SEC Filing Html Data
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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 1-13905
COMPX INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
Delaware 57-0981653
- ------------------------------- --------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240-2697
- ----------------------------------------------- --------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 233-1700
--------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Class A common stock New York Stock Exchange
($.01 par value per share)
Securities registered pursuant to Section 12(g) of the Act:
None.
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
---
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes No X
--- ---
The aggregate market value of the 4.7 million shares of voting stock held by
nonaffiliates of CompX International Inc. as of June 28, 2002 approximated $62.7
million.
As of February 28, 2003, 5,115,780 shares of Class A common stock were
outstanding.
Documents incorporated by reference
Certain of the information required by Part III is incorporated by reference
from the Registrant's definitive proxy statement to be filed with the Commission
pursuant to Regulation 14A not later than 120 days after the end of the fiscal
year covered by this report.
PART I
ITEM 1. BUSINESS
General
CompX International Inc. (NYSE: CIX) is a leading manufacturer of precision
ball bearing slides, security products and ergonomic computer support systems
used in office furniture, computer-related applications and a variety of other
industries. The Company's products are principally designed for use in medium to
high-end product applications, where design, quality and durability are critical
to the Company's customers. The Company believes that it is among the world's
largest producers of precision ball bearing slides, security products consisting
of cabinet locks and other locking mechanisms and ergonmomic computer support
systems. In 2002, precision ball bearing slides, security products and ergonomic
computer support systems accounted for approximately 43%, 37% and 15% of net
sales, respectively. The remaining sales were generated from sales of other
products.
Valhi, Inc. and Valhi's wholly-owned subsidiary Valcor, Inc. owned 69% of
the Company's outstanding common stock at December 31, 2002. At December 31,
2002, Contran Corporation held, directly or through subsidiaries, approximately
93% of Valhi's outstanding common stock. Substantially all of Contran's
outstanding voting stock is held by trusts established for the benefit of
certain children and grandchildren of Harold C. Simmons, of which Mr. Simmons is
sole trustee. Mr. Simmons is Chairman of the Board of each of Contran, Valhi and
Valcor and may be deemed to control each of such companies and CompX.
The Company was incorporated in Delaware in 1993 under the name National
Cabinet Lock, Inc. At that time, Valhi contributed the assets of its Cabinet
Lock Division and the stock of Waterloo Furniture Components Limited to the
Company. In 1996, the Company changed its name to CompX International Inc. In
1998, the Company issued approximately 6 million shares of its common stock in
an initial public offering and CompX acquired two additional security products
producers. CompX acquired two more slide producers in 1999 and another security
products producer in January 2000. See Note 2 to the Consolidated Financial
Statements.
The Company maintains a website on the internet with the address of
www.compxnet.com. Copies of this Annual Report on Form 10-K for the year ended
December 31, 2002 and copies of the Company's Quarterly Reports on Form 10-Q for
2002 and 2003 and any Current Reports on Form 8-K for 2002 and 2003, and any
amendments thereto, are or will be available free of charge as soon as
reasonably practical after they are filed with the Securities and Exchange
Commission ("SEC") at such website. The general public may also read and copy
any materials the Company files with the SEC at the SEC's Public Reference Room
at 450 Fifth Street, NW, Washington, DC 20549, and may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The
Company is an electronic filer, and the SEC maintains an internet website at
www.sec.gov that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC.
As provided by the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, the Company cautions that the statements in this
Annual Report on Form 10-K relating to matters that are not historical facts,
including, but not limited to, statements found in this Item 1 - "Business,"
Item 3 - "Legal Proceedings," Item 7 - "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Item 7A - "Quantitative and
Qualitative Disclosures About Market Risk," are forward-looking statements that
represent management's beliefs and assumptions based on currently available
information. Forward-looking statements can be identified by the use of words
such as "believes," "intends," "may," "should," "anticipates," "expects" or
comparable terminology or by discussions of strategies or trends. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable, it cannot give any assurances that these expectations
will prove to be correct. Such statements by their nature involve substantial
risks and uncertainties that could significantly impact expected results, and
actual future results could differ materially from those described in such
forward-looking statements. Among the factors that could cause actual future
results to differ materially are the risks and uncertainties discussed in this
Annual Report and those described from time to time in materials filed with the
Company's other filings with the SEC. While it is not possible to identify all
factors, the Company continues to face many risks and uncertainties including,
but not limited to, the following:
o Future supply and demand for the Company's products,
o Changes in costs of raw materials and other operating costs (such as energy
costs),
o General global economic and political conditions,
o Demand for office furniture,
o Service industry employment levels,
o The possibility of labor disruptions,
o Competitive products and prices, including increased competition from
low-cost manufacturing sources (such as China),
o Substitute products,
o Customer and competitor strategies,
o The introduction of trade barriers,
o The impact of pricing and production decisions,
o Fluctuations in the value of the U.S. dollar relative to other currencies
(such as the euro, Canadian dollar and New Taiwan dollar),
o Potential difficulties in integrating completed acquisitions,
o Uncertainties associated with new product development,
o Environmental matters (such as those requiring emission and discharge
standards for existing and new facilities),
o The ultimate outcome of income tax audits,
o The impact of current or future government regulations,
o Possible future litigation and
o Other risks and uncertainties.
Should one or more of these risks materialize (or the consequences of such a
development worsen) or should the underlying assumptions prove incorrect, actual
results could differ materially from those forecasted or expected. The Company
disclaims any intention or obligation to update publicly or revise such
statements whether as a result of new information, future events or otherwise.
Industry Overview
Prior to 1998, approximately 75% of the Company's products were sold to the
office furniture manufacturing industry. As a result of strategic acquisitions
in the security products industry in 1998 and 2000 and in the precision ball
bearing slide industry in 1999, the Company has expanded its product offering
and reduced its percentage of sales to the office furniture market. Currently,
approximately 62% of the Company's products are sold to the office furniture
manufacturing industry while the remainder are sold for use in other products,
such as vending equipment, electromechanical enclosures, transportation,
computers and related equipment, and other non-office furniture applications.
Beginning in 2001 and continuing throughout 2002, the office furniture industry
has experienced a contraction with consistently negative growth rates.
Consequently, CompX's sales growth has been negatively affected. See Item 6 -
"Selected Financial Data" and Item 7 - "Management's Discussion and Analysis of
Financial Condition and Results of Operations." However, CompX's management
believes that its emphasis on new product development, sales of its ergonomic
computer support systems as well as slide and security products used in computer
and other non-office furniture markets result in the potential for higher rates
of growth and diversification of risk than the office furniture industry as a
whole.
Products
CompX manufactures and sells components in three major product lines:
precision ball bearing slides, security products and ergonomic computer support
systems.
Sales for the respective product lines in 2000, 2001 and 2002 are as
follows:
Years ended December 31
2000 2001 2002
---- ---- ----
($ in thousands)
Precision ball bearing slides ........... $119,046 $ 91,822 $ 84,446
Security products ....................... 85,218 74,071 73,358
Ergonomic computer support systems ...... 41,658 36,383 29,945
Other products .......................... 7,372 9,146 8,352
-------- -------- --------
$253,294 $211,422 $196,101
======== ======== ========
The Company's precision ball bearing slides and ergonomic computer support
systems are sold under the CompX Waterloo, Waterloo Furniture Components, Thomas
Regout and Dynaslide brand names and the Company's security products are sold
under the CompX Security Products, National Cabinet Lock, Fort Lock, Timberline
Lock, Chicago Lock and TuBAR brand names. The Company believes that its brand
names are well recognized in the industry.
Precision ball bearing slides. CompX manufactures a complete line of
precision ball bearing slides for use in office furniture, computer-related
equipment, tool storage cabinets, imaging equipment, file cabinets, desk drawers
and other applications. These products include CompX's patented Integrated Slide
Lock in which a file cabinet manufacturer can reduce the possibility of multiple
drawers being opened at the same time and the adjustable patented Ball Lock
which reduces the risk of heavily-filled drawers, such as auto mechanic tool
boxes, from opening while in movement. Precision ball bearing slides are
manufactured to stringent industry standards and are designed in conjunction
with original equipment manufacturers ("OEMs") to meet the needs of end users
with respect to weight support capabilities, ease of movement and durability.
In addition to CompX's basic precision ball bearing slide product lines,
sales based on patented innovations such as the Butterfly Take Apart System, the
Integrated Slide Lock and the Ball Lock have accounted for an increasing
proportion of the Company's sales. These applications have expanded the
Company's product offerings within the office furniture industry as well as
adding products for heavy-duty tool storage cabinets, electromechanical imaging
equipment and computer server network cabinets.
Security products. The Company believes that it is a North American market
leader in the manufacture and sale of cabinet locks and other locking
mechanisms. CompX provides security products to various industries including
institutional furniture, banking, industrial equipment, vehicles, vending and
computer. The Company's products can also be found in various applications
including ignition systems, office furniture, vending and gaming machines,
parking meters, electrical circuit panels, storage compartments, security
devices for laptop and desktop computers as well as mechanical and electronic
locks for the toolbox industry. Some of these products may include CompX's KeSet
high security system, which has the ability to change the keying on a single
lock 64 times without removing the lock from its enclosure and it's patented
high security Tubar locking system.
The Company manufactures disc tumbler locking mechanisms at all of its
security products facilities, which mechanisms provide moderate security and
generally represent the lowest cost lock to produce. CompX also manufactures pin
tumbler locking mechanisms, including its KeSet, ACE II and TuBAR brand locks,
which mechanisms are more costly to produce and are used in applications
requiring higher levels of security. A substantial portion of the Company's
sales consist of products with specialized adaptations to individual
manufacturers' specifications. CompX, however, also has a standardized product
line suitable for many customers. This standardized product line is offered
through a North American distribution network through the Company's STOCK LOCKS
distribution program as well as to factory centers and to large OEMs.
Ergonomic computer support systems. CompX is a leading manufacturer and
innovator in ergonomic computer support systems. Unlike products targeting the
residential market, which are more price sensitive with less emphasis on the
overall value of products and service, the CompX line consists of more highly
engineered products designed to provide ergonomic benefits for business and
other sophisticated users.
Ergonomic computer support systems include articulating computer keyboard
support arms (designed to attach to desks in the workplace and home office
environments to alleviate possible strains and stress and maximize usable
workspace), adjustable computer table mechanisms (which provide variable
workspace heights), CPU storage devices (which minimize adverse effects of dust
and moisture) and a number of complementary accessories, including ergonomic
wrist rest aids, mouse pad supports and computer monitor support arms. These
products include CompX's Leverlock, which is designed to make the adjustment of
an ergonomic keyboard arm easier. In addition, the Company offers its
engineering and design capabilities for the design and manufacture of products
on a proprietary basis for key customers.
Other. CompX also markets and distributes a complete line of window
furnishings hardware in addition to manufacturing sheet metal products such as
filing frames in European markets.
Sales, Marketing and Distribution
CompX sells components to OEMs and to distributors through a dedicated
sales force. The majority of the Company's sales are to OEMs, while the balance
represents standardized products sold through distribution channels.
Sales to large OEM customers are made through the efforts of factory-based
sales and marketing professionals and engineers working in concert with field
salespeople and independent manufacturers' representatives. Manufacturers'
representatives are selected based on special skills in certain markets or
relationships with current or potential customers.
A significant portion of the Company's sales are made through distributors.
The Company has a significant market share of cabinet lock sales to the
locksmith distribution channel. CompX supports its distributor sales with a line
of standardized products used by the largest segments of the marketplace. These
products are packaged and merchandised for easy availability and handling by
distributors and the end user. Based on the Company's successful STOCK LOCKS
inventory program, similar programs have been implemented for distributor sales
of ergonomic computer support systems and, to some extent, precision ball
bearing slides. The Company also operates a small tractor/trailer fleet
associated with its Canadian facilities to provide an industry-unique service
response to major customers.
The Company does not believe it is dependent upon one or a few customers,
the loss of which would have a material adverse effect on its operations. In
2000, 2001 and 2002, sales to the Company's ten largest customers accounted for
approximately 35%, 36% and 30% of sales, respectively. In 2000, 2001 and 2002,
sales to the Company's largest customer were less than 10% of the Company's
total sales. In 2000, nine of the Company's top ten customers were located in
the United States. In 2001 and 2002, eight of the Company's top ten customers
were located in the United States.
Manufacturing and Operations
At December 31, 2002, CompX operated nine manufacturing facilities: six in
North America (two in each of Illinois and Canada and one in each of South
Carolina and Michigan), one in the Netherlands and two in Taiwan. Precision ball
bearing slides or ergonomic products are manufactured in the facilities located
in Canada, the Netherlands, Michigan and Taiwan. Security products are
manufactured in the facilities located in South Carolina and Illinois. The
Company owns all of these facilities except for one of the Taiwan facilities and
the Netherlands facility, which are leased. See also Item 2 - "Properties."
CompX also leases a distribution center in California and a warehouse in Taiwan.
CompX believes that all of its facilities are well maintained and satisfactory
for their intended purposes.
Raw Materials
Coiled steel is the major raw material used in the manufacture of precision
ball bearing slides and ergonomic computer support systems. Plastic resins for
injection molded plastics are also an integral material for ergonomic computer
support systems. Purchased components, including zinc castings, are the
principal raw materials used in the manufacture of security products. These raw
materials are purchased from several suppliers and are readily available from
numerous sources.
The Company occasionally enters into raw material arrangements to mitigate
the short-term impact of future increases in raw material costs. While these
arrangements do not commit the Company to a minimum volume of purchases, they
generally provide for stated unit prices based upon achievement of specified
volume purchase levels. This allows the Company to stabilize raw material
purchase prices, provided that the specified minimum monthly purchase quantities
are met. Materials purchased outside of these arrangements are sometimes subject
to unanticipated and sudden price increases such as rapidly increasing worldwide
steel prices in 2002. Due to the competitive nature of the markets served by the
Company's products, it is often difficult to recover such increases in raw
material costs through increased product selling prices. Consequently, overall
operating margins can be affected by such raw material cost pressures.
Competition
The markets in which CompX participates are highly competitive. The Company
competes primarily on the basis of product design, including ergonomic and
aesthetic factors, product quality and durability, price, on-time delivery,
service and technical support. The Company focuses its efforts on the middle and
high-end segments of the market, where product design, quality, durability and
service are placed at a premium.
The Company competes in the precision ball bearing slide market primarily
on the basis of product quality and price with two large manufacturers and a
number of smaller domestic and foreign manufacturers. The Company's security
products compete with a variety of relatively small domestic and foreign
competitors. The Company competes in the ergonomic computer support systems
market primarily on the basis of product quality, features and price with one
major producer and a number of smaller domestic manufacturers and primarily on
the basis of price with a number of foreign manufacturers. Although the Company
believes that it has been able to compete successfully in its markets to date,
price competition from foreign-sourced product has intensified in the current
economic market and there can be no assurance that the Company will be able to
continue to successfully compete in all existing markets in the future.
Patents and Trademarks
The Company holds a number of patents relating to its component products,
certain of which are believed to be important to CompX and its continuing
business activity. CompX's major trademarks and brand names, including CompX
Security Products, CompX Waterloo, National Cabinet Lock, KeSet, Fort Lock,
Timberline Lock, Chicago Lock, ACE II, TuBAR, Thomas Regout, STOCK LOCKS,
ShipFast, Waterloo Furniture Components Limited and Dynaslide, are protected by
registration in the United States and elsewhere with respect to the products
CompX manufactures and sells. The Company believes such trademarks are well
recognized in the component products industry.
Foreign Operations
The Company has substantial operations and assets located outside the
United States, principally slide and/or ergonomic product operations in Canada,
the Netherlands and Taiwan. The majority of the Company's 2002 non-U.S. sales
are to customers located in Canada and Europe. Foreign operations are subject
to, among other things, currency exchange rate fluctuations. The Company's
results of operations have in the past been both favorably and unfavorably
affected by fluctuations in currency exchange rates. Political and economic
uncertainties in certain of the countries in which the Company operates may
expose the Company to risk of loss. The Company does not believe that there is
currently any likelihood of material loss through political or economic
instability, seizure, nationalization or similar event. The Company cannot
predict, however, whether events of this type in the future could have a
material effect on its operations. See Item 7 - "Management's Discussion and
Analysis of Financial Condition and Results of Operations," Item 7A -
"Quantitative and Qualitative Disclosures About Market Risk" and Note 1 to the
Consolidated Financial Statements.
Environmental Matters
The Company's operations are subject to federal, state, local and foreign
laws and regulations relating to the use, storage, handling, generation,
transportation, treatment, emission, discharge, disposal and remediation of and
exposure to hazardous and non-hazardous substances, materials and wastes
("Environmental Laws"). The Company's operations also are subject to federal,
state, local and foreign laws and regulations relating to worker health and
safety. The Company believes that it is in substantial compliance with all such
laws and regulations. The costs of maintaining compliance with such laws and
regulations have not significantly impacted the Company to date, and the Company
has no significant planned costs or expenses relating to such matters. There can
be no assurance, however, that compliance with future Environmental Laws or
future laws and regulations governing worker health and safety will not require
the Company to incur significant additional expenditures or that such additional
costs would not have a material adverse effect on the Company's business,
consolidated financial condition, results of operations or liquidity.
Employees
As of December 31, 2002, the Company employed approximately 1,850
employees, including 665 in the United States, 700 in Canada, 300 in the
Netherlands and 185 in Taiwan. Approximately 76% of the Company's employees in
Canada are represented by a labor union covered by a collective bargaining
agreement that expires in January 2006. The Company believes that its labor
relations are satisfactory.
ITEM 2. PROPERTIES
The Company's principal executive offices are located in approximately 700
square feet of leased space at 5430 LBJ Freeway, Dallas, Texas 75240. The
following table sets forth the location, size, business operating segment and
general product types produced for each of the Company's facilities.
Size
Business (square
Facility Name Segment Location feet) Products Produced
Owned Facilities:
- ----------------
Manitou CW Kitchener, Ontario 276,000 Slides
Trillium CW Kitchener, Ontario 110,000 Ergonomic products
Byron Center CW Byron Center, MI 143,000 Slides
National CSP Mauldin, SC 198,000 Security products
Fort CSP River Grove, IL 100,000 Security products
Timberline CSP Lake Bluff, IL 16,000 Security products
Dynaslide CW Taipei, Taiwan 48,000 Slides
Leased Facilities:
- -----------------
Regout CR Maastricht,
the Netherlands 270,000 Slides
Dynaslide CW Taipei, Taiwan 25,000 Slides
Dynaslide CW Taipei, Taiwan 11,000 Product distribution/
Warehouse
Distribution Center CW Rancho Cucamonga, CA 12,000 Product distribution
CW - CompX Waterloo business segment
CR - CompX Regout business segment
CSP - CompX Security Products business segment
The Manitou, Trillium, Regout, Byron Center, National and Fort facilities
are ISO-9001 registered. The Dynaslide-owned facility is ISO-9002 registered.
The Company believes that all its facilities are well maintained and
satisfactory for their intended purposes.
A sale/leaseback transaction was executed on the Netherlands facility with
the municipality of Maastricht in December 2001. See Note 11 to the Consolidated
Financial Statements and see also Item 7 - "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
ITEM 3. LEGAL PROCEEDINGS
The Company is involved, from time to time, in various environmental,
contractual, product liability, patent (or intellectual property) and other
claims and disputes incidental to its business. Currently no material
environmental or other material litigation is pending or, to the knowledge of
the Company, threatened. The Company currently believes that the disposition of
all claims and disputes, individually or in the aggregate, should not have a
material adverse effect on the Company's consolidated financial condition,
results of operations or liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the quarter
ended December 31, 2002.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Class A common stock is listed and traded on the New York
Stock Exchange (symbol: CIX). As of February 28, 2003, there were approximately
26 holders of record of CompX Class A common stock. The following table sets
forth the high and low closing sales prices per share for CompX Class A common
stock for 2001 and 2002, according to the New York Stock Exchange Composite
Tape, and dividends paid per share during such periods. On February 28, 2003 the
closing price per share of CompX Class A common stock according to the NYSE
Composite Tape was $6.98.
Dividends
High Low paid
Year ended December 31, 2001
First Quarter .......................... $ 11.65 $ 9.18 $ .125
Second Quarter ......................... 13.00 10.77 .125
Third Quarter .......................... 13.40 10.45 .125
Fourth Quarter ......................... 12.97 8.95 .125
Year ended December 31, 2002
First Quarter .......................... $ 14.00 $ 11.00 $ .125
Second Quarter ......................... 14.40 11.72 .125
Third Quarter .......................... 14.00 8.78 .125
Fourth Quarter ......................... 9.55 7.61 .125
The declaration and payment of future dividends and the amount thereof, if
any, will be dependent upon the Company's results of operations, financial
condition, cash requirements for its businesses, contractual requirements and
restrictions and other factors deemed relevant by the Board of Directors.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
the Company's Consolidated Financial Statements and Item 7 - "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
The Company's operations are comprised of a 52 or 53-week fiscal year.
Excluding 1998, each of the years 1991 through 2002 consisted of a 52-week year.
1998 was a 53-week year.
Years ended December 31,
--------------------------------
1998 1999 2000 2001 2002
---- ---- ---- ---- ----
($ in millions, except per share data)
Income Statement Data
Net sales ..................... $ 152.1 $ 225.9 $ 253.3 $ 211.4 $ 196.1
Operating income .............. $ 30.4 $ 40.0 $ 37.3 $ 12.5 $ 6.2
Income before income taxes and
minority interest ........... $ 32.5 $ 39.2 $ 35.5 $ 12.9 $ 3.4
Income taxes .................. 12.0 14.1 13.4 5.8 2.8
Minority interest in losses ... (.2) (.1) -- -- --
-------- -------- -------- -------- --------
Net income .................. $ 20.7 $ 25.2 $ 22.1 $ 7.1 $ .6
======== ======== ======== ======== ========
Cash dividends ................ $ 1.8 $ 2.0 $ 8.1 $ 7.6 $ 7.6
Net income per basic and
diluted share ................ $ 1.37 $ 1.56 $ 1.37 $ .47 $ .04
Cash dividends per share ...... $ .18 $ .125 $ .50 $ .50 $ .50
Weighted average common shares
outstanding .................. 15.1 16.1 16.1 15.1 15.1
Balance Sheet Data
(at year end):
Cash and other current assets $ 86.5 $ 72.5 $ 83.0 $ 94.9 $ 71.3
Total assets ................ 152.4 200.4 223.7 222.9 200.1
Current liabilities ......... 20.3 26.8 28.9 24.5 22.2
Long-term debt, including
current maturities ......... 1.7 22.3 40.6 49.1 31.0
Stockholders' equity ........ 130.0 149.4 151.0 143.0 142.0
In 1998, the Company issued approximately 6 million shares of its common
stock in an initial public offering and CompX acquired two additional security
products producers. CompX acquired two more slide producers in 1999 and another
security products producer in January 2000.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
The Company reported net income of $.6 million, or $.04 per diluted share
for the year ended December 31, 2002, a decrease of 91% compared to net income
of $7.1 million or $.47 per diluted share for the year ended December 31, 2001.
The Company's net income in 2000 was $22.1 million, or $1.37 per diluted share.
The continued weak economic conditions in the manufacturing sector in North
America and Europe, coupled with the substantial rise in steel prices, had a
significant impact on CompX's results in 2002. Several cost control initiatives
were commenced during the year in response to the continuing soft market demand
in order to minimize the adverse effects of lower sales and favorably position
CompX to meet demand when the economy recovers. These initiatives were in
addition to actions taken during 2001 that included a restructuring of its
European operations in the fourth quarter of 2001. The most significant 2002
action was the retooling of its Byron Center, Michigan precision slide facility
in the fourth quarter of 2002 to rationalize several products within its
precision slide product family. The Byron Center retooling is expected to
achieve operating efficiencies that should begin to positively impact operating
results in the first quarter of 2003.
During 2003, CompX anticipates continuing its focus on opportunities to
rationalize its cost structure. As part of this initiative, CompX plans to
consolidate its two Kitchener, Ontario plants into a single facility and expects
substantial completion of this action during the second quarter of 2003.
Expenses relating to this consolidation are expected to primarily consist of the
cost to move machinery and equipment and are not anticipated to include a
significant cost for the disposal of fixed assets. Other facility and product
rationalization evaluations are also under review. These other evaluations could
result in additional charges for asset impairment, including goodwill, and other
costs in future quarters.
The Company defines its operations in terms of three operating segments:
CompX Security Products, CompX Waterloo and CompX Regout (formerly called CompX
Europe). The CompX Security Products segment, with manufacturing facilities in
South Carolina and Illinois, manufactures locking mechanisms and other security
products for sale to the office furniture, banking, vending, computer and other
industries. The CompX Waterloo segment, with facilities in Canada, Michigan and
Taiwan, and the CompX Regout segment, with facilities in the Netherlands, both
manufacture a complete line of precision ball bearing slides for use in office
furniture, computer-related equipment, tool storage cabinets and other
applications. Both of these segments also either manufacture and/or distribute
ergonomic computer support systems. Because of the similar economic
characteristics between the CompX Waterloo and CompX Regout segments and due to
the identical products, customer types, production processes and distribution
methods shared by these two segments, they have been aggregated into a single
reportable segment for segment reporting purposes. Prior period segment
information has been reclassified to reflect the current operating segments.
As discussed in Notes 1 and 15 to the Consolidated Financial Statements,
beginning in 2002 the Company no longer recognizes periodic amortization of
goodwill in its results of operations. The Company would have reported net
income of approximately $9.4 million in 2001, or about $2.3 million higher
($24.5 million, or about $2.4 million higher in 2000) than what was actually
reported, if the goodwill amortization included in the Company's reported net
income had not been recognized. Of such $2.3 million difference, approximately
$1.4 million and $.9 million relate to the Company's CompX Security Products and
CompX Waterloo/CompX Regout segments, respectively (approximately $1.4 million
and $1.0 million, respectively in 2000).
Critical Accounting Policies and Estimates
The accompanying "Management's Discussion and Analysis of Financial
Condition and Results of Operations" are based upon the Company's consolidated
financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States of America ("GAAP"). The
preparation of these financial statements requires the Company to make estimates
and judgments that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amount of revenues and expenses during the reported
period. On an on-going basis, the Company evaluates its estimates, including
those related to bad debts, inventory reserves, the recoverability of other
long-lived assets (including goodwill and other intangible assets) and the
realization of deferred income tax assets. The Company bases its estimates on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the reported amounts of assets, liabilities, revenues and
expenses. Actual results may differ from previously-estimated amounts under
different assumptions or conditions.
The Company believes the critical financial statement judgment risks of its
business are attributable to four primary areas:
o Will customer accounts receivable on the books be collected at full book
value?
o Will inventory on hand be sold with a sufficient mark up to cover the cost
to produce and ship the product?
o Will future cash flows of the Company be sufficient to recover the net book
value of long-lived assets?
o Will future taxable income be sufficient to utilize recorded deferred
income tax assets?
The Company believes the following critical accounting policies affect its
more significant judgments and estimates, as noted above, used in the
preparation of its consolidated financial statements and are applicable to all
of the Company's operating segments:
o Allowance for uncollectable accounts receivable. The Company maintains
allowances for doubtful accounts for estimated losses resulting from the
inability of its customers to make required payments. The Company takes
into consideration the current financial condition of the customers, the
age of outstanding balances and the current economic environment when
assessing the adequacy of the allowances. If the financial condition of the
Company's customers were to deteriorate, resulting in an impairment of
their ability to make payments, increased allowances may be required.
o Inventory reserves. The Company provides reserves for estimated
obsolescence or unmarketable inventory equal to the difference between the
cost of inventory and the estimated net realizable value using assumptions
about future demand for its products and market conditions. The Company
also considers the age and the quantity of inventory on hand in estimating
the reserve. If actual market conditions are less favorable than those
projected by management, increased inventory reserves may be required.
o Net book value of long-lived assets. The Company recognizes an impairment
charge associated with its long-lived assets, including property and
equipment, goodwill and other intangible assets, whenever it determines
that recovery of the long-lived asset is not probable. The determination is
made in accordance with applicable GAAP requirements associated with the
long-lived asset, and is based upon, among other things, estimates of the
amount of future net cash flows to be generated by the long-lived asset and
estimates of the current fair value of the asset. Adverse changes in
estimates of future net cash flows or estimates of fair value could result
in an inability to recover the carrying value of the long-lived asset,
thereby possibly requiring an impairment charge to be recognized in the
future. Based on the Company's latest annual impairment review of goodwill
of the reporting units during the third quarter of 2002, no goodwill
impairments were deemed to exist. Based on this review, the estimated fair
value of the CompX Waterloo/CompX Regout and CompX Security Products
reporting units exceeded the net carrying values by 23% and 37%,
respectively. See Notes 1 and 15 to the Consolidated Financial Statements.
o Deferred income tax assets. The Company records a valuation allowance to
reduce its deferred income tax assets to the amount that is believed to be
realizable under the "more-likely-than-not" recognition criteria. The
Company has considered future taxable income and ongoing prudent and
feasible tax planning strategies in assessing the need for a valuation
allowance. It is possible that in the future the Company may change its
estimate of the amount of the deferred income tax assets that would
"more-likely-than-not" be realized. This would result in an adjustment to
the deferred income tax asset valuation allowance that would either
increase or decrease, as applicable, reported net income in the period the
change in estimate is made.
Results of Operations
Net sales and operating income
Years ended December 31, % Change
-------------------------- ----------------
2000 2001 2002 2000 - 2001 2001 - 2002
---- ---- ---- ---- ----
(In millions)
Net sales:
CompX Waterloo/CompX
Regout segment ................ $168.3 $137.3 $122.7 -18% -11%
CompX Security
Products segment .............. 85.0 74.1 73.4 -13% -1%
------ ------ ------
Total net sales .............. $253.3 $211.4 $196.1 -17% -7%
====== ====== ======
Operating income (loss):
CompX Waterloo/CompX
Regout segment ................ $ 24.8 $ 5.2 $ (1.9) -79% -136%
CompX Security
Products segment .............. 12.5 7.3 8.1 -41% +10%
------ ------ ------
Total operating
income ...................... $ 37.3 $ 12.5 $ 6.2 -67% -50%
====== ====== ======
Operating income (loss) margin:
CompX Waterloo/CompX
Regout segment ................ 15% 4% (2%)
CompX Security
Products segment .............. 15% 10% 11%
Total operating income
margin ........................ 15% 6% 3%
Year ended December 31, 2002 compared to year ended December 31, 2001
Net sales decreased $15.3 million, or 7%, in 2002 compared to 2001
principally due to continued weak demand for the Company's component products
sold to the office furniture market resulting from continued weak economic
conditions in the manufacturing sector in North America and Europe. Net sales of
slide products in 2002 decreased 8% as compared to 2001, while net sales of
security products decreased 1% and net sales of ergonomic products decreased 18%
during the same period.
The Company's cost of goods sold decreased only 3% in 2002 compared to 2001
despite the 7% decrease in net sales during the same period. Therefore, the
Company's gross margin percentage decreased significantly from 21% in 2001 to
17% in 2002. The disproportionate change in cost of goods sold and its effect on
gross margins was primarily due to lower revenues from sales of slide and
ergonomic products and the resulting impact of spreading fixed factory costs
over lower volume. In addition, steel cost increases following the steel tariff
imposed by the United States government increased the Company's raw material
cost, most of which was not immediately recoverable through sales price
increases in 2002. Such steel cost increases resulted in additional 2002 raw
material costs to CompX of approximately $1.2 million compared to 2001 steel raw
material pricing. The CompX Waterloo/CompX Regout segment was most significantly
impacted by the steel cost increases, while the effects on the CompX Security
Products segment were minimal.
Operating income for 2002 decreased $6.3 million, or 50% compared to 2001
and operating margins decreased to 3% in 2002 compared to 6% for 2001. Continued
reductions in manufacturing, fixed overhead and other overhead costs partially
offset the effects of the decline in net sales in 2002. However, operating
margins in 2002 continued to be adversely impacted by the decline in volume
levels, unfavorable changes in the sales mix, increases in certain raw material
costs (primarily steel) and general competitive pricing pressures.
Through December 31, 2001, goodwill was amortized by the straight-line
method over not more than 20 years. Upon adoption of Statement of Financial
Accounting Standards ("SFAS") No. 142, Goodwill and Other Intangible Assets,
effective January 1, 2002, goodwill is no longer subject to periodic
amortization. The Company would have reported operating income of approximately
$14.7 million in 2001 if the goodwill amortization included in the Company's
reported operating income had not been recognized. Without goodwill
amortization, operating income for the CompX Waterloo/CompX Regout segment would
have been approximately $6.0 million in 2001 and operating income for the CompX
Security Products segment would have been approximately $8.7 million.
The Company recorded a pre-tax charge in the fourth quarter of 2002 of $1.6
million, the majority of which was non-cash in nature. The fourth quarter 2002
charge relates to a retooling of the Company's precision slide manufacturing
facility in Byron Center, Michigan and includes a $1.0 million loss on disposal
of equipment, reflected in other general corporate income (expense), net in the
consolidated statements of income. The remainder of the charge is reflected in
cost of goods sold. The cost savings and operating efficiencies resulting from
the retooling are expected to begin to benefit the financial results in the
first quarter of 2003. An additional fourth quarter pre-tax charge of
approximately $1.9 million was recorded to cost of goods sold to adjust for
various changes in estimates with respect to obsolete and slow-moving inventory,
inventory overhead absorption rates and other items. Approximately $1.3 million
of this charge related to the CompX Waterloo/CompX Regout segment with the
remaining $.6 million relating to the CompX Security Products segment. Pre-tax
charges of $5.7 million were also recorded in the fourth quarter of 2001, and
are discussed in connection with sales and operating income for 2000 compared to
2001, below.
CompX has substantial operations and assets located outside the United
States (principally in Canada, the Netherlands and Taiwan). A portion of CompX's
sales generated from its non-U.S. operations are denominated in currencies other
than the U.S. dollar, principally the Canadian dollar, the Dutch guilder, the
euro and the New Taiwan dollar. In addition, a portion of CompX's sales
generated from its non-U.S. operations (principally in Canada) are denominated
in the U.S. dollar. Most raw materials, labor and other production costs for
such non-U.S. operations are denominated primarily in local currencies.
Consequently, the translated U.S. dollar values of CompX's foreign sales and
operating results are subject to currency exchange rate fluctuations which may
favorably or unfavorably impact reported earnings and may affect comparability
of period-to--period operating results. The effects of fluctuations in currency
exchange rates affect the CompX Waterloo/CompX Regout segment, and do not
materially affect the CompX Security Products segment. During 2002, the effects
of currency fluctuations did not materially impact the Company or the CompX
Waterloo/CompX Regout segment.
Year ended December 31, 2001 compared to year ended December 31, 2000
Net sales decreased $41.9 million, or 17%, in 2001 compared to 2000 due to
decreased demand for the Company's products resulting from continued weak
economic conditions in the manufacturing sector in North America and Europe, and
to a lesser extent, the negative effects of fluctuations in currency exchange
rates. Net sales of slide products in 2001 decreased 23% as compared to 2000,
while net sales of security products and ergonomic products each decreased 13%
during the same period.
Cost of goods sold decreased 10% in 2001 as compared to 2000 due to the
lower sales volume in 2001. As a percentage of sales, cost of sales increased
from 74% in 2000 to 79% in 2001 due primarily to the spreading of fixed
production costs over lower sales volumes. In addition, a $2.6 million pre-tax
charge related to various changes in estimate with respect to reserves for
obsolete and slow-moving inventory was recorded in the fourth quarter of 2001
and negatively impacted cost of goods sold.
Operating income for 2001 decreased $24.8 million, or 67% compared to 2000
and operating income margins decreased to 6% in 2001 compared to 15% for 2000.
Reductions in manufacturing, fixed overhead and related overhead costs, which
began in the first quarter of 2001, partially offset the effects of the decline
in net sales in 2001. However, despite these cost reductions, operating margins
in 2001 were adversely impacted by the decline in volume levels and the related
impact on manufacturing efficiencies, the effects of unfavorable changes in the
sales mix and general pricing pressures. Operating income at the CompX
Waterloo/CompX Regout segment decreased 79% in 2001 compared to 2000, while
operating income at the CompX Security Products segment decreased 41% for the
same period. A pre-tax $2.7 million restructuring charge in the fourth quarter
of 2001 and a proportionately larger impact resulting from unfavorable changes
in the sales mix contributed to the more substantial operating income decline at
the CompX Waterloo/CompX Regout segment as compared to the CompX Security
Products segment.
As discussed in Note 6 to the Consolidated Financial Statements, the fourth
quarter 2001 restructuring charge included headcount reductions of about 35
employees at CompX's Maastricht, the Netherlands facility, substantially all of
which had been implemented by December 31, 2001. Of the $2.7 million charge, as
adjusted for changes in currency exchange rates, approximately $.4 million was
paid in 2001, $2.0 million was paid in 2002 and $.6 million was paid in January
2003. In addition, approximately $3.0 million in pre-tax charges were recorded
in the fourth quarter of 2001. These charges are predominately comprised of $2.6
million related to various changes in estimates with respect to reserves for
obsolete and slow-moving inventory, approximately $.1 million related to
allowances for doubtful accounts, with the remainder related to other items. Of
the $3.0 million charges, approximately $.9 million related to the CompX
Waterloo/CompX Regout segment and the remaining $2.1 million related to the
CompX Security Products segment.
In 2001, excluding the effects of currency exchange rate fluctuations, the
Company's sales decreased 15% compared to 2000. Sales of the CompX
Waterloo/CompX Regout segment decreased 16%, exclusive of the effects of
currency and acquisitions. Operating income comparisons for this period,
however, were not materially impacted by the effects of currency. The effects of
currency fluctuations do not materially affect the CompX Security Products
segment.
General
The Company's profitability primarily depends on its ability to utilize its
production capacity effectively, which is affected by, among other things, the
demand for its products and its ability to control its manufacturing costs,
primarily comprised of labor costs and raw materials such as zinc, copper,
coiled steel and plastic resins. Raw material costs represent approximately 43%
of the Company's total cost of sales. During 2000 and 2001, steel prices did not
change significantly compared to the respective prior years. However, in 2002,
worldwide steel prices increased significantly following the steel tariff
imposed by the United States government. The Company occasionally enters into
raw material supply arrangements to mitigate the short-term impact of future
increases in raw material costs. While these arrangements do not commit the
Company to a minimum volume of purchases, they generally provide for stated unit
prices based upon achievement of specified volume purchase levels. This allows
the Company to stabilize raw material purchase prices to a certain extent,
provided the specified minimum monthly purchase quantities are met. The Company
entered into such arrangements for zinc, coiled steel and plastic resins in 2002
and does not anticipate further significant changes in the cost of these
materials from their current levels for the next year. Materials purchased on
the spot market are sometimes subject to unanticipated and sudden price
increases. Due to the competitive nature of the markets served by the Company's
products, it is often difficult to recover such increases in raw material costs
through increased product selling prices. Consequently, overall operating
margins may be affected by such raw material cost pressures.
At December 31, 2002, none of the Company's employees in the U.S., the
Netherlands or Taiwan were represented by bargaining units, and wage increases
for such employees historically have been in line with overall inflation
indices. Approximately 76% of the Company's Canadian employees are covered by a
three year collective bargaining agreement which provided for annual wage
increases of approximately 3.5%. Wage increases for these Canadian employees
historically have also been in line with overall inflation indices. The
collective bargaining agreement expired in January 2003 and has been replaced
with a new agreement which expires in January 2006. The new agreement retains
the general provisions of the old agreement and provides for annual wage
increases from 1% to 2.5% over the life of the contract.
In January 2000, the Company acquired substantially all of the operating
assets of Chicago Lock Company for approximately $9 million, further expanding
its security products line. This acquisition was financed through a combination
of cash on hand and increased borrowings under the Company's Revolving Senior
Credit Facility.
Selling, general and administrative expense consists primarily of salaries,
commissions and advertising expenses directly related to product sales. As a
percentage of net sales, selling, general and administrative expense was 11% in
2000, 13% in 2001 and 14% in 2002. Despite cost reduction programs implemented
in 2001, the decline in sales volumes outpaced the ability of the Company to
reduce its selling, general and administrative expense during 2001 and 2002. As
a result, the Company's selling, general and administrative expense as a
percentage of net sales increased since 2000.
Other general corporate income (expense), net
As summarized in Note 12 to the Consolidated Financial Statements, "other
general corporate income (expense), net" primarily includes interest income,
losses on disposal of property and equipment and net foreign currency
transaction gain and loss. In 2002, loss on disposal of property and equipment
included approximately $1.0 million related to the retooling of the Company's
precision slide manufacturing facility in Byron Center, Michigan. The remainder
of the pre-tax charge, $.6 million, is reflected in cost of goods sold and
related to the cost of moving and installing machinery and equipment as well as
the disposal of obsolete inventory. Interest income decreased in 2002 compared
to 2001 due primarily to lower interest rates earned on funds available for
investment combined with a lower level of funds available for investment.
Conversely, 2001 interest income increased when compared to 2000 due to higher
levels of available funds for investment. In 2001, a curtailment gain of
approximately $.1 million was included in other general corporate income, net.
This curtailment gain, more fully described in Note 8 to the Consolidated
Financial Statements, relates to the cessation of benefits provided under
CompX's defined benefit plan which covered substantially all full-time employees
of Thomas Regout International B.V. As of December 31, 2001, certain obligations
related to the terminated plan had not yet been fully settled and are reflected
in accrued pension costs. In 2002, such obligations were settled and the Company
reported a $.7 million settlement gain.
Interest expense
Interest expense declined $1.0 million in 2002 compared to 2001 due
primarily to lower average interest rates and lower levels of outstanding
indebtedness on CompX's Revolving Senior Credit Facility. In contrast, interest
expense increased $.6 million in 2001 compared to 2000 due to higher average
levels of outstanding indebtedness on CompX's Revolving Senior Credit Facility.
Interest expense in 2003 is expected to be somewhat higher compared to 2002 due
to slightly higher interest rates charged on the Company's new Revolving Bank
Credit Agreement, which is explained more fully below and in Note 7 to the
Consolidated Financial Statements.
Provision for income taxes
The principal reasons for the difference between CompX's effective income
tax rates and the U.S. federal statutory income tax rates are explained in Note
9 to the Consolidated Financial Statements. Income tax rates vary by
jurisdiction (country and/or state), and relative changes in the geographic mix
of CompX's pre-tax earnings can result in fluctuations in the effective income
tax rate. Net income in 2002 was negatively impacted by an increase in the
effective income tax rate primarily as a result of lower income levels and an
increased proportion of foreign-sourced dividend income taxed at a higher
effective tax rate.
As discussed in Note 1 to the Consolidated Financial Statements, effective
January 1, 2002, the Company no longer recognizes periodic amortization of
goodwill. Under GAAP, generally there is no income tax benefit recognized for
financial reporting purposes attributable to goodwill amortization. Accordingly,
ceasing to periodically amortize goodwill beginning in 2002 resulted in a
reduction in the Company's overall effective income tax rate in 2002 as compared
to 2001, partially offsetting the increased effective tax rate on
foreign-sourced income.
Other
Reflected in the 2001 results of operations is a $2.2 million gain on the
sale/leaseback of the Company's manufacturing facility in the Netherlands, which
is discussed more fully below and in Note 11 to the Consolidated Financial
Statements.
Related party transactions
CompX is a party to certain transactions with related parties. See Note 13
to the Consolidated Financial Statements.
Outlook
The Company expects that weak market conditions will continue in the office
furniture market, the primary end-market for the Company's products. As a
result, sales volumes are expected to remain depressed through at least 2003 and
competitive pricing pressures are expected to continue. The Company has
initiated price increases on certain of its products and will continue to focus
on cost improvement initiatives, utilizing lean manufacturing techniques and
prudent balance sheet management in order to minimize the impact of lower sales
to the office furniture industry and to develop value-added customer
relationships with additional focus on sales of the Company's higher-margin
ergonomic computer support systems to improve operating results. Among the
Company's cost control initiatives is a plan to consolidate its two Kitchener,
Ontario plants into one facility. Expenses related to this consolidation are
expected to primarily consist of the cost to move machinery and equipment and
are not anticipated to include a significant net cost for the disposal of fixed
assets. Substantial completion of the consolidation is expected by the end of
the second quarter of 2003. In addition, other facility rationalizations are
also under review and could result in additional charges for asset impairment,
including goodwill, and other costs in future quarters. These actions, along
with other activities to eliminate duplicate product lines and excess capacity,
are designed to position the Company to more effectively concentrate on both new
product and new customer opportunities to improve Company profitability.
Liquidity and Capital Resources
Consolidated cash flows
Operating activities. Trends in cash flows from operating activities,
excluding changes in assets and liabilities, for 2000, 2001 and 2002 have
generally been similar to the trend in the Company's earnings. Net cash provided
by operating activities, excluding changes in assets and liabilities, in 2000,
2001 and 2002 totaled $36.7 million, $21.5 million and $13.5 million,
respectively, compared to net income of $22.1 million, $7.1 million and $.6
million, respectively. Depreciation and amortization expense increased in 2001
as compared to 2000 in part due to the acquisitions discussed above and
additional expenditures on facilities improvements and enhancements discussed
below. Depreciation and amortization expense decreased in 2002 compared to 2001
due primarily to the cessation of amortization of goodwill. See Notes 1 and 15.
Changes in assets and liabilities result primarily from the timing of
production, sales and purchases. Such changes in assets and liabilities
generally tend to even out over time. However, year-to-year relative changes in
assets and liabilities can significantly affect the comparability of cash flows
from operating activities. For example, relative changes in assets and
liabilities consumed approximately $8.3 million of cash in 2000. However, during
2001 and 2002, with CompX's specific focus on working capital management,
relative changes in assets and liabilities generated a net $6.2 million and $3.4
million, respectively, in cash. Therefore, despite the significant decline in
earnings in 2001 as compared to 2000, cash from operating activities in 2001
remained fairly consistent with 2000 primarily due to cash generated from
inventory and accounts receivable reduction initiatives undertaken during 2001.
The cash generated from these initiatives during 2001 was partially offset by a
use of cash related to relative changes in accounts payable and accrued
liabilities resulting from the overall decline in operating activity from 2000
to 2001. The inventory and accounts receivable reduction initiatives continued
during 2002, resulting in the generation of cash from relative changes in
inventory and accounts receivable, although the amount of cash generated from
such relative changes was less than the amount generated in 2001. However, this
positive cash generated was partially offset by the use of $1.7 million in cash
during 2002 relating to the restructuring reserve that was recorded in the
fourth quarter of 2001.
Investing activities. Net cash used by investing activities totaled $32.4
million, $2.7 million and $12.7 million for the years ended December 31, 2000,
2001 and 2002, respectively. Cash used by investing activities includes
approximately $9.3 million in 2000 for the Chicago Lock acquisition. In 2001,
$10.0 million in cash was provided from the sale/leaseback of the Company's
plant facility in the Netherlands. Other cash flows from investing activities in
each of the past three years related principally to capital expenditures.
Capital expenditures in the past three years emphasized manufacturing equipment
which utilizes new technologies and increases automation of the manufacturing
process to provide for increased productivity and efficiency. The capital
expenditures in 2000 relate primarily to the completion of facility expansions
at the Company's Kitchener facility, additional facility expansions at the
Company's Byron Center facility and general equipment upgrades and
modernization. Capital expenditures in 2001 and 2002 relate primarily to general
equipment upgrades and modernization.
Pursuant to the sale/leaseback of the Company's plant facility in
Maastricht, the Netherlands, CompX sold the manufacturing facility with a net
carrying value of $8.2 million for $10.0 million cash consideration in December
2001, and CompX simultaneously entered into a leaseback of the facility with a
nominal monthly rental for approximately 30 months. CompX has the option to
extend the leaseback period for up to an additional two years with monthly
rentals of $40,000 to $100,000. CompX may terminate the leaseback at any time
without penalty. In addition to the cash received up front, CompX included an
estimate of the fair market value of the monthly rental during the
nominal-rental leaseback period as part of the sale proceeds. A portion of the
gain from the sale of the facility after transaction costs, equal to the present
value of the monthly rentals over the expected leaseback period (including the
fair market value of the monthly rental during the nominal-rental leaseback
period), was deferred and is being amortized into income over the expected
leaseback period. CompX is recognizing rental expense over the leaseback period,
including amortization of the prepaid rent consisting of the estimated fair
market value of the monthly rental during the nominal-rental leaseback period.
Pursuant to the agreement, CompX is also obligated to acquire approximately 10
acres from the municipality of Maastricht for approximately $2.1 million within
the next two years.
Capital expenditures for 2003 are estimated at approximately $11 million,
the majority of which relate to projects that emphasize improved production
efficiency. Firm purchase commitments for capital projects in process at
December 31, 2002 approximated $1.4 million.
Financing activities. Net cash provided (used) by financing activities
totaled $2.1 million, $(1.8) million and $(25.5) million for the years ended
December 31, 2000, 2001 and 2002, respectively. Total cash dividends paid in
2000 were $8.1 million and in each of 2001 and 2002 were $7.6 million ($.50 per
share in each of 2000 through 2002). The Company used available cash on hand to
reduce its outstanding debt by $19 million in June 2002 and borrowed $1 million
on its unsecured Revolving Senior Credit Facility in the third quarter of 2002.
The Company's Board of Directors has authorized the Company to purchase up
to approximately 1.5 million shares of its common stock in open market or
privately-negotiated transactions at unspecified prices and over an unspecified
period of time. As of December 31, 2002, the Company had purchased approximately
1,104,000 shares for an aggregate of $11.3 million pursuant to such
authorization ($8.7 million for 844,300 shares in 2000, $2.6 million for 259,600
shares in 2001 and nil in 2002).
In January 2003, the Company replaced its expiring $100 million unsecured
Revolving Senior Credit Facility with a new $47.5 million secured Revolving Bank
Credit Agreement. Had the facility been in place at December 31, 2002, $16.5
million would have been available for future borrowing. The new credit agreement
is collateralized by substantially all of the Company's United States assets and
at least 65% of the ownership interests in the Company's first-tier non-United
States subsidiaries. Provisions contained in the Credit Agreement could result
in the acceleration of the indebtedness prior to its stated maturity for reasons
other than defaults from failing to comply with typical financial covenants. For
example, the Company's Credit Agreement allows the lender to accelerate the
maturity of the indebtedness upon a change of control (as defined) of the
borrower. The terms of the Credit Agreement could result in the acceleration of
all or a portion of the indebtedness following a sale of assets outside of the
ordinary course of business. See Note 7 to the Consolidated Financial
Statements. Other than certain operating leases discussed in Note 14 to the
Consolidated Financial Statements, neither CompX nor any of its subsidiaries or
affiliates are parties to any off-balance sheet financing arrangements.
Other
Management believes that cash generated from operations and borrowing
availability under the Revolving Bank Credit Agreement, together with cash on
hand, will be sufficient to meet the Company's liquidity needs for working
capital, capital expenditures, debt service and dividends. To the extent that
the Company's actual operating results or other developments differ from the
Company's expectations, CompX's liquidity could be adversely affected. In this
regard, during 2002 the Company's quarterly common stock dividend of $.125 per
share exceeded the Company's earnings per share. To the extent that the
Company's future operating results continue to be insufficient to cover such
dividend, it is possible the Company might decide to reduce or suspend its
quarterly dividend.
The Company periodically evaluates its liquidity requirements, alternative
uses of capital, capital needs and available resources in view of, among other
things, its capital expenditure requirements, dividend policy and estimated
future operating cash flows. As a result of this process, the Company has in the
past and may in the future seek to raise additional capital, refinance or
restructure indebtedness, issue additional securities, repurchase shares of its
common stock, modify its dividend policy or take a combination of such steps to
manage its liquidity and capital resources. In the normal course of business,
the Company may review opportunities for acquisitions, joint ventures or other
business combinations in the component products industry. In the event of any
such transaction, the Company may consider using available cash, issuing
additional equity securities or increasing the indebtedness of the Company or
its subsidiaries.
Contractual obligations. As more fully described in the notes to the
Consolidated Financial Statements, the Company is obligated to make future
payments under certain debt and lease agreements, and is a party to other
commitments. The following table summarizes these obligations as of December 31,
2002.
Payments due by period
--------------------------
Less than 1 - 3 4 - 5
Total 1 year years years
(In thousands)
Long-term debt ........................... $31,000 $ -- $ -- $31,000
Capital lease obligations and other ...... 89 89 -- --
Operating leases ......................... 1,565 662 881 22
Unconditional purchase obligations ....... 1,355 1,355 -- --
Other long-term obligation - Maastricht
real estate acquisition obligation ...... 2,085 -- 2,085 --
------- ------ ------ -------
Total contractual cash obligations ....... $36,094 $2,106 $2,966 $31,022
======= ====== ====== =======
In addition, the Company is a party to certain other agreements that
contractually and unconditionally commit the Company to pay certain amounts in
the future. While the Company believes it is probable that amounts will be spent
in the future under such contracts, the amount and/or the timing of such future
payments will vary depending on certain provisions of the applicable contract.
Agreements to which the Company is a party that fall into this category, more
fully described in Note 14 to the Consolidated Financial Statements, are CompX's
patent license agreements under which it pays royalties based on the volume of
certain products manufactured in Canada and sold in the United States.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
General. The Company is exposed to market risk from changes in foreign
currency exchange rates and interest rates. The Company periodically uses
currency forward contracts to manage a portion of foreign exchange rate risk
associated with receivables, or similar exchange rate risk associated with
future sales, denominated in a currency other than the holder's functional
currency. Otherwise, the Company does not generally enter into forward or option
contracts to manage such market risks, nor does the Company enter into any such
contract or other type of derivative instrument for trading or speculative
purposes. Other than the contracts discussed below, the Company was not a party
to any forward or derivative option contract related to foreign exchange rates
or interest rates at December 31, 2001 and 2002. See Note 1 to the Consolidated
Financial Statements.
Interest rates. The Company is exposed to market risk from changes in
interest rates, primarily related to indebtedness.
At December 31, 2001 and 2002, substantially all of the Company's
outstanding indebtedness were variable rate borrowings. Such borrowings at
December 31, 2002 related principally to $31 million ($49 million at December
31, 2001) in borrowings under the Company's unsecured Revolving Senior Credit
Facility which was replaced by a $47.5 million secured Revolving Bank Credit
Agreement in January 2003. The outstanding balances at December 31, 2001 and
2002 (which approximate fair value) had a weighted-average interest rate of 4.2%
and 2.5%, respectively. Amounts outstanding under the new credit facility are
due in January 2006. The remaining indebtedness outstanding at December 31, 2001
and 2002 is not material.
Foreign currency exchange rates. The Company is exposed to market risk
arising from changes in foreign currency exchange rates as a result of
manufacturing and selling its products outside the United States (principally
Canada, Western Europe and Taiwan). A portion of CompX's sales generated from
its non-U.S. operations are denominated in currencies other than the U.S.
dollar, principally the Canadian dollar, the euro and the New Taiwan dollar. In
addition, a portion of CompX's sales generated from its non-U.S. operations
(principally in Canada) are denominated in the U.S. dollar. Most raw materials,
labor and other production costs for such non-U.S. operations are denominated
primarily in local currencies. Consequently, the translated U.S. dollar value of
CompX's foreign sales and operating results are subject to currency exchange
rate fluctuations which may favorably or unfavorably impact reported earnings
and may affect comparability of period-to-period operating results.
Certain of CompX's sales generated by its Canadian operations are
denominated in U.S. dollars. To manage a portion of the foreign exchange rate
market risk associated with receivables, or similar exchange rate risk
associated with future sales, at December 31, 2002 CompX had entered into a
series of short-term forward exchange contracts maturing through January 2003 to
exchange an aggregate of $2.5 million for an equivalent amount of Canadian
dollars at an exchange rate of Cdn. $1.57 per U.S. dollar. At each balance sheet
date, outstanding currency forward contracts are marked-to-market with any
resulting gain or loss recognized in income currently. The difference between
the estimated fair value and the face value of all such outstanding forward
contracts at December 31, 2002 is not material. At December 31, 2002, the actual
exchange rate was Cdn. $1.57 per U.S. dollar. No foreign exchange contracts were
outstanding at December 31, 2001.
Other. The above discussion includes forward-looking statements of market
risk which assume hypothetical changes in market prices. Actual future market
conditions will likely differ materially from such assumptions. Accordingly,
such forward-looking statements should not be considered to be projections by
the Company of future events or losses. Such forward-looking statements are
subject to certain risks and uncertainties some of which are listed in
"Business-General."
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information called for by this Item is contained in a separate section
of this Annual Report. See "Index of Financial Statements and Schedules" (page
F-1).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item is incorporated by reference to
CompX's definitive Proxy Statement to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A within 120 days after the end of the
fiscal year covered by this report (the "CompX Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to the
CompX Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to the
CompX Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to the
CompX Proxy Statement. See also Note 13 to the Consolidated Financial
Statements.
ITEM 14. CONTROLS AND PROCEDURES
The Company maintains a system of disclosure controls and procedures. The
term "disclosure controls and procedures," as defined by regulations of the SEC,
means controls and other procedures that are designed to ensure that information
required to be disclosed in the reports that the Company files or submits to the
SEC under the Securities Exchange Act of 1934, as amended (the "Act"), is
recorded, processed, summarized and reported, within the time periods specified
in the SEC's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by the Company in the reports that it files or submits
to the SEC under the Act is accumulated and communicated to the Company's
management, including its principal executive officer and its principal
financial officer, as appropriate to allow timely decisions to be made regarding
required disclosure. Each of David A. Bowers, the Company's Vice Chairman of the
Board, President and Chief Executive Officer, and Darryl R. Halbert, the
Company's Vice President, Chief Financial Officer and Controller, have evaluated
the Company's disclosure controls and procedures as of a date within 90 days of
the filing date of this Form 10-K. Based upon their evaluation, these executive
officers have concluded that the Company's disclosure controls and procedures
are effective as of the date of such evaluation.
The Company also maintains a system of internal controls. The term
"internal controls," as defined by the American Institute of Certified Public
Accountants' Codification of Statement on Auditing Standards, AU Section 319,
means controls and other procedures designed to provide reasonable assurance
regarding the achievement of objectives in the reliability of the Company's
financial reporting, the effectiveness and efficiency of the Company's
operations and the Company's compliance with applicable laws and regulations.
There have been no significant changes in the Company's internal controls or in
other factors that could significantly affect such controls subsequent to the
date of their last evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) and (d) Financial Statements and Schedules
The Registrant
The consolidated financial statements and schedules listed
on the accompanying Index of Financial Statements and
Schedules (see page F-1) are filed as part of this Annual
Report.
(b) Reports on Form 8-K
No reports on Form 8-K were filed for the quarter ended
December 31, 2002.
(c) Exhibits
Included as exhibits are the items listed in the Exhibit
Index. CompX will furnish a copy of any of the exhibits
listed below upon payment of $4.00 per exhibit to cover the
costs to CompX of furnishing the exhibits. Instruments
defining the rights of holders of long-term debt issues
which do not exceed 10% of consolidated total assets will be
furnished to the Commission upon request.
Item No. Exhibit Item
3.1 Restated Certificate of Incorporation of Registrant -
incorporated by reference to Exhibit 3.1 of the Registrant's
Registration Statement on Form S-1 (File No. 333-42643).
3.2 Amended and Restated Bylaws of Registrant, adopted by the
Board of Directors August 31, 2002.
10.1 Intercorporate Services Agreement between the Registrant and
Contran Corporation effective as of January 1, 2002 -
incorporated by reference to Exhibit 10.1 of the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2002.
10.2* CompX International Inc. 1997 Long-Term Incentive Plan -
incorporated by reference to Exhibit 10.2 of the
Registrant's Registration Statement on Form S-1 (File No.
