Person or of any agreement, undertaking,
contract, indenture, mortgage,
4
deed of trust or other instrument, document or agreement to which such
Person is a party or by which it or any of its property is bound.
Conversion/Continuation Date means any date on which, under
Section 2.4, the Company (a) converts Committed Loans of one Type to
the other Type or (b) continues as Eurodollar Loans, but with a new
Interest Period, Eurodollar Loans having an Interest Period expiring on
such date.
Debt of any Person means, without duplication, (a) all
indebtedness of such Person for borrowed money and all mandatory
purchase, redemption or other retirement obligations of such Person in
respect of its mandatorily redeemable preferred stock; (b) all
obligations issued, undertaken or assumed by such Person as the
deferred purchase price of property or services (other than trade
payables arising in the ordinary course of business); (c) all
reimbursement or payment obligations of such Person with respect to
letters of credit; (d) all obligations of such Person evidenced by
notes, bonds, debentures or similar instruments; (e) all indebtedness
of such Person created or arising under any conditional sale or other
title retention agreement, or incurred as financing, in either case
with respect to property acquired by such Person (even though the
rights and remedies of the seller or lender under such agreement in the
event of default are limited to repossession or sale of such property);
(f) all Capitalized Lease Obligations of such Person; (g) all
indebtedness of the types referred to in clauses (a) through (f) above
secured by (or for which the holder of such indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien
upon or in property (including accounts and contracts rights) owned by
such Person, even though such Person has not assumed or become liable
for the payment of such Debt, provided that the amount of any such Debt
shall be deemed to be the lesser of the face principal amount thereof
and the fair market value of the property subject to such Lien; (h) all
Hedging Obligations of such Person; and (i) all Guaranty Obligations of
such Person in respect of indebtedness or obligations of others.
Disposition - see Section 7.3.
Dollars and $ each mean lawful money of the United States.
Effective Date means the date on which the Agent has received
counterparts of this Agreement executed by the parties hereto.
Eligible Assignee means: (a) a commercial bank organized under
the laws of the United States, or any state thereof, and having a
combined capital and surplus of at least $1,000,000,000; (b) a
commercial bank organized under the laws of any other country which is
a member of the Organization for Economic Cooperation and Development
(the "OECD"), or a political subdivision of such country, and having a
combined capital and
5
surplus of at least $1,000,000,000, provided that such bank is acting
through a branch or agency located in the United States; (c) a Person
that is primarily engaged in the business of commercial banking and
that is (i) a Lender, (ii) a Subsidiary of a Lender, (iii) a Subsidiary
of a Person of which a Lender is a Subsidiary or (iv) a Person of which
a Lender is a Subsidiary; or (d) any other Person approved by the Agent
and, unless an Event of Default or Unmatured Event of Default has
occurred and is continuing at the time any assignment is effected in
accordance with Section 10.8, the Company, such approvals not to be
unreasonably withheld or delayed; provided that neither the Company nor
an Affiliate of the Company shall qualify as an Eligible Assignee.
Environmental Claims means all claims, however asserted, by
any Governmental Authority or other Person alleging potential liability
or responsibility for violation of any Environmental Law, or for
release or injury to the environment.
Environmental Laws means all Federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes,
together with all administrative orders, directed duties, requests,
licenses, authorizations and permits of, and agreements with, any
Governmental Authorities, in each case relating to environmental and
land use matters.
ERISA means the Employee Retirement Income Security Act of
1974.
ERISA Affiliate means any trade or business (whether or not
incorporated) under common control with the Company within the meaning
of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of
the Code for purposes of provisions relating to Section 412 of the
Code).
ERISA Event means: (a) a Reportable Event with respect to a
Pension Plan; (b) a withdrawal by the Company or any ERISA Affiliate
from a Pension Plan subject to Section 4063 of ERISA during a plan year
in which it was a substantial employer (as defined in Section
4001(a)(2) of ERISA) or a substantial cessation of operations which is
treated as such a withdrawal; (c) a complete or partial withdrawal by
the Company or any ERISA Affiliate from a Multiemployer Plan or
notification that a Multiemployer Plan is in reorganization; (d) the
filing of a notice of intent to terminate, the treatment of a Pension
Plan amendment as a termination under Section 4041 or 4041A of ERISA,
or the commencement of proceedings by the PBGC to terminate a Pension
Plan or Multiemployer Plan; (e) an event or condition which might
reasonably be expected to constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan or Multiemployer Plan; or (f) the
imposition of any liability under Title IV of ERISA, other than PBGC
premiums due but not delinquent under Section 4007 of ERISA, upon the
Company or any ERISA Affiliate.
6
Eurodollar Loan means any Committed Loan which bears interest
by reference to the Eurodollar Rate.
Eurodollar Rate means, for any Interest Period, with respect
to Eurodollar Loans comprising part of the same Borrowing, the rate of
interest per annum determined by the Agent as the rate (rounded upward,
if necessary to an integral multiple of 1/100 of 1%) at which Dollar
deposits in the approximate amount of the Eurodollar Loan of BofA for
such Interest Period would be offered by BofA's London office (or such
other office as may be designated for such purpose by BofA), to major
banks in the eurodollar interbank market at their request at
approximately 11:00 a.m. (London time) two Business Days prior to the
commencement of such Interest Period.
Event of Default - see Section 8.1.
Exchange Act means the Securities Exchange Act of 1934.
Extension Request - see Section 2.18.
Facility Fee Rate means the percentage set forth in Schedule
1.1 opposite the then-current Leverage Ratio.
Federal Funds Rate means, for any day, the rate set forth in
the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Bank of New
York (including any such successor, "H.15(519)") on the immediately
preceding Business Day opposite the caption "Federal Funds
(Effective)"; or, if for any relevant day such rate is not so published
on any such immediately preceding Business Day, the rate for such day
will be the arithmetic mean as determined by the Agent of the rates for
the last transaction in overnight Federal funds arranged prior to 9:00
a.m. (New York City time) on that day by each of three leading brokers
of Federal funds transactions in New York City selected by the Agent.
Five-Year Commitment Amount means the "Aggregate Commitment
Amount" under and as defined in the Five-Year Credit Agreement.
Five-Year Credit Agreement means the Five-Year Credit
Agreement dated as of the date hereof among the Company, various
financial institutions and BofA, as agent.
FRB means the Board of Governors of the Federal Reserve
System, and any Governmental Authority succeeding to any of its
principal functions.
Funded Debt means, at any time, the sum (determined on a
consolidated basis and without duplication) of (i) all Debt of the
Company and its Subsidiaries of the types
7
described in clauses (a), (b), (d), (e), (f) and (g) of the definition
of Debt, (ii) all non-contingent obligations of the Company and its
Subsidiaries with respect to letters of credit, (iii) all contingent
obligations of the Company and its Subsidiaries with respect to letters
of credit issued for the account of the Company or any Subsidiary to
support, and all Guaranty Obligations of the Company and its
Subsidiaries in respect of, Funded Debt of any Person other than the
Company or a Subsidiary and (iv) to the extent not included in the
definition of Debt, the aggregate outstanding investment or claim held
at such time by purchasers, assignees or other transferees of (or of
interests in) receivables or other rights to payment of the Company and
its Subsidiaries in connection with any Securitization Transaction
(regardless of the accounting treatment of such Securitization
Transaction).
GAAP means generally accepted accounting principles set forth
from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date
of determination.
Governmental Authority means any nation or government, any
state or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
Guaranty Obligation means, as to any Person, any direct or
indirect liability of such Person, with or without recourse, with
respect to any Debt, lease, dividend, letter of credit or other
obligation (the "primary obligations") of another Person (the "primary
obligor"), including any obligation of such Person (i) to purchase,
repurchase or otherwise acquire such primary obligations or any
security therefor, (ii) to advance or provide funds for the payment or
discharge of any such primary obligation, or to maintain working
capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency or any balance sheet item, level of
income or financial condition of the primary obligor, (iii) to purchase
property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation or (iv) otherwise to
assure or hold harmless the holder of any such primary obligation
against loss in respect thereof. The amount of any Guaranty Obligation
shall be deemed equal to the stated or determinable amount of the
primary obligation in respect of which such Guaranty Obligation is made
or, if not stated or if indeterminable, the maximum reasonably
anticipated liability in respect thereof.
Hedging Obligations means, with respect to any Person, all
liabilities of such Person under interest rate, currency and commodity
swap agreements, cap agreements and
8
collar agreements, and all other agreements or arrangements designed to
protect such Person against fluctuations in interest rates, currency
exchange rates or commodity prices.
Indemnified Liabilities - see Section 10.5.
Indemnified Person - see Section 10.5.
Independent Auditor - see subsection 6.1(a).
Insolvency Proceeding means, with respect to any Person, (a)
any case, action or proceeding with respect to such Person before any
court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution,
winding-up or relief of debtors or (b) any general assignment for the
benefit of creditors, composition, marshalling of assets for creditors,
or other, similar arrangement in respect of its creditors generally or
any substantial portion of its creditors, undertaken under U.S.
Federal, state or foreign law, including the U.S. Bankruptcy Code.
Interest Payment Date means, as to any Loan other than a Base
Rate Loan, the last day of each Interest Period applicable to such Loan
and, as to any Base Rate Loan, the last Business Day of each calendar
quarter, provided that (a) if any Interest Period for a Eurodollar Loan
exceeds three months, each three month anniversary of the beginning of
such Interest Period shall also be an Interest Payment Date and (b) as
to any Bid Loan, such intervening dates prior to the maturity thereof
as may be specified by the Company and agreed to by the applicable
Lender in the applicable Competitive Bid also shall be Interest Payment
Dates.
Interest Period means, (a) as to any Eurodollar Loan, the
period commencing on the Borrowing Date of such Loan or on the
Conversion/Continuation Date on which the Loan is converted into or
continued as a Eurodollar Loan, and ending on the date one, two, three
or six months thereafter as selected by the Company in its Notice of
Borrowing or Notice of Conversion/Continuation, as the case may be; and
(b) as to any Bid Loan, a period of not less than 7 days and not more
than 183 days as selected by the Company in the applicable Competitive
Bid Request; provided that:
(i) if any Interest Period would otherwise end on a
day that is not a Business Day, such Interest Period shall be
extended to the following Business Day unless, in the case of
a Eurodollar Loan, the result of such extension would be to
carry such Interest Period into another calendar month, in
which event such Interest Period shall end on the preceding
Business Day;
(ii) any Interest Period for a Eurodollar Loan that
begins on a day for which there is no numerically
corresponding day in the calendar month at the end
9
of such Interest Period shall end on the last Business Day of
the calendar month at the end of such Interest Period; and
(iii) no Interest Period for any Loan shall extend
beyond the Termination Date.
Invitation for Competitive Bids means a solicitation for
Competitive Bids substantially in the form of Exhibit D.
IRS means the Internal Revenue Service, and any Governmental
Authority succeeding to any of its principal functions under the Code.
Lender - see the Preamble.
Lending Office means, as to any Lender, the office or offices
of such Lender specified as its "Lending Office" or "Domestic Lending
Office" or "Eurodollar Lending Office", as the case may be, on Schedule
10.2, or such other office or offices as such Lender may from time to
time notify the Company and the Agent.
Leverage Ratio means at any time the ratio of (a) Funded Debt
to (b) the sum of Funded Debt plus Consolidated Net Worth.
Lien means any security interest, mortgage, deed of trust,
pledge, hypothecation, assignment, charge or deposit arrangement,
encumbrance, lien (statutory or other) or preferential arrangement of
any kind or nature whatsoever in respect of any property (including
those created by, arising under or evidenced by any conditional sale or
other title retention agreement), the interest of a lessor under a
capital lease, or any financing lease having substantially the same
economic effect as any of the foregoing, but not including the interest
of a lessor under an operating lease.
Loan means an extension of credit by a Lender to the Company
under Section 2. A Loan may be a Committed Loan or a Bid Loan.
Margin Stock means "margin stock" as such term is defined in
Regulation T, U or X of the FRB.
Material Adverse Effect means (a) a material adverse change
in, or a material adverse effect upon, the operations, business,
properties, condition (financial or otherwise) or prospects of the
Company and its Subsidiaries taken as a whole; or (b) a material
impairment of the ability of the Company to perform its obligations
hereunder.
10
Material Financial Obligations means Debt, Guaranty
Obligations or Hedging Obligations of the Company or any Subsidiary, or
obligations of the Company or any Subsidiary in respect of any
Securitization Transaction, in an aggregate principal amount (for all
applicable Debt, Guaranty Obligations, Hedging Obligations and
obligations in respect of Securitization Transactions) equal to
$10,000,000 or more.
Multiemployer Plan means a "multiemployer plan", within the
meaning of Section 4001(a)(3) of ERISA, with respect to which the
Company or any ERISA Affiliate may have any liability.
Net Cash Proceeds means, with respect to any Disposition, the
aggregate cash proceeds (including cash proceeds received by way of
deferred payment of principal pursuant to a note, installment
receivable or otherwise, but only as and when received) received by the
Company or any Subsidiary pursuant to such Disposition, net of (i)
direct costs relating to such Disposition (including sales commissions
and legal, accounting and investment banking fees), (ii) taxes paid or
reasonably estimated by the Company to be payable as a result thereof
(after taking into account any available tax credits or deductions and
any tax sharing arrangements) and (iii) amounts required to be applied
to the repayment of any Debt secured by a Lien on the asset subject to
such Disposition (other than the Loans).
Note means a promissory note executed by the Company in favor
of a Lender pursuant to subsection 2.2(b), in substantially the form of
Exhibit H.
Notice of Borrowing means a notice in substantially the form
of Exhibit A.
Notice of Conversion/Continuation means a notice in
substantially the form of Exhibit B.
Obligations means all advances, debts, liabilities,
obligations, covenants and duties arising under this Agreement owing by
the Company to any Lender, the Agent or any Indemnified Person, whether
direct or indirect (including those acquired by assignment), absolute
or contingent, due or to become due, or now existing or hereafter
arising.
Organization Documents means (i) for any corporation, the
certificate of incorporation, the bylaws, any certificate of
determination or instrument relating to the rights of preferred
shareholders of such corporation, any shareholder rights agreement, and
all applicable resolutions of the board of directors (or any committee
thereof) of such corporation, (ii) for any partnership or joint
venture, the partnership or joint venture agreement and any other
organizational document of such entity, (iii) for any limited liability
company, the certificate or articles of organization, the operating
agreement and any other organizational document of such limited
liability company, (iv) for any trust, the
11
declaration of trust, the trust agreement and any other organizational
document of such trust and (v) for any other entity, the document or
agreement pursuant to which such entity was formed and any other
organizational document of such entity.
Other Taxes means any present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies
which arise from any payment made hereunder or from the execution,
delivery, performance, enforcement or registration of, or otherwise
with respect to, this Agreement or any Note.
Participant - see subsection 10.8(c).
PBGC means the Pension Benefit Guaranty Corporation, or any
Governmental Authority succeeding to any of its principal functions
under ERISA.
Pension Plan means a pension plan (as defined in Section 3(2)
of ERISA) subject to Title IV of ERISA with respect to which the
Company or any ERISA Affiliate may have any liability but not including
any Multiemployer Plan.
Permitted Holders means Arthur O. Smith and Lloyd B. Smith,
their respective spouses, their respective lineal descendants and the
spouses of such descendants, trusts for the benefit of or controlled by
the foregoing and any corporation controlled by any of the foregoing.
Person means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust,
unincorporated association, joint venture or Governmental Authority.
Plan means an employee benefit plan (as defined in Section
3(3) of ERISA) with respect to which the Company may have any
liability.
Pro Rata Share means, as to any Lender at any time, the
percentage equivalent (expressed as a decimal, rounded to the ninth
decimal place) at such time of (i) prior to termination of the
Commitments, the amount of such Lender's Commitment divided by the
combined Commitments of all Lenders and (ii) after termination of the
Commitments, the unpaid principal amount of such Lender's Loans divided
by the then aggregate unpaid amount of the Loans of all Lenders.
Replacement Lender - see Section 3.7.
Reportable Event means any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder, other than any such
event for which the 30-day notice requirement under ERISA has been
waived in regulations issued by the PBGC.
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Required Lenders means (a) prior to the Termination Date,
Lenders holding more than 50% of the Commitments, and (b) thereafter,
Lenders holding more than 50% of the then aggregate unpaid principal
amount of the Loans.
Requirement of Law means, as to any Person, any law (statutory
or common), treaty, rule or regulation or determination of an
arbitrator (under binding arbitration) or of a Governmental Authority,
in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.
Response Date - see subsection 2.18(a).
Responsible Officer means the chief executive officer or the
president of the Company, or any other officer having substantially the
same authority and responsibility; or, with respect to compliance with
financial covenants, the chief financial officer, the secretary or the
treasurer of the Company, or any other officer having substantially the
same authority and responsibility.
