SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
Commission File Number 1-1169
THE TIMKEN COMPANY ______________________________________________________ (Exact name of registrant as specified in its charter)
Ohio 34-0577130 ________________________________________ ___________________ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.)
1835 Dueber Avenue, S.W., Canton, Ohio 44706-2798 ________________________________________ ___________________ (Address of principal executive offices) (Zip Code)
Registrants telephone number, including area code (330)438-3000 ___________________
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange Title of Each Class on Which Registered
Common Stock without par value New York Stock Exchange ______________________________ _______________________
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, 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. [ ].
Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). YES [X] NO [ ] i
The aggregate market value of the voting stock held by all shareholders other than shareholders identified under Item 12 of this Form 10-K as of June 30, 2002, was $1,097,999,327 (representing 49,171,488 shares).
Indicate the number of shares outstanding of each of the registrant's classes of Common Stock, as of June 30, 2002.
Common Stock without par value--60,421,178 shares (representing a market value of $1,349,204,905).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the year ended December 31, 2002, are incorporated by reference into Parts I and II.
Portions of the proxy statement for the annual meeting of shareholders to be held on April 15, 2003, are incorporated by reference into Parts III and IV.
Exhibit Index may be found on Pages 22 through 28.
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THE TIMKEN COMPANY
INDEX TO FORM 10-K REPORT
PAGE ---- I. PART I.
Item 1. Description of Business.................................... 1 General.................................................. 2 Products................................................. 3 Geographical Financial Information....................... 5 Sales and Distribution................................... 5 Industry Segments........................................ 6 Competition.............................................. 7 New Joint Ventures....................................... 9 Backlog.................................................. 9 Raw Materials............................................ 9 Research................................................. 10 Environmental Matters.................................... 10 Patents, Trademarks and Licenses......................... 11 Employment............................................... 11 Available Information.................................... 11
Item 2. Properties................................................. 12 Item 3. Legal Proceedings.......................................... 13 Item 4. Submission of Matters to a Vote of Security Holders........ 13 Item 4A. Executive Officers of the Registrant....................... 13
II. PART II.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters........................................ 17 Item 6. Selected Financial Data.................................... 17 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations........................ 17 Item 7A. Quantitative and Qualitative Disclosures about Market Risk. 17 Item 8. Financial Statements and Supplementary Data................ 18 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................................... 18
III. Part III.
Item 10. Directors and Executive Officers of the Registrant......... 19 Item 11. Executive Compensation..................................... 19 Item 12. Security Ownership of Certain Beneficial Owners and Management................................................. 19 Item 13. Certain Relationships and Related Transactions............. 21 Item 14. Controls and Procedures.................................... 21
IV. Part IV.
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K................................................... 22
PART 1 1 ______Item 1. Description of Business ________________________________ Certain statements set forth in this document (including the company's fore- casts, beliefs and expectations) that are not historical in nature are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. The company cautions readers that actual results may differ materially from those projected or implied in forward- looking statements made by or on behalf of the company due to a variety of important factors, such as:
a) risks associated with the acquisition of Torrington, including the uncertainties in both timing and amount of actual benefits, if any, that may be realized as a result of the integration of the Torrington business with the company's operations and the timing and amount of the resources required to achieve those benefits; risks associated with diversion of management's attention from routine operations during the integration process; and risks associated with the higher level of debt associated with the acquisition.
b) changes in world economic conditions, including additional adverse effects from terrorism or hostilities. This includes, but is not limited to, political risks associated with the potential instability of governments and legal systems in countries in which the company or its customers conduct business and significant changes in currency valuations.
c) the effects of changes in customer demand on sales, product mix and prices in the industries in which the company operates. This includes the effects of customer strikes, the impact of changes in industrial business cycles and whether conditions of fair trade continue in the U.S. market.
d) competitive factors, including changes in market penetration, increasing price competition by existing or new foreign and domestic competitors, the introduction of new products by existing and new competitors and new technology that may impact the way the company's products are sold or distributed.
e) changes in operating costs. This includes the effect of changes in the company's manufacturing processes; changes in costs associated with varying levels of operations; changes resulting from inventory management and cost reduction initiatives and different levels of customer demands; the effects of unplanned work stoppages; changes in the cost of labor and benefits; and the cost and availability of raw materials and energy.
f) the success of the company's operating plans, including its ability to achieve the benefits from its global restructuring, manufacturing transformation, and administrative cost reduction initiatives as well as its ongoing continuous improvement and rationalization programs; the ability of acquired companies to achieve satisfactory operating results; and its ability to maintain appropriate relations with unions that represent company associates in certain locations in order to avoid disruptions of business. 2
g) unanticipated litigation, claims or assessments. This includes, but is not limited to, claims or problems related to intellectual property, product liability or warranty and environmental issues.
h) changes in worldwide financial markets, including interest rates to the extent they affect the company's ability to raise capital or increase the company's cost of funds, have an impact on the overall performance of the company's pension fund investments and/or cause changes in the economy which affect customer demand.
i) additional factors described in greater detail on pages S-18 to S-27 in the Company's Registration Statement and Prospectus Supplement dated February 11, 2003 relating to the offering of the Company's common shares.
Additional risks relating to the company's business, the industries in which the company operates or the company's common stock may be described from time to time in the company's filings with the SEC. All of these risk factors are difficult to predict, are subject to material uncertainties that may affect actual results and may be beyond the company's control.
Except as required by the federal securities laws, the company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
General _______
As used herein, the term "Timken" or the "company" refers to The Timken Company and its subsidiaries unless the context otherwise requires. Timken, an outgrowth of a business originally founded in 1899, was incorporated under the laws of the state of Ohio in 1904.
Timken is a leading global manufacturer of highly engineered bearings, alloy and specialty steel and related components. The company is the world's largest manufacturer of tapered roller bearings and alloy seamless mechani- cal steel tubing and the largest North American-based bearings manufacturer. Timken had facilities in 27 countries on six continents, and employed approx- imately 18,000 people, as of December 31, 2002.
On February 18, 2003, the company completed the acquisition of the Engineered Solutions business of Ingersoll-Rand Company Limited, including certain of its joint venture interests, operating assets and subsidiaries, including The Torrington Company. This business, referred to as Torrington, is a leading worldwide producer of needle roller, heavy-duty roller and ball bearings and motion control components and assemblies. Timken paid $700 million in cash, subject to adjustment, and approximately $140 million in common shares for Torrington. The company financed the $700 million cash component of the Torrington acquisition through a public offering of 12.65 million common shares, an offering of $250 million seven-year senior unsecured notes, a five-year revolving credit facility and a $125 million securitized accounts receivable facility.
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Torrington has been a leader in the bearing industry for over 100 years and is a leading manufacturer of needle roller bearings. It produces a wide range of bearings sold under a number of brand names, including Torrington needle roller bearings, Torrington heavy-duty roller bearings, Nadella precision needle roller bearings and linear motion solutions and Fafnir ball bearings and housed units. Torrington also produces a variety of precision motion control components and assemblies, such as steering shaft assemblies and steering column shafts. Torrington sells its products directly or through authorized distributors to automotive and industrial manufacturers, as well as to aftermarket users throughout the world.
Torrington had net sales of $1.2 billion for the year ended December 31, 2002, and, as of December 31, 2002, employed approximately 10,000 people and operated 27 plants throughout the world. Torrington has two business divisions: automotive engineered solutions and industrial engineered solutions.
The Torrington automotive business manufactures a variety of products, including roller and needle bearings and other components used in an auto- mobile's transmission, chassis, steering column and engine. Many of these products, such as column locks and rotary tilt products for steering columns, are highly engineered with precision technology, and are specially designed through collaborative efforts between Torrington and its customers. These products are primarily sold to original equipment manufacturers, or OEMs, including large automobile manufacturers, and their principal suppliers.
The Torrington industrial business produces a broad range of products, including roller bearings, needle bearings, wider inner ring ball bearings and housed units, radial ball bearings, super precision ball bearings, airframe control bearings, precision machined bearings and precision components and assemblies. These products are sold to OEMs, as well as through a global aftermarket network.
Products ________
The Timken Company manufactures two basic product lines: anti-friction bearings and steel products. Differentiation in these two product lines comes in two different ways: (1) differentiation by bearing type or steel type, and (2) differentiation in the applications of bearings and steel.
In the bearing industry, Timken is best known for the tapered roller bearing, which was originally patented by the company founder, Henry Timken. The tapered roller bearing is Timken's principal product in the anti-friction industry segment. It consists of four components: (1) the cone or inner race, (2) the cup or outer race, (3) the tapered rollers, which roll between the cup and cone, and (4) the cage, which serves as a retainer and maintains proper spacing between the rollers. Timken manufactures or purchases these four components and then sells them in a wide variety of configurations and sizes.
4 Products (cont.) ________________
The tapered rollers permit ready absorption of both radial and axial load combinations. For this reason, tapered roller bearings are particularly well adapted to reducing friction where shafts, gears or wheels are used. The applications for tapered roller bearings have diversified from the original application on horse-drawn wagons to applications on passenger cars, light and heavy trucks, and trains, as well as a wide range of industrial applica- tions, ranging from very small gear drives to bearings over two meters in diameter for wind energy machines. Further differentiation has come in the form of adding sensors to these bearings, which measure parameters such as speed, load, temperature or overall bearing condition.
Matching bearings to the specific requirements of customers' applications requires engineering, and often sophisticated analytical techniques. The design of Timken's tapered roller bearing permits distribution of unit pressures over the full length of the roller. This fact, combined with high precision tolerance, proprietary internal geometry and premium quality material, provides Timken bearings with high load carrying capacity, excellent friction-reducing qualities and long life.
Precision Cylindrical and Ball Bearings. Timken's aerospace and super pre- cision facilities produce high-performance ball and cylindrical bearings for ultra high-speed and/or high-accuracy applications in the aerospace, medical and dental, computer disk drive and other industries. These bearings utilize ball and straight rolling elements and are in the super precision end of the general ball and straight roller bearing product range in the bearing industry. A majority of Timken's aerospace and super precision bearings products are custom-designed bearings and spindle assemblies. They often involve specialized materials and coatings for use in applications that subject the bearings to extreme operating conditions of speed and temp- erature.
Spherical and Cylindrical Bearings. Timken Romania produces spherical and cylindrical roller bearings for large gear drives, rolling mills and other process industry and infrastructure development applications. Timken anticipates that its cylindrical and spherical roller bearing capability will be significantly enhanced with the acquisition of Torrington's broad range of spherical and heavy-duty cylindrical roller bearings for standard industrial and specialized applications. These products are sold worldwide to OEMs, and industrial distributors serving major industries, including construction and mining, natural resources, defense, pulp and paper production, rolling mills and general industrial goods.
Needle Bearings. With the acquisition of Torrington, the company expects to become a leading global producer of highly engineered needle roller bearings. Torrington produces a broad range of radial and thrust needle roller bearings, as well as bearing assemblies, which are sold to OEMs and industrial distributors worldwide. Major applications include products for the automotive, consumer product, construction and agriculture and general industrial goods industries.
5 Products (cont.) ________________
Bearing Reconditioning. A small part of the business involves providing bearing reconditioning services for industrial and railroad customers, both internationally and domestically. These services account for less than 5% of the company's net sales for the year ended December 31, 2002.
Steel products include steels of low and intermediate alloy, vacuum-processed alloys, tool steel and some carbon grades. These products are available in a wide range of solid and tubular sections with a variety of lengths and finishes. These steel products are used in a wide array of applications, in- cluding bearings, automotive transmissions, engine crankshafts, oil drilling, aerospace and other similarly demanding applications. Approximately 15% of Timken's steel production is consumed in its bearing operations.
Timken also produces custom-made steel products, including alloy and steel components for automotive and industrial customers. This business has pro- vided the company with the opportunity to further expand its market for tubing and capture higher value-added steel sales. This also enables Timken's traditional tubing customers in the automotive and bearing industries to take advantage of higher performing components that cost less than current alternative products. Customizing of products is a growing portion of the company's steel business.
Geographical Financial Information __________________________________
Information appearing under the caption "Geographic Financial Information," on Page 44 of the Annual Report to Shareholders for the year ended December 31, 2002 is incorporated herein by reference.
Sales and Distribution ______________________
Timken's products in the Automotive Bearings and Industrial Bearings segments are sold principally by its own internal sales organization. Timken's sales organization consists of a separate sales force for each bus- iness segment. The combined bearings sales forces accounted for approximately 80% of the total sales force in 2002.
Traditionally, a main focus of the company's sales strategy has consisted of collaborative projects with customers. For this reason, Timken's sales forces are primarily located in close proximity to its customers rather than at production sites. In some instances, the sales forces are located inside customer facilities. Timken's sales force is highly trained and knowledge- able regarding all bearings products and associates assist customers during the development and implementation phases and provide support on an ongoing basis. Torrington has also located its sales force in close proximity to its customers. This will facilitate the integration of the two sales forces as well as the necessary cross-training efforts.
A major portion of the customer shipments are made directly from Timken's warehouses located in a number of cities in the United States, Canada, the United Kingdom, France, Mexico, Singapore, Argentina and Australia. However, a growing number of shipments are made directly from plant
6 Sales and Distribution (cont.) ______________________________
locations. The warehouse inventories are augmented by authorized distrib- utor and jobber inventories throughout the world that provide local avail- ability when service is required. The majority of Torrington shipments are made directly from plant locations.
The company has a joint venture in North America focused on joint logistics and e-business services. This alliance is called Colinx, and was founded by Timken, SKF, INA and Rockwell Automation. The e-business service was launched in April 2001, and is focused on information and business services for authorized distributors in the Industrial Bearings segment. The company also has another e-business joint venture in Europe which focuses on infor- mation and business services for authorized distributors in the Industrial Bearings segment. This alliance, which Timken founded together with SKF AB, Sandvik AB, Industriewerk Schaffler INA-Ingenieurdienst GmBH and Reliance is called Endorsia.com International AB.
Timken's steel products are sold principally by its own sales organization. Most orders are customized to satisfy customer-specific applications and are shipped directly to customers from Timken's steel manufacturing plants. Approximately 15% of Timken's steel production is consumed in its bearing operations. In addition, sales are made to other anti-friction bearing com- panies and to the aircraft, automotive and truck, construction, forging, oil and gas drilling, and tooling industries. Sales are also made to steel service centers.
Timken has entered into individually negotiated contracts with some of its customers in its Automotive Bearings, Industrial Bearings and Steel segments. These contracts may extend for one or more years and, if a price is fixed for any period extending beyond current shipments, customarily include a commitment by the customer to purchase a designated percentage of its requirements from Timken. Contracts extending beyond one year that are not subject to price adjustment provisions do not represent a material portion of Timken's sales. Timken does not believe that there is any significant loss of earnings risk associated with any given contract.
Industry Segments _________________
The company has three reportable segments: Automotive Bearings, Industrial Bearings and Steel. Segment information in Note 14 of the Notes to Consolidated Financial Statements on pages 44 and 45 of the Annual Report to Shareholders for the year ended December 31, 2002, is incorporated herein by reference. Export sales from the U.S. and Canada are less than 10% of revenue. The company's Automotive and Industrial Bearings' businesses have historically participated in the global bearing industry, while Steel has concentrated primarily on U.S. customers. However, over the past few years, Steel has acquired non-U.S. companies, such as Timken Alloy Steel - Europe, in Leicester, England, which specializes in the manufacturing of seamless mechanical tubing, and Lecheres Industries SAS, the parent company of Bamarec S.A., a precision component manufacturer based in France.
7 Industry Segments (cont.) _________________________
Timken's non-U.S. operations are subject to normal international business risks not generally applicable to domestic business. These risks include currency fluctuation, changes in tariff restrictions, and restrictive regulations by foreign governments, including price and exchange controls.
Competition ___________
The anti-friction bearing business is intensely competitive in every country in which Timken sells products. Substantial downward pricing pressures exist in the United States and other countries even during periods of significant demand. Timken competes primarily based on price, quality, timeliness of delivery and design and the ability to provide engineering support and ser- vice on a global basis. The company competes with domestic manufacturers and many foreign manufacturers of anti-friction bearings, including SKF, INA- Holding Schaeffler KG, NTN Corporation, Koyo Seiko Co., Ltd. and NSK Ltd.
Competition within the steel industry, both domestically and globally, is intense and is expected to remain so. More than 30 U.S. steel companies have declared bankruptcy in recent years and have either ceased production or, more often, been acquired by other companies. Global production overcapacity is also likely to continue, which, combined with the high levels of steel imports into the United States, has exerted downward pressure on domestic steel prices and has resulted in, at times, a dramatic narrowing, or with many companies, the elimination, of gross margins. Timken's worldwide competitors for seamless mechanical tubing include Copperweld, Plymouth Tube, V & M Tube, Sanyo Special Steel, Ovako Steel and Tenaris. Competitors for steel bar products include North American producers such as Republic Engineered Products, Mac Steel, North Star Steel and a wide variety of off- shore steel producers who import into North America. Competitors in the pre- cision steel market include Metaldyne, Linamar and overseas companies such as Showa Seiko, SKF and FormFlo. In the specialty steel category, manufacturers compete for sales of high-speed, tool and die and aerospace steels. High- speed steel competitors in North America and Europe include Erasteel, Bohler and Crucible. Tool and die steel competitors include Crucible, Carpenter Technologies and Thyssen. The principal competitors for Timken's aerospace products include Ellwood Specialty, Slater/Atlas and Patriot (formerly Republic Technologies, Inc.).
Maintaining high standards of product quality and reliability while keeping production costs competitive is essential to Timken's ability to compete with domestic and foreign manufacturers in both the anti-friction bearing and steel businesses.
Trade Law Enforcement
In the second quarter of 2000, the U.S. International Trade Commission (ITC) voted to revoke the bearing industry's anti-dumping orders on imports of tapered roller bearings from Japan, Romania and Hungary. The ITC determined that revocation of the anti-dumping duty orders on tapered roller bearings from those countries was not likely to lead to continuation or recurrence of material injury to the domestic industry within a reasonably foreseeable
8 Competition (cont.) ___________________
time. The company has filed an appeal of the ITC's decision regarding Japan, which is still pending. The ITC upheld the anti-dumping duty order against China.
In June 2001, President Bush directed the ITC to initiate an investigation on steel imports under Section 201 of the U.S. Trade Act, and called for multilateral negotiations to reduce global excess steel capacity and to address market-distorting factors in the world steel trade. In late October 2001, the ITC voted and affirmed that injury had been caused by surges of low-priced imports of hot-rolled and cold-finished steel bars. Hot-rolled bars are a major product line for the company's Steel business, which also manufactures some cold-finished bar products. On March 5, 2002, President Bush signed a proclamation imposing tariffs on hot and cold-finished bar imports. The relief granted with respect to these product categories was to establish three years of tariffs at 30%, 24% and 18%. The ITC vote on the presence of injury with respect to tool steels was 3-3, and as a consequence, no relief was granted with respect to tool steels, which is a major product line for the Latrobe Steel subsidiary in Latrobe, Pennsylvania. Steel made in Mexico, Canada and developing nations is generally exempt from the tariffs announced.
While the President's decision to implement a Section 201 remedy is not appealable to U.S. courts, foreign governments may appeal, and some have appealed, to the World Trade Organization (WTO). The European Union, Japan and other countries are currently prosecuting these appeals. These dispute settlement proceedings at the WTO and further appeals to the Appellate Body of the WTO generally take 15 to 24 months. Moreover, a number of affected countries have imposed or threatened to impose various retaliatory tariffs on U.S. steel or other products or have sought various product exemptions from the imposition of the tariffs.
Continued Dumping and Subsidy Offset Act
In December 2002 and 2001, the company received gross amounts of approx- imately $54 million and $31 million, respectively, from the U.S. Treasury Department under the Continued Dumping and Subsidy Offset Act (CDSOA). The CDSOA payments for 2002 and 2001, net of expenses, were $50.2 million and $29.6 million, respectively. These payments resulted from the requirement in the CDSOA that dumping duties collected by the U.S. Customs Service be distributed to qualifying domestic producers and are related to the company's Automotive and Industrial Bearings' segments. In September 2002, the WTO ruled that such payments violate international trade rules. The U.S. Trade Representative appealed this ruling; however, the WTO upheld the ruling on January 16, 2003. The company may not receive payments under the CDSOA in 2003 or future years, and the company cannot predict the amount of any such payments it may receive.
Torrington received gross payments of approximately $62 million under the CDSOA in 2001 and approximately $72 million in 2002. Ingersoll-Rand retained 100% of all such payments received in 2001 and 2002. Under the purchase agreement with Ingersoll-Rand, the Company will be obligated to pay to Ingersoll-Rand 80% of any payments Torrington receives under the CDSOA in 2003 and 2004. 9
New Joint Ventures ___________________
On April 8, 2002, Timken announced an agreement with NSK Ltd. to form Timken- NSK Bearings (Suzhou) Co. Ltd. to build a plant near Shanghai, China to manu- facture certain tapered roller bearing product lines. Construction of the plant began in December 2002, and production is expected to begin in the first quarter of 2004. Ownership of this joint venture is divided evenly between NSK Ltd. and Timken.
On June 27, 2002, Timken announced an agreement with two Japan-based com- panies, Sanyo Special Steel Co., Ltd. and Showa Seiko Co., Ltd., to form Advanced Green Components, LLC to supply forged and machined rings for bearing manufacture. The joint venture operates as an independent manu- facturing business. It acquired the assets of the company's Winchester, Kentucky plant and commenced operations at the beginning of November 2002.
Backlog _______
The backlog of orders of Timken's domestic and overseas operations is estimated to have been $1.05 billion at December 31, 2002, and $1.01 billion at December 31, 2001. Actual shipments are dependent upon ever-changing production schedules of the customer. Accordingly, Timken does not believe that its backlog data and comparisons thereof as of different dates are reliable indicators of future sales or shipments.
Raw Materials _____________
The principal raw materials used by Timken in its North American bearing plants to manufacture bearings are its own steel tubing and bars, purchased strip steel and energy resources. Outside North America, the company purchases raw materials from local sources with whom it has worked closely to assure steel quality according to its demanding specifications. In addition, Timken Alloy Steel Europe in Leicester, England is a major source of raw materials for the Timken plants in Western Europe.
The principal raw materials used by Timken in steel manufacturing are scrap metal, nickel and other alloys. The availability and prices of raw materials and energy resources is subject to curtailment or change due to, among other things, new laws or regulations, suppliers' allocations to other purchasers, interruptions in production by suppliers, changes in exchange rates and prevailing price levels. For example, the weighted average price of scrap metal increased 12.5% from 1999 to 2000, decreased 19.6% from 2000 to 2001, and increased 8.1% from 2001 to 2002.
Moreover, disruptions in the supply of raw materials or energy resources could temporarily impair the company's ability to manufacture its products for its customers or require the company to pay higher prices in order to obtain these raw materials or energy resources from other sources, and could thereby affect the company's sales and profitability. Any increase in the prices for such raw materials or energy resources could materially affect the company's costs and therefore its earnings.
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Raw Materials (cont.) _____________________
Timken believes that the availability of raw materials and alloys are adequate for its needs, and, in general, it is not dependent on any single source of supply.
Research ________
Timken's major research center, located in Canton, Ohio near its world head- quarters, is engaged in research on bearings, steels, manufacturing methods and related matters. Research facilities are also located at the Timken Aerospace & Super Precision Bearings New Hampshire plants; the Colmar, France plant; the Latrobe, Pennsylvania plant; the Ploiesti, Romania plant; and the facility in Bangelore, India. Expenditures for research, development and testing amounted to approximately $53 million in 2002, $54 million in 2001, and $52 million in 2000. The company's research program is committed to the development of new and improved bearing and steel products, as well as more efficient manufacturing processes and techniques and the expansion of applications for existing products.
Environmental Matters _____________________
The company continues to protect the environment and comply with environ- mental protection laws. Additionally, it has invested in pollution control equipment and updated plant operational practices. The company is committed to implementing a documented environmental management system worldwide and to becoming certified under the ISO 14001 standard to meet or exceed customer requirements. By the end of 2002, 11 of the company's plants had obtained ISO 14001 certification. Six additional plants are on schedule to be certified by July of 2003.
It is difficult to assess the possible effect of compliance with future requirements that differ from existing ones. As previously reported, the company is unsure of the future financial impact to the company that could result from the United States Environmental Protection Agency's (EPA's) final rules to tighten the National Ambient Air Quality Standards for fine particulate and ozone.
The company and certain of its U.S. subsidiaries have been designated as potentially responsible parties by the EPA for site investigation and remediation at certain sites under the Comprehensive Environmental Response, Compensation and Liability Act (Superfund). The claims for remediation have been asserted against numerous other entities, which are believed to be financially solvent and are expected to fulfill their proportionate share of the obligation. Management believes any ultimate liability with respect to all pending actions will not materially affect the company's operations, cash flows or consolidated financial position. Furthermore, the company believes it has established adequate reserves to cover its environmental expenses and has a well-established environmental compliance audit program, which includes a proactive approach to bringing its domestic and international units to higher standards of environmental performance. This program measures performance against local laws as well as standards that have been established for all units worldwide. 11
Patents, Trademarks and Licenses ________________________________
Timken owns a number of U. S. and foreign patents, trademarks and licenses relating to certain of its products. While Timken regards these as items of importance, it does not deem its business as a whole, or any industry segment, to be materially dependent upon any one item or group of items.
Employment __________
At December 31, 2002, Timken had approximately 18,000 associates. Thirty-one percent of Timken's U.S. associates are covered under collective bargaining agreements. None of Timken's U.S. associates are covered under collective bargaining agreements that expire within one year.
As of December 31, 2002, Torrington had approximately 10,000 employees. Approximately 4% of Torrington's U.S. associates are covered under collective bargaining agreements.
Available Information _____________________
Timken's annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available on Timken's website at www.timken.com as soon as reasonably practicable after electronically filing such material with the Securities and Exchange Commission.
12Item 2. Properties ___________________
Timken has Automotive and Industrial Bearing and Steel manufacturing facilities at multiple locations in the United States. Timken also has Automotive and Industrial Bearing and Steel manufacturing facilities in a number of countries outside the United States. The aggregate floor area of these facilities worldwide is approximately 13,153,000 square feet, all of which, except for approximately 834,000 square feet, is owned in fee. The facilities not owned in fee are leased. The buildings occupied by Timken are principally made of brick, steel, reinforced concrete and concrete block construction. All buildings are in satisfactory operating condition in which to conduct business.
Timken's Automotive and Industrial Bearing manufacturing facilities in the United States are located in Bucyrus, Canton, New Philadelphia, and Niles Ohio; Altavista, Virginia; Randleman and Iron Station, North Carolina; Carlyle, Illinois; South Bend, Indiana; Gaffney, South Carolina; Keene and Lebanon, New Hampshire; Mascot, Tennessee; Lenexa, Kansas; Ogden, Utah; Orange, California; and Sanford, Florida. These facilities, including the research facility in Canton, Ohio, and warehouses at plant locations, have an aggregate floor area of approximately 4,195,000 square feet. As part of the manufacturing strategy initiative announced in April 2001, the company sold its tooling plant in Ashland, Ohio effective June 20, 2002. The sale of the plant decreased floor area by approximately 54,000 square feet. In connection with the Advanced Green Components, LLC, joint venture, the company contributed the Winchester, Kentucky plant assets to the joint venture. This transaction decreased floor area by approximately 75,000 square feet.
Timken's Automotive and Industrial Bearing manufacturing plants outside the United States are located in Benoni, South Africa; Brescia, Italy; Colmar, France; Northampton and Wolverhampton, England; Medemblik, The Netherlands; Ploiesti, Romania; Mexico City, Mexico; Sao Paulo, Brazil; Singapore; Jamshedpur, India; Sosnowiec, Poland; St. Thomas, Canada and Yantai, China. The facilities, including warehouses at plant locations, have an aggregate floor area of approximately 2,961,000 square feet. As part of the manu- facturing strategy initiative announced in April 2001, the company ceased manufacturing operations at the Duston, England plant in November 2002, which decreased floor area by approximately 656,000 square feet.
Timken's Steel manufacturing facilities in the United States are located in Canton, Eaton, Wauseon, Wooster, and Vienna, Ohio; Columbus, North Carolina; White House, Tennessee; and Franklin and Latrobe, Pennsylvania. These facilities have an aggregate floor area of approximately 5,253,000 square feet.
Timken's Steel manufacturing facilities outside the United States are located in Leicester and Sheffield, England; and Fougeres and Marnaz, France. These facilities have an aggregate floor of approximately 743,000 square feet.
In addition to the manufacturing and distribution facilities discussed above, Timken owns warehouses and steel distribution facilities in the United States, United Kingdom, France, Singapore, Mexico, Argentina and Australia, and leases several relatively small warehouse facilities in cities throughout the world. 13
Properties (cont.) __________________
During 2002, the widespread incentive programs on light-trucks and changing environmental regulations on heavy trucks drove the increase in North American demand. Automotive bearing plant utilization was higher in 2002 compared to 2001 as a result of this demand. Additionally, plant utilization was impacted by the closing of the Duston, England, plant, resulting in operating inefficiencies and costs incurred to meet higher-than-expected customer demand. Industrial bearing plant utilization was comparable to 2001. In 2002, steel plant utilization was between 70% and 80%, varying by business and product, which was slightly better than 2001.
Item 3. Legal Proceedings __________________________
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders ____________________________________________________________
No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year ended December 31, 2002.
Item 4A. Executive Officers of the Registrant ______________________________________________
The officers are elected by the Board of Directors normally for a term of one year and until the election of their successors. All officers, except for two, have been employed by Timken or by a subsidiary of the company during the past five-year period. The Executive Officers of the company as of February 14, 2003, are as follows:
Current Position and Previous Name Age Positions During Last Five Years ___________________ ___ ____________________________________________
W. R. Timken, Jr. 64 1997 Chairman, President and Chief Executive Officer; Director; 1999 Chairman and Chief Executive Officer; Director; 2002 Chairman - Board of Directors; Director; Officer since 1968.
J. W. Griffith 49 1997 Vice President - Bearings - North American Automotive, Rail, Asia Pacific and Latin America; 1998 Group Vice President - Bearings - North American Automotive, Asia Pacific and Latin America; 1999 President and Chief Operating Officer; Director; 2002 President and Chief Executive Officer; Director; Officer since 1996.
14
Executive Officers of the Registrant (cont.) ____________________________________________
Current Position and Previous Name Age Positions During Last Five Years ___________________ ___ ____________________________________________
B. J. Bowling 61 1997 Executive Vice President, Chief Operating Officer and President - Steel; Officer since 1996. - Steel; Officer since 1996. C. J. Andersson 41 1997 General Manager - Mexico Sourcing and Business Development, GE International Mexico (General Electric Company); 1999 General Manager - Aviation Information Services, GE Aircraft Engines (General Electric Company); 2000 Senior Vice President - e-Business, The Timken Company; 2001 Senior Vice President - e-Business and Lean Six Sigma, The Timken Company; 2002 Senior Vice President - Industrial Integration, The Timken Company; Officer since 2000.
M. C. Arnold 46 1997 Director - Bearing Business Process Advancement; 1998 Vice President - Bearings - Business Process Advancement; 2000 President - Industrial; Officer since 2000.
S. B. Bailey 43 1997 Director - Finance; 1999 Director - Finance and Treasurer; 2000 Treasurer; 2001 Corporate Controller; 2002 Senior Vice President - Finance and Controller; Officer since 1999.
W. R. Burkhart 37 1997 Legal Counsel - Europe, Africa and West Asia; 1998 Director of Affiliations and Acquisitions; 2000 Senior Vice President and General Counsel; Officer since 2000.
D. J. Demerling 52 1997 President - MPB Corporation; 2000 President - Aerospace and Super Precision; 2002 Senior Vice President - Supply Chain Trans- formation; Officer since 2000.
15
Executive Officers of the Registrant (cont.) ____________________________________________
Current Position and Previous Name Age Positions During Last Five Years ___________________ ___ ____________________________________________
G. A. Eisenberg 41 1997 Executive Vice President and Chief Financial Officer, United Dominion Industries; 1998 President - Test Instrumentation Segment; Executive Vice President and Chief Financial Officer, United Dominion Industries; 1999 President and Chief Operating Officer, United Dominion Industries; 2002 Executive Vice President - Finance and Administration, The Timken Company; Officer since 2002.
J. T. Elsasser 50 1997 Vice President - Bearings - Europe, Africa and West Asia; 1998 Group Vice President - Bearings - Rail, Europe, Africa and West Asia; 1999 Senior Vice President - Corporate Development; 2002 Senior Vice President - e-Business and Corporate Planning; Officer since 1996.
K. P. Kimmerling 45 1997 Vice President - Manufacturing - Steel; 1998 Group Vice President - Alloy Steel; 1999 President - Automotive; Officer since 1998.
S. J. Miraglia, Jr. 52 1997 Vice President - Bearings - North American Industrial and Super Precision; 1998 Group Vice President - Bearings - North American Industrial and Super Precision; 1999 Senior Vice President - Technology; Officer since 1996.
H. J. Sack 49 1997 President - Latrobe Steel Company; 1998 Group Vice President - Specialty Steel and President - Latrobe Steel Company; 1999 Group Vice President - Specialty Steel and President - Timken Latrobe Steel; 2000 President - Specialty Steel; Officer since 1998.
Executive Officers of the Registrant (cont.) ____________________________________________
Current Position and Previous Name Age Positions During Last Five Years ___________________ ___ ____________________________________________
M. J. Samolczyk 47 1997 Vice President - Sales and Marketing - Industrial - Original Equipment; 1998 Vice President and General Manager - Precision Steel Components; 2000 President - Precision Steel Components; 2002 Senior Vice President - Automotive Integration; Officer since 2000.
S. A. Scherff 49 1997 Director - Legal Services and Assistant Secretary; 1999 Corporate Secretary; 2000 Corporate Secretary and Assistant General Counsel; Officer since 1999.
W. J. Timken 60 1997 Vice President; Director; Officer since 1992.
W. J. Timken, Jr. 35 1997 Market Manager - Original Equipment Distribution - Europe, Africa and West Asia; 1998 Vice President - Latin America; 2000 Corporate Vice President - Office of the Chairman; 2002 Corporate Vice President - Office of the Chairman; Director; Officer since 2000.
17
Item 5. Market for Registrant's Common Equity and Related Stockholder ______________________________________________________________________ Matters _______
The company's common stock is traded on the New York Stock Exchange (TKR). The estimated number of record holders of the company's common stock at December 31, 2002, was 7,719. The estimated number of shareholders at December 31, 2002, was 44,057.
High and low stock prices and dividends for the last two fiscal years are presented in the Quarterly Financial Data schedule on Page 1 of the Annual Report to Shareholders for the year ended December 31, 2002, and are incorporated herein by reference.
Information regarding the company's stock compensation plans is presented in Note 10 to the Consolidated Financial Statements on Page 41 of the Annual Report to Shareholders for the year ended December 31, 2002, and is incor- porated herein by reference. Information regarding disclosure of the company's equity compensation plans approved by shareholders is presented in Item 12.
Item 6. Selected Financial Data ________________________________
The Summary of Operations and Other Comparative Data on Pages 48-49 of the Annual Report to Shareholders for the year ended December 31, 2002, is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and ________________________________________________________________________Results of Operations _____________________
Management's Discussion and Analysis of Financial Condition and Results of Operations on Pages 22-31 of the Annual Report to Shareholders for the year ended December 31, 2002, is incorporated herein by reference.
On March 20, 2003, the company announced the closing of the bearing plant in Darlington, England. This plant was acquired as part of the company's acquisition of Ingersoll-Rand's Engineered Solutions business, which was effective February 16, 2003. Operations at the Darlington plant are expected to be phased out during the next 8 to 12 months.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk ____________________________________________________________________
Information appearing under the caption "Management's Discussion and Analysis of Other Information" appearing on Page 29-31 of the Annual Report to Shareholders for the year ended December 31, 2002, is incorporated herein by reference.
18
Item 8. Financial Statements and Supplementary Data ____________________________________________________
The Quarterly Financial Data schedule included on Page 1, the Consolidated Financial Statements of the registrant and its subsidiaries on Pages 22-32, the Notes to Consolidated Financial Statements on Pages 33-46 and the Report of Independent Auditors on Page 47 of the Annual Report to Shareholders for the year ended December 31, 2002, are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting ____________________________________________________________________ and Financial Disclosure ________________________
Not applicable.
19
PART III ________
Item 10. Directors and Executive Officers of the Registrant ____________________________________________________________
Required information is set forth under the captions "Election of Directors" on Pages 4-7 and "Section 16(a) Beneficial Ownership Report Compliance" on Page 25 of the proxy statement filed in connection with the annual meeting of shareholders to be held April 15, 2003, and is incorporated herein by reference. Information regarding the executive officers of the registrant is included in Part I hereof.
Item 11. Executive Compensation ________________________________
Required information is set forth under the captions "Executive Compensation" on Pages 11-22 and "Comparison of Five Year Cumulative Total Return" on Page 23 of the proxy statement filed in connection with the annual meeting of shareholders to be held April 15, 2003, and is incorporated herein by reference.
In addition, Joseph F. Toot, Jr., retired President and CEO of the company, and currently a Director, was paid $100,000 in 2002, for services provided by Mr. Toot pursuant to the Consulting Agreement between Mr. Toot and the company effective January 1, 2001, and filed with the Commission on March 30, 2001. That agreement expired on December 31, 2002. Currently, Mr. Toot is provided office space and secretarial support, and the company pays travel and entertainment expenses incurred by Mr. Toot in connection with maintaining certain company customer relationships. Mr. Toot also receives a pension from the company.
Item 12. Security Ownership of Certain Beneficial Owners and Management and ____________________________________________________________________________
Related Stockholder Matters ___________________________
Required information, including with respect to institutional investors owning more than 5% of the company's Common Stock, is set forth under the caption "Beneficial Ownership of Common Stock" on Pages 9-10 of the proxy statement filed in connection with the annual meeting of shareholders to be held April 15, 2003, and is incorporated herein by reference.
20
Item 12. Security Ownership of Certain Beneficial Owners and Management ________________________________________________________________________
Related Stockholder Matters (cont.) ___________________________________
Equity Compensation Plan Information
The table below sets forth certain information regarding the following equity compensation plans of the Company as of December 31, 2002: The Timken Company Long-Term Incentive Plan (As Amended and Restated as of January 30, 2002) (the "LTIP"), and The 1985 Incentive Plan of The Timken Company (the "Incentive Plan"), pursuant to which the Company has made equity compensation available to eligible persons. Both plans have been approved by shareholders.
Number of securities remaining Number of available for future securities to be Weighted-average issuance under issued upon exercise exercise price equity compensation of outstanding of outstanding plans (excluding Plan category options, warrants options, warrants securities reflected and rights and rights in column (a))
(a) (b) (c)
(1) The Common Shares set forth in column c represent those remaining available under the LTIP, which authorizes the Compensation Committee to make awards of Option Rights, Appreciation Rights, Restricted Shares, Deferred Shares, Performance Shares, and Performance Units. Awards may be credited with dividend equivalents payable in the form of Company Common Shares. In addition, under the LTIP nonemployee directors are entitled to awards of Restricted Shares, Common Shares and Option Rights pursuant to a formula set forth in that plan. The maximum number of Common Shares that may be issued under the LTIP as Restricted Shares and Deferred Shares cannot (after taking any forfeitures into account and excluding automatic awards of Restricted Shares to non-employee directors) exceed 10% of the 11,700,000 Common Shares previously authorized for issuance under the LTIP. As of December 31, 2002, 736,300 Common Shares remained available for future issuance as Restricted Shares or Deferred Shares.
(2) The Company also maintains the Director Deferred Compensation Plan and the Deferred Compensation Plan pursuant to which directors and employees, respectively, may defer receipt of Company Common Shares authorized for issuance under either the LTIP or the Incentive Plan. The table does not include separate information about these plans because they merely provide for the deferral, rather than the issuance, of Company Common Shares.
21
Item 13. Certain Relationships and Related Transactions ________________________________________________________
Required information is set forth under the captions "Election of Directors" on Pages 4-7 and "Executive Loan" on Page 17 of the proxy statement issued in connection with the annual meeting of shareholders to be held April 15, 2003, and is incorporated herein by reference.
Item 14. Controls and Procedures _________________________________
(a). Evaluation of disclosure controls and procedures. Timken maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the company in reports that it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Within the 90-day period prior to the filing of this Form 10-K, an evaluation was carried out under the supervision and with the participation of the company's management, including the principal executive officer and principal financial officer, of the effectiveness of the company's disclosure controls and procedures (as defined in Rule 13a-14(c) and 15(d)-14(c) of the Securities Exchange Act of 1934, as amended). Based on that evaluation, the principal executive officer and principal financial officer of the company have each concluded that such disclosure controls and procedures are effective.
(b). Changes in internal controls. Subsequent to the date of their evaluation, there have not been any significant changes in the company's internal controls or in other factors that could significantly affect these controls, including any corrective action with regard to significant deficiencies and material weaknesses.
22
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. ___________________________________________________________________________
(a)(1) and (2) - The response to this portion of Item 15 is submitted as a separate section of this report.
Schedules I, III, IV and V are not applicable to the company and, therefore, have been omitted.
(3) Listing of Exhibits
Exhibit _______
(3)(i) Amended Articles of Incorporation of The Timken Company (Effective April 16, 1996) were filed with Form S-8 dated April 16, 1996 (Registration Number 333-02553) and are incorporated herein by reference.
(3)(ii) Amended Regulations of The Timken Company effective April 21, 1987, were filed on March 29, 1993 with Form 10-K (Commission File Number 1-1169), and are incorporated herein by reference.
(4) Credit Agreement dated as of December 31, 2002 among The Timken Company, as Borrower, Various Financial Institutions, as Banks, and Bank of America, N.A. and Keybank National Association, as Co-Administrative Agents.
(4.1) Credit Agreement dated as of July 10, 1998 among The Timken Company, as Borrower, Various Financial Institutions, as Banks, and Keybank National Association, as Agent was filed on August 13, 1998 with Form 10-Q (Commission File Number 1-1169), and is incorporated herein by reference.
(4.2) Indenture dated as of April 24, 1998, between The Timken Company and The Bank of New York, which was filed with Timken's Form S-3 registration statement which became effective April 24, 1998 (Registration Number 333-45791), and is incorporated herein by reference.
(4.3) Indenture dated as of July 1, 1990, between Timken and Ameritrust Company of New York, which was filed with Timken's Form S-3 registration statement dated July 12, 1990 (Registration Number 333-35773), and is incorporated herein by reference.
(4.4) First Supplemental Indenture, dated as of July 24, 1996, by and between The Timken Company and Mellon Bank, N.A. was filed on November 13, 1996 with Form 10-Q (Commission File Number 1-1169), and is incorporated herein by reference.
23
Listing of Exhibits (cont.) ___________________________
(4.5) First Amendment Agreement dated as of January 1, 2002 among The Timken Company, as Borrower, Various Financial Institutions, as Banks, and Keybank National Association, as Agent was filed on March 28, 2002 with Form 10-K (Commission File Number 1-1169), and is incorporated herein by reference.
(4.6) Second Amendment Agreement dated as of among The Timken Company, as Borrower, Various Financial Institutions, as Banks, and Keybank National Association, as Agent.
(4.7) Indenture dated as of February 18, 2003, between The Timken Company and The Bank of New York, as Trustee, Providing for Issuance of Notes in Series.
(4.8) The company is also a party to agreements with respect to other long-term debt in total amount less than 10% of the registrant's consolidated total assets. The registrant agrees to furnish a copy of such agreements upon request.
Management Contracts and Compensation Plans ___________________________________________
(10) The Management Performance Plan of The Timken Company for Officers and Certain Management Personnel, as revised on December 18, 2002.
(10.1) The form of Deferred Compensation Agreement entered into with James W. Griffith, W. R. Timken, Jr., R. L. Leibensperger and B. J. Bowling was filed on November 13, 1995 with Form 10-Q (Commission File Number 1-1169), and is incorporated herein by reference.
(10.2) The Timken Company 1996 Deferred Compensation Plan for officers and other key employees, amended and restated as of April 20, 1999 was filed on May 13, 1999 with Form 10-Q (Commission File Number 1-1169), and is incorporated herein by reference.
(10.3) The Timken Company Long-Term Incentive Plan for directors, officers and other key employees as amended and restated as of January 30, 2002 and approved by shareholders on April 16, 2002 was filed as Appendix A to Proxy Statement filed on February 22, 2002 (Commission File Number 1-1169), and is incorporated herein by reference.
(10.4) The 1985 Incentive Plan of The Timken Company for Officers and other key employees as amended through December 17, 1997 was filed on March 20, 1998 with Form 10-K (Commission File Number 1-1169), and is incorporated herein by reference.
(10.5) The form of Severance Agreement entered into with all Executive Officers of the company was filed on March 27, 1997 with Form 10-K (Commission File Number 1-1169), and is incorporated herein by reference. Each differs only as to name and date executed.
Listing of Exhibits (cont.) ___________________________
Management Contracts and Compensation Plans (cont.) ___________________________________________________
(10.6) The form of Death Benefit Agreement entered into with all Executive Officers of the company was filed on March 30, 1994 with Form 10-K (Commission File Number 1-1169), and is incorporated herein by reference. Each differs only as to name and date executed.
(10.7) The form of Indemnification Agreements entered into with all Directors who are not Executive Officers of the company was filed on April 1, 1991 with Form 10-K (Commission File Number 1-1169), and is incorporated herein by reference. Each differs only as to name and date executed.
(10.8) The form of Indemnification Agreements entered into with all Executive Officers of the company who are not Directors of the company was filed on April 1, 1991 with Form 10-K (Commission File Number 1-1169), and is incorporated herein by reference. Each differs only as to name and date executed.
(10.9) The form of Indemnification Agreements entered into with all Executive Officers of the company who are also Directors of the company was filed on April 1, 1991 with Form 10-K (Commission File Number 1-1169), and is incorporated herein by reference. Each differs only as to name and date executed.
(10.10) The form of Employee Excess Benefits Agreement entered into with all active Executive Officers, certain retired Executive Officers, and certain other key employees of the company was filed on March 27, 1992 with Form 10-K (Commission File Number 1-1169), and is incorporated herein by reference. Each differs only as to name and date executed.
(10.11) The Amended and Restated Supplemental Pension Plan of The Timken Company as adopted March 16, 1998 was filed on March 20, 1998 with Form 10-K (Commission File Number 1-1169), and is incorporated herein by reference.
(10.12) Amendment to the Amended and Restated Supplemental Pension Plan of the Timken Company executed on December 29, 1998 was filed on March 30, 1999 with Form 10-K (Commission File Number 1-1169), and is incorporated herein by reference.
(10.13) The form of The Timken Company Nonqualified Stock Option Agreement for nontransferable options as adopted on April 18, 2000 was filed on May 12, 2000 with Form 10-Q (Commission File Number 1-1169), and is incorporated herein by reference. 25
Listing of Exhibits (cont.) ___________________________
Management Contracts and Compensation Plans (cont.) ___________________________________________________
(10.14) The form of The Timken Company Nonqualified Stock Option Agreement for transferable options as adopted on April 16, 2002 was filed on May 14, 2002 with Form 10-Q (Commission File Number 1-1169), and is incorporated herein by reference.
(10.15) The form of The Timken Company Nonqualified Stock Option Agreement for special award options as adopted on April 18, 2000 was filed on May 12, 2000 with Form 10-Q (Commission File Number 1-1169), and is incorporated herein by reference.
(10.16) The Timken Company Deferral of Stock Option Gains Plan effective as of April 21, 1998 was filed on May 14, 1998 with Form 10-Q (Commission File Number 1-1169), and is incorporated herein by reference.
(10.17) The form of The Timken Company Performance Share Agreement entered into with W. R. Timken, Jr., R. L. Leibensperger and B. J. Bowling was filed on March 20, 1998 with Form 10-K (Commission File Number 1-1169), and is incorporated herein by reference.
(10.18) The Timken Company Senior Executive Management Performance Plan effective January 1, 1999, and approved by shareholders April 20, 1999 was filed as Appendix A to Proxy Statement filed on February 29, 1999 (Commission File Number 1-1169), and is incorporated herein by reference.
(10.19) The Timken Company Nonqualified Stock Option Agreement entered into with James W. Griffith and adopted on December 16, 1999 was filed on March 29, 2000 with Form 10-K (Commission File Number 1-1169), and is incorporated herein by reference.
(10.20) The Timken Company Promissory Note entered into with James W. Griffith and dated December 17, 1999 was filed on March 29, 2000 with Form 10-K (Commission File Number 1-1169), and is incorporated herein by reference.
(10.21) The Timken Company Director Deferred Compensation Plan effective as of February 4, 2000 was filed on May 12, 2000 with Form 10-Q (Commission File Number 1-1169), and is incorporated herein by reference.
(10.22) The form of The Timken Company Deferred Shares Agreement as adopted on April 18, 2000 was filed on May 12, 2000 with Form 10-Q (Commission File Number 1-1169), and is incorporated herein by reference.
26 Listing of Exhibits (cont.) ___________________________
Management Contracts and Compensation Plans (cont.) ___________________________________________________
(10.23) Amendment to Employee Excess Benefits Agreement was filed on May 12, 2000 with Form 10-Q (Commission File Number 1-1169), and is incorporated herein by reference.
(10.24) The form of The Timken Company Nonqualified Stock Option Agreement for nontransferable options without dividend credit as adopted on April 17, 2001 was filed on May 14, 2001 with Form 10-Q (Commission File Number 1-1169), and is incorporated herein by reference.
(10.25) Restricted Shares Agreement entered into with Glenn A. Eisenberg was filed on March 28, 2002 with Form 10-K (Commission File Number 1-1169), and is incorporated herein by reference.
(10.26) Restricted Shares Agreement entered into with Curt J. Andersson was filed on March 28, 2002 with Form 10-K (Commission File Number 1-1169), and is incorporated herein by reference.
(10.27) The form of The Timken Company 1996 Deferred Compensation Plan Election Agreement as adopted on April 16, 2002. Each differs only as to name and date executed and was filed on May 14, 2002 with Form 10-Q (Commission File Number 1-1169), and is incorporated herein by reference.
(10.28) The form of The Timken Company Restricted Shares Agreement as adopted on April 16, 2002 was filed on May 14, 2002 with Form 10-Q (Commission File Number 1-1169), and is incorporated herein by reference.
(10.29) The form of The Timken Company Performance Unit Agreement as adopted on April 16, 2002 was filed on May 14, 2002 with Form 10-Q (Commission File Number 1-1169), and is incorporated herein by reference.
(10.30) The form of The Timken Company 1996 Deferred Compensation Plan Election Agreement for Deferral of Restricted Shares was filed on August 13, 2002 with Form 10-Q (Commission File Number 1-1169), and is incorporated herein by reference.
(10.31) Retirement Agreement entered into as of June 30, 2002 between the company and Gene E. Little was filed on August 13, 2002 with Form 10-Q (Commission File Number 1-1169), and is incorporated herein by reference. 27
Listing of Exhibits (cont.) ___________________________
Management Contracts and Compensation Plans (cont.) ___________________________________________________
(10.32) The Consulting Agreement entered into with Joseph F. Toot, Jr., effective January 1, 2001 was filed on March 30, 2001 with Form 10-K (Commission File Number 1-1169), and is incorporated herein by reference.
(10.33) Executive Severance Agreement entered into with Glenn A. Eisenberg.
(12) Ratio of Earnings to Fixed Charges.
(13) Annual Report to Shareholders for the year ended December 31, 2002 (only to the extent expressly incorporated herein by reference).
(21) A list of subsidiaries of the registrant.
(23) Consent of Independent Auditors.
(24) Power of Attorney
(99.1) Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 signed on March 28, 2003 by the President and Chief Executive Officer and the Executive Vice President - Finance and Administration
(99.2) The Consulting Agreement entered into with e-Solutions.biz, LLC (Thomas W. Strouble, Owner and principal) was filed on November 13, 2002 with Form 10-Q (Commission File Number 1-1169), and is incorporated herein by reference.
(b) Reports on Form 8-K:
On February 18, 2003, the company filed a Form 8-K regarding Acquisition or Disposition of Assets, which contained information regarding the company's completion of the acquisition of the Engineered Solutions Business of Ingersoll-Rand Company Limited. Financial state- ments for the company and the Engineered Solutions business of Ingersoll-Rand Company Limited were incorporated by reference into this Form 8-K.
On February 13, 2003, the company filed a Form 8-K regarding Other Events and Regulation FD disclosure, which contained a press release announcing the offering of $250 million of 5.75% notes due 2010. No financial statements were filed.
On February 12, 2003, the company filed a Form 8-K regarding Other Events and Regulation FD disclosure, which contained a press release announcing the pricing of the offering of 11 million shares of the company's common stock. No financial statements were filed.
28 Listing of Exhibits (cont.) ___________________________
(b) Reports on Form 8-K (cont.):
On February 7, 2003, the company filed a Form 8-K regarding Other Events, which contained information regarding the company's pending acquisition of the Engineered Solutions business of Ingersoll-Rand Company Limited. Audited combined financial statements of Ingersoll- Rand Engineered Solutions Business for the years ended December 31, 2002, 2001 and 2000 were filed.
On January 29, 2003, the company filed a Form 8-K regarding Other Events and Regulation FD disclosure, which contained a press release announcing the company's first quarter and full year 2003 outlook. No financial statements were filed.
On January 22, 2003, the company filed a Form 8-K regarding Other Events and Regulation FD disclosure, which contained a press release announcing the company's fourth quarter and 2002 results. No financial statements were filed.
On December 24, 2002, the company filed a Form 8-K regarding Other Events, which contained information regarding the company's pending acquisition of the Engineered Solutions business of Ingersoll-Rand Company Limited. Audited combined financial statements of Ingersoll- Rand Engineered Solutions Business for the years ended December 31, 2001, 2000 and 1999 and for the nine months ended September 30, 2002 and 2001 were filed. In addition, unaudited pro forma financial information for the company and the Ingersoll-Rand Engineered Solutions Business for the year ended December 31, 2001 and the nine months ended September 30, 2002 was filed.
On December 24, 2002, the company filed a Form 8-K regarding Other Events, which contained informatin regarding the company's change in method of accounting in accordance with the adoption of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets." No financial statements were filed.
On November 19, 2002, the company filed a Form 8-K regarding Other Events and Regulation FD disclosure, which contained estimated market data and industry trend information relating to a number of industry segments in which the company sells bearing and steel products. No financial statements were filed.
(c) The exhibits are contained in a separate section of this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
THE TIMKEN COMPANY
By /s/ James W. Griffith By /s/ Glenn A. Eisenberg ________________________________ ________________________________ James W. Griffith Glenn A. Eisenberg Chief Executive Officer and Executive Vice President - Finance Director and Administration (Principal Financial Officer Date March 27, 2003 Date March 27, 2003 ________________________________ _______________________________
By /s/ Sallie B. Bailey ________________________________ Sallie B. Bailey Senior Vice President - Finance (Principal Accounting Officer) Date March 27, 2003 _______________________________
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By /s/ Stanley C. Gault* By /s/ Ward J. Timken, Jr.* ______________________________ _______________________________ Stanley C. Gault Director Ward J. Timken, Jr. Director Date March 27, 2003 Date March 27, 2003
By /s/ John A. Luke, Jr.* By /s/ W. R. Timken, Jr.* ______________________________ _______________________________ John A. Luke, Jr. Director W. R. Timken, Jr. Director Date March 27, 2003 Date March 27, 2003
/s/ Robert W. Mahoney* By /s/ Joseph F. Toot, Jr.* ______________________________ _______________________________ Robert W. Mahoney Director Joseph F. Toot, Jr. Director Date March 27, 2003 Date March 27, 2003
By /s/ Jay A. Precourt* By /s/ Martin D. Walker* ______________________________ _______________________________ Jay A. Precourt Director Martin D. Walker Director Date March 27, 2003 Date March 27, 2003
By /s/ John M. Timken, Jr. By /s/ Jacqueline F. Woods* ______________________________ _______________________________ John M. Timken, Jr. Director Jacqueline F. Woods, Director Date March 27, 2003 Date March 27, 2003
By /s/ Ward J. Timken ______________________________ Ward J. Timken Director Date March 27, 2003
By /s/ Glenn A. Eisenberg ___________________________________ Glenn A. Eisenberg, attorney-in-fact By authority of Power of Attorney filed as Exhibit 24 hereto Date March 27, 2003
CERTIFICATIONS
I, James W. Griffith, certify that:
1. I have reviewed this annual report on Form 10-K of The Timken Company;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated sub- sidiaries, is made known to us by others within those entities, particu- larly during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal con- trols which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: March 27, 2003 BY /s/ James W. Griffith ______________________________________ James W. Griffith, Chief Executive Officer, President and Director
I, Glenn A. Eisenberg, certify that:
1. I have reviewed this annual report on Form 10-K of The Timken Company;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated sub- sidiaries, is made known to us by others within those entities, particu- larly during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal con- trols which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: March 27, 2003 BY /s/ Glenn A. Eisenberg ______________________________________ Glenn A. Eisenberg Executive Vice President - Finance and Administration
ANNUAL REPORT ON FORM 10-K
ITEM 15(a)(1) AND (2), (c) AND (d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
CERTAIN EXHIBITS
FINANCIAL STATEMENT SCHEDULE
YEAR ENDED DECEMBER 31, 2002
THE TIMKEN COMPANY
CANTON, OHIO
FORM 10-K-ITEM 15(a)(1) AND (2)
THE TIMKEN COMPANY AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
The following consolidated financial statements of The Timken Company and subsidiaries, included in the annual report of the registrant to its shareholders for the year ended December 31, 2002, are incorporated by reference in Item 8:
Consolidated statements of operations-Years ended December 31, 2002, 2001 and 2000
Consolidated balance sheets-December 31, 2002 and 2001
Consolidated statements of cash flows-Years ended December 31, 2002, 2001 and 2000
Consolidated statements of shareholders' equity-Years ended December 31, 2002, 2001 and 2000
Notes to consolidated financial statements-December 31, 2002
The consolidated financial statement Schedule II-Valuation and qualifying accounts of The Timken Company and subsidiaries is included in Item 15(d).
All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.
Report of Independent Auditors
To the Board of Directors and Shareholders of The Timken Company
We have audited the accompanying consolidated balance sheets of The Timken Company and subsidiaries as of December 31, 2002 and 2001, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2002. Our audits also included the financial statement schedule listed in the index at Item 15(a). These financial statements and schedule are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and schedule. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement and schedule presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Timken Company and subsidiaries at December 31, 2002 and 2001, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
As discussed in Note 6 to the consolidated financial statements, "Change in Method of Accounting," The Timken Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" effective January 1, 2002.
