-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Va7iiS2lmHCnkkT7ZuMmRt1C8K7T3hfGaXm5qigrcYL3pbjxKl0YlyXZz2t2emzb alWPslendoDSsiBM9U78nQ== 0000950123-99-002244.txt : 19990319 0000950123-99-002244.hdr.sgml : 19990319 ACCESSION NUMBER: 0000950123-99-002244 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19981225 FILED AS OF DATE: 19990318 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FOSTER WHEELER CORP CENTRAL INDEX KEY: 0000038321 STANDARD INDUSTRIAL CLASSIFICATION: HEAVY CONSTRUCTION OTHER THAN BUILDING CONST - CONTRACTORS [1600] IRS NUMBER: 131855904 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-00286 FILM NUMBER: 99567552 BUSINESS ADDRESS: STREET 1: PERRYVILLE CORPORATE PARK STREET 2: SERVICE ROAD EST 173 CITY: CLINTON STATE: NJ ZIP: 08809 BUSINESS PHONE: 9087304090 10-K 1 FOSTER WHEELER CORPORATION 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 25, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from .......... to .......... Commission file number 1-286-2 FOSTER WHEELER CORPORATION (Exact Name of Registrant as specified in its charter)
NEW YORK 13-1855904 (State of incorporation) (I.R.S. Employer Identification No.) PERRYVILLE CORPORATE PARK, CLINTON, NEW JERSEY 08809-4000 (Address of Principal Executive Offices) (Zip Code)
(908) 730-4000 (Registrant's telephone number, including area code) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
FOSTER WHEELER CORPORATION NEW YORK STOCK EXCHANGE COMMON STOCK, $1.00 PAR VALUE FW PREFERRED CAPITAL TRUST I NEW YORK STOCK EXCHANGE 9.00% PREFERRED SECURITIES, SERIES I (Name of Each Exchange on Which (GUARANTEED BY FOSTER WHEELER CORPORATION) Registered) (Title of Class)
Securities registered pursuant to Section 12(g) of the Act: NONE Title of Class Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X Yes 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. [ ] As of March 1, 1999, 40,708,296 shares of the Registrant's Common Stock, excluding stock held in Treasury, were issued and outstanding, and the aggregate market value of such shares held by nonaffiliates of the Registrant on such date was approximately $498,676,626 (based on the last price on that date of $12.25 per share). List hereunder the following documents if incorporated by reference, and the Part of the Form 10-K into which the document is incorporated: DOCUMENTS INCORPORATED BY REFERENCE List hereunder the following documents if incorporated by reference, and the Part of the Form 10-K into which the document is incorporated: (1) Portions of the Registrant's Proxy Statement dated March 18, 1999 filed with the Commission are incorporated by reference in Part III of this report. 2 FOSTER WHEELER CORPORATION 1998 Form 10-K Annual Report Table of Contents PART I Item 1. Business 2. Properties 3. Legal Proceedings 4. Submission of Matters to a Vote of Security Holders Executive Officers of the Registrant PART II 5. Market for the Registrant's Common Equity and Related Stockholder Matters 6. Selected Financial Data 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 8. Financial Statements and Supplementary Data 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure PART III 10. Directors and Executive Officers of the Registrant 11. Executive Compensation 12. Security Ownership of Certain Beneficial Owners and Management 13. Certain Relationships and Related Transactions PART IV 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21 E of the Securities Exchange Act of 1934. Actual results could differ materially from those projected in the forward-looking statements as a result of the risk factors set forth in this report. 1 3 PART I ITEM 1. BUSINESS GENERAL DEVELOPMENT OF BUSINESS: Foster Wheeler Corporation was incorporated under the laws of the State of New York in 1900. Executive offices of Foster Wheeler Corporation are at Perryville Corporate Park, Clinton, New Jersey, 08809-4000 (Telephone (908) 730-4000). Foster Wheeler Corporation is essentially a holding company which owns the stock of various subsidiary companies. Except as the context otherwise requires, the terms "Foster Wheeler" or the "Corporation" as used herein include Foster Wheeler Corporation and its subsidiaries. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS: See Note 18 to Financial Statements on page 44 of this Form 10-K. NARRATIVE DESCRIPTION OF BUSINESS: The business of the Corporation and its subsidiaries falls within three business groups. The ENGINEERING AND CONSTRUCTION GROUP ("E&C Group") designs, engineers and constructs petroleum, chemical, petrochemical and alternative-fuels facilities and related infrastructure, including power generation and distribution facilities, production terminals, pollution control equipment and water treatment facilities and process plants for the production of fine chemicals, pharmaceuticals, dyestuffs, fragrances, flavors, food additives and vitamins. Also, the E&C Group provides a broad range of environmental remediation services, together with related technical, design and regulatory services. The ENERGY EQUIPMENT GROUP designs, manufactures and erects steam generating and auxiliary equipment for power stations and industrial markets worldwide. Steam generating equipment includes a full range of fluidized bed and conventional boilers firing coal, oil, gas, biomass and other municipal solid waste, waste wood and low-Btu gases. Auxiliary equipment includes feedwater heaters, steam condensers, heat-recovery equipment and low-NOx burners. Site services related to these products encompass plant erection, maintenance engineering, plant upgrading and life extension, and plant repowering. In addition, this Group provides research analysis and experimental work in fluid dynamics, heat transfer, combustion and fuel technology, materials engineering and solids mechanics. The POWER SYSTEMS GROUP utilizes Foster Wheeler strengths in design, engineering, manufacturing and construction to build, own or lease, and operate cogeneration, independent power production and resource recovery facilities as well as facilities for the process and petrochemical industries. This Group generates revenues from construction and operating activities pursuant to long-term sale of project outputs (i.e., electricity and steam contracts), operating and maintenance agreements and from returns on its equity positions. A special-purpose subsidiary established for each new project manages that project from the permitting stage through plant construction and operation. All of the special-purpose subsidiary project debt is limited-recourse. The Corporation's obligations with respect to this debt are limited to guaranteeing the operating performance of the projects. This Group refinances its equity interest in selected projects from time to time when such refinancing will result in risk mitigation, a lower effective financing cost or a potential increased return on investment. In the second quarter of 1997, the Corporation sold the business of Glitsch International, Inc. The earnings of Glitsch International, Inc. up to the closing date of June 27, 1997 have been included in the operating results of the Corporation within the Energy Equipment Group. Foster Wheeler markets its services and products through a staff of sales and marketing personnel and through a network of sales representatives. The Corporation's businesses are not seasonal nor are they dependent on a limited group of customers. No single customer accounted for 10 percent or more of Foster Wheeler's consolidated revenues in fiscal 1997 and 1996, however, for 1998 one customer (Oman LNG) accounted for approximately $500.0 million. The materials used in Foster Wheeler's manufacturing and construction operations are obtained from both domestic and foreign sources. Materials, which consist mainly of steel products and manufactured items, are heavily dependent on foreign sources, particularly for overseas projects. Generally, lead time for delivery of materials does not constitute a problem. 2 4 Foster Wheeler owns and licenses patents, trademarks and know-how which are used in each of its industry groups. Such licenses, patents and trademarks are of varying durations. No Group is materially dependent upon any particular or related group of patents, trademarks or licenses. Foster Wheeler has licensed companies throughout the world to manufacture marine and stationary steam generators and related equipment and certain of its other products. Principal licensees are in Finland, Japan, the Netherlands, Italy, Spain, Portugal, Norway and England. For the most part, Foster Wheeler products are custom designed and manufactured and are not produced for inventory. As is the practice in the Engineering and Construction Group and Energy Equipment Group, customers often make a down payment at the time a contract is executed, and continue to make progress payments until the contract is completed and the work has been accepted as meeting contract guarantees. Foster Wheeler had unfilled orders as of December 25, 1998 of $7,411,900,000 as compared to unfilled orders as of December 26, 1997 of $7,184,600,000. The elapsed time from the award of a contract to completion of performance may be up to four years. The dollar amount of unfilled orders is not necessarily indicative of the future earnings of the Corporation related to the performance of such work. Although unfilled orders represent only business which is considered firm, there can be no assurance that cancellations or scope adjustments will not occur. Due to additional factors outside of the Corporation's control, such as changes in project schedules, the Corporation cannot predict with certainty the portion of unfilled orders that will not be performed. The unfilled orders by major industry segments as of December 25, 1998 and December 26, 1997 are as follows:
1998 1997 ---- ---- Engineering and Construction $ 5,867,800,000 $ 5,354,200,000 Energy Equipment 1,383,500,000 1,633,900,000 Power Systems 213,500,000 255,000,000 Corporate and Financial Services (including eliminations) (52,900,000) (58,500,000) --------------- --------------- $ 7,411,900,000 $ 7,184,600,000 =============== ===============
The following schedule summarizes the unfilled orders of projects at December 25, 1998:
1998 ---- Signed contracts $6,626,798,000 Letters of intent and contracts awarded but not finalized 785,102,000 -------------- $7,411,900,000 ==============
3 5 The Power Systems Group projects consist of the following:
PLANT LOCATION TYPE AND SIZE UNIT FUEL OPERATION - -------------- ------------------ ---- --------- Martinez, California 99.9 MW Cogeneration Refinery Gas/NG 1987 Chapleau, Ontario, Canada 360 Ton/Day Wood Waste Wood Waste 1987 Gilberton, Pennsylvania 80 MW Cogeneration Waste Coal 1988 Charleston, South Carolina 600 Ton/Day Waste-to-Energy Refuse 1989 Mt. Carmel, Pennsylvania 40 MW Cogeneration Waste Coal 1990 ACE, California 96 MW Cogeneration Coal 1991 Camden County, New Jersey 1050 Ton/Day Waste-to-Energy Refuse 1991 Hudson Falls, New York 400 Ton/Day Waste-to-Energy Refuse 1992 University of Minnesota Heating Plant Operation Coal/Gas/Oil 1992 InterPower, Pennsylvania 102 MW Power Waste Coal 1995 Concepcion, Chile 8 MM SCFD Hydrogen Plant -- 1996 Robbins, Illinois 1600 Ton/Day Waste-to-Energy* Refuse/RDF 1996 Lagoven, Venezuela 50 MM SCFD Hydrogen Plant -- 1997 Concepcion, Chile 65 MW Cogeneration Plant Plus Coke 1998 12,000 Barrels/Day Coker and 7,014 Barrels/Day Hydrotreater Teverola, Southern Italy 140 MW Cogeneration Natural Gas 1998 Lisbon, Portugal 2015 Ton/Day Waste-to-Energy Refuse Construction Ferrara, Central Italy 145 MW Cogeneration Natural Gas Construction University of Minnesota 15 MW Cogeneration Coal/Gas/Oil Construction Lomellina, Italy 400 Ton/Day Waste-to-Energy RDF Construction * Includes Recycling
Many companies compete in the engineering and construction segment of Foster Wheeler's business. Management of the Corporation estimates, based on industrial publications, that Foster Wheeler is among the ten largest of the many large and small companies engaged in the design and construction of petroleum refineries and chemical plants. In the manufacture of refinery and chemical plant equipment, neither Foster Wheeler nor any other single company contributes a large percentage of the total volume of such business. On an international basis many companies compete in the Energy Equipment segment of Foster Wheeler's business. Management of the Corporation estimates, based on industrial surveys and trade association materials, that it is among the ten largest suppliers of utility and industrial-sized steam generating and auxiliary equipment in the world and among the three largest in the United States. For the most part, contracts are awarded on the basis of price, delivery, performance and service. Foster Wheeler is continually engaged in research and development efforts both in performance and analytical services on current projects and in development of new products and processes. During 1998, approximately $14,100,000, and in 1997 and 1996, $16,100,000 and $16,900,000 respectively, was spent on Foster Wheeler sponsored research activities. During the same periods, approximately $32,700,000, $40,400,000 and $29,600,000, respectively, was spent on research activities that were paid for by customers of Foster Wheeler. 4 6 Foster Wheeler and its domestic subsidiaries are subject to certain Federal, state and local environmental, occupational health and product safety laws. Foster Wheeler believes all its operations are in compliance with such laws and does not anticipate any material capital expenditures or adverse effect on earnings or cash flows in maintaining compliance with such laws. Foster Wheeler had approximately 11,120 full-time employees on December 25, 1998. Following is a tabulation of the number of full-time employees of Foster Wheeler in each of its industry segments on the dates indicated:
December 25, December 26, December 27, 1998 1997 1996 ---- ---- ---- Engineering and Construction 7,515 7,625 7,130 Energy Equipment 3,125 3,025 4,350 Power Systems 450 410 410 Corporate and Financial Services 30 30 195 ------ ------ ------ 11,120 11,090 12,085 ====== ====== ======
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES: See Note 18 to Financial Statements on page 44 of this Form 10-K. ITEM 2. PROPERTIES COMPANY AND (INDUSTRY SEGMENT*)
BUILDING LEASE LOCATION USE LAND AREA SQUARE FEET EXPIRES -------- --- --------- ----------- ------- Foster Wheeler Corporation (CF) New York City, New York Executive Offices -- 2,270 2009 Livingston, New Jersey General Office & Engineering 31.0 acres 288,000(2) Union Township, Undeveloped 203.8 acres -- New Jersey General Office & Engineering 29.4 acres 294,000 General Office & Engineering 21.0 acres 292,000 2003 Storage and Reproduction Facilities 10.8 acres 30,400 Livingston, New Jersey Research Center 6.7 acres 51,355 Bedminster, New Jersey Office 10.72 acres 135,000(1)(3) Bridgewater, New Jersey Undeveloped 81.4 acres -- (4)
5 7 COMPANY AND (INDUSTRY SEGMENT*)
BUILDING LEASE LOCATION USE LAND AREA SQUARE FEET EXPIRES -------- --- --------- ----------- ------- Foster Wheeler Energy Corporation (EE) Dansville, New York Manufacturing & Offices 82.4 acres 513,786 Foster Wheeler USA Corporation (EC) Houston, Texas General Offices -- 143,192 2003 Foster Wheeler Iberia, S.A. (EC) Madrid, Spain Office & Engineering 4.2 acres 82,500 Foster Wheeler France, S.A. (EC) Paris, France Office & Engineering -- 109,029 2006 Paris, France Archive Storage Space 12,985 2006 Foster Wheeler International Corp. (Thailand Branch) (EC) Sriracha, Thailand Office & Engineering -- 26,400 2000 Foster Wheeler Constructors, Inc. (EC) McGregor, Texas Storage Facilities 15.0 acres 24,000 Mobile (Chickasaw), Storage and 3.5 acres 100,000 2000 Alabama Fabrication Aqua Prieta, Mexico Repair and 1.0 acres 17,000 2000 Fabrication Foster Wheeler Limited (England) (EC) Glasgow, Scotland Office & Engineering 2.26 acres 28,798 Reading, England Office & Engineering -- 325,114(1) 1999/2016 Reading, England Office & Engineering 26 acres 335,521 -- Teeside, England Office & Engineering -- 18,100 1999/2014 Foster Wheeler Limited (Canada) (EE) Niagara-On-The-Lake, Ontario Office Building 34.5 acres 86,000(1) 2004 Foster Wheeler Andina, S.A. (EC) Bogota, Colombia Office & Engineering 2.25 acres 26,000
6 8 COMPANY AND (INDUSTRY SEGMENT*)
BUILDING LEASE LOCATION USE LAND AREA SQUARE FEET EXPIRES -------- --- --------- ----------- ------- Foster Wheeler Energia, S.A. (EE) Tarragona, Spain Manufacturing & Office 11.96 acres 77,794 Madrid, Spain Office Building 1.26 acres 27,500 Foster Wheeler Italiana, S.p.A. (EC) Milan, Italy (via S. Caboto,1) Office & Engineering -- 161,400 2001 Milan, Italy (via S. Caboto,7) Office & Engineering -- 133,000 2002 Birlesik Insaat ve Muhendislik A.S. (BIMAS) (EC) Istanbul, Turkey Engineering & Office -- 26,000 2000 Foster Wheeler Eastern Private Limited (EC) Singapore Office & Engineering -- 25,000 1999 Foster Wheeler Environmental Corporation (EC) Atlanta, Georgia General Offices 18,160 1999 Bellevue, Washington General Offices 53,545 2000 Boston, Massachusetts General Offices 26,326 1999 Lakewood, Colorado General Offices 19,140 2000 Oak Ridge, Tennessee General Offices 14,494 1999 Costa Mesa, California General Offices 14,754 2000 Foster Wheeler Power Systems, Inc. (PS) Martinez, California Cogeneration Plant 6.4 acres -- Mt. Carmel, Cogeneration Plant 105 acres -- 2010 Pennsylvania Charleston, Waste-to-Energy 18 acres -- 2010 South Carolina Plant Hudson Falls, New York Waste-to-Energy 11.2 acres -- Plant Camden, New Jersey Waste-to-Energy 18 acres -- 2011 Plant
7 9 COMPANY AND (INDUSTRY SEGMENT*)
BUILDING LEASE LOCATION USE LAND AREA SQUARE FEET EXPIRES -------- --- --------- ----------- ------- C> Robbins, Illinois Waste-to-Energy Plant Facility Site 16.1 acres -- 2029 Laydown Site 14.6 acres -- 2029 Talcahuano, Chile Cogeneration Plant-Facility Site 21 acres -- 2028 Hydrogen Plant-Facility Site 1.4 acres -- 2013 Paraquana, Venezuela Hydrogen Plant Facility Site 3.9 acres -- 2013 Laydown Site 2.8 acres -- 1999 Foster Wheeler Pyropower, Inc. (EE) San Diego, California Office 9.25 acres 86,000(1) Foster Wheeler Energia OY (EE) Varkhaus, Finland Manufacturing & Offices 22 acres 366,527 Karhula, Finland Research Center 12.84 acres 15,100 2095 Office Laboratory 57,986 Kouvola, Finland Manufacturing & Offices 9.09 acres 79,903 Kaarina, Finland Office 24,762 1999 Helsinki, Finland Office 11,841 1999 Foster Wheeler Energy FAKOP Ltd. (EE) Sosnowiec, Poland Manufacturing & Offices 15.57 acres 231,688
*Designation of Industry Groups: EC - Engineering and Construction EE - Energy Equipment PS - Power Systems CF - Corporate & Financial Services (1) Portion or entire facility leased or subleased. (2) Entire facility leased, with a portion being subleased to Foster Wheeler subsidiaries. (3) 50% ownership interest. (4) 75% ownership interest. With the exception of the New York office of the Corporation, locations of less than 10,000 square feet are not listed. Except as noted above, the properties set forth are held in fee. All or part of listed locations may be leased or subleased to other affiliates. All properties are in good condition and adequate for their intended use. 8 10 ITEM 3. LEGAL PROCEEDINGS See Note 14 to Financial Statements on page 39 of this Form 10-K. Under the federal Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") and similar state laws, the current owner or operator of real property and the past owners or operators of real property (if disposal took place during such past ownership or operation) may be jointly and severally liable for the costs of removal or remediation of toxic or hazardous substances on or under their property, regardless of whether such materials were released in violation of law or whether the owner or operator knew of, or was responsible for, the presence of such substances. Moreover, under CERCLA and similar state laws, persons who arrange for the disposal or treatment of hazardous or toxic substances may also be jointly and severally liable for the costs of the removal or remediation of such substances at a disposal or treatment site, whether or not such site was owned or operated by such person ("off-site facility"). Liability at such off-site facilities is typically allocated among all of the viable responsible parties based on such factors as the relative amount of waste contributed to a site, toxicity of such waste, relationship of the waste contributed by a party to the remedy chosen for the site, and other factors. The Corporation currently owns and operates industrial facilities and has also transferred its interests in industrial facilities that it formerly owned or operated. It is likely that as a result of its current or former operations, such facilities have been impacted by hazardous substances. The Corporation is not aware of any conditions at its currently owned facilities in the United States that it expects will cause the Corporation to incur significant costs. The Corporation is aware of potential environmental liabilities at facilities that it recently acquired in Europe, but the Corporation has the benefit of an indemnity from the Seller with respect to any required remediation or other environmental violations that it believes will address the costs of any such remediation or other required environmental measures. The Corporation also may receive claims, pursuant to indemnity obligations from owners of recently sold facilities that may require the Corporation to incur costs for investigation and/or remediation. Based on the available information, the Corporation does not believe that such costs will be material. No assurance can be provided that the Corporation will not discover environmental conditions at its currently owned or operated properties, or that additional claims will be made with respect to formerly owned properties, that would require the Corporation to incur material expenditures to investigate and/or remediate such conditions. The Corporation had been notified that it was a potentially responsible party ("PRP") under CERCLA or similar state laws at three off-site facilities, excluding sites as to which the Corporation has resolved its liability. At each of these sites, the Corporation's liability should be substantially less than the total site remediation costs because the percentage of waste attributable to the Corporation compared to that attributable to all other PRPs is low. The Corporation does not believe that its share of cleanup obligations at any of the three off-site facilities as to which it has received a notice of potential liability will individually exceed $1.0 million. The Corporation received an Administrative Order and Notice of Civil Administrative Penalty Assessment (the "Administrative Order") dated April 1, 1997 alleging state air act violations at the Camden Project in New Jersey. The Administrative Order seeks a penalty of $32,000 and revocation of the Certificate to Operate. The Corporation requested an administrative hearing to challenge the Administrative Order, which request automatically stayed any permit revocation. The Corporation expects an additional penalty demand to increase to more than $100,000 as a result of other violations which the Corporation expects the state to allege. The Corporation believes that it will be able to address all issues of concern to the state and that the resulting civil penalty will not be material to the financial position, results of operations or cash flows of the Corporation. The Corporation received a Complaint for Injunction and Civil Penalties from the State of Illinois date April 28, 1998 alleging primarily state air act violations at the Robbins Facility (People of the State of Illinois v. Foster Wheeler Robbins, Inc., filed in the Circuit Court of Cook County, Illinois, County Department, Chancery Division). Although the complaint seeks substantial civil penalties for numerous violations of up to $50,000 for each violation, with an additional penalty of $10,000 for each day of each violation, the maximum allowed under the statute, and an injunction against continuing violations, the Corporation has submitted a plan to the state designed to correct all violations and expects that the resulting penalty will not be material to the financial position, results of operations or cash flows of the Corporation. 9 11 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS NONE EXECUTIVE OFFICERS OF THE REGISTRANT In accordance with General Instruction G (3) of Form 10-K information regarding executive officers is included in PART I. The executive officers of Foster Wheeler, all of whom have held executive positions with Foster Wheeler or its subsidiaries for more than the past five years are as follows:
NAME AGE POSITION ---- --- -------- Richard J. Swift 54 Chairman, President and Chief Executive Officer David J. Roberts 54 Vice Chairman and Chief Financial Officer Henry E. Bartoli 52 Senior Vice President - Energy Equipment Group John C. Blythe 51 Senior Vice President - Engineering and Construction Group Claudio Ferrari 62 Senior Vice President - Power Systems Group Thomas R. O'Brien 60 Senior Vice President and General Counsel Lisa Fries Gardner 42 Vice President, Secretary and Chief Compliance Officer Robert D. Iseman 50 Vice President and Treasurer James E. Schessler 53 Vice President - Human Resources and Administration George S. White 62 Vice President and Controller
Each officer holds office for a term running until the Board of Directors meeting following the Annual Meeting of Stockholders and until his/her successor is elected and qualified. There are no family relationships between the officers listed above. There are no arrangements or understandings between any of the listed officers and any other person, pursuant to which he/she was elected as an officer. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Corporation's common stock is traded on the New York Stock Exchange. The approximate number of stockholders of record as of the end of 1998 was 6,835.
Three Months Ended ------------------------------------------------ 1998 March 27 June 26 Sept. 25 Dec. 25 - ---- -------- ------- -------- ------- Cash dividends per share.................... .21 .21 .21 .21 Stock prices: High................................... 31.25 32.25 21.875 18.6875 Low.................................... 22.4375 21.50 11.75 13.00
Three Months Ended ------------------------------------------------ 1997 March 28 June 27 Sept. 26 Dec. 26 - ---- -------- ------- -------- ------- Cash dividends per share.................... .205 .21 .21 .21 Stock prices: High................................... 42.75 41.50 48.125 44.75 Low.................................... 35.875 35.125 39.75 26.6875
10 12 ITEM 6. SELECTED FINANCIAL DATA COMPARATIVE FINANCIAL STATISTICS (In Thousands, Except per Share Amounts)
1998 1997 1996 1995 1994 ---------- ---------- ---------- ---------- ---------- Revenues ................................ $4,596,992 $4,172,015 $4,040,611 $3,081,930 $2,271,123 Provision for special charges ........... -- -- 24,000 50,120 -- Earnings before income taxes ............ 47,789(1) 19,516(2)(3) 126,866(4) 69,663(5) 106,867 Provision for income taxes .............. 79,295(1) 13,892 44,626 41,129 41,457 Net (loss)/earnings ..................... (31,506) 5,624 82,240 28,534 65,410 (Loss)/earnings per share: Basic .............................. $(.77) $ .14 $2.03 $ .79 $1.83 Diluted ............................ $(.77) $ .14 $2.02 $ .78 $1.82 Shares outstanding: Basic: Weighted average number of shares outstanding .................... 40,729 40,677 40,592 36,322 35,788 Diluted: Effect of stock options ......... * 127 167 107 90 ---------- ---------- ---------- ---------- ---------- Total diluted ...................... 40,729 40,804 40,759 36,429 35,878 ========== ========== ========== ========== ========== Current assets .......................... $1,672,842 $1,545,271 $1,762,448 $1,468,973 $1,112,709 Current liabilities ..................... 1,498,677 1,412,302 1,441,894 1,270,276 890,579 Working capital ......................... 174,165 132,969 320,554 198,697 222,130 Land, buildings and equipment (net) ..... 911,081 824,452 724,779 644,812 566,156 Total assets ............................ 3,495,019 3,357,700 3,510,334 2,975,809 2,140,334 Bank loans .............................. 107,051 53,748 52,278 86,869 77,350 Long-term borrowings (including current installments): Corporate and other debt ............ 541,173 445,836 441,399 289,958 190,819 Project debt ........................ 476,303 443,360 387,644 299,094 308,383 Cash dividends per share of common stock $ .84 $.835 $ .81 $ .77 $ .72 Other data: Unfilled orders, end of year ............ $7,411,907 $7,184,628 $7,135,413 $6,473,990 $5,135,452 New orders booked ....................... 5,269,398 5,063,940 5,570,333 4,071,352 3,090,977
(1) Includes in 1998 a pretax loss for the Robbins Facility of $72,800 ($47,300 after tax) and a provision of $61,300 for an increase in the income tax valuation allowance for a total after-tax charge of $108,600. (2) Includes in 1997 a net charge of $50,900 ($37,400 after tax) consisting of the following pretax items: Second quarter amounts: Gain on sale of Glitsch International, Inc.'s operations-$56,400; provision for reorganization costs of the Energy Equipment Group-$32,000; and write-downs of long-lived assets-$6,500. Third quarter amounts: Contract write-downs-$24,000 (Engineering & Construction Group) and $30,000 (Energy Equipment Group). Fourth quarter amount: Realignment of the Engineering & Construction Group's European operations-$14,800. (3) Includes in 1997 a pre-tax loss for the Robbins Facility of $38,900 ($25,300 after tax). (4) Includes in 1996 a provision of $24,000 ($15,600 after tax) for asbestos claims. (5) Includes in 1995 a provision of $50,120 ($46,500 after tax) for reorganization costs. * The effect of the stock options was not included in the calculation of diluted earnings per share as these options were antidilutive due to the 1998 loss. 11 13 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Millions of Dollars, Except per Share Amounts) This Management's Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Annual Report contain forward-looking statements that are based on management's assumptions, expectations and projections about the various industries within which the Corporation operates. Such forward-looking statements by their nature involve a degree of risk and uncertainty. The Corporation cautions that a variety of factors, including but not limited to the following, could cause business conditions and results to differ materially from what is contained in forward-looking statements: changes in the rate of economic growth in the United States and other major international economies, changes in investment by the energy, power and environmental industries, changes in regulatory environment, changes in project schedules, changes in trade, monetary and fiscal policies worldwide, currency fluctuations, outcomes of pending and future litigation, protection and validity of patents and other intellectual property rights and increasing competition by foreign and domestic companies. The following discussion should be read in conjunction with the consolidated financial statements and notes thereto. THREE YEARS ENDED DECEMBER 25, 1998 RESULTS OF OPERATIONS
Consolidated Data 1998 1997 1996 ---- ---- ---- Unfilled orders $7,411.9 $7,184.6 $7,135.4 New orders 5,269.4 5,063.9 5,570.3 Revenues 4,597.0 4,172.0 4,040.6 Net (loss)/earnings (31.5) 5.6 82.2 Earnings per share: (Basic) (.77) .14 2.03
The Corporation's consolidated unfilled orders at the end of fiscal 1998 were $7,411.9, an increase of $227.3 over the amount reported for the end of fiscal 1997 of $7,184.6, which in turn represented an increase of $49.2 from unfilled orders at the end of fiscal 1996 of $7,135.4. The dollar amount of unfilled orders was not necessarily indicative of the future earnings of the Corporation related to the performance of such work. Although unfilled orders represent only business which is considered firm, there can be no assurance that cancellations or scope adjustments will not occur. Due to additional factors outside of the Corporation's control, such as changes in project schedules, the Corporation cannot predict with certainty the portion of unfilled orders which may not be performed. Unfilled orders have been adjusted to reflect project cancellations, deferrals, and revised project scopes and costs. The net reduction in unfilled orders from project adjustments and cancellations for fiscal 1998 was $638.1, compared with $619.5 in fiscal 1997 and $966.2 in fiscal 1996. The Corporation's future award prospects include several large-scale international projects. The large size and uncertain timing of these projects can create variability in the Corporation's contract awards, and therefore, future award trends are difficult to predict. New orders awarded for fiscal 1998 ($5,269.4) were 4.1% higher than new orders awarded in fiscal 1997 ($5,063.9), which were 9.1% lower than new orders awarded in fiscal 1996 ($5,570.3). A total of 52% of new orders in fiscal 1998 was for projects awarded to the Corporation's subsidiaries located outside of the United States as compared to 58% in fiscal 1997 and 56% in fiscal 1996. Key geographic regions outside of the United States contributing to new orders awarded in fiscal 1998 were Europe, Southeast Asia and South America. Operating revenues increased in fiscal 1998 by $476.8 compared to fiscal 1997, to $4,536.8 from $4,060.0, which in turn represented a $54.5 increase as compared to fiscal 1996 of $4,005.5. Gross earnings from operations, which are equal to operating revenues minus the cost of operating revenues ("gross earnings"), increased $102.5 or 38% in fiscal 1998 as compared to fiscal 1997, to $370.5 from $268.0, which was a decrease of approximately 46% from fiscal 1996. A loss of $21.1 for the Robbins Resource Recovery Facility was included in 1998 gross earnings from operations. The 1997 results included $32.0 for reorganization cost of the 12 14 Energy Equipment Group, $24.0 for contract write-downs in the Engineering and Construction Group, $30.0 for contract write-downs in the Energy Equipment Group, $13.3 provision for realignment of the European operations of the Engineering and Construction Group, and losses from operations of $36.3 related to the Robbins Resource Recovery Facility (the "Robbins Facility"). In the fourth quarter of 1996, the Corporation recorded a special pretax charge of $24.0 with respect to estimated probable payments for asbestos litigation that may not be covered by insurance primarily due to insurers that have become, or may in the future become insolvent. The Corporation and its subsidiaries, along with many other companies, are codefendants in numerous lawsuits pending in the United States. Plaintiffs claim damages for personal injury alleged to have arisen from the exposure to or use of asbestos in connection with work performed by the Corporation and its subsidiaries prior to and during the 1970s for which the insolvent insurers provided coverage. In conjunction with outside experts, the Corporation has carefully considered the financial viability and legal obligations of its insurance carriers and has concluded that after recognition of the special charge, insurers will continue to adequately fund the balance of the claims and defense costs relating to current and future asbestos litigation. The Corporation anticipates funding the major portion of this charge over the next five to ten years. Selling, general and administrative expenses decreased $14.6 in fiscal 1998 as compared to fiscal 1997, to $253.4 from $268.0, which in turn represented a decrease of $28.9 from expenses reported in fiscal 1996 of $296.9. General and administrative expenses increased by $6.0 in fiscal 1998 and selling expenses decreased by $20.6, principally as a result of the sale of Glitsch International, Inc. in the second quarter of 1997 and in 1998 lower proposal costs for Foster Wheeler Environmental Corporation. The decrease of $28.9 in fiscal 1997 compared to fiscal 1996 was due principally to the sale of Glitsch International, Inc. in 1997. Other income in fiscal 1998 as compared to fiscal 1997 decreased $51.8 to $60.2 from $112.0 in 1997. In 1997, the Corporation recorded a $56.4 gain in other income on the sale of Glitsch International, Inc.'s operations to Koch Engineering Company. The Corporation received approximately $185.0 in cash for the majority of the assets of Glitsch International, Inc. The retained net assets have been valued at their current estimated realizable value which are not material to the overall operations of the Corporation. For segment reporting purposes, the earnings of Glitsch International, Inc. up to the closing date of June 27, 1997, have been included in the operating results of the Energy Equipment Group. In addition to the Glitsch transaction gain, approximately $13.4 in equity earnings of unconsolidated affiliates, and a gain of $2.8 related to the sale of an office building in France were included in other income in 1997. Other deductions in fiscal 1998 increased $37.4 primarily due to the $47.0 charge for asset impairments relating to the Robbins Facility in the third quarter of 1998. Interest expense for the year 1998 increased $7.8. Fiscal 1997 increased $12.8 over 1996 primarily due to the provision of approximately $8.0 for disposition of certain under-performing assets. Included in the $8.0 was a provision of $6.5 for the disposition of Ullrich Copper, Inc., whose assets were sold in the third quarter of 1997 with no additional financial impact. The tax provision for fiscal 1998 was $79.3 on earnings before income taxes of $47.8. The high effective tax rate was primarily due to an increase in the valuation allowance of $61.3 for 1998, caused by the losses related to the Robbins Facility and their impact on the realizability of tax benefits in the future. The tax provision for fiscal 1997 was $13.9 on earnings before income taxes of $19.5 primarily due to the high effective tax rate on foreign earnings and losses. The net loss for fiscal 1998 was $(31.5) or $(.77) basic per share, which included $108.6 in combined net losses for Robbins Facility of $47.3 and the related increase in the tax valuation allowance of $61.3. The net earnings for fiscal 1997 were $5.6 or $.14 basic per share, which included after-tax charges recorded in the second and fourth quarters of $25.0 and $12.2, respectively, the after-tax gain on sale of Glitsch International, Inc. of $36.7 and $25.3 in losses for Robbins Facility's operations. 13 15 ENGINEERING AND CONSTRUCTION GROUP
1998 1997 1996 ---- ---- ---- Unfilled orders $5,867.8 $5,354.2 $5,091.2 New orders 4,329.1 3,610.7 3,710.6 Operating revenues 3,422.3 2,892.8 2,564.1 Gross earnings from operations 206.3 166.1 207.7
The E&C Group's unfilled orders at the end of fiscal 1998 were $5,867.8, a 10% increase over unfilled orders of $5,354.2 at the end of fiscal 1997, which in turn represented a 5% increase from unfilled orders of $5,091.2 at the end of fiscal 1996. New orders awarded to the E&C Group in fiscal 1998 amounted to $4,329.1 compared with $3,610.7 in fiscal 1997, representing a 20% increase. New orders decreased 3% in fiscal 1997 as compared to fiscal 1996 levels of $3,710.6. The E&C Group reported an 18% increase in operating revenues in fiscal 1998 as compared to fiscal 1997 from $2,892.8 to $3,422.3, which in turn represented a 13% increase from fiscal 1996 operating revenues of $2,564.1. The increase in fiscal 1998 and 1997 operating revenues was due to increased activities in the United Kingdom and the United States. The Corporation includes pass-through costs on cost-plus contracts, which are customer-reimbursable materials, equipment and subcontractor costs when the Corporation determines that it is responsible for the engineering specification, procurement and management of such cost components on behalf of the customer. The percentage relationship between pass-through costs of contracts and revenues will fluctuate from year to year depending on a variety of factors including the mix of business in the years compared. The E&C Group's gross earnings increased $40.2 in fiscal 1998 as compared with fiscal 1997 or 24%, to $206.3 from $166.1, which in turn represented a decrease of 20% from gross earnings of $207.7 in fiscal 1996. The increase in fiscal 1998 was due primarily to the activities in the United Kingdom and the United States. The decrease in fiscal 1997 was attributed to a provision of approximately $24.0 on several projects in the third quarter of 1997 for which the Corporation is seeking recovery of a significant portion from clients and the $13.3 provision for the realignment of the Group's European operations. The realignment has brought the Italian, French and Spanish operations under common management, headquartered in Milan, Italy. The $13.3 pretax charge included $6.2 for severance and benefits for employees to be terminated and $6.6 for office lease expense, due to the consolidation of the Reading, United Kingdom operations into one office facility during 1998 and 1999. Also in 1997, there was a decrease in gross earnings in the Spanish subsidiary of $13.1. ENERGY EQUIPMENT GROUP
1998 1997 1996 ---- ---- ---- Unfilled orders $1,383.5 $1,633.9 $1,827.4 New orders 841.5 1,312.6 1,873.2 Operating revenues 1,102.7 1,117.9 1,367.4 Gross earnings from operations 139.8 88.1 222.1
The Energy Equipment Group's unfilled orders were $1,383.5 at the end of fiscal 1998, representing a 15% decrease in the unfilled orders of $1,633.9 at the end of fiscal 1997, which in turn represented a 11% decrease over unfilled orders of $1,827.4 at the end of fiscal 1996. Approximately $130.0 of the decrease in unfilled orders in fiscal 1997 was attributable to the sale of Glitsch International, Inc. Management is more cautious about the outlook for the Group because of delayed bookings and execution schedules on some higher margin projects. New orders awarded to the Energy Equipment Group were $841.5, $1,312.6 and $1,873.2 in fiscal years 1998, 1997 and 1996, respectively. Of such new orders, in 1997 and 1996, $113.0 and $260.7, respectively, were related to Glitsch International, Inc.'s activities, which were sold at the end of June 1997. The decrease in 1998 was primarily due to receiving lower orders from China. 14 16 Operating revenues for the Energy Equipment Group decreased $15.2 in fiscal 1998 as compared to fiscal 1997, to $1,102.7 from $1,117.9, which in turn represented a decrease of 18% from fiscal 1996 of $1,367.4. The decrease in 1997 is primarily attributable to the sale of Glitsch International, Inc.'s operations in the second quarter. The Energy Equipment Group's gross earnings increased by $51.7 or 59%, to $139.8 in fiscal 1998 from $88.1 in fiscal 1997, which in turn represented a 60% decrease from gross earnings in fiscal 1996 of $222.1. The change in 1998 can be attributed to the following charges in 1997, (1) reorganization costs of $32.0 recorded in the second quarter of 1997, and (2) $30.0 in provisions for increased costs on three projects, which were initially bid and executed out of the San Diego office. The reorganization started in 1995 following the Pyropower acquisition. These actions resulted in a further reduction in operating costs with a more efficient project execution capability. This plan includes $14.5 for the discontinuance of certain product lines, including incremental costs on certain completed contracts. Approximately $9.2 of the charge relates to the consolidation of the San Diego operations with the Group's activities in New Jersey. Of this amount $5.2 was for personnel costs, including severance and related benefits, and the balance represent write-downs of property to its net realizable value. These San Diego long-lived assets are now considered to be for sale and have been accounted for at their current market value less estimated cost to sell. The remaining balance of $8.3 was primarily related to the write-down of a Canadian cogeneration plant to its net realizable value. POWER SYSTEMS GROUP
1998 1997 1996 ---- ---- ---- Unfilled orders $213.5 $255.0 $384.9 New orders 190.3 159.2 209.3 Operating revenues 159.4 197.7 149.6 Gross earnings from operations 22.5 11.3 62.8
The Power Systems Group's gross earnings from operations for fiscal 1998 improved primarily due to lower losses reported in 1998 for the Robbins Facility. The future earnings of the Power Systems Group will be negatively impacted by the Robbins Facility due to (1) funding of the Corporation's guarantees of $79.6 and (2) the unamortized prepaid lease expense of $47.8. The future impact is expected to be a reduction in pretax earnings as follows: 1999 by $5.1; 2000 by $27.1; 2001 by $23.4 and the balance of $71.8, thereafter. The timing of the foregoing estimates are subject to change based on the operating results of the Robbins Facility. The Robbins Facility gross loss from operations for fiscal 1998 and 1997 was $21.1 and $36.3, respectively. The total pretax loss for the Robbins Facility for 1998 was $72.8, which included $21.1 in gross losses from operations, $47.0 for asset impairments and $4.7 for other expenses (primarily interest). It is expected that the Robbins Facility will continue to incur losses and will not fully recover lease costs from operations. RESEARCH AND DEVELOPMENT The Corporation is continually engaged in research and development efforts, both in performance and analytical services on current projects and in development of new products and processes. During fiscal years 1998, 1997 and 1996, approximately $14.1, $16.1 and $16.9, respectively, were spent on Corporation-sponsored research activities. During the same periods, approximately $32.7, $40.4 and $29.6, respectively, were spent on customer-sponsored research activities that were paid for by customers of the Corporation. FINANCIAL CONDITION Stockholders' equity at the end of fiscal 1998 was $572.1 as compared to $635.5 at the end of fiscal 1997 and $689.0 at the end of fiscal 1996. The decrease for 1998 of $63.4 was due to the net loss of $31.5 and the payment of dividends of $34.2. The decrease for 1997 of $53.5 was primarily due to the change in accumulated translation adjustment of $28.3 and the payment of dividends of $34.0. For the fiscal years 1996, 1997 and 1998, investments in land, buildings and equipment were $158.5, $189.8 and $166.5, respectively. During the next few years, capital expenditures will continue to be directed primarily toward strengthening and supporting the Corporation's core businesses. At the end of June 1997, the Corporation sold the majority of the operations of Glitsch International, Inc. for approximately $185.0 in cash. Based on the previously announced repositioning plan for the Power Systems Group, it is anticipated that the level of future capital expenditures for Power Systems projects will decrease. The key components of this plan as they relate to long-term 15 17 investments included a tighter focus on fewer projects and only those where Foster Wheeler's technology adds a significant value, no investments in further waste-to-energy plants in the United States, and higher levels of equity participation by third parties. Corporate and other debt, special purpose project debt and bank loans increased by $448.6, net of repayments of $130.9, during the three-year period. Since year-end 1995, Corporate and other debt increased by $251.2 and special purpose project debt increased by $177.2. At year-end 1998, the Corporation had $340.0 outstanding under the Revolving Credit Agreements, the proceeds of which were used to fund domestic working capital and other corporate requirements and make a scheduled $22.0 debt repayment under the Corporation's 8.58% unsecured promissory private placement notes (the "Private Notes"). In the third quarter of 1998, a subsidiary of the Corporation entered into a three-year agreement with a financial institution whereby the subsidiary would sell an undivided interest in a designated pool of qualified accounts receivable. Under the terms of the agreement, new receivables are added to the pool as collections reduce previously sold accounts receivable. The credit risk of uncollectible accounts receivable has been transferred to the purchaser. The Corporation services, administers and collects the receivables on behalf of the purchaser. Fees payable to the purchaser under this agreement are equivalent to rates afforded high quality commercial paper issuers plus certain administrative expenses and are included in other deductions, in the Consolidated Statement of Earnings. The agreement contains certain covenants and provides for various events of termination. As of December 25, 1998, $38.4 in receivables were sold under the agreement and are therefore not reflected in the accounts receivable - trade balance in the Consolidated Balance Sheet. In the ordinary course of business, the Corporation and its subsidiaries enter into contracts providing for assessment of damages for nonperformance or delays in completion. Suits and claims have been or may be brought against the Corporation by customers alleging deficiencies in either equipment design or plant construction. Based on its knowledge of the facts and circumstances relating to the Corporation's liabilities, if any, and to its insurance coverage, management of the Corporation believes that the disposition of such suits will not result in charges materially in excess of amounts provided in the accounts. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents amounted to $180.1 at December 25, 1998, an increase of $12.7 from the prior fiscal year-end. Short-term investments decreased $30.7 to $61.2 at the end of 1998. During fiscal 1998, the Corporation paid $34.2 in stockholder dividends, repaid debt of $48.7, including a scheduled $22.0 repayment of the Private Notes, and funded other operating requirements. During fiscal 1998, cash flow used for operating activities totaled $26.3 while in 1997, cash flow used by operating activities amounted to $120.1. This reduction of $93.8 was primarily due to increased cash provided by the Engineering and Construction Group ($42.7) and lower uses of cash by the Energy Equipment Group ($48.7). The 1998 cash flow used for operating activities of $26.3 was due to the Energy Equipment Group ($10.6), Power Systems Group ($47.1), and Corporate and Financial Services ($55.9), which was offset by cash flow provided by operations of $87.3 for the Engineering and Construction Group. The Corporation's working capital varies from period to period depending on the mix, stage of completion and commercial terms and conditions of the Corporation's contracts. Working capital needs have increased during the past several years as a result of the Corporation's satisfying requests from its customers, primarily in the Energy Equipment Group, for more favorable payment terms under contracts. Such requests generally include reduced advance payments and less favorable payment schedules to the Corporation. The Corporation's contracts in process and inventories increased by $63.3 during 1998 from $415.2 at December 26, 1997, to $478.5 at December 25, 1998. This increase can be attributed to increases in the E&C Group of $83.4 and $17.0 in the Power Systems Group, offset by reductions in the Energy Equipment Group of $41.6. In addition, accounts receivable increased by $57.6 in fiscal 1998 to $857.0 from $799.4 in fiscal 1997. As of year end, the Corporation had available under an existing shelf registration statement $300.0. Subsequent to year end, on January 13, 1999 FW Preferred Capital Trust I, a wholly-owned subsidiary of the Corporation issued $175.0 in Preferred Trust Securities. These Preferred Trust Securities are entitled to receive cumulative cash distributions at an annual rate of 9.0%. Distributions will be paid quarterly in arrears on April 15, July 15, October 15 and January 15 of each year, beginning April 15, 1999. The maturity date is January 15, 2029. Foster Wheeler 16 18 can redeem these Preferred Trust Securities on or after January 15, 2004. As a result of the Robbins Facility charge taken in the third quarter of 1998, the Corporation was not in compliance with its covenants under its Revolving Credit Agreement. The Corporation received a waiver until February 15, 1999. The Corporation had received a commitment from financial institutions for up to $360.0 under a new facility. On February 12, 1999, the Corporation borrowed $200.0 under the new facility. As a result of this transaction and the issuance of the Preferred Trust Securities all of the outstanding debt ($340.0) under the old Revolving Credit Agreement has been classified as long-term (see Note 8 to Financial Statements). Management of the Corporation believes that cash and cash equivalents on hand of $180.1 and short-term investments of $61.2 at December 25, 1998, combined with cash flow from operating activities, available credit under its new Revolving Credit Agreements and access to third-party financing in the capital markets will be adequate to meet its working capital and liquidity needs for the foreseeable future. In 1996, the Corporation completed the construction of a recycling and waste-to-energy project for the Village of Robbins, Illinois. A subsidiary of the Corporation, Robbins Resource Recovery Limited Partnership (the "Partnership"), operates this facility under a long-term operating lease. By virtue of the facility qualifying under the Illinois Retail Rate Law as a qualified solid waste-to-energy facility, it was to receive electricity revenues projected to be substantially higher than the utility's "avoided cost." Under the Retail Rate Law, the utility was entitled to a tax credit against a state tax on utility gross receipts and invested capital. The State was to be reimbursed by the facility for the tax credit beginning after the 20th year following the initial sale of electricity to the utility. The State repealed the Retail Rate Law insofar as it applies to this facility. The Partnership is contesting the Illinois legislature's partial repeal of the Retail Rate Law in Court. In the event this litigation is not successful and no other means are available to generate revenue from the sale of electric power above that provided by selling electricity at the "avoided cost," there may be an additional adverse financial impact on the operating results of the project. The Corporation estimates payments under the Corporate guarantees for the Robbins Facility to be $2.5 in 1999; $24.5 in 2000; $20.8 in 2001; and $31.8 thereafter. These foregoing estimates are subject to change based on the actual operating results of the Robbins Facility. In 1997, the United States Supreme Court effectively invalidated New Jersey's long-standing municipal solid waste flow rules and regulations. The immediate effect was to eliminate the guaranteed supply of municipal solid waste to the Camden County Waste-to-Energy Project (the "Project") with its corresponding tipping fee revenues. As a result, tipping fees have been reduced to market rate in order to provide a steady supply of fuel to the plant. Those market-based revenues are not expected to be sufficient to service the debt on outstanding bonds, which were issued to construct the plant and to acquire a landfill for Camden County's use. These outstanding bonds are public debt, not debt of the Corporation. The Corporation has filed suit against the involved parties, including the State of New Jersey, seeking among other things to void the applicable contracts and agreements governing the Project. Pending outcome of the litigation and the results of legislative initiatives in New Jersey to solve the crisis, management believes that the plant will continue to operate at full capacity while receiving market rates for waste disposal. At this time, management cannot determine the ultimate outcome and its effect on the Project. The Corporation and its subsidiaries, along with many other companies, are codefendants in numerous lawsuits pending in the United States. Plaintiffs claim damages for personal injury alleged to have arisen from exposure to or use of asbestos in connection with work performed by the Corporation and its subsidiaries during the 1970s and prior. As of December 25, 1998, there were approximately 62,400 (1997-65,000) claims pending. Approximately 24,000 new claims were filed in 1998. The Corporation has agreements with insurance carriers covering significantly more than a majority of the potential costs relating to these exposures. During the three-year period ended December 25, 1998, the Corporation tried, settled or summarily disposed of approximately 104,400 (1998-26,500) asbestos-related claims. Approximately $95.3, substantially all of which was reimbursed or will be reimbursed, were spent on asbestos litigation defense and case resolution during the three-year period (1996-$27.0; 1997-$28.7; 1998-$39.6). The Corporation has recorded an asset relating to probable insurance recoveries and a liability relating to probable losses. These assets and liabilities were estimated based on historical data developed in conjunction with outside experts. Management of the Corporation has carefully considered the financial viability and legal obligations of its insurance carriers and has concluded that except for those insurers that have become or may become insolvent, the insurers will continue to adequately fund claims and defense costs relating to asbestos litigation (see Note 19). 17 19 QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Management's strategy for managing risks associated with interest rate fluctuations is to enter into financial instrument transactions, such as interest rate swaps and forward rate agreements, to reduce such risks. Management's strategy for managing transaction risks associated with currency fluctuations is for each operating unit to enter into forward foreign exchange agreements to hedge its exposure on contracts into the operating unit's functional currency. The Corporation utilizes all such financial instruments solely for hedging. Corporate policy prohibits the speculative use of such instruments. The Corporation is exposed to credit loss in the event of nonperformance by the counter parties to such financial instruments. To minimize this risk, the Corporation enters into these financial instruments with financial institutions that are primarily rated A or better by Standard & Poor's or A2 or better by Moody's. Management believes that the geographical diversity of the Corporation's operations mitigates the effects of the currency translation exposure. No significant unhedged assets or liabilities are maintained outside the functional currency of the operating subsidiaries. Accordingly, translation exposure is not hedged. Interest Rate Risk - The Corporation is exposed to changes in interest rates primarily as a result of its borrowings under its Revolving Credit Agreements and its unhedged variable rate project debt. If market rates average 1% more in 1999 than in 1998, the Corporation's interest expense, after considering the effect of the interest rate swap agreements, would increase, and income before tax would decrease by approximately $5.8. This amount has been determined by considering the impact of the hypothetical interest rates on the Corporation's variable-rate balances and interest rate swap agreements as of December 25, 1998. In the event of a significant change in interest rates, management would likely take action to further mitigate its exposure to the change. However, due to uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis assumes no changes in the Corporation's financial structure. Foreign Currency Risk - The Corporation has significant overseas operations. Generally, all significant activities of the overseas affiliates are recorded in their functional currency, which is generally the currency of the country of domicile of the affiliate. This results in a mitigation of the potential impact of swing in earnings as a result of changes in foreign exchange rates. In addition in order to further mitigate risks associated with foreign currency fluctuations, the affiliates of the Corporation enter into foreign currency exchange contracts to hedge the exposed contract value back to their functional currency. As of year end the Corporation had $378.0 of foreign exchange contracts outstanding. These contracts mature between 1999 and 2003. Approximately 28% of these contracts require a domestic subsidiary to sell Japanese yen and receive U.S. dollars. The remaining contracts have been established by various international subsidiaries to sell a variety of currencies and either receive their respective functional currency or other currencies for which they have payment obligations to third parties. The Corporation does not enter into foreign currency contracts for speculative purposes. Other Financial Instruments - At year end 1998 the Corporation had entered into a treasury lock to fix the interest rate on an anticipated issue of Preferred Trust Securities for a nominal value of $150.0 for thirty years. The Preferred Trust Securities totaling $175.0 were subsequently issued on January 13, 1999. INFLATION The effect of inflation on the Corporation's revenues and earnings is minimal. Although a majority of the Corporation's revenues are made under long-term contracts, the selling prices of such contracts, established for deliveries in the future, generally reflect estimated costs to complete in these future periods. In addition, some contracts provide for price adjustments through escalation clauses. 18 20 OTHER ACCOUNTING MATTERS The Financial Accounting Standards Board released in June 1998, Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement is effective for all fiscal quarters of all fiscal years beginning after June 15, 1999. This statement addresses the accounting for derivative instruments including certain derivative instruments embedded in other contracts and for hedging activities. The Corporation is currently assessing the impact of adoption of this new Statement. In the second quarter of 1998, the Accounting Standard Executive Committee of the AICPA issued Statement of Position 98-5. "Reporting on the Costs of Start-up Activities." This Statement provides guidance on financial reporting of start-up costs and organizational costs. This Statement of Position is effective for financial statements for fiscal years beginning after December 15, 1998. This Statement of Position requires start-up costs to be expensed as incurred. The Corporation does not anticipate that the adoption of the Statement of Position will materially impact its results of operations. YEAR 2000 CONVERSION GENERAL For purposes of this statement the "Year 2000 Problem" is defined to mean the inability of a computer or other device to perform properly because it does not interpret date information correctly. It is believed that cases of misinterpretation might result from computer hardware, firmware or software using only two digits to identify year information, and therefore not being able to distinguish the year 1900 from the year 2000. However, other date-related misinterpretations may also occur, including one, which could occur when the date February 29, 2000 is processed. Also for purposes of this statement "Year 2000 Compliant" means that the performance or functionality of a device (including software) is not affected by dates prior to, during or after the Year 2000. STATE OF READINESS/BUSINESS CONTINUATION PLAN The Corporation and its subsidiaries initiated Year 2000 activities in 1996. In 1997 a formal Year 2000 Problem management strategy was prepared. At that time the Corporation formed a company-wide committee (the "Y2K Committee") to develop a Business Continuation Plan focused on the Year 2000 Problem. Each of the Corporation's subsidiaries formed similar committees and coordinated their efforts through Chairmen selected for each Committee. Each subsidiary committee also prepared a Business Continuation Plan. Each Committee Chairman reports on a quarterly basis to the Corporation's Y2K Committee Chairman, who then reports to the Corporation's Executive Committee. In 1997, the Y2K Committee prepared a plan to safeguard against interruption of the Corporation's (and its subsidiaries') business activities as a result of Year 2000 Problems. The plan included an Assessment Step, a Testing Step, a Remediation Step and a Confirmation Step. Since 1996 the Corporation and/or its subsidiaries have been investigating the IT and non-IT equipment, software and services they will use to identify, evaluate, modify and/or replace goods or services which are not Year 2000 Compliant. The Corporation and its subsidiaries have all completed the Assessment Step and many subsidiaries are substantially advanced in the Testing and Remediation Steps. Some subsidiaries, such as Foster Wheeler Power Systems, Inc., and its subsidiaries, must wait for scheduled outage periods in order to complete Testing and/or Remediation activities, but all are expected to do so by mid-1999. All subsidiaries have reported that they have completed at least fifty percent (50%) of their Testing Step activities. The primary computerized financial reporting system used by the Corporation and most of its subsidiaries, which was provided by J.D. Edwards, has been confirmed to be Year 2000 Compliant. LIABILITY EXPOSURE MANAGEMENT In 1997 the Corporation formed a group to develop a strategy for managing liability exposures which could result from the Year 2000 Problem (the Y2K Liaison Group). Since then the Y2K Liaison Group has developed guidelines for the Corporation's subsidiaries that address future, current and completed contract activities, and has also conducted global conferences for the Corporation's subsidiaries to discuss how those guidelines should be implemented. The Corporation's Executive Committee adopted the Group's guidelines as business policies in 1998. Over the past twenty years, the Corporation has owned the stock of various companies which are no longer 19 21 operating or whose stock or assets were sold to others. When it sold the stock or assets of such companies the Corporation transferred the company's records to the purchaser. The Corporation continues to evaluate the specific steps it intends to take in regard to equipment and software that was created and sold by those companies during the time that the Corporation owned them. In a given case the Corporation might be unable to find records that would allow it to identify the nature of the equipment and software or the identities of the owners of the equipment and software. THIRD PARTY REVIEW In 1998 the Corporation engaged a third party to conduct a review of certain aspects of the Corporation's and its subsidiaries' Business Continuation Plans. This review was completed during November 1998, and the resulting report is being acted on by Management. The Corporation also engaged several law firms to prepare reports regarding liabilities which the Corporation and its subsidiaries may face, and recommendations for liability exposure management. This work was completed in August 1998. The Corporation plans to have outside counsel conduct a legal audit of contract activities in early 1999. COORDINATION WITH OUTSIDE PARTIES The Corporation and its subsidiaries coordinate with insurers, clients, vendors, contractors and trade organizations to keep abreast of Year 2000 matters. The Corporation also has participated and plans to participate in conferences, seminars and other gatherings to improve its Year 2000 readiness condition as the Year 2000 approaches. COSTS The total cost associated with required modifications to become Year 2000 Compliant is not expected to be material to the Corporation's financial position. The estimated total cost of the Year 2000 Project is approximately $10.0. Items of a capital nature will be capitalized while all other costs will be expensed as incurred. This estimate does not include a share of Year 2000 costs that may be incurred by partnerships and joint ventures in which the Corporation or its subsidiaries participate. The total amount expended on the Business Continuation Plan through December 25, 1998 was $4.0, of which approximately $2.0 related to the cost to repair or replace software and related hardware problems, and approximately $.5 related to the cost of identifying and communicating with vendors and/or contractors. The estimated future cost of completing implementation of the Business Continuation Plan is estimated to be approximately $6.0. All Year 2000 expenses will be funded from operations. CONTINGENCY PLANS Although the Corporation and its subsidiaries expect to be ready to continue their business activities without interruption by a Year 2000 Problem, they recognize that they depend on outsiders (such as suppliers, contractors and utility companies) to provide various goods and services necessary for doing business. The Corporation is now developing a contingency plan for itself, and has required each of its subsidiaries to do likewise. Each plan will address alternative arrangements to cope with Year 2000 Problems caused by others, and back-up strategies to follow if a subsidiary's software or equipment does not perform properly, even though it appears now to be Year 2000 Compliant. Contingency Plans are expected to be finalized by mid 1999. RISKS The failure to correct a Year 2000 Problem could result in an interruption in, or a failure of, certain normal business activities or operations. Such failures are not expected to have a material adverse affect on the Corporation's results of operations and financial condition. However, due to the general uncertainty inherent in the Year 2000 Problem, resulting in part from the uncertainty about the Year 2000 readiness of vendors, contractors and customers, the Corporation is unable to determine at this time whether the consequences of Year 2000 Problems will have a material impact on the Corporation's results of operations or financial condition. The completion of the Business Continuation Plan is expected to significantly reduce the Corporation's level of uncertainty about the Year 2000 Problem and, in particular, about Year 2000 Compliance and readiness of vendors, contractors and customers. The Corporation believes that the implementation of new business systems and the complete implementation of the Business Continuation Plan should reduce the possibility of significant interruptions of normal operation. It is not possible to describe a "most reasonably likely worst case Year 2000 scenario" without making a variety of assumptions. Our Business Continuation Plan assumes that parties which provide us goods or services necessary for 20 22 our operations will continue to do so, or that the Contingency features of our Plan will respond to address our needs. Based upon those assumptions we believe that a most likely worst case Year 2000 scenario may make it necessary to replace some suppliers or contractors, rearrange some work plans or even interrupt some field activities. We do not believe that such circumstances will materially adversely affect our financial condition or results of operations, even if it is necessary to incur costs to do so. Readers are cautioned that forward-looking statements contained in the Year 2000 Statement should be read in conjunction with the Corporation's risk disclosures under the heading: "Safe Harbor Statement." CONVERSION TO THE EURO On January 1, 1999, several of our European affiliates converted over to a common currency - the Euro. At this time, the Corporation does not anticipate any material negative impact related to the conversion to the Euro. SAFE HARBOR STATEMENT This Management's Discussion and Analysis of Financial Condition and Results of Operations and other sections of the Report Form 10-K contain forward-looking statements that are based on management's assumptions, expectations and projections about the various industries within which the Corporation operates. Such forward-looking statements by their nature involve a degree of risk and uncertainty. The Corporation cautions that a variety of factors, including but not limited to the following, could cause business conditions and results to differ materially from what is contained in forward-looking statements: changes in the rate of economic growth in the United States and other major international economies, changes in investment by the energy, power and environmental industries, changes in regulatory environment, changes in project schedules, changes in trade, monetary and fiscal policies worldwide, currency fluctuations, outcomes of pending and future litigation, protection and validity of patents and other intellectual property rights and increasing competition by foreign and domestic companies. The Corporation's management continues to evaluate the Corporation's condition of readiness relating to the Year 2000 Problem and the costs and risks arising from the Year 2000 Problem, and is designing and developing the Corporation's contingency plan, based on its best estimates of certain factors, which estimates were derived by relying on numerous assumptions about future events. However, there can be no guarantee that these assumptions or estimates have been correctly made, or that there will not be a delay in, or increased costs associated with, the implementation of the Company's Business Continuation Plan. A delay in the implementation of the Business Continuation Plans of the Company or of the Company's subsidiaries could also affect the Company's readiness for the Year 2000. Specific factors that might cause actual outcome to differ from the projected outcome include, without limitation, the continued availability and cost of consulting services and of personnel trained in the computer programming necessary for remediation of the Year 2000 issue, the ability to locate and correct all relevant computer code, timely responses by third parties and suppliers, the ability to implement interfaces between the new systems and the systems not being replaced. 21 23 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA REPORT OF INDEPENDENT ACCOUNTANTS To the Stockholders of Foster Wheeler Corporation In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings, changes in stockholders' equity and cash flows present fairly, in all material respects, the consolidated financial position of Foster Wheeler Corporation and its subsidiaries at December 25, 1998 and December 26, 1997, and the results of their operations and their cash flows for each of the three years in the period ended December 25, 1998, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Corporation's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards 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, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York January 26, 1999, except for Note 8, as to which the date is February 12, 1999. 22 24 FOSTER WHEELER CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EARNINGS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1998 1997 1996 ---- ---- ---- REVENUES: Operating revenues.......................................... $4,536,765 $4,059,965 $4,005,503 Other income (including interest: 1998-$19,455; 1997-$21,669; 1996-$21,714)............... 60,227 112,050 35,108 ---------- ---------- ---------- Total Revenues.......................................... 4,596,992 4,172,015 4,040,611 ---------- ---------- ---------- COSTS AND EXPENSES: Cost of operating revenues.................................. 4,166,257 3,791,998 3,510,970 Selling, general and administrative expenses................ 253,401 268,026 296,921 Other deductions (including interest: 1998-$62,535; 1997-$54,675; 1996-$54,940)............... 126,983 89,544 76,678 Provision for special charges............................... - - 24,000 Minority interest........................................... 2,562 2,931 5,176 ---------- ---------- ---------- Total Costs and Expenses................................ 4,549,203 4,152,499 3,913,745 ---------- ---------- ---------- Earnings before income taxes..................................... 47,789 19,516 126,866 Provision for income taxes....................................... 79,295 13,892 44,626 ---------- ---------- --------- Net (loss)/earnings.............................................. (31,506) 5,624 82,240 Other comprehensive income/(loss): Foreign currency translation adjustment..................... 2,538 (34,615) 8,316 Foreign currency translation transferred to income upon sale of subsidiary...................................... - 6,273 - ---------- ---------- ---------- Comprehensive (loss)/income................................. $ (28,968) $ (22,718) $ 90,556 ========== ========== ========== (Loss)/earnings per share: Basic....................................................... $ (.77) $ .14 $ 2.03 --======== ========== ========== Diluted..................................................... $ (.77) $ .14 $ 2.02 --======== ========== ========== Shares outstanding: Basic: Weighted average number of shares outstanding........... 40,729 40,677 40,592 Diluted: Effect of stock options................................. * 127 167 ---------- ---------- ---------- Total diluted............................................... 40,729 40,804 40,759 ========== ========== ==========
* The effect of the stock options was not included in the calculation of diluted earnings per share as these options were antidilutive due to the 1998 loss. See notes to financial statements. 23 25 FOSTER WHEELER CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
December 25, December 26, 1998 1997 ---- ---- ASSETS CURRENT ASSETS: Cash and cash equivalents .................................. $ 180,068 $ 167,417 Short-term investments ..................................... 61,223 91,888 Accounts and notes receivable: Trade .................................................. 719,507 663,505 Other .................................................. 137,498 135,870 Contracts in process ....................................... 469,049 406,378 Inventories ................................................ 9,432 8,808 Prepaid, deferred and refundable income taxes .............. 66,068 46,175 Prepaid expenses ........................................... 29,997 25,230 ----------- ----------- Total current assets ................................... 1,672,842 1,545,271 ----------- ----------- Land, buildings and equipment ................................... 1,251,703 1,138,098 Less accumulated depreciation ................................... 340,622 313,646 ----------- ----------- Net book value ......................................... 911,081 824,452 ----------- ----------- Notes and accounts receivable - long-term ....................... 103,612 86,353 Investments and advances ........................................ 117,859 127,629 Intangible assets, net .......................................... 285,245 298,217 Prepaid pension cost and benefits ............................... 196,812 187,200 Other, including insurance recoveries ........................... 203,277 275,582 Deferred income taxes ........................................... 4,291 12,996 ----------- ----------- TOTAL ASSETS ........................................... $ 3,495,019 $ 3,357,700 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current installments on long-term debt ..................... $ 26,762 $ 33,528 Bank loans ................................................. 107,051 53,748 Accounts payable ........................................... 434,969 380,016 Accrued expenses ........................................... 283,368 246,144 Estimated costs to complete long-term contracts ............ 563,271 578,474 Advance payments by customers .............................. 56,630 98,865 Income taxes ............................................... 26,626 21,527 ----------- ----------- Total current liabilities .............................. 1,498,677 1,412,302 Corporate and other debt less current installments .............. 540,827 422,896 Special-purpose project debt less current installments .......... 449,887 432,772 Deferred income taxes ........................................... 85,484 34,148 Postretirement and other employee benefits other than pensions ........................................ 168,799 169,212 Other long-term liabilities and minority interest ............... 179,227 250,853 ----------- ----------- TOTAL LIABILITIES ...................................... 2,922,901 2,722,183 ----------- ----------- STOCKHOLDERS' EQUITY: Preferred Stock Authorized 1,500,000 shares; no par value - none outstanding Common Stock $1.00 par value; authorized 160,000,000 shares; issued: 1998-40,747,668; 1997-40,745,668 ....................... 40,748 40,746 Paid-in capital ................................................. 201,158 201,105 Retained earnings ............................................... 377,147 442,848 Accumulated other comprehensive loss ............................ (46,349) (48,887) ----------- ----------- 572,704 635,812 Less cost of treasury stock (shares: 1998-30,804; 1997-10,804) ................................................... 586 295 ----------- ----------- TOTAL STOCKHOLDERS' EQUITY ............................. 572,118 635,517 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .............................. $ 3,495,019 $ 3,357,700 =========== ===========
See notes to financial statements. 24 26 FOSTER WHEELER CORPORATION CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (In Thousands, Except per Share Amounts)
1998 1997 1996 ---- ---- ---- COMMON STOCK Balance at beginning of year ....................................... $ 40,746 $ 40,651 $ 40,498 Sold under stock options: (shares: 1998-2,000; 1997-94,427; 1996-128,199) .................................................. 2 95 128 Restricted stock issued under incentive plans (shares: 1996-24,561) -- -- 25 --------- --------- --------- Balance at end of year ............................................. 40,748 40,746 40,651 --------- --------- --------- PAID-IN CAPITAL Balance at beginning of year ....................................... 201,105 197,970 192,721 Stock option exercise price less par value ......................... 49 2,665 3,417 Excess of market value over cost of treasury stock or common stock issued under incentive plans ................................... -- -- 1,068 Tax benefits related to stock options .............................. 4 470 764 --------- --------- --------- Balance at end of year ............................................. 201,158 201,105 197,970 --------- --------- --------- RETAINED EARNINGS Balance at beginning of year ....................................... 442,848 471,177 421,804 Net (loss)/earnings for the year ................................... (31,506) 5,624 82,240 Cash dividends paid: Common (per share outstanding: 1998-$.84; 1997-$.835; 1996-$.81) ... (34,195) (33,953) (32,867) --------- --------- --------- Balance at end of year ............................................. 377,147 442,848 471,177 --------- --------- --------- ACCUMULATED OTHER COMPREHENSIVE LOSS Balance at beginning of year ....................................... (48,887) (20,545) (28,861) Change in accumulated translation adjustment during the year ....... 2,538 (34,615) 8,316 Amount transferred to income upon sale of subsidiary ............... -- 6,273 -- --------- --------- --------- Balance at end of year ............................................. (46,349) (48,887) (20,545) --------- --------- --------- TREASURY STOCK Balance at beginning of year ....................................... 295 295 295 Common stock required for Treasury: (shares: 1998-20,000) .......... 291 -- -- --------- --------- --------- Balance at end of year ............................................. 586 295 295 --------- --------- --------- TOTAL STOCKHOLDERS' EQUITY ......................................... $ 572,118 $ 635,517 $ 688,958 ========= ========= =========
See notes to financial statements. 25 27 FOSTER WHEELER CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (IN THOUSANDS OF DOLLARS)
1998 1997 1996 ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Net (loss)/earnings ................................... $ (31,506) $ 5,624 $ 82,240 Adjustments to reconcile net (loss)/earnings to cash flows from operating activities: Depreciation and amortization ...................... 61,607 62,010 63,605 Noncurrent deferred tax ............................ 59,424 (4,553) 5,338 Gain on sale of land, buildings and equipment ...... (1,525) (5,583) (400) Equity earnings, net of dividends .................. (9,890) (13,429) (1,474) Robbins Resource Recovery Facility charge .......... 47,014 -- -- Net gain on sale of subsidiaries ................... -- (49,400) -- Provision for special charges ...................... -- -- 24,000 Other noncash items ................................ (8,257) (6,534) (5,133) Changes in assets and liabilities, net of effects of acquisitions and divestitures: Receivables ........................................ (48,440) (62,072) (148,023) Sales of receivables ............................... 38,400 -- -- Contracts in process and inventories ............... (51,979) (72,533) (19,983) Accounts payable and accrued expenses .............. 40,461 37,940 64,219 Estimated costs to complete long-term contracts .... (29,681) 58,925 17,376 Advance payments by customers ...................... (45,413) 1,251 39,300 Income taxes ....................................... (16,145) (22,472) 13,520 Other assets and liabilities ....................... (30,366) (49,231) (23,629) --------- --------- --------- Net cash (used)/provided by operating activities ... (26,296) (120,057) 110,956 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures ............................... (166,547) (189,767) (158,526) Proceeds from sale of properties ................... 2,235 12,516 16,278 Payments for acquisitions of businesses, net of cash acquired .......................................... -- -- (14,798) Sales of subsidiaries .............................. -- 185,601 -- Decrease/(increase) in investments and advances .... 27,351 (40,426) (10,926) Decrease/(increase)in short-term investments ....... 34,267 34,160 (19,713) Partnership distribution ........................... (4,256) (4,800) (4,859) --------- --------- --------- Net cash used by investing activities .............. (106,950) (2,716) (192,544) --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Dividends to stockholders .......................... (34,195) (33,953) (32,867) Repurchase of common stock ......................... (291) -- -- Proceeds from the exercise of stock options ........ 51 2,760 3,545 Increase/(decrease)in short-term debt .............. 48,429 7,590 (35,258) Proceeds from long-term debt ....................... 178,022 98,761 287,937 Repayment of long-term debt ........................ (48,677) (34,551) (47,646) --------- --------- --------- Net cash provided by financing activities .......... 143,339 40,607 175,711 --------- --------- --------- Effect of exchange rate changes on cash and cash equivalents ......................................... 2,558 (17,566) 5,895 --------- --------- --------- INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS ........................................ 12,651 (99,732) 100,018 Cash and cash equivalents at beginning of year ............. 167,417 267,149 167,131 --------- --------- --------- CASH AND CASH EQUIVALENTS AT END OF YEAR ................... $ 180,068 $ 167,417 $ 267,149 ========= ========= ========= Cash paid during the year for: Interest (net of amount capitalized) .................. $ 47,286 $ 40,225 $ 45,985 Income taxes .......................................... $ 27,694 $ 30,099 $ 20,271
See notes to financial statements. 26 28 FOSTER WHEELER CORPORATION NOTES TO FINANCIAL STATEMENTS (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the accounts of Foster Wheeler Corporation and all significant domestic and foreign subsidiary companies. The Corporation's fiscal year is the 52- or 53-week annual accounting period ending the last Friday in December for domestic operations and December 31 for foreign operations. For domestic operations, the years 1996, 1997 and 1998 included 52 weeks. USE OF ESTIMATES - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the period reported. Actual results could differ from those estimates. Significant estimates are used when accounting for long-term contracts including customer and vendor claims, depreciation, employee benefit plans, taxes, and contingencies, among others. As of year end 1998, costs of approximately $75,000 were included in assets, primarily in receivables and contracts in process, representing amounts expected to be realized from claims. REVENUE RECOGNITION ON LONG-TERM CONTRACTS - The Engineering and Construction Group records profits on long-term contracts on a percentage-of-completion basis determined on the ratio of earned revenues to total contract price, after considering accumulated costs and estimated costs to complete each contract. Contracts in process are valued at cost plus accrued profits less earned revenues and progress payments on uncompleted contracts. Contracts of the Engineering and Construction Group are generally considered substantially complete when engineering is completed and/or field construction is completed. The Corporation includes pass-through costs on cost-plus contracts, which are customer-reimbursable materials, equipment and subcontractor costs when the Corporation determines that it is responsible for the engineering specification, procurement and management of such cost components on behalf of the customer. The Energy Equipment Group primarily records profits on long-term contracts on a percentage-of-completion basis determined on a variation of the efforts-expended and the cost-to-cost methods, which include multiyear contracts that require significant engineering efforts and multiple delivery units. These methods are periodically subject to physical verification of the actual progress towards completion. Contracts of the Energy Equipment Group are generally considered substantially complete when manufacturing and/or field erection is completed. The Corporation has numerous contracts that are in various stages of completion. Such contracts require estimates to determine the appropriate cost and revenue recognition. The Corporation has a substantial history of making reasonably dependable estimates of the extent of progress towards completion, contract revenues and contract costs. However, current estimates may be revised as additional information becomes available. If estimates of costs to complete long-term contracts indicate a loss, provision is made currently for the total loss anticipated. The elapsed time from award of a contract to completion of performance may be up to four years. Certain special-purpose subsidiaries in the Power Systems Group are reimbursed for their costs, including repayment of project debt, for building and owning certain facilities over the lives of the service contracts. The Corporation records revenues relating to debt repayment obligations on these contracts on a straight-line basis over the lives of the service contracts, and records depreciation of the facilities on a straight-line basis over the estimated useful lives of the facilities, after consideration of the estimated residual value. CASH AND CASH EQUIVALENTS - Cash and cash equivalents include highly liquid short-term investments purchased with original maturities of three months or less. 27 29 SHORT-TERM INVESTMENTS - Short-term investments consist primarily of bonds of foreign governments and are classified as available for sale under Financial Accounting Standards Board Statement No. 115. Realized gains and losses from sales are based on the specific identification method. As of year end 1998, unrealized gains and losses are immaterial. The proceeds from sales of short-term investments for 1998, 1997 and 1996 were $40,000, $1,100 and $14,500, respectively. The gains on sales for 1998, 1997 and 1996 were $5,000, $24 and $17, respectively. TRADE ACCOUNTS RECEIVABLE - In accordance with terms of long-term contracts, certain percentages of billings are withheld by customers until completion and acceptance of the contracts. Final payments of all such amounts withheld, which might not be received within a one-year period, are indicated in Note 3. In conformity with industry practice, however, the full amount of accounts receivable, including such amounts withheld, has been included in current assets. LAND, BUILDINGS AND EQUIPMENT - Depreciation is computed on a straight-line basis using composite estimated lives ranging from 10 to 50 years for buildings and from 3 to 35 years for equipment. Expenditures for maintenance and repairs are charged to operations. Renewals and betterments are capitalized. Upon retirement or other disposition of fixed assets, the cost and related accumulated depreciation are removed from the accounts and the resulting gains or losses are reflected in earnings. INVESTMENTS AND ADVANCES - The Corporation uses the equity method of accounting for investment ownership of between 20% and 50% in affiliates unless significant economic or political considerations indicate that the cost method is appropriate. Investment ownership of less than 20% in affiliates is carried at cost. Currently, all of the Corporation's significant investments in affiliates are recorded using the equity method. INCOME TAXES - Deferred income taxes are provided on a liability method whereby deferred tax assets are established for the difference between the financial reporting and income tax basis of assets and liabilities as well as operating loss and tax credit carryforwards. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Investment tax credits are accounted for by the flow-through method whereby they reduce income taxes currently payable and the provision for income taxes in the period the assets giving rise to such credits are placed in service. To the extent such credits are not currently utilized on the Corporation's tax return, deferred tax assets, subject to considerations about the need for a valuation allowance, are recognized for the carryforwards amount. Provision is made for Federal income taxes which may be payable on foreign subsidiary earnings to the extent that the Corporation anticipates they will be remitted. Unremitted earnings of foreign subsidiaries, which have been, or are intended to be, permanently reinvested (and for which no Federal income tax has been provided) aggregated $317,900 at December 25, 1998. It is not practicable to estimate the additional tax that would be incurred, if any, if these amounts were repatriated. FOREIGN CURRENCY TRANSLATION - Assets and liabilities of foreign subsidiaries are translated into U.S. dollars at year-end exchange rates and income and expenses and cash flows at monthly weighted average rates. Foreign currency transaction gains/(losses) for 1998, 1997 and 1996 were approximately $1,600, $2,600 and $(500), respectively [$1,000, $1,700 and $(320) net of taxes]. The Corporation enters into foreign exchange contracts in its management of foreign currency exposures. Realized and unrealized gains and losses on contracts that qualify as designated hedges are deferred. Amounts receivable or payable under foreign exchange hedges are recognized as deferred gains or losses, and are included in either contracts in process or estimated costs to complete long-term contracts. The Corporation utilizes foreign exchange contracts solely for hedging purposes. Corporate policy prohibits the speculative use of financial instruments. INVENTORIES - Inventories, principally materials and supplies, are stated at lower of cost or market, determined primarily on the average cost method. 28 30 INTANGIBLE ASSETS - Intangible assets for 1998 and 1997 consist principally of the excess of cost over the fair value of net assets acquired (goodwill) ($195,847 and $206,807), trademarks ($57,560 and $58,390) and patents ($31,835 and $33,020), respectively. These assets are being amortized on a straight-line basis over periods of 10 to 40 years. The Corporation periodically evaluates goodwill on a separate operating unit basis to assess recoverability, and impairments, if any, are recognized in earnings. In the event facts and circumstances indicate that the carrying amount of goodwill associated with an investment is impaired, the Corporation reduces the carrying amount to an amount representing the estimated undiscounted future cash flows before interest to be generated by the operation. EARNINGS PER SHARE - Basic per share data has been computed based on the weighted average number of shares of common stock outstanding. Diluted per share data has been computed on the basic plus the dilution of stock options. 2. DIVESTITURES In 1997, the Corporation sold two subsidiaries: (1) in the second quarter, an accrual for $6,500 was recognized for the valuation of Ullrich Copper, Inc. Since this subsidiary (a manufacturer of copper extrusions) was not part of the Corporation's three core business groups, management of the Corporation reached a decision to sell this subsidiary which was valued at the estimated fair value less the cost to sell. The final sale was completed in the third quarter of 1997 with no additional financial impact; and (2) in the second quarter, the Corporation recorded a $56,400 pretax ($36,660 after tax) gain on the sale of Glitsch International, Inc.'s operations to Koch Engineering Company. This gain was included in the second quarter. The Corporation received approximately $185,000 in cash for the majority of the assets of Glitsch International, Inc. The retained net assets have been valued at their current estimated realizable value, which are not considered material to the overall operations of the Corporation. For segment reporting purposes, the earnings of Glitsch International, Inc. up to the closing date of June 27, 1997, were included in the operating results of the Energy Equipment Group. 3. ACCOUNTS AND NOTES RECEIVABLE The following tabulation shows the components of trade accounts and notes receivable:
1998 1997 ---- ---- From long-term contracts: Amounts billed due within one year $383,027 $443,355 -------- -------- Retentions: Billed: Estimated to be due in: 1998 ............................. -- 48,694 1999 ............................. 58,596 3,367 2000 ............................. 7,221 148 2001 ............................. 8,857 -- 2002 ............................. 1,544 -- 2003 ............................. 9,570 -- -------- -------- Total billed ..................... 85,788 52,209 -------- --------
29 31
1998 1997 ---- ---- Unbilled: Estimated to be due in: 1998 ............................... - 131,583 1999 ............................... 214,948 540 2000 ............................... 2,232 337 -------- -------- Total unbilled....................... 217,180 132,460 -------- -------- Total retentions..................... 302,968 184,669 -------- -------- Total receivables from long-term contracts............... 685,995 628,024 Other trade and notes receivable.................. 36,326 36,719 -------- -------- 722,321 664,743 Less, allowance for doubtful accounts............. 2,814 1,238 -------- -------- $719,507 $663,505 ======== ========
In the third quarter of 1998, a subsidiary of the Corporation entered into a three year agreement with a financial institution whereby the subsidiary would sell an undivided interest in a designated pool of qualified accounts receivable. Under the terms of the agreement, new receivables are added to the pool as collections reduce previously sold accounts receivable. The credit risk of uncollectible accounts receivable has been transferred to the purchaser. The Corporation services, administers and collects the receivables on behalf of the purchaser. Fees payable to the purchaser under this agreement are equivalent to rates afforded high quality commercial paper issuers plus certain administrative expenses and are included in other deductions, in the Consolidated Statement of Earnings. The agreement contains certain covenants and provides for various events of termination. As of December 25, 1998, $38,400 in receivables were sold under the agreement and are therefore not reflected in the accounts receivable - trade balance in the Consolidated Balance Sheet. 4. CONTRACTS IN PROCESS AND INVENTORIES Costs of contracts in process and inventories considered in the determination of cost of operating revenues are shown below:
1998 1997 1996 ---- ---- ---- Inventories Materials and supplies................ $ 7,960 $ 7,336 $ 31,037 Work in process ...................... - - 2,445 Finished goods ...................... 1,472 1,472 6,317 -------- -------- -------- $ 9,432 $ 8,808 $ 39,799 ======== ======== ========
The following tabulation shows the elements included in contract in process as related to long-term contracts:
1998 1997 1996 ---- ---- ---- Contracts in Process Costs plus accrued profits less earned revenues on contracts currently in process............................ $986,886 $837,556 $633,392 Less, progress payments.................. 517,837 431,178 269,676 -------- -------- -------- $469,049 $406,378 $363,716 ======== ======== ========
30 32 5. LAND, BUILDINGS AND EQUIPMENT Land, buildings and equipment are stated at cost and are set forth below:
1998 1997 ---- ---- Land and land improvements.................. $ 20,012 $ 19,820 Buildings................................... 177,962 134,574 Equipment................................... 986,521 744,484 Construction in progress.................... 67,208 239,220 ---------- ---------- $1,251,703 $1,138,098 ========== ==========
Depreciation expense for the years 1998, 1997 and 1996 was $52,472, $52,336 and $54,374, respectively. 6. PENSIONS AND OTHER POSTRETIREMENT BENEFITS PENSION BENEFITS - The Corporation and its domestic and foreign subsidiaries have several pension plans covering substantially all full-time employees. Under the plans, retirement benefits are primarily a function of both years of service and level of compensation; the domestic plans are noncontributory. It is the Corporation's policy to fund the plans on a current basis to the extent deductible under existing Federal tax regulations. Such contributions, when made, are intended to provide not only for benefits attributed to service to date, but also those expected to be earned in the future. The Corporation has a 401(k) plan for salaried employees. The Corporation, for the years 1998, 1997 and 1996, contributed a 50% match of the employees' contributions, which amounted to a cost of $5,400, $5,500 and $5,900, respectively. OTHER BENEFITS - In addition to providing pension benefits, the Corporation and some of its domestic subsidiaries provide certain health care and life insurance benefits for retired employees. Employees may become eligible for these benefits if they reach normal retirement age while working for the Corporation. Benefits are provided through insurance companies. 31 33 In accordance with the current year adoption of Financial Accounting Standards Board Statement No. 132, the following chart contains the disclosures for pension and other benefits for 1998 and 1997.