SEC means the Securities and Exchange Commission, or any
Governmental Authority succeeding to any of its principal functions.
Securitization Transaction means any sale, assignment or other
transfer by the Company or any Subsidiary of accounts receivable, lease
receivables or other payment obligations owing to the Company or such
Subsidiary or any interest in any of the foregoing, together in each
case with any collections and other proceeds thereof, any collection or
deposit accounts related thereto, and any collateral, guaranties or
other property or claims in favor of the Company or such Subsidiary
supporting or securing payment by the obligor thereon of, or otherwise
related to, any such receivables.
Subsidiary of a Person means any corporation, association,
partnership, limited liability company, joint venture or other business
entity of which more than 50% of the voting stock, membership interests
or other equity interests (in the case of Persons other than
corporations), is owned or controlled directly or indirectly by the
Person, or one or more of the Subsidiaries of the Person, or a
combination thereof. Unless the context otherwise clearly requires,
references herein to a "Subsidiary" refer to a Subsidiary of the
Company.
Taxes means any and all present or future taxes, levies,
assessments, imposts, duties, deductions, charges or withholdings,
fees, withholdings or similar charges, and all liabilities with respect
thereto, excluding, in the case of each Lender and the Agent, such
taxes (including income taxes or franchise taxes) as are imposed on or
measured by its net income by the jurisdiction (or any political
subdivision thereof) under the laws of which such Lender or the Agent,
as the case may be, is organized or maintains a lending office.
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Termination Date means the earlier to occur of (a) July 28,
2000 or (b) the date on which the Commitments terminate in accordance
with the provisions of this Agreement.
Total Commitment Amount means at any time the sum of the
Aggregate Commitment Amount and the Five-Year Commitment Amount.
Type has the meaning specified in the definition of "Committed
Loan."
Unfunded Pension Liability means the excess of a Pension
Plan's accrued benefit liabilities under Section 4001(a)(16) of ERISA
over the current value of that Plan's assets, determined in accordance
with the assumptions used for funding the Pension Plan pursuant to
Section 412 of the Code for the applicable plan year.
United States and U.S. each means the United States of
America.
Unmatured Event of Default means any event or circumstance
which, with the giving of notice, the lapse of time, or both, would (if
not cured or otherwise remedied during such time) constitute an Event
of Default.
Voting Stock means, as to any Person, all outstanding
securities of all classes of such Person ordinarily (and apart from
rights accruing under special circumstances) having the right to elect
directors of such Person.
Wholly-Owned Subsidiary means any Subsidiary in which (other
than directors' qualifying shares required by law) 100% of the Voting
Stock, and 100% of the capital stock of every other class, in each
case, at the time as of which any determination is being made, is
owned, beneficially and of record, by the Company, or by one or more of
the other Wholly-Owned Subsidiaries, or both.
Year 2000 Problem means the risk that computer applications
and embedded microchips in non-computing devices may be unable to
recognize and perform properly date-sensitive functions involving
certain dates prior to and any date after December 31, 1999.
1.2 Other Interpretive Provisions.
(a) The meanings of defined terms are equally applicable to
the singular and plural forms of the defined terms.
(b) Section, subsection, Article, Schedule and Exhibit
references are to this Agreement unless otherwise specified.
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(c) The term "including" is not limiting and means "including
without limitation."
(d) In the computation of periods of time from a specified
date to a later specified date, the word "from" means "from and including"; the
words "to" and "until" each mean "to but excluding", and the word "through"
means "to and including."
(e) Unless otherwise expressly provided herein, (i) references
to agreements (including this Agreement) and other contractual instruments shall
be deemed to include all subsequent amendments and other modifications thereto,
but only to the extent such amendments and other modifications are not
prohibited by the terms of this Agreement, and (ii) references to any statute or
regulation are to be construed as including all statutory and regulatory
provisions or rules consolidating, amending, replacing, supplementing,
interpreting or implementing such statute or regulation.
(f) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(g) This Agreement may use several different limitations,
tests or measurements to regulate the same or similar matters. All such
limitations, tests and measurements are cumulative and shall each be performed
in accordance with their terms.
(h) This Agreement is the result of negotiations among and has
been reviewed by counsel to the Agent, the Company and the Lenders, and is the
product of all parties. Accordingly, this Agreement shall not be construed
against the Lenders or the Agent merely because of the Agent's or Lenders'
involvement in its preparation.
1.3 Accounting Principles.
(a) Unless the context otherwise clearly requires, all
accounting terms not expressly defined herein shall be construed, and all
financial computations required under this Agreement shall be made, in
accordance with GAAP, consistently applied; provided that if the Company
notifies the Agent that the Company wishes to amend any covenant in Section 7 to
eliminate the effect of any change in GAAP on the operation of such covenant (or
if the Agent notifies the Company that the Required Lenders wish to amend
Section 7 for such purpose), then the Company's compliance with such covenant
shall be determined on the basis of GAAP in effect immediately before the
relevant change in GAAP became effective, until either such notice is withdrawn
or such covenant is amended in a manner satisfactory to the Company and the
Required Lenders.
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(b) References herein to "fiscal year" and "fiscal quarter"
refer to such fiscal periods of the Company.
SECTION 2 THE CREDITS
2.1 Amounts and Terms of Commitments. Each Lender severally agrees, on
the terms and conditions set forth herein, to make Committed Loans to the
Company from time to time on any Business Day during the period from the Closing
Date to the Termination Date, in an aggregate amount not to exceed at any time
outstanding the amount of such Lender's Commitment; provided that the aggregate
principal amount of all outstanding Loans (whether Committed Loans or Bid Loans)
shall not at any time exceed the Aggregate Commitment Amount. Subject to the
foregoing and the other terms and conditions hereof, the Company may borrow
under this Section 2.1, prepay under Section 2.8 and reborrow under this Section
2.1.
2.2 Loan Accounts. (a) The Loans made by each Lender shall be evidenced
by one or more accounts or records maintained by such Lender in the ordinary
course of business. The accounts or records maintained by the Agent and each
Lender shall be conclusive (absent manifest error) of the amount of the Loans
made by the Lenders to the Company, and the interest and payments thereon. Any
failure so to record or any error in doing so shall not, however, limit or
otherwise affect the obligation of the Company hereunder to pay any amount owing
with respect to the Loans.
(b) Upon the request of any Lender made through the Agent, the
Loans made by such Lender may be evidenced by one or more Notes, instead of or
in addition to loan accounts. Each such Lender shall endorse on the schedules
annexed to its Note(s) the date, amount and maturity of each Loan made by it and
the amount of each payment of principal made by the Company with respect
thereto. Each such Lender is irrevocably authorized by the Company to endorse
its Note(s) and each Lender's record shall be conclusive absent manifest error;
provided that the failure of a Lender to make, or an error in making, a notation
thereon with respect to any Loan shall not limit or otherwise affect the
obligations of the Company hereunder or under any such Note to such Lender.
2.3 Procedure for Committed Borrowing. (a) Each Committed Borrowing
shall be made upon the Company's irrevocable written notice delivered to the
Agent in the form of a Notice of Borrowing, which notice must be received by the
Agent prior to 10:30 a.m. (Chicago time) (i) three Business Days prior to the
requested Borrowing Date, in the case of Eurodollar Loans, and (ii) on the
requested Borrowing Date, in the case of Base Rate Loans, specifying:
(A) the amount of the Committed Borrowing,
which shall be in an aggregate amount not less than
$10,000,000 or a higher integral multiple of
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$1,000,000 (provided that any Borrowing of Base Rate Loans may
be in an amount equal to the unused Aggregate Commitment
Amount);
(B) the requested Borrowing Date, which
shall be a Business Day;
(C) the Type of Loans comprising such
Committed Borrowing; and
(D) in the case of Eurodollar Loans, the
duration of the initial Interest Period therefor.
(b) The Agent will promptly notify each Lender of its receipt
of any Notice of Borrowing and of the amount of such Lender's Pro Rata Share of
such Borrowing.
(c) Each Lender will make the amount of its Pro Rata Share of
each Committed Borrowing available to the Agent for the account of the Company
at the Agent's Payment Office by 12:00 noon (Chicago time) on the Borrowing Date
requested by the Company in funds immediately available to the Agent. The
proceeds of all such Committed Loans will then be made available to the Company
by the Agent at such office by crediting the account of the Company on the books
of BofA with the aggregate of the amounts made available to the Agent by the
Lenders and in like funds as received by the Agent.
2.4 Conversion and Continuation Elections for Committed Borrowings. (a)
The Company may, upon irrevocable written notice to the Agent in accordance with
subsection 2.4(b):
(i) elect, as of any Business Day, in the case of
Base Rate Loans, or as of the last day of the applicable Interest
Period, in the case of Eurodollar Loans, to convert any such Committed
Loans (or any part thereof in an aggregate amount not less than
$5,000,000 or a higher integral multiple of $1,000,000) into Committed
Loans of the other Type; or
(ii) elect as of the last day of the applicable
Interest Period, to continue any Eurodollar Loans having Interest
Periods expiring on such day (or any part thereof in an amount not less
than $5,000,000 or a higher integral multiple of $1,000,000);
provided that if at any time the aggregate amount of Eurodollar Loans in respect
of any Borrowing is reduced, by payment, prepayment or conversion of part
thereof, to be less than $5,000,000, such Eurodollar Loans shall automatically
convert into Base Rate Loans.
(b) The Company shall deliver a Notice of
Conversion/Continuation to be received by the Agent not later than 10:30 a.m.
(Chicago time) at least (i) three Business Days in
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advance of the Conversion/Continuation Date, if the Committed Loans are to be
converted into or continued as Eurodollar Loans and (ii) on the
Conversion/Continuation Date, if the Committed Loans are to be converted into
Base Rate Loans, specifying:
(A) the proposed Conversion/Continuation
Date;
(B) the aggregate amount of Committed Loans
to be converted or continued;
(C) the Type of Committed Loans resulting
from the proposed conversion or continuation; and
(D) in the case of conversions into
Eurodollar Loans, the duration of the requested Interest
Period.
(c) If upon the expiration of any Interest Period applicable
to Eurodollar Loans, the Company has failed to select timely a new Interest
Period to be applicable to such Eurodollar Loans, the Company shall be deemed to
have elected to convert such Eurodollar Loans into Base Rate Loans effective as
of the expiration date of such Interest Period.
(d) The Agent will promptly notify each Lender of its receipt
of a Notice of Conversion/Continuation, or, if no timely notice is provided by
the Company, the Agent will promptly notify each Lender of the details of any
automatic conversion. All conversions and continuations shall be made ratably
according to the respective outstanding principal amounts of the Committed Loans
with respect to which the notice was given held by each Lender.
(e) Unless the Required Lenders otherwise consent, during the
existence of an Event of Default or Unmatured Event of Default, the Company may
not elect to have a Loan converted into or continued as a Eurodollar Loan.
2.5 Bid Borrowings. In addition to Committed Borrowings pursuant to
Section 2.3, each Lender severally agrees that the Company may, as set forth in
Section 2.6, from time to time request the Lenders prior to the Termination Date
to submit offers to make Bid Loans to the Company; provided that the Lenders
may, but shall have no obligation to, submit such offers and the Company may,
but shall have no obligation to, accept any such offers; and provided, further,
that the aggregate principal amount of all outstanding Loans (whether Bid Loans
or Committed Loans) shall not at any time exceed the Aggregate Commitment
Amount.
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2.6 Procedure for Bid Borrowings.
(a) When the Company wishes to request the Lenders to submit
offers to make Bid Loans hereunder, it shall transmit to the Agent by telephone
call followed promptly by facsimile transmission a notice in substantially the
form of Exhibit C (a "Competitive Bid Request") so as to be received no later
than 9:00 a.m. (Chicago time) one Business Day prior to the date of such
proposed Bid Borrowing, specifying:
(i) the date of such Bid Borrowing, which shall be
a Business Day;
(ii) the aggregate amount of such Bid Borrowing,
which shall be a minimum amount of $5,000,000 or a higher integral
multiple of $1,000,000; and
(iii) the duration of the Interest Period applicable
thereto, subject to the provisions of the definition of "Interest
Period" herein.
The Company may not request Competitive Bids for more than three Interest
Periods in a single Competitive Bid Request and may not request Competitive Bids
more than once in any period of five Business Days.
(b) Upon receipt of a Competitive Bid Request, the Agent will
promptly send to the Lenders by facsimile transmission an Invitation for
Competitive Bids, which shall constitute an invitation by the Company to each
Lender to submit Competitive Bids offering to make the Bid Loans to which such
Competitive Bid Request relates in accordance with this Section 2.6.
(c) (i) Each Lender may at its discretion submit a Competitive
Bid containing an offer or offers to make Bid Loans in response to any
Invitation for Competitive Bids. Each Competitive Bid must comply with
the requirements of this subsection 2.6(c) and must be submitted to the
Agent by facsimile transmission at the Agent's office for notices not
later than 8:30 a.m. (Chicago time) on the proposed date of Borrowing;
provided that Competitive Bids submitted by the Agent (or any Affiliate
of the Agent) in the capacity of a Lender may be submitted, and may
only be submitted, if the Agent or such Affiliate notifies the Company
of the terms of the offer or offers contained therein not later than
8:15 a.m. (Chicago time) on the proposed date of Borrowing.
(ii) Each Competitive Bid shall be in substantially
the form of Exhibit E, specifying therein:
(A) the proposed date of Borrowing;
(B) the principal amount of each Bid Loan
for which such Competitive Bid is being made, which principal
amount (x) may be equal to,
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greater than or less than the amount of the Commitment of the
quoting Lender, (y) must be $5,000,000 or a higher integral
multiple of $1,000,000 and (z) may not exceed the principal
amount of Bid Loans for which Competitive Bids were requested;
(C) the rate of interest per annum (which
shall be an integral multiple of 1/100th of 1%) (the "Absolute
Rate") offered for each such Bid Loan; and
(D) the identity of the quoting Lender.
A Competitive Bid may contain up to three separate offers by the
quoting Lender with respect to each Interest Period specified in the
related Invitation for Competitive Bids.
(iii) Any Competitive Bid shall be disregarded if it:
(A) is not substantially in conformity with
Exhibit E or does not specify all of the information
required by subsection (c)(ii) of this Section;
(B) contains qualifying, conditional or
similar language (other than a maximum aggregate principal
amount of Competitive Bids which may be accepted thereunder);
(C) proposes terms other than or in addition
to those set forth in the applicable Invitation for
Competitive Bids; or
(D) arrives after the time set forth in
subsection (c)(i) of this Section.
(d) Promptly on receipt and not later than 9:00 a.m. (Chicago
time) on the proposed date of Borrowing, the Agent will notify the Company of
the terms (i) of any Competitive Bid submitted by a Lender that is in accordance
with subsection 2.6(c) and (ii) of any Competitive Bid that amends, modifies or
is otherwise inconsistent with a previous Competitive Bid submitted by such
Lender with respect to the same Competitive Bid Request. Any such subsequent
Competitive Bid shall be disregarded by the Agent unless such subsequent
Competitive Bid is submitted solely to correct a manifest error in such former
Competitive Bid and only if received within the time set forth in subsection
2.6(c). The Agent's notice to the Company shall specify (1) the aggregate
principal amount of Bid Loans for which offers have been received for each
Interest Period specified in the related Competitive Bid request; and (2) the
respective principal amounts and Absolute Rates so offered. Subject only to the
provisions of Sections 3.2 and 4.2 hereof and the provisions of this subsection
(d), any Competitive Bid shall be
20
irrevocable except with the written consent of the Agent given on the written
instructions of the Company.
(e) Not later than 9:30 a.m. (Chicago time) on the proposed
date of a Bid Borrowing, the Company shall notify the Agent of its acceptance or
non-acceptance of the offers notified to it pursuant to subsection 2.6(d). The
Company shall be under no obligation to accept any offer and may choose to
reject all offers. In the case of acceptance, such notice shall specify the
aggregate principal amount of offers for each Interest Period that is accepted.
The Company may accept any Competitive Bid in whole or in part; provided that:
(i) the aggregate principal amount of each Bid
Borrowing may not exceed the applicable amount set forth in the related
Competitive Bid Request;
(ii) the principal amount of each Bid Borrowing must
be $5,000,000 or a higher integral multiple of $1,000,000;
(iii) acceptance of offers may only be made on the
basis of ascending Absolute Rates, within each Interest Period; and
(iv) the Company may not accept any offer that is
described in subsection 2.6(c)(iii) or that otherwise fails to comply
with the requirements of this Agreement.