/s/ ERNST & YOUNG LLP
Canton, Ohio February 18, 2003 II--VALUATION AND QUALIFYING ACCOUNTS
THE TIMKEN COMPANY AND SUBSIDIARIES
COL. A COL. B COL. C COL. D COL. E Additions Balance at Charged to Charged to Other Beginning of Costs and Accounts-- Deductions-- Balance at End Description Period Expenses Describe Describe of Period (Thousands of dollars) Year ended December 31, 2002: Reserves and allowances deducted from asset accounts: Allowance for uncollectible accounts $ 14,976 $ 4,752 (1) $ 5,342 (3) $ 14,386 Valuation allowance on deferred tax assets 34,756 2,547 (2) 19,179 (4) 18,124 ______ ______ ______ ______ $ 49,732 $ 7,299 $ 24,521 $ 32,510 ====== ====== ====== ====== Year ended December 31, 2001: Reserves and allowances deducted from asset accounts: Allowance for uncollectible accounts $ 11,259 $ 10,025 (1) $ 6,308 (3) $ 14,976 Valuation allowance on deferred tax assets 18,084 20,219 (2) 3,547 (4) 34,756 ______ ______ ______ ______ $ 29,343 $ 30,244 $ 9,855 $ 49,732 ====== ====== ====== ====== Year ended December 31, 2000: Reserves and allowances deducted from asset accounts: Allowance for uncollectible accounts $ 9,497 $ 2,406 (1) $ 644 (3) $ 11,259 Valuation allowance on deferred tax assets 15,041 11,543 (2) 8,500 (4) 18,084 ______ ______ ______ ______ $ 24,538 $ 13,949 $ 9,144 $ 29,343 ====== ====== ====== ====== (1) Provision for uncollectible accounts included in expenses. (2) Increase in valuation allowance is recorded as a component of the provision for income taxes. (3) Actual accounts written off against the allowance--net of recoveries. (4) Reduction in valuation allowance due to utilization of foreign net operating losses previously
EXHIBIT 4
EXECUTION COPY
CREDIT AGREEMENT
Dated as of December 31, 2002
among
THE TIMKEN COMPANY, as the Borrower,
BANK OF AMERICA, N.A. and KEYBANK NATIONAL ASSOCIATION, as Co-Administrative Agents,
MERRILL LYNCH & CO., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED as Syndication Agent,
MORGAN STANLEY BANK, as Documentation Agent,
KEYBANK NATIONAL ASSOCIATION, as Paying Agent and as Swing Line Lender,
KEYBANK NATIONAL ASSOCIATION And the Other Letter of Credit Issuers Hereto, as Appropriate L/C Issuers,
and
The Other Lenders Party Hereto
BANC OF AMERICA SECURITIES LLC and KEYBANK NATIONAL ASSOCIATION,
as
Joint Lead Arrangers and Joint Book Managers
TABLE OF CONTENTS
Section Page
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS
1.01 Defined Terms ......................................................... 1 1.02 Other Interpretive Provisions..........................................25 1.03 Accounting Terms.......................................................25 1.04 Rounding...............................................................26 1.05 References to Agreements and Laws......................................26 1.06 Times of Day...........................................................26 1.07 Letter of Credit Amounts...............................................26 1.08 Currency Equivalents Generally.........................................26
ARTICLE II THE COMMITMENTS AND CREDIT EXTENSIONS
2.01 The Loans..............................................................26 2.02 Borrowings, Conversions and Continuations of Loans.....................27 2.03 Letters of Credit......................................................28 2.04 Swing Line Loans.......................................................35 2.05 Prepayments............................................................38 2.06 Termination or Reduction of Commitments................................40 2.07 Repayment of Loans.....................................................41 2.08 Interest...............................................................41 2.09 Fees...................................................................42 2.10 Computation of Interest and Fees.......................................42 2.11 Evidence of Indebtedness...............................................42 2.12 Payments Generally.....................................................43 2.13 Sharing of Payments....................................................45
ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY
3.01 Taxes..................................................................46 3.02 Illegality.............................................................47 3.03 Inability to Determine Rates...........................................48 3.04 Increased Cost and Reduced Return; Capital Adequacy; Reserves on Eurocurrency Rate Loans................................................48 3.05 Funding Losses.........................................................49 3.06 Matters Applicable to All Requests for Compensation....................49 3.07 Survival...............................................................49
ARTICLE IV CONDITIONS PRECEDENT TO CREDIT EXTENSIONS
4.01 Conditions to Documentation Closing Date...............................50 4.02 Conditions of Initial Credit Extensions................................51
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4.03 Conditions to all Credit Extensions....................................53
ARTICLE V REPRESENTATIONS AND WARRANTIES
5.01 Existence, Qualification and Power; Compliance with Laws...............54 5.02 Authorization; No Contravention........................................54 5.03 Governmental Authorization; Other Consents.............................55 5.04 Binding Effect.........................................................55 5.05 Financial Statements; No Material Adverse Effect.......................55 5.06 Litigation.............................................................55 5.07 No Default.............................................................56 5.08 Ownership of Property; Liens...........................................56 5.09 Environmental Compliance...............................................56 5.10 Insurance..............................................................57 5.11 Taxes..................................................................57 5.12 ERISA Compliance..............................Error!Bookmark not defined. 5.13 Subsidiaries; Equity Interests.........................................57 5.14 Margin Regulations; Investment Company Act; Public Utility Holding Company Act............................................................58 5.15 Disclosure.............................................................58 5.16 Compliance with Laws...................................................58 5.17 Intellectual Property; Licenses, Etc...................................59 5.18 Solvency...............................................................59
ARTICLE VI AFFIRMATIVE COVENANTS
6.01 Financial Statements...................................................59 6.02 Certificates; Other Information........................................60 6.03 Notices................................................................61 6.04 Payment o Obligations..................................................61 6.05 Preservation of Existence, Etc.........................................62 6.06 Maintenance of Properties..............................................62 6.07 Maintenance of Insurance...............................................62 6.08 Compliance with Laws...................................................62 6.09 Books and Records......................................................62 6.10 Inspection Rights......................................................62 6.11 Use of Proceeds........................................................63 6.12 Convenant to Guarantee Oblications.....................................63 6.13 Compliance with Environmental Laws.....................................63 6.14 Further Assurances.....................................................63
ARTICLE VII NEGATIVE COVENANTS 7.01 Liens..................................................................64 7.02 Investments............................................................65 7.03 Indebtedness...........................................................67 7.04 Fundamental Changes....................................................69 7.05 Dispositions...........................................................70 7.06 Restricted Payments....................................................71
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7.07 Change in Nature of Business...........................................71 7.08 Transactions with Affiliates...........................................71 7.09 Burdensome Agreements..................................................72 7.10 Use of Proceeds........................................................72 7.11 Financial Convenants...................................................72 7.12 Amendments of Organization Documents...................................73 7.13 Prepayments, Etc., of Indebtedness.....................................73
ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES
8.01 Events of Default......................................................73 8.02 Remedies upon Event of Default.........................................75 8.03 Application of Funds...................................................76
ARTICLE IX AGENTS
9.01 Appointment and Authorization of Agents................................76 9.02 Delegation of Duties...................................................77 9.03 Liability of Agents....................................................77 9.04 Reliance by Agents.....................................................77 9.05 Notice of Default......................................................78 9.06 Credit Decision; Disclosure of Information by Agents...................78 9.07 Indemnification of Agents..............................................79 9.08 Agents in Their Individual Capacities..................................79 9.09 Successor Agents.......................................................79 9.10 Co-Administrative Agents May File Proofs of Claim......................80 9.11 Guaranty Matters.......................................................81 9.12 Other Agents; Arrangers and Managers...................................81
ARTICLE X MISCELLANEOUS
10.01 Amendments, Etc........................................................81 10.02 Notices and Other Communications;Facsimile Copies......................82 10.03 No Waiver; Cumulative Remedies.........................................83 10.04 Attorney Costs, Expenses and Taxes.....................................84 10.05 Indemnification by the Borrower........................................84 10.06 Payments Set Aside.....................................................85 10.07 Successors and Assigns.................................................85 10.08 Confidentiality........................................................88 10.09 Setoff.................................................................89 10.10 Interest Rate Limitation...............................................89 10.11 Counterparts...........................................................90 10.12 Integration............................................................90 10.13 Survival of Representations and Warranties.............................90 10.14 Severability...........................................................90 10.15 Tax Forms..............................................................90 10.16 Replacement of Lenders.................................................92 10.17 Judgment...............................................................92
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10.18 Substitution of Currency...............................................92 10.19 Governing Law..........................................................93 10.20 Waiver of Right to Trial by Jury.......................................93 10.21 Binding Effect.........................................................93 SIGNATURES..................................................................S-1
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SCHEDULES
I Guarantors II Certain Timken Stockholders III Maximum Impairment, Restructuring, Reorganization and Implementation Charges IV Material Subsidiaries V Existing Letters of Credit and Appropriate L/C Issuers 2.01 Commitments and Pro Rata Shares 5.06 Disclosed Litigation 5.08(b)Existing Liens 5.09 Environmental Matters 5.12 Pension Plans 5.13 Subsidiaries and Other Equity Investments 5.15 Projected Financial Information 7.02(f)Existing Investments 7.03 Existing Indebtedness 7.08 Transactions with Affiliates 7.09 Burdensome Agreements 10.02 Paying Agent's Office, Certain Addresses for Notices 10.22 Post-Closing Restructuring
EXHIBITS
Form of
A Committed Loan Notice B Swing Line Loan Notice C-1 Term Note C-2 Revolving Credit Note D Compliance Certificate E Assignment and Assumption F Guaranty G-1 Opinion Matters - Counsel to Loan Parties with respect to Loan Documents G-2 Opinion Matters - In-House Counsel to Loan Parties
CREDIT AGREEMENT
This CREDIT AGREEMENT ("Agreement") is entered into as of December 31, 2002,among THE TIMKEN COMPANY, an Ohio corporation (the "Borrower"), BANK OF AMERICA, N.A. and KEYBANK NATIONAL ASSOCIATION, as Co-Administrative Agents, MERRILL LYNCH & CO., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, as Syndication Agent, MORGAN STANLEY BANK, as Documentation Agent, KEYBANK NATIONAL ASSOCIATION, as Paying Agent, BANC OF AMERICA SECURITIES LLC and KEYBANK NATIONAL ASSOCIATION, as Joint Lead Arrangers and Joint Book Managers, each lender from time to time party hereto (collectively, the "Lenders" and individually, a "Lender"), KEYBANK NATIONAL ASSOCIATION, as an Appropriate L/C Issuer and Swing Line Lender, and the other Letter of Credit issuers party hereto, each as an Appropriate L/C Issuer.
PRELIMINARY STATEMENTS:
Pursuant to the Stock and Asset Purchase Agreement dated as of October 16, 2002 (as amended, supplemented or otherwise modified in accordance with its terms,to the extent permitted in accordance with the Loan Documents (as hereinafter defined), together with all schedules and exhibits thereto, the "Purchase Agreement") among Ingersoll-Rand Company Limited, a corporation organized under the laws of Bermuda ("IR"), on behalf of itself, Ingersoll-Rand European Holding Company B.V. with respect to Industria Cuscinetti S.p.A. and the other stock sellers set forth on Schedule A thereto (the "Stock Sellers") and the asset sellers set forth on Schedule A thereto (the "Asset Sellers"; and collectively with IR and the other Stock Sellers,the "Sellers"),and the Borrower on behalf of itself and the other buyers set forth on Schedule F thereto (collectively with the Borrower, the "Buyers"),the Buyers have agreed to acquire (the "Acquisition") from the Sellers the Business (as hereinafter defined) through the acquisition from Sellers of the Shares of the Sold Companies, the Venture Interests and the Separate Assets (each as defined in the Purchase Agreement).
The Borrower has requested that (a) in connection with the Acquisition, the Lenders provide commitments to the Borrower of (i) $375,000,000 in the form of a term loan and (ii) $500,000,000 in the form of a revolving credit loan to finance,in part,the Acquisition,to pay transaction fees and expenses,and to refinance certain Indebtedness of the Borrower and its Subsidiaries,and (b) from time to time,the Lenders make loans to the Borrower and the Appropriate L/C Issuers (as hereinafter defined) issue Letters of Credit (as hereinafter defined)for the account of the Borrower or any Subsidiary pursuant to a revolving credit facility for the Borrower and its Subsidiaries. The Lenders have indicated their willingness to agree to so lend, and the Appropriate L/C Issuers have indicated their willingness to so issue such Letters of Credit, in each case, on the terms and subject to the conditions of this Agreement.
In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS
1.01 Defined Terms. As used in this Agreement, the following terms shall have the meanings set forth below:
"Acquisition" has the meaning specified in the Preliminary Statements to this Agreement.
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"Administrative Questionnaire" means an Administrative Questionnaire in a form supplied by the Paying Agent.
"Adjusted Foreign Subsidiaries/Joint Venture Basket" means at any time for each fiscal year, an amount equal to the Foreign Subsidiaries/Joint Venture Basket for such fiscal year, plus the Foreign Subsidiaries/Joint Venture Basket in effect at the end of the immediately preceding fiscal year, it being understood that no Foreign Subsidiaries/Joint Venture Basket may be carried over for more than one fiscal year and that the Foreign Subsidiaries/Joint Venture Basket for a fiscal year shall be fully used in such fiscal year before any Foreign Subsidiaries/Joint Venture Basket for the immediately preceding fiscal year is used.
"Affiliate" means, with respect to any 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. "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. Without limiting the generality of the foregoing, a Person shall be deemed to be Controlled by another Person if such other Person possesses, directly or indirectly, power to vote 10% or more of the securities having ordinary voting power for the election of directors, managing general partners or the equivalent.
"Agents" means, collectively, the Co-Administrative Agents,the Syndication Agent, the Documentation Agent, the Paying Agent and the Lead Arrangers.
"Agent-Related Persons" means the Co-Administrative Agents, the Syndication Agent, the Documentation Agent, the Paying Agent and the Lead Arrangers,together with their respective Affiliates,and the officers,directors, employees, agents and attorneys-in-fact of such Persons and Affiliates.
"Aggregate Commitments" means the Commitments of all the Lenders.
"Aggregate Credit Exposures" means, at any time, the sum of (i) the unused portion of the Revolving Credit Commitment then in effect, (ii) the unused portion of each Term Commitment then in effect and (iii) the Total Outstandings at such time.
"Agreement" means this Credit Agreement.
"Annualized" means, for any period,
(a) with respect to Consolidated EBITDA,(i) if such period ends on or after the first anniversary of the Documentation Closing Date, Consolidated EBITDA for the prior four fiscal quarters,and (ii) if such period ends prior to the first anniversary of the Documentation Closing Date, LTM EBITDA,
(b) with respect to Capital Expenditures,(i) if such period ends on or after the first anniversary of the Documentation Closing Date, Capital Expenditures made by or on behalf of the Borrower and its Subsidiaries during the prior four fiscal quarters, (ii) if such period is for the first full fiscal quarter after the Documentation Closing Date, Capital Expenditures made by or on behalf of the Borrower and its Subsidiaries during such fiscal quarter multiplied by four, (iii) if such period is for the first two full fiscal quarters after the Documentation Closing Date, Capital Expenditures made by or on behalf of the Borrower and its Subsidiaries during such fiscal quarters multiplied by two, and (iv) if such period is for the first three full fiscal quarters after the Documentation
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Closing Date, Capital Expenditures made by or on behalf of the Borrower and its Subsidiaries during such fiscal quarters multiplied by four and divided by three, and
(c) with respect to Consolidated Interest Charges,(i) if such period ends on or after the first anniversary of the Documentation Closing Date, Consolidated Interest Charges for the prior four fiscal quarters, (ii) if such period is for the first full fiscal quarter after the Documentation Closing Date, Consolidated Interest Charges for such fiscal quarter multiplied by four, (iii) if such period is for the first two full fiscal quarters after the Documentation Closing Date, Consolidated Interest Charges for such fiscal quarters multiplied by two, and (iv) if such period is for the first three full fiscal quarters after the Documentation Closing Date, Consolidated Interest Charges for such fiscal quarters multiplied by four and divided by three.
"Applicable Rate" means, from time to time, the following percentages per annum, based upon the Debt Rating as set forth below:
Applicable Rate Eurocurrency Rate +
Pricing Debt Ratings Letter of Level S&P/Moody's Commitment Fee Credit Base Rate +
1 BBB+/Baa1 or higher 0.150% 1.000% 0.000% 2 BBB/Baa2 0.200% 1.250% 0.250% 3 BBB-/Baa3 0.250% 1.500% 0.500% 4 BB+/Ba1 0.375% 1.750% 0.750% 5 BB/Ba2 or lower 0.500% 2.500% 1.500%
Initially, the Applicable Rate shall be determined based upon the Debt Rating specified in the certificate delivered pursuant to Section 4.01(h). Thereafter, each change in the Applicable Rate resulting from a publicly announced change in the Debt Rating shall be effective during the period commencing on the date of the public announcement thereof and ending on the date immediately preceding the effective date of the next such change. If at any time no Debt Rating shall then be in effect, then the Applicable Rate shall be at Pricing Level 5 from and after such time and until such time as a Debt Rating shall be in effect.
"Appropriate L/C Issuer" means, at any time, (a) with respect to each Existing Letter of Credit, Bank One, NA, Wachovia Bank or The Northern Trust Company, as applicable, in its capacity as issuer of such Existing Letter of Credit, and (b) with respect to each other Letter of Credit, KeyBank, in its capacity as issuer of such other Letter of Credit, or any successor issuer of such other Letters of Credit hereunder.
"Appropriate Lender" means, at any time, (a) with respect to the Term Facility or the Revolving Credit Facility, a Lender that has a Commitment with respect to such Facility at such time, (b) with respect to the Letter of Credit Sublimit, (i) the Appropriate L/C Issuers and (ii) if any Letters of Credit have been issued, or have been deemed to have been issued, pursuant to Section 2.03(a), the Revolving Credit Lenders, and (c) with respect to the Swing Line Sublimit, (i) the Swing Line Lender and (ii) if any Swing Line Loans are outstanding pursuant to Section 2.04(a), the Revolving Credit Lenders.
"Approved Fund" has the meaning specified in Section 10.07(g).
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"Asset Sellers" has the meaning specified in the Preliminary Statements to this Agreement.
"Assignment and Assumption" means an Assignment and Assumption substantially in the form of Exhibit E.
"Attorney Costs" means and includes all reasonable fees, expenses and disbursements of any law firm or other external counsel and, without duplication, the allocated cost of internal legal services and all expenses and disbursements of internal counsel.
"Attributable Indebtedness" means, on any date, (a) in respect of any capital lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP, and (b) in respect of any Synthetic Lease Obligation, the capitalized amount of the remaining lease payments under the relevant lease that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease were accounted for as a capital lease.
"Audited Financial Statements" means the audited consolidated balance sheet of the Borrower and its Subsidiaries for the fiscal year ended December 31, 2001, and the related consolidated statements of income or operations, shareholders' equity and cash flows for such fiscal year of the Borrower and its Subsidiaries, including the notes thereto.
"Auto-Renewal Letter of Credit" has the meaning specified in Section 2.03(b)(iii).
"Availability Period" means the period from and including the Funding Date to the earliest of (a) the Maturity Date, (b) the date of termination of the Aggregate Commitments pursuant to Section 2.06, and (c) the date of termination of the commitment of each Lender to make Loans and of the obligation of each Appropriate L/C Issuer to make L/C Credit Extensions pursuant to Section 8.02.
"Bank of America" means Bank of America, N.A. and its successors.
"BAS" means Banc of America Securities LLC and its successors.
"Base Rate" means a rate per annum equal to the greater of (a) the Prime Rate and (b) one-half of one percent (0.50%) in excess of the Federal Funds Effective Rate. Any change in the Base Rate shall be effective immediately from and after such change in the Base Rate.
"Base Rate Loan" means a Loan denominated in Dollars that bears interest based on the Base Rate.
"Borrower" has the meaning specified in the introductory paragraph hereto.
"Borrowing" means a Revolving Credit Borrowing, a Swing Line Borrowing or a Term Borrowing, as the context may require.
"Business" has the meaning specified in the Purchase Agreement.
"Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in,the state where the Paying Agent's Office is located and, if such day relates to any Eurocurrency Rate Loan, means any such day on which dealings are conducted by and between banks in the London interbank market and banks are open for business in London and in the country of issue of the currency of such
5
Eurocurrency Rate Loan (or,in the case of a Loan denominated in Euro, on which the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET) System is open).
"Buyers" has the meaning specified in the Preliminary Statements to this Agreement.
"Capital Expenditures" means, with respect to any Person for any period, any expenditure in respect of the purchase or other acquisition of any fixed or capital asset (excluding normal replacements and maintenance which are properly charged to current operations). For purposes of this definition, the purchase price of equipment that is purchased simultaneously with the trade-in of existing equipment or with insurance proceeds shall be included in Capital Expenditures only to the extent of the gross amount by which such purchase price exceeds the credit granted by the seller of such equipment for the equipment being traded in at such time or the amount of such insurance proceeds, as the case may be.
"Cash Collateralize" has the meaning specified in Section 2.03(g).
"Cash Equivalents" means any of the following types of Investments,to the extent owned by the Borrower or any of its Subsidiaries free and clear of all Liens:
(a) readily marketable obligations issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof having maturities of not more than 360 days from the date of acquisition thereof; provided that the full faith and credit of the United States of America is pledged in support thereof;
(b) readily marketable obligations issued by the District of Columbia, any state of the United States of America or any political subdivision thereof (i) having maturities of not more than 360 days from the date of acquisition thereof, (ii) rated at least A by S&P and at least A2 by Moody's, and (iii) in an amount not to exceed $20,000,000 per issuer or $100,000,000 in the aggregate;
(c) time deposits or repurchase agreements with, or insured certificates of deposit or bankers' acceptances of, any commercial bank that (i) (A)is a Lender or (B) is organized under the laws of the United States of America, any state thereof or the District of Columbia or is the principal banking subsidiary of a bank holding company organized under the laws of the United States of America, any state thereof or the District of Columbia, and is a member of the Federal Reserve System, (ii) issues (or the parent of which issues) commercial paper rated as described in clause (d) of this definition and (iii) has combined capital and surplus of at least $1,000,000,000, in each case with maturities of not more than 180 days from the date of acquisition thereof;
(d) commercial paper or master notes issued by any Person organized under the laws of any state of the United States of America and rated at least "Prime-1" (or the then equivalent grade) by Moody's or at least "A-1" (or the then equivalent grade) by S&P, in each case with maturities of not more than 90 days from the date of acquisition thereof;
(e) obligations issued by any Person organized under the laws of any state of the United States of America (i) having maturities of not more than 365 days from the date of acquisition thereof and (ii) rated at least A by S&P and at least A2 by Moody's;
(f) Investments, classified in accordance with GAAP as Current Assets of the Borrower or any of its Subsidiaries, in money market investment programs registered under the Investment Company Act of 1940 which are administered by financial institutions that have the highest rating obtainable from either Moody's or S&P, and the portfolios of which are
6
limited solely to Investments of the character, quality and maturity described in clauses (a),(b),(c),(d) and (e) of this definition; and
(g) with respect to Foreign Subsidiaries, the approximate foreign equivalent of any of clauses (a) through (f) above.
"CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980.
"CERCLIS" means the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the U.S. Environmental Protection Agency.
"Change of Control" means, an event or series of events by which:
(a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan), other than those Persons listed on Schedule II and the heirs, administrators or executors of any such Persons and any trust established by or for the benefit of such Persons, becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a person or group shall be deemed to have "beneficial ownership" of all securities that such person or group has the right to acquire (such right, an "option right"), whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of 30% or more of the equity securities of the Borrower entitled to vote for members of the board of directors or equivalent governing body of such Person on a fully-diluted basis (and taking into account all such securities that such person or group has the right to acquire pursuant to any option right); or
(b) during any period of 24 consecutive months, a majority of the members of the board of directors or other equivalent governing body of the Borrower cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body (excluding, in the case of both clause (ii) and clause (iii), any individual whose initial nomination for, or assumption of office as, a member of that board or equivalent governing body occurs as a result of an actual or threatened solicitation of proxies or consents for the election or removal of one or more directors by any person or group other than a solicitation for the election of one or more directors by or on behalf of the board of directors), or
(c) any Person or two or more Persons acting in concert, other than those Persons listed on Schedule II, shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation thereof, will result in its or their acquisition of the power to exercise, directly or indirectly, a controlling influence over the management or policies of the Borrower, or control over the equity securities of such Person entitled to vote for members of the board of directors or equivalent governing body of such Person on a fully-diluted basis (and taking into account all such securities that such person or group
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has the right to acquire pursuant to any option right) representing 30% or more of the combined voting power of such securities.
"Co-Administrative Agent" means each of Bank of America and KeyBank in its capacity as a co-administrative agent under any of the Loan Documents, or any successor co-administrative agent.
"Code" means the Internal Revenue Code of 1986.
"Commitment" means a Term Commitment or a Revolving Credit Commitment, as the context may require.
"Committed Currencies" means Canadian dollars, pounds sterling, Japanese yen, Euros and other freely transferable currencies satisfactory to the Revolving Credit Lenders in their sole discretion.
"Committed Currency Sublimit" means an amount equal to $100,000,000. The Committed Currency Sublimit is part of, and not in addition to, the Revolving Credit Facility.
"Committed Loan Notice" means a notice of (a) a Term Loan Borrowing, (b) a Revolving Credit Borrowing, (c) a conversion of Loans from one Type to the other, or (d) a continuation of Eurocurrency Rate Loans, pursuant to Section 2.02(a), which, if in writing, shall be substantially in the form of Exhibit A.
"Compensation Period"has the meaning specified in Section 2.12(c)(ii).
"Compliance Certificate" means a certificate substantially in the form of Exhibit D.
"Consolidated EBITDA" means, for any period, for the Borrower and its Subsidiaries on a consolidated basis, an amount equal to Consolidated Net Income before cumulative effect of accounting changes for such period plus (a) the following to the extent deducted in calculating such Consolidated Net Income: (i) Consolidated Interest Charges for such period, (ii) the provision for federal, state, local and foreign income taxes for such period, (iii) the amount of depreciation and amortization expense deducted in determining such Consolidated Net Income, (iv) other non-recurring expenses of the Borrower and its Subsidiaries reducing such Consolidated Net Income which do not represent a cash item in such period or any future period, (v) any losses realized upon the Disposition of assets outside the ordinary course of business, and (vi) the aggregate amount of impairment, restructuring, reorganization and implementation charges for such period of the type disclosed in the Borrower's report on Form 10- Q for the fiscal quarter ended September 30, 2002 or otherwise incurred in connection with the Acquisition in an amount incurred for all periods after the date hereof not to exceed the amount set forth on Schedule III and minus (b) the sum of (i) all non- recurring material non-cash items increasing Consolidated Net Income for such period, (ii) any gains realized upon the Disposition of assets outside the ordinary course of business, and (iii) payments (net of expenses) received with respect to the United States - Continued Dumping and Subsidy Offset Act of 2000.
"Consolidated Fixed Charge Coverage Ratio" means, for any period, the ratio of (a) (i) Annualized Consolidated EBITDA for such period, less (ii) the aggregate amount of all Annualized Capital Expenditures made by or on behalf of the Borrower and its Subsidiaries during such period to (b) Annualized Consolidated Interest Charges for such period.
"Consolidated Funded Indebtedness" means, as of any date of determination, for the Borrower and its Subsidiaries on a consolidated basis, the sum of (a) the outstanding principal amount of all obligations, whether
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current or long-term, for borrowed money (including Obligations hereunder) and all obligations evidenced by bonds, debentures, notes, loan agreements or other similar instruments, (b) all purchase money Indebtedness, (c) all direct obligations arising under letters of credit (including standby and commercial), bankers' acceptances, bank guaranties, surety bonds and similar instruments, (d) all obligations in respect of the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business), (e) Attributable Indebtedness in respect of capital leases and Synthetic Lease Obligations, (f) all Off- Balance Sheet Liabilities, (g) without duplication, all Guarantees with respect to outstanding Indebtedness (other than Indebtedness that is contingent in nature) of the types specified in clauses (a) through (f) above of Persons other than the Borrower or any Subsidiary, and (h) all Indebtedness of the types referred to in clauses (a) through (g) above of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which the Borrower or a Subsidiary is a general partner or joint venturer, unless such Indebtedness is expressly made non-recourse to the Borrower or such Subsidiary.
"Consolidated Interest Charges" means, for any period, for the Borrower and its Subsidiaries on a consolidated basis, the sum of (a) all interest, premium payments, debt discount, fees, charges and related expenses of the Borrower and its Subsidiaries in connection with borrowed money (including capitalized interest) or in connection with the deferred purchase price of assets, in each case to the extent treated as interest in accordance with GAAP, net of interest income, and (b) the portion of rent expense of the Borrower and its Subsidiaries with respect to such period under capital leases that is treated as interest in accordance with GAAP.
"Consolidated Leverage Ratio" means, as of any date of determination, the ratio of (a) Consolidated Funded Indebtedness as of such date to (b) Annualized Consolidated EBITDA for such period.
"Consolidated Net Income" means, for any period, for the Borrower and its Subsidiaries on a consolidated basis, the net income of the Borrower and its Subsidiaries (excluding extraordinary gains and extraordinary losses) for that period.
"Consolidated Net Worth" means, as of any date of determination, the consolidated net worth of the Borrower and its Subsidiaries, determined as of such date in accordance with GAAP; provided, however, that there shall be excluded from consolidated net worth any adjustments made to consolidated net worth as a result of the effects of FAS 87, provided that the cumulative amount of such adjustments for periods on or after January 1, 2003 may not exceed $150,000,000.
"Contractual Obligation" means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.
"Control" has the meaning specified in the definition of "Affiliate."
"Credit Extension" means each of the following: (a) a Borrowing and (b) an L/C Credit Extension.
"Current Assets" means, with respect to any Person, all assets of such Person that, in accordance with GAAP, would be classified as current assets on the balance sheet of a company conducting a business the same as or similar to that of such Person, after deducting appropriate and adequate reserves therefrom in each case in which a reserve is proper in accordance with GAAP.
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"Debt Rating" means, as of any date of determination, the rating as determined (x) by S&P of the Borrower's long term corporate credit or (y) by Moody's of the Borrower's senior unsecured long term debt, in each of clause (x) and (y) on a non- credit enhanced basis; provided that if (i) a Debt Rating is issued by each of the foregoing rating agencies, then the lower of such Debt Ratings shall apply (with the Debt Rating for Pricing Level 1 being the highest and the Debt Rating for Pricing Level 5 being the lowest) and (ii) either S&P or Moody's shall change the basis on which ratings are established by it, each reference to the Debt Rating announced by S&P or Moody's shall refer to the then equivalent rating by S&P or Moody's, as the case may be.
"Debtor Relief Laws" means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.
"Default" means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would be an Event of Default.
"Default Rate" means an interest rate equal to (a) the Applicable Rate, if any, applicable to Base Rate Loans plus (b) 2.0% per annum; provided, however, that with respect to a Eurocurrency Rate Loan, the Default Rate shall be an interest rate equal to the Applicable Rate otherwise applicable to such Loan plus 2.0% per annum, in each case to the fullest extent permitted by applicable Laws.
"Defaulting Lender" means any Lender that (a) has failed to fund any portion of the Term Loans, Revolving Credit Loans, participations in L/C Obligations or participations in Swing Line Loans required to be funded by it hereunder within one Business Day of the date required to be funded by it hereunder, (b) has otherwise failed to pay over to the Paying Agent or any other Lender any other amount required to be paid by it hereunder within one Business Day of the date when due, unless the subject of a good faith dispute, or (c) has been deemed insolvent or becomes the subject of a bankruptcy or insolvency proceeding.
"Determination Date" has the meaning specified in Section 2.14(a).
"Disclosed Litigation" has the meaning specified in Section 5.06.
"Disposition" or "Dispose" means the sale, transfer, license, lease or other disposition (including any sale and leaseback transaction) of any property by any Person, including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith.
"Documentation Agent" means Morgan Stanley in its capacity as a documentation agent under any of the Loan Documents, or any successor documentation agent.
"Documentation Closing Date" has the meaning specified in Section 4.01.
"Dollar" and "$" mean lawful money of the United States.
"Domestic Subsidiary" means any Subsidiary that is organized under the laws of any political subdivision of the United States.
"Eligible Assignee" has the meaning specified in Section 10.07(g).
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"Environmental Laws" means any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including those related to hazardous substances or wastes, air emissions and discharges to waste or public systems.
"Environmental Liability" means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower, any other Loan Party or any of their respective Subsidiaries directly or indirectly resulting from or 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.
"Environmental Permit" means any permit, approval, identification number, license or other authorization required under any Environmental Law.
"Equity Documents" means the documents effecting the IR Equity Issuance and the documents effecting the Public Equity Issuance.
"Equity Interests" means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including, without limitation, partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.
"Equivalent" in Dollars of any Committed Currency on any date means the equivalent in Dollars of such Committed Currency determined by using the quoted spot rate at which Bank of America's principal office in London offers to exchange Dollars for such Committed Currency in London prior to 4:00 P.M. (London time) (unless otherwise indicated by the terms of this Agreement) on such date as is required pursuant to the terms of this Agreement, and the "Equivalent" in any Committed Currency of Dollars means the equivalent in such Committed Currency of Dollars determined by using the quoted spot rate at which Bank of America's principal office in London offers to exchange such Committed Currency for Dollars in London prior to 4:00 P.M. (London time) (unless otherwise indicated by the terms of this Agreement) on such date as is required pursuant to the terms of this Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"ERISA Affiliate" means any trade or business (whether or not incorporated) under common control with the Borrower within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).
"ERISA Event" means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by the Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of
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ERISA; (c) a complete or partial withdrawal by the Borrower or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Sections 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Borrower or any ERISA Affiliate.
"EURIBO Rate" means the rate appearing on Page 248 of the Telerate Service (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Paying Agent from time to time for purposes of providing quotations of interest rates applicable to deposits in Euro by reference to the Banking Federation of the European Union Settlement Rates for deposits in Euro) at approximately 10:00 a.m., London time, two Business Days prior to the commencement of the applicable Interest Period, as the rate for deposits in Euro with a maturity comparable to such Interest Period or, if for any reason such rate is not available, the average (rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if such average is not such a multiple) of the respective rates per annum at which deposits in Euros are offered by the principal office of Bank of America in London to prime banks in the London interbank market at 11:00 A.M. (London time) two Business Days before the first day of such Interest Period in an amount substantially equal to the Paying Agent's (in its capacity as a Lender) Eurocurrency Rate Loan comprising part of such Revolving Credit Borrowing to be outstanding during such Interest Period and for a period equal to such Interest Period (subject, however, to the provisions of Section 3.03).
"Euro" means the lawful currency of the European Union as constituted by the Treaty of Rome which established the European Community, as such treaty may be amended from time to time and as referred to in the EMU legislation.
"Eurocurrency Rate" means (a) for any Interest Period with respect to any Eurocurrency Rate Loan denominated in Dollars or any Committed Currency other than Euro:
(i) the rate per annum equal to the offered rate that appears on the page of the Telerate screen (or any successor thereto) that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars or the applicable Committed Currency (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or
(ii) if the rate referenced in the preceding clause (i) does not appear on such page or service or such page or service shall not be available, the rate per annum equal to the rate determined by the Paying Agent to be the offered rate on such other page or other service that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars or the applicable Committed Currency (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or
(iii) if the rates referenced in the preceding clauses (i) and (ii) are not available, the rate per annum determined by the Paying Agent as the rate of interest at which deposits in Dollars or the applicable Committed Currency for delivery on the first day of such Interest Period in same day funds in the approximate amount of the Eurocurrency Rate Loan being made,
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continued or converted by Bank of America and with a term equivalent to such Interest Period would be offered by Bank of America's London Branch to major banks in the London interbank Eurocurrency market at their request at approximately 4:00 p.m. (London time) two Business Days prior to the first day of such Interest Period; and
(b) for any Interest Period with respect to any Eurocurrency Rate Loan denominated in Euros, the EURIBO Rate
"Eurocurrency Rate Loan" means a Loan denominated in Dollars or a Committed Currency that bears interest at a rate based on the Eurocurrency Rate.
"Event of Default" has the meaning specified in Section 8.01.
"Existing Credit Agreement" means that certain Credit Agreement dated as of July 10, 1998, as amended, among the Borrower, various financial institutions, as Banks, and KeyBank, as Agent.
"Existing Letter of Credit" means each letter of credit listed on Schedule V, issued by the Appropriate L/C Issuer identified thereon with respect to such letter of credit, and each letter of credit extending or replacing such letter of credit if such extending or replacement letter of credit is with the same Appropriate L/C Issuer and is in a principal amount not in excess of the principal amount of the extended or replaced letter of credit; provided, however, that no letter of credit shall be or become an Existing Letter of Credit if on or prior to the Funding Date the Appropriate L/C Issuer with respect to such letter of credit shall have notified the Paying Agent and the Borrower that such Appropriate L/C Issuer has elected to not have such letter of credit be or become an Existing Letter of Credit.
"Extraordinary Receipt" means any cash received by or paid to or for the account of any Person not in the ordinary course of business, in connection with proceeds of insurance (other than proceeds of business interruption insurance to the extent such proceeds constitute compensation for lost earnings) and condemnation awards (and payments in lieu thereof); provided, however, that an Extraordinary Receipt shall not include cash receipts received from proceeds of insurance or condemnation awards (or payments in lieu thereof) to the extent that such proceeds or awards (a) in respect of loss or damage to equipment, fixed assets or real property are applied to replace or repair the equipment, fixed assets or real property in respect of which such proceeds were received in accordance with the terms of Section 2.05(b)(i), or (b) are received by any Person in respect of any third party claim against such Person and applied to pay (or to reimburse such Person for its prior payment of) such claim and the costs and expenses of such Person with respect thereto.
"Facility" means the Term Facility, the Revolving Credit Facility, the Swing Line Sublimit or the Letter of Credit Sublimit, as the context may require.
"Federal Funds Rate" means, for any day, the rate per annum (rounded upward to the nearest one one-hundredth of one percent (1/100 of 1%)) announced by the Federal Reserve Bank of New York (or any successor) on such day as being the weighted average of the rates on overnight federal funds transactions arranged by federal funds brokers on the previous trading day, as computed and announced by such Federal Reserve Bank (or any successor) in substantially the same manner as such Federal Reserve Bank computes and announces the weighted average it refers to as the "Federal Funds Effective Rate" as of the Funding Date.
"Fee Letter" means the letter agreement, dated October 15, 2002, among the Borrower, Bank of America, BAS, KeyBank, Merrill Lynch and Morgan Stanley.
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"Foreign Lender" has the meaning specified in Section 10.15(a)(i).
"Foreign Subsidiary" means any Subsidiary that is not a Domestic Subsidiary.
"Foreign Subsidiaries/Joint Venture Basket" means at any time for each fiscal year an amount equal to (a) $150,000,000, plus (b) the aggregate amount of dividends and other distributions made in cash during such fiscal year by any Foreign Subsidiary or joint venture with respect to any capital stock or other Equity Interest of any Loan Party, plus (c) the aggregate amount of payments or prepayments made in cash during such fiscal year by any Foreign Subsidiary or joint venture to any Loan Party with respect to any intercompany Indebtedness owed by such Foreign Subsidiary or joint venture to such Loan Party, plus (d) the aggregate amount of payments or prepayments made in cash during such fiscal year by any Foreign Subsidiary to any Person (other than the Borrower or any Subsidiary) with respect to any Indebtedness owed by such Foreign Subsidiary to such Person, minus (e) the aggregate amount of Investments made by any Loan Party in any Foreign Subsidiary or joint venture during such fiscal year pursuant to Section 7.02(j) or 7.02(k), minus (f) the aggregate amount of Indebtedness incurred by any Foreign Subsidiary in such fiscal year pursuant to Section 7.03(d)(A)
"FRB" means the Board of Governors of the Federal Reserve System of the United States.
"Fund" has the meaning specified in Section 10.07(g).
"Funding Date" means the first date on which all of the conditions precedent in Sections 4.02 and 4.03 are satisfied or waived in accordance with Sections 4.02 and 4.03.
"GAAP" means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession in the United States, that are applicable to the circumstances as of the date of determination, consistently applied.
"Governmental Authority" means any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, administrative tribunal, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.
"Granting Lender" has the meaning specified in Section 10.07(h).
"Guarantors" means, collectively, the Subsidiaries of the Borrower listed on Schedule I and each other Subsidiary of the Borrower that shall be required to execute and deliver a guaranty or guaranty supplement pursuant to Section 6.12.
"Guaranty" means, collectively, the Guaranty made by the Guarantors in favor of the Paying Agent on behalf of the Lenders, substantially in the form of Exhibit F, together with each other guaranty and guaranty supplement delivered pursuant to Section 6.12.
"Guarantee" means, as to any Person, any (a) any obligation, contingent or otherwise, of such Person guaranteeing any Indebtedness or other obligation payable or performable by another Person (the "primary obligor") in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the
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purchase or payment of) such Indebtedness or other obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other obligation of the payment or performance of such Indebtedness or other obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or other obligation of any other Person, whether or not such Indebtedness or other obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien). The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith. The term "Guarantee" as a verb has a corresponding meaning.
"Hazardous Materials" means 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 regulated pursuant to any Environmental Law.
"High Grade Notes" means unsecured notes of the Borrower due not earlier than one year after the Maturity Date for the Revolving Credit Facility; provided that, unless the Lead Arrangers otherwise consent in writing, (a) no Person (other than a Loan Party) shall guaranty any such notes, and any such guaranties shall be pari passu with or subordinate to the Guaranty, and (b) no document relating to such notes shall contain any provision requiring principal payments or the application of a sinking fund (or comparable provision) prior to the scheduled Maturity Date for the Revolving Credit Facility, other than any customary provision in any such documents that would require payment or prepayment upon the occurrence of a change of control of the Borrower or upon the Disposition of assets of the Borrower or any Loan Party (but solely to the extent that the Net Cash Proceeds from any such Disposition are not required to be used to prepay Loans or Cash Collateralize Letters of Credit).
"High Grade Notes Documents" means the High Grade Notes and all other agreements, instruments and other documents pursuant to which the High Grade Notes have been or will be issued or otherwise setting forth the terms of the High Grade Notes, in each case as such agreement, instrument or other document may be amended, supplemented or otherwise modified from time to time.
"Honor Date" has the meaning specified in Section 2.03(c)(i).
"ICC" has the meaning specified in Section 2.03(h).
"Indebtedness" means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:
(a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;
(b) all direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), bankers' acceptances, bank guaranties, surety bonds and similar instruments;
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(c) net obligations of such Person under any Swap Contract;
(d) all obligations of such Person to pay the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business on customary terms);
(e) indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;
(f) capital leases, Off-Balance Sheet Liabilities and Synthetic Lease Obligations;
(g) all obligations of such Person to mandatorily purchase, redeem, retire, defease or otherwise make any payment, in each case in cash, in respect of any Equity Interests in such Person or any other Person or any warrants, rights or options to acquire such Equity Interests, valued, in the case of redeemable preferred interests, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends; and
(h) all Guarantees of such Person in respect of any of the foregoing.
For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made non-recourse to such Person. The amount of any net obligation under any Swap Contract on any date shall be deemed to be the Swap Termination Value thereof as of such date. The amount of any capital lease or Synthetic Lease Obligation as of any date shall be deemed to be the amount of Attributable Indebtedness in respect thereof as of such date.
"Indemnified Liabilities" has the meaning set forth in Section 10.05.
"Indemnitees" has the meaning set forth in Section 10.05.
"Information" has the meaning specified in Section 10.08.
"Interest Payment Date" means, (a) as to any Loan other than a Base Rate Loan, the last day of each Interest Period applicable to such Loan and the Maturity Date; provided, however, that if any Interest Period for a Eurocurrency Rate Loan exceeds three months, the respective dates that fall every three months after the beginning of such Interest Period shall also be Interest Payment Dates; and (b) as to any Base Rate Loan (including a Swing Line Loan), the last Business Day of each March, June, September and December and the Maturity Date.
"Interest Period" means, as to each Eurocurrency Rate Loan, the period commencing on the date such Eurocurrency Rate Loan is disbursed or converted to or continued as a Eurocurrency Rate Loan and ending on the date one, two, three or six months thereafter, as selected by the Borrower in its Committed Loan Notice; provided that:
(a) any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the immediately preceding Business Day;
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(b) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and
(c) no Interest Period shall extend beyond the Maturity Date.
"Investment" means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of capital stock or other securities of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of debt of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person, or (c) the purchase or other acquisition (in one transaction or a series of transactions) of assets of another Person that constitute a business unit or all or a substantial part of the business of, such Person. For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment.
"IP Rights" has the meaning set forth in Section 5.17.
"IR" has the meaning specified in the Preliminary Statements to this Agreement.
"IR Equity Issuance" has the meaning specified in Section 4.02(g).
"IRS" means the United States Internal Revenue Service.
"KeyBank" means KeyBank National Association and its successors.
"Laws" means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof.
"L/C Advance" means, with respect to each Revolving Credit Lender, such Lender's funding of its participation in any L/C Borrowing in accordance with its Pro Rata Share.
"L/C Borrowing" means an extension of credit resulting from a drawing under any Letter of Credit which has not been reimbursed on the date when made or refinanced as a Revolving Credit Borrowing.
"L/C Credit Extension" means, with respect to any Letter of Credit, the issuance (or deemed issuance) thereof or extension of the expiry date thereof, or the renewal or increase of the amount thereof.
"L/C Obligations" means, as at any date of determination, the aggregate undrawn amount of all outstanding Letters of Credit plus the aggregate of all Unreimbursed Amounts, including all L/C Borrowings.
"Lead Arranger" means each of BAS and KeyBank in its capacity as a joint lead arranger and joint book manager under any of the Loan Documents, or any successor joint lead arranger and joint book manager.
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"Lender" has the meaning specified in the introductory paragraph hereto and, as the context requires, includes each Appropriate L/C Issuer and the Swing Line Lender.
"Lending Office" means, as to any Lender, the office or offices of such Lender described as such in such Lender's Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Borrower and the Paying Agent.
"Letter of Credit" means any letter of credit issued hereunder, or deemed to have been issued hereunder, including, without limitation, all Existing Letters of Credit. A Letter of Credit may be a commercial letter of credit or a standby letter of credit.
"Letter of Credit Application" means an application and agreement for the issuance or amendment of a Letter of Credit in the form from time to time in use by the Appropriate L/C Issuer.
"Letter of Credit Expiration Date" means the day that is seven days prior to the Maturity Date then in effect (or, if such day is not a Business Day, the next preceding Business Day).
"Letter of Credit Sublimit" means an amount equal to $150,000,000. The Letter of Credit Sublimit is part of, and not in addition to, the Revolving Credit Facility.
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any financing lease having substantially the same economic effect as any of the foregoing).
"Loan" means an extension of credit by a Lender to the Borrower under Article II in the form of a Term Loan, a Revolving Credit Loan or a Swing Line Loan.
"Loan Documents" means, collectively, (a) for purposes of this Agreement and the Notes and any amendment, supplement or other modification hereof or thereof and for all other purposes other than for purposes of the Guaranty, (i) this Agreement, (ii) the Notes, (iii) the Guaranty, (iv) the Fee Letter and (v) each Letter of Credit Application, and (b) for purposes of the Guaranty, (i) this Agreement, (ii) the Notes, (iii) the Guaranty, (iv) the Fee Letter, (v) each Swap Contract between a Loan Party and a Lender, and (vi) each Letter of Credit Application.
"Loan Parties" means, collectively, the Borrower and each Guarantor.
"LTM EBITDA" has the meaning specified in Section 4.02(m).
"Material Adverse Effect" means (a) a material adverse change in, or a material adverse effect upon, the business, assets, liabilities (actual or contingent), operations, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole; (b) a material impairment of the rights and remedies of any Agent or any Lender under any Loan Document, or of the ability of any Loan Party to perform its obligations under any Loan Document to which it is a party; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against any Loan Party of any Loan Document to which it is a party.
"Material Subsidiary" means each Subsidiary now existing or hereafter acquired or formed, and each successor thereto, which, after giving pro forma effect to such acquisition or formation, accounts for more than 5% of (i) the Consolidated gross revenues of the Borrower and its Subsidiaries, (ii)
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Consolidated EBITDA, or (iii) the Consolidated assets of the Borrower and its Subsidiaries, in each case, as of the last day of the most recently completed fiscal quarter of the Borrower with respect to which, pursuant to clauses (a) or (b) of Section 6.01, financial statements have been, or are required to have been, delivered by the Borrower, and in any event includes all of the Subsidiaries listed on Schedule IV.
"Maturity Date" means (a) with respect to the Term Facility, the earlier of (i) the first anniversary of the Funding Date and (ii) the date of termination in whole of the Term Commitments pursuant to Section 2.06 or 8.02(b), and (b) with respect to the Revolving Credit Facility, the earlier of (i) the fifth anniversary of the Funding Date and (ii) the date of termination in whole of the Revolving Credit Commitments, the Letter of Credit Sublimit, and the Swing Line Sublimit pursuant to Section 2.06 or 8.02(b).
"Maximum Rate" has the meaning specified in Section 10.10.
"Merrill Lynch" means Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and its successors.
"Moody's" means Moody's Investors Service, Inc. and any successor thereto.
"Morgan Stanley" means Morgan Stanley Bank and its successors.
"Multiemployer Plan" means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions.
"Net Cash Proceeds" means:
(a) with respect to the sale of any asset by any Loan Party or any of its Subsidiaries, the excess, if any, of (i) the sum of cash and Cash Equivalents received in connection with such sale (including any cash or Cash Equivalents received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) over (ii) the sum of (A) the principal amount of any Indebtedness that is secured by such asset and that is required to be repaid in connection with the sale thereof (other than Indebtedness under the Loan Documents), (B) out-of-pocket expenses, brokerage commissions and other direct fees and expenses (including legal expenses and the expenses of any financial advisor) incurred by such Loan Party or such Subsidiary in connection with such sale and (C) income, franchise, transfer or other taxes paid in connection with the relevant asset sale as a result of the sale or any gain recognized in connection therewith; and
(b) with respect to the incurrence or issuance of any Indebtedness by the Borrower or any of its Subsidiaries, the excess of (i) the sum of the cash and Cash Equivalents received in connection with such incurrence or issuance over (ii) the underwriting discounts and commissions, and other out-of-pocket expenses, incurred by the Borrower in connection with such incurrence or issuance.
"Nonrenewal Notice Date" has the meaning specified in Section 2.03(b)(iii).
"Note" means a Term Note or a Revolving Credit Note, as the context may require.
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"NPL" means the National Priorities List under CERCLA.
"Obligations" means all advances to, and debts, liabilities, obligations, covenants and duties of, any Loan Party arising under any Loan Document or otherwise with respect to any Loan or Letter of Credit, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Loan Party of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding. Without limiting the generality of the foregoing, the Obligations of the Loan Parties under the Loan Documents include (a) the obligation to pay principal, interest, Letter of Credit commissions, charges, expenses, fees, attorneys' fees and disbursements, indemnities and other amounts payable by any Loan Party under any Loan Document and (b) the obligation of any Loan Party to reimburse any amount in respect of any of the foregoing that any Lender, in its sole discretion, may elect to pay or advance on behalf of such Loan Party.
"Off-Balance Sheet Liabilities" means, with respect to any Person as of any date of determination thereof, without duplication and to the extent not included as a liability on the consolidated balance sheet of such Person and its Subsidiaries in accordance with GAAP: (a) with respect to any asset securitization transaction (including any accounts receivable purchase facility) (i) the unrecovered investment of purchasers or transferees of assets so transferred and (ii) any other payment, recourse, repurchase, hold harmless, indemnity or similar obligation of such Person or any of its Subsidiaries in respect of assets transferred or payments made in respect thereof, other than limited recourse provisions that are customary for transactions of such type and that neither (x) have the effect of limiting the loss or credit risk of such purchasers or transferees with respect to payment or performance by the obligors of the assets so transferred nor (y) impair the characterization of the transaction as a true sale under applicable Laws (including Debtor Relief Laws); (b) the monetary obligations under any sale and leaseback transaction which does not create a liability on the consolidated balance sheet of such Person and its Subsidiaries; or (c) any other monetary obligation arising with respect to any other transaction which is characterized as indebtedness for tax purposes but not for accounting purposes in accordance with GAAP.
"Organization Documents" means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.
"Other Taxes" has the meaning specified in Section 3.01(b).
"Outstanding Amount" means (i) with respect to Term Loans, Revolving Credit Loans and Swing Line Loans on any date, the aggregate outstanding principal amount thereof (based on the Equivalent in Dollars at such time) after giving effect to any borrowings and prepayments or repayments of Term Loans, Revolving Credit Loans and Swing Line Loans, as the case may be, occurring on such date; and (ii) with respect to any L/C Obligations on any date, the amount of such L/C Obligations on such date after giving effect to any L/C Credit Extension occurring on such date and any other changes in the aggregate amount of the L/C Obligations as of such date, including as a result of any reimbursements of outstanding unpaid drawings under any Letters of Credit or any reductions in the maximum amount available for drawing under Letters of Credit taking effect on such date.
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"Participant" has the meaning specified in Section 10.07(d).
"Paying Agent" means KeyBank in its capacity as a paying agent under any of the Loan Documents, or any successor paying agent.
"Paying Agent's Office" means the Paying Agent's address and, as appropriate, account as set forth on Schedule 10.02, or such other address or account as the Paying Agent may from time to time notify the Borrower and the Lenders.
"Payment Office" means, for any Committed Currency, such office of KeyBank as shall be from time to time selected by the Paying Agent and notified by the Paying Agent to the Borrower and the Lenders.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plan" means any "employee pension benefit plan" (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by the Borrower or any ERISA Affiliate or to which the Borrower or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding five plan years.
"Person" means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.
"Plan" means any "employee benefit plan" (as such term is defined in Section 3(3) of ERISA) established by the Borrower or, with respect to any such plan that is subject to Section 412 of the Code or Title IV of ERISA, any ERISA Affiliate.
"Primary Currency" has the meaning specified in Section 10.17(c).
"Prime Rate" means the interest rate established from time to time by the Paying Agent as the Paying Agent's prime rate, whether or not such rate is publicly announced. The Prime Rate may not be the lowest interest rate charged by the Paying Agent for commercial or other extensions of credit. Each change in the Prime Rate shall be effective immediately from and after such change.
"Pro Rata Share" means, with respect to each Lender at any time, a fraction (expressed as a percentage, carried out to the ninth decimal place), the numerator of which is the amount of the Commitment(s) of such Lender under the applicable Facility or Facilities at such time and the denominator of which is the amount of the Aggregate Commitments under the applicable Facility or Facilities at such time; provided that if the commitment of each Lender to make Loans and the obligation of each Appropriate L/C Issuer to make L/C Credit Extensions have been terminated pursuant to Section 8.02, then the Pro Rata Share of each Lender shall be determined based on the Pro Rata Share of such Lender immediately prior to such termination and after giving effect to any subsequent assignments made pursuant to the terms hereof. The initial Pro Rata Share of each Lender is set forth opposite the name of such Lender on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable.
"Public Equity Issuance" has the meaning specified in Section 4.02(g).
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"Purchase Agreement" has the meaning specified in the Preliminary Statements to this Agreement.
"Receivables Facility" has the meaning set forth in Section 7.05(g).
"Receivables Subsidiary" has the meaning set forth in Section 6.12.
"Reduction Amount" has the meaning set forth in Section 2.05(b)(vi).
"Register" has the meaning set forth in Section 10.07(c).
"Related Documents" means the Purchase Agreement and the other documents effecting the Acquisition.
"Reportable Event" means any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30 day notice period has been waived.
"Request for Credit Extension" means (a) with respect to a Borrowing, conversion or continuation of Term Loans or Revolving Credit Loans, a Committed Loan Notice, (b) with respect to an L/C Credit Extension, a Letter of Credit Application, and (c) with respect to a Swing Line Loan, a Swing Line Loan Notice.
"Required Lenders" means, as of any date of determination, Lenders having more than 50% of the sum of the (a) Total Outstandings (with the aggregate amount of each Lender's risk participation and funded participation in L/C Obligations and Swing Line Loans being deemed "held" by such Lender for purposes of this definition), (b) aggregate unused Term Commitments and (c) aggregate unused Revolving Credit Commitments; provided that the unused Term Commitment, unused Revolving Credit Commitment of, and the portion of the Total Outstandings held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders.
"Responsible Officer" means the chief executive officer, president, chief financial officer, vice president, corporate controller, treasurer, or assistant treasurer of a Loan Party and, with respect to certificates to be delivered pursuant to Sections 4.01 and 4.02, notices to be delivered pursuant to Section 6.03 and the requirements of Section 8.01, the general counsel or the secretary of the Borrower. Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.
"Restricted Payment" means any dividend or other distribution (whether in cash, securities or other property) with respect to any capital stock or other Equity Interest of the Borrower or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, defeasance, acquisition, cancellation or termination of any such capital stock or other Equity Interest, or on account of any return of capital to the Borrower's stockholders, partners or members (or the equivalent Persons thereof).
"Revolving Credit Borrowing" means a borrowing consisting of simultaneous Revolving Credit Loans of the same Type and, in the case of Eurocurrency Rate Loans, having the same Interest Period made by each of the Revolving Credit Lenders pursuant to Section 2.01(b).
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"Revolving Credit Borrowing Minimum" means, in respect of Revolving Credit Loans denominated in Dollars, $5,000,000, and in respect of any Revolving Credit Loans denominated in any Committed Currency, the Equivalent of $5,000,000.
"Revolving Credit Borrowing Multiple" means, in respect of Revolving Credit Loans denominated in Dollars, $1,000,000, and in respect of Revolving Credit Loans denominated in any Committed Currency, the Equivalent of $1,000,000.
"Revolving Credit Commitment" means, as to each Revolving Credit Lender, its obligation to (a) make Revolving Credit Loans to the Borrower pursuant to Section 2.01(b), (b) purchase participations in L/C Obligations, and (c) purchase participations in Swing Line Loans, in an aggregate principal Dollar amount at any one time outstanding not to exceed the amount set forth opposite such Lender's name on Schedule 2.01 under the caption "Revolving Credit Commitment" or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable, as such Dollar amount may be adjusted from time to time in accordance with this Agreement.
"Revolving Credit Facility" means, at any time, the aggregate amount of the Revolving Credit Lenders' Revolving Credit Commitments at such time.
"Revolving Credit Lender" means, at any time, any Lender that has a Revolving Credit Commitment at such time.
"Revolving Credit Loan" has the meaning specified in Section 2.01(b).
"Revolving Credit Note" means a promissory note of the Borrower payable to the order of any Revolving Credit Lender, in substantially the form of Exhibit C-2 hereto, evidencing the aggregate indebtedness of the Borrower to such Revolving Credit Lender resulting from the Revolving Credit Loans made by such Revolving Credit Lender.
"S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. and any successor thereto.
"SEC" means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.
"Sellers" has the meaning specified in the Preliminary Statements to this Agreement.
"Shareholders' Equity" means, as of any date of determination, consolidated shareholders' equity of the Borrower and its Subsidiaries as of that date determined in accordance with GAAP.
"Solvent" and "Solvency" mean, with respect to any Person, and its Subsidiaries on a consolidated basis, on any date of determination, that on such date (a) the fair value of the property of such Person, and its Subsidiaries on a consolidated basis, is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person, and its Subsidiaries on a consolidated basis, (b) the present fair salable value of the assets of such Person, and its Subsidiaries on a consolidated basis, is not less than the amount that will be required to pay the probable liability of such Person, and its Subsidiaries on a consolidated basis, on its debts as they become absolute and matured, (c) such Person, and its Subsidiaries on a consolidated basis, does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay such debts and liabilities as they mature and (d) such Person, and its Subsidiaries on a consolidated basis, is not engaged in business or a transaction, and is not
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about to engage in business or a transaction, for which the property of such Person, and its Subsidiaries on a consolidated basis, would constitute an unreasonably small capital. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.
"SPC" has the meaning specified in Section 10.07(h).
"Stock Sellers" has the meaning specified in the Preliminary Statements to this Agreement.
"Subsidiary" of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise specified, all references herein to a "Subsidiary" or to "Subsidiaries" shall refer to a Subsidiary or Subsidiaries of the Borrower.
"Swap Contract" means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a "Master Agreement"), including any such obligations or liabilities under any Master Agreement.
"Swap Termination Value" means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined based upon one or more mid- market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include a Lender or any Affiliate of a Lender).
"Swing Line" means the revolving credit facility made available by the Swing Line Lender pursuant to Section 2.04.
"Swing Line Borrowing" means a borrowing of a Swing Line Loan pursuant to Section 2.04.
"Swing Line Lender" means KeyBank in its capacity as provider of Swing Line Loans, or any successor swing line lender hereunder.
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"Swing Line Loan" has the meaning specified in Section 2.04(a).
"Swing Line Loan Notice" means a notice of a Swing Line Borrowing pursuant to Section 2.04(b), which, if in writing, shall be substantially in the form of Exhibit B.
"Swing Line Sublimit" means an amount equal to the lesser of (a) $15,000,000 and (b) the Revolving Credit Commitments. The Swing Line Sublimit is part of, and not in addition to, the Revolving Credit Facility.
"Syndication Agent" means Merrill Lynch in its capacity as syndication agent under any of the Loan Documents, or any successor syndication agent.
"Synthetic Lease Obligation" means the monetary obligation of a Person under (a) a so-called synthetic, off- balance sheet or tax retention lease, or (b) an agreement for the use or possession of property creating obligations that do not appear on the balance sheet of such Person but which, upon the insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment).
"Taxes" has the meaning specified in Section 3.01(a).
"Term Borrowing" means a borrowing consisting of simultaneous Term Loans of the same Type and, in the case of Eurocurrency Rate Loans, having the same Interest Period made by each of the Term Lenders pursuant to Section 2.01(a).
"Term Commitment" means, as to each Term Lender, its obligation to make Term Loans to the Borrower pursuant to Section 2.01(a) in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Lender's name on Schedule 2.01 under the caption "Term Commitment" or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement.
"Term Facility" means, at any time, the aggregate Term Loans of all Lenders at such time.
"Term Lender" means, at any time, any Lender that has a Term Commitment at such time.
"Term Loan" means an advance made by any Lender under the Term Facility.
"Term Note" means a promissory note of the Borrower payable to the order of any Term Lender, in substantially the form of Exhibit C-1 hereto, evidencing the aggregate indebtedness of the Borrower to such Term Lender resulting from the Term Loans made by such Term Lender.
"Threshold Amount" means $35,000,000.
"Total Outstandings" means the aggregate Outstanding Amount of all Loans and all L/C Obligations.
"Transaction" means, collectively, (a) the consummation of the Acquisition, (b) to the extent issued, the issuance and sale of the High Grade Notes, (c) the IR Equity Issuance, (d) the Public Equity Issuance, (e) the entering into by the Loan Parties and their applicable Subsidiaries of the Loan
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Documents, the High Grade Notes Documents, the Equity Documents and the Related Documents to which they are or are intended to be a party, (f) the refinancing of certain outstanding Indebtedness of the Borrower and its Subsidiaries and the termination of all commitments thereunder, and (g) the payment of the fees and expenses incurred in connection with the consummation of the foregoing.
"Type" means, with respect to a Loan, its character as a Base Rate Loan or a Eurocurrency Rate Loan.
"United States" and "U.S." mean the United States of America.
"Unreimbursed Amount" has the meaning set forth in Section 2.03(c)(i).
1.02 Other Interpretive Provisions. With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:
(a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms.
(b) (i) The words "herein," "hereto," "hereof" and "hereunder" and words of similar import when used in any Loan Document shall refer to such Loan Document as a whole and not to any particular provision thereof.
(ii) Article, Section, Exhibit and Schedule references are to the Loan Document in which such reference appears.
(iii) The term "including" is by way of example and not limitation.
(iv) The term "documents" includes any and all instruments, documents, agreements, certificates, notices, reports, financial statements and other writings, however evidenced, whether in physical or electronic form.
(c) In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including;" the words "to" and "until" each mean "to but excluding;" and the word "through" means "to and including."
(d) Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.
1.03 Accounting Terms. (a) All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to time, applied in a manner consistent with that used in preparing the Audited Financial Statements, except as otherwise specifically prescribed herein.
(b) If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either the Borrower or the Required Lenders shall so request, the Co-Administrative Agents, the Lenders and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders); provided that,
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until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Borrower shall provide to the Co-Administrative Agents and the Lenders financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP.
1.04 Rounding. Any financial ratios required to be maintained by the Borrower pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).
1.05 References to Agreements and Laws. Unless otherwise expressly provided herein, (a) references to Organization Documents, agreements (including the Loan Documents) and other contractual instruments shall be deemed to include all subsequent amendments, restatements, extensions, supplements and other modifications thereto, but only to the extent that such amendments, restatements, extensions, supplements and other modifications are not prohibited by any Loan Document; and (b) references to any Law shall include all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting such Law.