333-42643).
10.3* CompX International Inc. Variable Compensation Plan
effective as of January 1, 1999 - incorporated by reference
to Exhibit 10.4 of the Registrant's Annual Report on Form
10-K for the year ended December 31, 1998.
10.4 Agreement between Haworth, Inc. and Waterloo Furniture
Components, Ltd. and Waterloo Furniture Components, Inc.
effective October 1, 1992 - incorporated by reference to
Exhibit 10.3 of the Registrant's Registration Statement on
Form S-1 (File No. 333-42643).
10.5 Tax Sharing Agreement among the Registrant, Valcor, Inc. and
Valhi, Inc. dated as of January 2, 1998 - incorporated by
reference to Exhibit 10.4 of the Registrant's Registration
Statement on Form S-1 (File No. 333-42643).
Item No. Exhibit Item
10.6 $100,000,000 Credit Agreement between the Registrant,
Bankers Trust Company, as Agent and various lending
institutions dated February 26, 1998 - incorporated by
reference to Exhibit 10.5 of the Registrant's Registration
Statement on Form S-1 (File No. 333-42643).
10.7 Amendment No. 1 to Credit Agreement between Registrant,
Bankers Trust Company, as Agent and various lending
institutions, dated December 15, 1999 - incorporated by
reference to Exhibit 10.8 of the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1999.
10.8 Amendment No. 2 to Credit Agreement between Registrant,
Bankers Trust Company, as Agent and various lending
institutions, dated December 2001 - incorporated by
reference to Exhibit 10.8 of the Registrant's Annual Report
on Form 10-K for the year ended December 31, 2001.
10.9 $47,500,000 Credit Agreement between the Registrant,
Wachovia Bank, National Association, as Agent and various
lending institutions dated January 22, 2003.
10.10* Employment agreement between Registrant and Wouter J.
Dammers, effective August 30, 1999 - incorporated by
reference to Exhibit 10.1 of the Registrant's Quarterly
Report on Form 10-Q for the quarter ended March 31, 2001.
10.11 Asset sale/leaseback agreement between Thomas Regout
International BV and the municipality of Maastricht, the
Netherlands dated December 21, 2001 (English translation
from Dutch language document) - incorporated by reference to
Exhibit 10.12 of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 2001.
10.12* Agreement and General Release between the Registrant and
Brent A. Hagenbuch, effective May 22, 2002.
10.13* Agreement and General Release between the Registrant and
Stuart M. Bitting, effective July 31, 2002.
21.1 Subsidiaries of the Registrant.
23.1 Consent of PricewaterhouseCoopers LLP.
99.1 Annual Report of the CompX Contributory Retirement Plan
(Form 11-K) to be filed under Form 10-K to this Annual
Report on Form 10-K405 within 180 days after December 31,
2002.
99.2 Certification pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.3 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
* Management contract, compensatory plan or agreement.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
COMPX INTERNATIONAL INC.
By: /s/ David A. Bowers
------------------------------------------------
David A. Bowers
Vice Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on the
dates indicated.
Signature Title Date
/s/ Glenn R. Simmons Chairman of the Board March 14, 2003
- -----------------------------
Glenn R. Simmons
/s/ David A. Bowers Vice Chairman of the Board, March 14, 2003
- ----------------------------- President and
David A. Bowers Chief Executive Officer
(Principal Executive Officer)
/s/ Darryl R. Halbert Vice President, March 14, 2003
- ----------------------------- Chief Financial Officer
Darryl R. Halbert and Controller
(Principal Financial and Accounting
Officer)
/s/ Paul M. Bass, Jr. Director March 14, 2003
- -----------------------------
Paul M. Bass, Jr.
/s/ Keith R. Coogan Director March 14, 2003
- -----------------------------
Keith R. Coogan
/s/ Edward J. Hardin Director March 14, 2003
- -----------------------------
Edward J. Hardin
/s/ Ann Manix Director March 14, 2003
- --------------------------------------
Ann Manix
/s/ Steven L. Watson Director March 14, 2003
- -----------------------------
Steven L. Watson
CERTIFICATION
I, David A. Bowers, the Vice Chairman of the Board, President and Chief
Executive Officer of CompX International Inc., certify that:
1) I have reviewed this annual report on Form 10-K of CompX International
Inc.;
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 officer 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 subsidiaries, is made known to us by others within those
entities, particularly 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 officer 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
controls 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 officer and I have indicated in this
annual report whether or not 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 14, 2003
/s/ David A. Bowers
- -------------------------------------
David A. Bowers
Vice Chairman of the Board, President
and Chief Executive Officer
CERTIFICATION
I, Darryl R. Halbert, the Vice President, Chief Financial Officer and Controller
of CompX International Inc., certify that:
1) I have reviewed this annual report on Form 10-K of CompX International
Inc.;
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 officer 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 subsidiaries, is made known to us by others within those
entities, particularly 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 officer 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):
d) all significant deficiencies in the design or operation of internal
controls 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
e) 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 officer and I have indicated in this
annual report whether or not 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 14, 2003
/s/ Darryl R. Halbert
- ------------------------------------------------------
Darryl R. Halbert
Vice President, Chief Financial Officer and Controller
Annual Report on Form 10-K
Items 8, 14(a) and 14(d)
Index of Financial Statements and Schedules
Financial Statements Page
Report of Independent Accountants F-2
Consolidated Balance Sheets - December 31, 2001 and 2002 F-3
Consolidated Statements of Income -
Years ended December 31, 2000, 2001 and 2002 F-5
Consolidated Statements of Comprehensive Income -
Years ended December 31, 2000, 2001 and 2002 F-6
Consolidated Statements of Cash Flows -
Years ended December 31, 2000, 2001 and 2002 F-7
Consolidated Statements of Stockholders' Equity -
Years ended December 31, 2000, 2001 and 2002 F-9
Notes to Consolidated Financial Statements F-10
Financial Statement Schedule
Report of Independent Accountants S-1
Schedule II - Valuation and Qualifying Accounts S-2
Schedules I, III and IV are omitted because they are not applicable.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of CompX International Inc.:
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, comprehensive income, cash flows and
stockholders' equity present fairly, in all material respects, the consolidated
financial position of CompX International Inc. and Subsidiaries as of December
31, 2001 and 2002, 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 of
America. 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 of these financial
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
As discussed in Note 15 to the consolidated financial statements, effective
January 1, 2002 the Company changed its method of accounting for goodwill and
other intangible assets.
PricewaterhouseCoopers LLP
Dallas, Texas
February 13, 2003
COMPX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2001 and 2002
(In thousands, except share data)
ASSETS 2001 2002
---- ----
Current assets:
Cash and cash equivalents ........................ $ 33,309 $ 12,407
Accounts receivable, less allowance for
doubtful accounts of $841 and $812 .............. 23,422 22,924
Income taxes receivable from affiliates .......... 351 352
Refundable income taxes .......................... 2,032 1,378
Inventories ...................................... 30,902 28,876
Prepaid expenses and other current assets ........ 2,902 3,422
Deferred income taxes ............................ 1,944 1,983
-------- --------
Total current assets ......................... 94,862 71,342
-------- --------
Other assets:
Goodwill ......................................... 38,882 40,729
Other intangible assets .......................... 2,440 2,183
Prepaid rent ..................................... 1,079 426
Other ............................................ 577 233
-------- --------
Total other assets ........................... 42,978 43,571
-------- --------
Property and equipment:
Land ............................................. 4,368 4,344
Buildings ........................................ 29,092 29,452
Equipment ........................................ 89,773 102,347
Construction in progress ......................... 4,618 3,548
-------- --------
127,851 139,691
Less accumulated depreciation .................... 42,815 54,512
-------- --------
Net property and equipment ................... 85,036 85,179
-------- --------
$222,876 $200,092
======== ========
COMPX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
December 31, 2001 and 2002
(In thousands, except share data)
LIABILITIES AND STOCKHOLDERS' EQUITY 2001 2002
---- ----
Current liabilities:
Current maturities of long-term debt ................. $ 56 $ 6
Accounts payable and accrued liabilities ............. 23,168 21,318
Payable to affiliate ................................. 15 --
Income taxes ......................................... 1,000 419
Deferred income taxes ................................ 291 408
--------- ---------
Total current liabilities ........................ 24,530 22,151
--------- ---------
Noncurrent liabilities:
Long-term debt ....................................... 49,000 31,000
Deferred income taxes ................................ 4,441 4,469
Accrued pension costs ................................ 660 --
Deferred gain on sale/leaseback ...................... 1,221 493
--------- ---------
Total noncurrent liabilities ..................... 55,322 35,962
--------- ---------
Stockholders' equity:
Preferred stock, $.01 par value; 1,000 shares
authorized, none issued ............................. -- --
Class A common stock, $.01 par value;
20,000,000 shares authorized; 6,207,180 and 6,219,680
shares issued ....................................... 62 62
Class B common stock, $.01 par value;
10,000,000 shares authorized, issued and outstanding 100 100
Additional paid-in capital ........................... 119,224 119,387
Retained earnings .................................... 50,966 44,049
Accumulated other comprehensive income -
currency translation ................................ (16,013) (10,304)
Treasury stock, at cost - 1,103,900 shares ........... (11,315) (11,315)
--------- ---------
Total stockholders' equity ....................... 143,024 141,979
--------- ---------
$ 222,876 $ 200,092
========= =========
Commitments and contingencies (Notes 1, 11 and 14)
COMPX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 2000, 2001 and 2002
(In thousands, except per share data)
2000 2001 2002
---- ---- ----
Net sales ................................... $ 253,294 $ 211,422 $ 196,101
Cost of goods sold .......................... 187,299 167,884 163,181
--------- --------- ---------
Gross margin .......................... 65,995 43,538 32,920
Selling, general and administrative expense . 28,693 28,310 26,713
Restructuring charge ........................ -- 2,742 --
--------- --------- ---------
Operating income ...................... 37,302 12,486 6,207
Gain on sale of plant facility .............. -- 2,246 --
Other general corporate income (expense), net 443 1,009 (910)
Interest expense ............................ (2,302) (2,859) (1,888)
--------- --------- ---------
Income before income taxes and
minority interest .................... 35,443 12,882 3,409
Provision for income taxes .................. 13,390 5,758 2,771
Minority interest in losses ................. (3) -- --
--------- --------- ---------
Net income ............................ $ 22,056 $ 7,124 $ 638
========= ========= =========
Basic and diluted earnings per common share . $ 1.37 $ .47 $ .04
========= ========= =========
Cash dividends per share .................... $ .50 $ .50 $ .50
========= ========= =========
Shares used in the calculation of earnings
per share amounts for:
Basic earnings per share .................. 16,115 15,144 15,110
Dilutive impact of stock options .......... 32 6 8
--------- --------- ---------
Diluted earnings per share ................ 16,147 15,150 15,118
========= ========= =========
COMPX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years ended December 31, 2000, 2001 and 2002
(In thousands)
2000 2001 2002
---- ---- ----
Net income ................................ $ 22,056 $ 7,124 $ 638
-------- ------- -------
Other comprehensive income - currency
translation adjustment:
Pre-tax amount ........................ (5,159) (5,097) 5,643
Less income tax benefit ............... (323) (207) (66)
-------- ------- -------
Total other comprehensive income ...... (4,836) (4,890) 5,709
-------- ------- -------
Comprehensive income ................ $ 17,220 $ 2,234 $ 6,347
======== ======= =======
COMPX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 2000, 2001 and 2002
(In thousands)
2000 2001 2002
---- ---- ----
Cash flows from operating activities:
Net income .................................. $ 22,056 $ 7,124 $ 638
Depreciation and amortization ............... 12,416 14,769 13,004
Deferred income taxes ....................... 2,310 1,355 (750)
Gain on sale of plant facility .............. -- (2,246) --
Minority interest ........................... (3) -- --
Other, net .................................. (73) 465 604
Change in assets and liabilities:
Accounts receivable ....................... (826) 6,112 1,301
Inventories ............................... (7,421) 4,075 3,052
Accounts payable and accrued liabilities .. 2,746 (3,983) (2,798)
Accounts with affiliates .................. (284) (38) (16)
Income taxes .............................. (1,033) 202 1,561
Other, net ................................ (1,458) (172) 342
-------- -------- --------
Net cash provided by operating activities 28,430 27,663 16,938
-------- -------- --------
Cash flows from investing activities:
Capital expenditures ........................ (23,128) (13,283) (12,703)
Proceeds from sale of plant facility ........ -- 10,000 --
Purchase of business units .................. (9,346) -- --
Other, net .................................. 111 605 32
-------- -------- --------
Net cash used by investing activities ... (32,363) (2,678) (12,671)
-------- -------- --------
Cash flows from financing activities:
Long-term debt:
Borrowings ................................ 20,274 14,919 1,000
Principal payments ........................ (2,454) (6,511) (19,050)
Issuance of common stock .................... 1,027 -- 120
Dividends paid .............................. (8,076) (7,553) (7,555)
Common stock reacquired ..................... (8,665) (2,650) --
Other ....................................... 13 -- --
-------- -------- --------
Net cash provided (used) by financing
activities ............................. 2,119 (1,795) (25,485)
-------- -------- --------
Net increase (decrease) ....................... $ (1,814) $ 23,190 $(21,218)
======== ======== ========
COMPX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Years ended December 31, 2000, 2001 and 2002
(In thousands)
2000 2001 2002
---- ---- ----
Cash and cash equivalents:
Net increase (decrease) from:
Operating, investing and financing
activities .................................... $ (1,814) $23,190 $(21,218)
Currency translation ........................... (535) 299 316
Balance at beginning of year ..................... 12,169 9,820 33,309
-------- ------- --------
Balance at end of year ........................... $ 9,820 $33,309 $ 12,407
======== ======= ========
Supplemental disclosures:
Cash paid for:
Interest ....................................... $ 2,086 $ 3,238 $ 1,877
Income taxes ................................... 12,562 4,126 2,788
Net assets consolidated - business units acquired:
Cash and cash equivalents ...................... $ -- $ -- $ --
Goodwill ....................................... 4,837 -- --
Other intangible assets ........................ 254 -- --
Other non-cash assets .......................... 7,144 -- --
Liabilities .................................... (2,889) -- --
-------- ------- --------
Cash paid ...................................... $ 9,346 $ -- $ --
======== ======= ========
COMPX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 2000, 2001 and 2002
(In thousands)
Accumulated other
comprehensive
income -
Additional currency Total
Common stock paid-in Retained translation stockholders'
Class A Class B capital earnings stock Treasury equity
------- ------- ---------- ---------- ------
Balance at December 31, 1999 $61 $100 $118,067 $37,415 $ (6,287) $ - $149,356
Net income - - - 22,056 - - 22,056
Other comprehensive income - - - - (4,836) - (4,836)
Cash dividends - - - (8,076) - - (8,076)
Issuance of common stock 1 - 1,072 - - - 1,073
Common stock reacquired - - - - - (8,665) (8,665)
Other - - 55 - - - 55
--- ---- -------- ------- -------- -------- --------
Balance at December 31, 2000 62 100 119,194 51,395 (11,123) (8,665) 150,963
Net income - - - 7,124 - - 7,124
Other comprehensive income - - - - (4,890) - (4,890)
Cash dividends - - - (7,553) - - (7,553)
Issuance of common stock - - 30 - - - 30
Common stock reacquired - - - - - (2,650) (2,650)
--- ---- -------- ------- -------- -------- --------
Balance at December 31, 2001 62 100 119,224 50,966 (16,013) (11,315) 143,024
Net income - - - 638 - - 638
Other comprehensive income - - - - 5,709 - 5,709
Cash dividends - - - (7,555) - - (7,555)
Issuance of common stock - - 156 - - - 156
Other - - 7 - - 7
--- ---- -------- ------- -------- -------- --------
Balance at December 31, 2002 $62 $100 $119,387 $44,049 $(10,304) $(11,315) $141,979
=== ==== ======== ======= ======== ======== ========
COMPX INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of significant accounting policies:
Organization. CompX International Inc. (NYSE: CIX) is 69% owned by Valhi,
Inc. (NYSE: VHI) and Valhi's wholly-owned subsidiary Valcor, Inc. at December
31, 2002. The Company manufactures and sells component products (precision ball
bearing slides, security products and ergonomic computer support systems). At
December 31, 2002, Contran Corporation holds, directly or through subsidiaries,
approximately 93% of Valhi's outstanding common stock. Substantially all of
Contran's outstanding voting stock is held by trusts established for the benefit
of certain children and grandchildren of Harold C. Simmons, of which Mr. Simmons
is sole trustee. Mr. Simmons, the Chairman of the Board of each of Contran,
Valhi and Valcor, may be deemed to control each of such companies and the
Company.
Management estimates. The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
("GAAP") requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported amount
of revenues and expenses during the reporting period. Actual results may differ
from previously-estimated amounts under different assumptions or conditions.
Principles of consolidation. The accompanying consolidated financial
statements include the accounts of CompX International Inc. and its
majority-owned subsidiaries. All material intercompany accounts and balances
have been eliminated. Certain prior year amounts have been reclassified to
conform to the current year presentation. The Company has no involvement with
any variable interest entity covered by the scope of FASB Interpretation No. 46,
Consolidation of Variable Interest Entities.
Fiscal year. The Company's operations are reported on a 52 or 53-week
fiscal year. The years ended December 31, 2000, 2001 and 2002 each consisted of
52 weeks, and the year ended December 31, 2003 will be a 52-week year.
Translation of foreign currencies. Assets and liabilities of subsidiaries
whose functional currency is other than the U.S. dollar are translated at
year-end rates of exchange and revenues and expenses are translated at average
exchange rates prevailing during the year. Resulting translation adjustments are
accumulated in stockholders' equity as part of accumulated other comprehensive
income, net of related applicable deferred income taxes and minority interest.
Currency transaction gains and losses are recognized in income currently.
Cash and cash equivalents. Cash equivalents consist principally of bank
time deposits and government and commercial notes with original maturities of
three months or less.
Net sales. Sales are recorded when products are shipped and title and other
risks and rewards of ownership have passed to the customer. Shipping terms are
generally F.O.B. shipping point, although in some instances, shipping terms are
F.O.B. destination point (for which sales are recognized when the product is
received by the customer). Amounts charged to customers for shipping and
handling are not material. The related costs incurred for shipping and handling
are also not material.
Accounts receivable. The Company provides an allowance for doubtful
accounts for known and potential losses rising from sales to customers based on
a periodic review of these accounts.
Inventories and cost of sales. Inventories are stated at the lower of cost
or market, net of allowance for obsolete and slow-moving inventories.
Inventories are based on average cost or the first-in, first-out method.
Goodwill and other intangible assets. Goodwill represents the excess of
cost over fair value of individual net assets acquired in business combinations
accounted for by the purchase method. Through December 31, 2001, goodwill was
amortized by the straight-line method over not more than 20 years. Upon adoption
of Statement of Financial Accounting Standards ("SFAS") No. 142, Goodwill and
Other Intangible Assets, effective January 1, 2002, goodwill was no longer
subject to periodic amortization. Goodwill and other intangible assets are
stated net of accumulated amortization. See Notes 5 and 15.
Other intangible assets, consisting of the estimated fair value of certain
patents acquired, have been and will continue to be upon adoption of SFAS No.
142 effective January 1, 2002, amortized by the straight-line method over the
lives of such patents (approximately 11 years remaining at December 31, 2002),
with no assumed residual value at the end of the life of the patents. Other
intangible assets are stated net of accumulated amortization of $1.0 million at
December 31, 2001 and $1.2 million at December 31, 2002. Amortization expense of
intangible assets was $361,000 in 2000, $229,000 in 2001 and $240,000 in 2002,
and is expected to be approximately $250,000 in each of 2003 through 2007.
Through December 31, 2001, when events or changes in circumstances
indicated that goodwill or other intangible assets may be impaired, an
evaluation was performed to determine if an impairment existed. Such events or
circumstances included, among other things, (i) a prolonged period of time
during which the Company's net carrying value of its investment in subsidiaries
whose common stocks are publicly traded was greater than quoted market prices
for such stocks and (ii) significant current and prior periods or current and
projected periods with operating losses related to the applicable business unit.
All relevant factors were considered in determining whether an impairment
existed. If an impairment was determined to exist, goodwill and, if appropriate,
the underlying long-lived assets associated with the goodwill, were written down
to reflect the estimated future discounted cash flows expected to be generated
by the underlying business. Effective January 1, 2002, the Company commenced
assessing impairment of goodwill and other intangible assets in accordance with
SFAS No. 142. See Note 15.
Property, equipment and depreciation. Property and equipment, including
purchased computer software for internal use, are stated at cost. Expenditures
for maintenance, repairs and minor renewals are expensed; expenditures for major
improvements are capitalized. Depreciation for financial reporting purposes is
computed principally by the straight-line method over the estimated useful lives
of 15 to 40 years for buildings and three to 10 years for equipment and
software. Accelerated depreciation methods are used for income tax purposes, as
permitted. Upon sale or retirement of an asset, the related cost and accumulated
depreciation are removed from the accounts and any gain or loss is recognized in
income currently.
When events or changes in circumstances indicate that assets may be
impaired, an evaluation is performed to determine if an impairment exists. Such
events or changes in circumstances include, among other things, (i) significant
current and prior periods or current and projected periods with operating
losses, (ii) a significant decrease in the market value of an asset or (iii) a
significant change in the extent or manner in which an asset is used. All
relevant factors are considered. The test for impairment is performed by
comparing the estimated future undiscounted cash flows (exclusive of interest
expense) associated with the asset to the asset's net carrying value to
determine if a write-down to market value or discounted cash flow value is
required. Through December 31, 2001, if the asset being tested for impairment
was acquired in a business combination accounted for by the purchase method, any
goodwill which arose out of that business combination was also considered in the
impairment test if the goodwill related specifically to the acquired asset and
not to other aspects of the acquired business, such as the customer base or
product lines. Effective January 1, 2002, the Company began assessing impairment
of goodwill in accordance with SFAS No. 142, and the Company began assessing
impairment of other long-lived assets (such as property and equipment) in
accordance with SFAS No. 144 Accounting for the Impairment or Disposal of
Long-Lived Assets. SFAS No. 144 retains the fundamental provisions of existing
GAAP with respect to the recognition and measurement of long-lived asset
impairment contained in SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Lived-Lived Assets to be Disposed Of. However, SFAS
No. 144 provides new guidance intended to address certain implementation issues
associated with SFAS No. 121, including expanded guidance with respect to
appropriate cash flows to be used to determine whether recognition of any
long-lived asset impairment is required, and if required how to measure the
amount of the impairment. SFAS No. 144 also requires that any net assets to be
disposed of by sale are to be reported at the lower of carrying value or fair
value less cost to sell, and expands the reporting of discontinued operations to
include any component of an entity with operations and cash flows that can be
clearly distinguished from the rest of the entity. Adoption of SFAS No. 144 did
not have a significant effect on the Company as of January 1, 2002. See Notes 5
and 15.
Self-insurance. The Company is partially self-insured for workers'
compensation and certain employee health benefits and is self-insured for
environmental issues. Stop-loss coverage is purchased by the Company in order to
limit its exposure to any significant levels of workers' compensation or
employee health benefit claims. Self-insured losses are accrued based upon
estimates of the aggregate liability for uninsured claims incurred using certain
actuarial assumptions followed in the insurance industry and the Company's own
historical claims experience.
Derivatives and hedging activities. The Company adopted SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, as amended,
effective January 1, 2001. Under SFAS No. 133, all derivatives are recognized as
either assets or liabilities and measured at fair value. The accounting for
changes in fair value of derivatives depends upon the intended use of the
derivative, and such changes are recognized either in net income or other
comprehensive income. As permitted by the transition requirements of SFAS No.
133, as amended, the Company has exempted from the scope of SFAS No. 133 all
host contracts containing embedded derivatives which were issued or acquired
prior to January 1, 1999. Other than certain currency forward contracts
discussed below, the Company was not a party to any significant derivative or
hedging instrument covered by SFAS No. 133 at January 1, 2001. The accounting
for such currency forward contracts under SFAS No. 133 is not materially
different from the accounting for such contracts under prior GAAP, and therefore
the impact to the Company of adopting SFAS No. 133 was not material.
Certain of the Company's sales generated by its non-U.S. operations are
denominated in U.S. dollars. The Company periodically uses currency forward
contracts to manage a very nominal portion of foreign exchange rate risk
associated with receivables denominated in a currency other than the holder's
functional currency or similar exchange rate risk associated with future sales.
The Company has not entered into these contracts for trading or speculative
purposes in the past, nor does the Company currently anticipate entering into
such contracts for trading or speculative purposes in the future. At each
balance sheet date, any such outstanding currency forward contract is
marked-to-market with any resulting gain or loss recognized in income currently
as part of net currency transactions. To manage such exchange rate risk, at
December 31, 2002 the Company held contracts maturing through January 2003 to
exchange an aggregate of U.S. $2.5 million for an equivalent amount of Canadian
dollars at an exchange rate of Cdn. $1.57 per U.S. dollar. At December 31, 2002,
the actual exchange rate was Cdn. $1.57 per U.S. dollar. No such contracts were
held at December 31, 2001.
The Company periodically uses interest rate swaps and other types of
contracts to manage interest rate risk with respect to financial assets or
liabilities. The Company has not entered into these contracts for trading or
speculative purposes in the past, nor does the Company currently anticipate
entering into such contracts for trading or speculative purposes in the future.
The Company was not a party to any such contract during 2000, 2001 and 2002.
Income taxes. The Company is a separate United States federal income
taxpayer and is not a member of Contran's consolidated United States federal
income tax group. The Company is however a part of consolidated tax returns
filed by Contran in certain United States state jurisdictions. For such
consolidated state tax returns, intercompany allocations of state tax provisions
are computed on a separate company basis. Payments are made to, or received from
Contran in the amounts that would have been paid to or received from the
respective state tax authority had CompX not been a part of the consolidated
state tax return.
Deferred income tax assets and liabilities are recognized for the expected
future tax consequences of temporary differences between the income tax and
financial reporting carrying amounts of assets and liabilities, including
undistributed earnings of foreign subsidiaries which are not deemed to be
permanently reinvested. The Company periodically evaluates its deferred tax
assets in the various taxing jurisdictions in which it operates and adjusts any
related valuation allowance based on the estimate of the amount of such deferred
tax assets which the Company believes does not meet the "more-likely-than-not"
recognition criteria. Earnings of foreign subsidiaries deemed to be permanently
reinvested aggregated $54 million at December 31, 2001 and $45 million at
December 31, 2002.
Earnings per share. Basic earnings per share of common stock is based upon
the weighted average number of common shares actually outstanding during each
period. Diluted earnings per share of common stock includes the impact of
outstanding dilutive stock options. The weighted average number of outstanding
stock options excluded from the calculation of diluted earnings per share
because their impact would have been antidilutive aggregated approximately
848,000 in 2000, 746,000 in 2001 and 819,000 in 2002.
Stock options. At December 31, 2002, the Company has a stock-based employee
compensation plan, which is described more fully in Note 10. The Company
accounts for stock-based employee compensation related to stock options using
the intrinsic value method in accordance with Accounting Principles Board
Opinion ("APBO") No. 25, Accounting for Stock Issued to Employees, and its
various interpretations. Under APBO No. 25, no compensation cost is generally
recognized for fixed stock options in which the exercise price is greater than
or equal to the market price on the grant date. Compensation cost recognized by
the Company related to stock options in accordance with APBO No. 25 has not been
significant in any of the past three years. The following table illustrates the
effect on net income and earnings per share if the Company had applied the fair
value recognition provisions of SFAS No. 123, Accounting for Stock-Based
Compensation to stock-based employee compensation related to stock options for
all options granted on or after January 1, 1995.
Years ended December 31,
2000 2001 2002
---- ---- ----
(In thousands,
except per share data)
Net income, as reported ....................... $ 22,056 $ 7,124 $ 638
Deduct: Total stock-based employee
compensation expense related to stock options
determined under fair value based method
for all awards, net of related tax effects .. (1,342) (1,486) (1,572)
-------- ------- -------
Pro forma net income (loss) ................... $ 20,714 $ 5,638 $ (934)
======== ======= =======
Earnings (loss) per share - basic and diluted:
As reported ................................. $ 1.37 $ .47 $ .04
======== ======= =======
Pro forma ................................... $ 1.29 $ .37 $ (.06)
======== ======= =======
Fair value of financial instruments. The carrying amounts of accounts
receivable and accounts payable approximates fair value due to their short-term
nature. The carrying amount of indebtedness approximates fair value due to the
stated interest rate approximating a market rate. These estimated fair value
amounts have been determined using available market information or other
appropriate valuation methodologies.
Other. Advertising costs, expensed as incurred, were $931,000 in 2000,
$1,026,000 in 2001 and $879,000 in 2002. Research and development costs,
expensed as incurred, were $1,082,000 in 2000, $510,000 in 2001 and $659,000 in
2002.
Note 2 - Business units acquired:
In January 2000, the Company acquired substantially all of the operating
assets of Chicago Lock Company for a cash purchase price of $9.4 million, using
borrowings under the Company's revolving credit facility. The Company accounted
for this acquisition by the purchase method of accounting and, accordingly, the
results of operations and cash flows of the business acquired is included in the
Company's consolidated financial statements subsequent to the date of
acquisition. The purchase price for this acquisition has been allocated to the
individual assets acquired and liabilities assumed based upon estimated fair
values.
Note 3 - Business and geographic segments:
The Company's operating segments are defined as components of its
operations about which separate financial information is available that is
regularly evaluated by the chief operating decision maker in determining how to
allocate resources and in assessing performance. The Company's chief operating
decision maker is Mr. David Bowers, president and chief executive officer of the
Company. The Company has three operating segments - CompX Security Products,
CompX Waterloo and CompX Regout (formerly called CompX Europe). The CompX
Security Products segment, with manufacturing facilities in South Carolina and
Illinois, manufactures locking mechanisms and other security products for sale
to the office furniture, banking, vending, computer and other industries. The
CompX Waterloo segment, with facilities in Canada, Michigan and Taiwan, and the
CompX Regout segment, with facilities in the Netherlands, both manufacture
and/or distribute a complete line of precision ball bearing slides for use in
office furniture, computer-related equipment, tool storage cabinets and other
applications and ergonomic computer support systems for office furniture.
Because of the similar economic characteristics between the CompX Waterloo and
CompX Regout segments and due to the identical products, customer types,
production processes and distribution methods shared by these two segments, they
have been aggregated into a single reportable segment for segment reporting
purposes.
The chief operating decision maker evaluates segment performance based on
segment operating income, which is defined as income before income taxes,
minority interest and interest expense, exclusive of certain general corporate
income and expense items (including interest income and foreign exchange
transaction gains and losses) and special items. All corporate office operating
expenses are allocated to the two reportable segments based upon the segments'
net sales. The accounting policies of the reportable operating segments are the
same as those described in Note 1. Capital expenditures include additions to
property and equipment, but exclude amounts attributable to business
combinations accounted for by the purchase method. See Note 2.
Segment assets are comprised of all assets attributable to the reportable
segments. Corporate assets are not attributable to the operating segments and
consist primarily of cash and cash equivalents. For geographic information, net
sales are attributable to the place of manufacture (point of origin) and the
location of the customer (point of destination); property and equipment are
attributable to their physical location. At December 31, 2001 and 2002, the net
assets of non-U.S. subsidiaries included in consolidated net assets approximated
$91 million and $82 million, respectively.
Years ended December 31,
2000 2001 2002
---- ---- ----
(In thousands)
Net sales:
CompX Waterloo/CompX Regout ................. $ 168,276 $ 137,351 $ 122,743
CompX Security Products ..................... 85,018 74,071 73,358
--------- --------- ---------
Total net sales ........................... $ 253,294 $ 211,422 $ 196,101
========= ========= =========
Operating income (loss):
CompX Waterloo/CompX Regout ................. $ 24,822 $ 5,166 $ (1,869)
CompX Security Products ..................... 12,480 7,320 8,076
--------- --------- ---------
Total operating income .................... 37,302 12,486 6,207
Interest expense ............................ (2,302) (2,859) (1,888)
Gain on sale of plant facility .............. -- 2,246 --
Other general corporate income (expense), net 443 1,009 (910)
--------- --------- ---------
Income before income taxes and
minority interest ........................ $ 35,443 $ 12,882 $ 3,409
========= ========= =========
Depreciation and amortization:
CompX Waterloo/CompX Regout ................. $ 7,697 $ 9,136 $ 8,235
CompX Security Products ..................... 4,719 5,633 4,769
--------- --------- ---------
$ 12,416 $ 14,769 $ 13,004
========= ========= =========
Capital expenditures:
CompX Waterloo/CompX Regout ................. $ 13,611 $ 6,831 $ 11,121
CompX Security Products ..................... 9,517 6,452 1,582
--------- --------- ---------
$ 23,128 $ 13,283 $ 12,703
========= ========= =========
Years ended December 31,
2000 2001 2002
---- ---- ----
(In thousands)
Net sales:
Point of origin:
Canada .......................... $ 99,088 $ 81,326 $ 69,803
United States ................... 106,294 88,302 86,432
The Netherlands ................. 35,767 32,216 29,626
Taiwan .......................... 12,145 9,578 10,240
-------- -------- --------
$253,294 $211,422 $196,101
======== ======== ========
Point of destination:
United States ................... $159,658 $130,534 $126,182
Canada .......................... 43,903 35,475 29,601
Europe .......................... 34,858 37,097 33,115
Other ........................... 14,875 8,316 7,203
-------- -------- --------
$253,294 $211,422 $196,101
======== ======== ========
December 31,
2000 2001 2002
---- ---- ----
(In thousands)
Total assets:
CompX Waterloo/CompX Regout ........ $131,707 $128,502 $111,271
CompX Security Products ............ 90,321 92,503 87,795
Corporate and eliminations ......... 1,644 1,871 1,026
-------- -------- --------
$223,672 $222,876 $200,092
======== ======== ========
Goodwill:
CompX Waterloo/CompX Regout ........ $ 17,055 $ 15,139 $ 16,986
CompX Security Products ............ 25,158 23,743 23,743
-------- -------- --------
$ 42,213 $ 38,882 $ 40,729
======== ======== ========
Net property and equipment:
United States ...................... $ 47,555 $ 48,863 $ 46,251
Canada ............................. 24,410 23,420 23,046
The Netherlands .................... 17,259 7,323 10,034
Taiwan ............................. 5,735 5,430 5,848
-------- -------- --------
$ 94,959 $ 85,036 $ 85,179
======== ======== ========
Note 4 - Inventories:
December 31,
2001 2002
---- ----
(In thousands)
Raw materials ............................ $ 9,677 $ 6,573
Work in process .......................... 12,619 12,602
Finished products ........................ 8,494 9,532
Supplies ................................. 112 169
------- -------
$30,902 $28,876
Note 5 - Goodwill:
Changes in the carrying amount of goodwill during the past three years is
presented in the table below. Goodwill was generated principally from
acquisitions of certain business units during 1998, 1999 and 2000.
CompX
CompX Waterloo/ Security
CompX Regout Products Total
(In millions)
Balance at December 31, 1999 ............... $19.9 $21.8 $41.7
Goodwill acquired/adjusted during
the year .................................. (.6) 4.7 4.1
Changes in currency
exchange rates ............................ (1.2) -- (1.2)
Periodic amortization ...................... (1.0) (1.4) (2.4)
----- ----- -----
Balance at December 31, 2000 ............... 17.1 25.1 42.2
Changes in currency
exchange rates ............................ (1.0) -- (1.0)
Periodic amortization ...................... (.9) (1.4) (2.3)
----- ----- -----
Balance at December 31, 2001 ............... 15.2 23.7 38.9
Changes in currency
exchange rates ............................ 1.8 -- 1.8
----- ----- -----
Balance at December 31, 2002 ............... $17.0 $23.7 $40.7
===== ===== =====
Upon adoption of SFAS No. 142 effective January 1, 2002, the goodwill
related to the CompX Security Products and CompX Waterloo/CompX Regout segments
was assigned to reporting units (as defined in SFAS No. 142) consisting of the
reportable operating segments to which the goodwill relates.
Note 6 - Accounts payable and accrued liabilities:
December 31,
2001 2002
---- ----
(In thousands)
Accounts payable ............................... $ 9,459 $ 9,106
Accrued liabilities:
Employee benefits ............................ 6,619 7,065
Insurance .................................... 573 478
Royalties .................................... 223 246
Restructuring ................................ 2,278 540
Deferred gain on sale/leaseback .............. 479 805
Other ........................................ 3,537 3,078
------- -------
$23,168 $21,318
In 2001, the Company recognized a charge of $2.7 million related to a
consolidation and rationalization of CompX's European operations. This
restructuring effort included headcount reductions of about 35 employees at the
Company's Maastricht, the Netherlands facility, substantially all of which had
been implemented by December 31, 2001. As adjusted for changes in currency
exchange rates, through December 31, 2002 approximately $2.4 million of the
total charge has been paid. The remaining $.6 million was paid in January 2003.
Note 7 - Indebtedness:
December 31,
2001 2002
---- ----
(In thousands)
Revolving bank credit facility ................. $49,000 $31,000
Other .......................................... 56 6
------- -------
49,056 31,006
Less current portion ........................... 56 6
------- -------
$49,000 $31,000
At December 31, 2002, the Company had a $100 million unsecured revolving
bank credit facility expiring in February 2003 which bore interest at LIBOR plus
a margin resulting in an interest rate of 2.5% at December 31, 2002. In January
2003, this credit facility was replaced with a secured $47.5 million revolving
bank credit facility which bears interest at the Company's option, of either;
(i) the bank's prime rate plus the applicable basis point margin or (ii) LIBOR
plus the applicable basis point margin (resulting in a weighted-average interest
rate of 3.3% at loan inception). Borrowings are available for the Company's
general corporate purposes, including acquisitions, and are due no later than
January 2006. The credit facility is collateralized by substantially all of the
Company's United States assets and by at least 65% of the ownership interests in
the Company's first-tier foreign subsidiaries. The facility contains certain
covenants and restrictions customary in lending transactions of this type, which
are similar to the covenants in the former agreement and, among other things,
restricts the ability of CompX and its subsidiaries to incur debt, incur liens,
pay dividends, merge or consolidate with, or transfer all or substantially all
of their assets to another entity. The facility also requires maintenance of
specified levels of net worth (as defined). In the event of a change of control
of CompX, as defined, the lenders would have the right to accelerate the
maturity of the facility. CompX would also be required under certain conditions
to use the net proceeds from the sale of assets outside the ordinary course of
business to reduce outstanding borrowings under the facility, and such a
transaction would also result in a permanent reduction of the size of the
facility.
Amounts outstanding at December 31, 2002 under the prior facility are
classified as a noncurrent liability because those borrowings were refinanced on
a long-term basis under the terms of the new facility. At December 31, 2002, the
equivalent of $16.5 million would have been available for borrowing under the
terms of the new facility. Approximately $6.3 million was available for dividend
under the terms of the prior credit facility at December 31, 2002. Under the
terms of the new facility, the Company is permitted to pay dividends and/or
repurchase its common stock in an amount equal to the sum of (i) the current
dividend rate of $.125 per share in any calendar quarter, not to exceed $8.0
million in any calendar year, plus (ii) $6.0 million plus 50% of aggregate net
income over the term of the credit facility.
Aggregate maturities of long-term debt at December 31, 2002 are shown in
the table below.
Years ending December 31, Amount
(In thousands)
2003 $ 6
2006 31,000
-------
$31,006
Note 8 - Employee benefit plans:
Defined contribution plans. The Company maintains various defined
contribution plans with Company contributions based on matching or other
formulas. Defined contribution plan expense approximated $1,608,000 in 2000,
$1,720,000 in 2001 and $1,748,000 in 2002.
Defined benefit plans. Through January 1, 2001, the Company maintained a
defined benefit pension plan covering substantially all full-time employees of
Thomas Regout B.V. Variances from actuarially assumed rates resulted in
increases or decreases in accumulated pension obligations, pension expense and
funding requirements. As of January 1, 2001, the Company ceased providing future
benefits under the plan, thus reducing certain pension benefit obligations. In
connection with this curtailment, the Company recognized a curtailment gain of
approximately $116,000 in 2001. As of December 31, 2001, certain obligations
related to the terminated plan had not yet been fully settled and are reflected
in accrued pension costs. In 2002, such obligations were settled and the Company
reported a settlement gain of $677,000. See Note 12.
The rates used in determining the actuarial present value of benefit
obligations are presented below:
December 31,
2001
Discount rate 6.25%
Rate of increase in future compensation levels Not applicable
Long-term rate of return on assets 4.0 %
The funded status of the Company's defined benefit pension plans, the
components of net periodic defined benefit pension cost and the rates used in
determining the actuarial present value of benefit obligations are presented in
the tables below.
Years ended December 31,
2001 2002
---- ----
(In thousands)
Change in projected benefit obligations ("PBO"):
PBO at beginning of the year ................... $ 2,301 $ 1,279
Actuarial gains ................................ (766) --
Curtailment gain ............................... (116) --
Settlement ..................................... -- (1,259)
Change in foreign exchange rates ............... (140) (20)
------- -------
PBO at end of the year ..................... $ 1,279 $ --
======= =======
Years ended December 31,
2001 2002
---- ----
(In thousands)
Change in fair value of plan assets:
Fair value of plan assets at beginning of
the year .......................................... $ 1,055 $ 1,019
Actual return on plan assets ....................... 61 --
Employer contributions ............................. -- 240
Settlement ......................................... -- (1,259)
Change in foreign exchange rates ................... (97) --
------- -------
Fair value of plan assets at end of year ....... $ 1,019 $ --
======= =======
Funded status at year end:
Plan assets less than PBO .......................... $ 260 $ --
Unrecognized gains ................................. 640 --
------- -------
$ 900 $ --
======= =======
Amounts recognized in the balance sheet -
accrued pension costs:
Current .......................................... $ 240 $ --
Noncurrent ....................................... 660 --
------- -------
$ 900 $ --
======= =======
Years ended December 31,
------------------------------
2000 2001 2002
---- ---- ----
(In thousands)
Net periodic pension cost (benefit):
Service cost benefits ...................... $ 131 $-- $-
Interest cost on PBO ....................... 80 -- --
Expected return on plan assets ............. (35) (61) --
Unrecognized gains ......................... -- 19 --
----- ---- ----
$ 176 $(42) $-
===== ==== ====
Note 9 - Income taxes:
The components of pre-tax income and the provision for income taxes, the
difference between the provision for income taxes and the amount that would be
expected using the U.S. federal statutory income tax rate of 35% and the
comprehensive provision for income taxes are presented below.
Years ended December 31,
2000 2001 2002
---- ---- ----
(In thousands)
Components of pre-tax income (loss):
United States ............... $ 7,746 $ (998) $(1,913)
Non-U.S ..................... 27,697 13,880 5,322
------- -------- -------
$35,443 $ 12,882 $ 3,409
======= ======== =======
Years ended December 31,
2000 2001 2002
---- ---- ----
(In thousands)
Provision for income taxes:
Currently payable (refundable):
U.S. federal and state ................... $ 2,385 $ (844) $ 1,128
Foreign .................................. 8,695 5,247 2,394
-------- ------- -------
11,080 4,403 3,522
-------- ------- -------
Deferred income taxes (benefit):
U.S ...................................... 1,034 1,941 (114)
Foreign .................................. 1,276 (586) (637)
-------- ------- -------
2,310 1,355 (751)
-------- ------- -------
$ 13,390 $ 5,758 $ 2,771
======== ======= =======
Expected tax expense, at the U.S. federal
statutory income tax rate of 35% ............ $ 12,405 $ 4,509 $ 1,193
Non-U.S. tax rates ........................... (90) (353) (290)
Incremental U.S. tax on earnings of
foreign subsidiary .......................... 198 330 1,099
No tax benefit for goodwill amortization ..... 610 693 --
State income taxes and other, net ............ 267 579 769
-------- ------- -------
$ 13,390 $ 5,758 $ 2,771
======== ======= =======
Comprehensive provision for income tax
benefit allocable to:
Pre-tax income ............................. $ 13,390 $ 5,758 $ 2,771
Other comprehensive income -
currency translation ...................... (323) (207) (66)
-------- ------- -------
$ 13,067 $ 5,551 $ 2,705
======== ======= =======
The components of net deferred tax assets (liabilities) are summarized
below.
December 31,
2001 2002
---- ----
(In thousands)
Tax effect of temporary differences related to:
Inventories ............................................ $ 630 $ 575
Property and equipment ................................. (7,890) (8,510)
Accrued liabilities and other deductible differences ... 2,987 2,087
Tax loss and credit carryforwards ...................... 4,831 5,769
Other taxable differences .............................. (3,346) (2,815)
Valuation allowance .................................... -- --
------- -------
$(2,788) $(2,894)
======= =======
Net current deferred tax assets .......................... $ 1,944 $ 1,983
Net current deferred tax liabilities ..................... (291) (408)
Net noncurrent deferred tax liabilities .................. (4,441) (4,469)
------- -------
$(2,788) $(2,894)
======= =======
At December 31, 2002, the Company has net operating loss ("NOL")
carryforwards, which expire in 2007 through 2018, of approximately $8.4 million
for U.S. federal income tax purposes. The NOL carryforwards arose from the
acquisition of Thomas Regout USA, Inc. These losses may only be used to offset
future taxable income of the acquired subsidiary and are not available to offset
taxable income of other subsidiaries. Utilization of certain portions of the NOL
carryforward is limited to approximately $400,000 annually. The Company utilized
none of such NOL carryforward in 2000, 2001 or 2002. At December 31, 2002, the
Company also has the equivalent of approximately $5.8 million of tax loss
carryforwards in the Netherlands with no expiration date. The Company believes
that it is more-likely-than-not that all such NOLs will be utilized to reduce
future income tax liabilities. Consequently, no valuation allowance has been
recorded to offset the deferred tax asset related to these NOLs.
Note 10 - Stockholders' equity:
Shares of common stock
--------------------------------------------------
Class A Class B
------------------------------------ -----------
Issued and
Issued Treasury Outstanding outstanding
Balance at December 31, 1999 6,147,380 -- 6,147,380 10,000,000
Issued ..................... 57,300 -- 57,300 --
Reacquired ................. -- (844,300) (844,300) --
--------- ---------- ---------- ----------
Balance at December 31, 2000 6,204,680 (844,300) 5,360,380 10,000,000
Issued ..................... 2,500 -- 2,500 --
Reacquired ................. -- (259,600) (259,600) --
--------- ---------- ---------- ----------
Balance at December 31, 2001 6,207,180 (1,103,900) 5,103,280 10,000,000
Issued ..................... 12,500 -- 12,500 --
--------- ---------- ---------- ----------
Balance at December 31, 2002 6,219,680 (1,103,900) 5,115,780 10,000,000
========= ========== ========== ==========
Class A and Class B common stock. The shares of Class A Common Stock and
Class B Common Stock are identical in all respects, except for certain voting
rights and certain conversion rights in respect of the shares of the Class B
Common Stock. Holders of Class A Common Stock are entitled to one vote per
share. Valcor, which holds all of the outstanding shares of Class B Common
Stock, is entitled to one vote per share in all matters except for election of
directors, for which Valcor is entitled to ten votes per share. Holders of all
classes of common stock entitled to vote will vote together as a single class on
all matters presented to the stockholders for their vote or approval, except as
otherwise required by applicable law. Each share of Class A Common Stock and
Class B Common Stock have an equal and ratable right to receive dividends to be
paid from the Company's assets when, and if declared by the Board of Directors.
In the event of the dissolution, liquidation or winding up of the Company, the
holders of Class A Common Stock and Class B Common Stock will be entitled to
share equally and ratably in the assets available for distribution after
payments are made to the Company's creditors and to the holders of any preferred
stock of the Company that may be outstanding at the time. Shares of the Class A
Common Stock have no conversion rights. Under certain conditions, shares of
Class B Common Stock will convert, on a share-for-share basis, into shares of
Class A Common Stock.
Reacquired common stock. The Company's Board of Directors has authorized
the Company to purchase up to approximately 1.5 million shares of its common
stock in open market or privately-negotiated transactions at unspecified prices
and over an unspecified period of time. As of December 31, 2002, the Company had
purchased approximately 1,104,000 shares for an aggregate of $11.3 million
pursuant to such authorization.
Incentive compensation plan. The CompX International Inc. 1997 Long-Term
Incentive Plan provides for the award or grant of stock options, stock
appreciation rights, performance grants and other awards to employees and other
individuals providing services to the Company. Up to 1.5 million shares of Class
A Common Stock may be issued pursuant to the plan. Generally, employee stock
options are granted at prices not less than the market price of the Company's
stock on the date of grant, vest over five years and expire ten years from the
date of grant.
The following table sets forth changes in outstanding options during the
past three years.
Amount
Exercise payable
price per upon
Shares share exercise
(In thousands, except
per share amounts)
Outstanding at December 31, 1999 658 $15.88 -$20.00 $12,784
Granted 292 12.50 - 19.63 5,360
Exercised (57) 17.94 - 20.00 (1,073)
Canceled (171) 15.88 - 20.00 (3,290)
---- -------------- -------
Outstanding at December 31, 2000 722 12.50 - 20.00 13,781
Granted 330 10.00 - 13.00 4,181
Canceled (196) 13.00 - 20.00 (3,691)
---- -------------- -------
Outstanding at December 31, 2001 856 10.00 - 20.00 14,271
Granted 25 11.00 - 14.30 328
Exercised (10) 12.06 (120)
Canceled (107) 11.59 - 20.00 (1,484)
---- -------------- -------
Outstanding at December 31, 2002 764 $10.00 -$20.00 $12,995
==== ============== =======
Outstanding options at December 31, 2002 represent approximately 5% of the
Company's total outstanding shares of common shares at that date and expire
through 2012 with a weighted-average remaining term of 7 years. At December 31,
2002, options to purchase 378,000 of the Company's shares were exercisable at
prices ranging from $10.00 to $20.00 per share, or an aggregate amount payable
upon exercise of $7.0 million, with a weighted-average exercise price of $16.74
per share. These exercisable options are exercisable through 2012. All of such
exercisable options are exercisable at prices higher than the Company's December
31, 2002 market price of $8.37 per share. At December 31, 2002, options to
purchase 149,000 shares are scheduled to become exercisable in 2003 and an
aggregate of 496,000 shares were available for future grants.
Other. The pro forma information included in Note 1, required by SFAS No.
123, Accounting for Stock-Based Compensation, is based on an estimation of the
fair value of CompX options issued subsequent to January 1, 1998 (the first time
the Company granted stock options). The weighted-average fair values of CompX
options granted during 2000, 2001 and 2002 were $7.86, $4.53 and $5.05 per
share, respectively. The fair values of such options were calculated using the
Black-Scholes stock option valuation model with the following weighted-average
assumptions: stock price volatility of 37% to 45%, risk-free rates of return of
5.1% to 6.9%, dividend yields of nil to 5.0% and an expected term of 10 years.
The Black-Scholes model was not developed for use in valuing employee stock
options, but was developed for use in estimating the fair value of traded
options that have no vesting restrictions and are fully transferable. In
addition, it requires the use of subjective assumptions including expectations
of future dividends and stock price volatility. Such assumptions are only used
for making the required fair value estimate and should not be considered as
indicators of future dividend policy or stock price appreciation. Because
changes in the subjective assumptions can materially affect the fair value
estimate and because employee stock options have characteristics significantly
different from those of traded options, the use of the Black-Scholes stock
option valuation model may not provide a reliable estimate of the fair value of
employee stock options.
For purposes of this pro forma disclosure, the estimated fair value of
options is amortized to expense over the options' vesting period. Such pro forma
impact on net income and basic and dilutive earnings per share is not
necessarily indicative of future effects on net income or earnings per share.
Note 11 - Gain on sale of plant facility:
In 2001, the Company recorded a $2.2 million pre-tax gain related to the
sale/leaseback of its manufacturing facility in the Netherlands. Pursuant to the
sale/leaseback, CompX sold the manufacturing facility with a net carrying value
of $8.2 million for $10.0 million cash consideration in December 2001, and CompX
simultaneously entered into a leaseback of the facility with a nominal monthly
rental for approximately 30 months. CompX has the option to extend the leaseback
period for up to an additional two years with monthly rentals of $40,000 to
$100,000. CompX may terminate the leaseback at any time without penalty. In
addition to the cash received up front, CompX included an estimate of the fair
market value of the monthly rental during the nominal-rental leaseback period as
part of the sale proceeds. A portion of the gain from the sale of the facility
after transaction costs, equal to the present value of the monthly rentals over
the expected leaseback period (including the fair market value of the monthly
rental during the nominal-rental leaseback period), was deferred and is being
amortized into income over the expected leaseback period. CompX is recognizing
rental expense over the leaseback period, including amortization of the prepaid
rent consisting of the estimated fair market value of the monthly rental during
the nominal-rental leaseback period. Pursuant to the agreement, CompX is also
obligated to acquire approximately 10 acres from the municipality of Maastricht
for approximately $2.1 million within the next two years.
Note 12 - Other general corporate income (expense), net:
Years ended December 31,
2000 2001 2002
---- ---- ----
(In thousands)
Net foreign currency transaction gain (loss) .. $ (117) $ 636 $ (865)
Interest income ............................... 569 574 381
Defined benefit plan curtailment gain ......... -- 116 --
Defined benefit plan settlement gain .......... -- -- 677
Gain (loss) on disposal of property and
equipment .................................... 27 (126) (1,193)
Other income (expense), net ................... (36) (191) 90
------- ------- -------
$ 443 $ 1,009 $ (910)
======= ======= =======
In 2002, losses on disposal of property and equipment included $1,047,000
related to the retooling of the Company's precision slide manufacturing facility
in Byron Center, Michigan. The remainder of the charges for retooling are
recorded as cost of goods sold and relate to the cost of moving and installing
machinery and equipment as well as the disposal of obsolete inventory.
Note 13 - Related party transactions:
The Company may be deemed to be controlled by Harold C. Simmons. See Note
1. Corporations that may be deemed to be controlled by or affiliated with Mr.
Simmons sometimes engage in (a) intercorporate transactions such as guarantees,
management and expense sharing arrangements, shared fee arrangements, joint
ventures, partnerships, loans, options, advances of funds on open account, and
sales, leases and exchanges of assets, including securities issued by both
related and unrelated parties and (b) common investment and acquisition
strategies, business combinations, reorganizations, recapitalizations,
securities repurchases, and purchases and sales (and other acquisitions and
dispositions) of subsidiaries, divisions or other business units, which
transactions have involved both related and unrelated parties and have included
transactions which resulted in the acquisition by one related party of a
publicly-held minority equity interest in another related party. The Company
continuously considers, reviews and evaluates, and understands that Contran and
related entities consider, review and evaluate such transactions. Depending upon
the business, tax and other objectives then relevant, it is possible that the
Company might be a party to one or more such transactions in the future.
It is the policy of the Company to engage in transactions with related
parties on terms, in the opinion of the Company, no less favorable to the
Company than could be obtained from unrelated parties.
Under the terms of various Intercorporate Service Agreements ("ISAs") with
Contran, Valhi and NL Industries, Inc., a majority-owned subsidiary of Valhi,
Contran, Valhi and NL have performed certain management, tax planning, financial
and administrative services for the Company on a fee basis over the past three
years. Such fees are based upon estimates of time devoted to the affairs of the
Company by individual Contran, Valhi or NL employees and the compensation of
such persons. Because of the large number of companies affiliated with Contran,
the Company believes it benefits from cost savings and economies of scale gained
by not having certain management, financial and administrative staffs duplicated
at each entity, thus allowing certain individuals to provide services to
multiple companies but only be compensated by one entity. These ISAs are
reviewed and approved by the applicable independent directors of the companies
that are parties to the agreement. In addition, certain occupancy and related
office services are provided based upon square footage occupied. Fees pursuant
to these agreements aggregated $689,000 in 2000, $1,245,000 in 2001 and
$1,744,000 in 2002.
Certain of the Company's insurance coverages that were reinsured in 2000,
2001 and 2002 were arranged for and brokered by EWI Re, Inc. Parties related to
Contran own all of the outstanding common stock of EWI. Through December 31,
2000, a son-in-law of Harold C. Simmons managed the operations of EWI.
Subsequent to December 31, 2000, and pursuant to an agreement that, as amended,
may be terminated with 90 days' written notice by either party, such son-in-law
provides advisory services to EWI as requested by EWI, for which such son-in-law
is paid $11,875 per month and receives certain other benefits under EWI's
benefit plans. Such son-in-law is also currently the Chairman of the Board of
EWI. The Company generally does not compensate EWI directly for insurance, but
understands that, consistent with insurance industry practice, EWI receives a
commission for its services from the insurance underwriters.
Through January 2002, an entity controlled by one of Harold C. Simmons'
daughters owned a majority of EWI, and Contran owned all or substantially all of
the remainder of EWI. In January 2002, NL purchased EWI from its previous owners
for an aggregate cash purchase price of approximately $9 million, and EWI became
a wholly-owned subsidiary of NL. The purchase was approved by a special
committee of NL's board of directors consisting of two of its independent
directors, and the purchase price was negotiated by the special committee based
upon its consideration of relevant factors, including but not limited to due
diligence performed by independent consultants and an appraisal of EWI conducted
by an independent third party selected by the special committee.
The Company and other entities related to Contran participate in a combined
risk management program. Net charges from related parties related to this buying
program, principally charges for insuring property and other risks, aggregated
$563,000 in 2000, $889,000 in 2001 and $1,094,000 in 2002. These fees and
charges are principally pass-through in nature.
Note 14 - Commitments and contingencies:
Legal proceedings. The Company is involved, from time to time, in various
contractual, product liability, patent (or intellectual property), employment
and other claims and disputes incidental to its business. The Company currently
believes that the disposition of all claims and disputes, individually or in the
aggregate, if any, should not have a material adverse effect on the Company's
consolidated financial condition, results of operations or liquidity.
Environmental matters and litigation. The Company's operations are governed
by various federal, state, local and foreign environmental laws and regulations.
The Company's policy is to comply with environmental laws and regulations at all
of its plants and to continually strive to improve environmental performance in
association with applicable industry initiatives. The Company believes that its
operations are in substantial compliance with applicable requirements of
environmental laws. From time to time, the Company may be subject to
environmental regulatory enforcement under various statutes, resolution of which
typically involves the establishment of compliance programs.
Income taxes. The Company is undergoing examinations of certain of its
income tax returns, and tax authorities have or may propose tax deficiencies.
The Company believes that it has adequately provided accruals for additional
income taxes and related interest expense which may ultimately result from such
examinations and believes that the ultimate disposition of all such examinations
should not have a material adverse effect on its consolidated financial
position, results of operations or liquidity.
Concentration of credit risk. The Company's products are sold primarily in
North America and Europe to original equipment manufacturers. The ten largest
customers accounted for approximately 35%, 36% and 30% of sales in 2000, 2001
and 2002, respectively, with no single customer accounting for more than 10% of
sales.
Other. Royalty expense was $1,073,000 in 2000, $672,000 in 2001 and
$708,000 in 2002. Royalties relate principally to certain products manufactured
in Canada and sold in the United States under the terms of a third-party patent
license agreement.
Rent expense, principally for equipment, was $1,072,000 in 2000, $1,861,000
in 2001 and $1,009,000 in 2002. At December 31, 2002, future minimum rentals
under noncancellable operating leases are approximately $662,000 in 2003,
$399,000 in 2004, $292,000 in 2005, $190,000 in 2006 and $22,000 in 2007.
Firm purchase commitments for capital projects in process at December 31,
2002 approximated $1.4 million.