(f) If offers are made by two or more Lenders with the same
Absolute Rate for a greater aggregate principal amount than the amount in
respect of which such offers are accepted for the related Interest Period, the
principal amount of Bid Loans in respect of which such offers are accepted shall
be allocated by the Agent among such Lenders as nearly as possible (in such
multiples, not less than $1,000,000, as the Agent may deem appropriate) in
proportion to the aggregate principal amounts of such offers. Determination by
the Agent of the amount of Bid Loans shall be conclusive in the absence of
manifest error.
(g) (i) The Agent will promptly notify each Lender having
submitted a Competitive Bid if its offer has been accepted and, if its
offer has been accepted, of the amount of the Bid Loan or Bid Loans to
be made by it on the date of the Bid Borrowing.
(ii) Each Lender which has received notice pursuant
to subsection 2.6(g)(i) that its Competitive Bid has been accepted
shall make the amounts of such Bid Loans available to the Agent for the
account of the Company at the Agent's Payment Office by 12:00 noon
(Chicago time) on such date of Bid Borrowing, in immediately available
funds.
(iii) Promptly following each Bid Borrowing, the
Agent shall notify each Lender of the ranges of bids submitted and the
highest and lowest Bids accepted for each Interest Period requested by
the Company and the aggregate amount borrowed pursuant to such Bid
Borrowing.
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(h) If, on the proposed date of Borrowing, the Commitments
have not been terminated and all applicable conditions to funding referenced in
Sections 3.2 and 4.2 hereof are satisfied, the Lender or Lenders whose offers
the Company has accepted will fund each Bid Loan so accepted. Nothing in this
Section 2.6 shall be construed as a right of first offer in favor of the Lenders
or to otherwise limit the ability of the Company to request and accept credit
facilities from any Person (including any of the Lenders), provided that no
Event of Default or Unmatured Event of Default would otherwise arise or exist as
a result of the Company executing, delivering or performing under such credit
facilities.
2.7 Termination or Reduction of Commitments.
(a) On each date on which the Aggregate Commitment Amount is
required to be reduced pursuant to Section 7.3, the Aggregate Commitment Amount
shall be reduced by the amount required pursuant to Section 7.3.
(b) The Company may, upon not less than four Business Days'
prior notice to the Agent, terminate the Commitments or permanently reduce the
Aggregate Commitment Amount to an amount which is not less than the aggregate
principal amount of all outstanding Loans; provided that, if the Five-Year
Credit Agreement is still in effect, the Company shall concurrently terminate or
reduce by a proportionate amount, as the case may be, the Five-Year Commitment
Amount. Any reduction pursuant to this subsection (b) shall reduce the Total
Commitment Amount by $10,000,000 or a higher integral multiple of $1,000,000
(provided that if the Five-Year Credit Agreement has been terminated, any
reduction shall be in an amount which results in the Aggregate Commitment Amount
being an integral multiple of $1,000,000).
(c) Any reduction of the Aggregate Commitment Amount shall be
applied to reduce the amount of the Commitment of each Lender according to its
Pro Rata Share. All accrued facility fees to, but not including, the effective
date of any reduction or termination of Commitments shall be paid on the
effective date of such reduction or termination.
2.8 Prepayments.
(a) If, on any date on which the Aggregate Commitment Amount
is required to be reduced pursuant to subsection 2.7(a), the aggregate principal
amount of all outstanding Loans (whether Committed Loans or Bid Loans) would
exceed the Aggregate Commitment Amount after giving effect to such reduction,
then the Company shall make an immediate repayment of outstanding Committed
Loans in a principal amount equal to such excess (rounded upward, if necessary,
to an integral multiple of $1,000,000) or, if less, in the aggregate principal
amount of all outstanding Committed Loans. Any such prepayment shall be applied,
first, to prepay Base Rate Loans, and, second, to prepay Eurodollar Loans (in
such order as the Company shall specify). If after prepayment of all Committed
Loans, the aggregate principal amount of all
22
outstanding Loans would exceed the Aggregate Commitment Amount after giving
effect to the applicable reduction, the Company shall deposit with the Agent, to
be held by the Agent as cash collateral for the Obligations, an amount
sufficient to eliminate such excess, and the Agent shall apply such funds to
repay Bid Loans as they mature or as otherwise provided in Section 2.15.
(b) The Company may, from time to time, upon irrevocable
notice to the Agent not later than 10:30 a.m. (Chicago time) on the date of
prepayment, with respect to prepayments of Base Rate Loans, and one Business Day
prior to the proposed date of prepayment, with respect to Eurodollar Loans,
ratably prepay Committed Loans in whole or in part, in minimum amounts of
$5,000,000 or a higher integral multiple of $1,000,000 (provided that the
Company may make a prepayment of Base Rate Loans in an amount which is not such
an integral multiple if, after giving effect to such prepayment, the outstanding
principal amount of all Base Rate Loans will be an integral multiple of
$1,000,000). Such notice of prepayment shall specify the date and amount of such
prepayment and the Committed Loans to be prepaid. The Agent will promptly notify
each Lender of its receipt of any such notice, and of such Lender's Pro Rata
Share of such prepayment. If such notice is given by the Company, the Company
shall make such prepayment and the payment amount specified in such notice shall
be due and payable on the date specified therein.
(c) Any prepayment of Eurodollar Loans shall include accrued
interest to the date of prepayment on the amount prepaid and any amounts
required pursuant to Section 3.4.
(d) Bid Loans may not be voluntarily prepaid.
2.9 Repayment. The Company shall repay each Bid Loan on the last day of
each Interest Period therefor. The Company shall repay all Loans (including any
outstanding Bid Loan) on the Termination Date.
2.10 Interest. (a) Each Committed Loan shall bear interest on the
outstanding principal amount thereof from the applicable Borrowing Date at a
rate per annum equal to (i) in the case of a Eurodollar Loan, the Eurodollar
Rate for each applicable Interest Period plus the Applicable Margin as in effect
from time to time and (ii) in the case of a Base Rate Committed Loan, the Base
Rate as in effect from time to time. Each Bid Loan shall bear interest on the
outstanding principal amount thereof from the relevant Borrowing Date at a rate
per annum equal to the Absolute Rate.
(b) Interest on each Loan shall be paid in arrears on each
Interest Payment Date. Interest also shall be paid on each Eurodollar Loan on
the date of any conversion of such Eurodollar Loan under Section 2.4 and any
prepayment of such Eurodollar Loan under Section 2.8, in each case for the
portion of the Loan so prepaid.
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(c) The Company shall pay to each Lender, at any time such
Lender is required under regulations of the FRB to maintain reserves with
respect to liabilities or assets consisting of or including Eurocurrency funds
or deposits (currently known as "Eurocurrency liabilities"), additional interest
on the unpaid principal amount of each Eurodollar Loan equal to the actual cost
of such reserves allocated to such Eurodollar Loan by such Lender (as determined
by such Lender in good faith, which determination shall be conclusive), payable
on each date on which interest is payable on such Eurodollar Loan, provided that
the Company shall have received at least 10 days' prior written notice (with a
copy to the Agent) of the amount of such additional interest from such Lender.
If a Lender fails to give notice 10 days prior to the relevant Interest Payment
Date, such additional interest shall be payable 10 days after receipt of such
notice.
(d) Notwithstanding the foregoing provisions of this Section,
upon notice to the Company from the Agent (acting at the request or with the
consent of the Required Lenders) during the existence of an Event of Default,
and for so long as such Event of Default continues, the Company shall pay
interest (after as well as before entry of judgment thereon to the extent
permitted by law) on the principal amount of all outstanding Loans and, to the
extent permitted by applicable law, on any other amount payable hereunder, at a
rate per annum equal to the rate otherwise applicable thereto pursuant to the
terms hereof (or, if no such rate is specified, the Base Rate) plus 2%. All such
interest shall be payable on demand.
(e) Anything herein to the contrary notwithstanding, the
obligations of the Company to any Lender hereunder shall be subject to the
limitation that payments of interest shall not be required for any period for
which interest is computed hereunder, to the extent (but only to the extent)
that contracting for or receiving such payment by such Lender would be contrary
to the provisions of any law applicable to such Lender limiting the highest rate
of interest that may be lawfully contracted for, charged or received by such
Lender, and in such event the Company shall pay such Lender interest at the
highest rate permitted by applicable law.
2.11 Fees.
(a) Arrangement and Agency Fees. The Company shall pay
arrangement fees to the Arranger for the Arranger's own account, and shall pay
an agency fee to the Agent for the Agent's own account, as agreed among the
Company, the Arranger and the Agent from time to time.
(b) Facility Fees. The Company shall pay to the Agent for the
account of each Lender a facility fee on the amount of such Lender's Commitment
(and, if any Loans remain outstanding after termination of such Commitment, on
the aggregate principal amount of such Lender's Loans) at the Facility Fee Rate.
Such facility fee shall accrue from the Closing Date to the Termination Date and
shall be due and payable quarterly in arrears on the last Business Day of each
calendar quarter through the Termination Date (or, if later, the date on which
all Loans are paid in full), with the final payment to be made on the
Termination Date (or such later date);
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provided that, in connection with any reduction or termination of Commitments
under Section 2.7, the accrued facility fee calculated for the period ending on
such date shall also be paid on the date of such reduction or termination, with
(in the case of a reduction) the following quarterly payment being calculated on
the basis of the period from such reduction date to the quarterly payment date.
The facility fees shall accrue at all times after the Closing Date, including at
any time during which one or more conditions in Section 4 are not met.
(c) Utilization Fees. The Company shall pay to the Agent for
the account of each Lender a utilization fee on such Lender's Pro Rata Share of
the aggregate principal amount of all outstanding Committed Loans for any day on
which such aggregate principal amount plus the aggregate principal amount of all
outstanding "Committed Loans" under and as defined in the Five-Year Credit
Agreement exceeds 50% of the Total Commitment Amount, computed at a rate per
annum equal to 0.05%, or, at any time the Leverage Ratio is greater than 0.55 to
1, 0.075%. Such utilization fee shall accrue on each applicable day from the
Closing Date to the Termination Date and shall be due and payable quarterly in
arrears on the last Business Day of each calendar quarter through the
Termination Date, with the final payment to be made on the Termination Date.
2.12 Computation of Fees and Interest. (a) All computations of interest
for Base Rate Loans when the Base Rate is determined by BofA's "reference rate"
shall be made on the basis of a year of 365 or 366 days, as the case may be, and
actual days elapsed. All other computations of interest and fees shall be made
on the basis of a 360-day year and actual days elapsed. Interest and fees shall
accrue during each period during which such interest or such fees are computed
from the first day thereof to the last day thereof.
(b) Each determination of an interest rate by the Agent shall
be conclusive and binding on the Company and the Lenders in the absence of
manifest error. The Agent will, at the request of the Company or any Lender,
deliver to the Company or such Lender, as the case may be, a statement showing
the quotations used by the Agent in determining any interest rate and the
resulting interest rate.
2.13 Payments by the Company. (a) All payments to be made by the
Company shall be made without set-off, recoupment or counterclaim. Except as
otherwise expressly provided herein (including Section 10.11), all payments by
the Company shall be made to the Agent for the account of the Lenders at the
Agent's Payment Office, and shall be made in Dollars and in immediately
available funds, no later than 12:00 noon (Chicago time) on the date specified
herein. The Agent will promptly distribute to each Lender its Pro Rata Share (or
other applicable share as expressly provided herein) of such payment in like
funds as received. Any payment received by the Agent later than 12:00 noon
(Chicago time) shall be deemed to have been received on the following Business
Day and any applicable interest or fee shall continue to accrue.
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(b) Whenever any payment is due on a day other than a Business
Day, such payment shall be made on the following Business Day (unless, in the
case of a Eurodollar Loan, the following Business Day is in another calendar
month, in which case such payment shall be made on the preceding Business Day),
and such extension of time shall in such case be included in the computation of
interest or fees, as the case may be.
(c Unless the Agent receives notice from the Company prior to
the date on which any payment is due to the Lenders that the Company will not
make such payment in full as and when required, the Agent may assume that the
Company has made such payment in full to the Agent on such date in immediately
available funds and the Agent may (but shall not be so required), in reliance
upon such assumption, distribute to each Lender on such due date an amount equal
to the amount then due such Lender. If and to the extent the Company has not
made such payment in full to the Agent, each Lender shall repay to the Agent on
demand such amount distributed to such Lender, together with interest thereon at
the Federal Funds Rate for each day from the date such amount is distributed to
such Lender until the date repaid.
2.14 Payments by the Lenders to the Agent. (a) Unless the Agent
receives notice from a Lender on or prior to the Closing Date or, with respect
to any Committed Borrowing after the Closing Date, at least one Business Day
prior to the date of a Borrowing of Eurodollar Loans and prior to 11:30 a.m.
(Chicago time) on the date of a Borrowing of Base Rate Loans that such Lender
will not make available as and when required hereunder to the Agent for the
account of the Company the amount of such Lender's Pro Rata Share of such
Committed Borrowing, the Agent may assume that such Lender has made such amount
available to the Agent in immediately available funds on the Borrowing Date and
the Agent may (but shall not be so required), in reliance upon such assumption,
make available to the Company on such date a corresponding amount. If and to the
extent any Lender shall not have made its full amount available to the Agent in
immediately available funds and the Agent in such circumstances has made
available to the Company such amount, such Lender shall on the Business Day
following such Borrowing Date make such amount available to the Agent, together
with interest at the Federal Funds Rate for each day during such period. A
notice of the Agent submitted to any Lender with respect to amounts owing under
this subsection (a) shall be conclusive, absent manifest error. If such amount
is so made available, such payment to the Agent shall constitute such Lender's
Committed Loan on the date of Borrowing for all purposes of this Agreement. If
such amount is not made available to the Agent on the Business Day following the
Borrowing Date, the Agent will notify the Company of such failure to fund and,
upon demand by the Agent, the Company shall pay such amount to the Agent for the
Agent's account, together with interest thereon for each day elapsed since the
date of such Borrowing, at a rate per annum equal to the interest rate
applicable at the time to the Committed Loans comprising such Committed
Borrowing.
(b The failure of any Lender to make any Loan on any Borrowing
Date shall not relieve any other Lender of any obligation hereunder to make a
Loan on such Borrowing
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Date, but no Lender shall be responsible for the failure of any other Lender to
make the Loan to be made by such other Lender on any Borrowing Date.
2.15 Sharing of Payments, Etc. If, other than as expressly provided
elsewhere herein, any Lender shall obtain on account of the Committed Loans made
by it any payment (whether voluntary, involuntary, through the exercise of any
right of set-off, or otherwise) in excess of its Pro Rata Share (or other share
contemplated hereunder), such Lender shall immediately (a) notify the Agent of
such fact and (b) purchase from the other Lenders such participations in the
Committed Loans made by them as shall be necessary to cause such purchasing
Lender to share the excess payment pro rata with each of them; provided that if
all or any portion of such excess payment is thereafter recovered from the
purchasing Lender, such purchase shall to that extent be rescinded and each
other Lender shall repay to the purchasing Lender the purchase price paid
therefor, together with an amount equal to such paying Lender's ratable share
(according to the proportion of (i) the amount of such paying Lender's required
repayment to (ii) the total amount so recovered from the purchasing Lender) of
any interest or other amount paid or payable by the purchasing Lender in respect
of the total amount so recovered. The Company agrees that any Lender so
purchasing a participation from another Lender may, to the fullest extent
permitted by law, exercise all its rights of payment (including the right of
set-off, but subject to Section 10.10) with respect to such participation as
fully as if such Lender were the direct creditor of the Company in the amount of
such participation. The Agent will keep records (which shall be conclusive and
binding in the absence of manifest error) of participations purchased under this
Section and will in each case notify the Lenders following any such purchases or
repayments.
2.16 Limitation on Interest Periods. After giving effect to any
Borrowing, and any conversion or continuation of Committed Loans, there may not
be more than eight different Interest Periods in effect for all Loans.