1.06 Times of Day. Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable).
1.07 Letter of Credit Amounts. Unless otherwise specified, all references herein to the amount of a Letter of Credit at any time shall be deemed to mean the maximum face amount of such Letter of Credit at such time after giving effect to all increases thereof contemplated by such Letter of Credit or the Letter of Credit Application therefor, whether or not such maximum face amount is in effect at such time.
1.08 Currency Equivalents Generally. Any amount specified in this Agreement (other than in Articles II, IX and X) or any of the other Loan Documents to be in Dollars shall also include the equivalent of such amount in any currency other than Dollars, such equivalent amount to be determined at the rate of exchange quoted by KeyBank in Cleveland, Ohio at the close of business on the Business Day immediately preceding any date of determination thereof, to prime banks in New York, New York for the spot purchase in the New York foreign exchange market of such amount in Dollars with such other currency.
ARTICLE II THE COMMITMENTS AND CREDIT EXTENSIONS
2.01 The Loans. (a) The Term Borrowings. Subject to the terms and conditions set forth herein, each Term Lender severally agrees to make a single Term Loan in an amount equal to its Pro Rata Share of the Term Facility to the Borrower on the Funding Date. The Term Borrowing shall consist of Term Loans made simultaneously by the Term Lenders in accordance with their respective Pro Rata Share of the Term Facility. Amounts borrowed under this Section 2.01(a) and repaid or prepaid may not be reborrowed. Term Loans may be Base Rate Loans or Eurocurrency Rate Loans, as further provided herein.
(b) The Revolving Credit Borrowings. Subject to the terms and conditions set forth herein, each Revolving Credit Lender severally agrees to make loans (each such loan, a "Revolving Credit Loan") to the Borrower from time to time, on any Business Day during the Availability Period, in an aggregate
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amount (based in respect of any Revolving Credit Loans to be denominated in a Committed Currency by reference to the Equivalent thereof in Dollars determined on the date of delivery of the applicable Committed Loan Notice) not to exceed at any time outstanding the amount of such Lender's Revolving Credit Commitment; provided, however, that after giving effect to any Revolving Credit Borrowing, (i) the Total Outstandings shall not exceed the Aggregate Commitments, (ii) the aggregate Outstanding Amount of all Loans denominated in a Committed Currency shall not exceed the Committed Currency Sublimit, and (iii) the aggregate Outstanding Amount of the Revolving Credit Loans of any Lender, plus such Lender's Pro Rata Share of the Outstanding Amount of all L/C Obligations, plus such Lender's Pro Rata Share of the Outstanding Amount of all Swing Line Loans shall not exceed such Lender's Revolving Credit Commitment. Within the limits of each Lender's Revolving Credit Commitment, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.01(b), prepay under Section 2.05, and reborrow under this Section 2.01(b). Revolving Credit Loans may be Base Rate Loans or Eurocurrency Rate Loans, as further provided herein.
2.02 Borrowings, Conversions and Continuations of Loans.
(a) Each Term Borrowing, each Revolving Credit Borrowing, each conversion of Term Loans or Revolving Credit Loans from one Type to the other, and each continuation of Eurocurrency Rate Loans shall be made upon the Borrower's irrevocable notice to the Paying Agent, which may be given by telephone. Each such notice must be received by the Paying Agent not later than (i) 11:00 a.m. three Business Days prior to the requested date of any Borrowing of, conversion to or continuation of Eurocurrency Rate Loans denominated in Dollars or of any conversion of Eurocurrency Rate Loans denominated in Dollars to Base Rate Loans denominated in Dollars, (ii) 4:00 p.m. three Business Days prior to the requested date of any Revolving Credit Borrowing consisting of Eurocurrency Rate Loans denominated in any Committed Currency, and (iii) 11:00 a.m. on the requested date of any Borrowing of Base Rate Loans. Each telephonic notice by the Borrower pursuant to this Section 2.02(a) must be confirmed promptly by delivery to the Paying Agent of a written Committed Loan Notice, appropriately completed and signed by a Responsible Officer of the Borrower. Each Borrowing of, conversion to or continuation of Eurocurrency Rate Loans shall be in a principal amount of not less than the Revolving Credit Borrowing Minimum or the Revolving Credit Borrowing Multiple in excess thereof. Except as provided in Sections 2.03(c) and 2.04(c), each Borrowing of or conversion to Base Rate Loans shall be in a principal amount of not less than the Revolving Credit Borrowing Minimum or the Revolving Credit Borrowing Multiple in excess thereof. Each Committed Loan Notice (whether telephonic or written) shall specify (i) whether the Borrower is requesting a Term Loan Borrowing, a Revolving Credit Borrowing, a conversion of Term Loans or Revolving Credit Loans from one Type to the other, or a continuation of Eurocurrency Rate Loans, (ii) the requested date of the Borrowing, conversion or continuation, as the case may be (which shall be a Business Day), (iii) the principal amount of Loans to be borrowed, converted or continued, (iv) the Type of Loans to be borrowed or to which existing Term Loans or Revolving Credit Loans are to be converted, (v) if such Borrowing is a Revolving Credit Borrowing, the currency of such Borrowing, which shall be Dollars or a Committed Currency and (vi) if applicable, the duration of the Interest Period with respect thereto. If the Borrower fails to specify a Type of Loan in a Committed Loan Notice or if the Borrower fails to give a timely notice requesting a conversion or continuation, then the applicable Term Loans or Revolving Credit Loans shall be made as, or converted to, Base Rate Loans. Any such automatic conversion to Base Rate Loans shall be effective as of the last day of the Interest Period then in effect with respect to the applicable Eurocurrency Rate Loans. If the Borrower requests a Borrowing of, conversion to, or continuation of Eurocurrency Rate Loans in any such Committed Loan Notice, but fails to specify an Interest Period, it will be deemed to have specified an Interest Period of one month.
(b) Following receipt of a Committed Loan Notice, the Paying Agent shall promptly notify each Lender of the amount of its Pro Rata Share of the
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applicable Term Loans or Revolving Credit Loans, and if no timely notice of a conversion or continuation is provided by the Borrower, the Paying Agent shall notify each Lender of the details of any automatic conversion to Base Rate Loans described in Section 2.02(a). In the case of a Term Loan Borrowing or a Revolving Credit Borrowing, each Appropriate Lender shall make the amount of its Loan available to the Paying Agent in immediately available funds at the Paying Agent's Office not later than 1:00 p.m. on the Business Day specified in the applicable Committed Loan Notice, in the case of a Revolving Credit Borrowing consisting of Loans denominated in Dollars, and before 5:00 p.m. on the date of such Revolving Credit Borrowing, in the case of a Revolving Credit Borrowing consisting of Eurocurrency Rate Loans denominated in any Committed Currency. Upon satisfaction of the applicable conditions set forth in Section 4.03 (and, if such Borrowing is the initial Credit Extension, Section 4.02), the Paying Agent shall make all funds so received available to the Borrower in like funds as received by the Paying Agent either by (i) crediting the account of the Borrower on the books of KeyBank with the amount of such funds or (ii) wire transfer of such funds, in each case in accordance with instructions provided to the Paying Agent by the Borrower; provided, however, that if, on the date the Committed Loan Notice with respect to such Borrowing is given by the Borrower, there are Swing Line Loans or L/C Borrowings outstanding, then the proceeds of such Borrowing shall be applied, first, to the payment in full of any such L/C Borrowings, second, to the payment in full of any such Swing Line Loans, and third, to the Borrower as provided above.
(c) Except as otherwise provided herein, a Eurocurrency Rate Loan may be continued or converted only on the last day of an Interest Period for such Eurocurrency Rate Loan. During the existence of a Default, no Loans may be requested as, converted to or continued as Eurocurrency Rate Loans without the consent of the Required Lenders.
(d) The Paying Agent shall promptly notify the Borrower and the Lenders of the interest rate applicable to any Interest Period for Eurocurrency Rate Loans upon determination of such interest rate. The determination of the Eurocurrency Rate by the Paying Agent shall be conclusive in the absence of manifest error. At any time that Base Rate Loans are outstanding, the Paying Agent shall notify the Borrower and the Lenders of any change in KeyBank's prime rate used in determining the Base Rate promptly following the public announcement of such change.
(e) After giving effect to all Term Borrowings, all Revolving Credit Borrowings, all conversions of Term Loans or Revolving Credit Loans from one Type to the other, and all continuations of Term Loans or Revolving Credit Loans as the same Type, there shall not be more than ten Interest Periods in effect.
(f) The failure of any Lender to make the Loan to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Loan on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Loan to be made by such other Lender on the date of any Borrowing.
2.03 Letters of Credit.
(a) The Letter of Credit Commitment.
(i) On the Funding Date, each Existing Letter of Credit shall be deemed to have been issued hereunder by the Appropriate L/C Issuer with respect to such Existing Letter of Credit. Subject to the terms and conditions set forth herein, (A) each Appropriate L/C Issuer agrees, in reliance upon the agreements of the other Lenders set forth in this Section 2.03, (1) from time to time on any Business Day during the period from the Funding Date until the Letter of Credit Expiration Date, to issue Letters of Credit for the account of the Borrower or any Subsidiary in Dollars or any Committed
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Currency, and to amend or renew Letters of Credit previously issued by it, in accordance with Section 2.03(b), and (2) to honor drafts under the Letters of Credit; and (B) the Revolving Credit Lenders severally agree to participate in Letters of Credit issued (or deemed to have been issued) for the account of the Borrower; provided that no Appropriate L/C Issuer shall make any L/C Credit Extension with respect to any Letter of Credit, and no Lender shall be obligated to participate in any Letter of Credit if as of the date of such L/C Credit Extension, (x) the Total Outstandings would exceed the Aggregate Commitments, (y) the aggregate Outstanding Amount of the Loans of any Lender, plus such Lender's Pro Rata Share of the Outstanding Amount of all L/C Obligations, plus such Lender's Pro Rata Share of the Outstanding Amount of all Swing Line Loans would exceed such Lender's Revolving Credit Commitment, or (z)the Outstanding Amount of the L/C Obligations would exceed the Letter of Credit Sublimit. Within the foregoing limits, and subject to the terms and conditions hereof, the Borrower's ability to obtain Letters of Credit shall be fully revolving, and accordingly the Borrower may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit that have expired or that have been drawn upon and reimbursed.
(ii) No Appropriate L/C Issuer shall be under any obligation to issue any Letter of Credit if:
(A) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain such Appropriate L/C Issuer from issuing such Letter of Credit, or any Law applicable to such Appropriate L/C Issuer or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over such Appropriate L/C Issuer shall prohibit, or request that such Appropriate L/C Issuer refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon such Appropriate L/C Issuer with respect to such Letter of Credit any restriction, reserve or capital 33
requirement (for which such Appropriate L/C Issuer is not otherwise compensated hereunder) not in effect on the Documentation Closing Date, or shall impose upon such Appropriate L/C Issuer any unreimbursed loss, cost or expense which was not applicable on the Documentation Closing Date and which such Appropriate L/C Issuer in good faith deems material to it;
(B) subject to Section 2.03(b)(iii), the expiry date of such requested Letter of Credit would occur m ore than twelve months after the date of issuance or last renewal, unless the Required Lenders have approved such expiry date;
(C) the expiry date of such requested Letter of Credit would occur after the Letter of Credit Expiration Date, unless all the Lenders have approved such expiry date;
(D) the issuance of such Letter of Credit would violate one or more policies of such Appropriate L/C Issuer; or
(E) such Letter of Credit is in an initial amount less than $100,000, in the case of a commercial Letter of Credit, or $500,000, in the case of a standby Letter of Credit, or is to be denominated in a currency other than Dollars or a Committed Currency.
(iii) No Appropriate L/C Issuer shall be under any obligation to amend any Letter of Credit if (A) such Appropriate L/C Issuer would have no obligation at such time to issue such Letter of Credit in its amended form under the terms hereof, or (B) the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit.
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(b) Procedures for Issuance and Amendment of Letters of Credit; Auto-Renewal Letters of Credit.
(i) Each Letter of Credit shall be issued or amended, as the case may be, upon the request of the Borrower delivered to the Appropriate L/C Issuer (with a copy to the Paying Agent) in the form of a Letter of Credit Application, appropriately completed and signed by a Responsible Officer of the Borrower. Such Letter of Credit Application must be received by the Appropriate L/C Issuer and the Paying Agent not later than 11:00 a.m. at least two Business Days (or such later date and time as such Appropriate L/C Issuer may agree in a particular instance in its sole discretion) prior to the proposed issuance date or date of amendment, as the case may be. In the case of a request for an initial issuance of a Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the Appropriate L/C Issuer: (A) the proposed issuance date of the requested Letter of Credit (which shall be a Business Day); (B) the amount thereof; (C) the expiry date thereof; (D) the name and address of the beneficiary thereof; (E) the documents to be presented by such beneficiary in case of any drawing thereunder; (F) the full text of any certificate to be presented by such beneficiary in case of any drawing thereunder; (G) whether such Letter of Credit is to be denominated in Dollars or a Committed Currency and in the absence of such specification shall be deemed to be a request for a Letter of Credit denominated in Dollars; and (H) such other matters as such Appropriate L/C Issuer may require. In the case of a request for an amendment of any outstanding Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the Appropriate L/C Issuer (A) the Letter of Credit to be amended; (B) the proposed date of amendment thereof (which shall be a Business Day); (C) the nature of the proposed amendment; and (D) such other matters as such Appropriate L/C Issuer may require.
(ii) Promptly after receipt of any Letter of Credit Application, the Appropriate L/C Issuer will confirm with the Paying Agent (by telephone or in writing) that the Paying Agent has received a copy of such Letter of Credit Application from the Borrower and, if not, such Appropriate L/C Issuer will provide the Paying Agent with a copy thereof. Upon receipt by such Appropriate L/C Issuer of confirmation from the Paying Agent that the requested issuance or amendment is permitted in accordance with the terms hereof, then, subject to the terms and conditions hereof, such Appropriate L/C Issuer shall, on the requested date, issue a Letter of Credit for the account of the Borrower or enter into the applicable amendment, as the case may be,in each case in accordance with such Appropriate L/C Issuer's usual and customary business practices. Immediately upon the issuance (or deemed (issuance) of each Letter of Credit, each Revolving Credit Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Appropriate L/C Issuer a risk participation in such Letter of Credit in an amount equal to the product of such Lender's Pro Rata Share times the amount of such Letter of Credit.
(iii) If the Borrower so requests in any applicable Letter of Credit Application, the Appropriate L/C Issuer shall agree to issue a Letter of Credit that has automatic renewal provisions (each, an "Auto-Renewal Letter of Credit"); provided that any such Auto-Renewal Letter of Credit must permit such Appropriate L/C Issuer to prevent any such renewal at least once in each twelve-month period (commencing with the date of issuance of such Letter of Credit) by giving prior notice to the beneficiary thereof not later than a day (the "Nonrenewal Notice Date") in each such twelve-month period to be agreed upon at the time such Letter of Credit is issued. Unless otherwise directed by such Appropriate L/C Issuer, the Borrower shall not be required to make a specific request to such Appropriate L/C Issuer for any such renewal. Once an Auto-Renewal Letter of Credit has been issued, the Lenders shall be deemed to have authorized (but may not require) such Appropriate L/C Issuer to permit the renewal of such Letter of Credit at
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any time to an expiry date not later than the Letter of Credit Expiration Date; provided, however, that such Appropriate L/C Issuer shall not permit any such renewal if (A) such Appropriate L/C Issuer has determined that it would have no obligation at such time to issue such Letter of Credit in its renewed form under the terms hereof (by reason of the provisions of Section 2.03(a)(ii) or otherwise), or (B) it has received notice (which may be by telephone or in writing) on or before the day that is two Business Days before the Nonrenewal Notice Date from the Paying Agent, any Revolving Credit Lender or the Borrower that one or more of the applicable conditions specified in Section 4.03 is not then satisfied.
(iv) Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit to an advising bank with respect thereto or to the beneficiary thereof, the Appropriate L/C Issuer will also deliver to the Borrower and the Paying Agent a true and complete copy of such Letter of Credit or amendment.
(c) Drawings and Reimbursements; Funding of Participations.
(i) Upon receipt from the beneficiary of any Letter of Credit of any notice of a drawing under such Letter of Credit, the Appropriate L/C Issuer shall notify the Borrower and the Paying Agent thereof. Not later than 12:00 noon on the date of any payment by the Appropriate L/C Issuer under a Letter of Credit (each such date, an "Honor Date"), the Borrower shall reimburse such Appropriate L/C Issuer through the Paying Agent in an amount equal to the amount of such drawing. If the Borrower fails to so reimburse such Appropriate L/C Issuer by such time, the Paying Agent shall promptly notify each Revolving Credit Lender of the Honor Date, the amount of the unreimbursed drawing (the "Unreimbursed Amount"), and the Equivalent amount of such Revolving Credit Lender's Pro Rata Share thereof. In such event,the Borrower shall be deemed to have requested a Revolving Credit Borrowing in Dollars of Base Rate Loans to be disbursed on the Honor Date in an Equivalent amount equal to the Unreimbursed Amount, without regard to the minimum and multiples specified in Section 2.02 for the principal amount of Base Rate Loans, but subject to the amount of the unutilized portion of the Revolving Credit Commitments and the conditions set forth in Section 4.03 (other than the delivery of a Committed Loan Notice). Any notice given by an Appropriate L/C Issuer or the Paying Agent pursuant to this Section 2.03(c)(i) may be given by telephone if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.
(ii) Each Revolving Credit Lender (including any Lender acting as an Appropriate L/C Issuer) shall upon any notice pursuant to Section 2.03(c)(i) make funds available to the Paying Agent for the account of the Appropriate L/C Issuer at the Paying Agent's Office in an Equivalent amount equal to its Pro Rata Share of the Unreimbursed Amount not later than 1:00 p.m. on the Business Day specified in such notice by the Paying Agent, whereupon, subject to the provisions of Section 2.03(c)(iii), each Revolving Credit Lender that so makes funds available shall be deemed to have made a Base Rate Loan in Dollars to the Borrower in such amount. The Paying Agent shall remit the funds so received to such Appropriate L/C Issuer.
(iii) With respect to any Unreimbursed Amount that is not fully refinanced by a Revolving Credit Borrowing of Base Rate Loans because the conditions set forth in Section 4.03 cannot be satisfied or for any other reason, the Borrower shall be deemed to have incurred from the Appropriate L/C Issuer an L/C Borrowing in the amount of the Unreimbursed Amount that is not so refinanced, which L/C Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the Default Rate. In such event, each Revolving Credit Lender's payment to the Paying Agent for the account of the Appropriate L/C Issuer pursuant to
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Section 2.03(c)(ii) shall be deemed payment in respect of its participation in such L/C Borrowing and shall constitute an L/C Advance from such Lender in satisfaction of its participation obligation under this Section 2.03.
(iv) Until each Revolving Credit Lender funds its Revolving Credit Loan or L/C Advance pursuant to this Section 2.03(c) to reimburse the Appropriate L/C Issuer for any amount drawn under any Letter of Credit, interest in respect of such Lender's Pro Rata Share of such amount shall be solely for the account of such Appropriate L/C Issuer.
(v) Each Revolving Credit Lender's obligation to make Revolving Credit Loans or L/C Advances to reimburse an Appropriate L/C Issuer for amounts drawn under Letters of Credit, as contemplated by this Section 2.03(c), shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against such Appropriate L/C Issuer, the Borrower or any other Person for any reason whatsoever; (B) the occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided, however, that each Revolving Credit Lender's obligation to make Revolving Credit Loans pursuant to this Section 2.03(c) is subject to the conditions set forth in Section 4.03 (other than delivery by the Borrower of a Committed Loan Notice). No such making of an L/C Advance shall relieve or otherwise impair the obligation of the Borrower to reimburse any Appropriate L/C Issuer for the amount of any payment made by such Appropriate L/C Issuer under any Letter of Credit, together with interest as provided herein.
(vi) If any Revolving Credit Lender fails to make available to the Paying Agent for the account of any Appropriate L/C Issuer any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 2.03(c) by the time specified in Section 2.03(c)(ii), such Appropriate L/C Issuer shall be entitled to recover from such Lender (acting through the Paying Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to such Appropriate L/C Issuer at a rate per annum equal to the Federal Funds Rate from time to time in effect. A certificate of such Appropriate L/C Issuer submitted to any Revolving Credit Lender (through the Paying Agent) with respect to any amounts owing under this Section 2.03(c)(vi) shall be conclusive absent manifest error.
(d) Repayment of Participations.
(i) At any time after any Appropriate L/C Issuer has made a payment under any Letter of Credit and has received from any Revolving Credit Lender such Lender's L/C Advance in respect of such payment in accordance with Section 2.03(c), if the Paying Agent receives for the account of such Appropriate L/C Issuer any payment in respect of the related Unreimbursed Amount or interest thereon (whether directly from the Borrower or otherwise, including proceeds of Cash Collateral applied thereto by the Paying Agent), the Paying Agent will distribute to such Lender its Pro Rata Share thereof (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender's L/C Advance was outstanding) in the same funds as those received by the Paying Agent.
(ii) If any payment received by the Paying Agent for the account of any Appropriate L/C Issuer pursuant to Section 2.03(c)(i) is required to be returned under any of the circumstances described in Section 10.06 (including pursuant to any settlement entered into by such Appropriate L/C Issuer in its discretion), each Revolving Credit Lender shall pay to the Paying Agent for the account of such Appropriate L/C Issuer its Pro Rata
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Share thereof on demand of the Paying Agent, plus interest thereon from the date of such demand to the date such amount is returned by such Lender, at a rate per annum equal to the Federal Funds Rate from time to time in effect.
(e) Obligations Absolute. The obligation of the Borrower to reimburse any Appropriate L/C Issuer for each drawing under each Letter of Credit and to repay each L/C Borrowing shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following:
(i) any lack of validity or enforceability of such Letter of Credit, this Agreement, or any other agreement or instrument relating thereto;
(ii) the existence of any claim, counterclaim, setoff, defense or other right that the Borrower may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), any Appropriate L/C Issuer or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction;
(iii) any draft, demand, certificate or other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit;
(iv) any payment by the Appropriate L/C Issuer under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; or any payment made by such Appropriate L/C Issuer under such Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of such Letter of Credit, including any arising in connection with any proceeding under any Debtor Relief Law;
(v) any exchange, release or nonperfection of any collateral, or any release or amendment or waiver of or consent to departure from the Guaranty or any other guarantee, for all or any of the L/C Obligations of the Borrower in respect of such Letter of Credit; or
(vi) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower.
The Borrower shall promptly examine a copy of each Letter of Credit and each amendment thereto that is delivered to it and, in the event of any claim of noncompliance with the Borrower's instructions or other irregularity, the Borrower will immediately notify the Appropriate L/C Issuer. The Borrower shall be conclusively deemed to have waived any such claim against such Appropriate L/C Issuer and its correspondents unless such notice is given as aforesaid.
(f) Role of Appropriate L/C Issuer. Each Lender and the Borrower agree that, in paying any drawing under a Letter of Credit, the Appropriate L/C Issuer shall not have any responsibility to obtain any document (other than any sight draft, certificates and documents expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document. None of any Appropriate L/C Issuer, any Agent-Related Person nor any of the respective
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correspondents, participants or assignees of any Appropriate L/C Issuer shall be liable to any Lender for (i) any action taken or omitted in connection herewith at the request or with the approval ofthe Lenders or the Required Lenders, as applicable; (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; or (iii) the due execution, effectiveness, validity or enforceability of any document or instrument related to any Letter of Credit or Letter of Credit Application. The Borrower hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided, however, that this assumption is not intended to, and shall not, preclude the Borrower's pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement. None of any Appropriate L/C Issuer, any Agent-Related Person, nor any of the respective correspondents, participants or assignees of any Appropriate L/C Issuer, shall be liable or responsible for any of the matters described in clauses (i) through (v) of Section 2.03(e); provided, however,that anything in such clauses to the contrary notwithstanding, the Borrower may have a claim against an Appropriate L/C Issuer, and an Appropriate L/C Issuer may be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by the Borrower which the Borrower proves were caused by such Appropriate L/C Issuer's willful misconduct or gross negligence or such Appropriate L/C Issuer's willful failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of a Letter of Credit. In furtherance and not in limitation of the foregoing, any Appropriate L/C Issuer may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary, and such Appropriate L/C Issuer shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason.
(g) Cash Collateral. Upon the request of the Paying Agent, (i)if any Appropriate L/C Issuer has honored any full or partial drawing request under any Letter of Credit and such drawing has resulted in an L/C Borrowing, or (ii) if, as of the Letter of Credit Expiration Date, any Letter of Credit may for any reason remain outstanding and partially or wholly undrawn, the Borrower shall immediately Cash Collateralize the then Outstanding Amount of all L/C Obligations (in an amount equal to such Outstanding Amount determined as of the date of such L/C Borrowing or the Letter of Credit Expiration Date, as the case may be). For purposes hereof, "Cash Collateralize" means to pledge and deposit with or deliver to the Paying Agent, for the benefit of the Appropriate L/C Issuers and the Lenders, as collateral for the L/C Obligations, cash or deposit account balances pursuant to documentation in form and substance satisfactory to the Paying Agent and the Appropriate L/C Issuers (which documents are hereby consented to by the Lenders). Derivatives of such term have corresponding meanings. The Borrower hereby grants to the Paying Agent, for the benefit of the L/C Issuers and the Lenders, a security interest in all such cash, deposit accounts and all balances therein and all proceeds of the foregoing. Cash collateral shall be maintained in blocked, non-interest bearing deposit accounts at KeyBank. If at any time the Paying Agent determines that any funds held as Cash Collateral are subject to any right or claim of any Person other than the Paying Agent or that the total amount of such funds is less than the aggregate Outstanding Amount of all L/C Obligations, the Borrower will, forthwith upon demand by the Paying Agent, pay to the Paying Agent, as additional funds to be deposited and held in the deposit accounts at KeyBank as aforesaid, an amount equal to the excess of (a) such aggregate Outstanding Amount over (b) the total amount of funds, if any, then held as Cash Collateral that the Paying Agent determines to be free and clear of any such right and claim. Upon the drawing of any Letter of Credit for which funds are on deposit as Cash Collateral, such funds shall be applied, to the extent permitted under applicable law, to reimburse the Appropriate L/C Issuer.
(h) Applicability of ISP98 and UCP. Unless otherwise expressly agreed by the Appropriate L/C Issuer and the Borrower when a Letter of Credit is issued (or deemed issued), (i) the rules of the "International Standby Practices 1998" published by the Institute of International Banking Law & Practice (or such
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later version thereof as may be in effect at the time of issuance) shall apply to each standby Letter of Credit, and (ii) the rules of the Uniform Customs and Practice for Documentary Credits, as most recently published by the International Chamber of Commerce (the "ICC") at the time of issuance (or deemed issuance) (including the ICC decision published by the Commission on Banking Technique and Practice on April 6, 1998 regarding the European single currency (euro)) shall apply to each commercial Letter of Credit.
(i) Letter of Credit Fees. The Borrower shall pay to the Paying Agent for the account of each Revolving Credit Lender in accordance with its Pro Rata Share a Letter of Credit fee for each Letter of Credit equal to the Applicable Rate times the daily maximum amount available to be drawn under such Letter of Credit (whether or not such maximum amount is then in effect under such Letter of Credit). Such letter of credit fees shall be computed on a quarterly basis in arrears. Such letter of credit fees shall be due and payable on the first Business Day after the end of each March, June, September and December, commencing with the first such date to occur after the issuance (or deemed issuance) of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand. If there is any change in the Applicable Rate during any quarter, the daily maximum amount of each Letter of Credit shall be computed and multiplied by the Applicable Rate separately for each period during such quarter that such Applicable Rate was in effect.
(j) Fronting Fee and Documentary and Processing Charges Payable to Appropriate L/C Issuers. The Borrower shall pay directly to each Appropriate L/C Issuer for its own account a fronting fee with respect to each Letter of Credit issued (or deemed issued) by such Appropriate L/C Issuer equal to 0.125% times the daily maximum amount available to be drawn under such Letter of Credit (whether or not such maximum amount is then in effect under such Letter of Credit). Such letter of credit fees shall be computed on a quarterly basis in arrears. Such letter of credit fees shall be due and payable on the first Business Day after the end of each March, June, September and December, commencing with the first such date to occur after the issuance (or deemed issuance) of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand. In addition, the Borrower shall pay directly to each Appropriate L/C Issuer for its own account the customary issuance, presentation, amendment and other processing fees, and other standard costs and charges, of such Appropriate L/C Issuer relating to letters of credit as from time to time in effect. Such customary fees and standard costs and charges are due and payable on demand and are nonrefundable.
(k) Conflict with Letter of Credit Application. In the event of any conflict between the terms hereof and the terms of any Letter of Credit Application, the terms hereof shall control.
2.04 Swing Line Loans
(a) The Swing Line. Subject to the terms and conditions set forth herein, the Swing Line Lender agrees to make loans (each such loan, a "Swing Line Loan") to the Borrower from time to time on any Business Day during the Availability Period in an aggregate amount not to exceed at any time outstanding the amount of the Swing Line Sublimit, notwithstanding the fact that such Swing Line Loans, when aggregated with the Pro Rata Share of the Outstanding Amount of Loans and L/C Obligations of the Lender acting as Swing Line Lender, may exceed the amount of such Lender's Commitment; provided, however, that after giving effect to any Swing Line Loan, (i) the Total Outstandings shall not exceed the Aggregate Commitments, and (ii) the aggregate Outstanding Amount of the Revolving Credit Loans of any Lender, plus such Lender's Pro Rata Share of the Outstanding Amount of all L/C Obligations, plus such Lender's Pro Rata Share of the Outstanding Amount of all Swing Line Loans shall not exceed such Lender's Revolving Credit Commitment, and provided further that the Borrower shall not use the proceeds of any Swing Line Loan to refinance any outstanding Swing Line Loan. Within the foregoing limits, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.04, prepay under
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Section 2.05, and reborrow under this Section 2.04. Each Swing Line Loan shall be a Base Rate Loan denominated in Dollars. Immediately upon the making of a Swing Line Loan, each Revolving Credit Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Swing Line Lender a risk participation in such Swing Line Loan in an amount equal to the product of such Lender's Pro Rata Share times the amount of such Swing Line Loan.
(b) Borrowing Procedures. Each Swing Line Borrowing shall be made upon the Borrower's irrevocable notice to the Swing Line Lender and the Paying Agent, which may be given by telephone. Each such notice must be received by the Swing Line Lender and the Paying Agent not later than 1:00 p.m. on the requested borrowing date, and shall specify (i) the amount to be borrowed, which shall be a minimum of $100,000, and (ii) the requested borrowing date, which shall be a Business Day. Each such telephonic notice must be confirmed promptly by delivery to the Swing Line Lender and the Paying Agent of a written Swing Line Loan Notice, appropriately completed and signed by a Responsible Officer of the Borrower. Promptly after receipt by the Swing Line Lender of any telephonic Swing Line Loan Notice, the Swing Line Lender will confirm with the Paying Agent (by telephone or in writing) that the Paying Agent has also received such Swing Line Loan Notice and, if not, the Swing Line Lender will notify the Paying Agent (by telephone or in writing) of the contents thereof. Unless the Swing Line Lender has received notice (by telephone or in writing) from the Paying Agent (including at the request of any Revolving Credit Lender) prior to 2:00 p.m. on the date of the proposed Swing Line Borrowing (A) directing the Swing Line Lender not to make such Swing Line Loan as a result of the limitations set forth in the proviso to the first sentence of Section 2.04(a), or (B) that one or more of the applicable conditions specified in Section 4.03 is not then satisfied, then, subject to the terms and conditions hereof, the Swing Line Lender will, not later than 3:00 p.m. on the borrowing date specified in such Swing Line Loan Notice, make the amount of its Swing Line Loan available to the Borrower at its office by crediting the account of the Borrower on the books of the Swing Line Lender in immediately available funds.
(c) Refinancing of Swing Line Loans.
(i) The Swing Line Lender at any time in its sole and absolute discretion may request, on behalf of the Borrower (which hereby irrevocably authorizes the Swing Line Lender to so request on its behalf), that each Revolving Credit Lender make a Base Rate Loan in an amount equal to such Lender's Pro Rata Share of the amount of Swing Line Loans then outstanding. Such request shall be made in writing (which written request shall be deemed to be a Committed Loan Notice for purposes hereof) and in accordance with the requirements of Section 2.02, without regard to the minimum and multiples specified therein for the principal amount of Base Rate Loans, but subject to the unutilized portion of the Revolving Credit Commitments and the conditions set forth in Section 4.03. The Swing Line Lender shall furnish the Borrower with a copy of the applicable Committed Loan Notice promptly after delivering such notice to the Paying Agent. Each Revolving Credit Lender shall make an amount equal to its Pro Rata Share of the amount specified in such Committed Loan Notice available to the Paying Agent in immediately available funds for the account of the Swing Line Lender at the Paying Agent's Office not later than 1:00 p.m. on the day specified in such Committed Loan Notice, whereupon, subject to Section 2.04(c)(ii), each Revolving Credit Lender that so makes funds available shall be deemed to have made a Base Rate Loan to the Borrower in such amount. The Paying Agent shall remit the funds so received to the Swing Line Lender.
(ii) If for any reason any Swing Line Loan cannot be refinanced by a Revolving Credit Borrowing in accordance with Section 2.04(c)(i),the request for Base Rate Loans submitted by the Swing Line Lender as set forth herein shall be deemed to be a request by the Swing Line Lender that each of the Revolving Credit Lenders fund its risk participation in the relevant Swing Line Loan and each Revolving Credit Lender's payment to the Paying Agent
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for the account of the Swing Line Lender pursuant to Section 2.04(c)(i) shall be deemed payment in respect of such participation.
(iii) If any Revolving Credit Lender fails to make available to the Paying Agent for the account of the Swing Line Lender any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 2.04(c) by the time specified in Section 2.04(c)(i), the Swing Line Lender shall be entitled to recover from such Lender (acting through the Paying Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to the Swing Line Lender at a rate per annum equal to the Federal Funds Rate from time to time in effect. A certificate of the Swing Line Lender submitted to any Lender (through the Paying Agent) with respect to any amounts owing under this Section 2.04(c)(iii) shall be conclusive absent manifest error.
(iv) Each Revolving Credit Lender's obligation to make Revolving Credit Loans or to purchase and fund risk participations in Swing Line Loans pursuant to this Section 2.04(c) shall be absolute and unconditionaland shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against the Swing Line Lender, the Borrower or any other Person for any reason whatsoever, (B) the occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided, however, that each Revolving Credit Lender's obligation to make Revolving Credit Loans pursuant to this Section 2.04(c) is subject to the conditions set forth in Section 4.03. No such funding of risk participations shall relieve or otherwise impair the obligation of the Borrower to repay Swing Line Loans, together with interest as provided herein.
(d) Repayment of Participations.
(i) At any time after any Revolving Credit Lender has purchased and funded a risk participation in a Swing Line Loan, if the Swing Line Lender receives any payment on account of such Swing Line Loan, the Swing Line Lender will distribute to such Lender its Pro Rata Share of such payment (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender's risk participation was funded) in the same funds as those received by the Swing Line Lender.
(ii) If any payment received by the Swing Line Lender in respect of principal or interest on any Swing Line Loan is required to be returned by the Swing Line Lender under any of the circumstances described in Section 10.06 (including pursuant to any settlement entered into by the Swing Line Lender in its discretion), each Revolving Credit Lender shall pay to the Swing Line Lender its Pro Rata Share thereof on demand of the Paying Agent, plus interest thereon from the date of such demand to the date such amount is returned, at a rate per annum equal to the Federal Funds Rate. The Paying Agent will make such demand upon the request of the Swing Line Lender.
(e) Interest for Account of Swing Line Lender. The Swing Line Lender shall be responsible for invoicing the Borrower for interest on the Swing Line Loans. Until each Revolving Credit Lender funds its Base Rate Loan or risk participation pursuant to this Section 2.04 to refinance such Lender's Pro Rata Share of any Swing Line Loan, interest in respect of such Pro Rata Share shall be solely for the account of the Swing Line Lender.
(f) Payments Directly to Swing Line Lender. The Borrower shall make all payments of principal and interest in respect of the Swing Line Loans directly to the Swing Line Lender.
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2.05 Prepayments.
(a) Optional. (i) The Borrower may, upon notice to the Paying Agent, at any time or from time to time voluntarily prepay Loans in whole or in part without premium or penalty; provided that (1) such notice must be received by the Paying Agent not later than 11:00 a.m. (A) three Business Days prior to any date of prepayment of Eurocurrency Rate Loans and (B) on the date of prepayment of Base Rate Loans; (2) any prepayment of Term Loans or Revolving Credit Loans shall be in a principal amount of not less than the Revolving Credit Borrowing Minimum or the Revolving Credit Borrowing Multiple in excess thereof; and (3) any prepayment of Swing Line Loans shall be in a principal amount of not less than $100,000 or, in each case, if less, the entire principal amount thereof then outstanding. Each such notice shall specify the date and amount of such prepayment and the Type(s) of Loans to be prepaid. The Paying Agent will promptly notify each Lender of its receipt of each such notice, and of the amount of such Lender's Pro Rata Share of such prepayment. If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein. Any prepayment of a Eurocurrency Rate Loan shall be accompanied by all accrued interest thereon, together with any additional amounts required pursuant to Section 3.05. Each prepayment pursuant to this Section 2.05(a) shall be paid to the Paying Agent for distribution to the Appropriate Lenders in accordance with their respective Pro Rata Shares. Notwithstanding anything in this Section 2.05(a) to the contrary, the Borrower shall not be permitted to prepay any Revolving Credit Loans at any time prior to the repayment in full of all Term Loans and the termination of all Term Commitments.
(ii) The Borrower may, upon notice to the Swing Line Lender (with a copy to the Paying Agent), at any time or from time to time, voluntarily prepay Swing Line Loans in whole or in part without premium or penalty; provided that (1) such notice must be received by the Swing Line Lender and the Paying Agent not later than 1:00 p.m. on the date of the prepayment, and (2) any such prepayment shall be in a minimum principal amount of $100,000. Each such notice shall specify the date and amount of such prepayment. If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein.
(b) Mandatory. (i) If the Borrower or any of its Subsidiaries Disposes of any property or assets permitted by Section 7.05(a), (f), (i) or (j) which in the aggregate results in the realization by the Borrower or such Subsidiary of Net Cash Proceeds (determined as of the date of such Disposition, whether or not such Net Cash Proceeds are then received by the Borrower or such Subsidiary), in excess of $2,500,000 per annum, the Borrower shall prepay an aggregate principal amount of Term Loans and the Revolving Credit Loans equal to 100% of all Net Cash Proceeds received therefrom immediately upon receipt thereof by the Borrower or such Subsidiary; provided, however, that the Borrower shall be required to prepay Revolving Credit Loans with the Net Cash Proceeds of any Disposition of any property or assets permitted by (x) Section 7.05(f) or (i) only to the extent that the aggregate Net Cash Proceeds from all such Dispositions exceeds $150,000,000, and (y) Section 7.05(j) only to the extent that the aggregate Net Cash Proceeds from all such Dispositions exceeds $120,000,000; provided further, however, that, with respect to any Net Cash Proceeds realized (I) under a Disposition described in this Section 2.05(b)(i) or (II) proceeds of insurance and condemnation awards described in Section 2.05(b)(iii), at any time after all Term Loans have been repaid in full and all Term Commitments have been terminated, at the option of the Borrower (as elected by the Borrower in writing to the Co-Administrative Agents on or prior to the date of such Disposition or the receipt of such insurance proceeds or condemnation awards), and so long as no Default shall have occurred and be continuing, the Borrower may reinvest all or any portion of such Net Cash Proceeds in operating assets so long as within 270 days after the receipt of such Net Cash Proceeds, the purchase of such assets shall have been consummated (as certified by the Borrower in writing to the Co-Administrative Agents);
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provided still further, however, that any Net Cash Proceeds not so reinvested shall be immediately applied to the prepayment of the Loans as set forth in this Section 2.05.
(ii) So long as any Term Loan or Term Commitment remains outstanding, upon the incurrence or issuance by the Borrower or any of its Subsidiaries of any Indebtedness (other than Indebtedness expressly permitted to be incurred or issued pursuant to Section 7.03(a)(A), (b)(A), (c)(A), (c)(B), (c)(C), (c)(D), (c)(E), (c)(F) or (c)(G)), the Borrower shall prepay an aggregate principal amount of Term Loans equal to 100% of all Net Cash Proceeds received therefrom immediately upon receipt thereof by the Borrower or such Subsidiary.
(iii) Upon any Extraordinary Receipt received by or paid to or for the account of the Borrower or any of its Subsidiaries and not otherwise included in clause (i) or (ii) of this Section 2.05(b), the Borrower shall prepay an aggregate principal amount of Loans equal to 100% of all Net Cash Proceeds received therefrom immediately upon receipt thereof by the Borrower or such Subsidiary.
(iv) If for any reason the Total Outstandings at any time exceed the Aggregate Commitments then in effect, the Borrower shall immediately prepay Loans and/or Cash Collateralize the L/C Obligations in an aggregate amount equal to such excess; provided, however, that the Borrower shall not be required to Cash Collateralize the L/C Obligations pursuant to this Section 2.05(b)(iv) unless after the prepayment in full of the Loans and Swing Line Loans the Total Outstandings exceed the Aggregate Commitments then in effect.
(v) Each prepayment of Loans pursuant to this Section 2.05(b) shall be applied, first, to the Term Facility and, thereafter, to the Revolving Credit Facility in the manner set forth in clause (vi) of this Section 2.05(b).
(vi) Prepayments of the Revolving Credit Facility made pursuant to clause (i), (ii), (iii), (iv) or (v) of this Section 2.05(b), first, shall be applied to prepay L/C Borrowings outstanding at such time until all such L/C Borrowings are paid in full, second, shall be applied to prepay Swing Line Loans outstanding at such time until all such Swing Line Loans are paid in full, third, shall be applied to prepay Revolving Credit Loans outstanding at such time until the Outstanding Amount of all such Revolving Credit Loans is reduced to $350,000,000 and, fourth, shall be used to Cash Collateralize the L/C Obligations; and, in the case of prepayments of the Revolving Credit Facility required pursuant to clause (i), (ii) or (iii) of this Section 2.05(b), the amount remaining, if any, after the prepayment of all Loans, to the extent required under this Section 2.05(b)(vi), and L/C Borrowings outstanding at such time and the L/C Obligations have been Cash Collateralized in full (the sum of such prepayment amounts, cash collateralization amounts and remaining amount being, collectively, the "Reduction Amount") may be retained by the Borrower for use in the ordinary course of its business, and the Revolving Credit Facility shall be automatically and permanently reduced as set forth in Section 2.06(b)(ii). Upon the drawing of any Letter of Credit which has been Cash Collateralized, such funds shall be applied (without any further action by or notice to or from the Borrower or any other Loan Party) to reimburse the Appropriate L/C Issuer or the Revolving Credit Lenders, as applicable.
(c) Prepayments of Committed Currency Loans. If as of any Determination Date (i) the Equivalent of the Outstanding Amount of all Revolving Credit Loans, all Swing Line Loans and all L/C Obligations exceeds the Revolving Credit Facility then in effect or (ii) the Equivalent of all L/C Obligations exceeds the Letter of Credit Sublimit, in each case, the Borrower shall, on such Determination Date, prepay Revolving Credit Loans denominated in Committed Currencies and/or Cash Collateralize Letters of Credit denominated in a Committed Currency in an aggregate amount equal to such excess. If as of any Determination Date the Equivalent of the Outstanding Amount of all Revolving Credit Loans denominated in a Committed Currency exceeds 105% of the Committed
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Currency Sublimit then in effect, the Borrower shall, on such Determination Date, prepay Revolving Credit Loans denominated in Committed Currencies and/or Cash Collateralize Letters of Credit denominated in a Committed Currency in an aggregate amount equal to the amount by which such Outstanding Amount exceeds the Committed Currency Sublimit.
(d) Prepayments to Include Accrued Interest, Etc. All prepayments under this Section 2.05 shall be made together with (i) accrued and unpaid interest to the date of such prepayment on the principal amount so prepaid and (ii) in the case of any such prepayment of a Eurocurrency Rate Loan on a date other than the last day of an Interest Period therefor, any amounts owing in respect of such Eurocurrency Rate Loan pursuant to Section 3.05.
2.06 Termination or Reduction of Commitments.
(a) Optional. The Borrower may, upon notice to the Paying Agent, terminate the unused portions of the Term Commitments, the Letter of Credit Sublimit, the Committed Currency Sublimit or the unused Revolving Credit Commitments, or from time to time permanently reduce the unused portions of the Term Commitments, the Letter of Credit Sublimit, the Committed Currency Sublimit or the unused Revolving Credit Commitments; provided that (i) any such notice shall be received by the Paying Agent not later than 11:00 a.m. five Business Days prior to the date of termination or reduction, (ii) any such partial reduction shall be in an aggregate amount of $10,000,000 or any whole multiple of $1,000,000 in excess thereof, (iii) the Borrower shall not terminate or reduce the unused portions of the Term Commitments, the Letter of Credit Sublimit, the Committed Currency Sublimit or the unused Revolving Credit Commitments if, after giving effect thereto and to any concurrent prepayments hereunder, the Total Outstandings would exceed the Aggregate Commitments, and (iv) if, after giving effect to any reduction of the Revolving Credit Facility, the Letter of Credit Sublimit, the Swing line Sublimit or the Committed Currency Sublimit exceeds the amount of the Revolving Credit Facility, such Letter of Credit Sublimit, Swing Line Sublimit or Committed Currency Sublimit shall be automatically reduced by the amount of such excess. Notwithstanding anything in this Section 2.06(a) to the contrary, the Borrower shall not be permitted to terminate or reduce the unused Revolving Credit Commitments at any time prior to the repayment in full of all Term Loans and the termination of all Term Commitments.
(b) Mandatory. (i) The Term Facility shall be automatically and permanently reduced on the date of the Term Borrowing (after giving effect to the Term Borrowing), and from time to time thereafter upon each repayment or prepayment of the outstanding Term Loans, by an amount equal to the amount by which (A) the Term Facility immediately prior to such reduction exceeds (B) the aggregate principal amount of all Term Loans outstanding at such time. If the High Grade Notes are issued on or prior to the Funding Date, then the Term Facility shall be automatically and permanently reduced on the date of such issuance in an amount equal to the aggregate amount of Net Cash Proceeds received in connection with such issuance.
(ii) The Revolving Credit Facility shall be automatically and permanently reduced on each date on which the prepayment of Revolving Credit Loans outstanding thereunder is required to be made pursuant to Section 2.05(b)(i), (ii) or (iii) by an amount equal to the applicable Reduction Amount; provided, however, that notwithstanding the foregoing provisions of this clause (ii) and Section 2.05(b)(vi), in no event shall the Revolving Credit Facility be reduced, pursuant to this clause (ii), to less than $350,000,000.
(iii)If after giving effect to any reduction or termination of unused Commitments under this Section 2.06, the Letter of Credit Sublimit, the
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Committed Currency Sublimit or the Swing Line Sublimit exceeds the amount of the Revolving Credit Commitments, such Sublimit shall be automatically reduced by the amount of such excess.
(c) Application of Commitment Reductions; Payment of Fees. The Paying Agent will promptly notify the Lenders of any termination or reduction of unused portions of the Term Commitment, the Letter of Credit Sublimit, the Committed Currency Sublimit or the unused Revolving Credit Commitment under this Section 2.06. Upon any reduction of unused Commitments under a Facility, the Commitment of each Lender under such Facility shall be reduced by such Lender's Pro Rata Share of the amount by which such Facility is reduced. All commitment fees accrued until the effective date of any termination of the Aggregate Commitments shall be paid on the effective date of such termination.
2.07 Repayment of Loans.
(a) Term Loans. The Borrower shall repay to the Paying Agent for the ratable account of the Term Lenders on the Maturity Date the aggregate principal amount of all Term Loans outstanding on such date.
(b) Revolving Credit Loans. The Borrower shall repay to the Paying Agent for the ratable account of the Revolving Credit Lenders on the Maturity Date the aggregate principal amount of all Revolving Credit Loans outstanding on such date. (c) Swing Line Loans. The Borrower shall repay each Swing Line Loan on the earlier to occur of (i) the date agreed to between the Borrower and the Swing Line Lender, but in no event more than 30 days after such Loan is made and (ii) the Maturity Date.
2.08 Interest.
(a) Subject to the provisions of Section 2.08(b), (i) each Eurocurrency Rate Loan shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the Applicable Rate for Eurocurrency Rate Loans; (ii) each Base Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Applicable Rate for Base Rate Loans; and (iii) each Swing Line Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Applicable Rate for Base Rate Loans.
(b) If any amount of principal, interest or fees payable under any of Sections 2.03(i), 2.03(j) or 2.09 are not paid when due (without regard to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, such amount shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws. Furthermore, upon the request of the Required Lenders, while any Event of Default exists, the Borrower shall pay interest on the principal amount of all outstanding Obligations hereunder at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws. Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable upon demand.
(c) Interest on each Loan shall be due and payable in arrears on each Interest Payment Date applicable thereto and at such other times as may be specified herein. Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law.
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2.09 Fees. In addition to certain fees described in Sections 2.03(i) and 2.03(j):
(a) Commitment Fee. The Borrower shall pay to the Paying Agent for the account of each Appropriate Lender in accordance with its Pro Rata Share, a commitment fee equal to (x) from the Documentation Closing Date through the Funding Date, 0.250%, and (y) thereafter, the Applicable Rate, in each case, times the actual daily amount by which the aggregate Revolving Credit Commitments exceed the sum of (i) the Outstanding Amount of Revolving Credit Loans and (ii) the Outstanding Amount of L/C Obligations; provided, however, that any commitment fee accrued with respect to any of the Commitments of a Defaulting Lender during the period prior to the time such Lender became a Defaulting Lender and unpaid at such time shall not be payable by the Borrower so long as such Lender shall be a Defaulting Lender except to the extent that such commitment fee shall otherwise have been due and payable by the Borrower prior to such time; and provided further that no commitment fee shall accrue on any of the Commitments of a Defaulting Lender so long as such Lender shall be a Defaulting Lender. The commitment fee shall accrue at all times from the Documentation Closing Date through the Maturity Date, including at any time during which one or more of the conditions in Article IV is not met, and shall be due and payable in arrears on the earlier of (i) the Funding Date, and (ii) March 31, 2003, and thereafter on the last Business Day of each March, June, September and December, and on the Maturity Date. The commitment fee shall be calculated quarterly in arrears, and if there is any change in the Applicable Rate during any quarter, the actual daily amount shall be computed and multiplied by the Applicable Rate separately for each period during such quarter that such Applicable Rate was in effect.
(b) Other Fees. (i) The Borrower shall pay to the Agents for their own respective accounts fees in the amounts and at the times specified in the Fee Letter. Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever.
(ii) The Borrower shall pay to the Agents such fees as shall have been separately agreed upon in writing in the amounts and at the times so specified. Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever.
2.10 Computation of Interest and Fees. .All computations of interest for Base Rate Loans when the Base Rate is determined by KeyBank's "prime rate" shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed (which results in more fees or interest, as applicable, being paid than if computed on the basis of a 365-day year). Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid, provided that any Loan that is repaid on the same day on which it is made shall, subject to Section 2.12(a), bear interest for one day. Each determination by the Paying Agent of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.
2.11 Evidence of Indebtedness.
(a) The Credit Extensions made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and by the Paying Agent in the ordinary course of business. The accounts or records maintained by the Paying Agent and each Lender shall be conclusive absent manifest error of the amount of the Credit Extensions made by the Lenders to the Borrower and the interest and payments thereon. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Obligations. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Paying Agent in respect of such matters, the accounts and records of the Paying Agent shall control in the absence of
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manifest error. Upon the request of any Lender made through the Paying Agent, the Borrower shall execute and deliver to such Lender (through the Paying Agent) a Note, which shall evidence such Lender's Loans in addition to such accounts or records. Each Lender may attach schedules to its Note and endorse thereon the date, Type (if applicable), amount and maturity of its Loans and payments with respect thereto.
(b) In addition to the accounts and records referred to in Section 2.11(a), each Lender and the Paying Agent shall maintain in accordance with its usual practice accounts or records evidencing the purchases and sales by such Lender of participations in Letters of Credit and Swing Line Loans. In the event of any conflict between the accounts and records maintained by the Paying Agent and the accounts and records of any Lender in respect of such matters, the accounts and records of the Paying Agent shall control in the absence of manifest error.
(c) Entries made in good faith by the Paying Agent in the Register pursuant to Section 2.11(b), and by each Lender in its account or accounts pursuant to Section 2.11(a) above, shall be prima facie evidence of the amount of principal and interest due and payable or to become due and payable from the Borrower to, in the case of the Register, each Lender and, in the case of such account or accounts, such Lender, under this Agreement and the other Loan Documents, absent manifest error; provided that the failure of the Paying Agent or such Lender to make an entry, or any finding that an entry is incorrect, in the Register or such account or accounts shall not limit or otherwise affect the obligations of the Borrower under this Agreement and the other Loan Documents.
2.12 Payments Generally
(a) All payments to be made by the Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all payments by the Borrower hereunder (except with respect to principal of, interest on, and other amounts relating to, Loans denominated in a Committed Currency) shall be made to the Paying Agent, for the account of the respective Lenders to which such payment is owed, at the Paying Agent's Office in Dollars and in immediately available funds not later than 2:00 p.m. on the date specified herein. Except as otherwise expressly provided herein, all payments by the Borrower with respect to principal of, interest on, and other amounts relating to, Loans denominated in a Committed Currency shall be made to the Paying Agent, for the account of the respective Lenders to which such payment is owed, at the Payment Office in such Committed Currency and in immediately available funds not later than 2:00 p.m. on the date specified herein. The Paying Agent will promptly distribute to each Lender its Pro Rata Share (or other applicable share as provided herein) of such payment in like funds as received by wire transfer to such Lender's Lending Office. All payments received by the Paying Agent after 2:00 p.m. shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue.
(b) If any payment to be made by the Borrower shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be; provided, however, that, if such extension would cause payment of interest on or principal of Eurocurrency Rate Loans to be made in the next succeeding calendar month, such payment shall be made on the immediately preceding Business Day.
(c) Unless the Borrower or any Lender has notified the Paying Agent, prior to the date any payment is required to be made by it to the Paying Agent hereunder, that the Borrower or such Lender, as the case may be, will not make such payment, the Paying Agent may assume that the Borrower or such Lender, as the case may be, has timely made such payment and may (but shall not be so required to), in reliance thereon, make available a corresponding amount to the
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Person entitled thereto. If and to the extent that such payment was not in fact made to the Paying Agent in immediately available funds, then:
(i) if the Borrower failed to make such payment, each Lender shall forthwith on demand repay to the Paying Agent the portion of such assumed payment that was made available to such Lender in immediately available funds, together with interest thereon in respect of each day from and including the date such amount was made available by the Paying Agent to such Lender to the date such amount is repaid to the Paying Agent in immediately available funds at the higher of (A) Federal Funds Rate from time to time in effect in the case of Loans denominated in Dollars or (B) the cost of funds incurred by the Paying Agent in respect of such amount in the case of Loans denominated in Committed Currencies; and
(ii) if any Lender failed to make such payment, such Lender shall forthwith on demand pay to the Paying Agent the amount thereof in immediately available funds, together with interest thereon for the period from the date such amount was made available by the Paying Agent to the Borrower to the date such amount is recovered by the Paying Agent (the "Compensation Period") at a rate per annum equal to the higher of (A) Federal Funds Rate from time to time in effect in the case of Loans denominated in Dollars or (B) the cost of funds incurred by the Paying Agent in respect of such amount in the case of Loans denominated in Committed Currencies. If such Lender pays such amount to the Paying Agent, then such amount shall constitute such Lender's Loan included in the applicable Borrowing in the case of Loans denominated in Dollars or (B) the cost of funds incurred by the Paying Agent in respect of such amount in the case of Loans denominated in Committed Currencies. If such Lender does not pay such amount forthwith upon the Paying Agent's demand therefor, the Paying Agent may make a demand therefor upon the Borrower, and the Borrower shall pay such amount to the Paying Agent, together with interest thereon for the Compensation Period at a rate per annum equal to the rate of interest applicable to the applicable Borrowing. Nothing herein shall be deemed to relieve any Lender from its obligation to fulfill its Commitment or to prejudice any rights which the Paying Agent or the Borrower may have against any Lender as a result of any default by such Lender hereunder.
A notice of the Paying Agent to any Lender or the Borrower with respect to any amount owing under this Section
2.12(c) shall be conclusive, absent manifest error.
(d) If any Lender makes available to the Paying Agent funds for any Loan to be made by such Lender as provided in the foregoing provisions of this Article II, and such funds are not made available to the Borrower by the Paying Agent because the conditions to the applicable Credit Extension set forth in Article IV are not satisfied or waived in accordance with the terms hereof, the Paying Agent shall return such funds (in like funds as received from such Lender) to such Lender, without interest.
(e) The obligations of the Lenders hereunder to make Loans and to fund participations in Letters of Credit and Swing Line Loans are several and not joint. The failure of any Lender to make any Loan or to fund any such participation on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Loan or purchase its participation.
(f) Nothing herein shall be deemed to obligate any Lender to obtain the funds for any Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Loan in any particular place or manner.
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(g) Whenever any payment received by the Paying Agent under this Agreement or any of the other Loan Documents is insufficient to pay in full all amounts due and payable to the Agents and the Lenders under or in respect of this Agreement and the other Loan Documents on any date, such payment shall be distributed by the Paying Agent and applied by the Agents and the Lenders in the order of priority set forth in Section 8.03. If the Paying Agent receives funds for application to the Obligations of the Loan Parties under or in respect of the Loan Documents under circumstances for which the Loan Documents do not specify the manner in which such funds are to be applied, the Paying Agent may, but shall not be obligated to, elect to distribute such funds to each of the Lenders in accordance with such Lender's Pro Rata Share of the sum of (A) the Outstanding Amount of all Loans outstanding at such time and (b) the Outstanding Amount of all L/C Obligations outstanding at such time, in repayment or prepayment of such of the outstanding Loans or other Obligations then owing to such Lender.
(h) To the extent that the Paying Agent receives funds for application to the amounts owing by the Borrower under or in respect of this Agreement or any Note in currencies other than the currency or currencies required to enable the Paying Agent to distribute funds to the Lenders in accordance with the terms of this Section 2.12, the Paying Agent shall be entitled to convert or exchange such funds into Dollars or into a Committed Currency or from Dollars to a Committed Currency or from a Committed Currency to Dollars, as the case may be, to the extent necessary to enable the Paying Agent to distribute such funds in accordance with the terms of this Section 2.12; provided that the Borrower and each of the Lenders hereby agree that the Paying Agent shall not be liable or responsible for any loss, cost or expense suffered by the Borrower or such Lender as a result of any conversion or exchange of currencies affected pursuant to this Section 2.12(h) or as a result of the failure of the Paying Agent to effect any such conversion or exchange; and provided further that the Borrower agrees to indemnify the Paying Agent and each Lender, and hold the Paying Agent and each Lender harmless, for any and all losses, costs and expenses incurred by the Paying Agent or any Lender for any conversion or exchange of currencies (or the failure to convert or exchange any currencies) in accordance with this Section 2.12(h).
2.13 Sharing of Payments. If, other than as expressly provided elsewhere herein, any Lender shall obtain on account of the Loans made by it, or the participations in L/C Obligations or in Swing Line Loans held by it, any payment (whether voluntary, involuntary, through the exercise of any right of setoff, or otherwise) in excess of its ratable share (or other share contemplated hereunder) thereof, such Lender shall immediately (a) notify the Paying Agent of such fact, and (b) purchase from the other Lenders such participations in the Loans made by them and/or such subparticipations in the participations in L/C Obligations or Swing Line Loans held by them, as the case may be, as shall be necessary to cause such purchasing Lender to share the excess payment in respect of such Loans or such participations, as the case may be, pro rata with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from the purchasing Lender under any of the circumstances described in Section 10.06 (including pursuant to any settlement entered into by the purchasing Lender in its discretion), such purchase shall to that extent be rescinded and each other Lender shall repay to the purchasing Lender the purchase price paid therefor, together with an amount equal to such paying Lender's ratable share (according to the proportion of (i) the amount of such paying Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered, without further interest thereon. The Borrower agrees that any Lender so purchasing a participation from another Lender may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of setoff, but subject to Section 10.09) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. The Paying Agent will keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased under this Section 2.13 and will in each case notify the Lenders following any such purchases or repayments. Each Lender that purchases a participation pursuant to this Section 2.13 shall from and after such purchase have the right to give all notices, requests, demands, directions and other
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communications under this Agreement with respect to the portion of the Obligations purchased to the same extent as though the purchasing Lender were the original owner of the Obligations purchased.
2.14 Committed Currency Borrowings.
(a) Determination of Equivalents. The Paying Agent will determine the Equivalent amount on each of the following dates: (i) the last Business Day of each month, (ii) the date a Request for Credit Extension is delivered to the Paying Agent with respect to each Credit Extension with respect to each Credit Extension issued or advanced that results in an Outstanding Amount denominated in a Committed Currency, (iii) each date on which any Outstanding Amount is due, (iv) each Interest Payment Date applicable thereto, (v) the Honor Date with respect to each Letter of Credit denominated in a Committed Currency, (vi) each date of an amendment of any such Letter of Credit denominated in a Committed Currency having the effect of increasing the amount thereof, (vii) any date on which an L/C Borrowing is deemed to have been made with respect to a Letter of Credit denominated in a Committed Currency, and (viii) any additional and more frequent dates as the Lead Arrangers in their sole discretion may, or at the direction of the Required Lenders shall, select from time to time (each such date under clauses (i) through (viii), being a "Determination Date").