Note 15 - Accounting principles newly adopted in 2002:
Goodwill. The Company adopted SFAS No. 142, Goodwill and Other Intangible
Assets, effective January 1, 2002. Under SFAS No. 142, goodwill, is no longer
amortized on a periodic basis. Goodwill is subject to an impairment test to be
performed at least on an annual basis, and such impairment reviews may result in
future periodic write-downs charged to earnings. Under the transition provisions
of SFAS No. 142, all goodwill existing as of June 30, 2001 ceased to be
periodically amortized as of January 1, 2002, and all goodwill arising in a
purchase business combination completed on or after July 1, 2001 was not
periodically amortized from the date of such combination.
As discussed in Note 5, the Company has assigned its goodwill to two
reporting units (as that term is defined in SFAS No. 142). Goodwill was assigned
to two reporting units attributable to the two operating segments, one
consisting of CompX's security products operations and the other consisting of
CompX's ergonomic products and slide products operations. Under SFAS No. 142,
such goodwill will be deemed to not be impaired if the estimated fair value of
the applicable reporting unit exceeds the respective net carrying value of such
reporting unit, including the allocated goodwill. If the fair value of the
reporting unit is less than carrying value, then a goodwill impairment loss
would be recognized equal to the excess, if any, of the net carrying value of
the reporting unit goodwill over its implied fair value (up to a maximum
impairment equal to the carrying value of the goodwill). The implied fair value
of reporting unit goodwill would be the amount equal to the excess of the
estimated fair value of the reporting unit over the amount that would be
allocated to the tangible and intangible net assets of the reporting unit
(including unrecognized intangible assets) as if such reporting unit had been
acquired in a purchase business combination accounted for in accordance with
GAAP as of the date of the impairment testing.
In determining the estimated fair value of the reporting units, the Company
uses appropriate valuation techniques, such as discounted cash flows, to
estimate the fair value of the two reporting units. The Company completed its
initial, transitional goodwill impairment analysis under SFAS No. 142 as of
January 1, 2002, and no goodwill impairments were deemed to exist as of such
date. Starting in 2002, in accordance with the requirements of SFAS No. 142, the
Company reviews the goodwill of its two reporting units for impairment during
the third quarter of each year. Goodwill will also be reviewed for impairment at
other times during each year when events or changes in circumstances indicate
that an impairment might be present. No goodwill impairments were deemed to
exist as a result of the Company's impairment review completed during the third
quarter of 2002.
The following table presents what the Company's consolidated net income,
and related per share amounts, would have been in 2000 and 2001 if the goodwill
amortization included in the Company's reported consolidated net income had not
been recognized.
Years ended December 31,
2000 2001 2002
---- ---- ----
(In millions,
except per share data)
Net income, as reported ....................... $ 22.1 $ 7.1 $ .6
Goodwill amortization ......................... 2.4 2.3 --
Incremental income taxes ...................... -- -- --
------ ------ ------
Adjusted net income ......................... $ 24.5 $ 9.4 $ .6
====== ====== ======
Basic and diluted net income per share,
as reported .................................. $ 1.37 $ .47 $ .04
Goodwill amortization ......................... .14 .15 --
Incremental income taxes ...................... -- -- --
------ ------ ------
Adjusted basic and diluted net
income per share ........................... $ 1.51 $ .62 $ .04
====== ====== ======
Impairment of long-lived assets. The Company adopted SFAS No. 144,
effective January 1, 2002. SFAS No. 144 retains the fundamental provisions of
existing GAAP with respect to the recognition and measurement of long-lived
asset impairment contained in SFAS No. 121. However, SFAS No. 144 provides new
guidance intended to address certain implementation issues associated with SFAS
No. 121, including expanded guidance with respect to appropriate cash flows to
be used to determine whether recognition of any long-lived asset impairment is
required, and if required how to measure the amount of the impairment. SFAS No.
144 also requires that net assets to be disposed of by sale are to be reported
at the lower of carrying value or fair value less cost to sell, and expands the
reporting of discontinued operations to include any component of an entity with
operations and cash flows that can be clearly distinguished from the rest of the
entity. Adoption of SFAS No. 144 did not have a significant impact on the
Company.
Note 16 - Accounting principles not yet adopted:
Asset retirement obligations. The Company will adopt SFAS No. 143,
Accounting for Asset Retirement Obligations, on January 1, 2003. Under SFAS No.
143, the fair value of a liability for an asset retirement obligation covered
under the scope of SFAS No. 143 would be recognized in the period in which the
liability is incurred, with an offsetting increase in the carrying amount of the
related long-lived asset. Over time, the liability would be accreted to its
present value, and the capitalized cost would be depreciated over the useful
life of the related asset. Upon settlement of the liability, an entity would
either settle the obligation for its recorded amount or incur a gain or loss
upon settlement. The Company does not have any asset retirement obligations
covered by the scope of SFAS No. 143, and therefore adoption of such standard
did not have a significant effect on the Company as of January 1, 2003.
The Company will adopt SFAS No. 146, Accounting for Costs Associated with
Exit or Disposal Activities, on January 1, 2003 for exit or disposal activities
initiated on or after the date of adoption. Under SFAS No. 146, costs associated
with exit activities, as defined, that are covered by the scope of SFAS No. 146
will be recognized and measured initially at fair value, generally in the period
in which the liability is incurred. Costs covered by the scope of SFAS No. 146
include termination benefits provided to employees, costs to consolidate
facilities or relocate employees, and costs to terminate contracts (other than a
capital lease). Under existing GAAP, a liability for such an exit cost is
recognized at the date an exit plan is adopted, which may or may not be the date
at which the liability has been incurred.
Guarantees. The Company has no guarantees covered by the disclosure
requirements of FIN No. 45, Guarantor's Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of Others, as of
December 31, 2002. As required by the transition provisions of FIN No. 45,
beginning in 2003 the Company will adopt the recognition and initial measurement
provisions of this FIN on a prospective basis for any guarantees issued or
modified after December 31, 2002.
Note 17 - Quarterly results of operations (unaudited):
Quarter ended
----------------------
March 31 June 30 Sept. 30 Dec. 31
---- ---- ---- ----
(In millions, except per share amounts)
2001:
Net sales ............................... $ 59.6 $ 53.4 $ 51.5 $ 47.0
Operating income (loss) ................. 6.8 5.3 4.1 (3.8)
Net income (loss) ....................... 3.7 2.7 2.1 (1.4)
Basic and diluted earnings (loss)
per share .............................. $ .24 $ .18 $ .14 $ (.09)
2002:
Net sales ............................... $ 48.6 $ 51.0 $ 48.8 $ 47.7
Operating income (loss) ................. 2.5 2.7 1.3 (.3)
Net income (loss) ....................... 1.3 .8 .2 (1.8)
Basic and diluted earnings (loss)
per share .............................. $ .09 $ .05 $ .02 $ (.12)
The sum of the quarterly per share amounts may not equal the annual per
share amounts due to relative changes in the weighted-average number of shares
used in the per share computations.
During the fourth quarter of 2002, the Company recorded the following
significant adjustments:
o A $1.6 million pre-tax charge related to a re-tooling of the Company's
precision slide manufacturing facility in Byron Center, Michigan. $1.0
million of such charge was non-cash in nature and is reflected in other
general corporate income (expenses), net, with the remainder reflected in
cost of goods sold.
o A $1.9 million pre-tax charge, recorded as cost of goods sold, related to
various changes in estimates with respect to obsolete and slow-moving
inventory, inventory overhead absorption rates and other items.
Approximately $1.3 million of this charge related to the CompX
Waterloo/CompX Regout segment, with the remaining $.6 million relating to
the CompX Security Products segment.
The aggregate effect of these fourth quarter 2002 adjustments was a pre-tax
charge of $3.5 million ($2.3 million, or $.15 per diluted share, net of income
taxes).
During the fourth quarter of 2001, the Company recorded the following
significant adjustments:
o A $2.7 million pre-tax restructuring charge related to CompX's European
operations. See Note 6.
o A $2.2 million pre-tax gain on the sale/leaseback of its manufacturing
facility located in Maastricht, the Netherlands. See Note 11.
o A $3.0 million pre-tax charge related to changes in estimates with respect
to reserves for obsolete and slow-moving inventory and other items.
Approximately $2.1 million of this charge related to the CompX Security
Products segment with the remaining $.9 million relating to the CompX
Waterloo/CompX Regout segment.
The aggregate effect of these fourth quarter 2001 adjustments was a pre-tax
charge of $3.5 million ($2.0 million, or $.13 per diluted share, net of income
taxes).
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Stockholders and Board of Directors of CompX International Inc.:
Our audits of the consolidated financial statements referred to in our
report dated February 13, 2003, appearing on page F-2 of this 2002 Annual Report
on Form 10-K of CompX International Inc., also included an audit of the
financial statement schedule listed in the index on page F-1 of this Form 10-K.
In our opinion, this financial statement schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
PricewaterhouseCoopers LLP
Dallas, Texas
February 13, 2003
COMPX INTERNATIONAL INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Additions
Balance at charged to Balance
beginning costs and Net Currency at end
Description of year expenses deductions translation of year
------------------ --------- ---------- ---------- ----------- -------
Year ended December 31, 2000:
Allowance for doubtful accounts ....... $ 725 $ (123) $ (79) $ (36) $ 487
====== ======= ======= ===== ======
Amortization of goodwill .............. $2,730 $ 2,390 $ -- $ (55) $5,065
====== ======= ======= ===== ======
Amortization of other intangible assets $ 426 $ 361 $ -- $ (2) $ 785
====== ======= ======= ===== ======
Year ended December 31, 2001:
Allowance for doubtful accounts ....... $ 487 $ 636 $ (296) $ 14 $ 841
====== ======= ======= ===== ======
Amortization of goodwill .............. $5,065 $ 2,304 $ -- $ (75) $7,294
====== ======= ======= ===== ======
Amortization of other intangible assets $ 785 $ 229 $ -- $ (4) $1,010
====== ======= ======= ===== ======
Year ended December 31, 2002:
Allowance for doubtful accounts ....... $ 841 $ 458 $ (541) $ 54 $ 812
====== ======= ======= ===== ======
Amortization of goodwill .............. $7,294 $ -- $ -- $ 332 $7,626
====== ======= ======= ===== ======
Amortization of other intangible assets $1,010 $ 240 $ -- $ (1) $1,249
====== ======= ======= ===== ======
AMENDED AND RESTATED
BYLAWS
OF
COMPX INTERNATIONAL INC.
a Delaware Corporation
(Amended and Restated as of August 31, 2002)
TABLE OF CONTENTS
Page
TABLE OF CONTENTS........................................................i
ARTICLE I. REGISTERED AGENT AND OFFICES.................................1
Section 1.1. Registered Agent and Office.......................1
Section 1.2. Other Offices.....................................1
ARTICLE II. MEETINGS OF STOCKHOLDERS....................................1
Section 2.1. Place and Time of Meetings........................1
Section 2.2. Business to be Transacted at Meetings.............1
Section 2.3. Notice............................................2
Section 2.4. List of Stockholders..............................2
Section 2.5. Quorum............................................2
Section 2.6. Proxies...........................................2
Section 2.7. Order of Business.................................2
Section 2.8. Appointment of Inspectors of Election.............3
Section 2.9. Action Without a Meeting..........................3
Section 2.10. Fixing A Record Date.............................3
Section 2.11. Telephone Meetings...............................4
Section 2.12. Minutes..........................................4
ARTICLE III. DIRECTORS..................................................4
Section 3.1. Number, Qualifications and Term of Office.........4
Section 3.2. Nomination of Director Candidates.................4
Section 3.3. Removals..........................................5
Section 3.4. Vacancies.........................................5
Section 3.5. Annual Meeting....................................5
Section 3.6. Other Meetings and Notice.........................5
Section 3.7. Quorum............................................5
Section 3.8. Committees........................................5
Section 3.9. Committee Rules...................................6
Section 3.10. Telephonic Meetings..............................6
Section 3.11. Presumption of Assent............................6
Section 3.12. Action Without a Meeting.........................6
Section 3.13. Compensation.....................................6
Section 3.14. Minutes..........................................6
ARTICLE IV. OFFICERS....................................................6
Section 4.1. Number............................................6
Section 4.2. Election and Term of Office.......................6
Section 4.3. The Chairman of the Board.........................6
Section 4.4. The Vice Chairman of the Board....................7
Section 4.5. The President.....................................7
Section 4.6. The Chief Executive Officer.......................7
Section 4.7. The Chief Financial Officer.......................7
Section 4.8. Vice Presidents...................................7
Section 4.9. The Secretary and Assistant Secretary.............7
Section 4.10. The Treasurer and Assistant Treasurer............7
Section 4.11. Vacancies........................................8
Section 4.12. Other Officers, Assistant Officers and Agents....8
Section 4.13. Normal Duties and Responsibilities of Officers...8
ARTICLE V. INDEMNIFICATION AND INSURANCE OF DIRECTORS,
OFFICERS AND OTHERS................................................8
Section 5.1. Indemnification...................................8
Section 5.2. Advancement of Expenses...........................8
Section 5.3. Expenses of Contested Indemnification Claims......8
Section 5.4. Indemnification Not Exclusive.....................8
Section 5.5. Survival of Indemnification and Advancement
of Expenses.......................................9
Section 5.6. Employees, Agents and Others......................9
Section 5.7. Contract Right....................................9
Section 5.8. Insurance.........................................9
Section 5.9. Certain References Under Article V................9
ARTICLE VI. CERTIFICATES OF STOCK.......................................9
Section 6.1. Form..............................................9
Section 6.2. Transfers.........................................9
Section 6.3. Lost or Destroyed Certificates....................9
Section 6.4. Registered Stockholders...........................10
ARTICLE VII. CERTAIN BUSINESS COMBINATIONS..............................10
ARTICLE VIII. GENERAL PROVISIONS.........................................10
Section 8.1. Dividends.........................................10
Section 8.2. Moneys............................................10
ARTICLE IX. NOTICES.....................................................10
Section 9.1. General...........................................10
Section 9.2. Waivers...........................................10
Section 9.3. Attendance as Waiver..............................11
Section 9.4. Omission of Notice to Stockholders................11
AMENDED AND RESTATED
BYLAWS
OF
COMPX INTERNATIONAL INC.
a Delaware Corporation
(Amended and Restated as of August 31, 2002)
- -------------------------------------------------------------------------------
ARTICLE I.
REGISTERED AGENT AND OFFICES
Section 1.1. Registered Agent and Office. The registered agent and office
of the corporation shall be such person or entity and located at such place
within the state of Delaware as the board of directors may from time to time
determine.
Section 1.2. Other Offices. The corporation may also have offices at such
other places, both within and without the state of Delaware, as the
corporation's board of directors may from time to time determine or the business
of the corporation may require.
ARTICLE II.
MEETINGS OF STOCKHOLDERS
Section 2.1. Place and Time of Meetings. All meetings of the stockholders
shall be held on such date and at such time and place, within or without the
state of Delaware, as shall be determined, from time to time, by the board of
directors or by means of remote communication. The place at which a meeting of
stockholders shall be held shall be stated in the notice and call of the meeting
or a duly executed waiver of notice thereof. Special meetings of stockholders
may be called by the chairman of the board, the president, the board of
directors or the holders of at least 10 percent of the shares of the corporation
that would be entitled to vote at such a meeting. If a special meeting is called
by any person or persons other than the board of directors, the request shall be
in writing, specifying the time of such meeting and the general nature of the
business proposed to be transacted, and shall be delivered personally or sent by
registered mail or by facsimile transmission to the chairman of the board, the
president or the secretary of the corporation. No business may be transacted at
such special meeting other than specified in such notice. Nothing contained in
this Section shall be construed as limiting, fixing, or affecting the time when
a meeting of stockholders called by action of the board of directors may be
held.
Section 2.2. Business to be Transacted at Meetings. At a meeting of the
stockholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before a special meeting,
business must be specified in the notice of the meeting (or any supplement
thereto). To be properly brought before an annual meeting, business must be (a)
specified in the notice of the meeting (or any supplement thereto) given by or
at the direction of the board of directors, (b) otherwise properly brought
before the meeting by or at the direction of the board of directors or (c)
otherwise properly brought before the meeting by a stockholder. For business to
be properly brought before an annual meeting by a stockholder, the stockholder
must, in addition to any requirements imposed by federal securities law or other
applicable laws, have given timely notice thereof in writing to the secretary of
the corporation. To be timely for an annual meeting, a stockholder's notice must
be delivered to or mailed and received at the principal executive offices of the
corporation, no later than (i) if the corporation mailed notice of the last
annual meeting or publicly disclosed the date of such meeting and the annual
meeting for the current year has not changed more than thirty days from such
date (as if in the current year), forty-five days before the earlier of the date
(as if in the current year) of such mailing or public disclosure or (ii)
otherwise ninety days prior to the annual meeting. A stockholder's notice to the
secretary with regard to an annual meeting shall set forth as to each order of
business that the stockholder proposes to bring before the meeting (a) a brief
description of such business desired to be brought before the meeting and the
reasons for conducting such business at the annual meeting, (b) the name and
address, as they appear on the corporation's books, of the stockholder proposing
such business, (c) the class and number of shares of the corporation that are
beneficially owned by the stockholder and (d) any material interest of the
stockholder in such business. The chairman of the meeting may refuse to bring
before a meeting any business not properly brought before the meeting in
compliance with this section.
Section 2.3. Notice. Notice of the time and place of an annual meeting of
stockholders and notice of the time, place and purpose or purposes of a special
meeting of the stockholders shall be given by remote communications or by
mailing written or printed notice of the same not less than 10, nor more than
60, days prior to the meeting, with postage prepaid, to each stockholder of
record of the corporation entitled to vote at such meeting, and addressed to the
stockholder's last known post office address or to the address appearing on the
corporate books of the corporation.
Section 2.4. List of Stockholders. The officer or agent having charge of
the stock transfer books of the corporation shall make, at least 10 days before
every meeting of the stockholders, a complete list of the stockholders entitled
to vote at such meeting arranged in alphabetical order, specifying the address
of and the number of shares registered in the name of each stockholder. Such
list shall be open to the examination of any stockholder, for any purpose
germane to the meeting for a period of at least 10 days prior to the meeting on
a reasonably accessible electronic network or, during ordinary business hours,
at the principal place of business of the corporation. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present. The original
stock transfer books shall be the only evidence as to who are the stockholders
entitled to examine such list or transfer book or to vote at any such meeting of
stockholders.
Section 2.5. Quorum. The holders of a majority of the votes entitled to be
cast at any meeting of stockholders, counted as a single class if there be more
than one class of stock entitled to vote at such meeting, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders except as otherwise provided by statute or by the certificate of
incorporation. Once a quorum is present at a meeting of the stockholders, the
stockholders represented in person or by proxy at the meeting may conduct such
business as may be properly brought before the meeting until it is adjourned,
and the subsequent withdrawal from the meeting by any stockholder or the refusal
of any stockholder represented in person or by proxy to vote shall not affect
the presence of a quorum at the meeting. If a quorum is not present, the
chairman of the meeting or the holders of the shares present in person or
represented by proxy at the meeting, and entitled to vote thereat, shall have
the power, by the affirmative vote of the holders of a majority of such shares,
to adjourn the meeting to another time and/or place. Unless the adjournment is
for more than thirty days or unless a new record date is set for the adjourned
meeting, no notice of the adjourned meeting need be given to any stockholder
provided that the time and place of the adjourned meeting were announced at the
meeting at which the adjournment was taken. At the adjourned meeting the
corporation may transact any business that might have been transacted at the
original meeting.
Section 2.6. Proxies. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy. A telegram, telex, cablegram or reliable electronic transmission executed
or duly authorized by the stockholder, or a photographic, photostatic, facsimile
or reliable reproduction of a writing executed or duly authorized by the
stockholder shall be treated as an execution in writing for purposes of this
section. No proxy shall be valid after three years from the date of its
execution unless otherwise provided in the proxy. Each proxy shall be revocable
unless the proxy form conspicuously states that the proxy is irrevocable and the
proxy is coupled with an interest.
Section 2.7. Order of Business. The order of business at each such
stockholders meeting shall be as determined by the chairman of the meeting. One
of the following persons, in the order in which they are listed (and in the
absence of the first, the next, and so on), shall serve as chairman of the
meeting: the chairman of the board, vice chairman of the board, president, vice
presidents (in the order of their seniority if more than one) and secretary. The
chairman of the meeting shall have the right and authority to prescribe such
rules, regulations and procedures and to do all such acts and things as are
necessary or desirable for the proper conduct of the meeting, including, without
limitation, the establishment of procedures for the maintenance of order and
safety, limitations on the time allotted to questions or comments on the affairs
of the corporation, restrictions on entry to such meeting after the time
prescribed for the commencement thereof, and the opening and closing of the
voting polls.
Section 2.8. Appointment of Inspectors of Election. The board of directors
shall appoint one or more inspectors of election ("inspectors") to act at such
meeting or any adjournment or postponement thereof and make a written report
thereof. The board of directors may designate one or more persons as alternate
inspectors to replace any inspector who fails to act. If no inspector or
alternate is so appointed or if no inspector or alternate is able to act, the
chairman of the board, the vice chairman of the board or the president shall
appoint one or more inspectors to act at such meeting. Each inspector, before
entering upon the discharge of his or her duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of his or her ability. The inspectors may be directors,
officers or employees of the corporation.
Section 2.9. Action Without a Meeting.
(a) Any action to be taken at a meeting of the stockholders, may be taken
without a meeting, without prior notice, and without a vote, if a consent or
consents in writing, setting forth the action so taken, shall be signed by the
holder or holders of shares having not less than the minimum number of votes
that would be necessary to take such action at a meeting at which the holders of
all shares entitled to vote on the action were present and voted.
(b) Every written consent of the stockholders shall bear the date of
signature of each stockholder who signs the consent. No written consent shall be
effective to take the action that is the subject of the consent unless, within
60 days after the date of the earliest dated consent delivered to the
corporation as provided below, a consent or consents signed by the holder or
holders of shares having not less than the minimum number of votes that would be
necessary to take the action that is the subject of the consent are delivered to
the corporation by delivery to its registered office, its principal place of
business, or an officer or agent of the corporation having custody of the books
in which proceedings of meetings of the stockholders are recorded. Such delivery
shall be made by hand or by certified or registered mail, return receipt
requested, and in the case of delivery to the corporation's principal place of
business, shall be addressed to the president of the corporation.
(c) A telegram, cablegram or electronic transmission by a stockholder, or a
photographic, photostatic, facsimile or other reliable reproduction of a writing
signed or transmitted by a stockholder, shall be regarded as signed by the
stockholder for the purposes of this section.
(d) Prompt notice of the taking of any action by stockholders without a
meeting by less than unanimous written consent shall be given to those
stockholders who did not consent in writing to the action and who, if the action
had been taken at a meeting, would have been entitled to notice of the meeting
if the record date for such meeting had been the date that written consents
signed by a sufficient number of holders to take the action were delivered to
the corporation.
Section 2.10. Fixing A Record Date. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to express consent to
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the board of directors may fix, in
advance, a record date, which shall not be more than 60 nor less than 10 days
before the date of such meeting, nor more than 60 days prior to any other
action.
If the board of directors does not so fix a record date:
(a) The record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held.
(b) The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no prior action
by the board of directors is necessary, shall be the day on which the first
written consent is expressed.
(c) The record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the board of directors
adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
Section 2.11. Telephone Meetings. Stockholders may participate in and hold
a meeting by means of conference telephone or similar communication equipment by
means of which all persons participating in the meeting can hear each other.
Participation in such a meeting shall constitute presence in person at the
meeting, except where a person participates in the meeting for the express
purpose of objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened.
Section 2.12. Minutes. The stockholders shall cause regular minutes of
their proceedings to be kept, and such minutes shall be placed in the minute
book of the corporation.
ARTICLE III.
DIRECTORS
Section 3.1. Number, Qualifications and Term of Office. The business and
affairs of the corporation shall be managed by a board of directors. Subject to
the preferential voting rights of the holders of preferred stock or any other
class of capital stock of the corporation or any series of any of the foregoing
that is then outstanding, the board of directors shall consist of one or more
members. The number of members of the board of directors shall be fixed from
time to time (i) by the board of directors pursuant to a resolution adopted by a
majority of the entire board of directors or (ii) by the stockholders pursuant
to a resolution adopted by a majority of the holders of shares of the
corporation entitled to vote for the election of directors; provided, however,
that if the stockholders have acted to fix the number of directors, any action
by the board of directors to fix another number shall only become effective on
or after the first annual meeting of stockholders that follows such stockholder
action. Each director shall be elected at the annual meeting of the
stockholders, except as provided in Section 3.4, and each director elected shall
hold office until the next annual meeting of stockholders and until his or her
successor is duly elected and qualified or until his or her earlier death,
resignation or removal. No reduction of the authorized number of directors shall
have the effect of removing any director before that director's term expires.
Section 3.2. Nomination of Director Candidates. Subject to the preferential
voting rights of the holders of preferred stock or any other class of capital
stock of the corporation or any series of any of the foregoing that is then
outstanding, nominations for the election of directors may be made by the board
of directors or by any stockholder entitled to vote for the election of
directors. Any stockholder entitled to vote for the election of a director at a
meeting may nominate persons for whom such stockholder may vote only if written
notice of such stockholder's intent to make such nomination is given, either by
personal delivery or by United States mail, postage prepaid, to the secretary of
the corporation not later than (a) with respect to an election to be held at an
annual meeting of stockholders, (i) if the corporation mailed notice of the last
annual meeting or publicly disclosed the date of such meeting and the annual
meeting for the current year has not changed more than thirty days from such
date (as if in the current year), forty-five days before the earlier of the date
(as if in the current year) of such mailing or public disclosure or (ii)
otherwise ninety days prior to the annual meeting and (b) with respect to an
election to be held at a special meeting of stockholders for the election of
directors, the close of business on the tenth day following the date on which
notice of such meeting is first given to stockholders. Each such notice shall
set forth: (a) the name and address of the stockholder who intends to make the
nomination and of the person or persons intended to be nominated; (b) a
representation that the stockholder is a holder of record of stock of the
corporation entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to nominate the person or persons specified in the
notice; (c) a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
the stockholder; (d) such other information regarding each nominee proposed by
such stockholder as would have been required to be included in a proxy statement
filed pursuant to the proxy rules of the Securities and Exchange Commission had
such requirements been applicable and each nominee been nominated, or intended
to be nominated, by the board of directors; and (e) the consent of each nominee
to serve as a director of the corporation if so elected. The chairman of the
meeting may refuse to acknowledge the nomination of any person not made in
compliance with this section.
Section 3.3. Removals. Subject to the preferential voting rights of the
holders of preferred stock or any other class of capital stock of the
corporation or any series of any of the foregoing that is then outstanding, each
director may be removed from office at any time by the stockholders, with or
without cause, by the affirmative vote of the holders of at least a majority of
the voting power of all of the shares of the corporation entitled to vote for
the election of such director.
Section 3.4. Vacancies. Subject to the preferential voting rights of the
holders of preferred stock or any other class of capital stock of the
corporation or any series of any of the foregoing that is then outstanding and
except as otherwise required by law, all vacancies in the board of directors,
whether caused by resignation, death or otherwise, may be filled by a majority
of the remaining directors though less than a quorum; provided, however, that
any vacancy resulting from an increase in the number of directors that is the
result of a resolution adopted by the stockholders of the corporation may be
filled by the stockholders of the corporation in accordance with the laws of the
state of Delaware, any other applicable provisions of the certificate of
incorporation and these bylaws. Each director so chosen shall hold office for
the unexpired term of his or her predecessor and until his or her successor is
elected and qualified or until his or her earlier death, resignation or removal.
Section 3.5. Annual Meeting. The annual meeting of the board of directors
may be held without notice immediately after the annual meeting of stockholders
at the location of the stockholders' meeting. If not held immediately after the
annual meeting of the stockholders, the annual meeting of the board of directors
shall be held as soon thereafter as may be convenient.
Section 3.6. Other Meetings and Notice. Regular meetings of the board of
directors may be held without notice at such time and at such place as shall
from time to time be determined by the board of directors. Special meetings of
the board of directors may be called by or at the request of the chairman of the
board, the vice chairman of the board or the president and shall be called by
the chairman of the board on the written request of a majority of directors, in
each case on at least twenty-four hours notice to each director.
Section 3.7. Quorum. A majority of the total number of directors shall be
necessary at all meetings to constitute a quorum for the transaction of
business. If a quorum shall not be present at any meeting of the board of
directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present. At such adjourned meeting at which a quorum shall be present,
any business may be transacted that might have been transacted at the meeting as
originally notified and called.
Section 3.8. Committees. Standing or temporary committees consisting of one
or more directors of the corporation may be appointed by the board of directors
from time to time, and the board of directors may from time to time invest such
committees with such powers as it may see fit, subject to limitations imposed by
statute and such conditions as may be prescribed by the board of directors. An
executive committee may be appointed by resolution passed by a majority of the
entire board of directors and if appointed it shall have all the powers provided
by statute, except as specially limited by the board of directors. All
committees so appointed shall keep regular minutes of the transactions of their
meetings and shall cause them to be recorded in books kept for that purpose in
the office of the corporation, and shall report the same to the board of
directors at its next meeting. The board of directors may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. The board shall have the
power at any time to change the membership of, to increase or decrease the
membership of, to fill all vacancies in and to discharge any committee of the
board, or any member thereof, either with or without cause.
Section 3.9. Committee Rules. Each committee of the board of directors may
fix its own rules of procedure and shall hold its meetings as provided by such
rules, except as may otherwise be provided by the resolution of the board of
directors designating such committee, but in all cases the presence of at least
a majority of the members of such committee shall be necessary to constitute a
quorum.
Section 3.10. Telephonic Meetings. Members of the board of directors or any
committee designated by the board of directors may participate in any meeting of
the board of directors or such committee by means of a conference telephone or
other communications equipment by means of which all persons participating in
the meeting can hear each other. Participation in such a meeting shall
constitute presence in person at such meeting.
Section 3.11. Presumption of Assent. A director of the corporation who is
present at a meeting of the board of directors or any committee thereof at which
action on any corporate matter is taken shall be deemed to have assented to the
action taken unless his or her dissent shall be entered in the minutes of the
meeting or unless he or she shall file his or her written dissent to such action
with the person acting as the secretary of the meeting before the adjournment
thereof or shall forward such dissent by registered mail to the secretary of the
corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a director who voted in favor of such action.
Section 3.12. Action Without a Meeting. Any action required or permitted to
be taken at any meeting of the board of directors or of any committee thereof
may be taken without a meeting if all members of the board of directors or such
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the board of directors or
committee. Action taken pursuant to such written consent of the board of
directors or of any committee thereof shall have the same force and effect as if
taken by the board of directors or the committee, as the case may be, at a
meeting thereof.
Section 3.13. Compensation. The board of directors shall have the authority
to fix the compensation of directors.
Section 3.14. Minutes. The board of directors shall cause to be kept
regular minutes of its proceedings, and such minutes shall be placed in the
minute book of the corporation.
ARTICLE IV.
OFFICERS
Section 4.1. Number. The officers of the corporation shall be a chairman of
the board, a vice chairman of the board, a president, one or more vice
presidents, a secretary, a treasurer, and such other officers and assistant
officers as the board of directors may, by resolution, appoint. Any two or more
offices may be held by the same person. In its discretion, the board of
directors may choose not to fill any office for any period as it may deem
advisable, except the offices of president and secretary.
Section 4.2. Election and Term of Office. The officers of the corporation
shall be elected annually by the board of directors at the annual meeting of the
board of directors. If the election of officers shall not be held at such
meeting, such election shall be held as soon thereafter as may be convenient.
Each officer shall hold office until the next annual meeting of the board of
directors and until his or her successor is duly elected and qualified or until
his or her earlier death, resignation or removal as hereinafter provided.
Section 4.3. The Chairman of the Board. The chairman of the board shall
preside at all meetings of the stockholders and directors. He or she shall have
general and active management of the business of the corporation, shall see that
all orders and resolutions of the board of directors are carried into effect
and, in connection therewith, shall be authorized to delegate to the vice
chairman of the board, president and other officers such of his or her powers
and duties as chairman of the board at such time and in such manner as he or she
may deem to be advisable. The chairman of the board shall be an ex officio
member of all standing committees and he or she shall have such other powers and
duties as may from time to time be assigned by the board of directors.
Section 4.4. The Vice Chairman of the Board. The vice chairman of the board
shall assist the chairman of the board in the management of the business of the
corporation, and, in the absence or disability of the chairman of the board,
shall preside at all meetings of the stockholders and the board of directors and
exercise the other powers and perform the other duties of the chairman of the
board or designate the executive officers of the corporation by whom such other
powers shall be exercised and other duties performed. The vice chairman of the
board shall be an ex officio member of all standing committees and he or she
shall have such other powers and duties as may from time to time be assigned by
the board of directors or by the chairman of the board. In addition to the
foregoing, the vice chairman of the board shall have such other powers, duties
and authority as may be set forth elsewhere in these bylaws.
Section 4.5. The President. The president shall be the corporation's chief
operating officer unless otherwise determined by the board of directors. The
president shall assist the chairman of the board in the management of the
business of the corporation, and, in the absence or disability of the chairman
of the board and the vice chairman of the board, shall preside at all meetings
of the stockholders and the board of directors and exercise the other powers and
perform the other duties of the chairman of the board or designate the executive
officers of the corporation by whom such other powers shall be exercised and
other duties performed. The president shall be an ex officio member of all
standing committees and he or she shall have such other powers and duties as may
from time to time be assigned by the board of directors or by the chairman of
the board. In addition to the foregoing, the president shall have such other
powers, duties, and authority as may be set forth elsewhere in these bylaws. If
the board of directors does not elect a chairman or vice chairman of the board,
the president shall also have the duties and responsibilities, and exercise all
functions, of the chairman and the vice chairman of the board as provided in
these bylaws.
Section 4.6. The Chief Executive Officer. The board of directors may
designate an individual, whether or not such individual is an officer of the
corporation, to serve as the chief executive officer of the corporation. The
chief executive officer shall have the duties and responsibilities, and exercise
all functions, as the board of directors may determine.
Section 4.7. The Chief Financial Officer. The board of directors may
designate an individual, whether or not such individual is an officer of the
corporation, to serve as the chief financial officer of the corporation. The
chief financial officer shall have the duties and responsibilities, and exercise
all functions, as the board of directors may determine.
Section 4.8. Vice Presidents. Each vice president shall have such powers
and discharge such duties as may be assigned from time to time by the chairman
of the board, the vice chairman of the board or the president. During the
absence or disability of the president, one such vice president, when designated
by the board of directors, shall exercise all the functions of the president.
Section 4.9. The Secretary and Assistant Secretary. The secretary or the
chairman of the board shall issue notices for all meetings. The secretary shall
keep minutes of all meetings of the board of directors, the committees thereof
and the stockholders, shall have charge of the seal and the corporate books and
shall make such reports and perform such other duties as are incident to the
office, and perform such other duties designated or properly required by the
chairman of the board, the vice chairman of the board or the president. The
secretary shall keep, or cause to be kept, at the principal executive office of
the corporation or at the office of the corporation's transfer agent or
registrar, a share register, or a duplicate share register, showing the names of
all stockholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation. The
assistant secretary shall be vested with the same powers and duties as the
secretary, and any act may be done or duty performed by the assistant secretary
with like effect as though done or performed by the secretary. The assistant
secretary shall have such other powers and perform such other duties as may be
assigned by the chairman of the board, the vice chairman of the board or the
president.
Section 4.10. The Treasurer and Assistant Treasurer. The treasurer shall
have the custody of all moneys and securities of the corporation and shall keep
regular books of account. He or she shall disburse the funds of the corporation
in payment of just demands against the corporation, or as may be ordered by the
chairman of the board, the vice chairman of the board, the president or by the
board of directors, taking proper vouchers for such disbursements, and shall
render to the board of directors from time to time as may be required of him or
her, an account of all transactions as treasurer and of the financial condition
of the corporation. The treasurer shall perform all duties incident to the
office, and perform such other duties designated or properly required by the
chairman of the board, the vice chairman of the board or the president. The
assistant treasurer shall be vested with the same powers and duties as the
treasurer, and any act may be done, or duty performed by the assistant treasurer
with like effect as though done or performed by the treasurer. The assistant
treasurer shall have such other powers and perform such other duties as may be
assigned by the chairman of the board, the vice chairman of the board or the
president.
Section 4.11. Vacancies. Vacancies in any office arising from any cause may
be filled by the directors for the unexpired portion of the term with a majority
vote of the directors then in office. In the case of the absence or inability to
act of any officer of the corporation and of any person herein authorized to act
in his or her place, the board of directors may from time to time delegate the
powers or duties of such officer to any other officer or any director or other
person whom it may select.
Section 4.12. Other Officers, Assistant Officers and Agents. Officers,
assistant officers, and agents, if any, other than those whose duties are
provided for in these bylaws shall hold their offices for such terms and shall
exercise such powers and perform such duties as the board of directors may
determine.
Section 4.13. Normal Duties and Responsibilities of Officers. Unless
otherwise provided in these bylaws or the board of directors decides otherwise,
if an officer title is one commonly used for officers of a business corporation
formed under the Delaware General Corporation Law or any successor or similar
statute, the assignment of such title shall constitute the delegation to such
officer of the authority and duties that are normally associated with that
office, subject to any specific delegation of authority and duties made to such
officer by the board of directors.
ARTICLE V.
INDEMNIFICATION AND INSURANCE OF DIRECTORS, OFFICERS AND OTHERS
Section 5.1. Indemnification. To the fullest extent permitted by Delaware
law, the corporation shall indemnify any and all officers and directors of the
corporation from and against all expenses (including attorneys' fees),
liabilities or other matters arising out of their status as such or their acts,
omissions or services rendered by such persons in such capacities or otherwise
while serving at the request of the corporation. Unless specifically addressed
in a repeal or amendment of Delaware law with regard to a corporation's ability
to indemnify its officers and directors, no such repeal or amendment shall
adversely affect any indemnification rights of any person existing at the time
of such repeal or amendment.
Section 5.2. Advancement of Expenses. Reasonable expenses (including
attorneys' fees) incurred by a director or officer who was, is or is threatened
to be made a named defendant or respondent in a proceeding by reason of his or
her status as a director or officer of the corporation or services rendered by
such persons in such capacities or otherwise at the request of the corporation
or incurred by a director or officer for prosecuting a claim under Section 5.3
shall be paid by the corporation in advance of the final disposition of such
proceeding upon receipt of a written affirmation by the director or officer of
his or her good faith belief that he or she has met the standard of conduct
necessary for indemnification and a written undertaking by or on behalf of the
director or officer to repay such amount if it shall ultimately be determined
that he or she is not entitled to be indemnified by the corporation as
authorized in this Article.
Section 5.3. Expenses of Contested Indemnification Claims. If a claimant
makes a claim on the corporation under Section 5.1 or 5.2 and the corporation
does not pay such claim in full within thirty days after it has received such
written claim, the claimant may at any time thereafter bring suit against the
corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall also be entitled to be paid the expenses of
prosecuting such claim.
Section 5.4. Indemnification Not Exclusive. The indemnification and
advancement of expenses provided by, or granted pursuant to, this Article shall
not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any other
bylaw, agreement, vote of stockholders or directors or otherwise, both as to
action in his or her official capacity and as to action in another capacity
while holding such office.
Section 5.5. Survival of Indemnification and Advancement of Expenses. The
indemnification and advancement of expenses provided by, or granted pursuant to,
this Article shall continue as to a person who has ceased to be a director or
officer and shall inure to the benefit of the heirs, executors and
administrators of such person.
Section 5.6. Employees, Agents and Others. To the fullest extent of
Delaware law, the corporation may grant rights of indemnification and
advancement of expenses to any person who is not at the time a current director
or officer of the corporation.
Section 5.7. Contract Right. Each of the rights of indemnification and
advancement of expenses provided by, or granted pursuant to, this Article shall
be a contract right and any repeal or amendment of the provisions of this
Article shall not adversely affect any such right of any person existing at the
time of such repeal or amendment with respect to any act or omission occurring
prior to the time of such repeal or amendment, and further, shall not apply to
any proceeding, irrespective of when the proceeding is initiated, arising from
the service of such person prior to such repeal or amendment.
Section 5.8. Insurance. To the fullest extent of Delaware law, the
corporation shall have power to purchase and maintain insurance on behalf of any
person, including one who is or was a director, officer, employee or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another enterprise against any liability
asserted against him or her and incurred by him or her in any such capacity, or
arising out of his or her status as such, whether or not the corporation would
have the power to indemnify him or her against such liability under the
provisions of this Article.
Section 5.9. Certain References Under Article V. For purposes of this
Article, references to "the corporation," "other enterprise," "proceeding" and
"serving at the request of the corporation" shall have the meanings given such
terms in Section 145 of the Delaware General Corporation Law or any successor or
similar statute.
ARTICLE VI.
CERTIFICATES OF STOCK
Section 6.1. Form. Certificates of stock shall be issued in numerical
order, and each stockholder shall be entitled to a certificate signed by the
chairman of the board, the president or any vice president and the secretary,
any assistant secretary, the treasurer or any assistant treasurer, certifying to
the number of shares owned by such stockholder. Where, however, such certificate
is signed by a transfer agent or an assistant transfer agent or by a transfer
clerk acting on behalf of the corporation, and a registrar or by an agent acting
in the dual capacity of transfer agent and registrar, the signatures of any of
the above-named officers may be facsimile signatures. In the event that any
officer who has signed, or whose facsimile signature has been used on, a
certificate ceases to be an officer before the certificate has been delivered,
such certificate may nevertheless be adopted and issued and delivered by the
corporation, as though the officer who signed such certificate or certificates,
or whose facsimile signature or signatures shall have been used thereon, had not
ceased to be such officer of the corporation.
Section 6.2. Transfers. Transfers of stock shall be made only upon the
transfer books of the corporation or respective transfer agents designated to
transfer the several classes of stock, and before a new certificate is issued,
the old certificate shall be surrendered for cancellation.
Section 6.3. Lost or Destroyed Certificates. The corporation may issue a
new certificate of stock in place of any certificate theretofore issued by it,
alleged to have been lost, stolen or destroyed, and the corporation shall,
except as otherwise determined by the board of directors, the chairman of the
board, the president, any vice president or other authorized officer, require
the owner of the lost, stolen or destroyed certificate, or his or her legal
representative, to give the corporation a bond sufficient to indemnify it
against any claim that may be made against it on account of the alleged loss,
theft or destruction of any such certificate or the issuance of such new
certificate.
Section 6.4. Registered Stockholders. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such shares on the part of another person, whether or not the
corporation shall have express or other notice thereof, except as otherwise
provided by the laws of the state of Delaware.
ARTICLE VII.
CERTAIN BUSINESS COMBINATIONS
The provision of Section 203 of the Delaware General Corporation Law shall
not apply to the corporation.
This Article VII shall be amended, altered or repealed only as provided in
Section 203 of the Delaware General Corporation Law.
ARTICLE VIII.
GENERAL PROVISIONS
Section 8.1. Dividends. Dividends upon the capital stock of the
corporation, subject to any applicable provisions of the certificate of
incorporation, may be declared by the board of directors at any regular or
special meeting, pursuant to law. Dividends may be paid in cash, in property or
in shares of the capital stock, subject to the applicable provisions of the
certificate of incorporation. Before payment of any dividend, there may be set
aside out of any funds of the corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purpose as the directors shall think in the best interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
Section 8.2. Moneys. The chairman of the board, vice chairman of the board,
president or any vice president is authorized for and on behalf of the
corporation: to establish, maintain and to close depositary accounts, in the
corporation's name, for the deposit and withdrawal of corporation funds; to
designate those individuals authorized to withdraw funds or sign checks in said
depositary accounts; and to execute customer agreements with respect to such
depositary accounts, including forms of corporate resolutions, certified with
respect to the approval of the board of directors as of the date such forms of
corporate resolutions are executed. The secretary or assistant secretary is,
authorized for and on behalf of the corporation without further action of the
board of directors to certify as to the approval of the board of directors of
forms of resolutions regarding any of such depositary or trading accounts as of
the date the officer of the corporation executes the customer agreement with
respect to each such account.
ARTICLE IX.
NOTICES
Section 9.1. General. Whenever the provisions of any statute or these
bylaws require notice to be given to any director, officer or stockholder, such
notice may be given personally or in writing by facsimile, by telegraph or by
depositing the same in the United States mail with postage prepaid addressed to
each director, officer or stockholder at his or her address, as the same appears
in the books of the corporation, and the time when the same shall be personally
given, sent by facsimile or telegraph or mailed shall be deemed to be the time
of the giving of such notice.
Section 9.2. Waivers. Whenever any notice whatever is required to be given
under provisions of law or of the certificate of incorporation or of these
bylaws, a waiver thereof in writing signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice.
Section 9.3. Attendance as Waiver. Attendance of a person at a meeting
shall constitute a waiver of notice of such meeting, except where a person
attends a meeting for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened.
Section 9.4. Omission of Notice to Stockholders. Any notice required to be
given to any stockholder under any statutory provision, the certificate of
incorporation or these bylaws need not be given to the stockholder if:
(a) notice of two consecutive annual meetings and all notices of meetings
held or actions by written consent taken during the period between those annual
meetings, if any, or
(b) all, and at least two, payments (if sent by first class mail) of
distributions or interest on securities during a twelve month period have been
mailed to that person, addressed at his or her address as shown on the share
transfer records of the corporation, and have been returned undeliverable. Any
action or meeting taken or held without notice to such a person shall have the
same force and effect as if the notice had been duly given. If such a person
delivers to the corporation a written notice setting forth his or her then
current address, the requirement that notice be given to that person shall be
reinstated.
ADOPTED BY THE BOARD OF DIRECTORS AS OF AUGUST 31, 2002
/s/A. Andrew R. Louis, Secretary
-----------------------------------
A. Andrew R. Louis, Secretary
EXECUTION COPY
CREDIT AGREEMENT
CREDIT AGREEMENT, dated as of the 22nd day of January, 2003 by and among
COMPX INTERNATIONAL INC., a corporation organized under the laws of Delaware
(the "Borrower"), the lenders who are or may become a party to this Agreement,
as Lenders (the "Lenders"), and WACHOVIA BANK, NATIONAL ASSOCIATION, a national
banking association, as Administrative Agent for the Lenders (the
"Administrative Agent").
STATEMENT OF PURPOSE
The Borrower has requested, and the Lenders have agreed, to extend certain
credit facilities to the Borrower on the terms and conditions of this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, such parties
hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. The following terms when used in this Agreement
shall have the meanings assigned to ----------- them below:
"Administrative Agent" means Wachovia in its capacity as Administrative
Agent hereunder, and any successor thereto appointed pursuant to Section 12.9.
"Administrative Agent's Correspondent" means Wachovia Bank, National
Association, London Branch, or any other financial institution designated by the
Administrative Agent to act as its correspondent hereunder with respect to the
distribution and payment of Alternative Currency Loans.
"Administrative Agent's Office" means the office of the Administrative
Agent specified in or determined in accordance with the provisions of Section
13.1(c).
"Affiliate" means, with respect to any Person, any other Person (other than
a Subsidiary of the Borrower) which directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such first Person or any of its Subsidiaries. The term "control" means (a) the
power to vote ten percent (10%) or more of the securities or other equity
interests of a Person having ordinary voting power, or (b) the possession,
directly or indirectly, of any other power to direct or cause the direction of
the management and policies of a Person, whether through ownership of voting
securities, by contract or otherwise.
"Aggregate Commitment" means the aggregate amount of the Lenders'
Commitments hereunder, as such amount may be increased, reduced or otherwise
modified at any time or from time to time pursuant to the terms hereof. On the
Closing Date, the Aggregate Commitment shall be Forty-Seven Million Five Hundred
Thousand Dollars ($47,500,000). At no time shall the Aggregate Commitment exceed
Fifty Million Dollars ($50,000,000).
"Agreement" means this Credit Agreement, as amended, restated, supplemented
or otherwise modified from time to time.
"Alternative Currency" means (i) the euro, (ii) the Canadian Dollar and
(iii) with the prior written consent of the Administrative Agent and the
Lenders, any other lawful currency (other than Dollars) which is freely
transferable and convertible into Dollars in the United States currency market
and freely available to all of the Lenders in the London interbank deposit
market.
"Alternative Currency Amount" means with respect to each Loan made or
continued (or to be made or continued) in an Alternative Currency, the amount of
such Alternative Currency which is equivalent to the principal amount in Dollars
of such Loan at the most favorable spot exchange rate determined by the
Administrative Agent to be available to it at approximately 11:00 a.m.
(Charlotte time) two (2) Business Days before such Loan is made or continued (or
to be made or continued). When used with respect to any other sum expressed in
Dollars, "Alternative Currency Amount" shall mean the amount of such Alternative
Currency which is equivalent to the amount so expressed in Dollars at the most
favorable spot exchange rate determined by the Administrative Agent to be
available to it at the relevant time.
"Alternative Currency Commitment" means the lesser of (i) Ten Million
Dollars ($10,000,000) and (ii) the Aggregate Commitment, as such amount may be
reduced or modified at any time or from time to time pursuant to the terms
hereof.
"Alternative Currency Facility" means the alternative currency facility
established pursuant to Section 2.2.
"Alternative Currency Lender" means Wachovia, in its capacity as
alternative currency lender hereunder.
"Alternative Currency Loan" means any revolving credit loan denominated in
an Alternative Currency made by the Alternative Currency Lender to the Borrower
pursuant to Section 2.2, and all such Alternative Currency Loans collectively as
the context requires.
"Alternative Currency Note" means the Alternative Currency Note made by the
Borrower payable to the order of the Alternative Currency Lender, substantially
in the form of Exhibit A-3 hereto, evidencing the Alternative Currency Loans,
and any amendments, supplements and modifications thereto, any substitutes
therefor and any replacements, restatements, renewals or extensions thereof, in
whole or in part.
"Applicable Law" means all applicable provisions of constitutions, laws,
statutes, ordinances, rules, treaties, regulations, permits, licenses,
approvals, interpretations and orders of courts or Governmental Authorities and
all orders and decrees of all courts and arbitrators.
"Applicable Margin" shall have the meaning assigned thereto in Section
4.1(c); provided, that with respect to each LIBOR Rate Loan made in an
Alternative Currency, the Applicable Margin shall include the Mandatory Cost
Rate, as determined pursuant to the formula set forth on Schedule 1.1(b) hereto.
"Application" means an application, in the form specified by the Issuing
Lender from time to time, requesting the Issuing Lender to issue a Letter of
Credit.
"Approved Fund" means any Person (other than a natural Person), including,
without limitation, any special purpose entity, 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; provided,
that with respect to any assignment of any Commitment, such Approved Fund must
be administered 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.
"Arbitration Rules" shall have the meaning assigned thereto in Section
13.6(a).
"Assignment and Acceptance" shall have the meaning assigned thereto in
Section 13.10.
"Available Commitment" means, as to any Lender at any time, an amount equal
to (a) such Lender's Commitment less (b) such Lender's Extensions of Credit.
"Base Rate" means, at any time, the higher of (a) the Prime Rate and (b)
the Federal Funds Rate plus 1/2 of 1%; each change in the Base Rate shall take
effect simultaneously with the corresponding change or changes in the Prime Rate
or the Federal Funds Rate.
"Base Rate Loan" means any Loan bearing interest at a rate based upon the
Base Rate as provided in Section 4.1(a).
"Benefited Lender" shall have the meaning assigned thereto in Section 4.6.
"Borrower" means CompX International Inc., a corporation organized under
the laws of Delaware, in its capacity as borrower hereunder.
"Business Day" means (a) for all purposes other than as set forth in clause
(b) below, any day other than a Saturday, Sunday or legal holiday on which banks
in Charlotte, North Carolina and New York, New York, are open for the conduct of
their domestic or international commercial banking business, as applicable, and
(b) with respect to all notices and determinations in connection with, and
payments of principal and interest on, any LIBOR Rate Loan, any day (i) that is
a Business Day described in clause (a) and that is also a day for trading by and
between banks in deposits for the applicable Permitted Currency in the London
interbank market and (ii) on which banks are open for the conduct of their
domestic and international banking business in the place where the
Administrative Agent or the Administrative Agent's Correspondent shall make
available Loans in such Permitted Currency. Notwithstanding the foregoing, with
respect to any amount denominated or to be denominated in the euro, any
reference to a "Business Day" shall be construed as a reference to a day (other
than a Saturday or Sunday) on which banks are generally open for business in New
York, New York and prime banks in London generally provide quotations for
deposits denominated in the euro.
"Calculation Date" shall have the meaning assigned thereto in Section
4.1(c).
"Canadian Dollar" means, at any time of determination, the then official
currency of Canada.
"Capital Expenditures" means, with respect to the Borrower and its
Subsidiaries for any period, the aggregate amount of all expenditures of the
Borrower and its Subsidiaries during such period that, in conformity with GAAP,
are included in "additions to property, plant and equipment" or comparable items
reflected in the consolidated financial statements of the Borrower and its
Subsidiaries.
"Capital Lease" means any lease of any property by the Borrower or any of
its Subsidiaries, as lessee, that should, in accordance with GAAP, be classified
and accounted for as a capital lease on a Consolidated balance sheet of the
Borrower and its Subsidiaries.
"Change in Control" shall have the meaning assigned thereto in Section
11.1(h).
"Closing Date" means the date of this Agreement or such later Business Day
upon which each condition described in Section 5.2 shall be satisfied or waived
in all respects in a manner acceptable to the Administrative Agent, in its sole
discretion.
"Code" means the Internal Revenue Code of 1986, and the rules and
regulations thereunder, each as amended or modified from time to time.
"Collateral" means the collateral security for the Obligations pledged or
granted pursuant to the Security Documents.
"Collateral Agreement" means the collateral agreement of even date executed
by the Borrower and each of the Subsidiary Guarantors in favor of the
Administrative Agent, for the benefit of itself and the Lenders, substantially
in the form of Exhibit I, as amended, restated, supplemented or otherwise
modified from time to time.
"Commitment" means, as to any Lender, the obligation of such Lender to make
Loans (including, without limitation, to participate in Swingline Loans and
Alternative Currency Loans) to the Borrower, and issue or participate in Letters
of Credit issued for the account of the Borrower, in an aggregate principal or
face amount at any time outstanding not to exceed the amount set forth opposite
such Lender's name on Schedule 1.1(a) hereto, as the same may be reduced or
modified at any time or from time to time pursuant to the terms hereof.
"Commitment Fee Rate" shall have the meaning assigned thereto in Section
4.3(a).
"Commitment Percentage" means, as to any Lender at any time, the ratio of
(a) the amount of the Commitment of such Lender to (b) the Aggregate Commitment
of all of the Lenders.
"Consolidated" means, when used with reference to financial statements or
financial statement items of the Borrower and its Subsidiaries, such statements
or items on a consolidated basis in accordance with applicable principles of
consolidation under GAAP.
"Consolidated Net Worth" means, with respect to the Borrower and its
Subsidiaries, on any date of determination, the total shareholders' equity
(including capital stock, additional paid-in capital and retained earnings after
deducting the treasury stock) of the Borrower and its Subsidiaries appearing on
a Consolidated balance sheet of the Borrower and its Subsidiaries prepared in
accordance with GAAP (excluding on a cumulative basis any adjustments for
foreign currency translation).
"Credit Facility" means, collectively, the Revolving Credit Facility, the
Swingline Facility, the Alternative Currency Facility and the L/C Facility.
"Current Dividend Level" shall have the meaning set forth in Section
10.6(c).
"Debt" means, with respect to the Borrower and its Subsidiaries at any date
and without duplication, the sum of the following calculated in accordance with
GAAP: (a) all liabilities, obligations and indebtedness for borrowed money
including but not limited to obligations evidenced by bonds, debentures, notes
or other similar instruments of any such Person, (b) all obligations to pay the
deferred purchase price of property or services of any such Person (provided
that "Debt" shall not include trade payables and other accrued liabilities
arising in the ordinary course of business which are either (i) not more than
ninety (90) days past due or (ii) if more than ninety (90) days past due, being
contested in good faith by appropriate proceedings diligently conducted and for
which adequate reserves have been provided in accordance with GAAP), (c) all
obligations of any such Person as lessee under Capital Leases, (d) all Debt of
any other Person secured by a Lien on any asset of any such Person, (e) all
Guaranty Obligations of any such Person, (f) all obligations, contingent or
otherwise, of any such Person relative to the face amount of letters of credit,
whether or not drawn, including without limitation any Reimbursement Obligation,
and banker's acceptances issued for the account of any such Person, (g) all
obligations of any such Person to redeem, repurchase, exchange, defease or
otherwise make payments in respect of capital stock or other securities or
partnership interests of such Person, (h) all net payment obligations incurred
by any such Person pursuant to Hedging Agreements (solely to the extent that
such net payment obligations are in excess of $2,000,000), (i) all outstanding
payment obligations with respect to Synthetic Leases and (j) the outstanding
attributed principal amount under any asset securitization program. For the
purpose of item (h) above, (1) the amount of any net payment obligation pursuant
to any Hedging Agreement on any date shall be deemed to be the Termination Value
thereof as of such date and (2) "Termination Value" means, in respect of any one
or more Hedging Agreements, after taking into account the effect of any legally
enforceable netting agreement relating to such Hedging Agreements, (A) for any
date on or after the date such Hedging Agreements have been closed out and
termination value(s) determined in accordance therewith, such termination
value(s), and (B) for any date prior to the date referenced in clause (A), the
amount(s) determined as the mark-to-market value(s) for such Hedging Agreements,
as determined based upon one or more mid-market or other readily available
quotations provided by any recognized dealer in such Hedging Agreements (which
may include any Person that is a Lender or an Affiliate thereof at the time such
Hedging Agreement is executed).
"Default" means any of the events specified in Section 11.1 which with the
passage of time, the giving of notice or any other condition, would constitute
an Event of Default.
"Disputes" shall have the meaning set forth in Section 13.6.
"Dollars" or "$" means, unless otherwise qualified, dollars in lawful
currency of the United States.
"Dollar Amount" means (a) with respect to each Loan made or continued (or
to be made or continued), or Letter of Credit issued or extended (or to be
issued or extended), in Dollars, the principal amount thereof and (b) with
respect to each Loan made or continued (or to be made or continued) in an
Alternative Currency, the amount of Dollars which is equivalent to the principal
amount of such Loan, at the most favorable spot exchange rate determined by the
Administrative Agent at approximately 11:00 a.m. (the time of the Administrative
Agent's Correspondent) two (2) Business Days before such Loan is made or
continued (or to be made or continued). When used with respect to any other sum
expressed in an Alternative Currency, "Dollar Amount" shall mean the amount of
Dollars which is equivalent to the amount so expressed in such Alternative
Currency at the most favorable spot exchange rate determined by the
Administrative Agent to be available to it at the relevant time.
"Domestic Subsidiary" means any Subsidiary of the Borrower organized under
the laws of any state of the United States or the District of Columbia.
"EBIT" means, for any period, the sum of the following determined on a
Consolidated basis, without duplication, for the Borrower and its Subsidiaries
in accordance with GAAP: (a) Net Income for such period plus (b) the sum of the
following to the extent deducted in determining Net Income: (i) income taxes,
franchise taxes and similar taxes imposed in lieu of net income taxes, (ii)
Interest Expense and (iii) all non cash charges associated with any asset
impairment less (c) interest income; provided that for the purposes of
determining EBIT for any period during which any Permitted Acquisition is
consummated, EBIT shall be adjusted to give effect to the consummation of such
Permitted Acquisition on a pro forma basis in accordance with GAAP, as if such
Permitted Acquisition occurred on the first day of such period, such adjustments
to be calculated in a manner reasonably satisfactory to the Administrative
Agent.