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2.17 Optional Increase in Commitments. The Company may at any time (but
not more than once in any calendar year), by means of a letter to the Agent
substantially in the form of Exhibit J, request that the Aggregate Commitment
Amount be increased by (a) increasing the amount of the Commitment of one or
more Lenders which have agreed to such increase and/or (b) adding an Eligible
Assignee as a party hereto with a Commitment in an amount agreed to by such
Eligible Assignee; provided that (i) no Eligible Assignee shall be added as a
party hereto unless (A) such Eligible Assignee shall have been approved in
writing by the Agent (which approval shall not be unreasonably withheld) and (B)
if the Five-Year Credit Agreement is still in effect, such Eligible Assignee
shall concurrently become a party to the Five-Year Credit Agreement with a "Pro
Rata Share" under and as defined thereunder equal to its Pro Rata Share
hereunder, (ii) in no event shall the Aggregate Commitment Amount exceed
$114,285,714.29 without the written consent of all Lenders, (iii) in no event
shall the Total Commitment Amount exceed $400,000,000, (iv) at the time of such
increase, and after giving effect thereto, no Event of Default or Unmatured
Event of Default shall exist and (v) both before and after giving effect to such
increase, the Company shall be in pro forma compliance with all financial
covenants set forth in Section 7. Any increase in the Aggregate Commitment
Amount pursuant to this Section 2.17 shall become effective three Business Days
after the date on which the Agent has received and accepted the applicable
increase letter in the form of Annex 1 to Exhibit J (in the case of an increase
in the amount of the Commitment of an existing Lender) or assumption letter in
the form of Annex 2 to Exhibit J (in the case of the addition of an Eligible
Assignee as a new Lender) or on such other date as is agreed among the Company,
the Agent and the increasing or new Lender. The Agent shall promptly notify the
Company and the Lenders of any increase in the amount of the Aggregate
Commitment Amount pursuant to this Section 2.17 and of the amount of the
Commitment and Pro Rata Share of each Lender after giving effect thereto. The
Company acknowledges that, in order to maintain Committed Loans in accordance
with each Lender's Pro Rata Share, a reallocation of the Commitments as a result
of a non-pro-rata increase in the Aggregate Commitment Amount may require
prepayment of all or portions of certain Committed Loans on the date of such
increase (and any such prepayment shall be subject to the provisions of Section
3.4).
2.18 Extension Request. (a) The Company may request an extension of the
scheduled Termination Date by submitting a request for an extension to the Agent
(an "Extension Request") no more than 60 days prior to the then-scheduled
Termination Date. An Extension Request must specify the new scheduled
Termination Date requested by the Company and the date (which must be at least
30 Days after the Extension Request is delivered to the Agent) as of which the
Lenders must respond to the Extension Request (the "Response Date"). The new
scheduled Termination Date shall be no more than 364 days after the scheduled
Termination Date in effect at the time the Extension Request is received.
Promptly upon receipt of an Extension Request, the Agent shall notify each
Lender of the contents thereof and shall request each Lender to approve the
Extension Request. Each Lender approving the Extension Request shall deliver its
written consent no later than the Response Date. If the consent of each of the
Lenders is received by the Agent, the new scheduled Termination Date specified
in the Extension Request shall become effective on the
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existing Termination Date. No Lender shall be under any obligation to approve
any such Extension Request.
(b) If less than all Lenders consent to an Extension Request,
the Company shall have the right, for a period of 15 days after the Response
Date (provided that such period shall not extend beyond the scheduled
Termination Date), to replace any Lender which did not consent to such request
(a "Non-Consenting Lender") as a party to this Agreement pursuant to the
provisions of Section 3.7; provided that any Non-Consenting Lender shall
concurrently be replaced as a party to the Five-Year Credit Agreement. If all
Non-Consenting Lenders are replaced by Lenders which are willing to consent to
the Extension Request on or before the end of the period described in the
preceding sentence, the scheduled Termination Date specified in the Extension
Request shall become effective on the existing Termination Date.
(c) The Agent shall promptly notify the Company and each
Lender of any extension of the scheduled Termination Date pursuant to subsection
(a) or (b) above.
SECTION 3 TAXES, YIELD PROTECTION AND ILLEGALITY
3.1 Taxes. (a) Any and all payments by the Company to each Lender and
the Agent under this Agreement and any Note shall be made free and clear of, and
without deduction or withholding for, any Taxes. In addition, the Company shall
pay all Other Taxes.
(b If the Company shall be required by law to deduct or
withhold any Taxes or Other Taxes from or in respect of any sum payable
hereunder to any Lender or the Agent, then:
(i the sum payable shall be increased as necessary so
that, after making all required deductions and withholdings (including
deductions and withholdings applicable to additional sums payable under
this Section), such Lender or the Agent, as the case may be, receives
and retains an amount equal to the sum it would have received and
retained had no such deductions or withholdings been made;
(ii the Company shall make such deductions and
withholdings;
(iii the Company shall pay the full amount deducted
or withheld to the relevant taxing authority or other authority in
accordance with applicable law; and
(iv the Company shall also pay to the Agent for the
account of any applicable Lender or the Agent, at the time interest is
paid, all additional amounts which such Lender or such Agent specifies
as necessary to preserve the after-tax yield such Lender or the Agent
would have received if such Taxes or Other Taxes had not been imposed.
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(c The Company agrees to indemnify and hold harmless each
Lender and the Agent for the full amount of Taxes or Other Taxes in the amount
that such Lender or the Agent specifies as necessary to preserve the after-tax
yield such Lender would have received if such Taxes or Other Taxes had not been
imposed, and any liability (including penalties, interest, additions to tax and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted. Payment under this
indemnification shall be made within 30 days after the date such Lender or the
Agent makes written demand therefor. The Company will not be obligated to
indemnify any Lender for any Other Taxes which are to be paid as a result of
such Lender's gross negligence or willful misconduct in failing to timely pay
such amounts when due.
(d Within 10 days after the date of any payment by the Company
of Taxes or Other Taxes, the Company shall furnish to each Lender and the Agent
the original or a certified copy of a receipt evidencing payment thereof, or
other evidence of payment satisfactory to such Lender or the Agent.
(e If the Company is required to pay any amount to any Lender
or the Agent pursuant to subsection (b) or (c) of this Section, then such Lender
or the Agent shall use reasonable efforts (consistent with legal and regulatory
restrictions) to change the jurisdiction of its Lending Office or other relevant
office so as to eliminate any such additional payment by the Company which may
thereafter accrue, if such change in the judgment of such Lender or the Agent is
not otherwise disadvantageous to such Lender or the Agent.
3.2 Illegality. (a) If any Lender determines that the introduction of
any Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, has made it
unlawful, or that any central bank or other Governmental Authority has asserted
that it is unlawful, for any Lender or its applicable Lending Office to make
Eurodollar Loans, then, on notice thereof by the Lender to the Company through
the Agent, any obligation of that Lender to make Eurodollar Loans shall be
suspended until the circumstances giving rise to such determination no longer
exist.
(b If a Lender determines that it is unlawful to maintain any
Eurodollar Loan, the Company shall, upon its receipt of notice of such fact and
demand from such Lender (with a copy to the Agent), prepay in full such
Eurodollar Loan, together with interest accrued thereon and amounts required
under Section 3.4, either on the last day of the Interest Period thereof or, if
earlier, on the date on which such Lender may no longer lawfully continue to
maintain such Eurodollar Loan. If the Company is required to so prepay any
Eurodollar Loan, then concurrently with such prepayment, the Company shall
borrow from the Affected Lender, in the amount of such repayment, a Base Rate
Loan.
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(c If the obligation of any Lender to make or maintain
Eurodollar Loans has been so terminated or suspended, all Loans which would
otherwise be made by such Lender as Eurodollar Loans shall be instead Base Rate
Loans.
(d Before giving any notice to the Agent or demand upon the
Company under this Section, the Affected Lender shall designate a different
Lending Office with respect to its Eurodollar Loans if such designation will
avoid the need for giving such notice or making such demand and will not, in the
judgment of such Lender, be illegal or otherwise disadvantageous to such Lender.
3.3 Increased Costs and Reduction of Return. (a) If after the date
hereof any Lender determines that, due to either (i) the introduction of or any
change (other than any change by way of imposition of or increase in reserve
requirements included in the calculation of interest pursuant to Section
2.10(c)) in or in the interpretation of any law or regulation or (ii) the
compliance by that Lender with any guideline or request from any central bank or
other Governmental Authority (whether or not having the force of law), there
shall be any increase in the cost to such Lender of agreeing to make or making,
funding or maintaining any Eurodollar Loan, then the Company shall be liable
for, and shall from time to time, upon demand (with a copy of such demand to be
sent to the Agent), pay to the Agent for the account of such Lender, additional
amounts as are sufficient to compensate such Lender for such increased costs.
(b If after the date hereof any Lender shall have determined
that (i) the introduction of any Capital Adequacy Regulation, (ii) any change in
any Capital Adequacy Regulation, (iii) any change in the interpretation or
administration of any Capital Adequacy Regulation by any central bank or other
Governmental Authority charged with the interpretation or administration thereof
or (iv) compliance by the Lender (or its Lending Office) or any Person
controlling the Lender with any Capital Adequacy Regulation, affects or would
affect the amount of capital required or expected to be maintained by the Lender
or any Person controlling the Lender and (taking into consideration such
Lender's or such corporation's policies with respect to capital adequacy and
such Lender's desired return on capital) determines that the amount of such
capital is increased as a consequence of its Commitment, Loans, credits or
obligations under this Agreement, then, upon demand of such Lender to the
Company through the Agent, the Company shall pay to the Lender, from time to
time as specified by the Lender, additional amounts sufficient to compensate the
Lender for such increase.
3.4 Funding Losses. The Company shall reimburse each Lender and hold
each Lender harmless from any loss or expense which such Lender may sustain or
incur as a consequence of:
(a the failure of the Company to make on a timely basis any
payment of principal of any Eurodollar Loan;
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(b the failure of the Company to borrow, continue or convert a
Loan after the Company has given (or is deemed to have given) a Notice of
Borrowing, a Notice of Conversion/Continuation or accepted a Competitive Bid;
(c the failure of the Company to make any prepayment of a
Committed Loan in accordance with any notice delivered under Section 2.8;
(d the prepayment or other payment (including after
acceleration thereof) of a Eurodollar Loan on a day that is not the last day of
the relevant Interest Period; or
(e the automatic conversion under Section 2.4 of any
Eurodollar Loan to a Base Rate Loan on a day that is not the last day of the
relevant Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain any Eurodollar Loan or from fees payable to
terminate the deposits from which such funds were obtained. For purposes of
calculating amounts payable by the Company to the Lenders under this Section and
under subsection 3.3(a), each Eurodollar Loan made by a Lender (and each related
reserve, special deposit or similar requirement) shall be conclusively deemed to
have been funded at Eurodollar Rate for such Eurodollar Loan by a matching
deposit or other borrowing in the eurodollar interbank market for a comparable
amount and for a comparable period, whether or not such Eurodollar Loan is in
fact so funded.
3.5 Inability to Determine Rates. If the Agent determines that for any
reason adequate and reasonable means do not exist for determining the Eurodollar
Rate for any requested Interest Period with respect to a proposed Eurodollar
Loan, or if Lenders having 35% or more of the amount of the Commitments notify
the Agent that the Eurodollar Rate applicable pursuant to subsection 2.10(a) for
any requested Interest Period with respect to a proposed Eurodollar Loan does
not adequately and fairly reflect the cost to such Lenders of funding such Loan,
the Agent will promptly so notify the Company and each Lender. Thereafter, the
obligation of the Lenders to make or maintain Eurodollar Loans hereunder shall
be suspended until the Agent revokes such notice in writing. Upon receipt of
such notice, the Company may revoke any Notice of Borrowing or Notice of
Conversion/Continuation then submitted by it. If the Company does not revoke
such Notice, the Lenders shall make, convert or continue the Committed Loans, as
proposed by the Company, in the amount specified in the applicable notice
submitted by the Company, but such Loans shall be made, converted or continued
as Base Rate Loans instead of Eurodollar Loans.
3.6 Certificates of Lenders. Any Lender claiming reimbursement or
compensation under this Section 3 shall deliver to the Company (with a copy to
the Agent) a certificate setting forth in reasonable detail the amount payable
to the Lender hereunder and such certificate shall be conclusive and binding on
the Company in the absence of manifest error.
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3.7 Substitution of Lenders. Upon the receipt by the Company from any
Lender of a claim for compensation under Section 3.1 or 3.3 or a notice under
Section 3.2, or a Lender declines or fails to respond to an Extension Request
pursuant to subsection 2.18(a) (each Lender making such a claim for compensation
or giving such a notice, or declining or failing to respond to an Extension
Request, an "Affected Lender"), the Company may: (i) request one more of the
other Lenders to acquire and assume all or part of such Affected Lender's Loans
and Commitment; or (ii) designate a replacement bank or other financial
institution (a "Replacement Lender") to acquire and assume all or part of such
Affected Lender's Loans and Commitment. Any such designation of a Replacement
Lender shall be subject to the prior written consent of the Agent (which consent
shall not be unreasonably withheld). Any acquisition and assumption of Loans and
Commitments pursuant to this Section shall be governed by Sections 10.8(a) and
(b) and shall be for a purchase price equal to the outstanding principal amount
of the Loans payable to the Affected Lender plus any accrued but unpaid interest
on such Loans and accrued but unpaid fees in respect of such Lender's Commitment
and/or Loans plus any amount payable under Section 3.4 (assuming for purposes of
calculating such amount that each Eurodollar Loan (or the relevant portion
thereof) sold by such Affected Lender has been prepaid on the date of such
sale).
3.8 Survival. The agreements and obligations of the Company in this
Section 3 shall survive the payment of all other Obligations.
SECTION 4 CONDITIONS PRECEDENT
4.1 Conditions of Initial Loans. The obligation of each Lender to make
its initial Committed Loan, and to receive through the Agent the initial
Competitive Bid Request, is, in addition to the conditions precedent set forth
in Section 4.2, subject to the conditions that the Agent shall have received (i)
evidence that the Amended and Restated Credit Agreement dated as of February 26,
1993 among the Company, various financial institutions and The Chase Manhattan
Bank (formerly Chemical Bank) has been terminated and that all outstanding loans
thereunder have been paid in full and (ii) all of the following, in form and
substance satisfactory to the Agent and each Lender, and in sufficient copies
for each Lender:
(a Notes. A Note for each applicable Lender.
(b Resolutions; Incumbency.
(i Copies of resolutions of the board of directors of
the Company authorizing the transactions contemplated hereby, certified
as of the Closing Date by the Secretary or an Assistant Secretary of
the Company; and
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(ii a certificate of the Secretary or Assistant
Secretary of the Company certifying the names and true signatures of
the officers of the Company authorized to execute and deliver this
Agreement and the Notes.
(c Good Standing Certificate. A copy of a good standing
certificate as of a recent date for the Company from the Secretary of State of
the State of Delaware.
(d Legal Opinions. An opinion of W. David Romoser, Vice
President, General Counsel and Secretary to the Company, substantially in the
form of Exhibit F.
(e Payment of Fees. Evidence of payment by the Company of all
accrued and unpaid fees, costs and expenses in respect hereof to the extent then
due and payable on the Closing Date.
(f Certificate. A certificate signed by a Responsible Officer,
dated as of the Closing Date, stating that:
(i the representations and warranties contained in
Section 5 are true and correct on and as of such date, as though made
on and as of such date;
(ii no Event of Default or Unmatured Event of Default
exists or would result from the initial Borrowing; and
(iii since December 31, 1998, no event or
circumstance has occurred that has resulted or could reasonably be
expected to result in a Material Adverse Effect.
(g Other Documents. Such other approvals, opinions, documents
or materials as the Agent or any Lender may reasonably request.
4.2 Conditions to All Loans. The obligation of each Lender to make any
Committed Loan to be made by it, or any Bid Loan as to which the Company has
accepted the relevant Competitive Bid, is subject to the satisfaction of the
following conditions precedent on the relevant Borrowing Date:
(a Notice. As to any Committed Loan, the Agent shall have
received a Notice of Borrowing.
(b Continuation of Representations and Warranties. The
representations and warranties in Section 5 (other than subsection 5.11(b))
shall be true and correct on and as of such Borrowing Date with the same effect
as if made on and as of such Borrowing Date (except to the extent such
representations and warranties expressly refer to an earlier date, in which case
they shall be true and correct as of such earlier date).
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(c No Existing Default. No Event of Default or Unmatured Event
of Default shall exist or shall result from such Borrowing.
Each Notice of Borrowing and Competitive Bid Request submitted by the Company
hereunder shall constitute a representation and warranty by the Company that, as
of the date of such notice or request and as of the applicable Borrowing Date,
the conditions in this Section 4.2 are satisfied.
SECTION 5 REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Agent and each Lender that:
5.1 Corporate Existence and Power. The Company and each of its
Subsidiaries:
(a is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation;
(b has the power and authority and all governmental licenses,
authorizations, consents and approvals to (i) own its assets, (ii) carry on its
business and (iii) execute, deliver and perform its obligations hereunder and
under the Notes;
(c is duly qualified as a foreign entity and is licensed and
in good standing under the laws of each jurisdiction where its ownership, lease
or operation of property or the conduct of its business requires such
qualification or license; and
(d is in compliance with all Requirements of Law;
except, in each case referred to in clause (a) (with respect to Subsidiaries),
clause (b)(i), clause (b)(ii), clause (c) or clause (d), to the extent that the
failure to do so could not reasonably be expected to have a Material Adverse
Effect.
