2001
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, 2001
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 1-8142
ENGELHARD CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 22-1586002
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
101 WOOD AVENUE, ISELIN, NJ 08830
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (732) 205-5000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
----------------------------------- -----------------------------------------
Common Stock, par value $1 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X|. No | | .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes |X|.
Number of shares of common stock outstanding as of March 15, 2002 - 129,915,302.
Aggregate market value of common stock held by non-affiliates as of
March 15,2002 - $3,927,339,579.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates certain information by reference to the Proxy Statement
for the 2002 Annual Meeting of Shareholders, which will be filed by April 30,
2002.
1
Table of Contents
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Item Page
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Part I
1. Business
(a) General development of business 3
(b) Segment and geographic area data 3-6, 58-61
(c) Description of business 3-6, 58-61
2. Properties 8-9
3. Legal Proceedings 9-10
4. Submission of Matters to a Vote of 10
Security Holders
Part II
5. Market for Registrant's 11
Common Equity and Related
Stockholder Matters
6. Selected Financial Data 12,67
7. Management's Discussion and 13-27
Analysis of Financial Condition
and Results of Operations
8. Financial Statements and 28-66
Supplementary Data
9. Changes in and Disagreements with 68
Accountants on Accounting and Financial
Disclosure
Part III
10. Directors and Executive Officers of 69-70
the Registrant
11. Executive Compensation 70
12. Security Ownership of Certain 70
Beneficial Owners and Management
13. Certain Relationships and Related 70
Transactions
Part IV
14. Exhibits, Financial Statement 71-229
Schedules, and Reports on Form 8-K
2
PART I
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Item 1. Business
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Engelhard Corporation (which together with its subsidiaries, is
collectively referred to as the Company) was formed under the laws of Delaware
in 1938 and became a public company in 1981. The Company's principal executive
offices are located at 101 Wood Avenue, Iselin, NJ, 08830 (telephone number
(732) 205-5000).
The Company develops, manufactures and markets technology-based performance
products and engineered materials for a wide spectrum of industrial customers.
It also provides services to precious and base-metal customers.
The Company employed approximately 6,540 people as of January 1, 2002 and
operates on a worldwide basis with corporate, operating headquarters, principal
manufacturing facilities and mineral reserves in the United States and other
operations in the Asia-Pacific region, the European Community, the Russian
Federation, South Africa and South America.
The Company's businesses are organized into four reportable segments -
Environmental Technologies, Process Technologies, Appearance and Performance
Technologies and Materials Services.
The following information on the Company is included in Note 17, "Business
Segment and Geographic Area Data," of the Notes to Consolidated Financial
Statements: net sales to external customers, special and other charges,
operating earnings, net interest expense, depreciation, depletion and
amortization, equity in earnings of affiliates, total assets, equity investments
and capital expenditures.
ENVIRONMENTAL TECHNOLOGIES
The Environmental Technologies segment markets cost-effective compliance
with environmental regulations enabled by sophisticated emission-control
technologies and systems.
Environmental catalysts are used in applications such as the abatement of
carbon monoxide, oxides of nitrogen and hydrocarbon emissions from gasoline,
diesel and alternate-fueled vehicles. These catalysts also are used to remove
odors, fumes and pollutants associated with a variety of process industries;
co-generation and gas-turbine power generation; household appliances and lawn
and garden power tools.
The Company also participates in the manufacture and supply of automotive
emission-control catalysts through equity affiliates serving the Asia-Pacific
region: N.E. Chemcat Corporation (Japan) - 38.8%-owned; and Heesung-Engelhard
(South Korea) - 49%-owned, both of which also produce other catalysts and
products. Equity earnings of N.E. Chemcat are included in the Company's "All
Other" segment, whereas equity earnings from Heesung-Engelhard are included in
Environmental Technologies.
3
The products of the Environmental Technologies segment compete in the
marketplace on the basis of value performance and cost. No single competitor is
dominant in the markets in which the Company operates.
The manufacturing operations of the Environmental Technologies segment are
carried out in the United States, Germany, India, South Africa, South America,
China, Thailand and the United Kingdom with equity investments located in South
Korea and the United States. The products are sold principally through the
Company's sales organizations or those of its equity investments, supplemented
by independent distributors and representatives.
Principal raw materials used by the Environmental Technologies segment
include precious metals, procured by the Materials Services segment, and a
variety of minerals and chemicals that are generally readily available.
As of January 1, 2002, the Environmental Technologies segment had
approximately 1,830 employees worldwide.
PROCESS TECHNOLOGIES
The Process Technologies segment enables customers to make their processes
more productive, efficient, environmentally sound and safer through the supply
of advanced chemical-process catalysts, additives and sorbents.
Process Technologies' chemical-production catalysts are used in the
manufacture of a variety of products and intermediates made by chemical,
petrochemical, pharmaceutical and agricultural-chemical producers. In addition,
they are used in the production of polypropylene which is used in a wide range
of products, including food packaging, carpets, toys and automobile bumpers.
Sorbents are used to purify and decolorize naturally occuring fats and oils for
the manufacture of shortenings, margarines and cooking oils. Petroleum catalysts
are used by refiners to provide economies in petroleum processing and to meet
increasingly stringent fuel-quality requirements. The segment's catalyst
products are based on the Company's proprietary technology and often are
application-specific.
In October 2001, the Company acquired the fats and oils catalyst business
of Sud Chemie for approximately $13.6 million. This aquisition broadens the
Company's catalyst technology offering to oleochemical markets.
The products of the Process Technologies segment compete in the market-
place on the basis of value performance and cost. No single competitor is
dominant in the markets in which the Company operates.
The manufacturing operations of the segment are carried out in the United
States, Italy, The Netherlands and Spain. The products are sold
principally through the Company's sales organizations supplemented by
independent distributors and representatives.
The principal raw materials used by the segment include metals, procured by
the Materials Services segment and third parties; kaolin supplied by the
Appearance and Performance Technologies segment; and a variety of other minerals
and chemicals that are generally readily available.
As of January 1, 2002, the Process Technologies segment had approximately
1,810 employees worldwide. Most hourly employees are covered by collective
bargaining agreements. Employee relations have generally been good.
4
APPEARANCE AND PERFORMANCE TECHNOLOGIES
The Appearance and Performance Technologies segment provides pigments and
performance additives that enable its customers to market enhanced image and
functionality in their products. This segment serves a broad array of end
markets including coatings, plastics, cosmetics, construction and paper. This
segment's products help customers improve the look, performance and overall cost
of their products. This segment is also the internal supply source of precursors
for the Company's advanced chemical-process catalysts.
The segment's principal products include special-effect pigments, color
pigments and dispersions, paper pigments and extenders, specialty performance
additives and iridescent and specialty films. The segment's special-effect
pigments provide a range of aesthetic effects in coatings, personal care and
cosmetics products, packaging, plastics, inks and other applications. Color
pigments include a broad range of organic and inorganic products, dispersions
and universal colorants that impart color to automotive finishes, coatings,
plastics and inks. Paper pigments are used as coating and extender pigments to
improve the opacity, brightness, gloss and printability of coated and uncoated
papers. Specialty performance additives are used to improve the functionality,
appearance and value of liquid and powder coatings, plastics, rubber, adhesives,
inks, concrete and cosmetics. Iridescent and specialty films are used to
visually enhance a variety of products in such applications as product
packaging, labels, glitter, gift wrap and textiles.
The products of the Appearance and Performance Technologies segment compete
on the basis of value performance and cost. No single competitor is dominant in
the markets in which the Company competes.
Appearance and Performance Technologies manufacturing operations are
carried out in the United States, South Korea and Finland. Subsidiary sales and
distribution centers are located in France, Hong Kong, Japan, Mexico, and The
Netherlands. Products are sold through the Company's sales organization
supplemented by independent distributors and representatives.
The principal raw materials used by the Appearance and Performance
Technologies segment include naturally occurring minerals such as kaolin,
attapulgite and mica, which are mined from mineral reserves owned or leased by
the Company, and a variety of other minerals and chemicals which are readily
available.
As of January 1, 2002, the Appearance and Performance Technologies segment
had approximately 2,105 employees worldwide. Most hourly employees are covered
by collective bargaining agreements. Employee relations have generally been
good.
5
MATERIALS SERVICES
The Materials Services segment provides a full array of services to the
Company's technology businesses and their customers who rely on certain precious
and base metals as raw materials for their products. This is a distribution and
materials services business that purchases and sells precious metals, base
metals and related products and services. It does so under a variety of pricing
and delivery arrangements structured to meet the logistical, financial and
price-risk management requirements of the Company, its customers and suppliers.
Additionally, it offers related services for precious-metal refining and storage
and produces salts and solutions.
The Materials Services segment is responsible for procuring precious and
base metals to meet the requirements of the Company's operations and its
customers. Supplies of newly mined platinum group metals are obtained primarily
from South Africa and the Russian Federation, and to a lesser extent, from the
United States and Canada, the only four regions that are known significant
sources. Most of these platinum group metals are obtained pursuant to a number
of contractual arrangements with different durations and terms. Gold, silver and
base metals are purchased from various sources. In addition, in the normal
course of business, certain customers and suppliers deposit significant
quantities of precious metals with the Company under a variety of arrangements.
Equivalent quantities of precious metals are returnable as product or in other
forms.
Offices are located in the United States, Italy, Japan, the Russian
Federation, Switzerland and the United Kingdom. As of January 1, 2002, the
Materials Services segment had approximately 125 employees worldwide.
MAJOR CUSTOMERS
For the years ended December 31, 2001, 2000 and 1999, Ford Motor Company, a
customer of the Environmental Technologies and Materials Services segments,
accounted for more than 10% of the Company's net sales. Sales to this customer
included both fabricated products and precious metals and were therefore
significantly influenced by fluctuations in precious-metal prices as was the
quantity and type of metal purchased. In such cases, market price fluctuations,
quantities and types purchased can result in material variations in sales
reported, but do not usually have a direct or significant effect on earnings.
RESEARCH AND PATENTS
The Company currently employs approximately 565 scientists, technicians and
auxiliary personnel engaged in research and development in the fields of surface
chemistry and materials science. These activities are conducted in the United
States and abroad. Research and development expenses were $84.3 million in 2001,
$82.8 million in 2000 and $77.9 million in 1999.
6
Research facilities include fully staffed instrument analysis laboratories
that the Company maintains in order to achieve the high level of precision
necessary for its technology businesses and to assist customers in understanding
how the Company's products and services add value to their businesses.
The Company owns, or is licensed under, numerous patents secured over a
period of years. It is the policy of the Company to normally apply for patents
whenever it develops new products or processes considered to be commercially
viable and, in appropriate circumstances, to seek licenses when such products or
processes are developed by others. While the Company deems its various patents
and licenses to be important to certain aspects of its operations, it does not
consider any significant portion or its business as a whole to be materially
dependent on patent protection.
ENVIRONMENTAL MATTERS
With the oversight of environmental agencies, the Company is currently
preparing, has under review, or is implementing environmental investigations and
cleanup plans at several currently or formerly owned and/or operated sites,
including Plainville, Massachusetts and Salt Lake City, Utah. The Company is
continuing to investigate contamination at Plainville under a 1993 agreement
with the United States Environmental Protection Agency (EPA). In conjunction,
the Company is continuing to address decommissioning issues by the Commonwealth
of Massachusetts under authority delegated by the Nuclear Regulatory Commission.
Investigation of the environmental status at the Salt Lake City site continues
under a 1993 agreement with the Utah Solid and Hazardous Waste Control Board.
In addition, as of December 31, 2001, eleven sites have been identified at
which the Company believes liability as a potentially responsible party (PRP) is
probable under the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, or similar state laws (collectively referred
to as Superfund) for the cleanup of contamination resulting from the historic
disposal of hazardous substances allegedly generated by the Company, among
others. Superfund imposes strict, joint and several liability under certain
circumstances. In many cases, the dollar amount of the claim is unspecified and
claims have been asserted against a number of other entities for the same relief
sought from the Company. Based on existing information, the Company believes
that it is a de minimis contributor of hazardous substances at a number of the
sites referenced above. Subject to the reopening of existing settlement
agreements for extraordinary circumstances or natural resource damages, the
Company has settled a number of other cleanup proceedings. The Company has also
responded to information requests from EPA and state regulatory authorities in
connection with other Superfund sites.
The accruals for environmental cleanup-related costs recorded in the
consolidated balance sheets at December 31, 2001 and 2000 were $23.2 million and
$24.7 million, respectively, including $0.6 million for Superfund sites in both
years. These amounts represent those costs that the Company believes are
probable and reasonably estimable. Based on currently available information and
analysis, the Company's accrual represents approximately 48% of what it believes
are the reasonably possible environmental cleanup-related costs of a noncapital
nature. The estimate of reasonably possible costs is less certain than the
probable estimate upon which the accrual is based.
7
Cash payments for environmental cleanup-related matters were $1.7 million
in both 2001 and 2000 and $2.4 million in 1999. The amounts accrued in
connection with environmental cleanup-related matters were not significant over
this time period.
For the past three-year period, environmental-related capital projects have
averaged less than 10% of the Company's total capital expenditure programs, and
the expense of environmental compliance (e.g. environmental testing, permits,
consultants and in-house staff) was not material.
There can be no assurances that environmental laws and regulations will not
become more stringent in the future or that the Company will not incur
significant costs in the future to comply with such laws and regulations. Based
on existing information and currently enacted environmental laws and
regulations, cash payments for environmental cleanup-related matters are
projected to be $4.2 million for 2002, which has already been accrued. Further,
the Company anticipates that the amounts of capitalized environmental projects
and the expense of environmental compliance will approximate current levels.
While it is not possible to predict with certainty, management believes that
environmental cleanup-related reserves at December 31, 2001 are reasonable and
adequate, and environmental matters are not expected to have a material adverse
effect on financial condition. These matters, if resolved in a manner different
from the estimates, could have a material adverse effect on the Company's
operating results or cash flows.
Item 2. Properties
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The Company leases a building on approximately seven acres of land with a
combined area of approximately 271,000 square feet in Iselin, NJ. This building
serves as the principal executive and administrative office of the Company and
its operating segments. The Company owns approximately 15 acres of land and
three buildings with a combined area of approximately 150,000 square feet in
Iselin, NJ. These buildings serve as the major research and development
facilities for the Company's operations. The Company also owns research
facilities in Gordon, GA; Union, NJ; Buchanan and Ossining, NY; Beachwood, OH;
Pasadena, TX; Hannover, Germany and DeMeern, The Netherlands.
The Environmental Technologies segment owns and operates plants in
Huntsville, AL; East Windsor, CT; Deerfield Beach, FL; Wilmington, MA; Hiram,
OH; Duncan, SC; Newark, NJ; Nienburg, Germany; Madras, India; Port Elizabeth,
South Africa; Indiatuba, Brazil; Shanghai, China; Rayoung, Thailand and Coleford
and Cinderford in the United Kingdom.
8
The Process Technologies segment owns and operates plants in Attapulgus and
Savannah, GA; Elyria, OH; Erie, PA; Seneca, SC; Pasadena, TX; Rome, Italy;
DeMeern, The Netherlands and Tarragona, Spain.
The Appearance and Performance Technologies segment owns and operates
attapulgite processing plants in Quincy, FL near the area containing its
attapulgite reserves, plus a mica mine and processing facilities in Hartwell,
GA. In addition, the segment owns and operates five kaolin mines and five
milling facilities in Middle Georgia, which serve an 85-mile network of
pipelines to three processing plants. It also owns land containing kaolin and
leases on a long-term basis kaolin mineral rights to additional acreage. The
segment also owns sales and manufacturing facilities in Helsinki, Kotka, and
Rauma, Finland and Tokyo, Japan, in addition to owning and operating color,
pearlescent pigment and film manufacturing facilities in Sylmar, CA; Louisville,
KY; Eastport, ME; Peekskill, NY; Elyria, OH; Charleston, SC and Inchon, South
Korea. Management believes the Company's kaolin, attapulgite and mica reserves
will be sufficient to meet its needs for the foreseeable future.
The Materials Services segment's operations are conducted at leased
facilities in Iselin and Carteret, NJ; Lincoln Park, MI; Tokyo, Japan; Moscow,
Russia; Zug, Switzerland and London, United Kingdom. In addition, the segment's
operations are conducted at owned facilities in Seneca, SC and Rome, Italy.
Management believes that the Company's processing and refining facilities,
plants and mills are suitable and have sufficient capacity to meet its normal
operating requirements for the foreseeable future.
Item 3. Legal Proceedings
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Various lawsuits, claims and proceedings are pending against the Company.
The Company is one of a number of defendants in numerous proceedings that
allege that the plaintiffs were injured from exposure to hazardous substances
purportedly supplied by the Company and other defendants. The Company is also
subject to a number of environmental contingencies (see Note 19, "Environmental
Costs," for further detail) and is a defendant in a number of lawsuits covering
a wide range of other matters. In some of these matters, the remedies sought or
damages claimed are substantial. While it is not possible to predict with
certainty the ultimate outcome of these lawsuits or the resolution of the
environmental contingencies, management believes, after consultation with
counsel, that resolution of these matters is not expected to have a material
adverse effect on financial condition. These matters, if resolved in a manner
different from management's current expectations, could have a material adverse
effect on the Company's operating results or cash flows.
9
In 1998, management learned that Engelhard and several other companies
operating in Japan had been victims of a fraudulent scheme involving base-metal
inventory held in third-party warehouses in Japan. The inventory loss was
approximately $40 million in 1997 and $20 million in 1998. The Company is
vigorously pursuing recovery, including litigation in several cases. The most
significant case, in New Jersey Superior Court, is expected to reach trial in
the spring of 2002. In the first quarter of 1998, Engelhard recorded a
receivable from the insurance carriers and third parties involved for
approximately $20 million. This amount represented management's and counsel's
best estimate of the minimum probable recovery from the various insurance
policies and other parties involved in the fraudulent scheme. In 2001, the
Company recovered $3.7 million, reducing the receivable discussed above to $16.3
million. The Company continues to pursue recovery from insurance and other
parties.
The Company is involved in a value-added tax dispute in Peru. Management
believes the Company was targeted by corrupt officials within the former
Peruvian government. On December 2, 1999, Engelhard Peru, S.A., a wholly owned
subsidiary, was denied refund claims of approximately $28 million. The Peruvian
tax authority also determined that Engelhard Peru, S.A. is liable for
approximately $63 million in refunds previously paid, fines and interest as of
December 31, 1999. Interest and fines continue to accrue at rates established by
Peruvian law. Engelhard Peru, S.A. is contesting these determinations
vigorously, and management believes, based on consultation with counsel, that
Engelhard Peru, S.A. is entitled to all refunds claimed and is not liable for
these additional taxes, fines or interest. In late October 2000, a criminal
proceeding alleging tax fraud and forgery related to this value-added tax
dispute was initiated against two Lima-based officials of Engelhard Peru, S.A.
Although Engelhard Peru, S.A. is not a defendant, it may be civilly liable in
Peru if its representatives are found responsible for criminal conduct.
Accordingly, Engelhard Peru,S.A. is assisting in the vigorous defense of this
proceeding. Management believes the maximum economic exposure is limited to the
aggregate value of all assets of Engelhard Peru, S.A., including unpaid refunds,
which is approximately $30 million.
Item 4. Submission of Matters to a Vote of Security Holders
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Not applicable.
10
PART II
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Market for Registrant's Common Equity
Item 5. and Related Stockholder Matters
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As of March 1, 2002, there were 5,498 holders of record of the Company's
common stock, which is traded on the New York Stock Exchange (ticker symbol
"EC"), as well as on the London and Swiss stock exchanges.
The range of market prices and cash dividends for each quarterly period
were as follows:
NYSE Cash
Market Price dividends
High Low per share
--------- --------- --------------
2001
First quarter $27.35 $19.31 $0.10
Second quarter 29.20 24.10 0.10
Third quarter 27.23 18.20 0.10
Fourth quarter 28.40 22.27 0.10
2000
First quarter $19.19 $12.56 $0.10
Second quarter 19.00 14.31 0.10
Third quarter 19.75 15.06 0.10
Fourth quarter 21.50 16.00 0.10
11
Item 6. Selected Financial Data
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Selected Financial Data
($ in millions, except per-share amounts)
OPERATING RESULTS 2001 2000 1999 1998 1997
----------------- ---- ---- ---- ---- ----
Net sales $5,096.9 $5,542.6 $4,488.0 $4,246.6 $3,716.8
Net earnings(1) 225.6 168.3 197.5 187.1 47.8
Basic earnings per share 1.73 1.33 1.49 1.30 0.33
Diluted earnings per share 1.71 1.31 1.47 1.29 0.33
Total assets 2,995.5 3,166.8 2,920.5 2,866.3 2,586.3
Long-term debt 237.9 248.6 499.5 497.4 373.6
Shareholders' equity 1,003.5 874.6 764.4 901.6 785.3
Cash dividends paid per share 0.40 0.40 0.40 0.40 0.38
Return on average shareholders' equity 24.0% 20.5% 23.7% 22.2% 5.9%
Unless otherwise indicated, all per-share amounts are presented as diluted earnings per share, as calculated
under Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share."
(1) Net earnings in 2001 include a gain of $3.4 million ($0.03 per share) on the sale of inventory accounted
for under the LIFO method.
Net earnings in 2000 include the following: fourth-quarter special and other charges of $75.1 million ($0.59 per
share) for a variety of events (see Note 5, "Special and Other Charges," for further detail), a third-quarter
impairment charge of $16.9 million ($0.13 per share) related to the write-down of goodwill and fixed assets of the
Company's HexCore business unit, net gains of $12.9 million ($0.10 per share) on sales of investments and land, a
gain of $2.5 million ($0.02 per share) on the sale of inventory accounted for under the LIFO method and a gain of
$4.4 million ($0.03 per share) related to the reduction of precious metal inventories of Engelhard-CLAL,
a precious-metal-fabrication joint venture.
Net earnings in 1999 include net gains of $6.0 million ($0.04 per share) on sales of investments and land, a gain
of $2.2 million ($0.02 per share) on the sale of inventory accounted for under the LIFO method and a gain of $1.3
million ($0.01 per share) related to the reduction of precious metal inventories of Engelhard-CLAL.
Net earnings in 1998 include a gain of $4.9 million ($0.03 per share) on the sale of inventory accounted for under
the LIFO method.
Net earnings in 1997 include special and other charges of $117.7 million ($0.81 per share) for a variety of events
(including restructuring actions and a loss from the base-metal fraud in Japan). In addition, 1997 results include
a gain of $2.0 million ($0.01 per share) on the sale of inventory accounted for under the LIFO method.
12
Management's Discussion and Analysis
Item 7. of Financial Condition and Results of Operations
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Unless otherwise indicated, all per-share amounts are presented as diluted
earnings per share, as calculated under Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings per Share."
For a discussion of the Company's critical accounting policies, see page 25.
RESULTS OF OPERATIONS
Net sales were $5.1 billion in 2001, compared with $5.5 billion in 2000 and
$4.5 billion in 1999. Net earnings were $225.6 million ($1.71 per share)in 2001,
compared with $168.3 million ($1.31 per share) in 2000 and $197.5 million ($1.47
per share) in 1999.
Net earnings of $168.3 million ($1.31 per share) in 2000 include special and
other charges of $92.0 million ($0.72 per share) for a variety of events (see
Note 5, "Special and Other Charges," for further detail) and net gains on asset
sales of $12.9 million ($0.10 per share - see "Gain on Sale of Investments and
Land, Net" section on page 20 for further detail). Excluding these items, the
Company would have reported net earnings of $247.4 million and diluted earnings
per share of $1.93 in 2000.
Net earnings of $197.5 million ($1.47 per share) in 1999 include net gains on
asset sales of $6.0 million ($0.04 per share - see page 20 for further detail).
Excluding these net gains, the Company would have reported net earnings of
$191.5 million and diluted earnings per share of $1.43 in 1999.
The information in the discussion of each segment's results is derived directly
from that segment's internal financial reporting system used for management
purposes. Items allocated to each segment's results include the majority of
corporate overhead charges. Unallocated items include net interest expense,
royalty income, sale of inventory accounted for under the last-in, first-out
(LIFO) method, certain special and other charges and other miscellaneous
corporate items.
ENVIRONMENTAL TECHNOLOGIES
The Environmental Technologies segment markets cost-effective compliance with
environmental regulations enabled by sophisticated emission-control technologies
and systems.
2001 Performance
Sales increased 2% to $646.7 million, and operating earnings increased 22% to
$142.4 million. Excluding the impact of special and other charges of $15.4
million in 2000, operating earnings increased 8%.
13
Discussion (excluding the impact of special and other charges in 2000)
The majority of this segment's sales and operating earnings are derived from
technologies to control pollution from mobile sources, including gasoline- and
diesel-powered passenger cars, sport-utility vehicles, trucks, buses and
off-road vehicles. In spite of a 5% decline in production of light-duty vehicles
in both North America and Europe, earnings increased primarily from higher
volumes of auto-emission catalysts in North America.
Sales and earnings also were favorably impacted by strength in the segment's
non-automotive markets, primarily from increased volumes of emission-control
systems for gas turbines used in peak-power-generation facilities. These
increases were partly offset by the absence of results from the segment's
metal-joining products business sold in September 2000 and the segment's silver
nitrate business sold in February 2001. Excluding the results of these
dispositions, sales and operating earnings would have increased 9% and 14%,
respectively.
Outlook
This segment expects growth in sales and operating earnings to continue as
emission-control regulations become stricter around the world and address a much
broader range of emission sources. Demand from the automotive market is expected
to increase in response to the Company's development of several new
technologies. Demand also is expected to accelerate from the diesel-bus and
truck retrofit market. Programs in these retrofit markets are underway in Paris,
London, Hong Kong, the state of California and a number of cities in the United
States.
Although autobuilds were down in 2001, this segment was able to achieve
favorable earnings growth with the start-up of new technology and a favorable
platform mix. With autobuilds forecasted to be down again in 2002, this segment
expects some difficult comparisons in the first half of the year.
Sales of advanced catalysts for medium- and heavy-duty diesel trucks are
expected to expand beginning in the second half of 2002 as new regulations begin
to take effect. Demand also is expected to remain high for technologies related
to peak-power generation. This segment continues to reduce its reliance on the
automotive market by developing an array of other non-automotive markets and
applications, including technologies for motorcycles; small engines, such as
lawn and garden power equipment; charbroilers; materials handling, mining and
construction; and ozone management.
2000 compared with 1999
Sales increased 9% to $636.7 million, and operating earnings increased 14% to
$116.4 million. Excluding the impact of special and other charges of $15.4
million in 2000, operating earnings increased 29%.
14
Discussion (excluding the impact of special and other charges in 2000)
Sales and earnings increased primarily from higher volumes of auto-emission
catalysts in North America, as the business benefited from increased volumes
with General Motors and Nissan. Earnings benefited from lower manufacturing
costs and the elimination of losses from the segment's sensor technologies
business sold in February 2000. These earnings increases were partially offset
by costs related to the start-up of new manufacturing facilities in Brazil and
China and expansion of a facility in India.
Sales and earnings derived from the segment's non-automotive markets increased
due to continued high demand for emission-control systems for gas turbines and
heavy-duty diesel-engine retrofits for bus fleets. These increases were partly
offset by the absence of three months' results from the segment's metal-joining
products business sold in September 2000. Earnings from these non-automotive
markets were also partially offset by higher research and administrative costs.
PROCESS TECHNOLOGIES
The Process Technologies segment enables customers to make their processes more
productive, efficient, environmentally sound and safer through the supply of
advanced chemical-process catalysts, additives and sorbents.
2001 Performance
Sales of $568.2 million in 2001 were essentially unchanged compared with the
same period in 2000, and operating earnings increased 16% to $94.3 million.
Excluding the impact of special and other charges of $5.5 million in 2000,
operating earnings increased 9%.
Discussion (excluding the impact of special and other charges in 2000)
Sales were unchanged compared with 2000 as higher volumes to chemical-production
and petroleum-refining markets were offset by significantly lower precious metal
prices, which are passed through to chemical-production catalyst customers in
Europe. In the United States, manufactured catalysts often incorporate precious
metal owned by customers. Excluding the impact of these pass-through metal
costs, sales would have increased 8% on higher volumes and prices. The higher
volumes were driven by strong demand for Lynx 1000 (trademark) catalyst used in
the production of polypropylene and NaphthaMax (trademark), which enables
petroleum refiners to increase gasoline yields.
The increase in operating earnings was driven primarily by reduced costs from
supply-chain initiatives, productivity improvements, higher volumes, moderate
price increases and full-year inclusion of results from the polyolefin catalyst
business of Targor GmbH acquired in September 2000. Earnings in 2001 were held
back by higher energy and raw material costs.
Outlook
Sales and earnings growth in this segment is expected to come from custom
process catalysts, high value-add petroleum refining catalysts (primarily
NaphthaMax (trademark) and FlexTec (trademark)), petroleum refining additives,
increased market penetration for polypropylene catalysts and a favorable
comparison from the full-year inclusion of results of a fats and oils catalyst
business acquired from Sud Chemie. Additional growth is expected from continued
cost management, productivity improvements and product technology advances.
Capacity for a new custom gas-to-liquids catalyst was added in 2001. Overall
weakness in the chemical-production market and a relatively flat demand in the
petroleum refining market are expected to continue for most of 2002.
15
2000 compared with 1999
Sales increased 9% to $566.6 million, and operating earnings decreased 1% to
$81.0 million. Excluding the impact of special and other charges of $5.5 million
in 2000, operating earnings increased 6%.
Discussion (excluding the impact of special and other charges in 2000)
Earnings growth was driven primarily by reduced costs from supply-chain
initiatives, productivity improvements, strong demand for Lynx 1000
polypropylene catalysts and inclusion of results from the polyolefin catalyst
business of Targor GmbH acquired in September 2000. Earnings in 2000 were
partially offset by higher energy and raw material costs as well as an
unfavorable foreign currency translation.
APPEARANCE AND PERFORMANCE TECHNOLOGIES
The Appearance and Performance Technologies segment provides pigments and
performance additives that enable its customers to market enhanced image and
functionality in their products. This segment serves a broad array of end
markets including coatings, plastics, cosmetics, construction and paper. This
segment's products help customers improve the look, performance and overall cost
of their products. This segment is also the internal supply source of precursors
for the Company's advanced chemical-process catalysts.
2001 Performance
Sales decreased 7% to $634.4 million, and operating earnings increased 52% to
$46.5 million. Excluding the impact of special and other charges of $49.7
million in 2000, operating earnings decreased 42%.
Discussion (excluding the impact of special and other charges in 2000)
Declines in this segment's sales and operating earnings resulted from weak end
markets and significantly higher energy costs. Most notable was the paper
market, where weak pigment demand and industry overcapacity kept prices at
depressed levels. Markets for special-effect materials were mixed as lower
volumes for technologies used in automotive finishes were partially offset by
higher demand for those utilized in cosmetics.
Outlook
Revenues are expected to increase as recovery from the current economic
recession is anticipated to begin gradually after mid-year. Sales and earnings
from the paper market are expected to benefit from the impact of industry-wide
price increases announced in the fourth quarter of 2001. Revenue growth in 2002
and future years is expected to result from continuing new product development
efforts, product-line extensions, market diversification, and a greater focus on
higher value markets and customers for kaolin-based technologies.
16
In 2001, this segment put asset redeployment and productivity programs in place
to shift production resources to markets that offer the highest value. As a
result, this segment started to see a modest improvement in 2001 and expects to
benefit from these actions in 2002. This segment will continue efforts to
improve productivity through cost control and process improvements in
manufacturing operations, as well as aggressively controlling administrative
costs.
2000 compared with 1999
Sales increased 1% to $684.4 million, and operating earnings decreased 65% to
$30.5 million. Excluding the impact of special and other charges of $49.7
million in 2000, operating earnings decreased 8%.
Discussion (excluding the impact of special and other charges in 2000)
Earnings declined as the benefits from higher sales and volumes of
special-effect pigments, supply-chain management initiatives and productivity
improvements were more than offset by the negative impact of declining sales of
pigments to the paper market, lower selling prices and significantly higher
energy costs.
MATERIALS SERVICES
The Materials Services segment provides a full array of services to the
Company's technology businesses and their customers who rely on certain precious
and base metals as raw materials for their products. This is a distribution and
materials services business that purchases and sells precious metals, base
metals and related products and services. It does so under a variety of pricing
and delivery arrangements structured to meet the logistical, financial and
price-risk management requirements of the Company, its customers and suppliers.
Additionally, it offers related services for precious-metal refining and storage
and produces salts and solutions.
2001 Performance
Sales decreased 11% to $3.2 billion, and operating earnings decreased 57% to
$56.1 million.
Discussion
Sales for this segment include substantially all of the Company's sales of
metals to industrial customers of all segments. Sales also include fees invoiced
for services rendered (e.g. refining and handling charges). Because of the
logistical and hedging nature of much of this business and the significant
precious metal values included in both sales and cost of sales, gross margins
tend to be low in relation to the Company's other manufacturing businesses as
does capital employed. This effect also dampens the gross margin percentages of
the Company as a whole, but improves the return on investment.
While most customers for the Company's platinum-group-metals catalysts purchase
the metal from Materials Services, some choose to deliver metal from other
sources prior to the manufacture of the catalysts. In such cases, precious metal
values are not included in sales. The mix of such arrangements and the extent of
market price fluctuations can significantly affect the reported level of sales
and cost of sales. Consequently, there is no direct correlation between
year-to-year changes in reported sales and operating earnings.
17
Operating earnings and sales were down due to significantly lower
platinum-group-metals prices and lower volumes. The decrease in earnings was
partially offset by increased earnings in the recycling (refining) of platinum
group metals and the reversal of certain expense accruals that are no longer
necessary due to the recovery of metal from an unexpected industrial customer
bankruptcy and the restructuring of a professional services contract.
Outlook
The results of this segment are likely to approximate the more typical levels
produced in 1999, rather than the exceptional results reported in 2000 and the
somewhat higher levels of 2001. While a sustainable level of base business is
anticipated, the benefits of potential market volatility represent an upside for
this segment. Volatility not only increases the spreads on transactions, but
also provides opportunities to benefit from strong and prudent physical
positions (see the "Commodity Price Risk" section on page 24 for further
details).
2000 compared with 1999
Sales increased 39% to $3.6 billion, and operating earnings increased 226% to
$129.3 million.
The sales increase for the year resulted primarily from higher
platinum-group-metals prices and continued strong industrial demand for these
metals. Operating earnings increased significantly due to a combination of
higher volumes, prices and price volatility for all platinum group metals, as
well as growth in the recycling (refining) of these metals.
ACQUISITIONS
Other Party Business Arrangement Transaction Date Business Opportunity
----------- -------------------- ---------------- --------------------
Sud-Chemie AG Acquired the fats and October 2001 Broadens the Company's
(Sud Chemie) oils catalyst business catalyst technology
of Sud Chemie for offering to oleochemical
$13.6 million markets
Targor GmbH Acquired the polyolefin September 2000 Expansion of catalyst
catalyst business for business
$35.1 million
ISP Acquired the bismuth March 1999 Expansion of special-effect
product line for pigments for cosmetics
$11.5 million
CONSOLIDATED GROSS PROFIT
Gross profit as a percentage of sales was 13.0% in 2001, compared with 13.2% in
2000 and 14.4% in 1999. Excluding the impact of special and other charges of
$27.1 million in 2000, gross profit as a percentage of sales was 13.7% in 2000.
The decrease in 2001 was primarily driven by lower margins earned in the
Materials Services segment. Sales from this segment decreased 11% in 2001 to
$3.2 billion and provided a gross profit of 3%, while 2001 sales from all other
reportable segments decreased 2% to $1.8 billion and provided a gross profit of
31%. As described earlier, the lower margins on Materials Services sales are
driven by the inclusion of the value of precious metals in both sales and cost
of sales.
18
SELLING, ADMINISTRATIVE AND OTHER EXPENSES
Selling, administrative and other expenses were $336.0 million in 2001, compared
to $382.3 million in 2000 and $328.2 million in 1999. The decrease in 2001 was
primarily due to the impact of special and other charges reported in 2000 and
lower compensation costs.
EQUITY EARNINGS
Equity in earnings of affiliates was $29.1 million in 2001, compared with equity
earnings of $24.2 million in 2000 and $16.3 million in 1999. The earnings in
2000 reflect special and other charges of $0.8 million related to the write-off
of the Company's Dnipro Kaolin 50%-owned joint venture. The increase in 2001 was
primarily due to higher equity earnings from Engelhard-CLAL, a 50%-owned
precious-metal-fabrication joint venture, primarily on gains related to a change
in the mix of platinum group metals used in its operations. Higher equity
earnings were also reported in 2001 for Heesung-Engelhard, a 49% -owned
environmental catalyst joint venture in Korea. The increase in 2000 was
primarily due to higher equity earnings from Engelhard-CLAL and
Heesung-Engelhard. The higher Engelhard-CLAL earnings were primarily due to
gains related to the reduction of precious metal inventories as the joint
venture is in the process of selling off business units.
As of December 31, 2001, the Company's accumulated other comprehensive loss
included a foreign currency translation loss of approximately $16.4 million
relating to its Engelhard-CLAL joint venture. At this time, in accordance with
Statement of Financial Accounting Standards No. 52, "Foreign Currency
Translation," the joint venture's assets are held for use and therefore the
associated foreign currency translation loss has not been included in the
carrying value of the investment when assessing the investment for impairment.
Accordingly, at December 31, 2001, the investment is not impaired. The
Engelhard-CLAL joint venture is currently in the process of disposing of a
portion of its businesses. If the joint venture disposes of the remaining
significant businesses, the Company will likely develop and commit to a plan to
liquidate or dispose of the joint venture. At such time, the Company will
include the foreign currency translation loss as part of the carrying amount of
this investment when evaluating the investment for impairment. If and when this
happens, it will be likely that the carrying value of the joint venture will
exceed the fair value of the investment, thus resulting in the recognition of an
impairment loss in current earnings.
As the Engelhard-CLAL joint venture has already disposed of several operations,
the Company expects significantly lower results from this venture in 2002.
19
GAIN ON SALE OF INVESTMENTS AND LAND, NET
In the first quarter of 2000, the Company recorded a loss of $6.0 million ($4.1
million after tax or $0.03 per share) associated with the divestiture of the
International Dioxide, Inc. (IDI) business unit.
In the third quarter of 2000, the Company sold its metal-joining products
business located in Warwick, Rhode Island and recorded a gain of $24.8 million
($17.0 million after tax or $0.13 per share).
In the first quarter of 1999, the Company sold its investment in Acreon
Catalysts, a hydroprocessing joint venture. The Company recorded a gain of $1.0
million ($0.7 million after tax or less than $0.01 per share).
In the second quarter of 1999, the Company sold its metal-plating business and
recorded a gain of $9.3 million ($6.5 million after tax or $0.05 per share). In
addition, the Company reduced the carrying value of its investment in Engelhard
Highland Private Ltd., an India-based venture, to its estimated net realizable
value of $1.0 million. Accordingly, the Company recorded a loss of $4.6 million
($3.2 million after tax or $0.02 per share).
In the third quarter of 1999, the Company sold its Mearlcrete concrete foaming
agent business. The Company recorded a gain of $1.1 million ($0.7 million after
tax or less than $0.01 per share). In addition, the Company sold land and
certain mineral rights located in Talladega County, Alabama. The Company
recorded a gain of $1.8 million ($1.3 million after tax or $0.01 per share).
INTEREST
Net interest expense was $44.0 million in 2001, compared with $62.6 million in
2000 and $56.6 million in 1999. Net interest expense in 2001 decreased due to
decreased borrowings,lower short-term interest rates and an increase in interest
income. Net interest expense in 1999 included a reduction of $7.1 million
resulting from the settlement of treasury lock positions that were entered into
to hedge anticipated long-term borrowings that never occurred. Excluding this
reduction from 1999, net interest expense in 2000 decreased due to decreased
borrowings, partially offset by increased interest rates.
20
The Company capitalized interest of $3.0 million in 2001, $3.9 million in 2000
and $2.6 million in 1999.
Interest income was $3.3 million in 2001, $2.1 million in 2000 and $2.9 million
in 1999.
TAXES
The worldwide income tax expense was $79.7 million in 2001, compared with $77.4
million in 2000 and $86.7 million in 1999. The effective income tax rate was
26.1% in 2001, 31.5% in 2000 and 30.5% in 1999.
The decrease in the worldwide effective tax rate in 2001 was primarily due to
the recognition of foreign tax credits generated in previous years and the
recognition of favorable tax variances from the foreign sales corporation and
percentage depletion deductions. The increase in the worldwide effective tax
rate in 2000 primarily resulted from the Company's mix of income in
jurisdictions with higher tax rates and the mix of income from businesses with
fewer tax benefits.
FINANCIAL CONDITION AND LIQUIDITY
The working capital deficit was $7.1 million at December 31, 2001, compared with
a deficit of $85.0 million at December 31, 2000. The current ratio was 1.0 in
2001 and 2000. The year-end market value of the Company's precious-metal
inventories accounted for under the LIFO method exceeded carrying cost by $111.1
million at December 31, 2001, compared with $254.1 million at December 31, 2000.
The decrease in excess value reflects lower market values and the impact of
slightly reduced inventory levels (See Note 6, "Inventories," for further
detail).
The Company's total debt decreased to $626.9 million at December 31, 2001 from
$750.7 million at December 31, 2000. The percentage of total debt to total
capitalization decreased to 38% at December 31, 2001 from 46% at December 31,
2000, primarily due to decreased borrowings and increased retained earnings.
The Company currently has a $400-million, five-year committed credit facility
that expires in May 2006 and a $400-million, 364-day committed credit facility
that expires in May 2002, with a group of major U.S. and overseas banks.
Unused, uncommitted lines of credit exceeded $650 million at December
31, 2001.
In July 1998, the Company filed a shelf registration for $300 million of
corporate debt. Plans to issue debt under the shelf registration are under
consideration by management.
21
Operating activities provided net cash of $345.8 million in 2001 compared with
$180.1 million in 2000 and $349.0 million in 1999. The variance in cash flows
from operating activities primarily occurred in the Materials Services segment
and reflects changes in metal positions used to facilitate requirements of the
Company, its metals customers and suppliers. Materials Services routinely enters
into a variety of arrangements for the sourcing of metals. Generally,
transactions are hedged on a daily basis (see Note 1, "Summary of Significant
Accounting Policies" for further detail). Hedging is accomplished primarily
through forward, future and option contracts. However, in closely monitored
situations for which exposure levels have been set by senior management, the
Company from time to time holds large unhedged industrial commodity positions
that are subject to market price fluctuations. Hedged metal obligations
(primarily amounts payable for metal purchased forward as an economic hedge) are
considered financing activities and are included in that section of the
Company's "Consolidated Statements of Cash Flows." Materials Services works to
ensure that the Company and its customers have an uninterrupted source of
metals, primarily platinum group metals, utilizing supply contracts and
commodities markets around the world. Cash flows from operating activities in
2001 were also impacted by lower receivables primarily related to decreased
prices of platinum group metals and lower sales in the Appearance and
Performance Technologies segment.
The cash provided from operations other than the change in metal-related assets
and liabilities was $286.1 million in 2001, $295.6 million in 2000 and $266.0
million in 1999.
The variance in cash flows from investing activities is primarily related to
changes in capital expenditures, proceeds received from the sale of the
Company's metal-joining products business in September 2000, the acquisition of
the fats and oils catalyst business of Sud Chemie in October 2001 and the
acquisition of the Targor polyolefin catalyst business in September 2000.
The variance in cash flows from financing activities was impacted by the
repayment of long-term debt, an increase in stock option plan transactions
associated with the exercise of stock options in 2001, an increase in the
purchase of treasury stock and increased short-term borrowings in 1999 to fund a
major share repurchase.
The following table represents the Company's contractual obligations as of
December 31, 2001:
PAYMENTS DUE BY PERIOD
Less than After
CONTRACTUAL OBLIGATIONS Total 1 year 2-3 years 4-5 years 5 years
---------------------- ----- --------- --------- --------- -------
(in millions)
Short-term borrowings $ 389.0 $ 389.0 $ - $ - $ -
Accounts payable 252.3 252.3 - - -
Hedged metal obligations 517.7 517.7 - - -
Long-term debt 237.9 0.1 0.4 118.7 118.7
Operating leases 208.5 33.3 58.4 33.9 82.9
-------------------------------------------------------------------
Total Contractual Obligations $1,605.4 $1,192.4 $ 58.8 $ 152.6 $201.6
===================================================================
22
At December 31, 2001, the Company did not have any guarantees with any
unconsolidated subsidiary obligations.
The Company has consistently derived considerable cash flow from operations,
which has been used, along with both short-and long-term debt, to pay for
capital expenditures, acquisitions, dividends and other corporate requirements.
The continuation of these levels of cash flow is expected but is subject to the
risk factors listed elsewhere in this report (particularly in the
Forward-Looking Statements section on page 27). In addition, the Company has
always maintained investment-grade credit ratings that it considers important
for cost-effective and ready access to the credit markets. Management fully
expects to be able to obtain future funding from both short-and long-term debt
for cash requirements in excess of those from operations. In the event that any
of these sources prove to be below expectations, the Company has access to
committed lines of credit aggregating $800 million as of December 31, 2001.
Management intends to renew $400 million of this committed line of credit that
expires in May 2002.
MARKET RISK SENSITIVE TRANSACTIONS
The Company is exposed to market risks arising from adverse changes in interest
rates, foreign currency exchange rates and commodity prices. In the normal
course of business, the Company uses a variety of techniques and instruments,
including derivatives, as part of its overall risk management strategy. The
Company enters into derivative agreements with a diverse group of major
financial and other institutions with individually determined credit limits to
reduce exposure to the risk of nonperformance by counterparties.
Interest rate risk
The Company uses a sensitivity analysis to assess the market risk of its
debt-related financial instruments and derivatives. Market risk is defined here
as the potential change in the fair value of debt resulting from an adverse
movement in interest rates. The fair value of the Company's total debt was
$624.8 million at December 31, 2001 and $739.9 million at December 31, 2000
based on average market quotations of price and yields provided by investment
banks. A 100 basis-point increase in interest rates could result in a reduction
in the fair value of total debt of $17.7 million at December 31, 2001 compared
with $17.3 million at December 31, 2000.
The Company also uses interest rate derivatives to help achieve its fixed and
floating rate debt objectives. In 2001, the Company entered into two interest
rate swap agreements with a total notional value of $100 million to effectively
change a fixed rate debt obligation into a floating rate obligation. The total
notional amount of these agreements is equal to the face value of the designated
debt instrument. The swap agreements are expected to settle in August 2006, the
maturity date of the corresponding debt issuance.
23
Foreign currency exchange rate risk
The Company uses a variety of strategies, including foreign currency forward
contracts, to minimize or eliminate foreign currency exchange rate risk
associated with substantially all of its foreign currency transactions,
including metal-related transactions denominated in other than U.S. dollars.
The Company uses a sensitivity analysis to assess the market risk associated
with its foreign currency transactions. Market risk is defined here as the
potential change in fair value resulting from an adverse movement in foreign
currency exchange rates. A 10% adverse movement in foreign currency rates could
result in a net loss of $8.6 million at December 31, 2001 compared with $23.6
million at December 31, 2000 on the Company's foreign currency forward
contracts. However, since the Company limits the use of foreign currency
derivatives to the hedging of contractual foreign currency payables and
receivables, this loss in fair value for those instruments generally would be
offset by a gain in the value of the underlying payable or receivable.
A 10% adverse movement in foreign currency rates could result in an unrealized
loss of $48.6 million at December 31, 2001 compared with $46.8 million at
December 31, 2000 on the Company's net investment in foreign subsidiaries and
affiliates. However, since the Company views these investments as long term,
the Company would not expect such a loss to be realized in the near term.
Commodity price risk
In closely monitored situations, for which exposure levels and transaction size
limits have been set by senior management, the Company from time to time holds
large, unhedged industrial commodity positions that are subject to market price
fluctuations. Such positions may include varying levels of derivative commodity
instruments. All unhedged industrial commodity transactions are monitored and
marked-to-market daily. All other industrial commodity transactions are hedged
on a daily basis, using forward, future, option or swap contracts to
substantially eliminate the exposure to price risk.
The Company performed a "value-at-risk" analysis on all of its commodity assets
and liabilities. The "value-at-risk" calculation is a statistical model that
uses historical price and volatility data to predict market risk on a one-day
interval with a 95% confidence level. While the "value-at-risk" models are
relatively sophisticated, the quantitative information generated is limited by
the historical information used in the calculation. For example, the volatility
in the platinum and palladium markets in 2001 and 2000 was greater than
historical norms. Therefore, the Company uses this model only as a supplement to
other risk management tools and not as a substitute for the experience and
judgment of senior management and dealers who have extensive knowledge of the
markets and adjust positions and revise strategies as the markets change. Based
on the "value-at-risk" analysis in the context of a 95% confidence level, the
maximum potential one-day loss in fair value was approximately $3.4 million as
of December 31, 2001 compared with $4.8 million as of December 31, 2000.
24
CAPITAL EXPENDITURES, COMMITMENTS AND CONTINGENCIES
Capital projects are designed to maintain capacity, expand operations, improve
efficiency or protect the environment. Capital expenditures amounted to $168.9
million in 2001, $136.6 million in 2000 and $102.0 million in 1999. Capital
expenditures in 2002 are expected to be approximately $140.0 million. For
information about commitments and contingencies, see Note 19, "Environmental
Costs" and Note 20, "Litigation and Contingencies."
DIVIDENDS AND CAPITAL STOCK
The annualized common stock dividend rate at the end of 2001, 2000 and 1999 was
$0.40 per share.
JAPAN FRAUD UPDATE/PERU UPDATE
See Note 20, "Litigation and Contingencies," for a discussion of Japan and Peru.
SPECIAL AND OTHER CHARGES
See Note 5, "Special and Other Charges," for a discussion of the Company's
special and other charges.
OTHER MATTERS
See Note 1, "Summary of Significant Accounting Policies," for a discussion of
new accounting pronouncements.
CRITICAL ACCOUNTING POLICIES
Certain key policies are explained below to assist in understanding the
Company's consolidated financial statements. More detailed explanations may be
found elsewhere in the MD&A section and in the Company's Summary of Significant
Accounting Policies note on pages 32-37.
Sales
Over half of consolidated net sales represent the sale of platinum group metals
to industrial customers who buy the metals from Materials Services in connection
with products manufactured by the Environmental and Process Technologies
segments. Accordingly, almost all of these sales are reported in the Materials
Services segment, with a limited amount included in Environmental and Process
Technologies' reported sales. Because metal price levels may vary widely, there
is no consistent relationship between consolidated sales and gross profit.
25
Because the timing of the purchase of spot metals often does not coincide with
the timing of the subsequent sales to industrial users, Materials Services needs
to hedge price risk, usually by selling forward (i.e., for future delivery) to
investment-grade trading entities, industrial companies or on futures exchanges.
If a surplus of physical metal develops, Materials Services may also sell spot
and buy forward to balance the risk position. Other than hedges entered into
with industrial customers, sales related to these hedging transactions are not
included in reported sales, as they are not meaningful in an industrial context.
Customers of the Environmental and Process Technologies segments who purchase
products that improve efficiency and yields are often unable to precisely
predict the dates that catalysts will be required. Accordingly, they may request
that product that has already been ordered, manufactured and prepared for
shipment at the agreed upon date be temporarily held by the Company until that
customer's manufacturing facility is prepared to accept the new charge of
catalyst. In cases where the customer requests the Company to hold the goods,
agrees to be invoiced and to pay the invoices on normal terms as well as to
accept title to the goods, the Company will recognize the sale prior to
shipment. Great care is exercised to make sure that these sales are only
recognized in accordance with the applicable revenue recognition guidance.
Mark-to-market
Materials Services procures physical metal from third parties for resale and
enters into forward contracts and other relatively straight-forward hedging
derivatives which are recorded as either assets or liabilities at their fair
value. By acting in its capacity as a distributor and materials service
provider to the Company's technology businesses and their customers, Materials
Services takes on the attributes of a trading company. Both spot metal and
derivative instruments used in hedging (i.e., forwards, futures, swaps and
options) are stated at fair value. The Company manages the risk inherent in its
metal positions using a valuation methodology that is based on spot metal prices
and the fact that on a long-term basis there will exist a rational relationship
between forward/future prices of each metal and their respective spot market
prices. This same methodology is used for determining the fair value of physical
and open contractual positions for financial reporting purposes. For platinum,
palladium, gold and silver, the Company utilizes daily settlement prices that
are published by Reuters. There are no so-called "terminal" markets for rhodium,
ruthenium and iridium, so the Company's own published Industrial Bullion (EIB)
prices are used. However, these are compared to other reference prices published
in Metals Week, an independent trade journal. Values for base metals come from
the closing prices of the LME (London Metals Exchange).
In closely monitored situations, for which exposure levels and transaction size
limits have been set by senior management, the Company holds unhedged metal
positions that are subject to future market fluctuations. Such positions may
include varying levels of derivative instruments. At times, these positions can
be significant. All unhedged metal transactions are monitored and
marked-to-market daily. The portion of this metal that has not been hedged is
therefore subject to price risk and is disclosed in Note 9.
The fair values of Materials Services' various spot and derivative positions are
included in Committed Metal Positions on the asset side of the Consolidated
Balance Sheet and Hedged Metal Obligations on the liability side. The credit
(performance) risk associated with the fair value of derivatives in a gain
position is greatly mitigated through the selection of investment-grade
counterparties.
26
Precious metal inventories
Most of the platinum group metals used by Environmental and Process Technologies
to manufacture products are provided in advance by the customers. The customers
normally purchase these metals from Materials Services, but they may also be
shipped in from other sources.
Certain quantities of precious metals are carried at historical cost using the
LIFO method, which provides a better matching of current costs with current
revenues. Because most of the metal was acquired some time ago, the market value
of this metal, while fluctuating from year to year, has generally been
substantially above cost. While this excess of market over cost is useful in
evaluating the consolidated balance sheet from a credit perspective, the annual
changes are not reflected in the income statement. To the extent that periodic
liquidations of LIFO layers produce book profits, those amounts are separately
disclosed and not included in the operating earnings of the technology segments.
Kaolin mining operations
In order to provide kaolin-based products to the Company's customers and the
Process Technologies segment, the Company engages in kaolin mining operations
that are integrated into the manufacturing processes. The Company owns and
leases land containing kaolin deposits on a long-term basis. The Company does
not own any mining reserves or conduct any mining operations with respect to
platinum, palladium or other metals. The kaolin mining process includes
exploration, topsoil and overburden removal, extraction of kaolin and the
subsequent reclamation of mined areas. In order to match the costs of the mining
process with revenues associated with kaolin-based products, the mining process
costs are expensed by the Company over the life of estimated mineable reserves.
FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements relate to
analyses and other information that are based on forecasts of future results and
estimates of amounts not yet determinable. These statements also relate to the
future prospects, developments and business strategies. These forward-looking
statements are identified by their use of terms and phrases such as
"anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan,"
"predict," "project," "will" and similar terms and phrases, including references
to assumptions. These forward-looking statements involve risks and uncertainties
that may cause the Company's actual future activities and results of operations
to be materially different from those suggested or described in this document.
These risks include: competitive pricing or product development activities; the
Company's ability to achieve and execute internal business plans; global
economic trends; worldwide political instability and economic growth; markets,
alliances and geographic expansions developing differently than anticipated;
fluctuations in the supply and prices of precious and base metals; government
legislation and/or regulation (particularly on environmental issues);
technology, manufacturing and legal issues; and the impact of any economic
downturns and inflation. Investors are cautioned not to place undue reliance
upon these forward-looking statements, which speak only as of their dates. The
Company disclaims any obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
27
ENGELHARD CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
Year ended December 31 (in thousands, except per-share amounts) 2001 2000 1999
----------- ----------- ------------
Net sales $ 5,096,926 $ 5,542,648 $ 4,488,007
Cost of sales 4,433,709 4,812,450 3,843,950
----------- ----------- ------------
Gross profit 663,217 730,198 644,057
Selling, administrative and other expenses 335,994 382,287 328,242
Special charge 7,100 82,548 -
----------- ----------- ------------
Operating earnings 320,123 265,363 315,815
Equity in earnings of affiliates 29,095 24,187 16,266
Gain on sale of investments and land, net - 18,786 8,592
Interest expense, net (43,994) (62,649) (56,555)
----------- ----------- ------------
Earnings before income taxes 305,224 245,687 284,118
Income tax expense 79,663 77,391 86,656
----------- ----------- -----------
Net earnings $ 225,561 $ 168,296 $ 197,462
=========== =========== ============
Basic earnings per share $ 1.73 $ 1.33 $ 1.49
Diluted earnings per share $ 1.71 $ 1.31 $ 1.47
=========== =========== ============
Average number of shares outstanding - basic 130,018 126,351 132,432
=========== =========== ============
Average number of shares outstanding - diluted 132,155 128,141 134,590
=========== =========== ============
See accompanying Notes to Consolidated Financial Statements.
28
ENGELHARD CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31 (in thousands) 2001 2000
-------------------------- ---------------------------
Assets
Cash $ 33,034 $ 33,534
Receivables, net of allowances of
$5,219 and $6,534, respectively 347,656 459,753
Committed metal positions 569,109 720,659
Inventories 401,647 371,767
Other current assets 142,301 155,992
---------------------------
Total current assets 1,493,747 1,741,705
Investments 213,467 200,070
Property, plant and equipment, net 822,520 767,687
Intangible assets, net 301,609 302,843
Other noncurrent assets 164,206 154,527
---------------------------
Total assets $2,995,549 $3,166,832
===========================
Liabilities and Shareholders' Equity
Short-term borrowings $ 388,978 $ 352,042
Current portion of long-term debt 73 150,130
Accounts payable 252,319 220,827
Hedged metal obligations 517,681 676,460
Other current liabilities 341,749 427,240
---------------------------
Total current liabilities 1,500,800 1,826,699
Long-term debt 237,853 248,566
Other noncurrent liabilities 253,390 217,000
---------------------------
Total liabilities 1,992,043 2,292,265
---------------------------
Shareholders' equity:
Preferred stock, no par value, 5,000 shares
authorized and unissued - -
Common stock, $1 par value, 350,000 shares
authorized and 147,295 shares issued 147,295 147,295
Retained earnings 1,324,099 1,122,377
Treasury stock, at cost, 18,220 and 20,662
shares, respectively (335,879) (344,036)
Accumulated other comprehensive loss (132,009) (51,069)
---------------------------
Total shareholders' equity 1,003,506 874,567
---------------------------
Total liabilities and shareholders' equity $2,995,549 $3,166,832
===========================
See accompanying Notes to Consolidated Financial Statements.
29
ENGELHARD CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31 (in thousands) 2001 2000 1999
-----------------------------------------------
Cash flows from operating activities
Net earnings $225,561 $168,296 $197,462
Adjustments to reconcile net earnings to
net cash provided by operating activities
Depreciation and depletion 94,996 103,326 98,328
Amortization of intangible assets 13,521 13,733 13,296
Gain on sale of investments and land, net - (18,786) (8,592)
Equity results, net of dividends (24,937) (19,823) (13,835)
Net change in assets and liabilities
Metal related 59,734 (115,569) 83,033
All other (23,082) 48,878 (20,685)
-----------------------------------------------
Net cash provided by operating activities 345,793 180,055 349,007
-----------------------------------------------
Cash flows from investing activities
Capital expenditures (168,882) (136,579) (101,957)
Proceeds from sale of investments and land 3,400 52,811 12,764
Acquisitions and other investments (16,559) (40,095) (3,142)
Other - 838 368
-----------------------------------------------
Net cash used in investing activities (182,041) (123,025) (91,967)
-----------------------------------------------
Cash flows from financing activities
Increase in short-term borrowings 36,936 77 102,825
Increase/(decrease) in hedged metal obligations 11,333 69,188 (79,525)
Proceeds from issuance of long-term debt - - 100,773
Repayment of long-term debt (159,308) (104,132) (4,500)
Purchase of treasury stock (101,154) (71) (298,032)
Stock option plan transactions 101,175 11,400 7,455
Dividends paid (52,267) (51,002) (52,658)
-----------------------------------------------
Net cash used in financing activities (163,285) (74,540) (223,662)
Effect of exchange rate changes on cash (967) (3,331) (1,342)
-----------------------------------------------
Net (decrease)/increase in cash (500) (20,841) 32,036
Cash at beginning of year 33,534 54,375 22,339
-----------------------------------------------
Cash at end of year $ 33,034 $ 33,534 $ 54,375
===============================================
See accompanying Notes to Consolidated Financial Statements.