(b) Notification of Availability. If on any date on which a Revolving Credit Loan denominated in a Committed Currency is requested to be made or continued, in the event that the Committed Currency requested or elected by the Borrower to be continued is not available to the Paying Agent, then the Paying Agent shall notify the Borrower no later than 4:00 p.m., three Business Days prior to the proposed Borrowing or proposed continuation.
(c) Consequences of Non-Availability. If the Paying Agent notifies the Borrower pursuant to Section 2.14(b) that the Committed Currency requested or elected by the Borrower to be continued is not available, such notification shall (i) in the case of any request for a Borrowing, revoke such request and (ii) in the case of any continuation or conversion, result in the Eurocurrency Rate Loans denominated in such Committed Currency being automatically converted into Eurocurrency Rate Loans denominated in Dollars for a one month Interest Period on the last day of the then current Interest Period with respect to such Eurocurrency Rate Loans denominated in such Committed Currency.
(d) Automatic Conversions. During the existence of an Event of Default, all outstanding Loans denominated in a Committed Currency shall be redenominated and converted into their Equivalent of Base Rate Loans in Dollars on the last day of the Interest Period applicable to any such Loans.
ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY
3.01 Taxes.
(a) Any and all payments by the Borrower to or for the account of any Agent or any Lender under any Loan Document shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges, and all liabilities with respect thereto, excluding, in the case of each Agent and each Lender, taxes imposed on or measured by its overall net income, and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the Laws of which such Agent or such Lender, as the case may be, is organized or maintains a lending office, or to which such Agent or such Lender has a present or former connection (all such non-excluded taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges, and liabilities being hereinafter referred to
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as "Taxes"). If the Borrower shall be required by any Laws to deduct any Taxes from or in respect of any sum payable under any Loan Document to any Agent or any Lender, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.01), each of such Agent and such Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable Laws, and (iv) upon the request of the Paying Agent, the Borrower shall furnish to the Paying Agent (which shall forward the same to such Agent or such Lender, as the case may be) the original or a certified copy of a receipt evidencing payment thereof to the extent such a receipt is issued therefor, or other written proof of payment thereof that is reasonably satisfactory to the Paying Agent.
(b) In addition, the Borrower agrees to pay any and all present or future stamp, court or documentary taxes and any other excise or property taxes or charges or similar levies which arise from any payment made under any Loan Document or from the execution, delivery, performance, enforcement or registration of, or otherwise with respect to, any Loan Document (hereinafter referred to as "Other Taxes").
(c) If the Borrower shall be required to deduct or pay any Taxes or Other Taxes from or in respect of any sum payable under any Loan Document to any Agent or any Lender, the Borrower shall also pay to such Agent or to such Lender, as the case may be, at the time interest is paid, such additional amount that such Agent or such Lender specifies is necessary to preserve the after-tax yield (after factoring in all taxes, including taxes imposed on or measured by net income) that such Agent or such Lender would have received if such Taxes or Other Taxes had not been imposed.
(d) The Borrower agrees to indemnify each Agent and each Lender for (i) the full amount of Taxes and Other Taxes (including any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 3.01) paid by such Agent and such Lender, (ii) amounts payable under Section 3.01(c) and (iii) any liability (including additions to tax, penalties, interest and expenses) arising therefrom or with respect thereto. Payment under this Section 3.01(d) shall be made within 30 days after the date such Lender or such Agent makes a demand therefor.
3.02 Illegality. If any Lender determines that the introduction or change in any Law after the Documentation Closing Date has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make, maintain or fund Eurocurrency Rate Loans in Dollars or any Committed Currency, or to determine or charge interest rates based upon the Eurocurrency Rate, then, on notice thereof by such Lender to the Borrower through the Paying Agent, any obligation of such Lender to make or continue Eurocurrency Rate Loans or to convert Base Rate Loans to Eurocurrency Rate Loans shall be suspended until such Lender notifies the Paying Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrower shall, upon demand from such Lender (with a copy to the Paying Agent), prepay or, if applicable, convert all Eurocurrency Rate Loans of such Lender to Base Rate Loans (or if such Eurocurrency Rate Loan is denominated in any Committed Currency, be exchanged into an Equivalent amount of Dollars and be Converted into a Base Rate Loan), either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurocurrency Rate Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such Eurocurrency Rate Loans. Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted. Each Lender agrees to designate a different Lending Office if such designation will avoid the need for such notice and will not, in the good faith judgment of such Lender, otherwise be materially disadvantageous to such Lender.
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3.03 Inability to Determine Rates. If the Required Lenders determine that for any reason adequate and reasonable means do not exist for determining the Eurocurrency Rate for any requested Interest Period with respect to a proposed Eurocurrency Rate Loan, or that the Eurocurrency Rate for any requested Interest Period with respect to a proposed Eurocurrency Rate Loan does not adequately and fairly reflect the cost to such Lenders of funding such Loan, or that Dollar or Committed Currency deposits are not being offered to banks in the London interbank Eurocurrency market for the applicable amount and the Interest Period of such Eurocurrency Rate Loan, the Paying Agent will promptly so notify the Borrower and each Lender. Thereafter, the obligation of the Lenders to make or maintain Eurocurrency Rate Loans shall be suspended until the Paying Agent (upon the instruction of the Required Lenders) revokes such notice. Upon receipt of such notice, the Borrower may revoke any pending request for a Borrowing of, conversion to or continuation of Eurocurrency Rate Loans or, failing that, will be deemed to have converted such request into a request for a Committed Borrowing of Base Rate Loans in the amount specified therein.
3.04 Increased Cost and Reduced Return; Capital Adequacy; Reserves on Eurocurrency Rate Loans.
(a) If any Lender determines that as a result of the introduction of or any change in or in the interpretation of any Law or such Lender's compliance therewith, there shall be any increase in the cost to such Lender of agreeing to make or making, funding or maintaining Eurocurrency Rate Loans or (as the case may be) issuing or participating in Letters of Credit, or a reduction in the amount received or receivable by such Lender in connection with any of the foregoing (excluding for purposes of this Section 3.04(a) any such increased costs or reduction in amount resulting from (i) Taxes or Other Taxes (as to which Section 3.01 shall govern), (ii) changes in the basis of taxation of overall net income or overall gross income by the United States or any foreign jurisdiction or any political subdivision of either thereof under the Laws of which such Lender is organized or has its Lending Office, or to which such Lender has a present or former connection, and (iii) reserve requirements contemplated by Section 3.04(c)), then from time to time upon demand of such Lender (with a copy of such demand to the Paying Agent), the Borrower shall pay to such Lender such additional amounts as will compensate such Lender for such increased cost or reduction.
(b) If any Lender determines that the introduction of any Law regarding capital adequacy or any change therein or in the interpretation thereof, or compliance by such Lender (or its Lending Office) therewith, has the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of such Lender's obligations hereunder (taking into consideration its policies with respect to capital adequacy and such Lender's desired return on capital), then from time to time upon demand of such Lender (with a copy of such demand to the Paying Agent), the Borrower shall pay to such Lender such additional amounts as will compensate such Lender for such reduction.
(c) The Borrower shall pay to each Lender, as long as such Lender shall be required to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits (currently known as "Eurocurrency liabilities"), additional interest on the unpaid principal amount of each Eurocurrency Rate Loan equal to the actual costs of such reserves allocated to such Loan by such Lender (as determined by such Lender in good faith, which determination shall be conclusive), which shall be due and payable on each date on which interest is payable on such Loan, provided the Borrower shall have received at least 15 days' prior notice (with a copy to the Paying Agent) of such additional interest from such Lender. If a Lender fails to give notice 15 days prior to the relevant Interest Payment Date, such additional interest shall be due and payable 15 days from receipt of such notice.
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3.05 Funding Losses. (a) Upon demand of any Lender (with a copy to the Paying Agent) from time to time, the Borrower shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense incurred by it as a result of:
(i) any continuation, conversion, payment or prepayment of any Loan other than a Base Rate Loan on a day other than the last day of the Interest Period for such Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise);
(ii) any failure by the Borrower (for a reason other than the failure of such Lender to make a Loan) to prepay, borrow, continue or convert any Loan other than a Base Rate Loan on the date or in the amount notified by the Borrower; or
(iii)any assignment of a Eurocurrency Rate Loan on a day other than the last day of the Interest Period therefor as a result of a request by the Borrower pursuant to Section 10.16;
excluding any loss of anticipated profits but including any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate the deposits from which such funds were obtained. The Borrower shall also pay any customary administrative fees charged by such Lender in connection with the foregoing.
(b) In addition to the rights of the Lenders set forth in Section 3.05(a), at any time on or prior to the 180th day following the Funding Date, upon demand of the Paying Agent, from time to time, the Borrower shall promptly compensate the Paying Agent for and hold the Paying Agent harmless from any loss, cost or expense incurred by it as a result of any assignment of a Eurodollar Rate Loan on a day other than the last day of the Interest Period therefor as a result of the syndication of the Facilities.
(c) For purposes of calculating amounts payable by the Borrower to the Lenders or the Paying Agent under this Section 3.05, each Lender shall be deemed to have funded each Eurocurrency Rate Loan made by it at the Eurocurrency Rate for such Loan by a matching deposit or other borrowing in the London interbank Eurocurrency market for a comparable amount and for a comparable period, whether or not such Eurocurrency Rate Loan was in fact so funded.
3.06 Matters Applicable to All Requests for Compensation .
(a) A certificate of any Agent or any Lender claiming compensation under this Article III and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error; provided, however, that no Agent or Lender may seek compensation under this Article III more than 90 days after such Agent or Lender had actual knowledge that such amount or amounts were payable under this Article III. In determining such amount, such Agent or such Lender may use any reasonable averaging and attribution methods.
(b) Upon any Lender's making a claim for compensation under Section 3.01 or 3.04, the Borrower may replace such Lender in accordance with Section 10.16.
3.07 Survival. All of the Borrower's obligations under this Article III shall survive termination of the Aggregate Commitments and repayment of all other Obligations hereunder.
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ARTICLE IV CONDITIONS PRECEDENT TO CREDIT EXTENSIONS
4.01 Conditions to Documentation Closing Date. The "Documentation Closing Date" shall be the first date on which the Co-Administrative Agents shall have received each of the following, each of which shall be originals or facsimiles (followed promptly by originals) unless otherwise specified, each properly executed by a Responsible Officer of the signing Loan Party, if applicable, each dated such date (or, in the case of certificates of governmental officials, a recent date before such date) and each in form and substance satisfactory to the Lead Arrangers, the Lenders and their legal counsel:
(a) executed counterparts of this Agreement and the Guaranty, sufficient in number for distribution to each Agent, each Lender and the Borrower;
(b) a Note executed by the Borrower in favor of each Lender requesting a Note;
(c) such certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Loan Party as the Lead Arrangers and the Lenders may require evidencing the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Loan Party is a party or is to be a party;
(d) such documents and certifications as the Lead Arrangers and the Lenders may reasonably require to evidence that each Loan Party is duly organized or formed, and that each Loan Party is validly existing, in good standing and qualified to engage in business in each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect;
(e) a favorable opinion of Jones, Day, Reavis & Pogue, counsel to the Loan Parties, addressed to each Agent and each Lender, as to the matters set forth in Exhibit G-1 and such other matters concerning the Loan Parties and the Loan Documents as the Lead Arrangers and the Lenders may reasonably request;
(f) a favorable opinion of William R. Burkhart, internal counsel to the Loan Parties in Pennsylvania, as to the matters set forth in Exhibit G-2 and such other matters concerning the Loan Parties and the Loan Documents as the Lead Arrangers and the Lenders may reasonably request;
(g) a certificate of a Responsible Officer of each Loan Party either (A) attaching copies of all consents, licenses and approvals required in connection with the execution, delivery and performance by such Loan Party and the validity against such Loan Party of the Loan Documents to which it is a party, and such consents, licenses and approvals shall be in full force and effect, or (B) stating that no such consents, licenses or approvals are so required;
(h) a certificate signed by a Responsible Officer of the Borrower certifying (A) that there has been no event or circumstance since the date of the Audited Financial Statements that has had or could be reasonably expected to have, either individually or in the aggregate, a Material Adverse Effect; and (B) the current Debt Ratings;
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(i) evidence that all insurance required to be maintained pursuant to the Loan Documents has been obtained and is in effect;
(j) certified copies of each of the Related Documents, duly executed by the parties thereto and in form and substance satisfactory to the Lead Arrangers and the Lenders, together with such other agreements, instruments and other documents delivered in connection therewith as the Lead Arrangers and the Lenders shall request;
(k) such other assurances, certificates, documents, consents or opinions as the Co-Administrative Agents may reasonably require.
4.02 Conditions of Initial Credit Extensions. The obligation of each Lender to make its initial Credit Extension hereunder is subject to satisfaction of the following conditions precedent:
(a) The receipt by the Co-Administrative Agents of the following, each of which shall be originals or facsimiles (followed promptly by originals) unless otherwise specified, each properly executed by a Responsible Officer of the signing Loan Party, if applicable, each dated the Funding Date (or, in the case of certificates of governmental officials, a recent date before the Funding Date) and each in form and substance satisfactory to the Co-Administrative Agents and their legal counsel:
(i) a certificate signed by a Responsible Officer of the Borrower certifying that the conditions specified in Sections 4.03(a) and 4.03(b) have been satisfied;
(ii) a certificate attesting to the Solvency of the Borrower and its Subsidiaries on a consolidated basis before and after giving effect to the Transaction, from the Borrower's Chief Financial Officer or Executive Vice President-Finance and Administration;
(iii)a Notice of Borrowing or Notice of Issuance, as applicable, relating to the initial Credit Extension;
(iv) evidence that the Existing Credit Agreements have been or concurrently with the Funding Date are being terminated and all Liens securing obligations under the Existing Credit Agreements have been or concurrently with the Funding Date are being released;
(v) evidence that all outstanding commercial paper of the Borrower and all outstanding commercial paper, if any, of the Business shall each have been repaid in full; and
(vi) such other assurances, certificates, documents, consents or opinions not otherwise delivered on the Documentation Closing Date as any Agent may reasonably require.
(b) All fees required to be paid by the Borrower on or before the Funding Date shall have been paid in full.
(c) All accrued reasonable expenses of the Agents and the Lenders, including, without limitation, Attorney Costs for which the Borrower has received a reasonably detailed invoice at least 5 days prior to the Funding Date, shall have been paid in full.
(d) The Documentation Closing Date shall have occurred, and the Funding Date shall have occurred on or before March 31, 2003.
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(e) The absence of any action, suit, investigation or proceeding pending or threatened in any court or before any arbitrator or Governmental Authority that (a) could reasonably be expected to materially and adversely affect the Borrower and its Subsidiaries or the Business and its Subsidiaries, (b) purports to adversely affect the Transaction or the ability of the Borrower or any other Loan Party to perform their respective obligations under the Loan Documents, or (c) purports to affect the legality, validity or enforceability of any Loan Document.
(f) All governmental, shareholder and third party consents (including Hart-Scott Rodino, Council Regulation (EEC 4064/89) of the European Community and any other competition or investment Law clearance or approval) and other approvals necessary to consummate the Transaction shall have been obtained, except for those consents (i) that the Lead Arrangers have agreed in writing may be obtained after the Funding Date, and (ii) the failure of which to obtain would not, in the reasonable discretion of the Lead Arrangers, materially adversely affect the Lenders. All such consents and approvals shall be in full force and effect, and all applicable waiting periods shall have expired without any action being taken by any Governmental Authority that could restrain, prevent or impose any material adverse conditions on the Transaction or that could seek or threaten any of the foregoing, and no law or regulation shall be applicable which in the reasonable judgment of the Lead Arrangers could have such effect.
(g) The completion of (i) the issuance to the Sellers of approximately $140,000,000 worth of shares of common equity of the Borrower (the "IR Equity Issuance") and (ii) a common equity offering by the Borrower to the public for a price of not less than $14.75 per share and resulting in gross proceeds to the Borrower of not less than $162,250,000 (the "Public Equity Issuance"). The Transaction shall have been consummated, or shall be consummated substantially simultaneously with the initial Credit Extension, in accordance with the terms of the Transaction Documents and in compliance with applicable Law and regulatory approvals. The Lenders shall have received copies of each proposed alteration, amendment, change, supplement, waiver or other modification to the Purchase Agreement, and the Purchase Agreement shall not have been altered, amended or otherwise changed or supplemented or any material condition therein waived without the prior written consent of the Lead Arrangers to the extent any such alteration, amendment or other change would, in the reasonable discretion of the Lead Arrangers, materially adversely affect the Lenders. The Lenders shall have received copies of each amendment or other modification to the Related Documents (other than the Purchase Agreement), and such Related Documents shall not have been amended or otherwise modified or any material condition therein waived without the prior written consent of the Lead Arrangers to the extent any such amendment, modification or waiver would, in the reasonable discretion of the Lead Arrangers, materially adversely affect the Lenders.
(h) After giving effect to the Transaction, including all Credit Extensions made in connection therewith, the amount by which the aggregate Revolving Credit Commitments exceeds the sum of (i) the Outstanding Amount of Revolving Credit Loans and (ii) the Outstanding Amount of L/C Obligations shall be no less than $125,000,000.
(i) There shall not have occurred a material adverse change in the business, assets, liabilities (actual or contingent), operations, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries or the Business and its Subsidiaries taken as a whole since December 31, 2001 or a material adverse change in the facts and information regarding the Borrower, the Business and their respective Subsidiaries taken as a whole as represented to the Agents and the Lenders on or prior to October 15, 2002.
(j) None of Agents or the Lenders becoming aware after October 15, 2002 of any information relating to the Borrower and its Subsidiaries or the Business
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and its Subsidiaries not previously disclosed to the Agents and the Lenders (or of which the Agents and the Lenders were not otherwise aware), or any event, development or change relating to the Borrower and its Subsidiaries or the Business and its Subsidiaries after such date that, in the reasonable judgment of the Agents and the Lenders, is inconsistent in a material and adverse manner with any information or other matter disclosed to the Agents and the Lenders prior to such date.
(k) Receipt by the Lead Arrangers of (i) consolidated and consolidating monthly financial statements of the Business and its Subsidiaries for each month, beginning with the month ending August 2002, for which financial statements are available, prepared in a manner consistent with the financial statements previously delivered to the Lead Arrangers and otherwise in form satisfactory to the Lead Arrangers, (ii) consolidated and consolidating quarterly financial statements of the Business and its Subsidiaries for each fiscal quarter, beginning with the fiscal quarter ending September 2002, for which financial statements are available, prepared in a manner consistent with the financial statements previously delivered to the Lead Arrangers and otherwise in form satisfactory to the Lead Arrangers, and (iii) either (A) consolidated year-to-date financial statements of the Business and its Subsidiaries as of June 30, 2002 and as of the end of each fiscal quarter thereafter for which financial statements are available, reviewed by independent public accountants of recognized national standing and prepared in accordance with requirements of Regulation S- X under the Securities Act of 1933 and all other accounting rules and regulations of the SEC promulgated thereunder, and otherwise in form satisfactory to the Lead Arrangers, or (ii) if available, consolidated and consolidating financial statements of the Business and its Subsidiaries for the fiscal year ending December 31, 2002, audited by independent public accountants of recognized national standing and prepared in conformity with GAAP.
(l) If the condition in clause (iii) of Section 4.02(k) is satisfied by providing the financial statements described in subclause (A) thereof, the Lead Arrangers shall have received satisfactory evidence that the underwriters for the Public Equity Issuance have received financial statements identical to those described in such subclause (A) accompanied by a customary comfort letter addressed to such underwriters stating, among other things, that the financial statements accompanying such comfort letter were reviewed in accordance with SAS 71.
(m) The Borrower and its Subsidiaries shall have a last twelve months pro forma Consolidated EBITDA (an "LTM EBITDA") (i) for the twelve-month period ended September 30, 2002 of at least $381,000,000, and (ii) for the twelve-month period ending at the end of each fiscal quarter thereafter for which financial statements (produced in a manner consistent with the financial statements for the period ended September 30, 2002) are available, of not less than the LTM EBITDA for the immediately preceding fiscal quarter, in each case, calculated as if the Transaction had occurred on the first day of each such twelve month period.
(n) All Loans to be made by the Lenders on the Funding Date shall be in full compliance with Regulation U issued by the FRB.
(o) The Borrower shall have delivered to the Lead Arrangers revised Schedules 5.06, 5.08(b), 5.09, 5.12, 5.13, 7.02(f), 7.03, 7.08, 7.09 and 10.22, such revisions to be directly related to the Acquisition and to be reasonably acceptable to the Lead Arrangers.
4.03 Conditions to all Credit Extensions. The obligation of each Lender to honor any Request for Credit Extension (other than a Committed Loan Notice requesting only a conversion of Loans to the other Type, or a continuation of Eurocurrency Rate Loans) is subject to the following conditions precedent:
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(a) The representations and warranties of the Borrower and each other Loan Party contained in Article V or any other Loan Document, or which are contained in any document furnished by the Borrower or any other Loan Party at any time under or in connection herewith or therewith, shall be true and correct in all material respects on and as of the date of such Credit Extension, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct in all material respects as of such earlier date.
(b) No Default shall exist, or would result from such proposed Credit Extension or from the application of the proceeds therefrom.
(c) The Paying Agent and, if applicable, the Appropriate L/C Issuer or the Swing Line Lender shall have received a Request for Credit Extension in accordance with the requirements hereof.
Each Request for Credit Extension (other than a Committed Loan Notice requesting only a conversion of Loans to the other Type or a continuation of Eurocurrency Rate Loans) submitted by the Borrower shall be deemed to be a representation and warranty that the conditions specified in Sections 4.03(a) and 4.03(b) have been satisfied on and as of the date of the applicable Credit Extension.
ARTICLE V REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Agents and the Lenders that:
5.01 Existence, Qualification and Power; Compliance with Laws. Each Loan Party (a) is a corporation, partnership or limited liability company duly organized or formed, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority and all requisite governmental licenses, authorizations, consents and approvals to (i) own or lease its assets and carry on its business and (ii) execute, deliver and perform its obligations under the Loan Documents and Related Documents to which it is a party, (c) is duly qualified and is licensed and in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license, and (d) is in compliance with all applicable Laws; except in each case referred to in clause (b)(i), (c) or (d), to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.
5.02 Authorization; No Contravention. The execution, delivery and performance by each Loan Party of each Loan Document and Related Document to which such Person is or is to be a party, and the consummation of the Transaction, are within such Loan Party's corporate or other powers, have been duly authorized by all necessary corporate or other organizational action, and do not and will not (a) contravene the terms of any of such Person's Organization Documents; (b) conflict with or result in any breach or contravention of, or the creation of any Lien under, or require any payment to be made under (i) any Contractual Obligation to which such Person is a party or affecting such Person or the properties of such Person or any of its Subsidiaries or (ii) except as would not be reasonably likely to have a Material Adverse Effect, any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; or (c) except as would not be reasonably likely to have a Material Adverse Effect, violate any Law. No Loan Party or any of its Subsidiaries is in violation of any Law, the violation of which could be reasonably likely to have a Material Adverse Effect.
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5.03 Governmental Authorization; Other Consents. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with (i) the execution, delivery or performance by, or enforcement against, any Loan Party of this Agreement or any other Loan Document, or for the consummation of the Transaction, or (ii) the exercise by any Agent or any Lender of its rights under the Loan Documents, except for those that have already been obtained or have been determined by the Borrower as not necessary in accordance with Section 4.02(f).
5.04 Binding Effect. This Agreement has been, and each other Loan Document, when delivered hereunder, will have been, duly executed and delivered by each Loan Party that is party thereto. This Agreement constitutes, and each other Loan Document when so delivered will constitute, a legal, valid and binding obligation of such Loan Party, enforceable against such Loan Party in accordance with its terms, except as such enforceability may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or similar or laws of general applicability affecting the enforcement of creditors rights and (b) the application of general principals of equity.
5.05 Financial Statements; No Material Adverse Effect.
(a) The Audited Financial Statements (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) fairly present, in all material respects, the financial condition of the Borrower and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; and (iii) show all material Indebtedness and other liabilities, direct or contingent, of the Borrower and its Subsidiaries as of the date thereof, including liabilities for taxes, material commitments and Indebtedness.
(b) The unaudited consolidated financial statements of the Borrower and its Subsidiaries dated September 30, 2002, and the related consolidated statements of income or operations, shareholders' equity and cash flows for the fiscal quarter ended on that date (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, and (ii) fairly present, in all material respects, the financial condition of the Borrower and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby, subject, in the case of clauses (i) and (ii), to the absence of footnotes and to normal year-end audit adjustments.
(c) Since the date of the Audited Financial Statements, there has been no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect.
5.06 Litigation. There are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Borrower, threatened at law, in equity, in arbitration or before any Governmental Authority, by or against the Borrower or any of its Subsidiaries or against any of their properties or revenues that (a) purport to affect or pertain to this Agreement, any other Loan Document, or any Related Document or the consummation of the Transaction, or (b) except as otherwise set forth on Schedule 5.06 (the "Disclosed Litigation"), either individually or in the aggregate could reasonably be expected to have a Material Adverse Effect, and there shall have been no adverse change in the status, or financial effect on any Loan Party or any of its Subsidiaries, of the Disclosed Litigation from that described on Schedule 5.06.
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5.07 No Default. Neither the Borrower nor any Subsidiary is in default under or with respect to, or a party to, any Contractual Obligation that could, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. No Default has occurred and is continuing or would result from the consummation of the transactions contemplated by this Agreement or any other Loan Document.
5.08 Ownership of Property; Liens.
(a) Each Loan Party and each of its Subsidiaries has good record and marketable title in fee simple to, or valid leasehold interests in, all real property necessary or used in the ordinary conduct of its business, except for such defects in title as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(b) Set forth on Schedule 5.08(b) hereto is a complete and accurate list of all Liens (other than any Lien permitted pursuant to Section 7.01(b) through (j)) on the property or assets of any Loan Party or any of its Subsidiaries, showing as of each of the Documentation Closing Date and the Funding Date the lienholder thereof, the principal amount of the obligations secured thereby and the property or assets of such Loan Party or such Subsidiary subject thereto. The property of the Borrower and its Subsidiaries is subject to no Liens, other than Liens set forth on Schedule 5.08(b), and as otherwise permitted by Section 7.01. 5.09 Environmental Compliance. Except as otherwise set forth on Schedule 5.09:
(a) The Borrower and its Subsidiaries conduct in the ordinary course of business a review of the effect of existing Environmental Laws and known Environmental Liabilities on their respective businesses, operations and properties, and as a result thereof the Borrower has reasonably concluded that such Environmental Laws, known Environmental Liabilities, and Environmental Liabilities that would be known based upon appropriate inquiry and investigation, could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(b) The Borrower and each Loan Party are in compliance with all Environmental Laws governing its business, except to the extent that any such failure to comply (together with any resulting penalties, fines or forfeitures) would not reasonably be expected to have a Material Adverse Effect. All licenses, permits, registrations or approvals required for the business of the Borrower and each Loan Party under any Environmental Law have been secured and the Borrower and each such Loan Party are in substantial compliance therewith, except for such licenses, permits, registrations or approvals the failure to secure or to comply therewith is not reasonably likely to have a Material Adverse Effect. Neither the Borrower nor any Loan Party has received written notice, or otherwise knows, that it is in any respect in noncompliance with, breach of, or default under any Environmental Laws, and no event has occurred and is continuing which, with the passage of time or the giving of notice or both, would constitute noncompliance, breach of, or default thereunder, except in each such case, such noncompliance, breaches or defaults as would not reasonably be expected to, in the aggregate, have a Material Adverse Effect. No property currently or formerly owned or operated by the Borrower or any Loan Party existing as of the Documentation Closing Date and, to the knowledge of the Borrower, no property currently or formerly owned or operated by the Business, is listed on the NPL or any analogous foreign, state or local list, and, to the knowledge of the Borrower, no such properties are proposed for listing or are adjacent to a listed property.
(c) Hazardous Materials have not at any time been (i) generated, used, treated or stored on, or transported to or from, any real property currently or formerly owned or operated by the Borrower or by any Loan Party existing as of the Documentation Closing Date, or, to the knowledge of the Borrower, based upon
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appropriate inquiry and investigation, any real property currently or formerly owned or operated by the Business, or (ii) released, discharged or disposed on any such real property, in each case where such occurrence or event is not in compliance with Environmental Laws and is reasonably likely to have a Material Adverse Effect.
5.10 Insurance. The properties of the Borrower and its Subsidiaries are insured with financially sound and reputable insurance companies or are self-insured, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where the Borrower or the applicable Subsidiary operates.
5.11 Taxes. The Borrower and its Subsidiaries have filed all Federal, state and other material tax returns and reports required to be filed, and have paid all Federal, state and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings diligently conducted and for which adequate reserves have been provided in accordance with GAAP. There is no proposed tax assessment against the Borrower or any Subsidiary that would, if made, have a Material Adverse Effect. As of the Documentation Closing Date, neither any Loan Party nor any of its Subsidiaries is party to any tax sharing agreement, except for tax sharing agreements among any of the Loan Parties.
5.12 Pension Plans.
(a) Except as set forth on Schedule 5.12 hereto, (i) each Plan has been and will be funded in accordance with the terms of ERISA, (ii) there has been no Reportable Event, (iii) no Pension Plan has incurred a liability to the PBGC, (iv) no Pension Plan has incurred a liability under Title IV of ERISA (other than for premiums due and not delinquent under Section 4007 of ERISA), (v) neither the Borrower nor any Loan Party has incurred any withdrawal liability (within the meaning of Part 1 of Subtitle E of Title I of ERISA) with respect to any Multiemployer Plan, (vi) neither the Borrower nor any Loan Party intends to withdraw from a Multiemployer Plan, (vii) no Loan Party has incurred any liability under Section 502(i) of ERISA or Section 4975 of the Code with respect to the Plans, (viii) no prohibited transactions have occurred, (ix) no ERISA Event has occurred or is reasonably expected to occur, (x) the Borrower and each ERISA Affiliate have made all required contributions to each Plan subject to Section 412 of the Code in accordance with Section 412 of the Code or pursuant to any binding agreement with the PBGC, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan, (xi) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than for premiums due and not delinquent under Section 4007 of ERISA), (xii) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan, (xiii) neither the Borrower nor any ERISA Affiliate has engaged in a transaction that could be subject to Sections 4069 or 4212(c) of ERISA, (xiv) each Plan is in compliance with the applicable provisions of ERISA, the Code and other Federal or state Laws, and (xv) each Plan that is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS or an application for such a letter is currently being processed by the IRS with respect thereto and, to the knowledge of the Borrower, nothing has occurred which would prevent, or cause the loss of, such qualification, and which, with respect to subsections (i) through (xv) above, in the aggregate, would not reasonably be expected to result in a Material Adverse Effect.
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(b) There are no pending or, to the knowledge of the Borrower, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that could be reasonably be expected to have a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or could reasonably be expected to result in a Material Adverse Effect.
5.13 Subsidiaries; Equity Interests. As of each of the Documentation Closing Date and the Funding Date, no Loan Party has any Subsidiaries other than those specifically disclosed in Part (a) of Schedule 5.13, and all of the outstanding Equity Interests in such Subsidiaries have been validly issued, are fully paid and non-assessable and are owned by a Loan Party in the amounts specified in Part (a) of Schedule 5.13 free and clear of all Liens other than those permitted pursuant to Section 7.01. No Loan Party has any equity Investments in any other Person other than (i) those specifically disclosed in Part (b) of Schedule 5.13 and (ii) those Investments permitted by Section 7.02.
5.14 Margin Regulations; Investment Company Act; Public Utility Holding Company Act.
(a) The Borrower is not engaged and will not engage, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U issued by the FRB), or extending credit for the purpose of purchasing or carrying margin stock and no proceeds of any Borrowings or drawings under any Letter of Credit will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock.
(b) None of the Borrower, any Person Controlling the Borrower, or any Subsidiary (i) is a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, or (ii) is or is required to be registered as an "investment company" under the Investment Company Act of 1940. Neither the making of any Loan, nor the issuance (or deemed issuance) of any Letters of Credit, nor the application of the proceeds or repayment thereof by the Borrower, nor the consummation of the other transactions contemplated by the Loan Documents, will violate any provision of any such Act or any rule, regulation or order of the SEC thereunder.
5.15 Disclosure. No written report, financial statement, certificate or other information furnished by or on behalf of any Loan Party to any Agent or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or any other Loan Document (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information provided by the Borrower or that is otherwise described on Schedule 5.15, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.
5.16 Compliance with Laws. Each Loan Party and each Subsidiary is in compliance in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its properties, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted or (b) the failure to comply therewith, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.
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5.17 Intellectual Property; Licenses, Etc. Each Loan Party and its Subsidiaries own, or possess the right to use, all of the trademarks, service marks, trade names, copyrights, patents, patent rights, franchises, licenses and other intellectual property rights (collectively, "IP Rights") that are reasonably necessary for the operation of their respective businesses, without conflict with the rights of any other Person, except where the failure to do so, or for such conflicts that, could not reasonably be expected to have a Material Adverse Effect. To the best knowledge of the Borrower, no slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed, by any Loan Party or any Subsidiary infringes upon any rights held by any other Person, except for such infringements that could not reasonably be expected to have a Material Adverse Effect. No claim or litigation regarding any IP Rights is pending or, to the knowledge of the Borrower, threatened, which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
5.18 Solvency. The Borrower and its Subsidiaries are, on a consolidated basis, Solvent.
ARTICLE VI AFFIRMATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder which is accrued and payable shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding, the Borrower shall, and shall (except in the case of the covenants set forth in Sections 6.01, 6.02, 6.03 and 6.11) cause each Subsidiary to:
6.01 Financial Statements. Deliver to each Agent and each Lender, in form and detail satisfactory to the Co-Administrative Agents and the Required Lenders:
(a) as soon as available, but in any event within 90 days after the end of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal year, and the related consolidated statements of income or operations, shareholders' equity and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and prepared in accordance with GAAP, audited and accompanied by a report and opinion of an independent certified public accountant of nationally recognized standing reasonably acceptable to the Required Lenders, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any "going concern" or like qualification or exception or any qualification or exception as to the scope of such audit;
(b) as soon as available, but in any event within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal quarter, and the related consolidated statements of income or operations, shareholders' equity and cash flows for such fiscal quarter and for the portion of the Borrower's fiscal year then ended, setting forth in each case in comparative form the figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding portion of the previous fiscal year, all in reasonable detail and certified by a Responsible Officer of the Borrower as fairly presenting the financial condition, results of operations, shareholders' equity and cash flows of the Borrower and its Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes; and
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(c) as soon as available, but in any event no later than February 15th of each year, forecasts prepared by management of the Borrower, in form satisfactory to the Co-Administrative Agents, of consolidated balance sheets, income statements and cash flow statements of the Borrower and its Subsidiaries on a monthly basis for the fiscal year following such fiscal year and on an annual basis for each fiscal year thereafter until the Maturity Date for the Revolving Credit Facility.
As to any information contained in materials furnished pursuant to Section 6.02(d), the Borrower shall not be separately required to furnish such information under Section 6.01(a) or 6.01(b), but the foregoing shall not be in derogation of the obligation of the Borrower to furnish the information and materials described in Sections 6.01(a) and 6.01(b) at the times specified therein.
6.02 Certificates; Other Information. Deliver to each Agent and each Lender, in form and detail satisfactory to the Co-Administrative Agents and the Required Lenders:
(a) concurrently with the delivery of the financial statements referred to in Section 6.01(a), a certificate of its independent certified public accountants certifying such financial statements and stating that in making the examination necessary therefor no knowledge was obtained of any Default or, if any such Default shall exist, stating the nature and status of such event;
(b) concurrently with the delivery of the financial statements referred to in Sections 6.01(a) and 6.01(b), a duly completed Compliance Certificate signed by a Responsible Officer of the Borrower, and in the event of any change in generally accepted accounting principles used in the preparation of such financial statements, the Borrower shall also provide, if necessary for the determination of compliance with Section 7.11, a statement of reconciliation conforming such financial statements to GAAP;
(c) promptly after any request by any Agent, copies of any detailed audit reports, management letters or recommendations submitted to the board of directors (or the audit committee of the board of directors) of the Borrower by independent accountants in connection with the accounts or books of any Loan Party or any Subsidiary, or any audit of any of them;
(d) unless the same shall be publicly available, promptly after the same are available, copies of each annual report, proxy or financial statement or other report or communication sent to the stockholders of the Borrower, and copies of all annual, regular, periodic and special reports and registration statements which the Borrower may file or be required to file with the SEC under Section 13 or 15(d) of the Securities Exchange Act of 1934, or with any Governmental Authority that may be substituted therefor, or with any national securities exchange, and in any case not otherwise required to be delivered to the Agents pursuant hereto;
(e) promptly after the assertion or occurrence thereof, notice of any Environmental Action against or of any noncompliance by any Loan Party or any of its Subsidiaries with any Environmental Law or Environmental Permit that could reasonably be expected to have a Material Adverse Effect; and
(f) promptly, such additional information regarding the business, financial or corporate affairs of any Loan Party or any Subsidiary, or compliance with the terms of the Loan Documents, as any Agent or any Lender may from time to time reasonably request.
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Documents required to be delivered pursuant to Section 6.01(a), 6.01(b) or 6.02(d) (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower posts such documents, or provides a link thereto on the Borrower's website on the Internet at the website address listed on Schedule 10.02; or (ii) on which such documents are posted on the Borrower's behalf on IntraLinks/IntraAgency or another relevant website, if any, to which each Lender and each Agent have access (whether a commercial, third-party website or whether sponsored by the Co-Administrative Agents); provided that: (i) the Borrower shall deliver paper copies of such documents to any Agent or any Lender that requests the Borrower to deliver such paper copies until a written request to cease delivering paper copies is given by such Agent or such Lender and (ii) the Borrower shall notify (which may be by facsimile or electronic mail) each Agent and each Lender of the posting of any such documents and provide to the Co-Administrative Agents by electronic mail electronic versions (i.e., soft copies) of such documents. Notwithstanding anything contained herein, in every instance the Borrower shall be required to provide paper copies of the Compliance Certificates required by Section 6.02(c) to each of the Agents and each of the Lenders. Except for such Compliance Certificates, the Co-Administrative Agents shall have no obligation to request the delivery or to maintain copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Borrower with any such request for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents.
6.03 Notices. Promptly after a Responsible Officer has knowledge thereof, notify each Agent and each Lender:
(a) of the occurrence of any Default;
(b) of any matter that has resulted or could reasonably be expected to result in a Material Adverse Effect;
(c) of the occurrence of any ERISA Event;
(d) of any material change in accounting policies, financial reporting practices or fiscal year by the Borrower;
(e) of the (A) occurrence of any Disposition of property or assets for which the Borrower is required to make a mandatory repayment pursuant to Section 2.06(b)(i), (B) incurrence or issuance of any Indebtedness for which the Borrower is required to make a mandatory repayment pursuant to Section 2.06(b)(ii) and (C) receipt of any Extraordinary Receipt for which the Borrower is required to make a mandatory repayment pursuant to Section 2.06(b)(iii); and
(f) of any public announcement by Moody's or S&P of any change in a Debt Rating.
Each notice pursuant to subparts (a) through (e) of this Section 6.03 shall be accompanied by a statement of a Responsible Officer of the Borrower setting forth details of the occurrence referred to therein and stating what action the Borrower has taken and proposes to take with respect thereto.
6.04 Payment of Obligations. Pay and discharge as the same shall become due and payable, all its material obligations and liabilities, including (a) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings diligently conducted and adequate reserves in accordance with GAAP are being maintained by the Borrower or such Subsidiary,
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(b) all lawful claims which, if unpaid, would by law become a Lien upon its property not permitted pursuant to Section 7.01, and (c) all Indebtedness, as and when due and payable unless the failure to so pay would not constitute an Event of Default hereunder or would not be reasonably likely to cause a Material Adverse Effect, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness.
6.05 Preservation of Existence, Etc. (a) Preserve, renew and maintain in full force and effect its legal existence and good standing under the Laws of the jurisdiction of its organization except in a transaction permitted by Section 7.04 or 7.05; (b) take all reasonable action to maintain all rights, privileges, permits, licenses and franchises necessary or desirable in the normal conduct of its business, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; and (c) preserve or renew all of its registered patents, trademarks, trade names and service marks, the non-preservation of which could reasonably be expected to have a Material Adverse Effect.
6.06 Maintenance of Properties. (a) Maintain, preserve and protect all of its material properties and equipment necessary in the operation of its business in good working order and condition, ordinary wear and tear excepted, except to the extent that the continued maintenance of such property is no longer economically desirable as determined in good faith by the Borrower; (b) make all necessary repairs thereto and renewals and replacements thereof except where the failure to do so could not reasonably be expected to have a Material Adverse Effect; and (c) use the standard of care typical in the industry in the operation and maintenance of its facilities.
6.07 Maintenance of Insurance. Maintain insurance with financially sound and reputable insurance companies or maintain a self- insurance program, with respect to its properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts as are customarily carried under similar circumstances by such other Persons.
6.08 Compliance with Laws. Comply in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its business or property, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted; or (b) the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.
6.09 Books and Records. Maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of the Borrower or such Subsidiary, as the case may be.
6.10 Inspection Rights. Within five Business Days of delivery of the notice referred to below, permit representatives and independent contractors of each Agent and each Lender to visit and inspect any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and accounts with its directors, officers, and independent public accountants, all at the expense of the Borrower and at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Borrower; provided, however, that when an Event of Default exists any Agent or any Lender (or any of their respective representatives or independent contractors) may do any of the foregoing at the expense of the Borrower at any time during normal business hours and without advance notice.
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6.11 Use of Proceeds. Use the proceeds of the Credit Extensions (i) for working capital, Capital Expenditures and other lawful corporate purposes, and (ii) to finance the Acquisition, in each case, not in contravention of any Law or of any Loan Document.
6.12 Covenant to Guarantee Obligations. Upon (x) the request of any Co-Administrative Agent following the occurrence and during the continuance of a Default, or (y) the formation or acquisition of any new direct or indirect Domestic Subsidiaries by any Loan Party, then the Borrower shall, in each case at the Borrower's expense:
(i) in connection with the formation or acquisition of a Domestic Subsidiary (other than (A) a special purpose entity established to facilitate a securitization or other financing of accounts receivable or other assets of any Loan Party otherwise permitted hereunder (the "Receivables Subsidiary") or (B) PEL Technologies, LLC, but only so long as (x) the Borrower directly or indirectly owns less than 100% of the Equity Interests in PEL Technologies, LLC and (y) the fair market value of the assets of PEL Technologies, LLC is less than $75,000,000), within 30 days after such formation or acquisition, cause each such Domestic Subsidiary, and cause each direct and indirect parent of such Domestic Subsidiary (if it has not already done so), to duly execute and deliver to the Co-Administrative Agents a guaranty or guaranty supplement, in form and substance satisfactory to the Co- Administrative Agents, guaranteeing the other Loan Parties' obligations under the Loan Documents,
(ii) within 60 days after such request, formation or acquisition, deliver to the Co-Administrative Agents, upon the request of the Co-Administrative Agents in their sole discretion, a signed copy of a favorable opinion, addressed to the Agents and the other Lender Parties, of counsel for the Loan Parties acceptable to the Co-Administrative Agents as to the matters contained in clause (i) above, as to such guaranties and guaranty supplements, being legal, valid and binding obligations of each Loan Party party thereto enforceable in accordance with their terms;
provided, however, that, notwithstanding anything in any Loan Document to the contrary, in no event will the stock or assets of any Foreign Subsidiary be directly or indirectly pledged under any Loan Document, nor will any Foreign Subsidiary be required to provide a guaranty or guaranty supplement under any Loan Document.
6.13 Compliance with Environmental Laws. Comply, and cause all lessees and other Persons operating or occupying its properties to comply, in all material respects, with all applicable Environmental Laws and Environmental Permits; obtain and renew all Environmental Permits necessary for its operations and properties; and conduct any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action to address any Hazardous Materials on or under any of its properties, to the extent required by applicable Environmental Laws; provided, however, that neither the Borrower nor any of its Subsidiaries shall be required to undertake any such cleanup, removal, remedial or other action to the extent that its obligation to do so is being contested in good faith and by proper proceedings and appropriate reserves are being maintained with respect to such circumstances.
6.14 Further Assurances. Promptly upon request by any Agent, or any Lender through any Co-Administrative Agent, (i) correct any material defect or error that may be discovered in any Loan Document or in the execution, acknowledgment, filing or recordation thereof, and (ii) do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register any and all such further acts, deeds, certificates, assurances and other instruments as any Agent, or any Lender through any Co-Administrative Agent, may reasonably require from time to time in order to carry out more effectively the purposes of the Loan Documents.
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6.15 High Grade Notes Documents. If at any time any covenant (including, without limitation, any basket level) or any default (including, without limitation, the Threshold Amount or any grace period) contained in any High Grade Notes Document shall be more restrictive to the Borrower than the comparable provision of Article VI, VII or VIII, then the Borrower shall, within 45 days thereafter, enter into such agreements, documents and instruments, including without limitation an amendment to the Loan Documents, such that after giving effect to such agreements, documents and instruments, such covenant or event of default is no more restrictive to the Borrower than the comparable provision of Article VI, VII or VIII.
ARTICLE VII NEGATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder which is accrued and payable shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding, the Borrower shall not, nor shall it permit any Subsidiary to, directly or indirectly:
7.01 Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, or authorize the filing under the Uniform Commercial Code of any jurisdiction a financing statement that names the Borrower or any of its Subsidiaries as debtor, or sign or suffer to exist any security agreement authorizing any secured party thereunder to file such financing statement, or assign any accounts or other right to receive income, other than the following:
(a) Liens existing on the Documentation Closing Date and on the Funding Date that are listed on Schedule 5.08(b) and any renewals or extensions thereof, provided that the property covered thereby is not changed and the amount not increased or the direct or any contingent obligor
changed and any renewal or extension of the obligations secured or benefited thereby is permitted by Section 7.03(c)(B);
(b) Liens for taxes not yet due or which are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP;
(c) carriers', warehousemen's, mechanics', materialmen's, repairmen's, landlord's or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 30 days or which are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person;
(d) pledges or deposits in the ordinary course of business in connection with workers' compensation, unemployment insurance and other social security legislation, other than any Lien imposed by ERISA;
(e) deposits to secure the performance of bids, trade contracts and leases (other than Indebtedness), statutory obligations, surety bonds (other than bonds related to judgments or litigation), performance bonds and other obligations of a like nature incurred in the ordinary course of business;
(f) easements, rights-of-way, zoning restrictions, other restrictions and other similar encumbrances affecting real property which, in the
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aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the applicable Person;
(g) Liens securing judgments for the payment of money not constituting an Event of Default under Section 8.01(h) or securing appeal or other surety bonds related to such judgments;
(h) Liens securing Indebtedness permitted under Section 7.03(c)(E); provided that (i) such Liens do not at any time encumber any property other than the property financed by such Indebtedness, (ii) the Indebtedness secured thereby does not exceed the cost or fair market value, whichever is lower, of the property being acquired on the date of acquisition and (iii) with respect to capital leases, such Liens do not at any time extend to or cover any assets other than the assets subject to such capital leases;
(i) Liens on or transfers of accounts receivable and contracts, and instruments and other assets related thereto arising in connection with the sale of such accounts receivable pursuant to Section 7.05(g);
(j) Liens securing Indebtedness permitted by Section 7.03(c)(H), provided that such Liens existed prior to such Person becoming a Subsidiary of the Borrower, were not created in anticipation thereof and do not extend to any assets other than those of such Subsidiary; and
(k) other Liens securing Indebtedness outstanding in an aggregate principal amount not to exceed $50,000,000.
7.02 Investments. Make or hold any Investments, except:
(a) Investments held by the Borrower or such Subsidiary in the form of Cash Equivalents;
(b) in addition to any such advances outstanding on the Documentation Closing Date, advances to officers, directors and employees of the Borrower and Subsidiaries made in the ordinary course of business for travel, entertainment, relocation and analogous ordinary business purposes;
(c) (i) equity Investments of the Borrower in any Guarantor and Investments of any Guarantor in the Borrower or in another Guarantor, (ii) equity Investments of a Foreign Subsidiary in any other Subsidiary and (iii) equity Investments of a Loan Party in the Receivables Subsidiary and Investments of the Receivables Subsidiary in any Loan Party, in each case, to the extent such Investments pursuant to this clause (iii) are limited solely to the Receivables Subsidiary's acquisition of receivables and related assets in connection with the Receivables Facility and for activities incidental to such acquisitions and the Receivables Subsidiary's status as a special purpose vehicle;
(d) Investments consisting of extensions of credit in the nature of accounts receivable or notes receivable arising from the grant of trade credit in the ordinary course of business, and Investments received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss;
(e) Guarantees permitted by Section 7.03;
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(f) Investments existing on the Documentation Closing Date and on the Funding Date that are set forth on Schedule 7.02(f);
(g) Investments by the Borrower or any Subsidiary in Swap Contracts permitted under Section 7.03(a)(A) or Section 7.03(c)(D);
(h) Investments consisting of intercompany debt permitted under Section 7.03(a)(C), 7.03(b)(A), 7.03(c)(F) or 7.03(d)(A); and
(i) the purchase or other acquisition of all of the Equity Interests in, or all or substantially all of the property and assets of, any Person that, upon the consummation thereof, will be wholly owned directly by the Borrower or one or more of its wholly owned Subsidiaries (including, without limitation, as a result of a merger or consolidation); provided that, with respect to each purchase or other acquisition made pursuant to this Section 7.02(i):
(A) any such newly created or acquired Subsidiary shall comply with the requirements of Sections 6.12;
(B) the lines of business of the Person to be (or the property and assets of which are to be) so purchased or otherwise acquired shall not be substantially different than the lines of business currently conducted by the Borrower and its Subsidiaries or any business substantially related or incidental thereto;
(C) the total cash and noncash consideration (including, without limitation, all indemnities, earnouts and other contingent payment obligations to, and the aggregate amounts paid or to be paid under noncompete, consulting and other affiliated agreements with, the sellers thereof, all write-downs of property and assets and reserves for liabilities with respect thereto and all assumptions of debt, liabilities and other obligations in connection therewith, but specifically excluding (x) the fair market value of all Equity Interests issued or transferred to the sellers thereof, (y) the Net Cash Proceeds from the issuance of any Equity Interests of the Borrower on or after the Funding Date, and (z) the Net Cash Proceeds from the Disposition of any assets or property by the Borrower or any Subsidiary on or after the Funding Date, which Net Cash Proceeds are not required to be used to prepay Loans pursuant to Section 2.05(b)) paid by or on behalf of the Borrower and its Subsidiaries for any such purchase or other acquisition, when aggregated with the total cash and noncash consideration paid by or on behalf of the Borrower and its Subsidiaries for all other purchases and other acquisitions made by the Borrower and its Subsidiaries pursuant to this Section 7.02(i), shall not exceed (I) if, after giving effect to such purchase or other acquisition, the Borrower has a Debt Rating of BBB- by S&P and Baa3 by Moody's, $200,000,000 in any fiscal year, and (II) if, after giving effect to such purchase or other acquisition, the Borrower has a Debt Rating of less than BBB- by S&P or less than Baa3 by Moody's, $75,000,000 in any fiscal year, it being understood that the aggregate consideration limits in this clause (C) shall not be applicable if, after giving effect to such purchase or other acquisition, the Borrower has a Debt Rating of at least BBB by S&P and at least Baa2 by Moody's;
(D) (1) immediately before and immediately after giving pro forma effect to any such purchase or other acquisition, no Default shall have occurred and be continuing and (2) immediately after giving effect to such purchase or other acquisition, the Borrower and its Subsidiaries shall be in pro forma compliance with all of the covenants set forth in Section 7.11, such compliance to be determined on the basis of the
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financial information most recently delivered to the Agents and the Lenders pursuant to Section 6.01(a) or 6.01(b) as though such purchase or other acquisition had been consummated as of the first day of the fiscal period covered thereby; and
(E) if the acquisition involves consideration in excess of $5,000,000, the Borrower shall have delivered to the Co-Administrative Agents, on behalf of the Lenders, at least five Business Days prior to the date on which any such purchase or other acquisition is to be consummated, a certificate of a Responsible Officer, in form and substance reasonably satisfactory to the Co-Administrative Agents, certifying that all of the requirements set forth in this Section 7.02(i) have been satisfied or will be satisfied on or prior to the consummation of such purchase or other acquisition;
(j) Investments by the Borrower and its Subsidiaries not otherwise permitted under this Section 7.02 in Foreign Subsidiaries in an amount not to exceed the Adjusted Foreign Subsidiaries/Joint Venture Basket at the time of such Investment; provided that immediately before and immediately after giving pro forma effect to any such Investment, no Event of Default or Default under Section 8.01(a), (f) or (g) shall have occurred and be continuing and (2) immediately after giving effect to such Investment, the Borrower and its Subsidiaries shall be in pro forma compliance with all of the covenants set forth in Section 7.11, such compliance to be determined on the basis of the financial information most recently delivered to the Agents and the Lenders pursuant to Section 6.01(a) or 6.01(b) as though such Investment had been consummated as of the first day of the fiscal period covered thereby;
(k) Investments by the Borrower and its Subsidiaries not otherwise permitted under this Section 7.02 in joint ventures in an amount not to exceed the Adjusted Foreign Subsidiaries/Joint Venture Basket at the time of such Investment; provided that immediately before and immediately after giving pro forma effect to any such Investment, no Default shall have occurred and be continuing and (2) immediately after giving effect to such Investment, the Borrower and its Subsidiaries shall be in pro forma compliance with all of the covenants set forth in Section 7.11, such compliance to be determined on the basis of the financial information most recently delivered to the Agents and the Lenders pursuant to Section 6.01(a) or 6.01(b) as though such Investment had been consummated as of the first day of the fiscal period covered thereby; and
(l) other Investments not exceeding $25,000,000 in the aggregate in any fiscal year of the Borrower.
7.03 Indebtedness. Create, incur, assume or suffer to exist any Indebtedness, except:
(a) in the case of the Borrower,
(A) Indebtedness in respect of Swap Contracts designed to hedge against fluctuations in interest rates or foreign exchange rates incurred in the ordinary course of business and consistent with prudent business practice,
(B) Indebtedness evidenced by the High Grade Notes,
(C) Indebtedness owed to a wholly-owned Subsidiary, which Indebtedness shall be unsecured and subordinated on terms acceptable to the Co-Administrative Agents, and
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(D) unsecured Indebtedness owed to a Person other than a wholly- owned Subsidiary;
(b) in the case of the Guarantors,
(A) Indebtedness owed to the Borrower or a wholly-owned Subsidiary, which Indebtedness shall be unsecured and subordinated on terms acceptable to the Co-Administrative Agents, and
(B) unsecured Indebtedness owed to a Person other than the Borrower or a wholly-owned Subsidiary;
(c) in the case of the Borrower and its Subsidiaries,
(A) Indebtedness under the Loan Documents;
(B) Indebtedness outstanding on the Documentation Closing Date and on the Funding Date that are listed on Schedule 7.03 and any refinancings, refundings, renewals or extensions thereof; provided that the amount of such Indebtedness is not increased at the time of such refinancing, refunding, renewal or extension except by an amount equal to a reasonable premium or other reasonable amount paid, and fees and expenses reasonably incurred, in connection with such refinancing and by an amount equal to any existing commitments unutilized thereunder, and the direct and contingent obligors therefor shall not be changed, as a result of or in connection with such refinancing, refunding, renewal or extension, unless such obligor is a Foreign Subsidiary, in which case the obligor under such refinanced, refunded, renewed or extended Indebtedness may be another Foreign Subsidiary; provided still further that the terms relating to principal amount, amortization, maturity, collateral (if any) and subordination (if any), and other material terms taken as a whole, of any such extending, refunding or refinancing Indebtedness, and of any agreement entered into and of any instrument issued in connection therewith, are no less favorable in any material respect to the Loan Parties or the Lenders than the terms of any agreement or instrument governing the Indebtedness being extended, refunded or refinanced and the interest rate applicable to any such extending, refunding or refinancing Indebtedness does not exceed the then applicable market interest rate;
(C) Guarantees of the Borrower or any Guarantor (I) in respect of Indebtedness (other than intercompany Indebtedness) otherwise permitted hereunder of the Borrower or any other Guarantor, and (II) in respect of Indebtedness (other than intercompany Indebtedness) otherwise permitted hereunder of a Foreign Subsidiary (x) if such Foreign Subsidiary was acquired in connection with the Acquisition and to the extent such Indebtedness was guaranteed by IR or any of its Affiliates, or (y) if such Indebtedness was assumed by such Foreign Subsidiary from another Foreign Subsidiary and to the extent such Indebtedness was guaranteed by the Borrower or any Guarantor;
(D) obligations (contingent or otherwise) of the Borrower or any Subsidiary existing or arising under any Swap Contract, provided that (i) such obligations are (or were) entered into by such Person in the ordinary course of business for the purpose of directly mitigating risks associated with liabilities, commitments, investments, assets, or property held or reasonably anticipated by such Person, or changes in the value of securities issued by such Person, and not for purposes of
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speculation or taking a "market view;" and (ii) such Swap Contract does not contain any provision exonerating the non-defaulting party from its obligation to make payments on outstanding transactions to the defaulting party;
(E) Indebtedness in respect of capital leases, Synthetic Lease Obligations and purchase money obligations for fixed or capital assets within the limitations set forth in Section 7.01(h);
(F) (i) Indebtedness incurred in connection with the sale of accounts receivable and related assets pursuant to Section 7.05(g) so long as the amount of the facility relating thereto does not exceed $125,000,000 at any time and (ii) Indebtedness of the Receivables Subsidiary to a Loan Party incurred in connection with the Receivables Facility for the purchase of accounts receivable and related assets;
(G) secured Indebtedness so long as the amount thereof is within the limitations set forth in Section 7.01(k); and
(H) Indebtedness of a Person that becomes a Subsidiary of the Borrower as the result of an Investment permitted by Section 7.02(i), provided that such Indebtedness existed at the time such Person became a Subsidiary of the Borrower, and such Indebtedness was not created in anticipation thereof; and
(d) in the case of Foreign Subsidiaries,
(A) Indebtedness owed to a Loan Party or to another Foreign Subsidiary that is otherwise permitted to be made by such Loan Party under Section 7.02(j); and
(B) unsecured Indebtedness in an amount not to exceed the Adjusted Foreign Subsidiaries/Joint Venture Basket at the time of the incurrence of such Indebtedness.
7.04 Fundamental Changes. Merge, dissolve, liquidate, consolidate with or into another Person, or Dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person, except that, so long as no Default exists or would result therefrom:
(a) any Subsidiary may merge with (i) the Borrower, provided that the Borrower shall be the continuing or surviving Person, or (ii) any one or more other Subsidiaries, provided that when any Guarantor is merging with another Subsidiary, the Guarantor shall be the continuing or surviving Person or the continuing or surviving Person shall promptly thereafter become a Guarantor;
(b) any Subsidiary may Dispose of all or substantially all of its assets (upon voluntary liquidation or otherwise) to the Borrower or to another Subsidiary; provided that if the transferor in such a transaction is a Guarantor, then the transferee must either be the Borrower or a Guarantor or the transferee shall promptly thereafter become a Guarantor; and
(c) in connection with any acquisition permitted under Section 7.02, any Subsidiary of the Borrower may merge into or consolidate with any other Person or permit any other Person to merge into or consolidate with it; provided that the Person surviving such merger shall be a wholly owned Subsidiary of the Borrower; provided, however, that i n each case, immediately after giving effect thereto, in the case of any such merger to which the Borrower is a party, the Borrower is the surviving corporation.
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7.05 Dispositions. Make any Disposition or enter into any agreement to make any Disposition, except:
(a) Dispositions of obsolete or worn out property, whether now owned or hereafter acquired, in the ordinary course of business;
(b) Dispositions of inventory in the ordinary course of business;
(c) Dispositions of equipment or real property to the extent that (i) such property is exchanged for credit against the purchase price of similar replacement property or (ii) the proceeds of such Disposition are reasonably promptly applied to the purchase price of such replacement property;
(d) Dispositions of property by any Subsidiary to the Borrower or to a wholly-owned Subsidiary; provided that if the transferor of such property is a Guarantor, the transferee thereof must either be the Borrower or a Guarantor;
(e) Dispositions permitted by Section 7.04;
(f) Dispositions by the Borrower and its Subsidiaries not otherwise permitted under this Section 7.05; provided that (i) at the time of such Disposition, no Default shall exist or would result from such Disposition, (ii) immediately after giving effect to such Disposition, the Borrower and its Subsidiaries are in pro forma compliance with all of the covenants set forth in Section 7.11, such compliance to be determined on the basis of the financial information most recently delivered to the Agents and the Lenders pursuant to Section 6.01(a) or 6.01(b) as though such Disposition had been consummated as of the first day of the fiscal period covered thereby and (iii) until the Term Loan has been repaid in full, the purchase price for such asset to be paid to the Borrower or such Subsidiary is at least 80% cash;
(g) the limited recourse sale of accounts receivable and related assets in connection with the securitization of accounts receivable or similar rights to payment, which sale is non-recourse to the extent customary in securitizations and consistent with past practice and which is, to the extent entered into after the Documentation Closing Date, upon terms and conditions reasonably satisfactory to the Co-Administrative Agents (the "Receivables Facility");
(h) Dispositions of cash or Cash Equivalents for purposes not otherwise prohibited under this Agreement or under any other Loan Document;
(i) so long as no Default shall occur and be continuing, the grant of any option or other right to purchase any asset in a transaction that would be permitted under the provisions of Section 7.05(f); and
(j) Dispositions by the Borrower and its Subsidiaries not otherwise permitted under this Section 7.05 of property acquired pursuant to the Acquisition; provided that (i) at the time of such Disposition, no Default shall exist or would result from such Disposition, (ii) immediately after giving effect to such Disposition, the Borrower and its Subsidiaries are in pro forma compliance with all of the covenants set forth in Section 7.11, such compliance to be determined on the basis of the financial information
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most recently delivered to the Agents and the Lenders pursuant to Section 6.01(a) or 6.01(b) as though such Disposition had been consummated as of the first day of the fiscal period covered thereby and (iii) until the Term Loan has been repaid in full, the purchase price for such asset to be paid to the Borrower or such Subsidiary is at least 80% cash; provided, however, that any Disposition pursuant to Section 7.05(a) through Section 7.05(h) or Section 7.05(j) shall be for fair market value.