5.2 Authorization; No Contravention. The execution, delivery and
performance by the Company of this Agreement and each Note have been duly
authorized by all necessary corporate action, and do not and will not:
(a contravene the terms of any of the Company's Organization
Documents;
(b conflict with or result in any breach or contravention of,
or the creation of any Lien under, any document evidencing any Contractual
Obligation to which the Company is a
35
party or any order, injunction, writ or decree of any Governmental Authority to
which the Company or its property is subject; or
(c violate any Requirement of Law.
5.3 Governmental Authorization. No approval, consent, exemption,
authorization or other action by, or notice to, or filing with, any Governmental
Authority is necessary or required in connection with the execution, delivery or
performance by, or enforcement against, the Company of this Agreement or any
Note.
5.4 Binding Effect. This Agreement has been, and upon execution and
delivery thereof by the Company each Note will be, duly executed and delivered
by the Company. This Agreement constitutes, and, upon the execution and delivery
thereof by the Company each Note will constitute, a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability.
5.5 Litigation. Except as specifically disclosed in Schedule 5.5, there
are no actions, suits, proceedings, claims or disputes pending or, to the
knowledge of the Company, threatened or contemplated, at law, in equity, in
arbitration or before any Governmental Authority, against the Company or its
Subsidiaries or any of their respective properties which:
(a purport to affect or pertain to this Agreement or any of
the transactions contemplated hereby; or
(b would reasonably be expected to have a Material Adverse
Effect.
No injunction, writ, temporary restraining order or other order of any nature
has been issued by any court or other Governmental Authority purporting to
enjoin or restrain the execution, delivery or performance of this Agreement or
directing that the transactions provided for herein not be consummated as herein
provided.
5.6 No Default. No Event of Default or Unmatured Event of Default
exists or would result from the incurring of any Obligations by the Company. As
of the Closing Date, neither the Company nor any Subsidiary is in default under
or with respect to any Contractual Obligation in any respect which, individually
or together with all other such defaults, could reasonably be expected to have a
Material Adverse Effect or that would, if such default had occurred after the
Closing Date, create an Event of Default under subsection 8.1(e).
5.7 ERISA Compliance. Except as specifically disclosed in
Schedule 5.7:
36
(a) Each Plan is in compliance in all material respects with
the applicable provisions of ERISA, the Code and other Federal or state law.
Each Plan which is intended to qualify under Section 401(a) of the Code has
received a favorable determination letter from the IRS and to the best knowledge
of the Company, nothing has occurred which would cause the loss of such
qualification. The Company and each ERISA Affiliate has made all required
contributions to any Plan subject to Section 412 of the Code, and no application
for a funding waiver or an extension of any amortization period pursuant to
Section 412 of the Code has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of Company,
threatened claims, actions or lawsuits, or actions by any Governmental
Authority, with respect to any Plan which has resulted or could reasonably be
expected to result in a Material Adverse Effect. There has been no prohibited
transaction or violation of the fiduciary responsibility rules with respect to
any Plan which has resulted or could reasonably be expected to result in a
Material Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected
to occur; (ii) no contribution failure has occurred with respect to a Pension
Plan sufficient to give rise to a Lien under Section 302(f) of ERISA; (iii) no
Pension Plan has any Unfunded Pension Liability in excess of $10,000,000; (iv)
neither the Company nor any ERISA Affiliate has incurred, or reasonably expects
to incur, any liability under Title IV of ERISA with respect to any Pension Plan
(other than premiums due and not delinquent under Section 4007 of ERISA); (v)
neither the Company nor any ERISA Affiliate has incurred, or reasonably expects
to incur, any liability (and no event has occurred which, with the giving of
notice under Section 4219 of ERISA, would result in such liability) under
Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (vi)
neither the Company nor any ERISA Affiliate has engaged in a transaction that
could be subject to Section 4069 or 4212(c) of ERISA.
5.8 Use of Proceeds; Margin Regulations. The proceeds of the Loans are
to be used solely for the purposes set forth in and permitted by Section 6.10
and Section 7.6. Neither the Company nor any Subsidiary is generally engaged in
the business of purchasing or selling Margin Stock or extending credit for the
purpose of purchasing or carrying Margin Stock. Margin Stock constitutes less
than 25% of the consolidated assets of the Company and its Subsidiaries which
are subject to any limitation on sale, pledge or other disposition hereunder.
5.9 Title to Properties. The Company and each Subsidiary have good
record and marketable title in fee simple to, or valid leasehold interests in,
all real property necessary or used in the ordinary conduct of their respective
businesses, except for such defects in title as could not, individually or in
the aggregate, have a Material Adverse Effect. The Company and its Subsidiaries
have good title to all their other respective material properties and assets. As
of each of the Effective Date and the Closing Date, the property of the Company
and its Subsidiaries is subject to no Liens other than Liens permitted by
Section 7.1.
37
5.10 Taxes. The Company and its Subsidiaries have filed all Federal and
other material tax returns and reports required to be filed, and have paid all
Federal and other material taxes, assessments, fees and other governmental
charges levied or imposed upon them or their properties, income or assets
otherwise due and payable, except those which are being contested in good faith
by appropriate proceedings and for which adequate reserves have been provided in
accordance with GAAP. There is no proposed tax assessment against the Company or
any Subsidiary that would, if made, have a Material Adverse Effect.
5.11 Financial Condition. (a) The audited consolidated financial
statements of the Company and its Subsidiaries dated December 31, 1998 and the
unaudited consolidated financial statements of the Company and its Subsidiaries
dated March 31, 1999 and the related consolidated statements of income or
operations, stockholders' equity and cash flows for the fiscal periods ended on
such dates:
(i were prepared in accordance with GAAP consistently
applied throughout the periods covered thereby, except as otherwise
expressly noted therein;
(ii fairly present the financial condition of the
Company and its Subsidiaries as of the dates thereof and results of
operations for the periods covered thereby; and
(iii except as specifically disclosed in Schedule
5.11, show all material indebtedness and other liabilities, direct or
contingent, of the Company and its consolidated Subsidiaries as of the
dates thereof.
(b Since December 31, 1998, there has been no Material Adverse
Effect.
5.12 Environmental Matters. Except as disclosed on Schedule 5.12, to
the best of the Company's knowledge, all existing Environmental Laws and
existing Environmental Claims on its business, operations and properties, could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
5.13 Regulated Entities. Neither the Company nor any Subsidiary is an
"Investment Company" within the meaning of the Investment Company Act of 1940.
Neither the Company nor any Subsidiary is subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, any state public
utilities code, or any other Federal or state statute or regulation limiting its
ability to incur Debt.
5.14 No Burdensome Restrictions. Neither the Company nor any Subsidiary
is a party to or bound by any Contractual Obligation, or subject to any
restriction in any Organization
38
Document or any Requirement of Law, which could reasonably be expected to have a
Material Adverse Effect.
5.15 Subsidiaries. As of the Closing Date, the Company has no
Subsidiaries other than those listed on Schedule 5.15.
5.16 Insurance. The properties of the Company and its Subsidiaries are
insured either by adequately reserved self-insurance or with financially sound
and reputable insurance companies, in such amounts, with such deductibles and
covering such risks as are customarily carried by companies engaged in similar
businesses and owning similar properties in localities where the Company or such
Subsidiary operates.
5.17 Full Disclosure. None of the representations or warranties made by
the Company in this Agreement as of the date such representations and warranties
are made or deemed made, and none of the statements contained in any exhibit,
report, statement or certificate furnished by or on behalf of the Company in
connection with this Agreement (including the offering and disclosure materials
delivered by or on behalf of the Company to the Lenders prior to the Closing
Date), contains any untrue statement of a material fact or omits any material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they are made, not misleading
as of the time when made or delivered.
5.18 Year 2000 Problem. The Company and its Subsidiaries (a) have
reviewed the areas within their business and operations which could be adversely
affected by, and have developed a program to address on a timely basis, the Year
2000 Problem and (b) have made appropriate inquiries as to the effect the Year
2000 Problem will have on their material suppliers and customers. Based on such
review, program and inquiries, the Company reasonably believes that the Year
2000 Problem will not have a Material Adverse Effect.
SECTION 6 AFFIRMATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder, or any Loan
or other Obligation shall remain unpaid or unsatisfied, unless the Required
Lenders waive compliance in writing:
6.1 Financial Statements. The Company shall deliver to the Agent and
each Lender, in form and detail reasonably satisfactory to the Agent and the
Required Lenders:
(a As soon as available, but not later than 90 days after the
end of each fiscal year, a copy of the audited consolidated balance sheet of the
Company and its Subsidiaries as at the end of such year and the related
consolidated statements of income or operations, stockholders' equity and cash
flows for such year, setting forth in each case in comparative form
39
the figures for the previous fiscal year, and accompanied by the opinion of
Ernst & Young or another nationally-recognized independent public accounting
firm ("Independent Auditor") which report shall (x) state that such consolidated
financial statements present fairly the financial position for the periods
indicated in conformity with GAAP applied on a basis consistent with prior years
and (y) not be qualified or limited because of a restricted or limited
examination by the Independent Auditor of any material portion of the Company's
or any Subsidiary's records.
(b As soon as available, but not later than 45 days after the
end of each of the first three fiscal quarters of each fiscal year, a copy of
the unaudited consolidated balance sheet of the Company and its Subsidiaries as
of the end of such quarter and the related consolidated statements of income,
stockholders' equity and cash flows for such quarter and for the period
commencing on the first day of the then-current fiscal year and ending on the
last day of such quarter, certified by a Responsible Officer as fairly
presenting, in accordance with GAAP (subject to the absence of footnotes and to
ordinary year-end audit adjustments), the financial position and the results of
operations of the Company and its Subsidiaries.
6.2 Certificates; Other Information. The Company shall furnish to the
Agent and each Lender:
(a concurrently with the delivery of the financial statements
referred to in subsection 6.1(a) and each set of quarterly statements referred
to in subsection 6.1(b), a Compliance Certificate executed by a Responsible
Officer;
(b promptly, copies of all registration statements (other than
the exhibits thereto and any registration statements on Form S-8 or its
equivalent) and regular, periodic or special reports (including Forms 10K, 10Q
and 8K) that the Company or any Subsidiary may make to, or file with, the SEC;
(c promptly, such information or documentation as the Agent,
at the request of any Lender, may request from time to time regarding the
efforts of the Company and its Subsidiaries to address the Year 2000 Problem;
and
(d promptly, such additional information regarding the
business, financial or corporate affairs of the Company or any Subsidiary as the
Agent, at the request of any Lender, may from time to time reasonably request.
6.3 Notices. The Company shall promptly notify the Agent and each
Lender promptly after a Responsible Officer obtains knowledge of:
(a the occurrence of any Event of Default or Unmatured Event
of Default;
40
(b any of the following matters that has resulted or may
reasonably be expected to result in a Material Adverse Effect (i) any breach or
non-performance of, or any default under, a Contractual Obligation of the
Company or any Subsidiary, (ii) any dispute, litigation, investigation,
proceeding or suspension between the Company or any Subsidiary and any
Governmental Authority, (iii) the assertion of any Environmental Claim or (iv)
the commencement of, or any material development in, any litigation or
proceeding affecting the Company or any Subsidiary;
(c the occurrence of any of the following events affecting the
Company or any ERISA Affiliate:
(i) an ERISA Event;
(ii) a contribution failure with respect to a Pension
Plan sufficient to give rise to a Lien under Section 302(f) of ERISA;
(iii) a material increase in the Unfunded Pension
Liability of any Pension Plan;
(iv) the adoption of, or the commencement of
contributions to, any Plan subject to Section 412 of the Code by the
Company or any ERISA Affiliate; or
(v) the adoption of any amendment to a Plan subject
to Section 412 of the Code, if such amendment results in a material
increase in contributions or Unfunded Pension Liability; and
(d any material change in accounting policies or financial
reporting practices by the Company or any of its consolidated Subsidiaries.
Each notice under this Section shall be accompanied by a
written statement by a Responsible Officer setting forth details of the
occurrence referred to therein, and stating what action the Company or any
affected Subsidiary proposes to take with respect thereto and at what time. Each
notice under subsection 6.3(a) shall describe with particularity all provisions
of this Agreement that have been breached or violated.
6.4 Preservation of Corporate Existence, Etc. Except as otherwise
expressly permitted under this Agreement, the Company shall, and shall cause
each Subsidiary to:
(a preserve and maintain in full force and effect its
corporate existence and good standing under the laws of its jurisdiction of
incorporation;
(b preserve and maintain in full force and effect all
governmental rights, privileges, qualifications, permits, licenses and
franchises necessary or desirable in the normal
41
conduct of its business except in connection with transactions permitted by
Section 7.3 and sales of assets permitted by Section 7.2;
(c use reasonable efforts, in the ordinary course of business,
to preserve its business organization and goodwill; and
(d preserve or renew all of its registered patents,
trademarks, trade names and service marks; unless (with respect to any
Subsidiary in the case of clause (a)) in the good faith judgment of the Company,
the failure to do any of the acts specified above could not reasonably be
expected to have a Material Adverse Effect.
6.5 Insurance. The Company shall, and shall cause each Subsidiary to,
maintain with financially sound and reputable insurers, insurance with respect
to its properties and business against loss or damage of the kinds customarily
insured against by Persons engaged in the same or similar business, of such
types and in such amounts as are customarily carried under similar circumstances
by such other Persons; provided that the Company and its Subsidiaries may remain
self-insured for such matters and in such amounts as the Company and its
Subsidiaries have been customarily self-insured.
6.6 Compliance with Laws. The Company shall, and shall cause each
Subsidiary to, comply in all material respects with all Requirements of Law
(including any Environmental Law) of any Governmental Authority having
jurisdiction over it or its business.
6.7 Compliance with ERISA. The Company shall, and shall cause each of
its ERISA Affiliates to: (a) maintain each Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code and other Federal or
state law; (b) cause each Plan which is qualified under Section 401(a) of the
Code to maintain such qualification; and (c) make all required contributions to
any Plan subject to Section 412 of the Code.
6.8 Inspection of Property and Books and Records. The Company shall,
and shall cause each Subsidiary to, maintain proper books of record and account,
in which full, true and correct entries sufficient to permit the preparation of
financial statements in conformity with GAAP shall be made of all financial
transactions and matters involving the assets and business of the Company and
such Subsidiary. The Company shall, and shall cause each Subsidiary to, permit
representatives and independent contractors of the Agent or any Lender to visit
and inspect any of their respective properties, to examine their respective
corporate, financial and operating records, and make copies thereof or abstracts
therefrom, and to discuss their respective affairs, finances and accounts with
their respective directors, officers and independent public accountants, during
normal business hours and at reasonable intervals upon reasonable advance
notice; provided that when an Event of Default exists, no such notice shall be
required. After the occurrence and
42
during the continuance of an Event of Default, any such inspection shall be at
the Company's expense.
6.9 Payment of Taxes. The Company shall, and shall cause each
Subsidiary to, pay when due all tax liabilities, assessments and governmental
charges upon it or its properties, unless the same are being contested in good
faith by appropriate proceedings and adequate reserves in accordance with GAAP
are being maintained with respect thereto.
6.10 Use of Proceeds. The Company shall use the proceeds of the Loans
for working capital and other general corporate purposes (including acquisitions
and repurchases of the Company's stock) not in contravention of any Requirement
of Law.
6.11 Availability. The Company shall maintain at all times unused
availability hereunder and under the Company's other unsecured committed credit
facilities (including the Five-Year Credit Agreement) in an amount which is not
less than the amount of all outstanding commercial paper issued by the Company.
SECTION 7 NEGATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder, or any Loan
or other Obligation shall remain unpaid or unsatisfied, unless the Required
Lenders waive compliance in writing:
7.1 Limitation on Liens. The Company shall not, and shall not suffer or
permit any Subsidiary to, directly or indirectly, make, create, incur, assume or
suffer to exist any Lien upon or with respect to any part of its property,
whether now owned or hereafter acquired, other than the following:
(a any Lien existing on property of the Company or any
Subsidiary on the Effective Date and set forth in Schedule 7.1 securing Debt
outstanding on such date, and any extension, renewal or replacement of any such
Lien so long as the principal amount secured thereby is not increased and the
scope of the property subject to such Lien is not extended;
(b) Liens for taxes, fees, assessments or other governmental
charges which are not delinquent or remain payable without penalty, or to the
extent that non-payment thereof is permitted by Section 6.9, provided that no
notice of lien has been filed or recorded under the Code or any other
Requirement of Law;
(c) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the ordinary course
of business which are not delinquent or remain payable without penalty or which
are being contested in good faith and by
43
appropriate proceedings, which proceedings have the effect of preventing the
forfeiture or sale of the property subject thereto;
(d) Liens (other than any Lien imposed by ERISA) consisting of
pledges or deposits required in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other social security
legislation;
(e) Liens on the property of the Company or any Subsidiary
securing (i) the non-delinquent performance of bids, leases or statutory
obligations, (ii) surety bonds (excluding appeal bonds and other bonds posted in
connection with court proceedings or judgments) and (iii) other non-delinquent
obligations of a like nature, in each case incurred in the ordinary course of
business; provided all such Liens in the aggregate would not (even if enforced)
cause a Material Adverse Effect;
(f) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, individually or
in the aggregate, do not materially detract from the value of the property
subject thereto or interfere with the ordinary conduct of the businesses of the
Company and its Subsidiaries;
(g) Liens securing obligations in respect of Capital Leases on
the assets subject to such Capital Leases;
(h) Liens arising solely by virtue of any statutory or common
law provision relating to banker's liens, rights of set-off or similar rights
and remedies as to deposit accounts or other funds maintained with a creditor
depository institution; provided that (i) such deposit account is not a
dedicated cash collateral account and is not subject to restrictions against
access by the Company or the applicable Subsidiary in excess of those set forth
by regulations promulgated by the FRB and (ii) such deposit account is not
intended by the Company or any Subsidiary to provide collateral to the
depository institution;
(i) Liens arising in connection with Securitization
Transactions; provided that the aggregate investment or claim held at any time
by all purchasers, assignees or other transferees of (or of interests in)
receivables and other rights to payment in all Securitization Transactions shall
not exceed $150,000,000; and
(j) any Lien not otherwise permitted by the foregoing clauses
of this Section; provided that the aggregate amount of all obligations of the
Company and its Subsidiaries secured by all Liens permitted by this clause (j)
does not exceed 15% of Consolidated Net Worth.