30
ENGELHARD CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Accumulated
other Total
Common Retained Treasury Comprehensive comprehensive shareholders'
(in thousands, except per-share amounts) stock earnings stock income/(loss) income/(loss) equity
-------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 $147,295 $853,249 $(65,013) $(33,974) $901,557
Comprehensive income/(loss):
Net earnings 197,462 $197,462 197,462
-------
Other comprehensive income/(loss):
Foreign currency translation adjustments (18)
Minimum pension liability adjustment 2,896
-------
Other comprehensive income 2,878 2,878 2,878
-------
Comprehensive income 200,340
=======
Dividends ($0.40 per share) (52,658) (52,658)
Treasury stock acquired (298,032) (298,032)
Stock bonus and option plan transactions 2,420 10,763 13,183
----------------------------------------------------------------------------
Balance at December 31, 1999 147,295 1,000,473 (352,282) (31,096) 764,390
Comprehensive income/(loss):
Net earnings 168,296 168,296 168,296
-------
Other comprehensive income/(loss):
Foreign currency translation adjustments (20 993)
Minimum pension liability adjustment 1,020
-------
Other comprehensive loss (19,973) (19,973) (19,973)
-------
Comprehensive income 148,323
=======
Dividends ($0.40 per share) (51,002) (51,002)
Treasury stock acquired (71) (71)
Stock bonus and option plan transactions 4,610 8,317 12,927
----------------------------------------------------------------------------
Balance at December 31, 2000 147,295 1,122,377 (344,036) (51,069) 874,567
Comprehensive income/(loss):
Net earnings 225,561 225,561 225,561
-------
Other comprehensive loss:
Cash flow derivative adjustments, net of tax (4,550)
Foreign currency translation adjustments (51,035)
Minimum pension liability adjustment, net of tax (25,355)
-------
Other comprehensive loss (80,940) (80,940) (80,940)
-------
Comprehensive income $144,621
=======
Dividends ($0.40 per share) (52,267) (52,267)
Treasury stock acquired (101,154) (101,154)
Stock bonus and option plan transactions 28,428 109,311 137,739
----------------------------------------------------------------------------
Balance at December 31, 2001 $147,295 $1,324,099 $(335,879) $(132,009) $1,003,506
============================================================================
See accompanying Notes to Consolidated Financial Statements.
31
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Engelhard Corporation and its subsidiaries (collectively referred to as
Engelhard or the Company). All significant intercompany transactions and
balances have been eliminated in consolidation. Certain prior-year amounts have
been reclassified to conform with the current-year presentation.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could, but are not expected to, differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash equivalents include all investments purchased with an original maturity of
three months or less.
INVENTORIES
Inventories are stated at the lower of cost or market. The elements of cost
include direct labor and materials, variable overhead and fixed manufacturing
overhead. The cost of owned precious metals included in inventory is determined
using the last-in, first-out (LIFO) method of inventory valuation. The majority
of the Company's physical metal is carried in committed metal positions with the
remainder carried in inventory. The cost of other inventories is principally
determined using either the average cost or the first-in, first-out (FIFO)
method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation of buildings and
equipment is provided primarily on a straight-line basis over the estimated
useful lives of the assets. Buildings and building improvements are depreciated
over 20 years, while machinery and equipment is depreciated based on lives
varying from 3 to 10 years. Depletion of mineral deposits and deferred mine
development costs is provided under the units-of-production method. When assets
are sold or retired, the cost and related accumulated depreciation is removed
from the accounts, and any gain or loss is included in earnings. The Company
continually evaluates the reasonableness of the carrying value of its fixed
assets. If it becomes probable that expected future undiscounted cash flows
associated with these assets are less than their carrying value, the assets are
written down to their fair value.
32
INTANGIBLE ASSETS
Identifiable intangible assets, such as patents and trademarks, are amortized
using the straight-line method over their estimated useful lives. Goodwill is
amortized over periods up to 40 years using the straight-line method. The
Company recorded amortization expense of $13.5 million in 2001, $13.7 million in
2000 and $13.3 million in 1999. Accumulated amortization amounted to $73.9
million and $60.4 million at December 31, 2001 and 2000, respectively. Included
in intangible assets is net goodwill that amounted to $253.6 million and $248.4
million at December 31, 2001 and 2000, respectively. The Company continually
evaluates the reasonableness of the carrying value of its intangible assets.
Under prevailing accounting standards effective through December 31, 2001, if it
becomes probable that expected future undiscounted cash flows associated with
amortizable intangible assets are less than their carrying value, the assets are
written down to their fair value.
The Company has adopted Statement of Financial Accounting Standards No. 141,
"Business Combinations" and Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets." See discussion of these standards under
"New Accounting Pronouncements" on page 36.
In 2000, the Company wrote off goodwill of $30.4 million as follows: in the
first quarter, the Company wrote off $6.0 million of goodwill associated with
the divestiture of its International Dioxide, Inc. (IDI) business unit; in the
third quarter, the Company wrote off $21.9 million of goodwill related to the
impairment of its HexCore business unit; and in the fourth quarter, the Company
wrote off $2.5 million of goodwill as part of its fourth-quarter special charge
related to the impairment of its colors business.
COMMITTED METAL POSITIONS AND HEDGED METAL OBLIGATIONS
Committed metal positions reflect the fair value of the long spot metal
positions (other than LIFO inventory) held by the Company plus the fair value of
contracts undertaken to economically hedge price exposures. Because most of the
spot metal has been hedged through forward/future sales or other derivative
arrangements (e.g., swaps), it is referred to as being "committed," although the
physical metal can be used by the Company until such time as the sales are
settled. The portion of this metal that has not been hedged and, therefore, is
subject to price risk is discussed below and disclosed in Note 9, "Committed
Metal Positions and Hedged Metal Obligations."
The bulk of hedged metal obligations represents spot short positions. As these
positions generate cash, their cash effect is included in the financing
activities section of the Company's "Consolidated Statements of Cash Flows."
Other than in the closely monitored situations noted below, these positions are
hedged with forward purchases. In addition, the aggregate fair value of
derivatives in a loss position are reported in hedged metal obligations
(derivatives in a gain position are included in committed metal positions).
For the purpose of determining whether the Company is in a net spot long or
short position with respect to a metal, purchased quantities received for which
the Company is not exposed to market price risk (because of provisional rather
than final pricing) are considered a component of its spot positions.
To the extent metal prices increase subsequent to a spot purchase that has been
hedged, the Company will recognize a gain as a result of marking the spot metal
to market while at the same time recognizing a loss related to the fair value of
the derivative instrument. As noted above, the aggregate fair value of
derivatives in a loss position is classified as part of hedged metal obligations
at the balance sheet date because the Company has incurred a liability to the
counterparty. Should the reverse occur and metal prices decrease, the resultant
gain on the derivative will be offset against the spot loss within committed
metal positions.
33
Both spot metal and derivative instruments used in hedging (i.e., forwards,
futures, swaps and options) are stated at fair value. The Company manages the
risk inherent in its metal positions using a valuation methodology that is based
on spot metal prices and the fact that on a long-term basis there will exist a
rational relationship between forward/future prices of each metal and their
respective spot market prices. This same methodology is used for determining the
fair value of physical and open contractual positions for financial reporting
purposes. The methodology employed is stable and has not changed, either as to
calculation mechanics or critical assumptions for all periods presented. If
listed market prices are not available or if liquidating the Company's positions
would reasonably be expected to impact market prices, fair value is determined
based on other relevant factors, including dealer price quotations and price
quotations in different markets, including markets located in different
geographic areas. Any change in value, whether realized or unrealized, is
recognized in gross profit in the period of the change.
In closely monitored situations, for which exposure levels and transaction size
limits have been set by senior management, the Company holds unhedged metal
positions that are subject to future market fluctuations. Such positions may
include varying levels of derivative instruments. At times, these positions can
be significant. All unhedged metal transactions are monitored and
marked-to-market daily. The metal that has not been hedged is therefore subject
to price risk and is disclosed in Note 9, "Committed Metal Positions and Hedged
Metal Obligations."
ENVIRONMENTAL COSTS
In the ordinary course of business, like most other industrial companies, the
Company is subject to extensive and changing federal, state, local and foreign
environmental laws and regulations and has made provisions for the estimated
financial impact of environmental cleanup-related costs. The Company's policy is
to accrue for environmental cleanup-related costs of a noncapital nature when
those costs are believed to be probable and can be reasonably estimated.
Environmental cleanup costs are deemed probable when litigation has commenced or
a claim or an assessment has been asserted, or, based on available information,
commencement of litigation or assertion of a claim or an assessment is probable,
and, based on available information, it is probable that the outcome of such
litigation, claim or assessment will be unfavorable. The quantification of
environmental exposures requires an assessment of many factors, including
changing laws and regulations, advancements in environmental technologies, the
quality of information available related to specific sites, the assessment stage
of each site investigation, preliminary findings and the length of time involved
in remediation or settlement. For certain matters, the Company expects to share
costs with other parties. The Company does not include anticipated recoveries
from insurance carriers or other third parties in its accruals for environmental
liabilities.
REVENUE RECOGNITION
Revenues are recognized on sales of product at the time the goods are shipped or
when risks of ownership have passed to the customer. In limited situations,
revenue is recognized on a bill-and-hold basis as title passes to the customer
before shipment of goods. These bill-and-hold sales meet the criteria of Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements," for
revenue recognition. Sales recognized on a bill-and-hold basis were
approximately $28.9 million as of December 31, 2001, $24.2 million as of
December 31, 2000 and $18.9 million as of December 31, 1999. With regard to the
balance classified as bill-and-hold sales, the Company has collected $19.9
million of the outstanding balance as of December 31, 2001.
34
In accordance with EITF 00-10, "Accounting for Shipping and Handling Fees and
Costs," adopted by the Company in the fourth quarter of 2000, the Company
reports amounts billed to customers for shipping and handling fees as sales in
the Company's "Consolidated Statements of Earnings." Costs incurred by the
Company for shipping and handling fees are reported as cost of sales.
SALES AND COST OF SALES
Some of the Company's businesses use precious metals in their manufacturing
processes. Precious metals are included in sales and cost of sales if the metal
has been supplied by the Company. Often, customers supply the precious metals
for the manufactured product. In those cases, precious-metals values are not
included in sales or cost of sales. The mix of such arrangements, the extent of
market-price fluctuations and the general price level of platinum group and
other metals can significantly affect the reported level of sales and cost of
sales. Consequently there is no direct correlation between year-to-year changes
in reported sales and operating earnings.
For all Materials Services activities, an unrealized gain or loss is recorded as
an element of cost of sales based on changes in the market value of the
Company's positions.
INCOME TAXES
Deferred income taxes reflect the differences between the assets and liabilities
recognized for financial reporting purposes and amounts recognized for tax
purposes. Deferred taxes are based on tax laws as currently enacted.
EQUITY METHOD OF ACCOUNTING
The Company's investments in companies in which it has the ability to exercise
significant influence over operating and financial policies, generally 20% to
50% owned, are accounted for using the equity method. Accordingly, the Company's
share of the earnings of these companies is included in consolidated net income.
Investments in nonsubsidiary companies in which the Company does not have
significant influence are carried at cost.
FOREIGN CURRENCY TRANSLATION
The functional currency for the majority of the Company's foreign operations is
the applicable local currency. The translation from the applicable foreign
currencies to U.S. dollars is performed for balance sheet accounts using current
exchange rates in effect at the balance sheet date and for revenue and expense
accounts using a weighted-average exchange rate during the period. The resulting
translation adjustments are recorded as a component of shareholders' equity.
Gains or losses resulting from foreign currency transactions are included in the
Company's "Consolidated Statements of Earnings."
STOCK OPTION PLANS
The Company adopted Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123) in 1997. In conjunction
with the adoption, the Company will continue to apply the intrinsic-value-based
method of accounting prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" with pro forma disclosure of net
income and earnings per share as if the fair-value-based method prescribed by
SFAS 123 had been applied. In general, no compensation cost related to these
plans is recognized in the Company's "Consolidated Statements of Earnings" as
options are issued at market price on the date of grant.
35
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are charged to expense as incurred and were $84.3
million in 2001, $82.8 million in 2000 and $77.9 million in 1999. These costs
are included within selling, administrative and other expenses in the
Company's "Consolidated Statements of Earnings."
NEW ACCOUNTING PRONOUNCEMENTS
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 133,
"Accounting for Derivative Instruments and Hedging Activities" and SFAS No. 138,
"Accounting for Certain Derivative Instruments and Certain Hedging Activities
(an amendment of FASB Statement No. 133)" on January 1, 2001. Adoption of these
statements did not have a material effect on the Company's financial statements.
See Note 2, "Derivative Instruments and Hedging," for further detail of these
standards.
In June 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 141, "Business Combinations" (SFAS No.
141) and Statement of Financial Accounting Standards No. 142, "Goodwill and
Other Intangible Assets"(SFAS No. 142).
SFAS No. 141 addresses financial accounting and reporting for business
combinations. This new statement requires that all business combinations be
accounted for using one method (the purchase method) and that intangible assets
be recognized apart from goodwill if they meet certain criteria. In addition,
the statement requires disclosure of the primary reasons for a business
combination and the allocation of the purchase price paid to the assets acquired
and liabilities assumed by major balance sheet caption. The provisions of this
statement apply to all business combinations initiated after June 30, 2001.
The Company adopted the provisions of this statement for all acquisitions made
after June 30, 2001. Adoption of this statement did not have a material effect
on the Company's financial statements.
SFAS No. 142 addresses post-acquisition financial accounting and reporting for
acquired goodwill and other intangible assets. Under this new statement,
goodwill and intangible assets that have indefinite useful lives will not be
amortized but rather will be tested at least annually for impairment based on
the specific guidance of this statement. In addition, this statement requires
disclosure of information about goodwill and other intangible assets in the
years subsequent to their acquisition that was not previously required. The
Company adopted this statement on January 1, 2002 and will reduce its annual
amortization expense by approximately $10 million as a result of discontinuing
goodwill amortization. Other potential impacts of this statement are currently
being evaluated by the Company.
In August 2001, the FASB issued Statement of Financial Accounting Standards No.
144, "Accounting for the Impairment or Disposal of Long-lived Assets". This
Statement addresses financial accounting and reporting for the impairment or
disposal of long-lived assets. Under this statement, a single accounting model
is to be used for long-lived assets to be disposed of by sale, whether
previously held and used or newly acquired. In addition, the statement broadens
the presentation of discontinued operations to include more disposal
transactions. The adoption of this statement by the Company on January 1, 2002
did not have a material effect on the Company's financial statements.
36
In June 2001, the FASB issued Statement of Financial Accounting Standards No.
143, "Accounting for Asset Retirement Obligations." This statement addresses
financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs. This statement is effective for financial statements issued for fiscal
years beginning after June 15, 2002. The Company expects to adopt this statement
on January 1, 2003 and is evaluating the impact it will have on its financial
statements.
2. DERIVATIVE INSTRUMENTS AND HEDGING
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 133,
"Accounting for Derivative Instruments and Hedging Activities" and SFAS No. 138,
"Accounting for Certain Derivative Instruments and Certain Hedging Activities
(an amendment of FASB Statement No. 133)" on January 1, 2001. The Company
reports all derivative instruments on the balance sheet at their fair value.
Changes in the fair value of derivatives are recorded each period in earnings or
comprehensive income, depending on the designation of the derivative. Changes in
the fair value of derivatives that are not designated as cash flow hedges are
reported immediately in earnings.
In order to manage in a manner consistent with historical processes, procedures
and systems and to achieve operating economies, certain economic hedge
transactions are not designated as hedges for accounting purposes. In those
cases, which primarily relate to platinum group metals, the Company, in
accordance with the newly adopted standards, will continue to mark to market
both the hedge instrument and the related position constituting the risk hedged,
recognizing the net effect in current earnings.
The Company documents all relationships between derivative hedging instruments
and hedged items, as well as its risk-management objective and strategy for
entering into various hedge transactions. For the year ended December 31, 2001,
there was no gain or loss recognized in earnings resulting from hedge
ineffectiveness.
FOREIGN EXCHANGE CONTRACTS
The Company designates as cash flow hedges certain foreign currency forward
contracts entered into as hedges against anticipated receivables or payables
which will arise from forecasted transactions that are denominated in currencies
other than the functional currency of the entity which will hold those assets or
liabilities. The ultimate maturities of the contracts are timed to coincide with
the expected occurrence of the underlying transaction.
For the twelve-month period ended December 31, 2001, the Company reported
after-tax gains of $0.2 million in accumulated other comprehensive income
relating to the change in the fair value of derivatives designated as foreign
currency cash flow hedges. It is expected that this amount will be reclassified
into earnings within the next twelve months. There was no gain or loss
reclassified from accumulated other comprehensive income into earnings as a
result of the discontinuance of cash flow hedges due to the probability of
forecasted transactions not occurring. As of December 31, 2001, the maximum
length of time over which the Company is hedging its exposure to movements in
foreign exchange rates for forecasted transactions is twelve months.
37
A second group of forward contracts entered into to economically hedge the
exposure to foreign currency fluctuations associated with certain monetary
assets and liabilities are not designated as hedging instruments for accounting
purposes. Changes in the fair value of these items are recorded in
earnings to offset the foreign exchange gains and losses arising from the
related monetary assets and liabilities.
COMMODITY CONTRACTS (PRIMARILY ENERGY RELATED)
The Company enters into contracts that are designated as cash flow hedges to
protect a portion of its exposure to movements in certain commodity prices. The
ultimate maturities of the contracts are timed to coincide with the expected
usage of these commodities in the Company's manufacturing operations. For the
twelve-month period ended December 31, 2001, the Company reported after-tax
losses of $4.8 million in accumulated other comprehensive income relating to the
change in the fair value of derivatives designated as cash flow commodity
hedges. These losses primarily relate to derivatives designated as natural gas
cash flow hedges. It is expected that this amount will be reclassified into
earnings within the next twelve months. As of December 31, 2001, the maximum
length of time over which the Company is hedging its exposure to movements in
commodity prices for forecasted transactions is twelve months.
The use of derivative metal instruments is discussed on page 33 under "Committed
Metal Positions and Hedged Metal Obligations." To the extent that the maturities
of these instruments are mismatched, the Company may be exposed to interest rate
risk. This exposure is mitigated through the use of Eurodollar futures that are
marked-to-market daily along with the underlying commodity instruments.
INTEREST RATE DERIVATIVES
The Company uses interest rate derivatives that are designated as fair value
hedges to help achieve its fixed and floating rate debt objectives. In 2001, the
Company entered into two interest rate swap agreements with a total notional
value of $100 million to effectively change a fixed rate debt obligation into a
floating rate obligation. The total notional amount of these agreements is equal
to the face value of the designated debt instrument. The swap agreements are
expected to settle in August 2006, the maturity date of the corresponding debt
issuance.
3. SIGNIFICANT SHAREHOLDER TRANSACTION
In May 1999, the Company purchased approximately 18 million of its shares owned
by Minorco S.A. (Minorco), which represented approximately 13% of the Company's
total shares outstanding at the time. The remainder of Minorco's stake (28
million shares) was sold in a secondary public offering. Minorco compensated the
Company for costs and other expenses related to the secondary offering and the
purchase of the shares. The Company financed the share repurchase with
short-term debt.
38
4. ACQUISITIONS AND DIVESTITURES
In October 2001, the Company acquired the fats and oils catalyst business of Sud
Chemie for approximately $13.6 million. This acquisition broadened the Company's
catalyst technology offering to oleochemical markets. This acquisition was
recorded under the purchase method of accounting. The results of operations of
this acquisition, integrated into the Process Technologies segment, are included
in the accompanying consolidated financial statements from the date of
acquisition. A portion of the purchase price has been allocated to assets
acquired based on their fair values, while the remaining balance was
preliminarily recorded as goodwill. Pro forma information is not provided since
the impact of the acquisition does not have a material effect on the Company's
results of operations, cash flows or financial position.
During 2000, the Company recorded a gain of $24.8 million ($17.0 million after
tax or $0.13 per share on a diluted basis) on the sale of its metal-joining
products business located in Warwick, Rhode Island. In addition, the Company
recorded a loss of $6.0 million ($4.1 million after tax or $0.03 per share on a
diluted basis) associated with the divestiture of the International Dioxide,
Inc. (IDI) business unit.
In September 2000, the Company acquired a polyolefin catalyst business located
in Tarragona, Spain from Targor GmbH, a subsidiary of BASF AG, for approximately
$35.1 million. As part of the acquisition, the Company obtained a supply
agreement to become the exclusive supplier of polyolefin catalysts to Novolen
Technology Holdings C.V. This acquisition was recorded under the purchase method
of accounting. The results of operations of this acquisition, integrated into
the Process Technologies segment, are included in the accompanying consolidated
financial statements from the date of acquisition. A portion of the purchase
price has been allocated to assets acquired and liabilities assumed based on
their fair values, while the remaining balance was recorded as an intangible
asset and is being amortized over 15 years. Pro forma information is not
provided since the impact of the acquisition does not have a material effect on
the Company's results of operations, cash flows or financial position.
During 1999, the Company sold its hydroprocessing joint venture, its
metal-plating business, its Mearlcrete concrete foaming agent business, and
certain land and mineral rights located in Talladega County, Alabama. These
sales resulted in gains of $13.2 million ($9.2 million after tax or $0.06 per
share on a diluted basis). In addition, the Company reduced the carrying value
of its investment in Engelhard Highland Private Ltd. to its estimated net
realizable value of $1.0 million and accordingly recorded a loss of $4.6 million
($3.2 million after tax or $0.02 per share on a diluted basis).
In March 1999, the Company acquired the effect-pigment product line of ISP for
approximately $11.5 million. This acquisition expanded the Company's
special-effect pigments line. The excess of the purchase price over the fair
value of net assets acquired has been recorded as goodwill and is being
amortized over 20 years. Effective January 1, 2002, the goodwill will no longer
be amortized but rather will be tested at least annually for impairment in
accordance with SFAS No. 142. The results of operations of this product line,
integrated into the Appearance and Performance Technologies segment, are
included in the accompanying consolidated financial statements from the date of
acquisition.
39
5. SPECIAL AND OTHER CHARGES
The Company recorded a special charge of $7.1 million ($4.3 million after tax or
$0.03 per share on a diluted basis) in the second quarter of 2001 related to the
redeployment of assets between the Company's kaolin-based operations in Middle
Georgia and its petroleum refining catalyst facility in Savannah, Georgia. Some
assets previously dedicated to providing kaolin-based products to the paper
industry are being redirected to enable the Company to produce more value-added
catalyst technologies for petroleum refining. This charge includes employee
severance costs of $3.2 million, asset write-offs of $2.6 million and other
costs of $1.3 million related to the asset redeployment actions and productivity
improvements. The employee severance charges include the reduction of 57
salaried employees primarily located at the Middle Georgia facility, while an
additional 154 hourly employees were terminated as a result of this action. This
charge was recorded in the Appearance and Performance Technologies segment.
These actions are expected to be substantially complete by the end of 2002.
The Company recorded special and other charges of $134.2 million ($92.0 million
after tax or $0.72 per share on a diluted basis) in 2000 for a variety of
events.
The following table sets forth the impact of these charges in the
Company's 2000 "Consolidated Statements of Earnings":
FINANCIAL IMPACT
(in millions, except per-share amounts) Total
-------------
Cost of sales $ (27.1)
Selling, administrative and other expenses (23.8)
Special charge (82.5)
-------------
Operating loss (133.4)
Equity in losses of affiliates (0.8)
-------------
Loss before income taxes (134.2)
Income tax benefit 42.2
-------------
Net loss $ (92.0)
-------------
Diluted loss per share $ (0.72)
-------------
40
The 2000 special and other charges are described below:
The Environmental Technologies segment incurred charges of $15.4 million,
primarily related to additional provisions for warranty costs associated with
the segment's stationary-source, emission-control capital equipment business,
which was sold in 1998.
The Process Technologies segment incurred charges of $5.5 million, primarily for
the write-off of the unamortized balance of a customer supply agreement
recognized in connection with the acquisition of the chemical catalyst
businesses of Mallinckrodt Inc. in 1998. The Company does not expect future
deliveries under the contract.
The Appearance and Performance Technologies segment incurred charges of $50.5
million, including the write-down of assets of $30.4 million in the segment's
colors business, the write-off of $4.6 million of obsolete inventory within the
segment's minerals business, charges of $3.6 million related to the Company's
decision to divest its 50%-owned interest in the Dnipro Kaolin (Ukraine) joint
venture, which had previously generated immaterial losses, charges of $3.5
million related to the write-off of an obsolete computer system and other
charges of $8.4 million.
As a result of declining sales, a shift in product mix to higher volume,
low-gross-profit products and severe price pressure for all product lines, the
colors business continued operating at a loss in 2000. In accordance with SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," the Company performed an impairment review of its
long-lived assets. During the fourth quarter of 2000, the Company determined
that the estimated future undiscounted cash flows of the segment's colors
business were below the carrying value of its assets. Accordingly, the Company
adjusted the carrying value of the long-lived assets and goodwill to their
estimated fair values. The estimated fair values of the machinery and equipment
and goodwill were based on anticipated future cash flows discounted at a rate
commensurate with the Company's estimated cost of capital. The resulting
impairment charge consisted primarily of a write-down of machinery and
equipment.
41
Based on a reassessment of the volumes of usable crude kaolin contained in
stockpiles in Middle Georgia, a determination was made to adjust quantities
downward resulting in a charge of $4.6 million. Crude kaolin is used to produce
high-quality pigments and additives for a variety of end markets.
Within the Company's "All Other" category, the Company incurred special and
other charges of $62.8 million, primarily related to the decision to exit from
its residual, desiccant-based, climate-control-system business. This business
was comprised of the Company's HexCore subsidiary and a cost-based investment in
Fresh Air Solutions, a limited partnership. These charges primarily result from
asset write-offs and recognition of the Company's obligation under a guarantee.
Revenues and net losses from the HexCore subsidiary were immaterial for each of
the three years ended December 31, 2000.
With regard to the special charges incurred in 2000, non-separation-related cash
spending consisted primarily of obligations under guarantees related to the
Fresh Air Solutions limited partnership. Spending consisted of payments related
to the shutdown of facilities and the satisfaction of warranty obligations. The
actions undertaken by the Company in relation to the 2000 special and other
charges are expected to be substantially complete by the end of 2002.
In 1999, the Company recorded severance costs of $5.4 million and asset
impairments of $3.7 million associated with a restructuring of the Company's
business groups and for severance at three of the Company's manufacturing
facilities. The asset impairment charge of $3.7 million related to closure costs
at the Company's Salt Lake City facility as well as an impairment to goodwill
relating to the sensor technologies business unit. Earlier restructuring charges
included a $5.0 million impairment relating to the Company's Salt Lake City
facility and $3.8 million for environmental remediation costs for the
Harvard-Denison site in Cleveland, Ohio. In 1999, the Company restored the
carrying value of the Salt Lake City facility to its original book value of $5.0
million based on a third-party offer and independent appraisal. With regard to
Harvard-Denison, the United States Department of Energy determined that the site
was eligible for the Government's Formerly Utilized Sites Remedial Action
Program (FUSRAP) and, as a result, the government would be responsible for
future remediation. Accordingly, the Company reversed $3.8 million as a special
credit in 1999.
42
The following table sets forth the components of the Company's reserves for
restructuring and other costs:
RESTRUCTURING AND OTHER RESERVES Separations Other
(in millions) Pre-2000 2000 2001 Pre-2000 2000 2001 Total
-------------------------- -------------------------------------
Balance at December 31, 1998 $ 6.5 $ -- $ -- $ 3.1 $ -- $ -- $ 9.6
Cash spending, net (3.9) -- -- (2.9) -- -- (6.8)
Provision 0.6 -- -- 5.7 -- -- 6.3
-------------------------------------------------------------------
Balance at December 31, 1999 3.2 -- -- 5.9 -- -- 9.1
Cash spending, net (2.3) -- -- (4.7) -- -- (7.0)
Provision -- 1.1 -- -- 31.4 -- 32.5
-------------------------------------------------------------------
Balance at December 31, 2000 0.9 1.1 -- 1.2 31.4 -- 34.6
Cash spending, net (0.5) (0.7) (1.4) (1.2) (13.6) -- (17.4)
Provision -- -- 3.2 -- -- 1.3 4.5
-------------------------------------------------------------------
Balance at December 31, 2001 $0.4 $0.4 $1.8 $ -- $17.8 $1.3 $21.7
===================================================================
43
6. INVENTORIES
Inventories consist of the following:
INVENTORIES
(in millions) 2001 2000
------------------------
Raw materials $ 92.0 $ 81.1
Work in process 67.2 76.7
Finished goods 221.8 190.8
Precious metals 20.6 23.2
------------------------
Total inventories $401.6 $371.8
========================
The majority of the Company's physical metal is carried in committed metal
positions with the remainder carried in inventory. All precious metals included
in inventory are stated at LIFO cost. The market value of the precious-metals
inventories exceeded cost by $111.1 million and $254.1 million at December 31,
2001 and 2000, respectively. Net earnings include after-tax gains of $3.4
million in 2001, $2.5 million in 2000 and $2.2 million in 1999 from the sale of
inventory accounted for under the LIFO method.
In the normal course of business, certain customers and suppliers deposit
significant quantities of precious metals with the Company under a variety of
arrangements. Equivalent quantities of precious metals are returnable as product
or in other forms. Metals held for the accounts of customers and suppliers are
not reflected in the Company's financial statements.
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
PROPERTY, PLANT AND EQUIPMENT
(in millions) 2001 2000
---------------------
Land $ 29.2 $ 27.9
Buildings and building improvements 217.6 203.3
Machinery and equipment 1,416.2 1,330.8
Construction in progress 126.4 101.3
Mineral deposits and mine development costs 75.6 74.3
---------------------
1,865.0 1,737.6
Accumulated depreciation and depletion 1,042.5 969.9
---------------------
Property, plant and equipment, net $ 822.5 $ 767.7
=====================
Mineral deposits and mine development costs consist of industrial mineral
reserves including kaolin, attapulgite and mica. The Company does not own any
mining reserves or conduct any mining operations with respect to platinum,
palladium or other metals.
The Company capitalized interest of $3.0 million in 2001, $3.9 million in 2000
and $2.6 million in 1999.
44
8. INVESTMENTS
The Company has investments in affiliates that are accounted for under the
equity method. The more significant of these investments are Engelhard-CLAL,
N.E. Chemcat Corporation (N.E. Chemcat) and Heesung-Engelhard. Engelhard-CLAL, a
50%-owned joint venture, manufactures and markets certain products containing
precious metals. N.E. Chemcat is a 38.8%-owned, publicly traded Japanese
corporation and a leading producer of automotive and chemical catalysts,
electronic chemicals and other precious-metals-based products.
Heesung-Engelhard, a 49%-owned joint venture in Korea, manufactures and markets
catalyst products for automobiles.
The summarized unaudited financial information below represents an aggregation
of the Company's nonsubsidiary affiliates on a 100% basis, unless otherwise
noted:
FINANCIAL INFORMATION
(unaudited) (in millions) 2001 2000 1999
--------------------------------------------------------------------------------
Earnings data:
Revenue $1,640.3 $1,886.1 $1,553.2
Gross profit 158.0 195.2 156.1
Net earnings 62.8 60.2 37.1
Engelhard's equity in net earnings
of affiliates 29.1 24.2 16.3
Balance sheet data:
Current assets $ 551.5 $ 609.2 $ 513.0
Noncurrent assets 207.8 213.7 209.1
Current liabilities 248.9 301.5 232.6
Noncurrent liabilities 47.9 62.9 67.7
Net assets 462.4 458.5 421.8
Engelhard's equity in net assets 204.9 193.9 180.2
The Company's share of undistributed earnings of affiliated companies included
in consolidated retained earnings were earnings of $87.1 million, $60.3 million
and $40.5 million in 2001, 2000 and 1999, respectively. Divdends from affiliated
companies were $4.2 million in 2001, $4.4 million in 2000 and $2.4 million in
1999.
As of December 31, 2001, the Company's accumulated other comprehensive loss
included a foreign currency translation loss of approximately $16.4 million
relating to its Engelhard-CLAL joint venture. At this time, in accordance with
Statement of Financial Accounting Standards No. 52, "Foreign Currency
Translation," the joint venture's assets are held for use and therefore the
associated foreign currency translation loss has not been included in the
carrying value of the investment when assessing the investment for impairment.
Accordingly, at December 31, 2001, the investment is not impaired. The
Engelhard-CLAL joint venture is currently in the process of disposing of a
portion of its businesses. If the joint venture disposes of the remaining
significant businesses, the Company will likely develop and commit to a plan to
liquidate or dispose of the joint venture. At such time, the Company will
include the foreign currency translation loss as part of the carrying amount of
this investment when evaluating the investment for impairment. If and when this
happens, it will be likely that the carrying value of the joint venture will
exceed the fair value of the investment, thus resulting in the recognition of an
impairment loss in current earnings.
As the Engelhard-CLAL joint venture has already disposed of several operations,
the Company expects significantly lower results from this venture in 2002.
45
9. COMMITTED METAL POSITIONS AND HEDGED METAL OBLIGATIONS
The following table sets forth the Company's unhedged metal positions included
in committed metal positions on the Company's "Consolidated Balance Sheets":
METAL POSITIONS INFORMATION
(in millions) 2001 2000
--------------------------------------
Gross Gross
Position Value Position Value
-------------------------------------
Platinum group metals Long $44.3 Long $78.4
Gold Long 0.2 Flat -
Silver Long 0.9 Long 1.3
Base metals Short 5.9 Long 5.0
--------------------------------------
Total unhedged metal positions $51.3 $84.7
======================================
Derivative metal and foreign currency instruments are used to hedge metal
positions and obligations. Over 99% of these instruments have settlement terms
of less than one year. The remaining instruments are expected to settle within
two years. These derivative metal and foreign currency instruments consist of
the following:
METAL HEDGING INSTRUMENTS
(in millions) 2001 2000
----------------------------------------------
Buy Sell Buy Sell
----------------------------------------------
Metal forwards/futures $1,510.5 $ 699.1 $1,244.0 $1,146.6
Eurodollar futures 93.2 127.2 115.7 104.3
Swaps 38.3 24.1 16.0 22.7
Options 72.0 64.4 39.3 8.7
Foreign exchange forwards/futures - 24.8 - 171.2
10. FINANCIAL INSTRUMENTS
The Company's nonderivative financial instruments consist primarily of cash in
banks, temporary investments, accounts receivable and debt. The fair value of
financial instruments in working capital approximates book value. The fair value
of long-term debt was $235.8 million as of December 31, 2001 and $237.5 million
as of December 31, 2000 based on prevailing interest rates at those dates,
compared with a book value of $237.9 million as of December 31, 2001 and $248.6
million as of December 31, 2000.
The Company believes that its financial instruments do not represent a
concentration of credit risk because the Company deals with a variety of major
banks worldwide, and its accounts receivable are spread among a number of major
industries, customers and geographic areas. In addition, a centralized credit
committee reviews significant credit transactions and risk-management issues
before the granting of credit, and an appropriate level of reserves is
maintained. For the past three-year period, provisions to these reserves were
not significant.
46
FOREIGN CURRENCY INSTRUMENTS
Aggregate foreign transaction gains and losses were not significant for any year
presented. The following table sets forth, in U.S. dollars, the Company's open
foreign currency forward contracts accounted for as fair value hedges used for
hedging other than metal-related transactions as of the respective year-ends
(see Note 9, "Committed Metal Positions and Hedged Metal Obligations," for
further detail):
FOREIGN CURRENCY FORWARD CONTRACTS INFORMATION
(in millions)
2001 2000
---------------------------------------
Buy Sell Buy Sell
---------------------------------------
Deutsche mark $ - $ - $ - $27.7
Japanese yen 0.3 7.2 - -
French franc - - - 3.0
Euro 5.1 57.0 11.0 142.4
Netherlands guilder - - 4.1 9.4
South African rand - 3.7 - 4.8
British pound 7.2 - 6.9 -
Italian lira - 6.3 - 1.6
---------------------------------------
Total open foreign currency
forward contracts $12.6 $ 74.2 $22.0 $188.9
=======================================
None of these contracts exceeds a year in duration. These contracts were
marked-to-market at December 31, 2001 and 2000.
11. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
At December 31, 2001, the Company had two unsecured committed revolving credit
agreements for $400 million each with a group of major North American banks and
foreign banks. The $400-million five-year agreement expires in May 2006, and the
$400-million 364-day agreement expires in May 2002. In connection with these
credit facilities, the Company has agreed to certain covenants, including
maintaining a debt to EBITDA ratio of less than 3:1 (as defined in the credit
agreements). At December 31, 2001, the Company was fully compliant with all of
its debt covenants. Facility fees are paid to the bank group for these lines.
Management intends to renew the $400-million committed credit facility that
expires in May 2002.
At December 31, 2001 and 2000, short-term bank borrowings were $198.8 million
and $153.0 million, respectively. Weighted-average interest rates were 4.1%,
6.4% and 5.2% during 2001, 2000 and 1999, respectively. At December 31, 2001
and 2000, long-term debt due within one year was $0.1 million and $150.1
million, respectively.
At December 31, 2001 and 2000, commercial paper borrowings were $190.2 million
and $199.0 million, respectively. Weighted-average interest rates were 4.1%,
6.3% and 5.1% during 2001, 2000 and 1999, respectively.
Unused, uncommitted lines of credit available exceeded $650 million at December
31, 2001. The Company's lines of credit with its banks are available in
accordance with normal terms for prime commercial borrowers and are not subject
to commitment fees or other restrictions.
In July 1998, the Company filed a shelf registration for $300 million of
corporate debt. Plans to issue debt under the shelf registration are under
consideration by management.
47
The following table sets forth the components of long-term debt:
DEBT INFORMATION
(in millions) 2001 2000
---------------
Notes, with a weighted-average interest rate
of 12.1%, due 2003-2006 $ 14.1 $ 14.1
7% Notes, due 2001, net of discount - 149.9
7.375% Notes, due 2006, net of discount 98.0 99.6
6.95% Notes, due 2028, net of discount 118.5 118.5
Industrial revenue bonds, 5.375%, due 2006 6.5 6.5
Industrial revenue bonds, variable rate, due 2020 - 8.5
Foreign bank loans with a weighted-average interest
rate of 7.0%, due 2000-2003 0.2 1.1
Other, with a weighted-average rate of 6.1%, due 2000-2007 0.7 0.5
---------------
238.0 398.7
Amounts due within one year 0.1 150.1
---------------
Total long-term debt $237.9 $248.6
===============
As of December 31, 2001, the aggregate maturities of long-term debt for the
succeeding five years are as follows: $0.1 million in 2002, $0.3 million in
2003, $0.1 million in 2004, $0.1 million in 2005, $118.6 million in 2006 and
$118.7 million thereafter.
Net interest expense was $44.0 million in 2001, compared with $62.6 million in
2000 and $56.6 million in 1999. Net interest expense in 2001 decreased due to
decreased borrowings, lower short-term interest rates and an increase in
interest income. Net interest expense in 1999 included a reduction of $7.1
million resulting from the settlement of treasury lock positions that were
entered into to hedge anticipated long-term borrowings that never occurred.
Excluding this reduction from 1999, net interest expense in 2000 decreased due
to decreased borrowings, partially offset by increased interest rates. Interest
income was $3.3 million in 2001, $2.1 million in 2000 and $2.9 million in 1999.
48
12. INCOME TAXES
The components of income tax expense are shown in the following table:
INCOME TAX EXPENSE
(in millions) 2001 2000 1999
--------------------------------------
Current income tax expense
Federal $ 8.8 $105.7 $45.7
State and local 3.3 10.1 4.7
Foreign 27.5 14.5 31.6
--------------------------------------
39.6 130.3 82.0
--------------------------------------
Deferred income tax expense
Federal 38.1 (55.1) 3.4
State and local 6.5 (11.3) 0.6
Foreign (4.5) 13.5 0.7
--------------------------------------
40.1 (52.9) 4.7
--------------------------------------
Income tax expense $79.7 $ 77.4 $86.7
======================================
The foreign portion of earnings before income tax expense was $112.6 million in
2001, $126.3 million in 2000 and $109.4 million in 1999. Taxes on income of
foreign consolidated subsidiaries and affiliates are provided at the tax rates
applicable to their respective foreign tax jurisdictions.
The following table sets forth the components of the net deferred tax asset that
result from temporary differences between the amounts of assets and liabilities
recognized for financial reporting and tax purposes:
NET DEFERRED INCOME TAX ASSET
(in millions) 2001 2000
----------------------------
Deferred tax assets
Accrued liabilities $168.8 $193.7
Noncurrent liabilities 65.1 65.8
Unrealized net loss - pension asset 21.0 -
Tax credits/carryforwards 6.5 5.5
----------------------------
Total deferred tax assets 261.4 265.0
----------------------------
Valuation allowance (8.6) (11.1)
----------------------------
Total deferred tax assets, net of
valuation allowance 252.8 253.9
----------------------------
Deferred tax liabilities
Prepaid pension expense (30.5) (32.8)
Property, plant and equipment (2.2) (8.0)
Other assets (49.5) (37.2)
----------------------------
Total deferred tax liabilities (82.2) (78.0)
----------------------------
Net deferred tax asset $170.6 $175.9
============================
49
Net current deferred tax assets of $99.9 million and $116.8 million at December
31, 2001 and December 31, 2000, respectively, are included in other current
assets and net noncurrent deferred tax assets of $70.7 million and $59.1 million
at December 31, 2001 and December 31, 2000, respectively, are included in other
noncurrent assets in the Company's "Consolidated Balance Sheets."
In 2001, the Company generated and recorded a domestic deferred tax asset for
certain state net operating loss carryforwards in the amount of $2.5 million of
which $1.3 million will expire in 2008, $0.2 million will expire in 2016 and
$1.0 million will expire in 2021. As of December 31, 2001, the Company also had
approximately $0.9 million of research and development credits which carry
forward indefinitely, $0.2 million of state investment tax credits expiring in
2006 and $2.9 million of foreign net operating losses of which $0.1 million will
expire in 2005 and $2.8 million will carry forward indefinitely.
In 2000, the Company recorded special and other charges in the amount of $134.2
million. A deferred tax asset of $54.0 million was provided with respect to this
charge.
A reconciliation of the difference between the Company's consolidated income tax
expense and the expense computed at the federal statutory rate is shown in the
following table:
CONSOLIDATED INCOME TAX EXPENSE RECONCILIATION
(in millions)
2001 2000 1999
----------------------------------
Income tax expense at federal
statutory rate $106.8 $ 86.0 $ 99.4
State income taxes, net of
federal effect 5.4 4.0 3.8
Percentage depletion (7.8) (9.8) (12.9)
Equity earnings (3.5) (3.4) (3.1)
Effect of different tax rates
on foreign earnings, net 1.5 9.5 6.4
Tax credits/carrybacks (20.3) (11.1) (14.6)
Foreign sales corporation (6.8) (7.9) (7.3)
Non-deductible goodwill 2.0 2.9 2.0
Valuation allowance (2.5) 3.6 11.7
Other items, net 4.9 3.6 1.3
----------------------------------
Income tax expense $ 79.7 $ 77.4 $ 86.7
==================================
At December 31, 2001, the Company's share of the cumulative undistributed
earnings of foreign subsidiaries was approximately $586.9 million. No provision
has been made for U.S. or additional foreign taxes on the undistributed earnings
of foreign subsidiaries because such earnings are expected to be reinvested
indefinitely in the subsidiaries' operations. It is not practical to estimate
the amount of additional tax that might be payable on these foreign earnings in
the event of distribution or sale. However, under existing law, foreign tax
credits would be available to substantially reduce, or in some cases, eliminate
U.S. taxes payable.
50
13. RELATED PARTY TRANSACTIONS
In the ordinary course of business, the Company has related party transactions
with its equity affiliates, including N.E. Chemcat, Engelhard-CLAL and
Heesung-Engelhard, and with entities in which Anglo American Corporation of
South Africa Limited (Anglo) has material interests. Anglo, indirectly through
Minorco, held a significant minority interest in the common stock of the
Company. In May 1999, Minorco sold all the shares of common stock of Engelhard
that it owned (see Note 3, "Significant Shareholder Transaction," for further
detail). The Company's transactions with such entities (through May 1999 for
entities in which Anglo had material interests) amounted to: purchases-from of
$4.0 million in 2001, $5.5 million in 2000 and $41.3 million in 1999; sales-to
of $17.1 million in 2001, $27.8 million in 2000 and $24.6 million in 1999; and
metal leasing-to of $2.6 million in 2001, $9.9 million in 2000 and $2.8 million
in 1999. At December 31, 2001 and 2000, net amounts due to such entities totaled
$1.3 million and $0.4 million, respectively.
Citigroup, Inc. owned approximately 7.5% of the Company's voting securities as
of December 31, 2001. Citibank, N.A., a subsidiary of Citigroup Inc.,
participated with other lenders in lines of credit available to the Company
under revolving credit facilities. Citibank's total commitment is $38 million,
none of which was drawn in 2001. In 2001, Citibank received an initial fee of
$57,000 and annual facility fees of $35,000 for these facilities. The Company
uses subsidiaries of Citigroup, as well as other firms, to provide letters of
credit and cash management services to the Company. Fees to subsidiaries of
Citigroup for these services aggregated less than $60,000 in 2001. In the
ordinary course of business, the Company engages in foreign exchange and
commodities transactions with subsidiaries of Citigroup, as well as other firms,
all of which are negotiated at arm's length as principals in competitive
markets.
14. BENEFITS
The Company has domestic and foreign pension plans covering substantially all
employees. Plans covering most salaried employees generally provide benefits
based on years of service and the employee's final average compensation. Plans
covering most hourly bargaining unit members generally provide benefits of
stated amounts for each year of service. The Company makes contributions to the
plans as required and to such extent contributions are currently deductible for
tax purposes. Plan assets primarily consist of listed stocks, fixed income
securities and cash.
51
The following table sets forth the plans' funded status:
FUNDED STATUS
(in millions) 2001 2000
------------- ------- -------
CHANGE IN PROJECTED BENEFIT OBLIGATION
Projected benefit obligation at beginning of year $416.0 $382.0
Service cost 14.7 13.3
Interest cost 29.9 26.8
Plan amendments 1.2 1.6
Actuarial losses 20.5 21.2
Benefits paid (27.1) (23.3)
Foreign exchange (2.5) (5.6)
------- -------
Projected benefit obligation at end of year $452.7 $416.0
------- -------
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year $488.6 $422.4
Actual (loss)/gain on plan assets (80.4) 93.3
Employer contribution 4.8 2.9
Benefits paid (27.1) (23.3)
Foreign exchange (3.2) (6.7)
------- -------
Fair value of plan assets at end of year $382.7 $488.6
------- -------
Funded status $(70.0) $ 72.6
Unrecognized net actuarial loss/(gain) 123.4 (15.5)
Unrecognized prior service cost 9.7 10.9
Unrecognized transition asset, net of amortization (0.1) (0.6)
Fourth quarter contribution 0.2 0.1
------- --------
Prepaid pension asset $ 63.2 $ 67.5
======= ========
Amounts recognized in the consolidated balance sheets
consist of:
Prepaid benefit cost $ 68.6 $ 72.5
Accrued benefit liability (54.3) (5.0)
Intangible asset 5.9 -
Accumulated other comprehensive loss 43.0 -
------- --------
Net amount recognized $ 63.2 $ 67.5
======= ========
The prepaid pension asset balances of $68.6 million and $67.5 million at
December 31, 2001 and December 31, 2000, respectively, and the intangible asset
of $5.9 million at December 31, 2001 are included in other noncurrent assets in
the Company's "Consolidated Balance Sheets." The Company recorded a minimum
pension liability adjustment of $43.0 million ($25.4 million after tax) in 2001
and a minimum pension asset adjustment of $1.0 million in 2000. These
adjustments were recognized and charged to "Accumulated Other Comprehensive
Loss" within shareholders' equity.
52
The components of net periodic pension expense for all plans are shown in the
following table:
NET PERIODIC PENSION EXPENSE
(in millions) 2001 2000 1999
-----------------------------------
Service cost $ 14.7 $ 13.3 12.1
Interest cost 29.9 26.8 24.5
Expected return on plan assets (40.7) (37.7) (36.0)
Amortization of prior service cost 2.2 1.9 2.2
Amortization of transition asset (0.5) (0.6) (0.5)
Recognized actuarial loss 2.5 2.9 4.3
-----------------------------------
Net periodic pension expense $ 8.1 $ 6.6 $ 6.6
===================================
The Company uses September 30 as the measurement date for pension assets and
liabilities. The assumptions chosen to measure the current years' liabilities
are also used to determine the subsequent years' net periodic pension expense.
The following table sets forth the key weighted-average assumptions used in
determining the worldwide projected benefit obligation:
2001 2000 1999
-----------------------------------
Discount rate 7.24% 7.44% 7.38%
Rate of compensation increase 4.18% 4.39% 4.35%
Expected return on plan assets 10.04% 10.30% 10.29%
-----------------------------------
The Company also sponsors three savings plans covering certain salaried and
hourly paid employees. The Company's contributions, which may equal up to 50% of
certain employee contributions, were $4.1 million in 2001, $3.9 million in 2000
and $3.6 million in 1999. These amounts were recorded as an expense in the
Company's "Consolidated Statements of Earnings."
The Company also currently provides postretirement medical and life insurance
benefits to certain retirees (and their spouses), certain disabled employees
(and their families) and spouses of certain deceased employees. Substantially
all U.S. salaried employees and certain hourly paid employees are eligible for
these benefits, which are paid through the Company's general health care and
life insurance programs, except for certain medicare-eligible salaried and
hourly retirees who are provided a defined contribution towards the cost of a
partially insured health plan. In addition, the Company provides postemployment
benefits to former or inactive employees after employment but before retirement.
These benefits are substantially similar to the postretirement benefits, but
cover a much smaller group of employees.
53
The following table sets forth the components of the accrued postretirement and
postemployment benefit obligation, all of which are unfunded:
POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
(in millions) 2001 2000
-----------------------------------------------------------------------------
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year $123.0 $117.8
Service cost 2.8 2.8
Interest cost 9.1 8.7
Actuarial losses 5.5 3.5
Benefits paid (11.9) (9.8)
------- -------
Benefit obligation at end of year $128.5 $123.0
------- -------
Unrecognized net loss (11.4) (5.8)
Unrecognized prior service cost 15.8 21.6
------- -------
Accrued benefit obligation $132.9 $138.8
======= =======
The postretirement and postemployment benefit balances of $132.9 million and
$138.8 million at December 31, 2001 and December 31, 2000, respectively, are
included in other noncurrent liabilities in the Company's "Consolidated Balance
Sheets."
The components of the net expense for these postretirement and postemployment
benefits are shown in the following table:
POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
(in millions) 2001 2000 1999
-----------------------------
COMPONENTS OF NET PERIODIC BENEFIT COST
Service cost $2.8 $2.8 $3.2
Interest cost 9.1 8.7 8.3
Net amortization (5.8) (5.8) (5.6)
----- ----- -----
Net periodic benefit cost $6.1 $5.7 $5.9
===== ===== =====
The weighted-average discount rate used in determining the actuarial present
value of the accumulated postretirement and postemployment benefit obligation is
7.50% for 2001 and 7.75% for 2000. The average assumed health care cost trend
rate used for 2001 is 5% to 10%. A 1% increase in the assumed health care cost
trend rate would have increased aggregate service and interest cost in 2001 by
$0.7 million and the accumulated postretirement and postemployment benefit
obligation as of December 31, 2001 by $6.6 million. A 1% decrease in the assumed
health care cost trend rate would have decreased aggregate service and interest
cost in 2001 by $1.2 million and the accumulated postretirement and
postemployment benefit obligation as of December 31, 2001 by $11.0 million.
54
15. STOCK OPTION AND BONUS PLANS
The Company's Stock Option Plans of 1999 and 1991, as amended (the Key Option
Plans), generally provide for the granting to key employees of options to
purchase an aggregate of 5,500,000 and 16,875,000 common shares, respectively,
at fair market value on the date of grant. No options under the Stock Option
Plans of 1999 and 1991 may be granted after December 16, 2009 and June 30, 2002,
respectively.
In 1993, the Company established the Employee Stock Option Plan of 1993, as
amended, which generally provided for the granting to all employees (excluding
U.S. bargaining unit employees and key employees eligible under the Key Option
Plans) of options to purchase an aggregate of 2,812,500 common shares at fair
market value on the date of grant. No additional options may be granted under
this plan. In 1995, the Company established the Directors Stock Option Plan,
which generally provides for the annual granting to each non-employee director
the option to purchase up to 3,000 common shares at the fair market value on the
date of grant. Options under all plans become exercisable in four installments
beginning after one year, and no options may be exercised after 10 years from
the date of grant. Outstanding options may be canceled and reissued under terms
specified in the plan documents.
Had compensation cost for the Company's stock option plans been determined based
on the fair value at grant date for awards in 2001, 2000 and 1999 consistent
with the provisions of Statement of Financial Accounting Standards No.123,
"Accounting for Stock Based Compensation," the Company's net earnings and
earnings per share would have been as follows:
PRO FORMA INFORMATION
(in millions, except per-share data) 2001 2000 1999
-------------------------------
Net earnings--as reported $225.6 $168.3 $197.5
Net earnings--pro forma 219.7 159.9 189.3
Basic earnings per share--as reported 1.73 1.33 1.49
Basic earnings per share--pro forma 1.69 1.27 1.43
Diluted earnings per share--as reported 1.71 1.31 1.47
Diluted earnings per share--pro forma 1.66 1.25 1.41
The weighted-average fair value at date of grant for options granted during
2001, 2000 and 1999 was $8.13, $4.28 and $5.19, respectively. Fair value of each
option grant is estimated on the date of grant using the Black-Scholes
option-pricing model. The following assumptions were used:
2001 2000 1999
-------------- ----------------- ------------------
Dividend yield 1.5 - 1.8% 2.1 - 2.4% 1.9 - 2.3%
Expected volatility 35-36% 33% 33%
Risk-free interest rate 3.8-5.1% 6.0% 4.5 - 6.0%
Expected life (years) 5 4-5 4
55
Stock option transactions under all plans are as follows:
2001 2000 1999
Weighted-Average Weighted-Average Weighted-Average
Number Exercise Price Number Exercise Price Number Exercise Price
of Shares Per Share of Shares Per Share of Shares Per Share
----------------------------- ---------------------------- ----------------------------
Outstanding at beginning of year 17,686,507 $18.20 16,472,791 $18.30 14,084,148 $18.17
Granted 1,317,008 $24.55 1,611,786 $16.87 2,953,721 $18.62
Forfeited (187,330) $19.40 (255,840) $19.22 (328,616) $18.83
Exercised (5,900,350) $17.15 (142,230) $12.14 (236,462) $13.09
----------- ------ ----------- ------ ----------- ------
Outstanding at end of year 12,915,835 $19.32 17,686,507 $18.20 16,472,791 $18.30
Exercisable at end of year 9,472,409 $18.92 13,692,608 $18.24 10,412,192 $17.99
Available for future grants 4,253,336 5,383,014 3,738,960
The following table summarizes information about fixed-price options outstanding
at December 31, 2001:
Options Outstanding Options Exercisable
----------------------------------------------------- -----------------------
Weighted-
Average Weighted- Weighted-
Number Remaining Average Number Average
Range of Outstanding Contractual Exercise Exercisable Exercise
Exercise Prices at 12/31/01 Life (years) Price at 12/31/01 Price
----------------------------------------------------- ----------- ---------
$11.44 to 19.14 626,033 1-2 $17.52 626,033 $17.52
14.21 to 23.88 3,546,633 4-5 19.64 3,546,633 19.64
18.56 to 20.91 1,639,346 6 19.14 1,639,346 19.14
17.34 to 21.69 1,969,380 7 18.68 1,591,195 18.72
17.81 to 20.75 2,442,328 8 18.57 1,556,414 18.50
16.84 to 18.75 1,403,391 9 16.87 512,788 16.86
22.75 to 26.90 1,288,724 10 24.59 - -
---------- ------ ----------- ---------
12,915,835 $19.32 9,472,409 $18.92
The Company's Key Employee Stock Bonus Plan, as amended (the Bonus Plan)
provides for the award of up to 15,187,500 common shares to key employees as
compensation for future services, not exceeding 1,518,750 shares in any year
(plus any canceled awards or shares available for award but not previously
awarded). The Bonus Plan terminates on June 30, 2006. Shares awarded vest in
five annual installments, provided the recipient is still employed by the
Company on the vesting date. Compensation expense is measured on the date the
award is granted and is amortized over five years. Shares awarded are considered
issued and outstanding at the date of grant and are included in shares
outstanding for purposes of computing diluted earnings per share. Employees have
both dividend and voting rights on all unvested shares. In 2001 and 2000, the
Company granted 423,685 and 321,000 shares to key employees at a fair value of
$22.75 and $16.84, respectively, per share. Unvested shares were 626,112 and
405,092 at December 31, 2001 and 2000, respectively.
56
Compensation expense relating to stock awards was $4.4 million in 2001, $5.0
million in 2000 and $4.3 million in 1999.
The Company has certain deferred compensation arrangements where shares earned
under the Engelhard stock bonus plan are deferred and placed in a "Rabbi Trust."
Until February 2001, the plan permitted employees to convert their deferred
stock balance to deferred cash under certain conditions. In February 2001, the
Company terminated this deferred cash option. With the termination of the
deferred cash option, increases/decreases in the deferred compensation liability
will no longer be recognized in earnings. Shares held in the trust are recorded
as treasury stock with the corresponding liability recorded as a credit within
shareholders' equity.
For the year ended December 31, 2001, the Company recognized expense of $0.9
million related to the increase in the value of its common stock held in a Rabbi
Trust for deferred compensation from $20.38 at December 31, 2000 to $22.65 at
February 1, 2001 (as the deferred cash option was terminated at this time). For
the years ended December 31, 2000 and 1999, the Company recognized expense of
$0.4 million and income of $0.9 million, respectively, related to changes in the
value of its common stock held in the Rabbi Trust. The total value of the Rabbi
Trust at December 31, 2001 was $8.7 million compared to $7.8 million at December
31, 2000.
16. EARNINGS PER-SHARE
Statement of Financial Accounting Standard No. 128, "Earnings Per Share" (SFAS
128) specifies the computation, presentation, and disclosure requirements for
basic and diluted earnings per share (EPS). The following table represents the
computation of basic and diluted EPS as required by SFAS 128:
EARNINGS PER-SHARE COMPUTATIONS
Year ended December 31
(in thousands, except per-share data)
2001 2000 1999
----------------------------------
BASIC EPS COMPUTATION
Net income applicable to common shares $225,561 $168,296 $197,462
----------------------------------
Average number of shares outstanding-basic 130,018 126,351 132,432
----------------------------------
Basic earnings per share $ 1.73 $ 1.33 $ 1.49
==================================
DILUTED EPS COMPUTATION
Net income applicable to common shares $225,561 $168,296 $197,462
----------------------------------
Average number of shares outstanding-basic 130,018 126,351 132,432
Effect of dilutive stock options
and other incentives 2,137 546 823
Effect of Rabbi Trust - 1,244 1,335
----------------------------------
Total number of shares outstanding-diluted 132,155 128,141 134,590
----------------------------------
Diluted earnings per share $ 1.71 $ 1.31 $ 1.47
==================================
57
Options to purchase additional shares of common stock of 570,380 at a price of
$26.90, 11,684,042 (at a price range of $17.50 to $23.88) and 4,037,068 (at a
price range of $19.59 to $23.88) were outstanding at the end of 2001, 2000 and
1999, respectively, but were not included in the computation of diluted EPS
because the options' exercise prices were greater than the average annual market
price of the common shares. Shares held in the Rabbi Trust were excluded from
basic shares outstanding in 1999 and 2000. Effective February 2001, the Company
terminated the deferred cash option of the Rabbi Trust. With the termination of
this option, shares held in the Rabbi Trust were included in basic shares
outstanding in 2001.