PENSION BENEFITS OTHER BENEFITS ---------------- -------------- 1998 1997 1998 1997 ---- ---- ---- ---- PROJECTED BENEFIT OBLIGATION (PBO) PBO at Beginning of Period .......................... $ 500,744 $ 424,285 $ 87,352 $ 83,638 Service Cost ........................................ 29,581 25,363 1,008 1,000 Interest Cost ....................................... 35,972 33,526 6,092 6,264 Plan Participants Contributions ..................... 4,730 4,015 778 724 Plan Amendments ..................................... 2,965 2,744 -- (1,697) Actuarial Loss ...................................... 58,718 48,079 2,048 5,604 Benefits Paid ....................................... (34,952) (31,045) (7,417) (6,920) Curtailments ........................................ -- (3,355) -- (1,261) Special Termination Benefits/Other .................. 239 (2,868) -- -- --------- --------- --------- --------- PBO at End of Period ................................ 597,997 500,744 89,861 87,352 --------- --------- --------- --------- PLAN ASSETS Fair Value of Plan Assets Beginning of Period........ 542,601 490,659 -- -- Actual Return on Plan Assets ........................ 51,154 68,678 -- -- Employer Contributions .............................. 11,590 12,905 6,639 6,196 Plan Participant Contributions ...................... 4,730 4,015 778 724 Benefits Paid ....................................... (34,952) (31,045) (7,417) (6,920) Other ............................................... 1,545 (2,611) -- -- --------- --------- --------- --------- Fair Value of Plan Assets at End of Period .......... 576,668 542,601 0 0 --------- --------- --------- --------- FUNDED STATUS Funded Status ....................................... (21,329) 41,857 (89,861) (87,352) Unrecognized Net Actuarial Loss ..................... 121,878 63,442 4,536 2,442 Unrecognized Prior Service Cost ..................... 16,912 10,703 (23,742) (25,865) --------- --------- --------- --------- Prepaid (Accrued) Benefit Cost ...................... $ 117,461 $ 116,002 $(109,067) $(110,775) ========= ========= ========= ========= NET PERIODIC BENEFIT COST Service Cost ........................................ $ 29,581 $ 25,363 $ 1,008 $ 1,000 Interest Cost ....................................... 35,972 33,526 6,092 6,264 Expected Return on Plan Assets ...................... (52,534) (61,031) -- -- Amortization of Transition Asset .................... (3,031) (4,637) -- -- Amortization of Prior Service Cost .................. 2,625 1,373 (2,123) (2,211) Recognized Actuarial (Gain)/Loss/Other .............. (275) 14,261 (46) -- --------- --------- --------- --------- Total Net Periodic Pension Cost ..................... $ 12,338 $ 8,855 $ 4,931 $ 5,053 ========= ========= ========= ========= WEIGHTED AVERAGE ASSUMPTIONS Discount Rate ....................................... 6.33% 7.77% 7.0% 7.25% Long Term Rate of Return ............................ 9.85% 10.0% Salary Scale ........................................ 4.46% 5.48%
Net Periodic Benefit Cost 1996 was as follows:
Pensions Other Benefits -------- -------------- Service Cost....................................... $17,424 $ 1,623 Interest Cost...................................... 29,476 6,010 Actual Return of Plan Assets....................... (43,600) - Net Amortization and Deferrals..................... (2,279) (2,101) -------- -------- Net Periodic Benefit Cost.......................... $ 1,021 $ 5,532 ======== ========
32 34 Assumed health care cost trend rates have a significant effect on the amounts reported for the other benefit plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects:
1-Percentage 1-Percentage Point Increase Point Decrease -------------- -------------- Effect on total of service and interest cost components....... $ 303 $ (329) Effect on postretirement benefit obligations.................. 4,030 (4,235) Health care cost trend: 1998 ......................................................... 8.5% 1999 ......................................................... 8.0% Decline to 2011............................................... 5.0%
7. BANK BORROWINGS The approximate weighted average interest rates on borrowings outstanding (primarily foreign) at the end of 1998 and 1997 were 6% and 7%, respectively. Unused lines of credit for short-term bank borrowings aggregated $169,900 at year-end 1998, of which approximately 69% was available in the United States and Canada at interest rates not exceeding the prime commercial lending rate and the remainder was available overseas in various currencies at rates consistent with market conditions in the respective countries. Interest costs incurred in 1998, 1997 and 1996 were $72,284, $65,054 and $61,302 of which $9,749, $10,379 and $6,362, respectively, were capitalized. 8. CORPORATE AND OTHER DEBT
1998 1997 ---- ---- Corporate and other debt consisted of the following: 8.58% unsecured promissory notes due on September 30, 1998............... $ 22,000 Revolving Credit Agreements (average interest rate 6%) .................. $ 340,000 205,000 6.75% Notes due November 15, 2005........................................ 200,000 200,000 Other ................................................................... 1,173 18,835 --------- -------- 541,173 445,835 Less, Current portion.................................................... 346 22,939 --------- -------- $ 540,827 $422,896 ========= ======== Principal payments are payable in annual installments of: 2000 ............................................................ $ 223 2001 ............................................................ 232 2002 ............................................................ 165,130 2003 ............................................................ 53 2004 ............................................................ 58 Balance due in installments through 2014........................... 375,131 --------- $ 540,827 =========
33 35 CORPORATE DEBT - The Corporation has $200,000 Notes in the public market which bear interest at a fixed rate of 6.75% per annum, payable semiannually, and mature November 15, 2005. The Notes have been rated BBB and Baa3 by Standard & Poor's and Moody's, respectively, and were issued under an indenture between the Corporation and Harris Trust and Savings Banks. The Notes are not redeemable prior to maturity and are not subject to any sinking fund requirements. The Notes will constitute senior unsecured indebtedness of the Corporation and will rank on parity with the Corporation's other senior unsecured indebtedness. At year end 1998, the Corporation was a party to a four-year Revolving Credit Agreement ($300,000) and a 364-day Revolving Credit Agreement ($100,000) (the "Revolving Credit Agreements") with a group of banks, and a total of $340,000 had been borrowed thereunder. The loans were for general corporate purposes. The Corporation pays to the banks a facility fee on the total facility. The Revolving Credit Agreements required the maintenance of a maximum Consolidated Leverage Ratio and a minimum Consolidated Fixed Charge Coverage Ratio. As a result of the Robbins Facility charge taken in the third quarter of 1998, the Corporation was not in compliance with its covenants under the Revolving Credit Agreement. The Corporation received a waiver of these violations until February 15, 1999 and also received a commitment from financial institutions for up to $360,000 under a new facility. The new facility consists of a four-year revolving credit facility ($270,000) and a 364-day revolving credit facility ($90,000). On February 12, 1999, the Corporation borrowed $200,000 under the new facility. Borrowings under the new facility have been and are to be used to repay borrowings under the Revolving Credit Agreements and for general corporate purposes. Borrowings under the new facility bear interest at a floating rate. As of year end, the Corporation had available under an existing shelf registration statement $300,000. Subsequent to year end, on January 13, 1999 FW Preferred Capital Trust I, a wholly-owned subsidiary of the Corporation issued $175,000 in Preferred Trust Securities. These Preferred Trust Securities are entitled to receive cumulative cash distributions at an annual rate of 9.0%. Distributions will be paid quarterly in arrears on April 15, July 15, October 15 and January 15 of each year, beginning April 15, 1999. The maturity date is January 15, 2029. Foster Wheeler can redeem these Preferred Trust Securities on or after January 15, 2004. As a result of the new Revolving Credit Agreement and the issuance of the Preferred Trust Securities, all of the outstanding debt ($340,000) under the old Revolving Credit Agreement has been classified as long-term. 9. SPECIAL-PURPOSE PROJECT DEBT
1998 1997 ---- ---- The Corporation's obligations with respect to this debt are limited to guaranteeing the operating performance of the projects: Collateralized note payable, interest varies based on one of several money market rates (1998-year-end rate 6.695%), due semiannually through July 30, 2006............................... $ 46,853 $ 50,493 Floating/Fixed Rate Resource Recovery Revenue Bonds, interest varies based on tax-exempt money market rates (1998 year-end rate 4.05%), due semiannually August 1, 1999 through February 1, 2010..................................................... 40,048 43,648 Fixed Rate Trust Certificates, interest at 7.36%, due semiannually February 15, 1999 through February 15, 2014.......................... 162,000 162,000 Solid Waste Disposal and Resource Recovery System Revenue Bonds, interest 7.125% to 7.5%, due annually December 1, 1999 through 2010......................................................... 120,150 120,150 Resource Recovery Revenue Bonds, interest 7.9% to 10%, due annually December 15, 1999 through 2012.............................. 64,276 67,070 Collateralized note payable, interest varies based on six month LIBOR rates, due semiannually starting June 30, 2001 through December 31, 2012.................................................... 42,976 - -------- -------- 476,303 443,361 Less, Current portion.................................................... 26,416 10,589 -------- -------- $449,887 $432,772 ======== ========
34 36
Principal payments are payable in annual installments of: 2000....................................................................... $ 28,199 2001....................................................................... 65,896 2002....................................................................... 30,801 2003....................................................................... 34,814 2004....................................................................... 33,712 Balance due in installments through 2014................................... 256,465 -------- $449,887 ========
SPECIAL-PURPOSE SUBSIDIARY PROJECT DEBT - Special-purpose Subsidiary Project Debt represent debt incurred to finance the construction of cogeneration facilities or waste-to-energy projects. The notes and/or bonds are collateralized by the assets of each project. COGENERATION PROJECTS - The note payable for $46,853 represent a loan under a bank credit facility to a limited partnership whose general partner is a Special-purpose Project Subsidiary. The limited partnership entered into an interest rate swap agreement, which fixed the interest rate on $62,000 of the original principal amount of the debt. Under this agreement, the limited partnership pays to the counterparties interest at 8.85% on the current notional principal and the counterparties pay to the limited partnership interest at a variable rate based on LIBOR on the notional principal. The notional principal of the swap amortized through July 30, 1999, and at December 25, 1998, was $8,709. Amounts receivable under the swap agreements are reflected as a reduction of interest expense. The Floating/Fixed Rate Resource Recovery Revenue Bonds in the amount of $40,048 were issued in a total amount of $45,450. The bonds are collateralized by an irrevocable standby letter of credit issued by a commercial bank. The Fixed Rate Trust Certificates were issued and remain outstanding in a total amount of $162,000 by a Chilean limited liability company owned 85% by a Special-purpose Subsidiary and 15% by the Chilean national oil company and one of its affiliates. WASTE-TO-ENERGY PROJECTS - The Solid Waste Disposal and Resource Recovery System Revenue Bonds totaling $120,150 were issued in a total amount of $133,500. The bonds are collateralized by a pledge of certain revenues and assets of the project, but not the plant (see Note 14). The Resource Recovery Revenue Bonds of $64,276 were issued in a total amount of $86,780. The bonds are collateralized by a pledge of certain revenues and assets of the project. The note payable for $42,976 represents a loan under a bank credit facility to a Special-purpose Project subsidiary. The Corporation entered into interest rate swap agreements, which fixed the interest rate on the majority of the original principal amount of the debt. Under this agreement, the Corporation pays to the counterparties interest at 4.78% on the current notional principal and the counterparties pay to the Corporation interest at a variable rate based on LIBOR on the notional principal. The notional principal of the swap increases through December 29, 2000 and amortizes through December 30, 2011, and at December 31, 1998 was $31,448. Amounts receivable under the swap agreements are reflected as a reduction of interest expense. 10. RESEARCH AND DEVELOPMENT For the years 1998, 1997 and 1996, approximately $14,100, $16,100 and $16,900, respectively, were spent on Corporation-sponsored research activities. During the same periods, approximately $32,700, $40,400 and $29,600, respectively, were spent on customer-sponsored research activities, which were paid by customers of the Corporation. 35 37 11. INCOME TAXES The components of (loss)/earnings before income taxes for the years 1998, 1997 and 1996 were taxed under the following jurisdictions:
1998 1997 1996 ---- ---- ---- Domestic................................. $(39,858) $(66,438) $(11,261) Foreign.................................. 87,647 85,954 138,127 -------- -------- -------- Total.................................... $ 47,789 $ 19,516 $126,866 ======== ======== ========
The provision for income taxes on those earnings was as follows:
Current tax expense/(benefit): Domestic................................. $ 1,550 $(12,183) $ 6,002 Foreign.................................. 41,816 40,059 31,197 -------- -------- -------- Total current............................ 43,366 27,876 37,199 -------- -------- -------- Deferred tax expense/(benefit): Domestic................................. 47,600 (9,499) (5,434) Foreign.................................. (11,671) (4,485) 12,861 -------- -------- -------- Total deferred........................... 35,929 (13,984) 7,427 -------- -------- -------- Total provision for income taxes......... $ 79,295 $ 13,892 $ 44,626 ======== ======== ========
Deferred tax liabilities (assets) consist of the following:
1998 1997 1996 ---- ---- ---- Difference between book and tax depreciation...................... $ 90,911 $ 89,562 $ 90,995 Pension assets........................... 35,814 36,092 36,024 Capital lease transactions............... 11,422 11,899 12,201 Revenue recognition...................... 24,670 24,546 19,994 Other.................................... 8,440 2,023 6,416 -------- -------- -------- Gross deferred tax liabilities........... 171,257 164,122 165,630 -------- -------- -------- Current taxability of estimated costs to complete long-term contracts.......... (5,891) (7,331) (9,061) Income currently taxable deferred for financial reporting............... (5,930) (6,291) (6,697) Expenses not currently deductible for tax purposes...................... (56,970) (52,306) (37,104) Investment tax credit carryforwards...... (30,251) (30,251) (30,251) Postretirement benefits other than pensions......................... (63,017) (64,707) (64,900) Asbestos claims.......................... (6,370) (6,370) (8,400) Minimum tax credits...................... (10,120) (9,822) (6,832) Foreign tax credits...................... (38,197) (21,400) (21,400) Other.................................... (15,997) (1,809) (3,166) Valuation allowance...................... 81,250 20,000 20,000 -------- --------- -------- Net deferred tax assets.................. (151,493) (180,287) (167,811) -------- --------- -------- $ 19,764 $ (16,165) $ (2,181) ======== ========= ========
36 38 The domestic investment tax credit carryforwards, if not used, will expire in the years 2002 through 2007. Foreign tax credit carryforwards are recognized based on their potential utilization and, if not used, will expire in the years 1999 through 2003. The Corporation has significant foreign tax credit carryforwards for which deferred tax assets have not been recorded since their utilization is deemed remote. As reflected above, the Corporation has recorded various deferred tax assets. Realization is dependent on generating sufficient taxable income prior to the expiration of the various credits. Management believes that it is more likely than not that all of the deferred tax assets (after consideration of the valuation allowance) will be realized through future earnings and/or tax planning strategies. The amount of the deferred tax assets considered realizable, however, could change in the near future if estimates of future taxable income during the carryforward period are changed. The 1998 increase in the valuation allowance of $61,250 was caused by the losses of the Robbins Facility and their impact on the realizability of tax benefits in the future. The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory rate to earnings before income taxes, as a result of the following:
1998 1997 1996 ---- ---- ---- Tax provision at U.S. statutory rate..... 35.0% 35.0% 35.0% State income taxes, net of Federal income tax benefit........................... 3.1 9.9 2.0 Increase in valuation allowance.......... 128.2 - - Difference in estimated income taxes on foreign income and losses, net of previously provided amounts...................... (1.1) 28.1 - Other .................................. 0.7 (1.8) (1.8) ------ ----- ----- 165.9% 71.2% 35.2% ====== ===== =====
12. LEASES The Corporation entered into a sale/leaseback of the 600-ton-per-day waste-to-energy plant in Charleston, South Carolina, in 1989. The terms of the agreement are to lease back the plant under a long-term operating lease for 25 years. The minimum lease payments under the long-term noncancelable operating lease are as follows: 1999 - $6,500; 2000 -$8,000; 2001 - $8,000; 2002 - $8,300; 2003 - $8,000; and an aggregate of $87,300 thereafter. Lease expense recognized for 1998,1997 and 1996 was $7,500, $9,300 and $9,300, respectively. Recourse under this agreement is primarily limited to the assets of the special-purpose entity. In 1994, the Corporation entered into a lease agreement for a 1,600-ton-per-day recycling and waste-to-energy plant located in Robbins, Illinois, which went into commercial operation in January 1997. The terms of the agreement are to lease the facility under a long-term operating lease for 32 years. Due to the troubled status and limited liability project structure, annual lease expense will be the aggregate of 1) the annual amortization of prepaid lease cost over the term of the lease, 2) amounts due in accordance with the terms of the lease agreement to the extent of cash flows generated from operations (before lease expense) and 3) the amounts funded under the Corporate guarantees up to the total of $79,600 of Corporate guarantees. These guarantees are estimated to be paid out as follows: $2,500 in 1999, $24,500 for 2000, and $20,800 in 2001 and the balance in 2002 or thereafter. Such estimates depend upon the actual results of the project. The lease expense for the years 1997 and 1998 was $23,400 and $16,100, respectively. It is highly unlikely the Robbins Facility will generate sufficient revenues to repay the Robbins Facility debt, which is funded by the lease payments to the Village of Robbins. It is also unlikely that the earnings will justify the recovery of prepaid lease amount of $47,800. The Corporation and certain of its subsidiaries are obligated under other operating lease agreements primarily for office space. Rental expense for these leases amounted to $26,300 in 1998, $26,500 in 1997 and $28,800 in 1996. Future minimum rental commitments on noncancelable leases are as follows: 1999 - $25,000; 2000 - $22,100; 2001 - $21,200; 2002 - $18,600; 2003-$10,100; and an aggregate of $10,200 thereafter. 37 39 13. QUARTERLY FINANCIAL DATA (Unaudited)
Three Months Ended ------------------------------------------------------------ 1998 March 27 June 26 Sept. 25 Dec. 25 ---- -------- ------- -------- ------- Operating revenues ................................ $ 1,027,961 $ 1,033,825 $ 1,081,149 $ 1,393,830 Gross earnings from operations .................... 86,127 84,151 87,058 113,172 Net earnings/(loss) ............................... 13,285 12,845 (74,251)(a) 16,615 Earnings/(loss) per share: Basic ......................................... .33 .32 (1.82) .41 Diluted ....................................... .33 .32 (1.82) .41 Shares outstanding: Basic: Weighted average number of shares outstanding 40,735 40,737 40,727 40,717 Diluted: Effect of stock options ..................... 7 7 -- 0 ----------- ----------- ----------- ----------- Total diluted ................................. 40,742 40,744 40,727 40,717 =========== =========== =========== ===========
1997 March 28 June 27 Sept. 26 Dec. 26 ---- -------- ------- -------- ------- Operating revenues ................................ $965,114 $1,030,634 $1,029,994 $1,034,223 Gross earnings from operations .................... 110,599 71,280 10,829 75,259 Net earnings/(loss) ............................... 20,221 22,586(b) (34,976)(c) (2,207)(d) Earnings/(loss) per share: Basic ......................................... .50 .56 (.86) (.05) Diluted ....................................... .50 .55 (.86) (.05) Shares outstanding: Basic: Weighted average number of shares outstanding 40,642 40,643 40,688 40,734 Diluted: Effect of stock options ..................... 140 133 -- -- -------- ---------- ---------- ---------- Total diluted ................................. 40,782 40,776 40,688 40,734 ======== ========== ========== ==========
(a) Includes $47,000 ($30,600 after tax) for asset impairments of the Robbins Facility and a provision of $61,300 for an increase in the income tax valuation allowance. (b) Includes a gain of $56,400 related to the sale of Glitsch International, Inc. and a charge of $38,500, resulting in a net gain after tax of $11,600 ($.29 per share). See Notes 2 and 19. (c) Includes $54,000 for contract write-downs, a net loss of $36,800 $(.91) per share. See Note 19. (d) Includes a charge of $14,800 for the realignment of the Engineering & Construction Group in Europe, a net loss of $12,200 $(.30) per share. See Note 19. * The effect of the stock options was not included in the calculation of diluted earnings per share as these options were antidilutive due to the quarterly loss. 38 40 14. LITIGATION AND UNCERTAINTIES In the ordinary course of business, the Corporation and its subsidiaries enter into contracts providing for assessment of damages for nonperformance or delays in completion. Suits and claims have been or may be brought against the Corporation by customers alleging deficiencies in either equipment or plant construction. Based on its knowledge of the facts and circumstances relating to the Corporation's liabilities, if any, and to its insurance coverage, management of the Corporation believes that the disposition of suits will not result in charges against assets or earnings materially in excess of amounts previously provided in the accounts. The Corporation and its subsidiaries, along with many other companies, are codefendants in numerous lawsuits pending in the United States. Plaintiffs claim damages for personal injury alleged to have arisen from exposure to or use of asbestos in connection with work performed by the Corporation and its subsidiaries during the 1970s and prior. As of December 25, 1998, there were approximately 62,400 (1997-65,000) claims pending. Approximately 24,000 new claims were filed in 1998. The Corporation has agreements with insurance carriers covering significantly more than a majority of the potential costs relating to these exposures. During the three-year period ended December 25, 1998, the Corporation tried, settled or summarily disposed of approximately 104,400 (1998-26,500) asbestos-related claims. Approximately $95,300, substantially all of which was reimbursed or will be reimbursed, were spent on asbestos litigation defense and case resolution during the three-year period (1996-$27,000; 1997-$28,700; 1998-$39,600). The Corporation has recorded an asset relating to probable insurance recoveries and a liability relating to probable losses. These assets and liabilities were estimated based on historical data developed in conjunction with outside experts. Management of the Corporation has carefully considered the financial viability and legal obligations of its insurance carriers and has concluded that except for those insurers that have become or may become insolvent, the insurers will continue to adequately fund claims and defense costs relating to asbestos litigation (see Note 19). In 1997, the United States Supreme Court effectively invalidated New Jersey's long-standing municipal solid waste flow rules and regulations. The immediate effect was to eliminate the guaranteed supply of municipal solid waste to the Camden County Waste-to-Energy Project (the "Project") with its corresponding tipping fee revenue. As a result, tipping fees have been reduced to market rate in order to provide a steady supply of fuel to the plant. Those market-based revenues are not expected to be sufficient to service the debt on outstanding bonds which were issued to construct the plant and to acquire a landfill for Camden County's use. These outstanding bonds are public debt, not debt of the Corporation. The Corporation has filed suit against the involved parties, including the State of New Jersey, seeking among other things to void the applicable contracts and agreements governing the Project. Pending outcome of the litigation and the results of legislative initiatives in New Jersey to solve the crisis, management believes that the plant will continue to operate at full capacity while receiving market rates for waste disposal. At this time, management cannot determine the ultimate outcome and its effect on the Project. In 1996, the Corporation completed the construction of a recycling and waste-to-energy project for the Village of Robbins, Illinois. A subsidiary of the Corporation, Robbins Resource Recovery Limited Partnership (the "Partnership"), will operate this facility under a long-term operating lease. By virtue of the facility qualifying under the Illinois Retail Rate Law as a qualified solid waste-to-energy facility, it was to receive electricity revenues projected to be substantially higher than the utility's "avoided cost." Under the Retail Rate Law, the utility was entitled to a tax credit against a state tax on utility gross receipts and invested capital. The State was to be reimbursed by the facility for the tax credit beginning after the 20th year following the initial sale of electricity to the utility. The State repealed the Retail Rate Law insofar as it applied to this facility. The Partnership is contesting the Illinois legislature's partial repeal of the Retail Rate Law in Court. In the event this litigation is not successful and no other means are available to generate revenue from the sale of electric power above that provided by selling electricity at the "avoided cost," there will be a significant adverse financial impact on the operating results of the project (see Note 12). The ultimate legal and financial liability of the Corporation in respect to all claims, lawsuits and proceedings cannot be estimated with certainty. As additional information concerning the estimates used by the Corporation becomes known, the Corporation reassesses its position both with respect to gain contingencies and accrued 39 41 liabilities and other potential exposures. Estimates that are particularly sensitive to future change relate to legal matters, which are subject to change as events evolve and as additional information becomes available during the administration and litigation process. 15. STOCK OPTION PLANS The Corporation has two fixed option plans which reserve shares of common stock for issuance to executives, key employees and directors. The Corporation has adopted the disclosure-only provisions of Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation." Accordingly, no compensation cost has been recognized for the stock option plans. Had compensation cost for the Corporation's two stock option plans been determined based on the fair value at the grant date for awards in 1998, 1997 and 1996 consistent with the provisions of SFAS No. 123, the Corporation's net earnings and earnings per share would have been reduced to the pro forma amounts indicated below:
1998 1997 1996 ---- ---- ---- Net (loss)/earnings - as reported $(31,506) $ 5,624 $ 82,240 ========= ======== ======== Net (loss)/earnings - pro forma $(33,656) $ 2,994 $ 79,725 ========= ======== ======== (Loss)/earnings per share - as reported Basic $ (.77) $ .14 $ 2.03 Diluted * $ .14 $ 2.02 (Loss)/earnings per share - pro forma Basic $ (.83) $ .07 $ 1.96 Diluted * $ .07 $ 1.96
* Stock options not included in diluted earnings per share due to loss in 1998. The assumption regarding the stock options issued to executives in 1998 and 1997 was that 100% of such options vested in each year, rather than one-third as required by the Plan, since one-third of the previous two years would have vested in 1998, 1997 and 1996. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:
1998 1997 1996 ---- ---- ---- Dividend yield 3.04% 2.22% 1.83% Expected volatility 33.10% 27.52% 27.56% Risk-free interest rate 5.64% 6.25% 5.63% Expected life (years) 5.0 5.0 7.5
Under the 1995 Stock Option Plan approved by the stockholders in April 1995, the total number of shares of common stock that may be granted is 1,500,000. In April 1990, the stockholders approved a Stock Option Plan for Directors of the Corporation. On April 29, 1997, the stockholders approved an amendment of the Directors' Stock Option Plan, which authorizes the granting of options on 400,000 shares of common stock to directors who are not employees of the Corporation, who will automatically receive an option to acquire 3,000 shares each year. These plans provide that shares granted come from the Corporation's authorized but unissued or reacquired common stock. The price of the options granted pursuant to these plans will not be less than 100% of the fair market value of the shares on the date of grant. An option may not be exercised within one year from the date of grant and no option will be exercisable after ten years from the date granted. Under the Executive Compensation Plan, the long-term incentive segment provides for stock options to be issued. Participants may exercise approximately one-third of the stock option shares after the end of each year of the cycle. 40 42 Information regarding these option plans for 1998, 1997 and 1996 is as follows:
1998 1997 1996 Weighted- Weighted- Weighted- Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price ------ ----- ------ ----- ------ ----- Options outstanding, beginning of year........... 1,408,303 $34.32 1,123,230 $33.00 991,345 $29.78 Options exercised................................ (2,000) $25.41 (94,427) 29.23 (128,199) 27.65 Options granted.................................. 414,000 $27.62 379,500 36.96 260,084 42.63 Options cancelled or expired..................... (3,501) $37.92 --------- --------- --------- Options outstanding, end of year................. 1,816,802 $32.79 1,408,303 $34.32 1,123,230 $33.00 ========= ========= ========= Option price range at end of year................ $14.50 to $14.50 to $14.50 to $45.6875 $45.6875 $45.6875 Option price range for exercised shares.......... $22.1250 to $21.3125 to $14.50 to $28.6875 $42.1875 $32.9375 Options available for grant at end of year....... 741,416 1,153,416 1,282,916 ========= ========= ========= Weighted-average fair value of options, granted during the year.......................... $ 7.97 $10.67 $14.90 Options exercisable at end of year............... 1,198,941 827,358 685,590 Weighted-average of exercisable options at end of year...................................... $23.64 $32.05 $29.72
41 43 The following table summarizes information about fixed-price stock options outstanding at December 25, 1998:
Options Outstanding Options Exercisable Weighted- Number Average Weighted- Number Weighted- Range of Outstanding Remaining Average Exercisable Average Exercise Prices at 12/25/98 Contractual Life Exercise Price at 12/25/98 Exercise Price --------------- ----------- ---------------- -------------- ----------- -------------- $14.50 2,690 1 years $14.50 2,690 $14.50 21.3125 to 22.125 23,727 2 years 21.52 23,727 21.52 22.0625 to 28.6875 39,500 3 years 23.24 39,500 23.24 26.9375 to 27.4375 76,833 4 years 27.33 76,833 27.33 27.4375 to 28.75 89,667 5 years 28.49 89,667 28.49 32.9375 to 40.0625 160,834 6 years 36.04 160,834 36.04 29.75 to 35.25 374,467 7 years 30.19 374,467 30.19 42.1875 to 45.6875 255,584 8 years 42.63 184,056 42.80 36.9375 to 37.25 379,500 9 years 36.96 247,167 36.98 27.50 to 27.625 414,000 10 years 27.62 - - --------- --------- 14.50 to 45.6875 1,816,802 1,198,941 ========= =========
16. PREFERRED SHARE PURCHASE RIGHTS On September 22, 1987, the Corporation's Board of Directors (the "Board") declared a dividend distribution of one Preferred Share Purchase Right on each share of the Corporation's common stock outstanding as of October 2, 1987 and adopted the Rights Agreement, dated as of September 22, 1987 (the "Rights Agreement"). On September 30, 1997, the Board amended and restated the Rights Agreement. Each Right allows the shareholder to purchase a one one-hundredth of a share of a new series of preferred stock of the Corporation at an exercise price of $175. Rights are exercisable only if a person or group acquires 20% or more of the Corporation's common stock or announces a tender offer the consummation of which would result in ownership by a person or group of 20% or more of the Corporation's common stock. The Rights, which do not have the right to vote or receive dividends, expire on October 2, 2007, and may be redeemed, prior to becoming exercisable, by the Board at $.02 per Right or by shareholder action with an acquisition proposal. If any person or group acquires 20% or more of the Corporation's outstanding common stock, the "flip-in" provision of the Rights will be triggered and the Rights will entitle a holder (other than such person or any member of such group) to acquire a number of additional shares of the Corporation's common stock having a market value of twice the exercise price of each Right. In the event the Corporation is involved in a merger or other business combination transaction, each Right will entitle its holder to purchase, at the Right's then-current exercise price, a number of the acquiring Corporation's common stock having a market value at that time of twice the Right's exercise price. 42 44 17. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate values: CASH AND SHORT-TERM INVESTMENTS - All investments are considered available for sale and the carrying amount approximates fair value because of the short-term maturity of these instruments. LONG-TERM INVESTMENTS - The fair values of some investments are estimated based on quoted market prices for those or similar investments. LONG-TERM DEBT - The fair value of the Corporation's long-term debt (including current installments) is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to the Corporation for debt of the same remaining maturities. FOREIGN CURRENCY CONTRACTS AND INTEREST RATE SWAPS - The fair values of these financial instruments (used for hedging purposes) are estimated by obtaining quotes from brokers. The Corporation is exposed to market risks from changes in interest rates and fluctuations in foreign exchange rates. Financial instruments are utilized by the Corporation to reduce these risks. The Corporation does not hold or issue financial instruments for trading purposes. The Corporation is exposed to credit loss in the event of nonperformance by the counterparties. All of these financial instruments are with significant financial institutions that are primarily rated A (S&P) or better (see Notes 1, 8 and 9). TREASURY LOCK - At year-end, the Corporation had entered into a treasury lock in order to fix the interest rate at a level of 5.91% plus market spread on an anticipated issue of Trust Preferred Securities for a nominal value of $150,000 for 30 years. Trust Preferred Securities totaling $175,000 were subsequently issued on January 13, 1999. The difference will be recognized as an adjustment to interest expense over the term of the Trust Preferred Securities. CARRYING AMOUNTS AND FAIR VALUES - The estimated fair values of the Corporation's financial instruments are as follows:
1998 1997 Carrying Fair Carrying Fair Amount Value Amount Value ------ ----- ------ ----- Nonderivatives: Cash and short-term investments............. $241,291 $241,291 $259,305 $259,305 Long-term debt.............................. (1,017,476) (1,010,590) (889,196) (888,321) Derivatives: Foreign currency contracts.................. (1,036) (1,036) 31,210 31,210 Interest rate swaps......................... - (5,424) - (605) Treasury lock............................... - (15,268) - -
In the ordinary course of business, the Corporation is contingently liable for performance under letters of credit totaling approximately $349,000 and $252,000 at December 25, 1998 and December 26, 1997, respectively. In the Corporation's past experience, no material claims have been made against these financial instruments. Management of the Corporation does not expect any material losses to result from these off-balance-sheet instruments and, therefore, is of the opinion that the fair value of these instruments is zero. As of December 25, 1998, the Corporation had $378,000 of forward exchange contracts outstanding. These forward exchange contracts mature between 1999 and 2003. Approximately 28% of these contracts require a domestic subsidiary to sell Japanese yen and receive U.S. dollars. The remaining contracts have been established by various international subsidiaries to sell a variety of currencies and either receive their respective functional currencies or other currencies for which they have payment obligations to third parties. 43 45 Financial instruments, which potentially subject the Corporation to concentrations of credit risk, consist principally of cash equivalents and trade receivables. The Corporation places its cash equivalents with financial institutions and limits the amount of credit exposure to any one financial institution. Concentrations of credit risk with respect to trade receivables are limited due to the large number of customers comprising the Corporation's customer base and their dispersion across different business and geographic areas. As of December 25, 1998 and December 26, 1997, the Corporation had no significant concentrations of credit risk. The Corporation had issued third-party off-balance-sheet financial guarantees totaling approximately $24,750 and $77,000 at year-end 1998 and 1997, respectively. 18. BUSINESS SEGMENTS - DATA The Corporation adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information", in 1998 which changes the way the Corporation reports information about its operating segments. The information for 1997 and 1996 has been restated to conform to the 1998 presentation. The business of the Corporation and its subsidiaries falls within three business groups. THE ENGINEERING AND CONSTRUCTION GROUP designs, engineers and constructs petroleum, chemical, petrochemical and alternative-fuels facilities and related infrastructure, including power- generation and distribution facilities, production terminals, pollution control equipment and water treatment facilities and process plants for the production of fine chemicals, pharmaceuticals, dyestuffs, fragrances, flavors, food additives and vitamins. Also, the E&C Group provides a broad range of environmental remediation services, together with related technical, design and regulatory services. THE ENERGY EQUIPMENT GROUP designs, manufactures and erects steam- generating and auxiliary equipment for power stations and industrial markets worldwide. Steam-generating equipment includes a full range of fluidized-bed and conventional boilers firing coal, oil, gas, biomass and other municipal solid waste, waste wood and low-Btu gases. Auxiliary equipment includes feedwater heaters, steam condensers, heat-recovery equipment and low-NOX burners. Site services related to these products encompass plant erection, maintenance engineering, plant upgrading and life extension, and plant repowering. In addition, this Group provides research analysis and experimental work in fluid dynamics, heat transfer, combustion and fuel technology, materials engineering and solids mechanics. At the end of June 1997, the Energy Equipment Group sold Glitsch International, Inc. which provided proprietary solutions and systems for many separation applications and manufactured highly engineered chemical-separations equipment for the petroleum refining, petrochemical, chemical and gas processing industries. THE POWER SYSTEMS GROUP utilizes Foster Wheeler's strengths in design, engineering, manufacturing and construction to build, own or lease, and operate cogeneration, independent power production and resource recovery facilities as well as facilities for the process and petrochemical industries. The Corporation conducts its business on a global basis. The E&C Group accounted for the largest portion of the Corporation's operating revenues and operating income over the last ten years. In 1998, the Group accounted for approximately 73% of the operating revenues. The geographic dispersion of these operating revenues was as follows: 30% North America, 17% Asia, 22% Europe, 23% Middle East and 8% other. The Energy Equipment Group accounted for 23% of the operating revenues of the Corporation. The geographic dispersion of these operating revenues was as follows: 14% North America, 53% Asia, 25% Europe and 8% other. The Power Systems Group accounted for 4% of the Corporation's 1998 operating revenues. Earnings of segments represent revenues less expenses attributable to that group or geographic area where the operating units are located. Revenues between business segments are immaterial and are eliminated in Corporate and Financial Services. Export revenues accounts for 15.4% of operating revenues. No single customer represents 10% or more of operating revenues for 1997 and 1996. In 1998, one customer (Oman LNG) accounted for approximately $500,000. Identifiable assets by group are those assets that are directly related to and support the operations of each group. Corporate assets are principally cash, investments and real estate. 44 46 Summary financial information concerning the Corporation's reportable segments is shown in the following table: (In Millions of Dollars)
Corporate Engineering and and Energy Power Financial Total Construction Equipment Systems Services (1) ----- ------------ --------- ------- ------------ 1998 Revenues........................................ 4,597.0 3,459.5 1,111.2 184.3 (158.0) Interest income................................. 19.5 21.0 4.0 5.2 (10.7) Interest expense (2)............................ 62.5 7.9 9.3 25.6 19.7 Earnings/(loss) before income taxes............. 47.8 97.4 50.1 (50.6) (49.1) Income taxes/(benefits)......................... 79.3 34.1 18.9 (16.5) 42.8 Net (loss)/earnings............................. (31.5) 63.3 31.2 (34.1)(3) (91.9)(4) Identifiable assets............................. 3,495.0 1,543.1 954.5 956.0 41.4 Capital expenditures............................ 166.5 112.3 16.1 37.3 0.8 Depreciation and amortization................... 61.6 25.6 18.2 15.3 2.5 1997 Revenues........................................ 4,172.0 2,928.6 1,197.2 208.5 (162.3) Interest income................................. 21.7 18.7 6.1 5.2 (8.3) Interest expense (2)............................ 54.7 5.7 12.6 23.2 13.2 Earnings/(loss) before income taxes............. 19.5 51.5(5) 49.0(5) (26.7)(6) (54.3)(5) Income taxes/(benefits)......................... 13.9 24.3 17.0 (7.9) (19.5) Net earnings/(loss)............................. 5.6 27.2 32.0 (18.8) (34.8) Identifiable assets............................. 3,357.7 1,241.3 896.9 879.3 340.2 Capital expenditures............................ 189.8 42.1 14.6 131.2 1.9 Depreciation and amortization................... 62.0 24.5 21.4 13.4 2.7 1996 Revenues........................................ 4,040.6 2,588.9 1,381.9 158.9 (89.1) Interest income................................. 21.7 18.5 9.9 4.5 (11.2) Interest expense (2)............................ 54.9 3.1 15.5 23.3 13.0 Earnings before provision for special charges and income taxes.................... 150.9 92.0 79.2 27.3 (47.6) Earnings/(loss) before income taxes............. 126.9 92.0 79.2 27.3 (71.6)(7) Income taxes/(benefits)......................... 44.7 33.4 25.6 11.3 (25.6) Net earnings/(loss)............................. 82.2 58.6 53.6 16.0 (46.0) Identifiable assets............................. 3,510.3 1,165.0 1,130.2 730.3 484.8 Capital expenditures............................ 158.5 36.7 18.1 96.8 6.9 Depreciation and amortization................... 63.6 21.1 25.8 13.0 3.7
(1) Includes general corporate income and expense, the Corporation's captive insurance operation and eliminations (2) Includes intercompany interest charged by Corporate to the business groups on outstanding borrowings. (3) Includes in 1998 a pretax loss for the Robbins facility of $72.8 ($47.3 after tax). (4) Includes in 1998 a tax valuation allowance of $61.3. (5) Includes in 1997 a net charge of $50.9 ($37.4 after tax) consisting of the following pretax items: Second quarter amounts: Gain on sale of Glitsch International, Inc.'s operations-$56.4 (Energy Equipment Group); provision for reorganization costs-$32.0 (Energy Equipment Group); and write-downs of long-lived assets-$6.5 (Corporate and Financial Services). Third quarter amounts: Contract write-downs-$24.0 (Engineering & Construction Group) and $30.0 (Energy Equipment Group). Fourth quarter amount: European realignment cost-$14.8 (Engineering & Construction Group). (6) Includes in 1997 a pretax loss for the Robbins Facility of $38.9 ($25.3 after tax). (7) Includes in 1996 a provision of $24.0 for asbestos claims ($15.6 after tax). 45 47
1998 1997 1996 ---- ---- ---- (In Millions of Dollars) Equity earnings/(loss) in unconsolidated subsidiaries were as follows: Engineering and Construction ........... $ 3,521 $ 7,050 $ 353 Energy Equipment ....................... (302) 482 157 Power Systems .......................... 5,351 2,652 1,857 Corporate and Financial Services ....... (700) (700) (893) -------- -------- -------- Total .................................. $ 7,870 $ 9,484 $ 1,474 ======== ======== ======== Geographic Revenues: United States .......................... $1,877.9 $1,755.7 $1,747.6 Europe ................................. 2,806.2 2,478.2 2,306.3 Canada ................................. 70.9 100.4 75.8 Corporate and Financial Services, including eliminations ............. (158.0) (162.3) (89.1) -------- -------- -------- Total .................................. $4,597.0 $4,172.0 $4,040.6 ======== ======== ======== Long-lived assets United States .......................... $ 704.3 $ 753.5 $ 802.7 Europe ................................. 532.2 411.6 245.9 Canada ................................. 0.7 2.1 7.2 Corporate and Financial Services ....... 77.0 83.1 74.2 -------- -------- -------- Total .................................. $1,314.2 $1,250.3 $1,130.0 ======== ======== ========
Revenues and long-lived assets are based on the country in which the contracting subsidiary is located. 46 48 19. OTHER EVENTS In 1997, the Corporation recognized in the cost of operating revenues the following: (1) in the second quarter, $32,000 against the Energy Equipment Group representing the last phase of the Group's reorganization started in 1995 following the Pyropower acquisition. These actions will result in a further reduction in operating costs with a more efficient project execution capability. This plan includes $14,500 for the discontinuance of certain product lines including incremental costs on certain completed contracts. Approximately $9,200 of the charge relates to the consolidation of the San Diego operations with the Group's activities in New Jersey. The $9,200 includes approximately $5,200 for personnel costs including severance and related benefits. The balance ($4,000) represents write-downs of San Diego assets (primarily land and buildings) in accordance with SFAS No. 121, "Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed of". These San Diego long-lived assets are considered to be for sale and have been accounted for at their current market value less estimated cost to sell. The remaining balance of approximately $8,300 is primarily related to the write-down of a Canadian cogeneration plant in accordance with SFAS No.121. As a result of the reorganization, this cogeneration plant is considered to be for sale. The basis of this plant has been adjusted to its estimated fair market value less cost to sell. (2) in the third quarter $54,000 related to: (a) The Engineering and Construction Group recorded provisions amounting to $24,000 on several projects for which it is seeking recovery of a portion from clients. The ultimate outcome of these claims as to both timing and amount is uncertain; (b) The Energy Equipment Group recorded approximately $30,000 in provisions for increased cost on three projects, which were initially bid and executed out of the San Diego office. As previously announced in July 1997, this operation has been closed and the execution of contracts transferred to the New Jersey headquarters. (3) in the fourth quarter of 1997, the Corporation recorded a previously announced $14,800 provision for the realignment of the Engineering and Construction Group's European operations. The new structure will bring the Italian, French, and Spanish operations under common management, headquartered in Milan, Italy. This provision includes a charge of $6,200 for severance costs, $6,600 for office lease expense, due to the consolidation of the Reading, United Kingdom operations into one facility and $500 for other organizational costs. A $1,500 provision for the write-down of certain under-performing assets was included in other deductions. In the fourth quarter of 1996, the Corporation recorded a special pretax charge of $24,000 with respect to estimated probable payments for asbestos litigation that may not be covered by insurance due to insurers that have become, or may in the future become insolvent. The Corporation and its subsidiaries, along with many other companies, are codefendants in numerous lawsuits pending in the United States. Plaintiffs claim damages for personal injury alleged to have arisen from the exposure to or use of asbestos in connection with work performed by the Corporation and its subsidiaries prior to and during the 1970s for which the insolvent insurers provided coverage. In conjunction with outside experts, the Corporation has carefully considered the financial viability and legal obligations of its insurance carriers and has concluded that after recognition of the special charge, insurers will continue to adequately fund the balance of the claims and defense costs relating to current and future asbestos litigation. The Corporation anticipates funding the major portion of this charge over the next five to ten years. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE NONE 47 49 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Incorporated by reference to pages 1-4 of Foster Wheeler's Proxy Statement, dated March 18, 1999, for the Annual Meeting of Stockholders to be held April 26, 1999. Certain information regarding executive officers is included in PART I hereof in accordance with General Instruction G(3) of Form 10-K. ITEM 11. EXECUTIVE COMPENSATION Incorporated by reference to pages 6-13 of Foster Wheeler's Proxy Statement, dated March 18, 1999, for the Annual Meeting of Stockholders to be held April 26, 1999. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Incorporated by reference to pages 2-4 of Foster Wheeler's Proxy Statement, dated March 18, 1999, for the Annual Meeting of Stockholders to be held April 26, 1999. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Not applicable. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Documents filed as part of this report:
1 Financial Statements - see Item 8 All schedules and financial statements other than those indicated above have been omitted because of the absence of conditions requiring them or because the required information is shown in the financial statements or the notes thereto. 3 The following Exhibits are required by Item 601 of Regulation S-K and by paragraph (c) of Item 14 of Form 10-K: 3.1 Copy of Restated Certificate of Incorporation of Foster Wheeler Corporation, dated August 12, 1996 (filed as Exhibit 3.1 to Foster Wheeler Corporation's 1996 Quarterly Report on Form 10-Q for the quarter ended September 27, 1996 and incorporated herein by reference). 3.2 By-laws of Foster Wheeler Corporation, as amended June 27, 1995 (filed as Exhibit 3 to Foster Wheeler Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 and incorporated herein by reference). 4 Foster Wheeler Corporation hereby agrees to furnish copies of instruments defining the rights of holders of long-term debt of Foster Wheeler Corporation and its consolidated subsidiaries to the Commission upon its request. 4.1 Amended and Restated Rights Agreement dated as of September 30, 1997, between Foster Wheeler Corporation and Chase Mellon Shareholder Services, L.L.C., as Rights Agent (filed as Exhibit 1.2 to Foster Wheeler Corporation's Form 8-A dated October 1, 1997 and incorporated herein by reference.)
48 50
10.1 Purchase Agreement dated as of June 21, 1995 by and between Foster Wheeler Corporation and A. Ahlstrom Corporation (filed as Exhibit 10.1 to Foster Wheeler Corporation's Current Report on Form 8-K dated October 12, 1995 and incorporated herein by reference). 10.2 Supplement and Amendment Agreement dated as of September 30, 1995 between Foster Wheeler Corporation and A. Ahlstrom Corporation (filed as Exhibit 10.2 to Foster Wheeler Corporation's Current Report on Form 8-K dated October 12, 1995 and incorporated herein by reference). 10.3 Revolving Credit Agreement among the Corporation and the Lenders Signatory thereto, dated February 12, 1999 (filed as Exhibit 10.3 to Foster Wheeler Corporation's Annual Report on Form 10-K for the year ending December 25, 1998 and incorporated herein by reference). 10.4 Short-term Revolving Credit Agreement among the Corporation and the Lenders Signatory thereto, dated February 12, 1999 (filed as Exhibit 10.4 to Foster Wheeler Corporation's Annual Report on Form 10-K for the year ending December 25, 1998 and incorporated herein by reference). 10.5 Form of Change in Control Agreement entered into by the Corporation and the following executive officers: N. W. Atwater, H. E. Bartoli, J. Blythe, C. Ferrari, L. Fries Gardner , R. D. Iseman, T. R. O'Brien, D. J. Roberts, J. E. Schessler, R. J. Swift and G. S. White (incorporated by reference June 26, 1998 Form 10-Q). 12 Statement of Computation of Consolidated Ratio of Earnings to Fixed Charges and Preferred Shares Dividend Requirements (Exhibit 12) 21 Subsidiaries of the registrant (Exhibit 21) 23 Consent of independent accountants (page 50) 27 Financial data schedule (for the informational purposes of the Commission only).
(b) Current Reports on Form 8-K: NONE For the purposes of complying with the amendments to the rules governing Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned registrant hereby undertakes as follows, which undertaking shall be incorporated by reference into registrant's Registration Statements on Form S-8 Nos. 333-25945 (filed April 28, 1997), 33-59739 (filed June 1, 1995), 33-40878 (filed May 29, 1991) and 33-34694 (filed May 2, 1990): Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. A copy of the By-Laws of the Corporation, as amended through June 27, 1995, is available upon request to the Office of the Secretary, Foster Wheeler Corporation, Perryville Corporate Park, Clinton, New Jersey 08809-4000. 49 51 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of Foster Wheeler Corporation on (1) Form S-3 (File No. 33-61809, 333-52369, 333-52369-01 and 333-52369-02) and (2) Form S-8 (File Nos. 33-34694, 33-40878, 33-59739 and 333-25945) of our report dated January 26, 1999, except for Note 8 for which the date is February 12, 1999, on our audits of the consolidated financial statements of Foster Wheeler Corporation and Subsidiaries as of December 25, 1998 and December 26, 1997, and for each of the three years in the period ended December 25, 1998, which report is included in this Annual Report on Form 10-K. PricewaterhouseCoopers LLP New York, New York March 18, 1999 50 52 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. FOSTER WHEELER CORPORATION (Registrant) Dated March 18, 1999 By /s/ Lisa Fries Gardner --------------------- ------------------------------ Lisa Fries Gardner Vice President and Secretary Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed, as of March 18, 1999, by the following persons on behalf of the registrant, in the capacities indicated.
Signature Title --------- ----- /s/ Richard J. Swift Director, Chairman, President and - ---------------------------------- Chief Executive Officer Richard J. Swift (Principal Executive Officer) /s/ David J. Roberts Director, Vice Chairman and - ---------------------------------- Chief Financial Officer David J. Roberts (Principal Financial Officer) /s/ George S. White Vice President and Controller - ---------------------------------- George S. White (Principal Accounting Officer) /s/ Eugene D. Atkinson Director - ---------------------------------- Eugene D. Atkinson /s/ Louis E. Azzato Director - ---------------------------------- Louis E. Azzato /s/ David J. Farris Director - ---------------------------------- David J. Farris /s/ E. James Ferland Director - ---------------------------------- E. James Ferland /s/ Martha Clark Goss Director - ---------------------------------- Martha Clark Goss /s/ Constance J. Horner Director - ---------------------------------- Constance J. Horner /s/ Joseph J. Melone Director - ---------------------------------- Joseph J. Melone /s/ John E. Stuart Director - ---------------------------------- John E. Stuart
51 EX-10.3 2 REVOLVING CREDIT AGREEMENT 1 EXHIBIT 10.3 EXHIBIT I JOINDER TO REVOLVING CREDIT AGREEMENT ______________ , ____ Bank of America National Trust and Savings Association, as Administrative Agent for the Lenders party to the Short Term Revolving Credit Agreement dated as of February 12, 1999 among Foster Wheeler Corporation (the "Borrower"), the Guarantors party thereto from time to time, the Lenders party thereto from time to time, and Bank of America National Trust and Savings Association, as Administrative Agent (the "Credit Agreement") Ladies and Gentlemen: Reference is made to the Credit Agreement described above. Terms not defined herein which are defined in the Credit Agreement shall have for the purposes hereof the meaning provided therein. Pursuant to Section 1.04 of the Credit Agreement, the undersigned hereby joins in the Credit Agreement for the purposes of becoming a party thereto as one of the "Lenders" and agrees to comply with all of the terms and conditions of the Credit Agreement. The undersigned agrees (i) to undertake all of the obligations of a Lender under the Credit Agreement and (ii) to provide the Revolving Credit Commitment in the amount set forth below under the terms and conditions in the Credit Agreement. The undersigned hereby irrevocably appoints the Administrative Agent to act as Administrative Agent for the undersigned under the Credit Agreement and the other Loan Documents, all in accordance with Article VIII of the Credit Agreement and the other provisions of the Credit Agreement and the other Loan Documents. IN WITNESS WHEREOF, the undersigned has executed this Joinder as of the date first above written. , -------------------------------------- as Lender By: -------------------------------------- Title: -------------------------------------- Revolving Credit Commitment Amount: $ ------------------------------------------------------------------------ Address for Notices: -------------------------------------- -------------------------------------- -------------------------------------- Attention: -------------------------------------- Telephone: -------------------------------------- Telecopier: -------------------------------------- 2 EXHIBIT K COMMITMENT INCREASE SUPPLEMENT ______________ , ____ Bank of America National Trust and Savings Association, as Administrative Agent for the Lenders party to the Short Term Revolving Credit Agreement dated as of February 12, 1999 among Foster Wheeler Corporation (the "Borrower"), the Guarantors party thereto from time to time, the Lenders party thereto from time to time, and Bank of America National Trust and Savings Association, as Administrative Agent (the "Credit Agreement") Ladies and Gentlemen: Reference is made to the Credit Agreement described above. Terms not defined herein which are defined in the Credit Agreement shall have for the purposes hereof the meaning provided therein. Pursuant to Section 1.04 of the Credit Agreement, the undersigned hereby agrees to increase, as of , , its Revolving Credit Commitment to the amount set forth below and agrees that all of the terms and conditions of the Credit Agreement are equally applicable to its Revolving Credit Commitment as so increased. IN WITNESS WHEREOF, the undersigned has executed this Supplement as of the date first above written. , -------------------------------------- as Lender By: -------------------------------------- Title: -------------------------------------- Revolving Credit Commitment Amount: $ ------------------------------------------------------------------------ Address for Notices: -------------------------------------- -------------------------------------- -------------------------------------- Attention: -------------------------------------- Telephone: -------------------------------------- Telecopier: -------------------------------------- 3 EXHIBIT L REQUEST FOR EXTENSION OF CREDIT Date: - ---------------, - ------ To: Bank of America National Trust and Savings Association, as Administrative Agent Ladies and Gentlemen: Reference is made to that certain Short Term Revolving Credit Agreement dated as of February 12, 1999 among Foster Wheeler Corporation (the "Borrower"), the Guarantors from time to time party thereto, the Lenders from time to time party thereto and Bank of America National Trust and Savings Association, as Administrative Agent (as extended, renewed, amended or restated from time to time, the "Agreement;" the terms defined therein being used herein as therein defined). The undersigned hereby request (select one): [ ] a borrowing of Revolving Credit Loans [ ] a conversion or renewal of Loans 1. On --------------------, -----------. 2. In the amount of $ --------------. 3. ----------- Borrowing of Loans comprised of --------------------------------------------------. [type of interest rate Option requested] ----------- Conversion of Loans comprised of -------------------------- to --------------------------. ----------- Renewal of Loans comprised of -----------------------------------. 4. If applicable: with Funding Period of -------------- months/days. The foregoing request complies with the requirements of Section 2.07 or 2.09, as applicable, of the Agreement. The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the above date, before and after giving effect and to the application of the proceeds therefrom: (a) the representations and warranties of the Borrower contained in the Agreement are true and correct in all material respects as though made on and as of the above date (except (i) to the extent that such representations and warranties expressly relate solely to an earlier date and then shall be correct as of such date and (ii) that the representation and warranty set forth in Section 3.08 of the Agreement in the case of any Loans the proceeds of which are used solely to repay Loans maturing on such date) before and after giving effect to this extension of credit and to the application of the proceeds therefrom, as though made on and as of this date; and (b) no Potential Default or Event of Default has occurred and is continuing, or would result from such proposed extension of credit. FOSTER WHEELER CORPORATION By: -------------------------------------- Title: 4 REVOLVING CREDIT AGREEMENT AMONG FOSTER WHEELER CORPORATION, THE GUARANTORS SIGNATORY HERETO, THE LENDERS SIGNATORY HERETO, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS ADMINISTRATIVE AGENT, FIRST UNION NATIONAL BANK, AS SYNDICATION AGENT, AND ABN AMRO BANK N.V., AS DOCUMENTATION AGENT ARRANGED BY NATIONSBANC MONTGOMERY SECURITIES LLC, AS LEAD ARRANGER, AND ABN AMRO BANK N.V., FIRST UNION CAPITAL MARKETS, A DIVISION OF WHEAT FIRST SECURITIES, INC., GREENWICH NATWEST STRUCTURED FINANCE INC. AND TD SECURITIES (USA) INC., AS ARRANGERS ------------------------ DATED AS OF FEBRUARY 12, 1999 ------------------------ 5 TABLE OF CONTENTS
SECTION HEADING PAGE - ------- ------- ---- Recitals........................................................................ 1 ARTICLE I DEFINITIONS; CONSTRUCTION................................... 1 Section 1.01. Certain Definitions......................................... 1 Section 1.02. Construction................................................ 14 Section 1.03. Accounting Principles....................................... 15 Section 1.04. Optional Increase of the Commitments........................ 15 Section 1.05. Utilization of Commitments in Foreign Currencies............ 16 ARTICLE II THE CREDITS................................................. 17 Section 2.01. Revolving Credit Loans...................................... 17 Section 2.02. Fees; Reduction of the Committed Amounts.................... 17 Section 2.03. Competitive Bid Loans....................................... 18 Section 2.04. Maximum Aggregate Amount of Loans and Letters of Credit..... 24 Section 2.05. Swingline Advances.......................................... 24 Section 2.06. Letters of Credit........................................... 26 Section 2.06.01. Letter of Credit Sublimit................................... 26 Section 2.06.02. Issuance, Amendment and Renewal of Letters of Credit........ 27 Section 2.06.03. Risk Participations, Drawings and Reimbursements............ 28 Section 2.06.04. Repayment of Participations................................. 30 Section 2.06.05. Role of the LC Issuer....................................... 30 Section 2.06.06. Obligations Absolute........................................ 31 Section 2.06.07. Cash Collateral Pledge...................................... 31 Section 2.06.08. Uniform Customs and Practice................................ 31 Section 2.07. Making of Loans............................................. 31 Section 2.08. Interest Rates.............................................. 32 Section 2.09. Conversion or Renewal of Interest Rate Options.............. 35 Section 2.10. Prepayments Generally....................................... 36 Section 2.11. Optional Prepayments; Mandatory Prepayments................. 36 Section 2.12. Interest Payment Dates...................................... 37 Section 2.13. Pro Rata Treatment.......................................... 37 Section 2.14. Additional Compensation in Certain Circumstances............ 39 Section 2.15. Payments Generally; Interest on Overdue Amounts............. 40 Section 2.16 Taxes....................................................... 41 Section 2.17. Funding by Branch, Subsidiary or Affiliate.................. 42 Section 2.18. Extension of Revolving Credit Maturity Date................. 43 ARTICLE III REPRESENTATIONS AND WARRANTIES.............................. 43 Section 3.01. Corporate Status............................................ 43 Section 3.02. Corporate Power and Authorization........................... 43 Section 3.03. Execution and Binding Effect................................ 43 Section 3.04. Governmental Approvals and Filings.......................... 43 Section 3.05. Absence of Conflicts........................................ 43 Section 3.06. Audited Financial Statements................................ 44 Section 3.07. Absence of Undisclosed Liabilities.......................... 44 Section 3.08. Absence of Material Adverse Changes......................... 44 Section 3.09. Accurate and Complete Disclosure............................ 44 Section 3.10. Margin Regulations.......................................... 44
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SECTION HEADING PAGE - ------- ------- ---- Section 3.11. Subsidiaries................................................ 45 Section 3.12. Partnerships, etc. ......................................... 45 Section 3.13. Litigation.................................................. 45 Section 3.14. Absence of Events of Default................................ 45 Section 3.15. Absence of Other Defaults................................... 45 Section 3.16. Insurance................................................... 45 Section 3.17. Title to Property........................................... 45 Section 3.18. Intellectual Property....................................... 46 Section 3.19. Taxes....................................................... 46 Section 3.20. Employee Benefits........................................... 46 Section 3.21. Environmental Matters....................................... 47 Section 3.22. Year 2000................................................... 47 ARTICLE IV CONDITIONS OF LENDING....................................... 48 Section 4.01. Conditions to Initial Loans or Letter of Credit............. 48 Section 4.02. Conditions to All Loans and Letters of Credit............... 49 ARTICLE V AFFIRMATIVE COVENANTS....................................... 49 Section 5.01. Basic Reporting Requirements................................ 49 Section 5.02. Insurance................................................... 51 Section 5.03. Payment of Taxes and Other Potential Charges and Priority 52 Claims...................................................... Section 5.04. Preservation of Corporate Status............................ 52 Section 5.05. Governmental Approvals and Filings.......................... 52 Section 5.06. Maintenance of Properties................................... 52 Section 5.07. Avoidance of Other Conflicts................................ 53 Section 5.08. Financial Accounting Practices.............................. 53 Section 5.09. Use of Proceeds............................................. 53 Section 5.10. Continuation of or Change in Business....................... 53 Section 5.11. Consolidated Tax Return..................................... 53 Section 5.12. Fiscal Year................................................. 53 Section 5.13. ERISA....................................................... 53 Section 5.14. Ratings..................................................... 54 Section 5.15. Subsidiary Guaranty......................................... 54 ARTICLE VI NEGATIVE COVENANTS.......................................... 54 Section 6.01. Financial Covenants......................................... 54 Section 6.02. Liens....................................................... 55 Section 6.03. Indebtedness................................................ 56 Section 6.04. Loans, Advances and Certain Investments..................... 56 Section 6.05. Changes in Business......................................... 56 Section 6.06. Amendment of Certain Documents.............................. 56 Section 6.07. Mergers; Acquisitions....................................... 56 Section 6.08. ERISA Obligations........................................... 57 Section 6.09. Principal Foreign Affiliates................................ 57 Section 6.10. Certain Agreements.......................................... 57 Section 6.11. Restricted Payments......................................... 58 Section 6.12. Transactions with Affiliates................................ 58 Section 6.13. Capital Expenditures........................................ 58
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SECTION HEADING PAGE - ------- ------- ---- ARTICLE VII DEFAULTS.................................................... 58 Section 7.01. Events of Default........................................... 58 Section 7.02. Consequences of an Event of Default......................... 60 ARTICLE VIII THE AGENTS.................................................. 61 Section 8.01. Appointment................................................. 61 Section 8.02. General Nature of Agents' Duties............................ 61 Section 8.03. Exercise of Powers.......................................... 61 Section 8.04. Certain Provisions.......................................... 62 Section 8.05. Administration by the Agents................................ 62 Section 8.06. Lender Not Relying on Agents or Other Lenders............... 36 Section 8.07. Indemnification............................................. 63 Section 8.08. Agents in their Individual Capacities....................... 63 Section 8.09. Holders of Notes............................................ 63 Section 8.10. Successor Agents............................................ 64 Section 8.11. Calculations................................................ 64 Section 8.12. Funding by Administrative Agent............................. 64 Section 8.13. Syndication Agent and Documentation Agent................... 64 ARTICLE IX GUARANTY.................................................... 64 Section 9.01. The Guaranty................................................ 64 Section 9.02. Bankruptcy.................................................. 65 Section 9.03. Nature of Liability......................................... 65 Section 9.04. Independent Obligation...................................... 65 Section 9.05. Authorization............................................... 65 Section 9.06. Reliance.................................................... 66 Section 9.07. Subordination............................................... 66 Section 9.08. Waiver...................................................... 66 Section 9.09. Nature of Liability......................................... 67 Section 9.10. Judgments Binding........................................... 67 ARTICLE X MISCELLANEOUS............................................... 67 Section 10.01. Holidays.................................................... 67 Section 10.02. Records..................................................... 67 Section 10.03. Amendments and Waivers...................................... 67 Section 10.04. No Implied Waiver; Cumulative Remedies...................... 68 Section 10.05. Notices..................................................... 68 Section 10.06. Expenses; Taxes; Indemnity.................................. 69 Section 10.07. Severability................................................ 69 Section 10.08. Prior Understandings........................................ 69 Section 10.09. Duration; Survival.......................................... 70 Section 10.10. Counterparts................................................ 70 Section 10.11. Limitation on Payments...................................... 70 Section 10.12. Set-Off..................................................... 70 Section 10.13. Sharing of Collections...................................... 70 Section 10.14. Successors and Assigns; Participations; Assignments......... 71 Section 10.15. Governing Law; Submission to Jurisdiction; Waiver of Jury 74 Trial....................................................... Section 10.16. Confidentiality............................................. 74
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SECTION HEADING PAGE - ------- ------- ---- Section 10.17. Replacement of Lenders...................................... 75 Section 10.18. Judgment Currency........................................... 75 Signature Page.................................................................. 76
EXHIBIT A Form of Revolving Credit Note EXHIBIT B Form of Competitive Bid Loan Quote Request EXHIBIT C Form of Competitive Bid Loan Quote EXHIBIT D Form of Competitive Bid Note EXHIBIT E Form of Swingline Advance Note EXHIBIT F Form of Quarterly Compliance Certificate EXHIBIT G Form of Transfer Supplement EXHIBIT H Subsidiary Guaranty Agreement EXHIBIT I Joinder to Revolving Credit Agreement EXHIBIT J Pledge Agreement EXHIBIT K Commitment Increase Supplement EXHIBIT L Request for Extension of Credit SCHEDULE 3.01 Corporate Status SCHEDULE 3.02 Consents and Approvals SCHEDULE 3.07 Indebtedness SCHEDULE 3.11 Subsidiaries SCHEDULE 3.12 Partnerships SCHEDULE 3.21 Environmental Matters SCHEDULE 6.02 Liens
iv 9 REVOLVING CREDIT AGREEMENT THIS AGREEMENT, dated as of February 12, 1999, by and among FOSTER WHEELER CORPORATION, a New York corporation (the "Borrower"), the guarantors party hereto from time to time (the "Guarantors", as defined further below), the lenders party hereto from time to time (the "Lenders", as defined further below), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Administrative Agent for the Lenders hereunder, First Union National Bank, as Syndication Agent, and ABN AMRO Bank N.V., as Documentation Agent. RECITALS: A. The Borrower has requested the Lenders to extend credit to the Borrower to enable it to borrow, repay and reborrow hereunder amounts not exceeding $270,000,000 (subject to increase or reduction as provided herein) aggregate principal amount at any time outstanding, and the Lenders are willing to extend such credit upon the terms and conditions set forth herein. B. The Borrower and the Lenders desire to establish (i) sublimits under such credit for letters of credit and swingline advances and (ii) an uncommitted competitive bid facility. NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I DEFINITIONS; CONSTRUCTION Section 1.01. Certain Definitions. In addition to other words and terms defined elsewhere in this Agreement, as used herein the following words and terms shall have the following meanings, respectively, unless the context hereof otherwise clearly requires: "Absolute Rate" shall have the meaning set forth in Section 2.03(d)(ii)(F) hereof. "Absolute Rate Auction" shall mean a solicitation of Competitive Bid Loan Quotes setting forth Absolute Rates pursuant to Section 2.03 hereof. "Absolute Rate Loan" or "Absolute Rate Loans" shall mean any or all Competitive Bid Loans the interest rates of which are determined on the basis of Absolute Rates pursuant to an Absolute Rate Auction. "Administrative Agent" shall mean, initially, Bank of America National Trust and Savings Association, in its capacity as Administrative Agent for the Lenders hereunder, and any successor Administrative Agent appointed in accordance with Section 8.10 hereof. "Affected Lender" shall have the meaning set forth in Section 2.08(e) hereof. "Affiliate" of a Person (the "Specified Person") shall mean (a) any Person which directly or indirectly controls, or is controlled by, or is under common control with, the Specified Person, and (b) any director or officer (or, in the case of a Person which is not a corporation, any individual having analogous powers) of the Specified Person or of a Person who is an Affiliate of the Specified Person within the meaning of the preceding clause (a). For purposes of the preceding sentence, "control" of a Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "Agents" shall mean, collectively, the Administrative Agent, the Syndication Agent and the Documentation Agent and "Agent" shall mean any of the foregoing. "Anniversary Date" shall mean each February 12 during the term of this Agreement. 1 10 "Applicable Margin", "Facility Fee" and "Utilization Fee" each means the number of basis points designated below in the applicable column and appropriate grid:
- ------------------------------------------------------------------------------------------------------ LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V DAY DAY DAY DAY DAY -------- -------- --------- --------- ------------- - ------------------------------------------------------------------------------------------------------ Applicable Margin for Base Rate Option.................................. 0 bps 0 bps 30 bps 50 bps 80 bps - ------------------------------------------------------------------------------------------------------ Applicable Margin for CD Rate Option.... 62.5 bps 72.5 bps 117.5 bps 137.5 bps 167.5 bps - ------------------------------------------------------------------------------------------------------ Applicable Margin for Euro Rate Option.................................. 50 bps 60 bps 105 bps 125 bps 155 bps - ------------------------------------------------------------------------------------------------------ Facility Fee............................ 20 bps 25 bps 30 bps 35 bps 55 bps - ------------------------------------------------------------------------------------------------------ Utilization Fee......................... 15 bps 15 bps 15 bps 15 bps 15 bps - ------------------------------------------------------------------------------------------------------
(bps = basis points per annum) provided, however, that: (a) if on any day the Dollar Equivalent of the sum of the aggregate principal amount of outstanding Loans under this Agreement and all Letter of Credit Obligations exceeds 50% of the Total Revolving Credit Commitment under this Agreement, an additional 0.15% per annum (the "Utilization Fee") shall be added to the Applicable Margin for such day (and the term "Applicable Margin" shall be deemed to include the Utilization Fee); and (b) for each day from and including the date hereof and to and including the last day of the third fiscal quarter of the Borrower in 1999, the pricing under this Agreement shall be no lower than that applicable to Level II Day. "Assessment Rate" shall have the meaning set forth in Section 2.08(a)(ii) hereof. "Bank of America" means Bank of America National Trust and Savings Association, a national banking association. "Base Rate" shall have the meaning set forth in Section 2.08(a)(i) hereof. "Base Rate Auction" shall mean a solicitation of Competitive Bid Loan Quotes setting forth Base Rate Margins based on the Base Rate pursuant to Section 2.03 hereof. "Base Rate Loans" shall mean Competitive Bid Loans the interest rates of which are determined on the basis of the Base Rate pursuant to a Base Rate Auction. "Base Rate Margin" shall have the meaning set forth in Section 2.03(d)(ii)(E) hereof. "Base Rate Option" shall have the meaning set forth in Section 2.08(a)(i) hereof. "Base Rate Portion" of any Loan or Loans shall mean at any time the portion, including the whole, of such Loan or Loans bearing interest at such time (i) under the Base Rate Option or (ii) in accordance with Section 2.15 hereof. If no Loan or Loans is specified, "Base Rate Portion" shall refer to the Base Rate Portion of all Loans outstanding at such time. "Benefit Plan" shall mean any plan, agreement, arrangement or commitment which is an employment or consulting agreement, executive compensation plan, bonus plan, deferred compensation agreement, employee pension, profit-sharing, savings or retirement plan, employee stock option or stock purchase plan, retiree medical or life, group life, health, or accident insurance or other benefit plan, agreement, arrangement or commitment, including, without limitation, severance, or other bonus practice (including, but not limited to, employee benefit plans, as defined in section 3(3) of ERISA), with respect to which the Borrower, any of its Significant Subsidiaries, or a member of their respective Controlled Group, at any relevant time have some liability or obligation to contribute or pay benefits and which relates to current or former employees of the Borrower, any Significant Subsidiary or any member of their respective Controlled Group. "Business Day" shall mean (a) with respect to selection of the Euro-Rate Option, prepayment of any Euro-Rate Portion of any Revolving Credit Loans, determining the first or last day of any Euro-Rate Funding 2 11 Period, the giving of notices or quotes in connection with a LIBOR Auction or a payment of principal of or interest on, or the Interest Period for, a LIBOR-based Loan, a day for dealings in deposits in Dollars by and among banks in the London interbank market and on which commercial banks are open for domestic and international business in Los Angeles, California and New York, New York and (b) with respect to selection of any other interest rate Option, prepayment of any part of any other Portion of any Revolving Credit Loans, determining the first or last day of any other Funding Period, the giving of notices or quotes in connection with an Absolute Rate or a payment of principal of or interest on, or the Interest Period for, an Absolute Rate Loan and in every other context, any day other than a Saturday, Sunday or other day on which banking institutions are authorized or obligated to close in Los Angeles, California or New York, New York. "Capitalized Lease" shall mean at any time any lease which is, or is required under GAAP to be, capitalized on the balance sheet of the lessee at such time, and "Capitalized Lease Obligation" of any Person at any time shall mean the aggregate amount which is, or is required under GAAP to be, reported as a liability on the balance sheet of such Person at such time as lessee under a Capitalized Lease. "Cash Collateralize" means to pledge and deposit with or deliver to the Administrative Agent, for the benefit of the Administrative Agent, the LC Issuer and the Lenders, as collateral for the applicable Letter of Credit Obligations, cash or deposit account balances pursuant to documentation in form and substance reasonably satisfactory to the Administrative Agent and the LC Issuer. Derivatives of such term shall have corresponding meaning. The Borrower hereby grants the Administrative Agent, for the benefit of the Administrative Agent, the LC Issuer and the Lenders, a security interest in all such cash and deposit account balances. Cash collateral shall be maintained in blocked interest bearing (to the extent available) deposit accounts at Bank of America. "CD Rate" shall have the meaning set forth in Section 2.08(a)(ii) hereof. "CD Rate Funding Period" shall have the meaning set forth in Section 2.08(c) hereof. "CD Rate Option" shall have the meaning set forth in Section 2.08(a)(ii) hereof. "CD Rate Portion" of any Loan or Loans shall mean at any time the portion, including the whole, of such Loan or Loans bearing interest at any time under the CD Rate Option or at a rate calculated by reference to the CD Rate under Section 2.15 hereof. If no Loan or Loans is specified, "CD Rate Portion" shall refer to the CD Rate Portion of all Loans outstanding at such time. "CD Rate Reserve Percentage" for any day and for any CD Rate Funding Period shall mean the percentage (expressed as a decimal, rounded upward to the nearest 1/100 of 1%), as determined in good faith by the Administrative Agent (which determination shall be conclusive absent manifest error), which is in effect on such day as prescribed by the Board of Governors of the Federal Reserve System (or any successor) representing the maximum reserve requirement (including without limitation supplemental, marginal and emergency reserve requirements) for a member bank of such System in respect of nonpersonal time deposits in Dollars in the United States having a maturity comparable to such CD Rate Funding Period. "Change of Control" shall mean (a) any Person or group of Persons (as used in Sections 13 and 14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations thereunder) shall have become the beneficial owner (as defined in Rules 13d-3 and 13d-5 promulgated by the Securities and Exchange Commission (the "SEC") under the Exchange Act) of 20% or more of the Borrower's outstanding Voting Stock, unless a majority of the Continuing Directors approves the acquisition not later than 10 days after such acquisition or (b) a change in the board of directors of the Borrower shall have occurred which results in a majority of directors not being Continuing Directors. "Closing Date" shall mean the date on which the last of the conditions set forth in Section 4.01 hereof has been satisfied. "Code" means the Internal Revenue Code of 1986, as amended, and any successor statute of similar import, and regulations thereunder, in each case as in effect from time to time. References to sections of the Code shall be construed also to refer to any successor sections. 3 12 "Commitments" of a Lender shall mean the Revolving Credit Commitment of such Lender. "Commitment Percentage" of a Lender at any time shall mean the Commitment Percentage for such Lender set forth below its name on the signature page hereof, subject to adjustment as provided in Sections 1.04 and 10.17 hereof and subject to transfer to another Lender as provided in Section 10.14 hereof. "Competitive Bid Borrowing" shall have the meaning set forth in Section 2.03(b) hereof. "Competitive Bid Expiration Date" shall mean February 5, 2003, or such later date as may be established as the Competitive Bid Expiration Date pursuant to Section 2.18 hereof. "Competitive Bid Loan" or "Competitive Bid Loans" shall mean any or all loans provided for by Section 2.03 hereof. "Competitive Bid Loan Maturity Date" shall have the meaning set forth in Section 2.03(j) hereof. "Competitive Bid Loan Quote" shall mean an offer in accordance with Section 2.03(d) hereof by a Lender to make a Competitive Bid Loan. "Competitive Bid Loan Quote Request" shall have the meaning set forth in Section 2.03(b) hereof. "Competitive Bid Note" shall have the meaning set forth in Section 2.03(p) hereof. "Competitive Bid Record" shall have the meaning set forth in Section 2.03(l) hereof. "Consolidated Adjusted EBITDAR" for any period, with respect to the Borrower and its consolidated Subsidiaries, shall mean the sum of (a) Consolidated Net Income for such period, (b) Consolidated Adjusted Interest Expense for such period, (c) charges against income for foreign, federal, state and local income taxes for such period, (d) the amount of all expenses for depreciation and amortization for such period and (e) Consolidated Adjusted Rental Expense for such period, all as determined on a consolidated basis in accordance with GAAP. "Consolidated Adjusted Interest Expense" for any period shall mean the sum of (a) the total interest expense of the Borrower and its consolidated Subsidiaries (other than Special Purpose Subsidiaries) and (b) any cash dividend paid on the Borrower's Trust Preferred, for such period determined on a consolidated basis in accordance with GAAP. "Consolidated Adjusted Rental Expense" for any period shall mean aggregate rent and lease payments made pursuant to operating leases for such period by the Borrower and its consolidated Subsidiaries (other than Special Purpose Subsidiaries) determined on a consolidated basis in accordance with GAAP. "Consolidated Capitalization" at any time shall mean the sum of Consolidated Net Worth at such time and Consolidated Indebtedness at such time. "Consolidated Fixed Charges" for any period shall mean the sum of Consolidated Adjusted Interest Expense for such period and Consolidated Adjusted Rental Expense for such period. "Consolidated Fixed Charges Coverage Ratio" for any period shall mean the ratio of the Consolidated Adjusted EBITDAR (less any cash dividend paid on the Borrower's common stock) for such period to the Consolidated Fixed Charges for such period. "Consolidated Indebtedness" at any time shall mean the Indebtedness of the Borrower and its consolidated Subsidiaries at such time determined on a consolidated basis in accordance with GAAP. "Consolidated Leverage Ratio" at any time shall mean the ratio of Consolidated Indebtedness to the Consolidated Capitalization at such time. "Consolidated Net Income" for any period shall mean the net earnings (or loss) after taxes of the Borrower and its consolidated Subsidiaries for such period determined on a consolidated basis in accordance with GAAP. 4 13 "Consolidated Net Worth" at any time shall mean the total amount of stockholders' equity (including, without duplication, the face amount of the Borrower's Trust Preferred issued and outstanding at such time) of the Borrower and its consolidated Subsidiaries at such time determined on a consolidated basis in accordance with GAAP, provided, that in the calculation of Consolidated Net Worth of the Borrower solely for the purposes of Section 6.01(b), accumulated translation adjustments with respect to the Borrower's investments in foreign entities shall be excluded. "Continuing Directors" shall mean members of the board of directors of the Borrower who (a) were directors on January 1, 1999 or (b) have been directors for at least two years, or (c) were nominated or elected with the affirmative vote of the greater of (x) a majority of the Continuing Directors on the board or (y) three Continuing Directors. "Controlled Group" shall mean with respect to any Person, all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with such Person, are treated as a single employer under Section 414(b), 414(c), 414(m) or 414(o) of the Code or Section 4001(a)(2) of ERISA. "Corresponding Source of Funds" shall mean: (a) In the case of any Funding Segment of the CD Rate Portion, the proceeds of hypothetical issuances by a Lender of one or more of its certificates of deposit at the beginning of the CD Rate Funding Period corresponding to such Funding Segment, having maturities approximately equal to such CD Rate Funding Period and in an aggregate amount approximately equal to such Lender's Pro Rata share of such Funding Segment; and (b) In the case of any Funding Segment of the Euro-Rate Portion, the proceeds of hypothetical receipts by a Notional Euro-Rate Funding Office or by a Lender through a Notional Euro-Rate Funding Office of one or more Dollar deposits in the interbank eurodollar market at the beginning of the Euro-Rate Funding Period corresponding to such Funding Segment having maturities approximately equal to such Euro-Rate Funding Period and in an aggregate amount approximately equal to such Lender's Pro Rata share of such Funding Segment. "Creditors" shall mean the Lenders, the LC Issuer, the Swingline Lender and the Agents. "Credit Party" shall mean each of the Borrower and the Guarantors. "Debt Instrument" shall have the meaning set forth in Section 7.01(f) hereof. "Documentation Agent" shall mean ABN AMRO Bank N.V., in its capacity as documentation agent hereunder. "Dollar," "Dollars" and the symbol "$" shall mean lawful money of the United States of America. "Dollar Equivalent" shall mean, as of the date of determination, (a) the amount denominated in Dollars, and (b) as to any amount denominated in another currency, the equivalent amount in Dollars as determined by the Administrative Agent on the basis of the Spot Rate for the purchase of Dollars with such currency; provided, that with respect to Letter of Credit Obligations in Offshore Currencies that are valued as of the last Business Day of each month, the equivalent amount in Dollars shall be determined by Bank of America in its capacity as LC Issuer instead of the Administrative Agent. "Eligible Assignee" means (a) a financial institution organized under the laws of the United States, or any state thereof, and having a combined capital and surplus of at least $100,000,000; (b) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development, or a political subdivision of any such country, and having a combined capital and surplus of at least $100,000,000, provided that such bank is acting through a branch or agency located in the United States; (c) a Person that is primarily engaged in the business of commercial banking and that is (i) a Subsidiary of a Lender, (ii) a Subsidiary of a Person of which a Lender is a Subsidiary, or (iii) a Person of which a Lender is a Subsidiary or (d) another Lender. 