"EBITDA" means, for any period, the sum of the following determined on a
Consolidated basis, without duplication, for the Borrower and its Subsidiaries
in accordance with GAAP: (a) Net Income for such period plus (b) the sum of the
following to the extent deducted in determining Net Income: (i) income taxes,
franchise taxes and similar taxes imposed in lieu of net income taxes, (ii)
Interest Expense, (iii) amortization, depreciation and other non-cash charges
and (iv) all non cash charges associated with any asset impairment less (c)
interest income; provided that for the purposes of determining EBITDA for any
period during which any Permitted Acquisition is consummated, EBITDA shall be
adjusted to give effect to the consummation of such Permitted Acquisition on a
pro forma basis in accordance with GAAP, as if such Permitted Acquisition
occurred on the first day of such period, such adjustments to be calculated in a
manner reasonably satisfactory to the Administrative Agent.
"Eligible Assignee" means, with respect to any assignment of the rights,
interest and obligations of a Lender hereunder, a Person that is at the time of
such assignment (a) a commercial bank organized under the laws of the United
States or any state thereof, having combined capital and surplus in excess of
$500,000,000, (b) a commercial bank organized under the laws of any other
country that is a member of the Organization of Economic Cooperation and
Development, or a political subdivision of any such country, having combined
capital and surplus in excess of $500,000,000, (c) a finance company, insurance
company or other financial institution which in the ordinary course of business
extends credit of the type extended hereunder and that has total assets in
excess of $1,000,000,000, (d) already a Lender hereunder (whether as an original
party to this Agreement or as the assignee of another Lender), (e) the successor
(whether by transfer of assets, merger or otherwise) to all or substantially all
of the commercial lending business of the assigning Lender, (f) any Affiliate of
assigning Lender, (g) any Approved Fund or (h) any other Person that has been
approved in writing as an Eligible Assignee by (i) other than upon the
occurrence and during the continuance of any Default or Event of Default, the
Borrower, and (ii) the Administrative Agent.
"EMU" means economic and monetary union as contemplated in the Treaty on
European Union.
"EMU Legislation" means legislative measures of the Council of European
Union for the introduction of, change over to or operation of the euro.
"Employee Benefit Plan" means any employee benefit plan within the meaning
of Section 3(3) of ERISA which (a) is maintained for employees of the Borrower
or any ERISA Affiliate or (b) has at any time within the preceding six (6) years
been maintained for the employees of the Borrower or any current or former ERISA
Affiliate.
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, accusations,
allegations, notices of noncompliance or violation, investigations (other than
internal reports prepared by any Person in the ordinary course of business and
not in response to any third party action or request of any kind) or proceedings
relating in any way to any actual or alleged violation of or liability under any
Environmental Law or relating to any permit issued, or any approval given, under
any such Environmental Law, including, without limitation, any and all claims by
Governmental Authorities for enforcement, cleanup, removal, response, remedial
or other actions or damages, contribution, indemnification cost recovery,
compensation or injunctive relief resulting from Hazardous Materials or arising
from alleged injury or threat of injury to human health or the environment.
"Environmental Laws" means any and all federal, foreign, state, provincial
and local laws, statutes, ordinances, rules, regulations, permits, licenses,
approvals, interpretations and orders of courts or Governmental Authorities,
relating to the protection of human health or the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, and the
rules and regulations thereunder, each as amended or modified from time to time.
"ERISA Affiliate" means any Person who together with the Borrower is
treated as a single employer within the meaning of Section 414(b), (c), (m) or
(o) of the Code or Section 4001(b) of ERISA.
"euro" means the single currency to which the Participating Member States
of the European Union have converted.
"euro unit" means the currency unit of the euro.
"Eurodollar Reserve Percentage" means, for any day with respect to any
LIBOR Rate Loan denominated in Dollars, the percentage (expressed as a decimal
and rounded upwards, if necessary, to the next higher 1/100th of 1%) which is in
effect for such day as prescribed by the Federal Reserve Board (or any
successor) for determining the maximum reserve requirement (including without
limitation any basic, supplemental or emergency reserves) in respect of
eurocurrency liabilities or any similar category of liabilities for a member
bank of the Federal Reserve System in New York City.
"Event of Default" means any of the events specified in Section 11.1,
provided that any requirement for passage of time, giving of notice, or any
other condition, has been satisfied.
"Existing Facility" means the credit facility established pursuant to the
$100,000,000 Credit Agreement dated as of February 26, 1998, by and among the
Borrower, Bankers Trust Company, as Agent, and the various lending institutions
party thereto, as amended, restated, supplemented or otherwise modified.
"Extensions of Credit" means, as to any Lender at any time, (a) an amount
equal to the sum of (i) the aggregate principal amount of all Revolving Credit
Loans made by such Lender then outstanding, (ii) such Lender's Commitment
Percentage of the L/C Obligations then outstanding, (iii) such Lender's
Commitment Percentage of the Swingline Loans then outstanding and (iv) such
Lender's Commitment Percentage of the Alternative Currency Loans then
outstanding or (b) the making of any Loan or participation in any Letter of
Credit by such Lender, as the context requires.
"FDIC" means the Federal Deposit Insurance Corporation, or any successor
thereto.
"Federal Funds Rate" means, the rate per annum (rounded upwards, if
necessary, to the next higher 1/100th of 1%) representing the daily effective
federal funds rate as quoted by the Administrative Agent and confirmed in
Federal Reserve Board Statistical Release H.15 (519) or any successor or
substitute publication selected by the Administrative Agent. If, for any reason,
such rate is not available, then "Federal Funds Rate" shall mean a daily rate
which is determined, in the opinion of the Administrative Agent, to be the rate
at which federal funds are being offered for sale in the national federal funds
market at 9:00 a.m. (Charlotte time). Rates for weekends or holidays shall be
the same as the rate for the most immediately preceding Business Day.
"Fiscal Year" means the fiscal year of the Borrower and its Subsidiaries
ending on the nearest Sunday to December 31 (for United States reporting
purposes).
"Foreign Subsidiary" means any Subsidiary of the Borrower not organized
under the laws of any State of the United States or the District of Columbia.
"GAAP" means generally accepted accounting principles, as recognized by the
American Institute of Certified Public Accountants and the Financial Accounting
Standards Board, consistently applied and maintained on a consistent basis for
the Borrower and its Subsidiaries throughout the period indicated and (subject
to Section 13.9) consistent with the prior financial practice of the Borrower
and its Subsidiaries.
"Governmental Approvals" means all authorizations, consents, approvals,
licenses and exemptions of, registrations and filings with, and reports to, all
Governmental Authorities.
"Governmental Authority" means any nation, province, state or political
subdivision thereof, and any government or any Person exercising executive,
legislative, regulatory or administrative functions of or pertaining to
government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Guaranty Obligation" means, with respect to the Borrower and its
Subsidiaries, without duplication, any obligation, contingent or otherwise, of
any such Person pursuant to which such Person has directly or indirectly
guaranteed any Debt or other obligations of any other Person and, without
limiting the generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of any such Person (a) to purchase or pay (or advance
or supply funds for the purchase or payment of) such Debt or other obligation
(whether arising by virtue of partnership arrangements, by agreement to keep
well, to purchase assets, goods, securities or services, to take-or-pay, or to
maintain financial statement condition or otherwise) or (b) entered into for the
purpose of assuring in any other manner the obligee of such Debt or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided, that the term Guaranty
Obligation shall not include endorsements for collection or deposit in the
ordinary course of business.
"Hazardous Materials" means any substances or materials (a) which are or
become defined as hazardous wastes, hazardous substances, pollutants,
contaminants, chemical substances or mixtures or toxic substances under any
Environmental Law, (b) which are toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise harmful to human
health or the environment and are or become regulated by any Governmental
Authority, (c) the presence of which require investigation or remediation under
any Environmental Law or common law, (d) the discharge or emission or release of
which requires a permit or license under any Environmental Law or other
Governmental Approval, (e) which are deemed to constitute a nuisance or a
trespass which pose a health or safety hazard to Persons or neighboring
properties, (f) which consist of underground or aboveground storage tanks,
whether empty, filled or partially filled with any substance, or (g) which
contain, without limitation, asbestos, polychlorinated biphenyls, urea
formaldehyde foam insulation, petroleum hydrocarbons, petroleum derived
substances or waste, crude oil, nuclear fuel, natural gas or synthetic gas.
"Hedging Agreement" means any agreement with respect to any Interest Rate
Contract, forward rate agreement, commodity swap, forward foreign exchange
agreement, currency swap agreement, cross-currency rate swap agreement, currency
option agreement or other agreement or arrangement designed to alter the risks
of any Person arising from fluctuations in interest rates, currency values or
commodity prices, all as amended, restated, supplemented or otherwise modified
from time to time.
"Hedging Obligations" shall have the meaning assigned thereto in the
definition of "Obligations".
"Interest Expense" means, with respect to the Borrower and its Subsidiaries
for any period, the gross interest expense of the Borrower and its Subsidiaries,
all determined for such period on a Consolidated basis, without duplication, in
accordance with GAAP.
"Interest Period" shall have the meaning assigned thereto in Section
4.1(b).
"Interest Rate Contract" means any interest rate swap agreement, interest
rate cap agreement, interest rate floor agreement, interest rate collar
agreement, interest rate option or any other agreement regarding the hedging of
interest rate risk exposure executed in connection with hedging the interest
rate exposure of any Person and any confirming letter executed pursuant to such
agreement, all as amended, restated, supplemented or otherwise modified from
time to time.
"ISP 98" means the International Standby Practices (1998 Revision,
effective January 1, 1999), International Chamber of Commerce Publication No.
590.
"Issuing Lender" means Wachovia, in its capacity as issuer of any Letter of
Credit, or any successor thereto.
"Joinder Agreement" means, collectively, each joinder agreement executed in
favor of the Administrative Agent for the ratable benefit of itself and the
Lenders, substantially in the form of Exhibit J.
"L/C Commitment" means the lesser of (a) Ten Million Dollars ($10,000,000)
and (b) the Aggregate Commitment.
"L/C Facility" means the letter of credit facility established pursuant to
Article III.
"L/C Obligations" means at any time, an amount equal to the sum of (a) the
aggregate undrawn and unexpired amount of the then outstanding Letters of Credit
and (b) the aggregate amount of drawings under Letters of Credit which have not
then been reimbursed pursuant to Section 3.5.
"L/C Participants" means the collective reference to all the Lenders other
than the Issuing Lender.
"Lender" means each Person executing this Agreement as a Lender (including,
without limitation, the Issuing Lender, the Swingline Lender and the Alternative
Currency Lender unless the context otherwise requires) set forth on the
signature pages hereto and each Person that hereafter becomes a party to this
Agreement as a Lender pursuant to Section 13.10.
"Lender Addition and Acknowledgment Agreement" means each agreement
executed pursuant to Section 2.9 by the Borrower and an existing Lender or a
Person not theretofore a Lender, as applicable, and acknowledged by the
Administrative Agent and each Guarantor, providing for an increase in the
Aggregate Commitment hereunder, acknowledging that any Person not theretofore a
Lender shall be a party hereto and have the rights and obligations of a Lender
hereunder, and setting forth the Commitment of each Lender.
"Lending Office" means, with respect to any Lender, the office of such
Lender maintaining such Lender's Commitment Percentage of the Extensions of
Credit.
"Letters of Credit" shall have the meaning assigned thereto in Section 3.1.
"Leverage Ratio" means the ratio calculated pursuant to Section 9.1.
"LIBOR" means the rate of interest per annum determined on the basis of the
rate for deposits in Dollars in minimum amounts of at least $5,000,000 (or the
Alternative Currency Amount thereof with respect to a borrowing to be made in an
Alternative Currency) for a period equal to the applicable Interest Period which
appears on the Dow Jones Market Screen 3750, or the applicable Reuters Screen
Page, as determined by the Administrative Agent in its sole discretion, at
approximately 11:00 a.m. (London time) two (2) Business Days prior to the first
day of the applicable Interest Period (rounded upward, if necessary, to the
nearest 1/100th of 1%). If, for any reason, such rate does not appear on Dow
Jones Market Screen 3750, or the applicable Reuters Screen Page, then "LIBOR"
shall be determined by the Administrative Agent to be the arithmetic average of
the rate per annum at which deposits in the Permitted Currency in which the
applicable Loan is denominated would be offered by first class banks in the
London interbank market to the Administrative Agent (or the Administrative
Agent's Correspondent) approximately 11:00 a.m. (London time) two (2) Business
Days prior to the first day of the applicable Interest Period for a period equal
to such Interest Period. Each calculation by the Administrative Agent of LIBOR
shall be conclusive and binding for all purposes, absent manifest error.
"LIBOR Rate" means
(i) with respect to any LIBOR Rate Loan denominated in Dollars, a rate per
annum (rounded upwards, if necessary, to the next higher 1/100th of 1%)
determined by the Administrative Agent pursuant to the following formula:
LIBOR Rate = LIBOR
-------------------------------
1.00-Eurodollar Reserve Percentage
and
(ii) with respect to any LIBOR Rate Loan denominated in any Alternative
Currency, a rate per annum (rounded upwards, if necessary, to the next higher
1/100th of 1%) equal to LIBOR.
Each calculation by the Administrative Agent of the LIBOR Rate shall be
conclusive and binding for all purposes, absent manifest error.
"LIBOR Rate Loan" means any Loan bearing interest at a rate based upon the
LIBOR Rate as provided in Section 4.1(a).
"Lien" means, with respect to any asset, any mortgage, leasehold mortgage,
lien, pledge, charge, security interest, hypothecation or encumbrance of any
kind in respect of such asset. For the purposes of this Agreement, a Person
shall be deemed to own subject to a Lien any asset which it has acquired or
holds subject to the interest of a vendor or lessor under any conditional sale
agreement, Capital Lease or other title retention agreement relating to such
asset.
"Liquidity" means, with respect to the Borrower and its Subsidiaries as of
any date of determination, (i) consolidated cash and cash equivalents as of such
date plus (ii) the aggregate Available Commitments as of such date.
"Loan Documents" means, collectively, this Agreement, the Notes, the
Applications, the Subsidiary Guaranty Agreement, the Security Documents, each
Joinder Agreement and each other document, instrument, certificate and agreement
executed and delivered by the Borrower or any Subsidiary thereof in connection
with this Agreement (excluding any Hedging Agreement), all as may be amended,
restated, supplemented or otherwise modified from time to time.
"Loans" means the collective reference to the Revolving Credit Loans, the
Alternative Currency Loans and the Swingline Loans and "Loan" means any of such
Loans.
"Mandatory Cost Rate" means an addition to the interest rate on any
Revolving Credit Loan or Alternative Currency Loan made by any Lender to
compensate such Lender for the cost imputed to the Lender resulting from the
imposition from time to time under or pursuant to the Bank of England Act 1998
and/or by the Bank of England and/or the Financial Services Authority (or other
Governmental Authorities of the United Kingdom) of a requirement to place
non-interest bearing cash ratio deposits or special deposits (whether interest
bearing or not) with the Bank of England and/or fees to the Financial Services
Authority calculated by reference to liabilities used to fund the Revolving
Credit Loans and the Alternative Currency Loans, expressed as a rate per annum
and determined pursuant to the formula set forth on Schedule 1.1(b) hereto.
"Material Adverse Effect" means a material adverse effect on (i) the
properties, business, prospects, operations or condition (financial or
otherwise) of the Borrower and its Subsidiaries taken as a whole, (ii) the
ability of the Borrower or any of its Subsidiaries to perform its material
obligations under the Loan Documents to which it is a party, or (iii) the
validity and enforceability of the Loan Documents.
"Material Domestic Subsidiary" means, at any time, (a) any Domestic
Subsidiary of the Borrower with net assets in excess of three percent (3%) of
the total net assets of the Borrower and its Subsidiaries as reflected on the
financial statements delivered in accordance with Section 7.1, (b) any parent of
any Domestic Subsidiary referred to in clause (a) of this definition, which
parent is also a Domestic Subsidiary and which parent is not deemed a "Material
Domestic Subsidiary" pursuant to clause (a) of this definition, (c) any Domestic
Subsidiary of the Borrower voluntarily designated in writing to the
Administrative Agent by the Borrower as a "Material Domestic Subsidiary"
regardless of whether such Domestic Subsidiary is deemed a "Material Domestic
Subsidiary" pursuant to clause (a) or (b) of this definition and (d) any
Domestic Subsidiary of the Borrower that executes all the relevant joinder
documents in compliance with Section 8.11 regardless of whether such Domestic
Subsidiary is deemed a "Material Domestic Subsidiary" pursuant to clause (a),
(b) or (c) of this definition; provided, however, that notwithstanding the
foregoing, Domestic Subsidiaries of the Borrower which are not "Material
Domestic Subsidiaries" shall not have total net assets equal to greater than ten
percent (10%) of total net assets of the Borrower and its Subsidiaries at any
time.
"Mortgages" means the collective reference to each deed of trust, mortgage,
or other real property security document, whether encumbering a leasehold or fee
interest in real property, required by the Administrative Agent and executed by
the Borrower or any Material Domestic Subsidiary thereof in favor of the
Administrative Agent, for the ratable benefit of itself and the Lenders, as each
such document may be amended, restated, supplemented or otherwise modified from
time to time.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is making, or
is accruing an obligation to make, or has accrued an obligation to make,
contributions within the preceding six (6) years.
"Net Cash Position" means on any day, with respect to the Operating
Account, a sum equal to the opening available balance in the Operating Account,
plus any maturing investment principal and interest credited to the Operating
Account, minus the daily presentment of checks and Operating Account holds,
minus any floor balance which has been established to cover bank charges, minus
any maturing interest debited to the Operating Account, in each case for such
day.
"Net Cash Proceeds" means, as applicable, (a) with respect to any sale or
other disposition of assets, the gross cash proceeds received by the Borrower or
any of its Subsidiaries from such sale (including, without limitation, cash
received by way of deferred payment pursuant to a note receivable, conversion of
non-cash consideration, cash payments in respect of purchase price adjustments
or otherwise, but only as and when such cash is actually received) less the sum
of (i) all income taxes and other taxes assessed by a Governmental Authority
which are paid or payable by the Borrower or any of its Subsidiaries as a result
of such sale or other disposition, (ii) any other costs, fees and expenses
incurred in connection with such sale or other disposition and (iii) the
principal amount of, premium, if any, and interest on any Debt which is required
to be repaid by the Borrower or any of its Subsidiaries in connection with such
sale, (b) with respect to any offering of capital stock or issuance of Debt, the
gross cash proceeds received by the Borrower or any of its Subsidiaries
therefrom less all legal, underwriting and other fees and expenses incurred in
connection therewith and (c) with respect to any payment under an insurance
policy or in connection with a condemnation proceeding, the amount of cash
proceeds received by the Borrower or any of its Subsidiaries from an insurance
company or Governmental Authority, as applicable, net of all expenses of
collection and net of all income taxes and other taxes assessed by any
Governmental Authority which are paid or payable by the Borrower or any of its
Subsidiaries as a result of receiving any such payment.
"Net Income" means, with respect to the Borrower and its Subsidiaries, for
any period of determination, the net income (or loss) of the Borrower and its
Subsidiaries for such period, determined on a Consolidated basis in accordance
with GAAP; provided that there shall be excluded from Net Income (a) the net
income (or loss) of any Person in which the Borrower or any of its Subsidiaries
has a joint interest with a third party, except to the extent such net income is
actually paid to the Borrower or any of its Subsidiaries by dividend or other
distribution during such period, (b) the net income (or loss) of any Person
accrued prior to the date it becomes a Subsidiary of such Person or is merged
into or consolidated with such Person or any of its Subsidiaries or that
Person's assets are acquired by such Person or any of its Subsidiaries, (c) the
cumulative effect of a change in accounting principles required or permitted by
a change in GAAP subsequent to the Closing Date, and (d) any net gain classified
as an extraordinary item in accordance with GAAP.
"Non-Material Domestic Subsidiary" means any Domestic Subsidiary of the
Borrower which is not a Material Domestic Subsidiary.
"Notes" means the collective reference to the Revolving Credit Notes, the
Alternative Currency Note and the Swingline Note and "Note" means any of such
Notes.
"Notice of Account Designation" shall have the meaning assigned thereto in
Section 2.4(b).
"Notice of Borrowing" shall have the meaning assigned thereto in Section
2.4(a).
"Notice of Conversion/Continuation" shall have the meaning assigned thereto
in Section 4.2.
"Notice of Prepayment" shall have the meaning assigned thereto in Section
2.5(c).
"Obligations" means, in each case, whether now in existence or hereafter
arising: (a) the principal of and interest on (including interest accruing after
the filing of any bankruptcy or similar petition) the Loans, (b) the L/C
Obligations, (c) all existing or future payment and other obligations owing by
the Borrower under any Hedging Agreement (which such Hedging Agreement is
permitted hereunder) with any Person that is a Lender hereunder or an Affiliate
of a Lender hereunder at the time such Hedging Agreement is executed (all such
obligations with respect to any such Hedging Agreement, "Hedging Obligations")
and (d) all other fees and commissions (including attorneys' fees), charges,
indebtedness, loans, liabilities, financial accommodations, obligations,
covenants and duties owing by the Borrower or any of its Subsidiaries to the
Lenders or the Administrative Agent, in each case under or in respect of this
Agreement, any Note, any Letter of Credit or any of the other Loan Documents of
every kind, nature and description, direct or indirect, absolute or contingent,
due or to become due, contractual or tortious, liquidated or unliquidated, and
whether or not evidenced by any note.
"Officer's Compliance Certificate" shall have the meaning assigned thereto
in Section 7.2.
"Operating Account" means the principal operating account of the Borrower
maintained with Wachovia.
"Operating Lease" shall mean, as to any Person as determined in accordance
with GAAP, any lease of property (whether real, personal or mixed) by such
Person as lessee which is not a Capital Lease.
"Other Taxes" shall have the meaning assigned thereto in Section 4.13(b).
"Participating Member State" means each state so described in any EMU
Legislation.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
agency.
"Pension Plan" means any Employee Benefit Plan, other than a Multiemployer
Plan, which is subject to the provisions of Title IV of ERISA or Section 412 of
the Code and which (a) is maintained for the employees of the Borrower or any
ERISA Affiliate or (b) has at any time within the preceding six (6) years been
maintained for the employees of the Borrower or any of its current or former
ERISA Affiliates.
"Permitted Acquisition" has the meaning set forth in Section 10.3(c).
"Permitted Acquisition Documents" means with respect to any acquisition
proposed by the Borrower or any Subsidiary thereof, the purchase agreement, sale
agreement, merger agreement or other agreement evidencing such acquisition,
including, without limitation, all legal opinions and each other document
executed, delivered, contemplated by or prepared in connection therewith and any
amendment, modification or supplement to any of the foregoing.
"Permitted Currency" means Dollars or any Alternative Currency, or each
such currency, as the context requires.
"Permitted Holders" means (i) Harold C. Simmons, (ii) the trustees of the
Harold C. Simmons Family Trust No. 1 dated January 1, 1964, the Harold C.
Simmons Family Trust No. 2 dated January 1, 1964 and any trust or trusts
established after the Closing Date for the benefit of Harold C. Simmons and/or
his spouse or his or her descendants, whether natural or adopted (such trusts
collectively, the "Trusts" and such individuals, collectively the
"Beneficiaries"), (iii) each of the Trusts, (iv) each of the Beneficiaries, (v)
any Person controlled, directly or indirectly, by one or more of the Persons
described in clauses (i) through (iv) above, (vi) any employee benefit plan or
pension fund of the Borrower or any Subsidiary and any Person holding any class
of voting stock of the Borrower or Subsidiary for or pursuant to the terms of
any such plan or fund, and (vii) any group made up of Persons described in
clauses (i) through (vi) above.
"Person" means an individual, corporation, limited liability company,
partnership, association, trust, business trust, joint venture, joint stock
company, pool, syndicate, sole proprietorship, unincorporated organization,
Governmental Authority or any other form of entity or group thereof.
"Pounds Sterling" means, at any time of determination, the then official
currency of the United Kingdom of Great Britain and Northern Ireland.
"Prime Rate" means, at any time, the rate of interest per annum publicly
announced from time to time by Wachovia as its prime rate. Each change in the
Prime Rate shall be effective as of the opening of business on the day such
change in such prime rate occurs. The parties hereto acknowledge that the rate
announced publicly by Wachovia as its prime rate is an index or base rate and
shall not necessarily be its lowest or best rate charged to its customers or
other banks.
"Register" shall have the meaning assigned thereto in Section 13.10(d).
"Reimbursement Obligation" means the obligation of the Borrower to
reimburse the Issuing Lender pursuant to Section 3.5 for amounts drawn under
Letters of Credit.
"Replaced Lender" shall have the meaning assigned thereto in Section
4.15(c).
"Replacement Lender" shall have the meaning assigned thereto in Section
4.15(c).
"Required Lenders" means, at any date, any combination of Lenders whose
Commitment Percentages aggregate at least sixty-six and two-thirds percent
(66-2/3%) of the Aggregate Commitment or, if the Credit Facility has been
terminated pursuant to Section 11.2, any combination of Lenders holding at least
sixty-six and two-thirds percent (66-2/3%) of the aggregate Extensions of Credit
(with the aggregate amount of each Lender's risk participation and funded
participation in Alternative Currency Loans, Swingline Loans and L/C Obligations
being deemed "held" by such Lender for the purposes of this definition).
"Responsible Officer" means any of the following: the chief executive
officer, president, chief financial officer or controller of the Borrower or any
other officer of the Borrower reasonably acceptable to the Administrative Agent.
"Revolving Credit Facility" means the revolving credit, alternative
currency and swingline facilities established pursuant to Article II.
"Revolving Credit Loans" means any revolving credit loan denominated in
Dollars made by the Lenders to the Borrower pursuant to Section 2.1, and all
such revolving credit loans collectively as the context requires.
"Revolving Credit Notes" means the collective reference to the Revolving
Credit Notes made by the Borrower payable to the order of each Lender,
substantially in the form of Exhibit A-1 hereto, evidencing the Revolving Credit
Facility, and any amendments, supplements and modifications thereto, any
substitutes therefor, and any replacements, restatements, renewals or extensions
thereof, in whole or in part; "Revolving Credit Note" means any of such
Revolving Credit Notes.
"Revolving Credit Termination Date" means the earliest of the dates
referred to in Section 2.8.
"Security Documents" means the collective reference to the Subsidiary
Guaranty Agreement, the Collateral Agreement, the Mortgages and each other
agreement or writing pursuant to which the Borrower or any Subsidiary thereof
purports to pledge or grant a security interest in any property or assets
securing the Obligations or any such Person purports to guaranty the payment
and/or performance of the Obligations, in each case, as amended, restated,
supplemented or otherwise modified from time to time.
"Solvent" means, as to the Borrower and its Subsidiaries on a particular
date, that any such Person (a) has capital sufficient to carry on its business
and transactions and all business and transactions in which it is about to
engage and is able to pay its debts as they mature, (b) owns property having a
value, at fair valuation, greater than the amount required to pay its probable
liabilities (including contingencies), and (c) does not believe that it will
incur debts or liabilities beyond its ability to pay such debts or liabilities
as they mature.
"Subordinated Debt" means the collective reference to any Debt of the
Borrower or any Subsidiary subordinated in right and time of payment to the
Obligations and containing such other terms and conditions, in each case as are
satisfactory to the Required Lenders.
"Subsidiary" means as to any Person, any corporation, partnership, limited
liability company or other entity of which more than fifty percent (50%) of the
outstanding capital stock or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other managers of such
corporation, partnership, limited liability company or other entity is at the
time owned by or the management is otherwise controlled by such Person
(irrespective of whether, at the time, capital stock or other ownership
interests of any other class or classes of such corporation, partnership,
limited liability company or other entity shall have or might have voting power
by reason of the happening of any contingency). Unless otherwise qualified
references to "Subsidiary" or "Subsidiaries" herein shall refer to those of the
Borrower.
"Subsidiary Guaranty Agreement" means the unconditional guaranty agreement
of even date executed by the Subsidiary Guarantors in favor of the
Administrative Agent, for the ratable benefit of itself and the Lenders,
substantially in the form of Exhibit H, as amended, restated, supplemented or
otherwise modified from time to time.
"Subsidiary Guarantors" means the Material Domestic Subsidiaries of the
Borrower.
"Sweep Plus Service Program" means the Sweep Plus Service Program of
Wachovia and any other cash management arrangement which the Borrower and
Wachovia agree should be included in the borrowing and repayment of Swingline
Loans pursuant to Section 2.3.
"Swingline Commitment" means the lesser of (a) Five Million Dollars
($5,000,000) and (b) the Aggregate Commitment.
"Swingline Facility" means the swingline facility established pursuant to
Section 2.3.
"Swingline Lender" means Wachovia in its capacity as swingline lender
hereunder.
"Swingline Loan" means any swingline loan denominated in Dollars made by
the Swingline Lender to the Borrower pursuant to Section 2.3, and all such
swingline loans collectively as the context requires.
"Swingline Note" means the Swingline Note made by the Borrower payable to
the order of the Swingline Lender, substantially in the form of Exhibit A-2
hereto, evidencing the Swingline Loans, and any amendments, supplements and
modifications thereto, any substitutes therefor, and any replacements,
restatements, renewals or extensions thereof, in whole or in part.
"Swingline Termination Date" means the first to occur of (a) the
resignation of Wachovia as Administrative Agent in accordance with Section 12.9
and (b) the Revolving Credit Termination Date.
"Synthetic Lease" means any synthetic lease, tax retention operating lease,
off-balance sheet loan or similar off-balance sheet financing product where such
transaction is considered borrowed money indebtedness for tax purposes but is
classified as an Operating Lease in accordance with GAAP.
"Taxes" shall have the meaning assigned thereto in Section 4.13(a).
"Termination Event" means except for any such event or condition that could
not reasonably be expected to have a Material Adverse Effect: (a) a "Reportable
Event" described in Section 4043 of ERISA for which the notice requirement has
not been waived by the PBGC, or (b) the withdrawal of the Borrower or any ERISA
Affiliate from a Pension Plan during a plan year in which it was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA, or (c) the termination of a
Pension Plan, the filing of a notice of intent to terminate a Pension Plan or
the treatment of a Pension Plan amendment as a termination, under Section 4041
of ERISA, if the plan assets are not sufficient to pay all plan liabilities, or
(d) the institution of proceedings to terminate, or the appointment of a trustee
with respect to, any Pension Plan by the PBGC, or (e) any other event or
condition which would constitute grounds under Section 4042(a) of ERISA for the
termination of, or the appointment of a trustee to administer, any Pension Plan,
or (f) the imposition of a Lien pursuant to Section 412 of the Code or Section
302 of ERISA, or (g) the partial or complete withdrawal of the Borrower of any
ERISA Affiliate from a Multiemployer Plan if withdrawal liability is asserted by
such plan, or (h) any event or condition which results in the reorganization or
insolvency of a Multiemployer Plan under Sections 4241 or 4245 of ERISA, or (i)
any event or condition which results in the termination of a Multiemployer Plan
under Section 4041A of ERISA or the institution by PBGC of proceedings to
terminate a Multiemployer Plan under Section 4042 of ERISA.
"Total Funded Debt" means, as of any date of determination with respect to
the Borrower and its Subsidiaries on a Consolidated basis without duplication,
the sum of all Debt of the Borrower and its Subsidiaries.
"Treaty on European Union" means the Treaty of Rome of March 25, 1957, as
amended by the Single European Act of 1986 and the Maastricht Treaty (signed
February 7, 1992), as amended from time to time.
"UCC" means the Uniform Commercial Code as in effect in the State of North
Carolina, as amended or modified from time to time.
"Uniform Customs" means the Uniform Customs and Practice for Documentary
Credits (1993 Revision), effective January 1994 International Chamber of
Commerce Publication No. 500.
"United States" means the United States of America.
"Wachovia" means Wachovia Bank, National Association, a national banking
association, and its successors.
"Wholly-Owned" means, with respect to a Subsidiary, any Subsidiary for
which all of the shares of capital stock or other ownership interests are,
directly or indirectly, owned or controlled by the Borrower and/or one or more
of its Wholly-Owned Subsidiaries (except for directors' qualifying shares or
other shares required by Applicable Law to be owned by a Person other than the
Borrower).
SECTION 1.2 General. Unless otherwise specified, a reference in this
Agreement to a particular article, section, subsection, Schedule or Exhibit is a
reference to that article, section, subsection, Schedule or Exhibit of this
Agreement. Wherever from the context it appears appropriate, each term stated in
either the singular or plural shall include the singular and plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, the feminine and the neuter. Any reference herein to "Charlotte time"
shall refer to the applicable time of day in Charlotte, North Carolina.
SECTION 1.3 Effectiveness of Euro Provisions. With respect to any state (or
the currency of such state) that is not a Participating Member State on the date
of this Agreement, the provisions of Sections 4.1(g), 4.8(b), 4.8(c) and 4.14
shall become effective in relation to such state (and the currency of such
state) at and from the date on which such state becomes a Participating Member
State.
SECTION 1.4. Other Definitions and Provisions.
--------------------------------
(a) Use of Capitalized Terms. Unless otherwise defined therein, all
capitalized terms defined in this Agreement shall have the defined meanings when
used in this Agreement, the Notes and the other Loan Documents or any
certificate, report or other document made or delivered pursuant to this
Agreement.
(b) Miscellaneous. The words "hereof", "herein" and "hereunder" and words
of similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.
ARTICLE II
REVOLVING CREDIT FACILITY
SECTION 2.1 Revolving Credit Loans. Subject to the terms and conditions of
this Agreement, and in reliance upon the representations and warranties set
forth herein, each Lender severally agrees to make Revolving Credit Loans in
Dollars to the Borrower from time to time from the Closing Date through, but not
including, the Revolving Credit Termination Date as requested by the Borrower,
in accordance with the terms of Section 2.4; provided, that, based upon the
Dollar Amount of all outstanding Loans and L/C Obligations, (a) the aggregate
principal amount of all outstanding Revolving Credit Loans (after giving effect
to any amount requested) shall not exceed the Aggregate Commitment less the
Swingline Commitment less the sum of all outstanding Alternative Currency Loans
and L/C Obligations and (b) the aggregate principal amount of all outstanding
Revolving Credit Loans from any Lender to the Borrower shall not at any time
exceed such Lender's Commitment less such Lender's Commitment Percentage of the
Swingline Commitment less such Lender's Commitment Percentage of the sum of all
outstanding Alternative Currency Loans and L/C Obligations. Each Revolving
Credit Loan by a Lender shall be in a principal amount equal to such Lender's
Commitment Percentage of the aggregate principal amount of Revolving Credit
Loans requested on such occasion. Subject to the terms and conditions hereof,
the Borrower may borrow, repay and reborrow Revolving Credit Loans hereunder
until the Revolving Credit Termination Date.
SECTION 2.2 Alternative Currency Loans.
(a) Availability. Subject to the terms and conditions of this Agreement,
and in reliance upon the representations and warranties set forth herein, the
Alternative Currency Lender agrees to make Alternative Currency Loans to the
Borrower from time to time from the Closing Date through, but not including, the
Revolving Credit Termination Date as requested by the Borrower in accordance
with the terms of Section 2.4; provided, that, based upon the Dollar Amount of
all outstanding Loans and L/C Obligations, the aggregate principal amount of all
outstanding Alternative Currency Loans (after giving effect to any amount
requested) shall not exceed the lesser of (i) the Aggregate Commitment less the
sum of the aggregate principal amount of all outstanding Revolving Credit Loans
less the Swingline Commitment less the sum of all outstanding L/C Obligations,
and (ii) the Alternative Currency Commitment; provided further that the
Alternative Currency Lender will not make an Alternative Currency Loan from and
after the date which is one (1) day after it has received written notice from
the Administrative Agent (upon the request of the Required Lenders) that one or
more of the applicable conditions to Extensions of Credit specified in Section
5.3 is not then satisfied until such conditions are satisfied or waived in
accordance with the provisions of this Agreement (and the Alternative Currency
Lender shall be entitled to conclusively rely on any such notice and shall have
no obligation to independently investigate the accuracy of such notice and shall
have no liability to the Borrower in respect thereof if such notice proves to be
inaccurate). Alternative Currency Loans shall be funded in an amount equal to
the Alternative Currency Amount of such Alternative Currency Loan. Subject to
the terms and conditions hereof, the Borrower may borrow, repay and reborrow
Alternative Currency Loans hereunder until the Revolving Credit Termination
Date.
(b) Refunding of Alternative Currency Loans.
(i) Upon the occurrence and during the continuance of an Event of
Default, each Alternative Currency Loan may, at the discretion of the
Alternative Currency Lender, be converted immediately to a Base Rate Loan funded
in Dollars by the Lenders in an amount equal to the Dollar Amount of such
Alternative Currency Loan for the remainder of the Interest Period applicable to
such Alternative Currency Loan. Such Base Rate Loan shall thereafter be
reflected as a Revolving Credit Loan of the Lenders on the books and records of
the Administrative Agent. Each Lender shall fund its respective Commitment
Percentage of such Revolving Credit Loan as required to repay Alternative
Currency Loans outstanding to the Alternative Currency Lender upon such demand
by the Alternative Currency Lender in no event later than 2:00 p.m. (Charlotte
time) on the next succeeding Business Day after such demand is made. No Lender's
obligation to fund its respective Commitment Percentage of any Revolving Credit
Loan required to repay such Alternative Currency Loan shall be affected by any
other Lender's failure to fund its Commitment Percentage of such Revolving
Credit Loan, nor shall any Lender's Commitment Percentage be increased as a
result of any such failure of any other Lender to fund its Commitment Percentage
of such Revolving Credit Loan.
(ii) The Borrower shall pay to the Alternative Currency Lender, for
the account of the Alternative Currency Lender, on demand the amount of such
Alternative Currency Loans to the extent amounts received from the Lenders are
not sufficient to refund in full the outstanding Alternative Currency Loans
requested or required to be refunded upon the occurrence and during the
continuance of an Event of Default. In addition, the Borrower hereby authorizes
the Administrative Agent, upon the occurrence and during the continuance of an
Event of Default, to charge any account maintained by the Borrower with the
Alternative Currency Lender (up to the amount available therein) in order to
immediately pay the Alternative Currency Lender the amount of such Alternative
Currency Loans to the extent amounts received from the Lenders are not
sufficient to repay in full the outstanding Alternative Currency Loans requested
or required to be refunded. If any portion of any such amount paid to the
Alternative Currency Lender shall be recovered by or on behalf of the Borrower
from the Alternative Currency Lender in bankruptcy or otherwise, the loss of the
amount so recovered shall be ratably shared among all the Lenders in accordance
with their respective Commitment Percentages (unless the amount so recovered by
or on behalf of the Borrower pertains to an Alternative Currency Loan extended
after the occurrence and during the continuance of an Event of Default of which
the Alternative Currency Lender has received notice in the manner required
pursuant to Section 12.5 and which such Event of Default has not been waived by
the Required Lenders or the Lenders, as applicable).
(iii) Each Lender acknowledges and agrees that its obligation to
refund Alternative Currency Loans in accordance with the terms of this Section
2.2 is absolute and unconditional and shall not be affected by any circumstance
whatsoever, including, without limitation, non-satisfaction of the conditions
set forth in Article V. Further, each Lender agrees and acknowledges that if
prior to the refunding of any outstanding Alternative Currency Loans pursuant to
this Section 2.2, one of the events described in Section 11.1(i) or (j) shall
have occurred, each Lender will, on the date the applicable Revolving Credit
Loans would have been made, purchase an undivided participating interest in such
Alternative Currency Loans to be refunded in an amount equal to its Commitment
Percentage of the aggregate amount of such Alternative Currency Loans. Each
Lender will immediately transfer to the Administrative Agent, for the account of
the Alternative Currency Lender, in immediately available funds in Dollars, the
amount of its participation. Whenever, at any time after the Alternative
Currency Lender has received from any Lender such Lender's participating
interest in the refunded Alternative Currency Loans, the Alternative Currency
Lender receives any payment on account thereof, the Alternative Currency Lender
will distribute to such Lender its participating interest in such amount
(appropriately adjusted, in the case of interest payments, to reflect the period
of time during which such Lender's participating interest was outstanding and
funded).
(iv) In the event that any Lender fails to make payment to the
Alternative Currency Lender of any amount due under this Section 2.2, the
Administrative Agent, on behalf of the Alternative Currency Lender, shall be
entitled to receive, retain and apply against such obligation the principal and
interest otherwise payable to such Lender hereunder until the Alternative
Currency Lender receives such payment from such Lender or such obligation is
otherwise fully satisfied. In addition to the foregoing, if for any reason any
Lender fails to make payment to the Alternative Currency Lender of any amount
due under this Section 2.2, such Lender shall be deemed, at the option of the
Administrative Agent, to have unconditionally and irrevocably purchased from the
Alternative Currency Lender, without recourse or warranty, an undivided interest
and participation in the applicable Alternative Currency Loan, and such interest
and participation may be recovered from such Lender together with interest
thereon at the Federal Funds Effective Rate for each day during the period
commencing on the date of demand and ending on the date such amount is received.
SECTION 2.3 Swingline Loans.
(a) Availability. Subject to the terms and conditions of this Agreement,
the Swingline Lender agrees to make Swingline Loans to the Borrower from time to
time from the Closing Date through, but not including, the Swingline Termination
Date; provided, that (i) all Swingline Loans shall be denominated in Dollars and
(ii) based upon the Dollar Amount of all outstanding Loans and L/C Obligations,
the aggregate principal amount of all outstanding Swingline Loans (after giving
effect to any amount requested), shall not exceed the lesser of (A) the
Aggregate Commitment less the sum of all outstanding Revolving Credit Loans,
Alternative Currency Loans and L/C Obligations and (B) the Swingline Commitment;
provided further that the Swingline Lender will not make a Swingline Loan from
and after the date which is one (1) day after it has received written notice
from the Administrative Agent (upon the request of the Required Lenders) that
one or more of the applicable conditions to Extensions of Credit specified in
Section 5.3 is not then satisfied until such conditions are satisfied or waived
in accordance with the provisions of this Agreement (and the Swingline Lender
shall be entitled to conclusively rely on any such notice and shall have no
obligation to independently investigate the accuracy of such notice and shall
have no liability to the Borrower in respect thereof if such notice proves to be
inaccurate).
(b) Sweep Plus Service Program. On each Business Day, the Administrative
Agent shall calculate the Net Cash Position. If the Net Cash Position is less
than zero, then the Borrower shall be deemed to have irrevocably requested that
the Swingline Lender make a Swingline Loan to the Borrower in an amount equal to
the lesser of (i) an amount, which when rounded up to the nearest $1,000, equals
or exceeds the amount of the deficit Net Cash Position and (ii) an amount, which
when added to the aggregate principal amount of all outstanding Swingline Loans
(after giving effect to any amount requested), shall not exceed the lesser of,
based upon the Dollar Amount of all outstanding Loans and L/C Obligations, (A)
the Aggregate Commitment less the sum of all outstanding Revolving Credit Loans,
all outstanding Alternative Currency Loans and the L/C Obligations and (B) the
Swingline Commitment; provided, however, that the obligation of the Swingline
Lender to make any such Swingline Loan to the Borrower shall be subject to all
the terms and conditions hereof (including, without limitation, Section 5.3
hereof).
(c) Payment of Principal and Interest. Principal and interest on Swingline
Loans deemed requested pursuant to Section 2.3(b) hereof shall be paid pursuant
to the terms and conditions of the Sweep Plus Service Program without any
deduction, setoff or counterclaim whatsoever. Principal and interest on
Swingline Loans requested pursuant to Section 2.3 hereof shall be paid pursuant
to the terms of this Agreement. Unless sooner paid pursuant to the provisions
hereof or the provisions of the Sweep Plus Service Program, the principal of the
Swingline Loans shall be paid in full, together with accrued interest thereon,
on the Swingline Termination Date.
(d) Refunding.
(i) Swingline Loans shall be refunded by the Lenders on demand by the
Swingline Lender. Such refundings shall be made by the Lenders in accordance
with their respective Commitment Percentages and shall thereafter be reflected
as Revolving Credit Loans of the Lenders on the books and records of the
Administrative Agent. Each Lender shall fund its respective Commitment
Percentage of Revolving Credit Loans as required to repay Swingline Loans
outstanding to the Swingline Lender upon demand by the Swingline Lender but in
no event later than 2:00 p.m. (Charlotte time) on the next succeeding Business
Day after such demand is made. No Lender's obligation to fund its respective
Commitment Percentage of a Swingline Loan shall be affected by any other
Lender's failure to fund its Commitment Percentage of a Swingline Loan, nor
shall any Lender's Commitment Percentage be increased as a result of any such
failure of any other Lender to fund its Commitment Percentage of a Swingline
Loan.
(ii) The Borrower shall pay to the Swingline Lender on demand the
amount of such Swingline Loans to the extent amounts received from the Lenders
are not sufficient to refund in full the outstanding Swingline Loans requested
or required to be refunded. In addition, the Borrower hereby authorizes the
Administrative Agent to charge any account maintained by the Borrower with the
Swingline Lender (up to the amount available therein) in order to immediately
pay the Swingline Lender the amount of such Swingline Loans to the extent
amounts received from the Lenders are not sufficient to repay in full the
outstanding Swingline Loans requested or required to be refunded. If any portion
of any such amount paid to the Swingline Lender shall be recovered by or on
behalf of the Borrower from the Swingline Lender in bankruptcy or otherwise, the
loss of the amount so recovered shall be ratably shared among all the Lenders in
accordance with their respective Commitment Percentages (unless the amounts so
recovered by or on behalf of the Borrower pertain to a Swingline Loan extended
after the occurrence and during the continuance of an Event of Default of which
the Administrative Agent has received notice in the manner required pursuant to
Section 12.5 and which such Event of Default has not been waived by the Required
Lenders or the Lenders, as applicable).
(iii) Each Lender acknowledges and agrees that its obligation to
refund Swingline Loans in accordance with the terms of this Section 2.3 is
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including, without limitation, non-satisfaction of the conditions
set forth in Article V. Further, each Lender agrees and acknowledges that if
prior to the refunding of any outstanding Swingline Loans pursuant to this
Section 2.3, one of the events described in Section 11.1(i) or (j) shall have
occurred, each Lender will, on the date the applicable Revolving Credit Loans
would have been made, purchase an undivided participating interest in such
Swingline Loans to be refunded in an amount equal to its Commitment Percentage
of the aggregate amount of such Swingline Loans. Each Lender will immediately
transfer to the Swingline Lender, in immediately available funds, the amount of
its participation and upon receipt thereof the Swingline Lender will deliver to
such Lender a certificate evidencing such participation dated the date of
receipt of such funds and for such amount. Whenever, at any time after the
Swingline Lender has received from any Lender such Lender's participating
interest in a Swingline Loan, the Swingline Lender receives any payment on
account thereof, the Swingline Lender will distribute to such Lender its
participating interest in such amount (appropriately adjusted, in the case of
interest payments, to reflect the period of time during which such Lender's
participating interest was outstanding and funded).
(iv) In the event that any Lender fails to make payment to the
Swingline Lender of any amount due under this Section 2.3, the Administrative
Agent, on behalf of the Swingline Lender, shall be entitled to receive, retain
and apply against such obligation the principal and interest otherwise payable
to such Lender hereunder until the Swingline Lender receives such payment from
such Lender or such obligation is otherwise fully satisfied. In addition to the
foregoing, if for any reason any Lender fails to make payment to the Swingline
Lender of any amount due under this Section 2.3, such Lender shall be deemed, at
the option of the Administrative Agent, to have unconditionally and irrevocably
purchased from the Swingline Lender, without recourse or warranty, an undivided
interest and participation in the applicable Swingline Loan, and such interest
and participation may be recovered from such Lender together with interest
thereon at the Federal Funds Effective Rate for each day during the period
commencing on the date of demand and ending on the date such amount is received.
SECTION 2.4 Procedure for Advances of Revolving Credit Loans, Alternative
Currency Loans and Swingline Loans.
(a) Requests for Borrowing.
(i) Revolving Credit Loans and Alternative Currency Loans. The
Borrower shall give the Administrative Agent irrevocable prior written notice
substantially in the form attached hereto as Exhibit B (a "Notice of Borrowing")
not later than 12:00 p.m. (Charlotte time) (A) on the same Business Day as each
Base Rate Loan requested under this Section 2.4(a), (B) at least three (3)
Business Days before each LIBOR Rate Loan denominated in Dollars and (C) at
least four (4) Business Days before each LIBOR Rate Loan denominated in an
Alternative Currency, of its intention to borrow, specifying:
(1) the date of such borrowing, which shall be a Business Day;
(2) if such Loan is to be a Revolving Credit Loan or an
Alternative Currency Loan;
(3) if such Loan is to be a Revolving Credit Loan, whether such
Revolving Credit Loan shall be a LIBOR Rate Loan or a Base Rate Loan;
(4) the amount of such borrowing, which shall be in an amount
equal to the amount of the Aggregate Commitment or the Alternative
Currency Commitment, as applicable, then available to the Borrower, or
if less, (1) with respect to Base Rate Loans (other than Swingline
Loans), in an aggregate principal amount of $3,000,000 or a whole
multiple of $1,000,000 in excess thereof, (2) with respect to LIBOR
Rate Loans denominated in Dollars, in an aggregate principal amount of
$5,000,000 or a whole multiple of $1,000,000 in excess thereof and (3)
with respect to LIBOR Rate Loans denominated in an Alternative
Currency, in an aggregate principal Alternative Currency Amount of
$2,000,000 or a whole multiple of $1,000,000 in excess thereof; and
(5) if such Loan is to be a LIBOR Rate Loan, the duration of the
Interest Period applicable thereto.
A Notice of Borrowing received after 12:00 p.m. (Charlotte time) shall be deemed
received on the next Business Day. The Administrative Agent shall promptly
notify the Lenders of each Notice of Borrowing.
(ii) Swingline Loans. Swingline Loans shall be requested in the manner
set forth in Section 2.3.
(b) Disbursements.
(i) Revolving Credit Loans. Not later than 2:00 p.m. (Charlotte time)
on the proposed borrowing date for any Revolving Credit Loan, each Lender will
make available to the Administrative Agent, for the account of the Borrower, at
the office of the Administrative Agent in Dollars in funds immediately available
to the Administrative Agent, such Lender's Commitment Percentage of the
Revolving Credit Loan to be made on such borrowing date. The Borrower hereby
irrevocably authorizes the Administrative Agent to disburse the proceeds of each
borrowing requested pursuant to this Section 2.4 in immediately available funds
by crediting or wiring such proceeds to the deposit account of the Borrower
identified in the most recent notice substantially in the form of Exhibit C
hereto (a "Notice of Account Designation") delivered by the Borrower to the
Administrative Agent or as may be otherwise requested by the Borrower from time
to time (subject to the reasonable consent of the Administrative Agent). Subject
to Section 4.7 hereof, the Administrative Agent shall not be obligated to
disburse the portion of the proceeds of any Revolving Credit Loan requested
pursuant to this Section 2.4 to the extent that any Lender has not made
available to the Administrative Agent its Commitment Percentage of such
Revolving Credit Loan. Revolving Credit Loans to be made for the purpose of
refunding Swingline Loans shall be made by the Lenders as provided in Section
2.3(d). Revolving Credit Loans to be made for the purpose of refunding
Alternative Currency Loans shall be made by the Lenders as provided in Section
2.2(b).
(ii) Alternative Currency Loans. Not later than 11:00 a.m. (the time
of the Administrative Agent's Correspondent) on or before the proposed borrowing
date for any Alternative Currency Loan, the Alternative Currency Lender will
make available to the Administrative Agent, for the account of the Borrower, at
the office of the Administrative Agent's Correspondent in the requested
Alternative Currency in funds immediately available to the Administrative Agent,
the Alternative Currency Loan to be made on such borrowing date. The Borrower
hereby irrevocably authorizes the Administrative Agent to disburse the proceeds
of each borrowing requested pursuant to this Section 2.4 in immediately
available funds by crediting or wiring such proceeds to the deposit account of
the Borrower identified in the most recent Notice of Account Designation
delivered by the Borrower to the Administrative Agent or as may be otherwise
requested by the Borrower from time to time (subject to the reasonable consent
of the Administrative Agent). Subject to Section 4.7, the Administrative Agent
shall not be obligated to disburse the portion of the proceeds of any Loan
requested pursuant to this Section 2.4 to the extent that the Alternative
Currency Lender has not made available to the Administrative Agent such
Alternative Currency Loan.
(iii) Swingline Loans. Swingline Loans shall be disbursed in the
manner set forth in Section 2.3.
SECTION 2.5 Repayment of Loans.
(a) Repayment on the Revolving Credit Termination Date. The Borrower hereby
agrees to repay the outstanding principal amount of (i) all Revolving Credit
Loans in full in Dollars on the Revolving Credit Termination Date, (ii) all
Alternative Currency Loans in full in the Alternative Currency in which each
Alternative Currency Loan was initially funded on the Revolving Credit
Termination Date and (iii) all Swingline Loans in full in Dollars on the
Swingline Termination Date (or, if earlier, in accordance with Section 2.3(d)),
together, in each case, with all accrued but unpaid interest thereon.
(b) Mandatory Repayment of Revolving Credit Loans.
(i) Aggregate Commitment. If at any time (as determined by the
Administrative Agent under Section 2.5(b)(v)), based upon the Dollar Amount of
all outstanding Loans and L/C Obligations, (A) solely because of currency
fluctuation, the outstanding principal amount of all Revolving Credit Loans
exceeds one hundred and five percent (105%) of the Aggregate Commitment less the
Swingline Commitment less the sum of all outstanding Alternative Currency Loans
and L/C Obligations or (B) for any other reason, the outstanding principal
amount of all Revolving Credit Loans exceeds the Aggregate Commitment less the
Swingline Commitment less the sum of all outstanding Alternative Currency Loans
and L/C Obligations, then, in each such case, the Borrower shall (I) first, if
(and to the extent) necessary to eliminate such excess, immediately repay
outstanding Swingline Loans (and/or reduce any pending request for such Loans on
such day by the Dollar Amount of such excess), (II) second, if (and to the
extent) necessary to eliminate such excess, immediately repay outstanding
Revolving Credit Loans which are Base Rate Loans by the Dollar Amount of such
excess (and/or reduce any pending request for such Loans on such day by the
Dollar Amount of such excess), (III) third, if (and to the extent) necessary to
eliminate such excess, immediately repay Revolving Credit Loans which are LIBOR
Rate Loans and Alternative Currency Loans (and/or reduce any pending requests
for a borrowing or continuation or conversion of such Loans submitted in respect
of such Loans on such day by the Dollar Amount of such excess) and (IV) fourth,
with respect to any Letters of Credit then outstanding, make a payment of cash
collateral into a cash collateral account opened by the Administrative Agent for
the benefit of the Lenders in an amount equal to the aggregate then undrawn and
unexpired amount of such Letters of Credit (such cash collateral to be applied
in accordance with Section 11.2(b)).
(ii) Alternative Currency Commitment. If at any time (as determined by
the Administrative Agent under Section 2.5(b)(v)), based upon the Dollar Amount
of all outstanding Loans and L/C Obligations, (A) solely because of currency
fluctuation, the outstanding principal amount of all Alternative Currency Loans
exceeds the lesser of (1) one hundred and five percent (105%) of the Aggregate
Commitment less the Swingline Commitment less the sum of all outstanding
Revolving Credit Loans and L/C Obligations and (2) one hundred and five percent
(105%) of the Alternative Currency Commitment or (B) for any other reason, the
outstanding principal amount of all Alternative Currency Loans exceeds the
lesser of (1) the Aggregate Commitment less the Swingline Commitment less the
sum of all outstanding Revolving Credit Loans and L/C Obligations and (2) the
Alternative Currency Commitment, then, in each such case, such excess shall be
immediately repaid, in the currency in which such Alternative Currency Loan or
Alternative Currency Loans were initially funded, by the Borrower to the
Administrative Agent for the account of the Alternative Currency Lender.
(iii) Swingline Commitment. If at any time (as determined by the
Administrative Agent under Section 2.5(b)(v)), based upon the Dollar Amount of
all outstanding Loans and L/C Obligations, and for any reason the outstanding
principal amount of all Swingline Loans exceeds the lesser of (1) the Aggregate
Commitment less the sum of all outstanding Revolving Credit Loans, Alternative
Currency Loans and L/C Obligations and (2) the Swingline Commitment, then, in
each such case, such excess shall be immediately repaid by the Borrower to the
Administrative Agent for the account of the Swingline Lender.
(iv) Excess L/C Obligations. If at any time (as determined by the
Administrative Agent under Section 2.5(b)(v)) and for any reason, based upon the
Dollar Amount of all outstanding Loans and L/C Obligations, the outstanding
amount of all L/C Obligations exceeds the lesser of (A) the Aggregate Commitment
less the Swingline Commitment less the sum of the amount of all outstanding
Revolving Credit Loans and Alternative Currency Loans and (B) the L/C
Commitment, then, in each such case, the Borrower shall make a payment of cash
collateral into a cash collateral account opened by the Administrative Agent for
the benefit of the Lenders in an amount equal to the aggregate then undrawn and
unexpired amount of such Letters of Credit (such cash collateral to be applied
in accordance with Section 11.2(b)).
(v) Compliance and Payments. The Borrower's compliance with this
Section 2.5(b) shall be tested from time to time by the Administrative Agent at
its sole discretion, but in any event shall be tested on (A) the date on which
the Borrower requests the Lenders to make a Revolving Credit Loan or the
Alternative Currency Lender to make an Alternative Currency Loan or the Issuing
Lender to issue a Letter of Credit and (B) the date an interest payment is due
under Section 4.1(e). Each such repayment pursuant to this Section 2.5(b) shall
be accompanied by any amount required to be paid pursuant to Section 4.11
hereof.
(c) Optional Repayments. The Borrower may at any time and from time to time
repay the Loans, in whole or in part, upon at least four (4) Business Days'
irrevocable notice to the Administrative Agent with respect to Alternative
Currency Loans, upon at least three (3) Business Days' irrevocable notice to the
Administrative Agent with respect to LIBOR Rate Loans denominated in Dollars and
upon one (1) Business Day irrevocable notice with respect to Base Rate Loans and
Swingline Loans, substantially in the form attached hereto as Exhibit D (a
"Notice of Prepayment"), specifying (i) the date of repayment, (ii) the amount
of repayment, (iii) whether the repayment is of Revolving Credit Loans,
Alternative Currency Loans, Swingline Loans, or a combination thereof, and, if
of a combination thereof, the amount allocable to each and (iv) whether the
repayment is of LIBOR Rate Loans denominated in an Alternative Currency, LIBOR
Rate Loans denominated in Dollars, Base Rate Loans, or a combination thereof,
and, if of a combination thereof, the amount allocable to each. Upon receipt of
such notice, the Administrative Agent shall promptly notify each Lender. If any
such notice is given, the amount specified in such notice shall be due and
payable on the date set forth in such notice. Partial repayments shall be in an
aggregate amount (i) of $3,000,000 or a whole multiple of $1,000,000 in excess
thereof with respect to Base Rate Loans (other than Swingline Loans), (ii) of
$5,000,000 or a whole multiple of $1,000,000 in excess thereof with respect to
LIBOR Rate Loans denominated in Dollars, (iii) of $2,000,000 or a whole multiple
of $1,000,000 in excess thereof (based upon the Alternative Currency Amount
thereof) with respect to Alternative Currency Loans and (iv) permitted pursuant
to the terms and conditions of the Sweep Plus Service Program (or as otherwise
agreed to by the Swingline Lender and the Borrower). Each such repayment shall
be accompanied by any amount required to be paid pursuant to Section 4.11
hereof.