17. BUSINESS SEGMENT AND GEOGRAPHIC AREA DATA
The Company has four reportable business segments: Environmental Technologies,
Process Technologies, Appearance and Performance Technologies, and Materials
Services.
The Environmental Technologies segment, located principally in the United
States, Europe and South Africa, markets cost-effective compliance with
environmental regulations enabled by sophisticated emission-control technologies
and systems.
The Process Technologies segment, located principally in the United States and
Europe, enables customers to make their processes more productive, efficient,
environmentally sound and safer through the supply of advanced chemical-process
catalysts, additives and sorbents.
The Appearance and Performance Technologies segment, located principally in the
United States, South Korea and Finland provides pigments and performance
additives that enable its customers to market enhanced image and functionality
in their products. This segment serves a broad array of end markets including
coatings, plastics, cosmetics, construction and paper. This segment's products
help customers improve the look, performance and overall cost of their products.
This segment is also the internal supply source of precursors for the Company's
advanced chemical-process catalysts.
The Materials Services segment, located principally in the United States, Europe
and Japan, provides a full array of services to the Company's technology
businesses and their customers who rely on certain precious and base metals as
raw materials for their products. This is a distribution and materials services
business that purchases and sells precious metals, base metals and related
products and services. It does so under a variety of pricing and delivery
arrangements structured to meet the logistical, financial and price-risk
management requirements of the Company, its customers and suppliers.
Additionally, it offers related services for precious-metal refining and storage
and produces salts and solutions.
Within the "All Other" category, sales to external customers and operating
earnings/(losses) are derived primarily from the Ventures and Engineered
Materials businesses. The sale of inventory accounted for under the LIFO method,
royalty income and other miscellaneous income and expense items not related to
the reportable segments are included in the "All Other" category. In the second
quarter of 1999, the Company sold its Engineered Materials business
(metal-plating business).
The majority of Corporate expenses have been charged to the segments on either a
direct-service basis or as part of a general allocation. Environmental
Technologies and, to a much lesser extent, Process Technologies utilize metal in
their factories in excess of that provided by customers. This metal is provided
by Materials Services.
58
The following table presents certain data by business segment:
BUSINESS SEGMENT INFORMATION
(in millions)
Appearance
and Reportable
Environmental Process Performance Materials Segments All
Technologies Technologies Technologies Services Subtotal Other Total
---------------------------------------------------------------------------------------------------------------------
2001
Net sales to external customers $646.7 $568.2 $634.4 $3,207.9 $5,057.2 $ 39.7 $5,096.9
Operating earnings/(loss) 142.4 94.3 46.5 56.1 339.3 (a)(19.2) 320.1
Interest expense, net - - - - - 44.0 44.0
Depreciation, depletion
and amortization 21.5 24.6 51.4 1.3 98.8 9.7 108.5
Equity in earnings of affiliates 8.6 - - - 8.6 20.5 29.1
Total assets 506.9 563.4 799.7 593.1 2,463.1 532.4 2,995.5
Equity investments 23.0 - - - 23.0 181.9 204.9
Capital expenditures 68.7 30.4 36.9 8.2 144.2 24.7 168.9
---------------------------------------------------------------------------------------------------------------------
2000
Net sales to external customers $636.7 $566.6 $684.4 $3,614.2 $5,501.9 $ 40.7 $5,542.6
Operating earnings/(loss),
excluding special and
other charges 131.8 86.5 80.2 129.3 427.8 (a)(29.0) 398.8
Special and other charges (15.4) (5.5) (49.7) - (70.6) (62.8) (133.4)
Operating earnings/(loss),
as reported 116.4 81.0 30.5 129.3 357.2 (91.8) 265.4
Interest expense, net - - - - - 62.6 62.6
Depreciation, depletion and
amortization 21.6 28.2 51.0 1.5 102.3 14.8 117.1
Equity in earnings/(loss)
of affiliates 6.6 - (b)(1.2) - 5.4 18.8 24.2
Total assets 492.8 540.1 825.0 790.2 2,648.1 518.7 3,166.8
Equity investments 15.7 - - - 15.7 178.2 193.9
Capital expenditures 40.2 30.5 45.9 1.0 117.6 19.0 136.6
---------------------------------------------------------------------------------------------------------------------
1999
Net sales to external customers $584.8 $521.8 $675.3 $2,608.6 $4,390.5 $ 97.5 $4,488.0
Operating earnings 102.4 81.9 86.9 39.6 310.8 (a) 5.0 315.8
Interest expense, net - - - - - 56.6 56.6
Depreciation, depletion and
amortization 18.7 28.1 51.1 1.9 99.8 11.8 111.6
Equity in earnings/(loss)
of affiliates 3.0 - (0.1) - 2.9 13.4 16.3
Total assets 391.8 558.1 891.7 565.3 2,406.9 513.6 2,920.5
Equity investments 11.2 - 1.2 - 12.4 167.8 180.2
Capital expenditures 26.4 32.1 33.1 1.2 92.8 9.2 102.0
(a) "All Other" includes pretax gains on the sale of certain inventories accounted for under the LIFO method of
$5.3 million in 2001, $3.9 million in 2000 and $3.4 million in 1999.
(b) Includes pretax special and other charges of $0.8 million.
59
The following table presents certain data by geographic area:
GEOGRAPHIC AREA DATA
(in millions) 2001 2000 1999
--------------------------------------------------------------------------------
Net sales to external customers:
United States $2,983.9 $3,559.3 $2,928.3
International 2,113.0 1,983.3 1,559.7
--------------------------------------------------------------------------------
Total consolidated net sales to
external customers $5,096.9 $5,542.6 $4,488.0
--------------------------------------------------------------------------------
Long-lived assets:
United States $1,092.5 $1,065.6 $1,211.0
International 245.1 205.0 168.6
--------------------------------------------------------------------------------
Total long-lived assets $1,337.6 $1,270.6 $1,379.6
--------------------------------------------------------------------------------
The Company's international operations are predominantly based in Europe.
The following table reconciles segment operating earnings with earnings before
income taxes as shown in the Company's "Consolidated Statements of Earnings":
SEGMENT RECONCILIATIONS
(in millions)
2001 2000 1999
------------------------------
Net sales to external customers:
Net sales for reportable segments $5,057.2 $5,501.9 $4,390.5
Net sales for other business units 32.0 37.7(a) 95.0
All other 7.7 3.0 2.5
------------------------------
Total consolidated net sales to
external customers $5,096.9 $5,542.6 $4,488.0
==============================
Earnings before income taxes:
Operating earnings for reportable segments $ 339.3 $ 357.2 $ 310.8
Operating loss for other
business units (0.9) (35.6) (1.7)
Special and other charges - Corporate - (28.3) -
Other operating (loss)/earnings - Corporate (18.3) (27.9) 6.7
------------------------------
Total operating earnings $ 320.1 $ 265.4 $ 315.8
Interest expense, net (44.0) (62.6) (56.6)
Equity in earnings of affiliates 29.1 24.2 16.3
Gain on sale of investments and land, net - 18.7 8.6
------------------------------
Earnings before income taxes $ 305.2 $ 245.7 $ 284.1
==============================
Total assets
Total assets for reportable segments $2,463.1 $2,648.1 $2,406.9
Assets for other business units 28.5 29.1 81.3
All other 503.9 489.6 432.3
------------------------------
Total consolidated assets $2,995.5 $3,166.8 $2,920.5
==============================
(a) Decrease primarily due to the sale of the metal-plating business in the
second quarter of 1999.
60
An unaffiliated customer of the Environmental Technologies and Materials
Services segments accounted for approximately $796 million, $830 million and
$1,007 million of the Company's net sales in 2001, 2000 and 1999, respectively.
18. LEASE COMMITMENTS
The Company rents real property and equipment under long-term operating leases.
Rent expense and sublease income for all operating leases are summarized as
follows:
(in millions) 2001 2000 1999
----------------------------------------------------------------------------
Rents paid $33.0 $26.7 $22.0
Less sublease income (1.3) (0.8) (0.8)
----------------------------------------------------------------------------
Rent expense, net $31.7 $25.9 $21.2
============================================================================
Future minimum rent payments at December 31, 2001, required under
noncancellable operating leases, having initial or remaining lease terms in
excess of one year, are as follows:
(in millions)
------------------------------------------------------------------
2002 $ 33.3
2003 30.2
2004 28.2
2005 21.6
2006 12.3
Thereafter 82.9
------------------------------------------------------------------
Total minimum lease payments 208.5
Less: minimum sublease income (3.7)
------------------------------------------------------------------
Net minimum lease payments $204.8
==================================================================
In 2000, the Company entered into a sale-leaseback transaction for $97.3 million
for machinery and equipment that is used in the Process Technologies segment.
The term of this operating lease is five years. The Company intends to renew
this lease at the end of the lease term. In 1998, the Company entered into a
sale-leaseback transaction for $67.2 million for property that serves as the
principal executive and administrative offices of the Company and its operating
businesses. The term of this operating lease is 20 years.
61
19. ENVIRONMENTAL COSTS
With the oversight of environmental agencies, the Company is currently
preparing, has under review, or is implementing environmental investigations and
cleanup plans at several currently or formerly owned and/or operated sites,
including Plainville, Massachusetts and Salt Lake City, Utah. The Company is
continuing to investigate contamination at Plainville under a 1993 agreement
with the United States Environmental Protection Agency (EPA). In conjunction,
the Company is continuing to address decommissioning issues by the Commonwealth
of Massachusetts under authority delegated by the Nuclear Regulatory Commission.
Investigation of the environmental status at the Salt Lake City site continues
under a 1993 agreement with the Utah Solid and Hazardous Waste Control Board.
In addition, as of December 31, 2001, eleven sites have been identified at which
the Company believes liability as a potentially responsible party (PRP) is
probable under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, or similar state laws (collectively referred
to as Superfund) for the cleanup of contamination resulting from the historic
disposal of hazardous substances allegedly generated by the Company, among
others. Superfund imposes strict, joint and several liability under certain
circumstances. In many cases, the dollar amount of the claim is unspecified and
claims have been asserted against a number of other entities for the same relief
sought from the Company. Based on existing information, the Company believes
that it is a de minimis contributor of hazardous substances at a number of the
sites referenced above. Subject to the reopening of existing settlement
agreements for extraordinary circumstances or natural resource damages, the
Company has settled a number of other cleanup proceedings. The Company has also
responded to information requests from EPA and state regulatory authorities in
connection with other Superfund sites.
The accruals for environmental cleanup-related costs recorded in the
consolidated balance sheets at December 31, 2001 and 2000 were $23.2 million and
$24.7 million, respectively, including $0.6 million for Superfund sites in both
years. These amounts represent those costs that the Company believes are
probable and reasonably estimable. Based on currently available information and
analysis, the Company's accrual represents approximately 48% of what it believes
are the reasonably possible environmental cleanup-related costs of a noncapital
nature. The estimate of reasonably possible costs is less certain than the
probable estimate upon which the accrual is based.
Cash payments for environmental cleanup-related matters were $1.7 million in
both 2001 and 2000 and $2.4 million in 1999. The amounts accrued in connection
with environmental cleanup-related matters were not significant over this time
period.
For the past three-year period, environmental-related capital projects have
averaged less than 10% of the Company's total capital expenditure programs, and
the expense of environmental compliance (e.g. environmental testing, permits,
consultants and in-house staff) was not material.
62
There can be no assurances that environmental laws and regulations will not
become more stringent in the future or that the Company will not incur
significant costs in the future to comply with such laws and regulations. Based
on existing information and currently enacted environmental laws and
regulations, cash payments for environmental cleanup-related matters are
projected to be $4.2 million for 2002, which has already been accrued. Further,
the Company anticipates that the amounts of capitalized environmental projects
and the expense of environmental compliance will approximate current levels.
While it is not possible to predict with certainty, management believes
environmental cleanup-related reserves at December 31, 2001 are reasonable and
adequate, and environmental matters are not expected to have a material adverse
effect on financial condition. These matters, if resolved in a manner different
from the estimates, could have a material adverse effect on the Company's
operating results or cash flows.
20. LITIGATION AND CONTINGENCIES
Various lawsuits, claims and proceedings are pending against the Company.
The Company is one of a number of defendants in numerous proceedings that allege
that the plaintiffs were injured from exposure to hazardous substances
purportedly supplied by the Company and other defendants. The Company is also
subject to a number of environmental contingencies (see Note 19, "Environmental
Costs," for further detail) and is a defendant in a number of lawsuits covering
a wide range of other matters. In some of these matters, the remedies sought or
damages claimed are substantial. While it is not possible to predict with
certainty the ultimate outcome of these lawsuits or the resolution of the
environmental contingencies, management believes, after consultation with
counsel, that resolution of these matters is not expected to have a material
adverse effect on financial condition. These matters, if resolved in a manner
different from management's current expectations, could have a material adverse
effect on the Company's operating results or cash flows.
In 1998, management learned that Engelhard and several other companies operating
in Japan had been victims of a fraudulent scheme involving base-metal inventory
held in third-party warehouses in Japan. The inventory loss was approximately
$40 million in 1997 and $20 million in 1998. The Company is vigorously pursuing
recovery, including litigation in several cases. The most significant case, in
New Jersey Superior Court, is expected to reach trial in the spring of 2002. In
the first quarter of 1998, Engelhard recorded a receivable from the insurance
carriers and third parties involved for approximately $20 million. This amount
represented management's and counsel's best estimate of the minimum probable
recovery from the various insurance policies and other parties involved in the
fraudulent scheme. In 2001, the Company recovered $3.7 million, reducing the
receivable discussed above to $16.3 million. The Company continues to pursue
recovery from insurance and other parties.
63
The Company is involved in a value-added tax dispute in Peru. Management
believes the Company was targeted by corrupt officials within the former
Peruvian government. On December 2, 1999, Engelhard Peru, S.A., a wholly owned
subsidiary, was denied refund claims of approximately $28 million. The Peruvian
tax authority also determined that Engelhard Peru, S.A. is liable for
approximately $63 million in refunds previously paid, fines and interest as of
December 31, 1999. Interest and fines continue to accrue at rates established by
Peruvian law. Engelhard Peru, S.A. is contesting these determinations
vigorously, and management believes, based on consultation with counsel, that
Engelhard Peru, S.A. is entitled to all refunds claimed and is not liable for
these additional taxes, fines or interest. In late October 2000, a criminal
proceeding alleging tax fraud and forgery related to this value-added tax
dispute was initiated against two Lima-based officials of Engelhard Peru, S.A.
Although Engelhard Peru, S.A. is not a defendant, it may be civilly liable in
Peru if its representatives are found responsible for criminal conduct.
Accordingly, Engelhard Peru, S.A. is assisting in the vigorous defense of this
proceeding. Management believes the maximum economic exposure is limited to the
aggregate value of all assets of Engelhard Peru, S.A., including unpaid refunds,
which is approximately $30 million.
64
21. SUPPLEMENTAL INFORMATION
The following table presents certain supplementary information to the Company's
"Consolidated Statements of Cash Flows":
SUPPLEMENTARY CASH FLOW INFORMATION
(in millions) 2001 2000 1999
---------------------------
Cash paid during the year for:
Interest $ 48.7 $ 61.7 $ 58.7
Income taxes 95.1 60.9 65.3
--------------------------
Change in assets and liabilities - source(use):
Special and other charges $ 7.1 $ 133.4 $ -
Receivables 111.5 (79.4) (18.1)
Committed metal positions (18.6) (143.4) 98.1
Inventories (29.2) (22.7) (9.7)
Other current assets 18.0 (29.7) (41.5)
Other noncurrent assets 8.4 (13.2) (5.7)
Accounts payable 31.5 (26.8) 18.5
Accrued liabilities (71.5) 121.1 24.8
Noncurrent liabilities (20.5) (6.0) (4.1)
---------------------------
Net change in assets and liabilities $ 36.7 $ (66.7) $ 62.3
===========================
The following tables present certain supplementary information to the Company's
"Consolidated Balance Sheets":
SUPPLEMENTARY BALANCE SHEET INFORMATION
Other current assets
(in millions)
2001 2000
-----------------------
Prepaid insurance $ 8.1 $ 6.4
Current deferred taxes 99.9 116.8
Other 34.3 32.8
------------------------
Other current assets $142.3 $156.0
========================
Other current liabilities
(in millions)
2001 2000
-----------------------
Income taxes payable $ 79.2 $156.5
Payroll-related accruals 77.9 89.4
Deferred revenue 43.9 6.7
Interest payable 3.8 9.7
Restructuring and other reserves 21.7 34.6
Environmental accrual 7.5 5.7
Refining reserves 6.6 8.3
Other 101.1 116.3
-----------------------
Other current liabilities $341.7 $427.2
=======================
65
Report of Independent Accountants
-----------------------------------------
To the Shareholders and Board of Directors of Engelhard Corporation:
We have audited the accompanying consolidated balance sheets of Engelhard
Corporation and subsidiaries as of December 31, 2001 and 2000, and the related
consolidated statements of earnings, cash flows and shareholders' equity for
each of the three years in the period ended December 31, 2001. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Engelhard Corporation and
subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001 in conformity with accounting principles generally accepted in
the United States.
/s/Arthur Andersen LLP
----------------------
Arthur Andersen LLP
New York, New York
January 31, 2002
66
First Second Third Fourth
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) quarter quarter quarter quarter
($ in millions, except per-share amounts) -------------------------------------------------------
2001
Net sales $1,611.3 $1,471.6 $1,143.0 $871.0
Gross profit 166.2 173.1 168.2 155.7
Earnings before income taxes 69.8 80.3 80.7 74.4
Net earnings 47.9 59.5 57.7 60.5
Basic earnings per share 0.37 0.45 0.44 0.47
Diluted earnings per share 0.37 0.45 0.43 0.46
2000
Net sales $1,183.8 $1,419.6 $1,396.9 $1,542.3
Gross profit 192.0 184.0 166.7 187.5
Earnings/(loss) before income taxes 84.7 87.4 77.5 (3.9)
Net earnings/(loss) 58.0 59.9 51.3 (0.9)
Basic earnings/(loss) per share 0.46 0.47 0.41 (0.01)
Diluted earnings/(loss) per share 0.45 0.47 0.40 (0.01)
Results in the third and fourth quarters of 2001 include gains of $5.0 million ($3.2 million after tax) and
$0.3 million ($0.2 million after tax), respectively, on the sale of inventory accounted for under the LIFO method.
Results in the first quarter of 2000 include a loss of $6.0 million ($4.1 million after tax) associated with the
divestiture of the Company's International Dioxide, Inc. (IDI) business unit and a gain of $3.8 million ($2.5
million after tax) related to the reduction of precious metal inventories of Engelhard-CLAL.
Results in the second quarter of 2000 include a gain of $2.9 million ($1.9 million after tax) related to the
reduction of precious metal inventories of Engelhard-CLAL.
Results in the third quarter of 2000 include a gain of $24.8 million ($17.0 million after tax) on the sale of
the Company's metal-joining products business located in Warwick, Rhode Island. In addition, the Company recorded
an impairment charge of $24.6 million ($16.9 million after tax) related to the write-down of goodwill and fixed
assets of the Company's HexCore business unit.
Results in the fourth quarter of 2000 include special and other charges of $109.6 million ($75.1 million after
tax) for a variety of events (see Note 5, "Special and Other Charges," for further detail) and a gain of $3.9
million ($2.5 million after tax) on the sale of inventory accounted for under the LIFO method.
Basic and diluted earnings per share are calculated independently for each of the quarters presented. The sum
of the quarters may not equal the full year earnings-per-share amounts.
67
Changes in and Disagreements with
Item 9. Accountants on Accounting and Financial Disclosure
------ --------------------------------------------------
Not applicable
68
PART III
Item 10. Directors and Executive Officers of the Registrant
------- --------------------------------------------------
(a) Directors -
Information concerning directors of the Company is included under the
caption "Election of Directors," "Information with Respect to Nominees and
Directors Whose Terms Continue," "Share Ownership of Directors and Officers,"
and "Board of Directors' Meetings, Committees and Fees" in the Proxy Statement
for the 2002 Annual Meeting of Shareholders and is incorporated herein by
reference.
(b) Executive Officers -
ARTHUR A. DORNBUSCH, II Age 58. Vice President, General Counsel and
Secretary of the Company from prior to 1994.
MARK DRESNER Age 50. Vice President of Corporate Communications
effective December 17, 1998. Director of
Corporate Communications from October 1995 to
December 1998.
JOHN C. HESS Age 49. Vice President, Human Resources effective
August 1, 1997. Director of Human Resources for
the Process Technologies Group (formerly the
Chemical Catalyst Group) from November 1995 to
July 1997.
PETER B. MARTIN Age 62. Vice President, Investor Relations
effective June 18, 1997. Vice President, Investor
Relations, W.R. Grace & Company prior thereto.
BARRY W. PERRY * Age 55. Chairman and Chief Executive Officer of
the Company since January 2001. President and
Chief Operating Officer from 1997 until 2001,
Group Vice President and General Manager of the
Appearance and Performance Technologies Group
(formerly the Pigments and Additives Group)
prior thereto. Mr. Perry is also a director of
Arrow Electronics, Inc. and Cookson Group plc.
PETER R. RAPIN Age 47. Treasurer effective July 8, 1998.
Assistant Treasurer from July 1995 to July 1998.
MICHAEL A. SPERDUTO Age 44. Vice President and Chief Financial Officer
of the Company effective August 2, 2001.
Controller of the Company from August 1999 to
August 2001. Vice President-Finance from July
1998 to August 1999. Treasurer prior thereto.
* Also a director of the Company
69
Officers of the Company are elected at the meeting of the Board of
Directors held in May of each year after the annual meeting of shareholders and
serve until their successors shall be elected and qualified and shall serve as
such at the pleasure of the Board.
Item 11. Executive Compensation
------- ----------------------
Information concerning executive compensation is included under the
captions "Executive Compensation and Other Information," "Pension Plans,"
"Employment Contracts, Termination of Employment and Change in Control
Arrangements" and the "Performance Graph" of the Proxy Statement for the 2002
Annual Meeting of Shareholders and is incorporated herein by reference.
Security Ownership of Certain
Item 12. Beneficial Owners and Management
------- --------------------------------
Information concerning security ownership of certain beneficial owners and
management is included under the captions "Information as to Certain
Shareholders" and "Share Ownership of Directors and Officers" of the Proxy
Statement for the 2002 Annual Meeting of Shareholders and is incorporated herein
by reference.
Certain Relationships
Item 13. and Related Transactions
------- ------------------------
Information concerning certain transactions is included under the caption
"Certain Transactions" of the Proxy Statement for the 2002 Annual Meeting of
Shareholders and is incorporated herein by reference.
70
PART IV
Exhibits, Financial Statement
Item 14. Schedules and Reports on Form 8-K Pages
------- --------------------------------- -----
(a) (1) Financial Statements and Schedules
Report of Independent Accountants 66
Consolidated Statements of Earnings for each of the 28
three years in the period ended December 31, 2001
Consolidated Balance Sheets at December 31, 2001 and 2000 29
Consolidated Statements of Cash Flows for each of the 30
three years in the period ended December 31, 2001
Consolidated Statements of Shareholders' Equity for each 31
of the three years in the period ended December 31, 2001
Notes to Consolidated Financial Statements 32-65
(2) Financial Statement Schedules
Consolidated financial statement schedules not filed herein
have been omitted either because they are not applicable
or the required information is shown in the Notes to
Consolidated Financial Statements in this Form 10-K.
(b) There were no reports on Form 8-K filed during the year ended
December 31, 2001.
Exhibits Page
-------- ----
(3) (a) Certificate of Incorporation of the Company *
(incorporated by reference to Form 10, as
amended on Form 8-K filed with the Securities
and Exchange Commission on May 19, 1981).
(3) (b) Certificate of Amendment to the Restated Certificate *
of Incorporation of the Company (incorporated by
reference to Form 10-K for the year ended December 31,
1987).
* Incorporated by reference as indicated.
71
Exhibits Pages
-------- -----
(3) (c) Certificate of Amendment to the Restated Certificate of *
Incorporation of the Company (incorporated by reference to
Form 10-Q for the quarter ended March 31, 1993).
(3) (d) Amendment to the Restated Certificate of Incorporation *
of the Company, filed with the State of Delaware, Office of
the Secretary of State on May 2, 1996 (incorporated by
reference to Form 10-Q filed with the Securities and Exchange
Commission on May 14, 1996).
(3) (e) By-laws of the Company as amended June 12, 1997 *
(incorporated by reference to Form 10-Q filed with the
Securities and Exchange Commission on August 13, 1997).
(3) (f) Article II of the By-laws of the Company as amended *
December 17, 1998 (incorporated by reference to Form S-8
filed with the Securities and Exchange Commission on
January 29, 1999).
(3) (g) Certificate of Designation relating to Series A Junior *
Participating Preferred Stock, filed with the State of
Delaware, Office of the Secretary of State on
November 12, 1998 (incorporated by reference to Form 10-K
filed with the Securities and Exchange Commission on
March 19, 1999).
(3) (h) Article II, Section 8 of the By-Laws of the Company as *
amended March 1, 2001 (incorporated by reference to Form 10-K
filed with the Securities and Exchange Commission on
March 30, 2001).
(10)(a) Form of Agreement of Transfer entered into between *
Engelhard Minerals & Chemicals Corporation and the
Company, dated May 18, 1981 (incorporated by
reference to Form 10, as amended on Form 8 filed
with the Securities and Exchange Commission on
May 19, 1981).
(10)(b) Retirement Plan for Directors of Engelhard *
Corporation Effective January 1, 1985 - conformed
copy includes amendments through June 1991
(incorporated by reference to Form 10-K filed
with the Securities and Exchange Commission on
March 22, 1996).
* Incorporated by reference as indicated.
72
Exhibits Page
-------- ----
(10)(c) Deferred Compensation Plan for Key Employees of *
Engelhard Corporation Effective August 1, 1985 -
conformed copy includes amendments through December
1993 (incorporated by reference to Form 10-K filed
with the Securities and Exchange Commission on
March 22, 1996).
(10)(d) Engelhard Corporation Directors and Executives *
Deferred Compensation Plan (1986-1989) - conformed
copy includes amendments through December 1993
(incorporated by reference to Form 10-K filed
with the Securities and Exchange Commission on
March 22, 1996).
(10)(e) Key Employees Stock Bonus Plan of Engelhard *
Corporation Effective July 1, 1986 - conformed
copy includes amendments through June 1992
(incorporated by reference to Form 10-K filed with
the Securities and Exchange Commission on
March 22, 1996).
(10)(f) Stock Bonus Plan for Non-Employee Directors of *
Engelhard Corporation Effective July 1, 1986 -
conformed copy includes amendments through
June 1992 (incorporated by reference to Form
10-K filed with the Securities and Exchange
Commission on March 22, 1996).
(10)(g) Deferred Compensation Plan for Directors of *
Engelhard Corporation Restated as of May 7, 1987 -
conformed copy includes amendments through
December 1993 (incorporated by reference to Form
10-K filed with the Securities and Exchange
Commission on March 22, 1996).
(10)(h) Supplemental Retirement Program of Engelhard *
Corporation as Amended and Restated Effective
January 1, 1989 - conformed copy includes
amendments through November 1994 (incorporated
by reference to Form 10-K filed with the Securities
and Exchange Commission on March 22, 1996).
(10)(i) Engelhard Corporation Directors and Executives *
Deferred Compensation Plan (1990-1993) -
conformed copy includes amendments through
November 1993 (incorporated by reference to Form
10-K filed with the Securities and Exchange
Commission on March 22, 1996).
* Incorporated by reference as indicated.
73
Exhibits Page
-------- ----
(10)(j) Engelhard Corporation Directors Stock Option *
Plan Effective May 4, 1995 (incorporated by
reference to the 1995 definitive Proxy Statement
filed with the Securities and Exchange Commission on
March 31, 1995).
(10)(k) Amendments to the Key Employee Stock Bonus Plan of *
Engelhard Corporation adopted March 7, 1996
(incorporated by reference to the 1996 definitive
Proxy Statement filed with the Securities and
Exchange Commission on March 29, 1996).
(10)(l) Amendments to the Stock Bonus Plan for Non-Employee *
Directors of Engelhard Corporation adopted March 7,
1996 (incorporated by reference to the 1996 definitive
Proxy Statement filed with the Securities and Exchange
Commission on March 29, 1996).
(10)(m) Amendment to the Supplemental Retirement Program of *
Engelhard Corporation adopted December 19, 1996
(incorporated by reference to Form 10-K filed with the
Securities and Exchange Commission on March 27, 1997).
(10)(n) Amendment to the Deferred Compensation Plan for Key *
Employees of Engelhard Corporation, adopted April 3,
1997 (incorporated by reference to Form 10-Q filed
with the Securities and Exchange Commission on
May 14, 1997).
(10)(o) Change in Control Agreement (incorporated by reference *
to Form 10-Q filed with the Securities and Exchange
Commission on August 13, 1998).
* Incorporated by reference as indicated.
74
Exhibits Page
-------- ----
(10)(p) Amendment to Key Employees Deferred Compensation Plan, *
effective August 6, 1998 (incorporated by reference to
Form 10-Q filed with the Securities and Exchange Commission
on August 13, 1998).
(10)(q) Amendment to Supplemental Retirement Program of *
Engelhard Corporation, effective June 11, 1998
(incorporated by reference to Form 10-Q filed with
the Securities and Exchange Commission on August 13,
1998).
(10)(r) Engelhard Corporation Stock Option Plan of 1991 - *
conformed copy includes amendments through
September 1998 (incorporated by reference to Form 10-K
filed with the Securities and Exchange Commission on
March 19, 1999).
(10)(s) Rights Agreement, dated as of October 1, 1998 between the *
Company and ChaseMellon Shareholder Services, l.l.c., as
Rights Agent (incorporated by reference to Form 8-K filed
with the Securities and Exchange Commission on
October 29, 1998).
(10)(t) Amendment to Key Employees Stock Bonus Plan of *
Engelhard Corporation, effective October 1, 1998
(incorporated by reference to Form 10-Q filed with
the Securities and Exchange Commission on
November 13, 1998).
(10)(u) Amendment to Supplemental Retirement Program of *
Engelhard Corporation, effective October 1, 1998
(incorporated by reference to Form 10-Q filed with
the Securities and Exchange Commission on
November 13, 1998).
(10)(v) Amendment to Engelhard Corporation Directors and *
Executives Deferred Compensation Plan (1986-1989),
effective October 1, 1998 (incorporated by reference
to Form 10-Q filed with the Securities and Exchange
Commission on November 13, 1998).
(10)(w) Amendment to Engelhard Corporation Directors and *
Executives Deferred Compensation Plan (1990-1993),
effective October 1, 1998 (incorporated by reference
to Form 10-Q filed with the Securities and Exchange
Commission on November 13, 1998).
(10)(x) Amendment to Deferred Compensation Plan For Key *
Employees of Engelhard Corporation, effective October 1, 1998
(incorporated by reference to Form 10-Q filed with the
Securities and Exchange Commission on November 13, 1998).
10)(y) Amendment to Deferred Compensation Plan For *
Directors of Engelhard Corporation, effective October 1, 1998
(incorporated by reference to Form 10-Q filed with the
Securities and Exchange Commission on November 13, 1998).
* Incorporated by reference as indicated.
75
Exhibits Pages
-------- -----
(10)(z) Amendment to Retirement Plan For Directors of *
Engelhard Corporation, effective October 1, 1998
(incorporated by reference to Form 10-Q filed with
the Securities and Exchange Commission on
November 13, 1998).
(10)(aa) Amendment to Stock Bonus Plan For Non-Employee *
Directors of Engelhard Corporation, effective October 1, 1998
(incorporated by reference to Form 10-Q filed with the
Securities and Exchange Commission on November 13, 1998).
(10)(ab) Amendment to Deferred Compensation Plan for Key *
Employees of Engelhard Corporation, effective August 6, 1998
(incorporated by reference to Form 10-Q filed with the
Securities and Exchange Commission on November 13, 1998).
(10)(ac) Engelhard Corporation Deferred Stock Plan for Nonemployee *
Directors, effective May 6, 1999 (incorporated by reference
to the 1998 definitive Proxy Statement filed with the
Securities and Exchange Commission on March 31, 1999).
(10)(ad) Amendment to Key Employees Stock Bonus Plan of Engelhard *
Corporation, effective December 16, 1999 (incorporated by
reference to Form 10-K filed with the Securities and
Exchange Commission on March 28, 2000).
(10)(ae) Amendment to Engelhard Corporation Stock Option Plan of *
1991, effective December 16, 1999 (incorporated by
reference to Form 10-K filed with the Securities and
Exchange Commission on March 28, 2000).
(10)(af) Engelhard Corporation Stock Option Plan of 1999 for *
Certain Key Employees, effective December 16, 1999
(incorporated by reference to Form 10-K filed with the
Securities and Exchange Commission on March 28, 2000).
(10)(ag) Amendment to Engelhard Corporation Stock Option Plan of *
1999 For Certain Key Employees (Non section 16 (B)
Officers), effective February 1, 2001 (incorporated
by reference to Form 10-K filed with the Securities
and Exchange Commission on March 30, 2001).
(10)(ah) Amendment to Engelhard Corporation Stock Option Plan of *
1991, effective February 1, 2001 (incorporated
by reference to Form 10-K filed with the Securities
and Exchange Commission on March 30, 2001).
(10)(ai) Amendment to Engelhard Corporation Stock Option Plan of *
1999 For Certain Key Employees (Non Section 16 (B)
Officers), effective March 1, 2001 (incorporated
by reference to Form 10-K filed with the Securities
and Exchange Commission on March 30, 2001).
76
Pages
-----
(10)(aj) Amendment to Engelhard Corporation Stock Option Plan of *
1991, effective March 1, 2001 (incorporated
by reference to Form 10-K filed with the Securities
and Exchange Commission on March 30, 2001).
(10)(ak) Amendment to Engelhard Corporation Directors Stock Option *
Plan, effective March 1, 2001 (incorporated
by reference to Form 10-K filed with the Securities
and Exchange Commission on March 30, 2001).
(10)(al) Supplemental Retirement Trust Agreement, effective *
December, 1998 (incorporated by reference to Form 10-K
filed with the Securities and Exchange Commission
on March 30, 2001).
(10)(am) Annual Restricted Cash Incentive Compensation Plan, *
effective December 15, 2000 (incorporated
by reference to Form 10-K filed with the Securities
and Exchange Commission on March 30, 2001).
(10)(an) Deferred Compensation Plan For Key Employees of *
Engelhard Corporation effective August 1, 1985 - conformed
copy includes amendments through February 2001 (incorporated
by reference to Form 10-K filed with the Securities
and Exchange Commission on March 30, 2001).
(10)(ao) Consulting agreement for Orin R. Smith (incorporated by *
reference to Form 10-Q filed with the Securities and Exchange
Commission on May 15, 2001).
(10)(ap) Amendment to Key Employees Stock Bonus Plan of Engelhard *
Corporation, effective August 2, 2001 (incorporated by
reference to Form 10-Q filed with the Securities and
Exchange Commission on August 13, 2001).
(10)(aq) Employment agreement for Barry W. Perry, effective *
August 2, 2001 (incorporated by reference to Form 10-Q
filed with the Securities and Exchange Commission on
August 13, 2001).
(10)(ar) Amendment to Deferred Compensation Plan for Key Employees *
of Engelhard Corporation, effective October 4, 2001
(incorporated by reference to Form 10-Q filed with the
Securities and Exchange Commission on November 9,2001).
77
Pages
-----
(10)(as) Amendment to Retirement Plan For Directors of Engelhard *
Corporation, effective April 2000. (incorporated by reference
to Form 10-K filed with the Securities and Exchange Commission
on March 30, 2001).
(10)(at) Amendment to Deferred Compensation Plan for Directors of 81-82
Engelhard Corporation, effective December 13, 2001.
(10)(au) Amendment to Engelhard Corporation Directors and 83-84
Executives Deferred Compensation Plan (1986-1989),
effective December 13, 2001.
(10)(av) Amendment to Engelhard Corporation Directors and 85-86
Executives Deferred Compensation Plan (1990-1993),
effective December 13, 2001.
(10)(aw) Amendment to Employment Agreement for Barry W. Perry, 87-88
effective February 13, 2002.
(10)(ax) Amendment to Supplemental Retirement Program of
Engelhard Corporation, effective February 1, 2001. 89-90
(10)(ay) Amendment to Engelhard Corporation Stock Option Plan
of 1991, effective March 7, 2002. 91-92
(10)(az) 364-Day Credit Agreement dated as of May 11, 2001. 93-146
(10)(ba) Five-Year Credit Agreement dated as of May 11, 2001. 147-213
(12) Computation of the Ratio of Earnings to Fixed Charges. 214-215
(21) Subsidiaries of the Registrant. 216-218
(23) Consent of Independent Accountants. 219-220
(24) Powers of Attorney. 221-227
(99) Letter regarding independent public accountants, dated
as of March 21, 2002. 228-229
78
Signatures
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in Iselin, New Jersey
on the 21st day of March 2002.
Engelhard Corporation
---------------------
Registrant
/s/Barry W. Perry
---------------------
Barry W. Perry
(Chairman and Chief Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Barry W. Perry Chairman and Chief Executive March 21, 2002
------------------------- Officer & Director
Barry W. Perry (Principal Executive Officer)
/s/ Michael A. Sperduto Vice President and March 21, 2002
------------------------- Chief Financial Officer
Michael A. Sperduto (Chief Accounting Officer)
79
* Director March 21, 2002
---------------------------
Marion H. Antonini
* Director March 21, 2002
--------------------------
James V. Napier
* Director March 21, 2002
--------------------------
Norma T. Pace
* Director March 21, 2002
-------------------------
Orin R. Smith
* Director March 21, 2002
-------------------------
Reuben F. Richards
* Director March 21, 2002
-------------------------
Douglas G. Watson
* By this signature below, Arthur A. Dornbusch, II has signed this Form
10-K as attorney-in-fact for each person indicated by an asterisk pursuant
to duly executed powers of attorney filed with the Securities and Exchange
Commission included herein as Exhibit 24.
/s/ Arthur A. Dornbusch, II March 21, 2002
---------------------------
Arthur A. Dornbusch, II
80
EXHIBIT (10)(at)
Amendment to Deferred Compensation Plan
for Directors of Engelhard Corporation
----------------------------------------
81
AMENDMENT TO
DEFERRED COMPENSATION PLAN FOR
DIRECTORS OF ENGELHARD CORPORATION
The Deferred Compensation Plan for Directors of Engelhard Corporation (the
"Plan") is amended as follows, effective December 13, 2001.
1. Section 6 of the Plan is amended by adding the following after the fifth
sentence thereof:
"A Director who has attained age 70 may make a one-time election to change
his payment election with respect to all of his benefits payable hereunder (an
"Age 70 Election"); provided, however, that the Age 70 Election shall not become
effective prior to the first anniversary of the date the Age 70 Election is made
(and prior to such time the Director's existing payment election shall remain in
effect); and provided further, however, that the Age 70 Election shall be
effective only if (i) the election is made after the Director has attained age
70, (ii) the Board has approved the Age 70 Election, (iii) no prior Age 70
Election has been made by the Director, and (iv) the Director has agreed with
the Company that, if nominated and elected, he will continue to serve as a
Director of the Company for at least one year following the date of the Age 70
Election. The Age 70 Election shall specify the calendar year in which payments
(including delivery of previously deferred stock awards) will commence and the
number of installment payments or deliveries, up to ten. Any such annual
installment payments shall be payable in January of each payment year, beginning
with the calendar year specified in the Age 70 Election."
82
EXHIBIT (10)(au)
Amendment to Engelhard Corporation
Directors and Executives Deferred Compensation
Plan (1986-1989)
----------------------------------------------
83
AMENDMENT TO
ENGELHARD CORPORATION
DIRECTORS AND EXECUTIVES
DEFERRED COMPENSATION PLAN
(1986-1989)
The Engelhard Corporation Directors and Executives Deferred Compensation
Plan [1986-1989] (the "Plan") is amended as follows, effective December 13,
2001.
1. Section 3 of the Plan is amended by adding the following paragraph after
the third paragraph thereof:
"A participant who has attained age 70 and whose deferrals under this Plan
were made as a nonemployee director of the Company may elect by written election
to Engelhard (an "Age 70 Election") to irrevocably change the date of
commencement of payments hereunder; provided, however, that the Age 70 Election
shall not become effective prior to the first anniversary of the date the Age 70
Election is made (and prior to such time the nonemployee director's existing
payment election shall remain in effect); and provided further, however, that
the Age 70 Election shall be effective only if (i) the election is made after
the nonemployee director has attained age 70, (ii) the Board has approved the
Age 70 Election, (iii) no prior Age 70 Election has been made by the nonemployee
director, and (iv) the nonemployee director has agreed with the Company that, if
nominated and elected, he will continue to serve as a director of the Company
for at least one year following the date of the Age 70 Election. The number of
Supplemental Retirement Benefit payments to a nonemployee director shall not
change as a result of the Age 70 Election. However, the amount of the
Supplemental Retirement Benefit payments shall be adjusted to provide an
actuarially equivalent benefit."
2. The second sentence of Section 5 of the Plan is amended to read as
follows:
"However, if a participant makes an effective Additional Deferral Election
or Age 70 Election pursuant to Section 3 hereof, his Supplemental Retirement
Benefits shall be adjusted in order to provide an actuarially equivalent
benefit."
84
EXHIBIT (10)(av)
Amendment to Engelhard Corporation
Directors and Executives
Deferred Compensation Plan
(1990-1993)
----------------------------------
85
AMENDMENT TO
ENGELHARD CORPORATION
DIRECTORS AND EXECUTIVES
DEFERRED COMPENSATION PLAN
(1990-1993)
The Engelhard Corporation Directors and Executives Deferred Compensation
Plan [1990-1993] (the "Plan") is amended as follows, effective December 13,
2001.
1. Section 3 of the Plan is amended by adding the following paragraph after
the third paragraph thereof:
"A participant who has attained age 70 and whose deferrals under this Plan
were made as a nonemployee director of the Company may elect by written election
to Engelhard (an "Age 70 Election") to irrevocably change the date of
commencement of payments hereunder; provided, however, that the Age 70 Election
shall not become effective prior to the first anniversary of the date the Age 70
Election is made (and prior to such time the nonemployee director's existing
payment election shall remain in effect); and provided further, however, that
the Age 70 Election shall be effective only if (i) the election is made after
the nonemployee director has attained age 70, (ii) the Board has approved the
Age 70 Election, (iii) no prior Age 70 Election has been made by the nonemployee
director, and (iv) the nonemployee director has agreed with the Company that, if
nominated and elected, he will continue to serve as a director of the Company
for at least one year following the date of the Age 70 Election. The number of
Supplemental Retirement Benefit payments to a nonemployee director shall not
change as a result of the Age 70 Election. However, the amount of the
Supplemental Retirement Benefit payments shall be adjusted to provide an
actuarially equivalent benefit."
2. The second sentence of Section 5 of the Plan is amended to read as
follows:
"However, if a participant makes an effective Additional Deferral Election
or Age 70 Election pursuant to Section 3 hereof, his Supplemental Retirement
Benefits shall be adjusted in order to provide an actuarially equivalent
benefit."
86
EXHIBIT (10)(aw)
Amendment to
Employment Agreement
for Barry W. Perry
-------------------------
87
February 13, 2002
Mr. Barry W. Perry
Re: Special Stock Option
and Stock Bonus Awards
Dear Barry:
Reference is made to Section 7 of the Employment Agreement, dated as of
August 2, 2001, between you and Engelhard Corporation (the "Employment
Agreement") which provides for special grants of stock options and stock
bonus awards to you on January 7, 2002, provide the conditions stated
therein are met.
In order to more accurately reflect the understanding of the parties to the
Employment Agreement with respect to the computation of the amount of stock
options and stock bonus awards to be made pursuant to Section 7 thereof,
Section 7(a)(iii) of the Employment Agreement is amended to read as follows:
"The number of shares of Company common stock subject to the stock
option and stock bonus awards shall be computed by first determining
the excess of the total return (stated as a percentage) of the Company's
common stock for calendar year 2001 (computed by comparing the Average
Share Price to the closing price per share of Company common stock on
December 31, 2000 and ignoring dividends on the Company common stock)
over the total return (stated as a percentage and assuming reinvestment
of dividends) of the All S&P Chemicals Index for calendar year 2001
(the "Excess Total Return Percentage"). The Total Grant Value for the
awards will then be determined by multiplying the number of shares
of issued and outstanding common stock of the Company on December 31, 2001
by the opening share price on such date and then multiplying that product
by 0.0025 times the Excess Total Return Percentage (stated as a decimal)."
The conditions to the grant of stock option and stock bonus awards pursuant
to Section 7 of the Employment Agreement have been met, with the result that
options to purchase 84,000 shares of Company common stock and a stock bonus
award in the amount of 29,300 shares of Company common stock have been
granted to you on January 7, 2002.
Please indicate your acknowledgement of, and agreement to, the foregoing by
signing below and returning a copy of this letter to Arthur A. Dornbusch, II.
Sincerely,
/s/Marion H. Antonini
---------------------
Marion H. Antonini,
Chairman Stock Option/Stock
Bonus Committee
Acknowledged and Agreed
to this 13th day of February, 2002
/s/Barry W. Perry
-----------------
Barry W. Perry
88
EXHIBIT (10)(ax)
Amendment to
Supplemental Retirement
Program of
Engelhard Corporation
---------------------------------
89
AMENDMENT TO
SUPPLEMENTIAL RETIREMENT PROGRAM
OF ENGELHARD CORPORATION
The Supplemental Retirement Program of Engelhard Corporation (the "Plan")
is amended as follows, effective as the dates set forth below.
1. Schedule B of the Plan is amended, effective as of January 1, 2001, to
add at the end thereof the name "Barry W. Perry" in the Name column and the
number "5" in the Number-of-Years column.
2. Section 5 of the Plan is amended, effective as of January 1, 2000, to
add new paragraph (h) as follows:
"(h) Anything in this Supplemental Retirement Program to the contrary
nothwithstanding, if the present value of the benefits payable to the employee
under the Excess Benefit Plan and the Supplemental Executive Retirement Plan,
determined in accordance with the actuarial assumptions used for determing lump
sum benefits under the Pension Plan as in effect on the Pension Distribution
Date (as defined in subparagraph (1) of paragraph (b) above), shall be less than
$10,000, the present value of such benefits shall be paid in a single sum as
soon as practicable following the employee's Severance from Service Date."
90
EXHIBIT (10)(ay)
AMENDMENT TO
ENGELHARD CORPORATION
STOCK OPTION PLAN OF 1991
----------------------------------
91
AMENDMENT TO
ENGELHARD CORPORATION
STOCK OPTION PLAN OF 1991
The Engelhard Corporation Stock Option Plan of 1991 (the "Plan") is amended
as set forth below, effective as of March 7, 2002.
1. Sections 6 of the Plan is amended to read as follows:
"6 Duration. Unless sooner terminated by the Board of Directors, the Plan
shall terminate on, and no option shall be granted hereunder after June 30,
2003."
2. The first sentence of Section 7 (c) is amended to replace "June 30,
2002" with "June 30, 2003."
92
EXHIBIT (10)(az)
364-DAY CREDIT AGREEMNET
------------------------
93
EXECUTION COPY
------------------------------------------------------------
ENGELHARD CORPORATION
---------------------
364-DAY CREDIT AGREEMENT
Date as of May 11, 2001
----------------------
THE CHASE MANHATTAN BANK,
As Administrative Agent
JPMORGAN SECURITIES INC.,
as Lead Arranger and Book Manager
BANK OF TOKYO-MITSUBISHI TRUST COMPANY and
WACHOVIA BANK, N.A.,
as Documentation Agents
COMMERZBANK AG,
as Syndication Agent
and Each of the Bank Listed on the Signature Pages Hereof
---------------------------------------------------------
94
CREDIT AGREEMENT dated as of May 11, 2001, between ENGELHARD CORPORATION, a
corporation duly organized and validly existing under the laws of the State of
Delaware (the "Company"); each of the lenders that is a signatory hereto
identified under the caption "BANKS" on the signature pages hereto and each
lender that becomes a "Bank" after the date hereof pursuant to Section 11.06(b)
hereof (individually, a "Bank" and, collectively, the "Banks"), THE CHASE
MANHATTAN BANK, as agent for the Banks (in such capacity, together with its
successors in such capacity, the "Administrative Agent"), JPMORGAN SECURITIES
INC., as lead arranger and book manager for the Banks (in such capacity,
together with its successors in such capacity, the "Arranger"), BANK OF
TOKYO-MITSUBISHI TRUST COMPANY and WACHOVIA BANK, N.A., as documentation agents
for the Banks (in such capacity, together with their successors in such
capacity, the "Documentation Agents"), COMMERZBANK AG, as syndication agent for
the Banks (in such capacity, together with its successors in such capacity, the
"Syndication Agent").
The Company has requested that the Banks make loans to it in an aggregate
principal amount not exceeding $400,000,000 (as the same may be reduced pursuant
to Section 2.04(b) hereof) at any one time outstanding by way of Syndicated
Loans (which may be Eurodollar Loans or Base Rate Loans) and/or pursuant to a
competitive bid option providing for Competitive Bid Loans (which may be LIBOR
Bid Loans or Absolute Rate Loans) and the Banks are prepared to make such loans
upon and subject to the terms and conditions hereof. Accordingly, the parties
hereto agree as follows:
Section 1. Definitions and Accounting Matters.
1.01 Certain Defined Terms. As used herein, the following terms shall have
the following meanings (all terms defined in this Section 1.01 or in other
provisions of this Agreement in the singular to have the same meanings when used
in the plural and vice versa):
"Absolute Rate" shall have the meaning assigned to such term in Section
2.03(c)(ii)(D) hereof.
"Absolute Rate Auction" shall mean a solicitation of Competitive Bid Quotes
setting forth Absolute Rates pursuant to Section 2.03 hereof.
"Absolute Rate Loans" shall mean Competitive Bid Loans, the interest rates
on which are determined on the basis of Absolute Rates pursuant to an Absolute
Rate Auction.
"Administrative Questionnaire" shall mean an Administrative Questionnaire
in a form supplied by the Administrative Agent.
"Affiliate" means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
"Aggregate Permitted Amount" shall mean $50,000,000.
"applicable Facility Fee Rate", "Applicable Margin" and "Applicable
Utilization Fee Rate" shall mean, during any period when any of the Rating
Groups specified below is in effect, the percentage set forth below opposite the
reference to such fee or to the relevant Type of Syndicated Loan:
95
Rating Rating Rating Rating Rating
Group 1 Group II Group III Group IV Group V
-------------------------------------------------------
Applicable Facility
Fee Frate 0.070%p.a. 0.080%p.a. 0.090%p.a. 0.125%p.a. 0.175%p.a
Applicable Margin 0.180%p.a. 0.295%p.a. 0.410%p.a. 0.500%p.a. 0.575%p.a.
Applicable Utiliation
Fee Rate 0.050%p.a. 0.075%p.a. 0.100%p.a. 0.125%p.a. 0.125%p.a.
Any change in the Applicable Facility Fee Rate, the Applicable Margin or
the Applicable Utilization Fee Rate by reason of a change in the Moody's Rating
or the Standard & Poor's Rating (or a Substitute Rating) shall become effective
on the date of announcement or publication by the respective Rating Agency of a
change in such Rating or, in the absence of such announcement or publication, on
the effective date of such changed rating.
"Applicable Percentage" shall mean, with respect to any Bank, the
percentage of the total Commitments represented by such Bank's Commitment. If
the Commitments have terminated or expired, the Applicable Percentages shall be
determined based upon the Commitments most recently in effect, giving effect to
any assignments.
"Asset Disposition" shall mean any sale, transfer or other disposition of
any property or asset of the Company which is outside of the ordinary course of
its business; provided that Asset Disposition shall not include any such single
sale, transfer or disposition which results in Net Cash Proceeds to the Company
of $5,000,000 or less.
"Assignment and Acceptance" shall mean an agreement in the form of Exhibit
E hereto.
"Base Rate" shall mean, for any day, a rate per annum equal to the higher
of (a) the Federal Funds Rate for such day plus 1/2 of 1% and (b) the Prime Rate
for such day. Each change in any interest rate provided for herein based upon
the Base Rate resulting from a change in the Base Rate shall take effect at the
time of such change in the Base Rate.
"Base Rate Loans" shall mean Syndicated Loans that bear interest at rates
based upon the Base Rate.
"Business Day" shall mean any day (a) on which commercial banks are not
authorized or required to close in New York City and (b) if such day relates to
the giving of notices or quotes in connection with a LIBOR Auction or to a
borrowing of, a payment or prepayment of principal of or interest on, or a
Conversion of or into, or an Interest Period for, a Eurodollar Loan or a LIBOR
Bid Loan or a notice by the Company with respect to any such borrowing, payment,
prepayment, Conversion or Interest Period, that is also a day on which dealings
in Dollar deposits are carried out in the London interbank market.
96
"Change in Control" shall have the meaning assigned to such term in Section
9(j) hereof.
"Chase" shall mean The Chase Manhattan Bank, and its successors.
"Class" shall have the meaning assigned to such term in Section 1.03
hereof.
"Closing Date" shall mean the date hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Commitment" shall mean, as to each Bank, the obligation of such Bank to
make Syndicated Loans pursuant to Section 2.01 hereof, in an aggregate principal
amount at any one time outstanding up to but not exceeding the amount set
opposite the name of such Bank on Schedule I hereof under the caption
"Commitment" or, in the case of a Person that becomes a Bank pursuant to an
assignment permitted under Section 11.06(b) hereof, as specified in the
respective instrument of assignment pursuant to which such assignment is
effected (in each case, as the same may be reduced at any time or from time to
time pursuant to Section 2.04 or 11.06 hereof or increased pursuant to Section
5.06 hereof).
"Commitment Termination Date" shall mean the date which is 364 days after
the Closing Date; provided that if such date is not a Business Day, the
Commitment Termination Date shall be the immediately preceding Business Day.
"Competitive Bid Borrowing" shall have the meaning assigned to such term in
Section 2.03(b) hereof.
"Competitive Bid Loans" shall mean the loans provided for by Section 2.03
hereof.
"Competitive Bid Note" shall mean the promissory note requested by a Bank
pursuant to Section 2.08(d) hereof for its Competitive Bid Loans and all
promissory notes delivered in substitution or exchange therefor, in each case as
the same shall be modified and supplemented and in effect from time to time.
"Competitive Bid Quote" shall mean an offer in accordance with Section
2.03(c) hereof by a Bank to make a Competitive Bid Loan with one single
specified interest rate.
"Competitive Bid Quote Request" shall have the meaning assigned to such
term in Section 2.03(b) hereof.
"Confidentiality Agreement" shall mean an agreement substantially in the
form of Exhibit D hereto.
97
"Consolidated Tangible Net Worth" shall mean the excess of (i) the
consolidated net book value of the assets of the Company and its Subsidiaries
(other than patents, patent rights, trademarks, trade names, franchises,
copyrights, licenses, permits, goodwill and other intangible assets classified
as such in accordance with GAAP) after all appropriate deductions in accordance
with GAAP (including, without limitation, reserves for doubtful receivables,
obsolescence, depreciation and amortization) plus the amounts, if any, by which
the market value of precious metals inventories and investments exceeds the
carrying value of those metals on the consolidated books of account of the
Company, in each case, computed and consolidated in accordance with GAAP over
(ii) Total Debt.
"Continuation", "Continue" and "Continued" shall refer to the continuation
pursuant to Section 2.09 hereof of a Eurodollar Loan from one Interest Period to
the next Interest Period.
"Contract" shall mean any agreement or transaction (other than for
obligations incurred in connection with the borrowing of money or the obtaining
of advances or credit) entered into by the Company or any of its Subsidiaries in
the ordinary course of its business and not for the purpose of speculation,
including, without limitation, any agreement or transaction relating to any
currency or commodity regularly used or traded by the Company or any of its
Subsidiaries, including sale, purchase or entry into any swap agreement in
respect of a notional quantity; sale or purchase of any contract for future
delivery; or sale or purchase of any put or call option in respect of any such
currency or commodity.
"Control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
"Controlling" and "Controlled" have meanings correlative thereto.
"Conversion", "Convert" and "Converted" shall refer to a conversion
pursuant to Section 2.09 hereof of one Type of Syndicated Loan into another Type
of Syndicated Loan, which may be accompanied by the transfer by a Bank (at its
sole discretion) of a Loan from one lending office to another.
"Debt" of any Person means, without duplication, (a) all indebtedness of
such Person for borrowed money, (b) all obligations of such Person with respect
to reimbursement obligations relating to letters of credit issued for the
account of such Person and drawn upon by the applicable beneficiary and not
repaid by such Person, (c) all obligations of such Person evidenced by notes,
bonds, debentures or other similar instruments, and(d) all obligations of such
Person as lessee under leases which are capitalized in accordance with GAAP.
"Default" shall mean an Event of Default or an event that with notice or
lapse of time or both would become an Event of Default.
"Dollars" and "$" shall mean lawful money of the United States of America.
"Domestic Subsidiary" shall mean any Subsidiary of the Company that is
organized under the laws of any State of the United States of America.
98
"EBITDA" shall mean, for any period, the sum, determined on a consolidated
basis without duplication, of the Company's and its consolidated Subsidiaries':
(i) net earnings from continuing operations (or net loss), but excluding from
such amount any equity income (or loss) of Affiliates and the gain (or loss) on
the sale of long-term investments, (ii) interest expense, (iii) income tax
expense, (iv) depreciation expense, (v) amortization and depletion expense, and
(vi) all other non-cash charges, in each case determined in accordance with GAAP
for such period, provided that with respect to each of the items set forth in
clauses (i) through (vi) above, any extraordinary amounts shall be excluded from
the relevant calculations.
"Environmental Laws" shall mean all laws, rules, regulations, codes,
ordinances, orders, decrees, judgments, injunctions or binding agreements
issued, promulgated or entered into by any Governmental Authority, relating to
the environment, preservation or reclamation of natural resources, including
those relating to the management, release or threatened release of any Hazardous
Material.
"Environmental Liability" shall mean any liability (including any liability
for damages, costs of environmental remediation, fines, penalties or
indemnities) of the Company or any Subsidiary based upon (a) violation of any
Environmental Law, (b) the generation, use, handling, transportation, storage,
treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous
Materials, (d) the release or threatened release of any Hazardous Materials into
the environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" shall mean any corporation or trade or business that is a
member of any group of organizations (i) described in Section 414(b) or (c) of
the Code of which the Company is a member and (ii) solely for purposes of
potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of
the Code and the lien created under Section 302(f) of ERISA and Section 412(n)
of the Code, described in Section 414(m) or (o) of the Code of which the Company
is a member.
"Eurodollar Loans" shall mean Syndicated Loans that bear interest at rates
based on rates referred to in the definition of "Eurodollar Rate" in this
Section 1.01.
"Eurodollar Rate" shall mean, for any Fixed Rate Loan for any Interest
Period therefor:
99
(a) a rate per annum determined by the Administrative Agent to be equal to
the rate per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%)
reported at 11:00 a.m., London time on the date two Business Days prior to the
first day of such Interest Period on Telerate Access Service Page 3750 (British
Bankers Association Settlement Rate) (or on any successor or substitute page of
such service) as the London Interbank Offered Rate for Dollar deposits having a
term comparable to such Interest Period; or
(b) if such rate shall cease to be publicly available on the Telerate
Access Service Page 3750 (or on any successor or substitute page of such
service) or if the information contained on said Page, in the sole judgment of
the Administrative Agent, shall cease to accurately reflect such London
Interbank Offered Rate, the Eurodollar Rate shall mean the arithmetic mean
(rounded upwards, if necessary, to the nearest 1/16 of 1%), as determined by the
Administrative Agent, of the rates per annum quoted by the respective Reference
Banks at approximately 11:00 a.m. London time (or as soon thereafter as
practicable) on the date two Business Days prior to the first day of such
Interest Period for the offering by the respective Reference Banks to leading
banks in the London interbank market of Dollar deposits having a term comparable
to such Interest Period and in an amount comparable to the principal amount of
such Fixed Rate Loan to be made by the respective Reference Banks for such
Interest Period; provided that (i) if any Reference Bank is not participating in
any Fixed Rate Loans during any Interest Period therefor, the Eurodollar Rate
for such Loans for such Interest Period shall be determined by reference to the
amount of such Loans that such Reference Bank would have made or had outstanding
had it been participating in such Loan during such Interest Period, (ii) in
determining the Eurodollar Rate with respect to any Competitive Bid Loans, each
Reference Bank shall be deemed to have made a Competitive Bid Loan in an amount
equal to $10,000,000 and (iii) if any Reference Bank does not timely furnish
such information for determination of any Eurodollar Rate, the Administrative
Agent shall determine such Eurodollar Rate on the basis of the information
timely furnished by the remaining Reference Banks.