5 14 "Environmental Claim" shall mean, with respect to any Person, any action, suit, proceeding, investigation, notice, claim, complaint, demand, request for information or other communication (written or oral) by any other Person (including but not limited to any Governmental Authority, citizens' group or present or former employee of such Person) alleging, asserting or claiming any actual or potential (a) violation of any Requirements of Law, (b) liability under any Requirements of Law or (c) liability for investigatory costs, cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries, fines or penalties arising out of, based on or resulting from the presence, or release into the environment, of any Hazardous Materials at any location, whether or not owned by such Person. "Environmental Matters" means any matter arising out of, relating to, or resulting from any emissions, discharges, releases or threatened releases of Hazardous Materials into the air, surface water, groundwater, or soil, or otherwise arising out of, relating to, or resulting from the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials. "Environmental Permits" means all permits, licenses, authorizations, registrations and other governmental consents required by applicable Requirements of Law for the use, storage, treatment, transportation, release, emission and disposal of raw materials, by-products, wastes and other substances used or produced by or otherwise relating to the operations of the Borrower and any Significant Subsidiary of the Borrower. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, and regulations thereunder, in each case as in effect from time to time. References to sections of ERISA shall be construed also to refer to any successor sections. "ERISA Lien" shall mean a security interest or lien arising under or in connection with a Pension Plan or Title IV of ERISA or a claim asserted (including for failure to withhold) by the government which if successful would result in such a lien; provided, however, that any claim asserted, (a) for which the Borrower has reasonable grounds to contest and (b) which the Borrower is diligently contesting in good faith through appropriate proceedings with the IRS or a court of law, shall not be deemed an ERISA Lien for so long as all of the above conditions are met. "Eurocurrency Liabilities" shall have the meaning set forth in the definition of Euro-Rate Reserve Percentage set forth in Section 1.01 hereof. "Eurocurrency Loan" shall have the meaning set forth in Section 2.03(r) hereof. "Euro-Rate" shall have the meaning set forth in Section 2.08(a)(iii) hereof. "Euro-Rate Funding Period" shall have the meaning set forth in Section 2.08(c) hereof. "Euro-Rate Option" shall have the meaning set forth in Section 2.08(a)(iii) hereof. "Euro-Rate Portion" of any Loan or Loans shall mean at any time the portion, including the whole, of such Loan or Loans bearing interest at any time under the Euro-Rate Option or at a rate calculated by reference to the Euro-Rate under Section 2.15 hereof. If no Loan or Loans is specified, "Euro-Rate Portion" shall refer to the Euro-Rate Portion of all Loans outstanding at such time. "Euro-Rate Reserve Percentage" means for any day for any Lender for any Funding Segment or Interest Period the reserve percentage (expressed as a decimal, rounded upward to the next 1/100th of 1%) in effect on such day, as determined in good faith by such Lender (which determination shall be conclusive absent manifest error), under regulations issued from time to time by the Board of Governors of the Federal Reserve System for determining the maximum reserve requirement of such Lender (including any emergency, supplemental or other marginal reserve requirement) with respect to eurocurrency funding (currently referred to as "Eurocurrency Liabilities"). "Event of Default" shall mean any of the Events of Default described in Section 7.01 hereof. "Existing Credit Agreements" shall have the meaning set forth in Section 4.01(f) hereof. "Facility Fee" is set forth in the definition of "Applicable Margin." 6 15 "Federal Funds Effective Rate" for any day shall mean the rate per annum (rounded upward to the nearest 1/100 of 1%) determined by the Administrative Agent (which determination shall be conclusive) to be the rate per annum announced by the Federal Reserve Bank of New York (or any successor) on such day as being the weighted average of the rates on overnight Federal funds transactions arranged by Federal funds brokers on the previous trading day, as computed and announced by such Federal Reserve Bank (or any successor) in substantially the same manner as such Federal Reserve Bank computes and announces the weighted average it refers to as the "Federal Funds Effective Rate" as of the date of this Agreement; provided, that if such Federal Reserve Bank (or its successor) does not announce such rate on any day, the "Federal Funds Effective Rate" for such day shall be the Federal Funds Effective Rate for the last day on which such rate was announced. "Financial Letter of Credit" means a Letter of Credit that is not, as reasonably determined by the LC Issuer, a Performance Letter of Credit. "Financial Letter of Credit Sublimit" shall mean $20,000,000. "Financial Provisions" shall have the meaning set forth in Section 1.03(d) hereof. "Funding Periods" shall have the meaning set forth in Section 2.08(c) hereof. "Funding Segment" of the CD Rate Portion or the Euro-Rate Portion, as the case may be, of the Revolving Credit Loans at any time shall mean the entire principal amount of such Portion to which at the time in question there is applicable a particular Funding Period beginning on a particular day and ending on a particular day. (By definition, each such Portion is at all times composed of an integral number of discrete Funding Segments and the sum of the principal amounts of all Funding Segments of any such Portion at any time equals the principal amount of such Portion at such time.) "GAAP" shall have the meaning set forth in Section 1.03 hereof. "Governmental Action" shall have the meaning set forth in Section 3.04 hereof. "Governmental Authority" shall mean any government or political subdivision or any agency, authority, bureau, central bank, commission, department or instrumentality of either, or any court, tribunal, grand jury or arbitrator, in each case whether foreign or domestic. "Guarantee" shall mean the guarantee by any Person to pay or perform the obligations of any other Person, including any agreement, whether such agreement is on a contingency basis or otherwise, to purchase, repurchase or otherwise acquire Indebtedness of any other Person, or to purchase, sell or lease, as lessee or lessor, property or services, in any such case primarily for the purpose of enabling another Person to make payment of Indebtedness. "Guaranteed Obligations" shall mean the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of the principal and interest on each Note and Loan made under this Agreement and of the Letter of Credit Obligations, together with all the other obligations and liabilities (including, without limitation, indemnities, fees and interest thereon) of the Borrower to the Agents, the LC Issuer, the Swingline Lender and the Lenders now existing or hereafter incurred under, arising out of or in connection with this Agreement or any other Loan Document to which the Borrower is a party and the due performance and compliance with all the terms, conditions and agreements contained in such Loan Documents by the Borrower. "Guarantor" shall mean Foster Wheeler USA Corporation, Foster Wheeler Energy International, Inc., Foster Wheeler Energy Corporation and any other domestic Subsidiary of the Borrower designated pursuant to Section 5.15 hereof. "Guaranty" shall mean the Guaranty as set forth in Article IX hereof. "Hazardous Materials" means any pollutants, contaminants, hazardous or toxic substances, materials or wastes (including petroleum, petroleum by-products, PCBs, and friable asbestos) as those concepts are used in the Comprehensive Environmental Response Compensation and Liability Act (CERCLA), the Resource 7 16 Conservation and Recovery Act (RCRA), the Toxic Substance Control Act (TSCA), the Clean Air Act, the Clean Water Act, and other similar federal or state statutes or regulations. "Indebtedness" of a Person shall mean with respect to any Person, without duplication, all (a) liabilities or obligations incurred in connection with borrowings (including reimbursement obligations in respect of letters of credit or banker's acceptances which have been drawn and including the sale of debt securities) of such Person which in accordance with generally accepted accounting principles would be included in determining total liabilities as shown on the liability side of a balance sheet of such Person at the date as of which Indebtedness is to be determined, including, without limitation, Capitalized Lease Obligations of such Person; (b) liabilities or obligations of such Person issued, incurred or assumed in respect of the purchase price of property except for trade accounts payable incurred in the ordinary course of business on which interest is not being accrued; (c) liabilities or obligations of others of any of the types specified in the preceding clauses (a) and (b) for which such Person is directly or indirectly liable, by way of guaranty (whether by direct guaranty, suretyship, discount, endorsement, take-or-pay agreement, agreement to purchase or advance or keep in funds or other agreement having the effect of a guaranty) or otherwise; (d) liabilities or obligations of others of any of the types specified in the preceding clauses (a) and (b) which are secured by Liens on any assets of such Person, whether or not such liabilities or obligations shall have been assumed by it; and (e) to the extent not included in the preceding clauses (a) through (d), the excess over $10,000,000 of the aggregate undrawn amount of all financial letters of credit issued on account of such Person. "Indemnified Parties" shall mean the Agents, the LC Issuer, the Swingline Lender, the Lenders, their respective affiliates, and the directors, officers, employees, attorneys and agents of each of the foregoing. "Indenture" shall have the meaning set forth in Section 6.10 hereof. "Initial Revolving Credit Committed Amount" shall have the meaning set forth in Section 2.01(a) hereof. "Interest Period" shall mean with respect to any Competitive Bid Loan, the period commencing on the date such Competitive Bid Loan is made and ending on a date not less than seven days nor more than 180 days thereafter (with respect to any Absolute Rate Loan) or 30, 60, 90 or 180 days thereafter (with respect to any CD Rate Loan) or one, two, three or six months (with respect to any LIBO-Rate Loan), as the Borrower may specify in the related Competitive Bid Loan Quote Request as provided in Section 2.03(b) hereof, provided that: (a) No Interest Period may end after the Competitive Bid Expiration Date; (b) Each Interest Period that would otherwise end on a day that is not a Business Day shall end on the next succeeding Business Day or, in the case of an Interest Period for a LIBOR-based Loan, if such next succeeding Business Day falls in the next succeeding calendar month, then such Interest Period shall end on the next preceding Business Day; and (c) Notwithstanding clauses (a) and (b) above, no Interest Period for any Competitive Bid Loan shall have a duration of less than seven days and, if the Interest Period for any Competitive Bid Loan would otherwise be a shorter period, such Competitive Bid Loan shall not be available hereunder. "Investment" by any Person in any other Person shall mean: (a) the amount paid, or the value of property or services contributed, by such Person for or in connection with the acquisition by such Person of any stock, bonds, notes, debentures, option contracts, investment contracts, partnership or other ownership interests or other securities of any other Person; (b) the amount of any advance, loan or extension of credit to any other Person by such Person; and (c) the amount of any Indebtedness of any other Person which such Person has guaranteed and which by its terms or as a consequence of any default thereunder such Indebtedness has or may, at the option of the holder thereof, become due and payable by acceleration or otherwise. 8 17 "IRS" shall mean the Internal Revenue Service. "Issuance" means, with respect to any Letter of Credit, the issuance, extension of the expiry of, renewal or increase in the amount of such Letter of Credit. "Issue," "Issued" and "Issuing" have corresponding meanings. "Law" shall mean any law (including common law), constitution, statute, treaty, convention, regulation, rule, ordinance, order, injunction, writ, decree or award of any Governmental Authority. "LC Issuer" means Bank of America or any other Lender replacing Bank of America as LC Issuer upon the mutual consent of the Borrower and the Administrative Agent, in each case not to be unreasonably withheld, and such Lender. "Lender" shall mean any of the Lenders listed on the signature pages hereof, subject to the provisions of Sections 1.05, 10.14 and 10.17 hereof pertaining to Persons becoming or ceasing to be Lenders. "Letter of Credit" means a Financial Letter of Credit or a Performance Letter of Credit issued hereunder. "Letter of Credit Advance" means each Lender's participation in any Letter of Credit Borrowing under Section 2.06.03. "Letter of Credit Amendment Application" means an application form for amendment of outstanding Letters of Credit as shall at any time be in use by the LC Issuer, as the LC Issuer shall request. "Letter of Credit Application" means an application form for issuance of Letters of Credit as shall at any time be in use by the LC Issuer, as the LC Issuer shall request. "Letter of Credit Borrowing" means each drawing under any Letter of Credit that is not reimbursed under Section 2.06.03 or converted into a borrowing of Revolving Credit Loans under Section 2.06.03. "Letter of Credit Obligations" means the sum of (a) the aggregate undrawn amount of all outstanding Letter of Credit and (b) the aggregate amount of all unreimbursed drawings under all Letters of Credit, whether or not outstanding, including all outstanding Letter of Credit Borrowings. "Letter of Credit Related Document" means the Letters of Credit, the Letter of Credit Applications, the Letter of Credit Amendment Applications and any other document relating to any Letter of Credit, including any of the LC Issuer's standard form documents for letter of credit Issuance. "Level I Day" shall mean a day on which there is in effect a Moody's Rating of Baa2 or better and an S&P Rating of BBB or better. "Level II Day" shall mean a day which is not a Level I Day and on which there is in effect a Moody's Rating of Baa3 or better and an S&P Rating of BBB- or better. "Level III Day" shall mean a day which is not a Level I Day or a Level II Day and on which there is in effect a Moody's Rating of Ba1 or better and an S&P Rating of BB+ or better. "Level IV Day" shall mean a day which is not a Level I Day, a Level II Day or a Level III Day and on which there is in effect a Moody's Rating of Ba2 or better and an S&P Rating of BB or better. "Level V Day" shall mean a day which is not a Level I Day, a Level II Day, a Level III Day or a Level IV Day. "LIBO-Rate" for any day, as used herein, shall mean with respect to each proposed LIBOR-based Loan a rate of interest (which shall be the same for each day in the applicable Interest Period) equal to the rate of interest determined in good faith by the Administrative Agent in accordance with its usual procedures from the Reuters Screen LIBO page (which determination shall be conclusive absent manifest error) to be the average of the rates per annum for deposits in Dollars offered to the leading banks in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the first day of such Interest Period for delivery on the first day of such Interest Period in amounts comparable to the amount of the LIBOR-based Loan to be funded and having maturities comparable to such Interest Period. 9 18 "LIBOR Auction" shall mean a solicitation of Competitive Bid Loan Quotes setting forth LIBOR-based Margins based on the LIBO-Rate pursuant to Section 2.03 hereof. "LIBOR-based Loans" shall mean Competitive Bid Loans the interest rates of which are determined on the basis of the LIBO-Rate pursuant to a LIBOR Auction. "Lien" shall mean any mortgage, deed of trust, pledge, lien, security interest, charge or other encumbrance or security arrangement of any nature whatsoever, including but not limited to any conditional sale or title retention arrangement, and any assignment, deposit arrangement or lease intended as, or having the effect of, security. "Loan" shall mean any loan or advance by a Lender under this Agreement, whether a Revolving Credit Loan, a Competitive Bid Loan or a Swingline Advance and "Loans" shall mean all Revolving Credit Loans, Competitive Bid Loans and Swingline Advances made by Lenders under this Agreement. "Loan Documents" shall mean this Agreement, the Notes, the Subsidiary Guaranty Agreements, the Pledge Agreement, the Letter of Credit Related Documents and the Transfer Supplements, and all other agreements and instruments extending or renewing any indebtedness, obligation or liability arising under any of the foregoing, and any certificate or instrument delivered by the Borrower or the Guarantors in connection herewith or therewith, in each case as the same may be amended, modified or supplemented from time to time hereafter. "Material Adverse Effect" shall mean a material adverse effect on the business, operations, properties, assets or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole. "Material Domestic Subsidiary" shall mean each Significant Subsidiary of the Borrower (other than Special Purpose Subsidiaries) that is organized under the laws of one of the States of the United States. "Moody's" shall mean Moody's Investor's Services, Inc., or any successor thereto. "Moody's Rating" shall mean the rating assigned to the Borrower's senior unsecured long term debt by Moody's, or in the event the Borrower has no Moody's-rated senior unsecured long-term debt outstanding, the "hypothetical senior long-term debt rating" most recently assigned to the Borrower by Moody's, which assignment shall have been made not more than fifteen months prior to the time in question and not more than ninety (90) days after a request therefor by the Required Lenders pursuant to Section 5.14 hereof. "Nonextending Lender" shall have the meaning set forth in Section 2.18 hereof. "Note" or "Notes" shall mean the Revolving Credit Note(s), the Swingline Advance Note(s) or the Competitive Bid Note(s), as the case may be, of the Borrower executed and delivered under this Agreement, together with all extensions, renewals, refinancings or refundings of any thereof in whole or part. "Notional Euro-Rate Funding Office" shall have the meaning given to that term in Section 2.17(a) hereof. "Obligations" shall mean all indebtedness, obligations and liabilities of the Borrower to any Lender or any Agent, the Swingline Lender, or the LC Issuer from time to time arising under or in connection with or related to or evidenced by or secured by this Agreement or any other Loan Document, and all extensions or renewals thereof, whether such indebtedness, obligations or liabilities are direct or indirect, otherwise secured or unsecured, joint or several, absolute or contingent, due or to become due, whether for payment or performance, now existing or hereafter arising. Without limitation of the foregoing, such indebtedness, obligations and liabilities include the principal amount of Loans, Letter of Credit Obligations, interest, fees, indemnities or expenses under or in connection with this Agreement or any other Loan Document, and all extensions and renewals thereof, whether or not such Loans were made in compliance with the terms and conditions of this Agreement or in excess of the obligation of the Lenders to lend. Obligations shall remain Obligations notwithstanding any assignment or transfer or any subsequent assignment or transfer of any of the Obligations or any interest therein. 10 19 "Office," when used in connection with the Administrative Agent, shall mean its office located at 1850 Gateway Boulevard, 5th Floor, Concord, California 94520, or at such other office or offices of the Administrative Agent or any branch, subsidiary or affiliate thereof as may be designated in writing from time to time by the Administrative Agent to the Borrower. "Offshore Currencies" shall mean any lawful currency constituting a eurocurrency (other than Dollars), that in the opinion of the LC Issuer is freely traded in the offshore interbank foreign exchange markets and is freely transferable and freely convertible into Dollars. "Option" shall mean the Base Rate Option, the CD Rate Option or the Euro-Rate Option, as the case may be. "Other Credit Agreement" shall mean the Short Term Revolving Credit Agreement dated as of February 12, 1999 among Foster Wheeler Corporation, the guarantors signatory thereto, the lenders signatory thereto, Bank of America National Trust and Savings Association, as administrative agent, and other agents party thereto, as the same may be amended, modified or supplemented from time to time. "Participants" shall have the meaning set forth in Section 10.14(b) hereof. "PBGC" means the Pension Benefit Guaranty Corporation established under Title IV of ERISA or any other governmental agency, department or instrumentality succeeding to the functions of said corporation. "Pension Plan" shall mean a single employer plan as defined in Section 4001(a)(15) of ERISA or an individual account plan which is subject to the funding standards of Section 302 of ERISA with respect to which the Borrower, any of its Significant Subsidiaries, or members of their respective Controlled Groups, at any relevant time have some liability or obligation to contribute or pay benefits and which relates to current or former employees of the Borrower, any of its Significant Subsidiaries or any member of their respective Controlled Groups. "Performance Letter of Credit" means a Letter of Credit that, as reasonably determined by the LC Issuer, assures that the Borrower will fulfill a contractual nonfinancial obligation. "Performance Letter of Credit Sublimit" shall mean $100,000,000. "Permitted Liens" shall mean (a) pledges or deposits by the Borrower or any of its Subsidiaries under workers' compensation laws, unemployment insurance laws, social security laws, or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Indebtedness of the Borrower or any of its Subsidiaries), or leases to which the Borrower or any of its Subsidiaries is a party, or deposits to secure public or statutory obligations of the Borrower or any of its Subsidiaries or deposits of cash or U.S. governmental bonds to secure surety, appeal, performance or other similar bonds to which the Borrower or any of its Subsidiaries is a party, or deposits as security for contested taxes or import duties or for the payment of rent; (b) Liens imposed by law such as carriers', warehousemen's, materialmen's and mechanics' or other similar liens, or Liens arising out of judgments or awards against the Borrower or any of its Subsidiaries with respect to which the Borrower or any of its Subsidiaries at the time shall currently be prosecuting an appeal or proceedings for review; (c) Liens for taxes, assessments or governmental charges or levies not yet subject to penalties for nonpayment and Liens for taxes, assessments or governmental charges or levies the payment of which is being contested as permitted by Section 5.03 hereof; (d) survey exceptions, encumbrances, easements or reservations of, or rights of others for rights of way, highways and railroad crossings, sewers, electric lines, telephone and telegraph lines and other similar purposes, or zoning or other restrictions as to the use of real property; all of which Liens described in clause (d) hereof do not in the aggregate materially detract from the value of the properties to which they relate or materially impair their use in the operation of the business of the Borrower and its Subsidiaries taken as a whole; (e) Liens (i) in favor of the United States of America or any State thereof, or any department, agency or instrumentality or political subdivision of the United States of America or any State thereof, or (ii) in favor of any other country, or any political subdivision thereof, to secure partial, progress, advance or other payments pursuant to any contract or statute; (f) Liens made in favor of any customer arising in the ordinary course of business of the Borrower or any Subsidiary thereof in respect of payments made by or on behalf of such customer for goods produced or 11 20 services rendered to such customer; (g) a security interest granted to the Administrative Agent, for the benefit of the Administrative Agent, the LC Issuer and the Lenders, in Cash Collateral; and (h) Liens granted pursuant to the Pledge Agreement. "Person" shall mean an individual, corporation, partnership, trust, unincorporated association, joint venture, joint-stock company, Governmental Authority or any other entity. "Portion" shall mean the Base Rate Portion, the CD Rate Portion or the Euro-Rate Portion, as the case may be. "Potential Default" shall mean any event or condition which with notice or passage of time, or any combination of the foregoing, would constitute an Event of Default. "Pledge Agreement" shall mean the pledge agreement in the form of Exhibit J. "Principal Foreign Affiliates" shall have the meaning set forth in Section 6.09 hereof. "Project" shall mean any municipal solid waste project or any other project the assets of which are financed on a limited recourse basis. "Pro Rata" shall have the meaning set forth in Section 2.13 hereof. "Purchasing Lender" shall have the meaning set forth in Section 10.14(c) hereof. "Reference Rate" as used herein, shall mean for any day the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its "reference rate." (The "reference rate" is a rate set by Bank of America based upon various factors including Bank of America's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate.) Any change in the reference rate announced by Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change. "Register" shall have the meaning set forth in Section 10.14(d) hereof. "Regular Payment Date" shall mean the last Business Day of each March, June, September and December after the date hereof. "Relevant Date" shall have the meaning set forth in Section 1.03(a) hereof. "Replacement Lender" shall have the meaning set forth in Section 2.18 hereof. "Reportable Event" means an event described in Section 4043 of ERISA or in the regulations thereunder with respect to which the 30-day notice is not waived or an event described in Section 4043 or in the regulations thereunder with respect to which the 30-day notice has been waived and which involves a liability of $1,000,000 or more or a material plan or a receipt of a notice of withdrawal liabilities pursuant to Section 4202 of ERISA. For purposes of this definition a material plan is a plan in which benefit liabilities exceed assets on a termination basis based on PBGC assumptions by $1,000,000. "Required Lenders" shall mean, at any time prior to the termination or expiration of the Commitments, Lenders which have Commitments constituting, in the aggregate, more than 50% of the total Commitments of all the Lenders at such time and shall mean, at any time thereafter, Lenders which have outstanding Loans, Swingline Advance Participating Interests and Letter of Credit Obligations (without duplication) constituting, in the aggregate, more than 50% of all Loans, Swingline Advance Participating Interests and Letter of Credit Obligations (without duplication) outstanding at such time. "Requirements of Law" means all applicable federal, state, and local laws, statutes, rules, regulations, codes, ordinances, orders, decrees, directives, permits, licenses and judgments relating to Environmental Matters in effect from time to time. 12 21 "Responsible Officer" of the Borrower shall mean its Chief Executive Officer, its Chief Financial Officer, its Executive Vice President, any Senior Vice President, any Vice President, the Treasurer or one of its Assistant Treasurers. "Revolving Credit Commitment" shall have the meaning set forth in Section 2.01(a) hereof. "Revolving Credit Committed Amount" shall have the meaning set forth in Section 2.01(a) hereof. "Revolving Credit Loans" shall have the meaning set forth in Section 2.01(a) hereof. "Revolving Credit Maturity Date" shall mean February 12, 2003, as such date may be extended pursuant to Section 2.18 hereof. "Revolving Credit Note" shall mean the promissory note of the Borrower executed and delivered under Section 2.01(c) hereof, any promissory note issued in substitution therefor pursuant to Sections 2.17(b) or 10.14(c) hereof, together with all extensions, renewals, refinancings or refundings thereof in whole or part. "S&P" shall mean Standard & Poor's Rating Services, or any successor thereto. "S&P Rating" shall mean the rating assigned to the Borrower's senior unsecured long term debt by S&P, or in the event the Borrower has no S&P-rated senior unsecured long-term debt outstanding, the "issuer credit rating" most recently assigned to the Borrower by S&P, which assignment shall have been made not more than fifteen months prior to the time in question and not more than ninety (90) days after a request therefor by the Required Lenders pursuant to Section 5.14 hereof. "Significant Subsidiary" shall mean (a) each Special Purpose Subsidiary and (b) each other Subsidiary of the Borrower which in the most recent fiscal year of the Borrower accounted for more than 10% of the consolidated assets of the Borrower and its Subsidiaries or which accounted for more than 10% of the consolidated income of the Borrower and its Subsidiaries for each of the most recent three fiscal years of the Borrower; provided, however, that with respect to Subsidiaries created or acquired after the date hereof, if thereafter such entity, in a fiscal year, accounts for more than 10% of the consolidated assets of the Borrower and its Subsidiaries or accounts for more than 10% of the consolidated income of the Borrower and its Subsidiaries in such fiscal year, it shall be deemed to be a Significant Subsidiary for such fiscal year. "Special Purpose Subsidiary" shall mean a Subsidiary of the Borrower formed with the express and sole purpose of, and which is engaged solely in the business of, constructing or owning, leasing or operating a specific Project, and with respect to which Subsidiary, neither the Borrower nor any of its other Subsidiaries is obligated (except as guarantor of completion or performance) to pay any Indebtedness (including lease obligations) incurred to construct, own, lease or operate any such Project or any other Indebtedness of such Subsidiary. "Spot Rate" for a currency means the rate quoted (expressed as a decimal, rounded to the fourth decimal place) to the Administrative Agent as the spot rate for the purchase of such currency with another currency through the FX Trading Office of Bank of America at approximately 12:00 noon (London time) on the date two Business Days prior to the date as of which the foreign exchange settlement is made. "Standard Notice" shall mean an irrevocable notice substantially in the form of Exhibit L provided to the Administrative Agent on a Business Day which is: (a) At least two Business Day in advance in the case of selection of, conversion to or renewal of the CD Rate Option or prepayment of CD Rate Portion; (b) At least three Business Days in advance in the case of selection of, conversion to or renewal of the Euro-Rate Option or prepayment of any Euro-Rate Portion; (c) On the same Business Day in the case of selection of, conversion to or renewal of the Base Rate Option or prepayment of Base Rate Portion; and (d) On the same Business Day in the case of Swingline Advances. 13 22 Standard Notice must be provided no later than 9:00 a.m., Los Angeles time, on the last day permitted for such notice in the case of notices given pursuant to clauses (c) and (d) above, and no later than 10:00 a.m., Los Angeles time, on the last day permitted for such notice in the case of notices given pursuant to clauses (a) and (b) above. "Stock Payment" by any Person shall mean any dividend, distribution or payment of any nature (whether in cash, securities, or other property) on account of or in respect of any shares of the capital stock (or warrants, options or rights therefor) of such Person, including but not limited to any payment on account of the purchase, redemption, retirement, defeasance or acquisition of any shares of the capital stock (or warrants, options or rights therefor) of such Person, in each case regardless of whether required by the terms of such capital stock (or warrants, options or rights) or any other agreement or instrument. "Subsidiary" of a Person at any time shall mean any corporation of which a majority (by number of shares or number of votes) of any class of outstanding capital stock normally entitled to vote for the election of one or more directors (regardless of any contingency which does or may suspend or dilute the voting rights of such class) is at such time owned directly or indirectly, beneficially or of record, by such Person or one or more Subsidiaries of such Person, and any trust of which a majority of the beneficial interest is at such time owned directly or indirectly, beneficially or of record, by such Person or one or more Subsidiaries of such Person. "Subsidiary Guaranty Agreement" shall mean the agreement of a Subsidiary in the form of Exhibit H hereof whereby it acknowledges to become a party hereto as a Guarantor under Section 9 hereof. "Swingline Advance" shall have the meaning set forth in Section 2.05 hereof. "Swingline Advance Commitment" shall have the meaning set forth in Section 2.05 hereof. "Swingline Advance Committed Amount" shall have the meaning set forth in Section 2.05 hereof. "Swingline Advance Maturity Date" shall have the meaning set forth in Section 2.05 hereof. "Swingline Advance Participating Interest" shall have the meaning set forth in Section 2.05 hereof. "Swingline Lender" shall mean Bank of America and any Lender which is appointed as a successor Administrative Agent pursuant to Section 8.10 hereof. "Syndication Agent" shall mean First Union National Bank, in its capacity as Syndication Agent hereunder. "Taxes" shall have the meaning set forth in Section 2.16 hereof. "Total Revolving Credit Commitment" shall mean at any time, the aggregate Revolving Credit Committed Amounts of all Lenders hereunder at such time. "Transfer Effective Date" shall have the meaning set forth in the applicable Transfer Supplement. "Transfer Supplement" shall have the meaning set forth in Section 10.14(c) hereof. "Trust Preferred" shall mean 9% $175,000,000 Trust Preferred Securities of the Borrower issued on or about January 13, 1999. "Utilization Fee" is set forth in the definition of "Applicable Margin." "Voting Stock" shall mean, with respect to any corporation, the capital stock of such corporation having the power to vote for a majority of the board of directors of such corporation under ordinary circumstances. Section 1.02. Construction. Unless the context of this Agreement otherwise clearly requires, references to the plural include the singular, the singular the plural and the part the whole; "or" has the inclusive meaning represented by the phrase "and/or"; and "property" includes all properties and assets of any kind or nature, tangible or intangible, real, personal or mixed. References in this Agreement to "determination" (and similar terms) by any Agent or by any Lender include reasonable and good faith estimates by such Agent or by such Lender (in the case of quantitative determinations) and good faith beliefs by such Agent or by such Lender 14 23 (in the case of qualitative determinations). The words "hereof," "herein," "hereunder" and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. The section and other headings contained in this Agreement and the Table of Contents preceding this Agreement are for reference purposes only and shall not control or affect the construction of this Agreement or the interpretation thereof in any respect. Section, subsection and exhibit references are to this Agreement unless otherwise specified. Section 1.03. Accounting Principles. (a) As used herein, "GAAP" shall mean generally accepted accounting principles as such principles shall be in effect at the Relevant Date, subject to the provisions of this Section 1.03. As used herein, "Relevant Date" shall mean the date a relevant computation or determination is to be made or the date of relevant financial statements, as the case may be. (b) Except as otherwise provided in this Agreement, all computations and determinations as to accounting or financial matters shall be made, and all financial statements to be delivered pursuant to this Agreement shall be prepared, in accordance with GAAP (including principles of consolidation where appropriate), and all accounting or financial terms shall have the meanings ascribed to such terms by GAAP. (c) If any change in GAAP after the date of this Agreement is or shall be required to be applied to transactions then or thereafter in existence, and a violation of one or more provisions of this Agreement shall have occurred or in the opinion of the Borrower would likely occur which would not have occurred or be likely to occur if no change in accounting principles had taken place, (i) The parties agree that such violation shall not be considered to constitute an Event of Default or a Potential Default for a period of 60 days from the date the Borrower notifies the Administrative Agent of the application of this Section 1.03 (c); (ii) The parties agree in such event to negotiate in good faith an amendment of this Agreement which shall approximate to the extent possible the financial effect of the original financial covenants after taking into account such change in GAAP; and (iii) If the parties are unable to negotiate such an amendment within 60 days, the Borrower shall have the option of prepaying the Loans (subject to Section 2.14(b) hereof). If the Borrower does not exercise such option within said period, then as used in this Agreement, "GAAP" shall mean generally accepted accounting principles in effect at the Relevant Date. (d) If any change in GAAP after the date of this Agreement is required to be applied to transactions or conditions then or thereafter in existence, and the Administrative Agent shall assert that the effect of such change is or shall likely be to distort materially the effect of any of the definitions of financial terms in Article I hereof or any of the covenants of the Borrower in Article VI hereof (the "Financial Provisions"), so that the intended financial effect of any of the Financial Provisions will not in fact be accomplished, (i) The Administrative Agent shall notify the Borrower of such assertion, specifying the change in GAAP which is objected to, and until otherwise determined as provided below, the specified change in GAAP shall not be made by the Borrower in its financial statements for the purpose of applying the Financial Provisions; and (ii) The parties shall follow the procedures set forth in paragraph (ii) and the first sentence of paragraph (iii) of subsection (c) of this Section. If the parties are unable to agree on an amendment as provided in said paragraph (ii) and if the Borrower does not exercise the option set forth in the first sentence of said paragraph (iii) within the specified period, then as used in this Agreement "GAAP" shall mean generally accepted accounting principles in effect at the Relevant Date, except that the specified change in GAAP which is objected to by the Administrative Agent shall not be made in applying the Financial Provisions. (e) All expenses of compliance with this Section 1.03 shall be paid for by the Borrower upon demand. Section 1.04. Optional Increase of the Commitments. (a) The Borrower may from time to time increase the Total Revolving Credit Commitment by the addition of one or more new Lenders consented to by the 15 24 Administrative Agent and the LC Issuer or by the agreement of any existing Lender (a "Proposed Combined Commitments Increase") in the manner set forth below; provided that (i) the then Total Revolving Credit Commitment plus the Proposed Combined Commitments Increase shall not be greater than the $300,000,000; (ii) immediately prior to and after giving effect to the Proposed Combined Commitments Increase no event has occurred and is continuing that constitutes an Event of Default or Potential Default; (iii) the Borrower shall pay any costs payable under Section 2.14(b) if and to the extent any Loans are prepaid on the effective date of such increase (the "Increase Date"); (iv) to the extent the Other Credit Agreement is in effect, the Borrower must request the increase of the Total Revolving Credit Commitment under the Other Credit Agreement and such new or existing Lender consenting to the increase under this Agreement must also consent to the increase under the Other Credit Agreement at the same percentage; and (v) the Borrower may not request the increase of the Total Revolving Credit Commitment hereunder once the Borrower has reduced such Commitment under Section 2.02(c) hereof. (b) The Total Revolving Credit Commitment shall be increased by the Proposed Combined Commitments Increase on the Increase Date provided (i) each such new Lender shall execute and deliver to the Administrative Agent the Joinder to Revolving Credit Agreement (and by such execution and delivery, each such new Lender shall be deemed to have agreed with the matters set forth in this Agreement) and/or such existing Lender shall execute and deliver the Commitment Increase Supplement in the form of Exhibit K and (ii) the Administrative Agent shall have received on or before the Increase Date certified copies of the resolutions of the Board of Directors of the Borrower approving such increase of the Total Revolving Credit Commitment, and of all documents evidencing other necessary corporate action, if any, with respect to such increase. Upon satisfaction of the foregoing conditions, such new Lender shall become a Lender hereunder and/or such existing Lender's Commitment shall be increased, and the Administrative Agent shall, promptly following the effective date thereof, provide to the Borrower and the Lenders a revised Pro Rata shares giving effect thereto. The Borrower agrees that it shall execute and deliver upon request of such new or existing Lender, one or more Notes evidencing that such new or existing Lender's Pro Rata share. (c) If, after giving effect to the Proposed Combined Commitments Increase, any Lender's revised Pro Rata share of the Total Revolving Credit Commitment is different than its share of Obligations, the Obligations shall be reallocated among the Lenders as follows. On the Increase Date the Borrower shall be deemed to have prepaid all outstanding Revolving Credit Loans in accordance with Section 2.11 and reborrowed all Revolving Credit Loans in accordance with Section 2.01 from all Lenders ratably in accordance with their revised Pro Rata shares. Each Lender having a decreased Pro Rata share (a "Selling Lender") agrees to sell and assign to each other Lender (each a "Buying Lender"), and each Buying Lender hereby agrees to ratably purchase and assume, without recourse, from each Selling Lender, a ratable portion of each Selling Lender's Letter of Credit Obligations and Swingline Advance Participating Interest such that, after giving effect to such assignments, each Lender's share of all Obligations (except Competitive Bid Loans) equals its revised Pro Rata share. On the Increase Date, the Administrative Agent shall distribute to each Selling Lender an amount equal to the difference between its Revolving Credit Loans so prepaid and the new Revolving Credit Loans deemed to have been made by it (plus interest payable hereunder). Such payments shall be deemed to be a payment of the Revolving Credit Loans by the Borrower on the date such payment is received. The Selling Lender acknowledges and agrees to the maters set forth in Section 6(b) of the Transfer Supplement as to the Letter of Credit Obligations and Swingline Advance Participating Interest it has acquired. Interest and fees accruing on the Letter of Credit Obligations and Swingline Advance Participating Interest for the period prior to the Increase Date shall be for the account of each Selling Lender, and interest and fees accruing on the Letter of Credit Obligations and Swingline Advance Participating Interest for the period from and after the Increase Date shall be for the account of each Buying Lender. Section 1.05. Utilization of Commitments in Foreign Currencies. The Administrative Agent will determine the Dollar Equivalent with respect to any (i) borrowing of Eurocurrency Loans as of the requested borrowing date, (ii) Letter of Credit denominated in an Offshore Currency as of the Issuance Date, and (iii) outstanding Eurocurrency Currency Loans and Letter of Credit Obligations as of the last Business Day of each month provided, however, that (i) upon the occurrence and during the continuation of any Potential Default or Event of Default or (ii) for the purpose of calculating fees payable under this Agreement or for 16 25 other purposes, such determination shall be made as often as the Administrative Agent or the Required Lenders may reasonably deem necessary. ARTICLE II THE CREDITS Section 2.01. Revolving Credit Loans. (a) Revolving Credit Commitments. Subject to the terms and conditions and relying upon the representations and warranties herein set forth, each Lender, severally and not jointly, agrees (such agreement being herein called such Lender's "Revolving Credit Commitment") to make committed loans in Dollars (the "Revolving Credit Loans") to the Borrower from time to time on or after the date hereof and to but not including the Revolving Credit Maturity Date. A Lender shall have no obligation to make any Revolving Credit Loan to the extent that, upon the making of such Revolving Credit Loan, the sum of the aggregate principal amount of (i) such Lender's outstanding Revolving Credit Loans, (ii) such Lender's Pro Rata share of all outstanding Swingline Advances and (iii) such Lender's Pro Rata share of the Dollar Equivalent of Letter of Credit Obligations would exceed such Lender's Revolving Credit Committed Amount. No Revolving Credit Loans shall be made hereunder to the extent that such Revolving Credit Loans would cause the Dollar Equivalent of the sum of (i) the aggregate outstanding principal amount of all Loans outstanding hereunder and (ii) the Letter of Credit Obligations to exceed the Total Revolving Credit Commitment. Each Lender's "Revolving Credit Committed Amount" at any time shall be equal to the amount set forth as its "Initial Revolving Credit Committed Amount" below its name on the signature pages hereof, as such amount may have been reduced pursuant to Section 2.02(c) hereof at such time, subject to adjustment as provided in Sections 1.05 and 10.17 hereof and subject to transfer to another Lender as provided in Section 10.14 hereof. (b) Nature of Credit. Within the limits of time and amount set forth in this Section 2.01, and subject to the provisions of this Agreement, the Borrower may borrow, repay and reborrow Revolving Credit Loans hereunder. (c) Revolving Credit Notes. To the extent so requested by any Lender through the Administrative Agent, the obligation of the Borrower to repay the unpaid principal amount of the Revolving Credit Loans made to it by such Lender and to pay interest thereon shall be evidenced in part by promissory notes of the Borrower, one to such Lender, dated the Closing Date (the "Revolving Credit Notes") in substantially the form attached hereto as Exhibit A, with the blanks appropriately filled, payable to the order of such Lender in a face amount equal to such Lender's Initial Revolving Credit Committed Amount. (d) Maturity. To the extent not due and payable earlier, the Revolving Credit Loans shall be due and payable on the Revolving Credit Maturity Date. Section 2.02. Fees; Reduction of the Committed Amounts. (a) Facility Fee. The Borrower shall pay to the Administrative Agent for the account of each Lender a fee (the "Facility Fee") for each day from and including the date hereof and to but not including the Revolving Credit Maturity Date, on the amount of such Lender's Revolving Credit Committed Amount (whether used or unused) on such day (based upon a year of 365 or 366 days and actual days elapsed) at a rate per annum equal to the rate in effect for such day determined in accordance with the pricing grid set forth in the definition of "Applicable Margin". Facility Fees shall be due and payable for the preceding period for which such fees have not been paid on each Regular Payment Date and on the Revolving Credit Maturity Date. (b) Other Fees. The Borrower shall pay to each Agent an agency fee and other fees at the times and in the amounts previously agreed upon among the Agents and the Borrower. (c) Optional Reduction of the Revolving Credit Committed Amounts. The Borrower may at any time or from time to time reduce Pro Rata the Revolving Credit Committed Amounts of the Lenders to an aggregate amount (which may be zero) not less than the Dollar Equivalent of the sum of the unpaid principal amount of the Revolving Credit Loans, Swingline Advances and Competitive Bid Loans then outstanding plus the principal amount of all Revolving Credit Loans, Swingline Advances and Competitive Bid Loans not yet 17 26 made as to which notice has been given by Borrower under Section 2.07 hereof plus all Letter of Credit Obligations then outstanding plus the stated amount of all Letters of Credit not yet issued as to which notice has been given by Borrower under Section 2.06 hereof. Any reduction of the Revolving Credit Committed Amounts shall be in an aggregate amount not less than $10,000,000 which is an integral multiple of $1,000,000. Reduction of the Revolving Credit Committed Amounts shall be made by providing not less than two Business Days' notice (which notice shall be irrevocable) to such effect to the Administrative Agent. After the date specified in such notice the Facility Fee shall be calculated upon the Revolving Credit Committed Amounts as so reduced. The Administrative Agent will promptly send copies of such notice to the Lenders. (d) Bid Fees. In consideration of the Administrative Agent's management of bidding procedures for Competitive Bid Loans, the Borrower shall pay to the Administrative Agent for the Administrative Agent's own account on the date of each LIBOR Auction, CD Rate Auction, Base Rate Auction and Absolute Rate Auction, bid agency fees in the amount of $150 for each Competitive Bid Loan Quote submitted by each Lender, but in no event less than $450 per auction. (e) Letter of Credit Fee. The Borrower agrees to pay to the Administrative Agent for Pro Rata distribution to each Lender a fee in Dollars in respect of each Letter of Credit Issued hereunder (the "Letter of Credit Fee") for the period from and including the date of Issuance of such Letter of Credit to but not including the termination of such Letter of Credit, computed at a rate per annum equal to (i) in the case of Financial Letters of Credit, the Applicable Margin for the Euro-Rate Option, and (ii) in the case of Performance Letters of Credit, one-half (1/2) of the Applicable Margin for the Euro-Rate Option, as in effect from time to time on the Dollar Equivalent of the stated amount of such Letter of Credit. Accrued Letter of Credit Fees shall be due and payable in arrears on each Regular Payment Date and upon the first day on or after the termination of the Total Revolving Credit Commitment upon which no Letters of Credit remain outstanding. (f) Fronting Fee. The Borrower agrees to pay to the LC Issuer, for its account, a fronting fee in Dollars in respect of each Letter of Credit issued by the LC Issuer hereunder for the period from and including the date of Issuance of such Letter of Credit to but not including the termination of such Letter of Credit computed at a rate of 0.10% per annum on the Dollar Equivalent of the stated amount of such Letter of Credit. Such fee shall be due and payable in the same manner as the Letter of Credit Fee. (g) Administrative Charge. The Borrower agrees to pay to the LC Issuer, upon each drawing under, Issuance of, or amendment to, any Letter of Credit issued by the LC Issuer, such amount as shall at the time of such event be the standard administrative charge which the LC Issuer is generally imposing in connection with such occurrence with respect to letters of credit. Section 2.03. Competitive Bid Loans. (a) Making of Competitive Bid Loans. In addition to Revolving Credit Loans, the Borrower may, as set forth in this Section 2.03, request the Lenders to make offers to make one or more Competitive Bid Loans to the Borrower. Each Lender may, but shall have no obligation to, make one or more such offers and, subject to the terms and provisions hereof, the Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section 2.03. Competitive Bid Loans may be Base Rate Loans, CD Rate Loans, Absolute Rate Loans or LIBOR-based Loans (each a "type" of Competitive Bid Loan) and, subject to Section 2.03(r) hereof, may be in any freely available currency agreed upon by the Borrower and each Lender. Competitive Bid Loans shall be due and payable on the earlier of the Competitive Bid Expiration Date and the applicable Competitive Bid Loan Maturity Date. After giving effect to any borrowing of Competitive Bid Loans, the Dollar Equivalent of the sum of the aggregate principal amount of all Loans outstanding hereunder and the Letter of Credit Obligations shall not exceed the Total Revolving Credit Commitment at any time; provided, however, that the outstanding Competitive Bid Loans made by any Lender may exceed its Revolving Credit Committed Amount. The Competitive Bid Loans shall be deemed to utilize the Total Revolving Credit Commitment by an amount equal to the Dollar Equivalent of the aggregate outstanding principal amount thereof. (b) Competitive Bid Loan Quote Requests. When the Borrower wishes to request offers to make Competitive Bid Loans under this Section 2.03, it shall transmit to the Administrative Agent by telecopy, at 18 27 its Office, notice (a "Competitive Bid Loan Quote Request") so as to be received no later than 10:00 a.m., Los Angeles time on (x) the fourth Business Day prior to the date of borrowing proposed therein, in the case of a LIBOR Auction, (y) the third Business Day prior to the date of Borrowing proposed therein, in the case of a CD Rate Auction, or (z) the Business Day next preceding the date of borrowing proposed therein, in the case of a Base Rate Auction or Absolute Rate Auction (or, in any case, such other time as the Borrower and Administrative Agent may agree). The Borrower may request offers to make Competitive Bid Loans for different Interest Periods in a single notice; provided that the request for each separate Interest Period shall be deemed to be a separate Competitive Bid Loan Quote Request for a separate Competitive Bid Loan (all Competitive Bid Loans proposed to be made at one time herein collectively referred to as a "Competitive Bid Borrowing"). Each such notice shall be substantially in the form of Exhibit B hereto and in any case shall specify as to each Competitive Bid Borrowing: (i) The proposed date of such Competitive Bid Borrowing, which shall be a Business Day; (ii) The currency or currencies in which such Competitive Borrowing is to be made; (iii) The aggregate amount of such Competitive Bid Borrowing which shall be a Dollar Equivalent of at least $5,000,000 (or a higher integral multiple of $1,000,000) (to the extent practical in the case of Eurocurrency Loans), but shall not cause the limits specified in Section 2.04 hereof to be violated; (iv) The duration of the initial Interest Period or Periods applicable thereto, subject to the provisions of the definition of "Interest Period" (including without limitation that no such Interest Period shall end after the Competitive Bid Expiration Date); and (v) Whether the Competitive Bid Loan Quotes requested are to set forth a LIBOR-based Margin, a Base Rate Margin, a CD Rate Margin or an Absolute Rate. The Borrower may not request Competitive Bid Borrowings for more than three maturities nor request more than one type of Competitive Bid Loan in a single Competitive Bid Borrowing. Unless the Administrative Agent otherwise agrees, in its sole and absolute discretion, the Borrower may not submit a request for a Competitive Bid Borrowing if it has submitted another such request within the prior two Business Days. (c) Invitation for Competitive Bid Loan Quotes. The Administrative Agent shall promptly transmit to the Lenders by telecopy notice of such Competitive Bid Loan Request, which notice shall constitute an invitation by the Borrower to each Lender to submit Competitive Bid Loan Quotes offering to make Competitive Bid Loans in accordance with such Competitive Bid Loan Quote Request. No Competitive Bid Loan Request shall be given if such request could result in more than six Competitive Bid Loans being outstanding at any one time unless otherwise permitted by the Administrative Agent. (d) Submission and Contents of Competitive Bid Loan Quotes. (i) Each Lender may submit one or more Competitive Bid Loan Quotes, each containing an offer to make a Competitive Bid Loan in response to any Competitive Bid Loan Quote Request. Each Competitive Bid Loan Quote must comply with the requirements of this Section 2.03(d) and must be submitted to the Administrative Agent by telecopy at its Office not later than (x) 8:00 a.m., Los Angeles time on the third Business Day prior to the proposed date of borrowing, in the case of a LIBOR Auction or (y) 7:00 a.m., Los Angeles time on the proposed date of borrowing, in the case of a Base Rate Auction, CD Rate Auction or an Absolute Rate Auction (or, in either case upon reasonable notice to the Lenders, such other time and date as the Borrower and the Administrative Agent may agree); provided that any Competitive Bid Loan Quote submitted by the Administrative Agent (or an Affiliate of the Administrative Agent) in the capacity of a Lender may be submitted, and may only be submitted, if the Administrative Agent (or such Affiliate) notifies the Borrower of the terms of the offer or offers contained therein not later than (x) 7:30 a.m., Los Angeles time on the third Business Day prior to the proposed date of borrowing, in the case of a LIBOR Auction or (y) 6:30 a.m., Los Angeles time on the proposed date of borrowing, in the case of a Base Rate Auction, CD Rate Auction or an Absolute Rate Auction. Subject to Sections 2.14, 2.03(r) and 4.01 hereof, any Competitive Bid Loan Quote so made shall be 19 28 irrevocable except with the written consent of the Administrative Agent given on the written instructions of the Borrower. (ii) Each Competitive Bid Loan Quote shall be substantially in the form of Exhibit C hereto and shall in any case specify: (A) The proposed date of borrowing, the proposed currency and the Interest Period therefor; (B) The principal amount of the Competitive Bid Loan for which each such offer is being made, which principal amount shall be a Dollar Equivalent of at least $5,000,000 or a higher integral multiple of $1,000,000; provided that the aggregate principal amount of all Competitive Bid Loans for which a Lender submits Competitive Bid Loan Quotes (x) may be greater than, less than or equal to the Revolving Credit Committed Amount of such Lender but (y) may not exceed the principal amount of the Competitive Bid Borrowing for which offers were requested in the related Competitive Bid Loan Quote Request; (C) In the case of a LIBOR Auction, the margin above (or, if a negative margin is offered, below) the applicable LIBOR Rate (the "LIBOR-based Margin") offered for each such Competitive Bid Loan, expressed as a percentage (rounded upwards, if necessary, to the nearest 1/10,000th of 1%) to be added to the applicable LIBOR Rate; (D) In the case of a CD Rate Auction, the margin above (or, if a negative margin is offered, below) the applicable CD Rate (the "CD Rate Margin") offered for each such Competitive Bid Loan expressed as a percentage (rounded upward, if necessary, to the nearest 1/10,000th of 1%) to be added to the applicable CD Rate; (E) In the case of a Base Rate Auction, the margin above (or, if a negative margin is offered, below) the applicable Base Rate (the "Base Rate Margin") offered for each such Competitive Bid Loan, expressed as a percentage (rounded upward, if necessary, to the nearest 1/10,000th of 1%) to be added to the applicable Base Rate; (F) In the case of an Absolute Rate Auction, the rate of interest per annum, calculated on the basis of a 360-day year (rounded upwards, if necessary, to the nearest 1/10,000th of 1%) (the "Absolute Rate") offered for each such Competitive Bid Loan; and (G) The identity of the quoting Lender. (iii) No Competitive Bid Loan Quote shall contain qualifying, conditional or similar language or propose terms other than or in addition to those set forth in the applicable Competitive Bid Loan Quote Request and, in particular, no Competitive Bid Loan Quote may be conditioned upon acceptance by the Borrower of all (or some specified minimum) of the principal amount of the Competitive Bid Loan for which such Competitive Bid Loan Quote is being made, and the Administrative Agent shall disregard any Competitive Bid Loan Quote that contains such language or terms or conditions or that arrives at the Administrative Agent's Office after the time set forth for submission of Competitive Bid Loan Quotes in Section 2.03(d)(i) hereof. (e) Notice to the Borrower. The Administrative Agent shall (x) in the case of a LIBOR Auction, by 9:00 a.m., Los Angeles time on the day (which shall be a Business Day) a Competitive Bid Loan Quote is submitted or (y) in the case of a Base Rate Auction, CD Rate Auction or an Absolute Rate Auction, by 7:30 a.m., Los Angeles time on the day (which shall be a Business Day) a Competitive Bid Loan Quote is submitted, notify the Borrower by telecopy of the terms (i) of any Competitive Bid Loan Quote submitted by a Lender that is in accordance with Section 2.03(d) hereof and (ii) of any Competitive Bid Loan Quote that amends, modifies or is otherwise inconsistent with a previous Competitive Bid Loan Quote submitted by such Lender with respect to the same Competitive Bid Loan Quote Request. Any such subsequent Competitive Bid Loan Quote shall be disregarded by the Administrative Agent unless such subsequent Competitive Bid Loan Quote is submitted solely to correct a manifest error in such former Competitive Bid Loan Quote. The Administrative Agent's notice to the Borrower shall specify (A) the aggregate principal amount of each Competitive Bid Loan for which Competitive Bid Loan Quotes have been received for each Interest Period specified in the related Competitive Bid Loan Quote Request, (B) the respective principal amounts and 20 29 LIBOR-based Margins, CD Rate Margins, Base Rate Margins or Absolute Rates, as the case may be, so offered by each Lender, identifying the Lender that made each Competitive Bid Loan Quote and (C) if the Administrative Agent is notifying the Borrower of more than one Competitive Bid Loan Quote for a single Interest Period, the Administrative Agent shall arrange the Competitive Bid Loan Quotes in ascending yield order. (f) Acceptance and Notice by the Borrower. Not later than (x) 9:30 a.m., Los Angeles time on the third Business Day prior to the proposed date of the borrowing, in the case of a LIBOR Auction or (y) 8:00 a.m., Los Angeles time on the proposed date of the borrowing, in the case of a Base Rate Auction, CD Rate Auction or an Absolute Rate Auction (or, in either case upon reasonable prior notice to the Lenders, such other time and date as the Borrower and the Administrative Agent may agree), the Borrower shall notify the Administrative Agent by telecopy at its Office of its acceptance or nonacceptance of the Competitive Bid Loan Quotes so notified to it pursuant to Section 2.03(e) hereof (and the failure of the Borrower to give such notice by such time shall constitute nonacceptance) and the Administrative Agent shall promptly notify each affected Lender in accordance with Section 2.03(h) hereof. In the case of acceptance, such notice shall specify the aggregate principal amount of Competitive Bid Loan Quotes for each Interest Period that are accepted. The Borrower may accept one or more Competitive Bid Loan Quotes in whole or in part (provided that any Competitive Bid Loan Quote accepted in part shall be a Dollar Equivalent of at least $5,000,000 or a higher integral multiple of $1,000,000, to the extent practical in the case of Eurocurrency Loans); provided that: (i) The aggregate principal amount of each Competitive Bid Borrowing may not exceed the applicable amount set forth in the related Competitive Bid Loan Quote Request; (ii) The aggregate principal amount of each Competitive Bid Borrowing shall be a Dollar Equivalent of at least $5,000,000 (or a higher integral multiple of $1,000,000); (iii) Acceptance of offers may be made only in ascending yield order of LIBOR-based Margins, CD Rate Margins, Base Rate Margins or Absolute Rates, as the case may be; and (iv) The Borrower shall not accept any offer where the Administrative Agent has advised the Borrower that such offer fails to comply with Section 2.03(d)(ii) hereof or otherwise fails to comply with the requirements of this Agreement. (g) Allocation by Administrative Agent. If Competitive Bid Loan Quotes are made by two or more Lenders with the same LIBOR-based Margins, CD Rate Margins, Base Rate Margins or Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which Competitive Bid Loan Quotes are accepted for the related Interest Period, the principal amount of Competitive Bid Loans in respect of which such Competitive Bid Loan Quotes are accepted shall be allocated by the Administrative Agent among such Lenders as nearly as possible (in such multiples, not less than $500,000, as the Administrative Agent may deem appropriate) in proportion to the aggregate principal amount of such offers. If two or more such Competitive Bid Loan Quotes cannot be allocated evenly within the limits set forth in the immediately preceding sentence, the Administrative Agent shall have discretion to allocate a larger share of such Competitive Bid Loans to one or more of the successful Lenders and in making such allocation shall use reasonable efforts to take into account previous allocations of unequal shares to one or more of such Lenders in connection with other Competitive Bid Loans. Determinations by the Administrative Agent of the amounts of Competitive Bid Loans to be allocated to each such Lender shall be conclusive absent manifest error. (h) Notice to Lenders. On the date the Borrower notifies the Administrative Agent of its acceptance of one or more of the offers made by any Lender or Lenders pursuant to Section 2.03(f) hereof, the Administrative Agent shall promptly notify each Lender which has made an offer (i) of the aggregate amount of each Competitive Bid Borrowing with respect to which the Borrower accepted one or more Competitive Bid Loan Quotes and such Lender's share of such Competitive Bid Borrowing or (ii) that the Borrower accepted no offers, such notice to be by telecopy. (i) Funding of Competitive Bid Loans. Any Lender whose offer to make any Competitive Bid Loan has been accepted shall, not later than 11:00 a.m., Los Angeles time, on the date specified in the related 21 30 Competitive Bid Loan Quote Request for the making of such Competitive Bid Loan, make the amount of such Competitive Bid Loan available to the Borrower at the Administrative Agent's Office in immediately available funds. If any Lender makes a new Competitive Bid Loan hereunder on a day on which the Borrower is to repay all or any part of an outstanding Competitive Bid Loan from such Lender, such Lender shall apply the proceeds of its new Competitive Bid Loan to make such repayment and only an amount equal to the difference (if any) between the amount being borrowed and the amount being repaid shall be made available by such Lender to the Borrower as provided by this Section 2.03(i), or remitted by the Borrower to the Administrative Agent as provided in Section 2.14 hereof, as the case may be. (j) Competitive Bid Loan Maturity Dates. The principal amount of each Competitive Bid Loan shall be due and payable on the last day of the applicable Interest Period specified in the related Competitive Bid Loan Quote Request (the "Competitive Bid Loan Maturity Date"). (k) Competitive Bid Loan Interest Payment Dates. Interest on each Competitive Bid Loan shall be due and payable on the Competitive Bid Loan Maturity Date thereof and thereafter on demand at the rates provided for in Section 2.03(o), and if any Interest Period is longer than 90 days, also on each 90th day of such Interest Period. (1) Competitive Bid Record. The Administrative Agent shall maintain a record of the names and addresses of Lenders that have made Competitive Bid Loans and the principal amount of the Competitive Bid Loans owing to each Lender from time to time together with the Competitive Bid Loan Maturity Dates and interest rates applicable to each such Competitive Bid Loan, and other terms applicable thereto (the "Competitive Bid Record"). The entries in the Competitive Bid Record shall be prima facie evidence with respect to the entries therein. (m) Review of Competitive Bid Record. The Competitive Bid Record shall be available to the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (n) Interest Rates for Competitive Bid Loans. The outstanding principal amount of each Competitive Bid Loan shall bear interest for each day until due at the following rate or rates per annum: (i) For each LIBOR-based Loan, a rate per annum (computed on the basis of a year of 360 days and actual days elapsed) equal to the LIBO Rate applicable to the Interest Period therefor plus the LIBOR-based Margin quoted by the Lender making such Loan in the related Competitive Bid Loan Quote submitted in accordance with Section 2.03(d) hereof; (ii) For each Base Rate Loan, a rate per annum (computed on the basis of a year of 365 or 366 days and actual days elapsed) equal to the Base Rate as in effect from time to time plus the Base Rate Margin quoted by the Lender making such Loan in the related Competitive Bid Loan Quote submitted in accordance with Section 2.03(d) hereof; (iii) For each CD Rate Loan, a rate per annum (computed on the basis of a year of 360 days and actual days elapsed) equal to the CD Rate applicable to the Interest Period therefor plus the CD Rate Margin quoted by the Lender making such Loan in the related Competitive Bid Loan Quote submitted in accordance with Section 2.03(d) hereof; (iv) For each Absolute Rate Loan, a rate per annum (computed on the basis of a year of 360 days and actual days elapsed) equal to the Absolute Rate quoted by the Lender making such Loan in the related Competitive Bid Loan Quote submitted in accordance with Section 2.03(d) hereof. (o) Interest after Maturity for Competitive Bid Loans. After the principal amount of any Competitive Bid Loan shall have become due (by acceleration or otherwise), such Loan shall bear interest for each day until paid (before and after judgment) (i) until the Competitive Bid Loan Maturity Date of the applicable Interest Period of such Loan, at a rate per annum 2% above the rate applicable to such Loan prior to such Competitive Bid Loan Maturity Date and (ii) thereafter at a rate per annum determined in accordance with Section 2.15(b). 22 31 (p) Competitive Bid Notes. To the extent so requested by any Lender through the Administrative Agent, the obligation of the Borrower to repay the unpaid principal amount of any Competitive Bid Loans made by such Lender and to pay interest thereon shall be evidenced by a single promissory note of the Borrower (a "Competitive Bid Note") in substantially the form attached hereto as Exhibit D, with the blanks appropriately filled. The Competitive Bid Note payable to such Lender shall be dated the Closing Date, shall bear interest as provided in Section 2.03(n) or as otherwise provided herein, and shall be payable to the order of the Lender named as payee therein in a maximum face amount of the Total Revolving Credit Commitment. The Competitive Bid Note for such Lender shall be delivered, duly executed by the Borrower to the Administrative Agent at or prior to the funding of the first Competitive Bid Loan made by such Lender hereunder and the Administrative Agent shall promptly forward such Competitive Bid Note to such Lender. The outstanding principal amount of each Competitive Bid Loan evidenced by each Competitive Bid Note from time to time, the Competitive Bid Loan Maturity Date of such Competitive Bid Loan and the rate of interest and the amount of accrued and unpaid interest payable in respect thereof shall be determined from the records of the Administrative Agent, which shall be prima facie evidence with respect to the entries therein. In the event the holder of a Competitive Bid Note shall assign said Competitive Bid Note, it shall attach thereto a schedule, which shall be verified by the Administrative Agent, setting forth the then outstanding principal amount of each Competitive Bid Loan evidenced by such Competitive Bid Note and the Competitive Bid Loan Maturity Date thereof. (q) Payments. All payments to be made by the Borrower in Dollars in respect of any Competitive Bid Loan shall be payable at 11:00 a.m., Los Angeles time, on the day when due without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, and an action therefor shall immediately accrue, without setoff, counterclaim, withholding or other deduction of any kind or nature, except for payments to a Lender subject to a withholding deduction under Section 2.16(c) hereof. Such payments shall be made to the Administrative Agent at its Office in Dollars in funds immediately available at such Office. Any payment received by the Administrative Agent or such Lender after 11:00 a.m., Los Angeles time, on any day shall be deemed to have been received on the next succeeding Business Day. The Administrative Agent shall distribute to the Lenders all such payments received by it from the Borrower as promptly as practicable after receipt by the Administrative Agent. If and to the extent that the Administrative Agent has not forwarded to any Lender such Lender's share of any such payment on the same Business Day as such payment is received (or deemed received) from the Borrower, the Administrative Agent shall pay to such Lender interest on such amount at the Federal Funds Effective Rate for each day until such payment is made. All payments of any Competitive Bid Loans to be made in any currency other than Dollars shall be made by payment in that currency in immediately available and freely transferable funds by the time required by relevant local regulation and practice in the principal financial center in the country of such currency for value on the applicable payment date and such payment shall be due without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, and an action therefor shall immediately accrue, without setoff, counterclaim, withholding or other deduction of any kind or nature, except for payments to a Lender subject to a withholding deduction under Section 2.16(c) hereof. (r) Multiple Currency Option. (i) Competitive Bid Loans may be made in any currency requested by the Borrower and acceptable to the applicable Lender (each a "Eurocurrency Loan"). If Eurocurrency Loans are to be made or are made, the amount of such Loans shall be deemed to be, for purposes of determining utilization of Commitments and other provisions of this Agreement, equal to the Dollar Equivalent thereof. If the Dollar Equivalent of the sum of the all Eurocurrency Loans outstanding on the day of any such determination plus the outstanding Loans made in Dollars plus the Dollar Equivalent of all Letter of Credit Obligations exceeds the Total Revolving Credit Commitment as then in effect, the Administrative Agent shall immediately notify the Borrower and the Borrower shall prepay on the Business Day following such day Base Rate Loans and then, if necessary, Eurocurrency Loans to the extent required so that such aggregate unpaid amount will not exceed the Total Revolving Credit Commitment as then in effect; such prepayment being subject however to Section 2.14(b) hereof. The Borrower may designate the Loans to be prepaid by notice to the Administrative Agent before each such prepayment. 23 32 (ii) Changes in Law Rendering Eurocurrency Loans Unlawful. In the event that any change in Law or guideline or interpretation or application thereof should at any time make it unlawful for any Lender to make, maintain or fund its Eurocurrency Loans, such Lender shall promptly notify the Borrower and the Administrative Agent thereof. Thereupon, (i) the obligation of such Lender to make its Eurocurrency Loans shall, upon the later of the effectiveness of such event and the receipt of such notice, be suspended for the duration of such illegality, and (ii) the Borrower shall, on the applicable Competitive Bid Loan Maturity Date with respect to such Eurocurrency Loans (or, if later, on the last Competitive Bid Loan Maturity Date with respect to such Eurocurrency Loans to end prior to the effectiveness of such change) or, in any event, if such Lender so requests, on such earlier date as may be required by the relevant Law, prepay or repay such Eurocurrency Loans. Section 2.04. Maximum Aggregate Amount of Loans and Letters of Credit. No Revolving Credit Loan, Competitive Bid Loan, Swingline Advance or Letter of Credit shall be made, Issued or requested or permitted to remain outstanding hereunder if the making, Issuance or maintenance of such Loan or Letter of Credit would cause the Dollar Equivalent of the sum of the aggregate amount of all Loans to the Borrower outstanding hereunder and all Letter of Credit Obligations to exceed the Total Revolving Credit Commitment as then in effect. Section 2.05. Swingline Advances. (a) Swingline Advances. Subject to the terms and conditions set forth in this Agreement and relying upon the representations and warranties herein set forth, the Swingline Lender agrees (such agreement being herein called the "Swingline Advance Commitment") to make loans in Dollars (the "Swingline Advances") to the Borrower from time to time on or after the date hereof and to but not including the Revolving Credit Maturity Date. The Swingline Lender shall have no obligation to make any Swingline Advance to the extent that (i) the aggregate principal amount of Swingline Advances at any time outstanding would exceed the Swingline Advance Committed Amount at such time, or (ii) the Dollar Equivalent of the sum of the principal amount of all outstanding Loans plus all Letter of Credit Obligations would exceed the Total Revolving Credit Commitment, or (iii) an Event of Default has occurred and is continuing, unless otherwise consented by the Required Lenders. The Swingline Lender's "Swingline Advance Committed Amount" shall be equal to $10,000,000. Swingline Advances may be requested by the Borrower in any principal amount up to the Swingline Advance Committed Amount. The Swingline Lender shall have no obligation to make any Swingline Advance to the extent that doing so would cause the aggregate amount of (i) its outstanding Revolving Credit Loans and (ii) its Pro Rata share of (x) the Dollar Equivalent of the Letter of Credit Obligations and (y) Swingline Advances to exceed its Revolving Credit Committed Amount. Unless notified to the contrary by the Swingline Lender, borrowings of the Swingline Advances may be made in a minimum amount of $100,000 and multiples of $25,000 in excess thereof upon telephonic request made to the Swingline Lender not later than 9:00 a.m., Los Angeles time, on the Business Day of the requested borrowing. Promptly after receipt of such a request for borrowing, the Swingline Lender shall obtain telephonic verification from the Administrative Agent that, giving effect to such request, availability for Swingline Advances will exist under Section 2.05(a) (and such verification shall be promptly confirmed in writing by telecopier). Unless notified to the contrary by the Swingline Lender, each repayment of a Swingline Advance shall be in an amount which is an integral multiple of $25,000. If the Borrower instructs the Swingline Lender to debit its demand deposit account at the Swingline Lender in the amount of any payment with respect to a Swingline Advance, or the Swingline Lender otherwise receives repayment, after 1:00 p.m., Los Angeles time, on a Business Day, such payment shall be deemed received on the next Business Day. The Swingline Lender shall promptly notify the Administrative Agent of the outstanding Swingline Advances each time there is a change therein. (b) Nature of Credit. Within the limits of time and amount set forth in this Section 2.05, and subject to the provisions of this Agreement, the Borrower may borrow, repay and reborrow Swingline Advances hereunder. (c) Swingline Advance Note. To the extent requested by the Swingline Lender, the obligation of the Borrower to repay the unpaid principal amount of the Swingline Advances made to it by the Swingline Lender 24 33 and to pay interest thereon shall be evidenced in part by a promissory note of the Borrower to the Swingline Lender, dated the Closing Date (the "Swingline Advance Notes") in substantially the form attached hereto as Exhibit E, with the blanks appropriately filled, payable to the order of the Swingline Lender in a face amount equal to $10,000,000. (d) Maturity. To the extent not due and payable earlier, each Swingline Advance shall be due and payable on the earlier of (i) the seventh day after such Swingline Advance is made to the Borrower hereunder or (ii) the Revolving Credit Maturity Date. (e) Interest Rate. The Borrower shall pay interest on the unpaid principal amount of each Swingline Advance from the date of such Advance until such principal amount is paid in full, payable on such dates, not more frequently than monthly, as may be specified by the Swingline Lender and in any event on the Revolving Credit Maturity Date, at a fluctuating interest rate per annum equal to the Base Rate in effect from time to time; provided, however, that during any period in which an Event of Default has occurred and is continuing (but only so long as such Event of Default is continuing), the Borrower shall pay interest on the unpaid principal amount of each Swingline Advance made to it, payable from the date such Event of Default occurs and upon written demand by the Swingline Lender to the Borrower, at the rate determined in accordance with Section 2.15(b)(ii). The Swingline Lender shall be responsible for invoicing the Borrower for such interest. (f) Swingline Advance Participating Interests. (i) Generally. At the discretion of the Swingline Lender at any time, on one Business Day's notice to each Lender, the Swingline Lender may require each other Lender to purchase, acquire, accept and assume from the Swingline Lender, without recourse to, or representation or warranty by, the Swingline Lender, an undivided interest, in a proportion equal to such Lender's Pro Rata share, in all of the Swingline Lender's rights and obligations in, to or under the Swingline Lender's outstanding Swingline Advances, together with accrued and unpaid interest thereon (such interest of each Lender being referred to herein as a "Swingline Advance Participating Interest"). On the date that any Purchasing Lender becomes a party to this Agreement in accordance with Section 10.14 hereof, Swingline Advance Participating Interests in any outstanding Swingline Advances held by the Lender from which such Purchasing Lender acquired its interest hereunder shall be proportionately reallotted between such Purchasing Lender and such transferor Lender (and, to the extent such transferor Lender is the Swingline Lender, the Purchasing Lender shall be deemed to have acquired a Swingline Advance Participating Interest from such transferor Lender to such extent). (ii) Obligations Absolute. Notwithstanding any other provision hereof, each Lender hereby agrees that its obligation to participate in each Swingline Advance issued in accordance herewith, and its obligation to make the payments specified in Section 2.05(f)(iii) hereof, are each absolute, irrevocable and unconditional and shall not be affected by any event, condition or circumstance whatever. The failure of any Lender to make any such payment shall not relieve any other Lender of its funding obligation hereunder on the date due, but no Lender shall be responsible for the failure of any other Lender to meet its funding obligations hereunder. (iii) Payment by Lenders on Account of Swingline Advances. If the Swingline Lender desires to sell Swingline Advance Participating Interests to the Lenders, the Swingline Lender will promptly notify the Administrative Agent thereof (which notice may be by telephone), and the Administrative Agent shall forthwith notify each Lender (which notice may be by telephone promptly confirmed in writing) thereof. No later than the Administrative Agent's close of business on the date such notice is given by the Administrative Agent (if such notice is given by the Administrative Agent before 9:00 a.m., Los Angeles time on such date), each such Lender will pay to the Administrative Agent, for the account of the Swingline Lender, in immediately available funds, an amount equal to such Lender's Pro Rata share of the outstanding principal amount of the Swingline Advances and accrued and unpaid interest thereon. If and to the extent that any Lender fails to make such payment to the Swingline Lender on such date, such Lender shall pay such amount on demand, together with interest, for the Swingline Lender's own account, for each day from and including the date of the Swingline Lender's payment to and including the date of repayment to the Swingline Lender (before and after judgment) following rates per annum: (x) for each day from and including the date of such payment by the Swingline Lender to and including the second Business Day thereafter, at the Federal Funds 25 34 Effective Rate for such day, and (y) for each day thereafter, at the rate applicable to the Swingline Advances for such day. (iv) Distributions to Participants. If, at any time, after the Swingline Lender has made a Swingline Advance and has received from any Lender such Lender's share of such Swingline Advance, and the Swingline Lender receives any payment or makes any application of funds on account of such Swingline Advance, the Swingline Lender will pay on the same day as received or deemed to be received to the Administrative Agent, for the account of such Lender, such Lender's ratable share of such payment. (v) Rescission. If any amount received by the Swingline Lender on account of any Swingline Advance or interest thereon shall be avoided, rescinded or otherwise returned or paid over by the Swingline Lender for any reason at any time, whether before or after the termination of this Agreement (or the Swingline Lender believes in good faith that such avoidance, rescission, return or payment is required, whether or not such matter has been adjudicated), each such Lender will, promptly upon notice from the Administrative Agent or the Swingline Lender, pay over to the Administrative Agent for the account of the Swingline Lender its ratable share of such amount. (vi) Equalization. If any Lender receives any payment or makes any application on account of its Swingline Advance Participating Interest, such Lender shall forthwith pay over to the Swingline Lender, in Dollars and in like kind of funds received or applied by it the amount in excess of such Lender's ratable share of the amount so received or applied. Section 2.06. Letters of Credit. Section 2.06.01. Letter of Credit Sublimit. (a) On the terms and conditions set forth herein (i) the LC Issuer agrees, (A) from time to time on any Business Day during the period from the Closing Date to the Revolving Commitment Maturity Date to Issue Letters of Credit for the account of the Borrower, and to amend or renew Letters of Credit previously Issued by it, in accordance with Sections 2.06.02(c) and 2.06.02(d), and (B) to honor properly drawn drafts under the Letters of Credit Issued by it; and (ii) the Lenders severally agree to participate in Letters of Credit Issued for the account of the Borrower; provided that the LC Issuer shall not be obligated to Issue, and no Lender shall be obligated to participate in, any Letter of Credit if as of the date of Issuance of such Letter of Credit (the "Issuance Date") (1) the Dollar Equivalent of the sum of (i) all Letter of Credit Obligations plus (ii) the principal amount of all outstanding Loans exceeds the Total Revolving Credit Commitment or (2) if such Letter of Credit is a Financial Letter of Credit, the Dollar Equivalent of all Letter of Credit Obligations with respect to the Financial Letters of Credit exceed the Financial Letter of Credit Sublimit or (3) if such Letter of Credit is a Performance Letter of Credit, the Dollar Equivalent of all Letter of Credit Obligations with respect to the Performance Letters of Credit exceed the Performance Letter of Credit Sublimit or (4) the participation of any Lender in all Letter of Credit Obligations (in the amount of the Dollar Equivalent thereof) and in the Swingline Advances plus the Revolving Credit Loans made by such Lender exceed such Lender's Revolving Credit Commitment. Letters of Credit may be Issued in Dollars or Offshore Currencies. Within the foregoing limits, and subject to the other terms and conditions hereof, the Borrower's ability to obtain Letters of Credit shall be fully revolving, and, accordingly, the Borrower may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit which have expired or which have been drawn upon and reimbursed. (b) The LC Issuer shall not be under any obligation to Issue any Letter of Credit if: (i) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the LC Issuer from Issuing such Letter of Credit, or any Law applicable to the LC Issuer or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the LC Issuer shall prohibit, or request that the LC Issuer refrain from, the Issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the LC Issuer with respect to such Letter of Credit any restriction, reserve or capital requirement (for which the LC Issuer is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon the LC Issuer any unreimbursed loss, cost or expense which was not 26 35 applicable on the Closing Date and which the LC Issuer in good faith deems material to it and for which the LC Issuer is not otherwise compensated hereunder; or (ii) such Letter of Credit is not otherwise in form and substance reasonably acceptable to the LC Issuer, or the Issuance of such Letter of Credit shall violate any applicable policies of the LC Issuer. (c) The LC Issuer shall not Issue any Letter of Credit if: (i) the LC Issuer has received written notice from any Lender, the Administrative Agent or the Borrower, on or prior to the Business Day prior to the requested date of Issuance of such Letter of Credit, that one or more of the applicable conditions contained in Article IV is not then satisfied; (ii) the expiry date or any renewed or extended expiry date of such Letter of Credit is later than 25 days prior to the Revolving Commitment Maturity Date, unless all of the Lenders have approved such expiry date in writing; or (iii) such Letter of Credit is denominated in a currency other than Dollars or an Offshore Currency. Section 2.06.02. Issuance, Amendment and Renewal of Letters of Credit. (a) Each Letter of Credit shall be issued upon the written request of the Borrower received by the LC Issuer and the Administrative Agent at least (A) in the case of an Offshore Currency denominated Letter of Credit, six Business Days or (B) in the case of a Dollar denominated Letter of Credit, four Business Days (or, in either case, such shorter time as the LC Issuer and the Administrative Agent may agree in a particular instance in their sole discretion) prior to the proposed Issuance Date. Each such request for issuance of a Letter of Credit shall be by facsimile, confirmed promptly in an original writing, in the form of a Letter of Credit Application, and shall specify in form and detail reasonably satisfactory to the LC Issuer: (i) the proposed date of issuance (which shall be a Business Day), the face amount and currency of the Letter of Credit; (ii) the expiry date of such Letter of Credit; (iii) the name and address of the beneficiary thereof; (iv) the documents to be presented by the beneficiary of such Letter of Credit in case of any drawing thereunder; (v) the full text of any certificate to be presented by the beneficiary in case of any drawing thereunder; and (vi) such other matters as the LC Issuer may require. If a Letter of Credit is requested to be denominated in an Offshore Currency, the Administrative Agent shall promptly notify each Lender thereof. Such Letter of Credit shall not be issued if the LC Issuer notifies the Administrative Agent that it has determined that it cannot pay under a Letter of Credit denominated in such Offshore Currency. (b) At least two Business Days prior to the Issuance Date of any Letter of Credit, the LC Issuer will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has received a copy of the Letter of Credit Application or Letter of Credit Amendment Application from the Borrower and, if not, the LC Issuer will provide the Administrative Agent with a copy thereof. If and only if the Administrative Agent notifies the LC Issuer on or before the Business Day immediately preceding the proposed date of Issuance of a Letter of Credit that the LC Issuer may Issue such Letter of Credit, then, subject to the terms and conditions hereof, the LC Issuer shall, on the requested date, Issue such Letter of Credit for the account of the Borrower in accordance with the LC Issuer's usual and customary business practices. The Administrative Agent shall not give such notice if the Administrative Agent has knowledge that (A) such Issuance is not then permitted under Section 2.06.01(a) as a result of the limitations set forth in clause (1), (2), (3) or (4) thereof or (B) the LC Issuer has received a notice described in Section 2.06.01(c)(i). The Administrative Agent will promptly notify the Lenders of any Letter of Credit Issuance hereunder. (c) From time to time while a Letter of Credit is outstanding and prior to the Revolving Commitment Maturity Date, the LC Issuer will, upon the written request of the Borrower received by the LC Issuer (with a copy sent by the Borrower to the Administrative Agent) at least four Business Days (or such shorter time as the LC Issuer and the Administrative Agent may agree in a particular instance in their sole discretion) prior to the proposed date of amendment, amend any Letter of Credit issued by it, subject to approval thereof by the Administrative Agent. Each such request for amendment of a Letter of Credit shall be made by facsimile, confirmed promptly in an original writing, made in the form of a Letter of Credit Amendment Application and shall specify in form and detail reasonably satisfactory to the LC Issuer: (i) the Letter of Credit to be 27 36 amended; (ii) the proposed date of amendment of such Letter of Credit (which shall be a Business Day); (iii) the nature of the proposed amendment; and (iv) such other matters as the LC Issuer may reasonably require. The LC Issuer shall have no obligation to amend any Letter of Credit if the LC Issuer would have no obligation at such time to Issue such Letter of Credit in its amended form under the terms of this Agreement. The LC Issuer shall not amend any Letter of Credit if: (A) the LC Issuer would not be permitted to Issue such Letter of Credit in its amended form under the terms of this Agreement; or (B) the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit. (d) The LC Issuer and the Lenders agree that, while a Letter of Credit is outstanding and prior to the Revolving Commitment Maturity Date, at the option of the Borrower and upon the written request of the Borrower received by the LC Issuer (with a copy sent by the Borrower to the Administrative Agent) at least four Business Days (or such shorter time as the LC Issuer and the Administrative Agent may agree in a particular instance in their sole discretion) prior to the proposed date of notification of renewal, the LC Issuer shall be entitled, with the approval of the Administrative Agent, to authorize the renewal of any Letter of Credit issued by it. Each such request for renewal of a Letter of Credit shall be made by facsimile, confirmed promptly in an original writing, in the form of a Letter of Credit Amendment Application, and shall specify in form and detail reasonably satisfactory to the LC Issuer: (i) the Letter of Credit to be renewed; (ii) the proposed date of renewal of such Letter of Credit (which shall be a Business Day); (iii) the revised expiry date of such Letter of Credit (which, unless all Lenders otherwise consent in writing, shall be prior to the Revolving Commitment Maturity Date); and (iv) such other matters as the LC Issuer may reasonably require. The LC Issuer shall be under no obligation to renew any Letter of Credit if the LC Issuer would have no obligation at such time to Issue or amend such Letter of Credit in its renewed form under the terms of this Agreement. The LC Issuer shall not renew any Letter of Credit if: (A) the LC Issuer would not be permitted to Issue or amend such Letter of Credit in its renewed form under the terms of this Agreement; or (B) the beneficiary of such Letter of Credit does not accept the proposed renewal of such Letter of Credit. If any outstanding Letter of Credit shall provide that it shall be automatically renewed unless the beneficiary thereof receives notice from the LC Issuer that such Letter of Credit shall not be renewed, and if at the time of renewal the LC Issuer would be entitled to authorize the renewal of such Letter of Credit in accordance with this Section 2.06.02(d) upon the request of the Borrower but the LC Issuer shall not have received any Letter of Credit Amendment Application from the Borrower with respect to such renewal or other written direction by the Borrower with respect thereto, and the LC Issuer shall not have received notice from the Administrative Agent that such Letter of Credit shall not be renewed, the LC Issuer shall allow such Letter of Credit to renew, and the Borrower and the Lenders hereby authorize such renewal, and, accordingly, the LC Issuer shall be deemed to have received a Letter of Credit Amendment Application from the Borrower requesting such renewal. (e) The LC Issuer may, at its election (or as required by the Administrative Agent at the direction of the Required Lenders), deliver any notices of termination or other communications to any applicable Letter of Credit beneficiary or transferee, and take any other action as necessary or appropriate, at any time and from time to time, in order to cause the expiry date of such Letter of Credit to be a date not later than the Revolving Commitment Maturity Date. (f) This Agreement shall control in the event of any conflict with any Letter of Credit Related Document (other than any Letter of Credit). (g) The LC Issuer will deliver to the Administrative Agent, concurrently or promptly following its delivery of a Letter of Credit, or amendment to or renewal of a Letter of Credit, to the Borrower, an advising bank or a beneficiary, a true and complete copy of such Letter of Credit or amendment to or renewal of a Letter of Credit. Section 2.06.03. Risk Participations, Drawings and Reimbursements. (a) Immediately upon the Issuance of each Letter of Credit, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the LC Issuer a participation in such Letter of Credit and each drawing thereunder in an amount equal to the product of (i) such Lender's Pro Rata share times (ii) the maximum amount available to be drawn under such Letter of Credit and the amount of such drawing, respectively. 