7.2 Consolidations and Mergers. The Company shall not, and shall not
permit any Subsidiary to, be a party to any merger or consolidation, except for
any merger or consolidation of or by any Wholly-Owned Subsidiary into the
Company or into or with any other Wholly-
44
Owned Subsidiary; provided that (a) the Company may merge with another Person if
(i) the Company is the acquiring and surviving corporation, (ii) the holders of
the capital stock of the Company before such merger continue to own at least 75%
of the capital stock of the Company immediately after such merger and (iii)
immediately after giving effect to such merger, no Event of Default or Unmatured
Event of Default shall have occurred and be continuing; and (b) any Subsidiary
may merge with and into the Company or with any other Subsidiary.
7.3 Sales of Assets. The Company shall not, and shall not permit any
Subsidiary to, sell, transfer, convey or lease (any of the foregoing, a
"Disposition") all or any substantial part of its assets, except for (i) any
Disposition of inventory or obsolete equipment in the ordinary course of
business, (ii) any Disposition of or by any Wholly-Owned Subsidiary to the
Company or to any other Wholly-Owned Subsidiary and (iii) the sale, assignment
or other transfer of accounts receivable, lease receivables or other rights to
payment pursuant to any Securitization Transaction; provided that the aggregate
investment or claim held at any time by all purchasers, assignees or other
transferees of (or of interests in) such receivables or other rights to payment
shall not exceed $150,000,000. Notwithstanding the foregoing, (a) the Company
and its Subsidiaries may make Dispositions of any assets so long as the
aggregate book value of all assets disposed of in any fiscal year (in addition
to Dispositions permitted by the foregoing sentence) do not exceed 5% (or, if
neither the Company nor any Subsidiary is a party to any Securitization
Transaction, 10%) of Consolidated Net Worth; and (b) the Company and the
Subsidiaries may make additional Dispositions so long as 75% of the Net Cash
Proceeds for all Dispositions in any fiscal year (excluding any Disposition
permitted by the foregoing provisions of this Section 7.3) are applied to reduce
the Aggregate Commitment Amount hereunder and, if applicable, the Five-Year
Commitment Amount on a proportional basis.
7.4 Operating Leases. The Company shall not, and shall not permit any
Subsidiary to, incur or assume (whether pursuant to a Guaranty Obligation or
otherwise) any liability for rental payments under any lease (including any
lease resulting from a sale and leaseback transaction, but excluding Excluded
Leases as defined below) if, immediately after giving effect thereto, the
aggregate amount of lease payments that the Company and its Subsidiaries are
obligated to pay in any one fiscal year under all such leases will exceed, on a
consolidated basis, 10% of Consolidated Net Worth. As used in this Section,
"Excluded Leases" means (i) Capital Leases and (ii) leases of transportation and
data processing equipment.
7.5 Transactions with Affiliates. The Company shall not, and shall not
permit any Subsidiary to, enter into any material transaction with any Affiliate
of the Company (other than a Subsidiary), except upon fair and reasonable terms
no less favorable to the Company or such Subsidiary than would obtain in a
comparable arm's-length transaction with a Person not an Affiliate of the
Company.
7.6 Use of Proceeds. The Company shall not, and shall not permit any
Subsidiary to, use any portion of the Loan proceeds, directly or indirectly, (a)
to make any acquisition if the Person to be acquired (or its Board of Directors
or other equivalent governing body) has announced that
45
it will oppose such acquisition or commenced any litigation which alleges that
such acquisition violates or will violate any Requirement of Law or (b) for the
purpose of (i) purchasing or carrying Margin Stock, (ii) repaying or otherwise
refinancing indebtedness of the Company or others incurred to purchase or carry
Margin Stock or (iii) extending credit for the purpose of purchasing or carrying
any Margin Stock; provided that, so long as no Event of Default or Unmatured
Event of Default exists or will result therefrom, the Company may use the
proceeds the Loans to repurchase stock of the Company.
7.7 ERISA. The Company shall not, and shall not permit any of its ERISA
Affiliates to: (a) engage in a prohibited transaction or violation of the
fiduciary responsibility rules with respect to any Plan which has resulted or
could reasonably be expected to result in liability of the Company in an
aggregate amount in excess of $1,000,000; or (b) engage in a transaction that
could be subject to Section 4069 or 4212(c) of ERISA.
7.8 Maximum Leverage Ratio. The Company shall not at any time permit
the Leverage Ratio to exceed 0.6:1.0.
7.9 Minimum Consolidated Net Worth. The Company shall not permit
Consolidated Net Worth at any time to be less than the sum of (a) $350,000,000
plus (b) 50% of positive Consolidated Net Earnings (if any) for each fiscal year
ended after December 31, 1998 and, if financial statements therefor have been
delivered pursuant to subsection 6.1(b), for the completed portion of the
then-current fiscal year.
7.10 Limitation on Subsidiary Debt. The Company shall not permit the
aggregate amount of all Debt of Subsidiaries (other than Debt to the Company or
to another Subsidiary) to exceed 10% of Consolidated Net Worth.
7.11 Business Activities. The Company shall not, and shall not permit
any Subsidiary to, engage in any material line of business other than the
businesses engaged in by the Company and its Subsidiaries on the date of this
Agreement and businesses reasonably related thereto.
7.12 Hedging Obligations. The Company will not, and will not permit any
Subsidiary to, incur any Hedging Obligations other than in the ordinary course
of business for the purpose of directly mitigating risks associated with (a) raw
materials purchases, (b) interest or currency exchange rates, (c) operating
expenses or other anticipated obligations of such Person, (d) other liabilities,
commitments or assets held or reasonably anticipated by such Person or (e)
changes in the value of securities issued by such Person in conjunction with a
securities repurchase program not otherwise prohibited hereunder.
46
SECTION 8 EVENTS OF DEFAULT
8.1 Event of Default. Any of the following shall constitute an "Event
of Default":
(a) Non-Payment. The Company fails to pay, (i) when and as
required to be paid herein, any amount of principal of any Loan, or (ii) within
five Business Days after the same becomes due, any interest, fee or any other
amount payable hereunder or under any Note.
(b) Representation or Warranty. Any representation or warranty
by the Company made or deemed made herein, or which is contained in any
certificate, document or financial or other statement by the Company or any
Responsible Officer furnished at any time under this Agreement, is incorrect in
any material respect on or as of the date made or deemed made.
(c) Specific Defaults. The Company fails to perform or observe
any term, covenant or agreement contained in any of Section 6.3(a) or Section 7.
(d) Other Defaults. The Company fails to perform or observe
any other term or covenant contained in this Agreement, and such default shall
continue unremedied for a period of 30 days after the earlier of (i) the date
upon which a Responsible Officer knew of such failure or (ii) the date upon
which written notice thereof is given to the Company by the Agent or any Lender.
(e) Cross-Default. The Company and its Subsidiaries (A) fail
(subject to any applicable grace period) to make any payment in respect of
Material Financial Obligations when due (whether by scheduled maturity, required
prepayment, acceleration, demand, or otherwise); or (B) fail to perform or
observe any other condition or covenant, or any other event shall occur or
condition shall exist, under one or more agreements or instruments relating to
Material Financial Obligations if the effect of such failure, event or condition
is to cause (or require), or to permit (subject to any applicable grace period)
the holder or holders of such Material Financial Obligations or the beneficiary
or beneficiaries of such Material Financial Obligations (or a trustee or agent
on behalf of such holder or holders or beneficiary or beneficiaries) to cause
(or require), such Material Financial Obligations to become due and payable (or
to be purchased, repurchased or defeased) prior to the stated maturity thereof.
(f) Insolvency; Voluntary Proceedings. The Company or any
Subsidiary: (i) ceases or fails to be solvent, or generally fails to pay, or
admits in writing its inability to pay, its debts as they become due, subject to
applicable grace periods, if any, whether at stated maturity or otherwise; (ii)
voluntarily ceases to conduct its business in the ordinary course; (iii)
commences any Insolvency Proceeding with respect to itself; or (iv) takes any
action to effectuate or authorize any of the foregoing.
47
(g) Involuntary Proceedings. (i) Any involuntary Insolvency
Proceeding is commenced or filed against the Company or any Subsidiary, or any
writ, judgment, warrant of attachment, execution or similar process, is issued
or levied against a substantial part of the properties of the Company or any
Subsidiary, and any such proceeding or petition shall not be dismissed, or such
writ, judgment, warrant of attachment, execution or similar process shall not be
released, vacated or fully bonded within 60 days after commencement, filing or
levy; (ii) the Company or any Subsidiary admits the material allegations of a
petition against it in any Insolvency Proceeding, or an order for relief (or
similar order under non-U.S. law) is ordered in any Insolvency Proceeding; or
(iii) the Company or any Subsidiary acquiesces in the appointment of a receiver,
trustee, custodian, conservator, liquidator, mortgagee in possession (or agent
therefor), or other similar Person for itself or a substantial portion of its
property or business.
(h) ERISA. (i) An ERISA Event shall occur with respect to one
or more Pension Plans or Multiemployer Plans which has resulted or could
reasonably be expected to result in liability of the Company or any ERISA
Affiliate under Title IV of ERISA to one or more Pension Plans, Multiemployer
Plans or the PBGC in an aggregate amount in excess of $10,000,000; (ii) a
contribution failure shall have occurred with respect to a Pension Plan
sufficient to give rise to a Lien under Section 302(f) of ERISA; (iii) the
aggregate amount of Unfunded Pension Liability among all Pension Plans at any
time exceeds $10,000,000; or (iv) the Company or any ERISA Affiliate shall fail
to pay when due, after the expiration of any applicable grace period, any
installment payment with respect to its withdrawal liability under Section 4201
of ERISA under a Multiemployer Plan in an aggregate amount in excess of
$1,000,000.
(i) Monetary Judgments or Settlements. One or more judgments,
orders, decrees or arbitration awards is entered against the Company or any
Subsidiary involving in the aggregate a liability (to the extent not covered by
(x) third-party insurance as to which the insurer does not dispute coverage or
(y) a self-insurance reserve), as to any single or related series of
transactions, incidents or conditions, of $10,000,000 or more, and the same
shall remain unsatisfied, unvacated and unstayed pending appeal for a period of
30 days after the entry thereof, or the Company or any Subsidiary shall enter
into any agreement to settle or compromise any pending or threatened litigation
as to any single or related series of claims that would reasonably be expected
to have a Material Adverse Effect.
(j) Non-Monetary Judgments. Any non-monetary judgment, order
or decree is entered against the Company or any Subsidiary which has or would
reasonably be expected to have a Material Adverse Effect, and there shall be any
period of 30 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be in
effect.
(k) Change of Control. Any Change of Control occurs.
48
8.2 Remedies. If any Event of Default occurs, the Agent shall at the
request of, or may with the consent of, the Required Lenders, do any or all of
the following:
(a) declare the Commitment of each Lender to be terminated,
whereupon such Commitments shall be terminated;
(b) declare the unpaid principal amount of all outstanding
Loans, all interest accrued and unpaid thereon, and all other amounts owing or
payable hereunder to be immediately due and payable, without presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived by the Company; and
(c) exercise on behalf of itself and the Lenders all rights
and remedies available to it and the Lenders under this Agreement or applicable
law;
provided that upon the occurrence of any event specified in subsection (f) or
(g) of Section 8.1, the obligation of each Lender to make Loans shall
automatically terminate and the unpaid principal amount of all outstanding Loans
and all interest and other amounts as aforesaid shall automatically become due
and payable without further act of the Agent or any Lender, without presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived by the Company.
8.3 Rights Not Exclusive. The rights provided for in this Agreement and
the Notes are cumulative and are not exclusive of any other rights, powers,
privileges or remedies provided by law or in equity, or under any other
instrument, document or agreement now existing or hereafter arising.
49
SECTION 9 THE AGENT
9.1 Appointment and Authorization. Each Lender hereby irrevocably
(subject to Section 9.9) appoints, designates and authorizes the Agent to take
such action on its behalf under the provisions of this Agreement and to exercise
such powers and perform such duties as are expressly delegated to it by the
terms of this Agreement, together with such powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary contained elsewhere in
this Agreement, the Agent shall not have any duties or responsibilities, except
those expressly set forth herein, nor shall the Agent have or be deemed to have
any fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or otherwise exist against the Agent. Without limiting the generality
of the foregoing sentence, the use of the term "agent" in this Agreement with
reference to the Agent is not intended to connote any fiduciary or other implied
(or express) obligations arising under agency doctrine of any applicable law.
Instead, such term is used merely as a matter of market custom, and is intended
to create or reflect only an administrative relationship between independent
contracting parties.
9.2 Delegation of Duties. The Agent may execute any of its duties under
this Agreement by or through agents, employees or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
The Agent shall not be responsible for the negligence or misconduct of any agent
or attorney-in-fact that it selects with reasonable care.
9.3 Liability of Agent. None of the Agent-Related Persons shall (i) be
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or the transactions contemplated hereby (except
for its own gross negligence or willful misconduct), or (ii) be responsible in
any manner to any of the Lenders for any recital, statement, representation or
warranty made by the Company or any Subsidiary or Affiliate of the Company, or
any officer thereof, contained in this Agreement or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Agent under or in connection with, this Agreement, or the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any Note, or for any failure of the Company or any other party hereto to perform
its obligations hereunder. No Agent-Related Person shall be under any obligation
to any Lender to ascertain or to inquire as to the observance or performance of
any of the agreements contained in, or conditions of, this Agreement, or to
inspect the properties, books or records of the Company or any of the Company's
Subsidiaries or Affiliates.
9.4 Reliance by Agent. The Agent shall be entitled to rely, and shall
be fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to the
Company), independent accountants and other experts selected by the Agent. The
Agent shall be fully justified in failing or refusing to take any action under
this Agreement unless it shall first receive such advice or
50
concurrence of the Required Lenders as it deems appropriate and, if it so
requests, it shall first be indemnified to its 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 Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Agreement in
accordance with a request or consent of the Required Lenders and such request
and any action taken or failure to act pursuant thereto shall be binding upon
all of the Lenders.
9.5 Notice of Default. The Agent shall not be deemed to have knowledge
or notice of the occurrence of any Event of Default or Unmatured Event of
Default, except with respect to defaults in the payment of principal, interest
and fees required to be paid to the Agent for the account of the Lenders, unless
the Agent shall have received written notice from a Lender or the Company
referring to this Agreement, describing such Event of Default or Unmatured Event
of Default and stating that such notice is a "notice of default". The Agent will
promptly notify the Lenders of its receipt of any such notice. The Agent shall
take such action with respect to such Event of Default or Unmatured Event of
Default as may be requested by the Required Lenders in accordance with Section
8; provided that unless and until the Agent has received any such request, the
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Event of Default or Unmatured Event of
Default as it shall deem advisable or in the best interest of the Lenders.
9.6 Credit Decision. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by the Agent hereafter taken, including any review of the affairs of the
Company and its Subsidiaries, shall be deemed to constitute any representation
or warranty by any Agent-Related Person to any Lender. Each Lender represents to
the Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of the
Company and its Subsidiaries, and all applicable bank regulatory laws relating
to the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to the Company hereunder. Each Lender also
represents that it will, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement,
and to make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Company. Except for notices, reports and other documents
expressly herein required to be furnished to the Lenders by the Agent, the Agent
shall not have any duty or responsibility to provide any Lender with any credit
or other information concerning the business, prospects, operations, property,
financial and other condition or creditworthiness of the Company which may come
into the possession of any of the Agent-Related Persons.