"Event of Default" shall have the meaning assigned to such term in Section
9 hereof.
"Federal Funds Rate" shall mean, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day, provided that (a) if the day for which such rate is to be determined is not
a Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day as so published on the next
succeeding Business Day and (b) if such rate is not so published for any
Business Day, the Federal Funds Rate for such Business Day shall be the average
rate charged to Chase on such Business Day on such transactions as determined by
the Administrative Agent.
100
"Financial Officer" shall mean the Chief Financial Officer, the Treasurer
or the Controller of the Company.
"Fitch IBCA" shall mean Fitch IBCA Duff & Phelps, or any successor thereto.
"Fixed Rate Loans" shall mean Eurodollar Loans and Competitive Bid Loans
(other than Absolute Rate Loans).
"GAAP" shall mean generally accepted accounting principles applied on a
basis consistent with those that, in accordance with the last sentence of
Section 1.02(a) hereof, are to be used in making the calculations for purposes
of determining compliance with this Agreement.
"Governmental Authority" shall mean the government of the United States of
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body or court or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of government.
"Granting Lender" shall have the meaning assigned to such term in Section
11.05 hereof.
"Hazardous Materials" shall mean all explosive or radioactive substances or
wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature, in each case as regulated
pursuant to any Environmental Law.
"Interest Period" shall mean:
(a) with respect to any Eurodollar Loan, each period commencing on the date
such Eurodollar Loan is made or Converted from a Loan of another Type or (in the
event of a Continuation) the last day of the next preceding Interest Period for
such Loan and ending on the numerically corresponding day in the first, second,
third, sixth or, if agreed by all of the Banks, ninth or twelfth calendar month
thereafter, or any other period to which all the Banks have consented, as the
Company may select as provided in Section 4.05 hereof, provided that each
Interest Period that commences on the last Business Day of a calendar month (or
on any day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last Business Day of the
appropriate subsequent calendar month;
(b) with respect to any Absolute Rate Loan, the period commencing on the
date such Absolute Rate Loan is made and ending on any Business Day not less
than seven days and not more than one year thereafter, as the Company may select
as provided in Section 2.03(b) hereof; and
(c) with respect to any LIBOR Bid Loan, the period commencing on the date
such LIBOR Bid Loan is made and ending on the numerically corresponding day such
number of months not exceeding twelve thereafter, as the Company may select as
provided in Section 2.03(b) hereof, provided that each Interest Period that
commences on the last Business Day of a calendar month (or any day for which
there is no numerically corresponding day in the appropriate subsequent calendar
month) shall end on the last Business Day of the appropriate subsequent calendar
month.
101
Notwithstanding the foregoing, (i) if any Interest Period for any Loan
would otherwise end after the Commitment Termination Date, such Interest Period
shall not be available hereunder for such period; (ii) each Interest Period that
would otherwise end on a day that is not a Business Day shall end on the next
succeeding Business Day (or, in the case of an Interest Period for a Fixed Rate
Loan, if such next succeeding Business Day falls in the next succeeding calendar
month, on the next preceding Business Day); and (iii) no Interest Period for any
Loan (other than an Absolute Rate Loan) shall have a duration of less than one
month and, if the Interest Period for any Fixed Rate Loan would otherwise be a
shorter period, such Loan shall not be available hereunder for such period.
"Lender Affiliate" shall mean:
(a) with respect to any Bank, any entity (whether a corporation,
partnership, trust or otherwise) which is not an Affiliate, but that is engaged
in making, purchasing, holding or otherwise investing in bank loans and similar
extensions of credit in the ordinary course of its business and is administered
or managed by such Bank or an Affiliate of such Bank; and
(b) with respect to any Bank that is a fund which invests in bank loans and
similar extensions of credit, any other fund that is not an Affiliate and
invests in bank loans and similar extensions of credit and is managed by the
same investment advisor as such Bank or by an Affiliate of such investment
advisor.
"LIBO Margin" shall have the meaning assigned to such term in Section
2.03(c)(ii)(C) hereof.
"LIBOR Auction" shall mean a solicitation of Competitive Bid Quotes setting
forth Eurodollar Rates pursuant to Section 2.03 hereof.
"LIBOR Bid Loans" shall mean Competitive Bid Loans the interest rates in
which are determined on the basis of Eurodollar Rates pursuant to a LIBOR
Auction.
"Lien" shall mean, with respect to any Property, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this Agreement, a Person shall be deemed to own
subject to a Lien any Property that it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement (other than an operating lease)
relating to such Property.
"Loans" shall mean Syndicated Loans and Competitive Bid Loans.
"Long-Term Debt Incurrence" means any issuance or sale or other incurrence
by the Company or any of its Subsidiaries of any Debt for borrowed money which
results in Net Cash Proceeds to the Company in excess of $100,000,000 which (x)
by its terms is not required to be repaid in full within one year from the date
of such issuance, sale or other incurrence, or (y) would otherwise be required
to be characterized as long-term debt in accordance with GAAP.
102
"Majority Banks" shall mean Banks having more than 50% of the aggregate
amount of the Commitments or, if the Commitments shall have terminated, Banks
holding more than 50% of the aggregate unpaid principal amount of the Revolving
Credit Exposure.
"Moody's" shall mean Moody's Investors Service, Inc. or any successor
thereto.
"Moody's Rating" shall mean, as of any date, the rating most recently
announced or published by Moody's relating to the unsecured, long-term, senior
debt securities of the Company then outstanding.
"Multiemployer Plan" shall mean a multiemployer plan defined as such in
Section 3(37) of ERISA to which contributions have been made by the Company or
any ERISA Affiliate and that is covered by Title IV of ERISA.
"Named Persons" shall have the meaning assigned to such term in Section
11.03 hereof.
"Net Cash Proceeds" means, with respect to any Asset Disposition or
Long-Term Debt Incurrence by the Company, the aggregate amount of cash received
from time to time (whether as initial consideration or through payment or
disposition of deferred consideration) in connection with such transaction after
deducting therefrom only (without duplication) (i) brokerage commissions,
underwriting fees and discounts, legal fees, finder's fees and other direct
expenses actually paid which, if not in a customary amount, were negotiated on
an arm's length basis with the recipient thereof, (ii) the amount of taxes
payable in connection with or as a result of such transaction, (iii) the amount
of any Debt secured by a Lien on such asset that is required to be repaid upon
such disposition, in each case to the extent, but only to the extent, that the
amounts so deducted are, at the time of receipt of such cash, actually paid to a
Person that is not an Affiliate of such Person and are properly attributable to
such transaction or to the asset that is the subject thereof and (iv) the amount
to be used to replace any such asset.
"Notes" shall mean any promissory note issued by the Company pursuant to
Section 2.08(d) hereof and which Notes may be Syndicated Notes or Competitive
Bid Notes.
"Participant" shall have the meaning assigned to such term in Section
11.06(c) hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" shall mean any individual, corporation, company, voluntary
association, partnership, limited liability company, joint venture, trust,
unincorporated organization or government (or any agency, instrumentality or
political subdivision thereof).
"Plan" shall mean an employee benefit or other plan established or
maintained by the Company or any ERISA Affiliate and that is covered by Title IV
of ERISA, other than a Multiemployer Plan.
103
"Post-Default Rate" shall mean a rate per annum equal to one percent (1%)
plus the Base Rate as in effect from time to time, provided that, with respect
to principal of a Fixed Rate Loan that shall become due (whether at stated
maturity, by acceleration, by optional or mandatory prepayment or otherwise) on
a day other than the last day of the Interest Period therefor, the "Post-Default
Rate" shall be a rate per annum equal to, for the period from and including such
due date to but excluding the last day of such Interest Period, one percent (1%)
plus the interest rate for such Loan as provided in Section 3.02 hereof and,
thereafter, the rate provided for above in this definition.
"Prime Rate" shall mean the rate of interest from time to time announced by
Chase at its principal office as its prime commercial lending rate.
"Principal Subsidiary" shall mean any Subsidiary of the Company having
total assets as of the end of such fiscal year equal to or greater than 5% of
the consolidated total assets of the Company and its Subsidiaries as of the end
of the most recent fiscal year of the Company.
"Property" shall mean any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed and whether tangible or intangible.
"Quarterly Dates" shall mean the last Business Day of March, June,
September and December in each year, the first of which shall be the first such
day after the Closing Date.
"Quotation Date" shall have the meaning assigned to such term in Section
2.03(b)(v) hereof.
"Rating" shall mean the Moody's Rating or the Standard & Poor's Rating;
provided that, the Company may substitute a Substitute Rating for either (but
not both) the Moody's Rating or the Standard & Poor's Rating (i.e. either the
Moody's Rating or the Standard & Poor's Rating must at all times be a Rating).
"Rating Agency" shall mean Moody's, Standard & Poor's or Fitch IBCA, as the
case may be.
"Rating Group" shall mean any of Rating Group I, Rating Group II, Rating
Group III, Rating Group IV and Rating Group V.
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"Rating Group I" shall be in effect when the Moody's Rating is at or above
A2 (or a Substitute Rating is at or above the corresponding level) or the
Standard & Poor's Rating is at or above A (or a Substitute Rating is at or above
the corresponding level); "Rating Group II" shall be in effect when (a) the
Moody's Rating is at or above A3 (or a Substitute Rating is at or above the
corresponding level) or the Standard & Poor's Rating is at or above A- (or a
Substitute Rating is at or above the corresponding level) and (b) Rating Group I
is not in effect; "Rating Group III" shall be in effect when (a) the Moody's
Rating is at or above Baal (or a Substitute Rating is at or above the
corresponding level) or the Standard & Poor's Rating is at or above BBB+ (or a
Substitute Rating is at or above the corresponding level) and (b) neither Rating
Group I nor Rating Group II is in effect; "Rating Group IV" shall be in effect
when (a) the Moody's Rating is at or above Baa2 (or a Substitute Rating is at or
above the corresponding level) or the Standard & Poor's Rating is at or above
BBB (or a Substitute Rating is at or above the corresponding level) and (b) none
of Rating Group I, Rating Group II or Rating Group III is in effect; and "Rating
Group V" shall be in effect when none of Rating Group I, Rating Group II, Rating
Group III or Rating Group IV is in effect; provided that, (A) if the Moody's
Rating (or a Substitute Rating) and the Standard & Poor's Rating (or a
Substitute Rating) fall into different Rating levels and one of such Ratings is
no more than one Rating level lower than the other of such Ratings, then the
applicable Rating Group shall be based upon the higher of such Ratings, (B) if
the Moody's Rating (or a Substitute Rating) and the Standard & Poor's Rating (or
a Substitute Rating) fall into different Rating levels and one of such Ratings
is two Rating levels lower than the other of such Ratings, then the applicable
Rating Group shall be based upon a hypothetical Rating that would fall into the
Rating level that is one lower than the Rating level into which the higher of
such Ratings falls and (C) the Company may substitute a Substitute Rating for
either (but not both of) the Moody's Rating or the Standard & Poor's Rating
(i.e., either the Moody's Rating or the Standard & Poor's Rating must at all
times be used to determine which Rating Group is then in effect).
"Reference Banks" shall mean Chase, Citibank, N.A., and Bank of New York.
"Regulations A, D and U" shall mean, respectively, Regulations A, D and U
of the Board of Governors of the Federal Reserve System (or any successor), as
the same may be modified and supplemented and in effect from time to time.
"Related Parties" means, with respect to any specified Person, each of its
officers, directors and employees.
"Reportable Event" shall mean any reportable event as defined in Section
4043(c) of ERISA, other than a reportable event as to which provision for 30-day
notice to the PBGC would be waived under applicable regulations had the
regulations in effect on the Closing Date been in effect on the date of
occurrence of such reportable event.
"Revolving Credit Exposure" means, with respect to any Bank at any time,
the outstanding principal amount of such Bank's Syndicated Loans at such time.
"SPC" shall have the meaning assigned to such term in Section 11.05 hereof.
"Standard & Poor's" shall mean Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc., or any successor thereto.
"Standard & Poor's Rating" shall mean, as of any date, the rating most
recently announced or published by Standard & Poor's relating to the unsecured,
long-term, senior debt securities of the Company then outstanding.
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"Subsidiary" shall mean, with respect to any Person, any corporation,
partnership or other entity of which at least a majority of the securities or
other ownership interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions of such corporation, partnership or other entity (irrespective of
whether or not at the time securities or other ownership interests of any other
class or classes of such corporation, partnership or other entity shall have or
might have voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person.
"Substitute Rating" shall mean, as of any date, the rating most recently
announced or published by Fitch IBCA relating to the unsecured, long-term,
senior debt securities of the Company then outstanding.
"Syndicated Loans" shall mean the loans provided for by Section 2.01
hereof, which may be Base Rate Loans and/or Eurodollar Loans.
"Syndicated Note" shall mean the promissory note requested by a Bank for
its Syndicated Loans pursuant to Section 2.08(d) hereof and all promissory notes
delivered in substitution or exchange therefor, in each case as the same shall
be modified and supplemented and in effect from time to time.
"Term Loan Maturity Date" shall have the meaning assigned to such term in
Section 2.10 hereof.
"Term-Out Period" shall have the meaning assigned to such term in Section
2.10 hereof.
"Total Debt" shall mean, as at any date, the consolidated liabilities of
the Company and its consolidated Subsidiaries (including tax and other proper
accruals but excluding the accumulated postretirement benefit obligation
resulting from the application of the provisions of FAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions".
"Type" shall have the meaning assigned to such term in Section 1.03 hereof.
"Withdrawal Liability" shall have the meaning given such term under Part I
of Subtitle E of Title IV of ERISA.
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1.01 Accounting Terms and Determinations.
(a) Except as otherwise expressly provided herein, all accounting terms
used herein shall be interpreted, and all financial statements and certificates
and reports as to financial matters required to be delivered to the Banks
hereunder shall (unless otherwise disclosed to the Banks in writing at the time
of delivery thereof in the manner described in subsection (b) below) be
prepared, in accordance with generally accepted accounting principles applied on
a basis consistent with those used in the preparation of the latest financial
statements furnished to the Banks hereunder (which, prior to the delivery of the
first financial statements under Section 8.04 hereof, shall mean the audited
financial statements as at December 31, 2000 referred to in Section 7.04
hereof). All calculations made for the purposes of determining compliance with
this Agreement shall (except as otherwise expressly provided herein) be made by
application of generally accepted accounting principles applied on a basis
consistent with those used in the preparation of the latest annual or quarterly
financial statements furnished to the Banks pursuant to Section 8.04 hereof (or,
prior to the delivery of the first financial statements under Section 8.04
hereof, used in the preparation of the audited financial statements as at
December 31, 2000 referred to in Section 7.04 hereof) unless (i) the Company
shall have objected to determining such compliance on such basis at the time of
delivery of such financial statements or (ii) the Majority Banks shall so object
in writing within 30 days after delivery of such financial statements, in either
of which events such calculations shall be made on a basis consistent with those
used in the preparation of the latest financial statements as to which such
objection shall not have been made (which, if objection is made in respect of
the first financial statements delivered under Section 8.04 hereof, shall mean
the audited financial statements referred to in Section 7.04 hereof).
(b) The Company shall deliver to the Banks at the same time as the delivery
of any annual or quarterly financial statement under Section 8.04 hereof (i) a
description in reasonable detail of any material variation between the
application of accounting principles employed in the preparation of such
statement and the application of accounting principles employed in the
preparation of the next preceding annual or quarterly financial statements as to
which no objection has been made in accordance with the last sentence of
subsection (a) above and (ii) reasonable estimates of the difference between
such statements arising as a consequence thereof.
Classes and Types of Loans. Loans hereunder are distinguished by "Class"
and by "Type". The "Class" of a Loan refers to whether such Loan is a
Competitive Bid Loan or a Syndicated Loan, each of which constitutes a Class.
The "Type" of a Loan refers to whether such Loan is a Base Rate Loan, a
Eurodollar Loan, an Absolute Rate Loan or a LIBOR Bid Loan, each of which
constitutes a Type. Loans may be identified by both Class and Type.
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Section 1. Commitments, Loans, Notes and Prepayments.
1.01 Syndicated Loans. Each Bank severally agrees, on the terms and
conditions of this Agreement, to make loans to the Company in Dollars during the
period from and including the Closing Date to, but not including, the Commitment
Termination Date in an aggregate principal amount at any one time outstanding up
to but not exceeding the amount of the Commitment of such Bank as in effect from
time to time; provided that (x) each Bank's Revolving Credit Exposure at any
time shall not exceed its Commitment, and (y) the aggregate principal amount of
all Syndicated Loans, together with the aggregate principal amount of all
Competitive Bid Loans, at any one time outstanding shall not exceed the
aggregate amount of the Commitments at such time. Subject to the terms and
conditions of this Agreement, during such period the Company may borrow, repay
and reborrow the amount of the Commitments by means of Base Rate Loans and
Eurodollar Loans and during such period and thereafter the Company may Convert
Loans of one Type into Loans of another Type (as provided in Section 2.09
hereof) or Continue Loans of one Type as Loans of the same Type (as provided in
Section 2.09 hereof); provided that no more than ten separate Interest Periods
in respect of Eurodollar Loans from each Bank may be outstanding at any one
time.
1.01 Borrowings of Syndicated Loans. The Company shall give the
Administrative Agent notice of each borrowing hereunder as provided in Section
4.05 hereof. Not later than 1:00 p.m. New York time on the date specified for
each borrowing of Syndicated Loans hereunder, each Bank shall make available the
amount of the Syndicated Loan or Loans to be made by it on such date to the
Administrative Agent, at an account designated by the Administrative Agent, in
immediately available funds, for account of the Company. The amount so received
by the Administrative Agent shall, subject to the terms and conditions of this
Agreement, promptly be made available to the Company by depositing the same, in
immediately available funds, in an account of the Company designated by the
Company and maintained with Chase at its principal office.
1.01 Competitive Bid Option.
(a) In addition to borrowings of Syndicated Loans, at any time prior to the
Commitment Termination Date the Company may, as set forth in this Section 2.03,
request the Banks to make offers to make Competitive Bid Loans to the Company in
Dollars. The Banks may, but shall have no obligation to, make such offers and
the Company may, but shall have no obligation to, accept any such offers in the
manner set forth in this Section 2.03. Competitive Bid Loans may be LIBOR Bid
Loans or Absolute Rate Loans, provided that:
(i) there may be no more than fifteen different Interest Periods for both
Syndicated Loans and Competitive Bid Loans outstanding at the same time (for
which purpose Interest Periods described in different lettered clauses of the
definition of the term "Interest Period" shall be deemed to be different
Interest Periods even if they are coterminous); and
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(i) the aggregate principal amount of all Competitive Bid Loans, together
with the aggregate principal amount of all Revolving Credit Exposure at any one
time outstanding shall not exceed the aggregate amount of the Commitments at
such time.
(a) When the Company wishes to request offers to make Competitive Bid
Loans, it shall give the Administrative Agent (which shall promptly notify the
Banks) notice (a "Competitive Bid Quote Request") so as to be received no later
than 11:00 a.m. New York time on (x) the fourth Business Day prior to the date
of borrowing proposed therein, in the case of a LIBOR Auction or (y) one
Business Day prior to the date of borrowing proposed therein, in the case of an
Absolute Rate Auction (or, in any such case, such other time and date as the
Company and the Administrative Agent, with the consent of the Majority Banks,
may agree). The Company may request offers to make Competitive Bid Loans for up
to three different Interest Periods in a single notice (for which purpose
Interest Periods in different lettered clauses of the definition of the term
"Interest Period" shall be deemed to be different Interest Periods even if they
are coterminous); provided that the request for each separate Interest Period
shall be deemed to be a separate Competitive Bid Quote Request for a separate
borrowing (a "Competitive Bid Borrowing"). Each such notice shall be
substantially in the form of Exhibit B hereto and shall specify as to each
Competitive Bid Borrowing:
(i) the proposed date of such borrowing, which shall be a Business Day;
(ii) the aggregate amount of such Competitive Bid Borrowing, which shall be
at least $10,000,000 (or a larger multiple of $1,000,000) but shall not cause
the limits specified in Section 2.03(a) hereof to be violated;
(iii) the duration of the Interest Period applicable thereto;
(iv) whether the Competitive Bid Quotes requested for a particular Interest
Period are seeking quotes for LIBOR Bid Loans or Absolute Rate Loans; and
(i) if the Competitive Bid Quotes requested are seeking quotes for Absolute
Rate Loans, the date on which the Competitive Bid Quotes are to be submitted if
it is before the proposed date of borrowing (the proposed date of such borrowing
or, if the date on which such Competitive Bid Quotes are to be submitted is
before the proposed date of such borrowing, such submission date, is called the
"Quotation Date").
Except as otherwise provided in this Section 2.03(b), no Competitive Bid
Quote Request shall be given within five Business Days (or such other number of
days as the Company and the Administrative Agent may agree) of any other
Competitive Bid Quote Request.
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1) Each Bank may submit one or more Competitive Bid Quotes, each
constituting an offer to make a Competitive Bid Loan in response to any
Competitive Bid Quote Request; provided that, if the Company's request under
Section 2.03(b) hereof specified more than one Interest Period, such Bank may
make a single submission containing one or more Competitive Bid Quotes for each
such Interest Period. Each Competitive Bid Quote must be submitted to the
Administrative Agent not later than (x) 2:00 p.m. New York time on the fourth
Business Day prior to the proposed date of borrowing, in the case of a LIBOR
Auction or (y) 10:00 a.m. New York (a) time on the Quotation Date, in the case
of an Absolute Rate Auction (or, in any such case, such other time and date as
the Company and the Administrative Agent, with the consent of the Majority
Banks, may agree); provided that any Competitive Bid Quote may be submitted by
Chase (or its lending office) only if Chase (or such lending office) notifies
the Company of the terms of the offer contained therein not later than (x) 1:00
p.m. New York time on the fourth Business Day prior to the proposed date of
borrowing, in the case of a LIBOR Auction or (y) 9:45 a.m. New York time on the
Quotation Date, in the case of an Absolute Rate Auction. Subject to Sections
5.02, 5.03, 6.02 and 9 hereof, any Competitive Bid Quote so made shall be
irrevocable except with the consent of the Administrative Agent given on the
instructions of the Company.
(i) Each Competitive Bid Quote shall be substantially in the form of
Exhibit C hereto and shall specify:
(A) the proposed date of borrowing and the Interest Period therefor;
(B) the principal amount of the Competitive Bid Loan for which each such
offer is being made, which principal amount shall be at least $10,000,000 (or a
larger multiple of $1,000,000); provided that the aggregate principal amount of
all Competitive Bid Loans for which a Bank submits Competitive Bid Quotes (x)
may be greater or less than the Commitment of such Bank but (y) may not exceed
the principal amount of the Competitive Bid Borrowing for a particular Interest
Period for which offers were requested;
(A) in the case of a LIBOR Auction, the margin above or below the
applicable Eurodollar Rate (the "LIBO Margin") offered for each such Competitive
Bid Loan (expressed as a percentage rate per annum in the form of a decimal to
no more than four decimal places) to be added to or subtracted from the
applicable Eurodollar Rate;
(B) in the case of an Absolute Rate Auction, the rate of interest per annum
(expressed as a percentage rate per annum in the form of a decimal to no more
than four decimal places) offered for each such Competitive Bid Loan (the
"Absolute Rate"); and
(A) the identity of the quoting Bank.
Unless otherwise agreed by the Administrative Agent and the Company, no
Competitive Bid Quote shall contain qualifying, conditional or similar language
or propose terms other than or in addition to those set forth in the applicable
Competitive Bid Quote Request and, in particular, no Competitive Bid Quote may
be conditioned upon acceptance by the Company of all (or some specified minimum)
of the principal amount of the Competitive Bid Loan for which such Competitive
Bid Quote is being made, provided that the submission by any Bank containing
more than one Competitive Bid Quote may be conditioned on the Company not
accepting offers contained in such submission that would result in such Bank
making Competitive Bid Loans pursuant thereto in excess of a specified aggregate
amount (the "Competitive Bid Loan Limit").
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(a) The Administrative Agent shall (x) in the case of an Absolute Rate
Auction, as promptly as practicable after the Competitive Bid Quote is submitted
(but in any event not later than 10:15 a.m. New York time on the Quotation Date)
or (y) in the case of a LIBOR Auction, by 4:00 p.m. New York time on the day a
Competitive Bid Quote is submitted, notify the Company of the terms (i) of any
Competitive Bid Quote submitted by a Bank that is in accordance with Section
2.03(c) hereof and (ii) of any Competitive Bid Quote that amends, modifies or is
otherwise inconsistent with a previous Competitive Bid Quote submitted by such
Bank with respect to the same Competitive Bid Quote Request. Any such subsequent
Competitive Bid Quote shall be disregarded by the Administrative Agent unless
such subsequent competitive Bid Quote is submitted solely to correct a manifest
error in such former Competitive Bid Quote. The Administrative Agent's notice to
the Company shall specify (A) the aggregate principal amount of the Competitive
Bid Borrowing for which offers have been received and (B) the respective
principal amounts and LIBO Margins or Absolute Rates, as the case may be, so
offered by each Bank (identifying the Bank that made each Competitive Bid
Quote).
(a) Not later than 11:00 a.m. New York time on (x) the third Business Day
prior to the proposed date of borrowing, in the case of a LIBOR Auction or (y)
the Quotation Date, in the case of an Absolute Rate Auction (or, in any such
case, such other time and date as the Company and the Administrative Agent, with
the consent of the Majority Banks, may agree), the Company shall notify the
Administrative Agent of its acceptance or nonacceptance of the offers so
notified to it pursuant to Section 2.03(d) hereof (which notice shall specify
the aggregate principal amount of offers from each Bank for each Interest Period
that are accepted, it being understood that the failure of the Company to give
such notice by such time shall constitute nonacceptance) and the Administrative
Agent shall promptly notify each affected Bank. The notice from the
Administrative Agent shall also specify the aggregate principal amount of offers
for each Interest Period that were accepted and the lowest and highest LIBO
Margins or Absolute Rates that were accepted for each Interest Period. The
Company may accept any Competitive Bid Quote in whole or in part (provided that
any Competitive Bid Quote accepted in part shall be at least $5,000,000 or a
larger multiple of $1,000,000); provided that:
(i) the aggregate principal amount of each Competitive Bid Borrowing may
not exceed the applicable amount set forth in the related Competitive Bid Quote
Request;
(ii) the aggregate principal amount of each Competitive Bid Borrowing shall
be at least $10,000,000 (or a larger multiple of $1,000,000) but shall not cause
the limits specified in Section 2.03(a) hereof to be violated;
(iii) acceptance of offers may, subject to clause (v) below, be made only
in ascending order of LIBO Margins or Absolute Rates, as the case may be, in
each case beginning with the lowest rate so offered;
(iv) the Company may not accept any offer where the Administrative Agent
has advised the Company that such offer fails to comply with Section 2.03(c)(ii)
hereof or otherwise fails to comply with the requirements of this Agreement
(including, without limitation, Section 2.03(a) hereof);
(i) the aggregate principal amount of each Competitive Bid Borrowing from
any Bank may not exceed any applicable Competitive Bid Loan Limit of such Bank.
111
If offers are made by two or more Banks with the same LIBO Margins or
Absolute Rates, as the case may be, for a greater aggregate principal amount
than the amount in respect of which offers are accepted for the related Interest
Period, the principal amount of Competitive Bid Loans in respect of which such
offers are accepted shall be allocated by the Company among such Banks as nearly
as possible (in amounts of at least $5,000,000 or larger multiples of
$1,000,000) in proportion to the aggregate principal amount of such offers.
Determinations by the Company of the amounts of Competitive Bid Loans shall be
conclusive in the absence of manifest error.
(f) Any Bank whose offer to make any Competitive Bid Loan has been accepted
in accordance with the terms and conditions of this Section 2.03 shall, not
later than 1:00 p.m. New York time on the date specified for the making of such
Loan, make the amount of such Loan available to the Administrative Agent at an
account designated by the Administrative Agent, in immediately available funds,
for account of the Company. The amount so received by the Administrative Agent
shall, subject to the terms and conditions of this Agreement, be made available
to the Company on such date by depositing the same, in immediately available
funds, in an account of the Company maintained with Chase at its principal
office designated by the Company.
(g) Except for the purpose and to the extent expressly stated in Section
2.04(b) hereof, the amount of any Competitive Bid Loan made by any Bank shall
not constitute a utilization of such Bank's Commitment.
1.01 Changes of Commitments.
(a) The aggregate amount of the Commitments shall be automatically reduced
to zero on the Commitment Termination Date.
(b) The Company shall have the right at any time or from time to time (i)
so long as no Syndicated Loans or Competitive Bid Loans are outstanding, to
terminate the Commitments and (ii) to reduce the aggregate unused amount of the
Commitments (for which purpose use of the Commitments shall be deemed to include
(A) the aggregate principal amount of all Competitive Bid Loans and (B) the
aggregate Revolving Credit Exposure); provided that (x) the Company shall give
notice of each such termination or reduction as provided in Section 4.05 hereof
and (y) each partial reduction shall be in an aggregate amount at least equal to
$10,000,000 (or whole multiples thereof).
(c) The Company shall be required to make the following mandatory
prepayments of the term loan during the Term-Out Period:
In the event of any Long-Term Debt Incurrence(s) by the Company during the
Term-Out Period the Company shall be required to use 100% of the Net Cash
Proceeds of such Long-Term Debt Incurrence to prepay any amounts then
outstanding under the term loan existing hereunder at such time, plus accrued
interest and any applicable sums due pursuant to Section 5.04 hereof, if any,
thereon to but not including the date of prepayment (all of such principal,
interest and other sums to be paid solely from such Net Cash Proceeds).
(i) In the event of any Asset Dispositions(s) by the Company during the
Term-Out Period the Company shall be required to use 100% of the portion of the
Net Cash Proceeds of each such Asset Disposition which is in excess of the
Aggregate Permitted Amount to prepay any amounts then outstanding under the term
loan existing hereunder at such time, plus accrued interest and any applicable
sums due pursuant to Section 5.04 hereof, if any, thereon to but not including
the date of prepayment (all of such principal, interest and other sums to be
paid solely from such Net Cash Proceeds).
(b) The Commitments, once terminated or reduced as provided in this Section
2.04, may not be reinstated.
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1.01 Facility Fee; Utilization Fee.
(a) The Company shall pay to the Administrative Agent for the account of
each Bank a facility fee on the daily average amount of such Bank's Commitment
(whether used or unused), for the period from and including the Closing Date to
but not including the earlier of the date such Commitment is terminated and the
Commitment Termination Date (and throughout the Term-Out Period, if selected by
the Company, based upon the amount of the term loan as it may be reduced from
time to time), at a rate per annum equal to the Applicable Facility Fee Rate.
Accrued facility fees shall be payable in arrears on each Quarterly Date and on
the earlier of the date the Commitments are terminated and the Commitment
Termination Date as well as on the Term Loan Maturity Date if the Term-Out
Period is selected by the Company.
(b) The Company shall pay to the Administrative Agent for the account of
each Bank a utilization fee on the daily average amount of such Bank's Revolving
Credit Exposure for each fiscal quarter of the Company during which the Banks'
aggregate Revolving Credit Exposure is greater than or equal to 33% of the
Banks' aggregate Commitments, at a rate per annum equal to the Applicable
Utilization Fee Rate. Accrued utilization fees shall be payable in arrears on
each Quarterly Date and on the earlier of the date the Commitments are
terminated and the Commitment Termination Date.
(c) Notwithstanding any other provision of this Agreement, fees arising
pursuant to clause (a) or (b) of this Section 2.05 shall be payable during any
Term-Out Period.
1.02 Lending Offices. The Loans of each Type made by each Bank shall be
made and maintained at such Bank's lending office for Loans of such Type.
Several Obligations; Remedies Independent. The failure of any Bank to make
any Loan to be made by it on the date specified therefor shall not relieve any
other Bank of its obligation to make its Loan, but neither any Bank nor the
Administrative Agent shall be responsible for the failure of any other Bank to
make a Loan to be made by such other Bank, and (except as otherwise provided in
Section 4.06 hereof) no Bank shall have any obligation to the Administrative
Agent or any other Bank for the failure by such Bank to make any Loan required
to be made by such Bank. The amounts payable by the Company at any time
hereunder and under the Notes to each Bank shall be a separate and independent
debt and each Bank shall be entitled to protect and enforce its rights arising
out of this Agreement and the Notes, and it shall not be necessary for any other
Bank or the Administrative Agent to consent to, or be joined as an additional
party in, any proceedings for such purposes.
1.01 Evidence of Debt.
(a) Each Bank shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Company to such Bank
resulting from each Loan made by such Bank, including the amounts of principal
and interest payable and paid to such Bank from time to time hereunder.
(b) The Administrative Agent shall maintain accounts in which it shall
record (i) the amount of each Loan made hereunder, the Class and Type thereof
and the Interest Period applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from the Company to each
Bank hereunder and (iii) the amount of any sum received by the Administrative
Agent hereunder for the account of the Banks and each Bank's share thereof.
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(c) The entries made in the accounts maintained pursuant to paragraph (a)
or (b) of this Section shall be prima facie evidence of the existence and
amounts of the obligations recorded therein; provided that the failure of any
Bank or the Administrative Agent to maintain such accounts or any error therein
shall not in any manner affect the obligation of the Company to repay the Loans
in accordance with the terms of this Agreement.
(a) Any Bank may request that Loans made by it be evidenced by a promissory
note. In such event, the Company shall prepare, execute and deliver to such Bank
a promissory note payable to the order of such Bank and in a form approved by
the Administrative Agent. Thereafter, the Loans evidenced by such promissory
note and interest thereon shall at all times (including after assignment
pursuant to Section 11.06(b)) be represented by one or more promissory notes in
such form payable to the order of the payee named therein.
1.02 Optional Prepayments and Conversions or Continuations of Loans.
(a) Subject to Sections 4.04 and 5.04 hereof, the Company shall have the
right to prepay Syndicated Loans or to Convert Syndicated Loans of one Type into
Syndicated Loans of another Type or Continue Syndicated Loans of one Type as
Syndicated Loans of the same Type at any time or from time to time, provided
that the Company shall give the Administrative Agent notice of each such
prepayment or Conversion or Continuation as provided in Section 4.05 hereof
(and, upon the date specified in any such notice of prepayment, the amount to be
prepaid shall become due and payable hereunder).
(b) No Competitive Bid Loan may be prepaid without the consent of the Bank
holding such Competitive Bid Loan.
Notwithstanding the foregoing provisions of this Section 2.09, and without
limiting the rights and remedies of the Banks under Section 9 hereof, in the
event that any Event of Default shall have occurred and be continuing, the
Administrative Agent may (and at the request of the Majority Banks, shall)
suspend the right of the Company to Convert any Loan into a (a) Eurodollar Loan,
or to Continue any Loan as a Eurodollar Loan, in which event all Loans shall be
Converted (on the last day of the respective Interest Period therefor) or
Continued, as the case may be, as Base Rate Loans.
1.01 Conversion of Outstanding Advances to Term Loan. So long as no Event
of Default has occurred and is continuing hereunder, the Company may, by notice
to the Administrative Agent (which shall promptly notify the Banks) not less
than 60 days prior to the Commitment Termination Date, request that the Banks
convert any Syndicated Loans outstanding on the Commitment Termination Date to a
term loan maturing one year after the Commitment Termination Date. In such
event, the period from the Commitment Termination Date to the date on which such
term loan matures (the "Term Loan Maturity Date") shall be defined herein as the
"Term-Out Period". During the Term-Out Period, the Company may select Base Rate
Loans or Eurodollar Loans for applicable Interest Periods, provided that no such
Interest Period will end after the Term Loan Maturity Date and provided further
that repayments during the Term-Out Period shall be subject to the terms of
Section 2.04(c) hereof.
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Section 1. Payments of Principal and Interest.
1.01 Repayment of Loans.
(a) The Company hereby promises to pay to the Administrative Agent for
account of each Bank the principal of each Syndicated Loan made by such Bank,
and each Syndicated Loan shall mature, on the Commitment Termination Date
(subject to the Term-Out Period, if elected).
(a) The Company agrees to pay to the Administrative Agent for account of
each Bank that makes a Competitive Bid Loan the principal of such Competitive
Bid Loan, and such Competitive Bid Loan shall mature, on the last day of the
Interest Period for such Competitive Bid Loan.
1.02 Interest. The Company hereby promises to pay to the Administrative
Agent for account of each Bank interest on the unpaid principal amount of each
Loan made by such Bank for the period from and including the date of such Loan
to but excluding the date such Loan shall be paid in full, at the following
rates per annum:
(a) if such Loan is a Base Rate Loan, the Base Rate (as in effect from time
to time);
(b) if such Loan is a Eurodollar Loan, the Eurodollar Rate for such Loan
for the Interest Period therefor plus the Applicable Margin;
(c) if such Loan is a LIBOR Bid Loan, the Eurodollar Rate for such Loan for
the Interest Period therefor plus (or minus) the LIBO Margin quoted by the Bank
making such Loan in accordance with Section 2.03 hereof; and
if such Loan is an Absolute Rate Loan, the Absolute Rate for such Loan for
the Interest Period therefor quoted by the Bank making such Loan in accordance
with Section 2.03 hereof.
Notwithstanding the foregoing, the Company hereby promises to pay to the
Administrative Agent for account of each Bank interest at the applicable
Post-Default Rate on any principal of any Loan made by such Bank and on any
other amount payable by the Company hereunder or under the Notes, if any, held
by such Bank to or for account of such Bank, that shall not be paid in full when
due (whether at stated maturity, by acceleration, by mandatory prepayment or
otherwise), for the period from and including the due date thereof to but
excluding the date the same is paid in full. Accrued interest on each Loan shall
be payable (a) on the last day of the Interest Period therefor and, if such
Interest Period is longer than 90 days (in the case of an Absolute Rate Loan) or
three months (in the case of a Fixed Rate Loan), at 90-day or three-month
intervals, respectively, following the first day of such Interest Period,
provided that interest on Base Rate Loans shall be payable on each Quarterly
Date and on the Commitment Termination Date and, if applicable, on the Term Loan
Maturity Date and (b) in the case of any Loan, upon the payment or prepayment
thereof (but only on the principal amount so paid or prepaid), except that
interest payable at the Post-Default Rate shall be payable from time to time on
demand. Promptly after the determination of any interest rate provided for
herein or any change therein, the Administrative Agent shall give notice thereof
to the Banks to which such interest is payable and to the Company.
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Section 1. Payments; Pro Rata Treatment; Computations; Etc.
1.01 Payments.
(a) Except to the extent otherwise provided herein, all payments of
principal, interest, fees and other amounts to be made by the Company under this
Agreement and the Notes, shall be made in Dollars, in immediately available
funds, without deduction, set-off or counterclaim, to the Administrative Agent
at an account designated by the Administrative Agent not later than 1:00 p.m.
New York time on the date on which such payment shall become due (each such
payment made after such time on such due date to be deemed to have been made on
the next succeeding Business Day), provided that if a new Loan is to be made by
any Bank on a date the Company is to repay any principal of an outstanding Loan
of such Bank, such Bank shall apply the proceeds of such new Loan to the payment
of the principal to be repaid and only an amount equal to the difference between
the principal to be borrowed and the principal to be repaid shall be made
available by such Bank to the Administrative Agent as provided in Section 2.02
hereof or paid by the Company to the Administrative Agent pursuant to this
Section 4.01, as the case may be.
(a) The Company shall, at the time of making each payment under this
Agreement or any Note for account of any Bank, specify to the Administrative
Agent (which shall so notify the intended recipient(s) thereof) the Loans or
other amounts payable by the Company hereunder to which such payment is to be
applied (and in the event that the Company fails to so specify, or if an Event
of Default has occurred and is continuing, the Administrative Agent shall
distribute such payment, subject to Section 4.02 hereof, to the Banks for
application in such manner as the Administrative Agent may determine to be
appropriate).
(b) Each payment received by the Administrative Agent under this Agreement
or any Note for account of any Bank shall be paid by the Administrative Agent
promptly to such Bank, in immediately available funds, for account of such
Bank's lending office for the Loan or other obligation in respect of which such
payment is made.
(a) If the due date of any payment under this Agreement or any Note would
otherwise fall on a day that is not a Business Day, such date shall be extended
to the next succeeding Business Day, and interest shall be payable for any
principal so extended for the period of such extension.
1.02 Pro Rata Treatment. Except to the extent otherwise provided herein,
(a) each borrowing of Syndicated Loans from the Banks under Section 2.01 hereof
shall be made from the Banks, each payment of facility fee under Section 2.05
hereof shall be made for account of the Banks and each termination or reduction
of the amount of the Commitments under Section 2.04 hereof shall be applied to
the respective Commitments of the Banks, pro rata according to the amounts of
their respective Commitments; (b) except as otherwise provided in Sections 5.02
and 5.03 hereof, Eurodollar Loans having the same Interest Period shall be
allocated pro rata among the Banks according to the amounts of their respective
Commitments (in the case of making Loans) or their respective Loans (in the case
of Conversions and Continuation of Loans); (c) each payment or prepayment of
principal of Syndicated Loans by the Company shall be made for account of the
Banks pro rata in accordance with the respective unpaid principal amounts of the
Syndicated Loans held by them; and (d) each payment of interest on Syndicated
Loans by the Company shall be made for account of the Banks pro rata in
accordance with the amounts of interest on such Loans then due and payable to
the respective Banks.
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1.03 Computations. Interest on Fixed Rate Loans and all fees shall be
computed on the basis of a year of 360 days and actual days elapsed (including
the first day but excluding the last day) occurring in the period for which
payable, and interest on Base Rate Loans shall be computed on the basis of a
year of 365 or 366 days, as the case may be, and actual days elapsed (including
the first day but excluding the last day) occurring in the period for which
payable. Notwithstanding the foregoing, for each day that the Base Rate is
calculated by reference to the Federal Funds Rate, interest on Base Rate Loans
shall be computed on the basis of a year of 360 days and actual days elapsed.
1.04 Minimum Amounts. Except for prepayments made pursuant to Sections
2.04(c) and 5.04 hereof, (x) (A) each borrowing and Conversion of Base Rate
Loans shall be in a minimum amount of $1,000,000 and in an integral multiple of
$500,000 (provided that a Base Rate Loan may be in an aggregate amount that is
equal to the entire unused balance of the Banks' Commitments) and (B) each
partial prepayment of principal of Base Rate Loans shall be in an integral
multiple of $1,000,000 and (y) (A) each borrowing of, and Conversion into,
Eurodollar Loans shall be in an aggregate amount at least equal to $5,000,000 or
a larger multiple of $1,000,000 and (B) each partial prepayment of principal of
Eurodollar Loans shall be in an aggregate amount at least equal to $5,000,000 or
a larger multiple of $1,000,000 (borrowings, Conversions or prepayments of or
into Loans of different Types or, in the case of Eurodollar Loans, having
different Interest Periods at the same time hereunder to be deemed separate
borrowings, Conversions and prepayments for purposes of the foregoing, one for
each Type or Interest Period), provided that the aggregate principal amount of
Eurodollar Loans having the same Interest Period shall be in an amount at least
equal to $5,000,000 or a larger multiple of $1,000,000 and, if any Eurodollar
Loans would otherwise be in a lesser principal amount for any period, such Loans
shall be Base Rate Loans during such period.
1.01 Certain Notices. Except as otherwise provided in Section 2.03 hereof
with respect to Competitive Bid Loans, notices by the Company to the
Administrative Agent of terminations or reductions of the Commitments and of
borrowings, Conversions, Continuations and optional prepayments of Loans, of
Types of Loans and of the duration of Interest Periods shall be irrevocable and
shall be effective only if received by the Administrative Agent not later than
11:00 a.m. New York time on the number of Business Days prior to the date of the
relevant termination, reduction, borrowing, Conversion, Continuation or
prepayment or the first day of such Interest Period specified below:
Number of
Business
Notice Days Prior
Termination or reduction
of Commitments 3
Borrowing or prepayment of,
or Conversion into, Base Rate
Loans 1
Borrowing or prepayment of,
Conversion into, Continuation as
or duration of Interest Period for,
Eurodollar Loans 3
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Each such notice of termination or reduction shall specify the amount of
the Commitments to be terminated or reduced. Each such notice of borrowing,
Conversion, Continuation or optional prepayment shall specify the Loans to be
borrowed, Converted, Continued or prepaid and the amount (subject to Section
4.04 hereof) and Type of each Loan to be borrowed, Converted, Continued or
prepaid and the date of borrowing, Conversion, Continuation or optional
prepayment (which shall be a Business Day). The Administrative Agent shall
promptly notify the Banks of the contents of each such notice. In the event that
the Company fails to select the Type of Loan, or the duration of any Interest
Period for any Eurodollar Loan, within the time period and otherwise as provided
in this Section 4.05, such Loan (if outstanding as a Eurodollar Loan) will be
automatically Converted into a Base Rate Loan on the last day of the then
current Interest Period for such Loan or (if outstanding as a Base Rate Loan)
will remain as, or (if not then outstanding) will be made as, a Base Rate Loan.
Non-Receipt of Funds by the Administrative Agent. Unless the Administrative
Agent shall have been notified by a Bank or the Company (the "Payor") prior to
the date on which the Payor is to make payment to the Administrative Agent of
(in the case of a Bank) the proceeds of a Loan to be made by such Bank hereunder
or (in the case of the Company) a payment to the Administrative Agent for
account of one or more of the Banks hereunder (such payment being herein called
the "Required Payment"), which notice shall be effective upon receipt, that the
Payor does not intend to make the Required Payment to the Administrative Agent,
the Administrative Agent may assume that the Required Payment has been made and
may, in reliance upon such assumption (but shall not be required to), make the
amount thereof available to the intended recipient(s) on such date; and, if the
Payor has not in fact made the Required Payment to the Administrative Agent, the
recipient(s) of such payment shall, on demand, repay to the Administrative Agent
the amount so made available together with interest thereon in respect of each
day during the period commencing on the date (the "Advance Date") such amount
was so made available by the Administrative Agent until the date the
Administrative Agent recovers such amount at a rate per annum equal to the
Federal Funds Rate for such day and, if such recipient(s) shall fail promptly to
make such payment, the Administrative Agent shall be entitled to recover such
amount, on demand, from the Payor, together with interest as aforesaid, provided
that if neither the recipient(s) nor the Payor shall return the Required Payment
to the Administrative Agent within three Business Days of the Advance Date,
then, retroactively to the Advance Date, the Payor and the recipient(s) shall
each be obligated to pay interest on the Required Payment as follows:
(i) if the Required Payment shall represent a payment to be made by the
Company to the Banks, the Company and the recipient(s) shall each be obligated
retroactively to the Advance Date to pay interest in respect of the Required
Payment at the Post-Default Rate (without duplication of the obligation of the
Company under Section 3.02 hereof to pay interest on the Required Payment at the
Post-Default Rate), it being understood that the return by the recipient(s) of
the Required Payment to the Administrative Agent shall not limit such obligation
of the Company under said Section 3.02 to pay interest at the Post-Default Rate
in respect of the Required Payment and
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(i) if the Required Payment shall represent proceeds of a Loan to be made
by the Banks to the Company, the Payor and the Company shall each be obligated
retroactively to the Advance Date to pay interest in respect of the Required
Payment pursuant to whichever of the rates specified in Section 3.02 hereof is
applicable to the Type of such Loan, it being understood that the return by the
Company of the Required Payment to the Administrative Agent shall not limit any
claim the Company may have against the Payor in respect of such Required
Payment.
1.01 Sharing of Payments, Etc.
If any Bank shall obtain from the Company payment of any principal of or
interest on any Loan of any Class owing to it or any other amount under this
Agreement through the exercise of any right of set-off, banker's lien or
counterclaim or similar right or otherwise (other than from the Administrative
Agent as provided herein), and, as a result of such payment, such Bank shall
have received a greater percentage of the principal of or interest on the Loans
of such Class or such other amounts then due hereunder by the Company to such
Bank than the percentage received by any other Bank, it shall promptly purchase
from such other Banks participations in (or, of and to the extent specified by
such Bank, direct interests in) the Loans of such Class or such other amounts,
respectively, owing to such other Banks (or in interest due thereon, as the case
may be) in such amounts, and make such other adjustments from time to time as
shall be equitable, to the end that all the Banks shall share the benefit of
such excess payment (net of any expenses that may be incurred by such Bank in
obtaining or preserving such excess payment) pro rata in accordance with the
unpaid principal of and/or interest on the Loans of such Class or such other
amounts, respectively, owing to each of the Banks. To such end all the Banks
shall make appropriate adjustments among themselves (by the resale of
participations sold or otherwise) if such payment is rescinded or must otherwise
be restored.
(a) The Company agrees that any Bank so purchasing such a participation (or
direct interest) may exercise all rights of set-off, banker's lien, counterclaim
or similar rights with respect to such participation as fully as if such Bank
were a direct holder of Loans or other amounts (as the case may be) owing to
such Bank in the amount of such participation.
1.01 Additional Costs.
(a) It is understood that the cost to the Banks of making or maintaining
Eurodollar Loans may fluctuate as a result of the applicability of, or changes
in, reserve requirements imposed by the Board of Governors of the Federal
Reserve System of the United States, including but not limited to, reserve
requirements under Regulation D in connection with Eurocurrency Liabilities (as
defined in Regulation D) at the ratios provided for in Regulation D from time to
time. The Company agrees to pay to each Bank from time to time, as provided in
paragraph (c) below, such amounts as shall be necessary to compensate such Bank
for the portion of the cost of making or maintaining any Eurodollar Loans made
by it resulting from any such reserve requirements, it being understood that the
rates of interest applicable to Eurodollar Loans hereunder have been determined
on the hypothetical assumption that no such reserve requirements exist or will
exist and that such rates do not reflect costs imposed on such Bank in
connection with such reserve requirements. It is agreed that for purposes of
this paragraph (a) the Eurodollar Loans made hereunder shall be deemed to
constitute Eurocurrency Liabilities (as defined in Regulation D) and to be
subject to the reserve requirements of Regulation D without benefit or credit of
proration, exemptions or offsets which might otherwise be available to such Bank
from time to time under Regulation D.
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(a) In the event that after the Closing Date any change in conditions or in
applicable law, rule or regulations or in the interpretation or administration
thereof (including, without limitation, any request, guideline or policy not
having the force of law) by any authority charged with the administration or
interpretation thereof shall occur which shall:
(i) subject any Bank to any tax with respect to any Eurodollar Loan (other
than any tax on the overall net income of such Bank imposed by the United States
of America or by the jurisdiction in which such Bank has its principal office or
any political subdivision or taxing authority therein); or
(ii) change the basis of taxation of any payment to any Bank of principal
of or interest on any Eurodollar Loan or with respect to other fees and amounts
payable hereunder, or any combination of the foregoing; or
(iii) impose, modify or deem applicable any reserve, deposit, capital
adequacy or similar requirement against any assets held by, deposits with or for
the account of or loans or commitments by an office of any Bank; or
(i) impose upon any Bank or the London interbank market any other condition
with respect to the Eurodollar Loans or this Agreement;
and the result of any of the foregoing shall be to increase the actual cost
to such Bank of making or maintaining any Eurodollar Loan hereunder or to reduce
the amount of any payment (whether of principal, interest or otherwise) received
or receivable by such Bank, or to require such Bank to make any payment in
connection with any Eurodollar Loan or to reduce the rate of return on capital
of such Bank as a consequence of such Bank's obligations hereunder to a level
below that which such Bank could have achieved but for such change, in each case
by or in an amount which such Bank in its sole judgment shall deem material,
then and in each such case the Company shall pay to such Bank, as provided in
paragraph (c) below (but without duplication of the payments required under
paragraph (a) above), such amounts as shall be necessary to compensate such Bank
for such cost, reduction or payment.
(b) Each Bank shall deliver to the Company, with a copy to the
Administrative Agent, from time to time one or more certificates setting forth
the amounts due under paragraphs (a) and (b) above, the reserve requirements or
changes as a result of which such amounts are due and the manner of computing
such amounts. Each such certificate shall be conclusive in the absence of
manifest error. The Company shall pay the amounts shown as due on any such
certificate within 10 Business Days after its receipt of the same. No failure on
the part of any Bank to demand compensation under paragraph (a) or (b) above on
any one occasion shall constitute a waiver of its right to demand such
compensation on any other occasion. The protection of this Section 5.01 shall be
available to each Bank regardless of any possible contention of the invalidity
or inapplicability of any law, regulation or other condition which shall give
rise to any demand by such Bank for compensation hereunder; provided, however,
that if any Bank shall receive a reimbursement of any additional tax assessment
or other amount as a result of such contention, such Bank shall remit such
reimbursed funds to the Company to the extent that the Company had paid such
amounts to such Bank less any expenses reasonably incurred by such Bank.
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(c) Each Bank shall notify the Company, with a copy of such notice to the
Administrative Agent, as to the existence of any change described in paragraphs
(a) and (b) above as promptly as practicable after gaining knowledge thereof. If
the Company shall receive notice of such determination from any Bank with
respect to Eurodollar Loans, the Company may either (i) convert such Bank's
Eurodollar Loans to Base Rate Loans, or (ii) prepay, without premium (but
subject in either case to the payments required by Sections 5.01(a) and (b) and
5.04 hereof), upon at least three Business Days' prior written or telex notice
to such Bank, but not more than fifteen days after receipt of notice from such
Bank, all such Bank's Eurodollar Loans outstanding together with interest and
facility fee accrued to the date of prepayment on such amount and the aggregate
Commitments shall be reduced by an amount equal to such Bank's Commitment and
such Bank's Commitment shall be reduced to zero.
Any Bank claiming any additional amounts payable pursuant to paragraph (b)
above shall use its best efforts (consistent with its internal policy and legal
and regulatory restrictions) to change the jurisdiction of its applicable
lending office so as to eliminate the amount of any such costs or additional
amounts which may thereafter accrue; provided that no such (a) change shall be
made if, in the sole reasonable judgment of such Bank, such change would be
disadvantageous to such Bank.
1.01 Limitation on Types of Loans. In the event, and on each occasion, that
on the day two Business Days prior to the commencement of any Interest Period
for any Fixed Rate Loan, any Bank shall have determined (which determination
shall be conclusive and binding upon the Company absent manifest error) (x) that
dollar deposits in the amount of the principal amount of such Fixed Rate Loan
are not generally available in the London interbank market, or (y) that, in the
event that clause (ii) of the definition of "Eurodollar Rate" in Section 1.01
hereof is the basis for determining the rate of interest for Fixed Rate Loans
for such Interest Period, the rate at which such dollar deposits are being
offered will not adequately and fairly reflect the cost to such Bank of making
or maintaining the principal amount of such Fixed Rate Loan during such Interest
Period, or reasonable means do not exist for ascertaining the Eurodollar Rate,
such Bank shall, as soon as practicable thereafter, give notice of such
determination to the Administrative Agent and the other Banks and the Company.
If the Company shall receive notice of such determination, (i) in respect of any
such Eurodollar Loan the Company may either (A) withdraw its request for a
Eurodollar Loan from such Bank and/or (B) request a Base Rate Loan be made by
such Bank or (C) terminate the Commitment of such Bank, and at the end of the
then current Interest Period for each outstanding Loan repay all such Bank's
Loans outstanding together with interest and facility fee accrued to the date of
such payment on such amount (the aggregate Commitments shall be reduced by an
amount equal to such Bank's Commitment) and any applicable utilization fee due
to such Bank shall be paid in arrears on the next following Quarterly Date after
the date such Bank's Commitment has been terminated, and (ii) in respect of any
LIBOR Bid Loan, such Bank's obligation to make such LIBOR Bid Loan shall be
terminated.
1.01 Illegality.
(a) Notwithstanding anything to the contrary contained elsewhere in this
Agreement, if any change after the Closing Date in law or regulation or in the
interpretation thereof by any governmental authority charged with the
administration thereof shall make it unlawful for a Bank to make or maintain any
Fixed Rate Loan or to give effect to its obligations as contemplated hereby with
respect to a Eurodollar Loan, then, by notice to the Company with a copy to the
Administrative Agent, such Bank may:
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(i) declare that Eurodollar Loans will not thereafter be made by such Bank
hereunder, whereupon such Bank's pro rata portion of any subsequent Eurodollar
Loan shall instead be a Base Rate Loan, unless such declaration is subsequently
withdrawn;
(ii) require that all outstanding Eurodollar Loans be Converted to Base
Rate Loans, whereupon all of such Eurodollar Loans shall be automatically
Converted to Base Rate Loans as of the effective date of such notice as provided
in paragraph (b) below (notwithstanding the provisions of Section 2.09 hereof);
and
(iii) refuse to make any LIBOR Bid Loan that it has agreed to make.
(b) For purposes of this Section 5.03, a notice to the Company by any Bank
pursuant to paragraph (a) above shall be effective, if lawful, and if any Fixed
Rate Loans shal1 then be outstanding, on the last day of the then current
Interest Period; otherwise, such notice shall be effective on the date of
receipt by the Company.
1.01 Compensation. The Company shall pay to the Administrative Agent for
account of each Bank, upon the request of such Bank through the Administrative
Agent, such amount or amounts as shall be sufficient (in the reasonable opinion
of such Bank) to compensate it for any loss, cost or expense that such Bank
determines is attributable to:
(a) any payment, mandatory or optional prepayment or Conversion of a Fixed
Rate Loan or Absolute Rate Loan made by such Bank for any reason (including,
without limitation, the acceleration of the Loans pursuant to Section 9 hereof)
on a date other than the last day of the Interest Period for such Loan; or
(b) any failure by the Company for any reason (including, without
limitation, the failure of any of the conditions precedent specified in Section
6 hereof to be satisfied) to borrow a Fixed Rate Loan or Absolute Rate Loan
(with respect to which, in the case of a Competitive Bid Loan, the Company has
accepted a Competitive Bid Quote) from such Bank on the date for such borrowing
specified in the relevant notice of borrowing given pursuant to Section 2.02 or
2.03(b) hereof.
Without limiting the effect of the preceding sentence, such compensation
shall include for each Bank on demand an amount equal to any loss incurred or to
be incurred by it in the reemployment of the funds released by any (i) failure
of the Company to accept a Loan following a request therefor; or (ii) prepayment
of any Fixed Rate Loan (whether as a result of a reduction in Commitment or
otherwise) permitted under Section 2.09 hereof or any prepayment or Conversion
of such a Loan required or permitted by any other provision of this Agreement,
in each case if such Loan is prepaid or Converted other than on the last day of
the Interest Period for such Loan. Such loss shall be the excess, if any, as
reasonably determined by each Bank of its cost of obtaining the funds for the
Loan not accepted or being prepaid or Converted over the amount realized by such
Bank reemploying the funds received from the Company's failure to accept the
Loan, in prepayment or realized from the Loan so Converted, in each case during
the period from the date of such failure, prepayment or Conversion to the end of
the Interest Period of the Loan being requested, prepaid or Converted. Each Bank
shall deliver to the Company from time to time and upon demand by the Company
one or more certificates setting forth the cost of obtaining the funds for the
Loan not accepted or prepaid or Converted and the amount realized by such Bank
in reemploying the funds, received in prepayment or realized from the Loan so
not accepted or Converted.