(d) Limitation on Repayment of LIBOR Rate Loans. The Borrower may not repay
any LIBOR Rate Loan on any day other than on the last day of the Interest Period
applicable thereto unless such repayment is accompanied by any amount required
to be paid pursuant to Section 4.11 hereof.
(e) Hedging Agreements. No repayment or prepayment pursuant to this Section
2.5 shall affect any obligations of the Borrower's obligations under any Hedging
Agreement.
(f) Payment of Interest and Other Expenses. Each repayment or prepayment
pursuant to this Section 2.5 shall be accompanied by accrued interest on the
amount repaid.
SECTION 2.6 Notes.
(a) Revolving Credit Notes. Except as otherwise provided in Section
13.10(a) - (e), each Lender's Revolving Credit Loans and the obligation of the
Borrower to repay such Revolving Credit Loans shall be evidenced by a separate
Revolving Credit Note executed by the Borrower payable to the order of such
Lender.
(b) Alternative Currency Note. The Alternative Currency Loans and the
obligation of the Borrower to repay such Alternative Currency Loans shall be
evidenced by a separate Alternative Currency Note executed by the Borrower
payable to the order of the Alternative Currency Lender.
(c) Swingline Note. The Swingline Loans and the obligation of the Borrower
to repay such Swingline Loans shall be evidenced by a separate Swingline Note
executed by the Borrower payable to the order of the Swingline Lender.
SECTION 2.7 Permanent Reduction of the Aggregate Commitment and the
Alternative Currency Commitment.
(a) Voluntary Reduction. The Borrower shall have the right at any time and
from time to time, upon at least five (5) Business Days prior written notice to
the Administrative Agent, to permanently reduce, without premium or penalty, (i)
the entire Aggregate Commitment at any time or (ii) portions of the Aggregate
Commitment, from time to time, in an aggregate principal amount not less than
$3,000,000 or any whole multiple of $1,000,000 in excess thereof; provided that
in no event shall the Aggregate Commitment be reduced to an amount less than the
face amount of all Letters of Credit then outstanding.
(b) Mandatory Permanent Reduction. The Aggregate Commitment shall be
permanently reduced by the following amounts:
(i) 100% of the Net Cash Proceeds received by the Borrower or any of
its Subsidiaries from any issuance of Debt (other than Debt permitted pursuant
to Section 10.1);
(ii) 100% of the Net Cash Proceeds received by the Borrower or any of
its Subsidiaries in connection with any sale of assets (including its equity
ownership in any Person) unless, with respect to any sale of assets consisting
of property, plant or equipment of the Borrower or any of its Subsidiaries, and
so long as no Default or Event of Default has occurred and is continuing, such
Net Cash Proceeds are reinvested in assets that are similar or complimentary to
the assets sold (or otherwise in a manner acceptable to the Administrative Agent
and the Required Lenders, in their sole discretion) within two hundred seventy
(270) days after receipt of such Net Cash Proceeds; provided, that this clause
(ii) shall not apply with respect to (A) any asset sales permitted by Section
10.5(a) - (g), (B) up to an aggregate amount of $5,000,000 of the aggregate Net
Cash Proceeds received by the Borrower and the Domestic Subsidiaries of the
Borrower during the term of this Agreement pursuant to this clause (ii) and
clause (iii) below and (C) up to an aggregate amount of $10,000,000 of the
aggregate Net Cash Proceeds received by the Foreign Subsidiaries of the Borrower
during the term of this Agreement pursuant to this clause (ii) and clause (iii)
below;
(iii) 100% of the Net Cash Proceeds received by the Borrower or any of
its Subsidiaries under any policy of insurance of such Person or in connection
with any condemnation proceeding involving property of such Person, unless, so
long as no Default or Event of Default has occurred and is continuing, such Net
Cash Proceeds are utilized by the Borrower or such Subsidiary within two hundred
seventy (270) days of receipt of such Net Cash Proceeds to replace or repair any
of its assets damaged in connection with the related claim or proceeding;
provided, that this clause (iii) shall not apply with respect to (A) up to an
aggregate amount of $5,000,000 of the aggregate Net Cash Proceeds received by
the Borrower and the Domestic Subsidiaries of the Borrower during the term of
this Agreement pursuant to this clause (iii) and clause (ii) above and (ii) up
to an aggregate amount of $10,000,000 of the aggregate Net Cash Proceeds
received by the Foreign Subsidiaries of the Borrower during the term of this
Agreement pursuant to this clause (iii) and clause (ii) above;
(iv) 100% of the Net Cash Proceeds received by the Borrower or any of
its Domestic Subsidiaries from any offering of equity securities (other than
offerings of equity securities made solely to the Borrower, any Subsidiary
thereof or any Affiliate thereof).
(c) Corresponding Reductions. Each partial permanent reduction permitted or
required pursuant to this Section 2.7 shall (i) permanently reduce the Lenders'
Commitments pro rata in accordance with their respective Commitment Percentages
and (ii) permanently reduce the Alternative Currency Commitment pro rata in
accordance with the relative amount of the Alternative Currency Commitment and
the Aggregate Commitment.
(d) Corresponding Payments. Each permanent reduction permitted or required
pursuant to this Section 2.7 shall be accompanied by a payment of principal
sufficient to reduce (i) the aggregate Dollar Amount of all outstanding
Revolving Credit Loans, Alternative Currency Loans, Swingline Loans and L/C
Obligations, as applicable, after such reduction to the Aggregate Commitment as
so reduced and (ii) to the extent that the Alternative Currency Commitment is
reduced, the aggregate Dollar Amount of all outstanding Alternative Currency
Loans to the Alternate Currency Commitment as so reduced. If the Aggregate
Commitment as so reduced is less than the aggregate amount of all outstanding
Letters of Credit, the Borrower shall be required to deposit cash collateral in
a cash collateral account opened by the Administrative Agent in an amount equal
to the aggregate then undrawn and unexpired amount of such Letters of Credit.
Such cash collateral shall be applied in accordance with Section 11.2(b). Any
reduction of the Aggregate Commitment to zero shall be accompanied by payment of
all outstanding Revolving Credit Loans, Alternative Currency Loans and Swingline
Loans (and furnishing of cash collateral satisfactory to the Administrative
Agent for all L/C Obligations) and shall result in the termination of the
Commitments and Credit Facility. Such cash collateral shall be applied in
accordance with Section 11.2(b). If the reduction of the Aggregate Commitment or
the Alternative Currency Commitment, as applicable requires the repayment of any
LIBOR Rate Loan, such repayment shall be accompanied by any amount required to
be paid pursuant to Section 4.11 hereof.
SECTION 2.8 Termination of Credit Facility. The Credit Facility shall
terminate on the earliest of (a) January 15, 2006, (b) the date of termination
by the Borrower pursuant to Section 2.7 or (c) the date of termination by the
Administrative Agent on behalf of the Lenders pursuant to Section 11.2(a).
SECTION 2.9 Increase of the Aggregate Commitment. So long as no Default or
Event of Default shall have occurred and be continuing, the Borrower shall have
the right from time to time upon not less than thirty (30) days' prior written
notice to the Administrative Agent to increase the Aggregate Commitment;
provided that (i) no Lender shall have any obligation to increase its
Commitment, (ii) such requested increase shall be in an aggregate principal
amount of $2,500,000, (iii) in no event shall the Aggregate Commitment be
increased to an aggregate amount greater than Fifty Million Dollars
($50,000,000) and (iv) the Borrower and an existing Lender or a Person not
theretofore a Lender, as applicable, shall execute a Lender Addition and
Acknowledgement Agreement, which shall be acknowledged by the Administrative
Agent and each Guarantor and shall be in form and substance reasonably
satisfactory to the Administrative Agent.
(a) Any increase in the Aggregate Commitment which is accomplished by
increasing the Commitment of any Lender who is at the time of such increase
party to this Agreement (which Lender shall consent to such increase in its sole
and absolute discretion) shall be accomplished as follows: (i) this Agreement
will be amended by the Borrower, the Administrative Agent and the Lender whose
Commitment is being increased (but without any requirement that the consent of
any other Lenders be obtained) to reflect the revised Commitment of each of the
Lenders, (ii) the Administrative Agent will update the Register to reflect the
revised Commitment and Commitment Percentage of each of the Lenders, (iii) the
outstanding Revolving Credit Loans and Commitment Percentages of L/C
Obligations, Alternative Currency Loans and Swingline Loans will be reallocated
on the effective date of such increase among the Lenders in accordance with
their revised Commitment Percentages (and the Lenders agree to make all payments
and adjustments necessary to effect the reallocation and the Borrower shall pay
any and all costs required pursuant to Section 4.11 in connection with such
reallocation if the Administrative Agent reasonably determines that such
reallocation requires a repayment of outstanding Revolving Credit Loans) and
(iv) if requested, the Borrower will deliver new a Revolving Credit Note to the
Lender whose Commitment is being increased reflecting the revised Commitment
amount of such Lender;
(b) Any increase in the Aggregate Commitment which is accomplished by
addition of a new Lender under this Agreement shall be accomplished as follows:
(i) such new Lender shall be subject to the consent of the Administrative Agent
and the Borrower, which consent shall not be unreasonably withheld, (ii) this
Agreement will be amended by the Borrower, the Administrative Agent and such new
Lender (but without any requirement that the consent of any other Lenders be
obtained) to reflect the addition of such new Lender as a Lender hereunder,
(iii) the Administrative Agent will update the Register to reflect the revised
Commitment and Commitment Percentage of each of the Lenders, (iv) the
outstanding Revolving Credit Loans and Commitment Percentages of L/C
Obligations, Alternative Currency Loans and Swingline Loans will be reallocated
on the effective date of such increase among the Lenders in accordance with
their revised Commitment Percentages (and the Lenders agree to make all payments
and adjustments necessary to effect the reallocation and the Borrower shall pay
any and all costs required pursuant to Section 4.11 in connection with such
reallocation if the Administrative Agent reasonably determines that such
reallocation requires a repayment of outstanding Revolving Credit Loans) and (v)
if requested the Borrower will deliver a Revolving Credit Note to such new
Lender; and
(c) Notwithstanding anything to the contrary contained in this Agreement,
upon any voluntary reduction of the Aggregate Commitment pursuant to Section
2.7, the Borrower shall no longer have the option to request an increase in the
Aggregate Commitment pursuant to this Section 2.9.
ARTICLE III
LETTER OF CREDIT FACILITY
SECTION 3.1 L/C Commitment. Subject to the terms and conditions hereof, the
Issuing Lender, in reliance on the agreements of the other Lenders set forth in
Section 3.4(a), agrees to issue standby letters of credit ("Letters of Credit")
for the account of the Borrower on any Business Day from the Closing Date
through but not including the Revolving Credit Termination Date in such form as
may be approved from time to time by the Issuing Lender; provided, that the
Issuing Lender shall have no obligation to issue any Letter of Credit if, after
giving effect to such issuance, based upon the Dollar Amount of all outstanding
Loans and L/C Obligations, (a) the L/C Obligations would exceed the lesser of
(i) the L/C Commitment or (ii) the Aggregate Commitment less the Swingline
Commitment less the aggregate principal amount of all outstanding Revolving
Credit Loans and Alternative Currency Loans or (b) the Available Commitment of
any Lender would be less than zero. Each Letter of Credit shall (i) be
denominated in Dollars in a minimum amount of $100,000, (ii) be a standby letter
of credit issued to support obligations of the Borrower or any of its
Subsidiaries, contingent or otherwise, incurred in the ordinary course of
business, (iii) expire on a date satisfactory to the Issuing Lender, which date
shall be no later than ninety (90) days prior to the Revolving Credit
Termination Date and (iv) be subject to the Uniform Customs and/or ISP 98, as
set forth in the Application or as determined by the Issuing Lender, and, to the
extent not inconsistent therewith, the laws of the State of North Carolina. The
Issuing Lender shall not at any time be obligated to issue any Letter of Credit
hereunder if such issuance would conflict with, or cause the Issuing Lender or
any L/C Participant to exceed any limits imposed by, any Applicable Law.
References herein to "issue" and derivations thereof with respect to Letters of
Credit shall also include extensions or modifications of any existing Letters of
Credit, unless the context otherwise requires.
SECTION 3.2 Procedure for Issuance of Letters of Credit. The Borrower, may
from time to time request that the Issuing Lender issue a Letter of Credit by
delivering to the Issuing Lender at the Administrative Agent's Office an
Application therefor, completed to the satisfaction of the Issuing Lender, and
such other certificates, documents and other papers and information as the
Issuing Lender may reasonably request. Upon receipt of any Application, the
Issuing Lender shall process such Application and the certificates, documents
and other papers and information delivered to it in connection therewith in
accordance with its customary procedures and shall, subject to Section 3.1 and
Article V hereof, promptly issue the Letter of Credit requested thereby (but in
no event shall the Issuing Lender be required to issue any Letter of Credit
earlier than four (4) Business Days after its receipt of the Application
therefor and all such other certificates, documents and other papers and
information relating thereto) by issuing the original of such Letter of Credit
to the beneficiary thereof or as otherwise may be agreed by the Issuing Lender
and the Borrower; provided that the Issuing Lender shall not issue a Letter of
Credit from and after the date which is one (1) day after it has received
written notice from the Administrative Agent (upon the request of the Required
Lenders) that one or more of the applicable conditions to Extensions of Credit
specified in Section 5.3 is not then satisfied until such conditions are
satisfied or waived in accordance with the provisions of this Agreement (and the
Issuing Lender shall be entitled to conclusively rely on any such notice and
shall have no obligation to independently investigate the accuracy of such
notice and shall have no liability to the Borrower in respect thereof if such
notice proves to be inaccurate). The Issuing Lender shall promptly furnish to
the Borrower a copy of such Letter of Credit and promptly notify each Lender of
the issuance and upon request by any Lender, furnish to such Lender a copy of
such Letter of Credit and the amount of such Lender's participation therein.
SECTION 3.3 Commissions and Other Charges.
(a) The Borrower shall pay to the Administrative Agent, for the account of
the Issuing Lender and the L/C Participants, a letter of credit commission with
respect to each Letter of Credit in an amount equal to the face amount of such
Letter of Credit multiplied by the Applicable Margin with respect to LIBOR Rate
Loans (determined on a per annum basis). Such commission shall be payable
quarterly in arrears on the last Business Day of each calendar quarter and on
the Revolving Credit Termination Date. The Administrative Agent shall, promptly
following its receipt thereof, distribute to the Issuing Lender and the L/C
Participants all commissions received pursuant to this Section 3.3(a) in
accordance with their respective Commitment Percentages.
(b) In addition to the foregoing commission, the Borrower shall pay the
Issuing Lender an issuance fee with respect to each Letter of Credit in an
amount equal to the face amount of such Letter of Credit multiplied by
one-eighth of one percent (0.125%) per annum. Such issuance fee shall be payable
quarterly in arrears on the last Business Day of each calendar quarter and on
the Revolving Credit Termination Date.
(c) In addition to the foregoing fees and commissions, the Borrower shall
pay or reimburse the Issuing Lender for such normal and customary costs and
expenses as are incurred or charged by the Issuing Lender in issuing, effecting
payment under, amending or otherwise administering any Letter of Credit.
SECTION 3.4 L/C Participations.
(a) The Issuing Lender irrevocably agrees to grant and hereby grants to
each L/C Participant, and, to induce the Issuing Lender to issue Letters of
Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase
and hereby accepts and purchases from the Issuing Lender, on the terms and
conditions hereinafter stated, for such L/C Participant's own account and risk
an undivided interest equal to such L/C Participant's Commitment Percentage in
the Issuing Lender's obligations and rights under and in respect of each Letter
of Credit issued hereunder and the amount of each draft paid by the Issuing
Lender thereunder. Each L/C Participant unconditionally and irrevocably agrees
with the Issuing Lender that, if a draft is paid under any Letter of Credit for
which the Issuing Lender is not reimbursed in full by the Borrower through a
Revolving Credit Loan or otherwise in accordance with the terms of this
Agreement, such L/C Participant shall pay to the Issuing Lender upon demand at
the Issuing Lender's address for notices specified herein an amount equal to
such L/C Participant's Commitment Percentage of the amount of such draft, or any
part thereof, which is not so reimbursed.
(b) Upon becoming aware of any amount required to be paid by any L/C
Participant to the Issuing Lender pursuant to Section 3.4(a) in respect of any
unreimbursed portion of any payment made by the Issuing Lender under any Letter
of Credit, the Issuing Lender shall notify each L/C Participant of the amount
and due date of such required payment and such L/C Participant shall pay to the
Issuing Lender the amount specified on the applicable due date. If any such
amount is paid to the Issuing Lender after the date such payment is due, such
L/C Participant shall pay to the Issuing Lender on demand, in addition to such
amount, the product of (i) such amount, times (ii) the daily average Federal
Funds Rate as determined by the Administrative Agent during the period from and
including the date such payment is due to the date on which such payment is
immediately available to the Issuing Lender, times (iii) a fraction the
numerator of which is the number of days that elapse during such period and the
denominator of which is 360. A certificate of the Issuing Lender with respect to
any amounts owing under this Section 3.4(b) shall be conclusive in the absence
of manifest error. With respect to payment to the Issuing Lender of the
unreimbursed amounts described in this Section 3.4(b), if the L/C Participants
receive notice that any such payment is due (A) prior to 1:00 p.m. (Charlotte
time) on any Business Day, such payment shall be due that Business Day, and (B)
after 1:00 p.m. (Charlotte time) on any Business Day, such payment shall be due
on the following Business Day.
(c) Whenever, at any time after the Issuing Lender has made payment under
any Letter of Credit and has received from any L/C Participant its Commitment
Percentage of such payment in accordance with this Section 3.4, the Issuing
Lender receives any payment related to such Letter of Credit (whether directly
from the Borrower or otherwise), or any payment of interest on account thereof,
the Issuing Lender will distribute to such L/C Participant its pro rata share
thereof; provided, that in the event that any such payment received by the
Issuing Lender shall be required to be returned by the Issuing Lender, such L/C
Participant shall return to the Issuing Lender the portion thereof previously
distributed by the Issuing Lender to it.
SECTION 3.5 Reimbursement Obligation of the Borrower. In the event of any
drawing under any Letter of Credit, the Borrower agrees to reimburse (either
with the proceeds of a Revolving Credit Loan as provided for in this Section 3.5
or with funds from other sources), in the same day funds, the Issuing Lender on
each date on which the Issuing Lender notifies the Borrower of the date and
amount of a draft paid under any Letter of Credit for the amount of (a) such
draft so paid and (b) any amounts referred to in Section 3.3(c) incurred by the
Issuing Lender in connection with such payment. Unless the Borrower shall
immediately notify the Issuing Lender that the Borrower intends to reimburse the
Issuing Lender for such drawing from other sources or funds, the Borrower shall
be deemed to have timely given a Notice of Borrowing to the Administrative Agent
requesting that the Lenders make a Revolving Credit Loan bearing interest at the
Base Rate on such date in the amount of (a) such draft so paid and (b) any
amounts referred to in Section 3.3(c) incurred by the Issuing Lender in
connection with such payment, and the Lenders shall make a Revolving Credit Loan
bearing interest at the Base Rate in such amount, the proceeds of which shall be
applied to reimburse the Issuing Lender for the amount of the related drawing
and costs and expenses. Each Lender acknowledges and agrees that its obligation
to fund a Revolving Credit Loan in accordance with this Section 3.5 to reimburse
the Issuing Lender for any draft paid under a Letter of Credit is absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including, without limitation, non-satisfaction of the conditions set forth in
Section 2.4(a) or Article V. If the Borrower has elected to pay the amount of
such drawing with funds from other sources and shall fail to reimburse the
Issuing Lender as provided above, the unreimbursed amount of such drawing shall
bear interest at the rate which would be payable on any outstanding Base Rate
Loans which were then overdue from the date such amounts become payable (whether
at stated maturity, by acceleration or otherwise) until payment in full.
SECTION 3.6 Obligations Absolute. The Borrower's obligations under this
Article III (including without limitation the Reimbursement Obligation) shall be
absolute and unconditional under any and all circumstances and irrespective of
any set-off, counterclaim or defense to payment which the Borrower may have or
have had against the Issuing Lender or any beneficiary of a Letter of Credit or
any other Person. The Borrower also agrees that the Issuing Lender and the L/C
Participants shall not be responsible for, and the Borrower's Reimbursement
Obligation under Section 3.5 shall not be affected by, among other things, the
validity or genuineness of documents or of any endorsements thereon, even though
such documents shall in fact prove to be invalid, fraudulent or forged, or any
dispute between or among the Borrower and any beneficiary of any Letter of
Credit or any other party to which such Letter of Credit may be transferred or
any claims whatsoever of the Borrower against any beneficiary of such Letter of
Credit or any such transferee. The Issuing Lender shall not be liable for any
error, omission, interruption or delay in transmission, dispatch or delivery of
any message or advice, however transmitted, in connection with any Letter of
Credit, except for errors or omissions caused by the Issuing Lender's gross
negligence or willful misconduct. The Borrower agrees that any action taken or
omitted by the Issuing Lender under or in connection with any Letter of Credit
or the related drafts or documents, if done in the absence of gross negligence
or willful misconduct, shall be binding on the Borrower and shall not result in
any liability of the Issuing Lender or any L/C Participant to the Borrower. The
responsibility of the Issuing Lender to the Borrower in connection with any
draft presented for payment under any Letter of Credit shall, in addition to any
payment obligation expressly provided for in such Letter of Credit, be limited
to determining that the documents (including each draft) delivered under such
Letter of Credit in connection with such presentment are in conformity with such
Letter of Credit.
SECTION 3.7 Effect of Application. To the extent that any provision of any
Application related to any Letter of Credit is inconsistent with the provisions
of this Article III, the provisions of this Article III shall apply.
ARTICLE IV
GENERAL LOAN PROVISIONS
SECTION 4.1 Interest.
(a) Interest Rate Options. Subject to the provisions of this Section 4.1,
at the election of the Borrower, (i) Revolving Credit Loans shall bear interest
at (A) the Base Rate plus the Applicable Margin as set forth in Section 4.1(c)
or (B) the LIBOR Rate plus the Applicable Margin as set forth in Section 4.1(c),
(ii) Alternative Currency Loans shall bear interest at the LIBOR Rate plus the
Applicable Margin as set forth in Section 4.1(c) and (iii) Swingline Loans shall
bear interest at the Base Rate plus the Applicable Margin as set forth in
Section 4.1(c); provided that the LIBOR Rate shall not be available until three
(3) Business Days after the Closing Date. The Borrower shall select the rate of
interest and Interest Period, if any, applicable to any Loan at the time a
Notice of Borrowing is given pursuant to Section 2.4 or 3.5 or at the time a
Notice of Conversion/Continuation is given pursuant to Section 4.2. Each Loan or
portion thereof bearing interest based on the Base Rate (including, without
limitation, each Swingline Loan) shall be a "Base Rate Loan" and each Loan or
portion thereof bearing interest based on the LIBOR Rate shall be a "LIBOR Rate
Loan." Any Revolving Credit Loan or any portion thereof as to which the Borrower
has not duly specified an interest rate as provided herein shall be deemed a
Base Rate Loan denominated in Dollars. Any Alternative Currency Loan or any
portion thereof as to which the Borrower has not duly specified an interest rate
as provided herein shall be deemed a LIBOR Rate Loan with an Interest Period of
one (1) month and shall be made four (4) Business Days after receipt of such
notice
(b) Interest Periods. In connection with each LIBOR Rate Loan, the
Borrower, by giving notice at the times described in Section 4.1(a), shall elect
an interest period (each, an "Interest Period") to be applicable to such Loan,
which Interest Period shall be a period of one (1), two (2), three (3), or six
(6) months (or, if available to all of the Lenders, nine (9) months or twelve
(12) months) with respect to each LIBOR Rate Loan; provided that:
(i) the Interest Period shall commence on the date of advance of or
conversion to any LIBOR Rate Loan and, in the case of immediately successive
Interest Periods, each successive Interest Period shall commence on the date on
which the immediately preceding Interest Period expires;
(ii) if any Interest Period would otherwise expire on a day that is
not a Business Day, such Interest Period shall expire on the next succeeding
Business Day; provided, that if any Interest Period with respect to a LIBOR Rate
Loan would otherwise expire on a day that is not a Business Day but is a day of
the month after which no further Business Day occurs in such month, such
Interest Period shall expire on the immediately preceding Business Day;
(iii) any Interest Period with respect to a LIBOR Rate Loan 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 relevant calendar
month at the end of such Interest Period;
(iv) no Interest Period shall extend beyond the Revolving Credit
Termination Date; and
(v) there shall be no more than six (6) Interest Periods in effect at
any time.
(c) Applicable Margin. The Applicable Margin provided for in Section 4.1(a)
with respect to any Loan (the "Applicable Margin") shall be based upon the table
set forth below and shall be determined and adjusted quarterly on the date (each
a "Calculation Date") ten (10) Business Days after the date by which the
Borrower provides an Officer's Compliance Certificate for the most recently
ended fiscal quarter of the Borrower; provided, however, that (a) the initial
Applicable Margin shall be based on Pricing Level II (as shown below) and shall
remain at Pricing Level II until the first Calculation Date occurring after the
Closing Date and, thereafter the Pricing Level shall be determined by reference
to the Leverage Ratio (as calculated pursuant to the formula set forth in
Section 9.1) as of the last day of the most recently ended fiscal quarter of the
Borrower preceding the applicable Calculation Date, and (b) if the Borrower
fails to provide the Officer's Compliance Certificate as required by Section 7.2
for the most recently ended fiscal quarter of the Borrower preceding the
applicable Calculation Date, the Applicable Margin from such Calculation Date
shall be based on Pricing Level I (as shown below) until such time as an
appropriate Officer's Compliance Certificate is provided, at which time the
Pricing Level shall be determined by reference to the Leverage Ratio as of the
last day of the most recently ended fiscal quarter of the Borrower preceding
such Calculation Date. The Applicable Margin shall be effective from one
Calculation Date until the next Calculation Date. Any adjustment in the
Applicable Margin shall be applicable to all Extensions of Credit then existing
or subsequently made or issued.
- --------------------------------------------------------------------------------------------------------------------
- ----------------------------- ----------------------------- ---------------------------- ---------------------------
Pricing Level Leverage Ratio LIBOR Rate Base Rate
Applicable Margin Applicable Margin
- ----------------------------- ----------------------------- ---------------------------- ---------------------------
- ----------------------------- ----------------------------- ---------------------------- ---------------------------
I Greater than 2.00 to 1.00 2.00% 1.00%
- ----------------------------- ----------------------------- ---------------------------- ---------------------------
- ----------------------------- ----------------------------- ---------------------------- ---------------------------
II Greater than 1.50 to 1.00
but less than or equal to
2.00 to 1.00 1.75% 0.75%
- ----------------------------- ----------------------------- ---------------------------- ---------------------------
- ----------------------------- ----------------------------- ---------------------------- ---------------------------
III Greater than 1.00 to 1.00
but less than or equal to
1.50 to 1.00 1.50% 0.50%
- ----------------------------- ----------------------------- ---------------------------- ---------------------------
- ----------------------------- ----------------------------- ---------------------------- ---------------------------
IV Less than or equal to 1.00
to 1.00 1.25% 0.25%
- ----------------------------- ----------------------------- ---------------------------- ---------------------------
(d) Default Rate. Subject to Section 11.3, at the discretion of the
Administrative Agent or as directed by the Required Lenders, upon the occurrence
and during the continuance of any Event of Default, (i) the Borrower shall no
longer have the option to request LIBOR Rate Loans (including, without
limitation, Alternative Currency Loans) or Swingline Loans, (ii) all outstanding
LIBOR Rate Loans shall bear interest at a rate per annum two percent (2%) in
excess of the rate then applicable to LIBOR Rate Loans until the end of the
applicable Interest Period and thereafter at a rate equal to two percent (2%) in
excess of the rate then applicable to Base Rate Loans, and (iii) all outstanding
Base Rate Loans and other Obligations arising hereunder or under any other Loan
Document shall bear interest at a rate per annum equal to two percent (2%) in
excess of the rate then applicable to Base Rate Loans or such other Obligations
arising hereunder or under any other Loan Document; provided that clauses (i),
(ii) and (iii) shall apply immediately upon the occurrence and during the
continuance of any Event of Default under Sections 11.1(a), 11.1(b), 11.1(i) and
11.1(j). Interest shall continue to accrue on the Notes after the filing by or
against the Borrower of any petition seeking any relief in bankruptcy or under
any act or law pertaining to insolvency or debtor relief, whether state, federal
or foreign.
(e) Interest Payment and Computation. Interest on each Base Rate Loan shall
be payable in arrears on the last Business Day of each calendar quarter
commencing March 31, 2003; and interest on each LIBOR Rate Loan shall be payable
on the last day of each Interest Period applicable thereto, and if such Interest
Period extends over three (3) months, at the end of each three (3) month
interval during such Interest Period. Interest on LIBOR Rate Loans and all fees
payable hereunder shall be computed on the basis of a 360-day year and assessed
for the actual number of days elapsed (except, to the extent that Pounds
Sterling is agreed upon as an Alternative Currency pursuant to the definition
thereof, for Alternative Currency Loans denominated in Pounds Sterling which
shall be computed on the basis of a 365/66-day year) and interest on Base Rate
Loans shall be computed on the basis of a 365/66-day year and assessed for the
actual number of days elapsed.
(f) Maximum Rate. In no contingency or event whatsoever shall the aggregate
of all amounts deemed interest hereunder or under any of the Notes charged or
collected pursuant to the terms of this Agreement or pursuant to any of the
Notes exceed the highest rate permissible under any Applicable Law which a court
of competent jurisdiction shall, in a final determination, deem applicable
hereto. In the event that such a court determines that the Lenders have charged
or received interest hereunder in excess of the highest applicable rate, the
rate in effect hereunder shall automatically be reduced to the maximum rate
permitted by Applicable Law and the Lenders shall at the Administrative Agent's
option (i) promptly refund to the Borrower any interest received by the Lenders
in excess of the maximum lawful rate or (ii) apply such excess to the principal
balance of the Obligations on a pro rata basis. It is the intent hereof that the
Borrower not pay or contract to pay, and that neither the Administrative Agent
nor any Lender receive or contract to receive, directly or indirectly in any
manner whatsoever, interest in excess of that which may be paid by the Borrower
under Applicable Law.
(g) Basis of Accrual. Subject to Section 1.3 hereof, if the basis of
accrual of interest or fees expressed in this Agreement with respect to the
currency of any state that becomes a Participating Member State, in judgment of
the Administrative Agent, shall not be available because interest rate quotes
for the applicable national currency unit are no longer provided, or shall be
inconsistent with any convention or practice in the London Interbank Market for
the basis of accrual of interest or fees in respect of the euro, such convention
or practice shall replace such expressed basis effective as of and from the date
on which such state becomes a Participating Member State; provided that if any
Loan in the currency of such state is outstanding immediately prior to such
date, such replacement shall take effect, with respect to such Loan, at the end
of the then current Interest Period.
SECTION 4.2 Notice and Manner of Conversion or Continuation of Loans.
Provided that no Default or Event of Default has occurred and is then
continuing, the Borrower shall have the option to (a) convert at any time
following the third Business Day after the Closing Date all or any portion of
any outstanding Base Rate Loans (other than Swingline Loans) in a principal
amount equal to $5,000,000 or any whole multiple of $1,000,000 in excess thereof
into one or more LIBOR Rate Loans denominated in Dollars, (b) upon the
expiration of any Interest Period, convert all or any part of its outstanding
LIBOR Rate Loans denominated in Dollars in a principal amount equal to
$3,000,000 or a whole multiple of $1,000,000 in excess thereof into Base Rate
Loans (other than Swingline Loans), (c) upon the expiration of any Interest
Period, continue any LIBOR Rate Loan denominated in Dollars in a principal
amount of $5,000,000 or any whole multiple of $1,000,000 in excess thereof as a
LIBOR Rate Loan denominated in Dollars or (d) upon the expiration of any
Interest Period, continue any LIBOR Rate Loan denominated in any Alternative
Currency in a principal amount of $2,000,000 or any whole multiple of $1,000,000
in excess thereof (based on the Alternative Currency Amount thereof) as a LIBOR
Rate Loan in the same Alternative Currency. Whenever the Borrower desires to
convert or continue Loans as provided above, the Borrower shall give the
Administrative Agent irrevocable prior written notice in the form attached as
Exhibit E (a "Notice of Conversion/Continuation") not later than 12:00 p.m.
(Charlotte time) four (4) Business Days (with respect to any Alternative
Currency Loan) and three (3) Business Days (with respect to any Loan denominated
in Dollars) before the day on which a proposed conversion or continuation of
such Loan is to be effective specifying (A) the Loans to be converted or
continued, and, in the case of any LIBOR Rate Loan to be converted or continued,
the last day of the Interest Period therefor, (B) the Permitted Currency in
which such Loan is denominated, (C) the effective date of such conversion or
continuation (which shall be a Business Day), (D) the principal amount of such
Loans to be converted or continued, and (E) the Interest Period to be applicable
to such converted or continued LIBOR Rate Loan. The Administrative Agent shall
promptly notify the Lenders of such Notice of Conversion/Continuation.
SECTION 4.3 Fees.
(a) Commitment Fee. Commencing on the Closing Date, the Borrower shall pay
to the Administrative Agent, for the account of the Lenders, a non-refundable
commitment fee at a rate per annum equal to the applicable rate based upon the
table set forth below (the "Commitment Fee Rate") on the average daily unused
portion of the Aggregate Commitment; provided that the amount of outstanding
Swingline Loans and Alternative Currency Loans shall not be considered usage of
the Revolving Credit Commitment for the purpose of calculating such commitment
fee. The commitment fee shall be payable in arrears on the last Business Day of
each calendar quarter during the term of this Agreement commencing March 31,
2003, and on the Revolving Credit Termination Date. Such commitment fee shall be
distributed by the Administrative Agent to the Lenders pro rata in accordance
with the Lenders' respective Commitment Percentages. The Commitment Fee Rate
shall be determined and adjusted quarterly on each Calculation Date; provided,
however, that (a) the initial Commitment Fee Rate shall be based on Pricing
Level II (as shown below) and shall remain at Pricing Level II until the first
Calculation Date occurring after the Closing Date and thereafter the Pricing
Level shall be determined by reference to the Leverage Ratio (as calculated
pursuant to the formula set forth in Section 9.1) as of the last day of the most
recently ended fiscal quarter of the Borrower preceding the applicable
Calculation Date, and (b) if the Borrower fails to provide the Officer's
Compliance Certificate as required by Section 7.2 for the most recently ended
fiscal quarter of the Borrower preceding the applicable Calculation Date, the
Commitment Fee Rate from such Calculation Date shall be based on Pricing Level I
(as shown below) until such time as an appropriate Officer's Compliance
Certificate is provided, at which time the Pricing Level shall be determined by
reference to the Leverage Ratio as of the last day of the most recently ended
fiscal quarter of the Borrower preceding such Calculation Date. The Commitment
Fee Rate shall be effective from one Calculation Date until the next Calculation
Date.
- --------------------- ---------------------------------------------------------------- -----------------------------
Pricing Level Leverage Ratio Commitment Fee Rate
===================== ================================================================ =============================
I Greater than 2.00 to 1.00 0.35%
- --------------------- ---------------------------------------------------------------- -----------------------------
- --------------------- ---------------------------------------------------------------- -----------------------------
II Greater than 1.50 to 1.00 but less than or equal to 2.00 to 0.30%
1.00
- --------------------- ---------------------------------------------------------------- -----------------------------
- --------------------- ---------------------------------------------------------------- -----------------------------
III Greater than 1.00 to 1.00 but less than or equal to 1.50 to 0.25%
1.00
- --------------------- ---------------------------------------------------------------- -----------------------------
- --------------------- ---------------------------------------------------------------- -----------------------------
IV Less than or equal to 1.00 to 1.00 0.20%
- --------------------- ---------------------------------------------------------------- -----------------------------
(b) Administrative Agent's and Other Fees. In order to compensate the
Administrative Agent for structuring and syndicating the Extensions of Credit
and for its obligations hereunder, the Borrower agrees to pay to the
Administrative Agent, for its account, the fees set forth in the separate fee
letter agreement executed by the Borrower and the Administrative Agent dated
November 1, 2002.
SECTION 4.4 Manner of Payment.
(a) Loans and Letters of Credit Denominated in Dollars. Each payment by the
Borrower on account of the principal of or interest on any Loan or Letter of
Credit denominated in Dollars or of any fee, commission or other amounts
(including the Reimbursement Obligation with respect to any Letter of Credit
denominated in Dollars) payable to the Lenders under this Agreement or any Note
(except as set forth in Section 4.4(b)) shall be made in Dollars not later than
1:00 p.m. (Charlotte time) on the date specified for payment under this
Agreement to the Administrative Agent at the Administrative Agent's Office for
the account of the Lenders (other than as set forth below) pro rata in
accordance with their respective Commitment Percentages (except as specified
below) in immediately available funds and shall be made without any set-off,
counterclaim or deduction whatsoever. Any payment received after such time but
before 2:00 p.m. (Charlotte time) on such day shall be deemed a payment on such
date for the purposes of Section 11.1, but for all other purposes shall be
deemed to have been made on the next succeeding Business Day. Any payment
received after 2:00 p.m. (Charlotte time) shall be deemed to have been made on
the next succeeding Business Day for all purposes. With respect to each Letter
of Credit denominated in Dollars, each payment to the Administrative Agent of
the Issuing Lender's fees or L/C Participants' commissions shall be made in like
manner, but for the account of the Issuing Lender or the L/C Participants, as
the case may be.
(b) Alternative Currency Loans. Each payment by the Borrower on account of
the principal of or interest on the Alternative Currency Loans shall be made in
such Alternative Currency not later than 11:00 a.m. (the time of the
Administrative Agent's Correspondent) on the date specified for payment under
this Agreement to the Administrative Agent's account with the Administrative
Agent's Correspondent for the account of the Alternative Currency Lender (other
than as set forth below) in immediately available funds, and shall be made
without any set-off, counterclaim or deduction whatsoever. Any payment received
after such time but before 12:00 noon (the time of the Administrative Agent's
Correspondent) on such day shall be deemed a payment on such date for the
purposes of Section 11.1, but for all other purposes shall be deemed to have
been made on the next succeeding Business Day. Any payment received after 12:00
noon (the time of the Administrative Agent's Correspondent) shall be deemed to
have been made on the next succeeding Business Day for all purposes.
(c) Pro Rata Treatment. Upon receipt by the Administrative Agent of each
such payment, the Administrative Agent shall distribute to each Lender at its
address for notices set forth herein its pro rata share of such payment in
accordance with such Lender's Commitment Percentage (except as specified below)
and shall wire advice of the amount of such credit to each Lender. Each payment
to the Administrative Agent of the Issuing Lender's fees or L/C Participants'
commissions shall be made in like manner, but for the account of the Issuing
Lender or the L/C Participants, as the case may be. Each payment to the
Administrative Agent of Administrative Agent's fees or expenses shall be made
for the account of the Administrative Agent. Each payment to the Administrative
Agent with respect to the Swingline Note (including, without limitation, the
Swingline Lender's fees or expenses) shall be made for the account of the
Swingline Lender. Each payment to the Administrative Agent with respect to the
Alternative Currency Note shall be made for the account of the Alternative
Currency Lender. Any amount payable to any Lender under Sections 4.10, 4.11,
4.12, 4.13 or 13.2 shall be paid to the Administrative Agent for the account of
the applicable Lender. Subject to Section 4.1(b)(ii), if any payment under this
Agreement or any Note shall be specified to be made upon a day which is not a
Business Day, it shall be made on the next succeeding day which is a Business
Day and such extension of time shall in such case be included in computing any
interest if payable along with such payment.
SECTION 4.5 Crediting of Payments and Proceeds. In the event that the
Borrower shall fail to pay any of the Obligations when due and the Obligations
have been accelerated pursuant to Section 11.2, all payments received by the
Lenders upon the Notes and the other Obligations and all net proceeds from the
enforcement of the Obligations shall be applied: (a) first to all expenses then
due and payable by the Borrower hereunder and under the other Loan Documents,
(b) then to all indemnity obligations then due and payable by the Borrower
hereunder and under the other Loan Documents, (c) then to all Administrative
Agent's and Issuing Lender's fees then due and payable, (d) then to all
commitment and other fees and commissions then due and payable, (e) then to
accrued and unpaid interest on the Swingline Note to the Swingline Lender and
the Alternative Currency Note to the Alternative Currency Lender (pro rata in
accordance with all such amounts due), (f) then to the principal amount
outstanding under the Swingline Note to the Swingline Lender and the Alternative
Currency Note to the Alternative Currency Lender (pro rata in accordance with
all such amounts due), (g) then to accrued and unpaid interest on the Revolving
Credit Notes, accrued and unpaid interest on the Reimbursement Obligation and
any Hedging Obligations (including any termination payments and any accrued and
unpaid interest thereon) (pro rata in accordance with all such amounts due), (h)
then to the principal amount of the Revolving Credit Notes and Reimbursement
Obligation (pro rata in accordance with all such amounts due) and (i) then to
the cash collateral account described in Section 11.2(b) hereof to the extent of
any L/C Obligations then outstanding, in that order.
SECTION 4.6 Adjustments. If any Lender (a "Benefited Lender") shall at any
time receive any payment of all or part of the Obligations owing to it, or
interest thereon, or if any Lender shall at any time receive any collateral in
respect to the Obligations owing to it (whether voluntarily or involuntarily, by
set-off or otherwise) (other than pursuant to Sections 4.8, 4.9, 4.10, 4.11 or
13.2 hereof) in a greater proportion than any such payment to and collateral
received by any other Lender, if any, in respect of the similar Obligations
owing to such other Lender, or interest thereon, such Benefited Lender shall
purchase for cash from the other Lenders such portion of each such other
Lender's Extensions of Credit, or shall provide such other Lenders with the
benefits of any such collateral, or the proceeds thereof, as shall be necessary
to cause such Benefited Lender to share the excess payment or benefits of such
collateral or proceeds ratably with each of the Lenders; provided, that if all
or any portion of such excess payment or benefits is thereafter recovered from
such Benefited Lender, such purchase shall be rescinded, and the purchase price
and benefits returned to the extent of such recovery, but without interest. The
Borrower agrees that each Lender so purchasing a portion of another Lender's
Extensions of Credit may exercise all rights of payment (including, without
limitation, rights of set-off) with respect to such portion as fully as if such
Lender were the direct holder of such portion.
SECTION 4.7 Nature of Obligations of Lenders Regarding Extensions of
Credit; Assumption by the Administrative Agent. The obligations of the Lenders
under this Agreement to make the Loans and issue or participate in Letters of
Credit are several and are not joint or joint and several. Unless the
Administrative Agent shall have received notice from a Lender prior to a
proposed borrowing date that such Lender will not make available to the
Administrative Agent such Lender's ratable portion of the amount to be borrowed
on such date (which notice shall not release such Lender of its obligations
hereunder), the Administrative Agent may assume that such Lender has made such
portion available to the Administrative Agent on the proposed borrowing date in
accordance with Section 2.4(b) and the Administrative Agent may, in reliance
upon such assumption, make available to the Borrower on such date a
corresponding amount. If such amount is made available to the Administrative
Agent on a date after such borrowing date, such Lender shall pay to the
Administrative Agent on demand an amount, until paid, equal to (a) with respect
to any Loan denominated in Dollars, the product of (i) the amount not made
available by such Lender in accordance with the terms hereof, times (ii) the
daily average Federal Funds Rate during such period as determined by the
Administrative Agent, times (iii) a fraction the numerator of which is the
number of days that elapse from and including such borrowing date to the date on
which such amount not made available by such Lender in accordance with the terms
hereof shall have become immediately available to the Administrative Agent and
the denominator of which is 360 and (b) with respect to any Loan denominated in
an Alternative Currency, the amount not made available by such Lender in
accordance with the terms hereof and interest thereon at a rate per annum equal
to the Administrative Agent's aggregate marginal cost (including the cost of
maintaining any required reserves or deposit insurance and of any fees,
penalties, overdraft charges or other costs or expenses incurred by the
Administrative Agent as a result of the failure to deliver funds hereunder) of
carrying such amount. A certificate of the Administrative Agent with respect to
any amounts owing under this Section 4.7 shall be conclusive, absent manifest
error. If such Lender's Commitment Percentage of such borrowing is not made
available to the Administrative Agent by such Lender within three (3) Business
Days after such borrowing date, the Administrative Agent shall be entitled to
recover such amount made available by the Administrative Agent with interest
thereon at the rate per annum applicable to Base Rate Loans hereunder, on
demand, from the Borrower. The failure of any Lender to make available its
Commitment Percentage of any Loan requested by the Borrower shall not relieve it
or any other Lender of its obligation, if any, hereunder to make its Commitment
Percentage of such Loan available on the borrowing date, but no Lender shall be
responsible for the failure of any other Lender to make its Commitment
Percentage of such Loan available on the borrowing date. Notwithstanding
anything set forth herein to the contrary, any Lender that fails to make
available its Commitment Percentage of any Loan shall not (a) have any voting or
consent rights under or with respect to any Loan Document or (b) constitute a
"Lender" (or be included in the calculation of Required Lenders hereunder) for
any voting or consent rights under or with respect to any Loan Document.
SECTION 4.8. Redenomination of Alternative Currency Loans
(a) Conversion to the Base Rate. If any Alternative Currency Loan is
required to bear interest based at the Base Rate rather than the LIBOR Rate
pursuant to Section 4.1(d), Section 4.10 or any other applicable provision
hereof, such Loan shall be funded in Dollars in an amount equal to the Dollar
Amount of such Alternative Currency Loan, all subject to the provisions of
Section 2.5(b). The Borrower shall reimburse the Alternative Currency Lender or
the Lenders, as applicable, upon any such conversion for any amounts required to
be paid under Section 4.11.
(b) Redenomination of Loans and Obligations. Subject to Section 1.3 hereof,
(i) any Loan to be denominated in the currency of the applicable Participating
Member State shall be made in the euro and (ii) any obligation of any party
under this Agreement or any other Loan Document which has been denominated in
the currency of a Participating Member State shall be redenominated into the
euro.
(c) Further Assurances. The terms and provisions of this Agreement will be
subject to such reasonable changes of construction as determined by the
Administrative Agent to reflect the implementation of the EMU in any
Participating Member State or any market conventions relating to the fixing
and/or calculation of interest being changed or replaced and to reflect market
practice at that time, and subject thereto, to put the Administrative Agent, the
Lenders and the Borrower in the same position, so far as possible, that they
would have been if such implementation had not occurred. In connection
therewith, the Borrower agrees, at the request of the Administrative Agent, at
the time of or at any time following the implementation of the EMU in any
Participating Member State or any market conventions relating to the fixing
and/or calculation of interest being changed or replaced, to enter into an
agreement amending this Agreement in such manner as the Administrative Agent
shall reasonably request.
SECTION 4.9. Regulatory Limitation. In the event, as a result of increases
in the value of Alternative Currencies against the Dollar or for any other
reason, the obligation of any of the Lenders to make Loans (taking into account
the Dollar Amount of the Obligations and all other indebtedness required to be
aggregated under 12 U.S.C.A. ss.84, as amended, the regulations promulgated
thereunder and any other Applicable Law) is determined by such Lender to exceed
its then applicable legal lending limit under 12 U.S.C.A. ss.84, as amended, and
the regulations promulgated thereunder, or any other Applicable Law, the amount
of additional Extensions of Credit such Lender shall be obligated to make or
issue or participate in hereunder shall immediately be reduced to the maximum
amount which such Lender may legally advance (as determined by such Lender), the
obligation of each of the remaining Lenders hereunder shall be proportionately
reduced, based on their applicable Commitment Percentages and, to the extent
necessary under such laws and regulations (as determined by each of the Lenders,
with respect to the applicability of such laws and regulations to itself), and
the Borrower shall reduce, or cause to be reduced, complying to the extent
practicable with the remaining provisions hereof, the Obligations outstanding
hereunder by an amount sufficient to comply with such maximum amounts.
SECTION 4.10 Changed Circumstances.
(a) Circumstances Affecting LIBOR Rate and Alternative Currency
Availability. If with respect to any Interest Period for any LIBOR Rate Loan,
the Administrative Agent, the Alternative Currency Lender or any Lender (after
consultation with the Administrative Agent) shall determine that (i) by reason
of circumstances affecting the foreign exchange and interbank markets generally,
deposits in eurodollars or an Alternative Currency in the applicable amounts are
not being quoted via Dow Jones Market Screen 3750 or the applicable Reuters
Screen Page or offered to the Administrative Agent or such Lender for such
Interest Period, (ii) a fundamental change has occurred in the foreign exchange
or interbank markets with respect to any Alternative Currency (including,
without limitation, changes in national or international financial, political or
economic conditions or currency exchange rates or exchange controls) or (iii) it
has become otherwise materially impractical for the Alternative Currency Lender
to make such Alternative Currency Loan, then the Administrative Agent shall
forthwith give notice thereof to the Borrower. Thereafter, until the
Administrative Agent notifies the Borrower that such circumstances no longer
exist, the obligation of the Lenders or the Alternative Currency Lender, as
applicable, to make LIBOR Rate Loans or Alternative Currency Loans, as
applicable, and the right of the Borrower to convert any Loan to or continue any
Loan as a LIBOR Rate Loan or an Alternative Currency Loan, as applicable, shall
be suspended, and the Borrower shall repay in full (or cause to be repaid in
full) the then outstanding principal amount of each such LIBOR Rate Loan or
Alternative Currency Loan, as applicable, together with accrued interest
thereon, on the last day of the then current Interest Period applicable to such
LIBOR Rate Loan or Alternative Currency Loan, as applicable, or convert the then
outstanding principal amount of each such LIBOR Rate Loan or Alternative
Currency Loan, as applicable, to a Base Rate Loan in Dollars as of the last day
of such Interest Period; provided that if the Borrower elects to make such
conversion, the Borrower shall pay to the Administrative Agent, the Alternative
Currency Lender and the Lenders any and all costs, fees and other expenses
incurred by the Administrative Agent, the Alternative Currency Lender and the
Lenders in effecting such conversion.
(b) Laws Affecting LIBOR Rate and Alternative Currency Availability. If,
after the date hereof, the introduction of, or any change in, any Applicable Law
or any change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any of the Lenders
(or any of their respective Lending Offices) with any request or directive
(whether or not having the force of law) of any such Governmental Authority,
central bank or comparable agency, shall make it unlawful or impossible for any
of the Lenders (or any of their respective Lending Offices) to honor its
obligations hereunder to make or maintain any LIBOR Rate Loan or any Alternative
Currency Loan, such Lender shall promptly give notice thereof to the
Administrative Agent and the Administrative Agent shall promptly give notice to
the Borrower, and the other Lenders. Thereafter, until the Administrative Agent
notifies the Borrower that such circumstances no longer exist, (i) the
obligations of the Lenders or the Alternative Currency Lender, as applicable, to
make LIBOR Rate Loans or Alternative Currency Loans, as applicable, and the
right of the Borrower to convert any Loan or continue any Loan as a LIBOR Rate
Loan or an Alternative Currency Loan, as applicable, shall be suspended and
thereafter the Borrower may select only Base Rate Loans hereunder, and (ii) if
any of the Lenders or the Alternative Currency Lender, as applicable, may not
lawfully continue to maintain a LIBOR Rate Loan or an Alternative Currency Loan,
as applicable, to the end of the then current Interest Period applicable thereto
as a LIBOR Rate Loan or Alternative Currency Loan, as applicable, the applicable
LIBOR Rate Loan or an Alternative Currency Loan, as applicable, shall
immediately be converted to a Base Rate Loan in Dollars for the remainder of
such Interest Period; provided that if the Borrower elects to make such
conversion, the Borrower shall pay to the Administrative Agent, the Alternative
Currency Lender and the Lenders any and all costs, fees and other expenses
incurred by the Administrative Agent, the Alternative Currency Lender and the
Lenders in effecting such conversion.
(c) Increased Costs. If, after the date hereof, the introduction of, or any
change in, any Applicable Law, or in the interpretation or administration
thereof by any Governmental Authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any of the
Lenders (or any of their respective Lending Offices) with any request or
directive (whether or not having the force of law) of such Governmental
Authority, central bank or comparable agency:
(i) shall (except as provided in Section 4.13(e)) subject any of the
Lenders (or any of their respective Lending Offices) to any tax, duty or other
charge with respect to any Note, Letter of Credit or Application or shall change
the basis of taxation of payments to any of the Lenders (or any of their
respective Lending Offices) of the principal of or interest on any Note, Letter
of Credit or Application or any other amounts due under this Agreement in
respect thereof (except for changes in the rate of franchise tax or tax on the
overall net income of any of the Lenders or any of their respective Lending
Offices imposed by the jurisdiction in which such Lender is organized or is or
should be qualified to do business or such Lending Office is located); provided
that the Borrower shall not be obligated to pay any amounts pursuant to this
Section 4.10(c)(i) to the extent that such amounts are duplicative of any
amounts paid by the Borrower pursuant to Section 4.13; or
(ii) shall impose, modify or deem applicable any reserve (including,
without limitation, any reserve imposed by the Board of Governors of the Federal
Reserve System), special deposit, insurance or capital or similar requirement
against assets of, deposits with or for the account of, or credit extended by
any of the Lenders (or any of their respective Lending Offices) or shall impose
on any of the Lenders (or any of their respective Lending Offices) or the
foreign exchange and interbank markets any other condition affecting any Note;
and the result of any of the foregoing events described in clause (i) or (ii)
above is to increase the costs to any of the Lenders of maintaining any LIBOR
Rate Loan or an Alternative Currency Loan, as applicable, or issuing or
participating in Letters of Credit or to reduce the yield or amount of any sum
received or receivable by any of the Lenders under this Agreement or under the
Notes in respect of a LIBOR Rate Loan or an Alternative Currency Loan, as
applicable, or Letter of Credit or Application, then such Lender shall promptly
notify the Administrative Agent, and the Administrative Agent shall promptly
notify the Borrower of such fact and demand compensation therefor and, within
fifteen (15) days after such notice by the Administrative Agent, the Borrower
shall pay to such Lender such additional amount or amounts as will compensate
such Lender or Lenders for such increased cost or reduction. The Administrative
Agent will promptly notify the Borrower of any event of which it has knowledge
which will entitle such Lender to compensation pursuant to this Section 4.10(c);
provided, that the Administrative Agent shall incur no liability whatsoever to
the Lenders or the Borrower in the event it fails to do so. The amount of such
compensation shall be determined, in the applicable Lender's reasonable
discretion, based upon the assumption that such Lender funded its Commitment
Percentage of the LIBOR Rate Loans or Alternative Currency Loans, as applicable,
in the London interbank market and using any reasonable attribution or averaging
methods which such Lender deems appropriate and practical. A certificate of such
Lender setting forth the basis for determining such amount or amounts necessary
to compensate such Lender shall be forwarded to the Borrower through the
Administrative Agent and shall be conclusively presumed to be correct save for
manifest error.
(d) Exchange Indemnification and Increased Costs. The Borrower shall, upon
demand from the Administrative Agent, pay to the Administrative Agent or any
applicable Lender, the amount of (i) any loss or cost or increased cost incurred
by the Administrative Agent or any applicable Lender, (ii) any reduction in any
amount payable to or in the effective return on the capital to the
Administrative Agent or any applicable Lender, (iii) any interest or any other
return, including principal, foregone by the Administrative Agent or any
applicable Lender as a result of the introduction of, change over to or
operation of the euro, or (iv) any currency exchange loss, that Administrative
Agent or any Lender sustains as a result of any payment being made by the
Borrower in a currency other than that originally extended to the Borrower. A
certificate of the Administrative Agent setting forth the basis for determining
such additional amount or amounts necessary to compensate the Administrative
Agent or the applicable Lender shall be conclusively presumed to be correct save
for manifest error.
SECTION 4.11 Indemnity. The Borrower hereby indemnifies each of the Lenders
against any loss or expense (including, without limitation, any foreign exchange
costs) which may arise or be attributable to each Lender's obtaining,
liquidating or employing deposits or other funds acquired to effect, fund or
maintain any Loan (a) as a consequence of any failure by the Borrower to make
any payment when due of any amount due hereunder in connection with a LIBOR Rate
Loan or an Alternative Currency Loan, (b) due to any failure of the Borrower to
borrow, continue or convert on a date specified therefor in a Notice of
Borrowing or Notice of Conversion/Continuation or (c) due to any payment,
prepayment or conversion of any LIBOR Rate Loan or any Alternative Currency Loan
on a date other than the last day of the Interest Period therefor. The amount of
such loss or expense shall be determined, in the applicable Lender's reasonable
discretion, based upon the assumption that such Lender funded its Commitment
Percentage of the LIBOR Rate Loans in the London interbank market and using any
reasonable attribution or averaging methods which such Lender deems appropriate
and practical. A certificate of such Lender setting forth the basis for
determining such amount or amounts necessary to compensate such Lender shall be
forwarded to the Borrower through the Administrative Agent and shall be
conclusively presumed to be correct save for manifest error.
SECTION 4.12 Capital Requirements. If either (a) the introduction of, or
any change in, or in the interpretation of, any Applicable Law or (b) compliance
with any guideline or request from any central bank or comparable agency or
other Governmental Authority (whether or not having the force of law), has or
would have the effect of reducing the rate of return on the capital of, or has
affected or would affect the amount of capital required to be maintained by, any
Lender or any corporation controlling such Lender as a consequence of, or with
reference to the Commitments and other commitments of this type, below the rate
which such Lender or such other corporation could have achieved but for such
introduction, change or compliance, then within five (5) Business Days after
written demand by any such Lender, the Borrower shall pay to such Lender from
time to time as specified by such Lender additional amounts sufficient to
compensate such Lender or other corporation for such reduction. A certificate as
to such amounts submitted to the Borrower and the Administrative Agent by such
Lender, shall, in the absence of manifest error, be presumed to be correct and
binding for all purposes.
SECTION 4.13 Taxes.
(a) Payments Free and Clear. Except as otherwise provided in Section
4.13(e), any and all payments by the Borrower hereunder or under the Notes or
the Letters of Credit shall be made free and clear of and without deduction for
any and all present or future taxes, levies, imposts, deductions, charges or
withholding, and all liabilities with respect thereto excluding, (i) in the case
of each Lender and the Administrative Agent, income and franchise taxes imposed
by the jurisdiction under the laws of which such Lender or the Administrative
Agent (as the case may be) is organized or is or should be qualified to do
business or any political subdivision thereof and (ii) in the case of each
Lender, income and franchise taxes imposed by the jurisdiction of such Lender's
Lending Office or any political subdivision thereof (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Borrower shall be required by law to
deduct or withhold any Taxes from or in respect of any sum payable hereunder or
under any Note or in respect of any Letter of Credit to any Lender or the
Administrative Agent, (A) except as otherwise provided in Section 4.13(e), the
sum payable shall be increased as may be necessary so that after making all
required deductions or withholdings (including deductions or withholdings
applicable to additional sums payable under this Section 4.13) such Lender or
the Administrative Agent (as the case may be) receives an amount equal to the
amount such party would have received had no such deductions or withholdings
been made, (B) the Borrower shall make such deductions or withholdings, (C) the
Borrower shall pay the full amount deducted to the relevant taxing authority or
other authority in accordance with Applicable Law, and (D) the Borrower shall
deliver to the Administrative Agent and such Lender evidence of such payment to
the relevant taxing authority or other Governmental Authority in the manner
provided in Section 4.13(d).