7.06 Restricted Payments. Declare or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, or, except with respect to the Borrower, issue or sell any Equity Interests to any Person other than the Borrower or a wholly owned Domestic Subsidiary or accept any capital contributions, except that:
(a) each Subsidiary may make Restricted Payments to the Borrower and to wholly-owned Subsidiaries (and, in the case of a Restricted Payment by a non-wholly-owned Subsidiary, to the Borrower and any Subsidiary and to each other owner of capital stock or other Equity Interests of such Subsidiary on a pro rata basis based on their relative ownership interests);
(b) the Borrower and each Subsidiary may declare and make dividend payments or other distributions payable solely in the common stock or other common Equity Interests of such Person;
(c) the Borrower and each Subsidiary may purchase, redeem or otherwise acquire shares of its common stock or other common Equity Interests with the proceeds received from the substantially concurrent issue of new shares of its common stock or other common Equity Interests;
(d) so long as no Default shall then exist or would result therefrom, the Borrower may (i) declare or pay cash dividends to its stockholders and (ii) purchase, redeem or otherwise acquire shares of its capital stock or warrants, rights or options to acquire any such shares for cash, in an aggregate amount for all such purchases, redemptions and other acquisitions made under this clause (ii) on and after the date hereof not to exceed $20,000,000 in any fiscal year; and
(e) so long as no Default shall then exist or would result therefrom, the Borrower may acquire common stock of the Borrower from employees or former employees of the Borrower or any Subsidiary in consideration for the exercise of stock options by such employees or former employees and any tax obligations incurred by such employees or former employees in connection with such exercise; provided that no such exercise shall cause the Borrower to make any cash payment to such employee or former employee or any other Person; provided further that the fair market value of all such common stock acquired by the Borrower shall not exceed $10,000,000 in any fiscal year.
7.07 Change in Nature of Business. Engage in any material line of business substantially different from those lines of business conducted by the Borrower and its Subsidiaries on the date hereof or any business substantially related or incidental thereto.
7.08 Transactions with Affiliates. Enter into any transaction of any kind with any Affiliate of the Borrower, whether or not in the ordinary course of business, other than on fair and reasonable terms substantially as favorable to the Borrower or such Subsidiary as would be obtainable by the Borrower or such Subsidiary at the time in a comparable arm's length transaction with a
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Person other than an Affiliate, except (i) transactions between or among the Borrower and its Subsidiaries in the ordinary course of business, (ii) the transactions identified on Schedule 7.08 and (iii) transactions relating to the Receivables Facility.
7.09 Burdensome Agreements. Enter into or permit to exist any Contractual Obligation (other than this Agreement, any other Loan Document or any agreement relating to the Receivables Facility) that (a) limits the ability (i) of any Subsidiary to make Restricted Payments to the Borrower or any Guarantor or to otherwise transfer property to or invest in the Borrower or any Guarantor, except for any agreement in effect (A) on the date hereof or (B) at the time any Subsidiary becomes a Subsidiary of the Borrower, so long as such agreement was not entered into solely in contemplation of such Person becoming a Subsidiary of the Borrower, (ii) of any Subsidiary to Guarantee the Indebtedness of the Borrower, except for any document set forth on Schedule 7.09, or (iii) of the Borrower or any Subsidiary to create, incur, assume or suffer to exist Liens on property of such Person; provided, however, that this clause (iii) shall not prohibit (x) any negative pledge incurred or provided in favor of any holder of Indebtedness permitted under Section 7.03(c)(E) solely to the extent any such negative pledge relates to the property financed by or the subject of such Indebtedness, (y) any provision contained in any High Grade Notes Document (or any other document listed on Schedule 7.09) that provides that in the event any Loan Party grants any Lien on such Loan Party's assets or properties to secure any Indebtedness, such Loan Party secure the High Grade Notes (or Indebtedness in respect of such other document) on an equal and ratable basis with such Indebtedness, or (z) any negative pledge provision contained in any document listed on Schedule 7.09; or (b) requires the grant of a Lien to secure an obligation of such Person if a Lien is granted to secure another obligation of such Person, other than any provision contained in any High Grade Notes Document (or any other document listed on Schedule 7.09) that provides that in the event any Loan Party grants any Lien on such Loan Party's assets or properties to secure any Indebtedness, such Loan Party secure the High Grade Notes (or Indebtedness in respect of such other document) on an equal and ratable basis with such Indebtedness.
7.10 Use of Proceeds. Use the proceeds of any Credit Extension, whether directly or indirectly, and whether immediately, incidentally or ultimately, to purchase or carry margin stock (within the meaning of Regulation U of the FRB) or to extend credit to others for the purpose of purchasing or carrying margin stock or to refund Indebtedness originally incurred for such purpose in any manner that would violate Regulation T, U, or X of the FRB.
7.11 Financial Covenants.
(a) Consolidated Net Worth. Permit, at any time on or after June 30, 2003, Consolidated Net Worth at any time to be less than the sum of (a) 80% of the sum of (i) Shareholders' Equity as of December 31, 2002, (ii) the aggregate increase in Shareholders' Equity of the Borrower and its Subsidiaries as a result of the IR Equity Issuance, and (iii) the aggregate increase in Shareholders' Equity of the Borrower and its Subsidiaries as a result of the Public Equity Issuance, (b) an amount equal to 50% of the Consolidated Net Income earned in each fiscal quarter ending after the Documentation Closing Date, beginning with the fiscal quarter ending March 31, 2003 (with no deduction for a net loss in any such fiscal quarter) and (c) an amount equal to 50% of the aggregate increases in Shareholders' Equity of the Borrower and its Subsidiaries after the Funding Date by reason of the issuance and sale of capital stock or other Equity Interests of the Borrower or any Subsidiary, including upon any conversion of debt securities of the Borrower into such capital stock or other Equity Interests.
(b) Consolidated Leverage Ratio. Permit the Consolidated Leverage Ratio at any time during any period of four fiscal quarters of the Borrower set forth below to be greater than the ratio set forth below opposite such period:
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Maximum Consolidated Period Leverage Ratio
June 30, 2003 through December 31, 2003 3.25:1 January 1, 2004 through September 30, 2004 3.00:1 October 1, 2004 and thereafter 2.75:1
(c) Consolidated Fixed Charge Coverage Ratio. Permit the Consolidated Fixed Charge Coverage Ratio at any time to be less than the ratio set forth below for each period set forth below:
Minimum Fixed Charge Period Coverage Ratio
June 30, 2003 through December 31, 2003 1.50:1 January 1, 2004 through September 30, 2004 1.75:1 October 1, 2004 and thereafter 2.00:1
7.12 Amendments of Organization Documents. With respect to any Loan Party, amend any of its Organization Documents in a manner that could reasonably be expected to have a Material Adverse Effect.
7.13 Prepayments, Etc., of Indebtedness. At any time that any Term Loans or any Term Commitments are outstanding, prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner, or make any payment in violation of any subordination terms of, any Indebtedness in an original principal amount greater than $20,000,000 that is pari passu with, or subordinated to, the Loans, except (a) the prepayment of the Credit Extensions in accordance with the terms of this Agreement and (b) regularly scheduled or required repayments or redemptions of Indebtedness listed on Schedule 7.03, or amend, modify or change in any manner any term or condition of any such Indebtedness listed on Schedule 7.03.
ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES
8.01 Events of Default. Any of the following shall constitute an Event of Default:
(a) Non-Payment. The Borrower fails to pay (i) when and as required to be paid herein, any amount of principal of any Loan or any L/C Obligation, or (ii) within three Business Days after the same becomes due, any interest on any Loan or on any L/C Obligation, or any commitment or other fee due hereunder; or
(b) Specific Covenants. The Borrower fails to perform or observe any term, covenant or agreement contained in (i) any of Section 6.03, 6.05, 6.11 or 6.12, or Article VII or (ii) any of Section 6.01(a) or (b) or 6.02(a) or (b) and such failure continues for 10 days after the earlier of the date on which (i) a Responsible Officer of the Borrower has knowledge of such failure or (ii) notice is given from the Paying Agent to the Borrower at the request of the Required Lenders that the Borrower is to remedy the same; or
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(c) Other Defaults. Any Loan Party fails to perform or observe any other covenant or agreement (not specified in Section 8.01(a) or 8.01(b)) contained in any Loan Document on its part to be performed or observed and such failure continues for 30 days after the earlier of the date on which (i) a Responsible Officer of the Borrower has knowledge of such failure or (ii) notice is given from the Paying Agent to the Borrower at the request of the Required Lenders that the Borrower is to remedy the same; or
(d) Representations and Warranties. Any representation, warranty, certification or statement of fact made or deemed made by or on behalf of the Borrower or any other Loan Party herein, in any other Loan Document, or in any document delivered in connection herewith or therewith shall be incorrect or misleading in any material respect when made or deemed made; or
(e) Cross-Default. (i) Any Loan Party or any Subsidiary (A) fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Indebtedness or Guarantee (other than Indebtedness hereunder and Indebtedness under Swap Contracts) having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than the Threshold Amount, or (B) fails to observe or perform any other agreement or condition relating to any such Indebtedness or Guarantee or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is to cause, or to permit the holder or holders of such Indebtedness or the beneficiary or beneficiaries of such Guarantee (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to be demanded or to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to its stated maturity, or such Guarantee to become payable or cash collateral in respect thereof to be demanded; or (ii) there occurs under any Swap Contract an Early Termination Date (as defined in such Swap Contract) resulting from (A) any event of default under such Swap Contract as to which the Borrower or any Subsidiary is the Defaulting Party (as defined in such Swap Contract) or (B) any Termination Event (as defined in such Swap Contract) under such Swap Contract as to which the Borrower or any Subsidiary is an Affected Party (as defined in such Swap Contract) and, in either event, the Swap Termination Value owed by the Loan Party or such Subsidiary as a result thereof is greater than the Threshold Amount; or
(f) Insolvency Proceedings, Etc. Any Loan Party or any of its Material Subsidiaries institutes or consents to the institution of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for 60 calendar days; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for 60 calendar days, or an order for relief is entered in any such proceeding; or
(g) Inability to Pay Debts; Attachment. (i) Any Loan Party or any of its Material Subsidiaries becomes unable or admits in writing its inability or fails generally to pay its debts as they become due, or (ii) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of any such Person and is not released, vacated or fully bonded within 30 days after its issue or levy; or
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(h) Judgments. There is entered against any Loan Party or any Material Subsidiary (i) a final judgment or order for the payment of money in an aggregate amount exceeding the Threshold Amount, or (ii) any one or more non-monetary final judgments that have, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and, in either case, there is a period of 45 consecutive days during which the same shall not have been paid, discharged, vacated or stayed, by reason of a pending appeal or otherwise; or
(i) ERISA. Except as is not reasonably expected to result in a Material Adverse Effect: (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or is reasonably expected to result in liability of the Borrower under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of the Threshold Amount, or (ii) the Borrower or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of the Threshold Amount; or
(j) Invalidity of Loan Documents. Any provision of any Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder or satisfaction in full of all the Obligations, ceases to be in full force and effect; or any Loan Party or any other Person contests in any manner the validity or enforceability of any provision of any Loan Document; or any Loan Party denies that it has any or further liability or obligation under any Loan Document, or purports to revoke, terminate or rescind any Loan Document; or
(k) Change of Control. There occurs any Change of Control.
8.02 Remedies upon Event of Default
. If any Event of Default occurs and is continuing, the Co-Administrative Agents shall, at the request of, or may, with the consent of, the Required Lenders, take any or all of the following actions:
(a) declare the commitment of each Lender to make Loans and any obligation of the Appropriate L/C Issuers to make L/C Credit Extensions to be terminated, whereupon such commitments and obligation shall be terminated;
(b) declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower;
(c) require that the Borrower Cash Collateralize the L/C Obligations (in an amount equal to the then Outstanding Amount thereof); and
(d) exercise on behalf of themselves, the other Agents and the Lenders all rights and remedies available to them, the other Agents and the Lenders under the Loan Documents or applicable Law;
provided, however, that upon the occurrence of an actual or deemed entry of an order for relief with respect to the Borrower under the Bankruptcy Code of the United States, the obligation of each Lender to make Loans and any obligation of each Appropriate L/C Issuer to make L/C Credit Extensions shall automatically terminate, the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due
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and payable, and the obligation of the Borrower to Cash Collateralize the L/C Obligations as aforesaid shall automatically become effective, in each case without further act of any Agent or any Lender.
8.03 Application of Funds. After the exercise of remedies provided for in Section 8.02 (or after the Loans have automatically become immediately due and payable and the L/C Obligations have automatically been required to be Cash Collateralized as set forth in the proviso to Section 8.02), any amounts received on account of the Obligations shall be applied by the Paying Agent in the following order:
First, to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts (including Attorney Costs and amounts payable under Article III) payable to the Agents in their capacities as such ratably among them in proportion to the amounts described in this clause First payable to them;
Second, to payment of that portion of the Obligations constituting fees, indemnities and other amounts (other than principal and interest) payable to the Lenders (including Attorney Costs and amounts payable under Article III), ratably among them in proportion to the amounts described in this clause Second payable to them;
Third, to payment of that portion of the Obligations constituting accrued and unpaid interest on the Loans and L/C Borrowings, ratably among the Lenders in proportion to the respective amounts described in this clause Third payable to them;
Fourth, to payment of that portion of the Obligations constituting unpaid principal of the Loans and L/C Borrowings, ratably among the Lenders in proportion to the respective amounts described in this clause Fourth held by them;
Fifth, to the Paying Agent for the account of the Appropriate L/C Issuers, to Cash Collateralize that portion of L/C Obligations comprised of the aggregate undrawn amount of Letters of Credit;
Sixth, to the payment of all other Obligations of the Loan Parties owing under or in respect of the Loan Documents that are due and payable to the Agents and the Lenders on such date, ratably based upon the respective aggregate amounts of all such Obligations owing to the Agents and the Lenders on such date; and
Last, the balance, if any, after all of the Obligations have been indefeasibly paid in full, to the Borrower or as otherwise required by Law.
Subject to Section 2.03(c), amounts used to Cash Collateralize the aggregate undrawn amount of Letters of Credit pursuant to clause Fifth above shall be applied to satisfy drawings under such Letters of Credit as they occur. If any amount remains on deposit as Cash Collateral after all Letters of Credit have either been fully drawn or expired, such remaining amount shall be applied to the other Obligations, if any, in the order set forth above.
ARTICLE IX AGENTS
9.01 Appointment and Authorization of Agents .
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(a) Each Lender hereby irrevocably appoints, designates and authorizes each Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere herein or in any other Loan Document, no Agent shall have any duties or responsibilities, except those expressly set forth herein, nor shall any Agent have or be deemed to have any fiduciary relationship with any Lender or participant, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against any Agent. Without limiting the generality of the foregoing sentence, the use of the term "agent" herein and in the other Loan Documents with reference to any Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable Law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties.
(b) Each Appropriate L/C Issuer shall act on behalf of the Lenders with respect to any Letters of Credit issued (or deemed issued) by such Appropriate L/C Issuer and the documents associated therewith, and such Appropriate L/C Issuer shall have all of the benefits and immunities (i) provided to the Agents in this Article IX with respect to any acts taken or omissions suffered by such Appropriate L/C Issuer in connection with Letters of Credit issued (or deemed issued) by it or proposed to be issued (or deemed issued) by it and the applications and agreements for letters of credit pertaining to such Letters of Credit as fully as if the term "Agent" as used in this Article IX and in the definition of "Agent-Related Person" included such Appropriate L/C Issuer with respect to such acts or omissions, and (ii) as additionally provided herein with respect to such Appropriate L/C Issuer.
9.02 Delegation of Duties. Any Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel and other consultants or experts concerning all matters pertaining to such duties. No Agent shall be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects in the absence of gross negligence or willful misconduct.
9.03 Liability of Agents. No Agent-Related Person shall (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct in connection with its duties expressly set forth herein), or (b) be responsible in any manner to any Lender or participant for any recital, statement, representation or warranty made by any Loan Party or any officer thereof, contained herein or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by any Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of any Loan Party or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Lender or participant to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party or any Affiliate thereof.
9.04 Reliance by Agents.
(a) Each Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, communication, signature, resolution, representation, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, electronic mail message, statement or
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other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to any Loan Party), independent accountants and other experts selected by such Agent. Each Agent shall be fully justified in failing or refusing to take any action under any Loan Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Each Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Required Lenders (or such greater number of Lenders as may be expressly required hereby in any instance) and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders.
(b) For purposes of determining compliance with the conditions specified in Section 4.01, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Co- Administrative Agents shall have received notice from such Lender prior to the proposed Documentation Closing Date specifying its objection thereto.
9.05 Notice of Default. No Agent shall be deemed to have knowledge or notice of the occurrence of any Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Paying Agent for the account of the Lenders, unless such Agent shall have received written notice from a Lender or the Borrower referring to this Agreement, describing such Default and stating that such notice is a "notice of default." The applicable Agent will notify the Lenders of its receipt of any such notice. The Co-Administrative Agents shall take such action with respect to such Default as may be directed by the Required Lenders in accordance with Article VIII; provided, however, that unless and until the Co-Administrative Agents have received any such direction, the Co-Administrative Agents may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as they shall deem advisable or in the best interest of the Lenders.
9.06 Credit Decision; Disclosure of Information by Agents. Each Lender acknowledges that no Agent- Related Person has made any representation or warranty to it, and that no act by any Agent hereafter taken, including any consent to and acceptance of any assignment or review of the affairs of any Loan Party or any Affiliate thereof, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Lender as to any matter, including whether Agent-Related Persons have disclosed material information in their possession. Each Lender represents to each Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Loan Parties and their respective Subsidiaries, and all applicable bank or other regulatory Laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the Borrower hereunder. Each Lender also represents that it will, independently and without reliance upon any Agent- Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Borrower and the other Loan Parties. Except for notices, reports and other documents expressly required to be furnished to the Lenders by any Agent herein, such Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial
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and other condition or creditworthiness of any of the Loan Parties or any of their respective Affiliates which may come into the possession of any Agent-Related Person.
9.07 Indemnification of Agents. Whether or not the transactions contemplated hereby are consummated, the Lenders shall indemnify upon demand each Agent-Related Person (to the extent not reimbursed by or on behalf of any Loan Party and without limiting the obligation of any Loan Party to do so), pro rata, and hold harmless each Agent- Related Person from and against any and all Indemnified Liabilities incurred by it; provided, however, that no Lender shall be liable for the payment to any Agent-Related Person of any portion of such Indemnified Liabilities to the extent determined in a final, nonappealable judgment by a court of competent jurisdiction to have resulted from such Agent- Related Person's own gross negligence or willful misconduct; provided, however, that no action taken in accordance with the directions of the Required Lenders shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section 9.07. In the case of any investigation, litigation or proceeding giving rise to any Indemnified Liabilities, this Section 9.07 applies whether any such investigation, litigation or proceeding is brought by any Lender or any other Person. Without limitation of the foregoing, each Lender shall reimburse each Agent upon demand for its ratable share of any costs or out-of- pocket expenses (including Attorney Costs) incurred by such Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that such Agent is not reimbursed for such expenses by or on behalf of the Borrower. The undertaking in this Section 9.07 shall survive termination of the Aggregate Commitments, the payment of all other Obligations and the resignation of such Agent.
9.08 Agents in Their Individual Capacities. Each of Bank of America, BAS, Key Bank, Merrill Lynch, Morgan Stanley and their respective Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire Equity Interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with each of the Loan Parties and their respective Affiliates as though (i) Bank of America were not a Co- Administrative Agent, (ii) BAS were not a Lead Arranger, (iii) KeyBank were not a Co-Administrative Agent, a Lead Arranger, the Paying Agent or an Appropriate L/C Issuer, (iv) Merrill Lynch were not the Syndication Agent, and (v) Morgan Stanley were not the Documentation Agent, and without notice to or consent of the Lenders. The Lenders acknowledge that, pursuant to such activities, each of Bank of America, BAS, Key Bank, Merrill Lynch, Morgan Stanley or their respective Affiliates may receive information regarding any Loan Party or its Affiliates (including information that may be subject to confidentiality obligations in favor of such Loan Party or such Affiliate) and acknowledge that no Agent shall be under any obligation to provide such information to them. With respect to its Loans, each of Bank of America, BAS, Key Bank, Merrill Lynch, Morgan Stanley and their respective Affiliates shall have the same rights and powers under this Agreement as any other Lender and may exercise such rights and powers as though it were not an Agent or an Appropriate L/C Issuer, as the case may be, and the terms "Lender" and "Lenders" include Bank of America, BAS, Key Bank, Merrill Lynch, Morgan Stanley and their respective Affiliates in their individual capacities.
9.09 Successor Agents. Any Agent may resign as Agent upon 30 days' notice to the Lenders; provided that any such resignation by KeyBank shall also constitute its resignation as an Appropriate L/C Issuer and Swing Line Lender. If any Agent resigns under this Agreement, the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent shall be consented to by the Borrower at all times other than during the existence of an Event of Default (which consent of the Borrower shall not be unreasonably withheld or delayed). If no successor agent is appointed prior to the effective date of the resignation of such Agent, such Agent may appoint, after consulting with the Lenders and the Borrower, a successor agent from among
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the Lenders. Upon the acceptance of its appointment as successor agent hereunder, the Person acting as such successor agent shall succeed to all the rights, powers and duties of the retiring Agent and, if applicable, an Appropriate L/C Issuer and Swing Line Lender and the respective terms "Co- Administrative Agent", "Paying Agent", "Documentation Agent", "Syndication Agent", "Lead Arranger", "Appropriate L/C Issuer" and "Swing Line Lender", as applicable, shall mean such successor agent, Letter of Credit issuer and swing line lender, the retiring Agent's appointment, powers and duties as Agent shall be terminated and the retiring Appropriate L/C Issuer's and Swing Line Lender's rights, powers and duties as such shall be terminated, without any other or further act or deed on the part of such retiring Appropriate L/C Issuer or Swing Line Lender or any other Lender, other than the obligation of the successor Appropriate L/C Issuer to issue letters of credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession or to make other arrangements satisfactory to the retiring Appropriate L/C Issuer to effectively assume the obligations of the retiring Appropriate L/C Issuer with respect to such Letters of Credit. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article IX and Sections 10.04 and 10.05 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was an Agent under this Agreement. If no successor agent has accepted appointment as Agent by the date which is 30 days following a retiring Agent's notice of resignation, the retiring Agent's resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of such Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above. Upon the acceptance of any appointment as Agent hereunder by a successor, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, discretion, privileges, and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under the Loan Documents. After any retiring Agent's resignation hereunder as an Agent, the provisions of this Article IX 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 an Agent.
9.10 Co-Administrative Agents May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to any Loan Party, the Co-Administrative Agents (irrespective of whether the principal of any Loan or L/C Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Co- Administrative Agents shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise
(a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, L/C Obligations and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Agents (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and the Agents and their respective agents and counsel and all other amounts due the Lenders and the Agents under Sections 2.03(i) and (j), 2.09 and 10.04) allowed in such judicial proceeding; and
(b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Paying Agent and, in the event that the Paying Agent shall consent to the making of such payments directly to the Lenders, to pay to the Paying Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Agents and their respective agents and counsel, and any other amounts due the Agents under Sections 2.09 and 10.04.
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Nothing contained herein shall be deemed to authorize the Co-Administrative Agents to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or to authorize the Co- Administrative Agents to vote in respect of the claim of any Lender in any such proceeding.
9.11 Guaranty Matters. The Lenders irrevocably authorize the Co- Administrative Agents, at their option and in their discretion, to release any Guarantor from its obligations under the Guaranty if such Person ceases to be a Subsidiary as a result of a transaction permitted hereunder.
Upon request by the Co-Administrative Agents at any time, the Required Lenders will confirm in writing the Co- Administrative Agents' authority to release any Guarantor from its obligations under the Guaranties pursuant to this Section 9.11. In each case as specified in this Section 9.11, the Co- Administrative Agents will, at the Borrower's expense, execute and deliver to the applicable Loan Party such documents as such Loan Party may reasonably request to release such Guarantor from its obligations under the Guaranty in accordance with the terms of the Loan Documents and this Section 9.11.
9.12 Other Agents; Arrangers and Managers. None of the Lenders or other Persons identified on the facing page or signature pages of this Agreement as a "syndication agent," "documentation agent," "co-agent," "book manager," "lead manager," "arranger," "lead arranger" or "co- arranger" shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than, in the case of such Lenders, those applicable to all Lenders as such. Without limiting the foregoing, none of the Lenders or other Persons so identified shall have or be deemed to have any fiduciary relationship with any Lender. Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders or other Persons so identified in deciding to enter into this Agreement or in taking or not taking action hereunder.
ARTICLE X MISCELLANEOUS
10.01 Amendments, Etc. No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by the Borrower or any other Loan Party therefrom, shall be effective unless in writing signed by the Lead Arrangers, the Required Lenders and the Borrower or the applicable Loan Party, as the case may be, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such amendment, waiver or consent shall:
(a) extend or increase the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 8.02) without the written consent of such Lender;
(b) postpone any date scheduled for any payment of principal or interest under Section 2.07 or 2.08, or any date fixed for the payment of fees or other amounts due to the Lenders (or any of them) hereunder or under any other Loan Document without the written consent of each Lender directly affected thereby;
(c) reduce the principal of, or the rate of interest specified herein on, any Loan or L/C Borrowing, or (subject to clause (v) of the second proviso to this Section 10.01) any fees or other amounts payable hereunder or under any other Loan Document without the written consent of each Lender directly affected thereby; provided, however, that only the consent of the Required Lenders shall be necessary to amend the definition of "Default Rate" or to waive any obligation of the Borrower to pay interest at the Default Rate;
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(d) change the order of application of any reduction in the Commitments or any prepayment of Loans between the Facilities from the application thereof set forth in the applicable provisions of Section 2.05(b) or 2.06(b), respectively, in any manner that materially and adversely affects the Lenders under such Facilities or requires the permanent reduction of the Revolving Credit Facility at any time when all or a portion of the Term Facilities remains in effect without the written consent of each such Lender directly affected thereby;
(e) change any provision of this Section 10.01 or the definition of "Required Lenders" or any other provision hereof specifying the number or percentage of Lenders required to amend, waive or otherwise modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender;
(f) release all or substantially all of the value of the Guaranty, without the written consent of each Lender;
(g) impose any greater restriction on the ability of any Lender to assign any of its rights or obligations hereunder, without such amendment, waiver or consent receiving the written consent of Lenders having more than 50% of the Aggregate Credit Exposures then in effect within each of the following classes of Commitments, Loans and other Credit Extensions: (i) the class consisting of the Revolving Credit Commitment, and (ii) the class consisting of the Term Commitment. For purposes of this clause, the aggregate amount of each Lender's risk participation and funded participation in L/C Obligations and Swing Line Loans shall be deemed to be held by such Lender; or
(h) amend Section 2.13 or 8.03, without the written consent of each Lender directly affected thereby;
and provided further that (i) no amendment, waiver or consent shall, unless in writing and signed by an Appropriate L/C Issuer in addition to the Lenders required above, affect the rights or duties of such Appropriate L/C Issuer under this Agreement or any Letter of Credit Application relating to any Letter of Credit issued, deemed issued, or to be issued by such Appropriate L/C Issuer; (ii) no amendment, waiver or consent shall, unless in writing and signed by the Swing Line Lender in addition to the Lenders required above, affect the rights or duties of the Swing Line Lender under this Agreement; (iii) no amendment, waiver or consent shall, unless in writing and signed by an Agent in addition to the Lenders required above, affect the rights or duties of, or any fees or other amounts payable to, such Agent under this Agreement or any other Loan Document; (iv) Section 10.07(h) may not be amended, waived or otherwise modified without the consent of each Granting Lender all or any part of whose Loans are being funded by an SPC at the time of such amendment, waiver or other modification; and (v) the Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed only by the parties thereto. Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder, except that the Commitment of such Lender may not be increased or extended without the consent of such Lender.
10.02 Notices and Other Communications; Facsimile Copies.
(a) General. Unless otherwise expressly provided herein, all notices and other communications provided for hereunder or in any other Loan Document shall be in writing (including by facsimile transmission). All such written notices shall be mailed, faxed or delivered to the applicable address, facsimile number or (subject to Section 10.02(c)) electronic mail address, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows:
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(i) if to the Borrower, any Agent, any Appropriate L/C Issuer or the Swing Line Lender, to the address, facsimile number, electronic mail address or telephone number specified for such Person on Schedule 10.02 or to such other address, facsimile number, electronic mail address or telephone number as shall be designated by such party in a notice to the other parties; and
(ii) if to any other Lender, to the address, facsimile number, electronic mail address or telephone number specified in its Administrative Questionnaire or to such other address, facsimile number, electronic mail address or telephone number as shall be designated by such party in a notice to the Borrower, the Agents, the Appropriate L/C Issuers and the Swing Line Lender.
All such notices and other communications shall be deemed to be given or made upon the earlier to occur of (i) actual receipt by the relevant party hereto and (ii) (A) if delivered by hand or by courier, when signed for by or on behalf of the relevant party hereto; (B) if delivered by mail, four Business Days after deposit in the mails, postage prepaid; (C) if delivered by facsimile, when sent and receipt has been confirmed by telephone; and (D) if delivered by electronic mail (which form of delivery is subject to the provisions of Section 10.02(c)), when delivered; provided, however, that notices and other communications to the Agents, the Appropriate L/C Issuers and the Swing Line Lender pursuant to Article II shall not be effective until actually received by such Person. In no event shall a voicemail message be effective as a notice, communication or confirmation hereunder.
(b) Effectiveness of Facsimile Documents and Signatures. Loan Documents may be transmitted and/or signed by facsimile. The effectiveness of any such documents and signatures shall, subject to applicable Law, have the same force and effect as manually- signed originals and shall be binding on all Loan Parties, the Agents and the Lenders. The Agents may also require that any such documents and signatures be confirmed by a manually- signed original thereof; provided, however, that the failure to request or deliver the same shall not limit the effectiveness of any facsimile document or signature.
(c) Limited Use of Electronic Mail. Electronic mail and Internet and intranet websites may be used only to distribute routine communications, such as financial statements and other information as provided in Section 6.02, and to distribute Loan Documents for execution by the parties thereto, and may not be used for any other purpose.
(d) Reliance by Agents and Lenders. The Agents and the Lenders shall be entitled to rely and act upon any notices (including telephonic Committed Loan Notices and Swing Line Loan Notices) purportedly given by or on behalf of the Borrower even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof. The Borrower shall indemnify each Agent-Related Person and each Lender from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Borrower. All telephonic notices to and other communications with any Agent may be recorded by such Agent, and each of the parties hereto hereby consents to such recording.
10.03 No Waiver; Cumulative Remedies. No failure by any Lender or any Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder or any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights,
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remedies, powers and privileges herein provided, and provided under each other Loan Document, are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.
10.04 Attorney Costs, Expenses and Taxes. The Borrower agrees (a) to pay or reimburse each Agent for all reasonable costs and expenses incurred in connection with the development, preparation, negotiation, syndication and execution of this Agreement and the other Loan Documents, and any amendment, waiver, consent or other modification of the provisions hereof and thereof (whether or not the transactions contemplated hereby or thereby are consummated), and the consummation and administration of the transactions contemplated hereby and thereby, including all Attorney Costs incurred by such Agents, and (b) to pay or reimburse each Agent and each Lender for all reasonable costs and expenses incurred in connection with the enforcement of any rights or remedies under this Agreement or the other Loan Documents (including all such costs and expenses incurred during any legal proceeding, including any proceeding under any Debtor Relief Law), including all Attorney Costs incurred by each Agent and each Lender. The foregoing costs and expenses shall include all search, filing, recording, title insurance and appraisal charges and fees and taxes related thereto, and other out-of-pocket expenses incurred by the Co-Administrative Agents and the cost of independent public accountants and other outside experts retained by the Co-Administrative Agents or any Lender. All amounts due under this Section 10.04 shall be payable within 30 days after demand therefor, which demand shall be accompanied by an appropriate invoice. The agreements in this Section 10.04 shall survive the termination of the Aggregate Commitments and repayment of all other Obligations. If any Loan Party fails to pay when due any costs, expenses or other amounts payable by it hereunder or under any Loan Document, including, without limitation, Attorney Costs and indemnities, such amount may be paid on behalf of such Loan Party by any Agent or any Lender, in its sole discretion.
10.05 Indemnification by the Borrower. Whether or not the transactions contemplated hereby are consummated, the Borrower shall indemnify and hold harmless each Agent-Related Person, each Lender and their respective Affiliates, directors, officers, employees, counsel, agents and attorneys-in-fact (collectively the "Indemnitees") from and against any and all liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses and disbursements (including Attorney Costs) of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against any such Indemnitee in any way relating to or arising out of or in connection with (a) the execution, delivery, enforcement, performance or administration of any Loan Document or any other agreement, letter or instrument delivered in connection with the transactions contemplated thereby or the consummation of the transactions contemplated thereby, (b) any Commitment, Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by any Appropriate L/C Issuer to honor a demand for payment under a Letter of Credit issued (or deemed issued) by such Appropriate L/C Issuer if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (c) any actual or alleged presence or release of Hazardous Materials on or from any property currently or formerly owned or operated by the Borrower, any Subsidiary or any other Loan Party, or any Environmental Liability related in any way to the Borrower, any Subsidiary or any other Loan Party, or (d) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory (including any investigation of, preparation for, or defense of any pending or threatened claim, investigation, litigation or proceeding) and regardless of whether any Indemnitee is a party thereto (all the foregoing, collectively, the "Indemnified Liabilities"), in all cases, whether or not caused by or arising, in whole or in part, out of the negligence of the Indemnitee; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses or disbursements are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee. No Indemnitee shall be liable for any damages arising from the use by others of any information or other materials obtained through IntraLinks or other similar
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information transmission systems in connection with this Agreement, nor shall any Indemnitee have any liability for any indirect or consequential damages relating to this Agreement or any other Loan Document or arising out of its activities in connection herewith or therewith (whether before or after the Documentation Closing Date). In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 10.05 applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by any Loan Party, its directors, shareholders or creditors or an Indemnitee or any other Person, whether or not any Indemnitee is otherwise a party thereto and whether or not any of the transactions contemplated hereunder or under any of the other Loan Documents is consummated. All amounts due under this Section 10.05 shall be payable within 30 days after demand therefor, which demand shall be accompanied by an appropriate invoice. The agreements in this Section 10.05 shall survive the resignation of any Agent, the replacement of any Lender, the termination of the Aggregate Commitments and the repayment, satisfaction or discharge of all the other Obligations.
10.06 Payments Set Aside. To the extent that any payment by or on behalf of the Borrower is made to any Agent or any Lender, or any Agent or any Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by such Agent or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender severally agrees to pay to the Paying Agent upon demand its applicable share of any amount so recovered from or repaid by any Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect.
10.07 Successors and Assigns.
(a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an Eligible Assignee in accordance with the provisions of Section 10.07(b), (ii) by way of participation in accordance with the provisions of Section 10.07(d), (iii) by way of pledge or assignment of a security interest subject to the restrictions of Section 10.07(f) or 10.07(i), or (iv) to an SPC in accordance with the provisions of Section 10.07(h) (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in Section 10.07(d) and, to the extent expressly contemplated hereby, the Indemnitees) any legal or equitable right, remedy or claim under or by reason of this Agreement.
(b) Any Lender may at any time assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans (including for purposes of this Section 10.07(b), participations in L/C Obligations and in Swing Line Loans) at the time owing to it); provided that (i) except in the case of an assignment of the entire remaining amount of the assigning Lender's Commitment and the Loans at the time owing to it or in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund with respect to a Lender, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) or, if the applicable Commitment is not then in effect, the principal outstanding balance of the Loan of the assigning Lender subject to each such assignment, determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Paying Agent or, if "Trade
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Date" is specified in the Assignment and Assumption, as of the Trade Date, shall not be less than $10,000,000, in the case of any assignment in respect of the Revolving Credit Facility, or $2,500,000, in the case of any assignment in respect of the Term Facility, unless each of the Paying Agent and, so long as no Event of Default has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed); (ii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement with respect to the Loans or the Commitment assigned, except that this clause (ii) shall not (x) apply to rights in respect of Swing Line Loans or (y) prohibit any Lender from assigning all or a portion of its rights and obligations among separate Facilities on a non- pro rata basis; (iii) any assignment of a Revolving Credit Commitment must be approved by the Paying Agent, each Appropriate L/C Issuer and the Swing Line Lender unless the Person that is the proposed assignee is itself a Revolving Credit Lender, which approval shall not be unreasonably withheld or denied (whether or not the proposed assignee would otherwise qualify as an Eligible Assignee); and (iv) the parties to each assignment shall execute and deliver to the Paying Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500. Subject to acceptance and recording thereof by the Paying Agent pursuant to Section 10.07(c), from and after the effective date specified in each Assignment and Assumption, the Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 3.01, 3.04, 3.05, 10.04 and 10.05 with respect to facts and circumstances occurring prior to the effective date of such assignment). Upon request, the Borrower (at its expense) shall execute and deliver a Note to the assignee Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 10.07(b) shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 10.07(d).
(c) The Paying Agent,acting solely for this purpose as an agent of the Borrower, shall maintain at the Paying Agent's Office a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts of the Loans and L/C Obligations owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Borrower, the Agents and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower, any Agent and any Lender, at any reasonable time and from time to time upon reasonable prior notice.
(d) Any Lender may at any time, without the consent of, or notice to, the Borrower or the Paying Agent, sell participations to any Person (other than a natural person or the Borrower or any of the Borrower's Affiliates or Subsidiaries) (each, a "Participant") in all or a portion of such Lender's rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans (including such Lender's participations in L/C Obligations and/or Swing Line Loans) owing to it); provided that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Agents and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any
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amendment, waiver or other modification described in the first proviso to Section 10.01 that directly affects such Participant. Subject to Section 10.07(e), the Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.01, 3.04 and 3.05 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 10.07(b). To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.09 as though it were a Lender, provided such Participant agrees to be subject to Section 2.13 as though it were a Lender.
(e) A Participant shall not be entitled to receive any greater payment under Section 3.01 or 3.04 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower's prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 3.01 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 10.15 as though it were a Lender.
(f) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.
(g) As used herein, the following terms have the following meanings:
"Eligible Assignee" means (a) a Lender; (b) an Affiliate of a Lender; (c) an Approved Fund; and (d) any other Person (other than a natural person) approved by (i) the Paying Agent, (ii) in the case of any assignment of a Revolving Credit Commitment, each Appropriate L/C Issuer and the Swing Line Lender, and (iii) unless an Event of Default has occurred and is continuing, the Borrower (each such approval not to be unreasonably withheld or delayed); provided that notwithstanding the foregoing, "Eligible Assignee" shall not include the Borrower or any of the Borrower's Affiliates or Subsidiaries or any Person if a payment hereunder to such Person would be subject to withholding under the Code, as the Code is in effect on the date on which such Person is proposed to become a Lender hereunder.
"Fund" means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.
"Approved Fund" means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.
(h) Notwithstanding anything to the contrary contained herein, any Lender (a "Granting Lender") may grant to a special purpose funding vehicle identified as such in writing from time to time by the Granting Lender to the Paying Agent and the Borrower (an "SPC") the option to provide all or any part of any Loan that such Granting Lender would otherwise be obligated to make 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 make all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof. Each party hereto hereby agrees that (i) neither the grant to any SPC nor the exercise by any SPC of such option shall increase the costs or expenses or otherwise increase or change the obligations of the Borrower under this Agreement (including its obligations under Section 3.04), (ii) no SPC shall be
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liable for any indemnity or similar payment obligation under this Agreement for which a Lender would be liable, and (iii) the Granting Lender shall for all purposes, including the approval of any amendment, waiver or other modification of any provision of any Loan Document, remain the lender of record hereunder. The making 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 made by such Granting Lender. In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior debt of any SPC, it will not institute against, or join any other Person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency, or liquidation proceeding under the Laws of the United States or any State thereof. Notwithstanding anything to the contrary contained herein, any SPC may (i) with notice to, but without prior consent of the Borrower and the Paying Agent and with the payment of a processing fee of $3,500, assign all or any portion of its right to receive payment with respect to any Loan to the Granting Lender and (ii) disclose on a confidential basis any non-public information relating to its funding of Loans to any rating agency, commercial paper dealer or provider of any surety or Guarantee or credit or liquidity enhancement to such SPC.
(i) Notwithstanding anything to the contrary contained herein, any Lender that is a Fund may create a security interest in all or any portion of the Loans owing to it and the Note, if any, held by it to the trustee for holders of obligations owed, or securities issued, by such Fund as security for such obligations or securities, provided that unless and until such trustee actually becomes a Lender in compliance with the other provisions of this Section 10.07, (i) no such pledge shall release the pledging Lender from any of its obligations under the Loan Documents and (ii) such trustee shall not be entitled to exercise any of the rights of a Lender under the Loan Documents even though such trustee may have acquired ownership rights with respect to the pledged interest through foreclosure or otherwise.
(j) Notwithstanding anything to the contrary contained herein, if at any time KeyBank assigns all of its Commitments and Loans pursuant to Section 10.07(b), KeyBank may, upon 30 days' notice to the Borrower and the Lenders, resign as an Appropriate L/C Issuer and as Swing Line Lender. In the event of any such resignation as an Appropriate L/C Issuer or Swing Line Lender, the Borrower shall be entitled to appoint from among the Lenders a successor Appropriate L/C Issuer or Swing Line Lender hereunder; provided, however, that no failure by the Borrower to appoint any such successor shall affect the resignation of KeyBank as Swing Line Lender; provided further, however, that KeyBank shall not be released from its obligations as an Appropriate L/C Issuer hereunder unless and until another Lender assumes all such obligations. If KeyBank resigns as an Appropriate L/C Issuer, it shall retain all the rights and obligations of such Appropriate L/C Issuer hereunder with respect to all Letters of Credit issued by it and outstanding as of the effective date of its resignation as an Appropriate L/C Issuer and all L/C Obligations with respect thereto (including the right to require the Lenders to make Base Rate Loans or fund risk participations in Unreimbursed Amounts pursuant to Section 2.03(c)). If KeyBank resigns as Swing Line Lender, it shall retain all the rights of the Swing Line Lender provided for hereunder with respect to Swing Line Loans made by it and outstanding as of the effective date of such resignation, including the right to require the Lenders to make Base Rate Loans or fund risk participations in outstanding Swing Line Loans pursuant to Section 2.04(c).
10.08 Confidentiality. Each of the Agents and the Lenders agrees to maintain the confidentiality of the Information, except that Information may be disclosed (a) to its and its Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential); (b) to the extent requested by any regulatory authority; (c) to the extent required by applicable Laws or regulations or by any subpoena or similar legal process; (d) to any other party to this Agreement; (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights
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hereunder; (f) to (i) any Eligible Assignee of or Participant in, or any prospective Eligible Assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any direct or indirect contractual counterparty or prospective counterparty (or such contractual counterparty's or prospective counterparty's professional advisor) to any credit derivative transaction relating to obligations of the Loan Parties; (g) with the consent of the Borrower; (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section 10.08 or (ii) becomes available to any Agent or any Lender on a nonconfidential basis from a source other than the Borrower; (i) to any state, Federal or foreign authority or examiner (including the National Association of Insurance Commissioners or any other similar organization) regulating any Lender; or (j) to any rating agency when required by it (it being understood that, prior to any such disclosure, such rating agency shall undertake to preserve the confidentiality of any Information relating to the Loan Parties received by it from such Lender). In addition, the Agents and the Lenders may disclose the existence of this Agreement and information about this Agreement to market data collectors, similar service providers to the lending industry, and service providers to the Agents and the Lenders in connection with the administration and management of this Agreement, the other Loan Documents, the Commitments, and the Credit Extensions. For the purposes of this Section 10.08, "Information" means all information received from any Loan Party relating to any Loan Party or its business, other than any such information that is available to any Agent or any Lender on a nonconfidential basis prior to disclosure by any Loan Party. Any Person required to maintain the confidentiality of Information as provided in this Section 10.08 shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.
10.09 Setoff. In addition to any rights and remedies of the Lenders provided by law, upon the occurrence and during the continuance of any Event of Default, each Lender and each of their respective Affiliates is authorized at any time and from time to time, without prior notice to the Borrower or any other Loan Party, any such notice being waived by the Borrower (on its own behalf and on behalf of each Loan Party) to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other Indebtedness at any time owing by, such Lender to or for the credit or the account of the respective Loan Parties against any and all Obligations owing to such Lender hereunder or under any other Loan Document, now or hereafter existing, irrespective of whether or not such Agent or such Lender shall have made demand under this Agreement or any other Loan Document and although such Obligations may be contingent or unmatured or denominated in a currency different from that of the applicable deposit or Indebtedness. Each Lender agrees promptly to notify the Borrower and the Paying Agent after any such setoff and application made by such Lender; provided, however, that the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Agent and each Lender and their respective Affiliates under this Section 10.09 are in addition to other rights and remedies (including, without limitation, other rights of setoff) that such Agent, such Lender and their respective Affiliates may have.
10.10 Interest Rate Limitation. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non- usurious interest permitted by applicable Law (the "Maximum Rate"). If any Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrower. In determining whether the interest contracted for, charged, or received by an Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.
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10.11 Counterparts. This Agreement and each other Loan Document may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery by telecopier of an executed counterpart of a signature page to this Agreement and each other Loan Document shall be effective as delivery of an original executed counterpart of this Agreement and such other Loan Document. The Co-Administrative Agents may also require that any such documents and signatures delivered by telecopier be confirmed by a manually-signed original thereof; provided that the failure to request or deliver the same shall not limit the effectiveness of any document or signature delivered by telecopier.
10.12 Integration. This Agreement, together with the other Loan Documents, comprises the complete and integrated agreement of the parties on the subject matter hereof and thereof and supersedes all prior agreements, written or oral, on such subject matter. In the event of any conflict between the provisions of this Agreement and those of any other Loan Document, the provisions of this Agreement shall control; provided that the inclusion of supplemental rights or remedies in favor of the Agents or the Lenders in any other Loan Document shall not be deemed a conflict with this Agreement. Each Loan Document was drafted with the joint participation of the respective parties thereto and shall be construed neither against nor in favor of any party, but rather in accordance with the fair meaning thereof.
10.13 Survival of Representations and Warranties. All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations and warranties have been or will be relied upon by each Agent and each Lender, regardless of any investigation made by any Agent or any Lender or on their behalf and notwithstanding that any Agent or any Lender may have had notice or knowledge of any Default at the time of any Credit Extension, and shall continue in full force and effect as long as any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding.
10.14 Severability. If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
10.15 Tax Forms. (a) (i) Each Lender that is not a "United States person" within the meaning of Section 7701(a)(30) of the Code (a "Foreign Lender") shall deliver to the Paying Agent, prior to receipt of any payment subject to withholding under the Code (or upon accepting an assignment of an interest herein), two duly signed completed copies of either IRS Form W-8BEN or any successor thereto (relating to such Foreign Lender and entitling it to an exemption from, or reduction of, withholding tax on all payments to be made to such Foreign Lender by the Borrower pursuant to this Agreement) or IRS Form W-8ECI or any successor thereto (relating to all payments to be made to such Foreign Lender by the Borrower pursuant to this Agreement) or such other evidence satisfactory to the Borrower and the Paying Agent that such Foreign Lender is entitled to an exemption from, or reduction of, U.S. withholding tax, including any exemption pursuant to Section 881(c) of the Code. Thereafter and from time to time, each such Foreign Lender shall (A) promptly submit to the Paying Agent such additional duly completed and signed copies of one of such forms (or such successor forms as shall be adopted from time to time by the relevant United States taxing authorities) as may then be available under then current United States laws and regulations to avoid, or such evidence as is satisfactory to the Borrower and the Paying Agent of any available exemption from or reduction of, United States withholding taxes in respect of all payments
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to be made to such Foreign Lender by the Borrower pursuant to this Agreement, (B) promptly notify the Paying Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction, and (C) take such steps as shall not be materially disadvantageous to it, in the reasonable judgment of such Lender, and as may be reasonably necessary (including the re- designation of its Lending Office) to avoid any requirement of applicable Laws that the Borrower make any deduction or withholding for taxes from amounts payable to such Foreign Lender.
(ii) Each Foreign Lender, to the extent it does not act or ceases to act for its own account with respect to any portion of any sums paid or payable to such Lender under any of the Loan Documents (for example, in the case of a typical participation by such Lender), shall deliver to the Paying Agent on the date when such Foreign Lender ceases to act for its own account with respect to any portion of any such sums paid or payable, and at such other times as may be necessary in the determination of the Paying Agent (in the reasonable exercise of its discretion), (A) two duly signed completed copies of the forms or statements required to be provided by such Lender as set forth above, to establish the portion of any such sums paid or payable with respect to which such Lender acts for its own account that is not subject to U.S. withholding tax, and (B) two duly signed completed copies of IRS Form W-8IMY (or any successor thereto), together with any information such Lender chooses to transmit with such form, and any other certificate or statement of exemption required under the Code, to establish that such Lender is not acting for its own account with respect to a portion of any such sums payable to such Lender.
(iii) The Borrower shall not be required to pay any additional amount to any Foreign Lender under Section 3.01 (A) with respect to any Taxes required to be deducted or withheld on the basis of the information, certificates or statements of exemption such Lender transmits with an IRS Form W-8IMY pursuant to this Section 10.15(a) or (B) if such Lender shall have failed to satisfy the foregoing provisions of this Section 10.15(a); provided that if such Lender shall have satisfied the requirement of this Section 10.15(a) on the date such Lender became a Lender or ceased to act for its own account with respect to any payment under any of the Loan Documents, nothing in this Section 10.15(a) shall relieve the Borrower of its obligation to pay any amounts pursuant to Section 3.01 in the event that, as a result of any change in any applicable Law, treaty or governmental rule, regulation or order, or any change in the interpretation, administration or application thereof, such Lender is no longer properly entitled to deliver forms, certificates or other evidence at a subsequent date establishing the fact that such Lender or other Person for the account of which such Lender receives any sums payable under any of the Loan Documents is not subject to withholding or is subject to withholding at a reduced rate.
(iv) The Paying Agent may, without reduction, withhold any Taxes required to be deducted and withheld from any payment under any of the Loan Documents with respect to which the Borrower is not required to pay additional amounts under this Section 10.15(a).
(b) Upon the request of the Paying Agent, each Lender that is a "United States person" within the meaning of Section 7701(a)(30) of the Code shall deliver to the Paying Agent two duly signed completed copies of IRS Form W-9. If such Lender fails to deliver such forms, then the Paying Agent may withhold from any interest payment to such Lender an amount equivalent to the applicable back-up withholding tax imposed by the Code, without reduction.
(c) If any Governmental Authority asserts that the Paying Agent did not properly withhold or backup withhold, as the case may be, any tax or other amount from payments made to or for the account of any Lender, such Lender shall indemnify the Paying Agent therefor, including all penalties and interest, any taxes imposed by any jurisdiction on the amounts payable to the Paying Agent under this Section 10.15, and costs and expenses (including Attorney Costs) of the Paying Agent. The obligation of the Lenders under this Section 10.15 shall survive the termination of the Aggregate Commitments, repayment of all other Obligations hereunder and the resignation of the Paying Agent.
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10.16 Replacement of Lenders. Under any circumstances set forth herein providing that the Borrower shall have the right to replace a Lender as a party to this Agreement, the Borrower may, upon notice to such Lender and the Paying Agent, replace such Lender by causing such Lender to assign its Commitment (with the assignment fee to be paid by the Borrower in such instance) pursuant to Section 10.07(b) to one or more other Lenders or Eligible Assignees procured by the Borrower; provided, however, that if the Borrower elects to exercise such right with respect to any Lender pursuant to Section 3.06(b), it shall be obligated to replace all Lenders that have made similar requests for compensation pursuant to Section 3.01 or 3.04. The Borrower shall (x) pay in full all principal, accrued interest, accrued fees and other amounts owing to such Lender through the date of replacement (including any amounts payable pursuant to Section 3.05), (y) provide appropriate assurances and indemnities (which may include letters of credit) to the Appropriate L/C Issuers and the Swing Line Lender as each may reasonably require with respect to any continuing obligation to fund participation interests in any L/C Obligations or any Swing Line Loans then outstanding, and (z) release such Lender from its obligations under the Loan Documents. Any Lender being replaced shall execute and deliver an Assignment and Assumption with respect to such Lender's Commitment and outstanding Loans and participations in L/C Obligations and Swing Line Loans.
10.17 Judgment.
(a) If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder in Dollars into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures Bank of America could purchase Dollars with such other currency at Bank of America's principal office in London at 5:00 p.m. on the Business Day preceding that on which final judgment is given.
(b) If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder in a Committed Currency into Dollars, 105
the parties agree to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures Bank of America could purchase such Committed Currency with Dollars at Bank of America's principal office in London at 5:00 p.m. on the Business Day preceding that on which final judgment is given.
(c) The obligation of the Borrower in respect of any sum due from it in any currency (the "Primary Currency") to any Lender or any Agent hereunder shall, notwithstanding any judgment in any other currency, be discharged only to the extent that on the Business Day following receipt by such Lender or such Agent (as the case may be), of any sum adjudged to be so due in such other currency, such Lender or such Agent (as the case may be) may in accordance with normal banking procedures purchase the applicable Primary Currency with such other currency. If the amount of the applicable Primary Currency so purchased is less than such sum due to such Lender or such Agent (as the case may be) in the applicable Primary Currency, the Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify such Lender or such Agent (as the case may be) against such loss, and if the amount of the applicable Primary Currency so purchased exceeds such sum due to any Lender or any Agent (as the case may be) in the applicable Primary Currency, such Lender or such Agent (as the case may be) agrees to remit to the Borrower such excess.
10.18 Substitution of Currency. If a change in any Committed Currency occurs pursuant to any applicable Law, rule or regulation of any governmental, monetary or multi-national authority, this Agreement (including, without limitation, the definition of Eurocurrency Rate) will be amended to the extent determined by the Paying Agent (acting reasonably and in consultation with the Borrower) to be necessary to reflect the change in currency and to put the
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Lenders and the Borrower in the same position, so far as possible, that they would have been in if no change in such Committed Currency had occurred.
10.19 Governing Law.
(a) THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK CITY OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF SUCH STATE, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER, EACH AGENT AND EACH LENDER CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. THE BORROWER, EACH AGENT AND EACH LENDER IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF ANY LOAN DOCUMENT OR OTHER DOCUMENT RELATED THERETO. THE BORROWER, EACH AGENT AND EACH LENDER WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY THE LAW OF SUCH STATE.
10.20 Waiver of Right to Trial by Jury. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH 106
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 10.20 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
10.21 Binding Effect. This Agreement shall become effective when it shall have been executed by the Borrower and the Co- Administrative Agents shall have been notified by each Lender, Swing Line Lender and each Appropriate L/C Issuer that each such Lender, the Swing Line Lender and each Appropriate L/C Issuer has executed it and thereafter shall be binding upon and inure to the benefit of the Borrower, each Agent and each Lender and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lenders.
10.22 Post-Closing Restructuring. Notwithstanding anything in this Agreement or in any other Loan Agreement to the contrary, the parties hereto hereby agree that no transaction specifically described in Schedule 10.22 shall, with respect to any Loan Document, (w) breach any representation or warranty, (x) breach any covenant, (y) result in a Default or (z) result in any prepayment of the Loans or Cash Collateralization of Letters of Credit.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.
THE TIMKEN COMPANY
By: /s/ Sallie B. Bailey Name: Sallie B. Bailey Title: Corporate Controller
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BANK OF AMERICA, N.A., as Co-Administrative Agent and Lender
By: /s/ Thomas R. Durham Name: Thomas R. Durham Title: Managing Director
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BANC OF AMERICA SECURITIES LLC, as Lead Arranger
By: /s/ Joseph Siegel, Jr. Name: Joseph Siegel, Jr. Title: Managing Director
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KEYBANK NATIONAL ASSOCIATION, as Co- Administrative Agent, Paying Agent, Lead Arranger, Lender, Swing Line Lender and an Appropriate L/C Issuer
By: /s/ Marianne T. Meil Name: Marianne T. Meil Title: Vice President
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MERRILL LYNCH & CO., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, as Syndication Agent
By: /s/ Sheila McGillicuddy Name: Sheila McGillicuddy Title: Director
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MERRILL LYNCH CAPITAL CORPORATION, as Lender
By: /s/ Michael E. O'Brien Name: Michael E. O'Brien Title: Vice President
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MORGAN STANLEY BANK, as Documentation Agent and Lender
By: /s/ Jaap L. Tonckens Name: Jaap L. Tonckens Title: Vice President
EXHIBIT 4.6
SECOND AMENDMENT AGREEMENT
This SECOND AMENDMENT AGREEMENT (this "Amendment") is made as of the 7th day of February, 2003, by and among THE TIMKEN COMPANY, an Ohio corporation ("Borrower"), the financial institutions listed on Schedule 1 to the Credit Agreement, as hereinafter defined (collectively, the "Banks" and, individually, each a "Bank"), and KEYBANK NATIONAL ASSOCIATION, as administrative agent ("Agent"):
WHEREAS, Borrower, Agent and the Banks are parties to that certain Credit Agreement, dated as of July 10, 1998, that provides, among other things, for loans aggregating Three Hundred Million Dollars ($300,000,000), all upon certain terms and conditions (as amended and as the same may from time to time be further amended, restated or otherwise modified, the "Credit Agreement");
WHEREAS, Borrower, Agent and the Banks desire to amend the Credit Agreement to modify certain provisions thereof; and
WHEREAS, each capitalized term used herein and defined in the Credit Agreement, but not otherwise defined herein, shall have the meaning given such term in the Credit Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein and for other valuable considerations, Borrower, Agent and the Banks agree as follows:
1. Amendment to Reduction of Commitment Provision. Section 2.5(c) of the Credit Agreement is hereby amended to delete the words "not fewer than five (5) Business Days' notice" therefrom and to insert in place thereof the words "not fewer than one (1) Business Day's notice".
2. Closing Item. Concurrently with the execution of this Amendment, Borrower shall pay all legal fees and expenses of Agent in connection with this Amendment.
3. Representations and Warranties. Borrower hereby represents and warrants to Agent and the Banks that (a) Borrower has the legal power and authority to execute and deliver this Amendment; (b) the officers executing this Amendment have been duly authorized to execute and deliver the same and bind Borrower with respect to the provisions hereof; (c) the execution and delivery hereof by Borrower and the performance and observance by Borrower of the provisions hereof do not violate or conflict with the organizational agreements of Borrower or any law applicable to Borrower or result in a breach of any provision of or constitute a default under any other agreement, instrument or document binding upon or enforceable against Borrower; (d) no Default or Event of Default exists under the Credit Agreement, nor will any occur immediately after the execution and delivery of this Amendment or by the performance or observance of any provision hereof; (e) Borrower is not aware of any claim or offset against, or defense or counterclaim to, Borrower's obligations or liabilities under the Credit Agreement or any Related Writing;
and (f) this Amendment constitutes a valid and binding obligation of Borrower in every respect, enforceable in accordance with its terms.
4. Waiver. Borrower hereby waives and releases Agent and each of the Banks and their respective directors, officers, employees, attorneys, affiliates and subsidiaries from any and all claims, offsets, defenses and counterclaims of which Borrower is aware, such waiver and release being with full knowledge and understanding of the circumstances and effect thereof and after having consulted legal counsel with respect thereto.
5. References to Credit Agreement. Each reference that is made in the Credit Agreement or any Related Writing shall hereafter be construed as a reference to the Credit Agreement as amended hereby. Except as herein otherwise specifically provided, all provisions of the Credit Agreement shall remain in full force and effect and be unaffected hereby. This Amendment is a Related Writing.
6. Counterparts. This Amendment may be executed in any number of counterparts, by different parties hereto in separate counterparts and by facsimile signature, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement.
7. Governing Law. The rights and obligations of all parties hereto shall be governed by the laws of the State of Ohio, without regard to principles of conflict of laws.
[Remainder of page intentionally left blank.]
2
8. JURY TRIAL WAIVER. BORROWER, AGENT AND THE BANKS, TO THE EXTENT PERMITTED BY LAW, EACH HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG BORROWER, AGENT AND THE BANKS, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AMENDMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.
THE TIMKEN COMPANY
By: /s/ Sallie B. Bailey ________________________ Name: Sallie B. Bailey Title: Sr. Vice President-Finance & Controller
KEYBANK NATIONAL ASSOCIATION, as Agent and as a Bank
By: /s/ Marianne T. Meil _________________________ Name: Marianne T. Meil Title: Vice President
THE BANK OF NEW YORK
By: /s/ Kenneth R. McDonnell _____________________________ Name: Kenneth R. McDonnell Title: Vice President
BANK ONE, N.A.
By: /s/ Wieslaw R. Sliwinski _____________________________ Name: Wieslaw R. Sliwinski Title: Associate Director
MELLON BANK, N.A.
By: /s/ John R. Cooper _______________________ Name: John R. Cooper Title: Vice President
3
HSBC BANK USA
By: /s/ Christopher M. Samms _____________________________ Name: Christopher M. Samms Title: First Vice President
BANK OF AMERICA, N.A.
By: /s/ Thomas R. Durham _________________________ Name: Thomas R. Durham Title: Managing Director
THE NORTHERN TRUST COMPANY
By: /s/ Barbara B. Tuszynska _____________________________ Name: Barbara B. Tuszynska Title: Second Vice President
REVOLVING COMMITMENT VEHICLE CORPORATION By: J.P. Morgan Chase Bank, as Attorney-in-Fact for Revolving Commitment Vehicle Corporation
By: Name: Title:
SAN PAOLO IMI S.p.A.