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U.S. Taxes. Prior to the date of the initial Loan hereunder, and from time
to time thereafter if requested by the Company, each Bank, in each case if
organized under the laws of a jurisdiction outside the United States, shall
provide the Company with the forms prescribed by the Internal Revenue Service of
the United States certifying such Bank's exemption from United States
withholding taxes with respect to all payments to be made to such Bank hereunder
and under the Notes. Unless the Company has received forms or other documents
satisfactory to it indicating that payments hereunder or under any Note are not
subject to United States withholding tax or are subject to such tax at a rate
reduced by an applicable tax treaty, the Company may withhold taxes from such
payments at the applicable statutory rate in the case of payments to or for any
Bank organized under the laws of a jurisdiction outside the United States.
Notwithstanding any provision in this Section 5.05 to the contrary, in the event
the Company withholds such taxes from payments made by the Company, the Company
shall not be required to increase the amount of such payment to such Bank in
order to compensate such Bank for the amount withheld.
1.01 Replacement of Banks. So long as no Event of Default has occurred and
is continuing, the Company, upon three Business Days' notice, may require that
any Bank (a "Replaced Bank") transfer all of its right, title and interest under
this Agreement and such Replaced Bank's Notes, if any, to any bank or other
financial institution (which may be an existing Bank) (a "Proposed Bank")
identified by the Company so long as (i) if the Proposed Bank is not an existing
Bank, such Proposed Bank is satisfactory to the Administrative Agent in its
reasonable determination, (ii) (y) such Proposed Bank agrees to assume all of
the obligations of such Replaced Bank hereunder, and to purchase all of such
Replaced Bank's Loans hereunder for consideration equal to the aggregate
outstanding principal amount of such Replaced Bank's Loans, together with
interest thereon to the date of such purchase, and arrangements satisfactory to
such Replaced Bank in its reasonable determination are made for payment to such
Replaced Bank of all other amounts payable hereunder to such Replaced Bank on or
prior to the date of such transfer (including any fees accrued hereunder and any
amounts that would be payable under Section 5.04 hereof as if all of such
Replaced Bank's Loans were being prepaid in full on such date), or (z) other
arrangements satisfactory to the Replaced Bank, the Proposed Bank and the
Company are made and (iii) as a result of such replacement the Proposed Bank's
Commitment is not greater than 20% of the aggregate amount of the Commitments.
Subject to the provisions of Section 11.06(b) hereof, such Proposed Bank shall
be a "Bank" for all purposes hereunder. Without prejudice to the survival of any
other agreement of the Company hereunder, the agreements of the Company
contained in Sections 5.01 and 11.03 hereof (without duplication of any payments
made to such Replaced Bank by the Company or the Proposed Bank) shall survive
for the benefit of such Replaced Bank under this Section 5.06 with respect to
the time prior to such replacement.
section 1. Conditions Precedent.
1.01 Initial Loan. The obligation of any Bank to make its initial Loan
hereunder is subject to the conditions precedent that the Administrative Agent
shall have received the following documents (with sufficient copies for each
Bank), each of which shall be satisfactory to the Administrative Agent (and to
the extent specified below, to each Bank) in form and substance (which
conditions may be satisfied on the date of the execution and delivery of this
Agreement):
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(a) corporate Documents. Certified copies of the charter and by-laws (or
equivalent documents) of the Company, a long-form certificate of good standing
for the Company from the office of the Secretary of State of the State of
Delaware and certified copies of all corporate authority for the Company
(including, without limitation, board of director resolutions and evidence of
the incumbency, including specimen signatures, of officers) with respect to the
execution, delivery and performance of this Agreement and the Notes and each
other document to be delivered by the Company from time to time in connection
herewith and the Loans hereunder (and the Administrative Agent and each Bank may
conclusively rely on such certificate until it receives notice in writing from
the Company to the contrary).
(a) Opinion of Counsel to the Company. An opinion of Cahill Gordon &
Reindel, counsel to the Company, substantially in the form of Exhibit A hereto
(and the Company hereby instructs such counsel to deliver such opinion to the
Banks and the Administrative Agent).
(b) Other Documents. Such other documents as the Administrative Agent or
any Bank or Winston & Strawn, special counsel to Chase, may reasonably request.
(c) Payment of Fees. Receipt by each of the Banks of each of the fees which
they are entitled to be paid on the Closing Date or prior to the initial
extension of credit hereunder pursuant to the terms hereof or of any other
agreement between the Company and the Banks.
(d) Termination of Existing Credit Agreement. Evidence acceptable to the
Administrative Agent that all amounts outstanding pursuant to that certain
364-Day Revolving Credit Agreement dated May 12, 2000 among the Company, the
Banks party thereto, The Chase Manhattan Bank, as Administrative Agent, Chase
Securities Inc., as Arranger, Bank of America, N.A., as Documentation Agent and
Commerzbank AG, as Syndication Agent have been repaid in full and that the
commitments of the lenders thereunder have been terminated.
1.01 Initial and Subsequent Loans. The obligation of any Bank to make any
Loan (including any Competitive Bid Loan and such Bank's initial Syndicated
Loan) to the Company upon the occasion of each borrowing hereunder is subject to
the further conditions precedent that, both immediately prior to the making of
such Loan and also after giving effect thereto and to the intended use thereof:
(a) subject to the right of the Company to Continue Loans during the
occurrence and continuation of an Event of Default as provided in Section
2.09(c) hereof, no Event of Default (and, if such borrowing will increase the
outstanding aggregate principal amount of the Loans of any Bank hereunder, no
Default) shall have occurred and be continuing; and
(b) the representations and warranties made by the Company in Section 7
hereof (other than Section 7.07 hereof) shall be true and complete on and as of
the date of the making of such Loan, with the same force and effect as if made
on and as of such date (or, if any such representation or warranty is expressly
stated to have been made as of a specific date, as of such specific date,
provided that, notwithstanding the foregoing, the representation and warranty
made by the Company in Section 7.05 hereof shall not be required to be true and
complete on and as of the making of any Loan, if prior to the making of such
Loan, an officer of the Company shall have certified to the Administrative Agent
in writing that the purpose of such Loan is to repay commercial paper maturing
on such date.
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Each notice of borrowing by the Company hereunder shall constitute a
certification by the Company to the effect set forth in the preceding sentence
(both as of the date of such notice and as of the date of such borrowing).
Section 1. Representations and Warranties.
The Company represents and warrants to the Administrative Agent and the
Banks that:
1101 Organization, Corporate Powers. (a) The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware; (b) the Company (i) has the corporate power and authority to own its
Property and to carry on its business as now conducted and (ii) is qualified to
do business in every jurisdiction where such qualification is necessary in view
of the properties owned or business transacted by it; and (c) the Company has
the corporate power to execute, deliver and perform this Agreement, to borrow
hereunder, to execute and deliver the Notes.
1.02 Authorization. The execution, delivery and performance of this
Agreement, the borrowings hereunder and the execution and delivery of the Notes,
(a) have been duly authorized by all requisite corporate action on the part of
the Company and (b) will not (i) violate (A) any provision of law applicable to
the Company, the certificate of incorporation or by-laws of the Company, (B) any
applicable order of any court or other agency of government or (C) any
indenture, any agreement for borrowed money, any bond, note or other similar
instrument or any other material agreement to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries or
any of their respective Properties is bound, (ii) be in conflict with, result in
a breach of or constitute (with due notice or lapse of time or both) a default
under any such indenture, agreement, bond, note, instrument or other material
agreement or (iii) result in the creation or imposition of any Lien upon any
Property of the Company.
1.01 Governmental Approval. No action, consent or approval of, or
registration or filing with, or any other action by any governmental agency,
bureau, commission or court is required in connection with the execution,
delivery and performance by the Company of this Agreement, the borrowings
hereunder and the execution and delivery of the Notes.
1.02 Financial Statements. The Company has heretofore furnished to each
Bank its audited consolidated financial statements as at December 31, 2000 and
for the twelve-month period then ended. Such financial statements were prepared
in accordance with GAAP and present fairly the consolidated financial condition
and results of operations of the Company and its Subsidiaries as of the date and
for the period indicated, and such balance sheet shows all known direct
liabilities and all known contingent liabilities of a material nature of the
Company and its Subsidiaries.
1.03 No Material Adverse Change. There has been no material adverse change
in the business, assets, condition (financial or otherwise) or results of
operations of the Company and its Subsidiaries taken as a whole since December
31, 2000.
1.04 Title to Properties. All material assets of the Company and its
Subsidiaries are free and clear of Liens, except such as are permitted by
Section 8.07 hereof.
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Litigation. There are no lawsuits in any court or other proceedings before
any arbitrator or by or before any governmental commission, board, bureau or
other administrative agency, pending, or, to the knowledge of the Company,
threatened, the ultimate disposition of which should have a material adverse
effect on the consolidated financial condition or business of the Company and
its Subsidiaries taken as a whole; and neither the Company nor any of its
Subsidiaries is in default with respect to any judgment, writ, injunction,
decree, rule or regulation of any court or Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, which default would have a material adverse effect on the
Company and its Subsidiaries taken as a whole.
1.01 Tax Returns. All material assessed deficiencies resulting from
examinations of the Federal income tax returns of the Company and its
Subsidiaries by the Internal Revenue Service have been discharged or reserved
against in full. The Company and each of its Subsidiaries have filed or caused
to be filed all Federal, state and local tax returns which, to the knowledge of
the Company, are required to be filed and have paid or caused to be paid all
taxes as shown on such returns or on any assessment received by it or by any of
them to the extent that such taxes have become due, except taxes the validity of
which is being contested in good faith by appropriate proceedings or the
nonpayment of which would not have a material adverse effect on the financial
condition of the Company and its Subsidiaries taken as a whole.
1.02 Agreements. Neither the Company nor any of its Principal Subsidiaries
is in material default in the performance, observance or fulfillment of any
obligation, covenant or condition contained in any material agreement or
instrument to which it is a party.
1.03 Employee Benefit Plans. Each of the Company and its Subsidiaries is in
compliance in all material respects with the applicable provisions of ERISA and
the regulations and published interpretations thereunder. No Reportable Event
has occurred with respect to any Plan administered by the Company or any of its
Subsidiaries or any administrator designated by the Company or any of its
Subsidiaries. As of the date of the most recent actuarial valuation of each Plan
administered by the Company, its Domestic Subsidiaries and administrators
designated by the Company or any of its Subsidiaries, the aggregate present
value of all vested accrued benefits under all such Plans (determined in
accordance with the assumptions specified in such actuarial valuations) did not
exceed the fair market value of the aggregate assets of such Plans by more than
$10,000,000.
1.04 Federal Reserve Regulations. Neither the Company nor any of its
Subsidiaries is engaged principally, or as one of its important activities, in
the business of extending credit for the purposes of purchasing or carrying any
margin stock (within the meaning of Regulation U). Following application of the
proceeds of each Loan, not more than 25 percent (or such greater or lesser
percentage as provided in Regulation U in effect at the time of the making of
such Loan) of the value of the Property (either of the Company only or of the
Company and its Subsidiaries on a consolidated basis) subject to the provisions
of Section 8.07 or 8.08 hereof will be margin stock (within the meaning of
Regulation U).
1.05 Investment Company Act. Neither the Company nor any of its
Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
1.06 Public Utility Holding Company Act. Neither the Company nor any of its
Subsidiaries is a "holding company", or an "affiliate" of a "holding company" or
a "subsidiary company" of a "holding company", within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
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Section 1. Covenants of the Company.
The Company covenants and agrees with the Administrative Agent and the
Banks that, so long as any Commitment or Loan is outstanding or any amounts
payable by the Company hereunder have not yet been paid in full:
1.01 Corporate Existence. The Company shall do, and shall cause each of its
Principal Subsidiaries to do, all things necessary to preserve, renew and keep
in full force and effect its corporate existence, material rights, licenses,
permits and franchises and comply with all laws and regulations applicable to
it; at all times maintain and preserve all Property used or useful in the
conduct of its business and keep the same in good repair, working order and
conditions, and from time to time make, or cause to be made, all needful and
proper repairs, renewals and replacements thereto, so that the business carried
on in connection therewith may be properly conducted at all times.
1.02 Insurance. The Company shall, and shall cause each of its Principal
Subsidiaries to, (a) keep its insurable Properties adequately insured at all
times; (b) maintain such other insurance, to such extent and against such risks,
including fire and other risks insured against by extended coverage, as is
customary with companies in the same or similar businesses; (c) maintain in full
force and effect public liability insurance against claims for personal injury
or death or property damage occurring upon, in, about or in connection with the
use of any properties owned, occupied or controlled by the Company or any
Principal Subsidiary, as the case may be, in such amount as the Company or such
Principal Subsidiary, as the case may be, shall reasonably deem necessary; and
(d) maintain such other insurance as may be required by law.
1.03 Obligations and Taxes. The Company shall pay, and shall cause each of
its Principal Subsidiaries to pay, all its material indebtedness and obligations
promptly and in accordance with their terms and pay and discharge promptly all
material taxes, assessments and governmental charges or levies imposed upon it
or upon its income or profits or in respect of its Property, before the same
shall become in default, as well as all material lawful claims for labor,
materials and supplies or otherwise which, if unpaid, might become a Lien or
charge upon such properties or any part thereof; provided, however, that neither
the Company nor any of its Principal Subsidiaries shall be required to pay and
discharge or to cause to be paid and discharged any such tax, assessment,
charge, levy or claim so long as the validity or amount thereof shall be
contested in good faith by appropriate proceedings and provided the Company
shall have set aside on its books reserves which the Company deems adequate with
respect thereto.
1.04 Financial Statements, Reports, etc. The Company shall furnish to each
Bank:
within 95 days after the end of each fiscal year of the Company (being
December 31 in each calendar year), an audited consolidated balance sheet of the
Company and its Subsidiaries and the related audited consolidated statement of
earnings showing the financial condition of the Company and its Subsidiaries as
of the close of such fiscal year and the results of their operations during such
year, and a consolidated statement of stockholders' equity and a consolidated
statement of cash flows, as of the close of such fiscal year, all the foregoing
consolidated financial statements to be reported on by, and to carry the report
acceptable to the Majority Banks of, the Company's independent public
accountants (which shall be Arthur Andersen LLP or another independent firm of
nationally recognized certified public accountants), such financial statements
to be in form acceptable to the Majority Banks in their reasonable
determination;
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(a) within 50 days after the end of each of the first three fiscal quarters
of each fiscal year, an unaudited consolidated balance sheet and unaudited
consolidated statements of earnings and of cash flows showing the financial
condition of the Company and its Subsidiaries as of the end of each such quarter
and the results of operations for the then-elapsed portion of the fiscal year,
certified by a Financial Officer of the Company as being correct and complete
and as presenting fairly the financial position and results of operations of the
Company and its Subsidiaries and as having been prepared in accordance with GAAP
consistently applied, in each case subject to normal year-end audit adjustments;
(b) concurrently with (a) above, a certificate of the firm referred to
therein (which certificate may be limited to accounting matters and disclaim
responsibility for legal interpretations) certifying that to the best of its
knowledge no Default has occurred and is continuing or, if such a Default has
occurred and is continuing, specifying the nature and extent thereof;
(c) concurrently with (a) and (b) above, a certificate of the Company
setting forth in reasonable detail the computations necessary to determine
whether the Company is in compliance with Section 8.09 hereof as of the end of
the respective quarterly fiscal period or fiscal year; and
(d) promptly, from time to time, such other information regarding the
financial condition of the Company and its Subsidiaries (and the identities, net
income and assets of Principal Subsidiaries) as the Administrative Agent or any
Bank may reasonably request.
1.02 Notices and Delivery of Certain Documents. The Company shall give the
Administrative Agent and each Bank prompt notice of any Default and furnish each
Bank with copies of all press releases issued by the Company, all filings made
by the Company with the Securities and Exchange Commission under the Securities
Exchange Act of 1934 and all written communications from the Company to its
shareholders generally.
1.03 ERISA. The Company shall, and shall cause each of its Subsidiaries to,
(a) comply in all material respects with the applicable provisions of ERISA and
(b) furnish to each Bank, (i) as soon as possible, and in any event within 30
days after any officer of the Company knows that any Reportable Event with
respect to any Plan with vested unfunded liabilities in excess of $5,000,000 has
occurred, a statement of a Financial Officer setting forth details as to such
Reportable Event and the action, if any, that the Company proposes to take with
respect thereto, together with a copy of the notice of such Reportable Event
given to the PBGC, (ii) at the request of any Bank, promptly after the filing
thereof with the United States Secretary of Labor or the PBGC, copies of each
annual or other report, if any, with respect to any Plan, and (iii) promptly
after receipt thereof, a copy of any notice the Company or any of its
Subsidiaries may receive from the PBGC relating to the intention of the PBGC to
terminate any Plan with vested unfunded liabilities in excess of $5,000,000 or
to appoint a trustee to administer any such Plan.
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1.01 Liens. The Company shall not, and shall not permit any of its
Subsidiaries to, incur, create or permit to exist any Lien on any of its
Property now owned or hereafter acquired by the Company or any of its
Subsidiaries, other than:
(a) Liens for taxes or assessments and similar charges either (i) not
delinquent or (ii) being contested in good faith by appropriate proceedings and
as to which the Company or such Subsidiary, as the case may be, shall have set
aside on its books adequate reserves;
(b) Liens incurred or pledges and deposits made in connection with worker's
compensation, unemployment insurance, old-age pensions and social security
benefits or securing the performance of bids, tenders, leases, Contracts, and
statutory obligations of like nature, incurred as an incident to and in the
ordinary course of business;
(c) materialmen's, mechanics', repairmen's, employees', operators' or other
similar Liens or charges arising in the ordinary course of business incidental
to construction, maintenance or operation of any Property of the Company or any
of its Subsidiaries which have not at the time been filed pursuant to law and
any such Liens and charges incidental to construction, maintenance or operation
of any Property of the Company or any of its Subsidiaries, which, although
filed, relate to obligations not yet due or the payment of which is being
withheld as provided by law, or to obligations the validity of which is being
contested in good faith by appropriate proceedings;
(d) zoning restrictions, easements, licenses, reservations, provisions,
covenants, conditions, waivers, restrictions on the use of property or minor
irregularities of title (and with respect to leasehold interests, mortgages,
obligations, Liens and other encumbrances incurred, created, assumed or
permitted to exist and arising by, through or under or asserted by a landlord or
owner of the leased property, with or without consent of the lessee), which will
not individually or in the aggregate interfere materially with the use or
operation by the Company or any of its Subsidiaries of the Property affected
thereby for the purposes for which such Property was acquired or is held by the
Company or any of its Subsidiaries;
(e) Liens created by or resulting from any litigation or proceeding which
is currently being contested in good faith by appropriate proceedings and as to
which levy and execution have been stayed and continue to be stayed;
(f) Liens consisting of, or arising in connection with, repurchase
agreements, swaps or other obligations entered into in the ordinary course of
business and not for the purpose of speculation relating to precious metals
purchased, borrowed or otherwise held by the Company or any of its Subsidiaries;
(g) Liens incidental to the conduct of its business or the ownership of its
Property which were not incurred in connection with the borrowing of money or
the obtaining of advances or credit and which do not in the aggregate materially
detract from the value of the Property subject thereto or materially impair the
use thereof in the operation of its business;
(h) Liens on Property of a Subsidiary of the Company to secure obligations
of such Subsidiary to the Company or another Subsidiary of the Company;
(a) Liens arising in connection with letter of credit trade transactions,
provided that the Company or any of its Subsidiaries, as the case may be,
discharges within 30 days its obligation to pay the indebtedness to banks
arising from payments made by such banks under such letters of credit; and
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(b) other Liens, provided that the aggregate of all Properties and assets
of the Company and its Subsidiaries which are subject to or affected by such
Liens and which would properly be classified as assets on a consolidated balance
sheet prepared in accordance with GAAP (including all leases (other than leases
of office space and research and development facilities, if any) that would be
required to be reflected as capital leases pursuant to such principles) does not
at any time have a value on the books of the Company and its Subsidiaries in
excess of 25% of the Consolidated Tangible Net Worth calculated for the quarter
most recently ended.
1.01 Consolidations, Mergers and Sales of Assets. The Company shall not,
and the Company shall not permit any of its Principal Subsidiaries to, merge or
consolidate with or into any other Person or sell, lease, transfer or assign to
any Person or otherwise dispose of (whether in one transaction or a series of
transactions) all or substantially all of its assets (whether now owned or
hereafter acquired), except that so long as immediately thereafter and after
giving effect thereto no Default has occurred and is continuing, (a) the Company
or a Principal Subsidiary may merge or consolidate with another corporation in a
transaction in which the Company is the surviving entity or such Principal
Subsidiary is the surviving entity and continues to be a Subsidiary of the
Company, (b) the Company may merge or consolidate with another corporation in a
transaction in which such other corporation is the surviving entity if such
other corporation is acceptable to the Majority Banks in their reasonable
determination and such other corporation effectively assumes and agrees to
perform and discharge all the obligations of the Company under this Agreement
and under the Notes pursuant to a written instrument or instruments satisfactory
to the Banks and counsel for the Banks in their reasonable determination, and
(c) any Principal Subsidiary may (i) merge or consolidate with the Company or
into another Subsidiary of the Company which continues to be a Subsidiary after
such transaction or (ii) sell, lease, transfer, assign or otherwise dispose of
(whether in one transaction or series of transactions) all or substantially all
of its Property (whether now owned or hereafter acquired) to the Company or to
another Subsidiary of the Company which continues to be a Subsidiary after such
transaction or transactions. For the purpose of this Section 8.08 only,
"Principal Subsidiary" shall mean any Subsidiary of the Company having total
assets as of the end of the most recent fiscal year equal to or greater than 25%
of the consolidated total assets of the Company and its Subsidiaries as of the
end of such fiscal year of the Company.
1.02 Debt to EBITDA. The Company shall not permit, as of the last day of
each fiscal quarter of the Company, the ratio of Debt of the Company and its
Consolidated Subsidiaries at such date to EBITDA for the preceding four fiscal
quarters immediately preceding such date, including the fiscal quarter most
recently ended to be greater than 3.0 to 1.0.
Use of Proceeds. The proceeds of the Loans shall be used for general
corporate purposes, including, without limitation, to provide liquidity support
for the issuance of commercial paper and acquisition financing: provided,
however, that no Loan shall be available if the Majority Banks, in their sole
discretion and upon notice to the Company explaining the basis, 1.01 refuse to
make any Loan the proceeds of which will be used by the Company in an
acquisition which the Majority Banks have reasonable cause to believe is opposed
by the acquired Person's board of directors or other governing body or is likely
to be hostile or unfriendly; provided, further, that no Bank may refuse to make
any Loan pursuant to this Section 8.10 if the Company presents a certified
resolution of the board of directors or other governing body of the acquired
entity approving, supporting or otherwise evidencing agreement with the proposed
acquisition. None of the Administrative Agent, the Arranger, the Documentation
Agents, the Syndication Agent nor any Bank shall have any responsibility as to
the use of any of such proceeds.
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Section 1. Events of Default.
If one or more of the following events (herein called "Events of Default")
shall occur and be continuing:
(a) any representation or warranty made in connection with this Agreement
or with the execution and delivery of the Notes, the borrowings hereunder or any
statement or representation made in any report, certificate, financial statement
or other instrument furnished by the Company to the Administrative Agent or the
Banks pursuant to this Agreement shall prove to have been false or misleading in
any material respect when made or delivered;
(b) default shall be made in the payment of any principal or interest
hereunder or under any Note, or of any fees or other amounts payable by the
Company hereunder, when and as the same shall become due and payable, whether at
the due date thereof or at a date fixed for prepayment thereof or by
acceleration thereof or otherwise, and, in the case of payments other than of
any principal amounts hereunder, such default shall continue unremedied for
three (3) Business Days;
(c) default shall be made with respect to any agreement or other evidence
of indebtedness or liability for borrowed money in excess of $50,000,000 (other
than hereunder) of the Company or any Principal Subsidiary if the effect of such
default is to accelerate the maturity of such indebtedness or liability or to
require the prepayment thereof or to permit the holder or holders thereof (or a
trustee on behalf of the holder or holders thereof) to cause such indebtedness
to become due prior to the stated maturity thereof, or any such indebtedness or
liability shall become due and shall not be paid prior to the expiration of any
period of grace;
(d) default shall be made in the due observance or performance of Section
8.09 hereof;
(e) default shall be made in the due observance or performance of any other
covenant, condition or agreement to be observed or performed by the Company
pursuant to the terms hereof and such default shall continue unremedied for 10
days after written notice thereof to the Company by any Bank;
the Company or any Principal Subsidiary shall file one or more petitions or
answers or consents seeking relief under Title 11 of the United States Code, as
now or hereafter constituted, or any other applicable foreign, Federal or state
bankruptcy, insolvency or similar law or laws, or shall consent to the
institution of proceedings thereunder or to the filing of any such petition or
to the appointment of or taking of possession of the Company or any Principal
(a) Subsidiary, as the case may be, or any Property of any of the same, by, one
or more receivers, liquidators, assignees, trustees, custodians, sequestrator or
other similar officials or the Company or any Principal Subsidiary shall make
one or more assignments for the benefit of creditors, or shall become unable
generally to pay its debts as they become due, or the Company or any Principal
Subsidiary shall take action in furtherance of any such action;
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(a) one or more decrees or orders shall be entered by one or more courts
having jurisdiction in the premises for relief in respect of the Company or any
Principal Subsidiary under Title 11 of the United States Code, as now or
hereafter constituted, or any other applicable foreign, Federal or state
bankruptcy, insolvency or similar law or laws, or appointing one or more
receivers, liquidators, assignees, trustees, sequestrator or similar officials
of the Company or any Principal Subsidiary, as the case may be, or of any
Property of any of the same, or ordering the winding up or liquidation of the
affairs of the Company or any Principal Subsidiary, and any one or more such
decrees or orders shall continue unstayed and in effect for a period of 60 days;
(b) final judgment for the payment of money in excess of an aggregate of
$50,000,000 and not fully covered by insurance shall be rendered against the
Company or any Principal Subsidiary and the same shall remain undischarged for a
period of 60 consecutive days during which execution shall not be effectively
stayed;
(c) A Reportable Event shall have occurred with respect to any Plan with
vested unfunded liabilities in excess of $5,000,000 which the Majority Banks
determine constitutes reasonable grounds for the termination of such Plan by the
PBGC or for the appointment by the appropriate United States District Court of a
trustee to administer such Plan or a trustee shall be appointed by a United
States District Court to administer any Plan with vested unfunded liabilities in
excess of $5,000,000; or the PBGC shall institute proceedings to terminate any
Plan with vested unfunded liabilities in excess of $5,000,000; or the withdrawal
by the Company or any Subsidiary from a Multiemployer Plan giving rise to
Withdrawal Liability in excess of $5,000,000; or
(d) a Change in Control of the Company shall have occurred; for purposes of
this paragraph (j), a "Change in Control" shall mean the acquisition by any
Person (other than the Company) or group (as defined in the Securities Exchange
Act of 1934) of twenty-five percent (25%) or more of the voting power of the
Company entitled to vote in the election of directors;
THEREUPON: (1) in the case of an Event of Default other than one referred
to in clause (f) or (g) of this Section 9 with respect to the Company, (A) the
Administrative Agent, with the approval of the Majority Banks, may and, upon
request of the Majority Banks, will, by notice to the Company, terminate the
Commitments and they shall thereupon terminate, and (B) the Administrative
Agent, with the approval of the Majority Banks, may and, upon request of the
Majority Banks shall, by notice to the Company declare the principal amount then
outstanding of, and the accrued interest on, the Loans and all other amounts
payable by the Company hereunder and under the Notes (including, without
limitation, any amounts payable under Section'5.04 hereof) to be forthwith due
and payable, whereupon such amounts shall be immediately due and payable without
presentment, demand, protest or other formalities of any kind, all of which are
hereby expressly waived by the Company; and (2) in the case of the occurrence of
an Event of Default referred to in clause (f) or (g) of this Section 9 with
respect to the Company, the Commitments shall automatically be terminated and
the principal amount then outstanding of, and the accrued interest on, the Loans
and all other amounts payable by the Company hereunder and under the Notes
(including, without limitation, any amounts payable under Section 5.04 hereof)
shall automatically become immediately due and payable without presentment,
demand, protest or other formalities of any kind, all of which are hereby
expressly waived by the Company.
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Section 1. The Administrative Agent.
1.01 Appointment, Powers and Immunities. Each Bank hereby appoints and
authorizes the Administrative Agent to act as its agent hereunder with such
powers as are specifically delegated to the Administrative Agent by the terms of
this Agreement, together with such other powers as are reasonably incidental
thereto. The Administrative Agent (which term as used in this sentence and in
Section 10.05 and the first sentence of Section 10.06 hereof shall include
reference to its Related Parties):
(a) shall have no duties or responsibilities except those expressly set
forth in this Agreement, and shall not by reason of this Agreement be a trustee
for any Bank;
(b) shall not be responsible to the Banks for any recitals, statements,
representations or warranties contained in this Agreement, or in any certificate
or other document referred to or provided for in, or received by any of them
under, this Agreement, or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement, any Note or any other document
referred to or provided for herein or for any failure by the Company to perform
any of its obligations hereunder or thereunder;
(c) shall not be required to initiate or conduct any litigation or
collection proceedings hereunder; and
(d) shall not be responsible for any action taken or omitted to be taken by
it hereunder or under any other document or instrument referred to or provided
for herein or in connection herewith, except for its own gross negligence or
willful misconduct.
The Administrative Agent may employ agents and attorneys-in-fact and shall
not be responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith. The Administrative Agent may
deem and treat the payee of a Note as the holder thereof for all purposes hereof
unless and until a notice of the assignment or transfer thereof shall have been
filed with the Administrative Agent, together with the consent of the Company to
such assignment or transfer (to the extent required by Section 11.06(b) hereof).
Reliance by Administrative Agent. The Administrative Agent shall be
entitled to rely upon any certification, notice or other communication
(including, without limitation, any thereof by telephone, telecopy, telegram or
cable) believed by it to be genuine and correct and to have been signed or sent
by or on behalf of the proper Person or Persons, and upon advice and statements
of legal counsel, independent accountants and other experts selected by the
Administrative Agent. As to any matters not expressly provided for by this
Agreement, the Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, hereunder in accordance with instructions
given by the Majority Banks (or, if so provided in 1.01 Section 11.04 hereof,
all of the Banks), and such instructions of the Majority Banks (or all of the
Banks, as the case may be) and any action taken or failure to act pursuant
thereto shall be binding on all of the Banks.
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1.01 Defaults. The Administrative Agent shall not be deemed to have
knowledge or notice of the occurrence of a Default unless the Administrative
Agent has received notice from a Bank or the Company specifying such Default and
stating that such notice is a "Notice of Default". In the event that the
Administrative Agent receives such a notice of the occurrence of a Default, the
Administrative Agent shall give prompt notice thereof to the Banks. The
Administrative Agent shall (subject to Section 10.07 hereof) take such action
with respect to such Default as shall be directed by the Majority Banks provided
that, unless and until the Administrative Agent shall have received such
directions, the Administrative Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default as
it shall deem advisable in the best interest of the Banks except to the extent
that this Agreement expressly requires that such action be taken, or not be
taken, only with the consent or upon the authorization of the Majority Banks or
all of the Banks.
1.02 Rights as a Bank. With respect to its Commitment and the Loans made by
it, Chase (and any successor acting as Administrative Agent) in its capacity as
a Bank hereunder shall have the same rights and powers hereunder as any other
Bank and may exercise the same as though it were not acting as the
Administrative Agent, and the term "Bank" or "Banks" shall, unless the context
otherwise indicates, include the Administrative Agent in its individual
capacity. Chase (and any successor acting as Administrative Agent) and its
Affiliates may (without having to account therefor to any Bank) accept deposits
from, lend money to, make investments in and generally engage in any kind of
banking, trust or other business with the Company (and any of its Subsidiaries
or Affiliates) as if it were not acting as the Administrative Agent, and Chase
(and any such successor) and its Affiliates may accept fees and other
consideration from the Company for services in connection with this Agreement or
otherwise without having to account for the same to the Banks.
1.03 Indemnification. The Banks agree to indemnify the Administrative Agent
(to the extent not reimbursed under Section 11.03 hereof, but without limiting
the obligations of the Company under said Section 11.03) ratably in accordance
with their respective commitments (and, after the Commitments have been
terminated, ratably in accordance with the aggregate principal amount of the
Loans held by the Banks), for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind and nature whatsoever that may be imposed on, incurred by or
asserted against the Administrative Agent (including by any Bank) arising out of
or by reason of any investigation in or in any way relating to or arising out of
this Agreement or any other documents contemplated by or referred to herein or
the transactions contemplated hereby (including, without limitation, the costs
and expenses that the Company is obligated to pay under Section 11.03 hereof but
excluding, unless a Default has occurred and is continuing, normal
administrative costs and expenses incident to the performance of its agency
duties hereunder) or the enforcement of any of the terms hereof or of any such
other documents, provided that no Bank shall be liable for any of the foregoing
to the extent they arise from the gross negligence or willful misconduct of the
party to be indemnified.
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1.01 Non-Reliance on Administrative Agent and Other Banks. Each Bank agrees
that it has, independently and without reliance on the Administrative Agent, the
Arranger or any other Bank, and based on such documents and information as it
has deemed appropriate, made its own credit analysis of the Company and its
Subsidiaries and decision to enter into this Agreement and that it will,
independently and without reliance upon the Administrative Agent or any other
Bank, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own analysis and decisions in taking or not
taking action under this Agreement. The Administrative Agent shall not be
required to keep itself informed as to the performance or observance by the
Company of this Agreement or any other document referred to or provided for
herein or to inspect the Properties or books of the Company or any of its
Subsidiaries. Except for notices, reports and other documents and information
expressly required to be furnished to the Banks by the Administrative Agent
hereunder, the Administrative Agent shall not have any duty or responsibility to
provide any Bank with any credit or other information concerning the affairs,
financial condition, operations, business, Properties, liabilities or prospects
of the Company or any of its Subsidiaries (or any of their Affiliates) that may
come into the possession of the Administrative Agent or any of its Affiliates.
1.02 Failure to Act. Except for action expressly required of the
Administrative Agent hereunder, the Administrative Agent shall in all cases be
fully justified in failing or refusing to act hereunder unless it shall receive
further assurances to its satisfaction from the Banks of their indemnification
obligations under Section 10.05 hereof against any and all liability and expense
that may be incurred by it by reason of taking or continuing to take any such
action.
1.03 Resignation or Removal of Administrative Agent. Subject to the
appointment and acceptance of a successor Administrative Agent as provided
below, the Administrative Agent may resign at any time by giving notice thereof
to the Banks and the Company, and the Administrative Agent may be removed at any
time with or without cause by the Majority Banks. Upon any such resignation or
removal, the Majority Banks shall have the right to appoint a successor
Administrative Agent. If no successor Administrative Agent shall have been so
appointed by the Majority Banks and shall have accepted such appointment within
30 days after the retiring Administrative Agent's giving of notice of
resignation or the Majority Banks' removal of the retiring Administrative Agent,
then the retiring Administrative Agent may, on behalf of the Banks, appoint a
successor Administrative Agent, that shall be a bank that has an office in New
York, New York with a combined capital and surplus of at least $500,000,000.
Upon the acceptance of any appointment as Administrative Agent hereunder by a
successor Administrative Agent, such successor Administrative Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Administrative Agent, and the retiring Administrative
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Administrative Agent's resignation or removal hereunder as
Administrative Agent, the provisions of this Section 10 shall continue in effect
for its benefit in respect of any actions taken or omitted to be taken by it
while it was acting as the Administrative Agent.
Section 2. Miscellaneous.
Waiver. No failure on the part of the Administrative Agent or any Bank to
exercise and no delay in exercising, and no course of dealing with respect to,
any right, power or privilege under this Agreement or any Note shall operate as
a waiver thereof, nor shall any single 1.01 or partial exercise of any right,
power or privilege under this Agreement or any Note preclude any other or future
exercise thereof or the exercise of any right, power or privilege. The remedies
provided herein are cumulative and not exclusive of any remedies provided by
law.
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1.01 Notices. All notices, requests and other communications provided for
herein (including, without limitation, any modifications of, or waivers,
requests or consents under, this Agreement) shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, or with respect to notices given pursuant
to Section 2.03 hereof, by telephone, confirmed in writing by telecopier by the
close of business on the day such notice is given, as follows:
(a) if to the Company, to it at Engelhard Corporation, 101 Wood Avenue,
Iselin, New Jersey 08830, Attention of Peter Rapin, Treasurer (Telecopy No.
(732) 205-9847) with a copy to the General Counsel (Telecopy No. (732)
548-7835);
(b) if to the Administrative Agent, to The Chase Manhattan Bank, Agent Bank
Services Group, 270 Park Avenue, New York, New York 10017, Attention: Loan
Agency Group (Telecopy No. (212) 552-7253), with a copy to The Chase Manhattan
Bank, One Chase Manhattan Plaza, 8th Floor, New York, New York 10081, Attention:
Maxeen Pinnock (Telecopy No. (212) 552-7490);
(c) if to the Arranger, to JPMorgan Securities Inc., 270 Park Avenue, 5th
Floor, New York, New York 10017, Attention: Thomas Kuhn (Telecopy
No.(212)270-1063);
(d) if to any other Bank (including the Documentation Agents or the
Syndication Agent), to it at its address (or telecopy number) set forth in its
Administrative Questionnaire.
Any party hereto may change its address or telecopy number for notices and
other communications hereunder by notice to the other parties hereto. Except as
otherwise provided in this Agreement, all notices and other communications given
to any party hereto in accordance with the provisions of this Agreement shall be
deemed to have been given on the date of receipt.
1.02 Indemnification, Expenses, Etc. (a) The Company will indemnify each
Bank, the Administrative Agent, the Arranger, and each Related Party
(collectively, the "Named Persons") and hold such Named Persons harmless against
any losses and related reasonable out-of-pocket expenses incurred by each such
Named Person (i) in the enforcement or protection of its rights in connection
with this Agreement, with the Loans made or the Notes issued hereunder, (ii) as
a result of any transaction, action or failure to act arising from the
foregoing, including, but not limited to, the reasonable fees and disbursements
of counsel to such Named Persons, and (iii) with respect to any action which may
be instituted by any Person against such Named Persons, (x) as a direct result
of the execution and delivery of this Agreement or, (y) with respect to the
Loans made, provided that with respect to each of the indemnities provided for
in this subsection (a), such indemnities shall not, as to any Named Person, be
available to the extent that such losses or related expenses are determined by a
court of competent jurisdiction to have resulted from the gross negligence or
willful misconduct of such Named Person.
(b) The Company agrees that it shall indemnify each Named Person from and
hold each of them harmless against any documentary taxes, assessments or charges
made by any governmental authority by reason of the execution and delivery of
this Agreement or the Notes. The obligations of the Company under this Section
shall survive the termination of this Agreement and the payment of the Notes.
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(c) The Company shall indemnify each Named Person, and hold each Named
Person harmless from, any and all losses, damages, liabilities and reasonable
related expenses, including the fees, charges and disbursements of any counsel
for any Named Person, incurred by any Named Person arising out of or as a result
of any claims pursuant to any Environmental Laws regarding (a) any actual or
alleged presence or release of Hazardous Materials on or from any property owned
or operated by the Company or any of its Subsidiaries, or (b) any Environmental
Liability, except to the extent attributable to actions of any Named Person.
(d)(i) If after any Named Person(s) shall have made a claim for
indemnification hereunder and the Company shall have failed to agree to defend
or settle the claim to which such claim for indemnification relates (a
"Third-Party Claim") within fifteen (15) Business Days (the "Notice Period"),
such Named Person(s) may defend or settle the Third-Party Claim as it or they
deem appropriate without prejudice to any of their above rights to indemnity
from the Company, and with no further obligation to inform the Company of the
status of the Third-Party Claim and no right of the Company to approve or
disapprove any actions taken in connection therewith by the Named Person(s).
Notwithstanding the foregoing, in the event that the Company fails to agree to
defend or settle a Third-Party Claim on behalf of the Named Person(s) within the
Notice Period, the amount of any indemnity due hereunder shall bear interest
calculated at the Base Rate, from the date upon which the Named Person(s) are
required to make any payment(s) with respect to the Third-Party Claim and any
related costs and expenses as provided herein, to the date of the Company's
payment to the Named Person(s) as required hereby, calculated upon the actual
number of days elapsed over a 365-day year.
(ii) If the Company agrees to defend or settle a Third-Party Claim on
behalf of any Named Person(s) hereunder, it shall so notify the Named Person(s)
within the Notice Period and elect either (a) to undertake the defense or settle
such Third-Party Claim with counsel selected by the Company and approved by the
Named Person(s), which approval shall not be unreasonably withheld, and the
provisions of subclause (iii) of this Section 11.03(d) shall be applicable
thereto, or (b) to instruct the Named Person(s) to defend or settle such
Third-Party Claim, in which event the Named Person(s) may defend or settle the
Third-Party Claim as it or they deem appropriate without prejudice to any of
their above rights to indemnity from the Company, provided that, the Company
shall not be liable under this Section 11.03(d)(ii) to indemnify any Named Party
in respect of any settlement effected without its consent, such consent not to
be unreasonably withheld.
(iii) If the Company undertakes the defense or settlement of such
Third-Party Claim, the Named Person(s) shall be entitled, at their own expense,
to participate in such defense or settlement negotiation. If the Company
undertakes such defense or settlement of a Third-Party Claim on behalf of the
Named Person(s), no compromise or settlement of such Third-Party Claim shall be
made by any Named Person without the prior written consent of the Company. In
addition, no compromise or settlement of any Third-Party Claim shall be made by
the Company without the prior written consent of the Named Person(s), such
consent not to be unreasonably withheld, provided, that in the event that a
Named Person shall not consent to such compromise or settlement (in connection
with which the Company shall have agreed to indemnify such Named Person in full
in respect of such compromise or settlement pursuant to the terms of this
Section 11.03), the amount of indemnification to which such Named Person(s) is
entitled pursuant to this Section 11.03(d)(iii) shall be limited to the amount
of such proposed settlement, plus applicable out-of-pocket costs and expenses up
to the date of the proposal of such settlement.
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(iv) Notwithstanding the foregoing provisions of this subsection (d), in
the event that the Company agrees to undertake the defense of or settlement of
any Third-Party Claim, the Company agrees that its indemnity obligations
hereunder shall include the payment of the reasonable fees and disbursements of
separate counsel to the Named Person(s) if (x) in such Named Person(s)'s
reasonable judgment and in the good faith judgment of its separate legal
counsel, the use of counsel chosen by the Company would present such counsel
with a conflict of interest; or (y) the Company shall authorize such Named
Person(s) to employ separate counsel at the Company's expense, (it being agreed
that the Company shall not, under any of the circumstances described in clauses
(x) or (y) above, have the right to direct the defense of such action or
proceeding on behalf of the Named Person(s)).
(v) Notwithstanding any other provision of this subsection (d) (but without
affecting the limitation of the Company's liability set forth in subsection
(iii) of this Section 11.03(d)), (x) the Company shall not, without the prior
written consent of the relevant Named Person(s) agree to any settlement of any
claim, litigation or proceeding in respect of which indemnity shall be sought
hereunder if such settlement contains an admission of wrongdoing by such Named
Person or if all claimants shall not have executed a full release in favor of
such Named Person, and (y) each Named Person shall, subject to its reasonable
business needs, use reasonable efforts to minimize the indemnification sought
from the Company under this Section 11.03.
Amendments, Etc. Except as otherwise expressly provided in this Agreement,
any provision of this Agreement may be modified or supplemented only by an
instrument in writing signed by the Company and the Majority Banks, or by the
Company and the Administrative Agent acting with the consent of the Majority
Banks and any provision of this Agreement may be waived by the Majority Banks or
by the Administrative Agent acting with the consent of the Majority Banks;
provided that (a) no modification, supplement or waiver shall, unless by an
instrument signed by all of the Banks affected or by the Administrative Agent
acting with the consent of all of the Banks affected: (i) increase, or extend
the term of the Commitments, or extend the time or waive any requirement for the
reduction or termination of the Commitments, (ii) extend the date fixed for the
payment of principal of or interest on any Loan or the payment of any fee
hereunder, (iii) reduce the amount of any such payment of principal, (iv) reduce
the rate at which interest is payable thereon or any fee is payable hereunder,
(v) alter the manner in which payments or prepayments of principal, interest, or
other amounts hereunder shall be applied as between the Banks or Types or
Classes of Loans, (vi) alter the terms of Section 4.02 or 4.07(a) hereof or of
this Section 11.04, (vii) modify the definition of the term "Majority Banks" or
modify in any other manner the number or percentage of the Banks required to
make any determinations or waive any rights hereunder or to modify any provision
hereof, or (viii) waive any of the 1.01 conditions precedent set forth in
Section 6.01 hereof; and (b) any modification or supplement of Sections 4.06 or
10 hereof, or of any of the rights or duties of the Administrative Agent
hereunder, shall require the consent of the Administrative Agent.
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1.01 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns. Notwithstanding anything to the contrary contained herein,
any Bank (a "Granting Lender") may grant to a special purpose funding vehicle
(an "SPC") the option to fund all or any part of any Loan that such Granting
Lender would otherwise be obligated to fund pursuant to this Agreement; provided
that (i) nothing herein shall constitute a commitment by any SPC to fund any
Loan, and (ii) if an SPC elects not to exercise such option or otherwise fails
to fund all or any part of such Loan, the Granting Lender shall be obligated to
fund such Loan pursuant to the terms hereof. The Granting Lender shall provide
the Administrative Agent and the Company reasonable advance notice prior to the
granting of an option to an SPC. The funding of a Loan by an SPC hereunder shall
utilize the Commitment of the Granting Lender to the same extent, and as if,
such Loan were funded by such Granting Lender. Each party hereto hereby agrees
that a Granting Lender shall remain liable for any indemnity or payment under
this Agreement for which a Granting Lender would otherwise be liable hereunder
to the extent the granting Lender provides such indemnity or makes such payment.
Notwithstanding anything to the contrary contained in this Agreement, any SPC
may disclose on a confidential basis its funding of Loans to any rating agency,
commercial paper dealer or provider of any surety or guarantee to such SPC. The
grant of an option pursuant to this Section shall not be deemed an assignment or
a participation pursuant to Section 11.06 and shall not reduce the Commitment of
the Granting Lender. This Section 11.05 may not be amended without the prior
written consent of each Granting Lender, all or any part of whose Loan is being
funded by an SPC at the time of such amendment.
1.02 Assignments and Participations.
(a) The Company may not assign any of its rights or obligations hereunder
or under the Notes without the prior consent of all of the Banks and the
Administrative Agent.
(b) Each Bank may assign any of its Loans, its Notes, if any, and its
Commitment (but only with the consent of the Company unless an Event of Default
referred to in clause (b) of Section 9 hereof shall have occurred and be
continuing and the Administrative Agent, each of which consents will not be
unreasonably withheld); provided that
(i) no such consent by the Company or the Administrative Agent shall be
required in the case of any assignment to another Bank or an Affiliate of a
Bank, and only the consent of the Company shall be required in the case of any
assignment to a Lender Affiliate, such consent not to be unreasonably withheld;
(ii) except to the extent the Company and the Administrative Agent shall
otherwise consent, any such partial assignment (other than to another Bank)
shall be in an amount at least equal to $10,000,000;
each such assignment by a Bank of its Syndicated Loans, Syndicated Note, if
any, and Commitment shall be made in such manner so that the same portion of its
Syndicated Loans, Syndicated Note, if any, and Commitment is assigned to the
respective assignee;
139
(i) the assignee and assignor shall deliver to the Administrative Agent for
its acceptance an Assignment and Acceptance for each such assignment; and
(ii) each assignee, if it shall not be a Bank, shall deliver to the
Administrative Agent an Administrative Questionnaire.
Upon execution and delivery by the assignor and the assignee to the
Administrative Agent of such Assignment and Acceptance, and upon consent thereto
by the Company and the Administrative Agent to the extent required above, the
assignee shall have, to the extent of such assignment (unless otherwise
consented to by the Company and the Administrative Agent), the obligations,
rights and benefits of a Bank hereunder holding the Commitment and Loans (or
portions thereof) assigned to it and specified in such Assignment and Acceptance
(in addition to the Commitment and Loans, if any, theretofore held by such
assignee) and the assigning Bank shall, to the extent of such assignment, be
released from the Commitment (or portion thereof) so assigned. Upon each such
assignment the assigning Bank shall pay the Administrative Agent an assignment
fee of $3,000.
(b) A Bank may sell or agree to sell to one or more other Persons (each a
"Participant") a participation in all or any part of any Loans held by it or in
its Commitment, provided that such Participant shall not have any rights or
obligations under this Agreement or any Note (the Participant's rights against
such Bank in respect of such participation to be those set forth in the
agreements executed by such Bank in favor of the Participant). All amounts
payable by the Company to any Bank under Section 5 hereof in respect of Loans
held by it and its Commitment, shall be determined as if such Bank had not sold
or agreed to sell any participations in such Loans and Commitment, and as if
such Bank were funding each of such Loans and Commitment in the same way that it
is funding the portion of such Loans and Commitment in which no participations
have been sold. In no event shall a Bank that sells a participation agree with
the Participant to take or refrain from taking any action hereunder except that
such Bank may agree with the Participant that it will not, without the consent
of the Participant, agree to (i) increase or extend the term of such Bank's
Commitment, or extend the time or waive any requirement for the reduction or
termination, of such Bank's Commitment, (ii) extend the date fixed for the
payment of principal of or interest on the related Loan or Loans, or any portion
of any fee hereunder payable to the Participant, (iii) reduce the amount of any
such payment of principal or (iv) reduce the rate at which interest is payable
thereon, or any fee hereunder payable to the Participant, to a level below the
rate at which the Participant is entitled to receive such interest or fee.
(c) In addition to the assignments and participations permitted under the
foregoing provisions of this Section 11.06, any Bank may (without notice to the
Company, the Administrative Agent or any other Bank and without payment of any
fee) (i) assign and pledge all or any portion of its Loans and its Notes, if
any, to any Federal Reserve Bank as collateral security pursuant to Regulation A
and any Operating Circular issued by such Federal Reserve Bank and (ii) assign
all or any portion of its rights under this Agreement, its Loans and its Notes,
if any, to an Affiliate. No such assignment shall release the assigning Bank
from its obligations hereunder.
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(a) A Bank may furnish any information concerning the Company or any of its
Subsidiaries in the possession of such Bank from time to time to assignees and
participants (including prospective assignees and participants), subject,
however, to the provisions of Section 11.12(b) hereof.
(b) Anything in this Section 11.06 to the contrary notwithstanding, no Bank
may assign or participate any interest in any Loan held by it hereunder to the
Company or any of its Affiliates or Subsidiaries without the prior consent of
each Bank.
1.02 Survival. The obligations of the Company under Sections 5.01, 5.04 and
11.03 hereof, and the obligations of the Banks under Sections 10.05 and 11.12
hereof, shall survive the repayment of the Loans, the termination of the
Commitments and, in the case of any Bank that may assign any interest in its
Commitment or Loans hereunder, shall survive the making of such assignment,
notwithstanding that such assigning Bank may cease to be a "Bank" hereunder. In
addition, each representation and warranty made, or deemed to be made by a
notice of any Loan herein or pursuant hereto shall survive the making of such
representation and warranty, and no Bank shall be deemed to have waived, by
reason of making any Loan, any Default that may arise by reason of such
representation or warranty proving to have been false or misleading when made or
deemed to be made, notwithstanding that such Bank or the Administrative Agent
may have had notice or knowledge or reason to believe that such representation
or warranty was false or misleading at the time such Loan was made.
1.03 Captions. The table of contents and captions and section headings
appearing herein are included solely for convenience of reference and are not
intended to affect the interpretation of any provision of this Agreement.
1.04 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
1.05 Governing Law; Submission to Jurisdiction. This Agreement and the
Notes shall be governed by, and construed in accordance with, the law of the
State of New York. The Company hereby submits to the nonexclusive jurisdiction
of the United States District Court for the Southern District of New York and of
any New York state court sitting in New York County for the purposes of all
legal proceedings arising out of or relating to this Agreement or the
transactions contemplated hereby. The Company hereby irrevocably waives, to the
fullest extent permitted by applicable law, any objection that it may now or
hereafter have to the laying of the venue of any such proceeding brought in such
a court and any claim that any such proceeding brought in such a court has been
brought in an inconvenient forum.
1.06 Waiver of Jury Trial. EACH OF THE COMPANY, THE ADMINISTRATIVE AGENT,
THE ARRANGER, THE DOCUMENTATION AGENTS, THE SYNDICATION AGENT AND THE BANKS
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT, THE NOTES OR THE TRANSACTIONS CONTEMPLATED HEREBY.
141
1.01 Treatment of Certain Information; Confidentiality.
(a) The Company acknowledges that from time to time financial advisory,
investment banking and other services may be offered or provided to the Company
or one or more of its Subsidiaries (in connection with this Agreement or
otherwise) by any Bank or by one or more Subsidiaries or Affiliates of such Bank
and the Company hereby authorizes each Bank to share any information delivered
to such Bank by the Company and its Subsidiaries pursuant to this Agreement, or
in connection with the decision of such Bank to enter into this Agreement, with
any such Subsidiary or Affiliate, it being understood that any such Subsidiary
or Affiliate receiving such information shall be bound by the provisions of
paragraph (b) below as if it were a Bank hereunder. Such authorization shall
survive the repayment of the Loans and the termination of the Commitments.
(b) Each of the Banks and the Administrative Agent agrees (on behalf of
itself and each of its Affiliates, directors, officers, employees and
representatives) to use reasonable precautions to keep confidential, in
accordance with its customary procedures for handling confidential information
of the same nature and in accordance with safe and sound banking practices, any
non-public information supplied to it by the Company pursuant to this Agreement
that is identified by the Company as being confidential; provided that nothing
herein shall limit the disclosure of any such information (i) after such
information shall have become public (other than through a violation of this
Section 11.12), (ii) to the extent required by statute, rule, regulation or
judicial process, (iii) to counsel for any of the Banks or the Administrative
Agent, (iv) to bank examiners (or any other regulatory authority having
jurisdiction over any Bank or the Administrative Agent), or to auditors or
accountants, (v) to the Administrative Agent or any other Bank (or to the
Arranger), (vi) in connection with any litigation to which any one or more of
the Banks or the Administrative Agent is a party, or in connection with the
enforcement of rights or remedies hereunder, (vii) to a Subsidiary or Affiliate
of such Bank as provided in paragraph (a) above or (viii) to any assignee or
participant (or prospective assignee or participant) so long as such assignee or
participant (or prospective assignee or participant) first executes and delivers
to the respective Bank a Confidentiality Agreement; provided further, that in no
event shall any Bank or the Administrative Agent be obligated or required to
return any materials furnished by the Company. The obligations of any assignee
that has executed a Confidentiality Agreement shall be superseded by this
Section 11.12 upon the date upon which such assignee becomes a Bank hereunder
pursuant to Section 11.06(b) hereof.
1.02 The Syndication Agent, Arranger and Documentation Agents. Except as
expressly set forth herein, the Syndication Agent, the Arranger and the
Documentation Agents shall have (x) no obligations hereunder other than (in the
case of the Syndication Agent and the Documentation Agents) those of a Bank, and
(y) no liability to the Banks hereunder.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
ENGELHARD CORPORATION
By /s/ Peter R. Rapin
Title: Treasurer
THE CHASE MANHATTAN BANK
as Administrative Agent
By /s/ Gary L. Spevack
Title: Vice President
JPMORGAN SECURITIES INC.,
as Lead Arranger and Book Manager
By /s/ William B. Murray
Title: MD
BANK OF TOKYO-MITSUBISHI TRUST COMPANY,
as Documentation Agent
By /s/ William J. Derasmo
Title: Vice President
BANK OF TOKYO-MITSUBISHI TRUST COMPANY,
as Documentation Agent
By /s/ William J. Derasmo
Title: Vice President
WACHOVIA BANK, N.A.,
as Documentation Agent
By /s/ Robert Wilson
Title: Vice President
COMMERZBANK, AG-NEW YORK AND
GRAND CAYMAN BRANCHES,
as Syndication Agent
By /s/ signature illegible
Title: Senior Vice President
By /s/ signature illegible
Title: Vice President
143
BANK OF AMERICA, N.A.
as Managing Agent
By /s/ Wendy J. Gorman
Title: Principal
CITIBANK, N.A.,
as Managing Agent
By /s/ Diane L. Pockaj
Title: Vice President
MELLON BANK, N.A.,
as Managing Agent
By /s/ signature illegible
Title: Vice President
ABN AMRO BANK, N.V.,
as Participant and as a Bank
By /s/ signature illegible
Title: Group Vice President
By /s/ signature illegible
Title: Vice President
THE BANK OF NEW YORK,
as Participant and as a Bank
By /s/ Ernest Fung
Title: Vice President
THE BANK OF NOVA SCOTIA,
as Participant and as a Bank
By /s/ Brian S. Allen
Title: Managing Director
FLEET NATIONAL BANK,
as Participant and as a Bank
By /s/ Miguel J. Medida
Title: Managing Director
BANK ONE, N.A. (Main Office-Chicago),
as Participant and as a Bank
By /s/ Mahua G. Thakurta
Title: Commercial Banking Officer
BANK OF CHINA,
as Participant and as a Bank
By /s/ signature illegible
Title: General Manager, USA Branches
144
NORDDEUTSCHE LANDESBANK,
as Participant and as a Bank
By /s/ Stephen K. Hunter
Title: Senior Vice President
By /s/ Josef Haas
Title: Vice President
THE FUJI BANK, LIMITED,
as Participant and as a Bank
By /s/ Raymond Ventura
Title: Senior Vice President
ING BANK N.V.,
as Participant and as a Bank
By /s/ signature illegible
Title: Director
By /s/ signature illegible
Title: Manager
ALLFIRST BANK,
as Participant and as a Bank
By /s/ signature illegible
Title: Vice President
BANCA POPOLARE DI MILANO,
as Participant and as a Bank
By /s/ Esperanza Quintero
Title: First Vice President
By /s/ Patrick F. Dillon
Title: Vice President,
Chief Credit Officer
145
SUMITOMO MITSUI BANKING CORPORATION,
as Participant and as a Bank
By /s/ Edward D. Henderson, Jr.
Title: Senior Vice President
WESTDEUTSCHE LANDESBANK GIROZENTRALE,
NEW YORK BRANCH,
as Participant and as a Bank
By /s/ Barry S. Wadler
Title: Associate Director
By /s/ Lisa Walker
Title: Associate Director
INTESABCI, NEW YORK BRANCH,
as Participant and as a Bank
By /s/ Frank Maffei
Title: Vice President
By /s/ E. Bermant
Title: FVP/Deputy Manager
SUNTRUST BANK,
as Participant and as a Bank
By /s/ W. David Wisdom
Title: Vice President
146
EXHIBIT (10)(ba)
Five-Year Credit Agreement
--------------------------
147
EXECUTION COPY
*******************************************************
ENGELHARD CORPORATION
______________________
FIVE YEAR CREDIT AGREEMENT
Dated as of May 11, 2001
______________________
THE CHASE MANHATTAN BANK,
as Administrative Agent
JPMORGAN SECURITIES INC.,
as Lead Arranger and Book Manager
BANK OF TOKYO-MITSUBISHI TRUST COMPANY and
WACHOVIA BANK, N.A.,
as Documentation Agents
COMMERZBANK AG,
as Syndication Agent
and Each of the Banks Listed on the Signature Pages Hereof
*******************************************************
148
FIVE YEAR CREDIT AGREEMENT dated as of May 11, 2001, between ENGELHARD
CORPORATION, a corporation duly organized and validly existing under the laws of
the State of Delaware (the "Company"); each of the lenders that is a signatory
hereto identified under the caption "BANKS" on the signature pages hereto and
each lender that becomes a "Bank" after the date hereof pursuant to Section
11.06(b) hereof (individually, a "Bank" and, collectively, the "Banks"), THE
CHASE MANHATTAN BANK, as Swingline Bank hereunder (in such capacity, together
with its successors and permitted assigns in such capacity, the "Swingline
Bank") and as agent for the banks (in such capacity, together with its
successors in such capacity, the "Administrative Agent"), JPMORGAN SECURITIES
INC., as lead arranger and book manager for the Banks (in such capacity,
together with their successors in such capacity, the "Arranger"), BANK OF
TOKYO-MITSUBISHI TRUST COMPANY and WACHOVIA BANK, N.A., as documentation agents
for the Banks (in such capacity, together with their successors in such
capacity, the "Documentation Agents"), COMMERZBANK AG, as syndication agent for
the Banks (in such capacity, together with their successors in such capacity,
the "Syndication Agent").