(b) Stamp and Other Taxes. In addition, the Borrower shall pay any present
or future stamp, registration, recordation or documentary taxes or any other
similar fees or charges or excise or property taxes, levies of the United States
or any state or political subdivision thereof or any applicable foreign
jurisdiction which arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement, the
Loans, the Letters of Credit, the other Loan Documents, or the perfection of any
rights or security interest in respect thereof (hereinafter referred to as
"Other Taxes").
(c) Indemnity. Except as otherwise provided in Section 4.13(e), the
Borrower shall indemnify each Lender and the Administrative Agent for the full
amount of Taxes and Other Taxes (including, without limitation, any Taxes and
Other Taxes imposed by any jurisdiction on amounts payable under this Section
4.13) paid by such Lender or the Administrative Agent (as the case may be) and
any liability (including penalties, interest and expenses) arising therefrom or
with respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted. Such indemnification shall be made within thirty (30) days
from the date such Lender or the Administrative Agent (as the case may be) makes
written demand therefor. Within sixty (60) days of the written request of the
Borrower, the Administrative Agent and each Lender shall execute and deliver
such certificates, forms or other documents which can be reasonably furnished
thereby consistent with the facts and which are reasonably necessary to assist
the Borrower in applying for refunds of such Taxes or Other Taxes.
(d) Evidence of Payment. Within thirty (30) days after the date of any
payment of Taxes or Other Taxes, the Borrower shall furnish to the
Administrative Agent, at its address referred to in Section 13.1, the original
or a certified copy of a receipt evidencing payment thereof or other evidence of
payment satisfactory to the Administrative Agent.
(e) Delivery of Tax Forms. To the extent required by Applicable Law to
reduce or eliminate withholding or payment of taxes, each Lender and the
Administrative Agent shall deliver to the Borrower, with a copy to the
Administrative Agent, on the Closing Date or concurrently with the delivery of
the relevant Assignment and Acceptance, as applicable, (i) two United States
Internal Revenue Service Forms W-9, Forms W-8ECI or Forms W-8BEN, as applicable
(or successor forms) properly completed and certifying in each case that such
Lender is entitled to a complete exemption from withholding or deduction for or
on account of any United States federal income taxes, and (ii) an Internal
Revenue Service Form W-8BEN or W-8ECI or successor applicable form, as the case
may be, to establish an exemption from United States backup withholding taxes.
Each such Lender further agrees to deliver to the Borrower with a copy to the
Administrative Agent, as applicable, two Form W-9, Form W-8BEN or W-8ECI, or
successor applicable forms or manner of certification, as the case may be, on or
before the date that any such form expires or becomes obsolete or after the
occurrence of any event requiring a change in the most recent form previously
delivered by it to the Borrower certifying in the case of a Form W-9, Form
W-8BEN or W-8ECI (or successor forms) that such Lender is entitled to receive
payments under this Agreement without deduction or withholding of any United
States federal income taxes (unless in any such case an event (including without
limitation any change in treaty, law or regulation) has occurred prior to the
date on which any such delivery would otherwise be required which renders such
forms inapplicable or the exemption to which such forms relate unavailable and
such Lender notifies the Borrower and the Administrative Agent that it is not
entitled to receive payments without deduction or withholding of United States
federal income taxes) and, in the case of a Form W-9, Form W-8BEN or W-8ECI,
establishing an exemption from United States backup withholding tax.
Notwithstanding anything in any Loan Document to the contrary, the Borrower
shall not be required to pay additional amounts to any Lender or the
Administrative Agent under Section 4.13 or Section 4.10(c), (i) if such Lender
or the Administrative Agent fails to comply with the requirements of this
Section 4.13(e), other than to the extent that such failure is due to a change
in law occurring after the date on which such Lender or the Administrative Agent
became a party to this Agreement or (ii) that are the result of such Lender's or
the Administrative Agent's gross negligence or willful misconduct, as
applicable.
(f) Survival. Without prejudice to the survival of any other agreement of
the Borrower hereunder, the agreements and obligations of the Borrower contained
in this Section 4.13 shall survive the payment in full of the Obligations and
the termination of the Commitments.
SECTION 4.14. Rounding and Other Consequential Changes. Subject to Section
1.3 hereof, without prejudice and in addition to any method of conversion or
rounding prescribed by any EMU Legislation and without prejudice to the
respective obligations of the Borrower to the Administrative Agent and the
Lenders and the Administrative Agent and the Lenders to the Borrower under or
pursuant to this Agreement, except as expressly provided in this Agreement, each
provision of this Agreement, including, without limitation, the right to combine
currencies to effect a set-off, shall be subject to such reasonable changes of
interpretation as the Administrative Agent may from time to time specify to be
necessary or appropriate to reflect the introduction of or change over to the
euro in Participating Member States.
SECTION 4.15. Replacement of Lenders.
(a) If any Lender requests compensation pursuant to Section 4.10 or Section
4.12, or if the Borrower is required to pay any additional amount to any Lender
or any Governmental Authority for the account of any Lender pursuant to Section
4.13, then such Lender shall use reasonable efforts to designate a different
lending office for funding or booking its Extensions of Credit hereunder or to
assign its rights and obligations hereunder to another of its offices, branches
or affiliates, if, in the judgment of such Lender, such designation or
assignment (A) would eliminate or reduce amounts payable pursuant to Section
4.10, Section 4.12 or Section 4.13, as the case may be, in the future and (B)
would not subject such Lender to any unreimbursed cost or expense and would not
otherwise be disadvantageous to such Lender.
(b) If any Lender requests compensation pursuant to Section 4.10 or Section
4.12, or if the Borrower is required to pay any additional amount to any Lender
or any Governmental Authority for the account of any Lender pursuant to Section
4.13, then the Borrower may, upon notice to such Lender and the Administrative
Agent, require such Lender to assign and delegate, without recourse (in
accordance with and subject to the restrictions contained in Section 13.10), all
of its interests, rights and obligations under this Agreement to an Eligible
Assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment); provided that (A) the Borrower
shall have received the prior written consent of the Administrative Agent, which
consent shall not unreasonably be withheld, (B) such Lender shall have received
payment of an amount equal to the outstanding principal of its Extensions of
Credit, accrued interest thereon, accrued fees, breakage costs and all other
amounts payable to it hereunder, from the assignee (to the extent of such
outstanding principal and accrued interest and fees) or the Borrower (in the
case of all other amounts) and (C) in the case of any such assignment resulting
from a claim for compensation pursuant to Section 4.10 or Section 4.12, such
assignment will result in a reduction in such compensation or payments. A Lender
shall not be required to make any such assignment and delegation if, prior
thereto, as a result of a waiver by such Lender or otherwise, the circumstances
entitling the Borrower to require such assignment and delegation cease to apply.
(c) To the extent that any Lender (a "Replaced Lender") is required to
assign all of its interests, rights and obligations under this Agreement to an
Eligible Assignee (a "Replacement Lender") pursuant to this Section 4.15, upon
the execution of all applicable assignment documents and the satisfaction of all
other conditions set forth herein, the Replacement Lender shall become a Lender
hereunder and the Replaced Lender shall cease to be a Lender hereunder, except
with respect to the indemnification provisions under this Agreement, which
provisions shall survive as to such Replaced Lender.
SECTION 4.16. Security. The Obligations shall be secured as provided in the
Security Documents.
ARTICLE V
CLOSING; CONDITIONS OF CLOSING AND BORROWING
SECTION 5.1 Closing. The closing shall take place at the offices of
Kennedy, Covington, Lobdell & Hickman, L.L.P. at 10:00 a.m. on January 22, 2003,
or on such other date and time as the parties hereto shall mutually agree.
SECTION 5.2 Conditions to Closing and Initial Extensions of Credit. The
obligation of the Lenders to close this Agreement and to make the initial Loan
or issue or participate in the initial Letter of Credit, if any, is subject to
the satisfaction of each of the following conditions:
(a) Executed Loan Documents. The following Loan Documents in form and
substance satisfactory to the Administrative Agent and each Lender:
(i) this Agreement,
(ii) the Revolving Credit Notes,
(iii) the Alternative Currency Note,
(iv) the Swingline Note,
(v) the Subsidiary Guaranty Agreement;
(vi) the Collateral Agreement;
(vii) the Mortgages; and
(viii) each other applicable Loan Document;
shall have been duly authorized, executed and delivered to the Administrative
Agent by the parties thereto, shall be in full force and effect and no Default
or Event of Default shall exist thereunder, and the Borrower shall have
delivered original counterparts thereof to the Administrative Agent.
(b) Closing Certificates; etc.
(i) Officer's Certificate of the Borrower. The Administrative Agent
shall have received a certificate from a Responsible Officer of the Borrower, in
form and substance satisfactory to the Administrative Agent, to the effect that
all representations and warranties of the Borrower and its Subsidiaries
contained in this Agreement and the other Loan Documents are true, correct and
complete; that the Borrower and its Subsidiaries are not in violation of any of
the covenants contained in this Agreement and the other Loan Documents; that,
after giving effect to the transactions contemplated by this Agreement, no
Default or Event of Default has occurred and is continuing; and that the
Borrower and its Subsidiaries have satisfied each of the closing conditions.
(ii) Certificate of Secretary of the Borrower and each Subsidiary
Guarantor. The Administrative Agent shall have received a certificate of the
secretary or assistant secretary of the Borrower and each Subsidiary Guarantor
certifying as to the incumbency and genuineness of the signature of each officer
of the Borrower or such Subsidiary Guarantor executing Loan Documents to which
it is a party and certifying that attached thereto is a true, correct and
complete copy of (A) the articles of incorporation of the Borrower or such
Subsidiary Guarantor and all amendments thereto, certified by the appropriate
Governmental Authority in its jurisdiction of incorporation, (B) the bylaws of
the Borrower or such Subsidiary Guarantor as in effect on the date of such
certifications, (C) resolutions duly adopted by the Board of Directors of the
Borrower and such Subsidiary Guarantor authorizing the borrowings contemplated
hereunder and the execution, delivery and performance of this Agreement and the
other Loan Documents to which it is a party, and (D) each certificate required
to be delivered pursuant to Section 5.2(b)(iii).
(iii) Certificates of Good Standing. The Administrative Agent shall
have received (A) certificates as of a recent date of the good standing of the
Borrower and each Subsidiary Guarantor under the laws of its jurisdiction of
organization and, to the extent requested by the Administrative Agent, each
other jurisdiction where the Borrower and each Subsidiary Guarantor is qualified
to do business and (B) a certificate of the relevant taxing authority of the
jurisdiction of organization of the Borrower and each Subsidiary Guarantor
certifying that such Person has filed required tax returns and owes no
delinquent taxes.
(iv) Opinions of Counsel. The Administrative Agent shall have received
favorable opinions of counsel to the Borrower and each Subsidiary Guarantor
addressed to the Administrative Agent and the Lenders with respect to the
Borrower, the Subsidiary Guarantors, the Loan Documents and such other matters
as the Lenders shall request.
(v) Tax Forms. The Administrative Agent shall have received copies of
the United States Internal Revenue Service forms required by Section 4.13(e)
hereof.
(c) Collateral.
(i) Filings and Recordings. All filings and recordations that are
necessary to perfect the security interests of the Lenders in the collateral
described in the Security Documents shall have been received by the
Administrative Agent and the Administrative Agent shall have received evidence
satisfactory to the Administrative Agent that upon such filings and recordations
such security interests constitute valid and perfected first priority Liens
therein (subject only to Liens permitted pursuant to Section 10.2); provided
that with regard to any Foreign Subsidiary whose capital stock is to be pledged
hereunder, (i) the Borrower may evidence compliance herewith by providing a
perfected first priority security interest (or the equivalent thereof pursuant
to the Applicable Laws and practices of any relevant foreign jurisdiction) in
the relevant indicia of ownership of such Foreign Subsidiary and (ii) the
Borrower or the applicable Domestic Subsidiary of the Borrower owning the
capital stock or other membership interests of such Foreign Subsidiary shall not
be required to pledge more than that percentage of all issued and outstanding
shares of all capital stock or other membership interests of such Foreign
Subsidiary the granting of a security interest in which shall not result in
material adverse tax consequences to the Borrower or such applicable Domestic
Subsidiary (it being acknowledged by the Borrower, the Lenders and the
Administrative Agent that, as of the Closing Date, such percentage required to
be pledged is sixty-five percent (65%)).
(ii) Pledged Collateral. The Administrative Agent shall have received
original stock certificates or other certificates (or the equivalent taking into
account the Applicable Laws and practices of any relevant foreign jurisdiction)
of each Material Domestic Subsidiary and, to the extent that the Applicable Laws
and practices of any relevant foreign jurisdiction provide for the issuance of
stock certificates or other certificates, each Foreign Subsidiary which is
directly owned by the Borrower or a Domestic Subsidiary of the Borrower
evidencing the capital stock or other ownership interests pledged pursuant to
the Collateral Agreement, together with an undated stock power for each such
certificate duly executed in blank by the registered owner thereof; provided
that with regard to any Foreign Subsidiary whose stock is to be pledged
hereunder, the Borrower may evidence compliance herewith by providing a
perfected first priority security interest (or the equivalent thereof pursuant
to the Applicable Laws and practices of any relevant foreign jurisdiction) in
the relevant indicia of ownership of such Foreign Subsidiary.
(iii) Foreign Security Interests and Filings. Notwithstanding the
provisions of the foregoing subsections (c)(i) and (ii), with regard to any
Foreign Subsidiary whose stock is to be pledged hereunder, (A) the Borrower
shall not be required to deliver a foreign pledge agreement unless reasonably
requested to do so by the Administrative Agent and (B) the Borrower shall not be
required to deliver an opinion of counsel as to the perfection, validity and
binding nature of the security interests created pursuant to such foreign pledge
agreement unless reasonably requested to do so by the Administrative Agent.
(iv) Lien Search. The Administrative Agent shall have received the
results of a Lien search (including a search as to judgments, pending litigation
and tax matters) made against the Borrower and the Subsidiary Guarantors under
the Uniform Commercial Code (or applicable judicial docket) as in effect in any
state in which any of its assets are located, indicating among other things that
its assets are free and clear of any Lien except for Liens permitted hereunder.
(v) Hazard and Liability Insurance. The Administrative Agent shall
have received certificates of insurance for the current policy year of the
Borrower, and, if requested by the Administrative Agent, copies (certified by a
Responsible Officer) of insurance policies in the form required under the
Security Documents and otherwise in form and substance reasonably satisfactory
to the Administrative Agent.
(vi) Title Insurance. The Administrative Agent shall have received a
marked-up commitment for a policy of title insurance, providing coverage in
amount satisfactory to the Administrative Agent, insuring Lenders' first
priority Liens and showing no Liens prior to Lenders' Liens other than for ad
valorem taxes not yet due and payable, with title insurance companies acceptable
to the Administrative Agent, on each parcel of real property subject to the
Mortgages, with the final title insurance policies being delivered within thirty
(30) days after the Closing Date. Further, the Borrower agrees to provide or
obtain any customary affidavits and indemnities as may be required or necessary
to obtain title insurance satisfactory to the Administrative Agent.
(vii) Title Exceptions. The Administrative Agent shall have received
copies of all recorded documents creating exceptions to the title policies
referred to in Section 5.2(c)(vi).
(viii) Matters Relating to Flood Hazard Properties. The Administrative
Agent shall have received a certification form of a certification from the
National Research Center, or any successor agency thereto, regarding each parcel
of real property securing any portion of the Obligations.
(ix) Surveys. The Administrative Agent shall have received copies of
as-built surveys prepared on or prior to the Closing Date of each parcel of real
property subject to the Mortgages certified by a registered engineer or land
surveyor, which surveys shall be in form and substance sufficient to permit the
issuance of the final title policy without exception for matters which would be
revealed by current, accurate as-built surveys of such parcels of real property.
To the extent that any such survey was not prepared within the sixty (60) day
period immediately preceding the Closing Date, such survey shall be accompanied
by an affidavit (a "Survey Affidavit") of an authorized signatory of the owner
of such property stating that there have been no improvements or encroachments
to the property since the date of the respective survey such that the existing
survey is no longer accurate. Such survey shall show the area of such property,
all boundaries of the land with courses and distances indicated, including chord
bearings and arc and chord distances for all curves, and shall show dimensions
and locations of all easements, private drives, roadways, and other facts
materially affecting such property, and shall show such other details as the
Administrative Agent may reasonably request, including without limitation, any
encroachment (and the extent thereof in feet and inches) onto the property or by
any of the improvements on the property upon adjoining land or upon any easement
burdening the property; any improvements, to the extent constructed, and the
relation of the improvements by distances to the boundaries of the property, to
any easements burdening the property, and to the established building lines and
the street lines; and if improvements are existing, the locations of all
utilities serving the improvement.
(x) Environmental Assessments. The Administrative Agent shall have
received a copy of an existing or updated Phase I environmental assessment for
each parcel of real property subject to the Mortgages and such other
environmental reports reasonably requested by the Administrative Agent regarding
each such parcel of real property showing no environmental conditions or
liabilities in violation of Environmental Laws that could reasonably be expected
to have a Material Adverse Effect.
(xi) Other Real Property Information. The Administrative Agent shall
have received such other certificates, documents and information as are
reasonably requested by the Lenders, each in form and substance satisfactory to
the Administrative Agent.
(d) Consents; Defaults.
(i) Governmental and Third Party Approvals. The Borrower shall have
obtained all necessary material approvals, authorizations and consents of any
Person and of all Governmental Authorities and courts having jurisdiction with
respect to the transactions contemplated by this Agreement and the other Loan
Documents.
(ii) No Injunction, Etc. No action, suit, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any Governmental Authority to enjoin, restrain, or prohibit, or to obtain
substantial damages in respect of, or which is related to or arises out of, this
Agreement or the other Loan Documents or the consummation by the Borrower or any
of its Subsidiaries of the transactions contemplated hereby or thereby, or which
would be reasonably likely to have a Material Adverse Effect.
(iii) No Event of Default. No Default or Event of Default shall have
occurred and be continuing.
(e) Financial Matters.
(i) Financial Statements. The Administrative Agent shall have received
the audited Consolidated financial statements of the Borrower and its
Subsidiaries for each of the Borrower's Fiscal Years ending in 2001, 2000 and
1999, each as filed with the Securities and Exchange Commission and prepared in
accordance with GAAP.
(ii) Financial Condition Certificate. The Borrower shall have
delivered to the Administrative Agent a certificate, in form and substance
satisfactory to the Administrative Agent, and certified as accurate by a
Responsible Officer, that (A) the Borrower and each of its Subsidiaries are each
Solvent as of the Closing Date, (B) the payables of the Borrower and each of its
Subsidiaries are current and not past due as of the Closing Date (except for
those payables which are being contested in good faith by appropriate
proceedings diligently conducted and for which adequate reserves have been
provided in accordance with GAAP), (C) attached thereto are calculations
evidencing compliance on a pro forma basis with the covenants contained in
Article IX hereof as the most recent quarterly financial statements of the
Borrower and its Subsidiaries (provided that, with respect to Section 9.3, the
Interest Coverage Ratio requirement shall be 2.00 to 1.0 for the purpose of this
Section 5.2(e)(ii)), (D) attached thereto are calculations setting forth the
total net assets of each Domestic Subsidiary of the Borrower as the most recent
quarterly financial statements of the Borrower and its Subsidiaries for the
purpose of determining which Domestic Subsidiaries of the Borrower are Material
Domestic Subsidiaries on the Closing Date and (E) the financial projections
previously delivered to the Administrative Agent represent the good faith
estimates (utilizing reasonable assumptions) of the financial condition and
operations of the Borrower and its Subsidiaries as of the date thereof.
(iii) Payment at Closing; Fee Letters. The Borrower shall have paid to
the Administrative Agent and the Lenders the fees set forth or referenced in
Section 4.3 and any other accrued and unpaid fees or commissions due hereunder
(including, without limitation, reasonable legal fees and expenses) and to any
other Person such amount as may be due thereto in connection with the
transactions contemplated hereby, including all taxes, fees and other charges in
connection with the execution, delivery, recording, filing and registration of
any of the Loan Documents.
(f) Miscellaneous.
(i) Notice of Borrowing. The Administrative Agent shall have received
(A) a Notice of Borrowing, as applicable, from the Borrower in accordance with
Section 2.4(a) and (B) a Notice of Account Designation from the Borrower in
accordance with Section 2.4(b) specifying the account or accounts to which the
proceeds of any Loans made after the Closing Date are to be disbursed.
(ii) Existing Facility. The Existing Facility shall be repaid in full
and terminated, and the Administrative Agent shall have received a pay-off
letter in form and substance satisfactory to it evidencing such repayment and
termination.
(iii) Miscellaneous Matters. The Administrative Agent shall have
received such information as it may have requested from the Borrower and its
Subsidiaries relating to litigation, tax, accounting, labor, insurance, pension
liabilities (actual or contingent), leases of real property, agreements
evidencing Debt, ownership of assets by the Borrower or any of its Subsidiaries,
environmental matters, contingent liabilities and management of the Borrower and
its Subsidiaries (including, as applicable, copies of all documents, instruments
and agreements relating to such subjects), and such information shall be in form
and substance satisfactory to Administrative Agent.
(iv) Other Documents. All opinions, certificates and other instruments
and all proceedings in connection with the transactions contemplated by this
Agreement shall be satisfactory in form and substance to the Administrative
Agent. The Administrative Agent shall have received copies of all other
documents, certificates and instruments reasonably requested thereby with
respect to the transactions contemplated by this Agreement.
SECTION 5.3 Conditions to All Extensions of Credit. The obligations of the
Lenders to make any Extensions of Credit (including the initial Extension of
Credit), convert or continue any Loan and/or the Issuing Lender to issue or
extend any Letter of Credit are subject to the satisfaction of the following
conditions precedent on the relevant borrowing, conversion, continuation,
issuance or extension date:
(a) Continuation of Representations and Warranties. The representations and
warranties contained in Article VI shall be true and correct on and as of such
borrowing, conversion, continuation, issuance or extension date with the same
effect as if made on and as of such date, except for any representation and
warranty made as of an earlier date, which representation and warranty shall
remain true and correct as of such earlier date.
(b) No Existing Default. No Default or Event of Default shall have occurred
and be continuing (i) on the borrowing, conversion or continuation date with
respect to such Loan or after giving effect to the Loans to be made, converted
or continued on such date or (ii) on the issue date with respect to such Letter
of Credit or after giving effect to the issuance or extension of such Letter of
Credit on such date.
(c) Notices. The Administrative Agent shall have received a Notice of
Borrowing or Notice of Conversion/Continuation, as applicable, from the Borrower
in accordance with Section 2.4(a).
(d) Compliance with Borrowing Limits. The Borrower shall have demonstrated
that compliance with Section 2.5(b) (i) on the borrowing, conversion or
continuation date with respect to such Loan or after giving effect to the Loans
to be made, converted or continued on such date or (ii) on the issuance or
extension date with respect to such Letter of Credit or after giving effect to
the issuance or extension of such Letter of Credit on such date.
(e) Additional Documents. The Administrative Agent shall have received each
additional document, instrument, legal opinion or other item reasonably
requested by it.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
SECTION 6.1 Representations and Warranties. To induce the Administrative
Agent and the Lenders to enter into this Agreement and to induce the Lenders to
make Extensions of Credit, the Borrower hereby represents and warrants to the
Administrative Agent and Lenders both before and after giving effect to the
transactions contemplated hereunder that:
(a) Organization; Power; Qualification. Each of the Borrower and its
Subsidiaries (i) is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or formation, (ii) has the
power and authority to own its properties and to carry on its business as now
being and hereafter proposed to be conducted and (iii) is duly qualified and
authorized to do business in each jurisdiction in which the character of its
properties or the nature of its business requires such qualification and
authorization, except where the failure to be so qualified could not reasonably
be expected to have a Material Adverse Effect. The jurisdictions in which the
Borrower and its Subsidiaries are organized and qualified to do business as of
the Closing Date are described on Schedule 6.1(a).
(b) Ownership. Each Subsidiary of the Borrower (including each Material
Domestic Subsidiary) as of the Closing Date is listed on Schedule 6.1(b). As of
the Closing Date, the capitalization of the Borrower and its Subsidiaries
consists of the number of shares, authorized, issued and outstanding, of such
classes and series, with or without par value, described on Schedule 6.1(b). All
outstanding shares have been duly authorized and validly issued and are fully
paid and nonassessable, with no personal liability attaching to the ownership
thereof, and not subject to any preemptive or similar rights. The shareholders
of the Subsidiaries of the Borrower and the number of shares owned by each as of
the Closing Date are described on Schedule 6.1(b). As of the Closing Date, there
are no outstanding stock purchase warrants, subscriptions, options, securities,
instruments or other rights of any type or nature whatsoever, which are
convertible into, exchangeable for or otherwise provide for or permit the
issuance of capital stock of the Borrower or its Subsidiaries, except pursuant
to plans and agreements described in the Borrower's periodic filings with the
SEC.
(c) Authorization of Agreement, Loan Documents and Borrowing. Each of the
Borrower and its Subsidiaries has the right, power and authority and has taken
all necessary corporate and other organizational action to authorize the
execution, delivery and performance of this Agreement and each of the other Loan
Documents to which it is a party in accordance with their respective terms. This
Agreement and each of the other Loan Documents have been duly executed and
delivered by the duly authorized officers of the Borrower and each of its
Subsidiaries party thereto, and each such document constitutes the legal, valid
and binding obligation of the Borrower or its Subsidiary party thereto,
enforceable in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar state
or federal debtor relief laws from time to time in effect which affect the
enforcement of creditors' rights in general and the availability of equitable
remedies.
(d) Compliance of Agreement, Loan Documents and Borrowing with Laws, Etc.
The execution, delivery and performance by the Borrower and its Subsidiaries of
the Loan Documents to which each such Person is a party, in accordance with
their respective terms, the Extensions of Credit hereunder and the transactions
contemplated hereby do not and will not, by the passage of time, the giving of
notice or otherwise, (i) require any material Governmental Approval or violate
any material Applicable Law relating to the Borrower or any of its Subsidiaries,
(ii) conflict with, result in a breach of or constitute a default under the
articles of incorporation, bylaws or other organizational documents of the
Borrower or any of its Subsidiaries or any material indenture, agreement or
other instrument to which such Person is a party or by which any of its
properties may be bound or any Governmental Approval relating to such Person,
(iii) result in or require the creation or imposition of any material Lien upon
or with respect to any property now owned or hereafter acquired by such Person
other than Liens arising under the Loan Documents or (iv) require any material
consent or material authorization of, material filing with, or other material
act in respect of, an arbitrator or Governmental Authority and no material
consent of any other Person is required in connection with the execution,
delivery, performance, validity or enforceability of this Agreement.
(e) Compliance with Law; Governmental Approvals. Each of the Borrower and
its Subsidiaries (i) has all Governmental Approvals required by any Applicable
Law for it to conduct its business, each of which is in full force and effect,
is final and not subject to review on appeal and is not the subject of any
pending or, to its knowledge, threatened attack by direct or collateral
proceeding, (ii) is in compliance in all material respects with each
Governmental Approval applicable to it and in compliance with all other
Applicable Laws relating to it or any of its respective properties and (iii) has
timely filed all material reports, documents and other materials required to be
filed by it under all Applicable Laws with any Governmental Authority and has
retained all material records and documents required to be retained by it under
Applicable Law.
(f) Tax Returns and Payments. Each of the Borrower and its Subsidiaries has
duly filed or caused to be filed all federal tax returns, all state tax returns
and all other material tax returns (including material local tax returns)
required by Applicable Law to be filed, and has paid, or made adequate provision
for the payment of, all federal taxes, state taxes and all other material taxes
(including material local taxes), assessments and governmental charges or levies
upon it and its property, income, profits and assets which are 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. Such returns accurately reflect in all material respects
all liability for taxes of the Borrower and its Subsidiaries for the periods
covered thereby. There is no ongoing audit or examination or, to the knowledge
of the Borrower, other investigation by any Governmental Authority of the tax
liability of the Borrower and its Subsidiaries, except as could not reasonably
be expected to have a Material Adverse Effect. No Governmental Authority has
asserted any Lien or other claim against the Borrower or any Subsidiary thereof
with respect to unpaid taxes which has not been discharged or resolved, except
unpaid taxes which are being contested in good faith by appropriate proceedings
diligently conducted and for which adequate reserves have been provided in
accordance with GAAP. The charges, accruals and reserves on the books of the
Borrower and any of its Subsidiaries in respect of federal, state, local and
other taxes for all Fiscal Years and portions thereof since the organization of
the Borrower and any of its Subsidiaries are in the judgment of the Borrower
adequate, and the Borrower does not anticipate any additional material taxes or
material assessments for any of such years with respect to the Borrower and its
Subsidiaries taken as a whole.
(g) Intellectual Property Matters. Each of the Borrower and its
Subsidiaries owns or possesses rights to use all franchises, licenses,
copyrights, copyright applications, patents, patent rights or licenses, patent
applications, trademarks, trademark rights, service marks, service mark rights,
trade names, trade name rights, copyrights and rights with respect to the
foregoing which are required to conduct its business, except for those, the
failure of which to own or possess, could not reasonably be expected to have a
Material Adverse Effect. To its knowledge, (i) no event has occurred which
permits, or after notice or lapse of time or both would permit, the revocation
or termination of any such rights and (ii) neither the Borrower nor any
Subsidiary thereof is liable to any Person for infringement under Applicable Law
with respect to any such rights as a result of its business operations, in each
case which could reasonably be expected to have a Material Adverse Effect.
(h) Environmental Matters.
(i) The properties owned, leased or operated by the Borrower and its
Subsidiaries now or in the past do not contain, and to their knowledge have not
previously contained, any Hazardous Materials in amounts or concentrations which
(A) constitute or constituted a violation of applicable Environmental Laws or
(B) could give rise to liability under applicable Environmental Laws, in each
case the result of which could reasonably be expected to have a Material Adverse
Effect;
(ii) The Borrower, each Subsidiary and such properties and all
operations conducted in connection therewith are in compliance, and have been in
compliance, with all applicable Environmental Laws, and there is no
contamination at, under or about such properties or such operations which could
interfere with the continued operation of such properties or impair the fair
saleable value thereof, except to the extent any such non-compliance or
contamination could not reasonably be expected to have a Material Adverse
Effect;
(iii) Neither the Borrower nor any Subsidiary thereof has received any
notice of violation, alleged violation, non-compliance, liability or potential
liability regarding environmental matters, Hazardous Materials, or compliance
with Environmental Laws, nor does the Borrower or any Subsidiary thereof have
knowledge or reason to believe that any such notice will be received or is being
threatened, except as could not reasonably be expected to have a Material
Adverse Effect;
(iv) Hazardous Materials have not been transported or disposed of by
the Borrower or any of its Subsidiaries or, to the Borrower's knowledge, by any
other Person to or from the properties owned, leased or operated by the Borrower
and its Subsidiaries in violation of, or in a manner or to a location which
could give rise to liability under, Environmental Laws, nor have any Hazardous
Materials been generated, treated, stored or disposed of by the Borrower or any
of its Subsidiaries or, to the Borrower's knowledge, by any other Person at, on
or under any of such properties in violation of, or in a manner that could give
rise to liability under, any applicable Environmental Laws that could reasonably
be expected to have a Material Adverse Effect;
(v) No judicial proceedings or governmental or administrative action
is pending, or, to the knowledge of the Borrower, threatened, under any
Environmental Law to which the Borrower or any Subsidiary thereof is or will be
named as a potentially responsible party with respect to such properties or
operations conducted in connection therewith, nor are there any consent decrees
or other decrees, consent orders, administrative orders or other orders, or
other administrative or judicial requirements outstanding under any
Environmental Law with respect to Borrower, any Subsidiary or such properties or
such operations that could reasonably be expected to have a Material Adverse
Effect; and
(vi) There has been no release, or to the Borrower's knowledge, threat
of release, of Hazardous Materials at or from properties owned, leased or
operated by the Borrower or any Subsidiary, now or in the past, in violation of
or in amounts or in a manner that could give rise to liability under
Environmental Laws that could reasonably be expected to have a Material Adverse
Effect.
(i) ERISA.
(i) As of the Closing Date, neither the Borrower nor any ERISA
Affiliate maintains or contributes to, or has any obligation under, any Employee
Benefit Plans other than those identified on Schedule 6.1(i);
(ii) The Borrower and each ERISA Affiliate is in material
compliance with all applicable provisions of ERISA and the regulations and
published interpretations thereunder with respect to all Employee Benefit Plans
except for any required amendments for which the remedial amendment period as
defined in Section 401(b) of the Code has not yet expired and except where a
failure to so comply could not reasonably be expected to have a Material Adverse
Effect. Each Employee Benefit Plan that is intended to be qualified under
Section 401(a) of the Code has been determined by the Internal Revenue Service
to be so qualified, and each trust related to such plan has been determined to
be exempt under Section 501(a) of the Code except for such plans that have not
yet received determination letters but for which the remedial amendment period
for submitting a determination letter has not yet expired. No liability has been
incurred by the Borrower or any ERISA Affiliate which remains unsatisfied for
any taxes or penalties with respect to any Employee Benefit Plan or any
Multiemployer Plan except for a liability that could not reasonably be expected
to have a Material Adverse Effect;
(iii) As of the Closing Date, no Pension Plan has been
terminated, nor has any accumulated funding deficiency (as defined in Section
412 of the Code) been incurred (without regard to any waiver granted under
Section 412 of the Code), nor has any funding waiver from the Internal Revenue
Service been received or requested with respect to any Pension Plan, nor has the
Borrower or any ERISA Affiliate failed to make any contributions or to pay any
amounts due and owing as required by Section 412 of the Code, Section 302 of
ERISA or the terms of any Pension Plan prior to the due dates of such
contributions under Section 412 of the Code or Section 302 of ERISA, nor has
there been any event requiring any disclosure under Section 4041(c)(3)(C) or
4063(a) of ERISA with respect to any Pension Plan;
(iv) Except where the failure of any of the following
representations to be correct in all material respects could not reasonably be
expected to have a Material Adverse Effect, neither the Borrower nor any ERISA
Affiliate has: (A) engaged in a nonexempt prohibited transaction described in
Section 406 of the ERISA or Section 4975 of the Code, (B) incurred any liability
to the PBGC which remains outstanding other than the payment of premiums and
there are no premium payments which are due and unpaid, (C) failed to make a
required contribution or payment to a Multiemployer Plan, or (D) failed to make
a required installment or other required payment under Section 412 of the Code;
(v) No Termination Event has occurred or is reasonably expected
to occur; and
(vi) Except where the failure of any of the following
representations to be correct in all material respects could not reasonably be
expected to have a Material Adverse Effect, no proceeding, claim (other than a
benefits claim in the ordinary course of business), lawsuit and/or investigation
is existing or, to the best knowledge of the Borrower after due inquiry,
threatened concerning or involving any (A) employee welfare benefit plan (as
defined in Section 3(1) of ERISA) currently maintained or contributed to by the
Borrower or any ERISA Affiliate, (B) Pension Plan or (C) Multiemployer Plan.
(j) Margin Stock. Neither the Borrower nor any Subsidiary thereof is
engaged principally or as one of its activities in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin stock" (as each
such term is defined or used, directly or indirectly, in Regulation U of the
Board of Governors of the Federal Reserve System). No part of the proceeds of
any of the Loans or Letters of Credit will be used for purchasing or carrying
margin stock or for any purpose which violates, or which would be inconsistent
with, the provisions of Regulation T, U or X of such Board of Governors.
(k) Government Regulation. Neither the Borrower nor any Subsidiary
thereof is an "investment company" or a company "controlled" by an "investment
company" (as each such term is defined or used in the Investment Company Act of
1940, as amended) and neither the Borrower nor any Subsidiary thereof is, or
after giving effect to any Extension of Credit will be, subject to regulation
under the Public Utility Holding Company Act of 1935 or the Interstate Commerce
Act, each as amended, or any other Applicable Law which limits its ability to
incur or consummate the transactions contemplated hereby.
(l) Employee Relations. Each of the Borrower and its Subsidiaries has
a stable work force in place and is not, as of the Closing Date, party to any
collective bargaining agreement nor has any labor union been recognized as the
representative of its employees except as set forth on Schedule 6.1(l). The
Borrower knows of no pending, threatened or contemplated strikes, work stoppage
or other collective labor disputes involving its employees or those of its
Subsidiaries that could reasonably be expected to have a Material Adverse
Effect.
(m) Burdensome Provisions. Neither the Borrower nor any Subsidiary
thereof is a party to any indenture, agreement, lease or other instrument, or
subject to any corporate or partnership restriction, Governmental Approval or
Applicable Law which could be reasonably expected to have a Material Adverse
Effect. No Subsidiary is party to any agreement or instrument or otherwise
subject to any restriction or encumbrance that restricts or limits its ability
to make dividend payments or other distributions in respect of its capital stock
to the Borrower or any Subsidiary or to transfer any of its assets or properties
to the Borrower or any other Subsidiary in each case other than existing under
or by reason of the Loan Documents or Applicable Law.
(n) Financial Statements. The (i) audited Consolidated balance sheet
of the Borrower and its Subsidiaries as of December 31, 2001 and the related
audited statements of income and retained earnings and cash flows for the Fiscal
Year then ended and (ii) unaudited Consolidated balance sheet of the Borrower
and its Subsidiaries as of September 30, 2002 and related unaudited interim
statements of income and retained earnings, in each case including the
accompanying notes, copies of which have been furnished to the Administrative
Agent and each Lender, are complete and correct and fairly present on a
Consolidated basis the financial position, results of operations and cash flows
of the Borrower and its Subsidiaries as of such dates and for the periods then
ended (other than customary, year end adjustments for unaudited financial
statements). All such financial statements, including the related schedules and
notes thereto, have been prepared in accordance with GAAP. The Borrower and its
Subsidiaries have no Debt, obligation or other unusual forward or long-term
commitment which is not fairly reflected in the foregoing financial statements
or in the notes thereto.
(o) No Material Adverse Change. Except as publicly disclosed by the
Borrower prior to the Closing Date, since September 30, 2002, there has been no
material adverse change in the properties, assets, liabilities (actual or
contingent), business, operations, prospects, or condition (financial or
otherwise) of the Borrower and its Subsidiaries, taken as a whole, and no event
has occurred or condition arisen that could reasonably be expected to have a
Material Adverse Effect.
(p) Solvency. As of the Closing Date and after giving effect to each
Extension of Credit made hereunder, the Borrower and each of its Subsidiaries
will be Solvent.
(q) Titles to Properties. Each of the Borrower and its Subsidiaries
has such title to the real property owned or leased by it as is necessary or
desirable to the conduct of its business and valid and legal title to all of its
personal property and assets, except those which have been disposed of by the
Borrower or its Subsidiaries subsequent to such date which dispositions have
been in the ordinary course of business or as otherwise expressly permitted
hereunder.
(r) Liens. None of the properties and assets of the Borrower or any
Subsidiary thereof is subject to any Lien, except Liens permitted pursuant to
Section 10.2. No financing statement under the Uniform Commercial Code of any
state which names the Borrower or any Subsidiary thereof or any of their
respective trade names or divisions as debtor and which has not been terminated,
has been filed in any state or other jurisdiction and neither the Borrower nor
any Subsidiary thereof has signed any such financing statement or any security
agreement authorizing any secured party thereunder to file any such financing
statement, except to perfect those Liens permitted by Section 10.2 hereof.
(s) Debt and Guaranty Obligations. Schedule 6.1(s) is a complete and
correct listing of all Debt and Guaranty Obligations of the Borrower and its
Subsidiaries as of the Closing Date in excess of $3,000,000. The Borrower and
its Subsidiaries have performed and are in compliance with all of the terms of
such Debt and Guaranty Obligations and all instruments and agreements relating
thereto, and no default or event of default, or event or condition which with
notice or lapse of time or both would constitute such a default or event of
default on the part of the Borrower or any of its Subsidiaries exists with
respect to any such Debt or Guaranty Obligation.
(t) Litigation. Except for matters existing on the Closing Date and
set forth on Schedule 6.1(t), there are no actions, suits or proceedings pending
nor, to the knowledge of the Borrower, threatened against or in any other way
relating adversely to or affecting the Borrower or any Subsidiary thereof or any
of their respective properties in any court or before any arbitrator of any kind
or before or by any Governmental Authority that, if adversely determined, could
reasonably be expected to have a Material Adverse Effect.
(u) Absence of Defaults. No event has occurred or is continuing which
constitutes a Default or an Event of Default, or which constitutes, or which
with the passage of time or giving of notice or both would constitute, a default
or event of default by the Borrower or any Subsidiary thereof under any
judgment, decree or order to which the Borrower or its Subsidiaries is a party
or by which the Borrower or its Subsidiaries or any of their respective
properties may be bound or which would require the Borrower or its Subsidiaries
to make any payment thereunder prior to the scheduled maturity date therefor,
except where such default or defaults, if any, could not reasonably be expected
to have a Material Adverse Effect.
(v) Senior Debt Status. The Obligations of the Borrower and each of
its Subsidiaries under this Agreement and each of the other Loan Documents ranks
and shall continue to rank at least senior in priority of payment to all
Subordinated Debt and all senior unsecured Debt of each such Person and is
designated as "Senior Indebtedness" under all instruments and documents, now or
in the future, relating to all Subordinated Debt and all senior unsecured Debt
of such Person.
(w) Accuracy and Completeness of Information. All written information,
reports and other papers and data produced by or on behalf of the Borrower or
any Subsidiary thereof and furnished to the Lenders were, at the time the same
were so furnished, complete and correct in all material respects to the extent
necessary to give the recipient a true and accurate knowledge of the subject
matter. No document furnished or written statement made to the Administrative
Agent or the Lenders by the Borrower or any Subsidiary thereof in connection
with the negotiation, preparation or execution of this Agreement or any of the
Loan Documents contains or will contain any untrue statement of a fact material
to the creditworthiness of the Borrower or its Subsidiaries or omits or will
omit to state a material fact necessary in order to make the statements
contained therein not misleading in any material respect. The Borrower is not
aware of any facts which it has not disclosed in writing to the Administrative
Agent having a Material Adverse Effect.
SECTION 6.2 Survival of Representations and Warranties, Etc. All
representations and warranties set forth in this Article VI and all
representations and warranties contained in any certificate, or any of the Loan
Documents (including but not limited to any such representation or warranty made
in or in connection with any amendment thereto) shall constitute representations
and warranties made under this Agreement. All representations and warranties
made under this Agreement shall be made or deemed to be made at and as of the
Closing Date (except those that are expressly made as of a specific date), shall
survive the Closing Date and shall not be waived by the execution and delivery
of this Agreement, any investigation made by or on behalf of the Lenders or any
borrowing hereunder.
ARTICLE VII
FINANCIAL INFORMATION AND NOTICES
Until all the Obligations have been paid and satisfied in full and the
Commitments terminated, unless consent has been obtained in the manner set forth
in Section 13.11, the Borrower will furnish or cause to be furnished to the
Administrative Agent at the Administrative Agent's Office at the address set
forth in Section 13.1 and to the Lenders at their respective addresses as set
forth on Schedule 1.1(a), or such other office as may be designated by the
Administrative Agent and Lenders from time to time:
SECTION 7.1 Financial Statements and Projections.
(a) Quarterly Financial Statements. As soon as practicable and in any event
within fifty (50) days after each fiscal quarter of each Fiscal Year, unaudited
Consolidated financial statements of the Borrower and its Subsidiaries for the
fiscal quarter then ended and that portion of the Fiscal Year then ended,
including the notes thereto, all in reasonable detail and prepared by the
Borrower in accordance with GAAP and in compliance with the applicable reporting
requirements of the Securities and Exchange Commission for issuers of publicly
traded securities, and certified by the chief financial officer or the
controller of the Borrower to present fairly in all material respects the
financial condition of the Borrower and its Subsidiaries on a Consolidated basis
as of their respective dates and the results of operations of the Borrower and
its Subsidiaries for the respective periods then ended, subject to normal year
end adjustments (it being agreed that the requirements of this subsection may be
satisfied by delivery of the applicable quarterly report on Form 10-Q of the
Borrower to the Securities and Exchange Commission to the extent that: (i) it
contains the foregoing information, (ii) it is delivered within the applicable
time period noted herein and is available to the Administrative Agent and the
Lenders on EDGAR and (iii) the Borrower notifies the Administrative Agent and
the Lenders within the time period noted herein that it is available to them on
EDGAR).
(b) Annual Financial Statements. As soon as practicable and in any event
within one hundred and five (105) days after the end of each Fiscal Year,
audited Consolidated financial statements of the Borrower and its Subsidiaries
for the Fiscal Year then ended, including the notes thereto, all in reasonable
detail and certified by an independent public accounting firm reasonably
acceptable to the Administrative Agent in accordance with GAAP, and accompanied
by a report thereon by such independent public accounting firm that is not
qualified with respect to scope limitations imposed by the Borrower or any of
its Subsidiaries or with respect to accounting principles followed by the
Borrower or any of its Subsidiaries not in accordance with GAAP (it being agreed
that the requirements of this subsection may be satisfied by delivery of the
applicable annual report on Form 10-K of the Borrower to the Securities and
Exchange Commission to the extent that: (i) it contains the foregoing
information, (ii) it is delivered within the applicable time period noted herein
and is available to the Administrative Agent and the Lenders on EDGAR and (iii)
the Borrower notifies the Administrative Agent and the Lenders within the time
period noted herein that it is available to them on EDGAR).
SECTION 7.2 Officer's Compliance Certificate. At each time financial
statements are delivered pursuant to Sections 7.1(a) or (b) and at such other
times as the Administrative Agent shall reasonably request, a certificate of the
chief financial officer, the controller or the treasurer of the Borrower in the
form of Exhibit F attached hereto (an "Officer's Compliance Certificate").
SECTION 7.3 Accountants' Certificate. At each time financial statements are
delivered pursuant to Section 7.1(b), a certificate from the independent public
accountants certifying such financial statements addressed to the Administrative
Agent for the benefit of the Lenders and stating that, in connection with their
audit, nothing came to their attention that caused them to believe that the
Borrower failed to comply with the terms, covenants, provisions or conditions of
Article IX of this Agreement insofar as they relate to accounting matters.
SECTION 7.4 Other Reports. Such other information regarding the operations,
business affairs and financial condition of the Borrower or any of its
Subsidiaries as the Administrative Agent or any Lender may reasonably request.
SECTION 7.5 Notice of Litigation and Other Matters. Prompt (but in no event
later than ten (10) days after an officer of the Borrower obtains knowledge
thereof) telephonic and written notice of:
(a) the commencement of (i) all proceedings and investigations by or before
any Governmental Authority and (ii) all actions and proceedings in any court or
before any arbitrator against or involving the Borrower or any Subsidiary
thereof or any of their respective properties, assets or businesses which, if
adversely determined, could reasonably be expected to have a Material Adverse
Effect;
(b) any notice of any violation received by the Borrower or any Subsidiary
thereof from any Governmental Authority including, without limitation, any
notice of violation of Environmental Laws, which violation could reasonably be
expected to have a Material Adverse Effect;
(c) any labor controversy that has resulted in, or threatens to result in,
a strike or other work action against the Borrower or any Subsidiary thereof
that could reasonably be expected to have a Material Adverse Effect;
(d) any attachment, judgment, lien, levy or order exceeding $3,000,000 that
may be assessed against or threatened against the Borrower or any Subsidiary
thereof;
(e) (i) any Default or Event of Default or (ii) the occurrence or existence
of any event or circumstance that could reasonably be expected to become a
Default or Event of Default;
(f) (i) any unfavorable determination letter from the Internal Revenue
Service regarding the qualification of an Employee Benefit Plan under Section
401(a) of the Code (along with a copy thereof), (ii) all notices received by the
Borrower or any ERISA Affiliate of the PBGC's intent to terminate any Pension
Plan or to have a trustee appointed to administer any Pension Plan, (iii) all
notices received by the Borrower or any ERISA Affiliate from a Multiemployer
Plan sponsor concerning the imposition or amount of withdrawal liability
pursuant to Section 4202 of ERISA and (iv) the Borrower obtaining knowledge or
reason to know that the Borrower or any ERISA Affiliate has filed or intends to
file a notice of intent to terminate any Pension Plan under a distress
termination within the meaning of Section 4041(c) of ERISA; and
(g) any event which makes any of the representations set forth in Section
6.1 inaccurate in any respect (provided that, with respect to any representation
set forth in Section 6.1 that is not subject to a materiality or a Material
Adverse Effect qualification, any event which makes such representation
inaccurate in any material respect).
SECTION 7.6 Accuracy of Information. All written information, reports,
statements and other papers and data furnished by or on behalf of the Borrower
to the Administrative Agent or any Lender whether pursuant to this Article VII
or any other provision of this Agreement, or any of the Security Documents,
shall, at the time the same is so furnished, comply with the representations and
warranties set forth in Section 6.1(w).
ARTICLE VIII
AFFIRMATIVE COVENANTS
Until all of the Obligations have been paid and satisfied in full and the
Commitments terminated, unless consent has been obtained in the manner provided
for in Section 13.11, the Borrower will, and will cause each of its Subsidiaries
to:
SECTION 8.1 Preservation of Corporate Existence and Related Matters. Except
as permitted by Section 10.4, preserve and maintain its separate corporate
existence and all rights, franchises, licenses and privileges necessary to the
material conduct of its business, and qualify and remain qualified as a foreign
corporation and authorized to do business in each jurisdiction in which the
failure to so qualify could reasonably be expected to have a Material Adverse
Effect.
SECTION 8.2 Maintenance of Property. In addition to the requirements of any
of the Security Documents, protect and preserve all properties useful in and
material to its business, including copyrights, patents, trade names, service
marks and trademarks; maintain in good working order and condition all
buildings, equipment and other tangible real and personal property; and from
time to time make or cause to be made all renewals, replacements and additions
to such property necessary for the conduct of its business, so that the business
carried on in connection therewith may be conducted in a commercially reasonable
manner.
SECTION 8.3 Insurance. Maintain insurance with financially sound and
reputable insurance companies against such risks and in such amounts as are
customarily maintained by similar businesses (including, without limitation,
hazard and business interruption coverage) and as may be required by Applicable
Law and as are required by any Security Documents, and on the Closing Date and
from time to time thereafter deliver to the Administrative Agent upon its
request a detailed list of the insurance then in effect, stating the names of
the insurance companies, retention amounts, the amounts of the insurance, the
dates of the expiration thereof and the properties and risks covered thereby.
SECTION 8.4 Accounting Methods and Financial Records. Maintain a system of
accounting, and keep such books, records and accounts (which shall be true and
complete in all material respects) as may be required or as may be necessary to
permit the preparation of financial statements in accordance with GAAP and in
compliance with the regulations of any Governmental Authority having
jurisdiction over it or any of its properties.
SECTION 8.5 Payment and Performance of Obligations. Pay and perform all
Obligations under this Agreement and the other Loan Documents, and pay or
perform (a) all taxes, assessments and other governmental charges that may be
levied or assessed upon it or any of its property, and (b) all other
indebtedness, obligations and liabilities in accordance with customary trade
practices; provided, that the Borrower or such Subsidiary may contest any item
described in clauses (a) or (b) of this Section 8.5 in good faith so long as
adequate reserves are maintained with respect thereto in accordance with GAAP.
SECTION 8.6 Compliance With Laws and Approvals. Observe and remain in
compliance in all material respects with all Applicable Laws and maintain in
full force and effect all Governmental Approvals, in each case applicable to the
conduct of its business.
SECTION 8.7 Environmental Laws. In addition to and without limiting the
generality of Section 8.6, (a) comply with, and ensure such compliance by all
tenants and subtenants, if any, with all applicable Environmental Laws and
obtain and comply with and maintain, and ensure that all tenants and subtenants,
if any, obtain and comply with and maintain, any and all licenses, approvals,
notifications, registrations or permits required by applicable Environmental
Laws, except to the extent that the failure to do so could not reasonably be
expected to have a Material Adverse Effect, (b) conduct and complete all
investigations, studies, sampling and testing, and all remedial, removal and
other actions required under Environmental Laws, and promptly comply in all
respects with all lawful orders and directives of any Governmental Authority
regarding Environmental Laws, except to the extent that such actions are being
contested in good faith by appropriate proceedings, adequate reserves are
maintained with respect to such actions in accordance with GAAP and the pendency
of such actions could not reasonably be expected to have a Material Adverse
Effect, and (c) defend, indemnify and hold harmless the Administrative Agent and
the Lenders, and their respective parents, Subsidiaries, Affiliates, employees,
agents, officers and directors, from and against any claims, demands, penalties,
fines, liabilities, settlements, damages, costs and expenses of whatever kind or
nature known or unknown, contingent or otherwise, arising out of, or in any way
relating to the presence of Hazardous Materials, or the violation of,
noncompliance with or liability under any Environmental Laws applicable to the
operations of the Borrower or any such Subsidiary, or any orders, requirements
or demands of Governmental Authorities related thereto, including, without
limitation, reasonable attorney's and consultant's fees, investigation and
laboratory fees, response costs, court costs and litigation expenses, except to
the extent that any of the foregoing directly result from the gross negligence
or willful misconduct of the party seeking indemnification therefor.
SECTION 8.8 Compliance with ERISA. In addition to and without limiting the
generality of Section 8.6, (a) except where the failure to so comply could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, (i) comply with all material applicable provisions of ERISA and
the regulations and published interpretations thereunder with respect to all
Employee Benefit Plans, (ii) not take any action or fail to take action the
result of which could be a liability to the PBGC or to a Multiemployer Plan,
(iii) not participate in any prohibited transaction that could result in any
civil penalty under ERISA or tax under the Code and (iv) operate each Employee
Benefit Plan in such a manner that will not incur any tax liability under
Section 4980B of the Code or any liability to any qualified beneficiary as
defined in Section 4980B of the Code and (b) furnish to the Administrative Agent
upon the Administrative Agent's request such additional information about any
Employee Benefit Plan as may be reasonably requested by the Administrative
Agent.
SECTION 8.9 Compliance With Agreements. Comply in all material respects
with each term, condition and provision of all material leases, agreements and
other instruments entered into in the conduct of its business; provided, that
the Borrower or any such Subsidiary may contest any such material lease,
agreement or other instrument in good faith through applicable proceedings so
long as adequate reserves are maintained in accordance with GAAP.
SECTION 8.10 Visits and Inspections. Permit representatives of the
Administrative Agent or any Lender, from time to time upon reasonable notice, to
visit and inspect its properties; inspect, audit and make extracts from its
books, records and files, including, but not limited to, management letters
prepared by independent accountants; and discuss with its principal officers,
and its independent accountants, its business, assets, liabilities, financial
condition, results of operations and business prospects.
SECTION 8.11 Additional Subsidiaries and Additional Collateral.
(a) Material Domestic Subsidiaries. Notify the Administrative Agent of (1)
the creation or acquisition of any Material Domestic Subsidiary or (2) any
Domestic Subsidiary of the Borrower becoming a Material Domestic Subsidiary as
evidenced by the information set forth in the Officer's Compliance Certificate
delivered pursuant to Section 7.2, and promptly thereafter (and in any event
within thirty (30) days), cause to be executed and delivered to the
Administrative Agent (i) a duly executed Joinder Agreement (pursuant to which
such Material Domestic Subsidiary shall become party to the Guaranty Agreement,
the Collateral Agreement and any other applicable Security Documents), (ii) such
other instruments and documents and other items of the type required to be
delivered pursuant to Section 5.2(c), all in form and substance reasonably
satisfactory to the Administrative Agent, as may be reasonably required by the
Administrative Agent to obtain a first priority perfected security interest in
all personal property and real property of such Material Domestic Subsidiary
(subject to Permitted Liens), (iii) such closing documents and closing
certificates of the type required to be delivered pursuant to Section 5.2(b),
including, without limitation, favorable legal opinions addressed to the
Administrative Agent and the Lenders in form and substance reasonably
satisfactory thereto with respect to such duly executed Joinder Agreement (and
the Guaranty Agreement, the Collateral Agreement and any other applicable
Security Documents to which such Material Domestic Subsidiary shall become party
thereto in connection therewith), in each case as may reasonably be requested by
the Administrative Agent, and (iv) such other documents and certificates as may
be reasonably requested by the Administrative Agent.
(b) Non-Material Domestic Subsidiaries. Notify the Administrative Agent of
the creation or acquisition of any Non-Material Domestic Subsidiary, and
promptly thereafter (and in any event within forty-five (45) days), cause to be
executed and delivered to the Administrative Agent, in each case only to the
extent requested by the Administrative Agent, (i) a duly executed Joinder
Agreement (pursuant to which the Borrower or the applicable Domestic Subsidiary
of the Borrower shall pledge to the Administrative Agent the capital stock of
such Non-Material Domestic Subsidiary), (ii) such other instruments and
documents and other items of the type required to be delivered pursuant to
Section 5.2(c), all in form and substance reasonably satisfactory to the
Administrative Agent, as may be reasonably required by the Administrative Agent
to obtain a first priority perfected security interest in the capital stock of
such Non-Material Domestic Subsidiary and (iii) such other documents and
certificates as may be reasonably requested by the Administrative Agent.
(c) Foreign Subsidiaries. Notify the Administrative Agent of the creation
or acquisition of any Foreign Subsidiary which is directly owned by the Borrower
or a Domestic Subsidiary of the Borrower, and promptly thereafter (and in any
event within forty-five (45) days), cause to be executed and delivered to the
Administrative Agent, in each case only to the extent requested by the
Administrative Agent, (i) a duly executed Joinder Agreement (pursuant to which
the Borrower or the applicable Domestic Subsidiary of the Borrower shall pledge
to the Administrative Agent no more that percentage of all issued and
outstanding shares of all capital stock or other membership interests of such
Foreign Subsidiary the granting of a security interest in which shall not result
in material adverse tax consequences to the Borrower or the applicable Domestic
Subsidiary (it being acknowledged by the Borrower, the Lenders and the
Administrative Agent that, as of the Closing Date, such percentage required to
be pledged is sixty-five percent (65%)), (ii) such other instruments and
documents and other items of the type required to be delivered pursuant to
Section 5.2(c), all in form and substance reasonably satisfactory to the
Administrative Agent, as may be reasonably required by the Administrative Agent
to obtain a first priority perfected security interest in the capital stock of
such Foreign Subsidiary, (iii) such closing documents and closing certificates
of the type required to be delivered pursuant to Section 5.2(b), including,
without limitation, favorable legal opinions addressed to the Administrative
Agent and the Lenders in form and substance reasonably satisfactory thereto with
respect to such duly executed Joinder Agreement (and the Collateral Agreement
and any other applicable Security Documents to which the Borrower (or the
applicable Domestic Subsidiary) and such Foreign Subsidiary shall become party
thereto in connection therewith), in each case as may reasonably be requested by
the Administrative Agent, and (iv) such other documents and certificates as may
be reasonably requested by the Administrative Agent. Notwithstanding the
provisions of the foregoing subsection (b)(i), the Borrower may evidence
compliance with such subsection (b)(i) by providing a perfected first priority
security interest (or the equivalent thereof pursuant to the Applicable Laws and
practices of any relevant foreign jurisdiction) in the relevant indicia of
ownership of such Foreign Subsidiary.
(d) Additional Real Property Collateral. Notify the Administrative Agent of
the acquisition of any real property by the Borrower or any Material Domestic
Subsidiary that is of the same type and character of the Collateral subject to
any Security Document, but that is not subject to the existing Security
Documents (including pursuant to any after-acquired property provisions
thereof), and any other event or condition that may require additional action of
any nature in order to preserve the effectiveness and perfected status of the
liens and security interests of the Administrative Agent and the Lenders with
respect to such real property pursuant to the Security Documents and, and
promptly thereafter (and in any event within thirty (30) days), cause to be
executed and delivered to the Administrative Agent (i) such instruments and
documents and other items of the type required to be delivered pursuant to
Section 5.2(c), all in form and substance reasonably satisfactory to the
Administrative Agent, as may be reasonably required by the Administrative Agent
to obtain a first priority perfected security interest in such real property
(subject to Liens permitted pursuant to Section 10.2), (ii) such closing
documents and closing certificates of the type required to be delivered pursuant
to Section 5.2(b), in form and substance reasonably satisfactory to the
Administrative Agent and the Lenders with respect to such instruments and
documents, in each case as may reasonably be requested by the Administrative
Agent, and (iii) such other documents and certificates as may be reasonably
requested by the Administrative Agent.