By: Name: Title:
UNIZAN BANK, N.A., fka United National Bank and Trust
By: /s/ Richard F. Kress _________________________ Name: Richard F. Kress Title: Vice President
4
Exhibit 4.7
EXECUTION VERSION
THE TIMKEN COMPANY
AND
THE BANK OF NEW YORK, AS TRUSTEE
INDENTURE
DATED AS OF FEBRUARY 18, 2003
PROVIDING FOR ISSUANCE OF NOTES IN SERIES
NYDOCS01/905069.6
THE TIMKEN COMPANY INDENTURE DETAILED CROSS-REFERENCE TABLE
Trust Indenture Act Indenture Section Section
310 (a) (1)................................................. 7.10 (a) (2)................................................. 7.10 (a) (3)................................................. N.A. (a) (4)................................................. N.A. (a) (5)................................................. 7.10 (b) .................................................... 7.08 (c) .................................................... N.A.
311 (a) .................................................... 7.03 (b) .................................................... 7.03 (c) .................................................... N.A.
312 (a) .................................................... 11.02 (b) .................................................... 11.02 (c) .................................................... 11.02
313 (a) .................................................... 7.06 (b) .................................................... 7.06 (c) .................................................... 7.06
314 (a) .................................................... N.A. (b) (1)................................................. N.A. (b) (2)................................................. N.A. (c) (1)................................................. 11.04 (c) (2)................................................. 11.04 (c) (3)................................................. N.A. (d) .................................................... N.A. (e) .................................................... 11.05 (f) .................................................... N.A.
315 (a) .................................................... 7.01, 7.02 (b) .................................................... 7.02, 7.05 (c) .................................................... 7.01 (d) .................................................... 7.02 (e) .................................................... 6.12, 7.02
316 (a) (last sentence)..................................... 2.05 (a) (1) (A)................................................. 6.05 (a) (1) (B)................................................. 6.02, 6.04 (a) (2) .................................................... N.A. (b) ........................................................ 6.06, 6.07
NYDOCS01/905069.6 i
Trust Indenture Act Indenture Section Section
317 (a) (1)................................................. 6.08 (a) (2) ................................................ 6.09 (b) .................................................... 2.03
318 (a) .................................................... N.A. (b) ........................................................ N.A. (c) ........................................................ 11.01
NYDOCS01/905069.6 ii
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS........................................ 1 SECTION 1.02. RULES OF CONSTRUCTION.............................. 7 SECTION 1.03. INCORPORATION BY REFERENCE OF THE TRUST INDENTURE ACT............................................... 7
ARTICLE II. THE NOTES
SECTION 2.01. UNLIMITED IN AMOUNT, ISSUABLE IN SERIES, FORM AND DATING....................................... 8 SECTION 2.02. EXECUTION, AUTHENTICATION AND DENOMINATIONS ...... 11 SECTION 2.03. REGISTRAR, PAYING AGENT AND AUTHENTICATING AGENT; PAYING AGENT TO HOLD MONEY IN TRUST.............. 13 SECTION 2.04. REPLACEMENT NOTES................................. 13 SECTION 2.05. OUTSTANDING NOTES................................. 14 SECTION 2.06. TEMPORARY NOTES................................... 15 SECTION 2.07. CANCELLATION...................................... 15 SECTION 2.08. CUSIP NUMBERS..................................... 15 SECTION 2.09. TRANSFER AND EXCHANGE............................. 15 SECTION 2.10. NOTEHOLDER LISTS.................................. 18 SECTION 2.11. DEFAULTED INTEREST................................ 18 SECTION 2.12. COMPUTATION OF INTEREST........................... 19
ARTICLE III. REDEMPTION
SECTION 3.01. METHOD AND EFFECT OF REDEMPTION................... 19 SECTION 3.02. EXCLUSION OF CERTAIN NOTES FROM ELIGIBILITY FOR SELECTION FOR REDEMPTION......................... 20 SECTION 3.03. DEPOSIT OF REDEMPTION PRICE....................... 21
ARTICLE IV. COVENANTS
SECTION 4.01. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST........ 21 SECTION 4.02. OFFICES FOR PAYMENTS, ETC......................... 21 SECTION 4.03. APPOINTMENT TO FILL A VACANCY IN OFFICE OF TRUSTEE.......................................... 22 SECTION 4.04. PAYING AGENTS..................................... 22 SECTION 4.05. WRITTEN STATEMENT TO TRUSTEE...................... 23 SECTION 4.06. [RESERVED]........................................ 23 SECTION 4.07. LIMITATION ON LIENS............................... 23 SECTION 4.08. LIMITATION ON SALE AND LEASEBACK.................. 24 SECTION 4.09. CALCULATION OF ORIGINAL ISSUE DISCOUNT............ 25
NYDOCS01/95069.6 iii
ARTICLE V. CONSOLIDATION, MERGER, SALE OR CONVEYANCE
SECTION 5.01. COMPANY MAY CONSOLIDATE, MERGE, ETC., ON CERTAIN TERMS............................................ 25 SECTION 5.02. SUCCESSOR COMPANY SUBSTITUTED..................... 25 SECTION 5.03. OPINION OF COUNSEL TO TRUSTEE..................... 26
ARTICLE VI. DEFAULT AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT................................. 26 SECTION 6.02. ACCELERATION...................................... 27 SECTION 6.03. OTHER REMEDIES.................................... 28 SECTION 6.04. WAIVER OF PAST DEFAULTS........................... 28 SECTION 6.05. CONTROL BY MAJORITY............................... 28 SECTION 6.06. LIMITATION ON SUITS............................... 29 SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.............. 29 SECTION 6.08. COLLECTION SUIT BY TRUSTEE........................ 29 SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.................. 30 SECTION 6.10. PRIORITIES........................................ 30 SECTION 6.11. RESTORATION OF RIGHTS AND REMEDIES................ 31 SECTION 6.12. UNDERTAKING FOR COSTS............................. 31 SECTION 6.13. RIGHTS AND REMEDIES CUMULATIVE.................... 31 SECTION 6.14. DELAY OR OMISSION NOT WAIVER...................... 32 SECTION 6.15. WAIVER OF STAY, EXTENSION OR USURY LAWS........... 32
ARTICLE VII. THE TRUSTEE
SECTION 7.01. GENERAL........................................... 32 SECTION 7.02. CERTAIN RIGHTS OF TRUSTEE......................... 32 SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE...................... 34 SECTION 7.04. TRUSTEE'S DISCLAIMER.............................. 34 SECTION 7.05. NOTICE OF DEFAULT................................. 34 SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS..................... 35 SECTION 7.07. COMPENSATION AND INDEMNITY........................ 35 SECTION 7.08. REPLACEMENT OF TRUSTEE............................ 35 SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER....................... 37 SECTION 7.10. ELIGIBILITY....................................... 37 SECTION 7.11. MONEY HELD IN TRUST............................... 37
ARTICLE VIII. DEFEASANCE AND DISCHARGE
SECTION 8.01. DISCHARGE OF COMPANY'S OBLIGATIONS................ 37 SECTION 8.02. LEGAL DEFEASANCE.................................. 38 SECTION 8.03. COVENANT DEFEASANCE............................... 39
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SECTION 8.04. APPLICATION OF TRUST MONEY........................ 40 SECTION 8.05. REPAYMENT TO COMPANY.............................. 40 SECTION 8.06. REINSTATEMENT..................................... 40
ARTICLE IX. SUPPLEMENTAL INDENTURES
SECTION 9.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS......................................... 40 SECTION 9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS... 42 SECTION 9.03. EXECUTION OF SUPPLEMENTAL INDENTURES.............. 43 SECTION 9.04. EFFECT OF SUPPLEMENTAL INDENTURES................. 43 SECTION 9.05. CONFORMITY WITH TRUST INDENTURE ACT............... 44 SECTION 9.06. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES..... 44
ARTICLE X. SINKING FUNDS
SECTION 10.01. APPLICABILITY OF ARTICLE......................... 44 SECTION 10.02. SATISFACTION OF SINKING FUND PAYMENTS WITH NOTES........................................... 44 SECTION 10.03. REDEMPTION OF NOTES FOR SINKING FUND............. 44
ARTICLE XI. SUBORDINATION OF NOTES
SECTION 11.01. APPLICABILITY OF ARTICLE; AGREEMENT TO SUBORDINATE..................................... 45 SECTION 11.02. RIGHTS OF HOLDERS OF SUBORDINATED INDEBTEDNESS... 45 SECTION 11.03. PAYMENTS AND DISTRIBUTIONS....................... 46 SECTION 11.04. PAYMENTS BY THE COMPANY.......................... 47 SECTION 11.05. APPOINTMENT OF THE TRUSTEE BY HOLDERS............ 48 SECTION 11.06. NOTICE TO TRUSTEE................................ 48 SECTION 11.07. RIGHTS OF TRUSTEE................................ 48 SECTION 11.08. PAYING AGENT..................................... 48
ARTICLE XII. MISCELLANEOUS
SECTION 12.01. TRUST INDENTURE ACT OF 1939...................... 49 SECTION 12.02. NOTEHOLDER COMMUNICATIONS; NOTEHOLDER ACTIONS.... 49 SECTION 12.03. NOTICES.......................................... 49 SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT....................................... 50 SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.... 51 SECTION 12.06. PAYMENT DATE OTHER THAN A BUSINESS DAY........... 51 SECTION 12.07. GOVERNING LAW.................................... 51 SECTION 12.08. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.... 51 SECTION 12.09. SUCCESSORS....................................... 51 SECTION 12.10. DUPLICATE ORIGINALS.............................. 52 SECTION 12.11. SEPARABILITY..................................... 52 SECTION 12.12. TABLE OF CONTENTS AND HEADINGS................... 52
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SECTION 12.13. NO LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, INCORPORATORS AND STOCKHOLDERS................. 52
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EXHIBIT
EXHIBIT A DTC LEGEND A-1
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INDENTURE, dated as of February 18, 2003, among The Timken Company, an Ohio corporation (the "Company"), and The Bank of New York, a banking corporation duly organized under the laws of New York, as Trustee ("Trustee").
RECITALS
The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its senior or subordinated debentures, notes or other evidences of indebtedness, which may be convertible into or exchangeable for any securities of any person (including ] the Company), to be issued in one or more series (the "Notes"), as herein provided, up to such principal amount as may from time to time be authorized in or pursuant to one or more resolutions of the Board of Directors or by supplemental indenture.
All things necessary to make this Indenture a valid, legal and binding agreement of the Company, in accordance with its terms, have been done.
This Indenture is subject to, and will be governed by, the provisions of the Trust Indenture Act that are required to be a part of and govern indentures qualified under the Trust Indenture Act.
THIS INDENTURE WITNESSETH
For and in consideration of the premises and the purchase from time to time of the Notes by the Holders thereof, the parties hereto covenant and agree, for the equal and proportionate benefit of all Holders, as follows:
ARTICLE I. DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions
"Affiliate" means, with respect to any specified Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with") with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.
"Agent" means any Registrar, Paying Agent or Authenticating Agent.
"Agent Member" means a member of, or a participant in, the Depositary.
"Attributable Debt" means, as to any particular lease under which any Person is at the time liable, at any date as of which the amount thereof is to be determined, the total net amount of rent required to be paid by such Person under such lease during the remaining term thereof (after giving effect to any extensions at the option of the lessee), discounted from the respective due dates thereof to such date at the average rate per annum borne by the
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Notes for the preceding 365 days. The net amount of rent required to be paid under any such lease for any such period shall be the amount of the rent payable by the lessee with respect to such period, after excluding amounts required to be paid on account of maintenance and repairs, insurance, taxes, assessments, water and utility rates and similar charges. In the case of any lease which is terminable by the lessee upon the payment of a penalty, such net amount shall also include the amount of such penalty, but no rent shall be considered as required to be paid under such lease subsequent to the first date upon which it may be so terminated.
"Authenticating Agent" refers to a Person engaged to authenticate the Notes instead of the Trustee.
"Authorized Agent" has the meaning assigned to such term in Section 12.07 hereof.
"Bankruptcy Default" has the meaning assigned to such term in Section 6.01.
"Board of Directors" means the board of directors or comparable governing body of the Company, or any committee thereof duly authorized to act on its behalf.
"Board Resolution" means a resolution duly adopted by the Board of Directors which is certified by the Secretary or an Assistant Secretary of the Company and remains in full force and effect as of the date of its certification.
"Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City or in the city where the Corporate Trust Office of the Trustee is located are authorized by law to close.
"Capital Stock" means with respect to any Person, any and all shares of stock of a corporation, partnership interests or other equivalent interests (however designated, whether voting or non-voting) in such Person's equity, entitling the holder to receive a share of the profits and losses of, or distributions of assets, after liabilities, of such Person.
"Certificated Note" means a Note in fully-registered certificated form without interest coupons.
"Commission" means the Securities and Exchange Commission.
"Company" means the party named as such in the first paragraph of the Indenture or any successor obligor under the Indenture and the Notes pursuant to Article Five.
"Company Order" means a written request or order signed in the name of the Company by two Officers of the Company or by an Officer and the Controller, Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, and delivered to the Trustee in respect of the series of Notes to which the Company Order shall relate. A Company Order shall specify the amount of Notes to be authenticated and the date on which the original issue of Notes is to be authenticated.
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"Consolidated Net Tangible Assets" means the aggregate amount of assets (less applicable reserves and other properly deductible items) after deducting therefrom (a) all current liabilities (excluding any constituting Funded Debt by reason of being renewable or extendible) and (b) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other intangibles, all as set forth on the most recent consolidated balance sheet of the Company and its consolidated Subsidiaries and computed in accordance with generally accepted accounting principles.
"Corporate Trust Office" means the office of the Trustee, the Registrar and any Paying Agent, the principal corporate trust office at which at any particular time such respective entity's corporate trust business shall be administered, which at the date of the Indenture is located at The Bank of New York, 101 Barclay Street, Floor 8 West, New York, New York 10286.
"Debt" has the meaning set forth in Section 4.07 hereof.
"Default" means any event that is, or after notice or passage of time or both would be, an Event of Default.
"Depositary" means with respect to the Notes of any series issuable or issued in whole or in part in the form of one or more Global Notes, the Person designated as Depositary for such series by the Company, which Depositary shall be a clearing agency registered under the Exchange Act; and if at any time there is more than one such Person, "Depositary" as used with respect to the Notes of any series shall mean the Depositary with respect to the Notes of such series. The initial Depositary shall be DTC.
"Domestic Subsidiary" means a Subsidiary of the Company except a Subsidiary (a) which neither transacts any substantial portion of its business nor regularly maintains any substantial portion of its fixed assets within the United States of America, or (b) which is engaged primarily in financing the operation of the Company or its Subsidiaries, or both, outside the United States of America.
"DTC" means The Depository Trust Company, a New York corporation, and its successors.
"DTC Legend" means the legend set forth in Exhibit A.
"Event of Default" has the meaning assigned to such term in Section 6.01 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exempted Debt" means the sum of the following items outstanding as of the date Exempted Debt is being determined: (i) indebtedness of the Company and its Subsidiaries incurred after the date of this Indenture and secured by Mortgages created or assumed pursuant to Section 4.07(b) and (ii) Attributable Debt of the Company and its Subsidiaries in respect of every Sale and Leaseback Transaction entered into after the date of this Indenture and pursuant to Section 4.08(b).
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"Funded Debt" means all indebtedness for money borrowed having a maturity of more than 12 months from the date as of which the amount thereof is to be determined or having a maturity of less than 12 months from the date as of which the amount thereof is to be determined but by its terms being renewable or extendible beyond 12 months from such date at the option of the borrower.
"GAAP" means generally accepted accounting principles in the United States of America as in effect from time to time.
"Global Note" means a Note in registered global form without interest coupons.
"Holder" or "Noteholder" means the registered holder of any Note.
"Indenture" means this indenture, as amended, supplemented or restated from time to time and shall include the terms of the or those particular series of Notes established as contemplated by Section 2.01; provided, however, that, if at any time more than one Person is acting as Trustee under this instrument, "Indenture" shall mean, with respect to any one or more series of Notes for which a Person is Trustee, this instrument as originally executed or as it may from time to time be amended, supplemented or restated by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, and shall include the terms of the or those particular series of Notes for which such Person is Trustee established as contemplated by Section 2.01, exclusive, however, of any provisions or terms which relate solely to other series of Notes for which such Person is not Trustee, regardless of when such terms or provisions were adopted, and exclusive of any provisions or terms adopted by means of one or more indentures supplemental hereto executed and delivered after such Person had become such Trustee but to which such Person, as such Trustee, was not a party.
"Interest", when used with respect to an Original Issue Discount Note that by its terms bears interest only after maturity, means interest payable after maturity.
"Interest Payment Date" means, for any series of Notes issued and outstanding hereunder, the date or dates in each year on which any interest on such series is due and payable.
"Mortgage" has the meaning assigned to such term in Section 4.07 hereof. "Notes" has the meaning assigned to such term in the recitals hereof and more particularly means any Notes authenticated and delivered under this Indenture; provided, however, that, if at any time there is more than one Person acting as Trustee under this Indenture, "Notes" with respect to the series as to which such Person is Trustee shall have the meaning stated in the first recital of this Indenture and shall more particularly mean Notes authenticated and delivered under this Indenture, exclusive, however, of Notes of any series as to which such Person is not Trustee.
"Officer" means the chairman of the Board of Directors, the president or chief executive officer, any vice president, the chief financial officer, the controller, the treasurer or any assistant treasurer, or the secretary or any assistant secretary, of the Company.
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"Officers' Certificate" means a certificate signed in the name of the Company (i) by the chairman of the Board of Directors, the president or any vice president and (ii) by any executive vice president, controller, treasurer, assistant treasurer or the secretary or any assistant secretary.
"Opinion of Counsel" means a written opinion signed by legal counsel, who may be an employee of or counsel to the Company, satisfactory in its reasonable discretion to the Trustee. Each opinion shall include the statements provided for in Section 12.5 hereof.
"Original Issue Discount Note" means any Note that provides that an amount less than its principal amount is due and payable upon acceleration after an Event of Default.
"Paying Agent" has the meaning assigned to such term in Section 2.03(a) hereof.
"Person" means an individual, a corporation, a partnership, a limited liability company, a joint venture, an association, a joint stock company, a trust, an unincorporated organization or government or any agency or political subdivision thereof.
"Principal" of any indebtedness means the principal amount of such indebtedness (or if such indebtedness was issued with original issue discount, the face amount of such indebtedness less the remaining unamortized portion of the original issue discount of such indebtedness), together with, unless the context otherwise indicates, any premium then payable on such indebtedness.
"Principal Manufacturing Property" means any building, structure or other facility, together with the land upon which it is erected and fixtures comprising a part thereof, used primarily for manufacturing or warehousing and located in the United States of America, owned or leased by the Company or any Subsidiary, other than any such building, structure or other facility or portion thereof or any such land or fixture (i) which is financed by obligations issued by a State, or a possession of the United States, or any political subdivision of any of the foregoing, or the District of Columbia, the interest on which is excludable from gross income of the holders thereof pursuant to the provisions of Section 103(a)(1) of the Internal Revenue Code (or any successor of such provision) as in effect at the time of the issuance of such obligations, or (ii) which, in the opinion of the Board of Directors of the Company, is not of material importance to the total business conducted by the Company and its Subsidiaries as a whole.
"Register" has the meaning assigned to such term in Section 2.03(a) hereof.
"Registrar" has the meaning assigned to such term in Section 2.03(a) hereof.
"Regular Record Date" means, for the interest payable on any Interest Payment Date in respect of any series of Notes, except as provided in, or pursuant to, Board Resolution and/or supplemental indenture (if any) relating thereto, the day (whether or not a Business Day) that is fifteen days preceding the applicable Interest Payment Date.
"Responsible Officer" shall mean, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant secretary,
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assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture.
"Sale and Leaseback Transaction" has the meaning assigned to such term in Section 4.08(a) hereof.
"Senior Indebtedness" means (a) the principal of and premium, if any, and interest on and fees, costs, enforcement expenses, collateral protection expenses and other reimbursements or indemnity obligations relating to all indebtedness, obligations and other liabilities, contingent or otherwise, of the Company, whether outstanding on the date of this Indenture or thereafter incurred or created, (i) for money borrowed by the Company that is evidenced by a note, bond, debenture, loan agreement or similar instrument or agreement, (ii) for money borrowed by, or non-contingent obligations of, others and either assumed or guaranteed, directly or indirectly, by the Company, (iii) in respect of letters of credit and banker's acceptances or similar transactions issued or made by banks, or (iv) constituting purchase money indebtedness, (b) all deferrals, renewals, extensions, refinancings, restructurings and refundings of, and amendments, modifications and supplements to, any such indebtedness, (c) all obligations of the Company for the payment of money relating to capital lease obligations and (d) all other general unsecured obligations. As used in the preceding sentence the term "purchase money indebtedness" means indebtedness, the proceeds of which are used, directly or indirectly, to purchase property or which is evidenced by a note, debenture, bond or other instrument (whether or not secured by any lien or other security interest) issued or assumed as all or a part of the consideration for the acquisition of property, whether by purchase, merger, consolidation or otherwise. Notwithstanding anything to the contrary in this Indenture or the Notes, Senior Indebtedness shall not include: (i) indebtedness or other obligations owed by the Company to any of its subsidiaries or Affiliates; (ii) any liabilities for taxes owed or owing by the Company; (iii) trade account payables incurred in the ordinary course of business; or (iv) any other indebtedness of the Company which, by its terms or the terms of the instrument creating or evidencing it, is subordinate in right of payment to or pari passu with the Subordinated Notes, as the case may be.
"Special Record Date" has the meaning assigned to such term in Section 2.11 hereof.
"Stated Maturity" means with respect to any indebtedness, the date specified as the fixed date on which the final installment of principal of such indebtedness is due and payable.
"Subordinated Notes" has the meaning assigned to such term in Section 11.01 hereof.
"Subsidiary" means a corporation at least a majority of the outstanding Voting Stock of which is owned or controlled, directly or indirectly, by the Company or by one or more Subsidiaries of the Company, or by the Company and one or more Subsidiaries of the Company.
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"Trust Indenture Act" means the Trust Indenture Act of 1939 as in effect on the date this Indenture was originally executed.
"Trustee" means the party named as such in the first paragraph of the Indenture or any successor trustee under the Indenture pursuant to Article Seven. If at any time there is more than one Person acting as Trustee hereunder, "Trustee" as used with respect to the Notes of any series shall mean the Trustee with respect to the Notes of that series.
"U.S. Government Obligations" means (i) direct obligations of the United States for which its full faith and credit are pledged for the full and timely payment thereof, (ii) obligations of a person controlled or supervised by and acting as an agency or instrumentality of the United States, the full and timely payment of which is unconditionally guaranteed as a full faith and credit obligation of the United States, or (iii) certificates or receipts representing direct ownership interests in obligations or specified portions (such as principal or interest) of obligations described in (i) or (ii), which obligations are held by a custodian in safekeeping on behalf of such certificates and receipts.
"Voting Stock" means, with respect to any Person, Capital Stock of any class or kind ordinarily having the power to vote for the election of directors, managers or other voting members of the governing body of such Person.
Section 1.02. Rules of Construction. Unless the context otherwise requires or except as otherwise expressly provided,
(1) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;
(2) "herein," "hereof" and other words of similar import refer to the Indenture as a whole and not to any particular Section, Article or other subdivision;
(3) all references to Sections or Articles or Exhibits refer to Sections or Articles or Exhibits of or to the Indenture unless otherwise indicated;
(4) references to agreements or instruments, or to statutes or regulations, are to such agreements or instruments, or statutes or regulations, as amended from time to time (or to successor statutes and regulations); and (5) in the event that a transaction meets the criteria of more than one category of permitted transactions or listed exceptions the Company may classify such transaction as it, in its sole discretion, determines.
Section 1.03. Incorporation by Reference of the Trust Indenture Act. Whenever this Indenture refers to a provision of the Trust Indenture Act, the provision is incorporated by reference in and made a part of this Indenture. The following Trust Indenture Act terms used in this Indenture have the following meanings:
(1) "indenture securities" means the Notes.
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(2) "indenture securityholder" means a Noteholder.
(3) "indenture to be qualified" means this Indenture.
(4) "indenture trustee" or "institutional trustee" means the Trustee.
(5) "obligor" on the Notes means the Company and any successor obligor on the Notes.
All other terms used in this Indenture that are defined by the Trust Indenture Act, defined by Trust Indenture Act reference to another statute or defined by Commission rule under the Trust Indenture Act have the meanings so assigned to them.
ARTICLE II. THE NOTES
Section 2.01. Unlimited in Amount, Issuable in Series, Form and Dating. The aggregate principal amount of Notes that may be authenticated and delivered under this Indenture is unlimited. The Notes may be issued in one or more series. The Notes may be subordinated in right of payment to Senior Indebtedness as provided in Article Eleven. There shall be established in or pursuant to a Board Resolution or an Officers' Certificate pursuant to authority granted under a Board Resolution or established in one or more indentures supplemental hereto, prior to the issuance of Notes of any series, any or all of the following, as applicable:
(a) the title of the Notes of the series (which shall distinguish the Notes of the series from all other series of Notes);
(b) any limit upon the aggregate principal amount of Notes of the series that may be authenticated and delivered under this Indenture (except for Notes authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Notes of the series pursuant to this Article Two);
(c) the price or prices (expressed as a percentage of the aggregate principal amount thereof) at which the Notes of the series will be issued;
(d) the date or dates on which the principal of the Notes of the series is payable or the manner in which such dates are determined;
(e) the rate or rates that may be fixed or variable at which the Notes of the series shall bear interest, if any, or the manner in which such rate or rates shall be determined, the date or dates from which such interest shall accrue, the Interest Payment Dates for the Notes of the series and the Regular Record Dates for the determination of Holders to whom interest is payable and the basis upon which interest shall be calculated, if other than on the basis of a 360-day year of twelve 30-day months;
(f) the place or places where the principal of, premium, if any, and any interest, if any, on Notes of the series shall be payable or the method of
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such payment, if by wire transfer, mail or by other means; and the place or places where notices or demands to or upon the Company in respect of the Notes of the series and this Indenture may be served, if, in each case, other than as provided herein;
(g) the obligation or right, if any, of the Company to redeem, purchase or repay Notes of the series, in whole or in part, pursuant to any redemption, any sinking fund or analogous provisions or at the option of a Holder thereof and the price or prices at which and the period and periods within which and the terms and conditions upon which Notes of the series shall be redeemed, purchased or repaid, in whole or in part, pursuant to such obligation;
(h) the dates, if any, on which, and the price or prices at which, the Notes of the series will be repurchased by the Company at the option of the Holders thereof and other detailed terms and provisions of such repurchase obligations;
(i) if other than the Trustee, the identity of the trustee, Registrar and/or Paying Agent and, if applicable, the Authentication Agent for the Notes of that series;
(j) if other than denominations of $1,000 and any integral multiple thereof, the denominations in which Notes of the series shall be issuable;
(k) if other than the principal amount thereof, the portion of the principal amount of Notes of the series which shall be payable upon declaration of acceleration of the maturity thereof pursuant to Section 6.02 hereof or the method by which such portion shall be determined;
(l) any addition to, change in, or deletion from the covenants set forth in Articles Four, Five or Eight that applies to Notes of the series;
(m) any addition to, changes in or deletion from the Events of Default with respect to the Notes of a particular series and any change in the right of the Trustee or the requisite Holders of such Notes to declare the principal amount thereof due and payable pursuant to Section 6.02 hereof;
(n) whether the amount of payment of principal of (and premium, if any, on) or interest, if any, on the Notes of the series may be determined with reference to an index, formula or other method (which index, formula or method may be based, without limitation, on one or more currencies, commodities, equity indices, or other indices), and the manner in which such amounts shall be determined;
(o) the terms and conditions of any warrants that may be offered by the Company in connection with Notes of any series;
(p) the forms of the Notes of the series and whether the Notes will be issuable, in whole or in part, as Global Notes;
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(q) the terms and conditions, if any, upon which such Global Note or Notes may be exchanged in whole or in part for other individual Notes, and the Depositary for such Global Note and Notes, if other than as set forth herein;
(r) the provisions, if any, relating to any security provided for the Notes of the series;
(s) the terms and conditions, if any, upon which additional interest or amounts may be payable with respect to Notes of any series;
(t) any other terms of the series (which terms may modify, supplement or delete any provision of this Indenture with respect to such series; provided, however, that no such term may modify or delete any provision hereof if imposed by the Trust Indenture Act; and provided, further, that any modification or deletion of the rights, duties or immunities of the Trustee hereunder shall have been consented to in writing by the Trustee);
(u) the terms and conditions, if any, upon which the Notes of the series shall be exchanged for or converted into other securities of the Company or securities of another person;
(v) any depositories, interest rate calculation agents or other agents with respect to Notes of such series if other than those appointed herein;
(w) whether the Notes of such series are subject to subordination and any modification of, addition to or provision in lieu of any of the provisions of Article Eleven hereof, and whether such Notes rank as senior Subordinated Notes or Subordinated Notes or any combination thereof; and
(x) the securities exchange or quotation system, if any, upon which Notes of any series will be listed or quoted and any CUSIP number, if any.
All Notes of any one series shall be substantially identical except as to denomination and except as may otherwise be provided in or pursuant to such Board Resolution or Officers' Certificate or in any such indenture supplemental hereto in each case, with appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture. Not all Notes of any one series need be issued at the same time, and, unless otherwise provided, a series may be reopened for issuance of additional Notes of such series. Notes may differ between series in respect of any matters, provided that all series of Notes shall be equally and ratably entitled to the benefits of this Indenture.
The principal of, premium, if any and any interest on the Notes shall be payable at the office or agency of the Company designated in the form of Note for the series (if other than the office or agency designated in Section 4.02 hereof); provided, however, that payment of interest may be made at the option of the Company by check mailed to the address of the Person entitled thereto as such address shall appear in the Register of Notes referred to in Section 2.03 hereof or by wire transfer to an account of the Person entitled thereto as such account shall be provided to the Registrar and shall appear on the Register.
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Each Note shall be in one of the forms approved from time to time by or pursuant to a Board Resolution or Officers' Certificate, or established in one or more indentures supplemental hereto. Prior to the delivery of a Note to the Trustee for authentication in any form approved by or pursuant to a Board Resolution, Officers' Certificate or supplemental indenture hereto, the Company shall deliver to the Trustee the Board Resolution, Officers' Certificate or supplemental indenture hereto by or pursuant to which such form of Note has been approved, which Board Resolution, Officers' Certificate or supplemental indenture hereto shall have attached thereto a true and correct copy of the form of Note that has been approved by or pursuant thereto.
The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage.
Section 2.02. Execution, Authentication and Denominations.
(a) Two Officers shall execute the Notes for the Company by facsimile or manual signature in the name and on behalf of the Company. Such signature may be the manual or facsimile signature of such Officer. If an Officer whose signature is on a Note no longer holds that office at the time the Note is authenticated, the Note will still be valid.
(b) A Note will not be valid until the Trustee manually signs the certificate of authentication on the Note, with the signature conclusive evidence that the Note has been authenticated under the Indenture. The form of the Trustee's certificate of authentication to be borne by the Notes shall be substantially as follows: TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes issued under the within-mentioned Indenture.
[Trustee], as Trustee
By: _________________________________ Authorized Signatory
Dated: _____________
(c) At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Notes of any series executed by the Company to the Trustee, together with a Company Order for the authentication and delivery of such Notes. The Company Order may provide that the Notes that are the subject thereof shall be authenticated and delivered by the Trustee upon the written order of Persons designated in the Company Order, and that such Persons are authorized to specify the terms and conditions of such Notes, to the extent permitted by the Board Resolutions, Officers' Certificate and/or supplemental indenture (if any) relating thereto. If not all the Notes of any series are to be issued at one time and if the Board Resolution, Officers' Certificate or supplemental indenture establishing such series shall so permit, such Company Order may set forth procedures acceptable to the Trustee for the issuance of such Notes and determination of the terms of particular Notes of such series such as interest rate, maturity date, date of issuance and date from which interest shall accrue. The Trustee shall execute
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and deliver the supplemental indenture (if any) relating to said Notes and the Trustee shall authenticate and deliver said Notes as specified in such Company Order; provided that, prior to authentication and delivery of the first Notes of any Series, the Trustee shall have received:
(1) a copy of the Board Resolutions or Officers' Certificate, with a copy of (i) the form of Note approved thereby and (ii) with respect to an Officers' Certificate, the Board Resolution approving such series, attached thereto, or a supplemental indenture in respect of the issuance of the Notes of the series, executed on behalf of the Company;
(2) an Officers' Certificate to the effect that the Notes of such series comply or will comply with the requirements of this Indenture and the said Board Resolutions, Officer's Certificate and/or supplemental indenture (if any);
(3) an Opinion of Counsel: (A) to the effect that (i) the Notes of such series, the Board Resolutions, Officers' Certificate and/or the supplemental indenture (if any) relating thereto comply or will comply with the requirements of this Indenture, and (ii) the Notes of such series, when authenticated and delivered by the Trustee in accordance with the said Company Order, will constitute valid, legal and binding obligations of the Company enforceable in accordance with their terms and will be entitled to the benefits of the Indenture, subject to (x) bankruptcy and other laws affecting creditors' rights generally as in effect from time to time, (y) limitations of generally applicable equitable principles and (z) other exceptions acceptable to the Trustee and its counsel; and (B) relating to such other matters as may reasonably be requested by the Trustee or its counsel; and
(4) if the Notes to be issued are Original Issue Discount Notes, an Officers' Certificate setting forth the yield to maturity for the Notes or other information sufficient to compute amounts due on acceleration, or specifying the manner in which such amounts are to be determined, if such yield to maturity and other facts are not specified in the form of the Notes.
(d) Subject to Section 7.02 hereof, the Trustee shall be fully protected in relying upon the documents delivered to it as provided above in connection with the issuance of any series of Notes.
(e) The Trustee shall have the right to decline to authenticate and deliver any Notes under this Section 2.02 if the Trustee, being advised by counsel, determines that such action may not lawfully be taken or the Trustee in good faith shall determine that such action would expose the Trustee to liability to Holders of previously issued and outstanding Notes.
(f) Each Note shall be dated the date of its authentication unless otherwise specified in the Officers' Certificate, Board Resolutions and/or supplemental indenture relating thereto.
(g) The Notes of each series shall be issuable in definitive registered form without coupons and, except for any Global Note, in such denominations as shall be specified as contemplated by Section 2.01. In the absence of any such provisions with respect to the Notes of any series, the
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Notes of such series, other than a Global Note, shall be issuable in denominations of $1,000 and any integral multiple thereof.
Section 2.03. Registrar, Paying Agent and Authenticating Agent; Paying Agent to Hold Money in Trust.
(a) The Company shall maintain an office or agency where Notes of a particular series may be presented for registration of transfer or for exchange (the "Registrar") and an office or agency where Securities of that series may be presented for payment (a "Paying Agent"). The Registrar for a particular series of Securities shall keep a register of the Notes of that series and of their registration of transfer and exchange (the "Register"). The Company may appoint one or more co-Registrars and one or more additional paying agents for each series of Notes. The term "Paying Agent" includes any additional paying agent. The Company may appoint an Authenticating Agent, in which case each reference in the Indenture to the Trustee in respect of the obligations of the Trustee to be performed by that Agent will be deemed to be references to the Agent. The Company may act as Registrar or (except for purposes of Article Eight) Paying Agent. In each case the Company and the Trustee will enter into an appropriate agreement with the Agent implementing the provisions of the Indenture relating to the obligations of the Trustee to be performed by the Agent and the related rights. The Company initially appoints the Trustee as Registrar and Paying Agent. The Company may change the Registrar or Paying Agent without notice to any Holder; provided that upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the Notes.
(b) The Company will require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of the Holders or the Trustee all money held by the Paying Agent for the payment of principal of, premium, if any and interest on the Notes and will promptly notify the Trustee of any default by the Company in making any such payment. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and account for any funds disbursed, and the Trustee may at any time during the continuance of any payment default, upon written request to a Paying Agent, require the Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed. Upon doing so, the Paying Agent will have no further liability for the money so paid over to the Trustee.
Section 2.04. Replacement Notes. If a mutilated Note is surrendered to the Trustee or the Company or if a Holder claims that its Note has been lost, destroyed or wrongfully taken, the Company will issue and the Trustee will authenticate a replacement Note of like tenor and principal amount and bearing a number not contemporaneously outstanding. Every replacement Note is an additional obligation of the Company and entitled to the benefits of the Indenture. An indemnity must be furnished by the Holder that is sufficient in the judgment of both the Trustee and the Company to protect the Company and the Trustee from any loss they may suffer if a Note is replaced. The Company may charge the Holder for the expenses of the Company and the Trustee in replacing a Note. In case the mutilated, lost, destroyed or wrongfully taken Note has become or is about to become due and payable, the Company in its discretion may pay the Note instead of issuing a replacement Note. Upon the issuance of any replacement Note under this Section, the Company may require the payment of a
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sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith.
Section 2.05. Outstanding Notes.
(a) Notes outstanding at any time are all Notes that have been authenticated by the Trustee except for:
(i) Notes cancelled by the Trustee or delivered to it for cancellation;
(ii) any Note which has been replaced pursuant to Section 2.04 unless and until the Trustee and the Company receive proof satisfactory to them that the replaced Note is held by a bona fide purchaser in whose hands such Note is a valid obligation of the Company; and
(iii) on or after the maturity date or any redemption date, those Notes payable or to be redeemed or purchased on that date for which the Trustee (or Paying Agent, other than the Company or an Affiliate of the Company) holds in trust money sufficient to pay all amounts then due; provided that if such Notes, or portions thereof, are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as herein provided, or provisions satisfactory to the Trustee shall have been made for giving such notice; and
(iv) solely to the extent provided in Article VIII, Notes which are subject to legal defeasance or covenant defeasance as provided in Section 8.02 or 8.03.
(b) A Note does not cease to be outstanding because the Company or one of its Affiliates holds the Note, provided that in determining whether the Holders of the requisite principal amount of the outstanding Notes have given or taken any request, demand, authorization, direction, notice, consent, waiver or other action hereunder, Notes owned by the Company or any Affiliate of the Company will be disregarded and deemed not to be outstanding (it being understood that in determining whether the Trustee is protected in relying upon any such request, demand, authorization, direction, notice, consent, waiver or other action, only Notes which a Responsible Officer of the Trustee knows to be so owned will be so disregarded). Notes so owned which have been pledged in good faith may be regarded as outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Notes and that the pledgee is not the Company or any Affiliate of the Company.
(c) In determining whether the holders of the requisite principal amount of outstanding Notes of any or all series have given any request, demand, authorization, direction, notice, consent or waiver hereunder, (a) the principal amount of an Original Issue Discount Note that shall be deemed to be outstanding for such purposes shall be the amount of the principal thereof that would be due and payable as of the date of such determination upon a declaration of acceleration of the maturity thereof, and (b) Notes owned beneficially by the Company or any other obligor on the Notes with respect to which such determination is being made or any Person, directly or indirectly, controlling or controlled by or under direct or indirect control with the Company or any other obligor on the Notes with respect to which such determination is being made shall be disregarded and deemed not to be
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outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes which a Responsible Officer of the Trustee knows to be so owned shall be so disregarded. Notes so owned by the Company which have been pledged in good faith may be regarded as outstanding for such purpose if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Notes and that the pledgee is not the Issuer.
Section 2.06. Temporary Notes. Until definitive Notes of any series are ready for delivery, the Company may prepare and the Trustee will authenticate temporary Notes upon a Company Order. Temporary Notes will be substantially in the form of definitive Notes of such series but may have insertions, substitutions, omissions and other variations determined to be appropriate by the Officers executing the temporary Notes, as evidenced by the execution and authentication of the temporary Notes. If temporary Notes are issued, the Company will cause definitive Notes to be prepared without unreasonable delay. After the preparation of definitive Notes, the temporary Notes will be exchangeable for definitive Notes upon surrender of the temporary Notes at the office or agency of the Company designated for the purpose pursuant to Section 4.02, without charge to the Holder. Upon surrender for cancellation of any temporary Notes, the Company will execute and the Trustee will authenticate and deliver in exchange therefor a like principal amount of definitive Notes of authorized denominations. Until so exchanged, the temporary Notes will be entitled to the same benefits under the Indenture as definitive Notes.
Section 2.07. Cancellation. The Company at any time may deliver to the Trustee for cancellation any Notes previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and may deliver to the Trustee for cancellation any Notes previously authenticated hereunder that the Company has not issued and sold. Any Registrar or the Paying Agent will forward to the Trustee any Notes surrendered to it for transfer, exchange or payment. The Trustee will cancel all Notes surrendered for transfer, exchange, payment or cancellation and dispose of them in accordance with its normal procedures or a Company Order. The Trustee shall deliver certification of all cancelled Notes to the Company and shall return cancelled Notes to the Company upon written request. The Company may not issue new Notes to replace Notes it has paid in full or delivered to the Trustee for cancellation. If the Company acquires any of the Notes, such acquisition shall not operate as a redemption or satisfaction of indebtedness represented by such Notes unless or until the same are delivered to the Trustee for cancellation.
Section 2.08. CUSIP Numbers. The Company in issuing the Notes may use "CUSIP" numbers, and the Trustee will use CUSIP numbers in notices of redemption or exchange as a convenience to Holders. Any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of redemption or exchange and reliance may be placed only on the identification number printed on the Notes, and any such redemption or exchange shall not be affected by any defect or omission in such numbers. The Company will promptly notify the Trustee of any change in the CUSIP numbers.
Section 2.09. Transfer and Exchange.
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(a) The Notes will be issued in registered form only, without coupons, and the Company shall cause the Registrar to maintain the Register for registering the record ownership of the Notes by the Holders and transfers and exchanges of the Notes.
(b) (i) Each Global Note will be registered in the name of the Depositary or its nominee. The Depositary shall be a clearing agency registered under the Exchange Act. The Company initially appoints DTC to act as Depositary with respect to the Notes in global form. Initially, the Global Notes shall be issued to the Depositary, registered in the name of Cede & Co., as the nominee of the Depositary, and deposited with the Trustee as custodian for Cede & Co. So long as DTC is serving as the Depositary thereof, each Global Note will bear the DTC Legend.
(ii) Each Global Note will be delivered to the Trustee as custodian for the Depositary. Transfers of a Global Note (but not a beneficial interest therein) will be limited to transfers thereof in whole, but not in part, by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary except as set forth in Section 2.09(b)(iv).
(iii) Agent Members will have no rights under the Indenture with respect to any Global Note held on their behalf by the Depositary, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner and Holder of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, the Depositary or its nominee may grant proxies and otherwise authorize any Person (including any Agent Member and any Person that holds a beneficial interest in a Global Note through an Agent Member) to take any action which a Holder is entitled to take under the Indenture or the Notes, and nothing herein will impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a holder of any security.
(iv) If (x) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for a Global Note and a successor depositary is not appointed by the Company within 90 days of the notice or (y) the Company notifies the Trustee to effect such exchange, the Trustee will promptly exchange each beneficial interest in the Global Note for one or more Certificated Notes in authorized denominations having an equal aggregate principal amount and registered in the name of the owner of such beneficial interest, as identified to the Trustee by the Depositary, and thereupon the Global Note will be deemed canceled.
(v) Unless otherwise provided herein or in a Board Resolution or Officers' Certificate establishing a series of Notes or in an indenture supplemental hereto, beneficial interests in a Global Note may not be exchanged for Certificated Notes.
(c) Each Certificated Note will be registered in the name of the Holder thereof or its nominee.
(d) A Holder may transfer a Note of any series (or a beneficial interest therein) to another Person or exchange a Note of any series (or a beneficial interest therein) for another Note or Notes of any authorized
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denomination of the same series by presenting to the Trustee a written request therefor stating the name of the proposed transferee or requesting such an exchange, accompanied by any certification, opinion or other document reasonably required by the Trustee. The Trustee will promptly register any transfer or exchange that meets the requirements of this Section by noting the same in the register maintained by the Trustee for the purpose; provided that:
(i) no transfer or exchange will be effective until it is registered in such register, and
(ii) the Trustee will not be required (x) to issue, register the transfer of or exchange any Note of any particular series for a period of 15 days before a selection of Notes of that series to be redeemed or purchased, (y) to register the transfer of or exchange any Note so selected for redemption or purchase in whole or in part, except, in the case of a partial redemption or purchase, that portion of any Note not being redeemed or purchased, or (z) if a redemption or a purchase is to occur after a Regular Record Date but on or before the corresponding Interest Payment Date, to register the transfer of or exchange such Note on or after the Regular Record Date and before the date of redemption or purchase. Prior to the registration of any transfer, the Company, the Trustee and their agents will treat the Person in whose name the Note is registered as the owner and Holder thereof for all purposes (whether or not the Note is overdue) and will not be affected by notice to the contrary.
From time to time the Company will execute and the Trustee will authenticate additional Notes as necessary in order to permit the registration of a transfer or exchange in accordance with this Section.
No service charge will be imposed in connection with any transfer or exchange of any Note, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than a transfer tax or other similar governmental charge payable upon exchange pursuant to subsection (b)(iv)).
(e) (i) Global Note to Global Note. If a beneficial interest in a Global Note of any particular series is transferred or exchanged for a beneficial interest in another Global Note of the same series, the Trustee will (x) record a decrease in the principal amount of the Global Note being transferred or exchanged equal to the principal amount of such transfer or exchange and (y) record a like increase in the principal amount of the other Global Note. Any beneficial interest in one Global Note that is so transferred to a Person who takes delivery in the form of an interest in another Global Note, or so exchanged for an interest in another Global Note, will, upon such transfer or exchange, cease to be an interest in such Global Note and become an interest in such other Global Note for as long as it remains such an interest.
(ii) Global Note to Certificated Note. If a beneficial interest in a Global Note of any particular series is transferred or exchanged for a Certificated Note of the same series, the Trustee will (x) record a decrease in the principal amount of such Global Note equal to the principal amount of such transfer or exchange and (y) deliver one or more new Certificated Notes of such series in authorized denominations having an equal aggregate principal amount to
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the transferee (in the case of a transfer) or the owner of such beneficial interest (in the case of an exchange), registered in the name of such transferee or owner, as applicable.
(iii) Certificated Note to Global Note. If a Certificated Note of any particular series is transferred or exchanged for a beneficial interest in a Global Note of the same series, the Trustee will (x) cancel such Certificated Note, (y) record an increase in the principal amount of such Global Note equal to the principal amount of such transfer or exchange and (z) in the event that such transfer or exchange involves less than the entire principal amount of the canceled Certificated Note, deliver to the Holder thereof one or more new Certificated Notes of the same series in authorized denominations having an aggregate principal amount equal to the untransferred or unexchanged portion of the canceled Certificated Note, registered in the name of the Holder thereof. (iv) Certificated Note to Certificated Note. If a Certificated Note of any particular series is transferred or exchanged for another Certificated Note of the same series, the Trustee will (x) cancel the Certificated Note being transferred or exchanged, (y) deliver one or more new Certificated Notes of such series in authorized denominations having an aggregate principal amount equal to the principal amount of such transfer or exchange to the transferee (in the case of a transfer) or the Holder of the canceled Certificated Note (in the case of an exchange), registered in the name of such transferee or Holder, as applicable, and (z) if such transfer or exchange involves less than the entire principal amount of the canceled Certificated Note, deliver to the Holder thereof one or more Certificated Notes of such series in authorized denominations having an aggregate principal amount equal to the untransferred or unexchanged portion of the canceled Certificated Note, registered in the name of the Holder thereof.
Section 2.10. Noteholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Noteholders, separately by series, and shall otherwise comply with Trust Indenture Act Section 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least seven Business Days before each Interest Payment Date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Noteholders, separately by series, relating to such Interest Payment Date or request, as the case may be.
Section 2.11. Defaulted Interest. If the Company defaults in a payment of interest on the Notes of any series, such installment of interest shall forthwith cease to be payable to the Holders in whose names the Notes were registered on the Regular Record Date applicable to such installment of interest. Defaulted interest (including any interest on such defaulted interest) may be paid by the Company, at its election, as provided in clause (a) or (b) below.
(a) The Company may elect to make payment of any defaulted interest (including any interest on such defaulted interest) to the Holders in whose names the Notes are registered at the close of business on a special record date for the payment of such defaulted interest (a "Special Record Date"), which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid and the date of the proposed payment. Thereupon the Trustee shall fix a Special Record Date for the payment of such defaulted
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interest, which shall not be more than 15 calendar days and not less than 10 calendar days prior to the date of the proposed payment and not less than 10 calendar days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payments of such defaulted interest and the Special Record Date therefor to be sent, first-class mail, postage prepaid, to each Holder at such Holder's address as it appears in the registration books of the Registrar, at least 15 calendar days prior to such Special Record Date. Notice of the proposed payment of such defaulted interest and the Special Record Date therefor having been mailed as aforesaid, such defaulted interest shall be paid to the Holders in whose names the Notes are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (b).
(b) Alternatively, the Company may make payment of any defaulted interest (including any interest on such defaulted interest) in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause (b), such manner of payment shall be deemed practicable by the Trustee.
Section 2.12. Computation of Interest. Except as otherwise specified as contemplated by Section 2.01 for Notes of any series, any interest on the Notes of each series shall be computed on the basis of a 360-day year of twelve 30-day months.
ARTICLE III. REDEMPTION
Section 3.01. Method and Effect of Redemption.
(a) If the Company elects to redeem Notes of any series pursuant to the optional redemption provisions (if any) thereof, it must notify the Trustee of the redemption date, the redemption price and the principal amount of Notes of that series to be redeemed by delivering written notice at least 45 days before the redemption date (unless a shorter period is satisfactory to the Trustee). Any such notice may be cancelled at any time prior to notice of such redemption being mailed to any Holder and shall thereby be void and of no effect. If fewer than all of the Notes of any series are being redeemed, the particular Notes to be redeemed shall be selected not more than 60 days prior to the redemption date by the Trustee, from the outstanding Notes of such series not previously called for redemption, by such method as may be specified by the terms of such Notes or, if no such method is so specified, by such method as the Trustee shall deem fair and appropriate. The Trustee shall notify the Company promptly in writing of the Notes or portions of Notes to be called for redemption and, in the case of any Notes selected for partial redemption, the principal amount thereof to be redeemed. Except as otherwise provided as to any particular series of Notes, Notes and portions thereof that the Trustee selects shall be in amounts equal to the minimum authorized denomination for Notes of the series to be redeemed or any integral multiple thereof, except that if all of the Notes of the series are to be redeemed, the entire outstanding amount of the Notes of the series held by such Holder, even if not equal to the minimum authorized denomination for the Notes of that
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series, shall be redeemed. Provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption.
(b) Notice of redemption must be mailed by first-class mail by the Company or at the Company's request, by the Trustee in the name and at the expense of the Company, to Holders at the address set forth in the most recent noteholder list described in Section 2.10 hereof whose Notes are to be redeemed at least 30 days but not more than 60 days before the redemption date. The notice of redemption will identify the Notes to be redeemed and will include or state the following:
(1) the redemption date;
(2) the redemption price fixed in accordance with the terms of the Notes of the series to be redeemed, plus accrued interest, if any, to the date fixed for redemption (the "Redemption Price");
(3) the place or places where Notes are to be surrendered to the Paying Agent for redemption;
(4) that Notes called for redemption must be so surrendered to the Paying Agent in order to collect the Redemption Price;
(5) that, on the redemption date, the Redemption Price will become due and payable on Notes called for redemption, and, unless the Company defaults in payment of the Redemption Price, interest on Notes called for redemption will cease to accrue on and after the redemption date;
(6) if less than all the outstanding Notes of any series are to be redeemed, the identification (and, in the case of partial redemption, the principal amounts) of the particular Notes to be redeemed;
(7) if any Note contains a CUSIP number, no representation is being made as to the correctness of the CUSIP number either as printed on the Notes or as contained in the notice of redemption and that the Holder should rely only on the other identification numbers printed on the Notes; and
(8) that the redemption is for a sinking fund, if such is the case.
(c) Once notice of redemption is sent to the Holders, Notes called for redemption become due and payable at the redemption price on the redemption date, and upon surrender of the Notes called for redemption, the Company shall redeem such Notes at the Redemption Price. Commencing on the redemption date, Notes redeemed will cease to accrue interest. Upon surrender of any Note redeemed in part, the Holder will receive a new Note equal in principal amount to the unredeemed portion of the surrendered Note.
Section 3.02. Exclusion of Certain Notes From Eligibility for Selection for Redemption. Notes shall be excluded from eligibility for selection for redemption if they are identified by registration and certificate number in an Officers' Certificate delivered to the Trustee at least 40 days
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prior to the last date on which notice of redemption may be given as being owned of record and beneficially by, and not pledged or hypothecated by either (a) the Issuer or (b) an entity specifically identified in such written statement as directly or indirectly controlling or controlled by or under direct or indirect common control with the Company.
Section 3.03. Deposit of Redemption Price. Prior to 10:00 a.m. on any redemption date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 4.04) an amount of money sufficient to pay the Redemption Price of, and (except if the redemption date shall be an Interest Payment Date, unless otherwise specified in or pursuant to the Board Resolutions or in the supplemental indenture executed in connection with the particular series of Notes) any accrued interest on, all the Notes or portions thereof which are to be redeemed on that date.
ARTICLE IV. COVENANTS
Section 4.01. Payment of Principal, Premium and Interest. The Company covenants and agrees for the benefit of each series of Notes that it will duly and punctually pay or cause to be paid the principal of, and interest on, each of the Notes of such series (together with any additional amounts payable pursuant to the terms of such Notes) at the place or places, at the respective times and in the manner provided in such Notes and in this Indenture. Each installment of interest on any Note may at the Company's option be paid by mailing a check for such interest, payable to or upon the written order of the Person entitled thereto pursuant to Section 2.03, to the address of such Person as it appears on the Register or by wire transfer to an account of the Person entitled thereto as such account shall be provided to the Registrar and shall appear on the Register. At the option of the Company, all payments of principal may be paid by official bank check to the Holder of the Note or other person entitled thereto against surrender of such Note.
Section 4.02. Offices for Payments, Etc. The Company will maintain in the Borough of Manhattan, The City of New York, an agency where the Notes of each series may be presented for payment, an agency where the Notes of each series may be presented for exchange as is provided in this Indenture and, if applicable, pursuant to Section 2.03 an agency where the Notes of each series may be presented for registration of transfer as is provided in this Indenture, which, in each case, initially shall be the Corporate Trust Office of the Trustee.
The Company will give to the Trustee written notice of the location of each such agency and of any change of location thereof. In case the Company shall fail to maintain any agency required by this Section to be located in the Borough of Manhattan, The City of New York, or shall fail to give such notice of the location or of any change in the location of any of the above agencies, presentations and demands may be made and notices may be served at the Corporate Trust Office of the Trustee. The Company hereby initially appoints the Trustee as its agency for each of said purposes.
The Company may from time to time designate one or more additional agencies where the Notes of a series may be presented for payment, where the
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Notes of that series may be presented for exchange as provided in this Indenture and pursuant to Section 2.03 and where the Notes of that series may be presented for registration of transfer as provided in this Indenture, and the Company may from time to time rescind any such designation, as the Company may deem desirable or expedient; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain the agency provided for in the first paragraph of this Section 4.02. The Company will give to the Trustee prompt written notice of any such designation or rescission thereof.
Section 4.03. Appointment to Fill a Vacancy in Office of Trustee. The Company, whenever necessary to avoid or fill a vacancy in the office of Trustee, will appoint, in the manner provided in Section 7.08, a Trustee, so that there shall at all times be a Trustee with respect to each series of Notes hereunder.
Section 4.04. Paying Agents. Whenever the Company shall appoint a paying agent other than the Trustee with respect to the Notes of any series, it will cause such paying agent to execute and deliver to the Trustee an instrument in which such agent shall agree with the Trustee, subject to the provisions of this Section,
(a) that it will hold all sums received by it as such agent for the payment of the principal of or interest on the Notes of such series in trust for the benefit of the holders of the Notes of such series or of the Trustee;
(b) that it will give the Trustee notice of any failure by the Company to make any payment of the principal of or interest on the Notes of such series when the same shall be due and payable; and
(c) that at any time during the continuance of any such failure, upon the written request of the Trustee it will forthwith pay to the Trustee all sums so held in trust by such paying agent.
The Company will, prior to each due date of the principal of or interest on the Notes of such series, deposit with the paying agent a sum sufficient to pay such principal or interest so becoming due, and (unless such paying agent is the Trustee) the Company will promptly notify the Trustee of any failure to take such action.
If the Company shall act as its own paying agent with respect to the Notes of any series, it will, on or before each due date of the principal of or interest on the Notes of such series, set aside, segregate and hold in trust for the benefit of the holders of the Notes of such series a sum sufficient to pay such principal or interest so becoming due. The Company will promptly notify the Trustee of any failure to take such action.
Anything in this Section to the contrary notwithstanding, the Company may, at any time, for the purpose of obtaining satisfaction and discharge of one or more series of Notes, or for any other reason, pay, or cause to be paid, to the Trustee all sums held in trust by the Company or any Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent.
NYDOCS01/905069.6 22 Anything in this Section to the contrary notwithstanding, the agreement to hold sums in trust as provided in this Section is subject to the provisions of Section 8.05.
Section 4.05. Written Statement to Trustee. The Company shall deliver to the Trustee on or before May 15 in each year (beginning with May 15, 2003) a written statement, signed by two of its officers one of which shall be the principal executive, principal financial or principal accounting officer to the Company (which need not comply with Section 12.05 hereof), stating that in the course of the performance of their duties as officers of the Company they would normally have knowledge of any default by the Company in the performance or fulfillment of any covenant, agreement or condition contained in this Indenture, without regard to notice requirements or periods of grace, stating whether or not they have knowledge of any such default and, if so, specifying each such default of which the signers have knowledge and the nature thereof.
The Company shall deliver to the Trustee, as soon as possible and in any event within five days after the Company becomes aware of the occurrence of any Event of Default or an event which, with notice or the lapse of time or both, would constitute an Event of Default, an Officers' Certificate setting forth the details of such Event of Default or default and the action which the Company proposes to take with respect thereto.
Section 4.06. [Reserved].
Section 4.07. Limitation on Liens. (a) The Company will not itself, and will not permit any Domestic Subsidiary to, incur, issue, assume or guarantee any indebtedness for money borrowed evidenced by notes, bonds, debentures or other similar evidences of indebtedness ("Debt"), secured by a mortgage or other encumbrance (a "Mortgage") on any Principal Manufacturing Property of the Company or any Domestic Subsidiary, or any shares of stock or Debt of any Domestic Subsidiary which owns a Principal Manufacturing Property, without effectively providing that the Notes shall be secured equally and ratably with (or prior to) such secured Debt, so long as such secured Debt shall be so secured; provided, however, that this Section shall not apply to, and there shall be excluded from secured Debt in any computation under this Section, Debt secured by:
(1) Mortgages of the Company or its Domestic Subsidiaries existing at the time of this Indenture;
(2) Mortgages on property of, or on any shares of stock of, any corporation existing at the time such corporation becomes a Domestic Subsidiary;
(3) Mortgages on property or shares of stock of a Domestic Subsidiary existing at the time of acquisition thereof (including acquisitions through merger or consolidation) or to secure the payment of all or any part of the purchase price or construction cost thereof or to secure any Debt incurred prior to, at the time of, or within 180 days after, the acquisition of such property or shares or the completion of any such construction and commencement of full operation of such property for the purpose of financing all or any part of the purchase price or construction cost thereof;
(4) Mortgages in favor of the Company or any Domestic Subsidiary;
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(5) Mortgages in favor of the United States of America, any State of the United States of America, or any subdivision, agency, department or other instrumentality thereof, to secure partial, progress, advance or other payments pursuant to any contract or provision of any statute; and
(6) any extension, renewal or replacement (or successive extensions, renewals or replacements), as a whole or in part, of any Debt secured by any Mortgage referred to in the foregoing clauses (1) to (5), inclusive; provided that (i) such extension, renewal or replacement Mortgage shall be limited to all or a part of the same property or shares of stock that secured the Mortgage extended, renewed or replaced (plus improvements on such property) and (ii) the Debt secured by such Mortgage at such time is not increased.
(b) Notwithstanding the limitations on liens described in Section 4.07(a), the Company or any Domestic Subsidiary may incur, issue, assume or guarantee any Debt secured by a Mortgage on any Principal Manufacturing Property of the Company or its Domestic Subsidiaries or any shares of stock or Debt of any Domestic Subsidiary which owns a Principal Manufacturing Property, in addition to that permitted above and without any obligation to secure the Notes, provided that at the time of such incurrences, issuance, assumption or guarantee of such Debt, and after giving effect thereto, Exempted Debt does not exceed 15% of the Consolidated Net Tangible Assets of the Company and its Subsidiaries, taken as a whole.