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9.7 Indemnification of Agent. Whether or not the transactions
contemplated hereby are consummated, the Lenders shall indemnify upon demand the
Agent-Related Persons (to the extent not reimbursed by or on behalf of the
Company and without limiting the obligation of the Company to do so), pro rata,
from and against any and all Indemnified Liabilities; provided that no Lender
shall be liable for the payment to any Agent-Related Person of any portion of
the Indemnified Liabilities resulting from such Person's gross negligence or
willful misconduct. Without limitation of the foregoing, each Lender shall
reimburse the Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including Attorney Costs) incurred by the Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement or any document contemplated by or
referred to herein, to the extent that the Agent is not reimbursed for such
expenses by or on behalf of the Company. The undertaking in this Section shall
survive the payment of all Obligations and the resignation or replacement of the
Agent.
9.8 Agent in Individual Capacity. BofA and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with the Company and its
Subsidiaries and Affiliates as though BofA were not the Agent hereunder and
without notice to or consent of the Lenders. The Lenders acknowledge that,
pursuant to such activities, BofA or its Affiliates may receive information
regarding the Company or its Affiliates (including information that may be
subject to confidentiality obligations in favor of the Company or such
Subsidiary) and acknowledge that the Agent shall be under no obligation to
provide such information to them. With respect to its Loans, BofA and any
Affiliate thereof shall have the same rights and powers under this Agreement as
any other Lender and may exercise the same as though BofA were not the Agent.
9.9 Successor Agent. The Agent may, and at the request of the Required
Lenders shall, resign as Agent upon 30 days' notice to the Lenders. If the Agent
resigns under this Agreement, the Required Lenders shall appoint from among the
Lenders a successor agent for the Lenders, which (so long as no Event of Default
exists) successor agent shall be reasonably acceptable to the Company. If no
successor agent is appointed prior to the effective date of the resignation of
the Agent, the Agent may appoint, after consulting with the Lenders and the
Company, a successor agent from among the Lenders, which (so long as no Event of
Default exists) successor agent shall be reasonably acceptable to the Company.
Upon the acceptance of its appointment as successor agent hereunder, such
successor agent shall succeed to all the rights, powers and duties of the
retiring Agent and the term "Agent" shall mean such successor agent and the
retiring Agent's appointment, powers and duties as Agent shall be terminated.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this Section 9 and Sections 10.4 and 10.5 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement. If no successor agent has accepted appointment as Agent by the date
which is 30 days following a retiring Agent's notice of resignation, the
retiring Agent's resignation shall
52
nevertheless thereupon become effective and the Lenders shall perform all of the
duties of the Agent hereunder until such time, if any, as the Required Lenders
appoint a successor agent as provided for above.
9.10 Withholding Tax. (a) If any Lender is a "foreign corporation,
partnership or trust" within the meaning of the Code and such Lender claims
exemption from, or a reduction of, U.S. withholding tax under Sections 1441 or
1442 of the Code, such Lender agrees with and in favor of the Agent, to deliver
to the Agent:
(i) if such Lender claims an exemption from, or a
reduction of, withholding tax under a United States tax treaty,
properly completed IRS Forms 1001 and W-8 before the payment of any
interest in the first calendar year and before the payment of any
interest in each third succeeding calendar year during which interest
may be paid under this Agreement;
(ii) if such Lender claims that interest paid under
this Agreement is exempt from United States withholding tax because it
is effectively connected with a United States trade or business of such
Lender, two properly completed and executed copies of IRS Form 4224
before the payment of any interest is due in the first taxable year of
such Lender and in each succeeding taxable year of such Lender during
which interest may be paid under this Agreement, and IRS Form W-9; and
(iii) such other form or forms as may be required
under the Code or other laws of the United States as a condition to
exemption from, or reduction of, United States withholding tax.
Each such Lender agrees to promptly notify the Agent of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Lender claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001 and
such Lender sells, assigns, grants a participation in, or otherwise transfers
all or part of the Obligations of the Company to such Lender, such Lender agrees
to notify the Agent of the percentage amount in which it is no longer the
beneficial owner of Obligations of the Company to such Lender. To the extent of
such percentage amount, the Agent will treat such Lender's IRS Form 1001 as no
longer valid.
(c) If any Lender claiming exemption from United States
withholding tax by filing IRS Form 4224 with the Agent grants a participation in
all or part of the Obligations of the Company to such Lender, such Lender agrees
to undertake sole responsibility for complying with the withholding tax
requirements imposed by Sections 1441 and 1442 of the Code with respect to its
participant.
53
(d) If any Lender is entitled to a reduction in the applicable
withholding tax, the Agent may withhold from any interest payment to such Lender
an amount equivalent to the applicable withholding tax after taking into account
such reduction. If the forms or other documentation required by subsection (a)
of this Section are not delivered to the Agent, then the Agent may withhold from
any interest payment to such Lender not providing such forms or other
documentation an amount equivalent to the applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the
United States or other jurisdiction asserts a claim that the Agent did not
properly withhold tax from amounts paid to or for the account of any Lender
(because the appropriate form was not delivered or was not properly executed, or
because such Lender failed to notify the Agent of a change in circumstances
which rendered the exemption from, or reduction of, withholding tax ineffective,
or for any other reason) such Lender shall indemnify the Agent fully for all
amounts paid, directly or indirectly, by the Agent as tax or otherwise,
including penalties and interest, and including any taxes imposed by any
jurisdiction on the amounts payable to the Agent under this Section, together
with all costs and expenses (including Attorney Costs). The obligation of the
Lenders under this subsection shall survive the payment of all Obligations and
the resignation or replacement of the Agent.
9.11 Syndication Agent. No Lender identified herein or in any related
document ads the "Syndication Agent" shall have any right, power, obligation,
liability, responsibility or duty under this Agreement other than those
applicable to all Lenders as such. Without limiting the foregoing, no Lender so
identified shall have or be deemed to have any fiduciary relationship with any
Lender. Each Lender acknowledges that it has not relied, and will not rely, on
any Lender so identified in deciding to enter into this Agreement or in taking
or not taking action hereunder.
SECTION 10 MISCELLANEOUS
10.1 Amendments and Waivers. No amendment or waiver of any provision of
this Agreement, and no consent with respect to any departure by the Company or
any Subsidiary therefrom, shall be effective unless the same shall be in writing
and signed by the Required Lenders (or by the Agent at the written request of
the Required Lenders) and the Company and acknowledged by the Agent, and then
any such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given; provided that no such waiver,
amendment or consent shall, unless in writing and signed by all Lenders and the
Company and acknowledged by the Agent, do any of the following:
(a) increase (except as permitted by Section 2.17) or extend
the Commitment of any Lender (or reinstate any Commitment terminated pursuant to
Section 8.2);
(b) postpone or delay any date fixed by this Agreement for any
payment of principal, interest, fees or other amounts due to the Lenders (or any
of them) hereunder;
54
(c) reduce the principal of, or the rate of interest specified
herein on, any Loan, or reduce any fees or other amounts payable hereunder;
(d) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans which is required for the Lenders
or any of them to take any action hereunder; or
(e) amend the definition of "Required Lenders," this Section
or Section 2.15, or any provision herein providing for consent or other action
by all Lenders;
and provided, further, that no amendment, waiver or consent shall, unless in
writing and signed by the Agent in addition to the Required Lenders or all
Lenders, as the case may be, affect the rights or duties of the Agent under this
Agreement.
10.2 Notices. (a) All notices, requests and other communications shall
be in writing (including, unless the context expressly otherwise provides, by
facsimile transmission, provided that any matter transmitted by the Company by
facsimile (i) shall be immediately confirmed by a telephone call to the
recipient and (ii) shall be followed promptly by delivery of a hard copy
original thereof) and mailed, faxed or delivered to the address or facsimile
number specified for notices on Schedule 10.2; or, as directed to the Company or
the Agent, to such other address as shall be designated by such party in a
written notice to the other parties, and as directed to any other party, at such
other address as shall be designated by such party in a written notice to the
Company and the Agent.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery or faxed, be effective when delivered or
transmitted in legible form by facsimile machine, respectively, or if mailed,
upon the third Business Day after the date deposited into the U.S. mail; except
that notices pursuant to Section 2 or 9 to the Agent shall not be effective
until actually received by the Agent.
(c) Any agreement of the Agent and the Lenders herein to
receive certain notices by telephone or facsimile is solely for the convenience
and at the request of the Company. The Agent and the Lenders shall be entitled
to rely on the authority of any Person purporting to be a Person authorized by
the Company to give such notice and the Agent and the Lenders shall not have any
liability to the Company or any other Person on account of any action taken or
not taken by the Agent or the Lenders in reliance upon such telephonic or
facsimile notice. The obligation of the Company to repay the Loans shall not be
affected in any way or to any extent by any failure by the Agent and the Lenders
to receive written confirmation of any telephonic or facsimile notice or the
receipt by the Agent and the Lenders of a confirmation which is at variance with
the terms understood by the Agent and the Lenders to be contained in the
telephonic or facsimile notice.
55
10.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Agent or any Lender, any right, remedy,
power or privilege hereunder, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege.
10.4 Costs and Expenses. The Company shall:
(a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse the Agent and the Arranger within five Business
Days after demand (subject to subsection 4.1(e)) for all costs and expenses
(including Attorney Costs) incurred by the Agent in connection with the
development, preparation, delivery, administration and execution of, and any
amendment, supplement, waiver or modification to (in each case, whether or not
consummated), this Agreement and any other document prepared in connection
herewith, and the consummation of the transactions contemplated hereby; and
(b) pay or reimburse the Agent, the Arranger and each Lender
within five Business Days after demand, for all costs and expenses (including
Attorney Costs) incurred by them in connection with the enforcement, or
preservation of any rights or remedies under this Agreement during the existence
of an Event of Default (including in connection with any "workout" or
restructuring regarding the Loans, and including in any Insolvency Proceeding or
appellate proceeding).
10.5 Company Indemnification. Whether or not the transactions
contemplated hereby are consummated, the Company shall indemnify and hold the
Agent-Related Persons and each Lender and each of their respective officers,
directors, employees, counsel, agents and attorneys-in-fact (each an
"Indemnified Person") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses and disbursements (including Attorney Costs) of any kind or
nature whatsoever which may at any time (including at any time following
repayment of the Loans and the termination, resignation or replacement of the
Agent or replacement of any Lender) be imposed on, incurred by or asserted
against any such Person in any way relating to or arising out of this Agreement
or any document contemplated by or referred to herein, or the transactions
contemplated hereby or thereby, or any action taken or omitted by any such
Person under or in connection with any of the foregoing, including with respect
to any investigation, litigation or proceeding (including any Insolvency
Proceeding or appellate proceeding) related to or arising out of this Agreement
or the Loans or the use of the proceeds thereof, whether or not any Indemnified
Person is a party thereto (all the foregoing, collectively, the "Indemnified
Liabilities"); provided that the Company shall have no obligation hereunder to
any Indemnified Person with respect to Indemnified Liabilities resulting from
the gross negligence or willful misconduct of such Indemnified Person. The
agreements in this Section shall survive payment of all other Obligations.
56
10.6 Payments Set Aside. To the extent that the Company makes a payment
to the Agent or any Lender, or the Agent or any Lender exercises its right of
set-off, and such payment or the proceeds of such set-off or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set
aside or required (including pursuant to any settlement entered into by the
Agent or such Lender in its discretion) to be repaid to a trustee or receiver,
or any other party, in connection with any Insolvency Proceeding or otherwise,
then (a) to the extent of such recovery the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such set-off had not occurred
and (b) each Lender severally agrees to pay to the Agent upon demand its pro
rata share of any amount so recovered from or repaid by the Agent.
10.7 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Company may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of the Agent and each Lender.
10.8 Assignments, Participations, etc. (a) Any Lender may, with the
written consent of the Company (at all times other than during the existence of
an Event of Default or Unmatured Event of Default) and the Agent, which consents
shall not be unreasonably withheld, at any time assign and delegate to one or
more Eligible Assignees (provided that no written consent of the Company or the
Agent shall be required in connection with any assignment and delegation by a
Lender to an Eligible Assignee that is an Affiliate of such Lender) (each an
"Assignee") all, or any ratable part of all, of the Committed Loans, the
Commitment and the other rights and obligations of such Lender hereunder;
provided that (i) if the Five-Year Credit Agreement is still in effect, such
Lender shall concurrently assign to the same Assignee a proportionate share of
such Lender's Committed Loans, Commitment and other rights and obligations under
the Five-Year Credit Agreement, (ii) except in the case of an assignment by a
Lender of all of its remaining rights and obligations hereunder and (if
applicable) under the Five-Year Credit Agreement, the sum of the amount of the
Commitment of such so assigned and the amount (if any) of the "Commitment" of
such Lender under and as defined in the Five-Year Credit Agreement concurrently
assigned to the same Assignee shall not be less than $5,000,000; and (iii) the
Company and the Agent may continue to deal solely and directly with such Lender
in connection with the interest so assigned to an Assignee until (x) written
notice of such assignment, together with payment instructions, addresses and
related information with respect to the Assignee, shall have been given to the
Company and the Agent by such Lender and the Assignee; (y) such Lender and its
Assignee shall have delivered to the Company and the Agent an Assignment and
Acceptance in the form of Exhibit G ("Assignment and Acceptance") and (z) the
assignor Lender or Assignee has paid to the Agent a processing fee in the amount
of $3,500 (which fee shall cover both the assignment hereunder and any
concurrent assignment under the Five-Year Credit Agreement).
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(b) From and after the date that the Agent notifies the
assignor Lender that it has received and provided its consent (and received, if
applicable, the consent of the Company) with respect to an executed Assignment
and Acceptance and payment of the above-referenced processing fee, (i) the
Assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, shall have the rights and obligations of a Lender hereunder, and
(ii) the assignor Lender shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish such rights and be released from such obligations.
(c) Any Lender may at any time sell to one or more commercial
banks or other Persons not Affiliates of the Company (a "Participant")
participating interests in any Loan, the Commitment of such Lender and the other
interests of such Lender (the "originating Lender") hereunder; provided that (i)
the originating Lender's obligations under this Agreement shall remain
unchanged, (ii) the originating Lender shall remain solely responsible for the
performance of such obligations, (iii) the Company and the Agent shall continue
to deal solely and directly with the originating Lender in connection with the
originating Lender's rights and obligations under this Agreement and (iv) no
Lender shall transfer or grant any participating interest under which the
Participant has rights to approve any amendment to, or any consent or waiver
with respect to, this Agreement, except to the extent such amendment, consent or
waiver would require unanimous consent of the Lenders as described in the first
proviso to Section 10.1. Each Participant shall be entitled to the benefit of
Sections 3.1, 3.3 and 10.5 as though it were also a Lender hereunder, and if
amounts outstanding under this Agreement are due and unpaid, or shall have been
declared or shall have become due and payable upon the occurrence of an Event of
Default, each Participant shall be deemed to have the right of set-off in
respect of its participating interest in amounts owing under this Agreement to
the same extent as if the amount of its participating interest were owing
directly to it as a Lender under this Agreement.
(d) Notwithstanding any other provision in this Agreement, any
Lender may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement and any Note held by
it in favor of any Federal Reserve Bank in accordance with Regulation A of the
FRB or U.S. Treasury Regulation 31 CFR ss.203.14, and such Federal Reserve Bank
may enforce such pledge or security interest in any manner permitted under
applicable law.
10.9 Confidentiality. Each Lender agrees to take and to cause its
Affiliates to take normal and reasonable precautions and exercise due care to
maintain the confidentiality of all information identified as "confidential" or
"secret" by the Company and provided to it by the Company or any Subsidiary, or
by the Agent on the Company's or such Subsidiary's behalf, under this Agreement,
and neither such Lender nor any of its Affiliates shall use any such information
other than in connection with or in enforcement of this Agreement or in
connection with other business now or hereafter existing or contemplated with
the Company or any Subsidiary; except to the extent such information (i) was or
becomes generally available to the public other than as a
58
result of disclosure by such Lender, or (ii) was or becomes available on a
non-confidential basis from a source other than the Company, provided that such
source is not bound by a confidentiality agreement with the Company or any
Subsidiary known to such Lender; provided that any Lender may disclose such
information (A) at the request or pursuant to any requirement of any
Governmental Authority to which such Lender is subject or in connection with an
examination of such Lender by any such authority; (B) pursuant to subpoena or
other court process, unless it is prohibited from doing so by applicable law,
the applicable Lender shall give the Company written notice of such subpoena or
other court process so that the Company has a reasonable opportunity to seek a
protective order or other judicial relief prior to any disclosure of
confidential information; (C) when required to do so in accordance with the
provisions of any applicable Requirement of Law; (D) to the extent reasonably
required in connection with any litigation or proceeding to which the Agent or
any Lender or any of their respective Affiliates may be party; (E) to the extent
reasonably required in connection with the exercise of any remedy hereunder or
under any Note; (F) to such Lender's independent auditors and other professional
advisors; (G) to any Participant or Assignee, actual or potential, provided that
such Person agrees in writing to keep such information confidential to the same
extent required of the Lenders hereunder; (H) as to any Lender or its Affiliate,
as expressly permitted under the terms of any other document or agreement
regarding confidentiality to which the Company or any Subsidiary is party or is
deemed party with such Lender or such Affiliate; and (I) to its Affiliates.