SECTION 8.12 Use of Proceeds. Use the proceeds of the Extensions of Credit
(a) to refinance the Existing Facility and (b) for working capital and general
corporate requirements of the Borrower and its Subsidiaries, including the
payment of certain fees and expenses incurred in connection with the
transactions contemplated by this Agreement.
SECTION 8.13 Further Assurances. Make, execute and deliver all such
additional and further acts, things, deeds and instruments as the Administrative
Agent the Required Lenders (through the Administrative Agent) may reasonably
require to document and consummate the transactions contemplated hereby and to
vest completely in and insure the Administrative Agent and the Lenders their
respective rights under this Agreement, the Notes, the Letters of Credit and the
other Loan Documents.
ARTICLE IX
FINANCIAL COVENANTS
Until all of the Obligations have been paid and satisfied in full and the
Commitments terminated, unless consent has been obtained in the manner set forth
in Section 13.11, the Borrower and its Subsidiaries on a Consolidated basis will
not:
SECTION 9.1 Leverage Ratio. As of any fiscal quarter end, permit the ratio
of (a) Total Funded Debt on such date, to (b) EBITDA for the period of four (4)
consecutive fiscal quarters ending on or immediately prior to such date, to be
greater than 2.50 to 1.00.
SECTION 9.2 Consolidated Net Worth. Permit, at any time, Consolidated Net
Worth to be less than the sum of (a) $135,000,000 plus (b) an amount equal to
fifty percent (50%) of aggregate Net Income of the Borrower and its Subsidiaries
since September 30, 2002; provided that, in the event that Borrower and its
Subsidiaries on a Consolidated basis have a net loss for any fiscal quarter, Net
Income for purposes of this Section 9.2 shall be deemed to be zero for such
fiscal quarter.
SECTION 9.3 Interest Coverage Ratio. As of any fiscal quarter end during
the periods set forth below, permit the ratio of (a) EBIT for the period of four
(4) consecutive fiscal quarters ending on or immediately prior to such date, to
(b) Interest Expense for the period of four (4) consecutive fiscal quarters
ending on or immediately prior to such date, to be less than the corresponding
ratio set forth below:
Period Ratio
- ------ -----
Closing Date through and including December 31, 2003 2.25 to 1.00
January 1, 2004 and thereafter 2.50 to 1.00
SECTION 9.4 Capital Expenditures. During any Fiscal Year, permit Capital
Expenditures to be greater than the sum of (i) one hundred thirty percent (130%)
of depreciation and amortization expense (calculated in accordance with GAAP)
for the prior Fiscal Year and (ii) $5,000,000.
ARTICLE X
NEGATIVE COVENANTS
Until all of the Obligations have been paid and satisfied in full and the
Commitments terminated, unless consent has been obtained in the manner set forth
in Section 13.11, the Borrower has not and will not permit any of its
Subsidiaries to:
SECTION 10.1 Limitations on Debt. Create, incur, assume or suffer to exist
any Debt except:
(a) the Obligations (excluding any Hedging Obligations);
(b) Debt incurred in connection with a Hedging Agreement with a
counterparty and upon terms and conditions (including interest rate) reasonably
satisfactory to the Administrative Agent; provided, that any counterparty that
is a Lender or The Bank of Montreal shall be deemed satisfactory to the
Administrative Agent;
(c) Debt existing on the Closing Date and not otherwise permitted under
this Section 10.1, as set forth on Schedule 6.1(s), and the renewal,
refinancing, extension and replacement (but not the increase in the aggregate
principal amount) thereof;
(d) Guaranty Obligations in favor of the Administrative Agent for the
benefit of the Administrative Agent and the Lenders;
(e) unsecured Debt of the Borrower and the Domestic Subsidiaries in an
aggregate amount not to exceed $5,000,000 on any date of determination (provided
that such Debt may be secured to the extent that any such Debt is created,
incurred, assumed or suffered to exist in connection with Capital Leases and
purchase money financing);
(f) Debt of the Foreign Subsidiaries in an aggregate amount not to exceed
$10,000,000 on any date of determination;
(g) intercompany Debt (i) between the Borrower and any Domestic Subsidiary
of the Borrower or between any Domestic Subsidiary of the Borrower and any other
Domestic Subsidiary of the Borrower, (ii) between the Borrower and any Foreign
Subsidiary of the Borrower or between the Borrower or any Domestic Subsidiary of
the Borrower and any Foreign Subsidiary of the Borrower and (iii) between any
Foreign Subsidiary of the Borrower and any other Foreign Subsidiary of the
Borrower; and
(h) Debt of any Person acquired in accordance with Section 10.3(c),
including any renewal, extension or refinancing, but not any increase in the
aggregate principal amount, thereof (provided that such Debt was not incurred in
connection with such acquisition); provided, that no agreement or instrument
with respect to Debt permitted to be incurred by this Section shall restrict,
limit or otherwise encumber (by covenant or otherwise) the ability of any
Subsidiary of the Borrower to make any payment to the Borrower or any of its
Subsidiaries (in the form of dividends, intercompany advances or otherwise) for
the purpose of enabling the Borrower to pay the Obligations.
SECTION 10.2 Limitations on Liens. Create, incur, assume or suffer to
exist, any Lien on or with respect to any of its assets or properties
(including, without limitation, shares of capital stock or other ownership
interests), real or personal, whether now owned or hereafter acquired, except:
(a) Liens for taxes, assessments and other governmental charges or levies
(excluding any Lien imposed pursuant to any of the provisions of ERISA or
Environmental Laws) not yet due or as to which the period of grace, if any,
related thereto has not expired or which are being contested in good faith and
by appropriate proceedings if adequate reserves are maintained to the extent
required by GAAP;
(b) the claims of materialmen, mechanics, carriers, warehousemen,
processors, landlords or other similar parties for labor, materials, supplies or
rentals incurred in the ordinary course of business, (i) which are not overdue
for a period of more than thirty (30) days or (ii) which are being contested in
good faith and by appropriate proceedings;
(c) Liens consisting of deposits or pledges made in the ordinary course of
business in connection with, or to secure payment of, obligations under workers'
compensation, unemployment insurance or similar legislation;
(d) Liens constituting encumbrances in the nature of zoning restrictions,
easements and rights or restrictions of record on the use of real property,
which in the aggregate are not substantial in amount and which do not, in any
case, detract from the value of such property or impair the use thereof in the
ordinary conduct of business;
(e) Liens of the Administrative Agent for the benefit of the Administrative
Agent and the Lenders;
(f) Liens not otherwise permitted by this Section 10.2 and in existence on
the Closing Date and described on Schedule 10.2;
(g) (i) Liens securing Debt incurred in connection with Capital Leases and
purchase money Debt (in each case to the extent that such Debt is permitted
under Section 10.1(e)); provided that (A) such Liens shall be created
substantially simultaneously with the acquisition or lease of the related asset,
(B) such Liens do not at any time encumber any property other than the property
financed by such Debt, (C) the amount of such Debt secured thereby is not
increased and (D) the principal amount of such Debt secured by any such Lien
shall at no time exceed one hundred percent (100%) of the original purchase
price or lease payment amount of such property at the time it was acquired and
(ii) Liens on the assets of any Foreign Subsidiary securing Debt of such Foreign
Subsidiary (to the extent that such Debt is permitted under Section 10.1(f));
(h) Liens in favor of the Borrower or a Domestic Subsidiary of the Borrower
on assets of any other Subsidiary of the Borrower;
(i) Liens securing judgments not giving rise to an Event of Default so long
as (i) such Lien is adequately bonded and (ii) any appropriate legal proceeding
which may have been duly initiated for the review of such judgment shall not
have been finally terminated or the period within which such proceeding may be
initiated shall not have expired;
(j) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual or warranty requirements of the Borrower or
any of its Subsidiaries, including rights of offset and set-off, incurred in the
ordinary course of business;
(k) Liens in favor of custom and revenue authorities arising as a matter of
law to secure payment of custom duties in connection with the importation of
goods in the ordinary course of business;
(l) Liens arising from the precautionary filing of Uniform Commercial Code
financing statements (or similar foreign counterparts) regarding leases; and
(m) rights of setoff or bankers' liens upon deposits of cash in favor of
banks or other financial institutions in the ordinary course of business
(provided that, to the extent requested by the Administrative Agent, such bank
or other financial institution has executed and delivered a deposit account
control agreement with respect to such deposits pursuant to the Collateral
Agreement).
SECTION 10.3 Limitations on Loans, Advances, Investments and Acquisitions.
Purchase, own, invest in or otherwise acquire, directly or indirectly, any
capital stock, interests in any partnership or joint venture (including, without
limitation, the creation or capitalization of any Subsidiary), evidence of Debt
or other obligation or security, substantially all or a portion of the business
or assets of any other Person or any other investment or interest whatsoever in
any other Person, or make or permit to exist, directly or indirectly, any loans,
advances or extensions of credit to, or any investment in cash or by delivery of
property in, any Person except:
(a) investments (i) existing on the Closing Date in Subsidiaries, (ii) in
Subsidiaries formed or acquired after the Closing Date so long as the Borrower
and its Subsidiaries comply with the applicable provisions of Section 8.11 and
(iii) existing on the Closing Date in the form of loans, advances and
investments described on Schedule 10.3;
(b) investments in (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency thereof
maturing within one hundred twenty (120) days from the date of acquisition
thereof, (ii) commercial paper maturing no more than one hundred twenty (120)
days from the date of creation thereof and currently having the highest rating
obtainable from either Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc. or Moody's Investors Service, Inc., (iii)
certificates of deposit maturing no more than one hundred twenty (120) days from
the date of creation thereof issued by commercial banks incorporated under the
laws of the United States of America, each having combined capital, surplus and
undivided profits of not less than $500,000,000 and having a rating of "A" or
better by a nationally recognized rating agency; provided, that the aggregate
amount invested in such certificates of deposit shall not at any time exceed
$5,000,000 for any one such certificate of deposit and $10,000,000 for any one
such bank, or (iv) time deposits maturing no more than thirty (30) days from the
date of creation thereof with commercial banks or savings banks or savings and
loan associations each having membership either in the FDIC or the deposits of
which are insured by the FDIC and in amounts not exceeding the maximum amounts
of insurance thereunder; and
(c) investments by the Borrower or any of its Subsidiaries in the form of
acquisitions of all, substantially all or a majority of the stock or assets of
the business or a line of business (whether by the acquisition of capital stock,
assets or any combination thereof) of any other Person (each, a "Permitted
Acquisition"); provided that:
(i) the Person to be acquired shall be a going concern, engaged in a
business, or the assets to be acquired shall be used in a business which is
similar, related or complimentary to the line of business of the Borrower and
its Subsidiaries as required pursuant to Section 10.12;
(ii) the Borrower or such Subsidiary (unless the Person to be acquired
complies with Section 8.11), as applicable, shall be the surviving Person and no
Change in Control shall have been effected thereby;
(iii) the Borrower shall have delivered written notice of such
proposed acquisition to the Administrative Agent (for delivery by the
Administrative Agent to the Lenders) and the Lenders, which notice shall include
the proposed closing date of such proposed acquisition, not less than twenty
(20) calendar days prior to such proposed closing date;
(iv) the Borrower shall have delivered to the Administrative Agent
copies of the Permitted Acquisition Documents;
(v) the Borrower shall have certified on or before the closing date of
such proposed acquisition, in writing and in a form reasonably acceptable to the
Administrative Agent and the Lenders, that such proposed acquisition has been
approved by the board of directors or equivalent governing body of the Person to
be acquired;
(vi) no Default or Event of Default shall have occurred and be
continuing both before and after giving effect to such proposed acquisition;
(vii) the Borrower shall have complied with Section 8.11;
(viii) the Borrower shall have delivered to the Administrative Agent
and the Lenders an Officer's Compliance Certificate dated as of the closing date
of such proposed acquisition demonstrating, in form and substance reasonably
satisfactory thereto, pro forma compliance with each covenant contained in
Article IX (both before and after giving effect to such proposed acquisition)
(it being agreed by the Borrower, the Administrative Agent and the Lenders that
such calculations shall assume that all Debt assumed or incurred in conjunction
with such proposed acquisition was incurred at the beginning of the applicable
calculation period and that all income and expenses associated with such
proposed acquisition shall be treated as earned and included in the pro-forma
calculations (both on a consolidated and consolidating basis));
(ix) the Borrower shall have at least $10,000,000 in Liquidity both
before and after giving effect to such proposed acquisition; and
(x) the Person to be acquired is not subject to material pending
litigation which could reasonably be expected to have a Material Adverse Effect;
(d) intercompany loans and advances in connection with intercompany Debt
permitted under Section 10.1(g);
(e) Hedging Agreements permitted pursuant to Section 10.1; and
(f) purchases of assets in the ordinary course of business.
SECTION 10.4 Limitations on Mergers and Liquidation. Merge, consolidate or
enter into any similar combination with any other Person or liquidate, wind-up
or dissolve itself (or suffer any liquidation or dissolution) except:
(a) (i) any Wholly-Owned Domestic Subsidiary of the Borrower may merge with
the Borrower or any other Wholly-Owned Domestic Subsidiary of the Borrower
(provided that (1) in any merger involving the Borrower, the Borrower shall be
the surviving entity and (2) in any merger involving any Subsidiary Guarantor
(and not involving the Borrower), such Subsidiary Guarantor shall be the
surviving entity) and (ii) any Wholly-Owned Foreign Subsidiary of the Borrower
may merge with any other Wholly-Owned Foreign Subsidiary of the Borrower;
(b) (i) any Wholly-Owned Domestic Subsidiary of the Borrower may merge into
the Person such Wholly-Owned Domestic Subsidiary was formed to acquire in
connection with an acquisition permitted by Section 10.3(c) (provided that,
after giving effect to such acquisition, such Person shall be a Wholly-Owned
Domestic Subsidiary and shall comply with the requirements set forth in Section
8.11) and (ii) any Wholly-Owned Foreign Subsidiary of the Borrower may merge
into the Person such Wholly-Owned Foreign Subsidiary was formed to acquire in
connection with an acquisition permitted by Section 10.3(c); and
(c) (i) any Wholly-Owned Domestic Subsidiary of the Borrower may wind-up
into the Borrower or any other Wholly-Owned Domestic Subsidiary of the Borrower
and (ii) any Wholly-Owned Foreign Subsidiary of the Borrower may wind-up into
any other Wholly-Owned Foreign Subsidiary of the Borrower.
SECTION 10.5 Limitations on Sale of Assets. Convey, sell, lease, assign,
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, the sale of any receivables and leasehold
interests and any sale-leaseback or similar transaction), whether now owned or
hereafter acquired except:
(a) the sale of inventory in the ordinary course of business;
(b) the sale of obsolete assets no longer used or usable in the business of
the Borrower or any of its Subsidiaries;
(c) the transfer of assets to the Borrower or any Wholly-Owned Subsidiary
of the Borrower pursuant to Section 10.4(c);
(d) the sale or discount without recourse of accounts receivable arising in
the ordinary course of business in connection with the compromise or collection
thereof;
(e) the disposition of any Hedging Agreement;
(f) sales or grants of licenses in the ordinary course of business to use
the patents, trade secrets, know-how and other intellectual property of the
Borrower and its Subsidiaries to the extent that any such license does not
prohibit the Borrower or its Subsidiaries from using any material technologies
licensed unless for due consideration, or require the Borrower or its
Subsidiaries to pay fees for the use of any material technology;
(g) any distribution permitted pursuant to Section 10.6; and
(h) sales of assets (i) by the Borrower or any Domestic Subsidiary of the
Borrower in an aggregate amount not to exceed $5,000,000 during the term of this
Agreement and (ii) by any Foreign Subsidiary of the Borrower in an aggregate
amount not to exceed $10,000,000 during the term of this Agreement.
SECTION 10.6 Limitations on Dividends and Distributions. Declare or pay any
dividends upon any of its capital stock or any other ownership interests;
purchase, redeem, retire or otherwise acquire, directly or indirectly, any
shares of its capital stock or other ownership interests, or make any
distribution of cash, property or assets among the holders of shares of its
capital stock or other ownership interests, or make any change in its capital
structure; provided that:
(a) the Borrower or any Subsidiary may pay dividends in shares of its own
capital stock;
(b) any Subsidiary may pay cash dividends to the Borrower;
(c) the Borrower may pay cash dividends on its capital stock, purchase,
redeem, retire or otherwise acquire, directly or indirectly, shares of its
capital stock (including purchases of treasury stock), or make distributions of
cash, property or assets among its shareholders in an aggregate amount not to
exceed the lesser of (i) twelve and one-half cents ($0.125) per share in any
calendar quarter, or (ii) $8,000,000 in any calendar year (such quarterly and
annual limitations, hereinafter, the "Current Dividend Level"); and
(d) in addition to transactions permitted under subsection (c) above, the
Borrower may pay cash dividends on its capital stock, purchase, redeem, retire
or otherwise acquire, directly or indirectly, shares of its capital stock
(including purchases of treasury stock), or make distributions of cash, property
or assets among its shareholders in an aggregate amount not to exceed, during
the term of this Agreement, the sum of (i) $6,000,000 plus (ii) an amount equal
to fifty percent (50%) of aggregate Net Income of the Borrower and its
Subsidiaries since September 30, 2002.
SECTION 10.7 Limitations on Exchange and Issuance of Capital Stock. Issue,
sell or otherwise dispose of any class or series of capital stock that, by its
terms or by the terms of any security into which it is convertible or
exchangeable, is, or upon the happening of an event or passage of time would be,
(a) convertible or exchangeable into Debt or (b) required to be redeemed or
repurchased, including at the option of the holder, in whole or in part, or has,
or upon the happening of an event or passage of time would have, a redemption or
similar payment due.
SECTION 10.8 Transactions with Affiliates. Except for transactions
permitted by 10.3, 10.6 and 10.7 and those transactions existing on the Closing
Date and identified on Schedule 10.8, directly or indirectly enter into, or be a
party to, any transaction with any of its Affiliates, except pursuant to the
reasonable requirements of its business and upon fair and reasonable terms that
are no less favorable to it than it would obtain in a comparable arm's length
transaction with a Person not its Affiliate.
SECTION 10.9 Certain Accounting Changes; Organizational Documents.
(a) Make any change in its accounting treatment and reporting practices
except as required or permitted by GAAP; or
(b) Amend, modify or change its articles of incorporation (or corporate
charter or other similar organizational documents) or amend, modify or change
its bylaws (or other similar documents) in any manner adverse in any material
respect to the rights or interests of the Lenders.
SECTION 10.10 Amendments; Payments and Prepayments of Subordinated Debt.
Amend or modify (or permit the modification or amendment of) any of the terms or
provisions of any Subordinated Debt, or cancel or forgive, make any elective,
voluntary or optional payment or prepayment on, or redeem or acquire for value
(including, without limitation, by way of depositing with any trustee with
respect thereto money or securities before due for the purpose of paying when
due) any Subordinated Debt.
SECTION 10.11 Restrictive Agreements.
(a) Enter into any Debt which contains any negative pledge on assets or any
covenants more restrictive than the provisions of Articles VIII, IX and X
hereof, or which restricts, limits or otherwise encumbers its ability to incur
Liens on or with respect to any of its assets or properties other than the
assets or properties securing such Debt.
(b) Enter into or permit to exist any agreement which impairs or limits the
ability of any Subsidiary of the Borrower to pay dividends to the Borrower.
SECTION 10.12 Nature of Business. Alter in any material respect the
character or conduct of the business conducted by the Borrower and its
Subsidiaries taken as a whole as of the Closing Date (except as otherwise
permitted by the terms of this Agreement).
SECTION 10.13 Impairment of Security Interests. Take or omit to take any
action, which might or would have the result of materially impairing the
security interests in favor of the Administrative Agent with respect to the
Collateral or grant to any Person (other than the Administrative Agent for the
benefit of itself and the Lenders pursuant to the Security Documents) any
interest whatsoever in the Collateral, except for Liens permitted under Section
10.2 and asset sales permitted under Section 10.5.
ARTICLE XI
DEFAULT AND REMEDIES
SECTION 11.1 Events of Default. Each of the following shall constitute an
Event of Default, whatever the reason for such event and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment or order of any court or any order, rule or regulation of any
Governmental Authority or otherwise:
(a) Default in Payment of Principal of Loans and Reimbursement Obligations.
The Borrower shall default in any payment of principal of any Loan, Note or
Reimbursement Obligation when and as due (whether at maturity, by reason of
acceleration or otherwise).
(b) Other Payment Default. The Borrower shall default in the payment when
and as due (whether at maturity, by reason of acceleration or otherwise) of (i)
interest on any Loan, Note or Reimbursement Obligation, and such default shall
continue unremedied for five (5) Business Days or (ii) any other Obligation, and
such default shall continue unremedied for ten (10) Business Days.
(c) Misrepresentation. Any representation or warranty made or deemed to be
made by the Borrower or any of its Subsidiaries under this Agreement, any other
Loan Document or any amendment hereto or thereto, shall at any time prove to
have been incorrect or misleading in any material respect when made or deemed
made.
(d) Default in Performance of Certain Covenants. The Borrower or any of its
Subsidiaries shall default in the performance or observance of any covenant or
agreement contained in Sections 7.1, 7.2 or 7.5(e)(i) or Articles IX or X of
this Agreement.
(e) Default in Performance of Other Covenants and Conditions. The Borrower
or any Subsidiary thereof shall default in the performance or observance of any
term, covenant, condition or agreement contained in this Agreement (other than
as specifically provided for otherwise in this Section 11.1) or any other Loan
Document and such default shall continue for a period of thirty (30) days after
written notice thereof has been given to the Borrower by the Administrative
Agent.
(f) Hedging Agreement. The Borrower shall default in the performance or
observance of any terms, covenant, condition or agreement (after giving effect
to any applicable grace or cure period) under any Hedging Agreement with respect
to any Debt or other obligation in a principal amount in excess of $3,000,000
and such default causes the termination of such Hedging Agreement or permits any
counterparty to such Hedging Agreement to terminate any such Hedging Agreement.
(g) Debt Cross-Default. The Borrower or any of its Subsidiaries shall (i)
default in the payment of any Debt (other than the Notes or any Reimbursement
Obligation) the aggregate outstanding amount of which Debt is in excess of
$3,000,000 beyond the period of grace if any, provided in the instrument or
agreement under which such Debt was created, or (ii) default in the observance
or performance of any other agreement or condition relating to any Debt (other
than the Notes or any Reimbursement Obligation) the aggregate outstanding amount
of which Debt is in excess of $3,000,000 or contained in any instrument or
agreement evidencing, securing or relating thereto or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such Debt (or a
trustee or agent on behalf of such holder or holders) to cause, with the giving
of notice if required, any such Debt to become due prior to its stated maturity
(any applicable grace period having expired).
(h) Change in Control. (i) The sale, lease or transfer of all or
substantially all of the Borrower's assets to any person or group of persons
(within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as
amended), (ii) the liquidation or dissolution of the Borrower, (iii) any person
or group of persons (within the meaning of Section 13(d) of the Securities
Exchange Act of 1934, as amended), other than the Permitted Holders, shall
obtain ownership or control in one or more series of transactions of more than
thirty-five percent (35%) of the common stock or thirty-five percent (35%) of
the voting power of the Borrower entitled to vote in the election of members of
the board of directors of the Borrower or (iv) during any period of twelve (12)
consecutive calendar months, individuals who, at the beginning of such period,
constituted the Borrower's board of directors (together with any new directors
whose election by the Borrower's board of directors or whose nomination for
election by the Borrower's stockholders was approved by a vote of at least
two-thirds (2/3rds) of the directors then still in office who either were
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason, other than death or
disability, to constitute a majority of the directors then in office (any such
event, a "Change in Control").
(i) Voluntary Bankruptcy Proceeding. The Borrower or any Subsidiary thereof
shall (i) commence a voluntary case under the federal bankruptcy laws (as now or
hereafter in effect), (ii) file a petition seeking to take advantage of any
other laws, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding up or composition for adjustment of debts, (iii) consent
to or fail to contest in a timely and appropriate manner any petition filed
against it in an involuntary case under such bankruptcy laws or other laws, (iv)
apply for or consent to, or fail to contest in a timely and appropriate manner,
the appointment of, or the taking of possession by, a receiver, custodian,
trustee, or liquidator of itself or of a substantial part of its property,
domestic or foreign, (v) admit in writing its inability to pay its debts as they
become due, (vi) make a general assignment for the benefit of creditors, or
(vii) take any corporate action for the purpose of authorizing any of the
foregoing.
(j) Involuntary Bankruptcy Proceeding. A case or other proceeding shall be
commenced against the Borrower or any Domestic Subsidiary thereof in any court
of competent jurisdiction seeking (i) relief under the federal bankruptcy laws
(as now or hereafter in effect) or under any other laws, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, winding up or adjustment of
debts, or (ii) the appointment of a trustee, receiver, custodian, liquidator or
the like for the Borrower or any Domestic Subsidiary thereof or for all or any
substantial part of their respective assets, domestic or foreign, and such case
or proceeding shall continue without dismissal or stay for a period of sixty
(60) consecutive days, or an order granting the relief requested in such case or
proceeding (including, but not limited to, an order for relief under such
federal bankruptcy laws) shall be entered.
(k) Failure of Agreements. This Agreement or any other Loan Document, at
any time after its execution and delivery and for any reason other than as
expressly permitted hereunder or the satisfaction in full of all of the
Obligations, ceases to be in full force and effect; or the Borrower, any
Subsidiary Guarantor or any other Person contests in any manner the validity or
enforceability of this Agreement or any other Loan Document; or the Borrower or
any Subsidiary Guarantor denies that it has any or further liability or
obligation under this Agreement or any other Loan Document, or purports to
revoke, terminate or rescind this Agreement or any other Loan Document.
(l) Termination Event. The occurrence of any of the following events: (i)
the Borrower or any ERISA Affiliate fails to make full payment when due of all
amounts which, under the provisions of any Pension Plan or Section 412 of the
Code, the Borrower or any ERISA Affiliate is required to pay as contributions
thereto, (ii) an accumulated funding deficiency in excess of $5,000,000 occurs
or exists, whether or not waived, with respect to any Pension Plan, (iii) a
Termination Event or (iv) the Borrower or any ERISA Affiliate as employers under
one or more Multiemployer Plans makes a complete or partial withdrawal from any
such Multiemployer Plan and the plan sponsor of such Multiemployer Plans
notifies such withdrawing employer that such employer has incurred a withdrawal
liability requiring payments in an amount exceeding $5,000,000.
(m) Judgment. A judgment or order for the payment of money which causes the
aggregate amount of all such judgments to exceed $5,000,000 in any Fiscal Year
shall be entered against the Borrower or any of its Subsidiaries by any court
and such judgment or order shall continue without discharge or stay for a period
of sixty (60) days.
(n) Environmental. Any one or more Environmental Claims shall have been
asserted against the Borrower or any of its Subsidiaries; the Borrower and its
Subsidiaries would be reasonable likely to incur liability as a result thereof;
and such liability would be reasonably likely, individually or in the aggregate,
to have a Material Adverse Effect.
SECTION 11.2 Remedies. Upon the occurrence of an Event of Default, with the
consent of the Required Lenders, the Administrative Agent may, or upon the
request of the Required Lenders, the Administrative Agent shall, by notice to
the Borrower:
(a) Acceleration; Termination of Facilities. Declare the principal of and
interest on the Loans, the Notes and the Reimbursement Obligations at the time
outstanding, and all other amounts owed to the Lenders and to the Administrative
Agent under this Agreement or any of the other Loan Documents (including,
without limitation, all L/C Obligations, whether or not the beneficiaries of the
then outstanding Letters of Credit shall have presented or shall be entitled to
present the documents required thereunder) and all other Obligations (other than
Hedging Obligations), to be forthwith due and payable, whereupon the same shall
immediately become due and payable without presentment, demand, protest or other
notice of any kind, all of which are expressly waived, anything in this
Agreement or the other Loan Documents to the contrary notwithstanding, and
terminate the Credit Facility and any right of the Borrower to request
borrowings or Letters of Credit thereunder; provided, that upon the occurrence
of an Event of Default specified in Section 11.1(i) or (j), the Credit Facility
shall be automatically terminated and all Obligations (other than Hedging
Obligations) shall automatically become due and payable without presentment,
demand, protest or other notice of any kind, all of which are expressly waived,
anything in this Agreement or in any other Loan Document to the contrary
notwithstanding.
(b) Letters of Credit. With respect to all Letters of Credit with respect
to which presentment for honor shall not have occurred at the time of an
acceleration pursuant to the preceding paragraph, require the Borrower at such
time to, and the Borrower shall, deposit in a cash collateral account opened by
the Administrative Agent an amount equal to the aggregate then undrawn and
unexpired amount of such Letters of Credit. Amounts held in such cash collateral
account shall be applied by the Administrative Agent to the payment of drafts
drawn under such Letters of Credit, and the unused portion thereof after all
such Letters of Credit shall have expired or been fully drawn upon, if any,
shall be applied to repay the other Obligations on a pro rata basis. After all
such Letters of Credit shall have expired or been fully drawn upon, the
Reimbursement Obligation shall have been satisfied and all other Obligations
shall have been paid in full, the balance, if any, in such cash collateral
account shall be returned to the Borrower.
(c) Rights of Collection. Exercise on behalf of the Lenders all of its
other rights and remedies under this Agreement, the other Loan Documents and
Applicable Law, in order to satisfy all of the Borrower's Obligations.
SECTION 11.3 Rights and Remedies Cumulative; Non-Waiver; etc. The
enumeration of the rights and remedies of the Administrative Agent and the
Lenders set forth in this Agreement is not intended to be exhaustive and the
exercise by the Administrative Agent and the Lenders of any right or remedy
shall not preclude the exercise of any other rights or remedies, all of which
shall be cumulative, and shall be in addition to any other right or remedy given
hereunder or under the other Loan Documents or that may now or hereafter exist
at law or in equity or by suit or otherwise. No delay or failure to take action
on the part of the Administrative Agent or any Lender in exercising any right,
power or privilege shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or privilege preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
or shall be construed to be a waiver of any Event of Default. No course of
dealing between the Borrower, the Administrative Agent and the Lenders or their
respective agents or employees shall be effective to change, modify or discharge
any provision of this Agreement or any of the other Loan Documents or to
constitute a waiver of any Event of Default.
SECTION 11.4. Judgment Currency. The obligation of the Borrower to make
payments of the principal of and interest on the Notes and the obligation of any
such Person to make payments of any other amounts payable hereunder or pursuant
to any other Loan Document in the currency specified for such payment shall not
be discharged or satisfied by any tender, or any recovery pursuant to any
judgment, which is expressed in or converted into any other currency, except to
the extent that such tender or recovery shall result in the actual receipt by
each of the Administrative Agent and Lenders of the full amount of the
particular Permitted Currency expressed to be payable pursuant to the applicable
Loan Document. The Administrative Agent shall, using all amounts obtained or
received from the Borrower pursuant to any such tender or recovery in payment of
principal of and interest on the Obligations, promptly purchase the applicable
currency at the most favorable spot exchange rate determined by the
Administrative Agent to be available to it. The obligation of the Borrower to
make payments in the applicable currency shall be enforceable as an alternative
or additional cause of action solely for the purpose of recovering in the
applicable currency the amount, if any, by which such actual receipt shall fall
short of the full amount of the currency expressed to be payable pursuant to the
applicable Loan Document.
ARTICLE XII
THE ADMINISTRATIVE AGENT
SECTION 12.1 Appointment. Each of the Lenders hereby irrevocably designates
and appoints Wachovia as Administrative Agent of such Lender under this
Agreement and the other Loan Documents for the term hereof and each such Lender
irrevocably authorizes Wachovia as Administrative Agent for such Lender, to take
such action on its behalf under the provisions of this Agreement and the other
Loan Documents and to exercise such powers and perform such duties as are
expressly delegated to the Administrative Agent by the terms of this Agreement
and such other Loan Documents, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement or such other Loan Documents, the Administrative Agent shall not
have any duties or responsibilities, except those expressly set forth herein and
therein, or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or the other Loan Documents or otherwise exist
against the Administrative Agent. Any reference to the Administrative Agent in
this Article XII shall be deemed to refer to the Administrative Agent solely in
its capacity as Administrative Agent and not in its capacity as a Lender.
SECTION 12.2 Delegation of Duties. The Administrative Agent may execute any
of its respective duties under this Agreement and the other Loan Documents by or
through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by the Administrative Agent with reasonable care.
SECTION 12.3 Exculpatory Provisions. Neither the Administrative Agent nor
any of its officers, directors, employees, agents, attorneys-in-fact,
Subsidiaries or Affiliates shall be (a) liable for any action lawfully taken or
omitted to be taken by it or such Person under or in connection with this
Agreement or the other Loan Documents (except for actions occasioned solely by
its or such Person's own gross negligence or willful misconduct), or (b)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the Borrower or any of its Subsidiaries or
any officer thereof contained in this Agreement or the other Loan Documents or
in any certificate, report, statement or other document referred to or provided
for in, or received by the Administrative Agent under or in connection with,
this Agreement or the other Loan Documents or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
the other Loan Documents or for any failure of the Borrower or any of its
Subsidiaries to perform its obligations hereunder or thereunder. The
Administrative Agent shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement, or to inspect the
properties, books or records of the Borrower or any of its Subsidiaries.
SECTION 12.4 Reliance by the Administrative Agent. The Administrative Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
note, writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message, statement, order or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons and upon advice
and statements of legal counsel (including, without limitation, counsel to the
Borrower), independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent may deem and treat the payee of
any Note as the owner thereof for all purposes unless such Note shall have been
transferred in accordance with Section 13.10. The Administrative Agent shall be
fully justified in failing or refusing to take any action under this Agreement
and the other Loan Documents unless it shall first receive such advice or
concurrence of the Required Lenders (or, when expressly required hereby or by
the relevant other Loan Documents, all the Lenders) as it deems appropriate or
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 except for its own gross negligence or
willful misconduct. The Administrative Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement and the
Notes in accordance with a request of the Required Lenders (or, when expressly
required hereby, all the Lenders), and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Lenders and all
future holders of the Notes.
SECTION 12.5 Notice of Default. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default unless it has received notice from a Lender or the Borrower referring to
this Agreement, describing such Default or Event of Default and stating that
such notice is a "notice of default". In the event that the Administrative Agent
receives such a notice, it shall promptly give notice thereof to the Lenders.
The Administrative Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Required Lenders (or,
when expressly required hereby, all the Lenders); provided that unless and until
the Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Lenders, except to the extent that
other provisions of this Agreement expressly require that any such action be
taken or not be taken only with the consent and authorization or the request of
the Lenders or Required Lenders, as applicable.
SECTION 12.6 Non-Reliance on the Administrative Agent and Other Lenders.
Each Lender expressly acknowledges that neither the Administrative Agent nor any
of its respective officers, directors, employees, agents, attorneys-in-fact,
Subsidiaries or Affiliates has made any representations or warranties to it and
that no act by the Administrative Agent hereafter taken, including any review of
the affairs of the Borrower or any of its Subsidiaries, shall be deemed to
constitute any representation or warranty by the Administrative Agent to any
Lender. Each Lender represents to the Administrative Agent that it has,
independently and without reliance upon the Administrative Agent or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of the
Borrower and its Subsidiaries and made its own decision to make its Loans and
issue or participate in Letters of Credit hereunder and enter into this
Agreement. Each Lender also represents that it will, independently and without
reliance upon the Administrative Agent or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking or not taking
action under this Agreement and the other Loan Documents, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Borrower and its Subsidiaries. Except for notices, reports and other documents
expressly required to be furnished to the Lenders by the Administrative Agent
hereunder or by the other Loan Documents, the Administrative Agent shall not
have any duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, property, financial and other
condition or creditworthiness of the Borrower or any of its Subsidiaries which
may come into the possession of the Administrative Agent or any of its
respective officers, directors, employees, agents, attorneys-in-fact,
Subsidiaries or Affiliates.
SECTION 12.7 Indemnification. The Lenders agree to indemnify the
Administrative Agent in its capacity as such and (to the extent not reimbursed
by the Borrower and without limiting the obligation of the Borrower to do so),
ratably according to the respective amounts of their Commitment Percentages,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever which may at any time (including, without limitation, at any
time following the payment of the Notes or any Reimbursement Obligation) be
imposed on, incurred by or asserted against the Administrative Agent in any way
relating to or arising out of this Agreement or the other Loan Documents, or any
documents, reports or other information provided to the Administrative Agent or
any Lender or contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby or any action taken or omitted by
the Administrative Agent under or in connection with any of the foregoing;
provided that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from the Administrative
Agent's bad faith, gross negligence or willful misconduct. The agreements in
this Section 12.7 shall survive the payment of the Notes, any Reimbursement
Obligation and all other amounts payable hereunder and the termination of this
Agreement.
SECTION 12.8 The Administrative Agent in Its Individual Capacity. The
Administrative Agent and its respective Subsidiaries and Affiliates may make
loans to, accept deposits from and generally engage in any kind of business with
the Borrower as though the Administrative Agent were not the Administrative
Agent hereunder. With respect to any Loans made or renewed by it and any Note
issued to it and with respect to any Letter of Credit issued by it or
participated in by it, the Administrative Agent shall have the same rights and
powers under this Agreement and the other Loan Documents as any Lender and may
exercise the same as though it were not the Administrative Agent, and the terms
"Lender" and "Lenders" shall include the Administrative Agent in its individual
capacity.
SECTION 12.9 Resignation of the Administrative Agent; Successor
Administrative Agent. Subject to the appointment and acceptance of a successor
as provided below, the Administrative Agent may resign at any time by giving
notice thereof to the Lenders and the Borrower. Upon any such resignation, the
Required Lenders shall have the right to appoint a successor Administrative
Agent, which successor shall have minimum capital and surplus of at least
$500,000,000. If no successor Administrative Agent shall have been so appointed
by the Required Lenders and shall have accepted such appointment within thirty
(30) days after the Administrative Agent's giving of notice of resignation, then
the Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent, which successor shall have minimum capital and surplus of
at least $500,000,000. Upon the acceptance of any appointment as Administrative
Agent hereunder by a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and become vested with all
rights, powers, privileges and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its duties and
obligations hereunder. After any retiring Administrative Agent's resignation
hereunder as Administrative Agent, the provisions of this Section 12.9 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 Administrative Agent.
SECTION 12.10 Administrative Agent 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 the Borrower or any Guarantor, the Administrative Agent
(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 Administrative Agent 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, the 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 Administrative
Agent and the Lenders (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Administrative Agent and the Lenders
and their respective agents and counsel and all other amounts due the
Administrative Agent and the Lenders under this Agreement, including, without
limitation, Section 3.3, Section 4.3 and Section 13.2) 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 Administrative Agent and, in the event that the Administrative
Agent shall consent to the making of such payments directly to the Lenders, to
pay to the Administrative Agent any amount due for the reasonable compensation,
expenses, disbursements and advances of the Administrative Agent and its agents
and counsel, and any other amounts due the Administrative Agent under this
Agreement (including, without limitation, Section 4.3 and Section 13.2). Nothing
contained herein shall be deemed to authorize the Administrative Agent 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 Administrative Agent to vote in
respect of the claim of any Lender in any such proceeding.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1 Notices.
(a) Method of Communication. Except as otherwise provided in this
Agreement, all notices and communications hereunder shall be in writing (for
purposes hereof, the term "writing" shall include information in electronic
format such as electronic mail and internet web pages), or by telephone
subsequently confirmed in writing. Any notice shall be effective if delivered by
hand delivery or sent via electronic mail, posting on an internet web page,
telecopy, recognized overnight courier service or certified mail, return receipt
requested, and shall be presumed to be received by a party hereto (i) on the
date of delivery if delivered by hand or sent by electronic mail, posting on an
internet web page, telecopy, (ii) on the next Business Day if sent by recognized
overnight courier service and (iii) on the third Business Day following the date
sent by certified mail, return receipt requested. A telephonic notice to the
Administrative Agent as understood by the Administrative Agent will be deemed to
be the controlling and proper notice in the event of a discrepancy with or
failure to receive a confirming written notice.
(b) Addresses for Notices. Notices to any party shall be sent to it at the
following addresses, or any other address as to which all the other parties are
notified in writing.
If to the Borrower: CompX International Inc.
Three Lincoln Centre
5430 LBJ Freeway, Suite 1700
Dallas, Texas 75240-2697
Attention: J. Mark Hollingsworth
Telephone No.: (972) 233-1700
Telecopy No.: (972) 448-1445
If to Wachovia as Wachovia Bank, National Association
Administrative Agent: Charlotte Plaza, CP-8
201 South College Street
Charlotte, North Carolina 28288-0680
Attention: Syndication Agency Services
Telephone No.: (704) 374-2698
Telecopy No.: (704) 383-0288
If to any Lender: To the address set forth on Schedule 1.1(a)
(c) Administrative Agent's Office. The Administrative Agent hereby
designates its office located at the address set forth above, or any subsequent
office which shall have been specified for such purpose by written notice to the
Borrower and Lenders, as the Administrative Agent's Office referred to herein,
to which payments due are to be made and at which Loans will be disbursed and
Letters of Credit issued, except for Alternative Currency Loans, to which
payments due are to be made at the office of the Administrative Agent's
Correspondent.
SECTION 13.2 Expenses; Indemnity. The Borrower will (a) pay all reasonable
out-of-pocket expenses (including, without limitation, all costs of electronic
or internet distribution of any information hereunder) of the Administrative
Agent in connection with (i) the preparation, execution and delivery of this
Agreement and each other Loan Document, whenever the same shall be executed and
delivered, including, without limitation, all out-of-pocket syndication and due
diligence expenses and reasonable fees and disbursements of counsel for the
Administrative Agent and (ii) the preparation, execution and delivery of any
waiver, amendment or consent by the Administrative Agent or the Lenders relating
to this Agreement or any other Loan Document, including, without limitation,
reasonable fees and disbursements of counsel for the Administrative Agent, (b)
pay all reasonable out-of-pocket expenses of the Administrative Agent and each
Lender actually incurred in connection with the administration and enforcement
of any rights and remedies of the Administrative Agent and Lenders under the
Credit Facility, including, without limitation, in connection with any workout,
restructuring, bankruptcy or other similar proceeding, creating and perfecting
Liens in favor of Administrative Agent on behalf of Lenders pursuant to any
Security Document, enforcing any Obligations of, or collecting any payments due
from, the Borrower or any Subsidiary Guarantor by reason of an Event of Default
(including in connection with the sale of, collection from, or other realization
upon any of the Collateral or the enforcement of the Subsidiary Guaranty
Agreement), consulting with appraisers, accountants, engineers, attorneys and
other Persons concerning the nature, scope or value of any right or remedy of
the Administrative Agent or any Lender hereunder or under any other Loan
Document or any factual matters in connection therewith, which expenses shall
include, without limitation, the reasonable fees and disbursements of such
Persons, and (c) defend, indemnify and hold harmless the Administrative Agent
and the Lenders, and their respective parents, Subsidiaries, Affiliates,
employees, agents, officers and directors, from and against any losses,
penalties, fines, liabilities, settlements, damages, costs and expenses,
suffered by any such Person in connection with any claim (including, without
limitation, any Environmental Claims), investigation, litigation or other
proceeding (whether or not the Administrative Agent or any Lender is a party
thereto) and the prosecution and defense thereof, arising out of or in any way
connected with the Loans, this Agreement, any other Loan Document or any
documents, reports or other information provided to the Administrative Agent or
any Lender or contemplated by or referred herein or therein or the transactions
contemplated hereby or thereby, including, without limitation, reasonable
attorney's and consultant's fees and settlement costs, except to the extent that
any of the foregoing directly result from the gross negligence or willful
misconduct of the party seeking indemnification therefor.
SECTION 13.3 Set-off.
(a) In addition to any rights now or hereafter granted under Applicable Law
and not by way of limitation of any such rights, upon and after the occurrence
of any Event of Default and during the continuance thereof, the Lenders and any
assignee or participant of a Lender in accordance with Section 13.10 are hereby
authorized by the Borrower at any time or from time to time, without notice to
the Borrower or to any other Person, any such notice being hereby expressly
waived, to set off and to appropriate and to apply any and all deposits (general
or special, time or demand, including, but not limited to, indebtedness
evidenced by certificates of deposit, whether matured or unmatured) and any
other indebtedness at any time held or owing by the Lenders, or any such
assignee or participant to or for the credit or the account of the Borrower
against and on account of the Obligations irrespective of whether or not (a) the
Lenders shall have made any demand under this Agreement or any of the other Loan
Documents or (b) the Administrative Agent shall have declared any or all of the
Obligations to be due and payable as permitted by Section 11.2 and although such
Obligations shall be contingent or unmatured. Notwithstanding the preceding
sentence, each Lender agrees to notify the Borrower and the Administrative Agent
after any such set-off and application; provided, that the failure to give such
notice shall not affect the validity of such set-off and application.
(b) Any amount to be set-off pursuant to Section 13.3(a) shall be
denominated in Dollars and any amount denominated in an Alternative Currency
shall be in an amount equal to the Dollar Amount of such amount at the most
favorable spot exchange rate determined by the Administrative Agent to be
available to it; provided that if at the time of any such determination no such
spot exchange rate can reasonably be determined, the Administrative Agent may
use any reasonable method as it deems applicable to determine such rate, any
such determination to be conclusive absent manifest error.
(c) Each Lender and any assignee or participant of such Lender in
accordance with Section 13.10 are hereby authorized by the Borrower to combine
currencies, as deemed necessary by such Person, in order to effect any set-off
pursuant to Section 13.3(a).
SECTION 13.4 Governing Law. This Agreement, the Notes and the other Loan
Documents, unless otherwise expressly set forth therein, shall be governed by,
construed and enforced in accordance with the laws of the State of North
Carolina, without reference to the conflicts or choice of law principles
thereof.
SECTION 13.5 Jurisdiction and Venue.
(a) Jurisdiction. The Borrower hereby irrevocably consents to the personal
jurisdiction of the state and federal courts located in Mecklenburg County,
North Carolina (and any courts from which an appeal from any of such courts must
or may be taken), in any action, claim or other proceeding arising out of any
dispute in connection with this Agreement, the Notes and the other Loan
Documents, any rights or obligations hereunder or thereunder, or the performance
of such rights and obligations. The Borrower hereby irrevocably consents to the
service of a summons and complaint and other process in any action, claim or
proceeding brought by the Administrative Agent or any Lender in connection with
this Agreement, the Notes or the other Loan Documents, any rights or obligations
hereunder or thereunder, or the performance of such rights and obligations, on
behalf of itself or its property, in the manner specified in Section 13.1.
Nothing in this Section 13.5 shall affect the right of the Administrative Agent
or any Lender to serve legal process in any other manner permitted by Applicable
Law or affect the right of the Administrative Agent or any Lender to bring any
action or proceeding against the Borrower or its properties in the courts of any
other jurisdictions.
(b) Venue. The Borrower hereby irrevocably waives any objection it may have
now or in the future to the laying of venue in the aforesaid jurisdiction in any
action, claim or other proceeding arising out of or in connection with this
Agreement, any other Loan Document or the rights and obligations of the parties
hereunder or thereunder. The Borrower irrevocably waives, in connection with
such action, claim or proceeding, any plea or claim that the action, claim or
other proceeding has been brought in an inconvenient forum.
SECTION 13.6 Binding Arbitration; Waiver of Jury Trial.
(a) Binding Arbitration. Upon demand of the Borrower, the Administrative
Agent or the Required Lenders, whether made before or after institution of any
judicial proceeding, any dispute, claim or controversy arising out of, connected
with or relating to this Agreement or any other Loan Document ("Disputes"),
between or among parties hereto and to the other Loan Documents shall be
resolved by binding arbitration as provided herein. Institution of a judicial
proceeding by a party does not waive the right of that party to demand
arbitration hereunder. Disputes may include, without limitation, tort claims,
counterclaims, claims brought as class actions, claims arising from Loan
Documents executed in the future, disputes as to whether a matter is subject to
arbitration, or claims concerning any aspect of the past, present or future
relationships arising out of or connected with the Loan Documents. Arbitration
shall be conducted under and governed by the Commercial Financial Disputes
Arbitration Rules (the "Arbitration Rules") of the American Arbitration
Association (the "AAA") and the Federal Arbitration Act. All arbitration
hearings shall be conducted in Charlotte, North Carolina. The expedited
procedures set forth in Rule 51, et seq. of the Arbitration Rules shall be
applicable to claims of less than $1,000,000. All applicable statutes of
limitations shall apply to any Dispute. A judgment upon the award may be entered
in any court having jurisdiction. Notwithstanding anything foregoing to the
contrary, any arbitration proceeding demanded hereunder shall begin within
ninety (90) days after such demand thereof and shall be concluded within
one-hundred twenty (120) days after such demand. These time limitations may not
be extended unless a party hereto shows cause for extension and then such
extension shall not exceed a total of sixty (60) days. The panel from which all
arbitrators are selected shall be comprised of licensed attorneys selected from
the Commercial Financial Dispute Arbitration Panel of the AAA. The single
arbitrator selected for expedited procedure shall be a retired judge from the
highest court of general jurisdiction, state or federal, of the state where the
hearing will be conducted. The parties hereto do not waive any applicable
Federal or state substantive law except as provided herein. Notwithstanding the
foregoing, this paragraph shall not apply to any Hedging Agreement.
(b) Jury Trial. THE ADMINISTRATIVE AGENT, EACH LENDER AND THE BORROWER
HEREBY ACKNOWLEDGE THAT BY AGREEING TO BINDING ARBITRATION THEY HAVE IRREVOCABLY
WAIVED THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM
OR OTHER PROCEEDING ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS
AGREEMENT, THE NOTES OR THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS
HEREUNDER OR THEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.
(c) Preservation of Certain Remedies. Notwithstanding the preceding binding
arbitration provisions, the parties hereto and the other Loan Documents
preserve, without diminution, certain remedies that such Persons may employ or
exercise freely, either alone, in conjunction with or during a Dispute. Each
such Person shall have and hereby reserves the right to proceed in any court of
proper jurisdiction or by self help to exercise or prosecute the following
remedies, as applicable: (i) all rights to foreclose against any real or
personal property or other security by exercising a power of sale granted in the
Loan Documents or under Applicable Law or by judicial foreclosure and sale,
including a proceeding to confirm the sale, (ii) all rights of self help
including peaceful occupation of property and collection of rents, set off, and
peaceful possession of property, (iii) obtaining provisional or ancillary
remedies including injunctive relief, sequestration, garnishment, attachment,
appointment of receiver and in filing an involuntary bankruptcy proceeding, and
(iv) when applicable, a judgment by confession of judgment. Preservation of
these remedies does not limit the power of an arbitrator to grant similar
remedies that may be requested by a party in a Dispute.
SECTION 13.7 Reversal of Payments. To the extent the Borrower makes a
payment or payments to the Administrative Agent for the ratable benefit of the
Lenders or the Administrative Agent receives any payment or proceeds of the
collateral which payments or proceeds or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then, to
the extent of such payment or proceeds repaid, the Obligations or part thereof
intended to be satisfied shall be revived and continued in full force and effect
as if such payment or proceeds had not been received by the Administrative
Agent.
SECTION 13.8 Injunctive Relief; Punitive Damages.
(a) The Borrower recognizes that, in the event the Borrower fails to
perform, observe or discharge any of its obligations or liabilities under this
Agreement, any remedy of law may prove to be inadequate relief to the Lenders.
Therefore, the Borrower agrees that the Lenders, at the Lenders' option, shall
be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages.
(b) The Administrative Agent, the Lenders and the Borrower (on behalf of
itself and its Subsidiaries) hereby agree that no such Person shall have a
remedy of punitive or exemplary damages against any other party to a Loan
Document and each such Person hereby waives any right or claim to punitive or
exemplary damages that they may now have or may arise in the future in
connection with any Dispute, whether such Dispute is resolved through
arbitration or judicially.
SECTION 13.9 Accounting Matters. Except as otherwise expressly provided
herein, all terms of an accounting or financial nature shall be construed in
accordance with GAAP, as in effect from time to time, provided that, if the
Borrower notifies the Administrative Agent that the Borrower requests an
amendment to any provision hereof to eliminate the effect of any change
occurring after the date hereof in GAAP or in the application thereof on the
operation of such provision (or if the Administrative Agent notifies the
Borrower that the Required Lenders request an amendment to any provision hereof
for such purpose), regardless of whether any such notice is given before or
after such change in GAAP or in the application thereof, then such provision
shall be interpreted on the basis of GAAP as in effect and applied immediately
before such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance therewith.
SECTION 13.10 Successors and Assigns; Participations.
(a) Benefit of Agreement. This Agreement shall be binding upon and inure to
the benefit of the Borrower, the Administrative Agent and the Lenders, all
future holders of the Notes, and their respective successors and assigns, except
that the Borrower shall not assign or transfer any of its rights or obligations
under this Agreement without the prior written consent of each Lender.
(b) Assignment by Lenders. Each Lender may, in the ordinary course of its
business and in accordance with Applicable Law, sell or assign to any Lender,
any Affiliate of a Lender and with the consent of the Borrower (so long as no
Default or Event of Default has occurred and is continuing) and the consent of
the Administrative Agent, which consents shall not be unreasonably withheld or
delayed, assign to one or more Eligible Assignees (any of the foregoing
assignees or purchasers, a "Participating Lender") all or a portion of its
interests, rights and obligations under this Agreement and the other Loan
Documents (including, without limitation, all or a portion of the Extensions of
Credit at the time owing to it and the Notes held by it); provided that:
(i) each such assignment shall be of a constant, and not a varying,
percentage of all the assigning Lender's rights and obligations under this
Agreement;
(ii) if less than all of the assigning Lender's Commitment is to be
assigned, the Commitment so assigned shall not be less than $5,000,000;
(iii) the parties to each such assignment shall execute and deliver to
the Administrative Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance substantially in the form of Exhibit G attached hereto
(an "Assignment and Acceptance"), together with (to the extent requested by any
Purchasing Lender) any Note or Notes subject to such assignment;
(iv) where consent of the Borrower to an assignment to a Purchasing
Lender is required hereunder (including consent to an assignment to an Approved
Fund), the Borrower shall be deemed to have given its consent five (5) Business
Days after the date written notice thereof has been delivered by the assigning
Lender (through the Administrative Agent) unless such consent is expressly
refused by the Borrower prior to such fifth (5th) Business Day;
(v) such assignment shall not, without the consent of the Borrower
require the Borrower to file a registration statement with the Securities and
Exchange Commission or apply to or qualify the Loans or the Notes under the blue
sky laws of any state; and
(vi) the assigning Lender shall pay to the Administrative Agent an
assignment fee of $3,500 upon the execution by such Lender of the Assignment and
Acceptance; provided that no such fee shall be payable upon any assignment by a
Lender to an Affiliate of such Lender.
Upon such execution, delivery, acceptance and recording, from and after the
effective date specified in each Assignment and Acceptance, which effective date
shall be at least five (5) Business Days after the execution thereof (unless
otherwise agreed to by the Administrative Agent), (A) the Purchasing Lender
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Lender hereby
and (B) the Lender thereunder shall, to the extent provided in such assignment,
be released from its obligations under this Agreement.
(c) Rights and Duties Upon Assignment. By executing and delivering an
Assignment and Acceptance, the assigning Lender thereunder and the Purchasing
Lender thereunder confirm to and agree with each other and the other parties
hereto as set forth in such Assignment and Acceptance.
(d) Register. The Administrative Agent shall maintain a copy of each
Assignment and Acceptance delivered to it and a register for the recordation of
the names and addresses of the Lenders and the amount of the Extensions of
Credit with respect to each Lender from time to time (the "Register"). The
entries in the Register shall be conclusive, in the absence of manifest error,
and the Borrower, the Administrative Agent and the Lenders may treat each person
whose name is recorded in the Register as a Lender hereunder for all purposes of
this Agreement. The Register shall be available for inspection by the Borrower
or any Lender at any reasonable time and from time to time upon reasonable prior
notice.
(e) Issuance of New Notes. Upon its receipt of an Assignment and Acceptance
executed by an assigning Lender and a Purchasing Lender together with any Note
or Notes (if applicable) subject to such assignment and (if applicable) the
written consent to such assignment, the Administrative Agent shall, if such
Assignment and Acceptance has been completed and is substantially in the form of
Exhibit G:
(i) accept such Assignment and Acceptance;
(ii) record the information contained therein in the Register;
(iii) give prompt notice thereof to the Lenders and the Borrower; and
(iv) promptly deliver a copy of such Assignment and Acceptance to the
Borrower.
Within five (5) Business Days after receipt of notice, the Borrower shall
execute and deliver to the Administrative Agent, in exchange for the surrendered
Note or Notes, a new Note or Notes to the order of such Purchasing Lender (to
the extent requested thereby) in amounts equal to the Commitment assumed by it
pursuant to such Assignment and Acceptance and a new Note or Notes to the order
of the assigning Lender (to the extent requested thereby) in an amount equal to
the Commitment retained by it hereunder. Such new Note or Notes shall be in an
aggregate principal amount equal to the aggregate principal amount of such
surrendered Note or Notes, shall be dated the effective date of such Assignment
and Acceptance and shall otherwise be in substantially the form of the assigned
Notes delivered to the assigning Lender. Each surrendered Note or Notes shall be
canceled and returned to the Borrower. Notwithstanding anything in this
Agreement to the contrary, any Lender which has not been issued a Note or Notes
hereunder may at any time deliver a written request for a Note or Notes to the
Administrative Agent and the Borrower. Within five (5) Business Days after
receipt of notice, the Borrower shall execute and deliver to the Administrative
Agent, a Note or Notes (as applicable) to the order of such Lender in amounts
equal to the Commitment of such Lender. Upon receipt thereby, the Administrative
Agent shall promptly deliver such Note or Notes to such Lender.
(f) Participations. Each Lender may, without notice to or the consent of
the Borrower or the Administrative Agent, in the ordinary course of its
commercial banking business and in accordance with Applicable Law, sell
participations to one or more banks or other entities (any such bank or other
entity, a "Participant") in all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of its
Extensions of Credit and the Notes held by it); provided that:
(i) each such participation shall be in an amount not less than
$5,000,000;
(ii) such Lender's obligations under this Agreement (including,
without limitation, its Commitment) shall remain unchanged;
(iii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations;
(iv) such Lender shall remain the holder of the Notes held by it for
all purposes of this Agreement;
(v) the Borrower, the Administrative Agent 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;
(vi) such Lender shall not permit such Participant the right to
approve any waivers, amendments or other modifications to this Agreement or any
other Loan Document other than waivers, amendments or modifications which would
reduce the principal of or the interest rate on any Loan or Reimbursement
Obligation, extend the term or increase the amount of the Commitment, reduce the
amount of any fees to which such Participant is entitled, extend any scheduled
payment date for principal of any Loan or, except as expressly contemplated
hereby or thereby, release substantially all of the Collateral or any Security
Document; and
(vii) any such disposition shall not, without the consent of the
Borrower require the Borrower to file a registration statement with the
Securities and Exchange Commission to apply to qualify the Loans or the Notes
under the blue sky law of any state.