The Company has requested that (i) the Banks make loans to it in an
aggregate principal amount not exceeding $400,000,000 (as the same may be
reduced by the Banks' LC Exposure resulting from Letters of Credit issued as
described in clause (ii) below, or pursuant to Section 2.05(b) hereof or
increased pursuant to Section 2.11 hereof) at any one time outstanding by way of
Syndicated Loans (which may be Eurodollar Loans or Base Rate Loans) and/or
pursuant to a competitive bid option providing for Competitive Bid Loans (which
may be LIBOR Bid Loans or Absolute Rate Loans), (ii) the Issuing Banks issue
Letters of Credit, as such terms are defined below, in amounts resulting in an
LC Exposure not to exceed $50,000,000, and (iii) the Swingline Bank make
Swingline Loans in amounts not to exceed $100,000,000, as such terms are defined
below, and the Banks, the Issuing Banks and the Swingline Bank are prepared to
make such loans and issue such Letters of Credit upon and subject to the terms
and conditions hereof. Accordingly, the parties hereto agree as follows:
Section 1. Definitions and Accounting Matters.
1.01 Certain Defined Terms. As used herein, the following terms shall have
the following meanings (all terms defined in this Section 1.01 or in other
provisions of this Agreement in the singular to have the same meanings when used
in the plural and vice versa):
"Absolute Rate" shall have the meaning assigned to such term in Section
2.03(c)(ii)(D) hereof.
"Absolute Rate Auction" shall mean a solicitation of Competitive Bid Quotes
setting forth Absolute Rates pursuant to Section 2.03 hereof.
"Absolute Rate Loans" shall mean Competitive Bid Loans, the interest rates
on which are determined on the basis of Absolute Rates pursuant to an Absolute
Rate Auction.
"Administrative Questionnaire" shall mean an Administrative Questionnaire
in a form supplied by the Administrative Agent.
149
"Affiliate" means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
"Applicable Facility Fee Rate", "Applicable Margin" and "Applicable
Utilization Fee Rate" shall mean, during any period when any of the Rating
Groups specified below is in effect, the percentage set forth below opposite the
reference to such fee or to the relevant Type of Syndicated Loan:
Rating Rating Rating Rating Rating
Group 1 Group II Group III Group IV Group V
-------------------------------------------------------
Applicable Facility
Fee Frate 0.090%p.a. 0.100%p.a. 0.125%p.a. 0.150%p.a. 0.200%p.a
Applicable Margin 0.160%p.a. 0.275%p.a. 0.375%p.a. 0.475%p.a. 0.550%p.a.
Applicable Utiliation
Fee Rate 0.050%p.a. 0.075%p.a. 0.100%p.a. 0.125%p.a. 0.125%p.a.
Any change in the Applicable Facility Fee Rate, the Applicable Margin or
the Applicable Utilization Fee Rate by reason of a change in the Moody"s Rating
or the Standard & Poor's Rating (or a Substitute Rating) shall become effective
on the date of announcement or publication by the respective Rating Agency of a
change in such Rating or, in the absence of such announcement or publication, on
the effective date of such changed rating.
"Applicable Percentage" shall mean, with respect to any Bank, the
percentage of the total Commitments represented by such Bank's Commitment. If
the Commitments have terminated or expired, the Applicable Percentages shall be
determined based upon the Commitments most recently in effect, giving effect to
any assignments.
"Assignment and Acceptance" shall mean an agreement in the form of Exhibit
E hereto.
"Base Rate" shall mean, for any day, a rate per annum equal to the higher
of (a) the Federal Funds Rate for such day plus 1/2 of 1% and (b) the Prime Rate
for such day. Each change in any interest rate provided for herein based upon
the Base Rate resulting from a change in the Base Rate shall take effect at the
time of such change in the Base Rate.
"Base Rate Loans" shall mean Syndicated Loans that bear interest at rates
based upon the Base Rate.
"Business Day" shall mean any day (a) on which commercial banks are not
authorized or required to close in New York City and (b) if such day relates to
the giving of notices or quotes in connection with a LIBOR Auction or to a
borrowing of, a payment or prepayment of principal of or interest on, or a
Conversion of or into, or an Interest Period for, a Eurodollar Loan or a LIBOR
Bid Loan or a notice by the Company with respect to any such borrowing, payment,
prepayment, Conversion or Interest Period, that is also a day on which dealings
in Dollar deposits are carried out in the London interbank market.
150
"Change in Control" shall have the meaning assigned to such term in Section
9(j) hereof.
"Chase" shall mean The Chase Manhattan Bank, and its successors.
"Class" shall have the meaning assigned to such term in Section 1.03
hereof.
"Closing Date" shall mean the date hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Commitment" shall mean, as to each Bank, the obligation of such Bank to
(a) make Syndicated Loans pursuant to Section 2.01 hereof, and (b) to acquire
participations in Letters of Credit pursuant to Section 2.13 hereof, in an
aggregate principal amount at any one time outstanding up to but not exceeding
the amount set opposite the name of such Bank on Schedule I hereof under the
caption "Commitment" or, in the case of a Person that becomes a Bank pursuant to
an assignment permitted under Section 11.06(b) hereof, as specified in the
respective instrument of assignment pursuant to which such assignment is
effected or, in the case of a Person that becomes a Bank pursuant to Section
2.11 hereof, as reflected in the respective instrument pursuant to which such
Person agrees to become a Bank hereunder (in each case, as the same may be
reduced at any time or from time to time pursuant to Section 2.05 or 11.06
hereof or increased pursuant to Section 2.11 or 5.06 hereof).
"Commitment Termination Date" shall mean the date five (5) years after the
Closing Date, as such date may be extended pursuant to Section 2.12 hereof;
provided that if such date is not a Business Day, the Commitment Termination
Date shall be the immediately preceding Business Day.
"Competitive Bid Borrowing" shall have the meaning assigned to such term in
Section 2.03(b) hereof.
"Competitive Bid Loans" shall mean the loans provided for by Section 2.03
hereof.
"Competitive Bid Note" shall mean the promissory note requested by a Bank
pursuant to Section 2.09(d) hereof for its Competitive Bid Loans and all
promissory notes delivered in substitution or exchange therefor, in each case as
the same shall be modified and supplemented and in effect from time to time.
"Competitive Bid Quote" shall mean an offer in accordance with Section
2.03(c) hereof by a Bank to make a Competitive Bid Loan with one single
specified interest rate.
"Competitive Bid Quote Request" shall have the meaning assigned to such
term in Section 2.03(b) hereof.
"Confidentiality Agreement" shall mean an agreement substantially in the
form of Exhibit D hereto.
"Consent Date" shall have the meaning set forth in Section 2.12(a) hereof.
151
"Consolidated Tangible Net Worth" shall mean the excess of (i) the
consolidated net book value of the assets of the Company and its Subsidiaries
(other than patents, patent rights, trademarks, trade names, franchises,
copyrights, licenses, permits, goodwill and other intangible assets classified
as such in accordance with GAAP) after all appropriate deductions in accordance
with GAAP (including, without limitation, reserves for doubtful receivables,
obsolescence, depreciation and amortization) plus the amounts, if any, by which
the market value of precious metals inventories and investments exceeds the
carrying value of those metals on the consolidated books of account of the
Company, in each case, computed and consolidated in accordance with GAAP over
(ii) Total Debt.
"Continuation", "Continue" and "Continued" shall refer to the continuation
pursuant to Section 2.10 hereof of a Eurodollar Loan from one Interest Period to
the next Interest Period.
"Contract" shall mean any agreement or transaction (other than for
obligations incurred in connection with the borrowing of money or the obtaining
of advances or credit) entered into by the Company or any of its Subsidiaries in
the ordinary course of its business and not for the purpose of speculation,
including, without limitation, any agreement or transaction relating to any
currency or commodity regularly used or traded by the Company or any of its
Subsidiaries, including sale, purchase or entry into any swap agreement in
respect of a notional quantity; sale or purchase of any contract for future
delivery; or sale or purchase of any put or call option in respect of any such
currency or commodity.
"Control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
"Controlling" and "Controlled" have meanings correlative thereto.
"Conversion", "Convert" and "Converted" shall refer to a conversion
pursuant to Section 2.10 hereof of one Type of Syndicated Loan into another Type
of Syndicated Loan, which may be accompanied by the transfer by a Bank (at its
sole discretion) of a Loan from one lending office to another.
"Debt" of any Person means, without duplication, (a) all indebtedness of
such Person for borrowed money, (b) all obligations of such Person with respect
to reimbursement obligations relating to letters of credit issued for the
account of such Person and drawn upon by the applicable beneficiary and not
repaid by such Person, (c) all obligations of such Person evidenced by notes,
bonds, debentures or other similar instruments, and (d) all obligations of such
Person as lessee under leases which are capitalized in accordance with GAAP.
"Default" shall mean an Event of Default or an event that with notice or
lapse of time or both would become an Event of Default.
"Dollars" and "$" shall mean lawful money of the United States of America.
"Domestic Subsidiary" shall mean any Subsidiary of the Company that is
organized under the laws of any State of the United States of America.
152
"EBITDA" shall mean, for any period, the sum, determined on a consolidated
basis without duplication, of the Company's and its consolidated Subsidiaries':
(i) net earnings from continuing operations (or net loss), but excluding from
such amount any equity income (or loss) of Affiliates and the gain (or loss) on
the sale of long-term investments, (ii) interest expense, (iii) income tax
expense, (iv) depreciation expense, (v) amortization and depletion expense, and
(vi) all other non-cash charges, in each case determined in accordance with GAAP
for such period, provided that with respect to each of the items set forth in
clauses (i) through (vi) above, any extraordinary amounts shall be excluded from
the relevant calculations.
"Environmental Laws" shall mean all laws, rules, regulations, codes,
ordinances, orders, decrees, judgments, injunctions or binding agreements
issued, promulgated or entered into by any Governmental Authority, relating to
the environment, preservation or reclamation of natural resources, including
those relating to the management, release or threatened release of any Hazardous
Material.
"Environmental Liability" shall mean any liability (including any liability
for damages, costs of environmental remediation, fines, penalties or
indemnities) of the Company or any Subsidiary based upon (a) violation of any
Environmental Law, (b) the generation, use, handling, transportation, storage,
treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous
Materials, (d) the release or threatened release of any Hazardous Materials into
the environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" shall mean any corporation or trade or business that is a
member of any group of organizations (i) described in Section 414(b) or (c) of
the Code of which the Company is a member and (ii) solely for purposes of
potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of
the Code and the lien created under Section 302(f) of ERISA and Section 412(n)
of the Code, described in Section 414(m) or (o) of the Code of which the Company
is a member.
"Eurodollar Loans" shall mean Syndicated Loans that bear interest at rates
based on rates referred to in the definition of
"Eurodollar Rate" in this Section 1.01.
"Eurodollar Rate" shall mean, for any Fixed Rate Loan for any Interest
Period therefor:
(a) a rate per annum determined by the Administrative Agent to be equal to
the rate per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%)
reported at 11:00 a.m., London time on the date two Business Days prior to the
first day of such Interest Period on Telerate Access Service Page 3750 (British
Bankers Association Settlement Rate) (or on any successor or substitute page of
such service) as the London Interbank Offered Rate for Dollar deposits having a
term comparable to such Interest Period; or
153
(a) if such rate shall cease to be publicly available on the Telerate
Access Service Page 3750 (or on any successor or substitute page of such
service) or if the information contained on said Page, in the sole judgment of
the Administrative Agent, shall cease to accurately reflect such London
Interbank Offered Rate, the Eurodollar Rate shall mean the arithmetic mean
(rounded upwards, if necessary, to the nearest 1/16 of 1%), as determined by the
Administrative Agent, of the rates per annum quoted by the respective Reference
Banks at approximately 11:00 a.m. London time (or as soon thereafter as
practicable) on the date two Business Days prior to the first day of such
Interest Period for the offering by the respective Reference Banks to leading
banks in the London interbank market of Dollar deposits having a term comparable
to such Interest Period and in an amount comparable to the principal amount of
such Fixed Rate Loan to be made by the respective Reference Banks for such
Interest Period; provided that (i) if any Reference Bank is not participating in
any Fixed Rate Loans during any Interest Period therefor, the Eurodollar Rate
for such Loans for such Interest Period shall be determined by reference to the
amount of such Loans that such Reference Bank would have made or had outstanding
had it been participating in such Loan during such Interest Period, (ii) in
determining the Eurodollar Rate with respect to any Competitive Bid Loans, each
Reference Bank shall be deemed to have made a Competitive Bid Loan in an amount
equal to $10,000,000 and (iii) if any Reference Bank does not timely furnish
such information for determination of any Eurodollar Rate, the Administrative
Agent shall determine such Eurodollar Rate on the basis of the information
timely furnished by the remaining Reference Banks.
"Event of Default" shall have the meaning assigned to such term in Section
9 hereof.
"Federal Funds Rate" shall mean, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day, provided that (a) if the day for which such rate is to be determined is not
a Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day as so published on the next
succeeding Business Day and (b) if such rate is not so published for any
Business Day, the Federal Funds Rate for such Business Day shall be the average
rate charged to Chase on such Business Day on such transactions as determined by
the Administrative Agent.
"Financial Officer" shall mean the Chief Financial Officer, the Treasurer
or the Controller of the Company.
"Fitch IBCA" shall mean Fitch IBCA Duff & Phelps, or any successor thereto.
"Fixed Rate Loans" shall mean Eurodollar Loans and Competitive Bid Loans
(other than Absolute Rate Loans).
"GAAP" shall mean generally accepted accounting principles applied on a
basis consistent with those that, in accordance with the last sentence of
Section 1.02(a) hereof, are to be used in making the calculations for purposes
of determining compliance with this Agreement.
154
"Governmental Authority" shall mean the government of the United States of
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body or court or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of government.
"Granting Lender" shall have the meaning assigned to such term in Section
11.05 hereof.
"Hazardous Materials" shall mean all explosive or radioactive substances or
wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature, in each case as regulated
pursuant to any Environmental Law.
"Interest Period" shall mean:
(a) with respect to any Eurodollar Loan, each period commencing on the date
such Eurodollar Loan is made or Converted from a Loan of another Type or (in the
event of a Continuation) the last day of the next preceding Interest Period for
such Loan and ending on the numerically corresponding day in the first, second,
third, sixth or, if agreed by all of the Banks, ninth or twelfth calendar month
thereafter, or any other period to which all the Banks have consented, as the
Company may select as provided in Section 4.05 hereof, provided that each
Interest Period that commences on the last Business Day of a calendar month (or
on any day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last Business Day of the
appropriate subsequent calendar month;
(b) with respect to any Absolute Rate Loan, the period commencing on the
date such Absolute Rate Loan is made and ending on any Business Day not less
than seven days and not more than one year thereafter, as the Company may select
as provided in Section 2.03(b) hereof; and
(c) with respect to any LIBOR Bid Loan, the period commencing on the date
such LIBOR Bid Loan is made and ending on the numerically corresponding day such
number of months not exceeding twelve thereafter, as the Company may select as
provided in Section 2.03(b) hereof, provided that each Interest Period that
commences on the last Business Day of a calendar month (or any day for which
there is no numerically corresponding day in the appropriate subsequent calendar
month) shall end on the last Business Day of the appropriate subsequent calendar
month.
Notwithstanding the foregoing, (i) if any Interest Period for any Loan
would otherwise end after the Commitment Termination Date, such Interest Period
shall not be available hereunder for such period; (ii) each Interest Period that
would otherwise end on a day that is not a Business Day shall end on the next
succeeding Business Day (or, in the case of an Interest Period for a Fixed Rate
Loan, if such next succeeding Business Day falls in the next succeeding calendar
month, on the next preceding Business Day); and (iii) no Interest Period for any
Loan (other than an Absolute Rate Loan) shall have a duration of less than one
month and, if the Interest Period for any Fixed Rate Loan would otherwise be a
shorter period, such Loan shall not be available hereunder for such period.
155
"Issuing Bank" means any Bank selected by the Company which has agreed to
issue Letters of Credit hereunder, in such Bank's capacity as an issuer of
Letters of Credit hereunder, and its successors in such capacity as provided in
Section 2.13(i). The Issuing Bank may, in its discretion, arrange for one or
more Letters of Credit to be issued by Affiliates of the Issuing Bank, in which
case the term "Issuing Bank" shall include any such Affiliate with respect to
Letters of Credit issued by such Affiliate.
"LC Disbursement" means a payment made by the Issuing Bank pursuant to a
Letter of Credit.
"LC Exposure" means, at any time, the sum of (a) the aggregate undrawn
amount of all outstanding Letters of Credit at such time plus (b) the aggregate
amount of all LC Disbursements that have not yet been reimbursed by or on behalf
of the Company at such time. The LC Exposure of any Bank at any time shall be
equal to the total LC Exposure multiplied by a fraction, the numerator of which
is equal to such Bank's Commitment and the denominator of which is equal to the
aggregate Commitments of all the Banks at such time.
"LC Obligations" means, at any time, all obligations of each of the Banks
hereunder with respect to any Letter of Credit issued and outstanding pursuant
to the terms hereof.
"Lender Affiliate" shall mean:
(a) with respect to any Bank, any entity (whether a corporation,
partnership, trust or otherwise) which is not an Affiliate, but that is engaged
in making, purchasing, holding or otherwise investing in bank loans and similar
extensions of credit in the ordinary course of its business and is administered
or managed by such Bank or an Affiliate of such Bank; and
(b) with respect to any Bank that is a fund which invests in bank loans and
similar extensions of credit, any other fund that is not an Affiliate and
invests in bank loans and similar extensions of credit and is managed by the
same investment advisor as such Bank or by an Affiliate of such investment
advisor.
"Letter of Credit" means any stand-by letter of credit issued pursuant to
this Agreement.
"LIBO Margin" shall have the meaning assigned to such term in Section
2.03(c)(ii)(C) hereof.
"LIBOR Auction" shall mean a solicitation of Competitive Bid Quotes setting
forth Eurodollar Rates pursuant to Section 2.03 hereof.
"LIBOR Bid Loans" shall mean Competitive Bid Loans the interest rates in
which are determined on the basis of Eurodollar Rates pursuant to a LIBOR
Auction.
"Lien" shall mean, with respect to any Property, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this Agreement, a Person shall be deemed to own
subject to a Lien any Property that it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement (other than an operating lease)
relating to such Property.
156
"Loans" shall mean Syndicated Loans, Competitive Bid Loans and Swingline
Loans.
"Majority Banks" shall mean Banks having more than 50% of the aggregate
amount of the Commitments or, if the Commitments shall have terminated, Banks
holding more than 50% of the aggregate unpaid principal amount of the Revolving
Credit Exposure.
"Moody's" shall mean Moody's Investors Service, Inc. or any successor
thereto.
"Moody's Rating" shall mean, as of any date, the rating most recently
announced or published by Moody's relating to the unsecured, long-term, senior
debt securities of the Company then outstanding.
"Multiemployer Plan" shall mean a multiemployer plan defined as such in
Section 3(37) of ERISA to which contributions have been made by the Company or
any ERISA Affiliate and that is covered by Title IV of ERISA.
"Named Persons" shall have the meaning assigned to such term in Section
11.03 hereof.
"Notes" shall mean any promissory note issued by the Company pursuant to
Section 2.09(d) hereof and which Notes may be Syndicated Notes, Competitive Bid
Notes or a Swingline Note.
"Participant" shall have the meaning assigned to such term in Section
11.06(c) hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" shall mean any individual, corporation, company, voluntary
association, partnership, limited liability company, joint venture, trust,
unincorporated organization or government (or any agency, instrumentality or
political subdivision thereof).
"Plan" shall mean an employee benefit or other plan established or
maintained by the Company or any ERISA Affiliate and that is covered by Title IV
of ERISA, other than a Multiemployer Plan.
"Post-Default Rate" shall mean a rate per annum equal to one percent (1%)
plus the Base Rate as in effect from time to time, provided that, with respect
to principal of a Fixed Rate Loan that shall become due (whether at stated
maturity, by acceleration, by optional or mandatory prepayment or otherwise) on
a day other than the last day of the Interest Period therefor, the "Post-Default
Rate" shall be a rate per annum equal to, for the period from and including such
due date to but excluding the last day of such Interest Period, one percent (1%)
plus the interest rate for such Loan as provided in Section 3.02 hereof and,
thereafter, the rate provided for above in this definition.
"Prime Rate" shall mean the rate of interest from time to time announced by
Chase at its principal office as its prime commercial lending rate.
157
"Principal Subsidiary" shall mean any Subsidiary of the Company having
total assets as of the end of such fiscal year equal to or greater than 5% of
the consolidated total assets of the Company and its Subsidiaries as of the end
of the most recent fiscal year of the Company.
"Property" shall mean any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed and whether tangible or intangible.
"Pro Rata Percentage" shall have the meaning assigned to such term in
Section 2.13(d) hereof.
"Quarterly Dates" shall mean the last Business Day of March, June,
September and December in each year, the first of which shall be the first such
day after the Closing Date.
"Quotation Date" shall have the meaning assigned to such term in Section
2.03(b)(v) hereof.
"Rating" shall mean the Moody's Rating or the Standard & Poor's Rating;
provided that, the Company may substitute a Substitute Rating for either (but
not both) the Moody's Rating or the Standard & Poor's Rating (i.e. either the
Moody's Rating or the Standard & Poor's Rating must at all times be a Rating).
"Rating Agency" shall mean Moody's, Standard & Poor's or Fitch IBCA, as the
case may be.
"Rating Group" shall mean any of Rating Group I, Rating Group II, Rating
Group III, Rating Group IV and Rating Group V.
"Rating Group I" shall be in effect when the Moody's Rating is at or above
A2 (or a Substitute Rating is at or above the corresponding level) or the
Standard & Poor's Rating is at or above A (or a Substitute Rating is at or above
the corresponding level); "Rating Group II" shall be in effect when (a) the
Moody's Rating is at or above A3 (or a Substitute Rating is at or above the
corresponding level) or the Standard & Poor's Rating is at or above A- (or a
Substitute Rating is at or above the corresponding level) and (b) Rating Group I
is not in effect; "Rating Group III" shall be in effect when (a) the Moody's
Rating is at or above Baal (or a Substitute Rating is at or above the
corresponding level) or the Standard & Poor's Rating is at or above BBB+ (or a
Substitute Rating is at or above the corresponding level) and (b) neither Rating
Group I nor Rating Group II is in effect; "Rating Group IV" shall be in effect
when (a) the Moody's Rating is at or above Baa2 (or a Substitute Rating is at or
above the corresponding level) or the Standard & Poor's Rating is at or above
BBB (or a Substitute Rating is at or above the corresponding level) and (b) none
of Rating Group I, Rating Group II or Rating Group III is in effect; and "Rating
Group V" shall be in effect when none of Rating Group I, Rating Group II, Rating
Group III or Rating Group IV is in effect; provided that, (A) if the Moody's
Rating (or a Substitute Rating) and the Standard & Poor's Rating (or a
Substitute Rating) fall into different Rating levels and one of such Ratings is
no more than one Rating level lower than the other of such Ratings, then the
applicable Rating Group shall be based upon the higher of such Ratings, (B) if
the Moody's Rating (or a Substitute Rating) and the Standard & Poor's Rating (or
a Substitute Rating) fall into different Rating levels and one of such Ratings
is two Rating levels lower than the other of such Ratings, then the applicable
Rating Group shall be based upon a hypothetical Rating that would fall into the
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rating level that is one lower than the Rating level into which the higher
of such Ratings falls and (C) the Company may substitute a Substitute Rating for
either (but not both of) the Moody's Rating or the Standard & Poor's Rating
(i.e. either the Moody's Rating or the Standard & Poor's Rating must at all
times be used to determine which Rating Group is then in effect).
"Reference Banks" shall mean Chase, Citibank, N.A., and Bank of New York.
"Regulations A, D and U" shall mean, respectively, Regulations A, D and U
of the Board of Governors of the Federal Reserve System (or any successor), as
the same may be modified and supplemented and in effect from time to time.
"Related Parties" means, with respect to any specified Person, each of its
officers, directors and employees.
"Reportable Event" shall mean any reportable event as defined in Section
4043(c) of ERISA, other than a reportable event as to which provision for 30-day
notice to the PBGC would be waived under applicable regulations had the
regulations in effect on the Closing Date been in effect on the date of
occurrence of such reportable event.
"Responsible Officer" shall mean, with respect to any Issuing Bank, those
officers listed on a written schedule provided by such Issuing Bank to the
Company and consented to by the Company on or prior to the date such Issuing
Bank issues its first Letter of Credit pursuant to the terms hereof, such
schedule to be revised from time to time by mutual agreement in writing between
the Issuing Bank and the Company.
"Revolving Credit Exposure" means, with respect to any Bank at any time,
the sum of the outstanding principal amount of such Bank's Syndicated Loans and
its LC Exposure at such time.
"SPC" shall have the meaning assigned to such term in Section 11.05 hereof.
"Standard & Poor's" shall mean Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc., or any successor thereto.
"Standard & Poor's Rating" shall mean, as of any date, the rating most
recently announced or published by Standard & Poor's relating to the unsecured,
long-term, senior debt securities of the Company then outstanding.
"Subsidiary" shall mean, with respect to any Person, any corporation,
partnership or other entity of which at least a majority of the securities or
other ownership interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions of such corporation, partnership or other entity (irrespective of
whether or not at the time securities or other ownership interests of any other
class or classes of such corporation, partnership or other entity shall have or
might have voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person.
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"Substitute Rating" shall mean, as of any date, the rating most recently
announced or published by Fitch IBCA relating to the unsecured, long-term,
senior debt securities of the Company then outstanding.
"Swingline Commitment" shall mean the obligation of the Swingline Bank to
make Swingline Loans in an aggregate amount not to exceed the lesser of (i)
$100,000,000 and (ii) the aggregate amount of the Commitments.
"Swingline Loans" shall mean the loans provided for by Section 2.04 hereof.
"Swingline Maturity Date" shall mean, for any Swingline Loan, the earliest
of (i) the fifteenth day, or last day, of the month in which such Swingline Loan
was made, (ii) the Commitment Termination Date and (iii) the borrowing of any
Syndicated Loan or Competitive Bid Loan.
"Swingline Note" shall mean the promissory note requested by the Swingline
Bank for its Swingline Loans pursuant to Section 2.09(d) hereof and all
promissory notes delivered in substitution or exchange therefor, in each case as
the same shall be modified and supplemented and in effect from time to time.
"Syndicated Loans" shall mean the loans provided for by Section 2.01
hereof, which may be Base Rate Loans and/or Eurodollar Loans.
"Syndicated Note" shall mean the promissory note requested by a Bank for
its Syndicated Loans pursuant to Section 2.09(d) hereof and all promissory notes
delivered in substitution or exchange therefor, in each case as the same shall
be modified and supplemented and in effect from time to time.
"Total Debt" shall mean, as at any date, the consolidated liabilities of
the Company and its consolidated Subsidiaries (including tax and other proper
accruals but excluding the accumulated postretirement benefit obligation
resulting from the application of the provisions of FAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions".
"Type" shall have the meaning assigned to such term in Section 1.03 hereof.
"Withdrawal Liability" shall have the meaning given such term under Part I
of Subtitle E of Title IV of ERISA.
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1.01 Accounting Terms and Determinations.
Except as otherwise expressly provided herein, all accounting terms used
herein shall be interpreted, and all financial statements and certificates and
reports as to financial matters required to be delivered to the Banks hereunder
shall (unless otherwise disclosed to the Banks in writing at the time of
delivery thereof in the manner described in subsection (b) below) be prepared,
in accordance with generally accepted accounting principles applied on a basis
consistent with those used in the preparation of the latest financial statements
furnished to the Banks hereunder (which, prior to the delivery of the first
financial statements under Section 8.04 hereof, shall mean the audited financial
statements as at December 31, 2000 referred to in Section 7.04 hereof). All
calculations made for the purposes of determining compliance with this Agreement
shall (except as otherwise expressly provided herein) be made by application of
generally accepted accounting principles applied on a basis consistent with
those used in the preparation of the latest annual or quarterly financial
statements furnished to the Banks pursuant to Section 8.04 hereof (or, prior to
the delivery of the first financial statements under Section 8.04 hereof, used
in the preparation of the audited financial statements as at December 31, 2000
referred to in Section 7.04 hereof) unless (i) the Company shall have objected
to determining such compliance on such basis at the time of delivery of such
financial statements or (ii) the Majority Banks shall so object in writing
within 30 days after delivery of such financial statements, in either of which
events such calculations shall be made on a basis consistent with those used in
the preparation of the latest financial statements as to which such objection
shall not have been made (which, if objection is made in respect of the first
financial statements delivered under Section 8.04 hereof, shall mean the audited
financial statements referred to in Section 7.04 hereof).
(a) The Company shall deliver to the Banks at the same time as the delivery
of any annual or quarterly financial statement under Section 8.04 hereof (i) a
description in reasonable detail of any material variation between the
application of accounting principles employed in the preparation of such
statement and the application of accounting principles employed in the
preparation of the next preceding annual or quarterly financial statements as to
which no objection has been made in accordance with the last sentence of
subsection (a) above and (ii) reasonable estimates of the difference between
such statements arising as a consequence thereof.
1.02 Classes and Types of Loans. Loans hereunder are distinguished by
"Class" and by "Type". The "Class" of a Loan refers to whether such Loan is a
Competitive Bid Loan, a Syndicated Loan or a Swingline Loan, each of which
constitutes a Class. The "Type" of a Loan refers to whether such Loan is a Base
Rate Loan, a Eurodollar Loan, an Absolute Rate Loan or a LIBOR Bid Loan, each of
which constitutes a Type. Loans may be identified by both Class and Type.
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Section 1. Commitments, Loans, Notes and Prepayments.
Syndicated Loans. Each Bank severally agrees, on the terms and conditions
of this Agreement, to make loans to the Company in Dollars during the period
from and including the Closing Date to, but not including the Commitment
Termination Date in an aggregate principal amount at any one time outstanding up
to but not exceeding the amount of the Commitment of such Bank as in effect from
time to time; provided that (x) each Bank's Revolving Credit Exposure at any
time shall not exceed its Commitment, and (y) the aggregate principal amount of
all Syndicated Loans, together with the aggregate principal amount of all
Competitive Bid Loans, Swingline Loans and the LC Exposure, at any one time
outstanding shall not exceed the aggregate amount of the Commitments at such
time. Subject to the terms and conditions of this Agreement, during such period
the Company may borrow, repay and reborrow the amount of the Commitments by
means of Base Rate Loans and Eurodollar Loans and during such period and
thereafter the Company may Convert Loans of one Type into Loans of another Type
(as provided in Section 2.10 hereof) or Continue Loans of one Type as Loans of
the same Type (as provided in 1.01 Section 2.10 hereof); provided that no more
than ten separate Interest Periods in respect of Eurodollar Loans from each Bank
may be outstanding at any one time.
1.01 Borrowings of Syndicated Loans. The Company shall give the
Administrative Agent notice of each borrowing hereunder as provided in Section
4.05 hereof. Not later than 1:00 p.m. New York time on the date specified for
each borrowing of Syndicated Loans hereunder, each Bank shall make available the
amount of the Syndicated Loan or Loans to be made by it on such date to the
Administrative Agent, at an account designated by the Administrative Agent, in
immediately available funds, for account of the Company. The amount so received
by the Administrative Agent shall, subject to the terms and conditions of this
Agreement, promptly be made available to the Company by depositing the same, in
immediately available funds, in an account of the Company designated by the
Company and maintained with Chase at its principal office, provided that Base
Rate Loans made to finance the reimbursement of an LC Disbursement as provided
in Section 2.13(e) shall be remitted by the Administrative Agent to the relevant
Issuing Bank.
1.01 Competitive Bid Option.
(a) In addition to borrowings of Syndicated Loans, at any time prior to the
Commitment Termination Date the Company may, as set forth in this Section 2.03,
request the Banks to make offers to make Competitive Bid Loans to the Company in
Dollars. The Banks may, but shall have no obligation to, make such offers and
the Company may, but shall have no obligation to, accept any such offers in the
manner set forth in this Section 2.03. Competitive Bid Loans may be LIBOR Bid
Loans or Absolute Rate Loans, provided that:
(i) there may be no more than fifteen different Interest Periods for both
Syndicated Loans and Competitive Bid Loans outstanding at the same time (for
which purpose Interest Periods described in different lettered clauses of the
definition of the term "Interest Period" shall be deemed to be different
Interest Periods even if they are coterminous); and
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(i) the aggregate principal amount of all Competitive Bid Loans, together
with the aggregate principal amount of all Syndicated Loans and Swingline Loans,
at any one time outstanding shall not exceed the aggregate amount of the
Commitments at such time.
When the Company wishes to request offers to make Competitive Bid Loans, it
shall give the Administrative Agent (which shall promptly notify the Banks)
notice (a "Competitive Bid Quote Request") so as to be received no later than
11:00 a.m. New York time on (x) the fourth Business Day prior to the date of
borrowing proposed therein, in the case of a LIBOR Auction or (y) one Business
Day prior to the date of borrowing proposed therein, in the case of an Absolute
Rate Auction (or, in any such case, such other time and date as the Company and
the Administrative Agent, with the consent of the Majority Banks, may agree).
The Company may request offers to make Competitive Bid Loans for up to three
different Interest Periods in a single notice (for which purpose Interest
Periods in different lettered clauses of the definition of the term "Interest
Period" shall be deemed to be different Interest Periods even if they are
coterminous); provided (a) that the request for each separate Interest Period
shall be deemed to be a separate Competitive Bid Quote Request for a separate
borrowing (a "Competitive Bid Borrowing"). Each such notice shall be
substantially in the form of Exhibit B hereto and shall specify as to each
Competitive Bid Borrowing:
(i) the proposed date of such borrowing, which shall be a Business Day;
(ii) the aggregate amount of such Competitive Bid Borrowing, which shall be
at least $10,000,000 (or a larger multiple of $1,000,000) but shall not cause
the limits specified in Section 2.03(a) hereof to be violated;
(iii) the duration of the Interest Period applicable thereto;
(iv) whether the Competitive Bid Quotes requested for a particular Interest
Period are seeking quotes for LIBOR Bid Loans or Absolute Rate Loans; and
(i) if the Competitive Bid Quotes requested are seeking quotes for Absolute
Rate Loans, the date on which the Competitive Bid Quotes are to be submitted if
it is before the proposed date of borrowing (the proposed date of such borrowing
or, if the date on which such Competitive Bid Quotes are to be submitted is
before the proposed date of such borrowing, such submission date, is called the
"Quotation Date").
Except as otherwise provided in this Section 2.03(b), no Competitive Bid
Quote Request shall be given within five Business Days (or such other number of
days as the Company and the Administrative Agent may agree) of any other
Competitive Bid Quote Request.
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(a) (i) Each Bank may submit one or more Competitive Bid Quotes, each
constituting an offer to make a Competitive Bid Loan in response to any
Competitive Bid Quote Request; provided that, if the Company's request under
Section 2.03(b) hereof specified more than one Interest Period, such Bank may
make a single submission containing one or more Competitive Bid Quotes for each
such Interest Period. Each Competitive Bid Quote must be submitted to the
Administrative Agent not later than (x) 2:00 p.m. New York time on the fourth
Business Day prior to the proposed date of borrowing, in the case of a LIBOR
Auction or (y) 10:00 a.m. New York time on the Quotation Date, in the case of an
Absolute Rate Auction (or, in any such case, such other time and date as the
Company and the Administrative Agent, with the consent of the Majority Banks,
may agree); provided that any Competitive Bid Quote may be submitted by Chase
(or its lending office) only if Chase (or such lending office) notifies the
Company of the terms of the offer contained therein not later than (x) 1:00 p.m.
New York time on the fourth Business Day prior to the proposed date of
borrowing, in the case of a LIBOR Auction or (y) 9:45 a.m. New York time on the
Quotation Date, in the case of an Absolute Rate Auction. Subject to Sections
5.02, 5.03, 6.02 and 9 hereof, any Competitive Bid Quote so made shall be
irrevocable except with the consent of the Administrative Agent given on the
instructions of the Company.
(i) Each Competitive Bid Quote shall be substantially in the form of
Exhibit C hereto and shall specify:
(A) the proposed date of borrowing and the Interest Period therefor;
(B) the principal amount of the Competitive Bid Loan for which each such
offer is being made, which principal amount shall be at least $10,000,000 (or a
larger multiple of $1,000,000); provided that the aggregate principal amount of
all Competitive Bid Loans for which a Bank submits Competitive Bid Quotes (x)
may be greater or less than the Commitment of such Bank but (y) may not exceed
the principal amount of the Competitive Bid Borrowing for a particular Interest
Period for which offers were requested;
(C) in the case of a LIBOR Auction, the margin above or below the
applicable Eurodollar Rate (the "LIBO Margin") offered for each such Competitive
Bid Loan (expressed as a percentage rate per annum in the form of a decimal to
no more than four decimal places) to be added to or subtracted from the
applicable Eurodollar Rate;
(D) in the case of an Absolute Rate Auction, the rate of interest per annum
(expressed as a percentage rate per annum in the form of a decimal to no more
than four decimal places) offered for each such Competitive Bid Loan (the
"Absolute Rate"); and
(E) the identity of the quoting Bank.
Unless otherwise agreed by the Administrative Agent and the Company, no
Competitive Bid Quote shall contain qualifying, conditional or similar language
or propose terms other than or in addition to those set forth in the applicable
Competitive Bid Quote Request and, in particular, no Competitive Bid Quote may
be conditioned upon acceptance by the Company of all (or some specified minimum)
of the principal amount of the Competitive Bid Loan for which such Competitive
Bid Quote is being made, provided that the submission by any Bank containing
more than one Competitive Bid Quote may be conditioned on the Company not
accepting offers contained in such submission that would result in such Bank
making Competitive Bid Loans pursuant thereto in excess of a specified aggregate
amount (the "Competitive Bid Loan Limit").
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The Administrative Agent shall (x) in the case of an Absolute Rate Auction,
as promptly as practicable after the Competitive Bid Quote is submitted (but in
any event not later than 10:15 a.m. New York time on the Quotation Date) or (y)
in the case of a LIBOR Auction, by 4:00 p.m. New York time on the day a
Competitive Bid Quote is submitted, notify the Company of the terms (i) of any
Competitive Bid Quote submitted by a Bank that is in accordance with Section
2.03(c) hereof and (ii) of any Competitive Bid Quote that amends, modifies or is
otherwise inconsistent with a previous Competitive Bid Quote submitted by such
Bank with respect to the same Competitive Bid Quote Request. Any such subsequent
Competitive Bid Quote shall be disregarded by the Administrative Agent unless
such subsequent competitive Bid Quote is submitted solely to correct a manifest
error in such former Competitive Bid Quote. The Administrative Agent's notice to
the Company shall specify (A) the aggregate principal amount of the Competitive
Bid Borrowing for which offers have been received and (B) the respective
principal amounts (a) and LIBO Margins or Absolute Rates, as the case may be, so
offered by each Bank (identifying the Bank that made each Competitive Bid
Quote).
(a) Not later than 11:00 a.m. New York time on (x) the third Business Day
prior to the proposed date of borrowing, in the case of a LIBOR Auction or (y)
the Quotation Date, in the case of an Absolute Rate Auction (or, in any such
case, such other time and date as the Company and the Administrative Agent, with
the consent of the Majority Banks, may agree), the Company shall notify the
Administrative Agent of its acceptance or nonacceptance of the offers so
notified to it pursuant to Section 2.03(d) hereof (which notice shall specify
the aggregate principal amount of offers from each Bank for each Interest Period
that are accepted, it being understood that the failure of the Company to give
such notice by such time shall constitute nonacceptance) and the Administrative
Agent shall promptly notify each affected Bank. The notice from the
Administrative Agent shall also specify the aggregate principal amount of offers
for each Interest Period that were accepted and the lowest and highest LIBO
Margins or Absolute Rates that were accepted for each Interest Period. The
Company may accept any Competitive Bid Quote in whole or in part (provided that
any Competitive Bid Quote accepted in part shall be at least $5,000,000 or a
larger multiple of $1,000,000); provided that:
(i) the aggregate principal amount of each Competitive Bid Borrowing may
not exceed the applicable amount set forth in the related Competitive Bid Quote
Request;
(ii) the aggregate principal amount of each Competitive Bid Borrowing shall
be at least $10,000,000 (or a larger multiple of $1,000,000) but shall not cause
the limits specified in Section 2.03(a) hereof to be violated;
(iii) acceptance of offers may, subject to clause (v) below, be made only
in ascending order of LIBO Margins or Absolute Rates, as the case may be, in
each case beginning with the lowest rate so offered;
(iv) the Company may not accept any offer where the Administrative Agent
has advised the Company that such offer fails to comply with Section 2.03(c)(ii)
hereof or otherwise fails to comply with the requirements of this Agreement
(including, without limitation, Section 2.03(a) hereof);
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(i) the aggregate principal amount of each Competitive Bid Borrowing from
any Bank may not exceed any applicable Competitive Bid Loan Limit of such Bank.
If offers are made by two or more Banks with the same LIBO Margins or
Absolute Rates, as the case may be, for a greater aggregate principal amount
than the amount in respect of which offers are accepted for the related Interest
Period, the principal amount of Competitive Bid Loans in respect of which such
offers are accepted shall be allocated by the Company among such Banks as nearly
as possible (in amounts of at least $5,000,000 or larger multiples of
$1,000,000) in proportion to the aggregate principal amount of such offers.
Determinations by the Company of the amounts of Competitive Bid Loans shall be
conclusive in the absence of manifest error.
(a) Any Bank whose offer to make any Competitive Bid Loan has been accepted
in accordance with the terms and conditions of this Section 2.03 shall, not
later than 1:00 p.m. New York time on the date specified for the making of such
Loan, make the amount of such Loan available to the Administrative Agent at an
account designated by the Administrative Agent, in immediately available funds,
for account of the Company. The amount so received by the Administrative Agent
shall, subject to the terms and conditions of this Agreement, be made available
to the Company on such date by depositing the same, in immediately available
funds, in an account of the Company maintained with Chase at its principal
office designated by the Company.
(b) Except for the purpose and to the extent expressly stated in Section
2.05(b) hereof, the amount of any Competitive Bid Loan made by any Bank shall
not constitute a utilization of such Bank's Commitment.
1.02 Swingline Loans.
(a) In addition to the Loans provided for in Sections 2.01 and 2.03 hereof,
the Swingline Bank hereby agrees, on the terms and conditions of this Agreement,
to make loans ("Swingline Loans") to the Company during the period from the
Closing Date to but excluding the date five Business Days prior to the
Commitment Termination Date in an aggregate amount at any one time outstanding
up to but not exceeding its Swingline Commitment; provided that the aggregate
principal amount of all Loans (including Swingline Loans) shall not at any time
outstanding exceed the aggregate amount of the Commitments. Subject to the terms
of this Agreement, the Company may borrow, repay and reborrow the amount of the
Swingline Commitment by means of Loans that bear interest at the Base Rate;
provided that only one Swingline Loan may be outstanding at any one time and no
Swingline Loan may be borrowed to repay an outstanding Swingline Loan.
(a) The Company shall give the Administrative Agent (which shall promptly
notify the Swingline Bank) notice of each borrowing of Swingline Loans hereunder
as provided in Section 4.05 hereof. Not later than one hour after such notice on
the date specified for each borrowing of Swingline Loans hereunder, the
Swingline Bank shall make available the amount of the Swingline Loan to be made
by it on such date to the Administrative Agent, at an account in New York
designated by the Administrative Agent, in Dollars and immediately available
funds, for account of the Company. The amount so received by the Administrative
Agent shall, subject to the terms and conditions of this Agreement, be made
available by the Administrative Agent to the Company by depositing the same, in
immediately available funds, in an account of the Company designated by the
Company.
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Unless the Company has already given a notice of borrowing of Syndicated
Loans to repay a Swingline Loan, at any time from and including the date of such
Swingline Loan until the unpaid principal amount of such Swingline Loan shall
have been paid in full, the Swingline Bank may, and the Company hereby
irrevocably authorizes and empowers (which power is coupled with an interest)
the Swingline Bank to, deliver, on behalf of the Company, to the Administrative
Agent under Section 2.02 hereof a notice of borrowing of Syndicated Loans that
are Base Rate Loans in an amount equal to the then unpaid principal amount of
such Swingline Loan. In the event that the power of the Swingline Bank to give
such notice of borrowing on behalf of the Company is terminated for any reason
whatsoever (including, without limitation, a termination resulting from the
occurrence of an event specified in clause (f) or (g) of Section 9 hereof with
respect to the Company), or the Swingline Bank is otherwise precluded for any
reason whatsoever from giving a notice of borrowing on behalf of the Company as
provided in the preceding sentence, each Bank shall, upon notice from the
Swingline Bank given at any time from and including the date of such Swingline
Loan until the unpaid principal amount of such Swingline Loan shall have been
paid in full, promptly purchase from the Swingline Bank a participation in (or,
if and to the extent specified by the Swingline Bank, an assignment of) such
Swingline Loan in the amount of the Base Rate Loan it would have been obligated
to make pursuant to such notice of borrowing. Each Bank shall, not later than
4:00 p.m. New York time on the Business Day on which such notice is given (if
such notice is given by 3:00 p.m. New York time) or 9:00 a.m. New York time on
the next succeeding Business Day (if such notice is given after 3:00 p.m., but
before 5:00 p.m., New York time), make available the amount of the Base Rate
Loan to be made by it (or the amount of the participation or assignment to be
purchased by it, as the case may be) to the Administrative Agent at the account
specified in Section 2.02 hereof and the amount so received by the
Administrative Agent shall promptly be made available to the Swingline Bank by
remitting the same, in immediately available funds, to the Swingline Bank.
Promptly following its receipt of any payment in respect of such Swingline Loan,
the Swingline Bank shall pay to each Bank that has acquired a participation in
such Swingline Loan such Bank's proportionate share of such payment. Anything in
this Agreement to the contrary notwithstanding (including, without limitation,
in Section 6.02 hereof), the obligation of each Bank to make its Base Rate Loan
(or purchase its participation in or assignment of such Swingline Loan, as the
case may be) pursuant to this Section 2.04(c) is unconditional under any and all
circumstances whatsoever and shall not be subject to set-off, counterclaim or
defense to payment that such Bank may have or have had against the Company, the
Administrative Agent, the Swingline Bank or any other Bank and, without limiting
any of the foregoing, shall be unconditional irrespective of (i) the occurrence
of any Default, (ii) the financial condition of the Company, any Subsidiary, the
Administrative Agent, the Swingline Bank or any other Bank or (iii) the
termination or cancellation of the Commitments; provided that no Bank shall be
obligated to make any such Base Rate Loan (or to purchase any such participation
or direct interest in the Swingline Loan) if (i) before the making of such
Swingline Loan, such Bank had notified the Swingline Bank that a Default had
occurred and was continuing and that such Bank would not refinance such
Swingline Loan or (ii) to the extent (and only to the extent) that such
Swingline Loan, together with all Syndicated Loans and Competitive Bid Loans
then outstanding at the time of the making of such Swingline Loan, exceeded the
then aggregate amount of the Commitments at the time of the making of such
Swingline Loan. The Company agrees that any Bank so purchasing a participation
(or assignment) in such Swingline Loan may exercise all rights of set-off,
bankers' lien, counterclaim or similar rights with respect to such participation
as fully as if such Bank were a direct holder of a Swingline Loan in the amount
of such participation.
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1.01 Changes of Commitments.
(a) The aggregate amount of the Commitments shall be automatically reduced
to zero on the Commitment Termination Date.
(b) The Company shall have the right at any time or from time to time (i)
so long as no Syndicated Loans, Competitive Bid Loans, Swingline Loans or
Letters of Credit are outstanding, to terminate the Commitments and (ii) to
reduce the aggregate unused amount of the Commitments (for which purpose use of
the Commitments shall be deemed to include (A) the aggregate principal amount of
all Competitive Bid Loans, (B) the aggregate principal amount of all Swingline
Loans and (C) the aggregate Revolving Credit Exposure); provided that (x) the
Company shall give notice of each such termination or reduction as provided in
Section 4.05 hereof and (y) each partial reduction shall be in an aggregate
amount at least equal to $10,000,000 (or whole multiples thereof).
(c) The Company shall have the right to terminate or reduce the unused
amount of the Swingline Commitment at any time or from time to time on not less
than three Business Days' prior notice to the Administrative Agent (which shall
promptly notify the Swingline Bank and each Bank) or each such termination or
reduction, which notice shall specify the effective date thereof and the amount
of any such reduction (which shall be in integral multiples of $10,000,000) and
shall be irrevocable and effective only upon receipt by the Administrative
Agent.
(d) The Commitments and the Swingline Commitment, once terminated or
reduced as provided in this Section 2.05, may not be reinstated except pursuant
to Section 2.11 hereof.
1.02 Facility Fee; Utilization Fee; Letter of Credit Fees. (a) The Company
shall pay to the Administrative Agent for account of each Bank a facility fee on
the daily average amount of such Bank's Commitment (whether used or unused), for
the period from and including the Closing Date to but not including the earlier
of the date such Commitment is terminated and the Commitment Termination Date,
at a rate per annum equal to the Applicable Facility Fee Rate. Accrued facility
fees shall be payable in arrears on each Quarterly Date and on the earlier of
the date the Commitments are terminated and the Commitment Termination Date.
The Company shall pay to the Administrative Agent for the account of each
Bank a utilization fee on the daily average amount of such Bank's Revolving
Credit Exposure for each fiscal quarter of the Company during which the Banks'
aggregate Revolving Credit Exposure is greater than or equal to 33% of the
Banks' aggregate Commitments, at a rate per annum equal to the Applicable
Utilization Fee Rate. Accrued utilization fees shall be payable in arrears on
each Quarterly Date and on the earlier of the date the Commitments are
terminated and the Commitment Termination Date.
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The Company agrees to pay (i) to the Administrative Agent for the account
of each Bank a participation fee with respect to its participations in Letters
of Credit, which shall accrue at a rate equal to the Applicable Margin on the
average daily amount of such Bank's LC Exposure (excluding any portion thereof
attributable to unreimbursed LC Disbursements) from the Closing Date hereof to,
but excluding the later of the date on which such Bank's Commitment terminates
and the date on which such Bank ceases to have any LC Exposure, and (ii) to each
Issuing Bank a fronting fee, which shall accrue at the rate or rates per annum
separately agreed upon between the Company and such Issuing Bank, such rate or
rates not to exceed 0.125% per annum, on the average daily amount of the LC
Exposure (excluding any portion thereof attributable to unreimbursed LC
Disbursements) during the period from the Closing Date to but excluding the
later of the date of termination of the Commitments and the date on which there
ceases to be any LC Exposure, as well as the Issuing Bank's standard fees with
respect to the issuance, amendment, renewal or extension of any Letter of Credit
or processing of drawings thereunder. Participation fees and fronting fees
accrued through and including each Quarterly Date of each year shall be payable
on the third Business Day following such Quarterly Date, commencing on the first
such date to occur after the Closing Date; provided that all such fees shall be
payable on the date on which the Commitments terminate and any such fees
accruing after the date on which the Commitments terminate shall be payable on
demand. Any other fees payable to any Issuing Bank pursuant to this paragraph
shall be payable within 10 days after demand. All participation fees and
fronting fees shall be computed on the basis of a year of 360 days and shall be
payable for the actual number of days elapsed (including the first day but
excluding the last day).
1.01 Lending Offices. The Loans of each Type made by each Bank shall be
made and maintained at such Bank's lending office for Loans of such Type.
1.01 Several Obligations; Remedies Independent. The failure of any Bank to
make any Loan to be made by it on the date specified therefor or perform any LC
Obligation shall not relieve any other Bank of its obligation to make its Loan
or perform its LC Obligations on such date, but neither any Bank nor the
Administrative Agent shall be responsible for the failure of any other Bank to
make a Loan to be made, or to perform an LC Obligation to be performed, by such
other Bank, and (except as otherwise provided in Section 4.06 hereof) no Bank
shall have any obligation to the Administrative Agent or any other Bank for the
failure by such Bank to make any Loan required to be made, or to perform any LC
Obligation to be performed, by such Bank. The amounts payable by the Company at
any time hereunder and under the Notes to each Bank shall be a separate and
independent debt and each Bank shall be entitled to protect and enforce its
rights arising out of this Agreement and the Notes, and it shall not be
necessary for any other Bank or the Administrative Agent to consent to, or be
joined as an additional party in, any proceedings for such purposes.
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1.01 Evidence of Debt.
(a) Each Bank shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Company to such Bank
resulting from each Loan made by such Bank, including the amounts of principal
and interest payable and paid to such Bank from time to time hereunder.
The Administrative Agent shall maintain accounts in which it shall record
(i) the amount of each Loan made hereunder, the Class and Type thereof and the
Interest Period applicable thereto, (ii) the amount of each Letter of Credit
issued hereunder by an (a) Issuing Bank, (iii) the amount of any principal or
interest or the amount of any reimbursement obligation with respect to any LC
Disbursement, in each case due and payable or to become due and payable from the
Company to each Bank hereunder and (iv) the amount of any sum received by the
Administrative Agent hereunder for the account of the Banks and each Bank's
share thereof.
(a) The entries made in the accounts maintained pursuant to paragraph (a)
or (b) of this Section shall be prima facie evidence of the existence and
amounts of the obligations recorded therein; provided that the failure of any
Bank or the Administrative Agent to maintain such accounts or any error therein
shall not in any manner affect the obligation of the Company to repay the Loans
in accordance with the terms of this Agreement.
(b) Any Bank, including the Swingline Bank, may request that Loans made by
it be evidenced by a promissory note. In such event, the Company shall prepare,
execute and deliver to such Bank a promissory note payable to the order of such
Bank and in a form approved by the Administrative Agent. Thereafter, the Loans
evidenced by such promissory note and interest thereon shall at all times
(including after assignment pursuant to Section 11.06(b)) be represented by one
or more promissory notes in such form payable to the order of the payee named
therein.
1.01 Optional Prepayments and Conversions or Continuations of Loans.
(a) Subject to Sections 4.04 and 5.04 hereof, the Company shall have the
right to prepay Syndicated Loans or Swingline Loans or to Convert Syndicated
Loans of one Type into Syndicated Loans of another Type or Continue Syndicated
Loans of one Type as Syndicated Loans of the same Type at any time or from time
to time, provided that (i) the Company shall give the Administrative Agent
notice of each such prepayment or Conversion or Continuation as provided in
Section 4.05 hereof (and, upon the date specified in any such notice of
prepayment, the amount to be prepaid shall become due and payable hereunder),
(ii) if any Swingline Loan is outstanding, the Syndicated Loans may not be
prepaid or Converted and (iii) Swingline Loans may not be Continued.
(b) No Competitive Bid Loan may be prepaid without the consent of the Bank
holding such Competitive Bid Loan.
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(a) Notwithstanding the foregoing provisions of this Section 2.10, and
without limiting the rights and remedies of the Banks under Section 9 hereof, in
the event that any Event of Default shall have occurred and be continuing, the
Administrative Agent may (and at the request of the Majority Banks, shall)
suspend the right of the Company to Convert any Loan into a Eurodollar Loan, or
to Continue any Loan as a Eurodollar Loan, in which event all Loans shall be
Converted (on the last day of the respective Interest Period therefor) or
Continued, as the case may be, as Base Rate Loans.
1.02 Increase in Commitments.
Subject to Section 4.05, in the event that the Company wishes, at any time
or from time to time, to increase the aggregate amount of the Commitments, it
shall notify the Administrative Agent in writing of the amount (the "Offered
Increase Amount") of such proposed increase (such notice, a "Commitment Increase
Notice"). The Company may, at its election, (i) offer one or more of the Banks
the opportunity to participate in all or a portion of the Offered Increase
Amount pursuant to subsection (c) below and/or (ii) with the consent of the
Administrative Agent (which consent shall not be unreasonably withheld), offer
one or more additional banks, financial institutions or other entities (each, an
"Additional Bank") the opportunity to participate in all or a portion of the
Offered Increase Amount which Banks and/or Additional Banks the Company desires
to participate in such Commitment increase. The Company or, if requested by the
Company, the Administrative Agent will notify such Banks and/or Additional Banks
of such offer.
Any Additional Bank which the Company selects to offer participation in the
increased Commitments and which elects to become a party to this Agreement and
obtain a Commitment in an amount so offered and accepted by it pursuant to
Section 2.11(a)(ii) hereof shall become a Bank for all purposes and the same
extent as if originally a party hereto and shall be bound by and entitled to the
benefits of this Agreement, and Schedule I shall be deemed to be amended to add
the name and Commitment of such Additional Bank (and the Administrative Agent
shall deliver to the Banks a copy of the Schedule I as amended as soon as
practicable), provided that the Commitment of any such Additional Bank shall be
in an amount not less than $10,000,000.
Any Bank which accepts an offer to it by the Company to increase its
Commitment pursuant to Section 2.11(a)(i) hereof shall be bound by and entitled
to the benefits of this Agreement with respect to the full amount of its
Commitment as so increased, and Schedule I shall be deemed to be amended to so
increase the Commitment of such Bank.
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If any Additional Bank becomes a Bank pursuant to Section 2.11(b) hereof or
any Bank's Commitment is increased pursuant to Section 2.11(c) hereof,
additional Syndicated Loans made on or after the effectiveness thereof (the
"Re-Allocation Date") shall be made pro rata based on the Commitment Percentages
in effect on and after such Re-Allocation Date (except to the extent that any
such pro rata borrowings would result in any Lender making an aggregate
principal amount of Syndicated Loans in excess of its Commitment, in which case
such excess amount will be allocated to, and made by, such Additional Banks
and/or Banks with such increased Commitments to the extent of, and pro rata
based on, their respective Commitments otherwise available for Syndicated
Loans), and continuations of Eurodollar Loans outstanding on such Re-Allocation
Date shall be effected by repayment of such Eurodollar Loans on the last day of
the Interest Period applicable thereto and the making of new Eurodollar Loans
pro rata based on such new Commitments; provided that until such date after the
Re-Allocation Date as all the Syndicated Loans outstanding shall be held pro
rata by all the Banks (including the Additional Banks), the Company shall only
request Interest Periods that end on or before the last day of the last Interest
Period for Syndicated Loans existing on the Re-Allocation Date. In the event
that on any such Re-Allocation Date there is an unpaid principal amount of Base
Rate Loans, the Borrower shall make prepayments thereof and borrowings of Base
Rate Loans so that, after giving effect thereto, the Base Rate Loans outstanding
are held pro rata based on such new Commitments. In the event that on any such
Re-Allocation Date there is an unpaid principal amount of Eurodollar Loans, such
Eurodollar Loans may remain outstanding with the respective holders thereof only
until the earlier of (i) the expiration of their respective Interest Periods and
(ii) the date on which such Eurodollar Loans may be prepaid hereunder without
any amounts becoming payable pursuant to Section 5.04 hereof; and interest on
and repayments of such Eurodollar Loans will be paid thereon to the respective
Banks holding such Eurodollar Loans pro rata based on the respective principal
amounts thereof outstanding.