28 37 (b) In the event of any request for a drawing under a Letter of Credit by the beneficiary or transferee thereof, the LC Issuer will promptly notify the Borrower and the Administrative Agent. The Borrower shall reimburse the LC Issuer prior to 12:00 noon (Los Angeles time), (i) on each date on which any amount is paid by the LC Issuer under any applicable Letter of Credit (each such date, an "Honor Date"), in Dollars in the Dollar Equivalent of an amount equal to the amount so paid by the LC Issuer, if the Administrative Agent notifies the Borrower on or prior to the Business Day preceding the Honor Date that the payment under such Letter of Credit will be made on the Honor Date and (ii) on the Business Day following the Honor Date, in Dollars in the Dollar Equivalent of an amount equal to the amount so paid by the LC Issuer, plus interest thereon at the Base Rate (plus Applicable Margin for the Base Rate Option) from and including the Honor Date to but excluding the date of such reimbursement, if the Administrative Agent notifies the Borrower on the Honor Date that the payment under such Letter of Credit is required on the Honor Date. If the Borrower fails to reimburse the LC Issuer for the full amount of any drawing under any Letter of Credit by 12:00 noon (Los Angeles time) on the Business Day on which such reimbursement is required as set forth above, the LC Issuer will promptly notify the Administrative Agent and the Administrative Agent will promptly notify each Lender and the Borrower thereof, and the Borrower shall be deemed to have requested that Revolving Credit Loans bearing interest at the Base Rate (plus the Applicable Margin for Base Rate Option) in the principal amount equal to the Dollar Equivalent of such drawing be made by the Lenders to be disbursed on such Business Day, subject to the amount of the unutilized portion of the Revolving Credit Commitments and subject to the conditions set forth in Section 4.02 (other than clause (a) thereof). Any notice given by the LC Issuer or the Administrative Agent pursuant to this Section 2.06.03(b) may be oral if promptly confirmed in writing (including by facsimile); provided that the lack of such prompt confirmation shall not affect the conclusiveness or binding effect of such notice. (c) Each Lender shall upon any notice pursuant to Section 2.06.03(b) make available to the Administrative Agent for the account of the LC Issuer an amount in Dollars and in immediately available funds equal to its Pro Rata share of the Dollar Equivalent of the amount of the drawing with respect to a Letter of Credit, whereupon the participating Lenders shall (subject to Section 2.06.03(d)) each be deemed to have made a Revolving Credit Loan bearing interest at the Base Rate (plus the Applicable Margin for Base Rate Option) to the Borrower in such amount. If any Lender so notified fails to make available to the Administrative Agent for the account of the LC Issuer the amount of such Lender's Pro Rata share of the amount of such drawing by no later than 3:00 p.m. (Los Angeles time) on the Business Day on which it received such notice pursuant to Section 2.06.03(b), then interest shall accrue on such Lender's obligation to make such payment, from such Business Day to the date such Lender makes such payment, at a rate per annum equal to the Federal Funds Effective Rate in effect from time to time during such period. The Administrative Agent will promptly give notice of the occurrence of the Honor Date, but failure of the Administrative Agent to give any such notice on the Honor Date or in sufficient time to enable any Lender to effect such payment on such date shall not relieve such Lender from its obligations under this Section 2.06.03. (d) With respect to any unreimbursed drawing that is not converted into Revolving Credit Loans bearing interest at the Base Rate (plus the Applicable Margin for Base Rate Option) in whole or in part, because of the Borrower's failure to satisfy the conditions set forth in Section 4.02 (other than clause (a) thereof) or for any other reason, the Borrower shall be deemed to have incurred from the LC Issuer a Letter of Credit Borrowing in Dollars in the Dollar Equivalent of the amount of such drawing, which Letter of Credit Borrowing shall be due and payable on demand (together with interest) and shall bear interest at a rate per annum equal to the Base Rate plus the Applicable Margin for Base Rate Option (and after notice from the LC Issuer) plus 2% per annum, and each Lender's payment to the LC Issuer pursuant to Section 2.06.03(c) with respect to a Letter of Credit shall be deemed payment in respect of its participation in such Letter of Credit Borrowing and shall constitute a Letter of Credit Advance from such Lender in satisfaction of its participation obligation under this Section 2.06.03. (e) Each Lender's obligation in accordance with this Agreement to make Revolving Credit Loans or Letter of Credit Advances, as contemplated by this Section 2.06.03, as a result of a drawing under a Letter of Credit, shall be absolute and unconditional and without recourse to the LC Issuer and shall not be affected by any circumstance, including (i) any set-off, counterclaim, recoupment, defense or other right which such 29 38 Lender may have against the LC Issuer, the Borrower or any other Person for any reason whatsoever, (ii) the occurrence or continuance of a Potential Default, an Event of Default or a Material Adverse Effect or (iii) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing; provided that each Lender's obligation to make Revolving Credit Loans with respect to Letters of Credit under this Section 2.06.03 is subject to the conditions set forth in Section 4.02 (other than clause (a) thereof). Section 2.06.04. Repayment of Participations. (a) Upon (and only upon) receipt by the Administrative Agent for the account of the LC Issuer of immediately available funds from the Borrower (i) in reimbursement of any payment made by the LC Issuer under a Letter of Credit with respect to which any Lender has paid the Administrative Agent for the account of the LC Issuer for such Lender's participation in such Letter of Credit pursuant to Section 2.06.03 or (ii) in payment of interest thereon, the Administrative Agent will promptly pay to each Lender, in like funds as those received by the Administrative Agent for the account of the LC Issuer, the amount of such Lender's Pro Rata share of such funds, and the LC Issuer shall receive the amount of the Pro Rata share of such funds of any Lender that did not so pay the Administrative Agent for the account of the LC Issuer. (b) If the Administrative Agent or the LC Issuer is required at any time to return to the Borrower, or to a trustee, receiver, liquidator or custodian, or to any official in any insolvency proceeding, any portion of any payment made by the Borrower to the Administrative Agent for the account of the LC Issuer pursuant to Section 2.06.04(a) in reimbursement of a payment made under a Letter of Credit or interest or fee thereon, to the extent any Lender received its Pro Rata share of such amount pursuant to Section 2.06.04(a), such Lender shall, on demand of the Administrative Agent, forthwith return to the Administrative Agent or the LC Issuer the amount of its Pro Rata share of any amount so returned by the Administrative Agent or the LC Issuer together with interest thereon from the date such demand is made to the date such amount is returned by such Lender to the Administrative Agent or the LC Issuer, at a rate per annum equal to the Federal Funds Effective Rate in effect from time to time. Section 2.06.05. Role of the LC Issuer. (a) Each Lender and the Borrower agree that, in paying any drawing under a Letter of Credit, the LC Issuer shall not have any responsibility to obtain any document (other than any sight draft and certificate expressly required by such Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document. (b) No Agent, LC Issuer nor any of their respective correspondents, participants or assignees shall be liable to any Lender for: (i) any action taken or omitted in connection herewith at the request or with the approval of the Lenders (including the Required Lenders, as applicable); (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; or (iii) the due execution, effectiveness, validity or enforceability of any Letter of Credit Related Document. (c) The Borrower hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided that this assumption is not intended to, and shall not, preclude the Borrower's pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under this Agreement or any other agreement. Neither the Agents, LC Issuer, the Lenders nor any of their respective correspondents, participants or assignees shall be liable or responsible for any of the matters described in clauses (i) through (vii) of Section 2.06.06; provided that, anything in such clauses to the contrary notwithstanding, the Borrower may have a claim against the LC Issuer, and such LC Issuer may be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by the Borrower which the Borrower proves were caused by the LC Issuer's willful misconduct, gross negligence or bad faith or the LC Issuer's bad faith, willful or grossly negligent failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of such Letter of Credit. In furtherance and not in limitation of the foregoing: (i) the LC Issuer may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary; and (ii) the LC Issuer shall not be responsible for the validity or sufficiency of any instrument transferring or 30 39 assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason. Section 2.06.06. Obligations Absolute. The obligations of the Borrower under this Agreement and any Letter of Credit Related Document to reimburse the LC Issuer for a drawing under a Letter of Credit, and to repay any Letter of Credit Borrowing and any drawing under a Letter of Credit converted into Revolving Credit Loans, shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement and each such other Letter of Credit Related Document under all circumstances, including the following: (i) any lack of validity or enforceability of this Agreement or any Letter of Credit Related Document; (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the obligations of the Borrower in respect of any Letter of Credit or any other amendment or waiver of or any consent to departure from all or any of the Letter of Credit Related Documents; (iii) the existence of any claim, counterclaim, set-off, recoupment, defense or other right that the Borrower may have at any time against any beneficiary or any transferee of any Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), the LC Issuer or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by the Letter of Credit Related Documents or any unrelated transaction; (iv) any draft, demand, certificate or other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any Letter of Credit; (v) any payment by the LC Issuer under any Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; or any payment made by the LC Issuer under any Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of any Letter of Credit, including any arising in connection with any insolvency proceeding; (vi) any exchange, release or non-perfection of any collateral, or any release or amendment or waiver of or consent to departure from any guarantee, for all or any of the obligations of the Borrower in respect of any Letter of Credit; or (vii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower or a guarantor. Section 2.06.07. Cash Collateral Pledge. If any Letter of Credit remains outstanding and partially or wholly undrawn as of the Revolving Credit Maturity Date or the expiration or termination of the Total Revolving Credit Commitment, then the Borrower shall immediately Cash Collateralize the Letter of Credit Obligations in an amount equal to the maximum amount then available to be drawn under all Letters of Credit. Section 2.06.08. Uniform Customs and Practice. The Uniform Customs and Practice for Documentary Credits as published by the International Chamber of Commerce most recently at the time of Issuance of any Letter of Credit or the International Standby Practice 1998 (selected by the LC Issuer at its discretion at the time of Issuance thereof) shall (unless otherwise expressly provided in such Letter of Credit) apply to each Letter of Credit. Section 2.07. Making of Loans. Whenever the Borrower desires that the Lenders make Revolving Credit Loans or the Swingline Lender make Swingline Advances, the Borrower shall provide Standard Notice 31 40 to the Administrative Agent setting forth the following information (a separate notice being required for each such type of Loans): (a) Whether the proposed Loans are Revolving Credit Loans or Swingline Advances; (b) The date, which shall be a Business Day, on which such proposed Loans are to be made; (c) In the case of proposed Revolving Credit Loans, the aggregate principal amount of such proposed Loans, which shall be the sum of the principal amounts selected pursuant to clause (e) of this Section 2.07, and, except as provided in Section 2.06.03, which shall be at least $5,000,000 and integral multiples of $1,000,000 in excess thereof; (d) In the case of proposed Swingline Advances, the aggregate principal amount of such proposed Swingline Advances, which shall be at least $100,000 and integral multiples of $25,000 in excess thereof; (e) In the case of proposed Revolving Credit Loans, the interest rate Option or Options selected in accordance with Section 2.08(a) hereof and the principal amounts selected in accordance with Section 2.08(d) hereof of the Base Rate Portion and each Funding Segment of the CD Rate Portion and the Euro-Rate Portion, as the case may be, of such proposed Loans; and (f) In the case of proposed Revolving Credit Loans, with respect to each such Funding Segment of such proposed Loans, the Funding Period to apply to such Funding Segment, selected in accordance with Section 2.08(c) hereof. Standard Notice having been so provided, the Administrative Agent shall promptly notify each Lender of the information contained therein and of the amount of such Lender's Loan, calculated in accordance with Section 2.13. Unless any applicable condition specified in Article IV hereof has not been satisfied, on the date specified in such Standard Notice each Lender shall make the proceeds of its Loan available to the Administrative Agent at the Administrative Agent's Office, no later than 11:00 a.m., Los Angeles time, in funds immediately available at such Office. The Administrative Agent will make the funds so received available to the Borrower in funds immediately available at the Administrative Agent's Office. If and to the extent that the Administrative Agent does not make such funds available to the Borrower on the date specified in such Standard Notice the Administrative Agent shall pay to each Lender interest on the amount made available by such Lender at the Federal Funds Effective Rate for each day until either (i) the date such funds are made available to the Borrower or (ii) the date such amounts are returned to such Lender. Section 2.08. Interest Rates. (a) Optional Bases of Borrowing. The unpaid principal amount of the Revolving Credit Loans shall bear interest for each day from and including the date on which funds are made available to the Borrower by the Administrative Agent and to but excluding the date of repayment on one or more bases selected by the Borrower from among the interest rate options set forth below. Subject to the provisions of this Agreement the Borrower may select different options to apply simultaneously to different Portions of the Loans and may select different Funding Segments to apply simultaneously to different parts of the CD Rate Portion or the Euro-Rate Portion of the Loans. Each selection of a rate Option shall apply separately and without overlap to the Revolving Credit Loans as a class. The aggregate number of Funding Segments applicable to the CD Rate Portion and the Euro-Rate Portion of the Revolving Credit Loans at any time shall not exceed ten unless otherwise permitted by the Administrative Agent. (i) Base Rate Option: A rate per annum (computed on the basis of a year of 365 or 366 days and actual days elapsed) for each day equal to the Base Rate for such day plus the Applicable Margin for such day. The "Base Rate" for any day shall mean the greater of (A) the Reference Rate for such day or (B) 0.50% plus the Federal Funds Effective Rate for such day, such interest rate to change automatically from time to time effective as of the effective date of each change in the Reference Rate or the Federal Funds Effective Rate. (ii) CD Rate Option: A rate per annum (based on a year of 360 days and actual days elapsed) for each day during the applicable CD Rate Funding Period equal to the CD Rate for such day plus the Applicable Margin for such day. "CD Rate" for any day shall mean for each Funding Segment of the CD 32 41 Rate Portion corresponding to a proposed or existing CD Rate Funding Period the rate per annum determined by the Administrative Agent by adding (A) the rate per annum (which shall be the same for each day in such CD Rate Funding Period) determined in good faith by the Administrative Agent in accordance with its usual procedures (which determination shall be conclusive absent manifest error) to be the arithmetic average of the secondary market bid rates at or about 8:00 a.m., Los Angeles time, on the first day of such CD Rate Funding Period by dealers of recognized standing in negotiable certificates of deposit for the purchase at face value of negotiable certificates of deposit of major money center banks for delivery on such day in amounts comparable to such Funding Segment and having maturities comparable to such CD Rate Funding Period plus (B) the Assessment Rate. "Assessment Rate" for any day shall mean the rate per annum (rounded upward to the nearest 1/100 of 1%) determined in good faith by the Administrative Agent in accordance with its usual procedures (which determination shall be conclusive absent manifest error) to be the maximum effective rate per annum payable by a depository institution insured by the Federal Deposit Insurance Corporation (or any successor) for such day as an assessment for insurance on Dollar time deposits, exclusive of any credit that is or may be allowed against such assessment on account of assessment payments made or to be made by such depository institution. The CD Rate shall be adjusted automatically as of the effective date of each change in the Assessment Rate. The CD Rate Option shall be calculated in accordance with the foregoing if any Lender is actually required to pay FDIC assessments or, if required to pay such assessments, is required to pay such assessments at the "Assessment Rate" as herein defined. The Administrative Agent shall give prompt notice to the Borrower and to the Lenders of the CD Rate determined or adjusted in accordance with the definition of CD Rate, which determination or adjustment shall be conclusive if made in good faith. (iii) Euro-Rate Option: A rate per annum (based on a year of 360 days and actual days elapsed) for each day during the applicable Euro-Rate Funding Period equal to the Euro-Rate for such day plus, in each case, the Applicable Margin for Euro-Rate Option for such day. "Euro-Rate" for any day, as used herein, shall mean for each Funding Segment of the Euro-Rate Portion corresponding to a proposed or existing Euro-Rate Funding Period the rate per annum determined by the Administrative Agent to be the rate of interest (which shall be the same for each day in such Euro-Rate Funding Period) determined in good faith by the Administrative Agent in accordance with its usual procedures from the Reuters Screen LIBO page (which determination shall be conclusive absent manifest error) to be the average of the rates per annum for deposits in Dollars offered to the leading banks in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the first day of such Euro-Rate Funding Period for delivery on the first day of such Euro-Rate Funding Period in amounts comparable to such Funding Segment and having maturities comparable to such Funding Period. The Administrative Agent shall give prompt notice to the Borrower and to the Lenders of the Euro-Rate determined in accordance with the definition of the Euro-Rate, which determination shall be conclusive if made in good faith. (b) Applicable Margins. The "Applicable Margin" with respect to the Base Rate Option, the CD Rate Option and the Euro-Rate Option shall be determined in accordance with the pricing grid set forth in the definition of "Applicable Margin". (c) Funding Periods. At any time when the Borrower shall select, convert to or renew the CD Rate Option or the Euro-Rate Option to apply to any part of the Loans, the Borrower shall specify one or more 33 42 periods (the "Funding Periods") during which each such Option shall apply, such Funding Periods being as set forth below:
Interest Rate Option Available Funding Periods - -------------------- -------------------------------------------------- CD Rate Option................. 30, 60, 90 or 180 days or such longer period as may be offered by all of the Lenders ("CD Rate Funding Period"); and Euro-Rate Option............... One, two, three or six months ("Euro-Rate Funding Period");
provided, that: (i) Each CD Rate Funding Period which would otherwise end on a day which is not a Business Day shall be extended to the next succeeding Business Day; (ii) Each Euro-Rate Funding Period shall begin on a Business Day, and the term "month", when used in connection with a Euro-Rate Funding Period, shall be construed in accordance with prevailing practices in the interbank eurodollar market at the commencement of such Euro-Rate Funding Period, as determined in good faith by the Administrative Agent (which determination shall be conclusive); and (iii) In the case of Revolving Credit Loans, the Borrower may not select a Funding Period that would end after the Revolving Credit Maturity Date. (d) Transactional Amounts. Every selection of, conversion from, conversion to or renewal of an interest rate option and every payment or prepayment of any Loans shall be in a principal amount such that after giving effect thereto the aggregate principal amount of the Base Rate Portion of the Revolving Credit Loans, or the aggregate principal amount of each Funding Segment of the CD Rate Portion or the Euro-Rate Portion of the Revolving Credit Loans, shall be at least $5,000,000 and integral multiples of $1,000,000 in excess thereof. (e) CD Rate or Euro-Rate Unascertainable; Impracticability. If (i) on any date on which a CD Rate or a Euro-Rate would otherwise be set, the Administrative Agent (in the case of clause (A) or (B) below) shall have determined in good faith (which determination shall be conclusive absent manifest error) that: (A) adequate and reasonable means do not exist for ascertaining such CD Rate or Euro-Rate, or (B) a contingency has occurred which materially and adversely affects the secondary market for negotiable certificates of deposit maintained by dealers of recognized standing or the interbank eurodollar market, as the case may be, or (ii) at any time any Lender shall have determined in good faith (which determination shall be conclusive absent manifest error) that the making, maintenance or funding of any part of the CD Rate Portion or the Euro-Rate Portion has been made impracticable or unlawful by compliance by such Lender or a Notional Euro-Rate Funding Office in good faith with any Law or guideline or interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof or with any request or directive of any such Governmental Authority (whether or not having the force of law); then, and in any such event, the Administrative Agent or such Lender, as the case may be, may notify the Borrower of such determination (and any Lender giving such notice shall notify the Administrative Agent). Upon such date as shall be specified in such notice (which shall not be earlier than the date such notice is given), the obligation of each of the Lenders, in the case of clause (i) above, or such Affected Lender, in the case of clause (ii) above, to allow the Borrower to select, convert to or renew the CD Rate Option or Euro-Rate Option, as the case may be, shall be suspended until the Administrative Agent or such Lender, as the case may be, shall have later notified the Borrower (and any Lender giving such notice shall notify the Administrative Agent) of the Administrative Agent's or such Lender's determination in good faith (which 34 43 determination shall be conclusive absent manifest error) that the circumstance giving rise to such previous determination no longer exist. If any Lender notifies the Borrower of a determination under subsection (ii) of this Section 2.08(e), the CD Rate Portion or the Euro-Rate Portion, as the case may be, of the Loans of such Lender (the "Affected Lender") shall, subject to Section 2.14(b) hereof, automatically be converted to the Base Rate Option as of the last day of the then current Funding Period with respect to such Loans (in the case of a determination that the making, maintenance or funding of any CD Rate Portion or Euro-Rate Portion of such Loans is impracticable) and the last day on which the making, maintenance or funding of any CD Rate Portion or Euro-Rate Portion of such Loans is not unlawful (in the case of a determination that the making, maintenance or funding of any CD Rate Portion or Euro-Rate Portion of such Loans is unlawful) and accrued interest thereon shall be due and payable on such date. If at the time the Administrative Agent or an Affected Lender makes a determination under subsection (i) or (ii) of this Section 2.08(e), as the case may be, the Borrower previously has notified the Administrative Agent that it wishes to select, convert to or renew the CD Rate Option or the Euro-Rate Option, as the case may be, with respect to any proposed Loans but such Loans have not yet been made, such notification shall be deemed to provide for selection of, conversion to or renewal of the Base Rate Option instead of the CD Rate Option or the Euro-Rate Option, as the case may be, with respect to such Loans or, in the case of a determination by an Affected Lender, such Loans only of such Affected Lender. Section 2.09. Conversion or Renewal of Interest Rate Options. (a) Conversion or Renewal. Subject to the provisions of Section 2.14(b) hereof the Borrower may convert any part of its Revolving Credit Loans from any interest rate Option or Options to one or more different interest rate Options and may renew the CD Rate Option or the Euro-Rate Option as to any Funding Segment of the CD Rate Portion or the Euro-Rate Portion: (i) At any time with respect to conversion from the Base Rate Option; or (ii) At the expiration of any Funding Period with respect to conversions from or renewals of the CD Rate Option or the Euro-Rate Option, as the case may be, as to the Funding Segment corresponding to such expiring Funding Period. Whenever the Borrower desires to convert or renew any interest rate Option or Options, the Borrower shall provide to the Administrative Agent Standard Notice setting forth the following information: (w) The date, which shall be a Business Day, on which the proposed conversion or renewal is to be made; (x) The principal amounts selected in accordance with Section 2.08(d) hereof of the Base Rate Portion and each Funding Segment of the CD Rate Portion and the Euro-Rate Portion, as the case may be, to be converted from or renewed; (y) The interest rate Option or Options selected in accordance with Section 2.08(a) hereof and the principal amounts selected in accordance with Section 2.08(d) hereof of the Base Rate Portion and each Funding Segment of the CD Rate Portion and the Euro-Rate Portion, as the case may be, to be converted to; and (z) With respect to each Funding Segment to be converted to or renewed, the Funding Period selected in accordance with Section 2.08(c) hereof to apply to such Funding Segment. Standard Notice having been so provided, after the date specified in such Standard Notice, interest shall be calculated upon the principal amount of the Loans as so converted or renewed. (b) Failure to Convert or Renew. Absent due notice from the Borrower of conversion or renewal in the circumstances described in Section 2.09(a)(ii) hereof, any part of the CD Rate Portion or Euro-Rate Portion for which such notice is not received shall be converted automatically to the Base Rate Option on the last day of the expiring Funding Period. 35 44 Section 2.10. Prepayments Generally. Whenever the Borrower desires to prepay any part of its Loans, it shall provide Standard Notice to the Administrative Agent setting forth the following information: (a) The date, which shall be a Business Day, on which the proposed prepayment is to be made; (b) The total principal amount of such prepayment, which shall be the sum of the principal amounts selected pursuant to clause (c) of this Section 2.10; and (c) The principal amounts selected in accordance with Section 2.08(d) hereof of the Base Rate Portion and each part of each Funding Segment of the CD Rate Portion and the Euro-Rate Portion, as the case may be, to be prepaid. Section 2.11. Optional Prepayments; Mandatory Prepayments. (a) Optional Prepayments. The Borrower shall have the right at its option from time to time to prepay its Revolving Credit Loans and Swingline Advances in whole or part without premium or penalty (subject, however, to Section 2.14(b) hereof). (b) Mandatory Prepayments. (i) Unless the Required Lenders otherwise agree in writing, the Borrower shall, within 15 days after a Change in Control, prepay in full all outstanding Loans (subject to Section 2.14(b) hereof) and terminate, permanently and irrevocably, all existing Commitments of the Lenders hereunder, and Cash Collateralize the amount available for drawing under any and all outstanding Letters of Credit. (ii) If, on any day, the Dollar Equivalent of the sum of the all Eurocurrency Loans outstanding on the day of any such determination plus the outstanding Loans made in Dollars plus the Dollar Equivalent of all Letter of Credit Obligations exceeds the Total Revolving Credit Commitment as then in effect, the Administrative Agent shall immediately notify the Borrower and the Borrower shall prepay on the Business Day following such day Base Rate Loans and then, if necessary, Eurocurrency Loans to the extent required so that such aggregate unpaid amount will not exceed the Total Revolving Credit Commitment as then in effect; such prepayment being subject however to Section 2.14(b) hereof. The Borrower may designate the Loans to be prepaid by notice to the Administrative Agent before each such prepayment. (c) General. All prepayments shall be made in accordance with Section 2.10 hereof. No prepayments shall be permitted with respect to Competitive Bid Loans except as required by Sections 2.18 and 10.17 or (ii) with the consent of the Lender or Lenders that have made the same. Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of the Borrower to such Lender resulting from each Loan of such Lender from time to time, including without limitation, the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement. The entries made in the accounts of each Lender maintained pursuant hereto shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided that the failure of any Lender to maintain any such account, or any error therein, shall not in any manner effect the obligation of the Borrower to repay (with applicable interest) the Loans made to the Borrower by such Lender in accordance with the terms of this Agreement. Section 2.12. Interest Payment Dates. Interest on the Base Rate Portion shall be due and payable on each Regular Payment Date. Interest on each Funding Segment of the CD Rate Portion shall be due and payable on the last day of the corresponding CD Rate Funding Period and, if such CD Rate Funding Period is longer than 90 days, also every 90th day during such CD Rate Funding Period. Interest on each Funding Segment of the Euro-Rate Portion shall be due and payable on the last day of the corresponding Euro-Rate Funding Period and, if such Euro-Rate Funding Period is longer than three months, also on the last day of every third month during such Funding Period. After maturity of any part of the Loans (by acceleration or otherwise), interest on such part of the Loans shall be due and payable on demand. 36 45 Section 2.13. Pro Rata Treatment. (a) Certain Definitions. As used in this Agreement, the following term has the meaning indicated: "Pro Rata" means from or to each Lender: (i) in the case of payments of Facility Fee, reductions pursuant to Section 2.02(c) hereof of the Revolving Credit Committed Amounts, payments on account of Swingline Advance Participating Interests under Section 2.05(f) hereof, participations in the Letter of Credit Obligations pursuant to Section 2.06 hereof and indemnification payments under Section 8.07 hereof, ratably in accordance with such Lender's Commitment Percentage; (ii) in the case of payments of principal of and interest on, and conversions and renewals of interest rate options with respect to, any particular Funding Segments, ratably in accordance with such Lender's percentage share of such Funding Segment; (iii) in the case of payments of principal and conversions and renewals of interest rate options with respect to, the Base Rate Portion of some or all of the Revolving Credit Loans, ratably in accordance with such Lender's percentage share of such Base Rate Portion; and (iv) in the case of payments of interest for any day with respect to the Base Rate Portion of some of all of the Revolving Credit Loans, ratably in accordance with such Lender's percentage share of such Base Rate Portion on such day. (b) Making of Revolving Credit Loans. Revolving Credit Loans shall be made by the Lenders ratably in accordance with their respective Commitment Percentages. (c) Several Obligations. The failure of any Lender to make a Revolving Credit Loan shall not relieve any other Lender of its obligation to lend hereunder, but neither any Agent nor any Lender shall be responsible for the failure of any other Lender to make a Revolving Credit Loan. Section 2.14. Additional Compensation in Certain Circumstances. (a) Increased Costs or Reduced Return Resulting from Taxes, Reserves, Capital Adequacy Requirements, Expenses, Etc. If any Law or change therein or guideline or interpretation or application thereof by any Governmental Authority charged with the interpretation or administration thereof or compliance with any request or directive of any Governmental Authority (whether or not having the force of law) adopted or made after the date hereof: (i) subjects any Lender or any Notional Euro-Rate Funding Office or the LC Issuer to any tax or changes the basis of taxation, to the extent such tax or change relates to the Euro-Rate Loans or the CD Rate Loans, with respect to this Agreement, the Notes, the Euro-Rate Loans or the CD Rate Loans, the Letters of Credit, participations therein or payments by the Borrower of principal of, or interest on, the Euro-Rate Loans or the CD Rate Loans, from the Borrower hereunder or under the Notes (except for taxes on the overall net income or overall gross receipts of such Lender or such Notional Euro-Rate Funding Office or the LC Issuer imposed by the jurisdictions (federal, state, local and foreign) in which the Lender's principal office or Notional Euro-Rate Funding Office or the LC Issuer is located), (ii) imposes, modifies or deems applicable any reserve, special deposit or similar requirement against credits or commitments to extend credit extended by, assets (funded or contingent) of, deposits with or for the account of, other acquisitions of funds by, such Lender or any Notional Euro-Rate Funding Office (in connection with the Euro-Rate Loans or the CD Rate Loans) or the LC Issuer (other than requirements expressly included herein in the determination of the CD Rate or the Euro-Rate, as the case may be, hereunder), (iii) imposes, modifies or deems applicable any capital adequacy or similar requirement (A) against assets (funded or contingent) of, or credits or commitments to extend credit extended by, any Lender or any Notional Euro-Rate Funding Office or the LC Issuer, or (B) otherwise applicable to the obligations of any Lender or any Notional Euro-Rate Funding Office or the LC Issuer under this Agreement, or (iv) imposes upon any Lender or any Notional Euro-Rate Funding Office or the LC Issuer any other condition or expense, to the extent such condition or expense relates to the Euro-Rate Loans or the CD Rate Loans, directly related to this Agreement, the Notes or its making, maintenance or funding of any Euro-Rate or CD Rate Loan or the Letters of Credit or participations therein. and the result of any of the foregoing is reasonably determined by any Lender or the LC Issuer to increase the cost to, reduce the income receivable by, or impose any expense (excluding loss of margin) upon such Lender, 37 46 any Notional Euro-Rate Funding Office or the LC Issuer, as applicable, or, in the case of clause (iii) hereof, any Person controlling a Lender or the LC Issuer, with respect to this Agreement, the Notes, the Letters of Credit or the making, maintenance or funding of any Loan or Letters of Credit or participations therein (or, in the case of any capital adequacy or similar requirement, to have the effect of reducing the rate of return on such Lender's or LC Issuer's or controlling Person's capital, taking into consideration such Lender's or LC Issuer's or controlling Person's policies with respect to capital adequacy) by an amount which such Lender or the LC Issuer reasonably deems to be material (such Lender being deemed for this purpose to have made, maintained or funded each Funding Segment of the CD Rate Portion and the Euro-Rate Portion from a Corresponding Source of Funds), such Lender or the LC Issuer may from time to time promptly notify the Borrower of the amount determined in good faith (using any reasonable averaging and attribution methods) by such Lender or the LC Issuer (which determination shall be conclusive absent manifest error) to be necessary to compensate such Lender or such Notional Euro-Rate Funding Office or the LC Issuer for such increase, reduction or imposition. The Borrower shall have no obligation to reimburse a Lender or the LC Issuer under this Section 2.14(a) for any amount with respect to any such increase, reduction or imposition which amount is attributable to a period of more than 60 days ending prior to the date of such Lender's or LC Issuer's first notice to the Borrower of such increase, reduction or imposition. Each Lender or the LC Issuer will notify the Borrower and the Administrative Agent of any event occurring after the date of this Agreement which will entitle such Lender or the LC Issuer to compensation pursuant to this Section 2.14 as promptly as practicable after it obtains knowledge thereof and determines to request such compensation. Each Lender or the LC Issuer will furnish the Borrower and the Administrative Agent with a statement setting forth in reasonable detail the basis, the manner of calculation and the amount of each request by such Lender or the LC Issuer for compensation from the Borrower under this Section 2.14. Such amount shall be due and payable by the Borrower to such Lender or the LC Issuer five Business Days after such notice is given. In the event that after the Borrower shall have paid any additional amount under this Section 2.14(a) with respect to any Loan or Letter of Credit or participations therein such Lender or the LC Issuer shall have successfully contested such law, regulation, treaty, order, directive, interpretation or condition, then, to the extent that such Lender or the LC Issuer is or will be placed in the same position it was prior to the incurrence of the additional costs received or receivable (on an after-tax basis) and its contest of such law, regulation or other condition, such Lender or the LC Issuer shall refund to the Borrower such additional amount or any portion thereof with respect to which such Lender or the LC Issuer is or will be placed in such position. (b) Funding Breakage. In addition to the compensation required under Section 2.14(a) hereof, the Borrower shall indemnify each Lender against any loss or expense (excluding loss of margin) which such Lender has incurred as a consequence of: (i) any payment, prepayment or conversion of any part of any Funding Segment of any CD Rate Portion or Euro-Rate Portion of the Loans on a day other than the last day of the corresponding Funding Period or any prepayment of any Competitive Bid Loan prior to its maturity date (whether or not such payment, prepayment or conversion is mandatory or automatic and whether or not such payment or prepayment is then due), (ii) any attempt by the Borrower to revoke (expressly, by later inconsistent notices or otherwise) in whole or in part any notice stated herein to be irrevocable (the Administrative Agent having in its sole discretion the options (A) to give effect to such attempted revocation provided that indemnity under this Section 2.14(b) is obtained or (B) to treat such attempted revocation as having no force or effect, as if never made), or (iii) any failure of the Borrower to pay when due (by acceleration or otherwise) any principal, interest or any other amount due hereunder or under any Note relating to a Euro-Rate Loan or a CD Rate Loan. If any Lender sustains or incurs any such loss or expense it shall from time to time promptly notify the Borrower and the Administrative Agent in writing setting forth in reasonable detail the amount determined in good faith by such Lender (which determination shall be conclusive absent manifest error) to be necessary to 38 47 indemnify such Lender for such loss or expense. Such amount shall be due and payable by the Borrower to the Administrative Agent for the account of such Lender, five Business Days after such notice is given. (c) Additional Interest. (i) So long as any Lender shall be required under regulations of the Board of Governors of the Federal Reserve System to maintain reserves with respect to liabilities or assets consisting of or including loans made with reference to the CD Rate, such Lender may require the Borrower to pay, but only in respect of any period during which such reserves shall actually be maintained by such Lender, additional interest on the unpaid principal amount of the CD Rate Portion of the Loans, at an interest rate per annum equal at all times during each CD Rate Funding Period to the difference obtained by subtracting (A) the CD Rate for such CD Rate Funding Period from (B) the rate obtained by dividing such CD Rate referred to in clause (A) above by that percentage equal to 100% minus the CD Rate Reserve Percentage of such Lender for such CD Rate Funding Period, payable on each date on which interest is payable on such CD Rate Portion. (ii) So long as any Lender shall be required under regulations of the Board of Governors of the Federal Reserve System to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency Liabilities, such Lender may require the Borrower to pay, but only in respect of any period during which such reserves shall actually be maintained by such Lender, additional interest on the unpaid principal amount of the Euro-Rate Portion of the Loans, at an interest rate per annum equal at all times during each Euro-Rate Funding Period to the difference obtained by subtracting (A) the Euro-Rate for such Euro-Rate Funding Period from (B) the rate obtained by dividing such Euro-Rate referred to in clause (A) above by that percentage equal to 100% minus the Euro-Rate Reserve Percentage of such Lender for such Euro-Rate Funding Period, payable on each date on which interest is payable on such Euro-Rate Portion. (iii) If any Lender shall claim entitlement to any additional amount pursuant to this Section 2.14(c), then such Lender shall deliver to the Borrower a certificate setting forth the basis for the determination thereof as promptly as practicable. More than one such certificate may be so delivered. Each such certificate shall be conclusive and binding for all purposes as to the amount due absent manifest error. The Borrower shall pay to each Lender the amount shown as due on any such certificate within five Business Days after its receipt of the same. Section 2.15. Payments Generally; Interest on Overdue Amounts. (a) Payments Generally. All payments and prepayments to be made by the Borrower in respect of principal, interest, fees, indemnity, expenses or other amounts due from the Borrower hereunder or under any other Loan Document in Dollars shall be payable at 11:00 a.m., Los Angeles time, on the day when due without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, and an action therefor shall immediately accrue, without setoff, counterclaim, withholding or other deduction of any kind or nature, except for payments to a Lender subject to a withholding deduction under Section 2.16(c) hereof. Except for payments under Sections 2.03(q), 2.14 and 10.06 hereof, such payments shall be made for the account of Lenders to the Administrative Agent's Bancontrol Account #12334-16521 at its Office in Dollars in funds immediately available at such Office, and payments under Sections 2.14 and 10.06 hereof shall be made to the applicable Lender at such domestic account as it shall specify to the Borrower from time to time in funds immediately available at such account. Any payment or prepayment received by the Administrative Agent or such Lender after 11:00 a.m., Los Angeles time, on any day shall be deemed to have been received on the next succeeding Business Day. The Administrative Agent shall distribute to the Lenders all such payments received by it from the Borrower as promptly as practicable after receipt by the Administrative Agent. If and to the extent that the Administrative Agent has not forwarded to any Lender such Lender's share of any such payment on the same Business Day as such payment is received (or deemed received) from the Borrower, the Administrative Agent shall pay to such Lender interest on such amount at the Federal Funds Effective Rate for each day until such payment is made. Upon termination of this Agreement and payment in full of all principal, interest, fees, expenses and other amounts due from the Borrower hereunder or under any other Loan Document, each Lender will promptly mark its Notes "cancelled" and forward them to the Administrative Agent for delivery to the Borrower. 39 48 (b) Interest on Overdue Amounts. To the extent permitted by law, after there shall have become due (by acceleration or otherwise) principal, interest, fees, indemnity, expenses or any other amounts due from the Borrower hereunder or under any other Loan Document, such amounts shall bear interest for each day until paid (before and after judgment), payable on demand, at a rate per annum based on a year of 365 or 366 days, as the case may be, and actual days elapsed (in the case of any Portion of Loans bearing interest at the Base Rate Option) and 360 days and actual days elapsed (in the case of any Portion of Loans bearing interest at the CD Rate Option or the Euro-Rate Option) which for each day shall be equal to the following: (i) In the case of any part of the CD Rate Portion or Euro-Rate Portion of any Loans, (A) until the end of the applicable then-current Funding Period at a rate per annum 2% above the rate otherwise applicable to such part, and (B) thereafter in accordance with the following clause (ii); and (ii) In the case of any other amount due from the Borrower hereunder or under any other Loan Document, 2% above the then-current Base Rate plus the Applicable Margin for Base Rate Option. Section 2.16 Taxes. (a) Payments Net of Taxes. All payments made by the Borrower under this Agreement shall be made free and clear of, and without reduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, and all liabilities with respect thereto, excluding (i) in the case of each Agent, the LC Issuer and each Lender, income or franchise taxes imposed on such Agent, the LC Issuer or such Lender by the jurisdiction under the laws of which such Agent, the LC Issuer or such Lender is organized or any political subdivision or taxing authority thereof or therein or as a result of a connection between such Agent, the LC Issuer or such Lender and any jurisdiction other than a connection resulting solely from this Agreement and the transactions contemplated hereby, and (ii) in the case of the LC Issuer and each Lender, income or franchise taxes imposed by any jurisdiction in which the LC Issuer or such Lender's lending offices which issue or book Letters of Credit, or make or book Loans are located or any political subdivision or taxing authority thereof or therein (all such non-excluded taxes, levies, imposts, deductions, charges or withholdings being hereinafter called "Taxes"). If any Taxes are required to be withheld or deducted from any amounts payable to any Agent, the LC Issuer or any Lender under this Agreement or any other Loan Document, the Borrower shall pay the relevant amount of such Taxes and the amounts so payable to such Agent, the LC Issuer or such Lender shall be increased to the extent necessary to yield to such Agent, the LC Issuer or such Lender (after payment of all Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement and the other Loan Documents. Whenever any Taxes are paid by the Borrower with respect to payments made in connection with this Agreement, as promptly as possible thereafter, the Borrower shall send to the Administrative Agent for its own account or for the account of the LC Issuer or such Lender, as the case may be, a certified copy of an original official receipt received by the Borrower showing payment thereof. In the event that after the Borrower shall have paid any additional amount under this Section 2.16(a) with respect to any Loan or any letter of Credit the Lender or the LC Issuer, as the case may be, shall have received a refund or credit of any Taxes paid by the Borrower with respect to payments made in connection with this Agreement, then, to the extent that such Lender or the LC Issuer receives a refund or credit of all or a portion of such Taxes from the Governmental Authority to whom such Taxes were paid by the Borrower, such Lender or the LC Issuer shall refund to the Borrower such additional amount or any portion thereof with respect to which such Lender or the LC Issuer receives such refund or credit. Nothing contained in this paragraph (a) shall require any Lender, the LC Issuer or any Agent to make available any of its tax returns (or any other information relating to its taxes which it deems to be confidential). (b) Indemnity. The Borrower hereby indemnifies each Agent, the LC Issuer and each of the Lenders for the full amount of all Taxes attributable to payments by or on behalf of the Borrower hereunder or under any of the other Loan Documents, any such Taxes paid by such Agent, the LC Issuer or such Lender, as the case may be, any present or future claims, liabilities or losses with respect to or resulting from any omission of the Borrower to pay or delay in paying any Taxes (including any incremental Taxes, interest or penalties that 40 49 may become payable by such Agent, the LC Issuer or such Lender as a result of any failure of the Borrower to pay such Taxes), whether or not such Taxes were correctly or legally asserted. Such indemnification shall be made within 30 days from the date such Lender, the LC Issuer or such Agent, as the case may be, makes written demand therefor. (c) Withholding and Backup Withholding. Each Lender that is incorporated or organized under the laws of any jurisdiction other than the United States or any State thereof agrees that, on or prior to the Closing Date (or, with respect to any Lender which becomes a party to this Agreement pursuant to Section 10.14 hereof, the Transfer Effective Date), it will furnish to the Borrower and the Administrative Agent (i) two valid, duly completed copies of United States Internal Revenue Service Form 4224 or United States Internal Revenue Form 1001 or successor applicable form, as the case may be, certifying in each case that such Lender is entitled to receive payments under this Agreement and the other Loan Documents without deduction or withholding of any United States federal income taxes, and (ii) a valid, duly completed Internal Revenue Service Form W-8 or W-9 or successor applicable form, as the case may be, to establish an exemption from United States backup withholding tax. Each Lender which so delivers to the Borrower and the Administrative Agent a Form 1001 or 4224 and Form W-8 or W-9 applicable forms (the "Forms") agrees to deliver to the Borrower and the Administrative Agent two further copies of the Forms, or other manner of certification, as the case may be, on or before the date that any such form expires or becomes obsolete or otherwise is required to be resubmitted as a condition to obtaining an exemption from withholding tax, or after the occurrence of any event requiring a change in the most recent form previously delivered by it, and such extensions or renewals thereof as may reasonably be requested by the Borrower and the Administrative Agent, certifying in the case of a Form 1001 or Form 4224 that such Lender is entitled to receive payments under this Agreement or any other Loan Document without deduction or withholding of any United States federal income taxes, unless in any such cases an event (including any changes in Law) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such letter or form with respect to it and such Lender advises the Borrower and the Administrative Agent that it is not capable of receiving payments without any deduction or withholding of United States federal income tax, and in the case of a Form W-8 or W-9, establishing an exemption from United States backup withholding tax. Notwithstanding anything to the contrary contained herein, the Borrower shall not be required to pay any additional amounts pursuant to this Section 2.16 or pursuant to Section 2.14 if the obligation to pay such additional amounts would not have arisen but for the failure by any Agent or any Lender to comply with its obligations hereunder, or if such Agent or Lender shall have delivered the appropriate Forms and such Agent or Lender is not entitled to exemption from deduction or withholding of U.S. federal income tax in respect of payments made by the Borrower hereunder for any reason other than a change in U.S. law or regulations or in the official interpretation thereof after the date of delivery of such Forms. Section 2.17. Funding by Branch, Subsidiary or Affiliate. (a) Notional Funding. Each Lender shall have the right from time to time, prospectively or retrospectively, without notice to the Borrower, to deem any branch, subsidiary or affiliate of such Lender to have made, maintained or funded any part of the Euro-Rate Portion at any time. Any branch, subsidiary or affiliate so deemed shall be known as a "Notional Euro-Rate Funding Office." Such Lender shall deem any part of the Euro-Rate Portion of the Loans or the funding therefor to have been transferred to a different Notional Euro-Rate Funding Office if such transfer would avoid or cure an event or condition described in Section 2.08(e)(ii) hereof or would lessen compensation payable by the Borrower under Sections 2.14(a), 2.16(a) or 2.16(b) hereof, and provided that such Lender determines in its reasonable discretion that such transfer would be practicable and would not have a material adverse effect on such part of the Loans, such Lender or any Notional Euro-Rate Funding Office (it being assumed for purposes of such determination that each part of the Euro-Rate Portion is actually made or maintained by or funded through the corresponding Notional Euro-Rate Funding Office). Notional Euro-Rate Funding Offices may be selected by such Lender without regard to such Lender's actual methods of making, maintaining or funding Loans or any sources of funding actually used by or available to such Lender. 41 50 (b) Actual Funding. Each Lender shall have the right from time to time to make or maintain any part of the Euro-Rate Portion by arranging for a branch, subsidiary or affiliate of such Lender to make or maintain such part of the Euro-Rate Portion. Such Lender shall have the right to hold any applicable Note payable to its order for the benefit and account of such branch, subsidiary or affiliate or (ii) request the Borrower to issue one or more promissory notes in the principal amount of such Euro-Rate Portion, in substantially the form attached hereto as Exhibit A with the blanks appropriately filled, payable to such branch, subsidiary or affiliate and with appropriate changes reflecting that the holder thereof is not obligated to make any additional Loans to the Borrower. The Borrower agrees to comply promptly with any request under subsection (ii) of this Section 2.17(b). If any Lender causes a branch, subsidiary or affiliate to make or maintain any part of the Euro-Rate Portion hereunder, all terms and conditions of this Agreement shall, except where the context clearly requires otherwise, be applicable to such part of the Euro-Rate Portion and to any note payable to the order of such branch, subsidiary or affiliate to the same extent as if such part of the Euro-Rate Portion were made or maintained and such note were a Revolving Credit Note payable to such Lender's order. Section 2.18. Extension of Revolving Credit Maturity Date. On and after the first Anniversary Date hereof, the Revolving Credit Maturity Date and the Competitive Bid Expiration Date may be extended for successive one year periods at the request of the Borrower with the express consent of each Lender (to be at such Lender's sole discretion) as provided below. Not later than the date 60 days prior to each Anniversary Date, the Borrower shall, at its option, in a written notice to the Administrative Agent request (an "Extension Request") that the Revolving Credit Maturity Date be extended for a period of one year provided that the Borrower must also request, to the extent the Other Credit Agreement is in effect, the extension of the "Revolving Credit Maturity Date" under the Other Credit Agreement. The Administrative Agent shall promptly inform the Lenders of such Extension Request. Each Lender that agrees with such Extension Request shall deliver to the Administrative Agent its express written consent thereto no later than such Anniversary Date. If (i) any Lender notifies the Administrative Agent in writing prior to such Anniversary Date that it will not consent to such Extension Request or (ii) all of the Lenders have not in writing expressly consented to any such Extension Request as provided in the preceding sentence, then the Administrative Agent shall so notify the Borrower and the Borrower, at its option, may replace each Lender which has not agreed to such Extension Request (a "Nonextending Lender") with another commercial lending institution reasonably satisfactory to the Administrative Agent and the LC Issuer (a "Replacement Lender") and/or with one or more existing Lenders by giving (not later than 160 days after such Anniversary Date) notice of the name of such Replacement Lender or such existing Lenders to the Administrative Agent. Unless the Administrative Agent or the LC Issuer shall object to the identity of such proposed Replacement Lender (in the case of a Replacement Lender) prior to the date 170 days after such Anniversary Date, upon notice from the Administrative Agent, each Nonextending Lender shall promptly (but in no event later than the date which is 180 days after such Anniversary Date) assign all of its interests hereunder to such Replacement Lender and/or existing Lenders in accordance with the provisions of Section 10.14(c) hereof. If all Lenders consent to any such Extension Request (or, if all Nonextending Lenders are replaced in accordance with this Section), then as of 2:00 p.m., Los Angeles time on the date which is 180 days after such Anniversary Date, the Revolving Credit Maturity Date shall be deemed to have been extended for, and shall be the date, one year after the then effective Revolving Credit Maturity Date, and if the Revolving Credit Maturity Date is so extended, the Competitive Bid Expiration Date (as such dates may have been previously extended pursuant to this Section) shall be deemed to have been extended for, and shall be the date, one year after the then effective Competitive Bid Expiration Date. If any Lender declines to consent to any such Extension Request and such Lender is not replaced in accordance with this Section, then the Revolving Credit Maturity Date and the Competitive Bid Expiration Date then in effect shall not be extended. To the extent the Other Credit Agreement is in effect, the "Revolving Credit Commitment Amount" of a Nonextending Lender under the Other Credit Agreement shall be replaced or assumed at the same percentage by such Replacement Lender and/or such existing Lenders. 42 51 ARTICLE III REPRESENTATIONS AND WARRANTIES The Borrower hereby represents and warrants to each Agent and each Lender as follows: Section 3.01. Corporate Status. The Borrower and each Significant Subsidiary thereof (a) is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation; (b) has corporate power and authority to own its property and to transact the business in which it is engaged or presently proposes to engage; and (c) is duly qualified to do business as a foreign corporation and is in good standing in all jurisdictions in which the ownership of its properties or the nature of its activities or both makes such qualification necessary; except for matters that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. Schedule 3.01 hereof states as of the date hereof the jurisdiction of incorporation of the Borrower, each Significant Subsidiary and each Special Purpose Subsidiary. Section 3.02. Corporate Power and Authorization. Each Credit Party has the corporate power to execute, deliver and perform the Loan Documents to be executed by it and has taken all necessary action, corporate or otherwise, to authorize the execution, delivery and performance of this Agreement and the other Loan Documents to be executed by it. The Borrower has the power to borrow and request the Issuance of the Letters of Credit hereunder and has taken all necessary corporate action to authorize the borrowings and the requests for the Issuance of the Letters of Credit hereunder on the terms and conditions of this Agreement. No consent or approval of any Person (including, without limitation, any stockholder of any Credit Party), no consent or approval of any landlord or mortgagee, no waiver of any Lien of right or distraint or other similar right and no consent, license, approval, authorization or declaration of any governmental authority, bureau or agency, is or will be required in connection with the execution, delivery or performance by each Credit Party, or the validity, enforcement or priority, of the Loan Documents to be executed by it, except as set forth on Schedule 3.02 hereto, each of which has been duly and validly obtained on or prior to the date hereof and is now in full force and effect and is sufficient for its intended purpose. Section 3.03. Execution and Binding Effect. This Agreement and each other Loan Document to which each Credit Party is a party has been, or upon its execution and delivery will be, duly executed and delivered by such Credit Party and each constitutes, or upon its execution and delivery will constitute, the valid and legally binding obligation of such Credit Party, enforceable in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or other similar laws, now or hereafter in effect, relating to or affecting the enforcement of creditors' rights generally and except that the remedy of specific performance and other equitable remedies are subject to judicial discretion. There is no action, suit, proceeding or investigation pending or, to the knowledge of any Credit Party, threatened against or affecting the Borrower or any of its Subsidiaries which questions the validity or the enforceability of any of the Loan Documents. Section 3.04. Governmental Approvals and Filings. No approval, order, consent, authorization, certificate, license, permit or validation of, or exemption or other action by, or filing, recording or registration with, or notice to, any Governmental Authority (collectively, "Governmental Action") is or will be necessary in connection with execution and delivery of this Agreement or any other Loan Document, consummation by the Credit Parties of the transactions herein or therein contemplated, or performance of or compliance with the terms and conditions hereof or thereof. Neither the Borrower nor any Subsidiary thereof is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act or the Investment Company Act of 1940 or to any Federal or state statute or regulation limiting the Borrower's ability to incur Indebtedness for money borrowed or to request the Issuance of the Letters of Credit. Neither the Borrower nor any Subsidiary thereof is an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. Section 3.05. Absence of Conflicts. The execution and delivery by each Credit Party of this Agreement and each other Loan Document to which it is a party and performance by it hereunder and thereunder, will not 43 52 violate any Law (including, without limitation, Regulations U, T and X of the Federal Reserve Board) and will not conflict with or result in a breach of any order, writ, injunction, ordinance, resolution, decree, or other similar document or instrument of any court or governmental authority, bureau or agency, domestic or foreign, or its certificate of incorporation or by-laws or any similar constituent documents or create (with or without the giving of notice or lapse of time, or both) a default under or breach of any material agreement, bond, note or indenture to which it is a party (by successor in interest or otherwise), or by which it is bound or any of its properties or assets is affected, or result in the imposition of any Lien of any nature whatsoever upon any of the properties or assets owned by or used in connection with the business of the Borrower or any of its Subsidiaries. Section 3.06. Audited Financial Statements. The Borrower has heretofore furnished to each Agent and each Lender consolidated balance sheets of the Borrower and its consolidated Subsidiaries as of December 26, 1997 (as such financial statements have been restated and filed with the Securities and Exchange Commission) and September 25, 1998 (as such financial statements have been restated and filed with the Securities and Exchange Commission) and the related consolidated statements of income, cash flows and changes in stockholders' equity for the fiscal year or three fiscal quarters, as the case may be, then ended, and with respect to such information as of December 26, 1997, as examined and reported on by Coopers & Lybrand, independent certified public accountants for the Borrower, who delivered an unqualified opinion in respect thereof. Such financial statements (including the notes thereto) present fairly in all material respects the financial condition of the Borrower and its consolidated Subsidiaries as of the end of each such fiscal year or nine month period, as the case may be, and the results of their operations and their cash flows for the fiscal years then ended, all in conformity with GAAP, except for the absence of footnotes and for normal year end audit adjustments in the case of the nine month statements. Section 3.07. Absence of Undisclosed Liabilities. As of the Closing Date, neither the Borrower nor any Subsidiary of the Borrower has any liability or obligation of any nature whatever (whether absolute, accrued, contingent or otherwise, whether or not due), forward or long-term commitments or unrealized or anticipated losses from unfavorable commitments, except (a) as disclosed in the financial statements referred to in Section 3.06 hereof, (b) matters that, individually or in the aggregate, in the Borrower's reasonable judgment, could not reasonably be expected to have a Material Adverse Effect and (c) liabilities, obligations, commitments and losses incurred after September 25, 1998 otherwise permitted, or not restricted, by the Existing Credit Agreements. As of the Closing Date, neither the Borrower nor any Subsidiary of the Borrower has any Indebtedness other than the Indebtedness of the Borrower and its Subsidiaries set forth on Schedule 3.07 hereto. Section 3.08. Absence of Material Adverse Changes. Except as disclosed in the financial statements referred to in Section 3.06 hereof, since September 25, 1998, there has been no material adverse change in the business, operations, properties, assets or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole. Section 3.09. Accurate and Complete Disclosure. No information heretofore, contemporaneously or hereafter provided by or on behalf of the Borrower or any Subsidiary thereof in writing to any Agent or any Lender in writing pursuant to or in connection with any Loan Document or any transaction contemplated hereby or thereby contains any untrue statement of a material fact or omits to state any material fact necessary to make such information (taken as a whole) not misleading in any material respect at such time in light of the circumstances in which it was provided. The Borrower has disclosed to each Agent and each Lender in writing every fact or circumstance known to the Borrower which has a Material Adverse Effect. Section 3.10. Margin Regulations. No part of the proceeds of any Loan or any Letter of Credit issued hereunder will be used for the purpose of buying or carrying any "margin stock," as such term is used in Regulation U of the Board of Governors of the Federal Reserve System, as amended from time to time, or to extend credit to others for the purpose of buying or carrying any "margin stock," in either case in a manner which would violate or conflict with Regulation T, U, or X of the Board of Governors of the Federal Reserve System. Neither the Borrower nor any Subsidiary thereof is engaged in the business of extending credit to others for the purpose of buying or carrying "margin stock." Neither the making of any Loan, the issuance of 44 53 any Letter of Credit nor any use of proceeds of any such Loan or Letter of Credit will violate or conflict with the provisions of Regulation T, U or X of the Board of Governors of the Federal Reserve System, as amended from time to time. Section 3.11. Subsidiaries. Schedule 3.11 hereof states as of the Closing Date each Significant Subsidiary of the Borrower and the percentage of outstanding shares owned by the Borrower and by each Significant Subsidiary. The outstanding shares of each Significant Subsidiary of the Borrower have been duly authorized and validly issued and are fully paid and nonassessable. The Borrower and each Significant Subsidiary thereof owns beneficially and of record and has good title to all of the shares represented by the ownership percentage shown in such Schedule 3.11, free and clear of any Lien. There are no options, warrants, calls, subscriptions, conversion rights, exchange rights, preemptive rights or other rights, agreements or arrangements (contingent or otherwise) which may in any circumstances now or hereafter obligate any Significant Subsidiary to issue any shares of its capital stock or any other securities. As of the Closing Date, no Significant Subsidiary has outstanding any class of preferred stock or any class of common stock with a prior right to dividends. Section 3.12. Partnerships, Etc. As of the Closing Date, neither the Borrower nor any Significant Subsidiary thereof is a partner (general or limited) of any partnership, is a party to any joint venture or owns (beneficially or of record) any equity or similar interest in any Person (including but not limited to any interest pursuant to which the Borrower or such Significant Subsidiary has or may in any circumstance have an obligation to make capital contributions to, or be generally liable for or on account of the liabilities, acts or omissions of such other Person), except for the partnership interests and joint ventures set forth in Schedule 3.12 hereof. Section 3.13. Litigation. There is no pending or (to the Borrower's knowledge) threatened action, suit, proceeding or investigation by or before any Governmental Authority against or affecting the Borrower or any Subsidiary of the Borrower, except for (a) matters described in the financial statements referred to in Section 3.06 hereof, and (b) matters that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. Section 3.14. Absence of Events of Default. No event has occurred and is continuing and no condition exists which constitutes an Event of Default or Potential Default. Section 3.15. Absence of Other Defaults. Neither the Borrower nor any Subsidiary thereof is in default under any agreement, ordinance, resolution, decree, bond, note, indenture, order or judgment to which it is a party (by successor in interest or otherwise) or by which it is bound, or any other agreement or other instrument by which any of the properties or assets owned by it or used in the conduct of its business is affected, which individually or in the aggregate, would have a Material Adverse Effect. The Borrower and each Subsidiary thereof have complied and are in compliance in all respects with all Laws, except for such instances of non-compliance that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. Section 3.16. Insurance. The policies, binders or self-insurance programs for fire, liability, product liability, workmen's compensation, vehicular and other insurance currently held by or on behalf of the Borrower and each Subsidiary thereof insure its material properties and business activities against such losses and risks as are adequate to protect its properties in accordance with customary industry practice when entered into or renewed. To the best knowledge of the Borrower, as of the date hereof, all such policies, binders and self-insurance programs are in full force and effect. As of the date hereof, neither the Borrower nor, to the best knowledge of the Borrower, any of its Subsidiaries has received notice from any insurer or agent of such insurer that substantial capital improvements or other expenditures will have to be made in order to continue such insurance and, to the best knowledge of the Borrower, no such improvements or expenditures are required. As of the date hereof, neither the Borrower nor, to the best knowledge of the Borrower, any of its Subsidiaries has received notice of cancellation of any material insurance policy or binder. Section 3.17. Title to Property. The Borrower and each Subsidiary thereof has good and marketable title in fee simple to all material real property owned or purported to be owned by it and necessary for the 45 54 operation of its business and good title to all other material property of whatever nature owned or purported to be owned by it, including but not limited to all property reflected in the most recent audited balance sheet referred to in Section 3.06 hereof or submitted pursuant to Section 5.01(a) hereof, as the case may be (except as sold or otherwise disposed of in the ordinary course of business after the date of such balance sheet or the Existing Credit Agreements for periods prior to the Closing Date and thereafter as otherwise expressly permitted by the Loan Documents) in each case free and clear of all Liens, other than Permitted Liens or Liens permitted pursuant to Section 6.02 hereof. Section 3.18. Intellectual Property. The Borrower and each Subsidiary thereof owns, or is licensed or otherwise has the right to use, all the patents, trademarks, service marks, names (trade, service, fictitious or otherwise), copyrights, technology (including but not limited to computer programs and software), processes, data bases and other rights, free from burdensome restrictions, necessary to own and operate its properties and to carry on its business as presently conducted and presently planned to be conducted without conflict with the rights of others, except for such instances of non-compliance that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. Section 3.19. Taxes. The Borrower and each Subsidiary thereof have filed all Federal and other material tax returns required to be filed by it and has not failed to pay any material taxes, or interest and penalties relating thereto, on or before the due dates thereof except for taxes not yet due and except for those the amount or validity of which is currently being contested in good faith by appropriate proceedings. Except to the extent that reserves therefor are reflected in the financial statements, to the best knowledge of the Borrower (a) there are no material Federal, state or local tax liabilities of the Borrower or any of its Subsidiaries due or to become due for any tax year ended on or prior to the Closing Date relating to the Borrower or any of its Subsidiaries, whether incurred in respect of or measured by the income of the Borrower or any of its Subsidiaries, which are not properly reflected in the financial statements delivered pursuant to Section 3.06, and (b) there are no material claims pending, proposed or threatened against the Borrower or any of its Subsidiaries for past Federal, state or local taxes, except those, if any, as to which proper reserves in accordance with GAAP are reflected in such financial statements. Section 3.20. Employee Benefits. (a) No borrowing or issuance of Letters of Credit contemplated by this Agreement is a transaction which is subject to the prohibitions of Section 406 of ERISA or in connection with which a tax could be imposed pursuant to Section 4975 of the Code or a civil penalty assessed pursuant to Section 502(i) of ERISA (assuming that monies other than monies representing plan assets are borrowed hereunder). Neither the Borrower, any of its Subsidiaries nor any other Person, including any fiduciary, has engaged in any prohibited transaction (as defined in Section 4975 of the Code or Section 406 of ERISA) which could subject any of the Benefit Plans, the Borrower, or any Subsidiary (or any entity which they have an obligation to indemnify) to any tax or penalty imposed under 4975 of the Code or Section 502(i) of ERISA or any other material liability under a foreign law of similar nature which alone or together with any other item described in this Section 3.20 would have a Material Adverse Effect. (b) Neither the Borrower nor any of its Significant Subsidiaries (including any member of their respective Controlled Group) (i) has incurred or expects to incur any liability under Title IV of ERISA or Section 502(g) of ERISA or any analogous provision relating to Section 515 of ERISA or (ii) has become subject or expects to be subject to the lien described in Section 412(n) of the Code, which alone or together with any other item described in this Section 3.20 would have a Material Adverse Effect. (c) The Pension Plans do not have an "accumulated funding deficiency" (whether or not waived) within the meaning of Section 412 of the Code or Section 302 of ERISA. No Pension Plan has benefit liabilities as defined in Section 4001(a)(16) of ERISA which exceed the assets of such Pension Plan by such an amount that the termination of such Pension Plan alone or together with any other item described in this Section would have a Material Adverse Effect. The Borrower has received a favorable determination letter from the IRS with respect to all Pension Plans except for such Pension Plans with respect to which the failure to receive such a favorable determination would not alone or together with any other item described in this Section 3.20 have a Material Adverse Effect and nothing has happened since the date of such letter that has adversely affected such qualification. There is no Lien outstanding or security interest given in connection with 46 55 a Pension Plan or under Title IV of ERISA which would exceed the percentage limitations of Section 6.02(a) hereof. As of the date hereof, the Borrower has received both IRS and PBGC approval with respect to any terminated Benefit Plans subject to Title IV of ERISA. (d) Neither the Borrower nor any of its Significant Subsidiaries (including any member of their respective Controlled Group) is in default in any material respect under any Benefit Plan and all Benefit Plans are administered in accordance with their terms and are in all material respects in compliance with all applicable Laws, except where any such default or failure to comply would not alone or together with any other item described in this Section 3.20 have a Material Adverse Effect. Section 3.21. Environmental Matters. (a) The Borrower and each Significant Subsidiary of the Borrower, to its knowledge, has been operated in compliance with all applicable Requirements of Law, except for (i) matters set forth in Schedule 3.21(a) hereof and (ii) matters which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. (b) The Borrower and each Significant Subsidiary of the Borrower, to its knowledge, has obtained all Environmental Permits required by applicable Requirements of Law for the ownership and operation of their respective properties, and all such Environmental Permits are in full force and effect or the Borrower and each Significant Subsidiary of the Borrower, as the case may be, has made all appropriate filings for issuance or renewal of such Environmental Permits, except for (i) matters set forth in Schedule 3.21(b) hereof, and (ii) matters which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. (c) The Borrower and each Significant Subsidiary of the Borrower, to its knowledge, is not aware of any acts, omissions, events or circumstances that may interfere with or prevent continued compliance with the Requirements of Law and Environmental Permits referred to in (a) and (b) above, except for (i) matters set forth in Schedule 3.21(c) hereof, and (ii) matters which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. (d) The Borrower and each Significant Subsidiary of the Borrower will use its best efforts to comply with all Requirements of Law and obtain all Environmental Permits which may be legally imposed in the future in jurisdictions in which the Borrower and each Significant Subsidiary, as the case may be, may then be doing business; provided, however, that the Borrower and each Significant Subsidiary shall not be deemed to be in violation of Section 3.21 of this Agreement as a result of any failure to comply with any provisions of such Requirements of Law and Environmental Permits (i) the applicability or validity of which is being contested by the Borrower or any of its Significant Subsidiaries in good faith and by appropriate proceedings, or (ii) the noncompliance with which would not result in fines, penalties, injunctive relief of other civil or criminal liabilities which, individually or in the aggregate, would have a Material Adverse Effect. (e) The Borrower and each Significant Subsidiary of the Borrower, to its knowledge, has not received notice of any asserted or threatened claim, action, suit, proceeding, hearing, investigation or request for information relating to any Environmental Matter, except for (i) matters set forth in Schedule 3.21(e) hereof, and (ii) matters which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. (f) The Borrower and each Significant Subsidiary of the Borrower, to its knowledge, has not received notice from any governmental authority that any of them is a potentially responsible party under any Requirements of Law at any disposal site containing Hazardous Materials, nor received any notice that any lien under any Requirements of Law against any property of the Borrower or Significant Subsidiary of the Borrower exists, except for (i) matters setting forth in Schedule 3.21(f) hereof, and (ii) matters, which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. Section 3.22. Year 2000. The Borrower has (a) initiated a review and assessment of all areas within its and each of its Subsidiaries' business and operations (including those affected by key suppliers and vendors) that could be adversely affected by the "Year 2000 Problem" (that is, the risk that computer applications used by the Borrower or any of its Subsidiaries (or its key suppliers and vendors) may be unable to recognize and perform properly date-sensitive functions involving certain dates prior to and any date after December 31, 47 56 1999), (ii) developed a plan and timeline for addressing the Year 2000 Problem on a timely basis, and (iii) to the date hereof, implemented that plan in accordance with the timetable. The Borrower reasonably believes that all computer applications (including those of its key suppliers and vendors) that are material to its or any of its Subsidiaries' business and operations will on a timely basis be able to perform properly date-sensitive functions for all dates before and after January 1, 2000 (that is, be "Year 2000 compliant"), except to the extent that a failure to do so could not reasonably be expected to have a Material Adverse Effect. ARTICLE IV CONDITIONS OF LENDING Section 4.01. Conditions to Initial Loans or Letter of Credit. The obligation of each Lender to make Loans (or of the LC Issuer to Issue a Letter of Credit) on the Closing Date is subject to the satisfaction, immediately prior to or concurrently with the making of such Loan (or the Issuance of such Letter of Credit), of the following conditions precedent, in addition to the conditions precedent set forth in Section 4.02 hereof: (a) Agreement; Notes. The Administrative Agent shall have received executed counterparts of this Agreement for each Lender, duly executed by each Credit Party, each Agent and each Lender, and executed Revolving Credit Notes, Competitive Bid Loan Notes and a Swingline Advance Note conforming to the requirements hereof, duly executed on behalf of the Borrower for each Lender requesting the same. (b) Corporate Proceedings. The Administrative Agent shall have received, with copies for each Lender, certificates by the Secretary or Assistant Secretary of each Credit Party dated as of the Closing Date as to (i) true copies of the articles of incorporation and by-laws (or other constituent documents) of such Credit Party in effect on such date, (ii) true copies of all corporate action taken by such Credit Party relative to this Agreement and the other Loan Documents and (iii) the incumbency and signature of the respective officers of such Credit Party executing this Agreement and the other Loan Documents to which such Credit Party is a party, together with satisfactory evidence of the incumbency of such Secretary or Assistant Secretary. The Administrative Agent shall have received, with a copy for each Lender, certificates from the appropriate Secretary of State or other applicable Governmental Authority dated not more than 30 days before the Closing Date showing the good standing of each Credit Party in its state of incorporation. (c) Financial Statements. The Administrative Agent shall have received, with a copy for each Lender, copies of the consolidated financial statements referred to in Section 3.06 hereof. (d) Legal Opinion of Counsel to the Credit Parties. The Administrative Agent shall have received, with an executed counterpart for each Lender, opinions addressed to the Agents and each Lender, dated the Closing Date, of (i) Thomas R. O'Brien, Esquire, Senior Vice President and General Counsel of the Borrower, and (ii) White & Case LLP, special New York counsel to the Credit Parties, each in a form reasonably satisfactory to the Administrative Agent. (e) Fees, Expenses, Etc. All fees and other compensation required to be paid to each Agent or the Lenders pursuant hereto or pursuant to any other written agreement on or prior to the Closing Date shall have been paid or received. (f) Existing Credit Agreements. The Administrative Agent shall have received evidence of the termination of the Revolving Credit Agreement and the Short Term Revolving Credit Agreement, each dated as of September 20, 1995 among the Borrower, the lenders signatory thereto, Mellon Bank, N.A., as Funding Agent, and National Westminster Bank PLC, as Administrative Agent (the "Existing Credit Agreements"). (g) Year 2000 Review. The Administrative Agent shall have received and completed the review, with results reasonably satisfactory to the Agents and Lenders, of information confirming that (a) the Borrower and its Subsidiaries are taking all necessary and appropriate steps to ascertain the extent of, and successfully address, business and financial risks facing the Borrower and its Subsidiaries as a result of 48 57 what is commonly referred to as the "Year 2000 Problem" (i.e., the inability of certain computer applications to recognize correctly and perform date-sensitive functions involving certain dates prior to and after December 31, 1999), including risks resulting from the failure of key vendors and customers of the Borrower and its Subsidiaries to successfully address the Year 2000 Problem, and (b) the Borrower's and its Subsidiaries' material computer applications and those of its key vendors and customers will, on a timely basis, adequately address the Year 2000 Problem in all material respects. (h) Pledge. The Administrative Agent shall have received (i) executed counterparts of the Pledge Agreement, duly executed by each Guarantor and the collateral agent thereunder and (ii) as the collateral agent thereunder, the collateral pledged thereunder. (i) Additional Matters. All corporate and other proceedings, and all documents, instruments and other matters in connection with the transactions contemplated by this Agreement and the other Loan Documents shall be reasonably satisfactory in form and substance to each Agent. Section 4.02. Conditions to All Loans and Letters of Credit. The obligation of each Lender to make any Loan (including the initial Loans) and of the LC Issuer to Issue any Letter of Credit (including the initial Letter of Credit) is subject to satisfaction of the following further conditions precedent: (a) Notice. Appropriate notice of such Loan or request for the Issuance of such Letter of Credit, as the case may be, shall have been given by the Borrower as provided in Article II hereof. (b) Representations and Warranties. Each of the representations and warranties made by the Borrower herein shall be true and correct in all material respects on and as of such date as if made on and as of such date (except with respect to representations and warranties which specifically refer to an earlier date, which shall be true and correct in all material respects as of such earlier date), both before and after giving effect to the Loans or the Letters of Credit requested to be made or Issued, as the case may be, on such date, except that the foregoing shall not apply to the representations and warranties set forth in Section 3.08 hereof in the case of any Loans the proceeds of which are used solely to repay Loans maturing on such date. (c) No Defaults. No Event of Default or Potential Default shall have occurred and be continuing on such date or after giving effect to the Loans or the Letters of Credit requested to be made or Issued, as the case may be, on such date. (d) No Violations of Law, Etc. Neither the making nor use of the Loans shall cause any Lender to violate or conflict with any Law. Neither the issuance nor use of the Letters of Credit shall cause the LC Issuer to violate or conflict with any Law. Each request by the Borrower for any Loan or Letter of Credit (including the initial Loans and Letter of Credit) shall constitute a representation and warranty by the Borrower that the conditions set forth in this Section 4.02 have been satisfied as of the date of such request. Failure of the Administrative Agent to receive notice from the Borrower to the contrary before such Loan is made or such Letter of Credit is issued shall constitute a further representation and warranty by the Borrower that the conditions referred to in this Section 4.02 have been satisfied as of the date such Loan is made or such Letter of Credit is Issued. ARTICLE V AFFIRMATIVE COVENANTS The Borrower hereby covenants to each Agent and each Lender as follows: Section 5.01. Basic Reporting Requirements. (a) Annual Audit Reports. The Borrower shall deliver to the Administrative Agent, with a copy for each Lender, as soon as available, but in any event within 90 days after the last day of each of its fiscal years, a consolidated balance sheet of the Borrower as at such last day of the fiscal year, and the related consolidated statement of income and retained earnings and changes in financial position, for such fiscal year, each prepared in accordance with GAAP (except as required by any change in accounting principles or concurred in by the Borrower's independent certified public accountants), 49 58 in reasonable detail, and, as to the financial statements, certified without qualification (other than relating to a change in accounting principles with which such accountants concur and other than any other qualification which the Administrative Agent and the Required Lenders deem, in their reasonable judgment, to be immaterial) by PricewaterhouseCoopers LLP or another firm of independent certified public accountants reasonably satisfactory to the Administrative Agent as fairly presenting in all material respects the financial position and the results of operations of the Borrower as at and for the year ending on such date and as having been prepared in accordance with GAAP. (b) Quarterly Consolidated Reports. The Borrower shall deliver to the Administrative Agent, with a copy for each Lender, as soon as available, but in any event within 45 days after the end of each of the Borrower's first three fiscal quarterly periods, a consolidated balance sheet of the Borrower as of the last day of such quarter and consolidated statement of income and retained earnings and changes in financial position, for such quarter, and on a comparative basis figures for the corresponding period of the immediately preceding fiscal year, all in reasonable detail, each such statement to be certified in a certificate of a Responsible Officer of the Borrower, as fairly presenting in all material respects the financial position and the results of operations of the Borrower as at such date and for such quarter and as having been prepared in accordance with GAAP (subject to customary year-end audit adjustments and the absence of footnotes). Such financial statement and the financial statement provided under clause (a) above shall (so long as the Borrower has not received a clean audit with respect to the Year 2000 Problem on or after the end of the first fiscal quarter of the Borrower in 2000): (i) include, or be accompanied by, a progress report as to the Year 2000 remediation efforts of the Borrower and its Subsidiaries; and (ii) indicate whether an auditor, regulator, or third party consultant has issued a management letter or other communication indicating the Borrower's and/or its Subsidiaries inability to remedy the Year 2000 Problem (to the extent not included in the Borrower's financial statements). (c) Quarterly Compliance Certificates. The Borrower shall deliver to the Administrative Agent, with a copy for each Lender, a Quarterly Compliance Certificate in substantially the form set forth as Exhibit F hereto, duly completed and signed by a Responsible Officer of the Borrower concurrently with the delivery of the financial statements referred to in subsections (a) and (b) of this Section 5.01. Each such Quarterly Compliance Certificate shall in addition include a listing, as of the end of the most recently completed fiscal quarter, showing the respective amounts of Indebtedness for borrowed money of each Subsidiary (other than any Special Purpose Subsidiary) of the Borrower which is organized under the laws of a jurisdiction outside the United States. To the extent such information is not included in the financial statements delivered pursuant to Section 5.01(a) hereof, each Quarterly Compliance Certificate with respect to the last quarter of a fiscal year shall in addition include a listing, as of the end of such quarter, of the respective amounts of Indebtedness for borrowed money of each Special Purpose Subsidiary of the Borrower which is organized under the laws of a jurisdiction outside the United States. (d) Certain Other Reports and Information. Promptly upon their becoming available to the Borrower, the Borrower shall deliver to the Administrative Agent, with a copy for each Lender, a copy of (i) all regular or special reports, registration statements and amendments to the foregoing which the Borrower or any Subsidiary shall file with the Securities and Exchange Commission (or any successor thereto) or any securities exchange, and (ii) all reports, proxy statements, financial statements and other information distributed by the Borrower to its stockholders or bondholders. (e) Further Information. The Borrower will promptly furnish to the Administrative Agent, with a copy for each Lender that has requested the same, such other information and in such form as any Agent or any Lender may reasonably request from time to time. (f) Notice of Certain Events. Promptly upon becoming aware of any of the following, the Borrower shall give the Administrative Agent notice thereof, together with a written statement of a Responsible Officer of the Borrower setting forth the details thereof and any action with respect thereto taken or proposed to be taken by the Borrower: (i) Any Event of Default or Potential Default; provided, however,that the Borrower shall not be required to deliver notice of any violation of any covenant contained in Article V hereof (other than Section 5.01 hereof) during the 30 days immediately following the first occurrence of such violation if the 50 59 Borrower reasonably believes that such violation will be cured within such 30-day period; and provided, further, that the Borrower shall not be required to deliver notice of any violation of any covenant contained in Section 5.01 hereof (other than subparagraph (f)(i) thereof) during the first 10 days after the first occurrence of such violation if the Borrower reasonably believes that such violation will be cured within such 10-day period. (ii) Any change in the business, operations or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole which could reasonably be expected to have a Material Adverse Effect. (iii) Any pending or threatened action, suit, proceeding or investigation by or before any Governmental Authority against the Borrower or any Subsidiary, except for matters that, if adversely decided, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. (iv) Any violation, breach or default by the Borrower or any Subsidiary of the Borrower of or under any agreement or instrument material to the business, operations or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole which could in the reasonable judgment of the Borrower have a Material Adverse Effect. (v) Any material correspondence with the PBGC, the Secretary of Labor or any representative of the IRS with respect to any Benefit Plan or Pension Plan, relating to an actual or threatened change or development which would materially and adversely affect the financial condition of the Borrower and its Subsidiaries taken as a whole; and copies of any notices from the PBGC to the Borrower with respect to the intent of the PBGC to institute involuntary proceedings. (vi) Any Environmental Claim pending or threatened against the Borrower or any Significant Subsidiary of the Borrower, or any past or present acts, omissions, events or circumstances (including but not limited to any dumping, leaching, deposition, removal, abandonment, escape, emission, discharge or release of any Hazardous Material at, on or under any facility or property now or previously owned, operated or leased by the Borrower or any Significant Subsidiary of the Borrower) that could form the basis of such Environmental Claim, which Environmental Claim, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. (vii) Any discovery or determination by the Borrower or its Subsidiary that any computer application (including those of its suppliers and vendors) that is material to the Borrower or any of its Subsidiaries' business and operations will not be Year 2000 compliant on a timely basis, except to the extent that such failure could not reasonably be expected to have a Material Adverse Effect. (g) Visitation; Verification. The Borrower shall, and shall cause each of its Subsidiaries to, permit the Lenders to make or cause to be made, at their own expense (and with respect to the Administrative Agent on behalf of the Lenders, after the occurrence of and during the continuance of an Event of Default, at the Borrower's expense), inspections and audits of any of its books, records and papers and to make extracts therefrom and copies thereof, or to make inspections and examinations of any of its properties and facilities (including, without limitation, any Project sites), on reasonable notice, at all such reasonable times and as often as any Lender may reasonably require, in order to assure that the Borrower and its Subsidiaries are and will be in compliance with their respective obligations under the Loan Documents or to evaluate the Lenders' investment in the then outstanding Notes. The Borrower shall have the right to have an authorized representative present during the inspection and examination of any of the Borrower's or any of its Subsidiaries' properties and facilities; provided, however, that the exercise of such right shall not delay or hinder the Lenders' right to such inspection and examination. The Administrative Agent shall promptly deliver to each Lender copies of all notices received pursuant to this Section 5.01. Section 5.02. Insurance. The Borrower shall, and shall cause each of its Subsidiaries to, maintain, at its expense, and keep in effect with responsible insurance companies, such liability insurance for bodily injury and third party property damage as is customary in the case of corporations engaged in the same or similar 51 60 business or having similar properties, similarly situated, provided, however, that the Borrower may maintain a system of self-insurance in accordance with sound business practice as is customary for corporations having a similar net worth as the Borrower. The Borrower shall, and shall cause each of its Subsidiaries to, keep and maintain, at its expense, its material real and personal property insured against loss or damage by fire, theft, explosion, spoilage, and all other risks ordinarily insured against by other owners or users of such properties in similar businesses in an amount equal to the full replacement or cash value thereof, subject to deductible amounts which the Borrower, in its reasonable judgment, deems prudent. The Borrower shall, and shall cause each of its Subsidiaries to, carry all insurance required by Law to cover its obligations to the PBGC. Section 5.03. Payment of Taxes and Other Potential Charges and Priority Claims. The Borrower shall, and shall cause each Subsidiary to, pay or discharge (a) on or prior to the date on which penalties are imposed by a taxing authority with respect thereto, all material taxes, assessments and other governmental charges imposed upon it or any of its properties; (b) on or prior to the date when due, all material lawful claims of materialmen, mechanics, carriers, warehousemen, landlords and other like Persons which, if unpaid, might result in the creation of a Lien upon any such property; and (c) on or prior to the date when due, all other material lawful claims which, if unpaid, might result in the creation of a Lien upon any such property or which, if unpaid, might give rise to a claim entitled to priority over general creditors of the Borrower or such Subsidiary in a case under Title 11 (Bankruptcy) of the United States Code, as amended; provided, that unless and until foreclosure, distraint, levy, sale or similar proceedings shall have been commenced the Borrower or such Subsidiary need not pay or discharge any such tax, assessment, charge or claim so long as (x) the validity thereof is contested in good faith and by appropriate proceedings diligently conducted and (y) such reserves or other appropriate provisions as may be required by GAAP shall have been made therefor. Section 5.04. Preservation of Corporate Status. The Borrower shall, and shall cause each of its Significant Subsidiaries to, do, or cause to be done, all things necessary to preserve and keep in full force and effect its corporate existence and all permits, rights and privileges necessary for the proper conduct of its business; provided, however, that nothing in this Section 5.04 shall prevent the withdrawal by the Borrower or any of its Significant Subsidiaries of its qualification as a foreign corporation in any jurisdiction where such withdrawal could not reasonably be expected to have a Material Adverse Effect; and provided further, that nothing in this Section 5.04 shall prevent the Borrower or any of its Significant Subsidiaries from failing to maintain or terminating any right, privilege or permit, if such failure or termination, is not in violation of or will not cause an Event of Default under, any provision of this Agreement and does not have a Material Adverse Effect. Section 5.05. Governmental Approvals and Filings. The Borrower shall, and shall cause each Subsidiary to, keep and maintain in full force and effect all Governmental Actions necessary in connection with execution and delivery of any Loan Document, consummation of the transactions hereon or therein contemplated, performance of or compliance with the terms and conditions hereof or thereof or to ensure the legality, validity, binding effect, enforceability or admissibility in evidence hereof or thereof. Section 5.06. Maintenance of Properties. The Borrower shall, and shall cause each Subsidiary to, maintain or cause to be maintained in good repair, working order and condition the properties now or hereafter owned, leased or otherwise possessed by it and shall make or cause to be made all needful and proper repairs, renewals, replacements and improvements thereto so that they are able to serve the functions for which they are currently being used, except to the extent that the failure to do so would not have a Material Adverse Effect. 