The Borrower agrees that each Participant shall be entitled to the benefits
of Section 4.7, Section 4.8, Section 4.9, Section 4.10, Section 4.11, Section
4.12, Section 4.13 and Section 13.3 to the same extent as if it were a Lender
and had acquired its interest by assignment pursuant to paragraph (b) of this
Section 13.10; provided that a Participant shall not be entitled to receive any
greater payment under Section 4.7, Section 4.8, Section 4.9, Section 4.10,
Section 4.11, Section 4.12, and Section 4.13 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 and such Participant shall have
delivered to the Administrative Agent all United States Internal Revenue Service
Forms required pursuant to Section 4.13(e).
(g) Disclosure of Information; Confidentiality. The Administrative Agent
and the Lenders shall hold all non-public information with respect to the
Borrower obtained pursuant to the Loan Documents (or any Hedging Agreement with
a Lender or the Administrative Agent) in accordance with their customary
procedures for handling confidential information; provided, that the
Administrative Agent may disclose information relating to this Agreement to Gold
Sheets and other similar bank trade publications, such information to consist of
deal terms and other information customarily found in such publications and
provided further, that the Administrative Agent or any Lender may disclose any
such information to the extent such disclosure is (i) required by law or
requested or required pursuant to any legal process, (ii) requested by, or
required to be disclosed to, any rating agency, or regulatory or similar
authority (including, without limitation, the National Association of Insurance
Commissioners) or (iii) used in any suit, action or proceeding for the purpose
of defending itself, reducing its liability or protecting any of its claims,
rights, remedies or interests under or in connection with the Loan Documents (or
any Hedging Agreement with a Lender or the Administrative Agent). Any Lender
may, in connection with any assignment, proposed assignment, participation or
proposed participation pursuant to this Section 13.10, disclose to the
Purchasing Lender, proposed Purchasing Lender, Participant, proposed
Participant, or to any direct or indirect contractual counterparty in swap
agreements or such contractual counterparty's professional advisor any
information relating to the Borrower furnished to such Lender by or on behalf of
the Borrower; provided, that prior to any such disclosure, each such Purchasing
Lender, proposed Purchasing Lender, Participant or proposed Participant,
contractual counterparty or professional advisor shall agree to be bound by the
provisions of this Section 13.10(g).
(h) Certain Pledges or Assignments. Any Lender may at any time pledge or
assign a security interest in all or any portion of its rights under this
Agreement or any other Loan Document to secure obligations of such Lender,
including, without limitation, any pledge or assignment to secure obligations to
a Federal Reserve Bank; provided that no such pledge or assignment of a security
interest shall release a Lender form any of its obligations hereunder or
substitute such pledgee or assignee for such Lender as a party hereto.
SECTION 13.11 Amendments, Waivers and Consents. Except as set forth below
or as specifically provided in the Credit Agreement or any other Loan Document
(including, without limitation, Section 2.9), any term, covenant, agreement or
condition of this Agreement or any of the other Loan Documents may be amended or
waived by the Lenders, and any consent given by the Lenders, if, but only if,
such amendment, waiver or consent is in writing signed by the Required Lenders
(or by the Administrative Agent with the consent of the Required Lenders) and
delivered to the Administrative Agent and, in the case of an amendment, signed
by the Borrower; provided that, except as specifically set forth in Section 2.9,
no amendment, waiver or consent shall (a) increase (i) the Commitment of any
Lender, (ii) the Alternative Currency Commitment or (iii) the Swingline
Commitment, (b) reduce the rate of interest or fees payable on any Loan or
Reimbursement Obligation, (c) reduce or forgive the principal amount of any Loan
or Reimbursement Obligation, (d) extend the originally scheduled time or times
of payment of the principal of any Loan or Reimbursement Obligation or the time
or times of payment of interest on any Loan or Reimbursement Obligation or any
fee or commission with respect thereto, (e) permit any subordination of the
principal or interest on any Loan or Reimbursement Obligation, (f) release the
Borrower from the Obligations (other than Hedging Obligations) hereunder, (g)
release any Subsidiary Guarantor from its obligations under the Subsidiary
Guaranty Agreement, (h) permit any assignment (other than as specifically
permitted or contemplated in this Agreement) of any of the Borrower's rights and
obligations hereunder, (i) release any Collateral the fair market value of which
exceeds $1,000,000 or release any Security Document (other than asset sales
permitted pursuant to Section 10.5 and as otherwise specifically permitted or
contemplated in this Agreement or the applicable Security Document), (j) amend
the definition of Alternative Currency, (k) amend the provisions of this Section
13.11 or the definition of Required Lenders, (l) extend the time of the
obligation of the Lenders to make or issue or participate in Letters of Credit,
in each case, without the prior written consent of each Lender or (m) amend or
waive the provisions of Section 2.7(b). In addition, no amendment, waiver or
consent to the provisions (a) of Article XII shall be made without the written
consent of the Administrative Agent, (b) of Article III shall be made without
the written consent of the Issuing Lender, (c) relating to Swingline Loans or
the Swingline Facility shall be made without the written consent of the
Swingline Lender and (d) relating to Alternative Currency Loans or the
Alternative Currency Facility shall be made without the written consent of the
Alternative Currency Lender.
SECTION 13.12 Performance of Duties. The Borrower's obligations under this
Agreement and each of the other Loan Documents shall be performed by the
Borrower at its sole cost and expense.
SECTION 13.13 All Powers Coupled with Interest. All powers of attorney and
other authorizations granted to the Lenders, the Administrative Agent and any
Persons designated by the Administrative Agent or any Lender pursuant to any
provisions of this Agreement or any of the other Loan Documents shall be deemed
coupled with an interest and shall be irrevocable so long as any of the
Obligations remain unpaid or unsatisfied, any of the Commitments remain in
effect or the Credit Facility has not been terminated.
SECTION 13.14 Survival of Indemnities. Notwithstanding any termination of
this Agreement, the indemnities to which the Administrative Agent and the
Lenders are entitled under the provisions of this Article XIII and any other
provision of this Agreement and the other Loan Documents shall continue in full
force and effect and shall protect the Administrative Agent and the Lenders
against events arising after such termination as well as before.
SECTION 13.15 Titles and Captions. Titles and captions of Articles,
Sections and subsections in, and the table of contents of, this Agreement are
for convenience only, and neither limit nor amplify the provisions of this
Agreement.
SECTION 13.16 Severability of Provisions. Any provision of this Agreement
or any other Loan Document which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating the remainder of
such provision or the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
SECTION 13.17 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and shall be binding
upon all parties, their successors and assigns, and all of which taken together
shall constitute one and the same agreement.
SECTION 13.18 Term of Agreement. This Agreement shall remain in effect from
the Closing Date through and including the date upon which all Obligations
arising hereunder or under any other Loan Document shall have been indefeasibly
and irrevocably paid and satisfied in full and all Commitments have been
terminated. The Administrative Agent is hereby permitted to release all Liens on
the Collateral in favor of the Administrative Agent, for the ratable benefit of
itself and the Lenders, upon repayment of the outstanding principal of and all
accrued interest on the Loans, payment of all outstanding fees and expenses
hereunder and the termination of the Lender's Commitments. No termination of
this Agreement shall affect the rights and obligations of the parties hereto
arising prior to such termination or in respect of any provision of this
Agreement which survives such termination.
SECTION 13.19 Advice of Counsel. Each of the parties represents to each
other party hereto that it has discussed this Agreement with its counsel.
SECTION 13.20 No Strict Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement.
SECTION 13.21 Inconsistencies with Other Documents; Independent Effect of
Covenants.
(a) In the event there is a conflict or inconsistency between this
Agreement and any other Loan Document, the terms of this Agreement shall
control; provided, that any provision of the Security Documents which imposes
additional burdens on the Borrower or its Subsidiaries or further restricts the
rights of the Borrower or its Subsidiaries or gives the Administrative Agent or
Lenders additional rights shall not be deemed to be in conflict or inconsistent
with this Agreement and shall be given full force and effect.
(b) The Borrower expressly acknowledges and agrees that each covenant
contained in Articles VIII, IX, or X hereof shall be given independent effect.
Accordingly, the Borrower shall not engage in any transaction or other act
otherwise permitted under any covenant contained in Articles VIII, IX, or X if,
before or after giving effect to such transaction or act, the Borrower shall or
would be in breach of any other covenant contained in Articles VIII, IX, or X.
SECTION 13.22 Continuity of Contract. The parties hereto agree that the
occurrence or non-occurrence of EMU, any event or events associated with EMU
and/or the introduction of the euro in all or any part of the European Union (a)
will not result in the discharge, cancellation, rescission or termination in
whole or in part of this Agreement or any other Loan Document, (b) will not give
any party the right to cancel, rescind, terminate or vary this Agreement or any
other Loan Document or (c) will not give rise to an Event of Default, in each
case other than as specifically provided in this Agreement.
[Signature pages to follow]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized officers, all as of the day and
year first written above.
BORROWER:
[CORPORATE SEAL] COMPX INTERNATIONAL INC., as Borrower
By:/s/David A. Bowers
---------------------------------------------
Name: David A. Bowers
---------------------------------------------
Title:President
---------------------------------------------
[Signature pages continued on the following page]
ADMINISTRATIVE AGENT AND LENDERS:
WACHOVIA BANK, NATIONAL
ASSOCIATION, as Administrative Agent
and Lender
By:/s/Thomas F. Snider
-----------------------------------------------
Name: Thomas F. Snider
-----------------------------------------------
Title:Vice President
-----------------------------------------------
[Signature pages continued on the following page]
COMPASS BANK, as Lender
By: /s/Key Coker
------------------------------------------------
Name: Key Coker
------------------------------------------------
Title: Executive Vice President
------------------------------------------------
[Signature pages continued on the following page]
COMERICA BANK, as Lender
By:/s/Mark B. Grover
------------------------------------------------
Name: Mark B. Grover
------------------------------------------------
Title:First Vice President
------------------------------------------------
Schedule 1.1(a)
to
Credit Agreement
Lenders and Commitments
- ---------------------------------------------------- -------------------------- --------------------------------------
LENDER COMMITMENT COMMITMENT
PERCENTAGE
- ---------------------------------------------------- -------------------------- --------------------------------------
- ---------------------------------------------------- -------------------------- --------------------------------------
Wachovia Bank, National Association
Charlotte Plaza, CP-8
201 South College Street 52.6315789473% $25,000,000.00
Charlotte, North Carolina 28288-0680
Attention: Syndication Agency Services
Telephone No.: (704) 374-2698
Telecopy No.: (704) 383-0288
- ---------------------------------------------------- -------------------------- --------------------------------------
- ---------------------------------------------------- -------------------------- --------------------------------------
Compass Bank
8080 N. Central Expway, Suite 250
Dallas, Texas 75206 26.3157894737% $12,500,000.00
Attention: Key Coker
Telephone No.: 214-706-8044
Telecopy No.: 214-346-2746
- ---------------------------------------------------- -------------------------- --------------------------------------
- ---------------------------------------------------- -------------------------- --------------------------------------
Comerica Bank
U.S. Banking Department- South
4100 Spring Valley Road, Suite 400 21.0526315790% $10,000,000.00
Dallas, Texas 75244
Attention: Janet L. Wheeler
Telephone No.: 972-361-2652
Telecopy No.: 972-361-2550
- ---------------------------------------------------- -------------------------- --------------------------------------
- ---------------------------------------------------- -------------------------- --------------------------------------
TOTAL: 100% $47,500,000.00
- ---------------------------------------------------- -------------------------- --------------------------------------
Schedule 1.1(b)
To
Credit Agreement
Mandatory Cost Rate
1. The Mandatory Cost Rate is an addition to the interest rate to compensate
Lenders for the cost of compliance with (a) the requirements of the Bank of
England and/or the United Kingdom's Financial Services Authority (the
"Financial Services Authority") (or, in either case, any other authority
which replaces all or any of its functions) or (b) the requirements of the
European Central Bank.
2. On the first day of each Interest Period (or as soon as possible
thereafter), the Administrative Agent shall calculate, as a percentage
rate, a rate (the "Additional Cost Rate") for each Lender in accordance
with the paragraphs set out below. The Mandatory Cost Rate will be
calculated by the Administrative Agent as a weighted average of the
Lenders' Additional Cost Rates (weighted in proportion to the percentage
participation of each Lender in the relevant Loan) and will be expressed as
a percentage rate per annum.
3. The Additional Cost Rate for any Lender lending from a Lending Office in a
Participating Member State will be the percentage notified by that Lender
to the Administrative Agent. This percentage will be certified by that
Lender in its notice to the Administrative Agent to be its reasonable
determination of the cost (expressed as a percentage of that Lender's
participation in all Loans made from that Lending Office) of complying with
the minimum reserve requirements of the European Central Bank in respect of
loans made from that Lending Office.
4. The Additional Cost Rate for any Lender lending from a Lending Office in
the United Kingdom will be calculated by the Administrative Agent as
follows:
(a) in relation to a Loan denominated in Pounds Sterling:
[OBJECT OMITTED] percent per annum
(b) in relation to a Loan in denominated in any Alternative Currency other
than Pounds Sterling:
[OBJECT OMITTED]
percent per annum.
Where:
A is the percentage of Eligible Liabilities (assuming these to be
in excess of any stated minimum) which that Lender is from time
to time required to maintain as an interest free cash ratio
deposit with the Bank of England to comply with cash ratio
requirements.
B is LIBOR for the relevant Interest Period on the relevant Loan.
C is the percentage (if any) of Eligible Liabilities which that
Lender is required from time to time to maintain as interest
bearing Special Deposits with the Bank of England.
D is the percentage rate per annum payable by the Bank of England
to the Administrative Agent on interest bearing Special Deposits.
E is designed to compensate Lenders for amounts payable under the
Fees Rules and is calculated by the Administrative Agent as being
the average of the most recent rates of charge supplied by any
applicable reference banks (the "Reference Banks") to the
Administrative Agent pursuant to paragraph 7 below and expressed
in pounds per (pound)1,000,000.
5. For the purposes of this Schedule 1.1(b):
(a) "Eligible Liabilities" has the meaning given to it from time to time
under or pursuant to the Bank of England Act 1998 or (as may be appropriate) by
the Bank of England;
(b) "Fees Rules" means the rules on periodic fees contained in the FSA
Supervision Manual or such other law or regulation as may be in force from time
to time in respect of the payment of fees for the acceptance of deposits;
(c) "Fee Tariffs" means the fee tariffs specified in the Fees Rules under
the activity group A.1 Deposit acceptors (ignoring any minimum fee or zero rated
fee required pursuant to the Fees Rules but taking into account any applicable
discount rate); and
(d) "Special Deposits" has the meanings given to it from time to time under
or pursuant to the Bank of England Act 1998 or (as may be appropriate) by the
Bank of England;
(e) "Tariff Base" has the meaning given to it in, and will be calculated in
accordance with, the Fees Rules.
6. In application of the above formulae, A, B, C and D will be included in the
formulae as percentages (i.e. 5 percent will be included in the formula as
5 and not as 0.05). A negative result obtained by subtracting D from B
shall be taken as zero. The resulting figures shall be rounded to four
decimal places.
7. If requested by the Administrative Agent, each Reference Bank shall, as
soon as practicable after publication by the Financial Services Authority,
supply to the Administrative Agent the rate of charge payable by that
Reference Bank to the Financial Services Authority pursuant to the Fees
Rules in respect of the relevant financial year of the Financial Services
Authority (calculated for this purpose by that Reference Bank as being the
average of the Fee Tariffs applicable to that Reference Bank for that
financial year) and expressed in pounds per (pound)1,000,000 of the Tariff
Base of that Reference Bank.
8. Each Lender shall supply any information required by the Administrative
Agent for the purpose of calculating its Additional Cost Rate. In
particular, but without limitation, each Lender shall supply the following
information on or prior to the date on which it becomes a Lender:
(a) the jurisdiction of its Lending Office; and
(b) any other information that the Administrative Agent may reasonably
require for such purpose.
Each Lender shall promptly notify the Administrative Agent of any change to
the information provided by it pursuant to this paragraph.
9. The percentages of each Lender for the purpose of A and C above and the
rates of charge of each Reference Bank for the purpose of E above shall be
determined by the Administrative Agent based upon the information supplied
to it pursuant to paragraphs 7 and 8 above and on the assumption that,
unless a Lender notifies the Administrative Agent to the contrary, each
Lender's obligations in relation to cash ratio deposits and Special
Deposits are the same as those of a typical bank from its jurisdiction of
incorporation with a Lending Office in the same jurisdiction as its Lending
Office.
10. The Administrative Agent shall have no liability to any person if such
determination results in an Additional Cost Rate which over or under
compensates any Lender and shall be entitled to assume that the information
provided by any Lender or Reference Bank pursuant to paragraphs 3, 7 and 8
above is true and correct in all respects.
11. The Administrative Agent shall distribute the additional amounts received
as a result of the Mandatory Cost Rate to the Lenders on the basis of the
Additional Cost Rate for each Lender based on the information provided by
each Lender and each Reference Bank pursuant to paragraphs 3, 7 and 8
above.
12. Any determination by the Administrative Agent pursuant to this Schedule
1.1(b) in relation to a formula, the Mandatory Cost Rate, an Additional
Cost Rate or any amount payable to a Lender shall, in the absence of
manifest error, be conclusive and binding on all parties.
13. The Administrative Agent may from time to time, after consultation with the
Borrower and the Lenders, determine and notify to all parties of any
amendments which are required to be made to this Schedule 1.1(b) in order
to comply with any change in law, regulation or any requirements from time
to time imposed by the Bank of England, the Financial Services Authority or
the European Central Bank (or, in any case, any other authority which
replaces all or any of its functions) and any such determination shall, in
the absence of manifest error, be conclusive and binding on all parties.
CREDIT AGREEMENT
dated as of January 22, 2003,
by and among
COMPX INTERNATIONAL INC.
as Borrower,
the Lenders referred to herein,
as Lenders,
and
WACHOVIA BANK, NATIONAL ASSOCIATION,
as Administrative Agent
WACHOVIA SECURITIES, INC.,
as Sole Lead Arranger and Sole Book Manager
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS................................................. 1
SECTION 1.1 Definitions.......................................1
SECTION 1.2 General...........................................19
SECTION 1.3 Effectiveness of Euro Provisions..................20
SECTION 1.4. Other Definitions and Provisions..................20
ARTICLE II REVOLVING CREDIT FACILITY...................................20
SECTION 2.1 Revolving Credit Loans............................20
SECTION 2.2 Alternative Currency Loans........................20
SECTION 2.3 Swingline Loans...................................22
SECTION 2.4 Procedure for Advances of Revolving Credit
Loans, Alternative Currency Loans and
Swingline Loans...................................25
SECTION 2.5 Repayment of Loans................................26
SECTION 2.6 Notes.............................................29
SECTION 2.7 Permanent Reduction of the
Aggregate Commitment and the Alternative
Currency Commitment...............................29
SECTION 2.8 Termination of Credit Facility....................31
SECTION 2.9 Increase of the Aggregate Commitment..............31
ARTICLE III LETTER OF CREDIT FACILITY..................................32
SECTION 3.1 L/C Commitment....................................32
SECTION 3.2 Procedure for Issuance of Letters of Credit.......33
SECTION 3.3 Commissions and Other Charges.....................33
SECTION 3.4 L/C Participations................................34
SECTION 3.5 Reimbursement Obligation of the Borrower..........35
SECTION 3.6 Obligations Absolute..............................35
SECTION 3.7 Effect of Application.............................36
ARTICLE IV GENERAL LOAN PROVISIONS.....................................36
SECTION 4.1 Interest..........................................36
SECTION 4.2 Notice and Manner of Conversion or
Continuation of Loans.............................39
SECTION 4.3 Fees..............................................40
SECTION 4.4 Manner of Payment.................................40
SECTION 4.5 Crediting of Payments and Proceeds................42
SECTION 4.6 Adjustments.......................................42
SECTION 4.7 Nature of Obligations of Lenders
Regarding Extensions of Credit; Assumption
by the Administrative Agent.......................42
SECTION 4.8. Redenomination of Alternative Currency Loans......43
SECTION 4.9. Regulatory Limitation.............................44
SECTION 4.10 Changed Circumstances.............................44
SECTION 4.11 Indemnity..........................................47
SECTION 4.12 Capital Requirements...............................47
SECTION 4.13 Taxes..............................................48
SECTION 4.14. Rounding and Other Consequential Changes...........49
SECTION 4.15. Replacement of Lenders.............................51
SECTION 4.16. Security...........................................51
ARTICLE V CLOSING; CONDITIONS OF CLOSING AND BORROWING.................51
SECTION 5.1 Closing...........................................51
SECTION 5.2 Conditions to Closing and Initial
Extensions of Credit..............................51
SECTION 5.3 Conditions to All Extensions of Credit............56
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE BORROWER..............57
SECTION 6.1 Representations and Warranties....................57
SECTION 6.2 Survival of Representations and Warranties, Etc...64
ARTICLE VII FINANCIAL INFORMATION AND NOTICES..........................64
SECTION 7.1 Financial Statements and Projections..............65
SECTION 7.2 Officer's Compliance Certificate..................65
SECTION 7.3 Accountants' Certificate..........................65
SECTION 7.4 Other Reports.....................................66
SECTION 7.5 Notice of Litigation and Other Matters............66
SECTION 7.6 Accuracy of Information...........................67
ARTICLE VIII AFFIRMATIVE COVENANTS.....................................67
SECTION 8.1 Preservation of Corporate Existence
and Related Matters...............................67
SECTION 8.2 Maintenance of Property...........................67
SECTION 8.3 Insurance.........................................67
SECTION 8.4 Accounting Methods and Financial Records..........67
SECTION 8.5 Payment and Performance of Obligations............68
SECTION 8.6 Compliance With Laws and Approvals................68
SECTION 8.7 Environmental Laws................................68
SECTION 8.8 Compliance with ERISA.............................68
SECTION 8.9 Compliance With Agreements........................69
SECTION 8.10 Visits and Inspections.............................69
SECTION 8.11 Additional Subsidiaries and Additional Collateral..69
SECTION 8.12 Use of Proceeds....................................71
SECTION 8.13 Further Assurances.................................71
ARTICLE IX FINANCIAL COVENANTS.........................................71
SECTION 9.1 Leverage Ratio....................................71
SECTION 9.2 Consolidated Net Worth............................71
SECTION 9.3 Interest Coverage Ratio...........................71
SECTION 9.4 Capital Expenditures..............................72
ARTICLE X NEGATIVE COVENANTS...........................................72
SECTION 10.1 Limitations on Debt................................72
SECTION 10.2 Limitations on Liens...............................73
SECTION 10.3 Limitations on Loans, Advances,
Investments and Acquisitions.......................74
SECTION 10.4 Limitations on Mergers and Liquidation.............76
SECTION 10.5 Limitations on Sale of Assets......................77
SECTION 10.6 Limitations on Dividends and Distributions.........77
SECTION 10.7 Limitations on Exchange and
Issuance of Capital Stock..........................78
SECTION 10.8 Transactions with Affiliates.......................78
SECTION 10.9 Certain Accounting Changes; Organizational
Documents..........................................78
SECTION 10.10 Amendments; Payments and Prepayments of
Subordinated Debt..................................79
SECTION 10.11 Restrictive Agreements.............................79
SECTION 10.12 Nature of Business.................................79
SECTION 10.13 Impairment of Security Interests...................79
ARTICLE XI DEFAULT AND REMEDIES........................................79
SECTION 11.1 Events of Default..................................79
SECTION 11.2 Remedies...........................................82
SECTION 11.3 Rights and Remedies Cumulative; Non-Waiver; etc....83
SECTION 11.4. Judgment Currency..................................83
ARTICLE XII THE ADMINISTRATIVE AGENT...................................84
SECTION 12.1 Appointment........................................84
SECTION 12.2 Delegation of Duties...............................84
SECTION 12.3 Exculpatory Provisions.............................84
SECTION 12.4 Reliance by the Administrative Agent...............84
SECTION 12.5 Notice of Default..................................85
SECTION 12.6 Non-Reliance on the Administrative Agent
and Other Lenders..................................85
SECTION 12.7 Indemnification....................................86
SECTION 12.8 The Administrative Agent in Its
Individual Capacity................................86
SECTION 12.9 Administrative Agent May File Proofs of Claim......86
SECTION 12.10 Resignation of the Administrative Agent;
Successor Administrative Agent.....................86
ARTICLE XIII MISCELLANEOUS.............................................88
SECTION 13.1 Notices............................................88
SECTION 13.2 Expenses; Indemnity................................89
SECTION 13.3 Set-off............................................89
SECTION 13.4 Governing Law......................................90
SECTION 13.5 Jurisdiction and Venue.............................90
SECTION 13.6 Binding Arbitration; Waiver of Jury Trial..........91
SECTION 13.7 Reversal of Payments...............................92
SECTION 13.8 Injunctive Relief; Punitive Damages................92
SECTION 13.9 Accounting Matters.................................92
SECTION 13.10 Successors and Assigns; Participations.............93
SECTION 13.11 Amendments, Waivers and Consents...................97
SECTION 13.12 Performance of Duties..............................97
SECTION 13.13 All Powers Coupled with Interest...................97
SECTION 13.14 Survival of Indemnities............................97
SECTION 13.15 Titles and Captions................................98
SECTION 13.16 Severability of Provisions.........................98
SECTION 13.17 Counterparts.......................................98
SECTION 13.18 Term of Agreement..................................98
SECTION 13.19 Advice of Counsel..................................98
SECTION 13.20 No Strict Construction.............................98
SECTION 13.21 Inconsistencies with Other Documents;
Independent Effect of Covenants....................98
SECTION 13.22 Continuity of Contract.............................99
EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit A-1 - Form of Revolving Credit Note
Exhibit A-2 - Form of Swingline Note
Exhibit A-3 - Form of Alternative Currency Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Notice of Account Designation
Exhibit D - Form of Notice of Prepayment
Exhibit E - Form of Notice of Conversion/Continuation
Exhibit F - Form of Officer's Compliance Certificate
Exhibit G - Form of Assignment and Acceptance
Exhibit H - Form of Subsidiary Guaranty Agreement
Exhibit I - Form of Collateral Agreement
Exhibit J - Form of Joinder Agreement
SCHEDULES
Schedule 1.1(a) - Lenders and Commitments
Schedule 1.1(b) - Mandatory Cost Rate
Schedule 6.1(a) - Jurisdictions of Organization and Qualification
Schedule 6.1(b) - Subsidiaries and Capitalization
Schedule 6.1(i) - ERISA Plans
Schedule 6.1(l) - Labor and Collective Bargaining Agreements
Schedule 6.1(s) - Debt and Guaranty Obligations
Schedule 6.1(t) - Litigation
Schedule 10.2 - Existing Liens
Schedule 10.3 - Existing Loans, Advances and Investments
Schedule 10.8 - Transactions with Affiliates
AGREEMENT AND GENERAL RELEASE
This Agreement and General Release (this "Agreement") is entered into as of
the date of the last signature affixed to this Agreement between Brent A.
Hagenbuch ("Employee") and COMPX INTERNATIONAL INC., a Delaware corporation
("CompX"), for itself and on behalf of its parent, subsidiary or other related
or affiliated entities or persons (including, without limitation, Contran
Corporation and the Harold C. Simmons Family Trusts) and such entities'
predecessors, successors, assigns, officers, directors, partners, agents,
employees, trustees, insurers and attorneys, past and present (hereinafter CompX
and all such entities and persons other than Employee are collectively referred
to as the "Company").
Recitals
A. Employee is an employee at will of CompX.
B. Employee resigned as president and chief executive officer of CompX
effective May 22, 2002 (the "Resignation Date").
C. In exchange for a general release from Employee of any and all claims
against the Company, CompX has agreed, among other things, to employ Employee
through the earlier of (i) November 30, 2002 and four additional weeks of
accrued vacation, which period shall terminate on December 27, 2002 (the "Salary
Payment Date") or (ii) such time as Employee terminates his employment with
CompX upon notice to CompX, in which event CompX will pay Employee in one
lump-sum his unpaid salary as if he had been employed through the Salary Payment
Date (the "Lump Sum Payment"). The earlier of December 27, 2002 or the date
Employee terminates his employment by notice to CompX shall be the termination
date of Employee's employment with CompX (the "Termination Date").
D. Employee has been given at least 21 days to consider this Agreement and
has been advised and encouraged by receipt of this writing to consult with an
attorney prior to executing this Agreement.
E. This Agreement will not become effective or enforceable until the
expiration of seven days following its execution and during such period Employee
may revoke the Agreement if he so desires.
Agreement
NOW, THEREFORE, IT IS AGREED, in consideration of the mutual undertakings
of the parties hereto, as follows:
Section 1. Recitals. The foregoing recitals are expressly incorporated
herein and made a part hereof.
Section 2. Amount of Consideration. Upon satisfying the following
conditions:
(i) Employee executes this Agreement;
(ii) Employee executes the NOTICE OF RIGHTS and ACKNOWLEDGMENT OF
RECEIPT substantially in the form attached to this Agreement;
(iii) Employee executes the REAFFIRMATION OF AGREEMENT AND
GENERAL RELEASE substantially in the form attached to this Agreement
(the "Reaffirmation"); and
(iv) Employee executes a written resignation letter addressed to
the board of directors of CompX stating that he resigns all director,
officer and all other elected or appointed positions of CompX and its
subsidiaries effective as of the Resignation Date;
CompX shall employ Employee at his current base salary rate with medical
benefits until the earlier of (i) the Salary Payment Date or (ii) such time as
Employee terminates his employment with CompX upon notice to CompX, in which
event and as soon thereafter as reasonably practicable CompX will pay Employee
the Lump-Sum Payment. In any event, Employee's employment with CompX shall
terminate, unless terminated earlier pursuant to Section 6, on the Termination
Date. CompX shall not be obligated to pay Employee any salary or medical
benefits for periods subsequent to the Resignation Date in excess of Employee's
accrued vacation as of the Resignation Date until Employee has satisfied all the
conditions set forth in this Section.
Section 3. 2002 Bonus and Profit-Sharing; Stock Options. Employee will not
receive any bonuses or profit-sharing benefits for 2002 from the Company. CompX
acknowledges that Employee currently has the vested right to purchase 10,000
shares of CompX class A common stock, par value $0.01 per share ("Class A Common
Stock"), at $12.06 per share pursuant to an Employee Nonqualified Stock Option
Agreement dated as of January 17, 2001 between CompX and Employee (the "Stock
Option Agreement") issued under the CompX International Inc. 1997 Long-Term
Incentive Plan. Employee waives his right under the Stock Option Agreement to
purchase any shares of Class A Common Stock that vest after the Resignation
Date. Employee agrees that he will only be able to purchase 10,000 shares of
Class A Common Stock under the Stock Option Agreement until 90 days after his
employment with CompX terminates.
Section 4. Employee's Authority After the Resignation Date. After the
Resignation Date, Employee shall be deemed an active employee of CompX for
welfare benefit plan purposes but shall take no action on behalf of the Company,
or represent to others that he has the authority to do so. Except as provided in
Section 8, Employee has no duty, nor is he expected, to appear at CompX's
offices or facilities. Any breach by Employee of this Section shall be deemed a
material breach of this Agreement.
Section 5. General Release. Employee agrees to the following General
Release (the "General Release"):
FOR VALUE RECEIVED, the adequacy and sufficiency of which is
hereby acknowledged, Employee, on behalf of himself and his heirs,
executors, attorneys, administrators, successors and assigns
(hereinafter referred to as "Releaser") hereby fully and forever
releases and discharges the Company from any and all claims, demands,
liens, agreements, contracts, covenants, actions, suits, causes of
action, obligations, controversies, debts, costs, expenses (including
but not limited to attorneys' fees and expenses), damages, judgments,
orders and liabilities of whatever kind or nature, in law or equity,
by statute or otherwise, whether now known or unknown, vested or
contingent, suspected or unsuspected, and whether or not concealed or
hidden, that have existed or may have existed, or that do exist,
including all claims arising in any manner relating to his employment
with the Company. This General Release shall include, without in any
way limiting the generality of the foregoing language, any and all
claims of employment discrimination under the United States
Constitution, the Constitution of the state of Texas, the Age
Discrimination in Employment Act, Title VII of the Civil Rights Act of
1964, as amended, the Civil Rights Act of 1991, 42 U.S.C. 1981, the
Americans with Disabilities Act, the Fair Labor Standards Act, the
Equal Pay Act, the Worker Adjustment and Retraining Notification Act,
the Employee Retirement Income Security Act, the Family and Medical
Leave Act, the Texas Commission on Human Rights Act, or under any
other applicable federal, state or local laws, ordinances or legal
restrictions on the Company's rights.
Unless otherwise provided in this Agreement, payment under this
Agreement shall not alter or change the rights that the Employee has
to benefits accrued as of his termination date under the CompX
Contributory Retirement Plan, the CompX Capital Accumulation Pension
Plan, the CompX International Inc. 1997 Long-Term Incentive Plan or
pursuant to any agreement of limited liability or any indemnification
available to Releaser as a director or officer of CompX or any of its
subsidiaries, whether set forth in such applicable entity's
certificate of incorporation, bylaws, resolutions of the board of
directors or otherwise. Unless otherwise provided in this Agreement,
Employee's rights under these plans shall continue to be controlled by
the respective plan documents and the consideration paid under this
Agreement shall not be included as compensation for benefit purposes
under these plans. Also, this Agreement shall not increase, decrease
or otherwise affect Releaser's right to medical coverage during his
term of employment or thereafter at Releaser's expense under COBRA.
It is the intention of Releaser in executing this General Release
that it shall be effective as a bar to each and every claim, demand
and cause of action of whatever kind or character whether or not
hereinabove mentioned or implied; and the Releaser hereby knowingly
and voluntarily waives any and all rights and benefits. Releaser
expressly consents that this General Release shall be given full force
and effect according to each and all of its express terms and
provisions, including those relating to unknown and unsuspected
claims, demands, charges and causes of action (notwithstanding any
state statute that expressly limits the effectiveness of a general
release of unknown, unsuspected and unanticipated claims), if any, as
well as those relating to any other claims, demands and causes of
action hereinabove mentioned or implied. Releaser acknowledges and
agrees that this waiver is an essential and material term of this
General Release and without such waiver this Agreement would not have
been entered into.
Releaser understands and agrees that this General Release is not
intended to be and shall not be deemed, construed or treated in any
respect as an admission of liability by any person or entity for any
purpose.
Releaser further acknowledges that he has entered into this
General Release freely and without coercion, that he has been advised
and encouraged in writing to consult with counsel and has been offered
a period of time of at least 21 days to consider the terms of this
General Release. Releaser understands that he has seven days from the
date this General Release is executed to revoke this Agreement and
until the expiration of this seven-day period the General Release
shall not be effective or enforceable.
Section 4. Contest, Grievance, Earlier Termination and Liquidated Damages.
In the event Employee (i) contests the effectiveness of the General Release in a
proceeding before a court of law, (ii) pursues a claim or grievance arising on
or before the effectiveness of this Agreement against the Company in a
proceeding before a court of law or (iii) pursues a damage award arising on or
before the effectiveness of this Agreement against the Company before an
administrative official or agency of an applicable governmental authority, ten
days prior to instituting any such proceeding or claim, Employee's employment
with CompX shall immediately terminate and Employee shall pay CompX a lump sum
as liquidated damages equal to the aggregate salary CompX paid Employee for
periods subsequent to the Resignation Date plus lawful interest on such salary
from the time of each applicable pay period at the lesser of 10% per annum or
the maximum lawful rate (the "Liquidated Damages"). If Employee fails to comply
with this Section, Employee agrees that CompX may seek injunctive relief for the
specific performance of this Section and in the event that specific performance
is not obtained any damages that Employee may be entitled to as a result of such
proceeding shall be reduced by the amount of the Liquidated Damages. The General
Release provided in Section 5 shall remain effective against Employee whether or
not Employee pays the Liquidated Damages to CompX.
Section 7. Return of Company Property. Upon execution of this Agreement,
Employee further agrees to return and leave in the custody of CompX all the
Company's documents and property except (i) for routine expense reports needed
for income tax return preparation, insurance policies, claim forms and the like
and (ii) with respect to CompX equipment (such as computers, cellular phones,
pagers, personal digital assistants and the like) in Employee's possession that
Employee would like to keep, Employee agrees to reimburse CompX for the agreed
upon value of such equipment within 10 days of Employee's execution of the
Reaffirmation.
Section 8. Cooperation in Legal Matters. Employee acknowledges that in the
course of his employment with CompX, he has gained knowledge and experience
and/or was a witness to events and circumstances that may arise in the Company's
defense or prosecution of subsequent proceedings. Employee agrees to cooperate
fully and truthfully with the Company and to appear upon the Company's
reasonable request and expense as a witness and/or consultant in defending or
prosecuting claims of all kinds, including but not limited to any litigation,
administrative actions or arbitrations.
Section 9. Attorney Fees for Successful Party. The parties agree that
should one party sue the other party for a breach of any provision of this
Agreement, the prevailing party shall be entitled to recover its reasonable
attorney's fees and costs of court if it is successful in obtaining a final
judgment against the other party. The parties hereby agree that each party shall
have the right to sue for specific performance of this Agreement and declaratory
and injunctive relief.
Section 10. Binding Effect. This Agreement shall be binding upon and inure
to the benefit of each of the parties hereto and the heirs, executors,
administrators, successors and assigns of each of the parties, as applicable.
Section 11. Nondisclosure. Employee shall refrain from all conduct, verbal
or otherwise, that would damage the Company's reputation, goodwill or standing
in the community or among its employees. Employee further agrees not to disclose
any privileged or proprietary information concerning the Company's operations,
except as may be required by governmental or judicial authorities. Under no
circumstances is Employee allowed to utilize information from Company files or
electronic equipment to disclose, or allow to be obtained or disclosed, through
the use of agents or any third party information in oral, written or
computerized data form, about such things as payroll information of any type, or
the names, addresses or telephone numbers of Company personnel, or any
non-public financial information about the Company, except as may be required by
governmental or judicial authorities. Employee further agrees not to disclose
any information relating to the terms or existence of this Agreement to any
other person or organization, including but not limited to past, present and
future employees of the Company, except as may be required by governmental or
judicial authorities.
Section 12. No Other Agreement. This Agreement contains the entire
agreement between the parties with respect to the subject matter hereof and the
parties acknowledge that there are no warranties, promises or representations of
any kind, express or implied, upon which the parties have relied in entering
into this Agreement. The terms and conditions of this Agreement are contractual
and not a mere recital. No part of this Agreement may be changed except in
writing executed by the parties.
Section 13. Governing Law. This Agreement shall be interpreted in
accordance with the laws of the state of Texas. Whenever possible, each
provision of this Agreement shall be interpreted in such a manner as to be
effective and valid under applicable law, but if any provision of this Agreement
shall be held to be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating or affecting in any manner whatsoever the
remainder of such provision or the remaining provisions
Section 14. Notice and Tenders. Any notice, request or other communication
hereunder to a party shall be in writing and all notices and tenders shall be
delivered or sent by postage prepaid first class mail or overnight courier to
the address of the party appearing beneath such party's signature to this
Agreement or such other address as such party may notify the other party
pursuant to this Section.
Section 15. Counterparts. This Agreement may be executed in any number of
counterparts.
IN WITNESS WHEREOF, the parties have executed this Agreement and General
Release effective as of the date of the last signature affixed below.
READ CAREFULLY BEFORE SIGNING
I have read this Agreement and General Release and have had the opportunity
to consult legal counsel prior to my signing of this Agreement and General
Release. I understand that by executing this Agreement and General Release I
will relinquish any right or demand I may have against the Company.
Date: June 18, 2002
/s/ Brent A. Hagenbuch
By:---------------------------------------
Brent A. Hagenbuch
Address: 5423 Harbor Town
Dallas, Texas 75287
Telephone No.: 972.380.4135
Social Security No.: XXX-XX-XXXX
Date: June 17, 2002 COMPX INTERNATIONAL INC.
/s/Glenn R. Simmons
By:-----------------------------------
Glenn R. Simmons, Chairman of the Board
Address: Three Lincoln Centre
5430 LBJ Freeway, Suite 1700
Dallas, Texas 75240-2697
Telephone No.: 972.448.1400
NOTICE OF RIGHTS
Attached hereto you will find a proposed AGREEMENT AND GENERAL RELEASE
("Agreement") with respect to your termination from employment. It is required
by law that you be given at least twenty-one (21) days from the date of receipt
of the proposed Agreement within which to consider its terms. It is recommended
that you consult with an attorney regarding your legal rights with respect to
the Agreement during this 21-day period.
ACKNOWLEDGMENT OF RECEIPT
I acknowledge that I received a copy of CompX International Inc.'s
AGREEMENT AND GENERAL RELEASE by 10:00 a.m. (Dallas, Texas time) the 18th day of
June, 2002.
/s/ Brent A. Hagenbuch
------------------------------------
Brent A. Hagenbuch
REAFFIRMATION OF AGREEMENT AND GENERAL RELEASE
[to be signed at the conclusion of the 7 day waiting period]
I, Brent A. Hagenbuch, acknowledge that I signed the AGREEMENT AND GENERAL
RELEASE ("Agreement") with CompX International Inc. and that during the seven
(7) day period immediately following my execution of the Agreement, I had the
right to revoke the Agreement at any time. By executing the Agreement, I also
understand that I agreed that I would receive no benefits thereunder unless and
until I executed this Reaffirmation.
By executing this Reaffirmation, I now affirm and attest that I (a) have
not heretofore, or contemporaneously with the execution of this Reaffirmation,
revoked, or attempted to revoke the Agreement, either by notice to CompX
International Inc., or otherwise, and (b) am now, by virtue of my execution of
this Reaffirmation, on or after seven (7) days after the execution of the
Agreement, fully bound by all of the terms and conditions of the Agreement.
EXECUTED in Dallas, Texas on June 25, 2002.
/s/ Brent A. Hagenbuch
-------------------------------------
Brent A. Hagenbuch
THE STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned, a Notary Public, on this day personally
appeared Brent A. Hagenbuch, known to me to be the person whose name is
subscribed to the foregoing instrument and acknowledged to me that he executed
the same for the purposes and consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 25th day of June, 2002.
[SEAL]
/s/ Linda S. Roberts
------------------------------------
Notary Public, State of Texas
AGREEMENT AND GENERAL RELEASE
This Agreement and General Release (this "Agreement") is entered into as of
the date of the last signature affixed to this Agreement between Stuart M.
Bitting ("Employee") and COMPX INTERNATIONAL INC., a Delaware corporation
("CompX"), for itself and on behalf of its parent, subsidiary or other related
or affiliated entities or persons (including, without limitation, Valhi, Inc.,
Contran Corporation and the Harold C. Simmons Family Trusts) and such entities'
predecessors, successors, assigns, officers, directors, partners, agents,
employees, trustees, insurers and attorneys, past and present (hereinafter CompX
and all such entities and persons other than Employee are collectively referred
to as the "Company").
Recitals
A. Employee is an at will employee of CompX.
B. CompX has decided to terminate Employee's employment with CompX.
C. CompX has agreed to give consideration to Employee in exchange for his
execution of the general release set forth herein, among other things.
D. Such consideration is in addition to anything of value that Employee has
received or is entitled to receive as a result of his discharge.
E. Employee has been given at least 21 days to consider this Agreement and
has been advised and encouraged by receipt of this writing to consult with an
attorney prior to executing this Agreement.
F. This Agreement will not become effective or enforceable until the
expiration of seven days following its execution and during such period Employee
may revoke the Agreement if he so desires.
Agreement
NOW, THEREFORE, IT IS AGREED, in consideration of the mutual undertakings
of the parties hereto, as follows:
Section 1. Recitals. The foregoing recitals are expressly incorporated
herein and made a part hereof.
Section 2. Termination Date. Unless terminated earlier pursuant to this
Section, Employee's employment with CompX shall terminate effective July 31,
2002. Either party may terminate Employee's employment with CompX at will
effective prior to July 31, 2002 upon written notice to the other party of such
earlier termination date. In either event, the effective date of the termination
of Employee's employment with CompX shall be referred to in this Agreement as
the "Termination Date."
Section 3. Amount of Consideration. Upon satisfying the following
conditions:
(i) Employee executes this Agreement;
(ii) Employee executes the NOTICE OF RIGHTS and ACKNOWLEDGMENT OF RECEIPT
substantially in the form attached to this Agreement;
(iii) Employee executes the REAFFIRMATION OF AGREEMENT AND GENERAL RELEASE
substantially in the form attached to this Agreement (the "Reaffirmation"); and
(iv) Employee executes a written resignation letter addressed to the board
of directors of CompX stating that he resigns all director, officer and all
other elected or appointed positions of CompX and its subsidiaries effective as
of the Termination Date;
CompX shall pay Employee, on the later of the satisfaction of such conditions or
within three business days after the Termination Date, the total sum of ONE
HUNDRED TWENTY SIX THOUSAND ONE HUNDRED TEN AND 82/100THS DOLLARS ($126,110.82),
less applicable withholding taxes (the "Severance Pay"). The Severance Pay
includes any amount owed to Employee for accrued vacation time.
Section 4. COBRA Benefits. If Employee and Employee's dependents wish to
continue health benefits, Employer agrees to pay on behalf of Employee the
actual expense of Employee's and his eligible dependents' benefits under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"),
for the period from the Termination Date through January 31, 2003, or such
shorter period if Employee becomes ineligible for COBRA benefits. Employer's
payment of COBRA expenses for Employee and his eligible dependents' benefits
pursuant to this Section shall NOT extend the period that Employee and his
dependents are eligible for COBRA benefits. If Employee and his dependents are
eligible for COBRA benefits after January 31, 2003, and they wish to continue
such benefits, Employee must make the payments for such benefits beginning
February 1, 2003. Employee and his dependents will not receive any further
notice to make such payments beginning February 1, 2003.
Section 5. 2002 Bonus and Profit-Sharing; Vacation Pay. Employee will not
receive any bonuses or profit-sharing benefits for 2002 from the Company.
Section 6. General Release. Employee agrees to the following General
Release (the "General Release"):
FOR VALUE RECEIVED, the adequacy and sufficiency of which is hereby
acknowledged, Employee, on behalf of himself and his heirs, executors,
attorneys, administrators, successors and assigns (hereinafter referred to
as "Releaser") hereby fully and forever releases and discharges the Company
from any and all claims, demands, liens, agreements, contracts, covenants,
actions, suits, causes of action, obligations, controversies, debts, costs,
expenses (including but not limited to attorneys' fees and expenses),
damages, judgments, orders and liabilities of whatever kind or nature, in
law or equity, by statute or otherwise, whether now known or unknown,
vested or contingent, suspected or unsuspected, and whether or not
concealed or hidden, that have existed or may have existed, or that do
exist, including all claims arising in any manner relating to his
employment or the termination of his employment with the Company. This
General Release shall include, without in any way limiting the generality
of the foregoing language, any and all claims of employment discrimination
under the United States Constitution, the Constitution of the state of
Texas, the Age Discrimination in Employment Act, Title VII of the Civil
Rights Act of 1964, as amended, the Civil Rights Act of 1991, 42 U.S.C.
1981, the Americans with Disabilities Act, the Fair Labor Standards Act,
the Equal Pay Act, the Worker Adjustment and Retraining Notification Act,
the Employee Retirement Income Security Act, the Family and Medical Leave
Act, the Texas Commission on Human Rights Act, any other statutory,
regulatory and common law requirements of the state of Texas, or under any
other applicable federal, state or local laws, ordinances or legal
restrictions on the Company's rights.
Unless otherwise provided in this Agreement, payment under this
Agreement shall not alter or change the rights that the Employee has to
benefits accrued as of his termination date under the CompX Contributory
Retirement Plan, the CompX Capital Accumulation Pension Plan or the CompX
International Inc. 1997 Long-Term Incentive Plan or pursuant to any
agreement of limited liability or any indemnification available to Releaser
as a director or officer of CompX or any of its subsidiaries, whether set
forth in such applicable entity's certificate of incorporation, bylaws,
resolutions of the board of directors or otherwise. Unless otherwise
provided in this Agreement, Employee's rights under these plans shall
continue to be controlled by the respective plan documents and the
consideration paid under this Agreement shall not be included as
compensation for benefit purposes under these plans. Also, except as
otherwise provided in this Agreement, this Agreement shall not increase,
decrease or otherwise affect Releaser's right to medical coverage during
his term of employment or thereafter at Releaser's expense under COBRA.
It is the intention of Releaser in executing this General Release that
it shall be effective as a bar to each and every claim, demand and cause of
action of whatever kind or character whether or not hereinabove mentioned
or implied; and the Releaser hereby knowingly and voluntarily waives any
and all rights and benefits arising through the date of this Agreement.
Releaser expressly consents that this General Release shall be given full
force and effect according to each and all of its express terms and
provisions, including those relating to unknown and unsuspected claims,
demands, charges and causes of action (notwithstanding any state statute
that expressly limits the effectiveness of a general release of unknown,
unsuspected and unanticipated claims), if any, as well as those relating to
any other claims, demands and causes of action hereinabove mentioned or
implied. Releaser acknowledges and agrees that this waiver is an essential
and material term of this General Release and without such waiver this
Agreement would not have been entered into.
Releaser understands and agrees that this General Release is not
intended to be and shall not be deemed, construed or treated in any respect
as an admission of liability by any person or entity for any purpose.
Releaser further acknowledges that he has entered into this General
Release freely and without coercion, that he has been advised and
encouraged in writing to consult with counsel and has been offered a period
of time of at least 21 days to consider the terms of this General Release.
Releaser understands that he has seven days from the date this General
Release is executed to revoke this Agreement and until the expiration of
this seven-day period the General Release shall not be effective or
enforceable.
Section 4. Contest, Grievance, Earlier Termination and Liquidated Damages.
In the event Employee (i) contests the effectiveness of the General Release in a
proceeding before a court of law, (ii) pursues a claim or grievance arising on
or before the effectiveness of this Agreement against the Company in a
proceeding before a court of law or (iii) pursues a damage award arising against
the Company before an administrative official or agency of an applicable
governmental authority, ten days prior to instituting any such proceeding or
claim Employee shall pay CompX a lump sum as liquidated damages equal to the
Severance Pay plus lawful interest from the date Employer paid the Severance Pay
to Employee at the lesser of 10% per annum or the maximum lawful rate (the
"Liquidated Damages"). If Employee fails to comply with this Section, Employee
agrees that CompX may seek injunctive relief for the specific performance of
this Section and, in the event that specific performance is not obtained, any
damages that Employee may be entitled to as a result of such proceeding shall be
reduced by the amount of the Liquidated Damages. The General Release provided in
Section 6 shall remain effective against Employee whether or not Employee pays
the Liquidated Damages to CompX.
Section 8. Return of Company Property. On the Termination Date, Employee
agrees to return and leave in the custody of CompX all the Company's documents
and property except (i) for routine expense reports needed for income tax return
preparation, insurance policies, claim forms and the like and (ii) with respect
to CompX equipment (such as computers, cellular phones, pagers, personal digital
assistants and the like) in Employee's possession that Employee would like to
keep, Employee agrees to reimburse CompX for the agreed upon value of such
equipment within two business days after the Termination Date. If Employee fails
to pay CompX for any such equipment that he decides to keep, CompX may deduct
the fair value of such equipment from the Severance Pay.
Section 9. Cooperation in Legal Matters. Employee acknowledges that in the
course of his employment with CompX, he has gained knowledge and experience
and/or was a witness to events and circumstances that may arise in the Company's
defense or prosecution of subsequent proceedings. Employee agrees to cooperate
fully and truthfully with the Company and to appear upon the Company's
reasonable request and expense as a witness and/or consultant in defending or
prosecuting claims of all kinds, including but not limited to any litigation,
administrative actions or arbitrations.
Section 10. Attorney Fees for Successful Party. The parties agree that
should one party sue the other party for a breach of any provision of this
Agreement, the prevailing party shall be entitled to recover its reasonable
attorney's fees and costs of court if it is successful in obtaining a final
judgment against the other party. The parties hereby agree that each party shall
have the right to sue for specific performance of this Agreement and declaratory
and injunctive relief.
Section 11. Binding Effect. This Agreement shall be binding upon and inure
to the benefit of each of the parties hereto and the heirs, executors,
administrators, successors and assigns of each of the parties, as applicable.
Section 12. Nondisclosure. Employee shall refrain from all conduct, verbal
or otherwise, that would damage the Company's reputation, goodwill or standing
in the community or among its employees. Employee further agrees not to disclose
any privileged or proprietary information concerning the Company's operations,
except as may be required by governmental or judicial authorities. Under no
circumstances is Employee allowed to utilize information from Company files or
electronic equipment to disclose, or allow to be obtained or disclosed, through
the use of agents or any third party information in oral, written or
computerized data form, about such things as payroll information of any type, or
the names, addresses or telephone numbers of Company personnel, or any
non-public financial information about the Company, except as may be required by
governmental or judicial authorities. Employee further agrees not to disclose
any information relating to the terms or existence of this Agreement to any
other person or organization, including but not limited to past, present and
future employees of the Company, except as may be required by governmental or
judicial authorities. Employee's breach of this Section will be deemed a
material breach of this Agreement.
Section 13. No Other Agreement. This Agreement contains the entire
agreement between the parties with respect to the subject matter hereof and the
parties acknowledge that there are no warranties, promises or representations of
any kind, express or implied, upon which the parties have relied in entering
into this Agreement. The terms and conditions of this Agreement are contractual
and not a mere recital. No part of this Agreement may be changed except in a
writing executed by both parties.
Section 14. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the state of Texas, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
state of Texas or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the state of Texas. Whenever possible,
each provision of this Agreement shall be interpreted in such a manner as to be
effective and valid under applicable law, but if any provision of this Agreement
shall be held to be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating or affecting in any manner whatsoever the
remainder of such provision or the remaining provisions.
Section 15. Notice and Tenders. Any notice, request or other communication
hereunder to a party shall be in writing and all notices and tenders shall be
delivered or sent by postage prepaid first class mail or overnight courier to
the address of the party appearing beneath such party's signature to this
Agreement or such other address as such party may notify the other party
pursuant to this Section.
Section 16. Counterparts. This Agreement may be executed in any number of
counterparts.
IN WITNESS WHEREOF, the parties have executed this Agreement and General
Release effective as of the date of the last signature affixed below.
READ CAREFULLY BEFORE SIGNING
I have read this Agreement and General Release and have had the opportunity
to consult legal counsel prior to my signing of this Agreement and General
Release. I understand that by executing this Agreement and General Release I
will relinquish any right or demand I may have against the Company.
Date: July 16, 2002
/s/ Stuart M. Bitting
---------------------------------------
Stuart M. Bitting
Address: 500 Carter Drive
Coppell, Texas 75019
Telephone No.: 972.393.8153
Social Security No.: XXX-XX-XXXX
Date: July 16, 2002 COMPX INTERNATIONAL INC.
/s/ Glenn R. Simmons
By:----------------------------------------
Glenn R. Simmons, Chairman of the Board
Address: Three Lincoln Centre
5430 LBJ Freeway, Suite 1700
Dallas, Texas 75240-2697
Telephone No.: 972.448.1400
NOTICE OF RIGHTS
Attached hereto you will find a proposed AGREEMENT AND GENERAL RELEASE
("Agreement") with respect to your termination from employment. It is required
by law that you be given at least twenty-one (21) days from the date of receipt
of the proposed Agreement within which to consider its terms. It is recommended
that you consult with an attorney regarding your legal rights with respect to
the Agreement during this 21-day period.
ACKNOWLEDGMENT OF RECEIPT
I acknowledge that I received a copy of CompX International Inc.'s
AGREEMENT AND GENERAL RELEASE by 10:00 a.m. (Dallas, Texas time) the 16th day of
July, 2002.
/s/Stuart M. Bitting
------------------------------------------
Stuart M. Bitting
REAFFIRMATION OF AGREEMENT AND GENERAL RELEASE
[to be signed at the conclusion of the 7 day waiting period]
I, Stuart M. Bitting, acknowledge that I signed the AGREEMENT AND GENERAL
RELEASE ("Agreement") with CompX International Inc. and that during the seven
(7) day period immediately following my execution of the Agreement, I had the
right to revoke the Agreement at any time. By executing the Agreement, I also
understand that I agreed that I would receive no benefits thereunder unless and
until I executed this Reaffirmation.
By executing this Reaffirmation, I now affirm and attest that I (a) have
not heretofore, or contemporaneously with the execution of this Reaffirmation,
revoked, or attempted to revoke the Agreement, either by notice to CompX
International Inc., or otherwise, and (b) am now, by virtue of my execution of
this Reaffirmation, on or after seven (7) days after the execution of the
Agreement, fully bound by all of the terms and conditions of the Agreement.
EXECUTED in Dallas, Texas on July 23, 2002.
/s/Stuart M. Bitting
------------------------------------------
Stuart M. Bitting
THE STATE OF TEXAS
COUNTY OF Dallas
BEFORE ME, the undersigned, a Notary Public, on this day personally
appeared Stuart M. Bitting, known to me to be the person whose name is
subscribed to the foregoing instrument and acknowledged to me that he executed
the same for the purposes and consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 24th day of July, 2002.
[SEAL]
/s/Linda Roberts
-----------------------------------------
Notary Public, State of Texas
EXHIBIT 21.1 SUBSIDIARIES OF THE REGISTRANT
% of Voting
Securities
Jurisdiction of Held at December
Incorporation or 31,
Name of Corporation Organization 2002
- ----------------------------------- ---------------- -------
Waterloo Furniture Components Limited Canada 100
CompX Security Products Inc. Delaware 100
CompX Europe B.V. the Netherlands 100
Thomas Regout Holding B.V. the Netherlands 100
Thomas Regout Nederland B.V. the Netherlands 100
Thomas Regout B.V. the Netherlands 100
Thomas Regout International B.V. the Netherlands 100
Thomas Regout U.S.A., Inc. Michigan 100
CompX Asia Holding Corporation Malaysia 100
Dynaslide Corporation Taiwan 100
CompX (H.K.) Corp. British Virgin 100
Islands
CompX SFC, Inc. Delaware 100
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in CompX International Inc.'s
(i) Registration Statement (Form S-8 No. 333-47539) and related Prospectus
pertaining to the CompX International Inc. 1997 Long-Term Incentive Plan and
(ii) Registration Statement (Form S-8 No. 333-56163) and related Prospectus
pertaining to the CompX Contributory Retirement Plan, of our report dated
February 13, 2003 on our audits of the consolidated financial statements and
financial statement schedule of CompX International Inc. and Subsidiaries
included in this Annual Report on Form 10-K for the year ended December 31,
2002.
PricewaterhouseCoopers LLP
Dallas, Texas
March 14, 2003
EXHIBIT 99.2
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 CompX International Inc. (the Company)
on Form 10-K for the year ending December 31, 2002 as filed with the Securities
and Exchange Commission on the date hereof (the Report), I, David A. Bowers,
Vice Chairman of the Board, President and Chief Operating Officer (Chief
Executive Officer) of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as
adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
(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 result of operations of the Company.
/s/ David A. Bowers
- -------------------------------------------
David A. Bowers
Vice Chairman of the Board, President and Chief Executive Officer
(Chief Executive Officer)
March 14, 2003
EXHIBIT 99.3
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 CompX International Inc. (the Company)
on Form 10-K for the year ending December 31, 2002 as filed with the Securities
and Exchange Commission on the date hereof (the Report), I, Darryl R. Halbert,
Vice President and Controller (Chief Financial Officer) of the Company, certify,
pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the
Sarbanes-Oxley Act of 2002, that:
(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 result of operations of the Company.
/s/ Darryl R. Halbert
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Darryl R. Halbert
Vice President, Chief Financial Officer and Controller
March 14, 2003