Notwithstanding the foregoing, no increase in the aggregate Commitments
hereunder pursuant to this Section 2.11 shall be effective unless:
(i) each Additional Bank prior to becoming a Bank hereunder shall have
entered into an agreement in form and substance satisfactory to the Company and
the Administrative Agent pursuant to which such Additional Bank undertakes a
Commitment, and upon the effectiveness of such agreement, the date of the
effectiveness of any such agreement being hereinafter referred to as the
"Increased Commitment Date"), such Additional Bank shall be a "Bank" for all
purposes of this Agreement;
(ii) the Company shall have given the Administrative Agent notice of such
increase at least three Business Days prior to the relevant Increased Commitment
Date;
(iii) no increase in the Commitments hereunder shall result in the
aggregate amount of the Commitments exceeding $700,000,000;
(iv) no Bank's Commitment shall be increased without the prior express
written consent of such Bank;
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(i) no Default shall have occurred and be continuing on and as of the date
of the notice referred to in clause (ii) above or on such Increased Commitment
Date;
(ii) there shall not have occurred any ratable reduction of the Commitments
pursuant to Section 2.05(b) hereof on or within the twelve month period
immediately prior to such Increased Commitment Date;
(iii) after giving effect to such increase in Commitments, no one Bank's
Commitment would exceed 20% of the aggregate amount of the Commitments; and
(iv) the Administrative Agent shall have received (with sufficient copies
for each Bank), each of which shall be satisfactory to the Administrative Agent,
certified copies of Board of Director resolutions authorizing such increase and
an opinion of counsel of the Company with respect to such increase.
1.02 Extension of Commitment Termination Date.
The Company may, by notice to the Administrative Agent (which shall
promptly notify the Banks) not less than 60 days and not more than 90 days prior
to any anniversary of the Closing Date, request that the Banks extend the
Commitment Termination Date then in effect (the "Existing Commitment Termination
Date") for an additional year or two years from the Existing Commitment
Termination Date; provided that, no such extension shall extend the Commitment
Termination Date beyond the sooner to occur of (i) the date five years after
such anniversary or (ii) the seventh anniversary of the Closing Date. Each Bank,
acting in its sole discretion, shall, by notice to the Company and the
Administrative Agent given on or prior to the date (herein, the "Consent Date")
that is 30 days prior to the relevant anniversary (except that, if such date is
not a Business Day, such notice shall be given on the next succeeding Business
Day), advise the Company whether or not such Bank agrees to such extension;
provided that each Bank that determines not to extend the Commitment Termination
Date (a "Non-extending Bank") shall notify the Administrative Agent (which shall
notify the Banks) of such fact promptly after such determination (but in any
event no later than the Consent Date) and any Bank that does not advise the
Company on or before the Consent Date shall be deemed to be a Non-extending
Bank. The election of any Bank to agree to such extension shall not obligate any
other Bank to so agree.
The Company shall have the right on or before the relevant anniversary to
replace each Non-extending Bank with, and otherwise add to this Agreement, one
or more other banks (which may include any Bank, each prior to the Existing
Commitment Termination Date an "Additional Commitment Bank") with (in the case
of any Additional Commitment Bank that is not already a Bank) the approval of
the Administrative Agent (which approval shall not be unreasonably withheld),
each of which Additional Commitment Banks shall have entered into an agreement
in form and substance satisfactory to the Company and the Administrative Agent
pursuant to which such Additional Commitment Bank shall, effective as of the
relevant anniversary, undertake a Commitment (and, if any such Additional
Commitment Bank is already a Bank, its Commitment shall be in addition to such
Bank's Commitment hereunder on such date).
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If (and only if) the total of the Commitments of the Banks that have agreed
so to extend the Commitment Termination Date and the additional Commitments of
the Additional Commitment Banks shall be at least 100% of the aggregate amount
of the Commitments in effect immediately prior to the Consent Date, then,
effective as of the relevant anniversary, the Existing Commitment Termination
Date shall be extended as requested under, and subject to the provisions of, the
first sentence of paragraph (a) above (except that, if the date on which the
Commitment Termination Date is to be extended is not a Business Day, such
Commitment Termination Date as so extended shall be the next preceding Business
Day) and each Additional Commitment Bank shall thereupon become a "Bank" for all
purposes of this Agreement (and the Administrative Agent shall notify the Banks
of the extension).
Notwithstanding the foregoing, the extension of the Existing Commitment
Termination Date shall not be effective unless:
(i) no Default shall have occurred and be continuing on each of the date of
the notice requesting such extension, on the Consent Date and on the relevant
anniversary date;
(ii) each of the representations and warranties made by the Company in
Section 7 hereof shall be true and complete on and as of each of the date of the
notice requesting such extension, the Consent Date and the relevant anniversary
date with the same force and effect as if made on and as of such date (or, if
any such representation or warranty is expressly stated to have been made as of
a specific date, as of such specific date); and
(iii) each Non-extending Bank shall have been paid in full all amounts
owing to such Bank hereunder on or before the relevant anniversary date.
1.01 Letters of Credit.
Subject to the terms and conditions set forth herein, the Company may
request the issuance of Letters of Credit for its own account (or in the name of
another Person as applicant, with the consent of the Issuing Bank, such consent
not to be unreasonably withheld, provided that either (x) such Letter of Credit
states by its terms that the Company remains the account party liable to
reimburse the Issuing Bank for all drawings under said Letter of Credit, or (y)
such other Person, the Company and the Issuing Bank shall enter into
documentation acceptable to the Issuing Bank and the Administrative Agent
providing that the Company is liable in all events to reimburse the Issuing Bank
for all drawings under said Letter of Credit) in a form reasonably acceptable to
the Administrative Agent and the Issuing Bank, at any time and from time to time
prior to the Commitment Termination Date. In the event of any inconsistency
between the terms and conditions of this Agreement and the terms and conditions
of any form of letter of credit application or other agreement submitted by the
Company to, or entered into by the Company with, the Issuing Bank relating to
any Letter of Credit, the terms and conditions of this Agreement shall control.
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To request the issuance of a Letter of Credit (or the amendment, renewal or
extension of an outstanding Letter of Credit), the Company shall hand deliver or
telecopy (or transmit by electronic communication, if arrangements for doing so
have been approved by the Issuing Bank) to the Issuing Bank and the
Administrative Agent (reasonably in advance of the requested date of issuance,
amendment, renewal or extension) a notice requesting the issuance of a Letter of
Credit, or identifying the Letter of Credit to be amended, renewed or extended,
the date of issuance, amendment, renewal or extension, the date on which such
Letter of Credit is to expire (which shall comply with paragraph (c) of this
Section), the amount of such Letter of Credit, the name and address of the
beneficiary thereof and such other information as shall be necessary to prepare,
amend, renew or extend such Letter of Credit. If requested by the Issuing Bank,
the Company also shall submit a letter of credit application in a form to be
agreed upon by the Company and the Issuing Bank in connection with any request
for a Letter of Credit, provided that to the extent that any term or condition
contained in such letter of credit application shall conflict in any respect
with any term or condition contained herein, the terms and conditions hereof
shall be controlling, and provided further that the terms and conditions set
forth in such letter of credit application shall be no less favorable to the
Company than those set forth herein. A Letter of Credit shall be issued,
amended, renewed or extended only if (and upon issuance, amendment, renewal or
extension of each Letter of Credit the Company shall be deemed to represent and
warrant that), after giving effect to such issuance, amendment, renewal or
extension (i) the LC Exposure shall not exceed $50,000,000 and (ii) the
aggregate principal amount of all Revolving Credit Exposure together with the
aggregate principal amount of all Competitive Bid Loans and Swingline Loans at
any one time outstanding shall not exceed the aggregate amount of the Banks'
Commitments at such time.
Each Letter of Credit shall expire at or prior to the close of business on
the date that is five Business Days prior to the Commitment Termination Date.
By the issuance of a Letter of Credit (or an amendment to a Letter of
Credit increasing the amount thereof) and without any further action on the part
of the Issuing Bank or the Banks, the Issuing Bank hereby grants to each Bank,
and each Bank hereby acquires from the Issuing Bank, a participation in such
Letter of Credit equal to such Bank's pro rata percentage (based upon such
Bank's Commitment in relation to the aggregate Commitments of all of the Banks
as of such date) (its "Pro Rata Percentage") of the aggregate amount available
to be drawn under such Letter of Credit. In consideration and in furtherance of
the foregoing, each Bank hereby absolutely and unconditionally agrees to pay to
the Administrative Agent, for the account of the Issuing Bank, such Bank's Pro
Rata Percentage of each LC Disbursement made by the Issuing Bank and not
reimbursed by the Company on the date due as provided in paragraph (e) of this
Section, or of any reimbursement payment required to be refunded to the Company
for any reason. Each Bank acknowledges and agrees that its obligation to acquire
a participation pursuant to this paragraph in respect of Letters of Credit is
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including any amendment, renewal or extension of any Letter of
Credit or the occurrence and continuance of a Default or reduction or
termination of the Commitments, and that each such payment shall be made without
any offset, abatement, withholding or reduction whatsoever.
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If the Issuing Bank shall make any LC Disbursement in respect of a Letter
of Credit, the Company shall reimburse such LC Disbursement by paying to the
Administrative Agent an amount equal to such LC Disbursement not later than
12:00 noon, New York City time on (i) the Business Day that the Company receives
such notice, if such notice is received prior to 10:00 a.m. , New York City
time, on the day of receipt, or (ii) the Business Day immediately following the
day that the Company receives such notice, if such notice is not received prior
to such time on the day of receipt; provided that, if such LC Disbursement is
not less than $50,000, unless otherwise specified to the Administrative Agent by
the Company, the Company shall be deemed to have requested, subject to the
conditions to borrowing set forth herein, in accordance with Sections 2.02 and
4.05 prior to 11:00 a.m., New York City time, on the date that such LC
Disbursement is made, that such payment be financed with a Base Rate Loan in an
equivalent amount and, to the extent so financed, the Company's obligation to
make such payment shall be discharged and replaced by the resulting Base Rate
Loan. If the Company fails to make such payment when due, the Administrative
Agent shall notify each Bank of the applicable LC Disbursement, the payment then
due from the Company in respect thereof and such Bank's Pro Rata Percentage
thereof. Promptly following receipt of such notice, each Bank shall pay to the
Administrative Agent its Pro Rata Percentage of the payment then due from the
Company, in the same manner as provided in Section 2.02 with respect to Loans
made by such Bank (and Section 2.02 shall apply, mutatis mutandis, to the
payment obligations of the Banks), and the Administrative Agent shall promptly
pay to the Issuing Bank the amounts so received by it from the Banks. Promptly
following receipt by the Administrative Agent of any payment from the Company
pursuant to this paragraph, the Administrative Agent shall distribute such
payment to the Issuing Bank or, to the extent that Banks have made payments
pursuant to this paragraph to reimburse the Issuing Bank, then to such Banks and
the Issuing Bank as their interests may appear. Any payment made by a Bank
pursuant to this paragraph to reimburse the Issuing Bank for any LC Disbursement
(other than the funding of Base Rate Loans as contemplated above) shall not
constitute a Loan and shall not relieve the Company of its obligation to
reimburse such LC Disbursement.
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The obligations of the Company to reimburse LC Disbursements as provided in
paragraph (e) of this Section shall be absolute, unconditional and irrevocable,
and shall be performed strictly in accordance with the terms of this Agreement
under all circumstances whatsoever, including without limitation the following:
(i) the existence of any claim, set-off, defense or other rights which the
Company or any other Person may have at any time against any beneficiary of any
Letter of Credit or any transferee of a Letter of Credit (or any Person for whom
any such beneficiary or any such transferee may be acting), the Issuing Bank,
the Administrative Agent, the Banks or any other Person, whether in connection
with this Agreement or any unrelated transaction; (ii) the failure by the
Issuing Bank to honor any drawing under a Letter of Credit or to make any
payment demanded under any Letter of Credit on the ground that the demand for
such payment does not conform to the terms and conditions of such Letter of
Credit; and (iii) any circumstances which might constitute a legal or equitable
discharge of any obligations hereunder, it being agreed that the Company's
obligations hereunder shall not be discharged except by the performance thereof
strictly in accordance with the terms of this Agreement including, without
limitation, the payment in full as herein provided of all amounts owing
hereunder in respect of Letters of Credit. Neither the Administrative Agent, the
Banks nor the Issuing Bank, nor any of their Related Parties, shall have any
liability or responsibility by reason of or in connection with the issuance or
transfer of any Letter of Credit or any payment or failure to make any payment
thereunder (irrespective of any of the circumstances referred to in the
preceding sentence), or any error, omission, interruption, loss or delay in
transmission or delivery of any draft, notice or other communication under or
relating to any Letter of Credit (including any document required to make a
drawing thereunder), any error in interpretation of technical terms or any
consequence arising from causes beyond the control of the Issuing Bank; provided
that the foregoing shall not be construed to excuse the Issuing Bank from
liability to the Company to the extent of any direct damages (as opposed to
consequential damages, claims in respect of which are hereby waived by the
Company to the extent permitted by applicable law) suffered by the Company that
are caused by the Issuing Bank's failure to exercise care when determining
whether drafts and other documents presented under a Letter of Credit comply
with the terms thereof. In furtherance of the foregoing and without limiting the
generality thereof, the parties agree that, with respect to documents presented
which appear on their face to be in substantial compliance with the terms of a
Letter of Credit, the Issuing Bank may, in its sole discretion, either (x)
accept and make payment upon such documents without responsibility for further
investigation, unless a Responsible Officer of the Issuing Bank has actually
received written notice to the contrary from the Company, or (y) refuse to
accept and make payment upon such documents if such documents are not in strict
compliance with the terms of such Letter of Credit. In no event shall any Bank
or the Administrative Agent be required to pay, reimburse or otherwise indemnify
the Issuing Bank for any loss, costs, liabilities or expenses incurred by the
Issuing Bank in connection with its issuance or maintenance of any Letter of
Credit hereunder except to the extent expressly set forth in this Agreement. The
immediately preceding sentence shall survive the termination of this Agreement.
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The Issuing Bank shall, promptly following its receipt thereof, examine all
documents purporting to represent a demand for payment under a Letter of Credit.
The Issuing Bank shall promptly notify the Administrative Agent and the Company
by telephone (confirmed by telecopy) of such demand for payment and whether the
Issuing Bank has made or will make an LC Disbursement thereunder; provided that
any failure to give or delay in giving such notice shall not relieve the Company
of its obligation to reimburse the Issuing Bank and the Banks with respect to
any such LC Disbursement.
If the Issuing Bank shall make any LC Disbursement, then, unless the
Company shall reimburse such LC Disbursement in full on the date such LC
Disbursement is made, the unpaid amount thereof shall bear interest, for each
day from and including the date such LC Disbursement is made to but excluding
the date that the Company reimburses such LC Disbursement, at the rate per annum
then applicable to Base Rate Loans; provided that, if the Company fails to
reimburse such LC Disbursement when due pursuant to paragraph (e) of this
Section, then interest shall be due and payable at the Post-Default Rate for
each day such reimbursement is not received by the Administrative Agent.
Interest accrued pursuant to this paragraph shall be for the account of the
Issuing Bank, except that interest accrued on and after the date of payment by
any Bank pursuant to paragraph (e) of this Section to reimburse the Issuing Bank
shall be for the account of such Bank to the extent of such payment.
The Issuing Bank for any Letter of Credit may be replaced at any time by
written agreement among the Company, the Administrative Agent, the replaced
Issuing Bank and the successor Issuing Bank. The Administrative Agent shall
notify the Banks of any such replacement of the Issuing Bank. At the time any
such replacement shall become effective, the Company shall pay all unpaid fees
accrued for the account of the replaced Issuing Bank pursuant to Section
2.06(c). From and after the effective date of any such replacement, (i) the
successor Issuing Bank shall have all the rights and obligations of an Issuing
Bank under this Agreement with respect to Letters of Credit to be issued
thereafter and (ii) references herein to the term "Issuing Bank" shall be
deemed, with respect to the relevant Letter of Credit, to refer to such
successor or to any previous Issuing Bank, or to such successor and all previous
Issuing Banks, as the context shall require. After the replacement of an Issuing
Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall
continue to have all the rights and obligations of an Issuing Bank under this
Agreement with respect to Letters of Credit issued by it prior to such
replacement, but shall not be required to issue additional Letters of Credit.
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If any Event of Default shall occur and be continuing, on the Business Day
that the Company receives notice from the Administrative Agent or the Majority
Banks (or, if the maturity of the Loans has been accelerated, Banks with LC
Exposure representing greater than 51% of the total LC Exposure) demanding the
deposit of cash collateral pursuant to this paragraph, the Company shall deposit
in an account with the Administrative Agent, in the name of the Administrative
Agent and for the benefit of the Banks, an amount in cash equal to the LC
Exposure as of such date plus any accrued and unpaid interest thereon; provided
that the obligation to deposit such cash collateral shall become effective
immediately, and such deposit shall become immediately due and payable, without
demand or other notice of any kind, upon the occurrence of any Event of Default
with respect to the Company described in clause (f) or (g) of Section 9. Such
deposit shall be held by the Administrative Agent as collateral for the payment
and performance of the obligations of the Company under this Agreement. The
Administrative Agent shall have exclusive dominion and control, including the
exclusive right of withdrawal, over such account. Other than any interest earned
on the investment of such deposits, which investments shall be made at the
option and sole discretion of the Administrative Agent and at the Company's risk
and expense, such deposits shall not bear interest. Interest or profits, if any,
on such investments shall accumulate in such account. Moneys in such account
shall be applied by the Administrative Agent to reimburse the Issuing Bank for
LC Disbursements for which it has not been reimbursed and, to the extent not so
applied, shall be held for the satisfaction of the reimbursement obligations of
the Company for the LC Exposure at such time or, if the maturity of the Loans
has been accelerated (but subject to the consent of Banks with LC Exposure
representing greater than 51% of the total LC Exposure), be applied to satisfy
other obligations of the Company under this Agreement. If the Company is
required to provide an amount of cash collateral hereunder as a result of the
occurrence of an Event of Default, such amount (to the extent not applied as
aforesaid) shall be returned to the Company within three Business Days after all
Events of Default have been cured or waived. To the extent that all, or any
portion of the Banks LC Exposure with respect to any Letter of Credit is reduced
by means of expiration of such Letter of Credit or by virtue of any provision in
any Letter of Credit permanently reducing the amounts available to be drawn
thereunder for any reason, the Administrative Agent shall return an amount to
the Company equal to the amount of such reduction no later than 90 days after
the date of such reduction. The Company hereby grants to the Administrative
Agent a security interest in any cash collateral deposited pursuant to the terms
of this Section 2.13(j) and this Agreement shall be deemed to be a security
agreement for all purposes of the Uniform Commercial Code in effect in all
applicable jurisdictions; provided that no UCC-1 or similar financing statement
shall be filed in connection with this Agreement in any jurisdiction, without
the Company's prior written consent.
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The provisions of this Section 2.13 shall not limit the right of the
Company to obtain letters of credit other than pursuant to this Agreement.
Section 1. Payments of Principal and Interest.
1.01 Repayment of Loans.
The Company hereby promises to pay to the Administrative Agent for account
of each Bank the principal of each Syndicated Loan made by such Bank, and each
Syndicated Loan shall mature, on the Commitment Termination Date.
The Company agrees to pay to the Administrative Agent for account of each
Bank that makes a Competitive Bid Loan the principal of such Competitive Bid
Loan, and such Competitive Bid Loan shall mature, on the last day of the
Interest Period for such Competitive Bid Loan.
The Company hereby promises to pay to the Administrative Agent for account
of the Swingline Bank the principal of each Swingline Loan at or prior to, and
such Swingline Loan shall mature at, 1:00 p.m. New York time on the Swingline
Maturity Date for such Swingline Loan.
1.02 Interest. The Company hereby promises to pay to the Administrative
Agent for account of each Bank interest on the unpaid principal amount of each
Loan made by such Bank for the period from and including the date of such Loan
to but excluding the date such Loan shall be paid in full, at the following
rates per annum:
if such Loan is a Base Rate Loan, the Base Rate (as in effect from time to
time);
if such Loan is a Eurodollar Loan, the Eurodollar Rate for such Loan for
the Interest Period therefor plus the Applicable Margin;
if such Loan is a Swingline Loan, the Base Rate for each day during the
period from and including the date of such Swingline Loan to but excluding the
Swingline Maturity Date for such Swingline Loan;
if such Loan is a LIBOR Bid Loan, the Eurodollar Rate for such Loan for the
Interest Period therefor plus (or minus) the LIBO Margin quoted by the Bank
making such Loan in accordance with Section 2.03 hereof; and
if such Loan is an Absolute Rate Loan, the Absolute Rate for such Loan for
the Interest Period therefor quoted by the Bank making such Loan in accordance
with Section 2.03 hereof.
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Notwithstanding the foregoing, the Company hereby promises to pay to the
Administrative Agent for account of each Bank interest at the applicable
Post-Default Rate on any principal of any Loan made by such Bank and on any
other amount payable by the Company hereunder or under the Notes, if any, held
by such Bank to or for account of such Bank, that shall not be paid in full when
due (whether at stated maturity, by acceleration, by mandatory prepayment or
otherwise), for the period from and including the due date thereof to but
excluding the date the same is paid in full. Accrued interest on each Loan shall
be payable (a) on the last day of the Interest Period therefor and, if such
Interest Period is longer than 90 days (in the case of an Absolute Rate Loan) or
three months (in the case of a Fixed Rate Loan), at 90-day or three-month
intervals, respectively, following the first day of such Interest Period,
provided that (i) interest on Base Rate Loans shall be payable on each Quarterly
Date and on the Commitment Termination Date and (ii) interest on Swingline Loans
shall be payable on the Swingline Maturity Date therefor and (b) in the case of
any Loan, upon the payment or prepayment thereof (but only on the principal
amount so paid or prepaid), except that interest payable at the Post-Default
Rate shall be payable from time to time on demand. Promptly after the
determination of any interest rate provided for herein or any change therein,
the Administrative Agent shall give notice thereof to the Banks to which such
interest is payable and to the Company.
Section 1. Payments; Pro Rata Treatment; Computations; Etc.
1.01 Payments.
Except to the extent otherwise provided herein, all payments of principal,
interest, reimbursement of LC Disbursements, fees and other amounts to be made
by the Company under this Agreement and the Notes, shall be made in Dollars, in
immediately available funds, without deduction, set-off or counterclaim, to the
Administrative Agent at an account designated by the Administrative Agent not
later than 1:00 p.m. New York time on the date on which such payment shall
become due (each such payment made after such time on such due date to be deemed
to have been made on the next succeeding Business Day), provided that if a new
Loan is to be made by any Bank on a date the Company is to repay any principal
of an outstanding Loan of such Bank, such Bank shall apply the proceeds of such
new Loan to the payment of the principal to be repaid and only an amount equal
to the difference between the principal to be borrowed and the principal to be
repaid shall be made available by such Bank to the Administrative Agent as
provided in Section 2.02 hereof or paid by the Company to the Administrative
Agent pursuant to this Section 4.01, as the case may be.
The Company shall, at the time of making each payment under this Agreement
or any Note for account of any Bank, specify to the Administrative Agent (which
shall so notify the intended recipient(s) thereof) the Loans or other amounts
payable by the Company hereunder to which such payment is to be applied (and in
the event that the Company fails to so specify, or if an Event of Default has
occurred and is continuing, the Administrative Agent shall distribute such
payment, subject to Section 4.02 hereof, first to the Swingline Bank (to the
extent any amounts are then due and payable to the Swingline Bank on account of
any Swingline Loan) and then to the Banks for application in such manner as the
Administrative Agent may determine to be appropriate).
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Each payment received by the Administrative Agent under this Agreement or
any Note for account of any Bank shall be paid by the Administrative Agent
promptly to such Bank, in immediately available funds, for account of such
Bank's lending office for the Loan or other obligation in respect of which such
payment is made.
If the due date of any payment under this Agreement or any Note would
otherwise fall on a day that is not a Business Day, such date shall be extended
to the next succeeding Business Day, and interest shall be payable for any
principal so extended for the period of such extension.
1.01 Pro Rata Treatment. Except to the extent otherwise provided herein,
(a) each borrowing of Syndicated Loans from the Banks under Section 2.01 hereof
shall be made from the Banks, each payment of facility fee under Section 2.06
hereof shall be made for account of the Banks and each termination or reduction
of the amount of the Commitments under Section 2.05 hereof shall be applied to
the respective Commitments of the Banks, pro rata according to the amounts of
their respective Commitments; (b) except as otherwise provided in Sections 2.11,
5.02 and 5.03 hereof, Eurodollar Loans having the same Interest Period shall be
allocated pro rata among the Banks according to the amounts of their respective
Commitments (in the case of making Loans) or their respective Loans (in the case
of Conversions and Continuation of Loans); (c) each payment or prepayment of
principal of Syndicated Loans by the Company shall be made for account of the
Banks pro rata in accordance with the respective unpaid principal amounts of the
Syndicated Loans held by them; and (d) each payment of interest on Syndicated
Loans by the Company shall be made for account of the Banks pro rata in
accordance with the amounts of interest on such Loans then due and payable to
the respective Banks; and notwithstanding the foregoing, borrowings, payments
and prepayments of Swingline Loans shall be made without regard to the foregoing
provisions of this Section 4.02.
Computations. Interest on Fixed Rate Loans and all fees shall be computed
on the basis of a year of 360 days and actual days elapsed (including the first
day but excluding the last day) occurring in the period for which payable, and
interest on Base Rate Loans shall be computed on the basis of a year of 365 or
366 days, as the case may be, and actual days elapsed (including the first day
but excluding the last day) occurring in the period for which payable.
Notwithstanding the foregoing, for each day that the Base Rate is calculated by
reference to the 1.01 Federal Funds Rate, interest on Base Rate Loans shall be
computed on the basis of a year of 360 days and actual days elapsed.
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1.01 Minimum Amounts. Except for prepayments made pursuant to Section 5.04
hereof, (x) (A) each borrowing and Conversion of Base Rate Loans shall be in a
minimum amount of $1,000,000 and in an integral multiple of $500,000 (provided
that a Base Rate Loan may be in an aggregate amount that is equal to the entire
unused balance of the Banks' Commitments or that is required to finance the
reimbursement of an LC Disbursement as contemplated by Section 2.13(e)) and (B)
each partial prepayment of principal of Base Rate Loans shall be in an integral
multiple of $1,000,000 and (y) (A) each borrowing of, and Conversion into,
Eurodollar Loans shall be in an aggregate amount at least equal to $5,000,000 or
a larger multiple of $1,000,000 and (B) each partial prepayment of principal of
Eurodollar Loans shall be in an aggregate amount at least equal to $5,000,000 or
a larger multiple of $1,000,000 (borrowings, Conversions or prepayments of or
into Loans of different Types or, in the case of Eurodollar Loans, having
different Interest Periods at the same time hereunder to be deemed separate
borrowings, Conversions and prepayments for purposes of the foregoing, one for
each Type or Interest Period), provided that the aggregate principal amount of
Eurodollar Loans having the same Interest Period shall be in an amount at least
equal to $5,000,000 or a larger multiple of $1,000,000 and, if any Eurodollar
Loans would otherwise be in a lesser principal amount for any period, such Loans
shall be Base Rate Loans during such period. Each borrowing or partial
prepayment of Swingline Loans shall be in an integral multiple of $500,000.
1.02 Certain Notices. Except as otherwise provided in Section 2.03 hereof
with respect to Competitive Bid Loans, notices by the Company to the
Administrative Agent of terminations or reductions of the Commitments and of
borrowings, Conversions, Continuations and optional prepayments of Loans, of
Types of Loans and of the duration of Interest Periods shall be irrevocable and
shall be effective only if received by the Administrative Agent not later than
11:00 a.m. New York time (or 2:00 p.m. in connection with Swingline Loans) on
the number of Business Days prior to the date of the relevant termination,
reduction, borrowing, Conversion, Continuation or prepayment or the first day of
such Interest Period specified below:
Number of
Business
Notice Days Prior
Termination or reduction
of Commitments 3
Borrowing or prepayment of, or Conversion into, Base
Rate Loans 1
Borrowing or prepayment of, Conversion into,
Continuation as or duration of Interest Period for,
Eurodollar Loans 3
Reimbursement of LC Disbursement by means of borrowing
of Base Rate Loan Same day
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Each such notice of termination or reduction shall specify the amount of
the Commitments to be terminated or reduced. Each such notice of borrowing,
Conversion, Continuation or optional prepayment shall specify the Loans to be
borrowed, Converted, Continued or prepaid and the amount (subject to Section
4.04 hereof) and Type of each Loan to be borrowed, Converted, Continued or
prepaid and the date of borrowing, Conversion, Continuation or optional
prepayment (which shall be a Business Day). The Administrative Agent shall
promptly notify the Banks of the contents of each such notice. In the event that
the Company fails to select the Type of Loan, or the duration of any Interest
Period for any Eurodollar Loan, within the time period and otherwise as provided
in this Section 4.05, such Loan (if outstanding as a Eurodollar Loan) will be
automatically Converted into a Base Rate Loan on the last day of the then
current Interest Period for such Loan or (if outstanding as a Base Rate Loan)
will remain as, or (if not then outstanding) will be made as, a Base Rate Loan.
1.01 Non-Receipt of Funds by the Administrative Agent. Unless the
Administrative Agent shall have been notified by a Bank or the Company (the
"Payor") prior to the date on which the Payor to make payment to the
Administrative Agent of (in the case of a Bank) the proceeds of a Loan to be
made by such Bank hereunder or (in the case of the Company) a payment to the
Administrative Agent for account of one or more of the Banks hereunder (such
payment being herein called the "Required Payment"), which notice shall be
effective upon receipt, that the Payor does not intend to make the Required
Payment to the Administrative Agent, the Administrative Agent may assume that
the Required Payment has been made and may, in reliance upon such assumption
(but shall not be required to), make the amount thereof available to the
intended recipient(s) on such date; and, if the Payor has not in fact made the
Required Payment to the Administrative Agent, the recipient(s) of such payment
shall, on demand, repay to the Administrative Agent the amount so made available
together with interest thereon in respect of each day during the period
commencing on the date (the "Advance Date") such amount was so made available by
the Administrative Agent until the date the Administrative Agent recovers such
amount at a rate per annum equal to the Federal Funds Rate for such day and, if
such recipient(s) shall fail promptly to make such payment, the Administrative
Agent shall be entitled to recover such amount, on demand, from the Payor,
together with interest as aforesaid, provided that if neither the recipient(s)
nor the Payor shall return the Required Payment to the Administrative Agent
within three Business Days of the Advance Date, then, retroactively to the
Advance Date, the Payor and the recipient(s) shall each be obligated to pay
interest on the Required Payment as follows:
(i) if the Required Payment shall represent a payment to be made by the
Company to the Banks, the Company and the recipient(s) shall each be obligated
retroactively to the Advance Date to pay interest in respect of the Required
Payment at the Post-Default Rate (without duplication of the obligation of the
Company under Section 3.02 hereof to pay interest on the Required Payment at the
Post-Default Rate), it being understood that the return by the recipient(s) of
the Required Payment to the Administrative Agent shall not limit such obligation
of the Company under said Section 3.02 to pay interest at the Post-Default Rate
in respect of the Required Payment and
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(i) if the Required Payment shall represent proceeds of a Loan to be made
by the Banks to the Company, the Payor and the Company shall each be obligated
retroactively to the Advance Date to pay interest in respect of the Required
Payment pursuant to whichever of the rates specified in Section 3.02 hereof is
applicable to the Type of such Loan, it being understood that the return by the
Company of the Required Payment to the Administrative Agent shall not limit any
claim the Company may have against the Payor in respect of such Required
Payment.
1.02 Sharing of Payments, Etc.
(a) If any Bank shall obtain from the Company payment of any principal of
or interest on any Loan of any Class owing to it or payment of any participation
in any LC Disbursement or any other amount under this Agreement through the
exercise of any right of set-off, banker's lien or counterclaim or similar right
or otherwise (other than from the Administrative Agent as provided herein), and,
as a result of such payment, such Bank shall have received a greater percentage
of the principal of or interest on the Loans of such Class, with respect to such
participation in such LC Disbursement, or such other amounts then due hereunder
by the Company to such Bank than the percentage received by any other Bank, it
shall promptly purchase from such other Banks participations in (or, of and to
the extent specified by such Bank, direct interests in) the Loans of such Class,
participations in such LC Disbursements or such other amounts, respectively,
owing to such other Banks (or in interest due thereon, as the case may be) in
such amounts, and make such other adjustments from time to time as shall be
equitable, to the end that all the Banks shall share the benefit of such excess
payment (net of any expenses that may be incurred by such Bank in obtaining or
preserving such excess payment) pro rata in accordance with the unpaid principal
of and/or interest on the Loans of such Class, participations in such LC
Disbursements or such other amounts, respectively, owing to each of the Banks.
To such end all the Banks shall make appropriate adjustments among themselves
(by the resale of participations sold or otherwise) if such payment is rescinded
or must otherwise be restored.
(b) The Company agrees that any Bank so purchasing such a participation (or
direct interest) may exercise all rights of set-off, banker's lien, counterclaim
or similar rights with respect to such participation as fully as if such Bank
were a direct holder of Loans or other amounts (as the case may be) owing to
such Bank in the amount of such participation.
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Section 1. Yield Protection, Etc.
1.01 Additional Costs.
(a) It is understood that the cost to the Banks of making or maintaining
Eurodollar Loans or participating in, issuing or maintaining Letters of Credit
may fluctuate as a result of the applicability of, or changes in, reserve
requirements imposed by the Board of Governors of the Federal Reserve System of
the United States, including but not limited to, reserve requirements under
Regulation D in connection with Eurocurrency Liabilities (as defined in
Regulation D) at the ratios provided for in Regulation D from time to time. The
Company agrees to pay to each Bank from time to time, as provided in paragraph
(c) below, such amounts as shall be necessary to compensate such Bank for the
portion of the cost of making or maintaining any Eurodollar Loans made by it or
participating in, issuing or maintaining Letters of Credit, resulting from any
such reserve requirements, it being understood that the rates of interest
applicable to Eurodollar Loans hereunder have been determined on the
hypothetical assumption that no such reserve requirements exist or will exist
and that such rates do not reflect costs imposed on such Bank in connection with
such reserve requirements. It is agreed that for purposes of this paragraph (a)
the Eurodollar Loans made hereunder shall be deemed to constitute Eurocurrency
Liabilities (as defined in Regulation D) and to be subject to the reserve
requirements of Regulation D without benefit or credit of proration, exemptions
or offsets which might otherwise be available to such Bank from time to time
under Regulation D.
(b) In the event that after the Closing Date any change in conditions or in
applicable law, rule or regulations or in the interpretation or administration
thereof (including, without limitation, any request, guideline or policy not
having the force of law) by any authority charged with the administration or
interpretation thereof shall occur which shall:
(i) subject any Bank to any tax with respect to any Eurodollar Loan (other
than any tax on the overall net income of such Bank imposed by the United States
of America or by the jurisdiction in which such Bank has its principal office or
any political subdivision or taxing authority therein) or with respect to
participating in issuing or maintaining Letters of Credit ; or
(ii) change the basis of taxation of any payment to any Bank of principal
of or interest on any Eurodollar Loan or with respect to participating in
issuing or maintaining Letters of Credit, or with respect to other fees and
amounts payable hereunder, or any combination of the foregoing; or
(iii) impose, modify or deem applicable any reserve, deposit, capital
adequacy or similar requirement against any assets held by, deposits with or for
the account of or loans or commitments by, or in respect of participations in or
the issuance or maintenance of Letters of Credit by an office of any Bank; or
(iv) impose upon any Bank or the London interbank market any other
condition with respect to the Eurodollar Loans or this Agreement;
186
and the result of any of the foregoing shall be to increase the actual cost
to such Bank of making or maintaining any Eurodollar Loan hereunder, or of
participating in, issuing or maintaining Letters of Credit or to reduce the
amount of any payment (whether of principal, interest, reimbursement of LC
Disbursements or otherwise) received or receivable by such Bank, or to require
such Bank to make any payment in connection with any Eurodollar Loan or in
respect of participations in or the issuance or maintenance of Letters of
Credit, or to reduce the rate of return on capital of such Bank as a consequence
of such Bank's obligations hereunder to a level below that which such Bank could
have achieved but for such change, in each case by or in an amount which such
Bank in its sole judgment shall deem material, then and in each such case the
Company shall pay to such Bank, as provided in paragraph (c) below (but without
duplication of the payments required under paragraph (a) above), such amounts as
shall be necessary to compensate such Bank for such cost, reduction or payment.
(a) Each Bank shall deliver to the Company, with a copy to the
Administrative Agent, from time to time one or more certificates setting forth
the amounts due under paragraphs (a) and (b) above, the reserve requirements or
changes as a result of which such amounts are due and the manner of computing
such amounts. Each such certificate shall be conclusive in the absence of
manifest error. The Company shall pay the amounts shown as due on any such
certificate within 10 Business Days after its receipt of the same. No failure on
the part of any Bank to demand compensation under paragraph (a) or (b) above on
any one occasion shall constitute a waiver of its right to demand such
compensation on any other occasion. The protection of this Section 5.01 shall be
available to each Bank regardless of any possible contention of the invalidity
or inapplicability of any law, regulation or other condition which shall give
rise to any demand by such Bank for compensation hereunder; provided, however,
that if any Bank shall receive a reimbursement of any additional tax assessment
or other amount as a result of such contention, such Bank shall remit such
reimbursed funds to the Company to the extent that the Company had paid such
amounts to such Bank less any expenses reasonably incurred by such Bank.
Each Bank shall notify the Company, with a copy of such notice to the
Administrative Agent, as to the existence of any change described in paragraphs
(a) and (b) above as promptly as practicable after gaining knowledge thereof. If
the Company shall receive notice of such determination from any Bank with
respect to Eurodollar Loans, the Company may either (i) convert such Bank's
Eurodollar Loans to Base Rate Loans, or (ii) prepay, without premium (but
subject in either case to the payments required by Sections 5.01(a) and (b) and
5.04 hereof), upon at least three Business Days' prior written or telex notice
to such Bank, but not more than fifteen days after receipt of notice from such
Bank, all such Bank's Eurodollar Loans outstanding together with interest and
facility fee accrued to the date of prepayment on such amount and the aggregate
Commitments shall be reduced by an amount equal to such Bank's Commitment and
such Bank's Commitment shall be reduced to zero.
Any Bank claiming any additional amounts payable pursuant to paragraph (b)
above shall use its best efforts (consistent with its internal policy and legal
and regulatory restrictions) to change the jurisdiction of its applicable
lending office so as to eliminate the amount of any such costs or additional
amounts which may thereafter accrue; provided that no such change shall be made
if, in the sole reasonable judgment of such Bank, such change would be
disadvantageous to such Bank.
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1.01 Limitation on Types of Loans. In the event, and on each occasion, that
on the day two Business Days prior to the commencement of any Interest Period
for any Fixed Rate Loan, any Bank shall have determined (which determination
shall be conclusive and binding upon the Company absent manifest error) (x) that
dollar deposits in the amount of the principal amount of such Fixed Rate Loan
are not generally available in the London interbank market, or (y) that, in the
event that clause (ii) of the definition of "Eurodollar Rate" in Section 1.01
hereof is the basis for determining the rate of interest for Fixed Rate Loans
for such Interest Period, the rate at which such dollar deposits are being
offered will not adequately and fairly reflect the cost to such Bank of making
or maintaining the principal amount of such Fixed Rate Loan during such Interest
Period, or reasonable means do not exist for ascertaining the Eurodollar Rate,
such Bank shall, as soon as practicable thereafter, give notice of such
determination to the Administrative Agent and the other Banks and the Company.
If the Company shall receive notice of such determination, (i) in respect of any
such Eurodollar Loan the Company may either (A) withdraw its request for a
Eurodollar Loan from such Bank and/or (B) request a Base Rate Loan be made by
such Bank or (C) terminate the Commitment of such Bank, and at the end of the
then current Interest Period for each outstanding Loan repay all such Bank's
Loans outstanding together with interest and facility fee accrued to the date of
such payment on such amount (the aggregate Commitments shall be reduced by an
amount equal to such Bank's Commitment) and any applicable utilization fee due
to such Bank shall be paid in arrears on the next following Quarterly Date after
the date such Bank's Commitment has been terminated, and (ii) in respect of any
LIBOR Bid Loan, such Bank's obligation to make such LIBOR Bid Loan shall be
terminated.
1.02 Illegality.
Notwithstanding anything to the contrary contained elsewhere in this
Agreement, if any change after the Closing Date in law or regulation or in the
interpretation thereof by any governmental authority charged with the
administration thereof shall make it unlawful for a Bank to make or maintain any
Fixed Rate Loan or to give effect to its obligations as contemplated hereby with
respect to a Eurodollar Loan, then, by notice to the Company with a copy to the
Administrative Agent, such Bank may:
(i) declare that Eurodollar Loans will not thereafter be made by such Bank
hereunder, whereupon such Bank's pro rata portion of any subsequent Eurodollar
Loan shall instead be a Base Rate Loan, unless such declaration is subsequently
withdrawn;
(ii) require that all outstanding Eurodollar Loans be Converted to Base
Rate Loans, whereupon all of such Eurodollar Loans shall be automatically
Converted to Base Rate Loans as of the effective date of such notice as provided
in paragraph (b) below (notwithstanding the provisions of Section 2.10 hereof);
and
(iii) refuse to make any LIBOR Bid Loan that it has agreed to make.
(b) For purposes of this Section 5.03, a notice to the Company by any Bank
pursuant to paragraph (a) above shall be effective, if lawful, and if any Fixed
Rate Loans shall then be outstanding, on the last day of the then current
Interest Period; otherwise, such notice shall be effective on the date of
receipt by the Company.
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1.01 Compensation. The Company shall pay to the Administrative Agent for
account of each Bank, upon the request of such Bank through the Administrative
Agent, such amount or amounts as shall be sufficient (in the reasonable opinion
of such Bank) to compensate it for any loss, cost or expense that such Bank
determines is attributable to:
(a) any payment, mandatory or optional prepayment or Conversion of a Fixed
Rate Loan or Absolute Rate Loan made by such Bank for any reason (including,
without limitation, the acceleration of the Loans pursuant to Section 9 hereof)
on a date other than the last day of the Interest Period for such Loan; or
(b) any failure by the Company for any reason (including, without
limitation, the failure of any of the conditions precedent specified in Section
6 hereof to be satisfied) to borrow a Fixed Rate Loan or Absolute Rate Loan
(with respect to which, in the case of a Competitive Bid Loan, the Company has
accepted a Competitive Bid Quote) from such Bank on the date for such borrowing
specified in the relevant notice of borrowing given pursuant to Section 2.02 or
2.03(b) hereof.
Without limiting the effect of the preceding sentence, such compensation
shall include for each Bank on demand an amount equal to any loss incurred or to
be incurred by it in the reemployment of the funds released by any (i) failure
of the Company to accept a Loan following a request therefor; or (ii) prepayment
of any Fixed Rate Loan (whether as a result of a reduction in Commitment or
otherwise) permitted under Section 2.10 hereof or any prepayment or Conversion
of such a Loan required or permitted by any other provision of this Agreement,
in each case if such Loan is prepaid or Converted other than on the last day of
the Interest Period for such Loan. Such loss shall be the excess, if any, as
reasonably determined by each Bank of its cost of obtaining the funds for the
Loan not accepted or being prepaid or Converted over the amount realized by such
Bank reemploying the funds received from the Company's failure to accept the
Loan, in prepayment or realized from the Loan so Converted, in each case during
the period from the date of such failure, prepayment or Conversion to the end of
the Interest Period of the Loan being requested, prepaid or Converted. Each Bank
shall deliver to the Company from time to time and upon demand by the Company
one or more certificates setting forth the cost of obtaining the funds for the
Loan not accepted or prepaid or Converted and the amount realized by such Bank
in reemploying the funds, received in prepayment or realized from the Loan so
not accepted or Converted.
U.S. Taxes. Prior to the date of the initial Loan hereunder, and from time
to time thereafter if requested by the Company, each Bank and the Swingline
Bank, in each case if organized under the laws of a jurisdiction outside the
United States, shall provide the Company with the forms prescribed by the
Internal Revenue Service of the United States certifying such Bank's exemption
from United States withholding taxes with respect to all payments to be made to
such Bank hereunder and under the Notes. Unless the Company has received forms
or other documents satisfactory to it indicating that payments hereunder or
under any Note are not subject to United States withholding tax or are subject
to such tax at a rate reduced by an applicable tax treaty, the Company may
withhold taxes from such payments at the applicable statutory rate in the case
of payments to or for any Bank organized under the laws of a jurisdiction
outside the United States. Notwithstanding any provision in this Section 5.05 to
the contrary, in the event the Company withholds such taxes from payments made
by the Company, the Company shall not be 1.01 required to increase the amount of
such payment to such Bank or the Swingline Bank in order to compensate such Bank
or the Swingline Bank for the amount withheld.
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1.01 Replacement of Banks. So long as no Event of Default has occurred and
is continuing, the Company, upon three Business Days' notice, may require that
any Bank (a "Replaced Bank") transfer all of its right, title and interest under
this Agreement (except for its right, title and interest with respect to Letters
of Credit for which it has acted as Issuing Bank) and such Replaced Bank's
Notes, if any, to any bank or other financial institution (which may be an
existing Bank) (a "Proposed Bank") identified by the Company so long as (i) if
the Proposed Bank is not an existing Bank, such Proposed Bank is satisfactory to
the Administrative Agent in its reasonable determination, (ii) (y) such Proposed
Bank agrees to assume all of the obligations of such Replaced Bank hereunder
(except with respect to Letters of Credit for which it has acted as Issuing
Bank), and to purchase all of such Replaced Bank's Loans and LC Exposure
hereunder for consideration equal to the aggregate outstanding principal amount
of such Replaced Bank's Loans and the amount of such LC Exposure, together with
interest thereon to the date of such purchase, and arrangements satisfactory to
such Replaced Bank in its reasonable determination are made for payment to such
Replaced Bank of all other amounts payable hereunder to such Replaced Bank on or
prior to the date of such transfer (including any fees accrued hereunder and any
amounts that would be payable under Section 5.04 hereof as if all of such
Replaced Bank's Loans were being prepaid in full on such date), or (z) other
arrangements satisfactory to the Replaced Bank, the Proposed Bank and the
Company are made and (iii) as a result of such replacement the Proposed Bank's
Commitment is not greater than 20% of the aggregate amount of the Commitments.
Subject to the provisions of Section 11.06(b) hereof, such Proposed Bank shall
be a "Bank" for all purposes hereunder. Without prejudice to the survival of any
other agreement of the Company hereunder, the agreements of the Company
contained in Sections 5.01 and 11.03 hereof (without duplication of any payments
made to such Replaced Bank by the Company or the Proposed Bank) shall survive
for the benefit of such Replaced Bank under this Section 5.06 with respect to
the time prior to such replacement.
Section 2. Conditions Precedent.
2.01 Initial Loan. The obligation of any Bank to make its initial Loan
hereunder and of any Issuing Bank to issue Letters of Credit hereunder is
subject to the conditions precedent that the Administrative Agent shall have
received the following documents (with sufficient copies for each Bank), each of
which shall be satisfactory to the Administrative Agent (and to the extent
specified below, to each Bank) in form and substance (which conditions may be
satisfied on the date of the execution and delivery of this Agreement):
(a) Corporate Documents. Certified copies of the charter and by-laws (or
equivalent documents) of the Company, a long-form certificate of good standing
for the Company from the office of the Secretary of State of the State of
Delaware and certified copies of all corporate authority for the Company
(including, without limitation, board of director resolutions and evidence of
the incumbency, including specimen signatures, of officers) with respect to the
execution, delivery and performance of this Agreement and the Notes and each
other document to be delivered by the Company from time to time in connection
herewith and the Loans hereunder (and the Administrative Agent and each Bank may
conclusively rely on such certificate until it receives notice in writing from
the Company to the contrary).
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(a) Opinion of Counsel to the Company. An opinion of Cahill Gordon &
Reindel, counsel to the Company, substantially in the form of Exhibit A hereto
(and the Company hereby instructs such counsel to deliver such opinion to the
Banks and the Administrative Agent).
(b) Other Documents. Such other documents as the Administrative Agent or
any Bank or Winston & Strawn, special counsel to Chase, may reasonably request.
Payment of Fees. Receipt by each of the Banks of each of the fees which
they are entitled to be paid on the Closing Date or prior to the initial
extension of credit hereunder pursuant to the terms hereof or of any other
agreement between the Company and the Banks.
Termination of Existing Credit Agreement. Evidence acceptable to the
Administrative Agent that all amounts outstanding pursuant to that certain
Credit Agreement dated April 10, 1997 among the Company, the Banks party
thereto, and The Chase Manhattan Bank, as Administrative Agent, have been repaid
in full and that the commitments of the lenders thereunder have been terminated.
1.02 Initial and Subsequent Loans. The obligation of any Bank or the
Swingline Bank to make any Loan (including any Competitive Bid Loan and such
Bank's initial Syndicated Loan and any Swingline Loan) to the Company upon the
occasion of each borrowing hereunder, and of the Issuing Bank to issue, amend,
renew or extend any Letters of Credit, is subject to the further conditions
precedent that, both immediately prior to the making of such Loan or the
issuance, amendment, renewal, or extension of such Letter of Credit, as the case
may be, and in either event also after giving effect thereto and to the intended
use thereof:
(a) subject to the right of the Company to Continue Loans during the
occurrence and continuation of an Event of Default as provided in Section
2.10(c) hereof, no Event of Default (and, if such borrowing or issuance,
amendment, renewal or extension of a Letter of Credit will increase the
outstanding aggregate principal amount of the Loans of any Bank hereunder or the
LC Exposure, as the case may be, no Default) shall have occurred and be
continuing; and
(b) the representations and warranties made by the Company in Section 7
hereof (other than Section 7.07 hereof) shall be true and complete on and as of
the date of the making of such Loan, or the date of issuance, amendment, renewal
or extension of such Letters of Credit, as applicable, with the same force and
effect as if made on and as of such date (or, if any such representation or
warranty is expressly stated to have been made as of a specific date, as of such
specific date) provided that, notwithstanding the foregoing, the representation
and warranty made by the Company in Section 7.05 hereof shall not be required to
be true and complete on and as of the making of any Loan, if prior to the making
of such Loan, an officer of the Company shall have certified to the
Administrative Agent in writing that the purpose of such Loan is to repay
commercial paper maturing on such date.
Each notice of borrowing or request for issuance, amendment, renewal or
extension of a Letter of Credit by the Company hereunder shall constitute a
certification by the Company to the effect set forth in the preceding sentence
(both as of the date of such notice and as of the date of such borrowing,
issuance, amendment, renewal or extension of a Letter of Credit, as the case may
be).
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Section 1. Representations and Warranties. The Company represents and
warrants to the Administrative Agent, the Swingline Bank and the Banks that:
1.01 Organization, Corporate Powers. (a) The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware; (b) the Company (i) has the corporate power and authority to own its
Property and to carry on its business as now conducted and (ii) is qualified to
do business in every jurisdiction where such qualification is necessary in view
of the properties owned or business transacted by it; and (c) the Company has
the corporate power to execute, deliver and perform this Agreement, to borrow
hereunder, to execute and deliver the Notes and to perform all of its
obligations hereunder with respect to Letters of Credit.
1.02 Authorization. The execution, delivery and performance of this
Agreement, the borrowings hereunder, the execution and delivery of the Notes and
the performance by the Company of each of its obligations hereunder with respect
to Letters of Credit issued by an Issuing Bank, (a) have been duly authorized by
all requisite corporate action on the part of the Company and (b) will not (i)
violate (A) any provision of law applicable to the Company, the certificate of
incorporation or by-laws of the Company, (B) any applicable order of any court
or other agency of government or (C) any indenture, any agreement for borrowed
money, any bond, note or other similar instrument or any other material
agreement to which the Company or any of its Subsidiaries is a party or by which
the Company or any of its Subsidiaries or any of their respective Properties is
bound, (ii) be in conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any such indenture, agreement,
bond, note, instrument or other material agreement or (iii) result in the
creation or imposition of any Lien upon any Property of the Company.
1.03 Governmental Approval. No action, consent or approval of, or
registration or filing with, or any other action by any governmental agency,
bureau, commission or court is required in connection with the execution,
delivery and performance by the Company of this Agreement, the borrowings
hereunder, the execution and delivery of the Notes, and the performance by the
Company of each of its obligations hereunder with respect to Letters of Credit
issued by an Issuing Bank.
1.04 Financial Statements. The Company has heretofore furnished to each
Bank its audited consolidated financial statements as at December 31, 2000 and
for the twelve month period then ended. Such financial statements were prepared
in accordance with GAAP and present fairly the consolidated financial condition
and results of operations of the Company and its Subsidiaries as of the date and
for the period indicated, and such balance sheet shows all known direct
liabilities and all known contingent liabilities of a material nature of the
Company and its Subsidiaries.
1.01 No Material Adverse Change. There has been no material adverse change
in the business, assets, condition (financial or otherwise) or results of
operations of the Company and its Subsidiaries taken as a whole since December
31, 2000.
1.02 Title to Properties. All material assets of the Company and its
Subsidiaries are free and clear of Liens, except such as are permitted by
Section 8.07 hereof.
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1.01 Litigation. There are no lawsuits in any court or other proceedings
before any arbitrator or by or before any governmental commission, board, bureau
or other administrative agency, pending, or, to the knowledge of the Company,
threatened, the ultimate disposition of which should have a material adverse
effect on the consolidated financial condition or business of the Company and
its Subsidiaries taken as a whole; and neither the Company nor any of its
Subsidiaries is in default with respect to any judgment, writ, injunction,
decree, rule or regulation of any court or Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, which default would have a material adverse effect on the
Company and its Subsidiaries taken as a whole.
1.02 Tax Returns. All material assessed deficiencies resulting from
examinations of the Federal income tax returns of the Company and its
Subsidiaries by the Internal Revenue Service have been discharged or reserved
against in full. The Company and each of its Subsidiaries have filed or caused
to be filed all Federal, state and local tax returns which, to the knowledge of
the Company, are required to be filed and have paid or caused to be paid all
taxes as shown on such returns or on any assessment received by it or by any of
them to the extent that such taxes have become due, except taxes the validity of
which is being contested in good faith by appropriate proceedings or the
nonpayment of which would not have a material adverse effect on the financial
condition of the Company and its Subsidiaries taken as a whole.
1.03 Agreements. Neither the Company nor any of its Principal Subsidiaries
is in material default in the performance, observance or fulfillment of any
obligation, covenant or condition contained in any material agreement or
instrument to which it is a party.
1.04 Employee Benefit Plans. Each of the Company and its Subsidiaries is in
compliance in all material respects with the applicable provisions of ERISA and
the regulations and published interpretations thereunder. No Reportable Event
has occurred with respect to any Plan administered by the Company or any of its
Subsidiaries or any administrator designated by the Company or any of its
Subsidiaries. As of the date of the most recent actuarial valuation of each Plan
administered by the Company, its Domestic Subsidiaries and administrators
designated by the Company or any of its Subsidiaries, the aggregate present
value of all vested accrued benefits under all such Plans (determined in
accordance with the assumptions specified in such actuarial valuations) did not
exceed the fair market value of the aggregate assets of such Plans by more than
$10,000,000.
Federal Reserve Regulations. Neither the Company nor any of its
Subsidiaries is engaged principally, or as one of its important activities, in
the business of extending credit for the purposes of purchasing or carrying any
margin stock (within the meaning of Regulation U). Following application of the
proceeds of each Loan, not more than 25 percent (or such greater or lesser
percentage as provided in Regulation U in effect at the time of the making of
such Loan) of 1.01 the value of the Property (either of the Company only or of
the Company and its Subsidiaries on a consolidated basis) subject to the
provisions of Section 8.07 or 8.08 hereof will be margin stock (within the
meaning of Regulation U).
1.02 Investment Company Act. Neither the Company nor any of its
Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
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1.01 Public Utility Holding Company Act. Neither the Company nor any of its
Subsidiaries is a "holding company", or an "affiliate" of a "holding company" or
a "subsidiary company" of a "holding company", within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
Section 2. Covenants of the Company. The Company covenants and agrees with
the Administrative Agent, the Swingline Bank and the Banks that, so long as (a)
any Commitment or Loan is outstanding, (b) any Letters of Credit shall not have
expired or been terminated, (c) any LC Disbursements shall have not been
reimbursed in full, or (d) any amounts payable by the Company hereunder have not
yet been paid in full:
2.01 Corporate Existence. The Company shall do, and shall cause each of its
Principal Subsidiaries to do, all things necessary to preserve, renew and keep
in full force and effect its corporate existence, material rights, licenses,
permits and franchises and comply with all laws and regulations applicable to
it; at all times maintain and preserve all Property used or useful in the
conduct of its business and keep the same in good repair, working order and
conditions, and from time to time make, or cause to be made, all needful and
proper repairs, renewals and replacements thereto, so that the business carried
on in connection therewith may be properly conducted at all times.
2.02 Insurance. The Company shall, and shall cause each of its Principal
Subsidiaries to, (a) keep its insurable Properties adequately insured at all
times; (b) maintain such other insurance, to such extent and against such risks,
including fire and other risks insured against by extended coverage, as is
customary with companies in the same or similar businesses; (c) maintain in full
force and effect public liability insurance against claims for personal injury
or death or property damage occurring upon, in, about or in connection with the
use of any properties owned, occupied or controlled by the Company or any
Principal Subsidiary, as the case may be, in such amount as the Company or such
Principal Subsidiary, as the case may be, shall reasonably deem necessary; and
(d) maintain such other insurance as may be required by law.
Obligations and Taxes. The Company shall pay, and shall cause each of its
Principal Subsidiaries to pay, all its material indebtedness and obligations
promptly and in accordance with their terms and pay and discharge promptly all
material taxes, assessments and governmental charges or levies imposed upon it
or upon its income or profits or in respect of its Property, before the same
shall become in default, as well as all material lawful claims for labor,
materials and supplies or otherwise which, if unpaid, might become a Lien or
charge upon such properties or any part thereof; provided, however, that neither
the Company nor any of its Principal Subsidiaries shall be required to pay and
discharge or to cause to be paid and discharged 1.01 any such tax, assessment,
charge, levy or claim so long as the validity or amount thereof shall be
contested in good faith by appropriate proceedings and provided the Company
shall have set aside on its books reserves which the Company deems adequate with
respect thereto.
1.02 Financial Statements, Reports, etc. The Company shall furnish to each
Bank and the Swingline Bank:
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(a) within 95 days after the end of each fiscal year of the Company (being
December 31 in each calendar year), an audited consolidated balance sheet of the
Company and its Subsidiaries and the related audited consolidated statement of
earnings showing the financial condition of the Company and its Subsidiaries as
of the close of such fiscal year and the results of their operations during such
year, and a consolidated statement of stockholders' equity and a consolidated
statement of cash flows, as of the close of such fiscal year, all the foregoing
consolidated financial statements to be reported on by, and to carry the report
acceptable to the Majority Banks of, the Company's independent public
accountants (which shall be Arthur Andersen LLP or another independent firm of
nationally recognized certified public accountants), such financial statements
to be in form acceptable to the Majority Banks in their reasonable
determination;
(b) within 50 days after the end of each of the first three fiscal quarters
of each fiscal year, an unaudited consolidated balance sheet and unaudited
consolidated statements of earnings and of cash flows showing the financial
condition of the Company and its Subsidiaries as of the end of each such quarter
and the results of operations for the then-elapsed portion of the fiscal year,
certified by a Financial Officer of the Company as being correct and complete
and as presenting fairly the financial position and results of operations of the
Company and its Subsidiaries and as having been prepared in accordance with GAAP
consistently applied, in each case subject to normal year-end audit adjustments;
(c) concurrently with (a) above, a certificate of the firm referred to
therein (which certificate may be limited to accounting matters and disclaim
responsibility for legal interpretations) certifying that to the best of its
knowledge no Default has occurred and is continuing or, if such a Default has
occurred and is continuing, specifying the nature and extent thereof;
(d) concurrently with (a) and (b) above, a certificate of the Company
setting forth in reasonable detail the computations necessary to determine
whether the Company is in compliance with Section 8.09 hereof as of the end of
the respective quarterly fiscal period or fiscal year; and
(e) promptly, from time to time, such other information regarding the
financial condition of the Company and its Subsidiaries (and the identities, net
income and assets of Principal Subsidiaries) as the Administrative Agent or any
Bank may reasonably request.
Notices and Delivery of Certain Documents. The Company shall give the
Administrative Agent and each Bank prompt notice of any Default and furnish each
Bank with 1.01 copies of all press releases issued by the Company, all filings
made by the Company with the Securities and Exchange Commission under the
Securities Exchange Act of 1934 and all written communications from the Company
to its shareholders generally.