10.10 Set-off. In addition to any rights and remedies of the Lenders
provided by law, if an Event of Default exists, or the Loans have been
accelerated, each Lender is authorized at any time and from time to time,
without prior notice to the Company, any such notice being waived by the Company
to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held by, and other indebtedness at any time owing by, such Lender to or for the
credit or the account of the Company against any and all Obligations owing to
such Lender, now or hereafter existing, irrespective of whether or not the Agent
or such Lender shall have made demand under this Agreement and although such
Obligations may be contingent or unmatured. Each Lender agrees promptly to
notify the Company and the Agent after any such set-off and application made by
such Lender; provided that the failure to give such notice shall not affect the
validity of such set-off and application.
10.11 Notification of Addresses, Lending Offices, Etc. Each Lender
shall notify the Agent in writing of any change in the address to which notices
to such Lender should be directed, of addresses of any Lending Office, of
payment instructions in respect of all payments to be made to it hereunder and
of such other administrative information as the Agent shall reasonably request.
10.12 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of which taken together shall be deemed to constitute but one
and the same instrument.
59
10.13 Severability. The illegality or unenforceability of any provision
of this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or such instrument or agreement.
10.14 No Third Parties Benefited. This Agreement is made and entered
into for the sole protection and legal benefit of the Company, the Lenders, the
Agent and the Agent-Related Persons, and their permitted successors and assigns,
and no other Person shall be a direct or indirect legal beneficiary of, or have
any direct or indirect cause of action or claim in connection with, this
Agreement.
10.15 Governing Law and Jurisdiction. (a) THIS AGREEMENT AND ANY NOTES
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAW OF THE
STATE OF ILLINOIS; PROVIDED THAT THE AGENT AND THE LENDERS SHALL RETAIN ALL
RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY NOTE MAY BE BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS OR
OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF ILLINOIS, AND BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE AGENT AND THE LENDERS
CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE
JURISDICTION OF SUCH COURTS. EACH OF THE COMPANY, THE AGENT AND THE LENDERS
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT
OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE COMPANY, THE AGENT AND THE
LENDERS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS,
WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY ILLINOIS LAW.
10.16 Entire Agreement. This Agreement, together with the Notes and any
fee letter among the Company, the Agent and the Arranger, embodies the entire
agreement and understanding among the Company, the Lenders and the Agent, and
supersedes all prior or contemporaneous agreements and understandings of such
Persons, verbal or written, relating to the subject matter hereof and thereof.
60
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
A.O. SMITH CORPORATION
By:___________________________________
Title:________________________________
BANK OF AMERICA, N.A.,
as Agent and as a Lender
By:___________________________________
Title:________________________________
THE FIRST NATIONAL BANK OF CHICAGO, as
Syndication Agent and as a Lender
By:___________________________________
Title:________________________________
S-1
THE BANK OF NEW YORK
By:___________________________________
Title:________________________________
CITIBANK, N.A.
By:___________________________________
Title:________________________________
S-2
FIRSTAR BANK MILWAUKEE, N.A.,
By:___________________________________
Title:________________________________
M&I MARSHALL & ILSLEY BANK
By:___________________________________
Title:________________________________
By:___________________________________
Title:________________________________
S-3
NORWEST BANK WISCONSIN, N.A.
By:___________________________________
Title:________________________________
U.S. BANK NATIONAL ASSOCIATION
By:___________________________________
Title:________________________________
WACHOVIA BANK, N.A.
By:___________________________________
Title:________________________________
S-4
SCHEDULE 1.1
PRICING SCHEDULE
The Applicable Margin and Facility Fee Rate shall be determined based
on the then-current Leverage Ratio as set forth below.
===============================================================================
Applicable Facility
Leverage Ratio Margin Fee Rate
-------------------------------------------------------------------------------
Less than or equal to 0.30 to 1 0.300% 0.075%
-------------------------------------------------------------------------------
Greater than 0.3 to 1 but less than or equal to
0.4 to 1 0.400% 0.100%
-------------------------------------------------------------------------------
Greater than 0.4 to 1 but less than or equal to
0.5 to 1 0.500% 0.125%
-------------------------------------------------------------------------------
Greater than 0.5 to 1 but less than or equal to
0.55 to 1 0.600% 0.150%
-------------------------------------------------------------------------------
Greater than 0.55 to 1 0.750% 0.175%
===============================================================================
Initially, the Applicable Margin and the Facility Fee Rate shall be
0.500% and 0.125%, respectively. The Applicable Margin and Facility Fee Rate
shall be adjusted, to the extent applicable, 45 days (or, in the case of the
last fiscal quarter of any fiscal year, 90 days) after the end of each fiscal
quarter (beginning with the fiscal quarter ending September 30, 1999) based on
the Leverage Ratio as of the last day of such fiscal quarter; it being
understood that if the Company fails to deliver the financial statements
required by subsection 6.1(a) or 6.1(b), as applicable, and the related
Compliance Certificate required by subsection 6.1(c) by the 45th day (or, if
applicable, the 90th day) after any fiscal quarter, the Applicable Margin shall
be 0.750% and the Facility Fee Rate shall be 0.175% until such financial
statements and Compliance Certificate are delivered.
SCHEDULE 2.1
COMMITMENTS AND PRO RATA SHARES
Amount of Pro Rata
Lender Commitment Share
------ ---------- --------
Bank of America, N.A. $17,142,857.14 17.142857143%
The First National Bank of Chicago 14,285,714.29 14.285714266
M&I Marshall & Ilsley Bank 11,428,571.43 11.428571429
Firstar Bank Milwaukee, N.A., 11,428,571.43 11.428571429
Norwest Bank Wisconsin, N.A. 11,428,571.43 11.428571429
U.S. Bank National Association 8,571,428.57 8.571428571
Citibank, N.A. 8,571,428.57 8.571428571
The Bank of New York 8,571,428.57 8.571428571
Wachovia Bank, N.A. 8,571,428.57 8.571428571
------------ -----------
TOTAL $100,000,000 100%
SCHEDULE 5.5
LITIGATION
- None -
SCHEDULE 5.7
ERISA
- None -
SCHEDULE 5.11
PERMITTED LIABILITIES
- None -
SCHEDULE 5.12
ENVIRONMENTAL MATTERS
- None -
SCHEDULE 5.15
SUBSIDIARIES
A.O. Smith (China) Water Heater Co., Ltd.
A.O. Smith Electric Motors (Ireland) Ltd.
A.O. Smith Enterprises Ltd.
A.O. Smith Export, Ltd. (Barbados)
A.O. Smith Holdings (Ireland) Ltd.
A.O. Smith International Corporation
A.O. Smith L'Eau Chaude S.a.r.I.
A.O. Smith Warmwasser-Systemtechnik GmbH
A.O. Smith Water Products Company, B.V.
AOS Holding Company
Harbin A.O. Smith Fiberglass Products Company Limited (HSF)
Motores Electricos de Juarez, S.A. de C.V.
Motores Electricos de Monterrey, S.A. de C.V.
Productos de Agua, S.A. de C.V.
Productos Electricos Aplicados, S.A. de C.V.
SCHEDULE 7.1
EXISTING LIENS
Asset Name of Mortgage Date Lien Amount of Maturity Date
Description or Secured Party was Created Outstanding Debt -------------
- ----------- ---------------- ----------- ----------------
Florence, KY Morgan Guaranty 12/28/83 $6,000,000 12/1/2008
Portion - Plant TrustCompany
and Facilities
SCHEDULE 10.2
EURODOLLAR AND DOMESTIC LENDING OFFICES;
ADDRESSES FOR NOTICES
A.O. SMITH
Addresses for Notices:
Patricia K. Ackerman
A.O. Smith Corporation
Assistant Treasurer
11270 West Park Place
Milwaukee, WI 53224
Phone: (414) 359-4130
Fax: (414) 359-4180
e-mail: packerman@aosmith.com
BANK OF AMERICA, N.A.
as Agent
Notices:
Bank of America, N.A.
Agency Management Services
1850 Gateway Boulevard
5th Floor
Concord, CA 94520
Attention: Paul W. Ober
Phone: (925) 675-8426
Fax: (925) 675-8500
Agent's Payment Office:
Bank of America, N.A.
Agency Management Services #5596
1850 Gateway Boulevard
Concord, California 94520
Attention: Paying & Receiving
Phone: (510) 675-8724
Fax: (510) 675-7378
BANK OF AMERICA, N.A.,
- ---------------------
as a Lender
Domestic and Eurodollar Lending Office:
1850 Gateway Boulevard
Concord, California 94520
Notices (other than Borrowing notices and Notices of
Conversion/Continuation):
Bank of America, N.A.
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Meg Claggett
Phone: (312) 828-1549
Fax: (312) 987-0303
THE FIRST NATIONAL BANK OF CHICAGO,
- ----------------------------------
as Syndication Agent
Domestic and Eurodollar Address:
One First National Plaza
Chicago, IL 60670
Credit Contact:
Scott Moreen
Vice President
Mail Code IL1-0364
Phone: (312) 732-6162
Fax: (312) 732-1117
e-mail: Scott_Moreen@em.fcnbd.com
Operations and Bid Contact:
Renee Williams
Client Service Associate
Mail Code IL1-0088
Phone: (312) 732-5091
Fax: (312) 732-2715
Letter of Credit Contact:
Marnetta Harris
300 South Riverside
Chicago, IL 60670
Mail Code IL1-0236
Phone: (312) 954-1948
Fax: (312) 954-6207
Documentation Contact:
Jenny Gilpin
Vice President
Mail Code IL1-0088
Phone: (312) 732-5867
Fax: (312) 732-1117
e-mail: Jenny_Gilpin@em.fcnbd.com
Legal Counsel:
Kyle Henderson
Mail Code IL1-0573
Phone: (312) 732-7351
Fax: (312) 732-5144
e-mail: Kyle_Henderson@em.fcnbd.com
LENDERS
THE BANK OF NEW YORK
Domestic and Eurodollar Address:
101 Barclay Street
New York, NY 10286
Notices:
Maxine Roach
One Wall Street
19th Floor
New York, NY 10286
Phone: (212) 635-8208
Fax: (212) 635-7923/4
CITIBANK N.A.
Domestic Address:
c/o Citicorp. N. America, Inc.
500 West Madison
Chicago, IL 60661
Credit and Documentation Contact:
Michael Ford
Vice President
7th Floor
Phone: (312) 627-3968
Fax: (312) 627-3990
e-mail: mike.ford@citicorp.com
Operations Contact:
Mark Waldron
Loan Administrator
Phone: (302) 894-6084
Fax: (302) 894-6120
Legal Counsel:
Craig Seledee
Phone: (212) 559-6051
Fax: (212) 793-6152
FIRSTAR BANK MILWAUKEE, N.A.
Domestic Address:
777 East Wisconsin Avenue
Milwaukee, WI 53202
Credit and Documentation Contact:
John Franceschi
Portfolio Manager
Phone: (414) 765-5656
Fax: (414) 765-5367
Operations Contact:
Brenda Luethy
1850 Osborn Avenue
Oshkosh, WI 54901
Phone: (920) 426-7604
Fax: (920) 426-7655
Bid Contact:
Brett Justman
Phone: (414) 765-5952
Fax: (414) 765-5062
Letter of Credit Contact:
Kay Bremser
International Department
Phone: (414) 765-5626
M&I MARSHALL & ILSLEY BANK
Domestic and Eurodollar Address:
770 North Water Street
Milwaukee, WI 53202
Credit and Bid Contact:
Scott Rank
Vice President
18th Floor
Phone: (414) 765-7630
Fax: (414) 765-7625
Operations Contact:
Nenita Yumang
401 North Executive Drive
Brookfield, WI 53005
Phone: (414) 938-8675
Fax: (414) 938-8684
Letter of Credit Contact:
Primary: Pat Seago
Vice President/Operations Manager
4th Floor
Phone: (414) 765-7691
Fax: (414) 765-7788
Secondary: Ermine DeYarmin
Import & Standby Production Manager
4th Floor
Phone: (414) 765-8158
Fax: (414) 765-7788
Documentation Contact:
Tom Bickelhaupt
Vice President
18th Floor
Phone: (414) 765-7630
Fax: (414) 765-7625
NORWEST BANK WISCONSIN, N.A.
Domestic Address:
100 East Wisconsin Avenue
Suite 1400
Milwaukee, WI 53202
Credit, Bid, Letter of Credit and Documentation Contact:
Jim Josten
Vice President
Phone: (414) 224-7408
Fax: (414) 224-7410
e-mail: James.Josten@Norwest.com
Operations Contact:
Kathy Herzog
Banking Assistant
Phone: (414) 224-7404
Fax: (414) 224-7410
U.S. BANK NATIONAL ASSOCIATION
Domestic and Eurodollar address:
201 West Wisconsin Avenue
Milwaukee, WI 53203
Credit, Bid and Documentation Contact:
Dennis Ciche
Assistant Vice President
Phone: (414) 227-5707
Fax: (414) 227-5881
e-mail: dennis.ciche@usbank.com
Operations Contact:
Leslie Wagner
Business Banking Associate
Phone: (414) 227-5923
Fax: (414) 227-5881
Letter of Credit Contact:
Susan Zube
International Banking Associate
Phone: (414) 227-5473
Fax: (414) 227-6008
WACHOVIA BANK, N.A.
Domestic and Eurodollar Address:
191 Peachtree Street, N.E.
Atlanta, GA 30303
Fax: (404) 332-6898
Documentation Contract:
Debra Coheley
Senior Vice President
Final Copies to:
James D. Heinz
Senior Vice President
Wachovia Corporate Services
70 West Madison
Suite 2440
Chicago, IL 60602
Phone: (312) 795-4343
Fax: (312) 853-0693
Administrative/Operations and Bid Contact:
Cynthia Comber
Phone: (312) 795-4335
Fax: (312) 853-0693
Letter of Credit Contacts:
Standby: Amy Walton
Phone: (336) 735-3371
Fax: (336) 735-0950
Back-up: Rhonda Sulier
Phone: (336) 735-3370
SUBSIDIARIES
The following lists all significant subsidiaries and affiliates of A. O. Smith
Corporation. Certain direct and indirect subsidiaries of A. O. Smith Corporation
have been omitted because, considered in the aggregate as a single subsidiary,
such subsidiaries would not constitute a significant subsidiary.
Jurisdiction in Which
---------------------
Name of Subsidiary Incorporated
- ------------------ ------------
AOS Holding Company Delaware
A. O. Smith International Corporation Delaware
A. O. Smith Export, Ltd. Barbados
A. O. Smith Electrical Products Canada Limited Canada
A. O. Smith Enterprises Ltd. Canada
A. O. Smith (China) Water Heater Co., Ltd. China
A. O. Smith L'eau Chaude S.a.r.l. France
A. O. Smith Warmwasser-Systemtechnik GmbH Germany
A. O. Smith Electrical Products Limited Liability Company Hungary
A. O. Smith Electric Motors (Ireland) Ltd. Ireland
A. O. Smith Holding (Ireland) Ltd. Ireland
IG-Mex, S.A. de C.V. Mexico
Motores Electricos de Juarez, S.A. de C.V. Mexico
Motores Electricos de Monterrey, S.A. de C.V. Mexico
Productos de Agua, S.A. de C.V. Mexico
Productos Electricos Aplicados, S.A. de C.V. Mexico
A. O. Smith Electrical Products B.V. The Netherlands
A. O. Smith Water Products Company B.V. The Netherlands
A. O. Smith Electrical Products (S.E.A) Pte Ltd Singapore
A. O. Smith Electrical Products Limited United Kingdom
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos. 2-72542, 33-19015, 33-21356, 33-37878, 33-56827, 333-05799, and
333-92329) pertaining to the 1990 Long-Term Executive Incentive Compensation
Plan and Long-Term Executive Incentive Compensation Plan of A. O. Smith
Corporation and in the related prospectuses of our report dated January 19,
2001, with respect to the consolidated financial statements and schedule of A.
O. Smith Corporation included in this Annual Report (Form 10-K) for the year
ended December 31, 2000.
ERNST & YOUNG LLP
Milwaukee, Wisconsin
February 20, 2001