52 61 Section 5.07. Avoidance of Other Conflicts. The Borrower shall not, and shall not permit any of its Subsidiaries to, violate or conflict with, be in violation of or conflict with, or be or remain subject to any liability (contingent or otherwise) on account of any violation or conflict with: (a) any Law, (b) its articles of incorporation or by-laws (or other constituent documents), or (c) any agreement or instrument to which it is party or by which any of them or any of their respective Subsidiaries is a party or by which any of them or any of their respective properties (now owned or hereafter acquired) may be subject or bound), except for matters which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. Section 5.08. Financial Accounting Practices. The Borrower shall, and shall cause each of its Subsidiaries to, keep proper books of record and account in accordance with normal business practice in which full and appropriate entries shall be made of all dealings or transactions in relation to its business and activities. Section 5.09. Use of Proceeds. The Borrower shall apply the proceeds of Loans and Letters of Credit hereunder for payment of all obligations of the Borrower under the Existing Credit Agreements, and for the general corporate purposes of the Borrower and its Subsidiaries. The Borrower shall not use the proceeds of any Loans and Letters of Credit hereunder directly or indirectly for any unlawful purpose or in any manner inconsistent with any other provision of any Loan Document. Section 5.10. Continuation of or Change in Business. The Borrower and each of its Significant Subsidiaries shall continue to engage in substantially the same lines of business conducted and operated during the present and preceding fiscal year and reasonably related extensions thereof, and the Borrower shall not, and shall not permit any Significant Subsidiary to, substantially engage in any other unrelated businesses. Section 5.11. Consolidated Tax Return. The Borrower shall not, and shall not suffer any of its Subsidiaries to, file or consent to the filing of any consolidated income tax return with any Person other than the Borrower and its Subsidiaries. Section 5.12. Fiscal Year. The Borrower shall not, and shall not suffer any of its Subsidiaries to, change its fiscal year or fiscal quarter except in accordance with GAAP. Section 5.13. ERISA. The Borrower shall, and shall cause each of its Subsidiaries to, as soon as possible and, in any event, within 10 days after the Borrower knows or has reason to know that a Reportable Event has occurred with respect to a Pension Plan, that a transaction prohibited under ERISA, the Code or a foreign law of similar nature has occurred resulting in a material liability to a Benefit Plan, the Borrower or any of its Subsidiaries (or any entity which they have an obligation to indemnify), that an accumulated funding deficiency has been incurred or an application is to be or has been made to the Secretary of the Treasury for a waiver of the minimum funding standard with respect to an accumulation funding deficiency of $1,000,000 or more, that a failure to make timely contributions to a Pension Plan may give or has given rise to a lien in a material amount, that an amendment to a Pension Plan may require or requires the granting of a security interest in a material amount, that proceedings are likely to be or have been instituted to terminate a Pension Plan, or that the Borrower, any of its Significant Subsidiaries or a member of their respective Controlled Group will or may incur any material liability under Section 502(g) or any analogous provision relating to Section 515 or Title IV of ERISA, the Borrower will deliver to the Administrative Agent a certificate of a Responsible Officer setting forth details as to such occurrence and action, if any, which the Borrower, such Subsidiary or the respective member of their Controlled Group is required or proposes to take, together with any notices required or proposed to be filed with or by the Borrower, such Subsidiary or the member of their respective Controlled Group, the PBGC or the plan administrator with respect thereto. For purposes of this Section, an item is material if alone or taken with any other item in this Section, it results in a liability of $1,000,000 or more. Copies of any notices required to be delivered to the Administrative Agent hereunder shall be delivered not later than 10 days after the later of the date such notice has been filed with the IRS or 53 62 the PBGC or received by the Borrower, any of its Subsidiaries or members of their respective Controlled Group. Upon the request of the Administrative Agent or any of the Lenders made from time to time, the Borrower will deliver a copy of the most recent actuarial report and annual report completed with respect to any Benefit Plan and any other financial information the Borrower has with respect to the Benefit Plan. Section 5.14. Ratings. In the event that the Borrower has no rated senior unsecured long-term debt outstanding, the Borrower will request Moody's to assign the Borrower a "hypothetical senior long-term debt rating" and will request S&P to assign the Borrower an "issuer credit rating," such request to be made (i) not later than thirty days after delivery to the Administrative Agent of the financial statements called for by Section 5.01(a) hereof and, in addition, (ii) not later than thirty days after instructions by the Required Lenders to make such request, which instructions may be given no more frequently than once during any six-month period. Section 5.15. Subsidiary Guaranty. Obligations hereunder shall at all times be guaranteed by Foster Wheeler USA Corporation, Foster Wheeler Energy International, Inc. and Foster Wheeler Energy Corporation by the execution and delivery of this Agreement by such Subsidiaries. If at the end of any fiscal quarter of the Borrower, (i) the assets of the Guarantors constitute less than 90% of the consolidated domestic total assets of the Borrower and its consolidated Subsidiaries or (ii) the net income for such fiscal quarter of the Guarantors constitute less than 90% of the consolidated domestic net income of the Borrower and its consolidated Subsidiaries for such quarter, then the Borrower shall designate (x) one or more Material Domestic Subsidiaries and (y) to the extent the designation provided in clause (x) does not make up the short-fall in clause (i) or (ii) above, one or more other domestic Subsidiaries, so that assets and net income of such one or more Material Domestic Subsidiaries and such one or more other domestic Subsidiaries, together with such item of the existing Guarantors, constitute 90% of the consolidated domestic total assets and net income, respectively of the Borrower and its consolidated Subsidiaries. The Borrower shall deliver to the Administrative Agent, together with the Quarterly Compliance Certificate required under Section 5.01(c), a schedule setting forth the assets and net income of each Guarantor and the consolidated domestic assets and the consolidated domestic net income of the Borrower and its consolidated Subsidiaries. If a Material Domestic Subsidiary or any other domestic Subsidiary is required to become a Guarantor, unless the Required Lenders otherwise agree, the Borrower shall, promptly (i) cause such Subsidiary to execute a Subsidiary Guaranty Agreement, (ii) cause such Subsidiary to deliver documentation similar to that described in Sections 4.01(b) and (d) relating to the authorization for, execution and delivery of, and validity of such Subsidiary's obligations as a Guarantor under the Guaranty in form and substance satisfactory to the Administrative Agent. Except as otherwise required or permitted by the Indenture, the Guarantors' obligations under the Guaranty shall at all times be secured by the pledge of the "Collateral" (as defined in the Pledge Agreement) pursuant to the Pledge Agreement. Without limiting the restrictions set forth in Section 6.07, a merger of a Guarantor into the Borrower or into another Guarantor shall not constitute a violation of this Section 5.15 so long as the Guaranty of the surviving entity, in the case of a merger into another Guarantor, remains in effect. ARTICLE VI NEGATIVE COVENANTS The Borrower hereby covenants to each Agent and each Lender as follows: Section 6.01. Financial Covenants. (a) Consolidated Fixed Charges Coverage Ratio. The Consolidated Fixed Charges Coverage Ratio shall be greater than (i) 2.25 to 1 for each period of four consecutive fiscal quarters of the Borrower ending after the Closing Date and prior to January 1, 2001 and (ii) thereafter 2.40 to 1. For the purpose of this Section 6.01(a) only, calculations of such Ratio shall exclude the $47,014,000 charges to the Borrower's earnings taken in the third fiscal quarter of the Borrower in 1998. (b) Consolidated Leverage Ratio. The Consolidated Leverage Ratio shall not at the end of any fiscal quarter of the Borrower ending after the Closing Date exceed 0.50 to 1.00 provided, however, that in the calculation of Indebtedness solely for purposes of this Section 6.01(b), (i) Consolidated Indebtedness shall 54 63 not include (to the extent otherwise included therein) indebtedness for money borrowed incurred solely for the purpose of hedging foreign currency exchange risk for which the sole source of repayment is a cash collateral deposit, (ii) Consolidated Indebtedness shall not include Indebtedness of any Special Purpose Subsidiary, (iii) with respect to Guarantees of obligations of any Special Purpose Subsidiary other than Guarantees solely for completion or operation of the related Project, an amount shall be included in Consolidated Indebtedness of the Borrower equal to the lesser of the Indebtedness of such Special Purpose Subsidiary so Guaranteed and the amount of such Guarantee, (iv) with respect to Guarantees of completion or operation obligations of any Special Purpose Subsidiary, an amount shall be included in Consolidated Indebtedness of the Borrower equal to 25% of the lesser of the outstanding amount of the Indebtedness of such Special Purpose Subsidiary so Guaranteed and the maximum amount payable by the Borrower pursuant to such Guarantee (after giving effect to (and without duplication of) any Guarantee of obligations of such Special Purpose Subsidiaries included in clause (iii) above) until completion of the Project and operation thereof in accord with the operating standards required under the terms of the financing agreement of the Indebtedness of such Special Purpose Subsidiary, after which time no amount shall be included in such calculation, except that if at any time such Special Purpose Subsidiary is in default of its obligations (until such default is remedied or cured) under the financing agreement of such Indebtedness and the Borrower is obligated to make payments pursuant to such Guarantee, the amount to be included shall be 25% of the outstanding amount of the Indebtedness of such Special Purpose Subsidiary, and (v) Consolidated Indebtedness shall be calculated as if the Trust Preferred was not outstanding; and provided, further, that in the calculation of Consolidated Indebtedness of the Borrower solely for the purposes of this Section 6.01(b), an amount shall be included on account of Letters of Credit equal to monetary damages, if any, which are due but unpaid according to the terms of any Project documents to which the beneficiary of such Letter of Credit is entitled. Section 6.02. Liens. The Borrower shall not and shall not permit any of its Subsidiaries to create, or assume or permit to exist, any Lien on any of the properties or assets of the Borrower or any of its Subsidiaries (other than any Special Purpose Subsidiary), whether now owned or hereafter acquired except: (a) ERISA Liens and Liens not otherwise permitted under this Section 6.02 securing Indebtedness and other obligations of the Borrower or any of its Subsidiaries which Indebtedness and other obligations and, in the case of ERISA Liens, the amount of the ERISA Liens, in the aggregate at any time outstanding, does not exceed 15% of the Consolidated Net Worth of the Borrower; (b) Liens by the Borrower or a Subsidiary thereof on property or assets securing all or part of the purchase price or construction cost thereof (hereinafter referred to individually as a "Purchase Money Security Interest"); provided, however, that: (i) Such Purchase Money Security Interest is created before or within 180 days after the purchase of, or the completion of construction of, such property or assets by the Borrower or such Subsidiary; (ii) The transaction in which any Purchase Money Security Interest is proposed to be created is not then prohibited by this Agreement; (iii) Any Purchase Money Security Interest shall attach only to the property or asset so acquired or constructed in such transaction (and the proceeds thereof) or any addition thereto or replacement thereof and shall not extend to or cover any other assets or properties of the Borrower or any of its Subsidiaries; and (iv) The Indebtedness secured or covered by any Purchase Money Security Interest together with any other Indebtedness secured by the property or asset acquired shall not exceed 100% of the lesser of the cost or fair market value of the property or asset acquired or constructed and shall not be renewed, extended or prepaid from the proceeds of any borrowing by the Borrower or any of its Subsidiaries; (c) Liens on the property or assets of the Borrower and its Subsidiaries in existence immediately prior to the Closing Date as listed on Schedule 6.02 hereto, provided that no such Lien is spread to cover 55 64 any additional property after the Closing Date and the amount of Indebtedness secured thereby is not increased, provided that the maturity of such Indebtedness may be extended or renewed; (d) Liens on all or any part of the property or the assets of any Subsidiary in favor of the Borrower or any other Subsidiary (other than a Special Purpose Subsidiary) as security for the Indebtedness owing to the Borrower or such other Subsidiary; (e) Liens (whether or not assumed) existing on property or assets at the time of purchase thereof by the Borrower or any Subsidiary, provided that: (i) such Lien is not created in contemplation of the purchase of such property by the Borrower or such Subsidiary, (ii) such Lien is confined solely to the property so purchased, improvements thereto and proceeds thereof and (iii) the aggregate amount secured by all Liens permitted by this Section 6.02(e) shall not at any time exceed $10,000,000; and (f) Permitted Liens. Section 6.03. Indebtedness. The Borrower shall not, and shall not permit any Subsidiary to, at any time create, incur, assume or suffer to exist or have outstanding any Indebtedness if, immediately after giving effect to such Indebtedness and the receipt and application of any proceeds thereof, there would exist an Event of Default or Potential Default hereunder, or any Indebtedness of any domestic Subsidiary (other than a Special Purpose Subsidiary) other than (i) Indebtedness set forth on Schedule 3.07 hereof and refinancings and renewals thereof (provided that the amount of such Indebtedness so refinanced or renewed shall not exceed the lesser of (x) the amount of such Indebtedness as of the date hereof or (y) the amount of such Indebtedness at the time of refinancing or renewal), (ii) intercompany Indebtedness between or among the Borrower and its Subsidiaries, (iii) Indebtedness of domestic Subsidiaries (other than Special Purpose Subsidiaries) not otherwise permitted under clauses (i) or (ii) above which in the aggregate at any time does not exceed $20,000,000 and (iv) the Guaranty hereunder, the "Guaranty" under the Other Credit Agreement and the Guarantee of the Borrower's obligations in connection with securities issued under the Indenture. Section 6.04. Loans, Advances and Certain Investments. The Borrower shall not, and shall not permit any Subsidiary to, at any time make or suffer to exist or remain outstanding any Investment in any Special Purpose Subsidiary other than Investments by the Borrower and its Subsidiaries in Special Purpose Subsidiaries which do not exceed, in the aggregate at any time, 50% of the Borrower's Consolidated Net Worth. For the purposes of this Section 6.04, the Borrower's Consolidated Net Worth shall not include any amount on account of the Borrower's Trust Preferred. Section 6.05. Changes in Business. The Borrower shall not, and shall not permit any Significant Subsidiary to, (a) liquidate or dissolve itself (or suffer any liquidation or dissolution) (other than into the Borrower or any other Significant Subsidiary), or (b) convey, sell, assign, transfer or otherwise dispose of any capital stock of or other ownership interest in any Significant Subsidiaries (other than Special Purpose Subsidiaries) held by it (other than to the Borrower or any other Significant Subsidiary), provided that, so long as no Default or Event of Default has occurred and is continuing or would result therefrom, the Borrower may in any fiscal year convey, sell, assign, transfer or otherwise dispose of capital stock or other ownership interest in one or more Significant Subsidiaries which did not account for an aggregate of 10% of the consolidated assets of the Borrower at the end of the prior fiscal year. Section 6.06. Amendment of Certain Documents. The Borrower shall not, and shall not permit any Significant Subsidiary to, modify, amend, supplement or terminate, or agree to modify, amend, supplement or terminate its certificate of incorporation or by-laws or any other constituent documents, in any manner which would materially and adversely affect the interests of any of the Lenders hereunder. Section 6.07. Mergers; Acquisitions. The Borrower shall not, and shall not permit any of its Significant Subsidiaries to, merge or consolidate with any Person; provided, however, that the Borrower or any Significant Subsidiary thereof may merge with another Person if (i) in the case of a merger involving the Borrower, the Borrower is the surviving corporation, (ii) in the case of a merger involving a Significant Subsidiary, a Subsidiary of the Borrower or, if the Borrower is also party to such merger, the Borrower, is the surviving corporation, and (iii) after giving effect to such merger no Potential Default or Event of Default would then exist. 56 65 Section 6.08. ERISA Obligations. The Borrower shall not, and shall not permit any of its Subsidiaries to, engage in a transaction in connection with which the Benefit Plans, the Borrower, any of its Subsidiaries or any entity which they have an obligation to indemnify could be subject to liability for either a civil penalty assessed pursuant to Section 502(i) or 502(1) of ERISA or a tax imposed by Section 4975 of the Code or any other material liability Plan or Benefit Plan, take any other action with respect to any such Pension Plan or Benefit Plan if such termination or other action could result in liability, or take any action or fail to take any action which could result in withdrawal liabilities under Title IV of ERISA or liability under Section 502(g) of ERISA or any analogous provision relating to Section 515 of ERISA; fail to make any payments on a timely basis which are required under applicable Law (including Section 412 of the Code) to be paid as contributions to Pension Plans; incur an accumulated funding deficiency (as defined in Section 302 of ERISA and Section 412 of the Code), whether or not waived, with respect to any Pension Plan; amend any Pension Plan in a manner which would require the granting of a security interest to maintain the continued qualification of such Pension Plan under Section 401(a)(29) of the Code, if, in any case described herein, or together with any other event described herein, such action, failure to act, event or transaction would (i) result in an ERISA Lien exceeding the percentage limitations of Section 6.02(a) or (ii) have a Material Adverse Effect. Section 6.09. Principal Foreign Affiliates. The Borrower shall not permit any of its Principal Foreign Affiliates to create, assume or permit to exist any Indebtedness the terms of which, prior to a payment default thereunder, would restrict dividends to be paid with respect to the consolidated net income of such Affiliate for any fiscal year by more than 40% of the consolidated net income of such Affiliate for such fiscal year. For purposes of this Section, "Principal Foreign Affiliates" shall mean Foster Wheeler Limited (Reading), Foster Wheeler France, S.A., Foster Wheeler Italiana, S.p.A., Foster Wheeler Iberia, S.A., Foster Wheeler Energia, S.A. and their respective successors and any other foreign Affiliate of the Borrower which in the most recent fiscal year of the Borrower accounted for more than 10% of the consolidated assets of the Borrower and its Subsidiaries or which accounted for more than 5% of the consolidated income of the Borrower and its Subsidiaries for the most recent fiscal year of the Borrower; provided, however, that with respect to such foreign Affiliate created or acquired after the date hereof, if thereafter such entity, in a fiscal year, accounts for more than 10% of the consolidated assets of the Borrower and its Subsidiaries or accounts for more than 5% of the consolidated income of the Borrower and its Subsidiaries in such fiscal year, it shall be deemed to be a Principal Foreign Affiliate for such fiscal year. Section 6.10. Certain Agreements. The Borrower will not become or be a party to any agreement or instrument relating to Indebtedness for borrowed money (other than agreements and instruments relating to Indebtedness for borrowed money in an aggregate principal amount not exceeding $15,000,000 (individually or in the aggregate with respect to such agreements and instruments) at any time outstanding and other than (with respect to debt securities offered and sold in a public offering in a principal amount not exceeding $500,000,000 ($175,000,000 of which is outstanding under the Borrower's Trust Preferred)) the Indenture between the Borrower and Harris Trust and Savings Bank, as Trustee, as amended and supplemented from time to time (the "Indenture"), filed as an exhibit to the Borrower's Registration Statement on Form S-3 (registration no. 33-61809)) which contains any covenant or event of default which could result in such Indebtedness becoming or being declared to be due and payable prior to its stated maturity (including by a requirement for purchase or prepayment) upon the occurrence of an event or condition which is not an event or condition the occurrence of which could cause the Loans to become or be declared to be (other than pursuant to Section 7.01(f) hereto) due and payable prior to their stated maturity, unless the Borrower shall make an "Amendment Offer" (as hereinafter defined); provided that this covenant shall not be violated by (i) an agreement to pay the principal of and interest on such Indebtedness in accordance with its terms or to provide to the holders of such Indebtedness or an agent or trustee for such holders any information which the Borrower is obligated to provide to the Lender or an Agent hereunder or (ii) any agreement or instrument relating to Indebtedness on account of Capitalized Lease or secured by Purchase Money Security Interest, any covenant or event of default of which principally relates to the use, condition or disposition of the property financed or acquired or constructed with such Indebtedness. As used herein, an "Amendment Offer" is an effective offer by the Borrower to the Administrative Agent to amend this Agreement, which offer shall be made no later than ten days after the Borrower becoming party to an agreement or instrument referred to in 57 66 the first sentence of this Section 6.10, to amend this Agreement (without deleting or overriding any term or provision of this Section 6.10) in a way that the first sentence of this Section would not otherwise be applicable to such agreement or instrument. The Administrative Agent, if so instructed by the Required Lenders, shall accept or decline such Amendment Offer within thirty days thereof, and a failure to so respond shall be deemed a declination of such Amendment Offer. Section 6.11. Restricted Payments. The Borrower shall not, and shall not suffer or permit any Subsidiary to, declare or make any Stock Payment; except that (i) any wholly-owned Subsidiary may declare and make dividend payments or other distributions to the Borrower or to another wholly-owned Subsidiary; (ii) any non-wholly-owned Subsidiary may declare and make dividend payments or other distribution to its shareholders or other equity holders generally so long as the Borrower or its respective Subsidiary which owns the equity interest in the Subsidiary paying such dividends or other distributions receives at least its proportionate share thereof (based upon its relative holdings of the equity interest in the Subsidiary paying such dividends or other distributions and taking into account the relative preferences, if any, of the various classes of equity interest of such Subsidiary); (iii) the Borrower and any Subsidiary may declare and make dividend payments or other distributions, in each case, payable solely in its stock; and (iv) the Borrower and any Subsidiary may declare, pay or make cash Stock Payments so long as no Event of Default then exist or would result therefrom. Section 6.12. Transactions with Affiliates. The Borrower will not, and will not permit any of its Subsidiaries to, enter into any transaction or series of related transactions, whether or not in the ordinary course of business, with any Affiliate of the Borrower or any of its Subsidiaries, other than on terms and conditions substantially as favorable to the Borrower or such Subsidiary as would be obtainable by the Borrower or such Subsidiary at the time in a comparable arm's-length transaction with a Person other than an Affiliate. Notwithstanding the foregoing, the provisions of this Section 6.12 shall not prohibit (i) Stock Payments permitted under Section 6.11 hereof, (ii) loans and other advances that may from time to time be made to directors, officers and/or employees of the Borrower or any of its Subsidiaries in the ordinary course of business, (iii) customary fees paid to directors of the Borrower and its Subsidiaries, (iv) the entering into, and making payments under, employment agreements, employee benefit plans, indemnification provisions and other similar compensatory arrangements with directors, officers and/or employees of the Borrower and its Subsidiaries in the ordinary course of business and (v) transactions between or among the Borrower and its Subsidiaries to the extent that such transactions are not otherwise prohibited by the terms of this Agreement. Section 6.13. Capital Expenditures. The Borrower shall not, and shall not permit any of its Subsidiaries (other than Special Purpose Subsidiaries) to, make any Capital Expenditures, except that during any fiscal year of the Borrower, the Borrower and its Subsidiaries (other than Special Purpose Subsidiaries) may make Capital Expenditures so long as the aggregate amount of such Capital Expenditures does not exceed $75,000,000 in such fiscal year. "Capital Expenditures" shall mean any expenditure for fixed or capital assets (including, without limitation, expenditures for maintenance and repairs which are capitalized in accordance with GAAP and Capitalized Lease Obligations). ARTICLE VII DEFAULTS Section 7.01. Events of Default. An Event of Default shall mean the occurrence or existence of one or more of the following events or conditions (for any reason, whether voluntary, involuntary or effected or required by Law): (a) The Borrower shall fail to pay when due principal of any Loan or of any Letter of Credit Obligation. (b) The Borrower shall fail to pay when due interest on any Loan, any fees, indemnity or expenses, or any other amount due hereunder or under any other Loan Document and such failure shall have continued for a period of five Business Days. 58 67 (c) Any representation or warranty made or deemed made by the Borrower or any Subsidiary of the Borrower in or pursuant to any Loan Document or in any certificate delivered thereunder, or any statement made by the Borrower or any Subsidiary of the Borrower in any financial statement, certificate, report, exhibit or document furnished by the Borrower or any Subsidiary of the Borrower to any Agent or any Lender pursuant to or in connection with any Loan Document, shall prove to have been false or misleading in any material respect as of the time when made or deemed made (including by omission of material information necessary to make such representation, warranty or statement not misleading). (d) The Borrower shall default in the performance or observance of any covenant contained in Article VI hereof which shall remain unremedied for a period of five days after the occurrence thereof or the Borrower shall default in the observance of any covenant contained in Section 5.01(f) hereof. (e) The Borrower shall default in the performance or observance of any other covenant, agreement or duty under this Agreement or any other Loan Document and such default shall have continued for a period of 30 days after notice of such default from the Administrative Agent to the Borrower. (f) (i) The Borrower or any Guarantor (other than a Special Purpose Subsidiary) or any Significant Subsidiary (other than a Special Purpose Subsidiary) of the Borrower shall fail to perform or observe any term, condition or covenant of any bond, note, debenture, loan or letter of credit agreement, indenture, guaranty, trust agreement, mortgage or similar instrument to which the Borrower or any such Guarantor (other than Special Purpose Subsidiary) or any such Significant Subsidiary (other than a Special Purpose Subsidiary) is a party or by which it is bound, or by which any of its properties or assets may be affected (a "Debt Instrument"), so that, as a result of any such failure to perform, the Indebtedness included therein or secured or covered thereby may at the time be declared due and payable prior to the date on which such Indebtedness would otherwise become due and payable; or (ii) any event or condition referred to in any Debt Instrument shall occur or fail to occur, so that, as a result thereof, the Indebtedness included therein or secured or covered thereby may at such time be declared due and payable prior to the date on which such Indebtedness would otherwise become due and payable; or (iii) the Borrower or any Guarantor (other than Special Purpose Subsidiary) or any Significant Subsidiary of the Borrower (other than any Special Purpose Subsidiary) shall fail to pay any Indebtedness when due, pursuant to demand under any Debt Instrument or otherwise, subject to any applicable grace period; provided, however, that the provisions of this Section 7.01(f) shall not be applicable to Indebtedness or any Debt Instrument or Debt Instruments which relate to or evidence Indebtedness which, on the date this Section 7.01(f) would otherwise be applicable thereto, is in the principal amount of less than $10,000,000 (or its equivalent in any foreign currencies) in the aggregate. (g) One or more final, non-appealable judgments for the payment of money shall have been entered against the Borrower or any Significant Subsidiary (other than a Special Purpose Subsidiary), which judgment or judgments exceed $15,000,000 (or its equivalent in any foreign currencies) in the aggregate, and such judgment or judgments shall have remained unpaid, undischarged and unstayed for a period of sixty consecutive days. (h) One or more final, non-appealable writs or warrants of attachment, garnishment, execution, distraint or similar process exceeding in value the aggregate amount of $15,000,000 (or its equivalent in any foreign currencies) shall have been issued against the Borrower or any Significant Subsidiary (other than a Special Purpose Subsidiary) or any of their respective properties and shall have remained undischarged and unstayed for a period of sixty consecutive days. (i) This Agreement or any term or provision hereof shall cease to be in full force and effect, or any Credit Party shall, or shall purport to, terminate, repudiate, declare voidable or void or otherwise contest, this Agreement or any term or provision thereof or any obligation or liability of the Credit Parties hereunder. (j) (i) Any Pension Plan is terminated pursuant to Section 4041 or 4042 of ERISA and the benefit liabilities exceed the assets based upon the assumptions used by the PBGC on plan termination by an amount such that the termination of such Pension Plan would have a Material Adverse Effect; (ii) the 59 68 Borrower or any of its Subsidiaries (or a member of their respective Controlled Group) incur a liability under Section 4062, 4063 or 4064 of ERISA for an amount that such liability would materially and adversely affect the financial condition of the Borrower and its Subsidiaries taken as a whole; or (iii) any other event or events shall occur with respect to any employee benefit plan whether or not subject to ERISA which individually or in the aggregate results in a Material Adverse Effect. (k) A proceeding shall have been instituted in respect of the Borrower or any Significant Subsidiary (other than a Special Purpose Subsidiary) (i) seeking to have an order for relief entered in respect of such Person, or seeking a declaration or entailing a finding that such Person is insolvent or a similar declaration or finding, or seeking dissolution, winding-up, charter revocation or forfeiture, liquidation, reorganization, arrangement, adjustment, composition or other similar relief with respect to such Person, its assets or its debts under any Law relating to bankruptcy, insolvency, relief of debtors or protection of creditors, termination of legal entities or any other similar Law now or hereafter in effect, or (ii) seeking appointment of a receiver, trustee, liquidator, assignee, sequestrator or other custodian for such Person or for all or any substantial part of its property and such proceeding shall result in the entry, making or grant of any such order for relief, declaration, finding, relief or appointment, or such proceeding shall remain undismissed and unstayed for a period of 60 consecutive days. (1) The Borrower or any Significant Subsidiary (other than a Special Purpose Subsidiary) shall voluntarily suspend transaction of its business; shall make a general assignment for the benefit of creditors; shall institute (or fail to controvert in a timely and appropriate manner) a proceeding described in Section 7.01(k)(i) hereof, or (whether or not any such proceeding has been instituted) shall consent to or acquiesce in any such order for relief, declaration, finding or relief described therein; shall institute (or fail to controvert in a timely and appropriate manner) a proceeding described in Section 7.01(k)(ii) hereof, or (whether or not any such proceeding has been instituted) shall consent to or acquiesce in any such appointment or to the taking of possession by any such custodian of all or any substantial part of its or his property; shall dissolve, wind-up, revoke or forfeit its charter (or other constituent documents) or liquidate itself or any substantial part of its property; or shall take any corporate or similar action in furtherance of any of the foregoing. Section 7.02. Consequences of an Event of Default. (a) If an Event of Default specified in subsections (a) through (j) of Section 7.01 hereof, or in subsections (k) and (l) with respect to a Significant Subsidiary, shall occur and be continuing or shall exist, then, in addition to all other rights and remedies which any Agent or any Lender may have hereunder or under any other Loan Document, at law, in equity or otherwise, the Lenders shall be under no further obligation to make Loans hereunder and the LC Issuer shall be under no further obligation to Issue Letters of Credit hereunder, and the Administrative Agent may, and upon the written request of the Required Lenders shall, by notice to the Borrower, from time to time do any or all of the following: (i) Declare the Commitments terminated, whereupon the Commitments will terminate and any fees hereunder shall be immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby waived, and an action therefor shall immediately accrue. (ii) Declare the unpaid principal amount of the Loans, interest accrued thereon and all other Obligations to be immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby waived, and an action therefor shall immediately accrue and demand the Borrower immediately to Cash Collateralize the full amount then available for drawing under any and all outstanding Letters of Credit. (b) If an Event of Default specified in subsection (k) or (1) of Section 7.01 hereof shall occur or exist with respect to the Borrower, then, in addition to all other rights and remedies which any Agent or any Lender may have hereunder or under any other Loan Document, at law, in equity or otherwise, the Commitments 60 69 shall automatically terminate and the Lenders shall be under no further obligation to make Loans and the LC Issuer shall be under no further obligation to Issue Letters of Credit, and the unpaid principal amount of the Loans, interest accrued thereon and all other Obligations shall become immediately due and payable and the Borrower shall immediately Cash Collateralize the full amount then available for drawing under all outstanding Letters of Credit, without presentment, demand, protest or notice of any kind, all of which are hereby waived, and an action therefor shall immediately accrue. ARTICLE VIII THE AGENTS Section 8.01. Appointment. Each Lender hereby irrevocably appoints Bank of America National Trust and Savings Association to act as Administrative Agent for such Lender under this Agreement and the other Loan Documents. Each Lender hereby irrevocably authorizes the Administrative Agent to take such action on behalf of such Lender under the provisions of this Agreement and the other Loan Documents, and to exercise such powers and to perform such duties, as are expressly delegated to or required of the Administrative Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto. Bank of America National Trust and Savings Association hereby agrees to act as Administrative Agent on behalf of the Lenders on the terms and conditions set forth in this Agreement and the other Loan Documents, subject to its right to resign as provided in Section 8.10 hereof. Each Lender hereby irrevocably authorizes the Administrative Agent to execute and deliver each of the Loan Documents and to accept delivery of such of the other Loan Documents as may not require execution by the Administrative Agent. Each Lender agrees that the rights and remedies granted to the Administrative Agent under the Loan Documents shall be exercised exclusively by the Administrative Agent, and that no Lender shall have any right individually to exercise any such right or remedy, except to the extent expressly provided herein or therein. Section 8.02. General Nature of Agents' Duties. Notwithstanding anything to the contrary elsewhere in this Agreement or in any other Loan Document: (a) No Agent shall have duties or responsibilities except those expressly set forth in this Agreement and the other Loan Documents, and no implied duties or responsibilities on the part of any Agent shall be read into this Agreement or any Loan Document or shall otherwise exist. (b) The duties and responsibilities of each Agent under this Agreement and the other Loan Documents shall be mechanical and administrative in nature, and no Agent shall have a fiduciary relationship in respect of any Lender. (c) Each Agent is and shall be solely the agent of the Lenders. No Agent assumes, and shall not at any time be deemed to have, any relationship of agency or trust with or for, or any other duty or responsibility to, the Borrower, any Subsidiary of the Borrower or any other Person (except only for its relationship as agent for, and its express duties and responsibilities to, the Lenders as provided in this Agreement and the other Loan Documents). (d) No Agent shall be under any obligation to take any action hereunder or under any other Loan Document if such Agent believes in good faith after consultation with counsel that taking such action may conflict with any Law or any provision of this Agreement or any other Loan Document, or may require such Agent to qualify to do business in any jurisdiction where it is not then so qualified. Section 8.03. Exercise of Powers. Each Agent shall take any action of the type specified in this Agreement or any other Loan Document as being within such Agent's rights, powers or discretion in accordance with directions from the Required Lenders (or, to the extent this Agreement or such Loan Document expressly requires the direction or consent of some other Person or set of Persons, then instead in accordance with the directions of such other Person or set of Persons). In the absence of such directions, each Agent shall have the authority (but under no circumstances shall be obligated), in its sole discretion, to take any such action, except to the extent this Agreement or such Loan Document expressly requires the direction or consent of the Required Lenders (or some other Person or set of Persons), in which case such Agent shall 61 70 not take such action absent such direction or consent. Any action or inaction pursuant to such direction, discretion or consent shall be binding on all the Lenders. No Agent shall have any liability to any Person as a result of (x) any Agent acting or refraining from acting in accordance with the directions of the Required Lenders (or other applicable Person or set of Persons), (y) any Agent refraining from acting in the absence of instructions to act from the Required Lenders (or other applicable Person or set of Persons), whether or not such Agent has discretionary power to take such action, or (z) any Agent taking discretionary action it is authorized to take under this Section. Section 8.04. Certain Provisions. Notwithstanding anything to the contrary elsewhere in this Agreement or any other Loan Document: (a) No Agent shall be liable for any action taken or omitted to be taken by it under or in connection with this Agreement or any other Loan Document, unless caused by its own gross negligence or willful misconduct. (b) No Agent shall be responsible for (i) the execution, delivery, effectiveness, enforceability, genuineness, validity or adequacy of this Agreement or any other Loan Document, (ii) any recital, representation, warranty, document, certificate, report or statement in, provided for in, or received under or in connection with, this Agreement or any other Loan Document or (iii) any failure of the Borrower or any Subsidiary of the Borrower or Lender to perform any of their respective obligations under this Agreement or any other Loan Document. (c) No Agent shall be under any obligation to ascertain, inquire or give any notice relating to (i) the performance or observance of any of the terms or conditions of this Agreement or any other Loan Document on the part of the Borrower or any Subsidiary of the Borrower, (ii) the business, operations, condition (financial or otherwise) or prospects of the Borrower or any other Person, or (iii) except to the extent set forth in Section 8.05(f) hereof, the existence of any Event of Default or Potential Default. (d) No Agent shall be under any obligation, either initially or on a continuing basis, to provide any Lender with any notices, reports or information of any nature, whether in its possession presently or hereafter, except for such notices, reports and other information expressly required by this Agreement or any other Loan Document to be furnished by such Agent to such Lender. Section 8.05. Administration by the Agents. (a) Any Agent may rely in good faith upon any notice or other communication of any nature (written or oral, including but not limited to telephone conversations, whether or not such notice or other communication is made in a manner permitted or required by this Agreement or any Loan Document) purportedly made by or on behalf of the proper party or parties, and no Agent shall have any duty to verify the identity or authority of any Person giving such notice or other communication. (b) Each Agent may consult with legal counsel (including, without limitation, in-house counsel for such Agent or in-house or other counsel for the Borrower), independent public accountants and any other experts selected by it from time to time, and such Agent shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts. (c) Each Agent may conclusively rely upon the truth of the statements and the correctness of the opinions expressed in any certificates or opinions furnished to such Agent in accordance with the requirements of this Agreement or any other Loan Document. Whenever any Agent shall deem it necessary or desirable that a matter be proved or established with respect to the Borrower or any Lender, such matter may be established by a certificate of the Borrower or Lender, as the case may be, and such Agent may conclusively rely upon such certificate (unless other evidence with respect to such matter is specifically prescribed in this Agreement or another Loan Document). (d) Any Agent may fail or refuse to take any action unless it shall be indemnified to its reasonable satisfaction from time to time against any and all amounts, liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature which may be imposed on, incurred by or asserted against such Agent by reason of taking or continuing to take any such action. 62 71 (e) Any Agent may perform any of its duties under this Agreement or any other Loan Document by or through agents or attorneys-in-fact. No Agent shall be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. (f) No Agent shall be deemed to have any knowledge or notice of the occurrence of any Event of Default or Potential Default unless such Agent has actual knowledge or has received notice from a Lender or the Borrower referring to this Agreement, describing such Event of Default or Potential Default, and stating that such notice is a "notice of default." If any Agent receives such a notice, such Agent shall give prompt notice thereof to the other Agent and each Lender. Section 8.06. Lender Not Relying on Agents or Other Lenders. Each Lender acknowledges as follows: (a) No Agent nor any other Lender has made any representations or warranties to it, and no act taken hereafter by any Agent or any other Lender shall be deemed to constitute any representation or warranty by such Agent or such other Lender to it. (b) It has, independently and without reliance upon any Agent or any other Lender, and based upon such documents and information as it has deemed appropriate, made its own credit and legal analysis and decision to enter into this Agreement and the other Loan Documents. (c) It will, independently and without reliance upon any Agent or any other Lender, and based upon such documents and information as it shall deem appropriate at the time, make its own decisions to take or not take action under or in connection with this Agreement and the other Loan Documents. Section 8.07. Indemnification. Each Lender agrees to reimburse and indemnify each Agent and its directors, officers, employees and agents (to the extent not reimbursed by the Borrower and without limitation of the obligations of the Borrower to do so), Pro Rata, from and against any and all amounts, losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements of any kind or nature (including, without limitation, the fees and disbursements of counsel for such Agent or such other Person in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Agent or such other Person shall be designated a party thereto) that may at any time be imposed on, incurred by or asserted against such Agent or such other Person as a result of, or arising out of, or in any way related to or by reason of, this Agreement, any other Loan Document, any transaction from time to time contemplated hereby or thereby, or any transaction financed in whole or in part or directly or indirectly with the proceeds of any Loan or Letter of Credit, provided that no Lender shall be liable for any portion of such amounts, losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements resulting solely from the gross negligence or willful misconduct of such Agent or such other Person, as finally determined by a court of competent jurisdiction. Section 8.08. Agents In Their Individual Capacities. With respect to its Commitments and the obligations owing to it, each Agent shall have the same rights and powers under this Agreement and each other Loan Document as any other Lender and may exercise the same as though it were not an Agent, and the terms "Lenders," "holders of Notes" and like terms shall include each Agent in its individual capacity as such. Each Agent and its affiliates may, without liability to account, make loans to, accept deposits from, acquire debt or equity interests in, act as trustee under indentures of, and engage in any other business with, the Borrower and any stockholder, Subsidiary or Affiliate of the Borrower, as though such Agent were not an Agent hereunder. Section 8.09. Holders of Notes. Each Agent may deem and treat the Lender which is payee of a Note as the owner and holder of such Note for all purposes hereof unless and until a Transfer Supplement with respect to the assignment or transfer thereof shall have been filed with the Administrative Agent in accordance with Section 10.14 hereof. Any authority, direction or consent of any Person who at the time of giving such authority, direction or consent is shown in the Register as being a Lender shall be conclusive and binding on each present and subsequent holder, transferee or assignee of any Note or Notes payable to such Lender or of any Note or Notes issued in exchange therefor. 63 72 Section 8.10. Successor Agents. Any Agent may resign at any time by giving 30 days' written notice thereof to the Lenders and the Borrower. Any Agent may be removed by the Required Lenders at any time by giving 10 days' prior written notice thereof to such Agent, the other Lenders and the Borrower. Upon any such resignation or removal, the Borrower shall have the right to appoint a successor Agent; provided, that the Required Lenders or the remaining Agents shall have the right, acting reasonably, to disapprove such successor Agent. If no successor Agent shall have been so appointed and consented to, and shall have accepted such appointment, within 30 days after such notice of resignation or removal, then any of the remaining Agents shall succeed to the obligations of such Agent hereunder. Each successor Agent shall be a commercial bank or trust company organized or licensed under the laws of the United States of America or any State thereof and having a combined capital and surplus of at least $1,000,000,000. Upon the acceptance by a successor Agent of its appointment as Agent hereunder, such successor Agent shall thereupon succeed to and become vested with all the properties, rights, powers, privileges and duties of the former Agent, without further act, deed or conveyance. Upon the effective date of resignation or removal of a retiring Agent, such Agent shall be discharged from its duties under this Agreement and the other Loan Documents, but the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted by it while it was Agent under this Agreement. If and so long as no successor Agent shall have been appointed, then any notice or other communication required or permitted to be given by the retiring Agent shall be sufficiently given if given by the Required Lenders, all notices or other communications required or permitted to be given to the Agent shall be given to each Lender, and all payments to be made to the retiring Agent shall be made directly to the Borrower or Lender for whose account such payment is made. Section 8.11. Calculations. No Agent shall be liable for any calculation, apportionment or distribution of payments made by it in good faith. If such calculation, apportionment or distribution is subsequently determined to have been made in error, the sole recourse of any Lender to whom payment was due but not made shall be to recover from the other Lenders any payment in excess of the amount to which they are determined to be entitled or, if the amount due was not paid by the Borrower, to recover such amount from the Borrower. Section 8.12. Funding by Administrative Agent. Unless the Administrative Agent shall have been notified in writing by any Lender not later than the close of business on the day before the day on which Loans are requested by the Borrower to be made that such Lender will not make its ratable share of such Loans, the Administrative Agent may assume that such Lender will make its ratable share of the Loans, and in reliance upon such assumption the Administrative Agent may (but in no circumstances shall be required to) make available to the Borrower a corresponding amount. If and to the extent that any Lender fails to make such payment to the Administrative Agent on such date, such Lender shall pay such amount on demand (or, if such Lender fails to pay such amount on demand, the Borrower shall pay such amount on demand), together with interest, for the Administrative Agent's own account, for each day from and including the date of the Administrative Agent's payment to and including the date of repayment to the Administrative Agent (before and after judgment) at the Federal Funds Effective Rate for the first day and thereafter at the rate or rates per annum applicable to such Loans. All payments to the Administrative Agent under this Section shall be made to the Administrative Agent at its Office in Dollars in funds immediately available at such Office, without set-off, withholding, counterclaim or other deduction of any nature. Section 8.13. Syndication Agent and Documentation Agent. Nothing in this Agreement shall impose upon the Syndication Agent or the Documentation Agent, in their respective capacities as such, any duty or responsibility whatsoever. ARTICLE IX GUARANTY Section 9.01. The Guaranty. In order to induce the Lenders to enter into this Agreement and to extend credit hereunder to the Borrower and in recognition of the direct benefits to be received by the Borrower and each Guarantor from the proceeds of the Loans and the Letters of Credit to the Borrower, each Guarantor hereby agrees with the Lenders as follows: each Guarantor hereby unconditionally and irrevocably 64 73 guarantees as primary obligor and not merely as surety the full and prompt payment when due, whether upon maturity, by acceleration or otherwise, of any and all of the Guaranteed Obligations to the Creditors. If any or all of the Guaranteed Obligations to the Creditors becomes due and payable hereunder, each Guarantor unconditionally promises to pay such Guaranteed Obligations to the Creditors in the same currency in which such Guaranteed Obligations are denominated, or order, on demand, together with any and all reasonable expenses which may be incurred by the Administrative Agent or the Creditors in collecting any of the Guaranteed Obligations. Section 9.02. Bankruptcy. Additionally, each Guarantor unconditionally and irrevocably guarantees the payment of any and all of the Guaranteed Obligations to the Creditors whether or not then due or payable by the Borrower upon the occurrence in respect of the Borrower of any of the events specified in Section 7.01(k) or (l), and unconditionally and irrevocably promises to pay such Guaranteed Obligations to the Creditors, or order, on demand, in the same currency in which such Guaranteed Obligations are denominated. Section 9.03. Nature of Liability. The liability of each Guarantor hereunder is exclusive and independent of any security for or other guaranty of the Guaranteed Obligations whether executed by such Guarantor, any other guarantor or by any other party, and the liability of each Guarantor hereunder shall not be affected or impaired by (a) any direction as to application of payment by the Borrower or by any other party, or (b) any other continuing or other guaranty, undertaking or maximum liability of a guarantor or of any other party as to the Guaranteed Obligations of the Borrower, or (c) any payment on or in reduction of any such other guaranty or undertaking, or (d) any dissolution, termination or increase, decrease or change in personnel by any Borrower, or (e) any payment made to the Administrative Agent or the other Creditors on the indebtedness which the Administrative Agent or such other Creditors repay the Borrower pursuant to court order in any bankruptcy, reorganization, arrangement, moratorium or other debtor relief proceeding (the Guaranty shall be reinstated in the case of any such disgorgement), and each Guarantor waives any right to the deferral or modification of its obligations hereunder by reason of any such proceeding. Section 9.04. Independent Obligation. The obligations of each Guarantor hereunder are independent of the obligations of any other guarantor or the Borrower, and a separate action or actions may be brought and prosecuted against each Guarantor whether or not action is brought against any other guarantor or the Borrower and whether or not any other Guarantor or the Borrower be joined in any such action or actions. Each Guarantor waives, to the fullest extent permitted by law, the benefit of any statute of limitations affecting its liability hereunder or the enforcement thereof. Any payment by the Borrower or other circumstance which operates to toll any statute of limitations as to the Borrower shall operate to toll the statute of limitations as to each Guarantor. Section 9.05. Authorization. Each Guarantor authorizes the Creditors without notice or demand (except as shall be required by applicable law and cannot be waived), and without affecting or impairing its liability hereunder, from time to time to: (a) change the manner, place or terms of payment of, and/or change or extend the time of payment of, renew, increase, accelerate or alter, any of the Guaranteed Obligations (including any increase or decrease in the rate of interest thereon), any security therefor, or any liability incurred directly or indirectly in respect thereof, and the guaranty herein made shall apply to the Guaranteed Obligations as so changed, extended, renewed or altered; (b) take and hold security for the payment of the Guaranteed Obligations and sell, exchange, release, surrender, realize upon or otherwise deal with in any manner and in any order any property by whomsoever at any time pledged or mortgaged to secure, or howsoever securing, the Guaranteed Obligations or any liabilities (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and/or any offset there against; (c) exercise or refrain from exercising any rights against the Borrower or others or otherwise act or refrain from acting; (d) release or substitute any one or more endorsers, guarantors, the Borrower or other obligors; 65 74 (e) settle or compromise any of the Guaranteed Obligations, any security therefor or any liability (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and may subordinate the payment of all or any part thereof to the payment of any liability (whether due or not) of the Borrower to its creditors other than the Creditors; (f) apply any sums by whomsoever paid or howsoever realized to any liability or liabilities of the Borrower to the Creditors regardless of what liability or liabilities of the Borrower remain unpaid; (g) consent to or waive any breach of, or any act, omission or default under, this Agreement or any of the instruments or agreements referred to herein, or otherwise amend, modify or supplement this Agreement or any of such other instruments or agreements; and/or (h) take any other action which would, under otherwise applicable principles of common law, give rise to a legal or equitable discharge of such Guarantor from its liabilities under this Section 9. Section 9.06. Reliance. It is not necessary for the Creditors to inquire into the capacity or powers of the Borrower or the officers, directors, partners or agents acting or purporting to act on its behalf, and any Guaranteed Obligations made or created in reliance upon the professed exercise of such powers shall be guaranteed hereunder. Section 9.07. Subordination. Any of the indebtedness of the Borrower now or hereafter owing to a Guarantor is hereby subordinated to the Guaranteed Obligations of the Borrower owing to the Creditors; and if the Administrative Agent so requests at a time when an Event of Default exists, all such indebtedness of the Borrower to a Guarantor shall be collected, enforced and received by the Borrower for the benefit of the Creditors and be paid over to the Administrative Agent on behalf of the Creditors on account of the Guaranteed Obligations of the Borrower to the Creditors, but without affecting or impairing in any manner the liability of such Guarantor under the other provisions of this Guaranty. Prior to the transfer by any Guarantor of any note or negotiable instrument evidencing any of the indebtedness of the Borrower to such Guarantor, such Guarantor shall mark such note or negotiable instrument with a legend that the same is subject to this subordination. Without limiting the generality of the foregoing, each Guarantor hereby agrees with the Creditors that it will not exercise any right of subrogation or contribution which it may at any time otherwise have as a result of this Guaranty (whether contractual, under Section 509 of the Bankruptcy Code or otherwise) against the Borrower or any other Guarantor until all Guaranteed Obligations have been irrevocably paid in full in cash. The Guaranteed Obligations shall not be deemed to be paid in full unless the Creditors shall have received all amounts set forth in the definition of "Guaranteed Obligations", including, in the event of a bankruptcy proceeding, all interest, fees and expenses accruing and arising after the filing of the bankruptcy petition. Section 9.08. Waiver. (a) Each Guarantor waives any right (except as shall be required by applicable law and cannot be waived) to require the Creditors to (i) proceed against the Borrower or any other party, (ii) proceed against or exhaust any security held from the Borrower or any other party or (iii) pursue any other remedy in the Administrative Agent's or any other Creditors' power whatsoever. Each Guarantor waives any defense based on or arising out of any defense of the Borrower or any other party, other than payment in full of the Guaranteed Obligations, based on or arising out of the disability of the Borrower, any other guarantor or any other party, or the unenforceability of the Guaranteed Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower other than payment in full of the Guaranteed Obligations. To the greatest extent permitted by law the Creditors may, at their election, foreclose on any security held by the Administrative Agent or any other Creditors by one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable (to the extent such sale is permitted by applicable law), or exercise any other right or remedy the Administrative Agent and any other Creditors may have against the Borrower or any other party, or any security, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent the Guaranteed Obligations have been paid. Each Guarantor waives any defense arising out of any such election by the Creditors, even though such election operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of such Guarantor against the Borrower or any other Guarantor or any other party or any security. 66 75 (b) Each Guarantor waives all presentments, demands for performance, protests and notices (except as otherwise expressly provided for herein), including without limitation notices of nonperformance, notices of protest, notices of dishonor, notices of acceptance of this Guaranty, and notices of the existence, creation or incurring of new or additional Guaranteed Obligations. Each Guarantor assumes all responsibility for being and keeping itself informed of the Borrower's financial condition and assets, and of all circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations and the nature, scope and extent of the risks which each Guarantor assumes and incurs hereunder, and agrees that the Creditors shall have no duty to advise any Guarantor of information known to them regarding such circumstances or risks. Section 9.09. Nature of Liability. It is the desire and intent of the Guarantors and the Creditors that this Guaranty shall be enforced against each Guarantor to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. If, however, and to the extent that, the obligations of any Guarantor under this Guaranty shall be adjudicated to be invalid or unenforceable for any reason (including, without limitation, because of any applicable state or federal law relating to fraudulent conveyances or transfers), then the amount of the Guaranteed Obligations of such Guarantor shall be deemed to be reduced and such Guarantor shall pay the maximum amount of the Guaranteed Obligations which would be permissible under applicable law. Section 9.10. Judgments Binding. If claim is ever made upon any Creditor or any subsequent holder of a Note of the Borrower for repayment or recovery of any amount or amounts received in payment or on account of any of the Guaranteed Obligations and any of the aforesaid payees repays all or part of said amount by reason of (a) any judgment, decree or order of any court or administrative body having jurisdiction over such payee or any of its property, or (b) any settlement or compromise of any such claim effected by such payee with any such claimant, then and in such event each Guarantor agrees that any such judgment, decree, order, settlement or compromise shall be binding upon each Guarantor, notwithstanding any revocation hereof or the cancellation of any Note or other instrument evidencing any liability of any Borrower, and each Guarantor shall be and remain liable to the aforesaid payees hereunder for the amount so repaid or recovered to the same extent as if such amount had never originally been received by any such payee. ARTICLE X MISCELLANEOUS Section 10.01. Holidays. Whenever any payment or action to be made or taken hereunder or under any other Loan Document shall be stated to be due on a day which is not a Business Day, such payment or action shall be made or taken on the next following Business Day and such extension of time shall be included in computing interest or fees, if any, in connection with such payment or action. Section 10.02. Records. The unpaid principal amount of the Loans owing to each Lender, the unpaid interest accrued thereon, the interest rate or rates applicable to such unpaid principal amount, the duration of such applicability, each Lender's Revolving Credit Committed Amount shall at all times be ascertained from the records of the Administrative Agent, which shall be conclusive absent manifest error. Section 10.03. Amendments and Waivers. Neither this Agreement nor any other Loan Document may be amended, modified or supplemented except in accordance with the provisions of this Section. The Required Lenders and the Borrower may from time to time amend, modify or supplement the provisions of this Agreement or any other Loan Document for the purpose of amending, adding to, or waiving any provisions or changing in any manner the rights and duties of the Borrower, any Agent, the LC Issuer or any Lender. Any such amendment, modification or supplement made by the Borrower and the Required Lenders, in accordance with the provisions of this Section shall be binding upon the Borrower, each Lender, the LC Issuer and each Agent. The Agents shall enter into such amendments, modifications, supplements or waivers from time to time as directed by the Required Lenders, and only as so directed, provided, that no such amendment, modification, waiver or supplement may be made which will: (a) Increase the Revolving Credit Committed Amount of any Lender over the amount thereof then in effect, or extend the Revolving Credit Maturity Date or the Competitive Bid Loan Expiration Date 67 76 without the written consent of each Lender affected thereby, or increase the Total Revolving Commitment Amount to exceed $300,000,000; (b) Reduce the principal amount of or extend the time for any payment of any Loan, or reduce the amount of or rate of interest or extend the time for payment of interest borne by any Loan or extend the time for payment of or reduce the amount of any Facility Fee or reduce or postpone the date for payment of any other fees, expenses, indemnities or amounts payable under any Loan Document, without the written consent of each Lender affected thereby; (c) Change the definition of "Required Lenders" or amend this Section 10.03, Section 10.13 hereof or any provision of this Agreement that states a requirement for the consent of all the Lenders, without the written consent of all the Lenders; (d) Release any of the Guarantors without the written consent of all the Lenders; (e) Amend or waive any of the provisions of Article VIII hereof, or impose additional duties upon any Agent or otherwise adversely affect the rights, interests or obligations of any Agent, without the written consent of such Agent; or (f) Amend or waive any of the provisions of Section 2.06 hereof or the Letters of Credit Related Documents, or impose additional duties upon the LC Issuer or otherwise adversely affect the rights, interests or obligations of the LC Issuer, without the written consent of the LC Issuer, and provided further, that Transfer Supplements may be entered into in the manner provided in Section 10.14 hereof. Any such amendment, modification or supplement must be in writing and shall be effective only to the extent set forth in such writing. Any Event of Default or Potential Default waived or consented to in any such amendment, modification or supplement shall be deemed to be cured and not continuing to the extent and for the period set forth in such waiver or consent, but no such waiver or consent shall extend to any other or subsequent Event of Default or Potential Default or impair any right consequent thereto. Section 10.04. No Implied Waiver; Cumulative Remedies. No course of dealing and no delay or failure of any Agent or any Lender in exercising any right, power or privilege under this Agreement or any other Loan Document shall affect any other or future exercise thereof or exercise of any other right, power or privilege; nor shall any single or partial exercise of any such right, power or privilege or any abandonment or discontinuance of steps to enforce such a right, power or privilege preclude any further exercise thereof or of any other right, power or privilege. The rights and remedies of the Agents and the Lenders under this Agreement and any other Loan Document are cumulative and not exclusive of any rights or remedies which any Agent or any Lender would otherwise have hereunder or thereunder, at law, in equity or otherwise. Section 10.05. Notices. (a) Except to the extent otherwise expressly permitted hereunder or thereunder, all notices, requests, demands, directions and other communications (collectively "notices") under this Agreement or any other Loan Document shall be in writing (including telexed and telecopied communication) and shall be sent by first-class mail, or by nationally-recognized overnight courier, or by telex or telecopier (with confirmation in writing mailed first-class or sent by such an overnight courier), or by personal delivery. All notices shall be sent to the applicable party at the address stated on the signature pages hereof or in accordance with the last unrevoked written direction from such party to the other parties hereto, in all cases with postage or other charges prepaid. Any such properly given notice shall be effective on the earliest to occur of receipt, telephone confirmation of receipt of telex or telecopy communication, one Business Day after delivery to a nationally-recognized overnight courier, or three Business Days after deposit in the mail. (b) Any Lender giving any notice to the Borrower shall simultaneously send a copy thereof to each Agent, and each Agent shall promptly notify the other Lenders of the receipt by it of any such notice. (c) Each Agent and each Lender may rely on any notice (whether or not such notice is made in a manner permitted or required by this Agreement or any Loan Document) purportedly made by or on behalf of the Borrower, and neither Agent nor any Lender shall have any duty to verify the identity or authority of any Person giving such notice. 68 77 Section 10.06. Expenses; Taxes; Indemnity. (a) The Borrower agrees to pay or cause to be paid and to save each Agent, the LC Issuer and, in the case of clause (iii) below, each of the Lenders harmless against liability for the payment of all reasonable out-of-pocket costs and expenses (including but not limited to reasonable fees and expenses of one counsel to the Agents and auditors, consulting engineers, appraisers, and all other professional, accounting, evaluation and consulting costs approved by the Borrower and, with respect to costs incurred by the Agents, or any Lender or the LC Issuer pursuant to clause (iii) below, reasonable fees and expenses of counsel (including allocated costs of in-house counsel to the extent that outside counsel has not been retained by such Lender)) incurred by the Agents or, in the case of clause (iii) below any Lender or the LC Issuer from time to time arising from or relating to (i) the negotiation, preparation, execution, delivery, administration and performance of this Agreement and the other Loan Documents, (ii) any requested amendments, modifications, supplements, waivers or consents (whether or not ultimately entered into or granted) to this Agreement or any other Loan Document, and (iii) following the occurrence of an Event of Default, the enforcement or preservation of rights under this Agreement or any other Loan Document (including but not limited to any such costs or expenses arising from or relating to (A) collection or enforcement of an outstanding Loan or any other amount owing hereunder or thereunder by any Agent, the LC Issuer or any Lender, and (B) any litigation, proceeding, dispute, work-out, restructuring or rescheduling related in any way to this Agreement or the other Loan Documents). (b) The Borrower hereby agrees to pay all stamp, document, transfer, recording, filing, registration, search, sales and excise fees and taxes and all similar impositions now or hereafter determined by any Agent, the LC Issuer or any Lender to be payable in connection with this Agreement or any other Loan Documents or any other documents, instruments or transactions pursuant to or in connection herewith or therewith, and the Borrower agrees to save each Agent, the LC Issuer and each Lender harmless from and against any and all present or future claims, liabilities or losses with respect to or resulting from any omission to pay or delay in paying any such fees, taxes or impositions. (c) The Borrower hereby agrees to reimburse and indemnify each of the Indemnified Parties from and against any and all losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel (including, without duplication, allocated costs of in-house counsel) for such Indemnified Party in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnified Party shall be designated a party thereto) that may at any time be imposed on, asserted against or incurred by such Indemnified Party as a result of, or arising out of, or in any way related to or by reason of, this Agreement or any other Loan Document, any transaction from time to time contemplated hereby or thereby, or any transaction financed in whole or in part or directly or indirectly with the proceeds of any Loan or Letter of Credit (and without in any way limiting the generality of the foregoing, including any violation or breach of any Requirement of Law or any other Law by the Borrower or any Subsidiary); or any exercise by any Agent or any Lender of any of its rights or remedies under this Agreement or any other Loan Document); but excluding any such losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements resulting primarily from the gross negligence or willful misconduct of such Indemnified Party. If and to the extent that the foregoing obligations of the Borrower under this subsection (c), or any other indemnification obligation of the Borrower hereunder or under any other Loan Document, are unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable Law. Section 10.07. Severability. The provisions of this Agreement are intended to be severable. If any provision of this Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability thereof in any other jurisdiction or the remaining provisions hereof in any jurisdiction. Section 10.08. Prior Understandings. This Agreement and the other Loan Documents supersede all prior and contemporaneous understandings and agreements other than with regard to any upfront fees, whether written or oral, among the parties hereto relating to the transactions provided for herein and therein. 69 78 Section 10.09. Duration; Survival. All representations and warranties of the Borrower contained herein or in any other Loan Document or made in connection herewith shall survive the making of, and shall not be waived by the execution and delivery, of this Agreement or any other Loan Document, any investigation by or knowledge of any Agent or any Lender, the making of any Loan, or any other event or condition whatever. All covenants and agreements of the Credit Parties contained herein or in any other Loan Document shall continue in full force and effect from and after the date hereof so long as the Borrower may borrow hereunder or request the Issuances of Letters of Credit and until payment in full of all Obligations other than indemnity obligations not yet due and payable. Without limitation, all obligations of the Borrower hereunder or under any other Loan Document to make payments to or indemnify each Agent or any Lender shall survive the payment in full of all other obligations, termination of the Borrower's right to borrow hereunder, and all other events and conditions whatever. In addition, all obligations of each Lender to make payments to or indemnify the Agents shall survive the payment in full by the Borrower of all Obligations, termination of the Borrower's right to borrow hereunder, and all other events or conditions whatever. Section 10.10. Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument. Section 10.11. Limitation on Payments. The parties hereto intend to conform to all applicable Laws in effect from time to time limiting the maximum rate of interest that may be charged or collected. Accordingly, notwithstanding any other provision hereof or of any other Loan Document, the Borrower shall not be required to make any payment to or for the account of any Lender, and each Lender shall refund any payment made by the Borrower, to the extent that such requirement or such failure to refund would violate or conflict with nonwaivable provisions of applicable Laws limiting the maximum amount of interest which may be charged or collected by such Lender. Section 10.12. Set-Off. Each Credit Party hereby agrees that, to the fullest extent permitted by law, if any Obligation of the Borrower shall be due and payable (by acceleration or otherwise), each Lender and the LC Issuer shall have the right, without notice to the Borrower, such Credit Party or any other Person, to set-off against and to appropriate and apply to the Obligation any indebtedness, liability or obligation of any nature owing to such Credit Party by such Lender or the LC Issuer, including but not limited to all deposits (whether time or demand, general or special, provisionally credited or finally credited, whether or not evidenced by a certificate of deposit and in whatever currency denominated) now or hereafter maintained by such Credit Party with such Lender or the LC Issuer, as the case may be. Such right shall be absolute and unconditional in all circumstances and, without limitation, shall exist whether or not such Lender or the LC Issuer or any other Person shall have given notice or made any demand to the Borrower, such other Credit Party or any other Person, whether such indebtedness, obligation or liability owed to such Credit Party is contingent, absolute, matured or unmatured (it being agreed that such Lender or the LC Issuer may deem such indebtedness, obligation or liability to be then due and payable at the time of such setoff), and regardless of the existence or adequacy of any collateral, guaranty or any other security, right or remedy available to any Lender or the LC Issuer or any other Person. Each Credit Party hereby agrees that, to the fullest extent permitted by law, any Participant and any branch, subsidiary or affiliate of any Lender or any Participant shall have the same rights of set-off as a Lender as provided in this Section (regardless of whether such Participant, branch, subsidiary or affiliate would otherwise be deemed in privity with or a direct creditor of the Borrower). The rights provided by this Section are in addition to all other rights of set-off and banker's lien and all other rights and remedies which any Lender (or any such Participant, branch, subsidiary or affiliate) may otherwise have under this Agreement, any other Loan Document, at law or in equity, or otherwise, and nothing in this Agreement or any Loan Document shall be deemed a waiver or prohibition of or restriction on the rights of set-off or bankers' lien of any such Person. Section 10.13. Sharing of Collections. The Lenders hereby agree among themselves that if any Lender shall receive (by voluntary payment, realization upon security, set-off or from any other source) any amount on account of the Loans, interest thereon, or any other Obligation contemplated by this Agreement or the other Loan Documents to be made by the Borrower pro rata to all Lenders in greater proportion than any such amount received by any other Lender, then the Lender receiving such proportionately greater payment shall 70 79 notify each other Lender and the Agents of such receipt, and equitable adjustment will be made in the manner stated in this Section so that, in effect, all such excess amounts will be shared ratably among all of the Lenders. The Lender receiving such excess amount shall purchase (which it shall be deemed to have done simultaneously upon the receipt of such excess amount) for cash from the other Lenders a participation in the applicable Obligations owed to such other Lenders in such amount as shall result in a ratable sharing by all Lenders of such excess amount (and to such extent the receiving Lender shall be a Participant). If all or any portion of such excess amount is thereafter recovered from the Lender making such purchase, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, together with interest or other amounts, if any, required by Law to be paid by the Lender making such purchase. The Borrower hereby consents to and confirms the foregoing arrangements. Each Participant shall be bound by this Section as fully as if it were a Lender hereunder. Section 10.14. Successors and Assigns; Participations; Assignments. (a) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Borrower, the LC Issuer, the Lenders, all future holders of the Notes, each Agent and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights hereunder or interests herein without the prior written consent of all the Lenders and each Agent, and any purported assignment without such consent shall be void. (b) Participations. Any Lender may, in accordance with applicable Law, at any time sell participations to one or more commercial banks or other Persons (each a "Participant") in all or a portion of its rights and obligations under this Agreement and the other Loan Documents (including, without limitation, all or a portion of its Commitments and the Loans owing to it and any Note held by it); provided, that (i) any such Lender's obligations under this Agreement and the other Loan Documents shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the parties hereto shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and each of the other Loan Documents, (iv) such Participant shall be bound by the provisions of Sections 10.13 and 10.16 hereof, and the Lender selling such participation shall obtain from such Participant a written confirmation of its agreement to be so bound, (v) no Participant (unless such Participant is an affiliate of such Lender, or is itself a Lender) shall be entitled to require such Lender to take or refrain from taking action under this Agreement or under any other Loan Document, except that such Lender may agree with such Participant that such Lender will not, without such Participant's consent, take action of the type described in subsections (a), (b), (c) or (d) of Section 10.03 hereof to the extent relating to such Participant's participation; notwithstanding the foregoing, in no event shall any participation by any Lender have the effect of releasing such Lenders from its obligations hereunder, and (vi) no Participant shall be an Affiliate of any Credit Party. The Borrower agrees that any such Participant shall be entitled to the benefits of Sections 2.14, 2.16 and 10.06 with respect to its participation in the Commitments and the Loans outstanding from time to time but only to the extent such Participant sustains such losses; provided, that no such Participant shall be entitled to receive any greater amount pursuant to such Sections than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred to such Participant had no such transfer occurred and nothing in this Section shall relieve such transferor Lender from its obligations under Section 2.17 hereof. (c) Assignments. Any Lender may, in the ordinary course of its commercial banking business and in accordance with applicable Law, at any time assign all or a portion of its rights and obligations under this Agreement and the other Loan Documents (including, without limitation, all or any portion of its Commitments and Loans owing to it and any Note held by it) to any Eligible Assignee (each a "Purchasing Lender"); provided, that 71 80 (i) any such assignment to a Purchasing Lender which is not a Lender shall be made only with the consent of the Borrower (provided that such consent of the Borrower shall not be required during the occurrence of and continuation of an Event of Default) and each Agent which with respect to each Agent shall not be unreasonably withheld, (ii) if a Lender makes such an assignment of less than all of its then remaining rights and obligations under this Agreement and the other Loan Documents, such transferor Lender shall retain, after such assignment, a minimum principal amount of $5,000,000 of the Commitments and Loans then outstanding, and such assignment shall be in a minimum aggregate principal amount of $5,000,000 of the Commitments and Loans then outstanding, (iii) each such assignment shall be of a constant, and not a varying, percentage of each Commitment of the transferor Lender and of all of the transferor Lender's rights and obligations under this Agreement and the other Loan Documents, (iv) each such assignment shall be made pursuant to a Transfer Supplement in substantially the form of Exhibit G to this Agreement, duly completed (a "Transfer Supplement"); and (v) to the extent the Other Credit Agreement is in effect, the assigning Lender shall assign the same percentage of its "Commitment" under the Other Credit Agreement concurrently with such assignment. In order to effect any such assignment, the transferor Lender and the Purchasing Lender shall execute and deliver to the Administrative Agent a duly completed Transfer Supplement (including the consents required by clause (i) of the preceding sentence) with respect to such assignment, together with any Note or Notes subject to such assignment (the "Transferor Lender Notes") and (except in the case of a transfer required by the Borrower under Section 10.17 hereof) a processing and recording fee of $3,500; and, upon receipt thereof, the Administrative Agent shall accept such Transfer Supplement. Notwithstanding the foregoing, no such processing and recording fee shall be payable in the case of a replacement of a Lender pursuant to Section 2.18 or 10.17. Upon receipt of the Purchase Price Receipt Notice pursuant to such Transfer Supplement, the Administrative Agent shall record such acceptance in the Register. Upon such execution, delivery, acceptance and recording, from and after the Transfer Effective Date specified in such Transfer Supplement (x) the Purchasing Lender shall be a party hereto and, to the extent provided in such Transfer Supplement, shall have the rights and obligations of a Lender hereunder, and (y) the transferor Lender thereunder shall be released from its obligations under this Agreement to the extent so transferred (and, in the case of an Transfer Supplement covering all or the remaining portion of a transferor Lender's rights and obligations under this Agreement, such transferor Lender shall cease to be a party to this Agreement) from and after the Transfer Effective Date. To the extent requested by the Purchasing Lender, on or prior to the Transfer Effective Date specified in an Transfer Supplement, the Borrower, at its expense, shall execute and deliver to the Administrative Agent (for delivery to the Purchasing Lender) new Notes evidencing such Purchasing Lender's assigned Commitments or Loans and (for delivery to the transferor Lender) replacement Notes in the principal amount of the Loans or Commitments retained by the transferor Lender (such Notes to be in exchange for, but not in payment of, those Notes then held by such transferor Lender). Each such Note shall be dated the date and be substantially in the form of the predecessor Note. The Administrative Agent shall mark the predecessor Notes, if any, "exchanged" and deliver them to the Borrower. Accrued interest and accrued fees shall be paid to the Purchasing Lender at the same time or times provided in the predecessor Notes and this Agreement. A transfer by a Lender of its rights under this Agreement from one of such Lender's branches to another of its branches shall not be considered to be an assignment for the purposes of this Section 10.14 and shall be permitted without the consent of the Borrower or of the Agents, provided that to the extent such transfer would, at the time of such transfer, result in increased costs under Section 2.14 or 2.16 from those being charged by the transferring branch, the Borrower shall not be obligated to pay such increased costs (although 72 81 the Borrower shall be obligated to pay any other increased costs of the type described above resulting from changes after the date of the respective transfer). The foregoing proviso shall also apply to such transfer from a Lender to another Lender or any affiliate thereof or of an affiliate of such transferor Lender or to a Person which will become a Lender. (d) Register. The Administrative Agent shall maintain at its office a copy of each Transfer Supplement delivered to it and a register (the "Register") for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Loans owing to, each Lender from time to time. The entries in the Register shall be conclusive absent manifest error and the Borrower, the Agents and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of the 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) Financial and Other Information. The Borrower authorizes each Agent and each Lender to disclose to any Participant or Purchasing Lender (each, a "transferee") and any prospective transferee any and all financial and other information in such Person's possession concerning the Borrower and its Subsidiaries and Affiliates which has been or may be delivered to such Person by or on behalf of the Borrower in connection with this Agreement or any other Loan Document or such Person's credit evaluation of the Borrower and its Subsidiaries and Affiliates; subject, however, to the provisions of Section 10.16 hereof. (f) Notwithstanding anything to the contrary contained herein, any Lender (a "Granting Lender") may grant to a special purpose funding vehicle (an "SPC") of such Granting Lender, identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower, the option to provide to the Borrower all or any part of any Loan that such Granting Lender would otherwise be obligated to make to the Borrower pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to make any Loan, (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof and (iii) no SPC or Granting Lender shall be entitled to receive any greater amount pursuant to Section 2.14 or 2.16 than the Granting Lender would have been entitled to receive had the Granting Lender not otherwise granted such SPC the option to provide any Loan to the Borrower. The making of any Revolving Credit Loan by an SPC hereunder shall utilize the Revolving Credit Commitment of the Granting Lender (and, if such Loan is a Competitive Bid Loan, shall be deemed to utilize the Total Revolving Credit Commitment of all the Lenders) to the same extent, and as if, such Loan were made by the Granting Lender. Each party hereto hereby agrees that no SPC shall be liable for any obligation of any kind with respect to this Agreement under any circumstances whatsoever, including without limitation whether or not the related Granting Lender makes such payment. The foregoing shall not release the Granting Lender from any obligation hereunder; and the Granting Lender's liability shall be determined as if no grant to an SPC had been made by it. Each party hereto hereby acknowledges and agrees that no SPC shall have any voting rights hereunder and that the voting rights attributable to any extensions of credit made by an SPC shall be exercised only by the relevant Granting Lender. Each Granting Lender shall serve as the administrative agent and attorney-in-fact for its SPC and shall on behalf of its SPC: (i) receive any and all payments made for the benefit of such SPC and (ii) give and receive all communications and notices and take all actions hereunder to the extent, if any, such SPC shall have any rights hereunder. To the extent an SPC shall have the right to receive or give any such notice or take any such action in writing, it shall be signed by its Granting Lender as administrative agent and attorney-in-fact for such SPC and need not be signed by such SPC on its own behalf. The Borrower, the Guarantors, the Administrative Agent and the Lenders may rely thereon without any requirement that the SPC sign or acknowledge the same. In addition, notwithstanding anything to the contrary contained in this Section 10.14, any SPC may (i) with notice to, but without the prior written consent of, the Borrower or the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loans to its Granting Lender or to any financial institutions providing liquidity and/or credit facilities to or for the account of such SPC to fund the Loans made by such SPC or to support the securities (if any) issued by such SPC to fund such Loans and (ii) disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider or a surety, guarantee or credit or liquidity enhancement to such SPC. In the event that an SPC extends a Loan to the 73 82 Borrower as contemplated above, the Borrower shall repay such Loan to the SPC through the Administrative Agent in full on the maturity date thereof, notwithstanding any provision for repayments being affected on a basis of re-borrowings. The foregoing shall not release the Granting Lender from any obligation hereunder, the Granting Lender's liability to be determined as if no grant to an SPC had been made by it. Each party hereto agrees that until the 369th day following the maturity of the last maturing commercial paper note issued or to be issued by an SPC, it will not institute, or join with others in instituting, against the SPC any involuntary bankruptcy or insolvency proceeding under any applicable bankruptcy reorganization, insolvency or similar law, as now or hereafter in effect. In the event that an SPC makes a Loan hereunder, the Borrower shall repay the full amount of such Loan to the SPC through the Administrative Agent on the maturity date thereof, notwithstanding any provision contained in this Agreement with respect to netting of amounts payable by the Borrower against amounts being borrowed by the Borrower on the same day. Section 10.15. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial. (a) Governing Law. THIS AGREEMENT AND ALL OTHER LOAN DOCUMENTS (EXCEPT TO THE EXTENT, IF ANY, OTHERWISE EXPRESSLY STATED IN SUCH OTHER LOAN DOCUMENTS) SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CHOICE OF LAW PRINCIPLES. (b) Certain Waivers. THE BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY: (i) AGREES THAT ANY ACTION, SUIT OR PROCEEDING BY ANY PERSON ARISING FROM OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY STATEMENT, COURSE OF CONDUCT, ACT, OMISSION, OR EVENT OCCURRING IN CONNECTION HEREWITH OR THEREWITH (COLLECTIVELY, "RELATED LITIGATION") MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION SITTING IN THE CITY AND COUNTY OF NEW YORK, NEW YORK, SUBMITS TO THE JURISDICTION OF SUCH COURTS, AND TO THE FULLEST EXTENT PERMITTED BY LAW AGREES THAT IT WILL NOT BRING ANY RELATED LITIGATION IN ANY OTHER FORUM (BUT NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT OR ANY LENDER TO BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM); (ii) WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY RELATED LITIGATION BROUGHT IN ANY SUCH COURT, WAIVES ANY CLAIM THAT ANY SUCH RELATED LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM, AND WAIVES ANY RIGHT TO OBJECT, WITH RESPECT TO ANY RELATED LITIGATION BROUGHT IN ANY SUCH COURT, THAT SUCH COURT DOES NOT HAVE JURISDICTION OVER THE BORROWER; (iii) CONSENTS AND AGREES TO SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER LEGAL PROCESS IN ANY RELATED LITIGATION BY REGISTERED OR CERTIFIED U.S. MAIL, POSTAGE PREPAID, TO THE BORROWER AT THE ADDRESS FOR NOTICES DESCRIBED IN SECTION 10.05 HEREOF, AND CONSENTS AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE IN EVERY RESPECT VALID AND EFFECTIVE SERVICE (BUT NOTHING HEREIN SHALL AFFECT THE VALIDITY OR EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER MANNER PERMITTED BY LAW); AND (iv) WAIVES THE RIGHT TO TRIAL BY JURY IN ANY RELATED LITIGATION. Section 10.16. Confidentiality. Except as may be required by Law, each Lender and each Agent covenants and agrees to use its best efforts not to permit any data or information relating to the Borrower or any of its Subsidiaries or the business of the Borrower or any of its Subsidiaries (other than any data or information which is otherwise publicly available or which is received by any such party in a capacity in which 74 83 such party is not bound by any restriction of a nature similar to that imposed by this Section 10.16), which data or information such Lender or any Agent possesses due to such party's relation to the transactions contemplated by the Loan Documents, to be out of such party's possession or the contents thereof to be divulged to any other Person; provided, however, that such data or information may be disclosed to the lawyers or accountants of such Lender or any Agent and to any Person empowered by Law to examine the records of any such Person and to any potential participant in, or assignee or transferee of, its rights under any Loan Documents which potential participant, assignee or transferee shall have, in each case, agreed with such party to comply with the terms of this Section 10.16. Section 10.17. Replacement of Lenders. If (a) the Borrower is required to make a payment to a particular Lender pursuant to Sections 2.14 or 2.16 hereof (or pursuant to a comparable provision in any agreement with respect to the Borrower's Indebtedness for borrowed money between the Borrower, such Lender and at least five other lenders) or (b) the Borrower is precluded from requesting Loans of any type from a particular Lender pursuant to Section 2.08(e) hereof, the Borrower may, upon not less than 15 Business Days' notice to the Administrative Agent, either (x) immediately terminate the Commitments of such Lender, prepay (subject to Section 2.14(b) hereof) such Lender's Loans, together with interest accrued thereon and all other amounts payable with respect thereto, and pay all other amounts then due and owing to such Lender (in which event the Total Revolving Credit Commitment shall be reduced by the amount of such Lender's Revolving Credit Committed Amount) or (y) cause a Replacement Lender reasonably satisfactory to the Administrative Agent (which may be one of the other Lenders) to purchase all of such Lender's interests in accordance with the provisions of Section 10.14(c) hereof. In such event, to the extent the Other Credit Agreement is in effect, the Borrower must also terminate such Lender's "Commitment" under the Other Credit Agreement and such Replacement Lender must purchase such Lender's interest under the Other Credit Agreement. Section 10.18. Judgment Currency. (a) The Borrower's obligation hereunder and under the other Loan Documents to make payments in Dollars or any other currency (the "Obligation Currency") shall not be discharged or satisfied by any tender or recovery pursuant to any judgment expressed in or converted into any currency other than the Obligation Currency, except to the extent that such tender or recovery results in the effective receipt by the Administrative Agent, the LC Issuer or the respective Lender of the full amount of the Obligation Currency expressed to be payable to the Administrative Agent, the LC Issuer or such Lender under this Agreement or the other Loan Documents. If for the purpose of obtaining or enforcing judgment against the Borrower in any court or in any jurisdiction, it becomes necessary to convert into or from any currency other than the Obligation Currency (such other currency being hereinafter referred to as the "Judgment Currency") an amount due in the Obligation Currency, the conversion shall be made, at the rate of exchange (as quoted by the Administrative Agent or if the Administrative Agent does not quote a rate of exchange on such currency, by a known dealer in such currency designated by the Administrative Agent) determined, in each case, as of the day immediately preceding the day on which the judgment is given (such Business Day being hereinafter referred to as the "Judgment Currency Conversion Date"). (b) If there is a change in the rate of exchange prevailing between the Judgment Currency Conversion Date and the date of actual payment of the amount due, the Borrower covenants and agrees to pay, or cause to be paid, such additional amounts, if any (but in any event not a lesser amount) as may be necessary to ensure that the amount paid in the Judgment Currency, when converted at the rate of exchange prevailing on the date of payment, will produce the amount of the Obligation Currency which could have been purchased with the amount of Judgment Currency stipulated in the judgment or judicial award at the rate or exchange prevailing on the Judgment Currency Conversion Date. (c) For purposes of determining any rate of exchange for this Section 10.18, such amounts shall include any premium and costs payable in connection with the purchase of the Obligation Currency. 75 84 IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly authorized, have executed and delivered this Agreement as of the date first above written. ATTEST: FOSTER WHEELER CORPORATION By ---------------------------------------------- Title: Address For Notices: Perryville Corporate Park Clinton, NJ 08809-4000 Attn: Vice President And Treasurer Telephone: 908-713-2945 Telecopier: 908-713-2953 By ----------------------------------------------------- Title:
76 85 EXHIBIT A TO CREDIT AGREEMENT FOSTER WHEELER CORPORATION REVOLVING CREDIT NOTE $________________ New York, New York ________________, ____ FOR VALUED RECEIVED, the undersigned, FOSTER WHEELER CORPORATION, a New York corporation, (the "Borrower"), promises to pay to the order of [NAME OF LENDER] (the "Lender") on or before the Revolving Credit Maturity Date, and at such earlier dates as may be required by the Agreement (as defined below), the lesser of (i) the principal sum of ________ ($_______) or (ii) the aggregate unpaid principal amount of all Revolving Credit Loans made by the Lender to the Borrower from time to time pursuant to the Agreement. The Borrower further promises to pay to the order of the Lender interest on the unpaid principal amount hereof from time to time outstanding at the rate or rates per annum determined pursuant to the Agreement, payable on the dates set forth in the Agreement. This Note is one of the "Revolving Credit Notes" as referred to in, and is entitled to the benefits of, the Revolving Credit Agreement, dated as of February 12, 1999, by and among the Borrower, the Guarantors party thereto from time to time, the Lenders party thereto from time to time and Bank of America National Trust and Savings Association, as Administrative Agent (as the same may be amended, modified or supplemented from time to time, the "Agreement"), which among other things provides for the acceleration of the maturity hereof upon the occurrence of certain events and for prepayments in certain circumstances and upon certain terms and conditions. Terms defined in the Agreement have the same meanings herein. Except as otherwise set forth in the Agreement, the Borrower hereby expressly waives presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note and the Agreement, and an action for amounts due hereunder or thereunder shall immediately accrue. This Note shall be governed by, construed and enforced in accordance with the laws of the State of New York, without regard to principles of choice of law. FOSTER WHEELER CORPORATION By Title:______________________________ 86 EXHIBIT B TO CREDIT AGREEMENT [Form of Competitive Bid Loan Quote Request] _________________, ____ To: Bank of America National Trust and Savings Association, as Administrative Agent From: Foster Wheeler Corporation Re: Competitive Bid Loan Quote Request Pursuant to Section 2.03(b) of the Revolving Credit Agreement dated as of February 12, 1999, by and among FOSTER WHEELER CORPORATION, the guarantors party thereto, the lenders party thereto and Bank of America National Trust and Savings Association, as Administrative Agent (as the same may from time to time be amended or modified, the "Agreement"), we hereby give notice that we request Competitive Bid Loan Quotes for the following proposed Competitive Bid Borrowing(s):
- -------------------------------------------------------------------------------- Borrowing Principal Interest Date Amount(1) Type(2) Period(3) Currency - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Terms used herein have the meanings assigned to them in the Agreement. FOSTER WHEELER CORPORATION By Title:_____________________________ - ---------- (1) Each amount must be a Dollar Equivalent of $5,000,000 or a higher integral multiple of $1,000,000 (to the extent practical in the case of Eurocurrency Loans). (2) Insert either "LIBOR-based Margin" (in the case of LIBOR-based Loans), "CD Rate Margin" (in the case of CD Rate Loans), "Base Rate Margin" (in the case of Base Rate Loans) or "Absolute Rate" (in the case of Absolute Rate Loans). (3) Each Interest Period must be not less than seventy days or more than 180 days. 87 EXHIBIT C TO CREDIT AGREEMENT [Form of Competitive Bid Loan Quote] Bank of America National Trust and Savings Association, as Administrative Agent 1850 Gateway Boulevard, 5th Floor Concord, California 94520 ATTENTION: ________________ RE: COMPETITIVE BID LOAN QUOTE TO FOSTER WHEELER CORPORATION (THE "BORROWER") This Competitive Bid Loan Quote is given in accordance with Section 2.03(d) of the Revolving Credit Agreement dated as of February 12, 1999, by and among Foster Wheeler Corporation, a New York corporation (the "Borrower"), the guarantors party thereto, the lenders party thereto and Bank of America National Trust and Savings Association, as Administrative Agent (as the same may from time to time be amended or modified, the "Agreement"). Terms defined in the Agreement are used herein as defined therein. In response to the Borrower's invitation dated ___________, ___, we hereby make the following Competitive Bid Loan Quote(s) on the following terms: 1. Quoting Bank: 2. Person to contact at Quoting Bank: 3. We hereby offer to make Competitive Bid Loan(s) in the following principal amounts, for the following Interest Periods and at the following rates: 88
- -------------------------------------------------------------------------------- Borrowing Principal Interest Date(1) Amount(2) Type(3) Period(4) Rate(5) Currency - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
We understand and agree that the offer(s) set forth above, subject to the satisfaction of the applicable conditions set forth in the Agreement, irrevocably obligate(s) us to make the Competitive Bid Loan(s) for which any offer(s) [is] [are] accepted, in whole or in part (subject to Section 2.03(g) of the Agreement). Very truly yours, [LENDER] By Authorized Officer Dated: ________________ - ---------- (1) As specified in the related Competitive Bid Loan Quote Request. (2) The principal amount bid for each Interest Period may not exceed the principal amount of Competitive Bid Loans requested. Bids must be made for a Dollar Equivalent of at least $5,000,000 or a higher integral multiple of $1,000,000. (3) Indicate "LIBOR-based Margin" (in the case of LIBOR-based Loans), "CD Rate Margin" (in the case of CD Rate Loans), "Base Rate Margin" (in the case of Base Rate Loans) or "Absolute Rate" (in the case of Absolute Rate Loans). (4) Must be not less than seven days or more than 180 days, as specified in the related Competitive Bid Loan Quote Request. (5) For a LIBOR-based Loan, specify margin over or under the LIBOR-Rate determined for the applicable Interest Period. For a CD Rate Loan, specify margin over or under the CD Rate determined for the applicable Interest Period. For a Base Rate Loan, specify margin over or under the Base Rate determined for the applicable Interest Period. In each case, specify percentage (rounded to the nearest 1/10,000 of 1%) and specify whether "PLUS" or "MINUS". For an Absolute Rate Loan, specify rate of interest per annum (rounded to the nearest 1/10,000 of 1%). -2- 89 EXHIBIT D TO CREDIT AGREEMENT [Form of Competitive Bid Note] FOSTER WHEELER CORPORATION PROMISSORY NOTE $______________ ____________, ____ FOR VALUE RECEIVED, the undersigned, FOSTER WHEELER CORPORATION, a New York corporation (the "Borrower"), hereby promises to pay to the order of __________________ (the "Lender") on the Competitive Bid Loan Maturity Date of each Competitive Bid Loan made by the Lender to the Borrower pursuant to the Agreement described below, the lesser of (i) the principal sum of ____________________________________________ Dollars ($___________) or (ii) the unpaid principal amount of all such Competitive Bid Loans made by the Lender maturing on such Competitive Bid Loan Maturity Date. The Borrower further promises to pay to the order of the Lender interest on the unpaid principal amount of each such Competitive Bid Loan from time to time outstanding at the rate or rates per annum determined pursuant to Section 2.03 of, or as otherwise provided in, the Agreement, payable on the dates set forth in Sections 2.03 (k) and 2.15 of, or as otherwise provided in, the Agreement. This Competitive Bid Note is one of the "Competitive Bid Notes" referred to in, and is entitled to the benefits provided by, the Revolving Credit Agreement dated as of February 12, 1999, by and among the Borrower, the guarantors party thereto, the lenders party thereto and Bank of America National Trust and Savings Association, as Administrative Agent for the lenders (as the same may from time to time be amended or modified, the "Agreement"). Said Agreement, among other things, contains provisions for acceleration of the maturity of Competitive Bid Loans evidenced hereby upon the happening of certain stated events, upon the terms and conditions therein specified. Terms defined in the Agreement shall have the same meanings herein. Subject to the provisions of the Agreement, payments of both principal and interest shall be made at the office of Bank of America National Trust and Savings Association located at 1850 Gateway Boulevard, 5th Floor, Concord, California 94520, in lawful money of the United States of America in immediately available funds. Except as otherwise set forth in the Agreement, the Borrower hereby expressly waives presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Competitive Bid Note and the Agreement, and an action for amounts due hereunder or thereunder shall immediately accrue. 90 This Competitive Bid Note shall be governed by and construed and enforced in accordance with the laws of the State of New York. FOSTER WHEELER CORPORATION By Title:______________________________ -2- 91 EXHIBIT E TO CREDIT AGREEMENT FOSTER WHEELER CORPORATION SWINGLINE ADVANCE NOTE $_____________ New York, New York, __________________, ____ FOR VALUE RECEIVED, the undersigned, FOSTER WHEELER CORPORATION, a New York corporation (the "Borrower"), promises to pay to the order of [NAME OF LENDER] (the "Lender") on or before the Revolving Credit Maturity Date, and at such earlier dates as may be required by the Agreement (as defined below), the lesser of (i) the principal sum of TEN MILLION DOLLARS ($10,000,000) or (ii) the aggregate unpaid principal amount of all Swingline Advances made by the Lender to the Borrower from time to time pursuant to the Agreement. The Borrower further promises to pay to the order of the Lender interest on the unpaid principal amount hereof from time to time outstanding at the rate or rates per annum determined pursuant to the Agreement, payable on the dates set forth in the Agreement. This Note is one of the "Swingline Advance Notes" as referred to in, and is entitled to the benefits of, the Revolving Credit Agreement, dated as of February 12, 1999, by and among the Borrower, the Guarantors party thereto from time to time, the Lenders party thereto from time to time and Bank of America National Trust and Savings Association, as Administrative Agent (as the same may be amended, modified or supplemented from time to time, the "Agreement"), which among other things provides for the acceleration of the maturity hereof upon the occurrence of certain events and for prepayments in certain circumstances and upon certain terms and conditions. Terms defined in the Agreement have the same meanings herein. Except as otherwise set forth in the Agreement, the Borrower hereby expressly waives presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note and the Agreement, and an action for amounts due hereunder or thereunder shall immediately accrue. This Note shall be governed by, construed and enforced in accordance with the laws of the State of New York, without regard to principles of choice of law. FOSTER WHEELER CORPORATION By Title;______________________________ 92 EXHIBIT F TO CREDIT AGREEMENT QUARTERLY COMPLIANCE CERTIFICATE I have conducted a review of the terms and conditions of the Revolving Credit Agreement dated as of February 12, 1999, (the "Agreement"), the Notes and the other Loan Documents, and the financial statements of the Borrower. Defined terms used herein without definition are used as defined in the Agreement. Such review has not disclosed nor does the signer have any knowledge of the existence as of the date of this certificate of any condition or event which constitutes a Potential Default or Event of Default. I further certify that all representations and warranties contained in the Agreement are true and correct in all material respects with the same effect as though such representations and warranties were made on the date of this certificate. Attached are Schedules 1, 2 and 3 which are detailed calculations indicating compliance with the covenants contained in Sections 6.01, 6.02 and 6.03 of the Agreement as of the date of this certificate. Date: By ____________________________________ Title:______________________________ 93 EXHIBIT G TO CREDIT AGREEMENT TRANSFER SUPPLEMENT THIS TRANSFER SUPPLEMENT, dated as of the date specified in Item 1 of Schedule I hereto, among the Transferor Lender specified in Item 2 of Schedule I hereto (the "Transferor Lender"), each Purchasing Lender specified in Item 3 of Schedule I hereto (each a "Purchasing Lender") and Bank of America National Trust and Savings Association, as Administrative Agent for the Lenders under the Revolving Credit Agreement described below. RECITALS: A. This Transfer Supplement is being executed and delivered in accordance with Section 10.14(c) of the Revolving Credit Agreement, dated as of February 12, 1999, by and among FOSTER WHEELER CORPORATION, a New York corporation (the "Borrower"), the Guarantors party thereto from time to time, the Lenders party thereto from time to time and Bank of America National Trust and Savings Association, as Administrative Agent for the Lenders (as the same may be amended, modified or supplemented from time to time, the "Credit Agreement"). Capitalized terms used herein without definition have the meaning specified in the Credit Agreement. B. Each Purchasing Lender (if it is not already a Lender) wishes to become a Lender party to the Credit Agreement. C. The Transferor Lender is selling and assigning to each Purchasing Lender, and each Purchasing Lender is purchasing and assuming, a certain portion of the Transferor Lender's rights and obligations under the Credit Agreement, including, without limitation, the Transferor Lender's Commitments, Loans owing to it, Swingline Advance Participating Interest, Letter of Credit Obligations owing to it and any Notes held by it (the "Transferor Lender's Interests"). NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Transfer Effective Notice. Upon receipt by the Administrative Agent of five counterparts of this Transfer Supplement (to each of which is attached a fully completed Schedule I and Schedule II), and each of which has been executed by the Transferor Lender, by each Purchasing Lender and by any other Person required by Section 10.14(c) of the Credit Agreement to execute this Transfer Supplement, the Administrative Agent will transmit to the Borrower, the Transferor Lender and each Purchasing Lender a transfer effective notice, substantially in the form of Schedule III to this Transfer Supplement (a "Transfer Effective Notice"). The date specified in such Transfer Effective Notice as the date on which the transfer effected by this Transfer Supplement shall become effective (the "Transfer Effective Date") shall be the fifth Business Day following the date of such Transfer Effective Notice or such other 94 date as shall be agreed upon among the Transfer Lender, the Purchasing Lender, the Administrative Agent and the Borrower. From and after the Transfer Effective Date each Purchasing Lender (if not already a Lender party to the Credit Agreement) shall be a Lender party to the Credit Agreement for all purposes thereof having the respective interests in the Transferor Lender's interests reflected in this Transfer Supplement. 2. Purchase Price; Sale. At or before 12:00 Noon, local time at the Transferor Lender's office specified in Schedule III, on the Transfer Effective Date, each Purchasing Lender shall pay to the Transferor Lender, in immediately available funds, an amount equal to the purchase price, as agreed between the Transferor Lender and such Purchasing Lender (the "Purchase Price"), of the portion being purchased by such Purchasing Lender (such Purchasing Lender's "Purchased Percentage") of the Transferor Lender's Interests. Effective upon receipt by the Transferor Lender of the Purchase Price from a Purchasing Lender, the Transferor Lender hereby irrevocably sells, assigns and transfers to such Purchasing Lender, without recourse, representation or warranty (express or implied) except as set forth in Section 6 hereof, and each Purchasing Lender hereby irrevocably purchases, takes and assumes from the Transferor Lender such Purchasing Lender's Purchased Percentage of the Transferor Lender's Interests. The Transferor Lender shall promptly notify the Administrative Agent of the receipt of the Purchase Price from a Purchasing Lender ("Purchase Price Receipt Notice"). Upon receipt by the Administrative Agent of such Purchase Price Receipt Notice, the Administrative Agent shall record in the Register the information with respect to such sale and purchase as contemplated by Section 10.14(d) of the Credit Agreement. 3. Principal, Interest and Fees. All principal payments, interest, fees and other amounts that would otherwise be payable from and after the Transfer Effective Date to or for the account of the Transferor Lender in respect of the Transferor Lender's Interests shall, instead, be payable to or for the account of the Transferor Lender and the Purchasing Lenders, as the case may be, in accordance with their respective interests as reflected in this Transfer Supplement. 4. Closing Documents. Concurrently with the execution and delivery hereof, the Transferor Lender will request that the Administrative Agent provide to each Purchasing Lender (if it is not already a Lender party to the Credit Agreement) conformed copies of all documents delivered to such Transferor Lender on the Closing Date in satisfaction of conditions precedent set forth in the Credit Agreement. 5. Further Assurances. Each of the parties to this Transfer Supplement agrees that at any time and from time to time upon the written request of any other party, it will execute and deliver such further documents and do such further acts and things as such other party may reasonably request in order to effect the purposes of this Transfer Supplement. 6. Certain Representations and Agreements. By executing and delivering this Transfer Supplement, the Transferor Lender and each Purchasing Lender confirm to and agree with each other and the Administrative Agent and the Lenders as follows: (a) Other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned hereby free and clear of any adverse claim, 95 the Transferor Lender makes no representation or warranty and assumes no responsibility with respect to (i) the execution, delivery, effectiveness, enforceability, genuineness, validity or adequacy of the Credit Agreement or any other Loan Document, (ii) any recital, representation, warranty, document, certificate, report or statement in, provided for in, received under or in connection with, the Credit Agreement or any other Loan Document, or (iii) the existence, validity, enforceability, perfection, recordation, priority, adequacy or value, now or hereafter, of any Lien or other direct or indirect security afforded or purported to be afforded by any of the Loan Documents or otherwise from time to time. (b) The Transferor Lender makes no representation or warranty and assumes no responsibility with respect to (i) the performance or observance of any of the terms or conditions of the Credit Agreement or any other Loan Document on the part of the Borrower or any other Person, (ii) the business, operations, condition (financial or otherwise) or prospects of the Borrower or any other Person, or (iii) the existence of any Event of Default or Potential Default. (c) Each Purchasing Lender confirms that it has received a copy of the Credit Agreement and each of the other Loan Documents, together with copies of the financial statements referred to in Section 3.06 thereof, the most recent financial statements delivered pursuant to Section 5.01 thereof, if any, and such other documents and information as it has deemed appropriate to make its own credit and legal analysis and decision to enter into this Transfer Supplement. Each Purchasing Lender confirms that it has made such analysis and decision independently and without reliance upon the Administrative Agent, the other Agents, the Transferor Lender or any other Lender. (d) Each Purchasing Lender, independently and without reliance upon the Administrative Agent, the other Agents, the Transferor Lender or any other Lender, and based on such documents and information as it shall deem appropriate at the time, will make its own decisions to take or not take action under or in connection with the Credit Agreement or any other Loan Document. (e) Each Purchasing Lender irrevocably appoints the Administrative Agent to act as Administrative Agent for such Purchasing Lender under the Agreement and the other Loan Documents, all in accordance with Article VIII of the Credit Agreement and the other provisions of the Credit Agreement and the other Loan Documents. (f) Each Purchasing Lender agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement and the other Loan Documents are required to be performed by it as a Lender. 7. Schedule II. Schedule II hereto sets forth the revised Commitments of the Transferor Lender and each Purchasing Lender as well as administrative information with respect to each Purchasing Lender. -3- 96 8. Governing Law. This Transfer Supplement shall be governed by, construed and enforced in accordance with the laws of the State of New York, without regard to principles of choice of law. 9. Counterparts. This Transfer Supplement may be executed on any number of counterparts and by the different parties hereto on separate counterparts each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Transfer Supplement to be executed by their respective duly authorized officers on Schedule I hereto as of the date set forth in Item I of Schedule I hereto. -4- 97 SCHEDULE I TO TRANSFER SUPPLEMENT COMPLETION OF INFORMATION AND SIGNATURES FOR TRANSFER SUPPLEMENT Re: Revolving Credit Agreement, dated as of February 12, 1999, by and among Foster Wheeler Corporation, a New York corporation (the "Borrower"), the Guarantors party thereto from time to time, the Lenders party thereto from time to time and Bank of America National Trust and Savings Association, as Administrative Agent for the Lenders (as amended, modified or supplemented from time to time, the "Credit Agreement") Item I (Date of [Insert date of Assignment Supplement): Assignment Supplement] Item 2 (Transferor Lender): [Insert name of Transferor Lender] Item 3 (Purchasing Lender[s]): [Insert name[s] of Purchasing Lender[s]] Item 4 (Signatures of Parties to Transfer Supplement): [Name of Transferor Lender] -------------------------------------- as Transferor Lender By: -------------------------------------- Title: [Name of Purchasing Lender] -------------------------------------- as Purchasing Lender By: -------------------------------------- Title: [Name of Purchasing Lender] -------------------------------------- as Purchasing Lender By: -------------------------------------- 98 Title: [Following two consents required only when Purchasing Lender is not already a Lender [or an Affiliate of a Lender]] CONSENTED TO AND ACKNOWLEDGED: FOSTER WHEELER CORPORATION By:_________________________________ Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Administrative Agent By:_________________________________ Title: ACCEPTED FOR RECORDATION IN PURCHASING LENDER REGISTER: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Administrative Agent By:_________________________________ Title: -2- 99 SCHEDULE II TO TRANSFER SUPPLEMENT LIST OF LENDING OFFICES, ADDRESSES FOR NOTICES AND COMMITTED AMOUNTS
[Name of Transferor Lender] Revised Commitment and Loan Amounts: Revolving Credit Committed Amount $__________ Additional Committed Amount $__________ Swingline Advance Committed Amount $__________ Revised Commitment Percentage: __________ [Name of Purchasing Lender] New Commitment and Loan Amounts: Revolving Credit Committed Amount $__________ Additional Committed Amount $__________ Swingline Advance Committed Amount $__________ New Commitment Percentage: __________
Administrative Information For Purchasing Lender: Address:________________ Attention:______________ Telephone:______________ Telex:__________________ (Answerback:__________) Telecopier:_____________ 100 SCHEDULE III TO TRANSFER SUPPLEMENT TRANSFER EFFECTIVE NOTICE To: [Insert Name of Borrower, Transferor Lender and each Purchasing Lender] The undersigned, as Administrative Agent under the Revolving Credit Agreement, dated as of February 12, 1999, by and among Foster Wheeler Corporation, a New York corporation (the "Borrower"), the Guarantors party thereto from time to time, the Lenders party thereto from time to time and Bank of America National Trust and Savings Association, as Administrative Agent for the Lenders (as amended, modified or supplemented from time to time, the "Credit Agreement"), acknowledges receipt of five executed counterparts of a completed Transfer Supplement, dated _________, ____, from [name of Transferor Lender] to [name of each Purchasing Lender] (the "Transfer Supplement"). Terms defined in the Transfer Supplement are used herein as therein defined. 1. Pursuant to the Transfer Supplement, you are advised that the Transfer Effective Date will be _________, ____. [Insert fifth Business Day following date of Transfer Effective Notice or other date agreed to among the Transferor Lender, the Purchasing Lender, the Administrative Agent and the Borrower.] 2. Pursuant to Section 10.14(c) of the Credit Agreement, the Transferor Lender has delivered to the Administrative Agent the Transferor Lender Notes. 3. Section 10.14(c) of the Credit Agreement provides that, to the extent requested by the Purchasing Lender, the Borrower is to deliver to the Administrative Agent on or before the Assignment Effective Date the following Notes, each dated the date of the Note it replaces. [Describe each new Revolving Credit Note, Swingline Advance Note and Competitive Bid Note for Transferor Lender and Purchasing Lender as to date (as required by the Credit Agreement), principal amount and payee.] 4. The Transfer Supplement provides that each Purchasing Lender is to pay its Purchase Price to the Transferor Lender at or before 12:00 o'clock Noon, local time at the Transferor Lender's lending office specified in Schedule II to the Transfer Supplement, on the Transfer Effective Date in immediately available funds. Very truly yours, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Administrative Agent By:___________________________________ Title: 101 EXHIBIT H SUBSIDIARY GUARANTY AGREEMENT ____________ __, ____ Bank of America National Trust and Savings Association, as Administrative Agent for the Lenders party to the Revolving Credit Agreement dated as of February 12, 1999 among Foster Wheeler Corporation (the "Borrower"), the Guarantors party thereto from time to time, the Lenders party thereto from time to time, and Bank of America National Trust and Savings Association, as Administrative Agent (the "Credit Agreement") Ladies and Gentlemen: Reference is made to the Credit Agreement described above. Terms not defined herein which are defined in the Credit Agreement shall have for the purposes hereof the meaning provided therein. The undersigned, [name of Subsidiary Guarantor], a [jurisdiction of incorporation] corporation, hereby acknowledges that it is a "Guarantor" for all purposes of the Credit Agreement, effective from the date hereof. The undersigned confirms that the representations and warranties set forth in Section 3 of the Credit Agreement are true and correct as to the undersigned as of the date hereof (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct in all material respects only as of such specified date). Without limiting the generality of the foregoing, the undersigned hereby agrees to perform all the obligations of a Guarantor under, and to be bound in all respects by the terms of, the Credit Agreement, including without limitation Article IX thereof, to the same extent and with the same force and effect as if the undersigned were a direct signatory thereto. This Agreement shall be construed in accordance with and governed by the internal laws of the State of New York. Very truly yours, [NAME OF SUBSIDIARY GUARANTOR] By Title:______________________________ 102 EXHIBIT J PLEDGE AGREEMENT PLEDGE AGREEMENT, dated as of February 12, 1999 (as amended, modified or supplemented from time to time, this "Agreement"), made by each of the undersigned pledgors (each a "Pledgor", and together with any entity that becomes a party hereto pursuant to Section 19 hereof, the "Pledgors"), in favor of BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as collateral agent, for the benefit of the Secured Creditors (as defined below) (in such capacity and together with any successor thereto, the "Pledgee"). Except as otherwise defined herein, terms used herein and defined in the Credit Agreements (as defined below) shall be used herein as therein defined. WITNESSETH: WHEREAS, Foster Wheeler Corporation (the "Borrower"), the Guarantors from time to time party thereto, various lenders from time to time party thereto (the "Banks"), ABN AMRO Bank N.V. and First Union National Bank, as Documentation Agent and Syndication Agent, respectively (in such capacity, the "Documentation Agent" and the "Syndication Agent", respectively), and Bank of America National Trust and Savings Association, as Administrative Agent (in such capacity and together with any successor thereto, the "Administrative Agent" and, together with the Pledgee, the Documentation Agent, the Syndication Agent and the Banks and their respective successors and assigns, the "Bank Creditors"), have entered into a Revolving Credit Agreement and a Short Term Revolving Credit Agreement, each dated as of February 12, 1999, providing for the extensions of credit to the Borrower as contemplated therein (as used herein, the term "Credit Agreements" means the Credit Agreements described above in this paragraph, as the same may be amended, modified, extended, renewed, replaced, restated, supplemented or refinanced from time to time, and including any agreement extending the maturity of, or refinancing or restructuring (including, but not limited to, the inclusion of additional borrowers or guarantors thereunder or any increase in the amount borrowed) all or any portion of, the indebtedness under such agreement or any successor agreement, whether or not with the same agent, trustee, representative, lenders or holders; WHEREAS, pursuant to the Guaranty, the Guarantors have jointly and severally guaranteed to the Bank Creditors the payment when due of all obligations and liabilities of the Borrower under or with respect to the Loan Documents; WHEREAS, the Borrower on November 15, 1995 issued $200,000,000 in aggregate principal amount of its 6-3/4% Notes due November 15, 2005 (the "6-3/4% Notes") (with the holders from time to time of such 6-3/4% Notes being herein called the "Noteholders") pursuant to an Indenture, dated as of November 15, 1995, by and between the Borrower and Harris Trust and Savings Bank, as trustee (together with any successor thereto, the "Trustee") on behalf of the Noteholders (as amended, modified or supplemented from time to time, the "Indenture"); 103 WHEREAS, the Pledgors have issued guarantees of the payment when due of all of the obligations and liabilities of the Borrower under or with respect to the 6-3/4% Notes and the Indenture (with any such guarantees, together with the 6-3/4% Notes and Indenture being herein collectively called the "Note Documents"); WHEREAS, it is a condition precedent to the extensions of credit under the Credit Agreements, and the Indenture requires, concurrently with the execution and delivery of the Credit Agreements by the Guarantors, that each Pledgor shall have executed and delivered to the Pledgee this Agreement; WHEREAS, it is contemplated that the Pledged Instruments (as defined below) will be pledged to secure the "Credit Document Obligations" and the "Note Obligations" and all other amounts comprising "Obligations" (as each such term is hereinafter defined) on an equal and ratable basis, as contemplated hereby, and that in connection therewith, the Pledgee, as collateral agent hereunder, shall act as the "Collateral Agent" for the benefit of the Bank Creditors, the Noteholders and the other Secured Creditors; and WHEREAS, each Pledgor desires to execute this Agreement to satisfy the conditions described in the second preceding paragraph; NOW, THEREFORE, in consideration of the benefits accruing to each Pledgor, the receipt and sufficiency of which are hereby acknowledged, each Pledgor hereby makes the following representations and warranties to the Pledgee and hereby covenants and agrees with the Pledgee as follows: SECTION 1. SECURITY FOR OBLIGATIONS; DEFINITIONS. (a) This Agreement is made by each Pledgor in favor of the Pledgee for the benefit of the Bank Creditors, the Noteholders and the Trustee (collectively, together with the Pledgee, the "Secured Creditors"), to secure on an equal and ratable basis: (i) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due (the "Bankruptcy Code" as used herein shall mean Title 11 of the United States Code entitled "Bankruptcy" as now or hereafter in effect, or any successor thereto) and liabilities (including, without limitation, indemnities, fees and interest thereon) of such Pledgor to the Bank Creditors, whether now existing or hereafter incurred under, arising out of or in connection with the Credit Agreements and all other Loan Documents to which it is at any time a party (including, without limitation, all such obligations and liabilities of such Pledgor under the Credit Agreements (if a party thereto) and under any guaranty by it of the obligations under the Credit Agreements) and the due performance and compliance by such Pledgor with the terms of each such Loan Document (all such obligations and liabilities under this clause (i) being herein collectively called the "Credit Document Obligations"); -2- 104 (ii) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities (including, without limitation, indemnities, fees and interest thereon) of such Pledgor to the Noteholders and the Trustee, whether now existing or hereafter incurred under, arising out of or in connection with the Note Documents to which such Pledgor is at any time a party (including, without limitation, all such obligations and liabilities of such Pledgor under the Indenture or any guaranty by it of the obligations under the Indenture) and the due performance and compliance by such Pledgor with all of the terms, conditions and agreements on its part contained in each such Note Document (all such obligations and liabilities under this clause (ii) being herein collectively called the "Note Obligations"); (iii) any and all sums advanced by the Pledgee in order to preserve the Collateral (as hereinafter defined) or preserve its security interest in the Collateral; (iv) in the event of any proceeding for the collection or enforcement of any indebtedness, obligations, or liabilities referred to in clauses (i) through (iii) above, after an Event of Default (such term, as used in this Agreement, shall mean (a) any "Event of Default" at any time under, and as defined in, either of the Credit Agreements, and (b) any payment default (after the expiration of any applicable grace period) on any of the Obligations secured hereunder at such time) shall have occurred and be continuing, the reasonable expenses of retaking, holding, preparing for sale or otherwise disposing or realizing on the Collateral, or of any exercise by the Pledgee of its rights hereunder, together with reasonable attorneys' fees and court costs; and (v) all amounts paid by any Secured Creditor as to which such Secured Creditor has the right to reimbursement under Section 9 of this Agreement; all such obligations, liabilities, sums and expenses set forth in clauses (i) through (v) of this Section 1, being herein collectively called the "Obligations," it being acknowledged and agreed that the "Obligations" shall include extensions of credit of the type described above, whether outstanding on the date of this Agreement or extended from time to time after the date of this Agreement. (b) As used herein, the term "Instruments" shall mean (i) a promissory note dated February 10, 1999 of Foster Wheeler Constructors, Inc. ("Constructors") in the amount of $10,000,000 payable to the order of Foster Wheeler USA Corporation; (ii) a promissory note dated February 10, 1999 of Constructors in the amount of $10,000,000 payable to the order of Foster Wheeler Energy International, Inc. and (iii) a promissory note dated February 10, 1999 of Constructors in the amount of $10,000,000 payable to the order of Foster Wheeler Energy Corporation. (c) All Instruments at any time pledged or required to be pledged hereunder is hereinafter called the "Pledged Instruments," which together with (i) all proceeds thereof, including any instruments, securities and moneys received and at the time held by the Pledgee -3- 105 hereunder, and (ii) all principal, interest, cash, rights, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Instruments are hereinafter called the "Collateral". SECTION 2. PLEDGE OF INSTRUMENTS. To secure all Obligations of such Pledgor and for the purposes set forth in Section 1 hereof, each Pledgor hereby: (i) grants to the Pledgee a first priority security interest in all of the Collateral owned by such Pledgor; (ii) pledges and deposits as security with the Pledgee the Pledged Instruments owned by such Pledgor on the date hereof, and delivers to the Pledgee such Pledged Instruments, duly endorsed in blank by such Pledgor, or such other instruments of transfer as are reasonably acceptable to the Pledgee; and (iii) assigns, transfers, hypothecates, mortgages, charges and sets over to the Pledgee all of such Pledgor's right, title and interest in and to such Pledged Instrument, to be held by the Pledgee, upon the terms and conditions set forth in this Agreement. SECTION 3. RIGHTS, ETC., WHILE NO EVENT OF DEFAULT. Unless and until an Event of Default shall have occurred and be continuing, each Pledgor shall be entitled to exercise any and all rights pertaining to the Pledged Instruments; provided, that no action shall be taken which would violate or be inconsistent with any of the terms of this Agreement or any other Secured Debt Agreement (as hereinafter defined). All such rights of such Pledgor shall cease in case an Event of Default shall occur and be continuing, and Section 5 hereof shall become applicable. SECTION 4. INTEREST AND OTHER DISTRIBUTIONS. Except as provided in Section 5 hereof, all payments in respect of the Pledged Instruments shall be paid to the respective Pledgor. SECTION 5. REMEDIES IN CASE OF EVENT OF DEFAULT. In case an Event of Default shall have occurred and be continuing, the Pledgee shall be entitled to exercise all of its rights, powers and remedies (whether vested in it by this Agreement, by any other Loan Document, or by any Note Document (with all of the Documents listed above being herein collectively called the "Secured Debt Agreements") or by law) for the protection and enforcement of its rights in respect of the Collateral, and the Pledgee shall be entitled to exercise all the rights and remedies of a secured party under the Uniform Commercial Code and also shall be entitled, without limitation, to exercise the following rights, which each Pledgor hereby agrees to be commercially reasonable: (i) to receive all amounts payable in respect of the Collateral otherwise payable to such Pledgor under Section 4 hereof; -4- 106 (ii) to instruct makers of the Pledged Instruments to make any and all payments in respect of the Pledged Instruments directly to the Pledgee; (iii) to transfer all or any part of the Pledged Instruments into the Pledgee's name or the name of its nominee or nominees; (iv) to take any action in respect of the Collateral and otherwise act with respect thereto as though it were the outright owner thereof; and (v) at any time or from time to time to sell, assign and deliver, or grant options to purchase, all or any part of the Collateral, or any interest therein, at any public or private sale, without demand of performance, advertisement or notice of intention to sell or of the time or place of sale or adjournment thereof or to redeem or otherwise (all of which are hereby waived by each Pledgor), for cash, on credit or for other property, for immediate or future delivery without any assumption of credit risk, and for such price or prices and on such terms as the Pledgee in its absolute discretion may determine; provided, that at least 10 Business Days' notice of the time and place of any such sale shall be given to such Pledgor. Each Pledgor hereby waives and releases to the fullest extent permitted by law any right or equity of redemption with respect to the Collateral, whether before or after sale hereunder, and all rights, if any, of marshalling the Collateral and any other security for the Obligations or otherwise. At any such sale, unless prohibited by applicable law, the Pledgee on behalf of the Secured Creditors may bid for and purchase all or any part of the Collateral so sold free from any such right or equity of redemption. Each purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of any Pledgor, and each Pledgor hereby waives (to the extent permitted by law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. The Pledgee may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Each Pledgor hereby waives any claims against the Pledgee arising by reason of the fact that the price at which any Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if the Pledgee accepts the first offer received and does not offer such Collateral to more than one offeree. If the proceeds of any sale or other disposition of the Collateral are insufficient to pay all the Obligations, the Pledgors shall be liable for the deficiency and the fees of any attorneys employed by the Pledgee to collect such deficiency. Neither the Pledgee nor any other Secured Creditor shall be liable for failure to collect or realize upon any or all of the Collateral or for any delay in so doing nor shall any of them be under any obligation to take any action whatsoever with regard thereto. SECTION 6. REMEDIES, ETC., CUMULATIVE. Each right, power and remedy of the Pledgee provided for in this Agreement or in any other Secured Debt Agreement or now or hereafter existing at law or in equity or by statute shall be cumulative and concurrent and shall be in addition to every other such right, power or remedy. -5- 107 The exercise or beginning of the exercise by the Pledgee or any other Secured Creditor of any one or more of the rights, powers or remedies provided for in this Agreement or in any other Secured Debt Agreement or now or hereafter existing at law or in equity or by statute or otherwise shall not preclude the simultaneous or later exercise by the Pledgee or any other Secured Creditor of all such other rights, powers or remedies, and no failure or delay on the part of the Pledgee or any other Secured Creditor to exercise any such right, power or remedy shall operate as a waiver thereof. The Secured Creditors agree that this Agreement may be enforced only by the Pledgee acting upon the instructions of the Required Secured Creditors (as defined in Annex A hereto) and that no other Secured Creditor shall have any right individually to seek to enforce or to enforce this Agreement or to realize upon the security to be granted hereby, it being understood and agreed that such rights and remedies may be exercised by the Pledgee for the benefit of the Secured Creditors upon the terms of this Agreement. SECTION 7. APPLICATION OF PROCEEDS. (a) All moneys collected by the Pledgee upon any sale or other disposition of the Collateral of each Pledgor, together with all other moneys received by the Pledgee hereunder, shall be applied as follows: (i) first, to the payment of all Obligations owing to the Pledgee of the type provided in clauses (iii), (iv) and (v) of the definition of Obligations in Section 1 hereof; (ii) second, to the extent proceeds remain after the application pursuant to the preceding clause (i), an amount equal to the outstanding Obligations shall be paid to the Secured Creditors as provided in Section 7(d) hereof, with each Secured Creditor receiving an amount equal to its outstanding Obligations of such Pledgor or, if the proceeds are insufficient to pay in full all such Obligations, its Pro Rata Share (as hereinafter defined) of the amount remaining to be distributed; and (iii) third, to the extent proceeds remain after the application pursuant to the preceding clauses (i) and (ii), inclusive, and following the termination of this Agreement pursuant to Section 15 hereof, to the relevant Pledgor or to whomever may be lawfully entitled to receive such surplus. (b) For purposes of this Agreement, "Pro Rata Share" shall mean, when calculating a Secured Creditor's portion of any distribution or amount, that amount (expressed as a percentage) equal to a fraction the numerator of which is the then unpaid amount of such Secured Creditor's Obligations and the denominator of which is the then outstanding amount of all Obligations. (c) If the Bank Creditors are to receive a distribution in accordance with the procedures set forth above in this Section 7 on account of undrawn amounts with respect to letters of credit issued under the Credit Agreements, such amounts shall be paid to the Administrative Agent under the Credit Agreements and held by it, for the equal and ratable benefit of the Bank Creditors as such. If any amounts are held as cash security pursuant to the immediately preceding sentence, then upon the termination of all outstanding letters of credit, and after the -6- 108 application of all such cash security to the repayment of all Obligations owing to the Bank Creditors after giving effect to the termination of all such letters of credit, if there remains any excess cash, such excess cash shall be returned by the Administrative Agent to the Pledgee for distribution in accordance with Section 7(a) hereof. (d) Except as set forth in Section 7(c) hereof, all payments required to be made hereunder shall be made (i) if to the Bank Creditors, to the Administrative Agent under the Credit Agreements for the account of the Bank Creditors, and (ii) if to any other Secured Creditors (other than the Pledgee), to the Trustee or paying agent (each a "Representative") for such Secured Creditors or, in the absence of such a Representative, directly to the other Secured Creditors. (e) For purposes of applying payments received in accordance with this Section 7, the Pledgee shall be entitled to rely upon (i) the Administrative Agent under the Credit Agreements and (ii) the Representative for any other Secured Creditors or, in the absence of such a Representative, upon the respective Secured Creditors for a determination (which the Administrative Agent, each Representative for any other Secured Creditors and the Secured Creditors agree (or shall agree) to provide upon request of the Pledgee) of the outstanding Primary Obligations and Secondary Obligations owed to the Secured Creditors. (f) It is understood and agreed that each Pledgor shall remain liable to the extent of any deficiency between the amount of the proceeds of the Collateral pledged by it hereunder and the aggregate amount of the Obligations of such Pledgor. SECTION 8. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the Pledgee hereunder (whether by virtue of the power of sale herein granted, pursuant to judicial process or otherwise), the receipt of the Pledgee or the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold, and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Pledgee or such officer or be answerable in any way for the misapplication or nonapplication thereof. SECTION 9. INDEMNITY. Each Pledgor jointly and severally agrees (i) to indemnify and hold harmless the Pledgee in such capacity and each Representative of a Secured Creditor in its capacity as such from and against any and all claims, demands, losses, judgments and liabilities of whatsoever kind or nature, and (ii) to reimburse the Pledgee in such capacity and each Representative of a Secured Creditor in its capacity as such for all reasonable costs and expenses, including reasonable attorneys' fees, in each case to the extent growing out of or resulting from the exercise by the Pledgee of any right or remedy granted to it hereunder except, with respect to clauses (i) and (ii) above, to the extent arising from the Pledgee's or such other Secured Creditor's gross negligence or willful misconduct. In no event shall the Pledgee be liable, in the absence of gross negligence or willful misconduct on its part, for any matter or thing in connection with this Agreement other -7- 109 than to account for moneys actually received by it in accordance with the terms hereof. If and to the extent that the obligations of the Pledgors under this Section 9 are unenforceable for any reason, each Pledgor hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law. SECTION 10. FURTHER ASSURANCES; POWER OF ATTORNEY. (a) Each Pledgor agrees that it will join with the Pledgee in executing and, at such Pledgor's own expense, file and refile under the applicable Uniform Commercial Code or such other law such financing statements, continuation statements and other documents in such offices as the Pledgee may reasonably deem necessary or appropriate and wherever required or permitted by law in order to perfect and preserve the Pledgee's security interest in the Collateral and hereby authorizes the Pledgee to file financing statements and amendments thereto relative to all or any part of the Collateral without the signature of such Pledgor where permitted by law, and agrees to do such further acts and things and to execute and deliver to the Pledgee such additional conveyances, assignments, agreements and instruments as the Pledgee may reasonably deem necessary or advisable to carry into effect the purposes of this Agreement or to further assure and confirm unto the Pledgee its rights, powers and remedies hereunder. (b) Each Pledgor hereby appoints the Pledgee such Pledgor's attorney-in-fact, with full authority in the place and stead of such Pledgor and in the name of such Pledgor or otherwise, to act from time to time after the occurrence and during the continuance of an Event of Default in the Pledgee's reasonable discretion to take any action and to execute any instrument which the Pledgee may deem necessary or advisable to accomplish the purposes of this Section 10. SECTION 11. THE PLEDGEE AS AGENT. The Pledgee will hold in accordance with this Agreement all items of the Collateral at any time received under this Agreement. It is expressly understood and agreed that the obligations of the Pledgee as holder of the Collateral and interests therein and with respect to the disposition thereof, and otherwise under this Agreement, are only those expressly set forth in this Agreement. The Pledgee shall act hereunder on the terms and conditions set forth herein and in Annex A hereto, the terms of which shall be deemed incorporated herein by reference as fully as if same were set forth herein in their entirety. SECTION 12. TRANSFER BY PLEDGORS. No Pledgor will sell or otherwise dispose of, grant any option with respect to, or mortgage, pledge or otherwise encumber any of the Collateral or any interest therein (except in accordance with the terms of this Agreement and as permitted by the terms of the Secured Debt Agreements). SECTION 13. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PLEDGORS. (a) Each Pledgor represents, warrants and covenants that: -8- 110 (i) it is the legal, record and beneficial owner of, and has good title to, all Pledged Instruments purported to be owned by such Pledgor, subject to no Lien, except the Liens created by this Agreement; (ii) it has full power, authority and legal right to pledge all the Pledged Instruments; (iii) this Agreement has been duly authorized, executed and delivered by such Pledgor and constitutes the legal, valid and binding obligation of such Pledgor enforceable in accordance with its terms, except to the extent that the enforceability hereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and by equitable principles (regardless of whether enforcement is sought in equity or at law); (iv) no consent of any other party (including, without limitation, any stockholder or creditor of such Pledgor or any of its Subsidiaries) and no consent, license, permit, approval or authorization of, exemption by, notice or report to, or registration, filing or declaration with, any governmental authority is required to be obtained by such Pledgor in connection with the execution, delivery or performance of this Agreement, or in connection with the exercise of its rights and remedies pursuant to this Agreement, in each case except those which have been obtained or made or as may be required by laws affecting the offer and sale of securities generally in connection with the exercise by the Pledgee of certain of its remedies hereunder; (v) the execution, delivery and performance of this Agreement by such Pledgor does not violate any provision of any applicable law or regulation or of any order, judgment, writ, award or decree of any court, arbitrator or governmental authority, domestic or foreign, or of the certificate of incorporation or by-laws (or analogous organizational documents) of such Pledgor or of any securities issued by such Pledgor or any of its Subsidiaries, or of any mortgage, indenture, lease, deed of trust, credit agreement or loan agreement, or any other material agreement, contract or instrument to which such Pledgor or any of its Subsidiaries is a party or which purports to be binding upon such Pledgor or any of its Subsidiaries or upon any of their respective assets and will not result in the creation or imposition (or the obligation to create or impose) of any lien or encumbrance on any of the assets of such Pledgor or any of its Subsidiaries except as contemplated by this Agreement; (vi) all Pledged Instruments have been duly and validly issued; and (vii) the pledge, assignment and delivery (which delivery has been made) to the Pledgee of the Pledged Instruments creates a valid and perfected first priority security interest in such Pledged Instruments, subject to no prior lien or encumbrance or to any agreement purporting to grant to any third party (except the Secured Creditors) a lien or encumbrance on the property or assets of such Pledgor which would include the Instruments. -9- 111 Each Pledgor covenants and agrees that it will defend the Pledgee's right, title and security interest in and to the Collateral and the proceeds thereof against the claims and demands of all persons whomsoever; and such Pledgor covenants and agrees that it will have like title to and right to pledge any other property at any time hereafter pledged to the Pledgee as Collateral hereunder and will likewise defend the right thereto and security interest therein of the Pledgee and the other Secured Creditors. (b) The Pledgors hereby agree that the rights created by the subordinated provisions of the guarantees executed by the Pledgors related to the Note Documents and the subordination provisions of the Guaranty which each provide for the subordination of the indebtedness of the Borrower owing to any Pledgor to the Obligations of the Borrower owing to the Secured Creditors shall be on a parity basis for the equal and ratable benefit of the Secured Creditors. SECTION 14. PLEDGORS' OBLIGATIONS ABSOLUTE, ETC. The obligations of each Pledgor under this Agreement shall be absolute and unconditional and shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, terminated or otherwise affected by, any circumstance or occurrence whatsoever, including, without limitation: (i) any renewal, extension, amendment or modification of or addition or supplement to or deletion from any Secured Debt Agreement or any other instrument or agreement referred to therein, or any assignment or transfer of any thereof; (ii) any waiver, consent, extension, indulgence or other action or inaction under or in respect of any such agreement or instrument or this Agreement; (iii) any furnishing of any additional security to the Pledgee or its assignee or any acceptance thereof or any release of any security by the Pledgee or its assignee; (iv) any limitation on any party's liability or obligations under any such instrument or agreement or any invalidity or unenforceability, in whole or in part, of any such instrument or agreement or any term thereof; (v) any limitation on any other Pledgor's liability or obligations under this Agreement or under any other Secured Debt Agreement or any invalidity or unenforceability, in whole or in part, of this Agreement or any other Secured Debt Agreement or any term thereof; or (vi) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to such Pledgor or any Subsidiary of such Pledgor, or any action taken with respect to this Agreement by any trustee or receiver, or by any court, in any such proceeding, whether or not such Pledgor shall have notice or knowledge of any of the foregoing. SECTION 15. TERMINATION, RELEASE. (a) After the Termination Date (as defined below), this Agreement shall terminate (provided that all indemnities set forth herein including, without limitation, in Section 9 hereof shall survive any such termination) and the Pledgee, at the request and expense of the respective Pledgor, will promptly execute and deliver to such Pledgor a proper instrument or instruments acknowledging the satisfaction and termination of this Agreement, and will duly assign, transfer and deliver to such Pledgor (without recourse and without any representation or warranty) such of the Collateral as may be in the possession of the Pledgee and as has not theretofore been sold or otherwise applied or released pursuant to this Agreement. As used in this Agreement, -10- 112 "Termination Date" shall mean the earliest of (i) the date upon which the Total Revolving Credit Commitment has been terminated, no Note under the Credit Agreements is outstanding and all other Credit Document Obligations (excluding normal continuing indemnity obligations which survive in accordance with their terms, so long as no amounts are then due and payable in respect thereof) have been indefeasibly paid in full, (ii) the date upon which the Credit Documents are amended to release all Collateral subject to this Agreement and (iii) the date on which the Indenture no longer requires equal and ratable security or the 6-3/4% Notes have been paid in full. (b) In the event that any part of the Collateral is sold (other than to any Credit Party) in connection with a sale permitted by the Secured Debt Agreements or is otherwise released at the direction of the Required Secured Creditors, the Pledgee, at the request and expense of such Pledgor will promptly execute and deliver to such Pledgor a proper instrument or instruments acknowledging such release, and will duly assign, transfer and deliver to such Pledgor (without recourse and without any representation or warranty) such of the Collateral as is then being (or has been) so sold, distributed or released and as may be in possession of the Pledgee and has not theretofore been released pursuant to this Agreement. (c) At any time that a Pledgor desires that Collateral be released as provided in the foregoing Section 15(a) or (b), it shall deliver to the Pledgee a certificate signed by an authorized officer of such Pledgor stating that the release of the respective Collateral is permitted pursuant to Section 15(a) or (b), and the Pledgee shall be entitled (but not required) to conclusively rely thereon. SECTION 16. NOTICES, ETC. Except as otherwise specified herein, all notices, requests, demands or other communications to or upon the respective parties hereto shall be deemed to have been given or made when delivered to the party to which such notice, request, demand or other communication is required or permitted to be given or made under this Agreement, addressed as follows: (a) if to any Pledgor, at: Perryville Corporate Park Clinton, New Jersey 08809-4000 Attention: Vice President and Treasurer Telephone No.: (908) 713-2945 Telecopier No.: (908) 713-2953 (b) if to the Pledgee, at: Bank of America National Trust and Savings Association 1850 Gateway Boulevard, 5th Floor Concord, California 94520 Attention: Glenis Croucher -11- 113 Telephone No.: (925) 675-8447 Telecopier No.: (925) 675-8500 (c) if to any Bank Creditor (other than the Pledgee), (x) to the Administrative Agent, at the address of the Administrative Agent specified in the Credit Agreements or (y) at such address as such Bank Creditor shall have specified in the Credit Agreements; (d) if to any other Secured Creditor, (x) to the Representative for such Secured Creditor or (y) if there is no such Representative, at such address as such Secured Creditor shall have specified in writing to each Pledgor and the Pledgee; or at such other address as shall have been furnished in writing by any Person described above to the party required to give notice hereunder. SECTION 17. WAIVER; AMENDMENT. None of the terms and conditions of this Agreement may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by each Pledgor directly affected thereby (it being understood that additional Pledgors may be added as parties hereto from time to time in accordance with Section 19 hereof and Pledgors may be released as parties hereto in accordance with Sections 15 and 18 hereof and that no consent of any other Pledgor or of the Secured Creditors shall be required in connection therewith) and the Pledgee (with the written consent of the Required Lenders (or all the Lenders if required by Section 10.03 of the Credit Agreements); provided, that the Borrower certifies that any such change, waiver, modification or variance is otherwise permitted by the terms of the respective Secured Debt Agreements or, if not so permitted, that the requisite consents therefor have been obtained. Notwithstanding anything to the contrary contained above, it is understood and agreed that the Required Lenders may agree to modifications to this Agreement for the purpose, among other things, of securing additional extensions of credit (including, without limitation, pursuant to the Credit Agreements or any refinancing or extension thereof), with such changes not being subject to the proviso to the immediately preceding sentence. Furthermore, the proviso to the second preceding sentence shall not apply to any release of Collateral effected in accordance with the requirements of Section 18 of this Agreement, or any other release of Collateral or termination of this Agreement so long as the Borrower certifies that such actions will not violate the terms of any Secured Debt Agreement then in effect. SECTION 18. RELEASE OF GUARANTORS. In the event any Pledgor party to the Guaranty is released from the Guaranty, such Pledgor shall be released from this Agreement and this Agreement shall, as to such Pledgor only, have no further force or effect. -12- 114 SECTION 19. ADDITIONAL PLEDGORS. Pursuant to Section 5.15 of the Credit Agreements, certain Subsidiaries of the Borrower may after the date hereof be required to enter into this Agreement as a Pledgor. Upon execution and delivery, after the date hereof, by the Pledgee and such Subsidiary of an instrument in the form of Exhibit A-2, such Subsidiary shall become a Pledgor hereunder with the same force and effect as if originally named as a Pledgor hereunder. Each Subsidiary which is required to become a party to this Agreement shall so execute and deliver a copy of Exhibit A-2 to the Pledgee and, at such time, shall execute a Pledge and Security Agreement Supplement in the form of Exhibit A-1 to this Agreement with respect to all Collateral of such Pledgor required to be pledged hereunder, which Supplement shall be completed in accordance with Exhibit A-1. The execution and delivery of any such instrument shall not require the consent of any other Pledgor hereunder. Upon the execution and delivery by the Pledgee and such Subsidiary of an instrument in the form of Exhibit A-2 as provided above, it is understood and agreed that the pledge and security interests hereunder shall apply to all Collateral of such additional Pledgor as provided in Section 2 hereof regardless of any failure of any additional Pledgor to deliver, or any inaccurate information stated in, the Pledge and Security Agreement Supplement. SECTION 20. RECOURSE. This Agreement is made with full recourse to the Pledgors and pursuant to and upon all representations, warranties, covenants and agreements on the part of the Pledgors contained herein and otherwise in writing in connection herewith. SECTION 21. PLEDGEE NOT BOUND. (a) The Pledgee shall not be obligated to perform or discharge any obligation of any Pledgor as a result of the collateral assignment hereby effected. (b) The acceptance by the Pledgee of this Agreement, with all the rights, powers, privileges and authority so created, shall not at any time or in any event obligate the Pledgee to appear in or defend any action or proceeding relating to the Collateral to which it is not a party, or to take any action hereunder or thereunder, or to expend any money or incur any expenses or perform or discharge any obligation, duty or liability under the Collateral. SECTION 22. CONTINUING PLEDGORS. The rights and obligations of each Pledgor (other than the respective released Pledgor in the case of following clause (y)) hereunder shall remain in full force and effect notwithstanding (x) the addition of any new Pledgor as a party to this Agreement as contemplated by Section 19 hereof or otherwise and/or (y) the release of any Pledgor under this Agreement as contemplated by Section 18 hereof or otherwise. -13- 115 SECTION 23. NO FRAUDULENT CONVEYANCE. Each Pledgor hereby confirms that it is its intention that this Agreement not constitute a fraudulent transfer or conveyance for purposes of any bankruptcy, insolvency or similar law, the Uniform Fraudulent Conveyance Act or any similar Federal, state or foreign law. To effectuate the foregoing intention, each Pledgor hereby irrevocably agrees that its obligations and liabilities hereunder shall be limited to the maximum amount as will, after giving effect to such maximum amount and all other (contingent or otherwise) liabilities of such Pledgor that are relevant under such laws, result in the obligations and liabilities of such Pledgor hereunder in respect of such maximum amount not constituting a fraudulent transfer or conveyance. SECTION 24. MISCELLANEOUS. This Agreement shall be binding upon the successors and assigns of each Pledgor and shall inure to the benefit of and be enforceable by the Pledgee and its successors and assigns; provided that no Pledgor may assign any of its rights or obligations hereunder without the prior written consent of the Pledgee (with the consent of the Required Lenders and, if required by Section 10.03 of the Credit Agreement, all Lenders). This Agreement shall be construed and enforced in accordance with and governed by the law of the State of New York (without regard to principles of conflict of laws). The headings in this Agreement are for purposes of reference only and shall not limit or define the meaning hereof. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which shall constitute one instrument. -14- 116 IN WITNESS WHEREOF, each Pledgor has caused this Agreement to be duly executed and delivered by its duly authorized officer on the date first above written. FOSTER WHEELER USA CORPORATION BY:____________________________________ TITLE: FOSTER WHEELER ENERGY INTERNATIONAL, INC. BY:____________________________________ TITLE: FOSTER WHEELER ENERGY CORPORATION BY:____________________________________ TITLE: ACCEPTED AND AGREED TO: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Collateral Agent and Pledgee By: ___________________________________ Title: -15- 117 ANNEX A TO PLEDGE AND SECURITY AGREEMENT THE PLEDGEE 1. Appointment. The Secured Creditors, by their acceptance of the benefits of the Pledge Agreement to which this Annex A is attached (the "Pledge Agreement") hereby irrevocably designate Bank of America National Trust and Savings Association (and any successor Pledgee) to act as specified herein and therein. Unless otherwise defined herein, all capitalized terms used herein (x) and defined in the Pledge Agreement, are used herein as therein defined and (y) not defined in the Pledge Agreement, are used herein as defined in the Credit Agreements referenced in the Pledge Agreement. Each Secured Creditor hereby irrevocably authorizes, and each holder of any Obligation by the acceptance of such Obligation and by the acceptance of the benefits of the Pledge Agreement shall be deemed irrevocably to authorize, the Pledgee to take such action on its behalf under the provisions of the Pledge Agreement and any instruments and agreements referred to therein and to exercise such powers and to perform such duties thereunder as are specifically delegated to or required of the Pledge Agreement by the terms thereof and such other powers as are reasonably incidental thereto. The Pledgee may perform any of its duties hereunder or thereunder by or through its authorized agents, sub-agents or employees. 2. Nature of Duties. (a) The Pledgee shall have no duties or responsibilities except those expressly set forth herein or in the Pledge Agreement. The duties of the Pledgee shall be mechanical and administrative in nature; the Pledgee shall not have by reason of the Pledge Agreement or any other Secured Debt Agreement a fiduciary relationship in respect of any Secured Creditor; and nothing in the Pledge Agreement or any other Secured Debt Agreement, expressed or implied, is intended to or shall be so construed as to impose upon the Pledgee any obligations in respect of the Pledge Agreement except as expressly set forth herein and therein. (b) The Pledgee shall not be responsible for insuring the Collateral or for the payment of taxes, charges or assessments or discharging of Liens upon the Collateral or otherwise as to the maintenance of the Collateral. (c) The Pledgee shall not be required to ascertain or inquire as to the performance by any Pledgor of any of the covenants or agreements contained in the Pledge Agreement or any other Secured Debt Agreement. (d) The Pledgee shall be under no obligation or duty to take any action under, or with respect to, the Pledge Agreement if taking such action (i) would subject the Pledgee to a tax in any jurisdiction where it is not then subject to a tax or (ii) would require the Pledgee to qualify to do business, or obtain any license, in any jurisdiction where it is not then so qualified or licensed or (iii) would subject the Pledgee to in personam jurisdiction in any locations where it is not then so subject. 118 ANNEX A Page 2 (e) Notwithstanding any other provision of this Annex A, neither the Pledgee nor any of its officers, directors, employees, affiliates or agents shall, in its individual capacity, be personally liable for any action taken or omitted to be taken by it in accordance with, or pursuant to this Annex A or the Pledge Agreement except for its own gross negligence or willful misconduct. 3. Lack of Reliance on the Pledgee. Independently and without reliance upon the Pledgee, each Secured Creditor, to the extent it deems appropriate, has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of each Pledgor and its Subsidiaries in connection with the making and the continuance of the Obligations and the taking or not taking of any action in connection therewith, and (ii) its own appraisal of the creditworthiness of each Pledgor and its Subsidiaries, and the Pledgee shall have no duty or responsibility, either initially or on a continuing basis, to provide any Secured Creditor with any credit or other information with respect thereto, whether coming into its possession before the extension of any Obligations or the purchase of any notes or at any time or times thereafter. The Pledgee shall not be responsible in any manner whatsoever to any Secured Creditor for the correctness of any recitals, statements, information, representations or warranties herein or in any document, certificate or other writing delivered in connection herewith or for the execution, effectiveness, genuineness, validity, enforceability, perfection, collectibility, priority or sufficiency of the Pledge Agreement or the security interests granted hereunder or the financial condition of any Pledgor or any Subsidiary of any Pledgor or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of the Pledge Agreement, or the financial condition of any Pledgor or any Subsidiary of any Pledgor, or the existence or possible existence of any default or Event of Default. The Pledgee makes no representations as to the value or condition of the Collateral or any part thereof, or as to the title of any Pledgor thereto or as to the security afforded by the Pledge Agreement. 4. Certain Rights of the Pledgee. (a) No Secured Creditor shall have the right to cause the Pledgee to take any action with respect to the Collateral, with only the Required Secured Creditors having the right to direct the Pledgee to take any such action. If the Pledgee shall request instructions from the Required Secured Creditors, with respect to any act or action (including failure to act) in connection with the Pledge Agreement, the Pledgee shall be entitled to refrain from such act or taking such action unless and until it shall have received instructions from the Required Secured Creditors and to the extent requested, appropriate indemnification in respect of actions to be taken, and the Pledgee shall not incur liability to any Person by reason of so refraining. Without limiting the foregoing, no Secured Creditor shall have any right of action whatsoever against the Pledgee as a result of the Pledgee acting or refraining from acting hereunder in accordance with the instructions of the Required Secured Creditors. As used herein, the term "Required Secured Creditors" shall mean the holders of at least a majority of the then outstanding Credit Document Obligations. (b) Notwithstanding anything to the contrary contained herein, the Pledgee is authorized, but not obligated, (i) to take any action reasonably required to perfect or continue the -2- 119 ANNEX A Page 3 perfection of the liens on the Collateral for the benefit of the Secured Creditors and (ii) when instructions from the Required Secured Creditors have been requested by the Pledgee but have not yet been received, to take any action which the Pledgee, in good faith, believes to be reasonably required to promote and protect the interests of the Secured Creditors in the Collateral; provided that once instructions have been received, the actions of the Pledgee shall be governed thereby and the Pledgee shall not take any further action which would be contrary thereto. (c) Notwithstanding anything to the contrary contained herein or in the Pledge Agreement, the Pledgee shall not be required to take any action that exposes or, in the good faith judgment of the Pledgee may expose, the Pledgee or its officers, directors, agents or employees to personal liability, unless the Pledgee shall be adequately indemnified as provided herein, or that is, or in the good faith judgment of the Pledgee may be, contrary to the Pledge Agreement, any Secured Debt Agreement or applicable law. 5. Reliance. The Pledgee shall be entitled to rely, and shall be fully protected in relying, upon, any note, writing, resolution, notice, statement, certificate, telex, teletype or telescopes message, cablegram, radiogram, order or other document or telephone message signed, sent or made by the proper Person or entity, and, with respect to all legal matters pertaining hereto or to the Pledge Agreement and its duties thereunder and hereunder, upon advice of counsel selected by it. 6. Indemnification. To the extent the Pledgee is not reimbursed and indemnified by the Pledgors under the Pledge Agreement, the Bank Creditors will reimburse and indemnify the Pledgee, in proportion to their respective outstanding principal amounts of Obligations, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Pledgee in performing its duties hereunder, or in any way relating to or arising out of its actions as Pledgee in respect of the Pledge Agreement except for those resulting solely from the Pledgee's own gross negligence or willful misconduct. The indemnities set forth in this Section 6 shall survive the repayment of all Obligations, with the respective indemnification at such time to be based upon the outstanding principal amounts (determined as described above) of Obligations at the time of the respective occurrence upon which the claim against the Pledgee is based or, if same is not reasonably determinable, based upon the outstanding principal amounts (determined as described above) of Obligations as in effect immediately prior to the termination of the Pledge Agreement. The indemnities set forth in this Section 6 are in addition to any indemnities provided by the Banks to the Pledgee pursuant to the Credit Agreements. 7. The Pledgee in its Individual Capacity. With respect to its obligations as a lender under the Credit Agreements and any other Loan Documents to which the Pledgee is a party, and to act as agent under one or more of such Loan Documents, the Pledgee shall have the rights and powers specified therein and herein for a "Lender", or the "Administrative Agent", as the case may be, and may exercise the same rights and powers as though it were not performing the duties -3- 120 ANNEX A Page 4 specified herein; and the terms "Banks," "Required Lenders," "holders of Notes," or any similar terms shall, unless the context clearly otherwise indicates, include the Pledgee in its individual capacity. The Pledgee and its affiliates may accept deposits from, lend money to, and generally engage in any kind of banking, investment banking, trust or other business with any Pledgor or any Affiliate or Subsidiary of any Pledgor as if it were not performing the duties specified herein or in the other Loan Documents, and may accept fees and other consideration from the Pledgors for services in connection with the Credit Agreements, the other Loan Documents and otherwise without having to account for the same to the Secured Creditors. 8. Holders. The Pledgee may deem and treat the payee of any note as the owner thereof for all purposes hereof unless and until written notice of the assignment, transfer or endorsement thereof, as the case may be, shall have been filed with the Pledgee. Any request, authority or consent of any person or entity who, at the time of making such request or giving such authority or consent, is the holder of any note, shall be final and conclusive and binding on any subsequent holder, transferee, assignee or endorsee, as the case may be, of such note or of any note or notes issued in exchange therefor. 9. Resignation by the Pledgee. (a) The Pledgee may resign from the performance of all of its functions and duties hereunder and under the Pledge Agreement at any time by giving 15 Business Days' prior or written notice to the Borrower, the Banks and Representatives for the other Secured Creditors or, if there is no such Representative, directly to such Secured Creditors. Such resignation shall take effect upon the appointment of a successor Pledgee pursuant to clause (b) or (c) below. (b) If a successor Pledgee shall not have been appointed within said 15 Business Day period by the Required Secured Creditors, the Pledgee, with the consent of the Borrower, which consent shall not be unreasonably withheld or delayed, shall then appoint a successor Pledgee who shall serve as Pledgee hereunder or thereunder until such time, if any, as the Required Secured Creditors appoint a successor Pledgee as provided above. (c) If no successor Pledgee has been appointed pursuant to clause (b) above by the 20th Business Day after the date of such notice of resignation was given by the Pledgee, as a result of a failure by the Borrower to consent to the appointment of such a successor Pledgee, the Required Secured Creditors shall then appoint a successor Pledgee who shall serve as Pledgee hereunder or thereunder until such time, if any, as the Required Secured Creditors appoint a successor Pledgee as provided above. -4- 121 EXHIBIT A-1 TO PLEDGE AND SECURITY AGREEMENT FORM OF PLEDGE AND SECURITY AGREEMENT SUPPLEMENT PLEDGE AND SECURITY SUPPLEMENT, dated as of __________ (this "Supplement"), made by _________, a ___________ (the "Pledgor"), in favor of BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Pledgee and as collateral agent (in such capacities, the "Pledgee") for the Secured Creditors (such term and each other capitalized term used but not defined having the meaning given in the Pledge Agreement referred to below). 1. Reference is hereby made to that certain Pledge Agreement, dated as of February 12, 1999 (as amended, supplemented or otherwise modified as of the date hereof, the "Pledge Agreement"), made by the Pledgors party thereto in favor of the Pledgee for the benefit of the Secured Creditors described therein. 2. The Pledgor hereby confirms and reaffirms the security interest in the Collateral granted to the Pledgee for the benefit of the Secured Creditors under the Pledge Agreement, and, as additional collateral security for the prompt and complete payment when due (whether at stated maturity, by acceleration or otherwise) of the Obligations and in order to induce the Secured Creditors to make loans and other extensions of credit constituting Obligations, the Pledgor hereby delivers to the Pledgee, for the benefit of the Secured Creditors, all of the property listed in Schedule I hereto (the "Additional Collateral"; as used in the Pledge Agreement as supplemented by this Supplement, "Collateral" shall be deemed to include the Additional Collateral), and hereby grants to the Pledgee, for the benefit of the Secured Creditors, a first priority security interest in the Additional Collateral and all proceeds thereof. 3. The Pledgor hereby represents and warrants that the representations and warranties contained in Section 13 of the Pledge Agreement are true and correct on the date of this Supplement with references therein to the "Collateral" to include the Additional Collateral and with references therein to the "Pledge Agreement" to mean the Pledge Agreement as supplemented by this Supplement. 4. This Supplement is supplemental to the Pledge Agreement, forms a part thereof and is subject to the terms thereof and the Pledge Agreement is hereby supplemented as provided herein. Without limiting the foregoing, "Collateral" subject to the Pledge Agreement shall hereby be deemed to include each item listed on Schedule I to this Supplement. IN WITNESS WHEREOF, the Pledgor and the Pledgee have caused this Supplement to be duly executed and delivered on the date first set forth above. 122 [PLEDGOR] By:____________________________________ Name: Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Pledgee By:____________________________________ Name: Title: -2- 123 SCHEDULE I TO PLEDGE AND SECURITY AGREEMENT SUPPLEMENT ADDITIONAL COLLATERAL 124 EXHIBIT A-2 TO PLEDGE AGREEMENT SUPPLEMENT NO. _______ dated as of __________, to the Pledge Agreement dated as of February 12, 1999 (the "Pledge Agreement"), among the Pledgors party thereto (immediately before giving effect to this Supplement) and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION as collateral agent and as pledgee (in such capacities, the "Pledgee") for the Secured Creditors (such term and each other capitalized term used but not defined having the meaning given it in the Pledge Agreement referred to below). A. The Pledgors have entered into the Pledge Agreement in order to induce the Secured Creditors to make loans and other extensions of credit constituting Obligations as defined in the Pledge Agreement. Pursuant to Section 5.15 of the Credit Agreements, certain Subsidiaries of the Borrower are, after the date of the Pledge Agreement, required to enter into the Pledge Agreement as a Pledgor. Section 19 of the Pledge Agreement provides that additional Subsidiaries may become Pledgors under the Pledge Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned (the "New Pledgor") is a Subsidiary of the Borrower and is executing this Supplement in accordance with the requirements of the Credit Agreements and/or the Pledge Agreement to become a Pledgor under the Pledge Agreement in order to induce the Secured Creditors to extend, or maintain, Obligations. Accordingly, the Pledgee and the New Pledgor agree as follows: Section 1. The New Pledgor by its signature below becomes a Pledgor under the Pledge Agreement with the same force and effect as if originally named therein as a Pledgor and the New Pledgor hereby agrees to all the terms and provisions of the Pledge Agreement applicable to it as a Pledgor thereunder. Each reference to a "Pledgor" in the Pledge Agreement shall be deemed to include the New Pledgor. The Pledge Agreement is hereby incorporated herein by reference. Section 2. The New Pledgor represents and warrants to the Secured Creditors that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to the effects of applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally and equitable principles of general applicability. Section 3. This Supplement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute but one instrument. This Supplement shall become effective when the Pledgee shall have received counterparts of this Supplement that, when taken together, bear the signatures of the New Pledgor and the Pledgee. 125 Section 4. Except as expressly supplemented hereby, the Pledge Agreement shall remain in full force and effect. Section 5. This supplement shall be governed by, and construed in accordance with, the Laws of the State of New York. Section 6. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, neither party hereto shall be required to comply with such provision for so long as such provision is held to be invalid, illegal or unenforceable, but the validity, legality and enforceability of the remaining provisions contained herein and in the Pledge Agreement shall not in any way be affected or impaired. The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. Section 7. All communications and notices hereunder shall be in writing and given as provided in the Pledge Agreement. All communications and notices hereunder to the New Pledgor shall be given to it at the address set forth under its signature, with a copy to the Borrower. IN WITNESS WHEREOF, the New Pledgor and the Pledgee have duly executed this Supplement to the Pledge Agreement as of the day and year first above written. [NAME OF NEW PLEDGOR] By:____________________________________ Name: Title: Address: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Pledgee By:____________________________________ Name: Title: -2- 126 Foster Wheeler Corporation Revolving Credit Agreements Schedule 1.04 Designated Subsidiaries NOT APPLICABLE 127 Foster Wheeler Corporation Revolving Credit Agreements Schedule 3.01 Corporate Status