ERISA. The Company shall, and shall cause each of its Subsidiaries to, (a)
comply in all material respects with the applicable provisions of ERISA and (b)
furnish to each Bank, (i) as soon as possible, and in any event within 30 days
after any officer of the Company knows that any Reportable Event with respect to
any Plan with vested unfunded liabilities in excess of $5,000,000 has occurred,
a statement of a Financial Officer setting forth details as to such Reportable
Event and the action, if any, that the Company proposes to take with respect
thereto, together with a copy of the notice of such Reportable Event given to
the PBGC, (ii) at the request of any Bank, promptly after the filing thereof
with the United States Secretary of Labor or the PBGC, copies of each annual or
other report, if any, with respect to any Plan, and (iii) promptly after receipt
thereof, a copy of any notice the Company or any of its Subsidiaries may receive
from the PBGC relating to the intention of the PBGC to terminate any Plan with
vested unfunded liabilities in excess of $5,000,000 or to appoint a trustee to
administer any such Plan.
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1.01 Liens. The Company shall not, and shall not permit any of its
Subsidiaries to, incur, create or permit to exist any Lien on any of its
Property now owned or hereafter acquired by the Company or any of its
Subsidiaries, other than:
(a) Liens for taxes or assessments and similar charges either (i) not
delinquent or (ii) being contested in good faith by appropriate proceedings and
as to which the Company or such Subsidiary, as the case may be, shall have set
aside on its books adequate reserves;
(b) Liens incurred or pledges and deposits made in connection with worker's
compensation, unemployment insurance, old-age pensions and social security
benefits or securing the performance of bids, tenders, leases, Contracts, and
statutory obligations of like nature, incurred as an incident to and in the
ordinary course of business;
(c) materialmen's, mechanics', repairmen's, employees', operators' or other
similar Liens or charges arising in the ordinary course of business incidental
to construction, maintenance or operation of any Property of the Company or any
of its Subsidiaries which have not at the time been filed pursuant to law and
any such Liens and charges incidental to construction, maintenance or operation
of any Property of the Company or any of its Subsidiaries, which, although
filed, relate to obligations not yet due or the payment of which is being
withheld as provided by law, or to obligations the validity of which is being
contested in good faith by appropriate proceedings;
zoning restrictions, easements, licenses, reservations, provisions,
covenants, conditions, waivers, restrictions on the use of property or minor
irregularities of title (and with respect to leasehold interests, mortgages,
obligations, Liens and other encumbrances incurred, created, assumed or
permitted to exist and arising by, through or under or asserted by a landlord or
owner of the leased property, with or without consent of the lessee), which will
not individually or in the aggregate interfere materially with the use or
operation by the Company or any of its Subsidiaries of the Property affected
thereby for (a) the purposes for which such Property was acquired or is held by
the Company or any of its Subsidiaries;
(b) Liens created by or resulting from any litigation or proceeding which
is currently being contested in good faith by appropriate proceedings and as to
which levy and execution have been stayed and continue to be stayed;
(c) Liens consisting of, or arising in connection with, repurchase
agreements, swaps or other obligations entered into in the ordinary course of
business and not for the purpose of speculation relating to precious metals
purchased, borrowed or otherwise held by the Company or any of its Subsidiaries;
196
(a) Liens incidental to the conduct of its business or the ownership of its
Property which were not incurred in connection with the borrowing of money or
the obtaining of advances or credit and which do not in the aggregate materially
detract from the value of the Property subject thereto or materially impair the
use thereof in the operation of its business;
(b) Liens on Property of a Subsidiary of the Company to secure obligations
of such Subsidiary to the Company or another Subsidiary of the Company;
(c) Liens arising in connection with letter of credit trade transactions,
provided that the Company or any of its Subsidiaries, as the case may be,
discharges within 30 days its obligation to pay the indebtedness to banks
arising from payments made by such banks under such letters of credit; and
(d) other Liens, provided that the aggregate of all Properties and assets
of the Company and its Subsidiaries which are subject to or affected by such
Liens and which would properly be classified as assets on a consolidated balance
sheet prepared in accordance with GAAP (including all leases (other than leases
of office space and research and development facilities, if any) that would be
required to be reflected as capital leases pursuant to such principles) does not
at any time have a value on the books of the Company and its Subsidiaries in
excess of 25% of the Consolidated Tangible Net Worth calculated for the quarter
most recently ended.
Consolidations, Mergers and Sales of Assets. The Company shall not, and the
Company shall not permit any of its Principal Subsidiaries to, merge or
consolidate with or into any other Person or sell, lease, transfer or assign to
any Person or otherwise dispose of (whether in one transaction or a series of
transactions) all or substantially all of its assets (whether now owned or
hereafter acquired), except that so long as immediately thereafter and after
giving effect thereto no Default has occurred and is continuing, (a) the Company
or a Principal Subsidiary may merge or consolidate with another corporation in a
transaction in which the Company is the surviving entity or such Principal
Subsidiary is the surviving entity and continues to be a Subsidiary of the
Company, (b) the Company may merge or consolidate with another corporation in a
transaction in which such other corporation is the surviving entity if such
other corporation is acceptable to the Majority Banks in their reasonable
determination and such other corporation effectively assumes and agrees to
perform and discharge all the obligations of the Company under this Agreement
1.01 under the Notes and with respect to the Letters of Credit pursuant to a
written instrument or instruments satisfactory to the Banks and counsel for the
Banks in their reasonable determination, and (c) any Principal Subsidiary may
(i) merge or consolidate with the Company or into another Subsidiary of the
Company which continues to be a Subsidiary after such transaction or (ii) sell,
lease, transfer, assign or otherwise dispose of (whether in one transaction or
series of transactions) all or substantially all of its Property (whether now
owned or hereafter acquired) to the Company or to another Subsidiary of the
Company which continues to be a Subsidiary after such transaction or
transactions. For the purpose of this Section 8.08 only, "Principal Subsidiary"
shall mean any Subsidiary of the Company having total assets as of the end of
the most recent fiscal year equal to or greater than 25% of the consolidated
total assets of the Company and its Subsidiaries as of the end of such fiscal
year of the Company.
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1.01 Debt to EBITDA. The Company shall not permit, as of the last day of
each fiscal quarter of the Company, the ratio of Debt of the Company and its
Consolidated Subsidiaries at such date to EBITDA for the preceding four fiscal
quarters immediately preceding such date, including the fiscal quarter most
recently ended to be greater than 3.0 to 1.0.
1.02 Use of Proceeds. The Company shall use the proceeds of the Loans for
general corporate purposes, including, without limitation, to provide liquidity
support for the issuance of commercial paper and acquisition financing;
provided, however, (a) that the proceeds of any Swingline Loan may not be used
to repay or prepay any other Swingline Loan and (b) that no Loan shall be
available if the Majority Banks, in their sole discretion and upon notice to the
Company explaining the basis, refuse to make any Loan the proceeds of which will
be used by the Company in an acquisition which the Majority Banks have
reasonable cause to believe is opposed by the acquired Person's board of
directors or other governing body or is likely to be hostile or unfriendly;
provided, further, that no Bank may refuse to make any Loan pursuant to this
Section 8.10 if the Company presents a certified resolution of the board of
directors or other governing body of the acquired entity approving, supporting
or otherwise evidencing agreement with the proposed acquisition. None of the
Administrative Agent, the Arranger, the Documentation Agents, the Syndication
Agent nor any Bank or the Swingline Bank shall have any responsibility as to the
use of any of such proceeds.
Section 2. Events of Default. If one or more of the following events
(herein called "Events of Default") shall occur and be continuing:
(a) any representation or warranty made in connection with this Agreement
or with the execution and delivery of the Notes, the borrowings hereunder or in
connection with the issuance of, or performance by any Bank (including without
limitation any Issuing Bank) with respect to, Letters of Credit, or any
statement or representation made in any report, certificate, financial statement
or other instrument furnished by the Company to the Administrative Agent, the
Swingline Bank or the Banks pursuant to this Agreement shall prove to have been
false or misleading in any material respect when made or delivered;
default shall be made in the payment of any principal or interest hereunder
or under any Note, any reimbursement obligation in respect of any LC
Disbursement, or of any fees or other amounts payable by the Company hereunder,
when and as the same shall become due and payable, whether at the due date
thereof or at a date fixed for prepayment (a) thereof or by acceleration thereof
or otherwise, and, in the case of payments other than of any principal amounts
or reimbursement obligations in respect of LC Disbursements hereunder, such
default shall continue unremedied for three (3) Business Days;
(b) default shall be made with respect to any agreement or other evidence
of indebtedness or liability for borrowed money in excess of $50,000,000 (other
than hereunder) of the Company or any Principal Subsidiary if the effect of such
default is to accelerate the maturity of such indebtedness or liability or to
require the prepayment thereof or to permit the holder or holders thereof (or a
trustee on behalf of the holder or holders thereof) to cause such indebtedness
to become due prior to the stated maturity thereof, or any such indebtedness or
liability shall become due and shall not be paid prior to the expiration of any
period of grace;
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(a) default shall be made in the due observance or performance of Section
8.09 hereof;
(b) default shall be made in the due observance or performance of any other
covenant, condition or agreement to be observed or performed by the Company
pursuant to the terms hereof and such default shall continue unremedied for 10
days after written notice thereof to the Company by any Bank;
(c) the Company or any Principal Subsidiary shall file one or more
petitions or answers or consents seeking relief under Title 11 of the United
States Code, as now or hereafter constituted, or any other applicable foreign,
Federal or state bankruptcy, insolvency or similar law or laws, or shall consent
to the institution of proceedings thereunder or to the filing of any such
petition or to the appointment of or taking of possession of the Company or any
Principal Subsidiary, as the case may be, or any Property of any of the same,
by, one or more receivers, liquidators, assignees, trustees, custodians,
sequestrator or other similar officials or the Company or any Principal
Subsidiary shall make one or more assignments for the benefit of creditors, or
shall become unable generally to pay its debts as they become due, or the
Company or any Principal Subsidiary shall take action in furtherance of any such
action;
(d) one or more decrees or orders shall be entered by one or more courts
having jurisdiction in the premises for relief in respect of the Company or any
Principal Subsidiary under Title 11 of the United States Code, as now or
hereafter constituted, or any other applicable foreign, Federal or state
bankruptcy, insolvency or similar law or laws, or appointing one or more
receivers, liquidators, assignees, trustees, sequestrator or similar officials
of the Company or any Principal Subsidiary, as the case may be, or of any
Property of any of the same, or ordering the winding up or liquidation of the
affairs of the Company or any Principal Subsidiary, and any one or more such
decrees or orders shall continue unstayed and in effect for a period of 60 days;
(e) final judgment for the payment of money in excess of an aggregate of
$50,000,000 and not fully covered by insurance shall be rendered against the
Company or any Principal Subsidiary and the same shall remain undischarged for a
period of 60 consecutive days during which execution shall not be effectively
stayed;
(a) A Reportable Event shall have occurred with respect to any Plan with
vested unfunded liabilities in excess of $5,000,000 which the Majority Banks
determine constitutes reasonable grounds for the termination of such Plan by the
PBGC or for the appointment by the appropriate United States District Court of a
trustee to administer such Plan or a trustee shall be appointed by a United
States District Court to administer any Plan with vested unfunded liabilities in
excess of $5,000,000; or the PBGC shall institute proceedings to terminate any
Plan with vested unfunded liabilities in excess of $5,000,000; or the withdrawal
by the Company or any Subsidiary from a Multiemployer Plan giving rise to
Withdrawal Liability in excess of $5,000,000; or
(b) a Change in Control of the Company shall have occurred; for purposes of
this paragraph (j), a "Change in Control" shall mean the acquisition by any
Person (other than the Company) or group (as defined in the Securities Exchange
Act of 1934) of twenty-five percent (25%) or more of the voting power of the
Company entitled to vote in the election of directors;
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THEREUPON: (1) in the case of an Event of Default other than one referred
to in clause (f) or (g) of this Section 9 with respect to the Company, (A) the
Administrative Agent, with the approval of the Majority Banks, may and, upon
request of the Majority Banks (or with respect to Swingline Loans, upon the
request of the Swingline Bank), will, by notice to the Company, terminate the
Commitments (and/or the Swingline Commitment) and they shall thereupon
terminate, and (B) the Administrative Agent, with the approval of the Majority
Banks, may and, upon request of the Majority Banks shall, by notice to the
Company declare the principal amount then outstanding of, and the accrued
interest on, the Loans and all other amounts payable by the Company hereunder
and under the Notes (including, without limitation, any amounts payable under
Section 5.04 hereof) to be forthwith due and payable, whereupon such amounts
shall be immediately due and payable without presentment, demand, protest or
other formalities of any kind, all of which are hereby expressly waived by the
Company; and (2) in the case of the occurrence of an Event of Default referred
to in clause (f) or (g) of this Section 9 with respect to the Company, the
Commitments shall automatically be terminated and the principal amount then
outstanding of, and the accrued interest on, the Loans and all other amounts
payable by the Company hereunder and under the Notes (including, without
limitation, any amounts payable under Section 5.04 hereof) shall automatically
become immediately due and payable without presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by the
Company.
Section 1. The Administrative Agent.
1.01 Appointment, Powers and Immunities. Each Bank and the Swingline Bank
hereby appoints and authorizes the Administrative Agent to act as its agent
hereunder with such powers as are specifically delegated to the Administrative
Agent by the terms of this Agreement, together with such other powers as are
reasonably incidental thereto. The Administrative Agent (which term as used in
this sentence and in Section 10.05 and the first sentence of Section 10.06
hereof shall include reference to its Related Parties):
(a) shall have no duties or responsibilities except those expressly set
forth in this Agreement, and shall not by reason of this Agreement be a trustee
for any Bank or the Swingline Bank;
(a) shall not be responsible to the Banks or the Swingline Bank for any
recitals, statements, representations or warranties contained in this Agreement,
or in any certificate or other document referred to or provided for in, or
received by any of them under, this Agreement, or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement, any
Note or any other document referred to or provided for herein or for any failure
by the Company to perform any of its obligations hereunder or thereunder;
(b) shall not be required to initiate or conduct any litigation or
collection proceedings hereunder; and
(c) shall not be responsible for any action taken or omitted to be taken by
it hereunder or under any other document or instrument referred to or provided
for herein or in connection herewith, except for its own gross negligence or
willful misconduct.
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The Administrative Agent may employ agents and attorneys-in-fact and shall
not be responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith. The Administrative Agent may
deem and treat the payee of a Note as the holder thereof for all purposes hereof
unless and until a notice of the assignment or transfer thereof shall have been
filed with the Administrative Agent, together with the consent of the Company to
such assignment or transfer (to the extent required by Section 11.06(b) hereof).
1.01 Reliance by Administrative Agent. The Administrative Agent shall be
entitled to rely upon any certification, notice or other communication
(including, without limitation, any thereof by telephone, telecopy, telegram or
cable) believed by it to be genuine and correct and to have been signed or sent
by or on behalf of the proper Person or Persons, and upon advice and statements
of legal counsel, independent accountants and other experts selected by the
Administrative Agent. As to any matters not expressly provided for by this
Agreement, the Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, hereunder in accordance with instructions
given by the Majority Banks (or, if so provided in Section 11.04 hereof, all of
the Banks), and such instructions of the Majority Banks (or all of the Banks, as
the case may be) and any action taken or failure to act pursuant thereto shall
be binding on all of the Banks.
1.02 Defaults. The Administrative Agent shall not be deemed to have
knowledge or notice of the occurrence of a Default unless the Administrative
Agent has received notice from a Bank, the Swingline Bank or the Company
specifying such Default and stating that such notice is a "Notice of Default".
In the event that the Administrative Agent receives such a notice of the
occurrence of a Default, the Administrative Agent shall give prompt notice
thereof to the Banks and the Swingline Bank. The Administrative Agent shall
(subject to Section 10.07 hereof) take such action with respect to such Default
as shall be directed by the Majority Banks or in the case of Swingline Loans,
the Swingline Bank provided that, unless and until the Administrative Agent
shall have received such directions, the Administrative Agent may (but shall not
be obligated to) take such action, or refrain from taking such action, with
respect to such Default as it shall deem advisable in the best interest of the
Banks except to the extent that this Agreement expressly requires that such
action be taken, or not be taken, only with the consent or upon the
authorization of the Majority Banks or all of the Banks.
Rights as a Bank. With respect to its Commitment, Swingline Commitment and
the Loans made by it, Chase (and any successor acting as Administrative Agent)
in its capacity as a Bank or the Swingline Bank hereunder shall have the same
rights and powers hereunder as any other Bank and may exercise the same as
though it were not acting as the Administrative Agent, and the term "Bank" or
"Banks" or "Swingline Bank" shall, unless the context otherwise indicates,
include the Administrative Agent in its individual capacity. Chase (and any
successor acting as Administrative Agent) and its Affiliates may (without having
to account therefor to any Bank) accept deposits from, lend money to, make
investments in and generally engage in any kind of banking, trust or other
business with the Company (and any of its Subsidiaries or Affiliates) as if it
were not acting as the Administrative Agent, and Chase (and any such successor)
and its Affiliates may accept fees and other consideration from the Company for
services in connection with this Agreement or otherwise without having to
account for the same to the Banks or the Swingline Bank.
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1.01 Indemnification. The Banks agree to indemnify the Administrative Agent
(to the extent not reimbursed under Section 11.03 hereof, but without limiting
the obligations of the Company under said Section 11.03) ratably in accordance
with their respective commitments (and, after the Commitments have been
terminated, ratably in accordance with the aggregate principal amount of the
Loans held by the Banks), for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind and nature whatsoever that may be imposed on, incurred by or
asserted against the Administrative Agent (including by any Bank) arising out of
or by reason of any investigation in or in any way relating to or arising out of
this Agreement or any other documents contemplated by or referred to herein or
the transactions contemplated hereby (including, without limitation, the costs
and expenses that the Company is obligated to pay under Section 11.03 hereof but
excluding unless a Default has occurred and is continuing, normal administrative
costs and expenses incident to the performance of its agency duties hereunder)
or the enforcement of any of the terms hereof or of any such other documents,
provided that no Bank shall be liable for any of the foregoing to the extent
they arise from the gross negligence or willful misconduct of the party to be
indemnified.
1.02 Non-Reliance on Administrative Agent and Other Banks. Each Bank agrees
that it has, independently and without reliance on the Administrative Agent, the
Arranger or any other Bank, and based on such documents and information as it
has deemed appropriate, made its own credit analysis of the Company and its
Subsidiaries and decision to enter into this Agreement and that it will,
independently and without reliance upon the Administrative Agent or any other
Bank, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own analysis and decisions in taking or not
taking action under this Agreement. The Administrative Agent shall not be
required to keep itself informed as to the performance or observance by the
Company of this Agreement or any other document referred to or provided for
herein or to inspect the Properties or books of the Company or any of its
Subsidiaries. Except for notices, reports and other documents and information
expressly required to be furnished to the Banks by the Administrative Agent
hereunder, the Administrative Agent shall not have any duty or responsibility to
provide any Bank with any credit or other information concerning the affairs,
financial condition, operations, business, Properties, liabilities or prospects
of the Company or any of its Subsidiaries (or any of their Affiliates) that may
come into the possession of the Administrative Agent or any of its Affiliates.
1.01 Failure to Act. Except for action expressly required of the
Administrative Agent hereunder, the Administrative Agent shall in all cases be
fully justified in failing or refusing to act hereunder unless it shall receive
further assurances to its satisfaction from the Banks of their indemnification
obligations under Section 10.05 hereof against any and all liability and expense
that may be incurred by it by reason of taking or continuing to take any such
action.
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1.01 Resignation or Removal of Administrative Agent. Subject to the
appointment and acceptance of a successor Administrative Agent as provided
below, the Administrative Agent may resign at any time by giving notice thereof
to the Banks and the Company, and the Administrative Agent may be removed at any
time with or without cause by the Majority Banks. Upon any such resignation or
removal, the Majority Banks shall have the right to appoint a successor
Administrative Agent. If no successor Administrative Agent shall have been so
appointed by the Majority Banks and shall have accepted such appointment within
30 days after the retiring Administrative Agent's giving of notice of
resignation or the Majority Banks' removal of the retiring Administrative Agent,
then the retiring Administrative Agent may, on behalf of the Banks, appoint a
successor Administrative Agent, that shall be a bank that has an office in New
York, New York with a combined capital and surplus of at least $500,000,000.
Upon the acceptance of any appointment as Administrative Agent hereunder by a
successor Administrative Agent, such successor Administrative Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Administrative Agent, and the retiring Administrative
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Administrative Agent's resignation or removal hereunder as
Administrative Agent, the provisions of this Section 10 shall continue in effect
for its benefit in respect of any actions taken or omitted to be taken by it
while it was acting as the Administrative Agent.
Section 2. Miscellaneous.
Waiver. No failure on the part of the Administrative Agent, the Swingline
Bank, or any Bank to exercise and no delay in exercising, and no course of
dealing with respect to, any right, power or privilege under this Agreement or
any Note shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege under this Agreement or any Note
preclude any other or future exercise thereof or the exercise of any right,
power or privilege. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law.
2.01 Notices. All notices, requests and other communications provided for
herein (including, without limitation, any modifications of, or waivers,
requests or consents under, this Agreement) shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, or with respect to notices given pursuant
to Section 2.03 hereof, by telephone, confirmed in writing by telecopier by the
close of business on the day such notice is given, as follows:
(a) if to the Company, to it at Engelhard Corporation, 101 Wood Avenue,
Iselin, New Jersey 08830, Attention of Peter Rapin, Treasurer (Telecopy No.
(732)205-9847) with a copy to the General Counsel (Telecopy No. (732)548-7835);
if to the Administrative Agent, to The Chase Manhattan Bank, Agent Bank
Services Group, 270 Park Avenue, New York, New York 10017, Attention: Loan
Agency (a) Group (Telecopy No. (212)552-7253), with a copy to The Chase
Manhattan Bank, One Chase Manhattan Plaza, 8th Floor, New York, New York 10081,
Attention: Maxeen Pinnock (Telecopy No. (212)552-7490);
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(a) if to the Arranger, to JPMorgan Securities Inc., 270 Park Avenue, 5th
Floor, New York, New York 10017, Attention: Thomas Kuhn (Telecopy
No.(212)270-1063);
(b) if to any other Bank (including the Documentation Agents or the
Syndication Agent), to it at its address (or telecopy number) set forth in its
Administrative Questionnaire.
Any party hereto may change its address or telecopy number for notices and
other communications hereunder by notice to the other parties hereto. Except as
otherwise provided in this Agreement, all notices and other communications given
to any party hereto in accordance with the provisions of this Agreement shall be
deemed to have been given on the date of receipt.
1.02 Indemnification, Expenses, Etc. (a) The Company will indemnify each
Bank, the Administrative Agent, the Arranger, the Issuing Banks and the
Swingline Bank and each Related Party (collectively, the "Named Persons") and
hold such Named Persons harmless against any losses and related reasonable
out-of-pocket expenses incurred by each such Named Person (i) in the enforcement
or protection of its rights in connection with this Agreement, with the Loans
made or the Notes or Letters of Credit issued hereunder, (ii) as a result of any
transaction, action or failure to act arising from the foregoing, including, but
not limited to, the reasonable fees and disbursements of counsel to such Named
Persons, and (iii) with respect to any action which may be instituted by any
Person against such Named Persons, (x) as a direct result of the execution and
delivery of this Agreement or, (y) with respect to the Loans made or Letters of
Credit issued hereunder, provided that with respect to each of the indemnities
provided for in this subsection (a), such indemnities shall not, as to any Named
Person, be available to the extent that such losses or related expenses are
determined by a court of competent jurisdiction to have resulted from the gross
negligence or willful misconduct of such Named Person.
(b) The Company agrees that it shall indemnify each Named Person from and
hold each of them harmless against any documentary taxes, assessments or charges
made by any governmental authority by reason of the execution and delivery of
this Agreement or the Notes or the issuance of, or performance of any Bank's
(including, without limitation, any Issuing Bank's) obligations with respect to,
any Letter of Credit. The obligations of the Company under this Section shall
survive the termination of this Agreement, the payment of the Notes and the
expiration or termination of all Letters of Credit.
(c) The Company shall indemnify each Named Person, and hold each Named
Person harmless from, any and all losses, damages, liabilities and reasonable
related expenses, including the fees, charges and disbursements of any counsel
for any Named Person, incurred by any Named Person arising out of or as a result
of any claims pursuant to any Environmental Laws regarding (a) any actual or
alleged presence or release of Hazardous Materials on or from any property owned
or operated by the Company or any of its Subsidiaries, or (b) any Environmental
Liability, except to the extent attributable to actions of any Named Person.
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(d)(i) If after any Named Person(s) shall have made a claim for
indemnification hereunder and the Company shall have failed to agree to defend
or settle the claim to which such claim for indemnification relates (a
"Third-Party Claim") within fifteen (15) Business Days (the "Notice Period"),
such Named Person(s) may defend or settle the Third-Party Claim as it or they
deem appropriate without prejudice to any of their above rights to indemnity
from the Company, and with no further obligation to inform the Company of the
status of the Third-Party Claim and no right of the Company to approve or
disapprove any actions taken in connection therewith by the Named Person(s).
Notwithstanding the foregoing, in the event that the Company fails to agree to
defend or settle a Third-Party Claim on behalf of the Named Person(s) within the
Notice Period, the amount of any indemnity due hereunder shall bear interest
calculated at the Base Rate, from the date upon which the Named Person(s) are
required to make any payment(s) with respect to the Third-Party Claim and any
related costs and expenses as provided herein, to the date of the Company's
payment to the Named Person(s) as required hereby, calculated upon the actual
number of days elapsed over a 365-day year.
(ii) If the Company agrees to defend or settle a Third-Party Claim on
behalf of any Named Person(s) hereunder, it shall so notify the Named Person(s)
within the Notice Period and elect either (a) to undertake the defense or settle
such Third-Party Claim with counsel selected by the Company and approved by the
Named Person(s), which approval shall not be unreasonably withheld, and the
provisions of subclause (iii) of this Section 11.03(d) shall be applicable
thereto, or (b) to instruct the Named Person(s) to defend or settle such
Third-Party Claim, in which event the Named Person(s) may defend or settle the
Third-Party Claim as it or they deem appropriate without prejudice to any of
their above rights to indemnity from the Company, provided that, the Company
shall not be liable under this Section 11.03(d)(ii) to indemnify any Named Party
in respect of any settlement effected without its consent, such consent not to
be unreasonably withheld.
(iii) If the Company undertakes the defense or settlement of such
Third-Party Claim, the Named Person(s) shall be entitled, at their own expense,
to participate in such defense or settlement negotiation. If the Company
undertakes such defense or settlement of a Third-Party Claim on behalf of the
Named Person(s), no compromise or settlement of such Third-Party Claim shall be
made by any Named Person without the prior written consent of the Company. In
addition, no compromise or settlement of any Third-Party Claim shall be made by
the Company without the prior written consent of the Named Person(s), such
consent not to be unreasonably withheld, provided, that in the event that a
Named Person shall not consent to such compromise or settlement (in connection
with which the Company shall have agreed to indemnify such Named Person in full
in respect of such compromise or settlement pursuant to the terms of this
Section 11.03), the amount of indemnification to which such Named Person(s) is
entitled pursuant to this Section 11.03(d)(iii) shall be limited to the amount
of such proposed settlement, plus all applicable out-of-pocket costs and
expenses up to the date of the proposal of such settlement.
(iv) Notwithstanding the foregoing provisions of this subsection (d), in
the event that the Company agrees to undertake the defense of or settlement of
any Third-Party Claim, the Company agrees that its indemnity obligations
hereunder shall include the payment of the reasonable fees and disbursements of
separate counsel to the Named Person(s) if (x) in such Named Person(s)'s
reasonable judgment and in the good faith judgment of its separate legal
counsel, the use of counsel chosen by the Company would present such counsel
with a conflict of interest; or (y) the Company shall authorize such Named
Person(s) to employ separate counsel at the Company's expense, (it being agreed
that the Company shall not, under any of the circumstances described in clauses
(x) or (y) above, have the right to direct the defense of such action or
proceeding on behalf of the Named Person(s)).
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(v) Notwithstanding any other provision of this subsection (d) (but without
affecting the limitation of the Company's liability set forth in subsection
(iii) of this Section 11.03(d)), (x) the Company shall not, without the prior
written consent of the relevant Named Person(s) agree to any settlement of any
claim, litigation or proceeding in respect of which indemnity shall be sought
hereunder if such settlement contains an admission of wrongdoing by such Named
Person or if all claimants shall not have executed a full release in favor of
such Named Person, and (y) each Named Person shall, subject to its reasonable
business needs, use reasonable efforts to minimize the indemnification sought
from the Company under this Section 11.03.
1.01 Amendments, Etc. Except as otherwise expressly provided in this
Agreement, any provision of this Agreement may be modified or supplemented only
by an instrument in writing signed by the Company and the Majority Banks, or by
the Company and the Administrative Agent acting with the consent of the Majority
Banks, and, if the rights or obligations hereunder of the Swingline Bank are
affected thereby, the Swingline Bank, and any provision of this Agreement may be
waived by the Majority Banks or by the Administrative Agent acting with the
consent of the Majority Banks and, if the rights or obligations hereunder of the
Swingline Bank are affected thereby, the Swingline Bank; provided that (a) no
modification, supplement or waiver shall, unless by an instrument signed by all
of the Banks affected or by the Administrative Agent acting with the consent of
all of the Banks affected: (i) increase, or extend the term of the Commitments,
or extend the time or waive any requirement for the reduction or termination of
the Commitments, (ii) extend the date fixed for the payment of principal of or
interest on any Loan, the reimbursement of any LC Disbursement, or the payment
of any fee hereunder, (iii) reduce the amount of any such payment of principal
or reimbursement of any LC Disbursement, (iv) reduce the rate at which interest
is payable thereon or any fee is payable hereunder, (v) alter the manner in
which payments or prepayments of principal, interest, reimbursements of any LC
Disbursement or other amounts hereunder shall be applied as between the Banks or
Types or Classes of Loans, (vi) alter the terms of Section 4.02 or 4.07(a)
hereof or of this Section 11.04, (vii) modify the definition of the term
"Majority Banks" or modify in any other manner the number or percentage of the
Banks required to make any determinations or waive any rights hereunder or to
modify any provision hereof, or (viii) waive any of the conditions precedent set
forth in Section 6.01 hereof; (b) if at the time any Swingline Loans shall be
outstanding, no modification, supplement or waiver with respect to any provision
of Sections 8 or 9 hereof shall be effective without the concurrence of the
Swingline Bank; and (c) any modification or supplement of Sections 4.06 or 10
hereof, or of any of the rights or duties of the Administrative Agent hereunder,
shall require the consent of the Administrative Agent.
1.02 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns (including any Affiliate of any Issuing Bank that issues any
Letters of Credit).
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Notwithstanding anything to the contrary contained herein, any Bank (a
"Granting Lender") may grant to a special purpose funding vehicle (an "SPC") the
option to fund all or any part of any Loan that such Granting Lender would
otherwise be obligated to fund pursuant to this Agreement; provided that
(i) nothing herein shall constitute a commitment by any SPC to fund any Loan,
and (ii) if an SPC elects not to exercise such option or otherwise fails to fund
all or any part of such Loan, the Granting Lender shall be obligated to fund
such Loan pursuant to the terms hereof. The Granting Lender shall provide the
Administrative Agent and the Company reasonable advance notice prior to the
granting of an option to an SPC. The funding of a Loan by an SPC hereunder shall
utilize the Commitment of the Granting Lender to the same extent, and as if,
such Loan were funded by such Granting Lender. Each party hereto hereby agrees
that a Granting Lender shall remain liable for any indemnity or payment under
this Agreement for which a Granting Lender would otherwise be liable hereunder
to the extent the granting Lender provides such indemnity or makes such payment.
Notwithstanding anything to the contrary contained in this Agreement, any SPC
may disclose on a confidential basis its funding of Loans to any rating agency,
commercial paper dealer or provider of any surety or guarantee to such SPC. The
grant of an option pursuant to this Section shall not be deemed an assignment or
a participation pursuant to Section 11.06 and shall not reduce the Commitment of
the Granting Lender. This Section 11.05 may not be amended without the prior
written consent of each Granting Lender, all or any part of whose Loan is being
funded by an SPC at the time of such amendment.
1.01 Assignments and Participations.
(a) The Company may not assign any of its rights or obligations hereunder
or under the Notes or with respect to any Letters of Credit without the prior
consent of all of the Banks and the Administrative Agent and the Swingline Bank.
(b) Each Bank may assign any of its Loans, its Notes, if any, its LC
Exposure and its LC Obligations, and its Commitment (but only with the consent
of the Company (unless an Event of Default referred to in clause (b) of Section
9 hereof shall have occurred and be continuing, the Administrative Agent and the
Swingline Bank, each of which consents will not be unreasonably withheld);
provided that
(i) no such consent by the Company, the Administrative Agent or the
Swingline Bank shall be required in the case of any assignment to another Bank
or an Affiliate of a Bank, and only the consent of the Company shall be required
in the case of any assignment to a Lender Affiliate, such consent not to be
unreasonably withheld;
(ii) except to the extent the Company and the Administrative Agent shall
otherwise consent, any such partial assignment (other than to another Bank)
shall be in an amount at least equal to $10,000,000;
(iii) each such assignment by a Bank of its Syndicated Loans, Syndicated
Note, if any, Commitment and LC Exposure shall be made in such manner so that
the same portion of its Syndicated Loans, Syndicated Note, if any, Commitment
and LC Exposure is assigned to the respective assignee;
(iv) the assignee and assignor shall deliver to the Administrative Agent
for its acceptance an Assignment and Acceptance for each such assignment; and
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(i) each assignee, if it shall not be a Bank, shall deliver to the
Administrative Agent an Administrative Questionnaire.
Upon execution and delivery by the assignor and the assignee to the
Administrative Agent of such Assignment and Acceptance, and upon consent thereto
by the Company and the Administrative Agent to the extent required above, the
assignee shall have, to the extent of such assignment (unless otherwise
consented to by the Company and the Administrative Agent), the obligations,
rights and benefits of a Bank hereunder holding the Commitment, Loans and LC
Exposure (or portions thereof) assigned to it and specified in such Assignment
and Acceptance (in addition to the Commitment, Loans and LC Exposure, if any,
theretofore held by such assignee) and the assigning Bank shall, to the extent
of such assignment, be released from the Commitment (or portion thereof) so
assigned. Upon each such assignment the assigning Bank shall pay the
Administrative Agent an assignment fee of $3,000.
(b) A Bank may sell or agree to sell to one or more other Persons (each a
"Participant") a participation in all or any part of any Loans held by it, or in
its Commitment, provided that such Participant shall not have any rights or
obligations under this Agreement, any Note or any Letter of Credit (the
Participant's rights against such Bank in respect of such participation to be
those set forth in the agreements executed by such Bank in favor of the
Participant). All amounts payable by the Company to any Bank under Section 5
hereof in respect of Loans held by it, its Commitment and LC Exposure, shall be
determined as if such Bank had not sold or agreed to sell any participations in
such Loans, Commitment and LC Exposure, and as if such Bank were funding each of
such Loans, Commitment and LC Exposure in the same way that it is funding the
portion of such Loans, Commitment and LC Exposure in which no participations
have been sold. In no event shall a Bank that sells a participation agree with
the Participant to take or refrain from taking any action hereunder except that
such Bank may agree with the Participant that it will not, without the consent
of the Participant, agree to (i) increase or extend the term of such Bank's
Commitment, or extend the time or waive any requirement for the reduction or
termination, of such Bank's Commitment, (ii) extend the date fixed for the
payment of principal of or interest on the related Loan or Loans, the
reimbursement of any LC Disbursement or any portion of any fee hereunder payable
to the Participant, (iii) reduce the amount of any such payment of principal or
(iv) reduce the rate at which interest is payable thereon, or any fee hereunder
payable to the Participant, to a level below the rate at which the Participant
is entitled to receive such interest or fee.
(c) In addition to the assignments and participations permitted under the
foregoing provisions of this Section 11.06, any Bank may (without notice to the
Company, the Administrative Agent or any other Bank and without payment of any
fee) (i) assign and pledge all or any portion of its Loans, its Notes and its LC
Exposure, if any, to any Federal Reserve Bank as collateral security pursuant to
Regulation A and any Operating Circular issued by such Federal Reserve Bank and
(ii) assign all or any portion of its rights under this Agreement, its Loans,
its Notes and its LC Exposure, and its LC Obligations, if any, to an Affiliate.
No such assignment shall release the assigning Bank from its obligations
hereunder.
A Bank or the Swingline Bank may furnish any information concerning the
Company or any of its Subsidiaries in the possession of such Bank from time to
time to assignees (a) and participants (including prospective assignees and
participants), subject, however, to the provisions of Section 11.12(b) hereof.
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(a) Anything in this Section 11.06 to the contrary notwithstanding, neither
any Bank nor the Swingline Bank may assign or participate any interest in any
Loan held by it hereunder or its LC Exposure to the Company or any of its
Affiliates or Subsidiaries without the prior consent of each Bank.
(b) The Swingline Bank may not (except as provided in Section 2.04 hereof)
assign or sell Participations in all or any part of its Swingline Loans, its
Swingline Note, if one, or its Swingline Commitment; provided that the Swingline
Bank may assign to another Bank all of its obligations, rights and benefits in
respect of its Swingline Loans and its Swingline Commitment (but only with the
consent of the Company which consent will not be unreasonably withheld). Upon
the effectiveness of any such assignment, the assignee shall have the
obligations, rights and benefits of the Swingline Bank hereunder holding the
Swingline Commitment and Swingline Loans assigned to it, and the assigning
Swingline Bank shall be released from its Swingline Commitment so assigned.
1.02 Survival. The obligations of the Company under Sections 5.01, 5.04 and
11.03 hereof, and the obligations of the Banks under Sections 10.05 and 11.12
hereof, shall survive the repayment of the Loans, the termination of the
Commitments, the expiration or termination of all Letters of Credit and, in the
case of any Bank that may assign any interest in its Commitment, Loans, LC
Exposure or LC Obligations hereunder, shall survive the making of such
assignment, notwithstanding that such assigning Bank may cease to be a "Bank"
hereunder. In addition, each representation and warranty made, or deemed to be
made by a notice of any Loan, or by the issuance, amendment, renewal or
extension of any Letter of Credit herein or pursuant hereto shall survive the
making of such representation and warranty, and no Bank shall be deemed to have
waived, by reason of making any Loan, or by the issuance, amendment, renewal or
extension of any Letter of Credit, any Default that may arise by reason of such
representation or warranty proving to have been false or misleading when made or
deemed to be made, notwithstanding that such Bank, the Swingline Bank or the
Administrative Agent may have had notice or knowledge or reason to believe that
such representation or warranty was false or misleading at the time such Loan
was made or such Letter of Credit was issued, amended, renewed or extended, as
the case may be.
1.03 Captions. The table of contents and captions and section headings
appearing herein are included solely for convenience of reference and are not
intended to affect the interpretation of any provision of this Agreement.
1.04 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
Governing Law; Submission to Jurisdiction. This Agreement and the Notes
shall be governed by, and construed in accordance with, the law of the State of
New York. The Company hereby submits to the nonexclusive jurisdiction of the
United States District Court for the Southern District of New York and of any
New York state court sitting in New York County for the purposes of all legal
proceedings arising out of or relating to this Agreement or the transactions
contemplated hereby. The Company hereby irrevocably waives, to the fullest
extent permitted by applicable law, any objection that it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum.
209
1.01 Waiver of Jury Trial. EACH OF THE COMPANY, THE ADMINISTRATIVE AGENT,
THE SWINGLINE BANK, THE ISSUING BANK, THE ARRANGER, THE DOCUMENTATION AGENTS,
THE SYNDICATION AGENT, AND THE BANKS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES, THE
LETTERS OF CREDIT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
1.02 Treatment of Certain Information; Confidentiality.
(a) The Company acknowledges that from time to time financial advisory,
investment banking and other services may be offered or provided to the Company
or one or more of its Subsidiaries (in connection with this Agreement or
otherwise) by any Bank or by one or more Subsidiaries or Affiliates of such Bank
and the Company hereby authorizes each Bank and the Swingline Bank to share any
information delivered to such Bank by the Company and its Subsidiaries pursuant
to this Agreement, or in connection with the decision of such Bank or the
Swingline Bank to enter into this Agreement, with any such Subsidiary or
Affiliate, it being understood that any such Subsidiary or Affiliate receiving
such information shall be bound by the provisions of paragraph (b) below as if
it were a Bank hereunder. Such authorization shall survive the repayment of the
Loans and the termination of the Commitments.
Each of the Banks, the Swingline Bank and the Administrative Agent agrees
(on behalf of itself and each of its Affiliates, directors, officers, employees
and representatives) to use reasonable precautions to keep confidential, in
accordance with its customary procedures for handling confidential information
of the same nature and in accordance with safe and sound banking practices, any
non-public information supplied to it by the Company pursuant to this Agreement
that is identified by the Company as being confidential; provided that nothing
herein shall limit the disclosure of any such information (i) after such
information shall have become public (other than through a violation of this
Section 11.12), (ii) to the extent required by statute, rule, regulation or
judicial process, (iii) to counsel for any of the Banks, the Swingline Bank or
the Administrative Agent, (iv) to bank examiners (or any other regulatory
authority having jurisdiction over any Bank, the Swingline Bank or the
Administrative Agent), or to auditors or accountants, (v) to the Administrative
Agent, the Swingline Bank or any other Bank (or to the Arranger), (vi) in
connection with any litigation to which any one or more of the Banks, the
Swingline Bank or the Administrative Agent is a party, or in connection with the
enforcement of rights or remedies hereunder, (vii) to a Subsidiary or Affiliate
of such Bank as provided in paragraph (a) above or (viii) to any assignee or
participant (or prospective assignee or participant) so long as such assignee or
participant (or prospective assignee or participant) first executes and delivers
to the respective Bank a Confidentiality Agreement; provided (a) further, that
in no event shall any Bank or the Administrative Agent be obligated or required
to return any materials furnished by the Company. The obligations of any
assignee that has executed a Confidentiality Agreement shall be superseded by
this Section 11.12 upon the date upon which such assignee becomes a Bank
hereunder pursuant to Section 11.06(b) hereof.
1.01 The Syndication Agent, Arranger and Documentation Agents. Except as
expressly set forth herein, the Syndication Agent, the Arranger and the
Documentation Agents shall have (x) no obligations hereunder other than (in the
case of the Syndication Agent and the Documentation Agents) those of a Bank, and
(y) no liability to the Banks hereunder.
210
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
ENGELHARD CORPORATION
By /s/ Peter R. Rapin
Title: Treasurer
THE CHASE MANHATTAN BANK
as Administrative Agent
By /s/ Gary L. Spevack
Title: Vice President
JPMORGAN SECURITIES INC.,
as Lead Arranger and Book Manager
By /s/ William B. Murray
Title: MD
BANK OF TOKYO-MITSUBISHI TRUST COMPANY,
as Documentation Agent
By /s/ William J. Derasmo
Title: Vice President
WACHOVIA BANK, N.A.,
as Documentation Agent
By /s/ Robert Wilson
Title: Vice President
COMMERZBANK, AG-NEW YORK AND
GRAND CAYMAN BRANCHES,
as Syndication Agent
By /s/ signature illegible
Title: Senior Vice President
By /s/ signature illegible
Title: Vice President
BANK OF AMERICA, N.A.
as Managing Agent
By /s/ Wendy J. Gorman
Title: Principal
CITIBANK, N.A.,
as Managing Agent
By /s/ Diane L. Pockaj
Title: Vice President
MELLON BANK, N.A.,
as Managing Agent
By /s/ signature illegible
Title: Vice President
211
ABN AMRO BANK, N.V.,
as Participant and as a Bank
By /s/ signature illegible
Title: Group Vice President
By /s/ signature illegible
Title: Vice President
THE BANK OF NEW YORK,
as Participant and as a Bank
By /s/ Ernest Fung
Title: Vice President
THE BANK OF NOVA SCOTIA,
as Participant and as a Bank
By /s/ Brian S. Allen
Title: Managing Director
FLEET NATIONAL BANK,
as Participant and as a Bank
By /s/ Miguel J. Medida
Title: Managing Director
BANK ONE, N.A. (Main Office-Chicago),
as Participant and as a Bank
By /s/ Mahua G. Thakurta
Title: Commercial Banking Officer
BANK OF CHINA,
as Participant and as a Bank
By /s/ signature illegible
Title: General Manager, USA Branches
NORDDEUTSCHE LANDESBANK,
as Participant and as a Bank
By /s/ Stephen K. Hunter
Title: Senior Vice President
By /s/ Josef Haas
Title: Vice President
THE FUJI BANK, LIMITED,
as Participant and as a Bank
By /s/ Raymond Ventura
Title: Senior Vice President
212
ING BANK N.V.,
as Participant and as a Bank
By /s/ signature illegible
Title: Director
By /s/ signature illegible
Title: Manager
ALLFIRST BANK,
as Participant and as a Bank
By /s/ signature illegible
Title: Vice President
BANCA POPOLARE DI MILANO,
as Participant and as a Bank
By /s/ Esperanza Quintero
Title: First Vice President
By /s/ Patrick F. Dillon
Title: Vice President, Chief Credit Officer
SUMITOMO MITSUI BANKING CORPORATION,
as Participant and as a Bank
By /s/ Edward D. Henderson, Jr.
Title: Senior Vice President
WESTDEUTSCHE LANDESBANK GIROZENTRALE,
NEW YORK BRANCH,
as Participant and as a Bank
By /s/ Barry S. Wadler
Title: Associate Director
By /s/ Lisa Walker
Title: Associate Director
INTESABCI, NEW YORK BRANCH,
as Participant and as a Bank
By /s/ Frank Maffei
Title: Vice President
By /s/ E. Bermant
Title: FVP/Deputy Manager
SUNTRUST BANK,
as Participant and as a Bank
By /s/ W. David Wisdom
Title: Vice President
213
EXHIBIT 12
COMPUTATION OF THE RATIO OF EARNINGS TO FIXED CHARGES
-----------------------------------------------------
214
EXHIBIT 12
ENGELHARD CORPORATION
COMPUTATION OF THE RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Thousands)
Years Ended December 31,
----------------------------------------------------------------
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
Earnings from continuing operations
before provision for income taxes $305,224 $245,687 $284,118 $260,563 $ 85,812
Add/(deduct)
Portion of rents representative
of the interest factor 8,400 8,800 7,000 3,500 3,000
Interest on indebtedness 43,994 62,649 56,555 58,887 52,776
Equity dividends 4,158 4,363 2,431 2,022 3,803
Equity in (earnings) losses of affiliates (29,095) (24,187) (16,266) (10,077) 47,833
--------- --------- -------- -------- ---------
Earnings, as adjusted $332,681 $297,312 $333,838 $314,895 $193,224
========= ========= ======== ======== =========
Fixed Charges
Portion of rents representative
of the interest factor $8,400 $8,800 $7,000 $3,500 $3,000
Interest on indebtedness 43,994 62,649 56,555 58,887 52,776
Capitalized interest 3,000 3,880 2,580 1,897 651
-------- -------- ------- ------- -------
Fixed charges $55,394 $75,329 $66,135 $64,284 $56,427
======== ======== ======= ======= =======
Ratio of Earnings to Fixed Charges 6.01 3.95(A) 5.05 4.90 3.42(B)
======== ======== ======= ======= =======
(A) Earnings in 2000 were negatively impacted by pre-tax special and other charges of $134.2 million for a
variety of events (See Note 5, "Special and Other Charges" for further detail). Excluding these charges, the ratio
of earnings to fixed charges would have been 5.73.
(B) Earnings in 1997 were negatively impacted by pre-tax special and other charges of $149.6 million for a
variety of events. Excluding these charges, the ratio of earnings to fixed charges would have been 5.28.
215
EXHIBIT 21:
SUBSIDIARIES OF THE REGISTRANT
------------------------------
216
Subsidiaries of the Registrant
------------------------------
Jurisdiction Under Which
Name of Subsidiary/Affiliate Incorporated or Organized
---------------------------- -------------------------
Engelhard Industries De Argentina SA Argentina
Engelhard Belgium BVBA Belgium
Engelhard Industries S.A. Belgium
Engelhard Do Brasil Industria E Commercio LTDA Brazil
Engelhard Canada, Ltd. Canada
Engelhard Industries International, Ltd. Canada
Mearl Company Ltd. Canada
Shanghai Engelhard Sinopec Environmental Technologies Ltd China
Engelhard (Shanghai) Co. Ltd. China
Engelhard Industries A/S Denmark
Engelhard Industries OY Finland
Engelhard Pigments OY Finland
Engelhard-CLAL SAS France
Engelhard S.A. France
Mearl International France S.A.R.L. France
Engelhard Holdings GmbH Germany
Engelhard Process Chemicals GmbH Germany
Engelhard Technologies GmbH Germany
Engelhard Asia Pacific (China) Ltd. Hong Kong
Engelhard Industries (Asia) Limited Hong Kong
Engelhard Asia Pacific Mauritius Limited India
Engelhard Asia Pacific Enterprises India Private Limited India
Engelhard Highland Private Limited India
Engelhard Environmental Systems India Ltd India
Engelhard Italiana S.P.A. Italy
Engelhard Metals Japan, Ltd. Japan
NE Chemcat Corporation Japan
Engelhard Asia Pacific (Korea) Ltd. Korea
Enelhard Mexicana S.A. de C.V. Mexico
Engelhard Industries De Mexico S.A. Mexico
Engelhard Demeern, B.V. The Netherlands
Engelhard Investment Europe B.V. The Netherlands
Engelhard Netherlands, B.V. The Netherlands
Engelhard Pigments and Additives Europe, B.V. The Netherlands
Engelhard Terneuzen, B.V. The Netherlands
Engelhard Peru S.A. Peru
Engelhard South Africa Proprietary, Ltd. South Africa
Heesung-Engelhard South Korea
Catalyst Center - Tarragona, S.L. Spain
Engelhard Arganda SL Spain
ECT Environmental Technologies AB Sweden
Engelhard Metals A.G. Switzerland
Engelhard Chemcat (Thailand) Ltd. Thailand
Mearl International Turkey Turkey
Dnipro Kaolin Ukraine
Engelhard Europe Finance Limited United Kingdom
Engelhard International, Ltd. United Kingdom
Engelhard Limited United Kingdom
217
Subsidiaries of the Registrant
------------------------------
Jurisdiction Under Which
Name of Subsidiary/Affiliate Incorporated or Organized
---------------------------- -------------------------
Engelhard Metals, Ltd. United Kingdom
Engelhard Pension Trustees Limited United Kingdom
Engelhard Sales, Ltd. United Kingdom
Engelhard Technologies, Ltd. United Kingdom
Engelhard Trustee Co. Ltd. United Kingdom
The Sheffield Smelting Co., Ltd. United Kingdom
Engelhard Export Corporation U.S. Virgin Islands
Corporacion Engelhard De Venezuela CA Venezuela
Engelhard West, Inc. California
EC Delaware Incorporated Delaware
Engelhard Asia Pacific, Inc. Delaware
Engelhard C Cubed Corporation Delaware
Engelhard DT, Inc. Delaware
Engelhard EM Holding Company Delaware
Engelhard Energy Corporation Delaware
Engelhard Equity Corporation Delaware
Engelhard Financial Corporation Delaware
Engelhard MC, Inc. Delaware
Engelhard Metal Plating Inc. Delaware
Engelhard Pollution Control, Inc. Delaware
Engelhard Power Marketing, Inc. Delaware
Engelhard Strategic Investments Incorporated Delaware
Engelhard Supply Corporation Delaware
Mustang Property Corporation Delaware
Harshaw Chemical Company New Jersey
Engelhard Metals Holding Corp. California
Mearl, LLC Delaware
Engelhard-CLAL, L.P. Delaware
Engelhard Hexcore, L.P. Delaware
Tickford Engelhard LLC Michigan
Engelhard PM, L.P. Delaware
The names of other subsidiaries have been omitted since such subsidiaries, if
considered in the aggregate as a single subsidiary, would not constitute a
significant subsidiary as that term is defined in Rule 12b-2 (17 CFR 240.12b-2)
promulgated under the Securities Exchange Act of 1934.
218
EXHIBIT 23:
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
219
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Form 10-K of our report dated January 31, 2002 included in
the following Registration Statement File Numbers:
1. Form S-3 of Engelhard Corporation and Subsidiaries
(File No. 333-59719).
2. Form S-8 of Engelhard Corporation and Subsidiaries
(File Nos. 2-72830, 2-81559, 2-84477, 2-89747,
33-28540, 33-37724, 33-40365, 33-40338, 33-43934,
33-65990, 333-02643, 333-71439, 333-39570 and
333-71856).
/s/Arthur Andersen LLP
----------------------
Arthur Andersen LLP
New York, New York
March 21, 2002
220
EXHIBIT 24:
POWERS OF ATTORNEY
------------------
221
ENGELHARD CORPORATION
Form 10-K
Power of Attorney
WHEREAS, ENGELHARD CORPORATION intends to file with the Securities and
Exchange Commission under the Securities Act of 1934 an Annual Report on Form
10-K for the fiscal year ended December 31, 2001.
NOW, THEREFORE, the undersigned in his/her capacity as a director of
ENGELHARD CORPORATION hereby appoints Arthur A. Dornbusch, II and Barry W.
Perry, or either of them individually, his/her true and lawful attorney to
execute in his/her name, place and stead, in his/her capacity as a director of
ENGELHARD CORPORATION, said Form 10-K and any and all amendments to said Form
10-K and all instruments necessary or incidental in connection therewith, and to
file the same with the Securities and Exchange Commission. Said attorney shall
have full power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatsoever necessary or
desirable to be done in the premises, as fully to all intents and purposes as
the undersigned might or could do in person. The undersigned hereby ratifies and
approves the acts of said attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument on March
16, 2002.
/s/ Marion H. Antonini
--------------------------------
Marion H. Antonini
222
ENGELHARD CORPORATION
Form 10-K
Power of Attorney
WHEREAS, ENGELHARD CORPORATION intends to file with the Securities and
Exchange Commission under the Securities Act of 1934 an Annual Report on Form
10-K for the fiscal year ended December 31, 2001.
NOW, THEREFORE, the undersigned in his/her capacity as a director of
ENGELHARD CORPORATION hereby appoints Arthur A. Dornbusch, II and Barry W.
Perry, or either of them individually, his/her true and lawful attorney to
execute in his/her name, place and stead, in his/her capacity as a director of
ENGELHARD CORPORATION, said Form 10-K and any and all amendments to said Form
10-K and all instruments necessary or incidental in connection therewith, and to
file the same with the Securities and Exchange Commission. Said attorney shall
have full power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatsoever necessary or
desirable to be done in the premises, as fully to all intents and purposes as
the undersigned might or could do in person. The undersigned hereby ratifies and
approves the acts of said attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument on March
16, 2002.
/s/ James V. Napier
------------------------------
James V. Napier
223
ENGELHARD CORPORATION
Form 10-K
Power of Attorney
WHEREAS, ENGELHARD CORPORATION intends to file with the Securities and
Exchange Commission under the Securities Act of 1934 an Annual Report on Form
10-K for the fiscal year ended December 31, 2001.
NOW, THEREFORE, the undersigned in his/her capacity as a director of
ENGELHARD CORPORATION hereby appoints Arthur A. Dornbusch, II and Barry W.
Perry, or either of them individually, his/her true and lawful attorney to
execute in his/her name, place and stead, in his/her capacity as a director of
ENGELHARD CORPORATION, said Form 10-K and any and all amendments to said Form
10-K and all instruments necessary or incidental in connection therewith, and to
file the same with the Securities and Exchange Commission. Said attorney shall
have full power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatsoever necessary or
desirable to be done in the premises, as fully to all intents and purposes as
the undersigned might or could do in person. The undersigned hereby ratifies and
approves the acts of said attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument on March
16, 2002.
/s/ Norma T. Pace
--------------------------------
Norma T. Pace
224
ENGELHARD CORPORATION
Form 10-K
Power of Attorney
WHEREAS, ENGELHARD CORPORATION intends to file with the Securities and
Exchange Commission under the Securities Act of 1934 an Annual Report on Form
10-K for the fiscal year ended December 31, 2001.
NOW, THEREFORE, the undersigned in his/her capacity as a director of
ENGELHARD CORPORATION hereby appoints Arthur A. Dornbusch, II and Barry W.
Perry, or either of them individually, his/her true and lawful attorney to
execute in his/her name, place and stead, in his/her capacity as a director of
ENGELHARD CORPORATION, said Form 10-K and any and all amendments to said Form
10-K and all instruments necessary or incidental in connection therewith, and to
file the same with the Securities and Exchange Commission. Said attorney shall
have full power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatsoever necessary or
desirable to be done in the premises, as fully to all intents and purposes as
the undersigned might or could do in person. The undersigned hereby ratifies and
approves the acts of said attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument on March
18, 2002.
/s/ Orin R. Smith
---------------------------------
Orin R. Smith
225
ENGELHARD CORPORATION
Form 10-K
Power of Attorney
WHEREAS, ENGELHARD CORPORATION intends to file with the Securities and
Exchange Commission under the Securities Act of 1934 an Annual Report on Form
10-K for the fiscal year ended December 31, 2001.
NOW, THEREFORE, the undersigned in his/her capacity as a director of
ENGELHARD CORPORATION hereby appoints Arthur A. Dornbusch, II and Barry W.
Perry, or either of them individually, his/her true and lawful attorney to
execute in his/her name, place and stead, in his/her capacity as a director of
ENGELHARD CORPORATION, said Form 10-K and any and all amendments to said Form
10-K and all instruments necessary or incidental in connection therewith, and to
file the same with the Securities and Exchange Commission. Said attorney shall
have full power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatsoever necessary or
desirable to be done in the premises, as fully to all intents and purposes as
the undersigned might or could do in person. The undersigned hereby ratifies and
approves the acts of said attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument on March
20, 2002.
/s/ Reuben F. Richards
--------------------------------
Reuben F. Richards
226
ENGELHARD CORPORATION
Form 10-K
Power of Attorney
WHEREAS, ENGELHARD CORPORATION intends to file with the Securities and
Exchange Commission under the Securities Act of 1934 an Annual Report on Form
10-K for the fiscal year ended December 31, 2001.
NOW, THEREFORE, the undersigned in his/her capacity as a director of
ENGELHARD CORPORATION hereby appoints Arthur A. Dornbusch, II and Barry W.
Perry, or either of them individually, his/her true and lawful attorney to
execute in his/her name, place and stead, in his/her capacity as a director of
ENGELHARD CORPORATION, said Form 10-K and any and all amendments to said Form
10-K and all instruments necessary or incidental in connection therewith, and to
file the same with the Securities and Exchange Commission. Said attorney shall
have full power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatsoever necessary or
desirable to be done in the premises, as fully to all intents and purposes as
the undersigned might or could do in person. The undersigned hereby ratifies and
approves the acts of said attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument on March
19, 2002.
/s/ Douglas G. Watson
---------------------------------
Douglas G. Watson
227
EXHIBIT (99)
Letter regarding independent
public accountants
----------------------------
228
March 21, 2002
Securities and Exchange Commission
Washington, DC
To Whom It May Concern:
Please be advised that Arthur Andersen LLP has audited the consolidated
financial statements of Engelhard Corporation and subsidiaries as of December
31, 2001 and for the year then ended and issued its report thereon dated January
31, 2002. Arthur Andersen LLP has represented to Engelhard Corporation that this
audit was subject to its quality control system for the U.S. accounting and
auditing practice to provide reasonable assurance that the engagement was
conducted in compliance with professional standards, that there was appropriate
continuity of Arthur Andersen LLP personnel working on the audit, availability
of national office consultation, and availability of personnel at foreign
affiliates of Arthur Andersen LLP to conduct the relevant portions of the audit.
Very truly yours,
ENGELHARD CORPORATION
By:/s/ Michael A. Sperduto
-----------------------
Michael A. Sperduto
Vice President and
Chief Financial Officer
229