Section 4.08. Limitation on Sale and Leaseback. (a) The Company will not itself, and it will not permit any Domestic Subsidiary to, enter into any arrangement with any bank, insurance company or other lender or investor (not including the Company or any Domestic Subsidiary) or to which any such lender or investor is a party, providing for the leasing by the Company or such Subsidiary for a period, including renewals, in excess of three years of any Principal Manufacturing Property of the Company or any Domestic Subsidiary which has been or is to be sold or transferred, more than 180 days after the later of (i) the acquisition thereof, (ii) the completion of construction thereof or (iii) the commencement of full operation thereof, by the Company or any such Subsidiary to such lender or investor or to any person to whom funds have been or are to be advanced by such lender or investor on the security of such Principal Manufacturing Property (herein referred to as a "Sale and Leaseback Transaction") unless either:
(1) the Company or such Domestic Subsidiary could create Debt secured by a Mortgage pursuant to Section 4.07 on the Principal Manufacturing Property to be leased back in an amount equal to the Attributable Debt with respect to such Sale and Leaseback Transaction without equally and ratably securing the Notes, or
(2) the Company within 180 days after the sale or transfer shall have been made by the Company or by any such Subsidiary, applies an amount equal to the greater of (i) the net proceeds of the sale of the Principal Manufacturing Property sold and leased back pursuant to such arrangement or (ii) the fair market value of the Principal Manufacturing Property so sold and leased back at the time of entering into such arrangement (as determined by any two of the following: the Chairman, President, any Vice President, Treasurer and Controller of the Company) to the retirement of Funded Debt of the Company or any Domestic Subsidiary; provided that the
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amount to be applied to the retirement of Funded Debt of the Company or any Domestic Subsidiary shall be reduced by (a) the principal amount of any Notes delivered within 180 days after such sale to the Trustee for retirement and cancellation, and (b) the principal amount of Funded Debt, other than Notes, voluntarily retired by the Company within 180 days after such sale. Notwithstanding the foregoing, no retirement referred to in this clause may be effected by payment at maturity or pursuant to any mandatory sinking fund payment or any mandatory prepayment provision.
(b) Notwithstanding the provisions of paragraph (a) of this Section 4.08, the Company or any Domestic Subsidiary may enter into a Sale and Leaseback Transaction in addition to that permitted by paragraph (a) of this Section 4.08 and without any obligation to retire any Notes or other indebtedness referred to in paragraph (a) of this Section 4.08, provided that at the time of entering into such Sale and Leaseback Transaction and after giving effect thereto, Exempted Debt does not exceed 15% of Consolidated Net Tangible Assets of the Company and its Subsidiaries, taken as a whole.
Section 4.09. Calculation of Original Issue Discount. The Company shall file with the Trustee promptly at the end of each calendar year (i) a written notice specifying the amount of original issue discount (including daily rates and accrual periods) accrued on outstanding Notes as of the end of such year and (ii) such other specific information relating to such original issue discount as may then be relevant under the Internal Revenue Code of 1986, as amended from time to time.
ARTICLE V. CONSOLIDATION, MERGER, SALE OR CONVEYANCE
Section 5.01. Company May Consolidate, Merge, Etc., on Certain Terms. The Company covenants that it will not merge or consolidate with any other corporation or sell or convey (including by way of lease) all or substantially all of its assets to any Person, unless (i) either the Company shall be the continuing corporation, or the successor corporation or the Person which acquires by sale or conveyance substantially all the assets of the Company (if other than the Company) shall be a corporation or entity organized under the laws of the United States of America, any state thereof or the District of Columbia and shall expressly assume the due and punctual payment of the principal of and interest on all the Notes of each series, according to their tenor, and the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed or observed by the Company, by supplemental indenture satisfactory to the Trustee, executed and delivered to the Trustee by such corporation or Person, and (ii) the Company or such successor corporation or Person, as the case may be, shall not, immediately after such merger or consolidation, or such sale or conveyance, be in Default in the performance of any such covenant or condition.
Section 5.02. Successor Company Substituted. In case of any such consolidation, merger, sale or conveyance, and following such an assumption by the successor corporation, such successor corporation shall succeed to and be substituted for the Company, with the same effect as if it had been named herein. Such successor corporation may cause to be signed, and may issue either in its own name or in the name of the Company prior to such succession any or all of the Notes issuable hereunder, which theretofore shall not have
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been signed by the Company and delivered to the Trustee; and, upon the order of such successor corporation instead of the Company and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any Notes, which previously shall have been signed and delivered by the Officers of the Company to the Trustee for authentication, and any Notes, which such successor corporation thereafter shall cause to be signed and delivered to the Trustee for that purpose. All of the Notes so issued shall in all respects have the same legal rank and benefit under this Indenture as the Notes theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Notes had been issued at the date of the execution hereof.
In case of any such consolidation, merger, sale, lease or conveyance, such changes in phraseology and form (but not in substance) may be made in the Notes thereafter to be issued as may be appropriate.
In the event of any such sale or conveyance (other than a conveyance by way of lease), the Company or any successor corporation which shall theretofore have become such in the manner described in this Article shall be discharged from all obligations and covenants under this Indenture and the Notes and may be liquidated and dissolved.
Section 5.03. Opinion of Counsel to Trustee. The Trustee, subject to the provisions of Sections 7.01 and 7.02, may receive an Opinion of Counsel, prepared in accordance with Section 12.05, as conclusive evidence that any such consolidation, merger, sale, lease or conveyance, and any such assumption, and any such liquidation or dissolution, complies with the applicable provisions of this Indenture.
ARTICLE VI. DEFAULT AND REMEDIES
Section 6.01. Events of Default. An "Event Of Default" occurs with respect to Notes of any particular series, unless it is specifically deleted or modified in the Officers' Certificate, Board Resolutions and/or supplemental indenture (if any) in respect of such series, and in addition to any other events which may be specified as Events of Default in the Officers' Certificate, Board Resolutions and/or supplemental indenture (if any) in respect of such series, if:
(1) the Company defaults in the payment of the principal (or premium, if any, on) any Note of such series when the same becomes due and payable at maturity, upon acceleration or redemption, or otherwise;
(2) the Company defaults in the payment of interest on any Note of such series when the same becomes due and payable, and the default continues for a period of 30 days;
(3) default in the payment of any sinking fund installment, when and as due by the terms of a Note of that series, and the default continues for a period of 30 days;
(4) the Company defaults in the performance of or breaches any other covenant or agreement of the Company contained in the Notes of such series or in this Indenture and the default or breach continues for a period of
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90 consecutive days after written notice to the Company by the Trustee or to the Company and the Trustee by the Holders of 25% or more in aggregate principal amount of the Notes of such affected series;
(5) an involuntary case or other proceeding is commenced against the Company with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding remains undismissed and unstayed for a period of 60 consecutive days; or an order for relief is entered against the Company under the federal bankruptcy laws as now or hereafter in effect; or
(6) the Company (i) commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (ii) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or for all or substantially all of the property and assets of the Company or (iii) effects any general assignment for the benefit of creditors (an event of default specified in clause (5) or (6) a "Bankruptcy Default").
Section 6.02. Acceleration.
(a) If an Event of Default with respect to the Notes of any series, other than a Bankruptcy Default with respect to the Company, occurs and is continuing under the Indenture, unless the principal of all the Notes of such series have already become due and payable, the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes of such series then outstanding (each such series voting as a separate class), by written notice to the Company (and to the Trustee if the notice is given by the Holders), may, and the Trustee at the request of such Holders shall, declare the principal of, premium, if any and accrued interest on the Notes to be immediately due and payable (or if the Notes of such series are Original Discount Notes, such portion of the principal amount as may be specified in the terms of such series). Upon a declaration of acceleration, such principal and interest will become immediately due and payable. If a Bankruptcy Default occurs with respect to the Company, the principal of, premium, if any and accrued interest on all Notes of each series then outstanding (or if the Notes of such series are Original Discount Notes, such portion of the principal amount as may be specified in the terms of such series) will, unless the principal of all the Notes of such series shall have already become due and payable, become immediately due and payable without any declaration or other act on the part of the Trustee or any Holder.
(b) At any time after such a declaration of acceleration with respect to the Notes of a series has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter provided, the Holders of a majority in principal amount of outstanding Notes of such series, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if:
(1) the Company has paid or deposited with the Trustee a sum sufficient to pay:
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(i) all overdue interest on all the Notes of such series;
(ii) the principal of any of the Notes of such series which has become due otherwise than by such declaration of acceleration, and interest thereon at the rate or rates prescribed therefor in such Notes; and
(iii) to the extent that payment of such interest is lawful and applicable, interest upon overdue installments of interest at the rate or rates prescribed therefor in such Notes; and
(2) all Events of Default with respect to the Notes of such series, other than the non-payment of the principal of, and interest on, such Notes which have become due solely by such declaration of acceleration, have been cured or waived or otherwise remedied in accordance with the provisions of this Indenture.
For all purposes under this Indenture, if a portion of the principal of any Original Issue Discount Notes shall have been accelerated and declared due and payable pursuant to the provisions hereof, then, from and after such declaration, unless such declaration has been rescinded and annulled, the principal amount of such Original Issue Discount Notes shall be deemed, for all purposes hereunder, to be such portion of the principal thereof as shall be due and payable as a result of such acceleration, and payment of such portion of the principal thereof as shall be due and payable as a result of such acceleration together with interest, if any, thereon and all other amounts owing thereunder, shall constitute payment in full of such Original Issue Discount Notes.
Section 6.03. Other Remedies. If an Event of Default occurs, has not been waived, and is continuing with respect to the Notes of any series, the Trustee may pursue, in its own name or as trustee of an express trust, any available remedy by proceeding at law or in equity to collect the payment of principal of, premium, if any and interest on the Notes of such series or to enforce the performance of any provision of the Notes of such series or the Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes of such series or does not produce any of them in the proceeding.
Section 6.04. Waiver of Past Defaults. Except as otherwise provided in Sections 6.02, 6.07 and 9.02, the Holders of a majority in aggregate principal amount of the outstanding Notes may, by notice to the Trustee, waive an existing Default and its consequences. Upon such waiver, the Default will cease to exist, any Event of Default arising therefrom will be deemed to have been cured and each of the Company, the Trustee and the Holders of the Notes will be restored to their former positions and rights hereunder; provided, however, that no such waiver will extend to any subsequent or other Default or impair any right consequent thereon.
Section 6.05. Control by Majority. The Holders of a majority in aggregate principal amount of the outstanding Notes of a particular series (or if more than one series is affected, of all such series voting as a separate class) may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any such direction that conflicts with law or this Indenture, that may involve the Trustee in
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personal liability, or that the Trustee determines in good faith may be unduly prejudicial to the rights of Holders of Notes of such series not joining in the giving of such direction, and may take any other action it deems proper that is not inconsistent with such direction.
Section 6.06. Limitation on Suits. A Holder may not pursue any proceeding, judicial or otherwise, or the appointment of a receiver or trustee, or any other remedy under the Indenture or the Notes of the applicable series, unless:
(1) the Holder has previously given to the Trustee written notice of a continuing Event of Default;
(2) Holders of at least 25% in aggregate principal amount of then outstanding Notes of the series in respect of which the Event of Default has occurred have made written request to the Trustee to pursue a remedy in respect of the Event of Default;
(3) such Holders have offered to the Trustee indemnity reasonably satisfactory to the Trustee against any costs, liabilities or expenses to be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to pursue any such remedy; and
(5) during such 60-day period, the Holders of a majority in aggregate principal amount of the outstanding Notes of such series have not given the Trustee a direction that is inconsistent with such written request.
The foregoing limitations do not apply to any proceeding instituted by a Holder with respect to a Default in the payment of principal, premium, if any, or interest on any Series of Notes.
No Holder of any series of Notes may use this Indenture to prejudice the rights of another Holder of Notes of that series or to obtain a preference or priority over another Holder of Notes of that series.
Section 6.07. Rights of Holders to Receive Payment. Notwithstanding anything herein to the contrary, the right of any Holder to receive payment of principal of and premium, if any, and interest on its Note on or after the Stated Maturities thereof, or to bring suit for the enforcement of any such payment on or after such respective dates, may not be impaired or affected without the consent of that Holder.
Section 6.08. Collection Suit by Trustee. If an Event of Default in payment of principal or interest specified in clause (1) or (2) of Section 6.01 occurs and is continuing with respect to the Notes of any series, upon the demand of the Trustee the Company will pay to the Trustee for the benefit of the Holders of any affected series of Notes the premium, if any, and interest remaining unpaid on the Notes of that series then outstanding, together with interest on overdue principal and, to the extent lawful, overdue installments of interest, in each case at the rate specified in the Notes, and such further amount as is sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of
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the Trustee, its agents and counsel and any other amounts due the Trustee hereunder. If the Company fails to pay such amount upon demand by the Trustee, the Trustee will be empowered to recover judgement in its own name and as trustee of an express trust the sums so due and payable.
Section 6.09. Trustee May File Proofs of Claim. The Trustee may file proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee hereunder) and the Holders allowed in any judicial proceedings relating to the Company or its respective creditors or property, and is entitled and empowered to collect, receive and distribute any money, securities or other property payable or deliverable upon any such claims. Any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, if the Trustee consents to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agent and counsel, and any other amounts due the Trustee hereunder. Nothing in the Indenture will be deemed to empower the Trustee to authorize or consent to, or accept or adopt on behalf of any Holder, any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.
Section 6.10. Priorities. If the Trustee collects any money with respect to Notes of any series pursuant to this Article, it shall pay out the money in the following order:
First: to the payment of costs and expenses applicable to such series in respect of which monies have been collected, including reasonable compensation to the Trustee and each predecessor Trustee and their respective agents and attorneys and of all expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee except as a result of negligence or bad faith, and all other amounts due to the Trustee or any predecessor Trustee pursuant to Section 7.07;
Second: in accordance with the subordination provisions, if any, of the Notes of such series;
Third: in case the principal of the Notes of such series in respect of which monies have been collected shall not have become and be then due and payable, to the payment of interest on the Notes of such series in default in the order of the maturity of the installments of such interest, with interest (to the extent that such interest has been collected by the Trustee) upon the overdue installments of interest at the same rate as the rate of interest or yield to maturity (in the case of Original Issue Discount Notes) specified in such Notes, such payments to be made ratably to the persons entitled thereto, without discrimination or preference;
Fourth: in case the principal of the Notes of such series in respect of which monies have been collected shall have become and shall be then
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due and payable, to the payment of the whole amount then owing and unpaid upon all the Notes of such series for principal and interest, with interest upon the overdue principal, and (to the extent such interest has been collected by the Trustee) upon overdue installments of interest at the same rate as the rate of interest or yield to maturity (in the case of Original Issue Discount Notes) specified in the Notes of such series; and in case such monies shall be insufficient to pay in full the whole amount so due and unpaid upon the Notes of such series, then to the payment of such principal and interest, without preference or priority of principal over interest or yield to maturity, or of interest or yield to maturity over principal, or of any installment of interest over any other installment of interest, or of any Notes of such series over any other Notes of such series, ratably to the aggregate of such principal and accrued and unpaid interest or yield to maturity; and
Fifth: to the Company or such other Person as a court of competent jurisdiction may direct.
The Trustee, upon written notice to the Company, may fix a record date and payment date for any payment to Holders pursuant to this Section.
Section 6.11. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted a proceeding to enforce any right or remedy under the Indenture and the proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to the Holder, then, subject to any determination in the proceeding, the Company, the Trustee and the Holders will be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Company, the Trustee and the Holders will continue as though no such proceeding had been instituted.
Section 6.12. Undertaking for Costs. In any suit for the enforcement of any right or remedy under the Indenture or in any suit against the Trustee for any action taken or omitted to be taken by it as Trustee, all parties to this Indenture agree, and each Holder shall be deemed to have agreed, that a court may require any party litigant in such suit (other than the Trustee) to file an undertaking to pay the costs of the suit, and the court may assess reasonable costs, including reasonable attorneys' fees, against any party litigant (other than the Trustee) in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by a Holder to enforce payment of principal, premium, if any, and interest on any Note of any series on the respective due dates, or a suit by Holders of more than 10% in principal amount of the outstanding Notes of any series.
Section 6.13. Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement of lost, destroyed or wrongfully taken Notes of any series in Section 2.04, no right or remedy conferred or reserved to the Trustee or to the Holders under this Indenture is intended to be exclusive of any other right or remedy, and all such rights and remedies are, to the extent permitted by law, cumulative and in addition to every other right and remedy hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or exercise of any right or remedy hereunder, or otherwise, will not prevent the concurrent assertion or exercise of any other right or remedy.
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Section 6.14. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder to exercise any right or remedy accruing upon any Event of Default will impair the exercise of any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be.
Section 6.15. Waiver of Stay, Extension or Usury Laws. The Company covenants, to the extent that it may lawfully do so, that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive the Company from paying all or any portion of the principal of, premium, if any, or interest on the Notes of any series as contemplated herein, wherever enacted, now or at any time hereafter in force, or that may affect the covenants or the performance of the Indenture. The Company hereby expressly waives, to the extent that it may lawfully do so, all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as if no such law had been enacted.
ARTICLE VII. THE TRUSTEE
Section 7.01. General.
(a) The duties and responsibilities of the Trustee are as provided by the Trust Indenture Act and as set forth herein. Whether or not expressly so provided, every provision of the Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee is subject to this Article.
(b) Except during the continuance of an Event of Default with respect to the Notes of any series, the Trustee need perform only those duties that are specifically set forth in the Indenture and no others, and no implied covenants or obligations will be read into the Indenture that are adverse to the Trustee. In case an Event of Default has occurred and is continuing with respect to the Notes of any series, the Trustee shall exercise those rights and powers vested in it by the Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his own affairs.
(c) No provision of the Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct.
Section 7.02. Certain Rights of Trustee. Subject to Trust Indenture Act Section 315(a) through (d):
(1) In the absence of bad faith on its part, the Trustee may conclusively rely, and will be protected in acting or refraining from acting, upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note,
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other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document, but, in the case of any document which is specifically required to be furnished to the Trustee pursuant to any provision hereof, the Trustee shall examine the document to determine whether it conforms to the requirements of the Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein). The Trustee, in its discretion, may make further inquiry or investigation into such facts or matters as it sees fit.
(2) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel conforming to Section 12.05, and the Trustee will not be liable for any action it takes or omits to take in good faith in reliance on the certificate or opinion.
(3) The Trustee may act through its attorneys and agents and will not be responsible for the misconduct or negligence of any agent appointed with due care.
(4) The Trustee will be under no obligation to exercise any of the rights or powers vested in it by the Indenture at the request or direction of any of the Holders of any series of Notes, unless such Holders have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction.
(5) The Trustee will not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within its rights or powers or for any action it takes or omits to take in accordance with the direction of the Holders of any series of Notes in accordance with Section 6.05 relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture.
(6) The Trustee may consult with counsel, and the advice of such counsel or any Opinion of Counsel will be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.
(7) No provision of this Indenture will require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of its duties hereunder, or in the exercise of its rights or powers, unless it receives indemnity satisfactory to it against any loss, liability or expense.
(8) The Trustee shall not be deemed to have notice of any default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at its Corporate Trust Office and such notice references the Notes and this Indenture.
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(9) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its rights to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder.
(10) The Trustee may request that the Company deliver an Officers' Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers' Certificate may be signed by any person authorized to sign an Officers' Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded.
Section 7.03. Individual Rights of Trustee. The Trustee, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not the Trustee. Any Agent may do the same with like rights. However, the Trustee is subject to Trust Indenture Act Section 311. For purposes of Trust Indenture Act Sections 311(b)(4) and (6):
(a) "Cash Transaction" means any transaction in which full payment for goods or securities sold is made within seven days after delivery of the goods or securities in currency or in checks or other orders drawn upon banks or bankers and payable upon demand; and
(b) "Self-Liquidating Paper" means any draft, bill of exchange, acceptance or obligation which is made, drawn, negotiated or incurred by the Company for the purpose of financing the purchase, processing, manufacturing, shipment, storage or sale of goods, wares or merchandise and which is secured by documents evidencing title to, possession of, or a lien upon, the goods, wares or merchandise or the receivables or proceeds arising from the sale of the goods, wares or merchandise previously constituting the security, provided the security is received by the Trustee simultaneously with the creation of the creditor relationship arising from the making, drawing, negotiating or incurring of the draft, bill of exchange, acceptance or obligation.
Section 7.04. Trustee's Disclaimer. The Trustee (i) makes no representation as to the validity or adequacy of the Indenture or the Notes of any series, (ii) is not accountable for the Company's use or application of the proceeds from the Notes of any series and (iii) is not responsible for any statement in the Notes of any series other than its certificate of authentication.
Section 7.05. Notice of Default. If any Default or Event of Default occurs and is continuing with respect to the Notes of any series, and if it is known to the Trustee, the Trustee will send notice of the uncured Default to each Holder of the Notes of such series within 90 days after it occurs, unless the Default has been cured; provided that, except in the case of a default in the payment of the principal of, premium, if any or interest on any such Note, the Trustee may withhold the notice if and so long as the board of directors, the executive committee or a trust committee of directors of the Trustee in good faith determines that withholding the notice is in the interest of the Holders. Notice to Holders under this Section will be given in the manner and to the extent provided in Trust Indenture Act Section 313(c). Except in the
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case of an Event of Default resulting from nonpayment on any Note, the Trustee shall not be deemed to have notice of any Default or Event of Default unless an officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a Default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Notes and this Indenture.
Section 7.06. Reports by Trustee to Holders. The Trustee shall transmit to each Holder such reports concerning, among other things, the Trustee and its action under this Indenture as may be required pursuant to the Trust Indenture Act at the time and in compliance with Section 313(a) of the Trust Indenture Act. The Trustee also shall comply with Sections 313(b)(2) and 313(c) of the Trust Indenture Act. A copy of each such report at the time of its mailing to Noteholders shall be filed with the Commission and each stock exchange, if any, on which the Notes of any series are listed. The Company shall notify the Trustee if the Notes of any series become listed on any stock exchange.
Section 7.07. Compensation and Indemnity.
(a) The Company will pay the Trustee from time to time such compensation as shall be agreed upon in writing for its services. The compensation of the Trustee is not limited by any law on compensation of a Trustee of an express trust. The Company will reimburse the Trustee upon request for all reasonable out-of-pocket expenses, disbursements and advances incurred or made by the Trustee while acting as Trustee under this Indenture, including the reasonable compensation and expenses of the Trustee's agents and counsel, except any such expense as may arise from negligence or bad faith.
(b) The Company will indemnify the Trustee for, and hold it harmless against, any and all loss or liability or expense (including the reasonable fees and expenses of counsel and taxes other than those based upon the income of the Trustee) incurred by it without negligence or bad faith on its part arising out of or in connection with the acceptance or administration of the Indenture and its duties under the Indenture and the Notes of each series, including the costs and expenses of defending itself against any claim (whether asserted by the Company, any Holder or any Person) or liability and of complying with any process served upon it or any of its officers in connection with the exercise or performance of any of its powers or duties under the Indenture and any such Notes. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(5) and (6) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under any bankruptcy law.
(c) The obligations of the Company under this Section shall not be subordinated to the payment of Senior Indebtedness pursuant to Article Eleven hereof and shall constitute additional indebtedness hereunder and shall survive the satisfaction and discharge of this Indenture. To secure the Company's payment obligations in this Section, the Trustee will have a lien prior to the Notes of each series on all money or property held or collected by the Trustee, in its capacity as Trustee, except money or property held in trust to pay principal of, premium, if any, and interest on particular Notes of any series.
Section 7.08. Replacement of Trustee.
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(a) (i) The Trustee may resign at any time by written notice to the Company.
(ii) The Holders of a majority in aggregate principal amount of the outstanding Notes of all series for which any one Trustee is acting as Trustee (voting as a single class) may remove such Trustee by written notice to the Company and the Trustee.
(iii) If the Trustee is no longer eligible under Section 7.10 or in the circumstances described in Trust Indenture Act Section 310(b), any Holder that satisfies the requirements of Trust Indenture Act Section 310(b) may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.
(iv) The Company may remove the Trustee if: (i) the Trustee is no longer eligible under Section 7.10; (ii) the Trustee is adjudged a bankrupt or an insolvent; (iii) a receiver or other public officer takes charge of the Trustee or its property; or (iv) the Trustee becomes incapable of acting.
A resignation or removal of the Trustee and appointment of a successor Trustee will become effective only upon the successor Trustee's acceptance of appointment as provided in this Section.
(b) If the Trustee has been removed by the Holders, Holders of a majority in principal amount of the outstanding Notes of all series for which the Trustee was acting as Trustee (voting as a single class) may appoint a successor Trustee for all such series with the consent of the Company. Otherwise, if the Trustee resigns or is removed, or if a vacancy exists in the office of Trustee for any reason, the Company will promptly appoint a successor Trustee. If the successor Trustee does not deliver its written acceptance within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of a majority in aggregate principal amount of the outstanding Notes of all series for which such Trustee was acting as Trustee (voting as a single class) may petition any court of competent jurisdiction for the appointment of a successor Trustee.
(c) Upon delivery by the successor Trustee of a written acceptance of its appointment to the retiring Trustee and to the Company, (i) the retiring Trustee will transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07, (ii) the resignation or removal of the retiring Trustee will become effective, and (iii) the successor Trustee will have all the rights, powers and duties of the Trustee under the Indenture. Upon request of any successor Trustee, the Company will execute any and all instruments for fully and vesting in and confirming to the successor Trustee all such rights, powers and trusts. The successor Trustee will mail notice of any resignation and any removal of the Trustee and its appointment to all Holders, and include in the notice its name and the address of its Corporate Trust Office.
(d) Notwithstanding replacement of the Trustee pursuant to this Section, the Company's obligations under Section 7.07 will continue for the benefit of the retiring Trustee.
(e) The Trustee agrees to give the notices provided for in, and otherwise comply with, Trust Indenture Act Section 310(b).
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Section 7.09. Successor Trustee by Merger. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation or national banking association, the resulting, surviving or transferee corporation or national banking association without any further act will, if such resulting, surviving or transferee corporation or national banking association is otherwise eligible under the Indenture, be the successor Trustee with the same effect as if the successor Trustee had been named as the Trustee in the Indenture.
Section 7.10. Eligibility. The Indenture must always have a Trustee that satisfies the requirements of Trust Indenture Act Section 310(a) and (b) and has a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition.
Section 7.11. Money Held in Trust. The Trustee will not be liable for interest on any money received by it except as it may agree with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law and except for money held in trust under Article Eleven.
ARTICLE VIII. DEFEASANCE AND DISCHARGE
Section 8.01. Discharge of Company's Obligations.
(a) Subject to paragraph (b) of this Section 8.01, the Company's obligations under any series of Notes and this Indenture will terminate if:
(1) all Notes of such series previously authenticated and delivered (other than (i) destroyed, lost or stolen Notes of such series that have been replaced or (ii) Notes of such series that are paid pursuant to Section 4.01 or (iii) Notes of such series for whose payment money or U.S. Government Obligations have been held in trust and then repaid to the Company pursuant to Section 8.05) have been delivered to the Trustee for cancellation and the Company has paid all sums payable by it hereunder; or
(2) (A) the Notes of such series mature within one year, or all of them are to be called for redemption within one year under arrangements satisfactory to the Trustee for giving the notice of redemption;
(B) the Company irrevocably deposits in trust with the Trustee, as trust funds solely for the benefit of the Holders of such Notes, money or U.S. Government Obligations or a combination thereof sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certificate delivered to the Trustee, without consideration of any reinvestment, to pay principal of, premium, if any, and each installment of interest on such Notes to maturity or redemption, as the case may be, and to pay all other sums payable by it hereunder;
(C) no Default or event that with the passage of time or the giving of notice, or both, will constitute an Event of Default has occurred and is continuing on the date of the deposit;
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(D) the deposit will not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Company is a party or by which it is bound;
(E) the Company delivers to the Trustee an Officers' Certificate and an Opinion of Counsel, in each case stating that all conditions precedent provided for herein relating to the satisfaction and discharge of the Indenture have been complied with;
(F) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or there has been a change in law, which in the Opinion of Counsel provides that holders of such Notes will not recognize gain or loss for Federal income tax purposes as a result of such deposit, defeasance and discharge and will be subject to Federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred; and
(G) the Company has delivered to the Trustee an Opinion of Counsel to the effect that such deposit shall not cause the Trustee or the trust so created to be subject to the Investment Company Act of 1940.
(b) After satisfying the conditions in clause (1), only the Company's obligations under Section 7.07 will survive. After satisfying the conditions in clause (2), only the Company's obligations in Article Two and Sections 4.01, 4.02, 7.07, 7.08, 8.05 and 8.06 will survive. In either case, the Trustee upon request will acknowledge in writing the discharge of the Company's obligations under the Notes of such series and the Indenture other than the surviving obligations.
Section 8.02. Legal Defeasance. Unless this Section 8.02 is otherwise specified, pursuant to Section 2.01(l), to be inapplicable to Notes of any Series, after the 91st day following the deposit referred to in clause (1), the Company will be deemed to have paid and will be discharged from its obligations in respect of the Notes of such series and the Indenture (as it relates to the Notes of such series), other than its obligations in Article Two and Sections 4.01, 4.02, 7.07, 7.08, 8.05 and 8.06, provided the following conditions have been satisfied:
(1) The Company has irrevocably deposited in trust with the Trustee, as trust funds solely for the benefit of the Holders of Notes of such series, money or U.S. Government Obligations or a combination thereof sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certificate thereof delivered to the Trustee, without consideration of any reinvestment, to pay principal of, premium, if any, and each installment of interest on the Notes of such series to maturity or redemption, as the case may be, provided that any redemption before maturity has been irrevocably provided for under arrangements satisfactory to the Trustee.
(2) No Default or event that with the passing of time or the giving of notice, or both, will constitute an Event of Default, has occurred and
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is continuing on the date of the deposit or occurs at any time during the 91-day period following the deposit with respect to the Notes of such series.
(3) The deposit will not result in a breach or violation of, or constitute a default under, the Indenture or any other agreement or instrument to which the Company is a party or by which it is bound.
(4) The Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, in each case stating that all conditions precedent provided for herein relating to the defeasance have been complied with.
(5) The Company has delivered to the Trustee:
(A) an Opinion of Counsel stating either that (x) the Company has received from or there has been published by the Internal Revenue Service a ruling or (y) there has been a change in law after the date of this Indenture to the effect that the Holders of the Notes of such series will not recognize gain or loss for federal income tax purposes as a result of the deposit, defeasance and discharge and will be subject to federal income tax on the same amount and in the same manner and at the same times as would otherwise have been the case, and
(B) an Opinion of Counsel to the effect that (i) the creation of the defeasance trust does not violate or cause the Trustee or the trust so created to be subject to the Investment Company Act of 1940, (ii) the Holders of the Notes of such series have a valid first priority security interest in the trust funds (subject to customary exceptions), and (iii) after the passage of 91 days following the deposit, the trust funds will not be subject to the effect of Section 547 of the United States Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law.
(6) If the Notes of such series are listed on a national securities exchange, the Company has delivered to the Trustee an Opinion of Counsel to the effect that the deposit and defeasance will not cause such Notes to be delisted.
Prior to the end of the 91-day period, none of the Company's obligations under the Indenture will be discharged. Thereafter, the Trustee upon request will acknowledge in writing the discharge of the Company's obligations under the Notes of such series and the Indenture (as it relates to the Notes of such series) except for the surviving obligations specified above.
Section 8.03. Covenant Defeasance. Unless this Section 8.03 is otherwise specified, pursuant to Section 2.01(l), to be inapplicable to the Notes of any series, after the 91st day following the deposit referred to in clause (1), the Company's obligations set forth in Sections 4.07 and 4.08, Article Five will terminate, and clauses (3), (4), (5) and (6) of Section 6.01 will no longer constitute Events of Default, provided the following conditions have been satisfied:
(1) The Company has complied with clauses (1), (2), (3), (4), (5)(B) and (6) of Section 8.02; and
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(2) the Company has delivered to the Trustee an Opinion of Counsel to the effect that the Holders will not recognize gain or loss for federal income tax purposes as a result of the deposit and defeasance and will be subject to federal income tax on the same amount and in the same manner and at the same times as would otherwise have been the case.
Except as specifically stated above, none of the Company's obligations under the Indenture will be discharged as a result of covenant defeasance pursuant to this Section 8.03.
Section 8.04. Application of Trust Money. Subject to Section 8.05, the Trustee will hold in trust the money or U.S. Government Obligations deposited with it pursuant to Section 8.01, 8.02 or 8.03, and apply the deposited money and the proceeds from deposited U.S. Government Obligations to the payment of principal of, premium, if any, and interest on the series of Notes for which such deposit was made in accordance with the Notes of such series and the Indenture. Such money and U.S. Government Obligations need not be segregated from other funds except to the extent required by law.
Section 8.05. Repayment to Company. Subject to Sections 7.07, 8.01, 8.02 or 8.03, the Trustee will promptly pay to the Company upon request any excess money or U.S. Government Obligations held by the Trustee at any time and thereupon be relieved from all liability with respect to such money. The Trustee will pay to the Company upon request any money or U.S. Government Obligations held for payment with respect to the Notes of any series that remains unclaimed for two years, provided that before making such payment the Trustee may at the expense of the Company publish once in a newspaper of general circulation in New York City, or send to each Holder entitled to such money, notice that the money remains unclaimed and that after a date specified in the notice (at least 30 days after the date of the publication or notice) any remaining unclaimed balance of money will be repaid to the Company. After payment to the Company, Holders entitled to such money must look solely to the Company for payment, unless applicable law designates another Person, and all liability of the Trustee with respect to such money will cease.
Section 8.06. Reinstatement. If and for so long as the Trustee is unable to apply any money or U.S. Government Obligations held in trust pursuant to Section 8.01, 8.02 or 8.03 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under the Indenture (with respect to the applicable series of Notes) and the Notes of the applicable series will be reinstated as if no such deposit in trust had been made. If the Company makes any payment of principal of, premium, if any, or interest on any Notes because of the reinstatement of its obligations, it will be subrogated to the rights of the Holders of such Notes to receive such payment from the money or U.S. Government obligations held in trust.
ARTICLE IX. SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent of Holders. Without the consent of any Holders, the Company, when authorized by a Board
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Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another corporation to the Company and the assumption by such successor of the covenants of the Company herein and in the Notes;
(2) to add to the covenants of the Company for the benefit of the Holders of all or any series of Notes (and, if such covenants are to be for the benefit of less than all series of Notes, stating that such covenants are expressly being included solely for the benefit of such series), or to surrender any right or power herein conferred upon the Company;
(3) to add any additional Events of Default (and, if such Events of Default are to be applicable to less than all series of Notes, stating that such Events of Default are expressly being included solely to be applicable to such series); provided, however, that in respect of any such additional Events of Default such supplemental indenture may provide for a particular grace period after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such default or may limit the remedies available to the Trustee upon such default or may limit the right of the Holders of a majority in aggregate principal amount of the series of Notes to which such additional Events of Default apply to waive such default;
(4) to change or eliminate any restrictions on the payment of principal (or premium, if any) of Notes, provided that any such action shall not adversely affect the interests of the Holders of Notes of any series in any material respect;
(5) to change or eliminate any of the provisions of this Indenture, provided that any such change or elimination shall become effective only when there is no outstanding Note of any series created prior to the execution of such supplemental indenture that is entitled to the benefit of such provision;
(6) to establish the form or terms of Notes of any series as permitted by Section 2.01;
(7) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Notes of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee;
(8) to add guarantees to the Notes;
(9) to supplement any of the provisions of the Indenture to such extent as shall be necessary to permit or facilitate the defeasance and discharge of any series of Notes pursuant to Sections 8.01, 8.02 or 8.03; provided that any such action shall not adversely affect the interests of the Holders of Notes of such series or any other series of Notes in any material respect;
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(10) to cure any ambiguity, to correct or supplement any provision herein that may be defective or inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture that shall not be inconsistent with any provisions of this Indenture, provided such other provisions shall not adversely affect the interests of the Holders of Notes of any series in any material respect;
(11) to secure the Notes;
(12) to make any changes that would provide any additional rights or benefits to Holders of Notes or that do not adversely affect the legal rights under the Indenture of any such Holder;
(13) to comply with the requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act;
(14) to provide for the conversion rights of Holders of Notes in certain events such as an amalgamation, consolidation, merger or sale of all or substantially all of the assets of the Company; or
(15) to reduce the conversion price, if applicable, of any series of Notes.
Section 9.02. Supplemental Indentures with Consent of Holders. (a) Except as provided in Section 9.01, with the consent of the Holders of not less than a majority in principal amount of the outstanding Notes affected by such supplemental indenture, by act of said Holders delivered to the Company and the Trustee, the Company when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders under this Indenture of such Notes; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each outstanding Note affected thereby:
(1) change the Stated Maturity of the principal of, or any installment of interest on, any Note, or reduce the principal amount thereof or the interest thereon or any premium payable upon redemption thereof, or reduce the amount of the principal of an Original Issue Discount Note that would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 6.02, or change any place of payment, or change the currency in which any Note or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the redemption date);
(2) reduce the percentage in principal amount of the outstanding Notes of any series, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain Defaults hereunder and their consequences) provided for in this Indenture; or
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(3) modify any of the provisions of this Section or Section 6.03, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each outstanding Notes affected thereby; provided, however, that this clause shall not be deemed to require the consent of any Holder with respect to changes in the references to "the Trustee" and concomitant changes in this Section, or the deletion of this proviso, in accordance with the requirements of Section 9.01(7).
(b) It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof.
(c) A supplemental indenture that changes or eliminates any covenant or other provisions of this Indenture that has expressly been included solely for the benefit of one or more particular series of Notes, or that modifies the rights of the Holders of Notes of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Notes of any other series.
(d) After an amendment, modification or waiver under this Section becomes effective, the Company will send to the Holders affected thereby a notice briefly describing the amendments, modification or waiver. The Company will send supplemental indentures to Holders upon request. Any failure of the Company to send such notice, or any defect therein, will not, however, in any way impair or affect the validity of any such amendment, modification, supplemental indenture or waiver.
Section 9.03. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article (other than Section 9.01(6)) or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and, subject to Section 7.02, shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture, is not inconsistent herewith, is a valid, legal and binding obligation of the Company enforceable in accordance with its terms, subject to enforceability being limited by bankruptcy, insolvency or other laws or foreign governmental actions affecting the enforcement of creditors' rights generally and equitable remedies including the remedies of specific performance and injunction being granted only in the discretion of a court of competent jurisdiction and, in connection with a supplemental indenture executed pursuant to Section 9.01, that the Trustee is authorized to execute and deliver such supplemental indenture without the consent of the Holders and, in connection with a supplemental indenture executed pursuant to Section 9.02, that the requisite consents of the Holders have been validly obtained in accordance with Section 9.02 hereof. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture that affects the Trustee's own rights, duties or immunities under this Indenture or otherwise.
Section 9.04. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Notes
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theretofore or thereafter authenticated and delivered under this Indenture shall be bound by the supplemental indenture.
Section 9.05. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect.
Section 9.06. Reference in Notes to Supplemental Indentures. Notes of any series authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Notes of any series so modified as to conform, in the opinion of the Trustee and the Board of Directors, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for outstanding Notes of such series.
ARTICLE X. SINKING FUNDS
Section 10.01. Applicability of Article. The provisions of this Article shall be applicable to any sinking fund for the retirement of Notes of a series except as otherwise specified pursuant to Section 2.01 for Notes of such series. The minimum amount of any sinking fund payment provided for by the terms of Notes of any series is herein referred to as "mandatory sinking fund payment", and any payment in excess of such minimum amount provided for by the terms of Notes of any series is herein referred to as an "optional sinking fund payment". If provided for by the terms of Notes of any series, the amount of any sinking fund payment may be subject to reduction as provided in Section 10.02. Each sinking fund payment shall be applied to the redemption of Notes of any series as provided for by the terms of such Notes.
Section 10.02. Satisfaction of Sinking Fund Payments with Notes. In lieu of making all or part or any mandatory sinking fund payment in cash, the Company may deliver outstanding Notes of a series (other than any previously called for redemption) and may apply as a credit Notes of a series that have been redeemed either at the election of the Company pursuant to the terms of such Notes or through the application of permitted optional sinking fund payments pursuant to the terms of such Notes, in each case, in satisfaction of all or any part of any sinking fund payment with respect to such Notes of such series required to be made pursuant to, and as provided for by, their terms; provided that such Notes have not been previously so credited. Such Notes shall be received and credited for such purpose by the Trustee at the redemption price specified in such Notes for redemption through operation of the sinking fund and the amount of such sinking fund payment shall be reduced accordingly.
Section 10.03. Redemption of Notes for Sinking Fund. Not less than 60 days prior to each sinking fund payment date for any series of Notes (unless a shorter period shall be satisfactory to the Trustee), the Company will deliver to the Trustee an Officers' Certificate of such entity specifying the amount of the next sinking fund payment for that series pursuant to the terms of that series, the portion thereof, if any, that is to be satisfied by
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delivering and crediting Notes of that series pursuant to Section 10.02 and the basis for any such credit and, prior to or concurrently with the delivery of such Officers' Certificate, will also deliver to the Trustee any Notes to be credited and not theretofore delivered to the Trustee. Not less than 45 days (unless a shorter period shall be satisfactory to the Trustee) before each sinking fund payment date the Trustee shall select the Notes to be redeemed upon such sinking fund payment date in the manner specified in Section 3.01 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 3.01. Such notice having been duly given, the redemption of such Notes shall be made upon the terms and in the manner stated in Sections 3.01 and 3.02.
ARTICLE XI. SUBORDINATION OF NOTES
Section 11.01. Applicability of Article; Agreement to Subordinate. In the event a series of Notes is designated as subordinated pursuant to Section 2.01 ("Subordinated Notes") and except as otherwise provided in a supplemental indenture or pursuant to Section 2.01, the Company, for itself, its successors and assigns, covenants and agrees, and each Holder of Subordinated Notes by his acceptance thereof, likewise covenants and agrees, that the payment of the principal of (and premium, if any) and interest, if any, on each and all of the Subordinated Notes is hereby expressly subordinated, to the extent and in the manner set forth in this Article, in right of payment to the prior payment in full of all Senior Indebtedness.
Section 11.02. Rights of Holders of Subordinated Indebtedness. (a) In the event of any insolvency or bankruptcy proceedings, or any receivership, liquidation, reorganization or other similar proceedings, relative to the Company or to its creditors, as such, or to its property, and in the event of any proceedings for voluntary liquidation, dissolution or other winding up of the Company, whether or not involving insolvency or bankruptcy, and in the event of any execution sale, then the holders of Senior Indebtedness shall be entitled to receive payment in full of the principal and premium, if any, thereof and interest due thereon (including without limitation, except to the extent, if any prohibited by mandatory provisions of law, post petition interest in any such proceedings) in money before the Holders of Subordinated Notes are entitled to receive any payment on account of the principal of, premium, if any, or interest on the indebtedness evidenced by the Subordinated Notes, and to that end the holders of Senior Indebtedness shall be entitled to receive for application in payment thereof any payment or distribution of any kind or character, whether in cash or property or securities, which may be payable or deliverable in connection with any such proceedings or sale in respect of the principal of, premium, if any, or interest on the Subordinated Notes other than securities of the Company as reorganized or readjusted or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in this Article Eleven with respect to the Subordinated Notes, to the payment of all indebtedness of the nature of Senior Indebtedness, provided that the rights of the holders of the Senior Indebtedness are not altered by such reorganization or readjustment;
(b) In the event and during the continuation of any default in payment of any Senior Indebtedness or if any event of default, as therein defined, shall exist and all grace periods with respect thereto shall have expired, under any Senior Indebtedness or any agreement pursuant to which any Senior Indebtedness is issued, no payment of the principal of, premium, if any,
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or interest on the Subordinated Notes shall be made and the Company covenants that it will, upon ascertaining any such default or event of default, provide written notice to the Trustee of such default or event of default, provided that payment on the Subordinated Notes may and shall be resumed, in the case of a notice relating to a payment default on such Senior Indebtedness, upon the date on which it is cured or waived pursuant to the terms of such Senior Indebtedness, and, in the case of a notice relating to a nonpayment default, the earlier of the date on which it is cured or waived pursuant to the terms of such Senior Indebtedness or 179 days after the date on which such notice is received by the Trustee, unless the maturity of the relevant Senior Indebtedness of the Company has been accelerated;
(c) In the event that the Subordinated Notes of any series are declared due and payable before their expressed maturity because of the occurrence of an Event of Default (under circumstances when the provisions of subsection (a) of this Section 11.02 shall not be applicable), the holders of all Senior Indebtedness shall be entitled to receive payment in full in money of such Senior Indebtedness before such Holders of Subordinated Notes are entitled to receive any payment on account of the principal of or interest on the Subordinated Notes; and (d) No holder of Senior Indebtedness shall be prejudiced in his right to enforce subordination of the Subordinated Notes by any act or failure to act on the part of the Company.
Section 11.03. Payments and Distributions. In the event that, notwithstanding the provisions of Section 11.02, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities (other than securities of the Company as reorganized or readjusted or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in this Article Eleven with respect to the Subordinated Notes, to the payment of all indebtedness of the nature of Senior Indebtedness, provided that the rights of the holders of the Senior Indebtedness are not altered by such reorganization or readjustment) shall be received by the Holders of Subordinated Notes or by the Trustee for their benefit in connection with any proceedings or sale referred to in subsection (a) of Section 11.02 before all Senior Indebtedness is paid in full in money, such payment or distribution shall be paid over to the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other Person making payment or distribution of assets of the Company, if any, otherwise such payment or distribution shall be paid over to the holders of such Senior Indebtedness or their representative or representatives or to the trustee or trustees under any indenture under which any instruments evidencing any of such Senior Indebtedness may have been issued, ratably according to the aggregate amounts remaining unpaid on account of the Senior Indebtedness held or represented by each, for application to the payment of all Senior Indebtedness remaining unpaid until all such Senior Indebtedness shall have been paid in full in money, after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness.
From and after the payment in full in money of all Senior Indebtedness, the Holders of Subordinated Notes (together with the holders of any other indebtedness of the Company which is subordinate in right of payment to the payment in full of all Senior Indebtedness, which is not subordinate in right of payment to the Subordinated Notes and which by its terms grants such right of subrogation to the holder thereof) shall be subrogated to the rights
NYDOCS01/905069.6 46
of the holders of Senior Indebtedness to receive payments or distributions of assets or securities of the Company applicable to the Senior Indebtedness until the Subordinated Notes shall be paid in full, and, for the purposes of such subrogation, no such payments or distributions to the holders of Senior Indebtedness of assets or securities, which otherwise would have been payable or distributable to Holders of Subordinated Notes, shall, as between the Company, its creditors other than the holders of Senior Indebtedness and the Holders, be deemed to be a payment by the Company to or on account of the Senior Indebtedness, it being understood that the provisions of this Article Eleven are and are intended solely for the purpose of defining the relative rights of the Holders, on the one hand, and the holders of the Senior Indebtedness, on the other hand, and nothing contained in this Article Eleven or elsewhere in this Indenture or in the Subordinated Notes is intended to or shall impair as between the Company, its creditors other than the holders of Senior Indebtedness and the Holders of Subordinated Notes, the obligation of the Company, which is unconditional and absolute, to pay to the Holders of Subordinated Notes the principal of and interest on the Subordinated Notes as and when the same shall become due and payable in accordance with their terms, or to affect the relative rights of the Holders of Subordinated Notes and creditors of the Company other than the holders of the Senior Indebtedness, nor shall anything herein or therein prevent the Trustee or the Holder of any Subordinated Note from exercising all remedies otherwise permitted by applicable law upon Default under this Indenture subject to the rights of the holders of Senior Indebtedness, under Section 11.02, to receive cash, property or securities of the Company otherwise payable or deliverable to the Holders of the Subordinated Notes.
Upon any distribution or payment in connection with any proceedings or sale referred to in subsection (a) of Section 11.02, the Trustee, subject as between the Trustee and the Holders of Subordinated Notes to the provisions of Section 7.02 hereof, shall be entitled to rely upon a certificate of the liquidating trustee or agent or other person making any distribution or payment to the Trustee, the amount of such Senior Indebtedness or the amount payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Eleven. In the event that the Trustee determines, in good faith, that further evidence is required with respect to the right of any person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Section 11.03, the Trustee may request such person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such person, as to the extent to which such person is entitled to participate in such payment or distribution, and as to other facts pertinent to the rights of such person under this Section 11.03, and if such evidence is not furnished, the Trustee may defer any payment to such person pending judicial determination as to the right of such person to receive such payment.
The Trustee, however, shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness, and shall not be liable to any such holders if it shall in good faith pay over or distribute to Holders of Subordinated Notes or the Company or any other person moneys or assets to which any holders of Senior Indebtedness shall be entitled by virtue of Article Eleven of this Indenture or otherwise.
Section 11.04. Payments by the Company. Nothing contained in this Article Eleven or elsewhere in this Indenture, or in any of the Subordinated Notes, shall prevent at any time, (a) the Company from making payments at any time of principal of or interest on the Subordinated Notes, except under the
NYDOCS01/905069.6 47
conditions described in Section 11.02 or during the pendency of any proceedings or sale therein referred to, provided, however, that payments of principal of, premium, if any, or interest on the Subordinated Notes shall only be made by the Company within three business days of the due dates for such payments or (b) the application by the Trustee of any moneys deposited with it hereunder to the payment of or on account of the principal of, premium, if any, or interest on the Subordinated Notes, if all the time of such deposit the Trustee did not have written notice in accordance with Section 11.06 of any event prohibiting the making of such deposit by the Company or if in the event of redemption, the Trustee did not have such written notice prior to the time that the notice of redemption pursuant to Section 3.01 was given (which notice of redemption shall in no event be given more than 60 days prior to the date fixed for redemption).
Section 11.05. Appointment of the Trustee by Holders. Each Holder by his acceptance of a Subordinated Note authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination as provided in this Article Eleven and appoints the Trustee as attorney-in-fact for any and all such purposes, including, in the event of any dissolution, winding up, liquidation or reorganization of the Company (whether in bankruptcy, insolvency or receivership proceedings or upon an assignment for the benefit of creditors or otherwise) tending towards liquidation of the business and assets of the Company, the immediate filing of a claim for the unpaid balance of such Holder's Subordinated Notes in the form required in said proceedings and cause said claim to be approved.
Section 11.06. Notice to Trustee. Notwithstanding the provisions of this Article Eleven or any other provisions of this Indenture, the Trustee shall not be charged with the knowledge of the existence of any facts which would prohibit the making of any payment of moneys to or by the Trustee, unless and until the Trustee shall have received written notice thereof from the Company or from the holder of, or the representative of any class of, Senior Indebtedness, together with proof satisfactory to the Trustee of such holding of Senior Indebtedness or of the authority of such representative; provided, however, that if at least two business days prior to the date upon which by the terms hereof any such monies may become payable for any purpose (including, without limitation, the payment of either the cash amount payable at maturity or interest on any Subordinated Note) the Trustee shall not have received with respect to such monies the notice provided for in this Section 11.06, then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such monies and to apply the same to the purpose for which they were received, and shall not be affected by any notice to the contrary, which may be received by it on or after such three business days prior to such date.
Section 11.07. Rights of Trustee. The Trustee shall be entitled to all the rights set forth in this Article Eleven with respect to any Senior Indebtedness which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness.
Section 11.08. Paying Agent. In case at any time any paying agent other than the Trustee shall be appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article Eleven shall in such case (unless the context shall otherwise require) be construed as extending to and including such paying agent within its meaning as fully for all intents
NYDOCS01/905069.6 48
and purposes as if such paying agent were named in this Article Eleven in place of the Trustee.
ARTICLE XII. MISCELLANEOUS
Section 12.01. Trust Indenture Act of 1939. The Indenture shall incorporate and be governed by the provisions of the Trust Indenture Act that are required to be part of and to govern indentures qualified under the Trust Indenture Act.
Section 12.02. Noteholder Communications; Noteholder Actions.
(a) The rights of Holders to communicate with other Holders with respect to the Indenture or the Notes are as provided by the Trust Indenture Act, and the Company and the Trustee shall comply with the requirements of Trust Indenture Act Sections 312(a) and 312(b). Neither the Company nor the Trustee will be held accountable by reason of any disclosure of information as to names and addresses of Holders made pursuant to the Trust Indenture Act.
(b) (1) Any request, demand, authorization, direction, notice, consent to amendment, modification or waiver or other action provided by this Indenture to be given or taken by a Holder (an "Act") may be evidenced by an instrument signed by the Holder delivered to the Trustee. The fact and date of the execution of the instrument, or the authority of the person executing it, may be proved in any manner that the Trustee deems sufficient.
(2) The Trustee may make reasonable rules for action by or at a meeting of Holders of any one or more series of Notes, which will be binding on all the Holders of such Notes.
(3) The ownership of Notes shall be proved by the Register.
(c) Any Act by the Holder of any Note binds that Holder and every subsequent Holder of a Note that evidences the same debt as the Note of the acting Holder, even if no notation thereof appears on the Note. Subject to paragraph (d), a Holder may revoke an act as to its Notes, but only if the Trustee receives the notice of revocation before the date the amendment or waiver or other consequence of the act becomes effective.
(d) The Company may, but is not obligated to, fix a record date (which need not be within the time limits otherwise prescribed by Trust Indenture Act Section 316(c)) for the purpose of determining the Holders entitled to act with respect to any amendment or waiver or in any other regard, except that during the continuance of an Event of Default, only the Trustee may set a record date as to notices of default, any declaration or acceleration or any other remedies or other consequences of the Event of Default. If a record date is fixed, those Persons that were Holders at such record date and only those Persons will be entitled to act, or to revoke any previous act, whether or not those Persons continue to be Holders after the record date. No act will be valid or effective for more than 90 days after the record date.
Section 12.03. Notices.
NYDOCS01/905069.6 49
(a) Any notice or communication to the Company will be deemed given if in writing (i) when delivered in person or (ii) five days after mailing when mailed by first class mail, or (iii) when sent by facsimile transmission, with transmission confirmed. Any notice or communication to the Trustee will be deemed given if in writing (i) when delivered in person, or (ii) when sent by facsimile transmission, with transmission confirmed. In each case the notice or communication should be addressed as follows:
if to the Company:
Scott A. Schreff Corporate Secretary and Assistant General Counsel The Timken Company Mail Code GNE 01 1835 Dueber Avenue, S.W. Canton, Ohio 44706-0928 FAX: (330) 471-3541
if to the Trustee:
The Bank of New York Corporate Finance Unit 101 Barclay Street, Floor 8 West New York, NY 10286 FAX: (212) 815-5704
The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications.
(b) Except as otherwise expressly provided with respect to published notices, any notice or communication to a Holder will be deemed given when mailed to the Holder at its last address as it appears on the Register by first class mail or, as to any Global Note registered in the name of DTC or its nominee, as agreed by the Company, the Trustee and DTC. Copies of any notice or communication to a Holder, if given by the Company, will be mailed to the Trustee at the same time. Defect in mailing a notice or communication to any particular Holder will not affect its sufficiency with respect to other Holders.
(c) Where the Indenture provides for notice, the notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and the waiver will be the equivalent of the notice. Waivers of notice by Holders must be filed with the Trustee, but such filing is not a condition precedent to the validity of any action taken in reliance upon such waivers.
Section 12.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take any action under the Indenture, the Company will furnish to the Trustee:
NYDOCS01/905069.6 50
(1) an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in the Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that all such conditions precedent have been complied with.
Section 12.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in the Indenture must include:
(1) a statement that each Person signing the certificate or opinion has read the covenant or condition and the related definitions;
(2) a brief statement as to the nature and scope of the examination or investigation upon which the statement or opinion contained in the certificate or opinion is based;
(3) a statement that, in the opinion of each such Person, that Person has made such examination or investigation as is necessary to enable the Person to express an informed opinion as to whether or not such covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of each such Person, such condition or covenant has been complied with, provided that an Opinion of Counsel may rely on an Officers' Certificate or certificates of public officials with respect to matters of fact.
Section 12.06. Payment Date Other Than a Business Day. If any payment with respect to a payment of any principal of, premium, if any, or interest on any Note (including any payment to be made on any date fixed for redemption or purchase of any Note) is due on a day which is not a Business Day, then the payment need not be made on such date, but may be made on the next Business Day with the same force and effect as if made on such date, and no interest will accrue for the intervening period.
Section 12.07. Governing Law. This Indenture and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York.
Section 12.08. No Adverse Interpretation of Other Agreements. The Indenture may not be used to interpret another indenture or loan or debt agreement of the Company or any Subsidiary of the Company, and no such indenture or loan or debt agreement may be used to interpret the Indenture.
Section 12.09. Successors. All agreements of the Company in the Indenture and the Notes will bind its successors. All agreements of the Trustee in the Indenture will bind its successor.
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Section 12.10. Duplicate Originals. The parties may sign any number of copies of the Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.
Section 12.11. Separability. In case any provision in the Indenture or in the Notes is invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired thereby.
Section 12.12. Table of Contents and Headings. The Table of Contents, Cross-Reference Table and headings of the Articles and Sections of the Indenture have been inserted for convenience of reference only, are not to be considered a part of the Indenture and in no way modify or restrict any of the terms and provisions of the Indenture.
Section 12.13. No Liability of Directors, Officers, Employees, Incorporators and Stockholders. No director, officer, employee, incorporator, member or stockholder of the Company or any Subsidiary will have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of, or by reason of, such obligations. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes.
* * *
This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.
NYDOCS01/905069.6 52
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused the Indenture to be duly executed as of the date first written above.
THE TIMKEN COMPANY as Issuer
By:/s/ Glenn A. Eisenberg Name: Glenn A. Eisenberg Title: Executive Vice President - Finance and Administration
By:/s/ William R. Burkhart Name: William R. Burkhart Title: Senior Vice President and General Counsel
THE BANK OF NEW YORK as Trustee
By:/s/ Joseph A. Lloret Name: Joseph A. Lloret Title: Assistant Treasurer
NYDOCS01/905069.6 53
EXHIBIT A
For Global Note only: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (THE "DEPOSITORY", WHICH TERM INCLUDES ANY SUCCESSOR DEPOSITORY FOR THE CERTIFICATES) TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AND ANY PAYMENT HEREIN IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
NYDOCS01/905069.6 A-1
EXHIBIT 10
January 1, 2003 (revised December 18, 2002)
THE TIMKEN COMPANY MANAGEMENT PERFORMANCE PLAN
Purpose _______
The purpose of The Timken Company (the "Company") Management Performance Plan (the "Plan") is to promote the profitable growth of the Company by:
* Providing rewards for achieving increasing levels of return on capital.
* Recognizing corporate, business unit and individual performance achievement.
* Attracting, motivating and retaining superior executive talent.
Administration ______________
It is the responsibility of senior management of the Company to execute the provisions of the Plan. Based on senior management recommendations, the Compensation Committee (the "Committee") approves financial goals, partici- pation, target bonus awards, actual bonus awards, timing of payment and other actions necessary to the administration of the Plan.
Participation _____________
The participant group includes Company executive officers and other key employees of the Company and its subsidiaries in positions assigned to Grades 7 or higher (i.e., 750 or more points) based on the Company's job evaluation process.
Bonus Opportunity _________________
Each position is assigned a target bonus expressed as a percentage of annual base salary. The targets are based on market data for companies that are similar for compensation purposes, including companies of similar size and similar industries. The targets are reviewed annually by management, and the Committee will approve all target bonuses for officers.
The full target bonus opportunity represents an appropriate bonus award if performance standards are met for Corporate, Business Unit and Individual results.
Bonus funds for the three components-Corporate, Business Unit and Individual- will be developed independently based on performance achievement versus the goal(s) for each component. The actual value of each component can range from 0% to 200% of target based on performance.
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For most participants, the total bonus will be the sum of the amounts for Corporate, Business Unit and Individual performance. In general, the more senior participants will have greater weight placed on corporate results, while other participants will have a greater weight placed on business unit and individual performance results.
The allocations to corporate, business unit and individual performance will be reviewed annually and changes to the allocations will be determined by senior management.
Performance Measures ____________________
Corporate/Business Unit Components
The primary Corporate and Business Unit performance measure is Return on Invested Capital, one measure of which is Earnings Before Interest and Taxes (EBIT) divided by Beginning Invested Capital (BIC).
At the beginning of each year, the Committee will specify the EBIT/BIC and other financial or non-financial performance measures to be used to evaluate Corporate and Business Unit performance for the coming year. Potential performance measures include, but are not limited to:
* Cash flow (including free cash flow) * Continuous improvement * Cost of capital * Customer satisfaction * Debt reduction * Earnings growth (including earnings per share and earnings before interest and taxes) * Financial performance exceeding that of peer/competitor companies * Improvement of shareholder return * Inventory management * Net income * Productivity improvement * Profit after taxes * Quality * Recruitment and development of excellent associates with emphasis on diversity * Reduction of fixed costs * Return on assets * Return on equity * Return on invested capital (EBIT/BIC) * Sales from new products * Sales growth * Successful start-up of new facility * Successful acquisition/divestiture
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For the Corporate, Business Unit and Individual components of the Plan, the size of the award will be determined by the degree to which targets are achieved for each measure within that component. Awards for performance that falls between threshold, target and maximum will be interpolated.
Individual Component ____________________
Individual performance goals will be established for each participant consistent with the Company's performance management process. The participant's supervisor will assess the participant's performance against these goals and make a determination of the amount of bonus to be earned for the individual component of the Plan. While the value of the individual component can range from 0% to 200% of target for a specific individual, the sum of individual award components for all participants must not exceed 100% of target.
Award Determination ___________________
A participant's bonus award will be determined by adding the value of each of the applicable components (corporate, business unit, individual) once performance is considered. The sum of all participant bonus determinations will equal the Total Fund.
Minimum Performance Requirement _______________________________
For a payment to be earned for any portion of this Plan, the Company must report a predetermined net profit for the Plan year after taking into account all Plan payments for that year. Once the predetermined profit level is achieved, the Plan will function as outlined. If the predetermined profit level is not achieved, no awards will be paid under the Corporate, Business Unit or Individual component of the Plan.
Bonus Payments ______________
At the end of the year, senior management will determine whether Corporate performance has exceeded the minimum performance requirement for paying bonuses. Senior management will recommend to the Committee the Total Fund based on its assessment of performance achievement at Corporate, Business Unit and individual levels. The Committee may make further adjustments to such management recommendations based on its assessment of financial and non- financial performance.
Awards under the Plan will be paid in cash.
One hundred percent of awards under the Plan will be included in pension earnings and earnings for the purpose of calculating 401(k) plan benefits. Awards will not be included for purposes of any other employee benefits plans, except long term disability.
mpplan02revised12-18-2002 .doc 3
EXHIBIT 10.33
EXECUTIVE SEVERANCE AGREEMENT
This Executive Severance Agreement (this "Agreement") is dated as of the 10th day of January, 2002, between The Timken Company, an Ohio corporation (the "Company"), and Glenn A. Eisenberg (the "Executive").