Borrower Jurisdiction ------------ Foster Wheeler Corporation New York Significant Subsidiaries Foster Wheeler Italiana, S.p.A. Italy Foster Wheeler Limited United Kingdom Foster Wheeler Continental Europe S.r.L. Italy Foster Wheeler USA Corporation* Delaware Foster Wheeler Energy Corporation* Delaware Foster Wheeler Energy International, Inc.* Delaware *Domestic Special Purpose Subsidiaries Camden County Energy Recovery Corporation Delaware Constructora Foster Wheeler Concepcion Limitada Chile Foster Wheeler Adirondack, Inc. Delaware Foster Wheeler Andes, Inc. Delaware Foster Wheeler Avon, Inc. Delaware Foster Wheeler Bedminster, Inc. Delaware Foster Wheeler Bridgewater, Inc. Delaware Foster Wheeler Broome County, Inc. Delaware Foster Wheeler Camden County, Inc. Delaware Foster Wheeler Canadian Resources, Limited Canada Foster Wheeler Canoas, Inc. Delaware Foster Wheeler Charleston Resource Recovery, Inc. Delaware Foster Wheeler Chile, S.A. Chile Foster Wheeler Hudson Falls, Inc. Delaware Foster Wheeler Hungarian Energy, Inc. Delaware Foster Wheeler Hydrobras, Inc. Delaware Foster Wheeler Hydroven, Inc. Delaware Foster Wheeler Hydrox, Inc. Delaware Foster Wheeler Irish Peat Power, Inc. Ireland Foster Wheeler Mt. Carmel, Inc. Delaware Foster Wheeler Martinez, Inc. Delaware Foster Wheeler Midwest, Inc. Delaware Foster Wheeler Passaic, Inc. Delaware La Societe d'Energie Foster Wheeler Ltd. Canada Foster Wheeler Penn Resources Delaware Foster Wheeler Twin Cities Delaware Foster Wheeler Robbins, Inc. Delaware Foster Wheeler Santiago, Inc. Delaware Foster Wheeler Timokhovo, Inc. Delaware Foster Wheeler Facilities Management, Inc. Delaware FWPS Specialty Products, Inc. Delaware
128 Foster Wheeler Corporation Revolving Credit Agreements Schedule 3.01 Continued Foster Wheeler Illinois, Inc. Delaware Foster Wheeler Wood Resources, Inc. Delaware Foster Farms, Inc. Delaware Chapleau Co-Generation Ltd. Canada Compania De Hidrogeno De Concepcion, Ltde. Chile Posco Gilberton, Inc. California
129 Foster Wheeler Corporation Revolving Credit Agreements Schedule 3.02 Consents and Approvals Boards of Directors of the Credit Parties 130 Foster Wheeler Corporation Revolving Credit Agreements Schedule 3.07 Indebtedness 131 Schedule 3.07 Indebtedness Bank Loans Foster Wheeler Corporation Leonia $ 20,000,000 ------------- Foster Wheeler USA (FW Andina) Banco Anglocol (Pesos) $ 615,387 Bank of America (Pesos) 781,440 1,396,827 ------------ ------------- Foster Wheeler Limited - UK Bank Overdrafts: National Westminster Bank 2,427,258 ------------- Foster Wheeler Iberia, S.A Solbank 3,550,035 Popular 4,852,964 Commerciale Italia 1,895,259 Nazionale Lavoro 2,655,588 Banco Santander 6,393,683 Unicredito 27,035,118 Citibank 3,151,145 49,533,792 ------------ ------------- Foster Wheeler Italiana, S.p.A 1st Banc. S.Paolo Torino 396,388 Deutsche Bank - (US Dollars) 2,528,002 Bank Overdrafts: Pop.Comm. Industria 188,156 IBSPT 1,415 Credito Italiana 1,238 Alpha Credit 11,440 Banca Popolare Di Milano 5,787 3,132,426 ------------ ------------- Foster Wheeler France S.A Bank overdrafts - BFCE Credit Lyonnais 535,800 Indosuez 1,786,000 Ste Generale 1,786,000 4,107,800 ------------ ------------- Foster Wheeler International Corporation British Bank of Latin America 1,040,000 Bank of America 2,000,000 3,040,000 ------------ ------------- Foster Wheeler Energy Group North America Foster Wheeler Limited (Canada): Bank of Nova Scotia 653,500 Bank overdrafts - Canadian Imperial Bank of Commerce 1,338,842 1,992,342 ------------ ------------- Foster Wheeler Energia, S.A Banesto 1,958,989 ------------- Foster Wheeler Energia, OY Merita Bank Ltd. 5,010,047 Leonia 2,702,400 7,712,447 ------------ ------------- Foster Wheeler Energy International, Inc. MBI (Moscow)- FW Fakop 786,866 BH Sosnowiec- FW Fakop 1,496,909 FW Power Machinery 5,416,201 Bank overdrafts - Sakura Bank - FW Pyropower KK 4,407,000 ABN AMRO Bank - FW Energia Polska Ltd. 935,545 Societe Generale - FW Energia Polska Ltd. 589,455 ABN AMRO Bank - FW Fakop 819,203 14,451,179 ------------ ------------- Total Bank Loans $ 109,753,060 =============
132 Indebtedness (continued) Long Term Debt Foster Wheeler Corporation Revolving Credit Agreement $200,000,000 Bonds 6.75% due - November 15, 2005 200,000,000 $ 400,000,000 ------------ ------------- Special Purpose Project Debt Foster Wheeler Martinez, Inc. Collateralized note payable, interest varies based on one of several money market rates, (1996 Year-end rate 6.4%) due semiannually through July 30, 2006 $ 46,853,327 ------------ Foster Wheeler Mt. Carmel, Inc. Floating/Fixed Rate Resource Recovery Revenue Bonds, interest varies based on tax-exempt money market rates (1996 year-end rate 4.2%) due semiannually August 1, 1997 through 2/1/2010 40,048,113 ------------ Foster Wheeler Hudson Falls, Inc. Resource Recovery Revenue Bonds, interest 7.90% to 10.00%, due annually December 15, 1997 through 2012 64,275,500 ------------ Camden County Energy Recovery Associates Solid Waste Disposal and Resource Recovery System Revenue Bonds, interest at fixed rates between 7.125% and 7.50%, due annually December 1, 1999 through 12/1/2010 120,150,000 ------------ Foster Wheeler Santiago Fixed Rate Trust Certificates, Interest at 7.36%, due semiannually August 15, 1997 through February 15, 2014 162,000,100 ------------ Foster Wheeler Italiana, S.p.A. (Lomellina Energia, S.r.l.) Collateralized note payable, interest varies based on six month LIBOR rates, due semiannually starting June 30, 2001 through December 31, 2012 42,976,300 ------------ Total Project Debt $ 476,303,340 ------------- Other Long Term Debt Foster Wheeler France, S.A. IBMFF $ 8,863 ------------ Foster Wheeler Italiana, S.p.A. Government of Italy Ministry of Industry 416,922 ------------ Foster Wheeler Energia, OY State of Finland loans 122,625 ------------
133 Indebtedness (continued) Long Term Debt Other Long Term Debt (continued) Foster Wheeler Environmental Hartman Assoc. 337,500 ------------ Foster Wheeler Robbins, Inc. Anthony & Aldo De Angelis 287,102 ------------ Total Other Long Term Debt $ 1,173,012 -------------- Total Long Term Debt $ 877,476,352 ============== Guarantees Foster Wheeler Corporation on Behalf of: Foster Wheeler Robbins $ 20,350,000 Foster Wheeler Crossroads - Bedminster 2,750,000 Foster Wheeler Energia, OY 1,650,000 ------------ Total Guarantees $ 24,750,000 ============== Indebtedness Total Bank Loans $109,753,060 Total Long Term Debt 877,476,352 Total Guarantees 24,750,000 ------------ Total Indebtedness $1,011,979,412 ==============
134 Foster Wheeler Corporation Revolving Credit Agreements Schedule 3.11 Significant Subsidiaries
% Ownership ----------- Foster Wheeler Italiana, S.p.A 100 Foster Wheeler Limited 100 Foster Wheeler Continental Europe S.r.L 100 Foster Wheeler USA Corporation 100 Foster Wheeler Energy Corporation 100 Foster Wheeler Energy International, Inc. 100 Camden County Energy Recovery Corporation 100 Constructora Foster Wheeler Concepcion Limitada 100 Foster Wheeler Adirondack, Inc. 100 Foster Wheeler Andes, Inc. 100 Foster Wheeler Avon, Inc. 100 Foster Wheeler Bedminster, Inc. 100 Foster Wheeler Bridgewater, Inc. 100 Foster Wheeler Broome County, Inc. 100 Foster Wheeler Camden County, Inc. 100 Foster Wheeler Canadian Resources, Limited 100 Foster Wheeler Canoas, Inc. 100 Foster Wheeler Charleston Resource Recovery, Inc. 100 Foster Wheeler Chile, S.A 100 Foster Wheeler Hudson Falls, Inc. 100 Foster Wheeler Hungarian Energy, Inc. 100 Foster Wheeler Hydrobras, Inc. 100 Foster Wheeler Hydroven, Inc. 100 Foster Wheeler Hydrox, Inc. 100 Foster Wheeler Irish Peat Power, Inc. 100 Foster Wheeler Mt. Carmel, Inc. 100 Foster Wheeler Martinez, Inc. 100 Foster Wheeler Midwest, Inc. 100 Foster Wheeler Passaic, Inc. 100 La Societe d'Energie Foster Wheeler Ltd. 100 Foster Wheeler Penn Resources 100 Foster Wheeler Twin Cities 100 Foster Wheeler Robbins, Inc. 100 Foster Wheeler Santiago, Inc. 100 Foster Wheeler Timokhovo, Inc. 100 Foster Wheeler Facilities Management, Inc. 100 FWPS Specialty Products, Inc. 100 Foster Wheeler Illinois, Inc. 100 Foster Wheeler Wood Resources, Inc. 100 Foster Farms, Inc. 100 Chapleau Co-Generation Ltd. 100 Compania De Hidrogeno De Concepcion, Ltde 100 Posco Gilberton, Inc. 100
135 Foster Wheeler Corporation Revolving Credit Agreements Schedule 3.12 Partnership Interests
Foster Wheeler Percentage Interest ------------------- A/C Power 50 Adirondack Resource Recovery Associates, L.P. 80 Crossroads Business Center Associates 50 Camden County Energy Recovery Associates, L.P. 100 Centro Energia Comunanza S.p.A 50 Centro Energia Gas S.p.A 50 Centro Energia Operator Ferrara S.r.l 50 Centro Energia Operator Teverola S.r.l 50 Centro Energia Teverola S.p.A 50 CeraFilter Systems, Inc. 50 CeraFilter Systems, L.P. 50 Chapleau Co-Generation, A Limited Partnership 100 Chiyoda-Foster Wheeler and Company LLC 17.5 East Midlands Power Limited 50 Energia Per L'Industria S.c. a r.l 60 F.FW FiatAvio - Foster Wheeler per l'Energia SpA 40 Foster Wheeler Crossroads Limited Partnership 100 Foster Wheeler Somerset Limited Partnership 100 Foster Wheeler Energy FAKOP Ltd. 51 Foster Wheeler Environmental Company Nigeria Limited 87 Foster Wheeler K.K 85 Martinez Cogen Limited Partnership 50 OTEPI FW, S.A 50 Somerset Corporate Center Associates 50 Cogeneradora Petropower Limitada 85 Robbins Resource Recovery Partners L.P. 100 Foster Wheeler Greenhouses, L.P. 100 Foster Wheeler Coque Verde, L.P. 100 Compania De Hidrogeno De Concepcion Ltde 100 Compania de Hidrogeno de Talcahuano 51 Foster Wheeler Rio Grande, L.P. 100 Foster Wheeler Power Machinery Company, Ltd. 52 Foster Wheeler Petroleum Development & Associates Ltd. 49 Foster Wheeler (Nigeria) Ltd. 60 Foster Wheeler Babcock (Pty) Ltd. 50 Hungarian Independent Power Producers, L.P. 100 Hydrogen Company of Paraguana Ltd. 50 I.S.T.E. S.p.A 7.7 Industrial Pro9motion and Coordination Ltd. S.A 6.25 Lomellina Energia S.r.l 98 Lomellina Energia Operator S.r.l 100 Wood Group Engineering 10
136 Foster Wheeler Corporation Revolving Credit Agreements Schedule 3.12 Continued
Oy Bioflow A.B 51 Protos S.p.A 2.95 Sorco Holdings AS 33.3 Project Management Holdings Ltd. 25 Fibrowatt Limited 15 Thai Maintenance Contracting Company Limited (TMC) 49 ThermoEnergy Environmental Corporation 50.1 Chiyoda-Foster Wheeler Partnership 50 Tecnicas Reunidas, S.A 30 UTE-Carbon II Project 61 UTE-Patache Project 50
137 Foster Wheeler Corporation Revolving Credit Agreements Schedule 3.21 Environmental Matters 3.21(a) Requirements of Law None 3.21(b) Environmental Permits None 3.21(c) Continuation of Requirements of Law and Environmental Permits None 3.21(e) Notice of Claims, Etc. Under the federal Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") and similar state laws, the current owner or operator of real property and the past owners or operators of real property (if disposal took place during such past ownership or operation) may be jointly and severally liable for the costs of removal or Remediation of toxic or hazardous substances on or under their property, regardless of whether such materials were released in violation of law or whether the owner or operator knew of, or was responsible for, the presence of such substances. Moreover, under CERCLA and similar state laws, persons who arrange for the disposal or treatment of hazardous or toxic substances may also be jointly and severally liable for the costs of the removal or remediation of such substances at a disposal or treatment site, whether or not such site was owned or operated by such person ("off-site facility"). Liability at such off-site facilities is typically allocated among all of the viable responsible parties based on such factors as the relative amount of waste contributed to a site, toxicity of such waste, relationship of the waste contributed by a party to the remedy chosen for the site, and other factors. The Corporation currently owns and operates industrial facilities and has also transferred its interests in industrial facilities that it formerly owned or operated. It is likely that as a result of its current or former operations, such facilities have been impacted by hazardous substances. The Corporation is not aware of any conditions at its currently owned facilities in the United States that it expects will cause the Corporation to incur significant costs. The Corporation is aware of potential environmental liabilities at facilities that it recently acquired in Europe, but the Corporation has the benefit of an indemnity from the Seller with respect to any required remediation or other environmental violations that it believes will address the costs of any such remediation or other required environmental measures. The Corporation also may receive claims, pursuant to indemnity 138 obligations from owners of recently sold facilities that may require the Corporation to incur costs for investigation and/or remediation. Based on the available information, the Corporation does not believe that such costs will be material. No assurance can be provided that the Corporation will not discover environmental conditions at its currently owned or operated properties, or that additional claims will be made with respect to formerly owned properties, that would require the Corporation to incur material expenditures to investigate and/or remediate such conditions. The Corporation had been notified that it was a potentially responsible party ("PRP") under CERCLA or similar state laws at three off-site facilities, excluding sites as to which the Corporation has resolved its liability. At each of these sites, the Corporation's liability should be substantially less than the total site remediation costs because the percentage of waste attributable to the Corporation compared to that attributable to all other PRPs is low. The Corporation does not believe that its share of cleanup obligations at any of the three off-site facilities as to which it has received a notice of potential liability will individually exceed $1.0 million. The Corporation received an Administrative Order and Notice of Civil Administrative Penalty Assessment (the "Administrative Order") dated April 1, 1997 alleging state air act violations at the Camden Project in New Jersey. The Administrative Order seeks a penalty of $32,000 and revocation of the Certificate to Operate. The Corporation requested an administrative hearing to challenge the Administrative Order, which request automatically stayed any permit revocation. The Corporation expects an additional penalty demand to increase to more than $100,000 as a result of other violations which the Corporation expects the state to allege. The Corporation believes that it will be able to address all issues of concern to the state and that the resulting civil penalty will not be material to the Corporation. The Corporation received a Complaint for Injunction and Civil Penalties from the State of Illinois date April 28, 1998 alleging primarily state air act violations at the Robbins Project (People of the State of Illinois v. Foster Wheeler Robbins, Inc., filed in the Circuit Court of Cook County, Illinois, County Department, Chancery Division). Although the complaint seeks substantial civil penalties for numerous violations of up to $50,000 for each violation, with an additional penalty of $10,000 for each day of each violation, the maximum allowed under the statute, and an injunction against continuing violations, the Corporation has submitted a plan to the state designed to correct all violations and expects that the resulting penalty will not be material to the Corporation. 3.21(f) Government Notices of any Liens None 139 Foster Wheeler Corporation Revolving Credit Agreements Schedule 6.02 Liens None 140 Exhibit F To Credit Agreement QUARTERLY COMPLIANCE CERTIFICATE I have conducted a review of the terms and conditions of the Short Term Revolving Credit Agreement dated as of February 12, 1999, (the "Agreement"), the Notes and the other Loan Documents, and the financial statements of the Borrower. Defined terms used herein without definition are used as defined in the Agreement. Such review has not disclosed nor does the signer have any knowledge of the existence as of the date of this certificate of any condition or event which constitutes a Potential Default or Event of Default. I further certify that all representations and warranties contained in the Agreement are true and correct in all material respects with the same effect as though such representations and warranties were made on the date of this certificate. Attached are Schedules 1, 2, and 3 which are detailed calculations indicating compliance with the covenants contained in Sections 6.01, 6.02 and 6.03 of the Agreement as of the date of this certificate. DATE: By:_____________________________ Title:_____________________________ EX-10.4 3 SHORT-TERM REVOLVING CREDIT AGREEMENT 1 EXHIBIT 10.4 SHORT TERM REVOLVING CREDIT AGREEMENT AMONG FOSTER WHEELER CORPORATION, THE GUARANTORS SIGNATORY HERETO, THE LENDERS SIGNATORY HERETO, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS ADMINISTRATIVE AGENT, FIRST UNION NATIONAL BANK, AS SYNDICATION AGENT, AND ABN AMRO BANK N.V., AS DOCUMENTATION AGENT ARRANGED BY NATIONSBANC MONTGOMERY SECURITIES LLC, AS LEAD ARRANGER, AND ABN AMRO BANK N.V., FIRST UNION CAPITAL MARKETS, A DIVISION OF WHEAT FIRST SECURITIES, INC., GREENWICH NATWEST STRUCTURED FINANCE INC. AND TD SECURITIES (USA) INC., AS ARRANGERS ------------------------ DATED AS OF FEBRUARY 12, 1999 ------------------------ 2 TABLE OF CONTENTS
SECTION HEADING PAGE - ------- ------- ---- Recitals...................................................................... 1 ARTICLE I DEFINITIONS; CONSTRUCTION................................... 1 Section 1.01. Certain Definitions......................................... 1 Section 1.02. Construction................................................ 13 Section 1.03. Accounting Principles....................................... 13 Section 1.04. Optional Increase of the Commitments........................ 14 Section 1.05. Utilization of Commitments in Foreign Currencies............ 15 ARTICLE II THE CREDITS................................................. 15 Section 2.01. Revolving Credit Loans...................................... 15 Section 2.02. Fees; Reduction of the Committed Amounts.................... 16 Section 2.03. Competitive Bid Loans....................................... 16 Section 2.04. Maximum Aggregate Amount of Loans........................... 22 Section 2.05. [Intentionally Omitted]..................................... 22 Section 2.06. [Intentionally Omitted]..................................... 22 Section 2.07. Making of Loans............................................. 22 Section 2.08. Interest Rates.............................................. 22 Section 2.09. Conversion or Renewal of Interest Rate Options.............. 25 Section 2.10. Prepayments Generally....................................... 26 Section 2.11. Optional Prepayments; Mandatory Prepayments................. 26 Section 2.12. Interest Payment Dates...................................... 27 Section 2.13. Pro Rata Treatment.......................................... 27 Section 2.14. Additional Compensation in Certain Circumstances............ 27 Section 2.15. Payments Generally; Interest on Overdue Amounts............. 29 Section 2.16. Taxes....................................................... 30 Section 2.17. Funding by Branch, Subsidiary or Affiliate.................. 31 Section 2.18. Extension of Revolving Credit Maturity Date................. 32 ARTICLE III REPRESENTATIONS AND WARRANTIES.............................. 33 Section 3.01. Corporate Status............................................ 33 Section 3.02. Corporate Power and Authorization........................... 33 Section 3.03. Execution and Binding Effect................................ 33 Section 3.04. Governmental Approvals and Filings.......................... 33 Section 3.05. Absence of Conflicts........................................ 34 Section 3.06. Audited Financial Statements................................ 34 Section 3.07. Absence of Undisclosed Liabilities.......................... 34 Section 3.08. Absence of Material Adverse Changes......................... 34 Section 3.09. Accurate and Complete Disclosure............................ 34 Section 3.10. Margin Regulations.......................................... 34 Section 3.11. Subsidiaries................................................ 35 Section 3.12. Partnerships, etc........................................... 35 Section 3.13. Litigation.................................................. 35 Section 3.14. Absence of Events of Default................................ 35 Section 3.15. Absence of Other Defaults................................... 35 Section 3.16. Insurance................................................... 35 Section 3.17. Title to Property........................................... 36
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SECTION HEADING PAGE - ------- ------- ---- Section 3.18. Intellectual Property....................................... 36 Section 3.19. Taxes....................................................... 36 Section 3.20. Employee Benefits........................................... 36 Section 3.21. Environmental Matters....................................... 37 Section 3.22. Year 2000................................................... 37 ARTICLE IV CONDITIONS OF LENDING....................................... 38 Section 4.01. Conditions to Initial Loans................................. 38 Section 4.02. Conditions to All Loans..................................... 39 ARTICLE V AFFIRMATIVE COVENANTS....................................... 39 Section 5.01. Basic Reporting Requirements................................ 39 Section 5.02. Insurance................................................... 41 Section 5.03. Payment of Taxes and Other Potential Charges and Priority 42 Claims...................................................... Section 5.04. Preservation of Corporate Status............................ 42 Section 5.05. Governmental Approvals and Filings.......................... 42 Section 5.06. Maintenance of Properties................................... 42 Section 5.07. Avoidance of Other Conflicts................................ 42 Section 5.08. Financial Accounting Practices.............................. 43 Section 5.09. Use of Proceeds............................................. 43 Section 5.10. Continuation of or Change in Business....................... 43 Section 5.11. Consolidated Tax Return..................................... 43 Section 5.12. Fiscal Year................................................. 43 Section 5.13. ERISA....................................................... 43 Section 5.14. Ratings..................................................... 43 Section 5.15. Subsidiary Guaranty......................................... 44 ARTICLE VI NEGATIVE COVENANTS.......................................... 44 Section 6.01. Financial Covenants......................................... 44 Section 6.02. Liens....................................................... 45 Section 6.03. Indebtedness................................................ 46 Section 6.04. Loans, Advances and Certain Investments..................... 46 Section 6.05. Changes in Business......................................... 46 Section 6.06. Amendment of Certain Documents.............................. 46 Section 6.07. Mergers; Acquisitions....................................... 46 Section 6.08. ERISA Obligations........................................... 46 Section 6.09. Principal Foreign Affiliates................................ 47 Section 6.10. Certain Agreements.......................................... 47 Section 6.11. Restricted Payments......................................... 47 Section 6.12. Transactions with Affiliates................................ 48 Section 6.13. Capital Expenditures........................................ 48 ARTICLE VII DEFAULTS.................................................... 48 Section 7.01. Events of Default........................................... 48 Section 7.02. Consequences of an Event of Default......................... 50 ARTICLE VIII THE AGENTS.................................................. 50 Section 8.01. Appointment................................................. 50 Section 8.02. General Nature of Agents' Duties............................ 51
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SECTION HEADING PAGE - ------- ------- ---- Section 8.03. Exercise of Powers.......................................... 51 Section 8.04. Certain Provisions.......................................... 51 Section 8.05. Administration by the Agents................................ 52 Section 8.06. Lender Not Relying on Agents or Other Lenders............... 52 Section 8.07. Indemnification............................................. 53 Section 8.08. Agents in their Individual Capacities....................... 53 Section 8.09. Holders of Notes............................................ 53 Section 8.10. Successor Agents............................................ 53 Section 8.11. Calculations................................................ 54 Section 8.12. Funding by Administrative Agent............................. 54 Section 8.13. Syndication Agent and Documentation Agent................... 54 ARTICLE IX GUARANTY.................................................... 54 Section 9.01. The Guaranty................................................ 54 Section 9.02. Bankruptcy.................................................. 54 Section 9.03. Nature of Liability......................................... 54 Section 9.04. Independent Obligation...................................... 55 Section 9.05. Authorization............................................... 55 Section 9.06. Reliance.................................................... 55 Section 9.07. Subordination............................................... 56 Section 9.08. Waiver...................................................... 56 Section 9.09. Nature of Liability......................................... 56 Section 9.10. Judgments Binding........................................... 57 ARTICLE X MISCELLANEOUS............................................... 57 Section 10.01. Holidays.................................................... 57 Section 10.02. Records..................................................... 57 Section 10.03. Amendments and Waivers...................................... 57 Section 10.04. No Implied Waiver; Cumulative Remedies...................... 58 Section 10.05. Notices..................................................... 58 Section 10.06. Expenses; Taxes; Indemnity.................................. 58 Section 10.07. Severability................................................ 59 Section 10.08. Prior Understandings........................................ 59 Section 10.09. Duration; Survival.......................................... 59 Section 10.10. Counterparts................................................ 59 Section 10.11. Limitation on Payments...................................... 60 Section 10.12. Set-Off..................................................... 60 Section 10.13. Sharing of Collections...................................... 60 Section 10.14. Successors and Assigns; Participations; Assignments......... 60 Section 10.15. Governing Law; Submission to Jurisdiction; Waiver of Jury 63 Trial....................................................... Section 10.16. Confidentiality............................................. 64
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SECTION HEADING PAGE - ------- ------- ---- Section 10.17. Replacement of Lenders...................................... 64 Section 10.18. Judgment Currency........................................... 65 Signature Page................................................................ 65 EXHIBIT A Form of Revolving Credit Note EXHIBIT B Form of Competitive Bid Loan Quote Request EXHIBIT C Form of Competitive Bid Loan Quote EXHIBIT D Form of Competitive Bid Note EXHIBIT E [Intentionally Omitted] EXHIBIT F Form of Quarterly Compliance Certificate EXHIBIT G Form of Transfer Supplement EXHIBIT H Subsidiary Guaranty Agreement EXHIBIT I Joinder to Revolving Credit Agreement EXHIBIT J Pledge Agreement EXHIBIT K Commitment Increase Supplement EXHIBIT L Request for Extension of Credit SCHEDULE 3.01 Corporate Status SCHEDULE 3.02 Consents and Approvals SCHEDULE 3.07 Indebtedness SCHEDULE 3.11 Subsidiaries SCHEDULE 3.12 Partnerships SCHEDULE 3.21 Environmental Matters SCHEDULE 6.02 Liens
iv 6 SHORT TERM REVOLVING CREDIT AGREEMENT THIS AGREEMENT, dated as of February 12, 1999, by and among FOSTER WHEELER CORPORATION, a New York corporation (the "Borrower"), the guarantors party hereto from time to time (the "Guarantors", as defined further below), the lenders party hereto from time to time (the "Lenders", as defined further below), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Administrative Agent for the Lenders hereunder, First Union National Bank, as Syndication Agent, and ABN AMRO Bank N.V., as Documentation Agent. RECITALS: A. The Borrower has requested the Lenders to extend credit to the Borrower to enable it to borrow, repay and reborrow hereunder amounts not exceeding $90,000,000 (subject to increase or reduction as provided herein) aggregate principal amount at any time outstanding, and the Lenders are willing to extend such credit upon the terms and conditions set forth herein. B. The Borrower and the Lenders desire to establish an uncommitted competitive bid facility. NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I DEFINITIONS; CONSTRUCTION Section 1.01. Certain Definitions. In addition to other words and terms defined elsewhere in this Agreement, as used herein the following words and terms shall have the following meanings, respectively, unless the context hereof otherwise clearly requires: "Absolute Rate" shall have the meaning set forth in Section 2.03(d)(ii)(F) hereof. "Absolute Rate Auction" shall mean a solicitation of Competitive Bid Loan Quotes setting forth Absolute Rates pursuant to Section 2.03 hereof. "Absolute Rate Loan" or "Absolute Rate Loans" shall mean any or all Competitive Bid Loans the interest rates of which are determined on the basis of Absolute Rates pursuant to an Absolute Rate Auction. "Administrative Agent" shall mean, initially, Bank of America National Trust and Savings Association, in its capacity as Administrative Agent for the Lenders hereunder, and any successor Administrative Agent appointed in accordance with Section 8.10 hereof. "Affected Lender" shall have the meaning set forth in Section 2.08(e) hereof. "Affiliate" of a Person (the "Specified Person") shall mean (a) any Person which directly or indirectly controls, or is controlled by, or is under common control with, the Specified Person, and (b) any director or officer (or, in the case of a Person which is not a corporation, any individual having analogous powers) of the Specified Person or of a Person who is an Affiliate of the Specified Person within the meaning of the preceding clause (a). For purposes of the preceding sentence, "control" of a Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "Agents" shall mean, collectively, the Administrative Agent, the Syndication Agent and the Documentation Agent and "Agent" shall mean any of the foregoing. 1 7 "Applicable Margin", "Facility Fee" and "Utilization Fee" each means the number of basis points designated below in the applicable column and appropriate grid:
- ------------------------------------------------------------------------------------------------------ LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V DAY DAY DAY DAY DAY -------- -------- --------- --------- ------------- - ------------------------------------------------------------------------------------------------------ Applicable Margin for Base Rate Option.................................. 0 bps 0 bps 35 bps 55 bps 85 bps - ------------------------------------------------------------------------------------------------------ Applicable Margin for CD Rate Option.... 67.5 bps 77.5 bps 122.5 bps 142.5 bps 172.5 bps - ------------------------------------------------------------------------------------------------------ Applicable Margin for Euro Rate Option.................................. 55 bps 65 bps 110 bps 130 bps 160 bps - ------------------------------------------------------------------------------------------------------ Facility Fee............................ 15 bps 20 bps 25 bps 30 bps 50 bps - ------------------------------------------------------------------------------------------------------ Utilization Fee......................... 15 bps 15 bps 15 bps 15 bps 15 bps - ------------------------------------------------------------------------------------------------------
(bps = basis points per annum) provided, however, that: (a) if on any day the Dollar Equivalent of the sum of the aggregate principal amount of outstanding Loans under this Agreement exceeds 50% of the Total Revolving Credit Commitment under this Agreement, an additional 0.15% per annum (the "Utilization Fee") shall be added to the Applicable Margin for such day (and the term "Applicable Margin" shall be deemed to include the Utilization Fee); and (b) for each day from and including the date hereof and to and including the last day of the third fiscal quarter of the Borrower in 1999, the pricing under this Agreement shall be no lower than that applicable to Level II Day. "Assessment Rate" shall have the meaning set forth in Section 2.08(a)(ii) hereof. "Bank of America" means Bank of America National Trust and Savings Association, a national banking association. "Base Rate" shall have the meaning set forth in Section 2.08(a)(i) hereof. "Base Rate Auction" shall mean a solicitation of Competitive Bid Loan Quotes setting forth Base Rate Margins based on the Base Rate pursuant to Section 2.03 hereof. "Base Rate Loans" shall mean Competitive Bid Loans the interest rates of which are determined on the basis of the Base Rate pursuant to a Base Rate Auction. "Base Rate Margin" shall have the meaning set forth in Section 2.03(d)(ii)(E) hereof. "Base Rate Option" shall have the meaning set forth in Section 2.08(a)(i) hereof. "Base Rate Portion" of any Loan or Loans shall mean at any time the portion, including the whole, of such Loan or Loans bearing interest at such time (i) under the Base Rate Option or (ii) in accordance with Section 2.15 hereof. If no Loan or Loans is specified, "Base Rate Portion" shall refer to the Base Rate Portion of all Loans outstanding at such time. "Benefit Plan" shall mean any plan, agreement, arrangement or commitment which is an employment or consulting agreement, executive compensation plan, bonus plan, deferred compensation agreement, employee pension, profit-sharing, savings or retirement plan, employee stock option or stock purchase plan, retiree medical or life, group life, health, or accident insurance or other benefit plan, agreement, arrangement or commitment, including, without limitation, severance, or other bonus practice (including, but not limited to, employee benefit plans, as defined in section 3(3) of ERISA), with respect to which the Borrower, any of its Significant Subsidiaries, or a member of their respective Controlled Group, at any relevant time have some liability or obligation to contribute or pay benefits and which relates to current or former employees of the Borrower, any Significant Subsidiary or any member of their respective Controlled Group. "Business Day" shall mean (a) with respect to selection of the Euro-Rate Option, prepayment of any Euro-Rate Portion of any Revolving Credit Loans, determining the first or last day of any Euro-Rate Funding Period, the giving of notices or quotes in connection with a LIBOR Auction or a payment of principal of or 2 8 interest on, or the Interest Period for, a LIBOR-based Loan, a day for dealings in deposits in Dollars by and among banks in the London interbank market and on which commercial banks are open for domestic and international business in Los Angeles, California and New York, New York and (b) with respect to selection of any other interest rate Option, prepayment of any part of any other Portion of any Revolving Credit Loans, determining the first or last day of any other Funding Period, the giving of notices or quotes in connection with an Absolute Rate or a payment of principal of or interest on, or the Interest Period for, an Absolute Rate Loan and in every other context, any day other than a Saturday, Sunday or other day on which banking institutions are authorized or obligated to close in Los Angeles, California or New York, New York. "Capitalized Lease" shall mean at any time any lease which is, or is required under GAAP to be, capitalized on the balance sheet of the lessee at such time, and "Capitalized Lease Obligation" of any Person at any time shall mean the aggregate amount which is, or is required under GAAP to be, reported as a liability on the balance sheet of such Person at such time as lessee under a Capitalized Lease. "CD Rate" shall have the meaning set forth in Section 2.08(a)(ii) hereof. "CD Rate Funding Period" shall have the meaning set forth in Section 2.08(c) hereof. "CD Rate Option" shall have the meaning set forth in Section 2.08(a)(ii) hereof. "CD Rate Portion" of any Loan or Loans shall mean at any time the portion, including the whole, of such Loan or Loans bearing interest at any time under the CD Rate Option or at a rate calculated by reference to the CD Rate under Section 2.15 hereof. If no Loan or Loans is specified, "CD Rate Portion" shall refer to the CD Rate Portion of all Loans outstanding at such time. "CD Rate Reserve Percentage" for any day and for any CD Rate Funding Period shall mean the percentage (expressed as a decimal, rounded upward to the nearest 1/100 of 1%), as determined in good faith by the Administrative Agent (which determination shall be conclusive absent manifest error), which is in effect on such day as prescribed by the Board of Governors of the Federal Reserve System (or any successor) representing the maximum reserve requirement (including without limitation supplemental, marginal and emergency reserve requirements) for a member bank of such System in respect of nonpersonal time deposits in Dollars in the United States having a maturity comparable to such CD Rate Funding Period. "Change of Control" shall mean (a) any Person or group of Persons (as used in Sections 13 and 14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations thereunder) shall have become the beneficial owner (as defined in Rules 13d-3 and 13d-5 promulgated by the Securities and Exchange Commission (the "SEC") under the Exchange Act) of 20% or more of the Borrower's outstanding Voting Stock, unless a majority of the Continuing Directors approves the acquisition not later than 10 days after such acquisition or (b) a change in the board of directors of the Borrower shall have occurred which results in a majority of directors not being Continuing Directors. "Closing Date" shall mean the date on which the last of the conditions set forth in Section 4.01 hereof has been satisfied. "Code" means the Internal Revenue Code of 1986, as amended, and any successor statute of similar import, and regulations thereunder, in each case as in effect from time to time. References to sections of the Code shall be construed also to refer to any successor sections. "Commitments" of a Lender shall mean the Revolving Credit Commitment of such Lender. "Commitment Percentage" of a Lender at any time shall mean the Commitment Percentage for such Lender set forth below its name on the signature page hereof, subject to adjustment as provided in Sections 1.04 and 10.17 hereof and subject to transfer to another Lender as provided in Section 10.14 hereof. "Competitive Bid Borrowing" shall have the meaning set forth in Section 2.03(b) hereof. "Competitive Bid Expiration Date" shall mean February 5, 2000, or such later date as may be established as the Competitive Bid Expiration Date pursuant to Section 2.18 hereof. 3 9 "Competitive Bid Loan" or "Competitive Bid Loans" shall mean any or all loans provided for by Section 2.03 hereof. "Competitive Bid Loan Maturity Date" shall have the meaning set forth in Section 2.03(j) hereof. "Competitive Bid Loan Quote" shall mean an offer in accordance with Section 2.03(d) hereof by a Lender to make a Competitive Bid Loan. "Competitive Bid Loan Quote Request" shall have the meaning set forth in Section 2.03(b) hereof. "Competitive Bid Note" shall have the meaning set forth in Section 2.03(p) hereof. "Competitive Bid Record" shall have the meaning set forth in Section 2.03(l) hereof. "Consolidated Adjusted EBITDAR" for any period, with respect to the Borrower and its consolidated Subsidiaries, shall mean the sum of (a) Consolidated Net Income for such period, (b) Consolidated Adjusted Interest Expense for such period, (c) charges against income for foreign, federal, state and local income taxes for such period, (d) the amount of all expenses for depreciation and amortization for such period and (e) Consolidated Adjusted Rental Expense for such period, all as determined on a consolidated basis in accordance with GAAP. "Consolidated Adjusted Interest Expense" for any period shall mean the sum of (a) the total interest expense of the Borrower and its consolidated Subsidiaries (other than Special Purpose Subsidiaries) and (b) any cash dividend paid on the Borrower's Trust Preferred, for such period determined on a consolidated basis in accordance with GAAP. "Consolidated Adjusted Rental Expense" for any period shall mean aggregate rent and lease payments made pursuant to operating leases for such period by the Borrower and its consolidated Subsidiaries (other than Special Purpose Subsidiaries) determined on a consolidated basis in accordance with GAAP. "Consolidated Capitalization" at any time shall mean the sum of Consolidated Net Worth at such time and Consolidated Indebtedness at such time. "Consolidated Fixed Charges" for any period shall mean the sum of Consolidated Adjusted Interest Expense for such period and Consolidated Adjusted Rental Expense for such period. "Consolidated Fixed Charges Coverage Ratio" for any period shall mean the ratio of the Consolidated Adjusted EBITDAR (less any cash dividend paid on the Borrower's common stock) for such period to the Consolidated Fixed Charges for such period. "Consolidated Indebtedness" at any time shall mean the Indebtedness of the Borrower and its consolidated Subsidiaries at such time determined on a consolidated basis in accordance with GAAP. "Consolidated Leverage Ratio" at any time shall mean the ratio of Consolidated Indebtedness to the Consolidated Capitalization at such time. "Consolidated Net Income" for any period shall mean the net earnings (or loss) after taxes of the Borrower and its consolidated Subsidiaries for such period determined on a consolidated basis in accordance with GAAP. "Consolidated Net Worth" at any time shall mean the total amount of stockholders' equity (including, without duplication, the face amount of the Borrower's Trust Preferred issued and outstanding at such time) of the Borrower and its consolidated Subsidiaries at such time determined on a consolidated basis in accordance with GAAP, provided, that in the calculation of Consolidated Net Worth of the Borrower solely for the purposes of Section 6.01(b), accumulated translation adjustments with respect to the Borrower's investments in foreign entities shall be excluded. "Continuing Directors" shall mean members of the board of directors of the Borrower who (a) were directors on January 1, 1999 or (b) have been directors for at least two years, or (c) were nominated or elected with the affirmative vote of the greater of (x) a majority of the Continuing Directors on the board or (y) three Continuing Directors. 4 10 "Controlled Group" shall mean with respect to any Person, all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with such Person, are treated as a single employer under Section 414(b), 414(c), 414(m) or 414(o) of the Code or Section 4001(a)(2) of ERISA. "Corresponding Source of Funds" shall mean: (a) In the case of any Funding Segment of the CD Rate Portion, the proceeds of hypothetical issuances by a Lender of one or more of its certificates of deposit at the beginning of the CD Rate Funding Period corresponding to such Funding Segment, having maturities approximately equal to such CD Rate Funding Period and in an aggregate amount approximately equal to such Lender's Pro Rata share of such Funding Segment; and (b) In the case of any Funding Segment of the Euro-Rate Portion, the proceeds of hypothetical receipts by a Notional Euro-Rate Funding Office or by a Lender through a Notional Euro-Rate Funding Office of one or more Dollar deposits in the interbank eurodollar market at the beginning of the Euro-Rate Funding Period corresponding to such Funding Segment having maturities approximately equal to such Euro-Rate Funding Period and in an aggregate amount approximately equal to such Lender's Pro Rata share of such Funding Segment. "Creditors" shall mean the Lenders and the Agents. "Credit Party" shall mean each of the Borrower and the Guarantors. "Debt Instrument" shall have the meaning set forth in Section 7.01(f) hereof. "Documentation Agent" shall mean ABN AMRO Bank N.V., in its capacity as documentation agent hereunder. "Dollar," "Dollars" and the symbol "$" shall mean lawful money of the United States of America. "Dollar Equivalent" shall mean, as of the date of determination, (a) the amount denominated in Dollars, and (b) as to any amount denominated in another currency, the equivalent amount in Dollars as determined by the Administrative Agent on the basis of the Spot Rate for the purchase of Dollars with such currency. "Eligible Assignee" means (a) a financial institution organized under the laws of the United States, or any state thereof, and having a combined capital and surplus of at least $100,000,000; (b) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development, or a political subdivision of any such country, and having a combined capital and surplus of at least $100,000,000, provided that such bank is acting through a branch or agency located in the United States; (c) a Person that is primarily engaged in the business of commercial banking and that is (i) a Subsidiary of a Lender, (ii) a Subsidiary of a Person of which a Lender is a Subsidiary, or (iii) a Person of which a Lender is a Subsidiary or (d) another Lender. "Environmental Claim" shall mean, with respect to any Person, any action, suit, proceeding, investigation, notice, claim, complaint, demand, request for information or other communication (written or oral) by any other Person (including but not limited to any Governmental Authority, citizens' group or present or former employee of such Person) alleging, asserting or claiming any actual or potential (a) violation of any Requirements of Law, (b) liability under any Requirements of Law or (c) liability for investigatory costs, cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries, fines or penalties arising out of, based on or resulting from the presence, or release into the environment, of any Hazardous Materials at any location, whether or not owned by such Person. "Environmental Matters" means any matter arising out of, relating to, or resulting from any emissions, discharges, releases or threatened releases of Hazardous Materials into the air, surface water, groundwater, or soil, or otherwise arising out of, relating to, or resulting from the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials. 5 11 "Environmental Permits" means all permits, licenses, authorizations, registrations and other governmental consents required by applicable Requirements of Law for the use, storage, treatment, transportation, release, emission and disposal of raw materials, by-products, wastes and other substances used or produced by or otherwise relating to the operations of the Borrower and any Significant Subsidiary of the Borrower. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, and regulations thereunder, in each case as in effect from time to time. References to sections of ERISA shall be construed also to refer to any successor sections. "ERISA Lien" shall mean a security interest or lien arising under or in connection with a Pension Plan or Title IV of ERISA or a claim asserted (including for failure to withhold) by the government which if successful would result in such a lien; provided, however, that any claim asserted, (a) for which the Borrower has reasonable grounds to contest and (b) which the Borrower is diligently contesting in good faith through appropriate proceedings with the IRS or a court of law, shall not be deemed an ERISA Lien for so long as all of the above conditions are met. "Eurocurrency Liabilities" shall have the meaning set forth in the definition of Euro-Rate Reserve Percentage set forth in Section 1.01 hereof. "Eurocurrency Loan" shall have the meaning set forth in Section 2.03(r) hereof. "Euro-Rate" shall have the meaning set forth in Section 2.08(a)(iii) hereof. "Euro-Rate Funding Period" shall have the meaning set forth in Section 2.08(c) hereof. "Euro-Rate Option" shall have the meaning set forth in Section 2.08(a)(iii) hereof. "Euro-Rate Portion" of any Loan or Loans shall mean at any time the portion, including the whole, of such Loan or Loans bearing interest at any time under the Euro-Rate Option or at a rate calculated by reference to the Euro-Rate under Section 2.15 hereof. If no Loan or Loans is specified, "Euro-Rate Portion" shall refer to the Euro-Rate Portion of all Loans outstanding at such time. "Euro-Rate Reserve Percentage" means for any day for any Lender for any Funding Segment or Interest Period the reserve percentage (expressed as a decimal, rounded upward to the next 1/100th of 1%) in effect on such day, as determined in good faith by such Lender (which determination shall be conclusive absent manifest error), under regulations issued from time to time by the Board of Governors of the Federal Reserve System for determining the maximum reserve requirement of such Lender (including any emergency, supplemental or other marginal reserve requirement) with respect to eurocurrency funding (currently referred to as "Eurocurrency Liabilities"). "Event of Default" shall mean any of the Events of Default described in Section 7.01 hereof. "Existing Credit Agreements" shall have the meaning set forth in Section 4.01(f) hereof. "Facility Fee" is set forth in the definition of "Applicable Margin." "Federal Funds Effective Rate" for any day shall mean the rate per annum (rounded upward to the nearest 1/100 of 1%) determined by the Administrative Agent (which determination shall be conclusive) to be the rate per annum announced by the Federal Reserve Bank of New York (or any successor) on such day as being the weighted average of the rates on overnight Federal funds transactions arranged by Federal funds brokers on the previous trading day, as computed and announced by such Federal Reserve Bank (or any successor) in substantially the same manner as such Federal Reserve Bank computes and announces the weighted average it refers to as the "Federal Funds Effective Rate" as of the date of this Agreement; provided, that if such Federal Reserve Bank (or its successor) does not announce such rate on any day, the "Federal Funds Effective Rate" for such day shall be the Federal Funds Effective Rate for the last day on which such rate was announced. "Financial Provisions" shall have the meaning set forth in Section 1.03(d) hereof. "Funding Periods" shall have the meaning set forth in Section 2.08(c) hereof. 6 12 "Funding Segment" of the CD Rate Portion or the Euro-Rate Portion, as the case may be, of the Revolving Credit Loans at any time shall mean the entire principal amount of such Portion to which at the time in question there is applicable a particular Funding Period beginning on a particular day and ending on a particular day. (By definition, each such Portion is at all times composed of an integral number of discrete Funding Segments and the sum of the principal amounts of all Funding Segments of any such Portion at any time equals the principal amount of such Portion at such time.) "GAAP" shall have the meaning set forth in Section 1.03 hereof. "Governmental Action" shall have the meaning set forth in Section 3.04 hereof. "Governmental Authority" shall mean any government or political subdivision or any agency, authority, bureau, central bank, commission, department or instrumentality of either, or any court, tribunal, grand jury or arbitrator, in each case whether foreign or domestic. "Guarantee" shall mean the guarantee by any Person to pay or perform the obligations of any other Person, including any agreement, whether such agreement is on a contingency basis or otherwise, to purchase, repurchase or otherwise acquire Indebtedness of any other Person, or to purchase, sell or lease, as lessee or lessor, property or services, in any such case primarily for the purpose of enabling another Person to make payment of Indebtedness. "Guaranteed Obligations" shall mean the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of the principal and interest on each Note and Loan made under this Agreement, together with all the other obligations and liabilities (including, without limitation, indemnities, fees and interest thereon) of the Borrower to the Agents and the Lenders now existing or hereafter incurred under, arising out of or in connection with this Agreement or any other Loan Document to which the Borrower is a party and the due performance and compliance with all the terms, conditions and agreements contained in such Loan Documents by the Borrower. "Guarantor" shall mean Foster Wheeler USA Corporation, Foster Wheeler Energy International, Inc., Foster Wheeler Energy Corporation and any other domestic Subsidiary of the Borrower designated pursuant to Section 5.15 hereof. "Guaranty" shall mean the Guaranty as set forth in Article IX hereof. "Hazardous Materials" means any pollutants, contaminants, hazardous or toxic substances, materials or wastes (including petroleum, petroleum by-products, PCBs, and friable asbestos) as those concepts are used in the Comprehensive Environmental Response Compensation and Liability Act (CERCLA), the Resource Conservation and Recovery Act (RCRA), the Toxic Substance Control Act (TSCA), the Clean Air Act, the Clean Water Act, and other similar federal or state statutes or regulations. "Indebtedness" of a Person shall mean with respect to any Person, without duplication, all (a) liabilities or obligations incurred in connection with borrowings (including reimbursement obligations in respect of letters of credit or banker's acceptances which have been drawn and including the sale of debt securities) of such Person which in accordance with generally accepted accounting principles would be included in determining total liabilities as shown on the liability side of a balance sheet of such Person at the date as of which Indebtedness is to be determined, including, without limitation, Capitalized Lease Obligations of such Person; (b) liabilities or obligations of such Person issued, incurred or assumed in respect of the purchase price of property except for trade accounts payable incurred in the ordinary course of business on which interest is not being accrued; (c) liabilities or obligations of others of any of the types specified in the preceding clauses (a) and (b) for which such Person is directly or indirectly liable, by way of guaranty (whether by direct guaranty, suretyship, discount, endorsement, take-or-pay agreement, agreement to purchase or advance or keep in funds or other agreement having the effect of a guaranty) or otherwise; (d) liabilities or obligations of others of any of the types specified in the preceding clauses (a) and (b) which are secured by Liens on any assets of such Person, whether or not such liabilities or obligations shall have been assumed by it; and (e) to the extent not included in the preceding clauses (a) through (d), the excess over 7 13 $10,000,000 of the aggregate undrawn amount of all financial letters of credit issued on account of such Person. "Indemnified Parties" shall mean the Agents, the Lenders, their respective affiliates, and the directors, officers, employees, attorneys and agents of each of the foregoing. "Indenture" shall have the meaning set forth in Section 6.10 hereof. "Initial Revolving Credit Committed Amount" shall have the meaning set forth in Section 2.01(a) hereof. "Interest Period" shall mean with respect to any Competitive Bid Loan, the period commencing on the date such Competitive Bid Loan is made and ending on a date not less than seven days nor more than 180 days thereafter (with respect to any Absolute Rate Loan) or 30, 60, 90 or 180 days thereafter (with respect to any CD Rate Loan) or one, two, three or six months (with respect to any LIBO-Rate Loan), as the Borrower may specify in the related Competitive Bid Loan Quote Request as provided in Section 2.03(b) hereof, provided that: (a) No Interest Period may end after the Competitive Bid Expiration Date; (b) Each Interest Period that would otherwise end on a day that is not a Business Day shall end on the next succeeding Business Day or, in the case of an Interest Period for a LIBOR-based Loan, if such next succeeding Business Day falls in the next succeeding calendar month, then such Interest Period shall end on the next preceding Business Day; and (c) Notwithstanding clauses (a) and (b) above, no Interest Period for any Competitive Bid Loan shall have a duration of less than seven days and, if the Interest Period for any Competitive Bid Loan would otherwise be a shorter period, such Competitive Bid Loan shall not be available hereunder. "Investment" by any Person in any other Person shall mean: (a) the amount paid, or the value of property or services contributed, by such Person for or in connection with the acquisition by such Person of any stock, bonds, notes, debentures, option contracts, investment contracts, partnership or other ownership interests or other securities of any other Person; (b) the amount of any advance, loan or extension of credit to any other Person by such Person; and (c) the amount of any Indebtedness of any other Person which such Person has guaranteed and which by its terms or as a consequence of any default thereunder such Indebtedness has or may, at the option of the holder thereof, become due and payable by acceleration or otherwise. "IRS" shall mean the Internal Revenue Service. "Law" shall mean any law (including common law), constitution, statute, treaty, convention, regulation, rule, ordinance, order, injunction, writ, decree or award of any Governmental Authority. "Lender" shall mean any of the Lenders listed on the signature pages hereof, subject to the provisions of Sections 1.05, 10.14 and 10.17 hereof pertaining to Persons becoming or ceasing to be Lenders. "Level I Day" shall mean a day on which there is in effect a Moody's Rating of Baa2 or better and an S&P Rating of BBB or better. "Level II Day" shall mean a day which is not a Level I Day and on which there is in effect a Moody's Rating of Baa3 or better and an S&P Rating of BBB-or better. "Level III Day" shall mean a day which is not a Level I Day or a Level II Day and on which there is in effect a Moody's Rating of Ba1 or better and an S&P Rating of BB+ or better. "Level IV Day" shall mean a day which is not a Level I Day, a Level II Day or a Level III Day and on which there is in effect a Moody's Rating of Ba2 or better and an S&P Rating of BB or better. 8 14 "Level V Day" shall mean a day which is not a Level I Day, a Level II Day, a Level III Day or a Level IV Day. "LIBO-Rate" for any day, as used herein, shall mean with respect to each proposed LIBOR-based Loan a rate of interest (which shall be the same for each day in the applicable Interest Period) equal to the rate of interest determined in good faith by the Administrative Agent in accordance with its usual procedures from the Reuters Screen LIBO page (which determination shall be conclusive absent manifest error) to be the average of the rates per annum for deposits in Dollars offered to the leading banks in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the first day of such Interest Period for delivery on the first day of such Interest Period in amounts comparable to the amount of the LIBOR-based Loan to be funded and having maturities comparable to such Interest Period. "LIBOR Auction" shall mean a solicitation of Competitive Bid Loan Quotes setting forth LIBOR-based Margins based on the LIBO-Rate pursuant to Section 2.03 hereof. "LIBOR-based Loans" shall mean Competitive Bid Loans the interest rates of which are determined on the basis of the LIBO-Rate pursuant to a LIBOR Auction. "Lien" shall mean any mortgage, deed of trust, pledge, lien, security interest, charge or other encumbrance or security arrangement of any nature whatsoever, including but not limited to any conditional sale or title retention arrangement, and any assignment, deposit arrangement or lease intended as, or having the effect of, security. "Loan" shall mean any loan or advance by a Lender under this Agreement, whether a Revolving Credit Loan or a Competitive Bid Loan and "Loans" shall mean all Revolving Credit Loans and Competitive Bid Loans made by Lenders under this Agreement. "Loan Documents" shall mean this Agreement, the Notes, the Subsidiary Guaranty Agreements, the Pledge Agreement and the Transfer Supplements, and all other agreements and instruments extending or renewing any indebtedness, obligation or liability arising under any of the foregoing, and any certificate or instrument delivered by the Borrower or the Guarantors in connection herewith or therewith, in each case as the same may be amended, modified or supplemented from time to time hereafter. "Material Adverse Effect" shall mean a material adverse effect on the business, operations, properties, assets or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole. "Material Domestic Subsidiary" shall mean each Significant Subsidiary of the Borrower (other than Special Purpose Subsidiaries) that is organized under the laws of one of the States of the United States. "Moody's" shall mean Moody's Investor's Services, Inc., or any successor thereto. "Moody's Rating" shall mean the rating assigned to the Borrower's senior unsecured long term debt by Moody's, or in the event the Borrower has no Moody's-rated senior unsecured long-term debt outstanding, the "hypothetical senior long-term debt rating" most recently assigned to the Borrower by Moody's, which assignment shall have been made not more than fifteen months prior to the time in question and not more than ninety (90) days after a request therefor by the Required Lenders pursuant to Section 5.14 hereof. "Nonextending Lender" shall have the meaning set forth in Section 2.18 hereof. "Note" or "Notes" shall mean the Revolving Credit Note(s) or the Competitive Bid Note(s), as the case may be, of the Borrower executed and delivered under this Agreement, together with all extensions, renewals, refinancings or refundings of any thereof in whole or part. "Notional Euro-Rate Funding Office" shall have the meaning given to that term in Section 2.17(a) hereof. "Obligations" shall mean all indebtedness, obligations and liabilities of the Borrower to any Lender or any Agent from time to time arising under or in connection with or related to or evidenced by or secured by this Agreement or any other Loan Document, and all extensions or renewals thereof, whether such indebtedness, obligations or liabilities are direct or indirect, otherwise secured or unsecured, joint or several, absolute or 9 15 contingent, due or to become due, whether for payment or performance, now existing or hereafter arising. Without limitation of the foregoing, such indebtedness, obligations and liabilities include the principal amount of Loans, interest, fees, indemnities or expenses under or in connection with this Agreement or any other Loan Document, and all extensions and renewals thereof, whether or not such Loans were made in compliance with the terms and conditions of this Agreement or in excess of the obligation of the Lenders to lend. Obligations shall remain Obligations notwithstanding any assignment or transfer or any subsequent assignment or transfer of any of the Obligations or any interest therein. "Office," when used in connection with the Administrative Agent, shall mean its office located at 1850 Gateway Boulevard, 5th Floor, Concord, California 94520, or at such other office or offices of the Administrative Agent or any branch, subsidiary or affiliate thereof as may be designated in writing from time to time by the Administrative Agent to the Borrower. "Option" shall mean the Base Rate Option, the CD Rate Option or the Euro-Rate Option, as the case may be. "Other Credit Agreement" shall mean the Revolving Credit Agreement dated as of February 12, 1999 among Foster Wheeler Corporation, the guarantors signatory thereto, the lenders signatory thereto, Bank of America National Trust and Savings Association, as administrative agent, and other agents party thereto, as the same may be amended, modified or supplemented from time to time. "Participants" shall have the meaning set forth in Section 10.14(b) hereof. "PBGC" means the Pension Benefit Guaranty Corporation established under Title IV of ERISA or any other governmental agency, department or instrumentality succeeding to the functions of said corporation. "Pension Plan" shall mean a single employer plan as defined in Section 4001(a)(15) of ERISA or an individual account plan which is subject to the funding standards of Section 302 of ERISA with respect to which the Borrower, any of its Significant Subsidiaries, or members of their respective Controlled Groups, at any relevant time have some liability or obligation to contribute or pay benefits and which relates to current or former employees of the Borrower, any of its Significant Subsidiaries or any member of their respective Controlled Groups. "Permitted Liens" shall mean (a) pledges or deposits by the Borrower or any of its Subsidiaries under workers' compensation laws, unemployment insurance laws, social security laws, or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Indebtedness of the Borrower or any of its Subsidiaries), or leases to which the Borrower or any of its Subsidiaries is a party, or deposits to secure public or statutory obligations of the Borrower or any of its Subsidiaries or deposits of cash or U.S. governmental bonds to secure surety, appeal, performance or other similar bonds to which the Borrower or any of its Subsidiaries is a party, or deposits as security for contested taxes or import duties or for the payment of rent; (b) Liens imposed by law such as carriers', warehousemen's, materialmen's and mechanics' or other similar liens, or Liens arising out of judgments or awards against the Borrower or any of its Subsidiaries with respect to which the Borrower or any of its Subsidiaries at the time shall currently be prosecuting an appeal or proceedings for review; (c) Liens for taxes, assessments or governmental charges or levies not yet subject to penalties for nonpayment and Liens for taxes, assessments or governmental charges or levies the payment of which is being contested as permitted by Section 5.03 hereof; (d) survey exceptions, encumbrances, easements or reservations of, or rights of others for rights of way, highways and railroad crossings, sewers, electric lines, telephone and telegraph lines and other similar purposes, or zoning or other restrictions as to the use of real property; all of which Liens described in clause (d) hereof do not in the aggregate materially detract from the value of the properties to which they relate or materially impair their use in the operation of the business of the Borrower and its Subsidiaries taken as a whole; (e) Liens (i) in favor of the United States of America or any State thereof, or any department, agency or instrumentality or political subdivision of the United States of America or any State thereof, or (ii) in favor of any other country, or any political subdivision thereof, to secure partial, progress, advance or other payments pursuant to any contract or statute; (f) Liens made in favor of any customer arising in the ordinary course of business of the Borrower or any Subsidiary thereof in respect of payments made by or on behalf of such customer for goods produced or 10 16 services rendered to such customer; (g) a security interest granted to the "Administrative Agent", for the benefit of the "Administrative Agent", the "LC Issuer" and the "Lenders", in "Cash Collateral" under the Other Credit Agreement (all terms in quotation having the meanings ascribed to such terms under the Other Credit Agreement); and (h) Liens granted pursuant to the Pledge Agreement. "Person" shall mean an individual, corporation, partnership, trust, unincorporated association, joint venture, joint-stock company, Governmental Authority or any other entity. "Portion" shall mean the Base Rate Portion, the CD Rate Portion or the Euro-Rate Portion, as the case may be. "Potential Default" shall mean any event or condition which with notice or passage of time, or any combination of the foregoing, would constitute an Event of Default. "Pledge Agreement" shall mean the pledge agreement in the form of Exhibit J. "Principal Foreign Affiliates" shall have the meaning set forth in Section 6.09 hereof. "Project" shall mean any municipal solid waste project or any other project the assets of which are financed on a limited recourse basis. "Pro Rata" shall have the meaning set forth in Section 2.13 hereof. "Purchasing Lender" shall have the meaning set forth in Section 10.14(c) hereof. "Reference Rate" as used herein, shall mean for any day the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its "reference rate." (The "reference rate" is a rate set by Bank of America based upon various factors including Bank of America's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate.) Any change in the reference rate announced by Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change. "Register" shall have the meaning set forth in Section 10.14(d) hereof. "Regular Payment Date" shall mean the last Business Day of each March, June, September and December after the date hereof. "Relevant Date" shall have the meaning set forth in Section 1.03(a) hereof. "Replacement Lender" shall have the meaning set forth in Section 2.18 hereof. "Reportable Event" means an event described in Section 4043 of ERISA or in the regulations thereunder with respect to which the 30-day notice is not waived or an event described in Section 4043 or in the regulations thereunder with respect to which the 30-day notice has been waived and which involves a liability of $1,000,000 or more or a material plan or a receipt of a notice of withdrawal liabilities pursuant to Section 4202 of ERISA. For purposes of this definition a material plan is a plan in which benefit liabilities exceed assets on a termination basis based on PBGC assumptions by $1,000,000. "Required Lenders" shall mean, at any time prior to the termination or expiration of the Commitments, Lenders which have Commitments constituting, in the aggregate, more than 50% of the total Commitments of all the Lenders at such time and shall mean, at any time thereafter, Lenders which have outstanding Loans constituting, in the aggregate, more than 50% of all Loans outstanding at such time. "Requirements of Law" means all applicable federal, state, and local laws, statutes, rules, regulations, codes, ordinances, orders, decrees, directives, permits, licenses and judgments relating to Environmental Matters in effect from time to time. "Responsible Officer" of the Borrower shall mean its Chief Executive Officer, its Chief Financial Officer, its Executive Vice President, any Senior Vice President, any Vice President, the Treasurer or one of its Assistant Treasurers. 11 17 "Revolving Credit Commitment" shall have the meaning set forth in Section 2.01(a) hereof. "Revolving Credit Committed Amount" shall have the meaning set forth in Section 2.01(a) hereof. "Revolving Credit Loans" shall have the meaning set forth in Section 2.01(a) hereof. "Revolving Credit Maturity Date" shall mean February 11, 2000, as such date may be extended pursuant to Section 2.18 hereof. "Revolving Credit Note" shall mean the promissory note of the Borrower executed and delivered under Section 2.01(c) hereof, any promissory note issued in substitution therefor pursuant to Sections 2.17(b) or 10.14(c) hereof, together with all extensions, renewals, refinancings or refundings thereof in whole or part. "S&P" shall mean Standard & Poor's Rating Services, or any successor thereto. "S&P Rating" shall mean the rating assigned to the Borrower's senior unsecured long term debt by S&P, or in the event the Borrower has no S&P-rated senior unsecured long-term debt outstanding, the "issuer credit rating" most recently assigned to the Borrower by S&P, which assignment shall have been made not more than fifteen months prior to the time in question and not more than ninety (90) days after a request therefor by the Required Lenders pursuant to Section 5.14 hereof. "Significant Subsidiary" shall mean (a) each Special Purpose Subsidiary and (b) each other Subsidiary of the Borrower which in the most recent fiscal year of the Borrower accounted for more than 10% of the consolidated assets of the Borrower and its Subsidiaries or which accounted for more than 10% of the consolidated income of the Borrower and its Subsidiaries for each of the most recent three fiscal years of the Borrower; provided, however, that with respect to Subsidiaries created or acquired after the date hereof, if thereafter such entity, in a fiscal year, accounts for more than 10% of the consolidated assets of the Borrower and its Subsidiaries or accounts for more than 10% of the consolidated income of the Borrower and its Subsidiaries in such fiscal year, it shall be deemed to be a Significant Subsidiary for such fiscal year. "Special Purpose Subsidiary" shall mean a Subsidiary of the Borrower formed with the express and sole purpose of, and which is engaged solely in the business of, constructing or owning, leasing or operating a specific Project, and with respect to which Subsidiary, neither the Borrower nor any of its other Subsidiaries is obligated (except as guarantor of completion or performance) to pay any Indebtedness (including lease obligations) incurred to construct, own, lease or operate any such Project or any other Indebtedness of such Subsidiary. "Spot Rate" for a currency means the rate quoted (expressed as a decimal, rounded to the fourth decimal place) to the Administrative Agent as the spot rate for the purchase of such currency with another currency through the FX Trading Office of Bank of America at approximately 12:00 noon (London time) on the date two Business Days prior to the date as of which the foreign exchange settlement is made. "Standard Notice" shall mean an irrevocable notice substantially in the form of Exhibit L provided to the Administrative Agent on a Business Day which is: (a) At least two Business Day in advance in the case of selection of, conversion to or renewal of the CD Rate Option or prepayment of CD Rate Portion; (b) At least three Business Days in advance in the case of selection of, conversion to or renewal of the Euro-Rate Option or prepayment of any Euro-Rate Portion; and (c) On the same Business Day in the case of selection of, conversion to or renewal of the Base Rate Option or prepayment of Base Rate Portion. Standard Notice must be provided no later than 9:00 a.m., Los Angeles time, on the last day permitted for such notice in the case of notices given pursuant to clause (c) above, and no later than 10:00 a.m., Los Angeles time, on the last day permitted for such notice in the case of notices given pursuant to clauses (a) and (b) above. 12 18 "Stock Payment" by any Person shall mean any dividend, distribution or payment of any nature (whether in cash, securities, or other property) on account of or in respect of any shares of the capital stock (or warrants, options or rights therefor) of such Person, including but not limited to any payment on account of the purchase, redemption, retirement, defeasance or acquisition of any shares of the capital stock (or warrants, options or rights therefor) of such Person, in each case regardless of whether required by the terms of such capital stock (or warrants, options or rights) or any other agreement or instrument. "Subsidiary" of a Person at any time shall mean any corporation of which a majority (by number of shares or number of votes) of any class of outstanding capital stock normally entitled to vote for the election of one or more directors (regardless of any contingency which does or may suspend or dilute the voting rights of such class) is at such time owned directly or indirectly, beneficially or of record, by such Person or one or more Subsidiaries of such Person, and any trust of which a majority of the beneficial interest is at such time owned directly or indirectly, beneficially or of record, by such Person or one or more Subsidiaries of such Person. "Subsidiary Guaranty Agreement" shall mean the agreement of a Subsidiary in the form of Exhibit H hereof whereby it acknowledges to become a party hereto as a Guarantor under Section 9 hereof. "Syndication Agent" shall mean First Union National Bank, in its capacity as Syndication Agent hereunder. "Taxes" shall have the meaning set forth in Section 2.16 hereof. "Total Revolving Credit Commitment" shall mean at any time, the aggregate Revolving Credit Committed Amounts of all Lenders hereunder at such time. "Transfer Effective Date" shall have the meaning set forth in the applicable Transfer Supplement. "Transfer Supplement" shall have the meaning set forth in Section 10.14(c) hereof. "Trust Preferred" shall mean 9% $175,000,000 Trust Preferred Securities of the Borrower issued on or about January 13, 1999. "Utilization Fee" is set forth in the definition of "Applicable Margin." "Voting Stock" shall mean, with respect to any corporation, the capital stock of such corporation having the power to vote for a majority of the board of directors of such corporation under ordinary circumstances. Section 1.02. Construction. Unless the context of this Agreement otherwise clearly requires, references to the plural include the singular, the singular the plural and the part the whole; "or" has the inclusive meaning represented by the phrase "and/or"; and "property" includes all properties and assets of any kind or nature, tangible or intangible, real, personal or mixed. References in this Agreement to "determination" (and similar terms) by any Agent or by any Lender include reasonable and good faith estimates by such Agent or by such Lender (in the case of quantitative determinations) and good faith beliefs by such Agent or by such Lender (in the case of qualitative determinations). The words "hereof," "herein," "hereunder" and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. The section and other headings contained in this Agreement and the Table of Contents preceding this Agreement are for reference purposes only and shall not control or affect the construction of this Agreement or the interpretation thereof in any respect. Section, subsection and exhibit references are to this Agreement unless otherwise specified. Section 1.03. Accounting Principles. (a) As used herein, "GAAP" shall mean generally accepted accounting principles as such principles shall be in effect at the Relevant Date, subject to the provisions of this Section 1.03. As used herein, "Relevant Date" shall mean the date a relevant computation or determination is to be made or the date of relevant financial statements, as the case may be. (b) Except as otherwise provided in this Agreement, all computations and determinations as to accounting or financial matters shall be made, and all financial statements to be delivered pursuant to this 13 19 Agreement shall be prepared, in accordance with GAAP (including principles of consolidation where appropriate), and all accounting or financial terms shall have the meanings ascribed to such terms by GAAP. (c) If any change in GAAP after the date of this Agreement is or shall be required to be applied to transactions then or thereafter in existence, and a violation of one or more provisions of this Agreement shall have occurred or in the opinion of the Borrower would likely occur which would not have occurred or be likely to occur if no change in accounting principles had taken place, (i) The parties agree that such violation shall not be considered to constitute an Event of Default or a Potential Default for a period of 60 days from the date the Borrower notifies the Administrative Agent of the application of this Section 1.03(c); (ii) The parties agree in such event to negotiate in good faith an amendment of this Agreement which shall approximate to the extent possible the financial effect of the original financial covenants after taking into account such change in GAAP; and (iii) If the parties are unable to negotiate such an amendment within 60 days, the Borrower shall have the option of prepaying the Loans (subject to Section 2.14(b) hereof). If the Borrower does not exercise such option within said period, then as used in this Agreement, "GAAP" shall mean generally accepted accounting principles in effect at the Relevant Date. (d) If any change in GAAP after the date of this Agreement is required to be applied to transactions or conditions then or thereafter in existence, and the Administrative Agent shall assert that the effect of such change is or shall likely be to distort materially the effect of any of the definitions of financial terms in Article I hereof or any of the covenants of the Borrower in Article VI hereof (the "Financial Provisions"), so that the intended financial effect of any of the Financial Provisions will not in fact be accomplished, (i) The Administrative Agent shall notify the Borrower of such assertion, specifying the change in GAAP which is objected to, and until otherwise determined as provided below, the specified change in GAAP shall not be made by the Borrower in its financial statements for the purpose of applying the Financial Provisions; and (ii) The parties shall follow the procedures set forth in paragraph (ii) and the first sentence of paragraph (iii) of subsection (c) of this Section. If the parties are unable to agree on an amendment as provided in said paragraph (ii) and if the Borrower does not exercise the option set forth in the first sentence of said paragraph (iii) within the specified period, then as used in this Agreement "GAAP" shall mean generally accepted accounting principles in effect at the Relevant Date, except that the specified change in GAAP which is objected to by the Administrative Agent shall not be made in applying the Financial Provisions. (e) All expenses of compliance with this Section 1.03 shall be paid for by the Borrower upon demand. Section 1.04. Optional Increase of the Commitments. (a) The Borrower may from time to time increase the Total Revolving Credit Commitment by the addition of one or more new Lenders consented to by the Administrative Agent or by the agreement of any existing Lender (a "Proposed Combined Commitments Increase") in the manner set forth below; provided that (i) the then Total Revolving Credit Commitment plus the Proposed Combined Commitments Increase shall not be greater than the $100,000,000; (ii) immediately prior to and after giving effect to the Proposed Combined Commitments Increase no event has occurred and is continuing that constitutes an Event of Default or Potential Default; (iii) the Borrower shall pay any costs payable under Section 2.14(b) if and to the extent any Loans are prepaid on the effective date of such increase (the "Increase Date"); (iv) to the extent the Other Credit Agreement is in effect, the Borrower must request the increase of the Total Revolving Credit Commitment under the Other Credit Agreement and such new or existing Lender consenting to the increase under this Agreement must also consent to the increase under the Other Credit Agreement at the same percentage; and (v) the Borrower may not request the increase of the Total Revolving Credit Commitment hereunder once the Borrower has reduced such Commitment under Section 2.02(c) hereof. 14 20 (b) The Total Revolving Credit Commitment shall be increased by the Proposed Combined Commitments Increase on the Increase Date provided (i) each such new Lender shall execute and deliver to the Administrative Agent the Joinder to Revolving Credit Agreement (and by such execution and delivery, each such new Lender shall be deemed to have agreed with the matters set forth in this Agreement) and/or such existing Lender shall execute and deliver the Commitment Increase Supplement in the form of Exhibit K and (ii) the Administrative Agent shall have received on or before the Increase Date certified copies of the resolutions of the Board of Directors of the Borrower approving such increase of the Total Revolving Credit Commitment, and of all documents evidencing other necessary corporate action, if any, with respect to such increase. Upon satisfaction of the foregoing conditions, such new Lender shall become a Lender hereunder and/or such existing Lender's Commitment shall be increased, and the Administrative Agent shall, promptly following the effective date thereof, provide to the Borrower and the Lenders a revised Pro Rata shares giving effect thereto. The Borrower agrees that it shall execute and deliver upon request of such new or existing Lender, one or more Notes evidencing that such new or existing Lender's Pro Rata share. (c) If, after giving effect to the Proposed Combined Commitments Increase, any Lender's revised Pro Rata share of the Total Revolving Credit Commitment is different than its share of Obligations, the Obligations shall be reallocated among the Lenders as follows. On the Increase Date the Borrower shall be deemed to have prepaid all outstanding Revolving Credit Loans in accordance with Section 2.11 and reborrowed all Revolving Credit Loans in accordance with Section 2.01 from all Lenders ratably in accordance with their revised Pro Rata shares. On the Increase Date, the Administrative Agent shall distribute to each Lender having a decreased Pro Rata share an amount equal to the difference between its Revolving Credit Loans so prepaid and the new Revolving Credit Loans deemed to have been made by it (plus interest payable hereunder). Such payments shall be deemed to be a payment of the Revolving Credit Loans by the Borrower on the date such payment is received. Section 1.05. Utilization of Commitments in Foreign Currencies. The Administrative Agent will determine the Dollar Equivalent with respect to any (i) borrowing of Eurocurrency Loans as of the requested borrowing date and (ii) outstanding Eurocurrency Currency Loans as of the last Business Day of each month provided, however, that (i) upon the occurrence and during the continuation of any Potential Default or Event of Default or (ii) for the purpose of calculating fees payable under this Agreement or for other purposes, such determination shall be made as often as the Administrative Agent or the Required Lenders may reasonably deem necessary. ARTICLE II THE CREDITS Section 2.01. Revolving Credit Loans. (a) Revolving Credit Commitments. Subject to the terms and conditions and relying upon the representations and warranties herein set forth, each Lender, severally and not jointly, agrees (such agreement being herein called such Lender's "Revolving Credit Commitment") to make committed loans in Dollars (the "Revolving Credit Loans") to the Borrower from time to time on or after the date hereof and to but not including the Revolving Credit Maturity Date. A Lender shall have no obligation to make any Revolving Credit Loan to the extent that, upon the making of such Revolving Credit Loan, the sum of the aggregate principal amount of such Lender's outstanding Revolving Credit Loans would exceed such Lender's Revolving Credit Committed Amount. No Revolving Credit Loans shall be made hereunder to the extent that such Revolving Credit Loans would cause the Dollar Equivalent of the sum of the aggregate outstanding principal amount of all Loans outstanding hereunder to exceed the Total Revolving Credit Commitment. Each Lender's "Revolving Credit Committed Amount" at any time shall be equal to the amount set forth as its "Initial Revolving Credit Committed Amount" below its name on the signature pages hereof, as such amount may have been reduced pursuant to Section 2.02(c) hereof at such time, subject to adjustment as provided in Sections 1.05 and 10.17 hereof and subject to transfer to another Lender as provided in Section 10.14 hereof. 