WHEREAS, the Executive is employed as Executive Vice President - Finance and Administration of the Company, is a key employee of the Company and is expected to make major contributions to the profitability, growth and financial strength of the Company; and
WHEREAS, the Company wishes to induce Executive to accept employment with and to remain in the employment of the Company; and
WHEREAS, the Company recognizes that a termination of employment may occur in circumstances where the Executive should receive additional compensation for services theretofore rendered and for other good consideration.
NOW, THEREFORE, in consideration of the premises, the Company and the Executive hereby agree as follows:
1. Definitions:
1.1 Company Termination Event: The term "Company Termination Event" shall mean the termination, prior to any Executive Termination Event, of the employment of the Executive by the Company in any of the following events:
(a) The Executive's death;
(b) If the Executive shall become eligible to receive and begin to receive long-term disability benefits under The Long Term Disability Program of The Timken Company or any successor plan in an amount not less than the benefits provided by such plans as in effect as of such date; or
(c) For Cause. Termination shall be deemed to have been for "Cause" if based on the fact that the Executive has (i) been convicted of or failed to contest charges of a felony; (ii) committed a material act of dishonesty or disloyalty with respect to the Company which is materially injurious to the Company, or (iii) willfully and deliberately refused to perform duties normally associated with the Executive's position or reasonable duties assigned by the Executive's supervisor consistent with the Executive's position, not remedied within 30 days after receipt of written notice by the Company.
1.2 Executive Termination Event: The term "Executive Termination Event" shall mean the termination of the Executive's employment (including a decision to retire if eligible under The 1984 Retirement Plan for Salaried Employees of The Timken Company, or any successor plan (the "Retirement Plan")) by the Executive in any of the following events:
(a) A significant reduction or other adverse change in the nature or scope of the responsibilities, authorities, duties, powers or functions (including status, offices, titles and reporting requirements) of the Executive, not effected at the request or with the consent of the Executive;
(b) A reduction by the Company in the Executive's annual base salary, as the same may be increased from time to time;
(c) The failure by the Company (i) to continue in effect without substantial change any compensation or benefit plan in which the Executive participates that is material to his total compensation, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or (ii) to continue the Executive's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of the Executive's participation relative to other participants;
(d) The material breach by the Company of any provision of any material agreement between the Executive and the Company, excluding for this purpose an isolated and inadvertent action not taken in bad faith and remedied by the Company within 30 days after receipt of notice from the Executive.
2. Executive Severance Compensation:
2.1 Severance Compensation: If the Executive's employment is terminated other than pursuant to a Company Termination Event, or if the Executive voluntarily terminates his employment pursuant to an Executive Termination Event, during the first three years, then the Company will: (a) pay to the Executive a lump sum cash payment equal to two times the sum of the Executive's base salary plus target bonus for the year in which the Executive's employment is terminated, (b) pay for individual executive outplacement services for the Executive for 12 months beginning on the termination date (or until such earlier date upon which the Executive has secured other full-time employment), and (c) provide to the Executive and his eligible dependants coverage, at no cost to the Executive, under (or benefits substantially similar to) the Company's medical and dental plans for 24 months beginning on the termination date. In the event the Executive's employment is terminated after the end of the third year, the Company and the Executive will negotiate in good faith an appropriate severance arrangement, taking into consideration the Executive's position with the Company.
2.2 Payment: In the event the Executive receives compensation under the Severance Agreement between the Executive and the Company (the "Severance Agreement"), the Executive will no longer be entitled to the severance compensation described in section 2.1 of this Executive Severance Agreemennt. In the event that the Executive becomes eligible to receive compensation under the Severance Agreement after he has already received compensation under this Executive Severance Agreement, all amounts received by
2
the Executive under this Executive Severance Agreement shall be deducted from the amount the Executive is entitled to under the Severance Agreement and the Executive shall receive the remaining benefits under the Severance Agreement.
2.3 Release: Payment of the severance compensation described section 2.1 of this Executive Severance Agreement is conditioned upon the Executive executing and delivering a release reasonably satisfactory to the Company releasing the Company from any and all claims, demands, damages, actions and/or causes of action whatsoever, which the Executive may have on account of the termination of his employment; provided, however, that such release will not release the Company of its obligations to the Executive under the preceding paragraph or any other contractual obligations between the Company or its affiliates and the Executive, or any indemnification obligations to the Executive under the Company's Regulations, Articles of Incorporation, state law, or otherwise.
3. Employment Rights: Either the Company or the Executive may terminate the Executive's employment with the Company at any time.
4. Successors and Binding Agreement: The obligations set forth in this agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives and shall inure to the benefit of and be binding upon the Company and its successors and assigns.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered as of the date first set forth above.
/s/ Glenn A. Eisenberg ______________________ Glenn A. Eisenberg
THE TIMKEN COMPANY
By: /s/ William R. Burkhart __________________________________ Name: William R. Burkhart Title: Sr. VP & General Counsel
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EXHIBIT 12
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Twelve Months Ended Three Months Ended Dec. 31 Dec. 31 Dec. 31 Dec. 31 2002 2001 2002 2001 -------- -------- -------- -------- (Thousands of Dollars, except ratio amounts) Income (loss) before income taxes, extraordinary item and cumulative effect of accounting changes $ 85,518 $(26,883) $ 58,173 $ 8,643 Amortization of capitalized interest 2,872 2,810 708 800 Interest expense 31,540 33,401 7,544 7,588 Interest portion of rental expense 1,391 2,585 278 975
-------- -------- -------- -------- Earnings $121,321 $ 11,913 $ 66,703 $ 18,006 ======== ======== ======== ========
Interest $ 31,975 $ 34,824 $ 7,740 $ 8,477 Interest portion of rental expense 1,391 2,585 278 975 -------- -------- -------- -------- Fixed Charges $ 33,366 $ 37,409 $ 8,018 $ 9,452 ======== ======== ======== ========
Ratio of Earnings to Fixed Charges 3.64 0.32 8.32 1.90
EXHIBIT 13
ANNUAL REPORT TO SHAREHOLDERS
FOR THE YEAR ENDED DECEMBER 31, 2002
FINANCIAL summary
2002 | 2001 | |
(Thousands of dollars, except per share data) |
||
Net sales
Impairment and restructuring charges Income (loss) before income taxes and cumulative effect of change in accounting principle Provision for income taxes Income (loss) before cumulative effect of change in accounting principle Net income (loss) Earnings per share Earnings per share - assuming dilution Dividends per share |
$ 2,550,075
32,143 85,518 34,067 $ 51,451 $ 38,749 $ .63 $ .62 $ .52 |
$ 2,447,178
54,689 (26,883) 14,783 (41,666) $ (41,666) $ (.69) $ (.69) $ .67 |
QUARTERLY financial data
2002 |
Net
Sales |
Gross
Profit |
Impairment &
Restructuring |
Net
Income (Loss) |
Earnings per Share (3) |
Dividends
per Share |
|
Basic | Diluted | ||||||
(Thousands of dollars, except per share data) |
|||||||
Q1
(1)
Q2 Q3 (3) Q4 |
$ 615,757
660,829 628,591 644,898 |
$ 118,642
124,301 111,262 115,372 |
$ 3,057
14,226 7,703 7,157 |
$ (3,514)
3,960 1,837 36,466 (2) |
$ (.06)
.07 .03 .58 |
$ (.06)
.07 .03 .57 |
$ .13
.13 .13 .13 |
|
|||||||
$ 2,550,075 | $ 469,577 | $ 32,143 | $ 38,749 | $ .63 | $ .62 | $ .52 | |
2001 |
|||||||
(Thousands of dollars, except per share data) |
|||||||
Q1
Q2 Q3 Q4 |
$ 661,516
634,389 577,698 573,575 |
$ 118,014
111,083 90,951 80,672 |
$ 7,907
16,859 24,639 5,284 |
$ 2,222
(14,574) (30,532) 1,218 (2) |
$ .04
(.24) (.51) .02 |
$ .04
(.24) (.51) .02 |
$ .18
.18 .18 .13 |
|
|||||||
$ 2,447,178 | $ 400,720 | $ 54,689 | $ (41,666) | $ (.69) | $ (.69) | $ .67 |
(1) Net income (loss) and earnings per share for Q1 reflect
the cumulative effect of change in accounting principle in accordance with the
adoption of
Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible
Assets." The change reduced net income (loss) by $12.7 million or $.21 per share.
(2) Includes receipt (net of expenses) of $50.2 million and $29.6 million in
2002 and 2001 resulting from the U.S. Continued Dumping and Subsidy Offset Act.
(3) Annual earnings per share do not equal the sum of the individual quarters
due to differences in the average number of shares outstanding during the respective
periods.
2002
Stock Prices
|
2001
Stock Prices
|
||||
High | Low | High | Low | ||
|
|
||||
Q1
Q2 Q3 Q4 |
$ 24.50
27.41 24.00 20.27 |
$ 15.35
20.50 16.54 14.92 |
Q1
Q2 Q3 Q4 |
$ 17.38
18.65 17.16 16.49 |
$ 14.63
14.89 11.75 13.04 |
1 |
CONSOLIDATED statement of operations
Year Ended December 31 | |||
2002 | 2001 | 2000 | |
(Thousands of dollars, except per share data) |
|||
Net sales
Cost of products sold |
$ 2,550,075
2,080,498 |
$ 2,447,178
2,046,458 |
$ 2,643,008
2,142,135 |
|
|||
Selling, administrative and general expenses Impairment and restructuring charges |
469,577
358,866 32,143 |
400,720
363,683 54,689 |
500,873
367,499 27,754 |
|
|||
Interest expense Interest income Receipt of Continued Dumping & Subsidy Offset Act (CDSOA) payment Other expense - net |
78,568
(31,540) 1,676 50,202 (13,388) |
(17,652)
(33,401) 2,109 29,555 (7,494) |
105,620
(31,922) 3,479 - (6,580) |
|
|||
Provision for income taxes |
85,518
34,067 |
(26,883)
14,783 |
70,597
24,709 |
|
|||
|
$ 51,451 |
$ (41,666) |
$ 45,888 |
|
|||
|
(12,702) |
- |
- |
|
|||
Earnings Per Share: Income (loss) before cumulative effect of change in accounting principle Cumulative effect of change in accounting principle |
$ 38,749
$0.84 (0.21) |
$ (41,666)
$(0.69) - |
$ 45,888
$0.76 - |
|
|||
Earnings Per Share - Assuming Dilution: Income (loss) before cumulative effect of change in accounting principle Cumulative effect of change in accounting principle |
$ 0.63
$ 0.83 (0.21) |
$ (0.69)
$(0.69) - |
$ 0.76
$(0.76) - |
|
|||
|
$ 0.62 | $ (0.69) | $ 0.76 |
MANAGEMENTS DISCUSSION AND ANALYSIS OF THE STATEMENT OF OPERATIONS
2002 compared to 2001
22
TIMKEN |
MANAGEMENTS DISCUSSION AND ANALYSIS OF THE STATEMENT
OF OPERATIONS
(CONTINUED)
23 |
MANAGEMENTS DISCUSSION AND ANALYSIS OF THE STATEMENT
OF OPERATIONS
(CONTINUED)
24
TIMKEN |
25 |
CONSOLIDATED balance sheet
December 31 | ||
2002 | 2001 | |
|
||
(Thousands of dollars
)
|
$ 82,050
361,316 36,003 - 34,493 243,485 210,945 |
$ 33,392
307,759 42,895 15,103 36,658 212,040 180,533 |
|
||
|
488,923 | 429,231 |
|
||
Property, Plant and Equipment Land and buildings Machinery and equipment |
968,292
482,878 2,462,198 |
828,380
488,540 2,483,253 |
|
||
Less allowances for depreciation |
2,945,076
1,718,832 |
2,971,793
1,666,448 |
|
||
Property, Plant and Equipment-Net
Other Assets Goodwill Intangible pension asset Miscellaneous receivables and other assets Deferred income taxes Deferred charges and prepaid expenses |
1,226,244
129,943 129,042 100,573 169,051 25,211 |
1,305,345
150,041 136,118 68,557 27,164 17,479 |
|
||
|
553,820 | 399,359 |
|
||
Total Assets | $ 2,748,356 | $ 2,533,084 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF THE BALANCE SHEET
26
TIMKEN |
December 31 | ||
2002 | 2001 | |
|
||
(Thousands of dollars
)
LIABILITIES AND SHAREHOLDERS EQUITY Current Liabilities Commercial paper Short-term debt Accounts payable and other liabilities Salaries, wages and benefits Income taxes Current portion of long-term debt |
$ 8,999
78,354 296,543 222,546 3,847 23,781 |
$ 1,962
84,468 258,001 254,291 - 42,434 |
|
||
Non-Current Liabilities Long-term debt Accrued pension cost Accrued postretirement benefits cost Other non-current liabilities |
634,070
350,085 723,188 411,304 20,623 |
641,156
368,151 317,297 406,568 18,177 |
|
||
|
1,505,200 | 1,110,193 |
Shareholders Equity Class I and II Serial Preferred Stock without par value: Authorized10,000,000 shares each class, none issued Common stock without par value: Authorized200,000,000 shares Issued (including shares in treasury) (2002 63,451,916 shares; 2001 63,082,626 shares) Stated capital Other paid-in capital Earnings invested in the business Accumulated other comprehensive loss Treasury shares at cost (2002 40,074 shares; 2001 3,226,544 shares) |
-
53,064 257,992 764,446 (465,677) (739) |
-
53,064 256,423 757,410 (224,538) (60,624) |
|
||
|
609,086 | 781,735 |
|
||
Total Liabilities and Shareholders Equity | $ 2,748,356 | $ 2,533,084 |
|
27 |
CONSOLIDATED statement of cash flows
Year Ended December 31 | |||
2002 | 2001 | 2000 | |
|
|||
(Thousands of dollars)
CASH PROVIDED (USED) Operating Activities Net income (loss) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Cumulative effect of change in accounting principle Depreciation and amortization Loss (gain) on disposals of property, plant and equipment Deferred income tax provision Common stock issued in lieu of cash to benefit plans Impairment and restructuring charges Changes in operating assets and liabilities: |
$ 38,749
12,702 146,535 5,904 17,250 5,217 (13,564) (43,679) (50,611) (3,198) 80,761 10,037 |
$ (41,666)
- 152,467 (2,233) 23,013 1,441 41,832 44,803 51,247 (16,897) (72,483) (3,886) |
$ 45,888
- 151,047 3,982 10,585 1,303 16,813 (22,536) (52,566) (172) 4,046 (1,296) |
|
|||
Investing Activities Purchases of property, plant and equipmentnet Proceeds from disposals of property, plant and equipment Acquisitions |
206,103
(85,277) 12,616 (6,751) |
177,638
(90,501) 6,357 (12,957) |
157,094
(159,157) 2,669 - |
|
|||
Financing Activities Cash dividends paid to shareholders Purchases of treasury shares Proceeds from issuance of long-term debt Payments on long-term debt Short-term debt activitynet |
(79,412)
(31,713) - - (37,296) (11,498) |
(97,101)
(40,166) (2,931) 80,766 (2,176) (90,980) |
(156,488)
(43,562) (24,149) 3,478 (3,595) 70,865 |
|
|||
Effect of exchange rate changes on cash |
(80,507)
2,474 |
(55,487)
(2,585) |
3,037
(622) |
|
|||
Cash and cash equivalents at beginning of year |
48,658
33,392 |
22,465
10,927 |
3,021
7,906 |
|
|||
|
$ 82,050 | $ 33,392 | $ 10,927 |
MANAGEMENTS DISCUSSION AND ANALYSIS OF THE BALANCE SHEET
(CONTINUED)
28
MANAGEMENTS DISCUSSION AND ANALYSIS OF THE BALANCE SHEET
(CONTINUED)
MANAGEMENTS DISCUSSION AND ANALYSIS OF THE STATEMENT OF
CASH FLOWS
TIMKEN
MANAGEMENTS DISCUSSION AND ANALYSIS OF OTHER INFORMATION
Recent Accounting Pronouncements
In October 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 144, "Accounting for Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS No. 144 retains the existing requirements for long-lived assets to be held and used, but it establishes one accounting model for long-lived assets to be disposed of by sale and revises guidance for assets to be |
disposed of other than by sale. Adoption of SFAS No. 144 did not have any effect on the company's financial position or results of operations. In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," which addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue |
29 |
MANAGEMENTS DISCUSSION AND ANALYSIS OF OTHER INFORMATION
(CONTINUED)
30
TIMKEN |
CONSOLIDATED
statement
of shareholders equity
32
notes
TO
CONSOLIDATED FINANCIAL STATEMENTS
1
SIGNIFICANT ACCOUNTING POLICIES
notes
TO
CONSOLIDATED FINANCIAL STATEMENTS
1
SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
34
2
COMPREHENSIVE LOSS
Accumulated other comprehensive loss
consists of the
following:
3
ACQUISITIONS
In March 2002, the company purchased an industrial equipment
repair facility in Niles, Ohio. In November 2001, the company purchased
Lecheres Industries SAS, the parent company of Bamarec S.A., a precision
component manufacturer based in France. In February 2001, the company
completed the buyout of its Chinese joint venture partner in Yantai Timken
Company Limited. Prior to the buyout, the company owned a 60% interest
in Yantai Timken, and its financial results were consolidated into the
company's financial statements, taking into account a minority interest.
In January 2001, the company purchased the assets of Score International,
Inc., a manufacturer of dental handpiece repair tools located in Sanford,
Florida.
The total cost of these acquisitions amounted to $6,751,000,
and $12,957,000 in 2002 and 2001, respectively. The purchase
price has been allocated to the assets and liabilities
acquired, based on their fair values at the dates of acquisition. The
fair value of the assets was $6,751,000 and $25,408,000 in 2002 and 2001;
and the fair value of liabilities assumed was $6,751,000 and $16,396,000
in 2002 and 2001. The excess of the purchase price over the fair value
of the net assets acquired has been allocated to goodwill. The acquisitions
were accounted for as purchases in accordance with SFAS No. 141, "Business
Combinations." The company's consolidated financial statements include
the results of operations of the acquired businesses for the period subsequent
to the effective date of this acquisition. Pro forma results of operations
have not been presented because the effect of these acquisitions was not
significant.
4
EARNINGS PER SHARE
The following table sets forth the
reconciliation
of
the numerator and the denominator of earnings per share and earnings per share
- assuming dilution for the years ended December 31:
notes
TO
CONSOLIDATED FINANCIAL STATEMENTS
5
IMPAIRMENT AND RESTUCTURING
CHARGES
36
The key elements of the 2002 restructuring, impairment and reorganization
expenses by segment for the year ended December 31, 2002 related to the MSI
and salaried workforce reduction programs are as follows:
The key elements of the
cumulative
restructuring, impairment
and reorganization expenses by segment related to the MSI and salaried workforce
reduction programs through December 31, 2002 are as follows:
The company also undertook a $55 million efficiency initiative
program announced in March 2000, which concluded during the first quarter
of 2001. The company incurred $49.4 million ($10.5 million in 2001) in
total impairment, restructuring and reorganization charges related to
the program. Of the $49.4 million total charges recorded between March
2000 and March 2001, $20.7 million were impairment expenses, $13.0 million
related to restructuring expenses and $15.7 million were reorganization
expenses.
In connection with this restructuring program, payments
of $13.0 million have been disbursed through December 31, 2001. Estimated
savings related to this first program realized through the end of 2001
approximated $26 million before taxes. During 2001, 106 positions were
identified and exited the company due to the initial restructuring. Combined
with positions eliminated during 2000, this resulted in a total elimination
of 694 positions as part of this restructuring.
Key elements of the 2001 restructuring, impairment and reorganization
expenses for this earlier restructuring program by segment are as follows:
notes
TO
CONSOLIDATED FINANCIAL STATEMENTS
6
CHANGE IN METHOD OF ACCOUNTING
Effective January 2002, the company adopted SFAS No. 142,
"Goodwill and Other Intangible Assets." In accordance with SFAS No. 142,
goodwill and indefinite lived intangible assets are no longer amortized
but are reviewed at least annually for impairment. The application of
the nonamortization provisions resulted in an increase in annual pretax
income of $6.1 million. Intangible assets that are separable and have
a definite life continue to be amortized over the estimated useful lives.
Changes in the estimated useful lives of identifiable intangible assets
did not result in a material change to net income.
As part of the adoption, the company evaluated the impairment
of indefinite lived intangible assets and determined that none were impaired
based on estimations in market value. Prior to testing goodwill for impairment,
the company determined the fair value
of each of its five reporting units using discounted cash
flows and validation with various market-comparable approaches. The company
completed the required transitional goodwill impairment analysis for SFAS
No. 142 adoption purposes in the third quarter of 2002 and recorded a
$12.7 million impairment loss, net of tax benefits of $7.8 million, relating
to its Specialty Steel business, which was treated as a cumulative effect
of a change in accounting principle.
SFAS No. 142 does not permit restatement of previously
issued financial statements. The following table sets forth reported operating
results for the company for the preceding two years, and what net income
and earnings per share would have been had SFAS No. 142 been applied in
all years ended as of December 31 (with goodwill amortization ceasing
on January 1, 2000):
Changes in the carrying amount of goodwill for the year ended
December 31, 2002 are as follows:
Indefinite lived intangible assets are immaterial.
38
The following table displays intangible assets as of December
31:
Amortization expense for intangible assets was approximately
$288,000 and $273,000 for the years ended December 31, 2002 and 2001, and is
estimated to be approximately $342,000 annually for the next five years.
7
CONTINGENCIES
notes
TO
CONSOLIDATED FINANCIAL STATEMENTS
8
FINANCING ARRANGEMENTS
Long-term debt
at December 31, 2002 and 2001 was
as follows:
40
9
FINANCIAL INSTRUMENTS
depending on the transaction. These deferred gains and
losses are reclassified from accumulated other comprehensive loss and
recognized in earnings when the future transactions occur, or through
depreciation expense.
The carrying value of cash and cash equivalents, accounts
receivable, commercial paper, short-term borrowings and accounts payable
are a reasonable estimate of their fair value due to the short-term nature
of these instruments. The fair value of the company's fixed-rate debt,
based on quoted market prices, was $325,000,000 and $334,000,000 at December
31, 2002 and 2001, respectively. The carrying value of this debt was $308,000,000
and $346,000,000.
10
STOCK COMPENSATION PLANS
Under the company's stock option plans, shares of common
stock have been made available to grant at the discretion of the Compensation
Committee of the Board of Directors to officers and key associates in
the form of stock options, stock appreciation rights, restricted shares
and deferred shares. In addition, shares can be awarded to directors not
employed by the company. The options have a ten-year term and vest in
25% increments annually beginning twelve months after the date of grant.
Pro forma information regarding net income and
Following is the
related assumptions
under the
Black-Scholes method:
A summary of activity related to
stock options
for the above plans is as follows for the years ended December 31:
notes
TO
CONSOLIDATED FINANCIAL STATEMENTS
11
RETIREMENT AND POSTRETIREMENT
BENEFIT PLANS
The company and its subsidiaries sponsor several unfunded
postretirement plans that provide health care and life insurance benefits
for eligible retirees and dependents. Depending on retirement date and
associate classification, certain health care plans contain contributions
and cost-sharing features such as deductibles and coinsurance. The remaining
health care and life insurance plans are noncontributory.
The company and its subsidiaries sponsor a number of defined
benefit pension plans, which cover many of their associates except those
at certain locations who are covered by government plans.
The following tables set forth the
change in benefit obligation,
change in plan assets, funded status and amounts recognized in the consolidated
balance sheet
of the defined benefit pension and postretirement benefits
as of December 31, 2002 and 2001:
42
The following table summarizes the
assumptions
used by the consulting actuary and the
related benefit cost
information:
12
RESEARCH AND DEVELOPMENT
notes
TO
CONSOLIDATED FINANCIAL STATEMENTS
13
SUBSEQUENT EVENT - ACQUISITION
14
SEGMENT INFORMATION
44
$ 825,778
$ 813,870
The Company evaluates operating performance based on each segment's
profit before interest and income taxes. Therefore, interest expense and interest
income are maintained at a corporate level and are not shown on a segmented
basis.
notes
TO
CONSOLIDATED FINANCIAL STATEMENTS
15
INCOME TAXES
The provision (credit) for
income taxes
consisted
of the following:
The company received an income tax refund of approximately $27,000,000
in 2002 and made income tax payments of approximately $7,210,000 in 2001 and
$17,520,000 in 2000. Taxes paid differ from current taxes provided, primarily
due to the timing of payments.
The effect of temporary differences giving rise to
deferred
tax assets and liabilities
at December 31, 2002 and 2001 was as follows:
The company has U.S. net operating losses from 2002 and 2001
with benefits totaling $29.5 million. These losses will start to expire in 2021.
In addition, the company has loss carryforward benefits in various foreign jurisdictions
of $4.7 million without expiration dates and state and local loss carryforward
benefits of $2.5 million, which will begin to expire in 2014. These losses are
fully reserved by the company.
The company has a research tax credit carryforward of $2.9 million,
an AMT credit carryforward of $9.3 million and state income tax credits of $10.6
million. The research tax credits will expire annually between 2019 and 2022,
and the AMT credits do not have any expiration date. The state income tax credits
will expire at various intervals beginning in 2003 and are fully reserved by
the company.
Following is the
reconciliation
between the provision
for income taxes and the amount computed by applying U.S. federal income tax
rate of 35% to income before taxes:
In 2001 and 2000, the company incurred losses without current
tax benefits related to the United Kingdom, Brazil and China. In 2002, the company
incurred losses without current tax benefits related to Brazil and China.
46
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
We have audited the consolidated balance sheets of The
Timken Company and subsidiaries as of December 31, 2002 and 2001, and
the related consolidated statements of operations, shareholders' equity,
and cash flows for each of the three years in the period ended December
31, 2002. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of The Timken Company and subsidiaries at December 31, 2002 and 2001,
and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 31, 2002, in
conformity with accounting principles generally accepted in the United
States.
As discussed in Note 6 to the consolidated financial statements,
"Change in Method of Accounting," the company adopted Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets" effective
January 1, 2002.
Ernst & Young LLP
FORWARD-LOOKING STATEMENTS
summary of operations
AND OTHER COMPARATIVE DATA
48
APPENDIX TO EXHIBIT 13
1993
31
Common Stock
Earnings
Invested
in the
Business
Accumulated
Other
Comprehensive
Loss
Total
Stated
Capital
Other
Paid-In
Capital
Treasury
Stock
(Thousands of dollars, except share data)
Year Ended December 31, 2000
Balance at January 1, 2000
Net income
Foreign currency translation adjustments
(net of income tax of $1,137)
Minimum pension liability adjustment
(net of income tax of $301)
Total comprehensive income
Dividends$0.72 per share
Purchase of 1,354,000 shares for treasury
Issuance of 123,068 shares from treasury
(1)
$ 1,045,981
45,888
(21,293)
514
25,109
(43,562)
(24,149)
1,303
$ 53,064
$ 258,287
(1,414)
$ 836,916
45,888
(43,562)
$ (64,134)
(21,293)
514
$ (38,152)
(24,149)
2,717
Balance at December 31, 2000
$ 1,004,682
$ 53,064
$ 256,873
$ 839,242
$ (84,913)
$ (59,584)
Year Ended December 31, 2001
Net loss
Foreign currency translation adjustments
(net of income tax of $963)
Minimum pension liability adjustment
(net of income tax of $61,892)
Cumulative effect of change in
method of accounting
Change in fair value of derivative
financial instruments
Reclassification adjustments -
contract settlements
Total comprehensive loss
Dividends$0.67 per share
Purchase of 206,300 shares for treasury
Issuance of 97,225 shares from treasury
(1)
(41,666)
(15,914)
(122,520)
(34)
(1,560)
403
(181,291)
(40,166)
(2,931)
1,441
(450)
(41,666)
(40,166)
(15,914)
(122,520)
(34)
(1,560)
403
(2,931)
1,891
Balance at December 31, 2001
$ 781,735
$ 53,064
$ 256,423
$ 757,410
$ (224,538)
$ (60,624)
Year Ended December 31, 2002
Net income
Foreign currency translation adjustments
(net of income tax of $2,843)
Minimum pension liability adjustment
(net of income tax of $147,303)
Change in fair value of derivative
financial instruments
Reclassification adjustments -
contract settlements
Total comprehensive loss
Dividends$0.52 per share
Issuance of 3,186,470 shares from treasury
(1)
Issuance of 369,290 shares from authorized
(1)
38,749
14,050
(254,318)
(2,320)
1,359
(202,390)
(31,713)
57,747
3,707
(2,138)
3,707
38,749
(31,713)
14,050
(254,318)
(2,320)
1,359
59,885
Balance at December 31, 2002
$ 609,086
$ 53,064
$ 257,992
$ 764,446
$ (465,677)
$ (739)
TIMKEN
2002
2001
2000
(Thousands of dollars)
Net income (loss), as reported
Deduct: Total stock-based
employee compensation
expense determined
under fair value based
methods for all awards,
net of related tax effects
$ 38,749
(5,439)
$ (41,666)
(5,731)
$ 45,888
(6,014)
Pro forma net income (loss)
$ 33,310
$ (47,397)
$ 39,874
Earnings per share:
Basic - as reported
Basic - pro forma
Diluted - as reported
Diluted - pro forma
$ 0.63
$ 0.54
$ 0.62
$ 0.54
$ (0.69)
$ (0.79)
$ (0.69)
$ (0.79)
$ 0.76
$ 0.66
$ 0.76
$ 0.66
33
TIMKEN
2002
2001
2000
(Thousands of dollars)
Foreign currency translation adjustment
Minimum pension liability adjustment
Fair value of open foreign currency cash flow hedges
$ (80,520)
(383,095)
(2,062)
$ (94,570)
(128,777)
(1,191)
$ (78,656)
(6,257)
-
$ (465,677)
$ (224,538)
$ (84,913)
2002
2001
2000
(Thousands of dollars, except per share data)
Numerator:
Net income (loss) for earnings per share and earnings per share
- assuming
dilution income available to common shareholders
Denominator:
Denominator for earnings per share weighted-average shares
Effect of dilutive securities:
Stock options and awards based on the treasury
stock method
$ 38,749
61,128,005
507,334
$ (41,666)
59,947,568
(1)
$ 45,888
60,556,595
166,577
Denominator for earnings per share -
assuming dilution adjusted
weighted-average shares
61,635,339
59,947,568
60,723,172
Earnings per share
$ 0.63
$ (0.69)
$ 0.76
Earnings per share - assuming dilution
$ 0.62
$ (0.69)
$ 0.76
35
2002
2001
(Millions of dollars)
Impairment expense
Severance expense
Curtailment expense (Pension and postretirement benefits)
Exit costs
Reorganization expense:
Cost of products sold
Selling, administrative and general expenses
$ 17.9
3.5
6.7
4.0
8.6
9.9
$ 1.5
30.8
15.1
1.4
4.1
3.9
Total MSI program charges
$ 50.6
$ 56.8
TIMKEN
Auto
Industrial
Steel
Total
(Millions of dollars)
Restructuring:
Severance expense
Exit costs
$ 0.1
3.9
$ 1.8
0.1
$ 1.6
-
$ 3.5
4.0
Impairment expense
Pension and postretirement benefits
$ 4.0
$ 14.2
0.8
$ 1.9
$ 3.7
3.7
$ 1.6
$ -
2.2
$ 7.5
$ 17.9
6.7
Total restructuring and impairment expense
Reorganization expense
$ 19.0
9.8
$ 9.3
8.7
$ 3.8
-
$ 32.1
18.5
Total expenses
$ 28.8
$ 18.0
$ 3.8
$ 50.6
Auto
Industrial
Steel
Total
(Millions of dollars)
Restructuring:
Severance expense
Exit costs
$ 26.0
4.3
$ 5.4
1.1
$ 2.9
-
$ 34.3
5.4
Impairment expense
Pension and postretirement benefits
$ 30.3
$ 15.3
0.8
$ 6.5
$ 4.1
18.8
$ 2.9
$ -
2.2
$ 39.7
$ 19.4
21.8
Total restructuring and impairment expense
Reorganization expense
$ 46.4
13.2
$ 29.4
13.3
$ 5.1
-
$ 80.9
26.5
Total expenses
$ 59.6
$ 42.7
$ 5.1
$ 107.4
Auto
Industrial
Steel
Total
(Millions of dollars)
Restructuring:
Severance expense
Reversal of severance expense
Impairment expense
$ 0.1
(0.2)
-
$ 4.0
(1.8)
3.4
$ -
-
0.4
$ 4.1
(2.0)
3.8
Total restructuring and impairment expense
Reorganization expense
$ (0.1)
0.3
$ 5.6
3.3
$ 0.4
1.0
$ 5.9
4.6
Total expenses
$ 0.2
$ 8.9
$ 1.4
$ 10.5
37
2001
2000
(Thousands of dollars except per share data)
Reported net (loss) income
Add back: goodwill amortization, net of income taxes
of 2001-$1,278; 2000-$1,339
Add back: amortization of indefinite lived intangible assets,
net of income taxes of 2001-$28; 2000-$11
$ (41,666)
4,782
45
$ 45,888
5,010
18
Adjusted net (loss) income
$ (36,839)
$ 50,916
Reported earnings per share - basic and diluted
Add back: goodwill amortization, net of income taxes
Add back: amortization of indefinite lived intangible assets, net of income
taxes
$ (0.69)
0.08
-
$ 0.76
0.08
-
Adjusted earnings per share - basic and diluted
$ (0.61)
$ 0.84
Beginning
Balance
Impairment
Other
Ending
Balance
(Thousands of dollars)
Goodwill:
Automotive
Industrial
Steel
$ 1,577
120,426
28,038
$ -
-
(20,488)
$ 56
(986)
1,320
$ 1,633
119,440
8,870
#160;
$ 150,041
$ (20,488)
$ 390
$ 129,943
TIMKEN
2002
2001
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Intangible assets subject to amortization:
Industrial trademarks
Industrial land use rights
Industrial know-how transfer
$ 712
4,484
417
$ 213
905
341
$ 499
3,579
76
$ 532
4,484
417
$ 289
798
341
$ 243
3,686
76
$ 5,613
$ 1,459
$ 4,154
$ 5,433
$ 1,428
$ 4,005
Intangible assets not subject to amortization:
Goodwill
Automotive land use rights
Industrial license agreements
$ 129,943
112
951
$ -
-
-
$ 129,943
112
951
$ 197,329
108
1,042
$ 47,288
-
97
$ 150,041
108
945
$ 131,006
-
$ 131,006
$ 198,479
$ 47,385
$ 151,094
Total intangible assets
$ 136,619
$ 1,459
$ 135,160
$ 203,912
$ 48,813
$ 155,099
39
2001
2000
(Thousands of dollars)
Fixed-rate Medium-Term Notes, Series A, due at various dates through
May 2028, with interest rates ranging from 6.20% to 7.76%
Variable-rate State of Ohio Air Quality and Water Development
Revenue Refunding Bonds, maturing on November 1, 2025
(1.5% at December 31, 2002)
Variable-rate State of Ohio Pollution Control Revenue Refunding
Bonds, maturing on July 1, 2003 (1.6% at December 31, 2002)
Variable-rate State of Ohio Water Development Revenue
Refunding Bonds, maturing May 1, 2007 (1.6% at December 31,
2002)
Variable-rate State of Ohio Water Development Authority Solid Waste
Revenue Bonds, maturing on July 1, 2032 (1.65% at December 31,
2002)
Other
$ 292,000
21,700
17,000
8,000
24,000
11,166
$ 327,000
21,700
17,000
8,000
24,000
12,885
Less current maturities
373,866
23,781
410,585
42,434
Long-tem debt
$ 350,085
$ 368,151
TIMKEN
As a result of the company's worldwide operating
activities, it is exposed to changes in foreign currency exchange rates,
which affect its results of operations and financial condition. The company
and certain subsidiaries enter into forward exchange contracts to manage
exposure to currency rate fluctuations, primarily related to anticipated
purchases of inventory and equipment. At December 31, 2002 and 2001, the
company had forward foreign exchange contracts, all having maturities of
less than one year, with notional amounts of $72,070,000 and $19,507,000,
respectively. The forward foreign exchange contracts were primarily entered
into by the company's European subsidiaries to manage Euro and U.S. dollar
exposures. The realized and unrealized gains and losses on these contracts
are deferred and included in inventory or property, plant and equipment,
earnings per share is required by SFAS No. 123, and has
been determined as if the company had accounted for its associate stock
options under the fair value method of SFAS No. 123. The fair value for
these options was estimated at the date of grant using a Black-Scholes option
pricing model. For purposes of pro forma disclosures, the estimated fair
value of the options granted under the plan is amortized to expense over
the options' vesting periods.
2002
2001
2000
Assumptions:
Risk-free interest rate
Dividend yield
Expected stock volatility
Expected life - years
5.29%
3.57%
0.506
8
6.32%
3.36%
0.480
8
6.31%
3.01%
0.481
8
2002
2001
2000
Options
Weighted-
Average
Exercise Price
Options
Weighted-
Average
Exercise Price
Options
Weighted-
Average
Exercise Price
Outstanding - beginning of year
Granted
Exercised
Canceled or expired
6,825,412
1,118,175
(499,372)
(134,189)
$20.22
25.01
16.30
20.61
5,720,990
1,367,400
(54,528)
(208,450)
$21.41
15.05
14.67
20.35
4,515,676
1,356,400
(88,761)
(62,325)
$22.90
15.88
12.96
21.28
Outstanding - end of year
7,310,026
$21.21
6,825,412
$20.22
5,720,990
$21.41
Options exercisable
4,397,590
3,745,131
2,910,271
41
The company sponsors defined contribution retirement
and savings plans covering substantially all associates in the United States
and certain salaried associates at non-U.S. locations. The company contributes
Timken Company common stock to certain plans based on formulas established
in the respective plan agreements. At December 31, 2002, the plans had 12,310,779
shares of Timken Company common stock with a fair value of $235,136,000.
Company contributions to the plans, including performance sharing, amounted
to $14,603,000 in 2002; $13,289,000 in 2001; and $14,384,000 in 2000. The
company paid dividends totaling $6,407,000 in 2002; $8,192,000 in 2001;
and $7,958,000 in 2000, to plans holding common shares.
Defined Benefit
Pension Plans
Postretirement
Plans
2002
2001
2002
2001
(Thousands of dollars)
Change in benefit obligation
Benefit obligation at beginning of year
Service cost
Interest cost
Amendments
Actuarial losses
Associate contributions
International plan exchange rate change
Curtailment loss
Benefits paid
$ 1,825,602
36,115
132,846
4,165
223,763
936
20,791
6,706
(133,780)
$ 1,641,959
35,313
126,809
6,246
120,256
1,604
(5,416)
16,522
(117,691)
$ 640,701
4,357
47,505
-
77,224
-
29
980
(50,121)
$ 588,824
4,047
48,380
(33,413)
69,500
-
(126)
9,109
(45,620)
Benefit obligation at end of year
$ 2,117,144
$ 1,825,602
$ 720,675
$ 640,701
Change in plan assets
(1)
Fair value of plan assets at beginning of year
Actual return on plan assets
Associate contributions
Company contributions
International plan exchange rate change
Benefits paid
$ 1,295,214
(91,994)
936
112,297
15,678
(133,780)
$ 1,383,683
(51,608)
1,604
84,882
(5,656)
(117,691)
Fair value of plan assets at end of year
$ 1,198,351
$ 1,295,214
Funded status
Projected benefit obligation in excess of plan assets
Unrecognized net actuarial loss
Unrecognized net asset at transition dates, net of amortization
Unrecognized prior service cost (benefit)
$ (918,793)
711,396
(1,102)
131,173
$ (530,388)
260,126
(2,246)
146,448
$ (720,675)
306,520
-
(45,335)
$ (640,701)
241,018
-
(51,743)
Accrued benefit cost
$ (77,326)
$ (126,060)
$ (459,490)
$ (451,426)
Amounts recognized in the consolidated balance
sheet
Accrued benefit liability
Intangible asset
Minimum pension liability included in accumulated
other comprehensive income
$ (802,327)
129,042
595,959
$ (456,517)
136,118
194,339
$ (459,490)
-
-
$ (451,426)
-
-
Net amount recognized
$ (77,326)
$ (126,060)
$ (459,490)
$ (451,426)
TIMKEN
Pension Benefits
Postretirement Benefits
2002
2001
2000
2002
2001
2000
Assumptions
Discount rate
Future compensation assumption
Expected long-term return on plan assets
6.6%
3% to 4%
9.5%
7.5%
3% to 4%
9.5%
8.0%
3% to 4%
9.5%
6.6%
7.5%
8.0%
Components of net periodic benefit cost
(Thousands of dollars)
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Recognized net actuarial (gain) loss
Curtailment loss
Amortization of transition asset
$ 36,115
132,846
(135,179)
19,725
473
6,706
(1,143)
$ 35,313
126,809
(126,882)
19,919
(292)
6,333
(982)
$ 33,328
119,943
(116,302)
21,995
(556)
-
(1,002)
$ 4,357
47,505
-
(6,408)
11,827
-
871
$ 4,047
48,380
-
(4,376)
9,646
8,738
-
$ 4,309
40,043
-
(3,730)
3,670
-
-
Net periodic benefit cost
$ 59,543
$ 60,218
$ 57,396
$ 58,152
$ 66,435
$ 44,292
For measurement purposes, the company assumed
a weighted-average annual rate of increase in the per capita cost (health
care cost trend rate) for medical benefits of 9.0% for 2003; declining gradually
to 6.0% in 2006 and thereafter for pre-age 65 benefits; 6.0% for post-age
65 benefits for all years; and 15.0% for 2003, declining gradually to 6.0%
in 2014 and thereafter for prescription drug benefits.
The assumed health care cost trend rate has a significant
effect on the amounts reported. A one-percentage-point increase in the assumed
health care cost trend rate would increase the 2002 total service and interest
cost components by $2,107,000 and would increase the postretirement benefit
obligation by $31,969,000. A one-percentage-point decrease would provide
corresponding reductions of $1,878,000 and $28,567,000, respectively.
Expenditures committed to research and development
amounted to approximately $53,000,000 in 2002; $54,000,000 in 2001; and
$52,000,000 in 2000. Such expenditures may fluctuate from
year to year depending on special projects and needs.
43
Geographic Financial Information
United States
Europe
Other Countries
Consolidated
(Thousands of dollars)
2002
Net sales
Non-current assets
$ 1,987,499
1,472,680
$ 365,460
223,348
$ 197,116
84,036
$ 2,550,075
1,780,064
2001
Net sales
Non-current assets
$ 1,906,823
1,402,780
$ 351,242
232,105
$ 189,113
69,819
$ 2,447,178
1,704,704
2000
Net sales
Non-current assets
$ 2,062,306
1,391,080
$ 361,649
204,135
$ 219,053
70,348
$ 2,643,008
1,665,563
TIMKEN
Segment Financial Information
2002
2001
2000
(Thousands of dollars)
Automotive Bearings
Net sales to external customers
Depreciation and amortization
Impairment and restructuring charges
Receipt of U.S. Continued Dumping and Subsidy Offset Act (CDSOA) payment
(net of expenses)
Earnings (loss) before interest and taxes
Capital expenditures
Assets employed at year-end
$ 840,763
33,886
18,992
10,829
14,715
34,948
718,495
$ 751,029
36,381
27,270
2,501
(39,939)
36,427
661,514
$ 839,838
35,344
1,143
-
24,595
50,540
632,814
Industrial Bearings
Net sales to external customers
Depreciation and amortization
Impairment and restructuring charges
Receipt of CDSOA payment (net of expenses)
Earnings before interest and taxes
Capital expenditures
Assets employed at year-end
$ 883,534
45,429
9,313
39,373
72,872
32,178
1,051,053
$ 882,279
48,314
25,671
27,054
32,144
34,646
966,647
$ 923,477
48,197
11,499
-
54,304
59,382
944,493
Steel
Net sales to external customers
Intersegment sales
Depreciation and amortization
Impairment and restructuring charges
Earnings before interest and taxes
Capital expenditures
Assets employed at year-end
155,500
67,240
3,838
28,682
23,547
978,808
146,492
67,772
1,748
9,345
31,274
904,924
$ 879,693
196,500
67,506
15,112
19,349
52,795
986,798
Total
Net sales to external customers
Depreciation and amortization
Impairment and restructuring charges
Receipt of CDSOA payment (net of expenses)
Earnings before interest and taxes
Capital expenditures
Assets employed at year-end
$ 2,550,075
146,535
32,143
50,202
116,269
90,673
2,748,356
$ 2,447,178
152,467
54,689
29,555
1,550
102,347
2,533,084
$ 2,643,008
151,047
27,754
-
98,248
162,717
2,564,105
Income Before Income Taxes
Total EBIT for reportable segments
Interest expense
Interest income
Intersegment adjustments
$ 116,269
(31,540)
1,676
(887)
$ 1,550
(33,401)
2,109
2,859
$ 98,248
(31,922)
3,479
792
Income (loss) before income taxes and cumulative
effect of change
in accounting principle
$ 85,518
$ (26,883)
$ 70,597
45
2002
2001
2000
Current
Deferred
Current
Deferred
Current
Deferred
(Thousands of dollars)
United States:
Federal
State and local
Foreign
$ 5,220
3,936
7,661
$ 17,808
(1,682)
1,124
$ (18,523)
2,332
7,961
$ 22,620
(628)
1,021
$ (1,093)
1,775
13,442
$ 13,093
(995)
(1,513)
$ 16,817
$ 17,250
$ (8,230)
$ 23,013
$ 14,124
$ 10,585
2002
2001
(Thousands of dollars)
Deferred tax assets:
Accrued postretirement benefits cost
Accrued pension cost
Benefit accruals
Tax loss and credit carryforwards
Othernet
Valuation allowance
$ 169,113
192,983
18,262
59,515
1,818
(18,124)
$ 170,975
67,571
18,473
33,787
12,754
(34,756)
Deferred tax liabilitydepreciation
423,562
(218,508)
268,804
(198,746)
Net deferred tax asset
$ 205,054
$ 70,058
2002
2001
2000
(Thousands of dollars)
Income tax (credit) at the statutory federal rate
Adjustments:
State and local income taxes, net of federal tax benefit
Losses without current tax benefits
Settlements and claims for prior years
Adjustment of world-wide tax liabilities
Other items
$ 29,931
1,465
3,598
-
(2,117)
1,190
$ (9,409)
1,107
20,854
-
532
1,699
$ 24,709
507
5,177
(5,125)
(1,900)
1,341
Provision for income taxes
$ 34,067
$ 14,783
$ 24,709
Effective income tax rate
40%
N/A
35%
TIMKEN
The Timken Company
Canton, Ohio
February 18, 2003
47
2002
2001
2000
1999
Statements of Income
Net sales:
Automotive Bearings
Industrial Bearings
Total Bearings
Steel
$ 840,763
883,534
1,724,297
825,778
$ 751,029
882,279
1,633,308
813,870
$ 839,838
923,477
1,763,315
879,693
(5)
(5)
1,759,871
735,163
Total net sales
2,550,075
2,447,178
2,643,008
2,495,034
Cost of products sold
Selling, administrative and general expenses
Impairment and restructuring charges
Operating income (loss)
Earnings before interest and taxes (EBIT)
Interest expense
Income (loss) before income taxes
Provision (credit) for income taxes
Income (loss) before cumulative effect of
accounting changes
Net income (loss)
2,080,498
358,866
32,143
78,568
115,382
31,540
85,518
34,067
51,451
$ 38,749
2,046,458
363,683
54,689
(17,652)
4,409
33,401
(26,883)
14,783
(41,666)
$ (41,666)
2,142,135
367,499
27,754
105,620
99,040
31,922
70,597
24,709
45,888
$ 45,888
2,002,366
359,910
-
132,758
123,120
27,225
98,991
36,367
62,624
$ 62,624
Balance Sheets
Inventory
Current assets
Working capital
Property, plant and equipment - net
Total assets
Total debt
Total liabilities
Shareholders equity
$ 488,923
968,292
334,222
1,226,244
2,748,356
461,219
2,139,270
$ 609,086
$ 429,231
828,380
187,224
1,305,345
2,533,084
497,015
1,751,349
$ 781,735
$ 489,549
898,542
311,090
1,363,772
2,564,105
514,604
1,559,423
$ 1,004,682
$ 446,588
833,526
348,455
1,381,474
2,441,318
449,890
1,395,337
$ 1,045,981
Other Comparative Data
Net income (loss)/Total assets
Net income (loss)/Net sales
EBIT/Beginning invested capital
(1)
Inventory days (FIFO)
Net sales per associate
(2)
Capital expenditures
Depreciation and amortization
Capital expenditures/Depreciation
Dividends per share
Earnings per share
(3)
Earnings per share - assuming dilution
(3)
Debt to total capital
Number of associates at year-end
Number of shareholders
(4)
1.4%
1.5%
5.6%
111.1
$ 139.0
$ 90,673
$ 146,535
61.9%
$ 0.52
$ 0.63
$ 0.62
43.1%
17,963
44,057
(1.6)%
(1.7)%
0.2%
104.8
$ 124.8
$ 102,347
$ 152,467
69.9%
$ 0.67
$ (0.69)
$ (0.69)
38.9%
18,735
39,919
1.8%
1.7%
4.7%
108.5
$ 127.9
$ 162,717
$ 151,047
112.4%
$ 0.72
$ 0.76
$ 0.76
33.9%
20,474
42,661
2.6%
2.5%
5.6%
108.4
$ 119.1
$ 173,222
$ 149,949
120.3%
$ 0.72
$ 1.01
$ 1.01
30.1%
20,856
42,907
TIMKEN
1998
1997
1996
1995
1994
1993
(5)
(5)
1,797,745
882,096
(5)
(5)
1,718,876
898,686
(5)
(5)
1,598,040
796,717
(5)
(5)
1,524,728
705,776
(5)
(5)
1,312,323
618,028
(5)
(5)
1,153,987
554,774
2,679,841
2,617,562
2,394,757
2,230,504
1,930,351
1,708,761
2,098,186
356,672
-
224,983
208,866
26,502
185,350
70,813
114,537
$ 114,537
2,005,374
332,419
-
279,769
286,766
21,432
266,592
95,173
171,419
$ 171,419
1,828,394
319,458
-
246,905
242,304
17,899
225,259
86,322
138,937
$ 138,937
1,723,463
304,046
-
202,995
197,957
19,813
180,174
67,824
112,350
$ 112,350
1,514,098
283,727
-
132,526
134,674
24,872
111,323
42,859
68,464
$ 68,464
1,369,711
276,928
48,000
14,122
7,843
29,619
(20,919)
(3,250)
(17,669)
$ (271,932)
$ 457,246
850,337
359,914
1,349,539
2,450,031
469,398
1,393,950
$ 1,056,081
$ 445,853
855,171
275,607
1,220,516
2,326,550
359,431
1,294,474
$ 1,032,076
$ 419,507
793,633
265,685
1,094,329
2,071,338
302,665
1,149,110
$ 922,228
$ 367,889
710,258
247,895
1,039,382
1,925,925
211,232
1,104,747
$ 821,178
$ 332,304
657,180
178,556
1,030,451
1,858,734
279,519
1,125,843
$ 732,891
$ 299,783
586,384
153,971
1,024,664
1,789,719
276,476
1,104,407
$ 685,312
4.7%
4.3%
10.5%
109.4
$ 127.5
$ 258,621
$ 139,833
192.5%
$ 0.72
$ 1.84
$ 1.82
30.8%
21,046
45,942
7.4%
6.5%
16.1%
111.5
$ 130.5
$ 229,932
$ 134,431
177.3%
$ 0.66
$ 2.73
$ 2.69
25.8%
20,994
46,394
6.7%
5.8%
15.1%
117.5
$ 132.4
$ 155,925
$ 126,457
127.0%
$ 0.60
$ 2.21
$ 2.19
24.7%
19,130
31,813
5.8%
5.0%
12.6%
112.2
$ 134.2
$ 131,188
$ 123,409
109.1%
$ 0.56
$ 1.80
$ 1.78
20.5%
17,034
26,792
3.7%
3.5%
9.0%
118.0
$ 119.9
$ 119,656
$ 119,255
102.6%
$ 0.50
$ 1.11
$ 1.10
27.6%
16,202
49,968
(15.2)%
(15.9)%
0.5%
122.5
$ 104.5
$ 92,940
$ 118,403
80.2%
$ 0.50
$ (0.29)
$ (0.29)
28.7%
15,985
28,767
In broad terms, invested capital is total assets minus non-interest-bearing current
liabilities.
(2)Based on the average number of associates employed during the year.
(3)Based on the average number of shares outstanding during the year and excludes
the cumulative effect of accounting changes in 1993,
which related to the adoption of FAS No. 106, 109 and 112.
(4)Includes an estimated count of shareholders having common stock held for their
accounts by banks, brokers and trustees for benefit plans.
(5)It is impracticable for the company to restate prior year segment financial
information into Automotive Bearings and Industrial Bearings
as this structure was not in place until 2000.
49
On inside cover of the printed document facing page 1, three bar charts were
shown which contain the following information:
(1)
Net Sales ($ Millions)
1998
1999
2000
2001
2002
2,680
2,495
2,643
2,447
2,550
(2)
Earnings Per Share - Diluted (dollars)
1998
1999
2000
2001
2002
1.82
1.01
0.76
(0.69)
0.62
(3)
Dividends per Share (cents)
1998
1999
2000
2001
2002
.72
.72
.72
.67
.52
O
n page 48 of the printed document, two bar charts were
shown that contain the following information:
(1)
Total Net Sales to Customers (Billions
of dollars)
Automotive and
Industrial Bearings
Steel
1994
1995
1996
1997
1998
1999
2000
2001
2002
1.154
1.312
1.525
1.598
1.719
1.798
1.760
1.763
1.633
1.724
0.555
0.618
0.706
0.797
0.899
0.882
0.735
0.880
0.814
0.826
(2)
EBIT/Beginning Invested Capital
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
0.5%
9.0%
12.6%
15.1%
16.1%
10.5%
5.6%
4.7%
0.2%
5.6%
Exhibit 21. Subsidiaries of the Registrant
___________________________________________
The Timken Company has no parent company.
The active subsidiaries of the Company (all of which are included
in the consolidated financial statements of the Company and its
subsidiaries) are as follows:
Percentage of
voting securities
State or sovereign owned directly
power under laws or indirectly
Name of which organized by Company
__________________________________________________________________
MBP Corporation Delaware 100%
Timken Super Precision-
Europa B.V. Netherlands 100%
Timken Super Precision-
Singapore Pte. Ltd. Singapore 100%
Timken UK, Ltd. England 100%
Australian Timken Proprietary,
Limited Victoria, Australia 100%
Timken do Brasil
Comercio e Industria, Ltda. Sao Paulo, Brazil 100%
British Timken Limited England 100%
Canadian Timken, Limited Ontario, Canada 100%
Timken Communications Company Ohio 100%
Timken Alloy Steel Europe
Limited England 100%
EDC, Inc. Ohio 100%
Timken Engineering and Research -
India Private Limited India 100%
Timken Espana, S.L. Spain 100%
Timken Germany GmbH Germany 100%
Timken Europe B.V. Netherlands 100%
Timken Finance Europe B.V. Netherlands 100%
Handpiece Headquarters Corp. Delaware 100%
Timken India Limited India 80%
Timken Industrial Services Delaware 100%
Timken Italia, S.R.L. Italy 100%
Timken Korea Limited Liability
Corporation Korea 100%
Timken Latrobe Steel Company Pennsylvania 100%
OH&R Special Steels Company Delaware 100%
Timken Latrobe Steel-Europe Ltd. England 100%
Timken de Mexico S.A. de C.V. Mexico 100%
MPB Export Corporation Delaware 100%
Nihon Timken K.K. Japan 100%
Timken Precision Components,
SAS France 100%
Timken Polska Sp.z.o.o. Poland 100%
Exhibit 21. Subsidiaries of the Registrant (cont).
_______________________________________________
Percentage of
voting securities
State or sovereign owned directly
power under laws or indirectly
Name of which organized by Company
__________________________________________________________________
Timken Rail Service Company Russia 100%
Timken Receivables Corporation Delaware 100%
Timken Romania S.A. Romania 96%
The Timken Corporation Ohio 100%
The Timken Service & Sales Co. Ohio 100%
Timken Servicios Administrativos
S.A. de C.V. Mexico 100%
Timken Singapore Pte. Ltd. Singapore 100%
Timken South Africa (Pty.) Ltd. South Africa 100%
Timken de Venezuela C.A. Venezuela 100%
Yantai Timken Company Limited China 100%
The Company also has a number of inactive subsidiaries which were
incorporated for name-holding purposes and a foreign sales
corporation subsidiary.
Exhibit 23
Consent of Independent Auditors
We consent to the incorporation by reference of our report dated February 18,
2003, with respect to the consolidated financial statements and schedule of
The Timken Company included in this Annual Report (Form 10-K) for the year
ended December 31, 2002, in the following Registration Statements and in
the related Prospectuses:
Registration Filing
Number Description of Registration Statement Date
2-97340 1985 Incentive Plan of The Timken Company - November 19, 1990
Post-effective Amendment No. 1 to Form S-8
333-17503 The Timken Company Dividend Reinvestment December 9, 1996
Plan - Form S-3
333-41155 OH&R Investment Plan - Form S-8 November 26, 1997
333-43847 The Timken Company International Stock January 7, 1998
Ownership Plan - Form S-8
333-45753 Rail Bearing Service Employee Savings February 6, 1998
Plan - Form S-8
333-45891 $300,000,000 Medium-Term Notes, Series April 23, 1998
A - Amendment No. 4 to Form S-3
333-66911 Voluntary Investment Program for Hourly November 6, 1998
Employees of Latrobe Steel Company - Form S-8
333-66907 The MPB Employees' Savings Plan - Form S-8 November 6, 1998
333-69129 The Timken Company - Latrobe Steel Company December 17,1998
Savings and Investment Pension Plan -
Form S-8
333-35154 The Timken Company Long-Term Incentive Plan April 19,2000
- Form S-8
333-35152 The Hourly Pension Investment Plan - Form S-8 April 19,2000
333-52866 Voluntary Investment Pension Plan for Hourly December 28, 2000
Employees of The Timken Company - Form S-8
333-76062 The Company Savings Plan for the Employees of December 28, 2001
Timken France - Form S-8
333-86452 The Timken Company Long-Term Incentive Plan - April 17, 2002
Form S-8
333-86448 The Timken Company Collective Investment Trust April 17, 2002
for Retirement Trusts - Form S-3
333-100731 Prospectus Supplements - 11,000,000 shares of February 11, 2003
Timken Company Common Stock: $250,000,000 in
Senior Notes - Form S-3
333-103753 The Timken Company Savings and Stock Investment March 11, 2003
Plan for Torrington Non-Bargaining Associates -
Form S-8
333-103754 The Timken Company Savings Plan for Torrington March 11, 2003
Bargaining Associates - Form S-8
ERNST & YOUNG LLP
Canton, Ohio
March 26, 2003
EXHIBIT 24
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors
and officers of The Timken Company, an Ohio corporation (the "Company"),
hereby (1) constitutes and appoints James W. Griffith, Glenn A. Eisenberg,
and William R. Burkhart, collectively and individually, as his or her
agent and attorney-in-fact, with full power of substitution and
resubstitution, to (a) sign and file on his or her behalf and in his or
her name, place and stead in any and all capacities (i) an Annual Report
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended, on Form 10-K for the fiscal year ended December 31, 2002, (ii)
any and all amendments, including post-effective amendments, and exhibits
to the Registration Statement and (iii) any and all applications or other
documents to be filed with the Securities and Exchange Commission or any
state securities commission or other regulatory authority with respect to
the securities covered by the Registration Statement, and (b) do and
perform any and all other acts and deeds whatsoever that may be necessary
or required in the premises; and (2) ratifies and approves any and all
actions that may be taken pursuant hereto by any of the above-named agents
and attorneys-in-fact or their substitutes.
IN WITNESS WHEREOF, the undersigned directors and officers of the
Company have hereunto set their hands as of the 30th day of January, 2003.
/s/ Glenn A. Eisenberg /s/ Ward J. Timken
_____________________________ ______________________________
Glenn A. Eisenberg Ward J. Timken
(Principal Financial Officer)
/s/ Stanley C. Gault /s/ Ward J. Timken, Jr.
_____________________________ ______________________________
Stanley C. Gault Ward J. Timken, Jr.
/s/ James W. Griffith /s/ W.R. Timken, Jr.
_____________________________ ______________________________
James W. Griffith W.R. Timken, Jr.
(Principal Executive Officer)
/s/ John A. Luke, Jr. /s/ Joseph F. Toot, Jr.
_____________________________ ______________________________
John A. Luke, Jr. Joseph F. Toot, Jr.
/s/ Robert W. Mahoney /s/ Martin D. Walker
_____________________________ ______________________________
Robert W. Mahoney Martin D. Walker
/s/ Jay A. Precourt /s/ Jacqueline F. Woods
_____________________________ ______________________________
Jay A. Precourt Jacqueline F. Woods
/s/ John M. Timken, Jr. /s/ Sallie B. Bailey
_____________________________ ______________________________
John M. Timken, Jr. Sallie B. Bailey
(Principal Accounting Officer)
EXHIBIT 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of The Timken Company (the "Company")
on Form 10-K for the period ended December 31, 2002, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), each
of the undersigned officers of the Company certifies, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that, to such officer's knowledge:
(1) The Report fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
March 27, 2003
/s/ James W. Griffith
_____________________________________________
Name: James W. Griffith
Title: President and Chief Executive Officer
/s/ Glenn A. Eisenberg
_____________________________________________
Name: Glenn A. Eisenberg
Title: Executive Vice President - Finance and
Administration