15 21 (b) Nature of Credit. Within the limits of time and amount set forth in this Section 2.01, and subject to the provisions of this Agreement, the Borrower may borrow, repay and reborrow Revolving Credit Loans hereunder. (c) Revolving Credit Notes. To the extent so requested by any Lender through the Administrative Agent, the obligation of the Borrower to repay the unpaid principal amount of the Revolving Credit Loans made to it by such Lender and to pay interest thereon shall be evidenced in part by promissory notes of the Borrower, one to such Lender, dated the Closing Date (the "Revolving Credit Notes") in substantially the form attached hereto as Exhibit A, with the blanks appropriately filled, payable to the order of such Lender in a face amount equal to such Lender's Initial Revolving Credit Committed Amount. (d) Maturity. To the extent not due and payable earlier, the Revolving Credit Loans shall be due and payable on the Revolving Credit Maturity Date. Section 2.02. Fees; Reduction of the Committed Amounts. (a) Facility Fee. The Borrower shall pay to the Administrative Agent for the account of each Lender a fee (the "Facility Fee") for each day from and including the date hereof and to but not including the Revolving Credit Maturity Date, on the amount of such Lender's Revolving Credit Committed Amount (whether used or unused) on such day (based upon a year of 365 or 366 days and actual days elapsed) at a rate per annum equal to the rate in effect for such day determined in accordance with the pricing grid set forth in the definition of "Applicable Margin". Facility Fees shall be due and payable for the preceding period for which such fees have not been paid on each Regular Payment Date and on the Revolving Credit Maturity Date. (b) Other Fees. The Borrower shall pay to each Agent an agency fee and other fees at the times and in the amounts previously agreed upon among the Agents and the Borrower. (c) Optional Reduction of the Revolving Credit Committed Amounts. The Borrower may at any time or from time to time reduce Pro Rata the Revolving Credit Committed Amounts of the Lenders to an aggregate amount (which may be zero) not less than the Dollar Equivalent of the sum of the unpaid principal amount of the Revolving Credit Loans and Competitive Bid Loans then outstanding plus the principal amount of all Revolving Credit Loans and Competitive Bid Loans not yet made as to which notice has been given by Borrower under Section 2.07 hereof. Any reduction of the Revolving Credit Committed Amounts shall be in an aggregate amount not less than $10,000,000 which is an integral multiple of $1,000,000. Reduction of the Revolving Credit Committed Amounts shall be made by providing not less than two Business Days' notice (which notice shall be irrevocable) to such effect to the Administrative Agent. After the date specified in such notice the Facility Fee shall be calculated upon the Revolving Credit Committed Amounts as so reduced. The Administrative Agent will promptly send copies of such notice to the Lenders. (d) Bid Fees. In consideration of the Administrative Agent's management of bidding procedures for Competitive Bid Loans, the Borrower shall pay to the Administrative Agent for the Administrative Agent's own account on the date of each LIBOR Auction, CD Rate Auction, Base Rate Auction and Absolute Rate Auction, bid agency fees in the amount of $150 for each Competitive Bid Loan Quote submitted by each Lender, but in no event less than $450 per auction. Section 2.03. Competitive Bid Loans. (a) Making of Competitive Bid Loans. In addition to Revolving Credit Loans, the Borrower may, as set forth in this Section 2.03, request the Lenders to make offers to make one or more Competitive Bid Loans to the Borrower. Each Lender may, but shall have no obligation to, make one or more such offers and, subject to the terms and provisions hereof, the Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section 2.03. Competitive Bid Loans may be Base Rate Loans, CD Rate Loans, Absolute Rate Loans or LIBOR-based Loans (each a "type" of Competitive Bid Loan) and, subject to Section 2.03(r) hereof, may be in any freely available currency agreed upon by the Borrower and each Lender. Competitive Bid Loans shall be due and payable on the earlier of the Competitive Bid Expiration Date and the applicable Competitive Bid Loan Maturity Date. After giving effect to any borrowing of Competitive Bid Loans, the Dollar Equivalent of the sum of the aggregate principal amount of all Loans outstanding hereunder shall not exceed the Total Revolving Credit Commitment at any time; provided, however, that the outstanding Competitive Bid Loans made by any 16 22 Lender may exceed its Revolving Credit Committed Amount. The Competitive Bid Loans shall be deemed to utilize the Total Revolving Credit Commitment by an amount equal to the Dollar Equivalent of the aggregate outstanding principal amount thereof. (b) Competitive Bid Loan Quote Requests. When the Borrower wishes to request offers to make Competitive Bid Loans under this Section 2.03, it shall transmit to the Administrative Agent by telecopy, at its Office, notice (a "Competitive Bid Loan Quote Request") so as to be received no later than 10:00 a.m., Los Angeles time on (x) the fourth Business Day prior to the date of borrowing proposed therein, in the case of a LIBOR Auction, (y) the third Business Day prior to the date of Borrowing proposed therein, in the case of a CD Rate Auction, or (z) the Business Day next preceding the date of borrowing proposed therein, in the case of a Base Rate Auction or Absolute Rate Auction (or, in any case, such other time as the Borrower and Administrative Agent may agree). The Borrower may request offers to make Competitive Bid Loans for different Interest Periods in a single notice; provided that the request for each separate Interest Period shall be deemed to be a separate Competitive Bid Loan Quote Request for a separate Competitive Bid Loan (all Competitive Bid Loans proposed to be made at one time herein collectively referred to as a "Competitive Bid Borrowing"). Each such notice shall be substantially in the form of Exhibit B hereto and in any case shall specify as to each Competitive Bid Borrowing: (i) The proposed date of such Competitive Bid Borrowing, which shall be a Business Day; (ii) The currency or currencies in which such Competitive Borrowing is to be made; (iii) The aggregate amount of such Competitive Bid Borrowing which shall be a Dollar Equivalent of at least $5,000,000 (or a higher integral multiple of $1,000,000) (to the extent practical in the case of Eurocurrency Loans), but shall not cause the limits specified in Section 2.04 hereof to be violated; (iv) The duration of the initial Interest Period or Periods applicable thereto, subject to the provisions of the definition of "Interest Period" (including without limitation that no such Interest Period shall end after the Competitive Bid Expiration Date); and (v) Whether the Competitive Bid Loan Quotes requested are to set forth a LIBOR-based Margin, a Base Rate Margin, a CD Rate Margin or an Absolute Rate. The Borrower may not request Competitive Bid Borrowings for more than three maturities nor request more than one type of Competitive Bid Loan in a single Competitive Bid Borrowing. Unless the Administrative Agent otherwise agrees, in its sole and absolute discretion, the Borrower may not submit a request for a Competitive Bid Borrowing if it has submitted another such request within the prior two Business Days. (c) Invitation for Competitive Bid Loan Quotes. The Administrative Agent shall promptly transmit to the Lenders by telecopy notice of such Competitive Bid Loan Request, which notice shall constitute an invitation by the Borrower to each Lender to submit Competitive Bid Loan Quotes offering to make Competitive Bid Loans in accordance with such Competitive Bid Loan Quote Request. No Competitive Bid Loan Request shall be given if such request could result in more than six Competitive Bid Loans being outstanding at any one time unless otherwise permitted by the Administrative Agent. (d) Submission and Contents of Competitive Bid Loan Quotes. (i) Each Lender may submit one or more Competitive Bid Loan Quotes, each containing an offer to make a Competitive Bid Loan in response to any Competitive Bid Loan Quote Request. Each Competitive Bid Loan Quote must comply with the requirements of this Section 2.03(d) and must be submitted to the Administrative Agent by telecopy at its Office not later than (x) 8:00 a.m., Los Angeles time on the third Business Day prior to the proposed date of borrowing, in the case of a LIBOR Auction or (y) 7:00 a.m., Los Angeles time on the proposed date of borrowing, in the case of a Base Rate Auction, CD Rate Auction or an Absolute Rate Auction (or, in either case upon reasonable notice to the Lenders, such other time and date as the Borrower and the Administrative Agent may agree); provided that any Competitive Bid Loan Quote submitted by the Administrative Agent (or an Affiliate of the Administrative Agent) in the capacity of a Lender may be submitted, and may only be submitted, if the Administrative Agent (or such Affiliate) notifies the Borrower of the terms of the offer or 17 23 offers contained therein not later than (x) 7:30 a.m., Los Angeles time on the third Business Day prior to the proposed date of borrowing, in the case of a LIBOR Auction or (y) 6:30 a.m., Los Angeles time on the proposed date of borrowing, in the case of a Base Rate Auction, CD Rate Auction or an Absolute Rate Auction. Subject to Sections 2.14, 2.03(r) and 4.01 hereof, any Competitive Bid Loan Quote so made shall be irrevocable except with the written consent of the Administrative Agent given on the written instructions of the Borrower. (ii) Each Competitive Bid Loan Quote shall be substantially in the form of Exhibit C hereto and shall in any case specify: (A) The proposed date of borrowing, the proposed currency and the Interest Period therefor; (B) The principal amount of the Competitive Bid Loan for which each such offer is being made, which principal amount shall be a Dollar Equivalent of at least $5,000,000 or a higher integral multiple of $1,000,000; provided that the aggregate principal amount of all Competitive Bid Loans for which a Lender submits Competitive Bid Loan Quotes (x) may be greater than, less than or equal to the Revolving Credit Committed Amount of such Lender but (y) may not exceed the principal amount of the Competitive Bid Borrowing for which offers were requested in the related Competitive Bid Loan Quote Request; (C) In the case of a LIBOR Auction, the margin above (or, if a negative margin is offered, below) the applicable LIBOR Rate (the "LIBOR-based Margin") offered for each such Competitive Bid Loan, expressed as a percentage (rounded upwards, if necessary, to the nearest 1/10,000th of 1%) to be added to the applicable LIBOR Rate; (D) In the case of a CD Rate Auction, the margin above (or, if a negative margin is offered, below) the applicable CD Rate (the "CD Rate Margin") offered for each such Competitive Bid Loan expressed as a percentage (rounded upward, if necessary, to the nearest 1/10,000th of 1%) to be added to the applicable CD Rate; (E) In the case of a Base Rate Auction, the margin above (or, if a negative margin is offered, below) the applicable Base Rate (the "Base Rate Margin") offered for each such Competitive Bid Loan, expressed as a percentage (rounded upward, if necessary, to the nearest 1/10,000th of 1%) to be added to the applicable Base Rate; (F) In the case of an Absolute Rate Auction, the rate of interest per annum, calculated on the basis of a 360-day year (rounded upwards, if necessary, to the nearest 1/10,000th of 1%) (the "Absolute Rate") offered for each such Competitive Bid Loan; and (G) The identity of the quoting Lender. (iii) No Competitive Bid Loan Quote shall contain qualifying, conditional or similar language or propose terms other than or in addition to those set forth in the applicable Competitive Bid Loan Quote Request and, in particular, no Competitive Bid Loan Quote may be conditioned upon acceptance by the Borrower of all (or some specified minimum) of the principal amount of the Competitive Bid Loan for which such Competitive Bid Loan Quote is being made, and the Administrative Agent shall disregard any Competitive Bid Loan Quote that contains such language or terms or conditions or that arrives at the Administrative Agent's Office after the time set forth for submission of Competitive Bid Loan Quotes in Section 2.03(d)(i) hereof. (e) Notice to the Borrower. The Administrative Agent shall (x) in the case of a LIBOR Auction, by 9:00 a.m., Los Angeles time on the day (which shall be a Business Day) a Competitive Bid Loan Quote is submitted or (y) in the case of a Base Rate Auction, CD Rate Auction or an Absolute Rate Auction, by 7:30 a.m., Los Angeles time on the day (which shall be a Business Day) a Competitive Bid Loan Quote is submitted, notify the Borrower by telecopy of the terms (i) of any Competitive Bid Loan Quote submitted by a Lender that is in accordance with Section 2.03(d) hereof and (ii) of any Competitive Bid Loan Quote that amends, modifies or is otherwise inconsistent with a previous Competitive Bid Loan Quote submitted by such Lender with respect to the same Competitive Bid Loan Quote Request. Any such subsequent Competitive Bid Loan Quote shall be disregarded by the Administrative Agent unless such subsequent Competitive Bid Loan 18 24 Quote is submitted solely to correct a manifest error in such former Competitive Bid Loan Quote. The Administrative Agent's notice to the Borrower shall specify (A) the aggregate principal amount of each Competitive Bid Loan for which Competitive Bid Loan Quotes have been received for each Interest Period specified in the related Competitive Bid Loan Quote Request, (B) the respective principal amounts and LIBOR-based Margins, CD Rate Margins, Base Rate Margins or Absolute Rates, as the case may be, so offered by each Lender, identifying the Lender that made each Competitive Bid Loan Quote and (C) if the Administrative Agent is notifying the Borrower of more than one Competitive Bid Loan Quote for a single Interest Period, the Administrative Agent shall arrange the Competitive Bid Loan Quotes in ascending yield order. (f) Acceptance and Notice by the Borrower. Not later than (x) 9:30 a.m., Los Angeles time on the third Business Day prior to the proposed date of the borrowing, in the case of a LIBOR Auction or (y) 8:00 a.m., Los Angeles time on the proposed date of the borrowing, in the case of a Base Rate Auction, CD Rate Auction or an Absolute Rate Auction (or, in either case upon reasonable prior notice to the Lenders, such other time and date as the Borrower and the Administrative Agent may agree), the Borrower shall notify the Administrative Agent by telecopy at its Office of its acceptance or nonacceptance of the Competitive Bid Loan Quotes so notified to it pursuant to Section 2.03(e) hereof (and the failure of the Borrower to give such notice by such time shall constitute nonacceptance) and the Administrative Agent shall promptly notify each affected Lender in accordance with Section 2.03(h) hereof. In the case of acceptance, such notice shall specify the aggregate principal amount of Competitive Bid Loan Quotes for each Interest Period that are accepted. The Borrower may accept one or more Competitive Bid Loan Quotes in whole or in part (provided that any Competitive Bid Loan Quote accepted in part shall be a Dollar Equivalent of at least $5,000,000 or a higher integral multiple of $1,000,000, to the extent practical in the case of Eurocurrency Loans); provided that: (i) The aggregate principal amount of each Competitive Bid Borrowing may not exceed the applicable amount set forth in the related Competitive Bid Loan Quote Request; (ii) The aggregate principal amount of each Competitive Bid Borrowing shall be a Dollar Equivalent of at least $5,000,000 (or a higher integral multiple of $1,000,000); (iii) Acceptance of offers may be made only in ascending yield order of LIBOR-based Margins, CD Rate Margins, Base Rate Margins or Absolute Rates, as the case may be; and (iv) The Borrower shall not accept any offer where the Administrative Agent has advised the Borrower that such offer fails to comply with Section 2.03(d)(ii) hereof or otherwise fails to comply with the requirements of this Agreement. (g) Allocation by Administrative Agent. If Competitive Bid Loan Quotes are made by two or more Lenders with the same LIBOR-based Margins, CD Rate Margins, Base Rate Margins or Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which Competitive Bid Loan Quotes are accepted for the related Interest Period, the principal amount of Competitive Bid Loans in respect of which such Competitive Bid Loan Quotes are accepted shall be allocated by the Administrative Agent among such Lenders as nearly as possible (in such multiples, not less than $500,000, as the Administrative Agent may deem appropriate) in proportion to the aggregate principal amount of such offers. If two or more such Competitive Bid Loan Quotes cannot be allocated evenly within the limits set forth in the immediately preceding sentence, the Administrative Agent shall have discretion to allocate a larger share of such Competitive Bid Loans to one or more of the successful Lenders and in making such allocation shall use reasonable efforts to take into account previous allocations of unequal shares to one or more of such Lenders in connection with other Competitive Bid Loans. Determinations by the Administrative Agent of the amounts of Competitive Bid Loans to be allocated to each such Lender shall be conclusive absent manifest error. (h) Notice to Lenders. On the date the Borrower notifies the Administrative Agent of its acceptance of one or more of the offers made by any Lender or Lenders pursuant to Section 2.03(f) hereof, the Administrative Agent shall promptly notify each Lender which has made an offer (i) of the aggregate amount of each Competitive Bid Borrowing with respect to which the Borrower accepted one or more Competitive Bid 19 25 Loan Quotes and such Lender's share of such Competitive Bid Borrowing or (ii) that the Borrower accepted no offers, such notice to be by telecopy. (i) Funding of Competitive Bid Loans. Any Lender whose offer to make any Competitive Bid Loan has been accepted shall, not later than 11:00 a.m., Los Angeles time, on the date specified in the related Competitive Bid Loan Quote Request for the making of such Competitive Bid Loan, make the amount of such Competitive Bid Loan available to the Borrower at the Administrative Agent's Office in immediately available funds. If any Lender makes a new Competitive Bid Loan hereunder on a day on which the Borrower is to repay all or any part of an outstanding Competitive Bid Loan from such Lender, such Lender shall apply the proceeds of its new Competitive Bid Loan to make such repayment and only an amount equal to the difference (if any) between the amount being borrowed and the amount being repaid shall be made available by such Lender to the Borrower as provided by this Section 2.03(i), or remitted by the Borrower to the Administrative Agent as provided in Section 2.14 hereof, as the case may be. (j) Competitive Bid Loan Maturity Dates. The principal amount of each Competitive Bid Loan shall be due and payable on the last day of the applicable Interest Period specified in the related Competitive Bid Loan Quote Request (the "Competitive Bid Loan Maturity Date"). (k) Competitive Bid Loan Interest Payment Dates. Interest on each Competitive Bid Loan shall be due and payable on the Competitive Bid Loan Maturity Date thereof and thereafter on demand at the rates provided for in Section 2.03(o), and if any Interest Period is longer than 90 days, also on each 90th day of such Interest Period. (l) Competitive Bid Record. The Administrative Agent shall maintain a record of the names and addresses of Lenders that have made Competitive Bid Loans and the principal amount of the Competitive Bid Loans owing to each Lender from time to time together with the Competitive Bid Loan Maturity Dates and interest rates applicable to each such Competitive Bid Loan, and other terms applicable thereto (the "Competitive Bid Record"). The entries in the Competitive Bid Record shall be prima facie evidence with respect to the entries therein. (m) Review of Competitive Bid Record. The Competitive Bid Record shall be available to the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (n) Interest Rates for Competitive Bid Loans. The outstanding principal amount of each Competitive Bid Loan shall bear interest for each day until due at the following rate or rates per annum: (i) For each LIBOR-based Loan, a rate per annum (computed on the basis of a year of 360 days and actual days elapsed) equal to the LIBO Rate applicable to the Interest Period therefor plus the LIBOR-based Margin quoted by the Lender making such Loan in the related Competitive Bid Loan Quote submitted in accordance with Section 2.03(d) hereof; (ii) For each Base Rate Loan, a rate per annum (computed on the basis of a year of 365 or 366 days and actual days elapsed) equal to the Base Rate as in effect from time to time plus the Base Rate Margin quoted by the Lender making such Loan in the related Competitive Bid Loan Quote submitted in accordance with Section 2.03(d) hereof; (iii) For each CD Rate Loan, a rate per annum (computed on the basis of a year of 360 days and actual days elapsed) equal to the CD Rate applicable to the Interest Period therefor plus the CD Rate Margin quoted by the Lender making such Loan in the related Competitive Bid Loan Quote submitted in accordance with Section 2.03(d) hereof; (iv) For each Absolute Rate Loan, a rate per annum (computed on the basis of a year of 360 days and actual days elapsed) equal to the Absolute Rate quoted by the Lender making such Loan in the related Competitive Bid Loan Quote submitted in accordance with Section 2.03(d) hereof. (o) Interest after Maturity for Competitive Bid Loans. After the principal amount of any Competitive Bid Loan shall have become due (by acceleration or otherwise), such Loan shall bear interest for each day until paid (before and after judgment) (i) until the Competitive Bid Loan Maturity Date of the applicable 20 26 Interest Period of such Loan, at a rate per annum 2% above the rate applicable to such Loan prior to such Competitive Bid Loan Maturity Date and (ii) thereafter at a rate per annum determined in accordance with Section 2.15(b). (p) Competitive Bid Notes. To the extent so requested by any Lender through the Administrative Agent, the obligation of the Borrower to repay the unpaid principal amount of any Competitive Bid Loans made by such Lender and to pay interest thereon shall be evidenced by a single promissory note of the Borrower (a "Competitive Bid Note") in substantially the form attached hereto as Exhibit D, with the blanks appropriately filled. The Competitive Bid Note payable to such Lender shall be dated the Closing Date, shall bear interest as provided in Section 2.03(n) or as otherwise provided herein, and shall be payable to the order of the Lender named as payee therein in a maximum face amount of the Total Revolving Credit Commitment. The Competitive Bid Note for such Lender shall be delivered, duly executed by the Borrower to the Administrative Agent at or prior to the funding of the first Competitive Bid Loan made by such Lender hereunder and the Administrative Agent shall promptly forward such Competitive Bid Note to such Lender. The outstanding principal amount of each Competitive Bid Loan evidenced by each Competitive Bid Note from time to time, the Competitive Bid Loan Maturity Date of such Competitive Bid Loan and the rate of interest and the amount of accrued and unpaid interest payable in respect thereof shall be determined from the records of the Administrative Agent, which shall be prima facie evidence with respect to the entries therein. In the event the holder of a Competitive Bid Note shall assign said Competitive Bid Note, it shall attach thereto a schedule, which shall be verified by the Administrative Agent, setting forth the then outstanding principal amount of each Competitive Bid Loan evidenced by such Competitive Bid Note and the Competitive Bid Loan Maturity Date thereof. (q) Payments. All payments to be made by the Borrower in Dollars in respect of any Competitive Bid Loan shall be payable at 11:00 a.m., Los Angeles time, on the day when due without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, and an action therefor shall immediately accrue, without setoff, counterclaim, withholding or other deduction of any kind or nature, except for payments to a Lender subject to a withholding deduction under Section 2.16(c) hereof. Such payments shall be made to the Administrative Agent at its Office in Dollars in funds immediately available at such Office. Any payment received by the Administrative Agent or such Lender after 11:00 a.m., Los Angeles time, on any day shall be deemed to have been received on the next succeeding Business Day. The Administrative Agent shall distribute to the Lenders all such payments received by it from the Borrower as promptly as practicable after receipt by the Administrative Agent. If and to the extent that the Administrative Agent has not forwarded to any Lender such Lender's share of any such payment on the same Business Day as such payment is received (or deemed received) from the Borrower, the Administrative Agent shall pay to such Lender interest on such amount at the Federal Funds Effective Rate for each day until such payment is made. All payments of any Competitive Bid Loans to be made in any currency other than Dollars shall be made by payment in that currency in immediately available and freely transferable funds by the time required by relevant local regulation and practice in the principal financial center in the country of such currency for value on the applicable payment date and such payment shall be due without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, and an action therefor shall immediately accrue, without setoff, counterclaim, withholding or other deduction of any kind or nature, except for payments to a Lender subject to a withholding deduction under Section 2.16(c) hereof. (r) Multiple Currency Option. (i) Competitive Bid Loans may be made in any currency requested by the Borrower and acceptable to the applicable Lender (each a "Eurocurrency Loan"). If Eurocurrency Loans are to be made or are made, the amount of such Loans shall be deemed to be, for purposes of determining utilization of Commitments and other provisions of this Agreement, equal to the Dollar Equivalent thereof. If the Dollar Equivalent of the sum of the all Eurocurrency Loans outstanding on the day of any such determination plus the outstanding Loans made in Dollars exceeds the Total Revolving Credit Commitment as then in effect, the Administrative Agent shall immediately notify the Borrower and the Borrower shall prepay on the Business Day following such day Base Rate Loans and then, if necessary, Eurocurrency Loans to the extent required so that such aggregate unpaid amount will not exceed the Total Revolving Credit Commitment as then in effect; such prepayment being subject however to Section 2.14(b) hereof. The 21 27 Borrower may designate the Loans to be prepaid by notice to the Administrative Agent before each such prepayment. (ii) Changes in Law Rendering Eurocurrency Loans Unlawful. In the event that any change in Law or guideline or interpretation or application thereof should at any time make it unlawful for any Lender to make, maintain or fund its Eurocurrency Loans, such Lender shall promptly notify the Borrower and the Administrative Agent thereof. Thereupon, (i) the obligation of such Lender to make its Eurocurrency Loans shall, upon the later of the effectiveness of such event and the receipt of such notice, be suspended for the duration of such illegality, and (ii) the Borrower shall, on the applicable Competitive Bid Loan Maturity Date with respect to such Eurocurrency Loans (or, if later, on the last Competitive Bid Loan Maturity Date with respect to such Eurocurrency Loans to end prior to the effectiveness of such change) or, in any event, if such Lender so requests, on such earlier date as may be required by the relevant Law, prepay or repay such Eurocurrency Loans. Section 2.04. Maximum Aggregate Amount of Loans. No Revolving Credit Loan or Competitive Bid Loan shall be made or requested or permitted to remain outstanding hereunder if the making or maintenance of such Loan would cause the Dollar Equivalent of the sum of the aggregate amount of all Loans to the Borrower outstanding hereunder to exceed the Total Revolving Credit Commitment as then in effect. Section 2.05. [INTENTIONALLY OMITTED]. Section 2.06. [INTENTIONALLY OMITTED]. Section 2.07. Making of Loans. Whenever the Borrower desires that the Lenders make Revolving Credit Loans, the Borrower shall provide Standard Notice to the Administrative Agent setting forth the following information (a separate notice being required for each such type of Loans): (a) The date, which shall be a Business Day, on which such proposed Loans are to be made; (b) The aggregate principal amount of such proposed Loans, which shall be the sum of the principal amounts selected pursuant to clause (c) of this Section 2.07, and, except as provided in Section 2.06.03, which shall be at least $5,000,000 and integral multiples of $1,000,000 in excess thereof; (c) The interest rate Option or Options selected in accordance with Section 2.08(a) hereof and the principal amounts selected in accordance with Section 2.08(d) hereof of the Base Rate Portion and each Funding Segment of the CD Rate Portion and the Euro-Rate Portion, as the case may be, of such proposed Loans; and (d) With respect to each such Funding Segment of such proposed Loans, the Funding Period to apply to such Funding Segment, selected in accordance with Section 2.08(c) hereof. Standard Notice having been so provided, the Administrative Agent shall promptly notify each Lender of the information contained therein and of the amount of such Lender's Loan, calculated in accordance with Section 2.13. Unless any applicable condition specified in Article IV hereof has not been satisfied, on the date specified in such Standard Notice each Lender shall make the proceeds of its Loan available to the Administrative Agent at the Administrative Agent's Office, no later than 11:00 a.m., Los Angeles time, in funds immediately available at such Office. The Administrative Agent will make the funds so received available to the Borrower in funds immediately available at the Administrative Agent's Office. If and to the extent that the Administrative Agent does not make such funds available to the Borrower on the date specified in such Standard Notice the Administrative Agent shall pay to each Lender interest on the amount made available by such Lender at the Federal Funds Effective Rate for each day until either (i) the date such funds are made available to the Borrower or (ii) the date such amounts are returned to such Lender. Section 2.08. Interest Rates. (a) Optional Bases of Borrowing. The unpaid principal amount of the Revolving Credit Loans shall bear interest for each day from and including the date on which funds are made available to the Borrower by the Administrative Agent and to but excluding the date of repayment on one or more bases selected by the Borrower from among the interest rate options set forth below. Subject to the provisions of this Agreement the Borrower may select different options to apply simultaneously to different 22 28 Portions of the Loans and may select different Funding Segments to apply simultaneously to different parts of the CD Rate Portion or the Euro-Rate Portion of the Loans. Each selection of a rate Option shall apply separately and without overlap to the Revolving Credit Loans as a class. The aggregate number of Funding Segments applicable to the CD Rate Portion and the Euro-Rate Portion of the Revolving Credit Loans at any time shall not exceed ten unless otherwise permitted by the Administrative Agent. (i) Base Rate Option: A rate per annum (computed on the basis of a year of 365 or 366 days and actual days elapsed) for each day equal to the Base Rate for such day plus the Applicable Margin for such day. The "Base Rate" for any day shall mean the greater of (A) the Reference Rate for such day or (B) 0.50% plus the Federal Funds Effective Rate for such day, such interest rate to change automatically from time to time effective as of the effective date of each change in the Reference Rate or the Federal Funds Effective Rate. (ii) CD Rate Option: A rate per annum (based on a year of 360 days and actual days elapsed) for each day during the applicable CD Rate Funding Period equal to the CD Rate for such day plus the Applicable Margin for such day. "CD Rate" for any day shall mean for each Funding Segment of the CD Rate Portion corresponding to a proposed or existing CD Rate Funding Period the rate per annum determined by the Administrative Agent by adding (A) the rate per annum (which shall be the same for each day in such CD Rate Funding Period) determined in good faith by the Administrative Agent in accordance with its usual procedures (which determination shall be conclusive absent manifest error) to be the arithmetic average of the secondary market bid rates at or about 8:00 a.m., Los Angeles time, on the first day of such CD Rate Funding Period by dealers of recognized standing in negotiable certificates of deposit for the purchase at face value of negotiable certificates of deposit of major money center banks for delivery on such day in amounts comparable to such Funding Segment and having maturities comparable to such CD Rate Funding Period plus (B) the Assessment Rate. "Assessment Rate" for any day shall mean the rate per annum (rounded upward to the nearest 1/100 of 1%) determined in good faith by the Administrative Agent in accordance with its usual procedures (which determination shall be conclusive absent manifest error) to be the maximum effective rate per annum payable by a depository institution insured by the Federal Deposit Insurance Corporation (or any successor) for such day as an assessment for insurance on Dollar time deposits, exclusive of any credit that is or may be allowed against such assessment on account of assessment payments made or to be made by such depository institution. The CD Rate shall be adjusted automatically as of the effective date of each change in the Assessment Rate. The CD Rate Option shall be calculated in accordance with the foregoing if any Lender is actually required to pay FDIC assessments or, if required to pay such assessments, is required to pay such assessments at the "Assessment Rate" as herein defined. The Administrative Agent shall give prompt notice to the Borrower and to the Lenders of the CD Rate determined or adjusted in accordance with the definition of CD Rate, which determination or adjustment shall be conclusive if made in good faith. (iii) Euro-Rate Option: A rate per annum (based on a year of 360 days and actual days elapsed) for each day during the applicable Euro-Rate Funding Period equal to the Euro-Rate for such day plus, in each case, the Applicable Margin for Euro-Rate Option for such day. "Euro-Rate" for any day, as used herein, shall mean for each Funding Segment of the Euro-Rate Portion corresponding to a proposed or existing Euro-Rate Funding Period the rate per annum determined by the Administrative Agent to be the rate of interest (which shall be the same for each day in such Euro-Rate Funding Period) determined in good faith by the Administrative Agent in accordance with its usual procedures from the Reuters Screen LIBO page (which determination shall be conclusive absent manifest error) to be the average of the rates per annum for deposits in Dollars offered to the leading banks in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the first day of such Euro-Rate 23 29 Funding Period for delivery on the first day of such Euro-Rate Funding Period in amounts comparable to such Funding Segment and having maturities comparable to such Funding Period. The Administrative Agent shall give prompt notice to the Borrower and to the Lenders of the Euro-Rate determined in accordance with the definition of the Euro-Rate, which determination shall be conclusive if made in good faith. (b) Applicable Margins. The "Applicable Margin" with respect to the Base Rate Option, the CD Rate Option and the Euro-Rate Option shall be determined in accordance with the pricing grid set forth in the definition of "Applicable Margin". (c) Funding Periods. At any time when the Borrower shall select, convert to or renew the CD Rate Option or the Euro-Rate Option to apply to any part of the Loans, the Borrower shall specify one or more periods (the "Funding Periods") during which each such Option shall apply, such Funding Periods being as set forth below:
Interest Rate Option Available Funding Periods - -------------------- -------------------------------------------------- CD Rate Option................. 30, 60, 90 or 180 days or such longer period as may be offered by all of the Lenders ("CD Rate Funding Period"); and Euro-Rate Option............... One, two, three or six months ("Euro-Rate Funding Period");
provided, that: (i) Each CD Rate Funding Period which would otherwise end on a day which is not a Business Day shall be extended to the next succeeding Business Day; (ii) Each Euro-Rate Funding Period shall begin on a Business Day, and the term "month", when used in connection with a Euro-Rate Funding Period, shall be construed in accordance with prevailing practices in the interbank eurodollar market at the commencement of such Euro-Rate Funding Period, as determined in good faith by the Administrative Agent (which determination shall be conclusive); and (iii) In the case of Revolving Credit Loans, the Borrower may not select a Funding Period that would end after the Revolving Credit Maturity Date. (d) Transactional Amounts. Every selection of, conversion from, conversion to or renewal of an interest rate option and every payment or prepayment of any Loans shall be in a principal amount such that after giving effect thereto the aggregate principal amount of the Base Rate Portion of the Revolving Credit Loans, or the aggregate principal amount of each Funding Segment of the CD Rate Portion or the Euro-Rate Portion of the Revolving Credit Loans, shall be at least $5,000,000 and integral multiples of $1,000,000 in excess thereof. (e) CD Rate or Euro-Rate Unascertainable; Impracticability. If (i) on any date on which a CD Rate or a Euro-Rate would otherwise be set, the Administrative Agent (in the case of clause (A) or (B) below) shall have determined in good faith (which determination shall be conclusive absent manifest error) that: (A) adequate and reasonable means do not exist for ascertaining such CD Rate or Euro-Rate, or (B) a contingency has occurred which materially and adversely affects the secondary market for negotiable certificates of deposit maintained by dealers of recognized standing or the interbank eurodollar market, as the case may be, or (ii) at any time any Lender shall have determined in good faith (which determination shall be conclusive absent manifest error) that the making, maintenance or funding of any part of the CD Rate Portion or the Euro-Rate Portion has been made impracticable or unlawful by compliance by such Lender or a Notional Euro-Rate Funding Office in good faith with any Law or guideline or interpretation 24 30 or administration thereof by any Governmental Authority charged with the interpretation or administration thereof or with any request or directive of any such Governmental Authority (whether or not having the force of law); then, and in any such event, the Administrative Agent or such Lender, as the case may be, may notify the Borrower of such determination (and any Lender giving such notice shall notify the Administrative Agent). Upon such date as shall be specified in such notice (which shall not be earlier than the date such notice is given), the obligation of each of the Lenders, in the case of clause (i) above, or such Affected Lender, in the case of clause (ii) above, to allow the Borrower to select, convert to or renew the CD Rate Option or Euro-Rate Option, as the case may be, shall be suspended until the Administrative Agent or such Lender, as the case may be, shall have later notified the Borrower (and any Lender giving such notice shall notify the Administrative Agent) of the Administrative Agent's or such Lender's determination in good faith (which determination shall be conclusive absent manifest error) that the circumstance giving rise to such previous determination no longer exist. If any Lender notifies the Borrower of a determination under subsection (ii) of this Section 2.08(e), the CD Rate Portion or the Euro-Rate Portion, as the case may be, of the Loans of such Lender (the "Affected Lender") shall, subject to Section 2.14(b) hereof, automatically be converted to the Base Rate Option as of the last day of the then current Funding Period with respect to such Loans (in the case of a determination that the making, maintenance or funding of any CD Rate Portion or Euro-Rate Portion of such Loans is impracticable) and the last day on which the making, maintenance or funding of any CD Rate Portion or Euro-Rate Portion of such Loans is not unlawful (in the case of a determination that the making, maintenance or funding of any CD Rate Portion or Euro-Rate Portion of such Loans is unlawful) and accrued interest thereon shall be due and payable on such date. If at the time the Administrative Agent or an Affected Lender makes a determination under subsection (i) or (ii) of this Section 2.08(e), as the case may be, the Borrower previously has notified the Administrative Agent that it wishes to select, convert to or renew the CD Rate Option or the Euro-Rate Option, as the case may be, with respect to any proposed Loans but such Loans have not yet been made, such notification shall be deemed to provide for selection of, conversion to or renewal of the Base Rate Option instead of the CD Rate Option or the Euro-Rate Option, as the case may be, with respect to such Loans or, in the case of a determination by an Affected Lender, such Loans only of such Affected Lender. Section 2.09. Conversion or Renewal of Interest Rate Options. (a) Conversion or Renewal. Subject to the provisions of Section 2.14(b) hereof the Borrower may convert any part of its Revolving Credit Loans from any interest rate Option or Options to one or more different interest rate Options and may renew the CD Rate Option or the Euro-Rate Option as to any Funding Segment of the CD Rate Portion or the Euro-Rate Portion: (i) At any time with respect to conversion from the Base Rate Option; or (ii) At the expiration of any Funding Period with respect to conversions from or renewals of the CD Rate Option or the Euro-Rate Option, as the case may be, as to the Funding Segment corresponding to such expiring Funding Period. Whenever the Borrower desires to convert or renew any interest rate Option or Options, the Borrower shall provide to the Administrative Agent Standard Notice setting forth the following information: (w) The date, which shall be a Business Day, on which the proposed conversion or renewal is to be made; (x) The principal amounts selected in accordance with Section 2.08(d) hereof of the Base Rate Portion and each Funding Segment of the CD Rate Portion and the Euro-Rate Portion, as the case may be, to be converted from or renewed; (y) The interest rate Option or Options selected in accordance with Section 2.08(a) hereof and the principal amounts selected in accordance with Section 2.08(d) hereof of the Base Rate Portion and each 25 31 Funding Segment of the CD Rate Portion and the Euro-Rate Portion, as the case may be, to be converted to; and (z) With respect to each Funding Segment to be converted to or renewed, the Funding Period selected in accordance with Section 2.08(c) hereof to apply to such Funding Segment. Standard Notice having been so provided, after the date specified in such Standard Notice, interest shall be calculated upon the principal amount of the Loans as so converted or renewed. (b) Failure to Convert or Renew. Absent due notice from the Borrower of conversion or renewal in the circumstances described in Section 2.09(a)(ii) hereof, any part of the CD Rate Portion or Euro-Rate Portion for which such notice is not received shall be converted automatically to the Base Rate Option on the last day of the expiring Funding Period. Section 2.10. Prepayments Generally. Whenever the Borrower desires to prepay any part of its Loans, it shall provide Standard Notice to the Administrative Agent setting forth the following information: (a) The date, which shall be a Business Day, on which the proposed prepayment is to be made; (b) The total principal amount of such prepayment, which shall be the sum of the principal amounts selected pursuant to clause (c) of this Section 2.10; and (c) The principal amounts selected in accordance with Section 2.08(d) hereof of the Base Rate Portion and each part of each Funding Segment of the CD Rate Portion and the Euro-Rate Portion, as the case may be, to be prepaid. Section 2.11. Optional Prepayments; Mandatory Prepayments. (a) Optional Prepayments. The Borrower shall have the right at its option from time to time to prepay its Revolving Credit Loans in whole or part without premium or penalty (subject, however, to Section 2.14(b) hereof). (b) Mandatory Prepayments. (i) Unless the Required Lenders otherwise agree in writing, the Borrower shall, within 15 days after a Change in Control, prepay in full all outstanding Loans (subject to Section 2.14(b) hereof) and terminate, permanently and irrevocably, all existing Commitments of the Lenders hereunder. (ii) If, on any day, the Dollar Equivalent of the sum of the all Eurocurrency Loans outstanding on the day of any such determination plus the outstanding Loans made in Dollars exceeds the Total Revolving Credit Commitment as then in effect, the Administrative Agent shall immediately notify the Borrower and the Borrower shall prepay on the Business Day following such day Base Rate Loans and then, if necessary, Eurocurrency Loans to the extent required so that such aggregate unpaid amount will not exceed the Total Revolving Credit Commitment as then in effect; such prepayment being subject however to Section 2.14(b) hereof. The Borrower may designate the Loans to be prepaid by notice to the Administrative Agent before each such prepayment. (c) General. All prepayments shall be made in accordance with Section 2.10 hereof. No prepayments shall be permitted with respect to Competitive Bid Loans except as required by Sections 2.18 and 10.17 or (ii) with the consent of the Lender or Lenders that have made the same. Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of the Borrower to such Lender resulting from each Loan of such Lender from time to time, including without limitation, the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement. The entries made in the accounts of each Lender maintained pursuant hereto shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided that the failure of any Lender to maintain any such account, or any error therein, shall not in any manner effect the obligation of the Borrower to repay (with applicable interest) the Loans made to the Borrower by such Lender in accordance with the terms of this Agreement. 26 32 Section 2.12. Interest Payment Dates. Interest on the Base Rate Portion shall be due and payable on each Regular Payment Date. Interest on each Funding Segment of the CD Rate Portion shall be due and payable on the last day of the corresponding CD Rate Funding Period and, if such CD Rate Funding Period is longer than 90 days, also every 90th day during such CD Rate Funding Period. Interest on each Funding Segment of the Euro-Rate Portion shall be due and payable on the last day of the corresponding Euro-Rate Funding Period and, if such Euro-Rate Funding Period is longer than three months, also on the last day of every third month during such Funding Period. After maturity of any part of the Loans (by acceleration or otherwise), interest on such part of the Loans shall be due and payable on demand. Section 2.13. Pro Rata Treatment. (a) Certain Definitions. As used in this Agreement, the following term has the meaning indicated: "Pro Rata" means from or to each Lender: (i) in the case of payments of Facility Fee, reductions pursuant to Section 2.02(c) hereof of the Revolving Credit Committed Amounts and indemnification payments under Section 8.07 hereof, ratably in accordance with such Lender's Commitment Percentage; (ii) in the case of payments of principal of and interest on, and conversions and renewals of interest rate options with respect to, any particular Funding Segments, ratably in accordance with such Lender's percentage share of such Funding Segment; (iii) in the case of payments of principal and conversions and renewals of interest rate options with respect to, the Base Rate Portion of some or all of the Revolving Credit Loans, ratably in accordance with such Lender's percentage share of such Base Rate Portion; and (iv) in the case of payments of interest for any day with respect to the Base Rate Portion of some of all of the Revolving Credit Loans, ratably in accordance with such Lender's percentage share of such Base Rate Portion on such day. (b) Making of Revolving Credit Loans. Revolving Credit Loans shall be made by the Lenders ratably in accordance with their respective Commitment Percentages. (c) Several Obligations. The failure of any Lender to make a Revolving Credit Loan shall not relieve any other Lender of its obligation to lend hereunder, but neither any Agent nor any Lender shall be responsible for the failure of any other Lender to make a Revolving Credit Loan. Section 2.14. Additional Compensation in Certain Circumstances. (a) Increased Costs or Reduced Return Resulting from Taxes, Reserves, Capital Adequacy Requirements, Expenses, Etc. If any Law or change therein or guideline or interpretation or application thereof by any Governmental Authority charged with the interpretation or administration thereof or compliance with any request or directive of any Governmental Authority (whether or not having the force of law) adopted or made after the date hereof: (i) subjects any Lender or any Notional Euro-Rate Funding Office to any tax or changes the basis of taxation, to the extent such tax or change relates to the Euro-Rate Loans or the CD Rate Loans, with respect to this Agreement, the Notes, the Euro-Rate Loans or the CD Rate Loans, or payments by the Borrower of principal of, or interest on, the Euro-Rate Loans or the CD Rate Loans, from the Borrower hereunder or under the Notes (except for taxes on the overall net income or overall gross receipts of such Lender or such Notional Euro-Rate Funding Office imposed by the jurisdictions (federal, state, local and foreign) in which the Lender's principal office or Notional Euro-Rate Funding Office is located), (ii) imposes, modifies or deems applicable any reserve, special deposit or similar requirement against credits or commitments to extend credit extended by, assets (funded or contingent) of, deposits with or for the account of, other acquisitions of funds by, such Lender or any Notional Euro-Rate Funding Office (in connection with the Euro-Rate Loans or the CD Rate Loans) (other than requirements expressly included herein in the determination of the CD Rate or the Euro-Rate, as the case may be, hereunder), (iii) imposes, modifies or deems applicable any capital adequacy or similar requirement (A) against assets (funded or contingent) of, or credits or commitments to extend credit extended by, any Lender or any Notional Euro-Rate Funding Office or (B) otherwise applicable to the obligations of any Lender or any Notional Euro-Rate Funding Office under this Agreement, or 27 33 (iv) imposes upon any Lender or any Notional Euro-Rate Funding Office any other condition or expense, to the extent such condition or expense relates to the Euro-Rate Loans or the CD Rate Loans, directly related to this Agreement, the Notes or its making, maintenance or funding of any Euro-Rate or CD Rate Loan. and the result of any of the foregoing is reasonably determined by any Lender to increase the cost to, reduce the income receivable by, or impose any expense (excluding loss of margin) upon such Lender or any Notional Euro-Rate Funding Office, as applicable, or, in the case of clause (iii) hereof, any Person controlling a Lender, with respect to this Agreement, the Notes or the making, maintenance or funding of any Loan (or, in the case of any capital adequacy or similar requirement, to have the effect of reducing the rate of return on such Lender's or controlling Person's capital, taking into consideration such Lender's or controlling Person's policies with respect to capital adequacy) by an amount which such Lender reasonably deems to be material (such Lender being deemed for this purpose to have made, maintained or funded each Funding Segment of the CD Rate Portion and the Euro-Rate Portion from a Corresponding Source of Funds), such Lender may from time to time promptly notify the Borrower of the amount determined in good faith (using any reasonable averaging and attribution methods) by such Lender (which determination shall be conclusive absent manifest error) to be necessary to compensate such Lender or such Notional Euro-Rate Funding Office for such increase, reduction or imposition. The Borrower shall have no obligation to reimburse a Lender under this Section 2.14(a) for any amount with respect to any such increase, reduction or imposition which amount is attributable to a period of more than 60 days ending prior to the date of such Lender's first notice to the Borrower of such increase, reduction or imposition. Each Lender will notify the Borrower and the Administrative Agent of any event occurring after the date of this Agreement which will entitle such Lender to compensation pursuant to this Section 2.14 as promptly as practicable after it obtains knowledge thereof and determines to request such compensation. Each Lender will furnish the Borrower and the Administrative Agent with a statement setting forth in reasonable detail the basis, the manner of calculation and the amount of each request by such Lender for compensation from the Borrower under this Section 2.14. Such amount shall be due and payable by the Borrower to such Lender five Business Days after such notice is given. In the event that after the Borrower shall have paid any additional amount under this Section 2.14(a) with respect to any Loan such Lender shall have successfully contested such law, regulation, treaty, order, directive, interpretation or condition, then, to the extent that such Lender is or will be placed in the same position it was prior to the incurrence of the additional costs received or receivable (on an after-tax basis) and its contest of such law, regulation or other condition, such Lender shall refund to the Borrower such additional amount or any portion thereof with respect to which such Lender is or will be placed in such position. (b) Funding Breakage. In addition to the compensation required under Section 2.14(a) hereof, the Borrower shall indemnify each Lender against any loss or expense (excluding loss of margin) which such Lender has incurred as a consequence of: (i) any payment, prepayment or conversion of any part of any Funding Segment of any CD Rate Portion or Euro-Rate Portion of the Loans on a day other than the last day of the corresponding Funding Period or any prepayment of any Competitive Bid Loan prior to its maturity date (whether or not such payment, prepayment or conversion is mandatory or automatic and whether or not such payment or prepayment is then due), (ii) any attempt by the Borrower to revoke (expressly, by later inconsistent notices or otherwise) in whole or in part any notice stated herein to be irrevocable (the Administrative Agent having in its sole discretion the options (A) to give effect to such attempted revocation provided that indemnity under this Section 2.14(b) is obtained or (B) to treat such attempted revocation as having no force or effect, as if never made), or (iii) any failure of the Borrower to pay when due (by acceleration or otherwise) any principal, interest or any other amount due hereunder or under any Note relating to a Euro-Rate Loan or a CD Rate Loan. If any Lender sustains or incurs any such loss or expense it shall from time to time promptly notify the Borrower and the Administrative Agent in writing setting forth in reasonable detail the amount determined in 28 34 good faith by such Lender (which determination shall be conclusive absent manifest error) to be necessary to indemnify such Lender for such loss or expense. Such amount shall be due and payable by the Borrower to the Administrative Agent for the account of such Lender, five Business Days after such notice is given. (c) Additional Interest. (i) So long as any Lender shall be required under regulations of the Board of Governors of the Federal Reserve System to maintain reserves with respect to liabilities or assets consisting of or including loans made with reference to the CD Rate, such Lender may require the Borrower to pay, but only in respect of any period during which such reserves shall actually be maintained by such Lender, additional interest on the unpaid principal amount of the CD Rate Portion of the Loans, at an interest rate per annum equal at all times during each CD Rate Funding Period to the difference obtained by subtracting (A) the CD Rate for such CD Rate Funding Period from (B) the rate obtained by dividing such CD Rate referred to in clause (A) above by that percentage equal to 100% minus the CD Rate Reserve Percentage of such Lender for such CD Rate Funding Period, payable on each date on which interest is payable on such CD Rate Portion. (ii) So long as any Lender shall be required under regulations of the Board of Governors of the Federal Reserve System to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency Liabilities, such Lender may require the Borrower to pay, but only in respect of any period during which such reserves shall actually be maintained by such Lender, additional interest on the unpaid principal amount of the Euro-Rate Portion of the Loans, at an interest rate per annum equal at all times during each Euro-Rate Funding Period to the difference obtained by subtracting (A) the Euro-Rate for such Euro-Rate Funding Period from (B) the rate obtained by dividing such Euro-Rate referred to in clause (A) above by that percentage equal to 100% minus the Euro-Rate Reserve Percentage of such Lender for such Euro-Rate Funding Period, payable on each date on which interest is payable on such Euro-Rate Portion. (iii) If any Lender shall claim entitlement to any additional amount pursuant to this Section 2.14(c), then such Lender shall deliver to the Borrower a certificate setting forth the basis for the determination thereof as promptly as practicable. More than one such certificate may be so delivered. Each such certificate shall be conclusive and binding for all purposes as to the amount due absent manifest error. The Borrower shall pay to each Lender the amount shown as due on any such certificate within five Business Days after its receipt of the same. Section 2.15. Payments Generally; Interest on Overdue Amounts. (a) Payments Generally. All payments and prepayments to be made by the Borrower in respect of principal, interest, fees, indemnity, expenses or other amounts due from the Borrower hereunder or under any other Loan Document in Dollars shall be payable at 11:00 a.m., Los Angeles time, on the day when due without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, and an action therefor shall immediately accrue, without setoff, counterclaim, withholding or other deduction of any kind or nature, except for payments to a Lender subject to a withholding deduction under Section 2.16(c) hereof. Except for payments under Sections 2.03(q), 2.14 and 10.06 hereof, such payments shall be made for the account of Lenders to the Administrative Agent's Bancontrol Account #12334-16521 at its Office in Dollars in funds immediately available at such Office, and payments under Sections 2.14 and 10.06 hereof shall be made to the applicable Lender at such domestic account as it shall specify to the Borrower from time to time in funds immediately available at such account. Any payment or prepayment received by the Administrative Agent or such Lender after 11:00 a.m., Los Angeles time, on any day shall be deemed to have been received on the next succeeding Business Day. The Administrative Agent shall distribute to the Lenders all such payments received by it from the Borrower as promptly as practicable after receipt by the Administrative Agent. If and to the extent that the Administrative Agent has not forwarded to any Lender such Lender's share of any such payment on the same Business Day as such payment is received (or deemed received) from the Borrower, the Administrative Agent shall pay to such Lender interest on such amount at the Federal Funds Effective Rate for each day until such payment is made. Upon termination of this Agreement and payment in full of all principal, interest, fees, expenses and other amounts due from the Borrower hereunder or under any other Loan Document, each Lender will promptly mark its Notes "cancelled" and forward them to the Administrative Agent for delivery to the Borrower. 29 35 (b) Interest on Overdue Amounts. To the extent permitted by law, after there shall have become due (by acceleration or otherwise) principal, interest, fees, indemnity, expenses or any other amounts due from the Borrower hereunder or under any other Loan Document, such amounts shall bear interest for each day until paid (before and after judgment), payable on demand, at a rate per annum based on a year of 365 or 366 days, as the case may be, and actual days elapsed (in the case of any Portion of Loans bearing interest at the Base Rate Option) and 360 days and actual days elapsed (in the case of any Portion of Loans bearing interest at the CD Rate Option or the Euro-Rate Option) which for each day shall be equal to the following: (i) In the case of any part of the CD Rate Portion or Euro-Rate Portion of any Loans, (A) until the end of the applicable then-current Funding Period at a rate per annum 2% above the rate otherwise applicable to such part, and (B) thereafter in accordance with the following clause (ii); and (ii) In the case of any other amount due from the Borrower hereunder or under any other Loan Document, 2% above the then-current Base Rate plus the Applicable Margin for Base Rate Option. Section 2.16. Taxes. (a) Payments Net of Taxes. All payments made by the Borrower under this Agreement shall be made free and clear of, and without reduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, and all liabilities with respect thereto, excluding (i) in the case of each Agent and each Lender, income or franchise taxes imposed on such Agent or such Lender by the jurisdiction under the laws of which such Agent or such Lender is organized or any political subdivision or taxing authority thereof or therein or as a result of a connection between such Agent or such Lender and any jurisdiction other than a connection resulting solely from this Agreement and the transactions contemplated hereby, and (ii) in the case of each Lender, income or franchise taxes imposed by any jurisdiction in which such Lender's lending offices which make or book Loans are located or any political subdivision or taxing authority thereof or therein (all such non-excluded taxes, levies, imposts, deductions, charges or withholdings being hereinafter called "Taxes"). If any Taxes are required to be withheld or deducted from any amounts payable to any Agent or any Lender under this Agreement or any other Loan Document, the Borrower shall pay the relevant amount of such Taxes and the amounts so payable to such Agent or such Lender shall be increased to the extent necessary to yield to such Agent or such Lender (after payment of all Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement and the other Loan Documents. Whenever any Taxes are paid by the Borrower with respect to payments made in connection with this Agreement, as promptly as possible thereafter, the Borrower shall send to the Administrative Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an original official receipt received by the Borrower showing payment thereof. In the event that after the Borrower shall have paid any additional amount under this Section 2.16(a) with respect to any Loan the Lender shall have received a refund or credit of any Taxes paid by the Borrower with respect to payments made in connection with this Agreement, then, to the extent that such Lender receives a refund or credit of all or a portion of such Taxes from the Governmental Authority to whom such Taxes were paid by the Borrower, such Lender shall refund to the Borrower such additional amount or any portion thereof with respect to which such Lender receives such refund or credit. Nothing contained in this paragraph (a) shall require any Lender or any Agent to make available any of its tax returns (or any other information relating to its taxes which it deems to be confidential). (b) Indemnity. The Borrower hereby indemnifies each Agent and each of the Lenders for the full amount of all Taxes attributable to payments by or on behalf of the Borrower hereunder or under any of the other Loan Documents, any such Taxes paid by such Agent or such Lender, as the case may be, any present or future claims, liabilities or losses with respect to or resulting from any omission of the Borrower to pay or delay in paying any Taxes (including any incremental Taxes, interest or penalties that may become payable by such Agent or such Lender as a result of any failure of the Borrower to pay such Taxes), whether or not such Taxes 30 36 were correctly or legally asserted. Such indemnification shall be made within 30 days from the date such Lender or such Agent, as the case may be, makes written demand therefor. (c) Withholding and Backup Withholding. Each Lender that is incorporated or organized under the laws of any jurisdiction other than the United States or any State thereof agrees that, on or prior to the Closing Date (or, with respect to any Lender which becomes a party to this Agreement pursuant to Section 10.14 hereof, the Transfer Effective Date), it will furnish to the Borrower and the Administrative Agent (i) two valid, duly completed copies of United States Internal Revenue Service Form 4224 or United States Internal Revenue Form 1001 or successor applicable form, as the case may be, certifying in each case that such Lender is entitled to receive payments under this Agreement and the other Loan Documents without deduction or withholding of any United States federal income taxes, and (ii) a valid, duly completed Internal Revenue Service Form W-8 or W-9 or successor applicable form, as the case may be, to establish an exemption from United States backup withholding tax. Each Lender which so delivers to the Borrower and the Administrative Agent a Form 1001 or 4224 and Form W-8 or W-9 applicable forms (the "Forms") agrees to deliver to the Borrower and the Administrative Agent two further copies of the Forms, or other manner of certification, as the case may be, on or before the date that any such form expires or becomes obsolete or otherwise is required to be resubmitted as a condition to obtaining an exemption from withholding tax, or after the occurrence of any event requiring a change in the most recent form previously delivered by it, and such extensions or renewals thereof as may reasonably be requested by the Borrower and the Administrative Agent, certifying in the case of a Form 1001 or Form 4224 that such Lender is entitled to receive payments under this Agreement or any other Loan Document without deduction or withholding of any United States federal income taxes, unless in any such cases an event (including any changes in Law) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such letter or form with respect to it and such Lender advises the Borrower and the Administrative Agent that it is not capable of receiving payments without any deduction or withholding of United States federal income tax, and in the case of a Form W-8 or W-9, establishing an exemption from United States backup withholding tax. Notwithstanding anything to the contrary contained herein, the Borrower shall not be required to pay any additional amounts pursuant to this Section 2.16 or pursuant to Section 2.14 if the obligation to pay such additional amounts would not have arisen but for the failure by any Agent or any Lender to comply with its obligations hereunder, or if such Agent or Lender shall have delivered the appropriate Forms and such Agent or Lender is not entitled to exemption from deduction or withholding of U.S. federal income tax in respect of payments made by the Borrower hereunder for any reason other than a change in U.S. law or regulations or in the official interpretation thereof after the date of delivery of such Forms. Section 2.17. Funding by Branch, Subsidiary or Affiliate. (a) Notional Funding. Each Lender shall have the right from time to time, prospectively or retrospectively, without notice to the Borrower, to deem any branch, subsidiary or affiliate of such Lender to have made, maintained or funded any part of the Euro-Rate Portion at any time. Any branch, subsidiary or affiliate so deemed shall be known as a "Notional Euro-Rate Funding Office." Such Lender shall deem any part of the Euro-Rate Portion of the Loans or the funding therefor to have been transferred to a different Notional Euro-Rate Funding Office if such transfer would avoid or cure an event or condition described in Section 2.08(e)(ii) hereof or would lessen compensation payable by the Borrower under Sections 2.14(a), 2.16(a) or 2.16(b) hereof, and provided that such Lender determines in its reasonable discretion that such transfer would be practicable and would not have a material adverse effect on such part of the Loans, such Lender or any Notional Euro-Rate Funding Office (it being assumed for purposes of such determination that each part of the Euro-Rate Portion is actually made or maintained by or funded through the corresponding Notional Euro-Rate Funding Office). Notional Euro-Rate Funding Offices may be selected by such Lender without regard to such Lender's actual methods of making, maintaining or funding Loans or any sources of funding actually used by or available to such Lender. (b) Actual Funding. Each Lender shall have the right from time to time to make or maintain any part of the Euro-Rate Portion by arranging for a branch, subsidiary or affiliate of such Lender to make or maintain 31 37 such part of the Euro-Rate Portion. Such Lender shall have the right to hold any applicable Note payable to its order for the benefit and account of such branch, subsidiary or affiliate or (ii) request the Borrower to issue one or more promissory notes in the principal amount of such Euro-Rate Portion, in substantially the form attached hereto as Exhibit A with the blanks appropriately filled, payable to such branch, subsidiary or affiliate and with appropriate changes reflecting that the holder thereof is not obligated to make any additional Loans to the Borrower. The Borrower agrees to comply promptly with any request under subsection (ii) of this Section 2.17(b). If any Lender causes a branch, subsidiary or affiliate to make or maintain any part of the Euro-Rate Portion hereunder, all terms and conditions of this Agreement shall, except where the context clearly requires otherwise, be applicable to such part of the Euro-Rate Portion and to any note payable to the order of such branch, subsidiary or affiliate to the same extent as if such part of the Euro-Rate Portion were made or maintained and such note were a Revolving Credit Note payable to such Lender's order. Section 2.18. Extension of Revolving Credit Maturity Date. The Revolving Credit Maturity Date may be extended with respect to a Lender for an additional 364 day period with the express written consent of such Lender (to be at such Lender's sole discretion) as provided below. If the Borrower desires to extend the Revolving Credit Maturity Date it shall send a request therefor, which shall be made to all Lenders, to the Administrative Agent; provided that the Borrower must, to the extent the Other Credit Agreement is in effect, also request the extension of the "Revolving Credit Maturity Date" under the Other Credit Agreement. No earlier than the date 45 days and no later than the date 40 days prior to the Revolving Credit Maturity Date the Borrower shall, at its option, in a written notice to the Administrative Agent request that the Revolving Credit Maturity Date be extended for a period of 364 days. The Administrative Agent shall promptly inform the Lenders of such request. Each Lender that agrees with such request shall deliver to the Administrative Agent its express written consent thereto no earlier than the date 30 days and no later than the date 27 days prior to the Revolving Credit Maturity Date. If the aggregate amount of (i) the Revolving Credit Commitment Amount of the Lenders so consented and (ii) the Revolving Credit Commitment Amount to be assumed by the Replacement Lenders or the existing Lenders (as provided below) equals or exceeds 85% of the Total Revolving Credit Commitment in effect as of the 10th day prior to the Revolving Credit Maturity Date then in effect, then, with respect to each Lender which has consented to an extension of the Revolving Credit Maturity Date as provided in the immediately preceding sentence and with respect to the Replacement Lenders, the Revolving Credit Maturity Date shall be extended for, and shall thereafter be the date, 364 days after the then effective Revolving Credit Maturity Date. If any Lender notifies the Administrative Agent in writing on or before the 27th day prior to such then effective Revolving Credit Maturity Date that it will not consent to such Extension Request or shall not have in writing expressly consented to any such Extension Request as provided in the preceding sentence, then the Administrative Agent shall so notify the Borrower and the Borrower, at its option, may replace each Nonextending Lender with another commercial lending institution reasonable satisfactory to the Administrative Agent (a "Replacement Lender") and/or with one or more of the existing Lenders by giving notice of the name of such Replacement Lender and/or such existing Lenders to the Administrative Agent by the 15th day prior to the then effective Revolving Credit Maturity Date. Unless either Agent shall object to the identity of such proposed Replacement Lender (in the case of a Replacement Lender) on or before the 10th day prior to the then effective Revolving Credit Maturity Date, upon notice from the Administrative Agent, each Nonextending Lender shall promptly (but in no event later than the close of business on the then effective Revolving Credit Maturity Date) assign all of its interests hereunder to such Replacement Lender and/or such existing Lenders in accordance with the provisions of Section 9.14(c) hereof. Such Replacement Lender shall have a Revolving Credit Commitment and shall have a Revolving Credit Commitment Amount equal to the then most recently effective Revolving Credit Commitment Amount of the related Nonextending Lender (less the amount assumed, if any, by such existing Lenders). To the extent any Nonextending Lender is not replaced with a Replacement Lender or the Revolving Commitment Amount of such Nonextending Lender is not assumed by an existing Lender, on the then effective Revolving Credit Maturity Date the Total Revolving Credit Commitments shall be reduced by the Revolving Credit Committed Amount of each such Nonext ending Lender which is not so replaced or so assumed. If the Revolving Credit Maturity Date with respect to a Lender is extended pursuant to this Section 2.17, the Competitive Bid Expiration Date with respect to such Lender shall be deemed to have been extended for, and shall be the date, not more than 364 days after the then effective Competitive Bid Expiration 32 38 Date. To the extent the Other Credit Agreement is in effect, the "Revolving Credit Commitment Amount" of a Nonextending Lender under the Other Credit Agreement shall be replaced or assumed at the same percentage by such Replacement Lender and/or such existing Lenders. ARTICLE III REPRESENTATIONS AND WARRANTIES The Borrower hereby represents and warrants to each Agent and each Lender as follows: Section 3.01. Corporate Status. The Borrower and each Significant Subsidiary thereof (a) is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation; (b) has corporate power and authority to own its property and to transact the business in which it is engaged or presently proposes to engage; and (c) is duly qualified to do business as a foreign corporation and is in good standing in all jurisdictions in which the ownership of its properties or the nature of its activities or both makes such qualification necessary; except for matters that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. Schedule 3.01 hereof states as of the date hereof the jurisdiction of incorporation of the Borrower, each Significant Subsidiary and each Special Purpose Subsidiary. Section 3.02. Corporate Power and Authorization. Each Credit Party has the corporate power to execute, deliver and perform the Loan Documents to be executed by it and has taken all necessary action, corporate or otherwise, to authorize the execution, delivery and performance of this Agreement and the other Loan Documents to be executed by it. The Borrower has the power to borrow and has taken all necessary corporate action to authorize the borrowings hereunder on the terms and conditions of this Agreement. No consent or approval of any Person (including, without limitation, any stockholder of any Credit Party), no consent or approval of any landlord or mortgagee, no waiver of any Lien of right or distraint or other similar right and no consent, license, approval, authorization or declaration of any governmental authority, bureau or agency, is or will be required in connection with the execution, delivery or performance by each Credit Party, or the validity, enforcement or priority, of the Loan Documents to be executed by it, except as set forth on Schedule 3.02 hereto, each of which has been duly and validly obtained on or prior to the date hereof and is now in full force and effect and is sufficient for its intended purpose. Section 3.03. Execution and Binding Effect. This Agreement and each other Loan Document to which each Credit Party is a party has been, or upon its execution and delivery will be, duly executed and delivered by such Credit Party and each constitutes, or upon its execution and delivery will constitute, the valid and legally binding obligation of such Credit Party, enforceable in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or other similar laws, now or hereafter in effect, relating to or affecting the enforcement of creditors' rights generally and except that the remedy of specific performance and other equitable remedies are subject to judicial discretion. There is no action, suit, proceeding or investigation pending or, to the knowledge of any Credit Party, threatened against or affecting the Borrower or any of its Subsidiaries which questions the validity or the enforceability of any of the Loan Documents. Section 3.04. Governmental Approvals and Filings. No approval, order, consent, authorization, certificate, license, permit or validation of, or exemption or other action by, or filing, recording or registration with, or notice to, any Governmental Authority (collectively, "Governmental Action") is or will be necessary in connection with execution and delivery of this Agreement or any other Loan Document, consummation by the Credit Parties of the transactions herein or therein contemplated, or performance of or compliance with the terms and conditions hereof or thereof. Neither the Borrower nor any Subsidiary thereof is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act or the Investment Company Act of 1940 or to any Federal or state statute or regulation limiting the Borrower's ability to incur Indebtedness for money borrowed. Neither the Borrower nor any Subsidiary thereof is an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. 33 39 Section 3.05. Absence of Conflicts. The execution and delivery by each Credit Party of this Agreement and each other Loan Document to which it is a party and performance by it hereunder and thereunder, will not violate any Law (including, without limitation, Regulations U, T and X of the Federal Reserve Board) and will not conflict with or result in a breach of any order, writ, injunction, ordinance, resolution, decree, or other similar document or instrument of any court or governmental authority, bureau or agency, domestic or foreign, or its certificate of incorporation or by-laws or any similar constituent documents or create (with or without the giving of notice or lapse of time, or both) a default under or breach of any material agreement, bond, note or indenture to which it is a party (by successor in interest or otherwise), or by which it is bound or any of its properties or assets is affected, or result in the imposition of any Lien of any nature whatsoever upon any of the properties or assets owned by or used in connection with the business of the Borrower or any of its Subsidiaries. Section 3.06. Audited Financial Statements. The Borrower has heretofore furnished to each Agent and each Lender consolidated balance sheets of the Borrower and its consolidated Subsidiaries as of December 26, 1997 (as such financial statements have been restated and filed with the Securities and Exchange Commission) and September 25, 1998 (as such financial statements have been restated and filed with the Securities and Exchange Commission) and the related consolidated statements of income, cash flows and changes in stockholders' equity for the fiscal year or three fiscal quarters, as the case may be, then ended, and with respect to such information as of December 26, 1997, as examined and reported on by Coopers & Lybrand, independent certified public accountants for the Borrower, who delivered an unqualified opinion in respect thereof. Such financial statements (including the notes thereto) present fairly in all material respects the financial condition of the Borrower and its consolidated Subsidiaries as of the end of each such fiscal year or nine month period, as the case may be, and the results of their operations and their cash flows for the fiscal years then ended, all in conformity with GAAP, except for the absence of footnotes and for normal year end audit adjustments in the case of the nine month statements. Section 3.07. Absence of Undisclosed Liabilities. As of the Closing Date, neither the Borrower nor any Subsidiary of the Borrower has any liability or obligation of any nature whatever (whether absolute, accrued, contingent or otherwise, whether or not due), forward or long-term commitments or unrealized or anticipated losses from unfavorable commitments, except (a) as disclosed in the financial statements referred to in Section 3.06 hereof, (b) matters that, individually or in the aggregate, in the Borrower's reasonable judgment, could not reasonably be expected to have a Material Adverse Effect and (c) liabilities, obligations, commitments and losses incurred after September 25, 1998 otherwise permitted, or not restricted, by the Existing Credit Agreements. As of the Closing Date, neither the Borrower nor any Subsidiary of the Borrower has any Indebtedness other than the Indebtedness of the Borrower and its Subsidiaries set forth on Schedule 3.07 hereto. Section 3.08. Absence of Material Adverse Changes. Except as disclosed in the financial statements referred to in Section 3.06 hereof, since September 25, 1998, there has been no material adverse change in the business, operations, properties, assets or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole. Section 3.09. Accurate and Complete Disclosure. No information heretofore, contemporaneously or hereafter provided by or on behalf of the Borrower or any Subsidiary thereof in writing to any Agent or any Lender in writing pursuant to or in connection with any Loan Document or any transaction contemplated hereby or thereby contains any untrue statement of a material fact or omits to state any material fact necessary to make such information (taken as a whole) not misleading in any material respect at such time in light of the circumstances in which it was provided. The Borrower has disclosed to each Agent and each Lender in writing every fact or circumstance known to the Borrower which has a Material Adverse Effect. Section 3.10. Margin Regulations. No part of the proceeds of any Loan hereunder will be used for the purpose of buying or carrying any "margin stock," as such term is used in Regulation U of the Board of Governors of the Federal Reserve System, as amended from time to time, or to extend credit to others for the purpose of buying or carrying any "margin stock," in either case in a manner which would violate or conflict with Regulation T, U, or X of the Board of Governors of the Federal Reserve System. Neither the Borrower 34 40 nor any Subsidiary thereof is engaged in the business of extending credit to others for the purpose of buying or carrying "margin stock." Neither the making of any Loan nor any use of proceeds of any such Loan will violate or conflict with the provisions of Regulation T, U or X of the Board of Governors of the Federal Reserve System, as amended from time to time. Section 3.11. Subsidiaries. Schedule 3.11 hereof states as of the Closing Date each Significant Subsidiary of the Borrower and the percentage of outstanding shares owned by the Borrower and by each Significant Subsidiary. The outstanding shares of each Significant Subsidiary of the Borrower have been duly authorized and validly issued and are fully paid and nonassessable. The Borrower and each Significant Subsidiary thereof owns beneficially and of record and has good title to all of the shares represented by the ownership percentage shown in such Schedule 3.11, free and clear of any Lien. There are no options, warrants, calls, subscriptions, conversion rights, exchange rights, preemptive rights or other rights, agreements or arrangements (contingent or otherwise) which may in any circumstances now or hereafter obligate any Significant Subsidiary to issue any shares of its capital stock or any other securities. As of the Closing Date, no Significant Subsidiary has outstanding any class of preferred stock or any class of common stock with a prior right to dividends. Section 3.12. Partnerships, Etc. As of the Closing Date, neither the Borrower nor any Significant Subsidiary thereof is a partner (general or limited) of any partnership, is a party to any joint venture or owns (beneficially or of record) any equity or similar interest in any Person (including but not limited to any interest pursuant to which the Borrower or such Significant Subsidiary has or may in any circumstance have an obligation to make capital contributions to, or be generally liable for or on account of the liabilities, acts or omissions of such other Person), except for the partnership interests and joint ventures set forth in Schedule 3.12 hereof. Section 3.13. Litigation. There is no pending or (to the Borrower's knowledge) threatened action, suit, proceeding or investigation by or before any Governmental Authority against or affecting the Borrower or any Subsidiary of the Borrower, except for (a) matters described in the financial statements referred to in Section 3.06 hereof, and (b) matters that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. Section 3.14. Absence of Events of Default. No event has occurred and is continuing and no condition exists which constitutes an Event of Default or Potential Default. Section 3.15. Absence of Other Defaults. Neither the Borrower nor any Subsidiary thereof is in default under any agreement, ordinance, resolution, decree, bond, note, indenture, order or judgment to which it is a party (by successor in interest or otherwise) or by which it is bound, or any other agreement or other instrument by which any of the properties or assets owned by it or used in the conduct of its business is affected, which individually or in the aggregate, would have a Material Adverse Effect. The Borrower and each Subsidiary thereof have complied and are in compliance in all respects with all Laws, except for such instances of non-compliance that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. Section 3.16. Insurance. The policies, binders or self-insurance programs for fire, liability, product liability, workmen's compensation, vehicular and other insurance currently held by or on behalf of the Borrower and each Subsidiary thereof insure its material properties and business activities against such losses and risks as are adequate to protect its properties in accordance with customary industry practice when entered into or renewed. To the best knowledge of the Borrower, as of the date hereof, all such policies, binders and self-insurance programs are in full force and effect. As of the date hereof, neither the Borrower nor, to the best knowledge of the Borrower, any of its Subsidiaries has received notice from any insurer or agent of such insurer that substantial capital improvements or other expenditures will have to be made in order to continue such insurance and, to the best knowledge of the Borrower, no such improvements or expenditures are required. As of the date hereof, neither the Borrower nor, to the best knowledge of the Borrower, any of its Subsidiaries has received notice of cancellation of any material insurance policy or binder. 35 41 Section 3.17. Title to Property. The Borrower and each Subsidiary thereof has good and marketable title in fee simple to all material real property owned or purported to be owned by it and necessary for the operation of its business and good title to all other material property of whatever nature owned or purported to be owned by it, including but not limited to all property reflected in the most recent audited balance sheet referred to in Section 3.06 hereof or submitted pursuant to Section 5.01(a) hereof, as the case may be (except as sold or otherwise disposed of in the ordinary course of business after the date of such balance sheet or the Existing Credit Agreements for periods prior to the Closing Date and thereafter as otherwise expressly permitted by the Loan Documents) in each case free and clear of all Liens, other than Permitted Liens or Liens permitted pursuant to Section 6.02 hereof. Section 3.18. Intellectual Property. The Borrower and each Subsidiary thereof owns, or is licensed or otherwise has the right to use, all the patents, trademarks, service marks, names (trade, service, fictitious or otherwise), copyrights, technology (including but not limited to computer programs and software), processes, data bases and other rights, free from burdensome restrictions, necessary to own and operate its properties and to carry on its business as presently conducted and presently planned to be conducted without conflict with the rights of others, except for such instances of non-compliance that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. Section 3.19. Taxes. The Borrower and each Subsidiary thereof have filed all Federal and other material tax returns required to be filed by it and has not failed to pay any material taxes, or interest and penalties relating thereto, on or before the due dates thereof except for taxes not yet due and except for those the amount or validity of which is currently being contested in good faith by appropriate proceedings. Except to the extent that reserves therefor are reflected in the financial statements, to the best knowledge of the Borrower (a) there are no material Federal, state or local tax liabilities of the Borrower or any of its Subsidiaries due or to become due for any tax year ended on or prior to the Closing Date relating to the Borrower or any of its Subsidiaries, whether incurred in respect of or measured by the income of the Borrower or any of its Subsidiaries, which are not properly reflected in the financial statements delivered pursuant to Section 3.06, and (b) there are no material claims pending, proposed or threatened against the Borrower or any of its Subsidiaries for past Federal, state or local taxes, except those, if any, as to which proper reserves in accordance with GAAP are reflected in such financial statements. Section 3.20. Employee Benefits. (a) No borrowing or issuance of Letters of Credit contemplated by this Agreement is a transaction which is subject to the prohibitions of Section 406 of ERISA or in connection with which a tax could be imposed pursuant to Section 4975 of the Code or a civil penalty assessed pursuant to Section 502(i) of ERISA (assuming that monies other than monies representing plan assets are borrowed hereunder). Neither the Borrower, any of its Subsidiaries nor any other Person, including any fiduciary, has engaged in any prohibited transaction (as defined in Section 4975 of the Code or Section 406 of ERISA) which could subject any of the Benefit Plans, the Borrower, or any Subsidiary (or any entity which they have an obligation to indemnify) to any tax or penalty imposed under 4975 of the Code or Section 502(i) of ERISA or any other material liability under a foreign law of similar nature which alone or together with any other item described in this Section 3.20 would have a Material Adverse Effect. (b) Neither the Borrower nor any of its Significant Subsidiaries (including any member of their respective Controlled Group) (i) has incurred or expects to incur any liability under Title IV of ERISA or Section 502(g) of ERISA or any analogous provision relating to Section 515 of ERISA or (ii) has become subject or expects to be subject to the lien described in Section 412(n) of the Code, which alone or together with any other item described in this Section 3.20 would have a Material Adverse Effect. (c) The Pension Plans do not have an "accumulated funding deficiency" (whether or not waived) within the meaning of Section 412 of the Code or Section 302 of ERISA. No Pension Plan has benefit liabilities as defined in Section 4001(a)(16) of ERISA which exceed the assets of such Pension Plan by such an amount that the termination of such Pension Plan alone or together with any other item described in this Section would have a Material Adverse Effect. The Borrower has received a favorable determination letter from the IRS with respect to all Pension Plans except for such Pension Plans with respect to which the failure to receive such a favorable determination would not alone or together with any other item described in this 36 42 Section 3.20 have a Material Adverse Effect and nothing has happened since the date of such letter that has adversely affected such qualification. There is no Lien outstanding or security interest given in connection with a Pension Plan or under Title IV of ERISA which would exceed the percentage limitations of Section 6.02(a) hereof. As of the date hereof, the Borrower has received both IRS and PBGC approval with respect to any terminated Benefit Plans subject to Title IV of ERISA. (d) Neither the Borrower nor any of its Significant Subsidiaries (including any member of their respective Controlled Group) is in default in any material respect under any Benefit Plan and all Benefit Plans are administered in accordance with their terms and are in all material respects in compliance with all applicable Laws, except where any such default or failure to comply would not alone or together with any other item described in this Section 3.20 have a Material Adverse Effect. Section 3.21. Environmental Matters. (a) The Borrower and each Significant Subsidiary of the Borrower, to its knowledge, has been operated in compliance with all applicable Requirements of Law, except for (i) matters set forth in Schedule 3.21(a) hereof and (ii) matters which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. (b) The Borrower and each Significant Subsidiary of the Borrower, to its knowledge, has obtained all Environmental Permits required by applicable Requirements of Law for the ownership and operation of their respective properties, and all such Environmental Permits are in full force and effect or the Borrower and each Significant Subsidiary of the Borrower, as the case may be, has made all appropriate filings for issuance or renewal of such Environmental Permits, except for (i) matters set forth in Schedule 3.21(b) hereof, and (ii) matters which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. (c) The Borrower and each Significant Subsidiary of the Borrower, to its knowledge, is not aware of any acts, omissions, events or circumstances that may interfere with or prevent continued compliance with the Requirements of Law and Environmental Permits referred to in (a) and (b) above, except for (i) matters set forth in Schedule 3.21(c) hereof, and (ii) matters which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. (d) The Borrower and each Significant Subsidiary of the Borrower will use its best efforts to comply with all Requirements of Law and obtain all Environmental Permits which may be legally imposed in the future in jurisdictions in which the Borrower and each Significant Subsidiary, as the case may be, may then be doing business; provided, however, that the Borrower and each Significant Subsidiary shall not be deemed to be in violation of Section 3.21 of this Agreement as a result of any failure to comply with any provisions of such Requirements of Law and Environmental Permits (i) the applicability or validity of which is being contested by the Borrower or any of its Significant Subsidiaries in good faith and by appropriate proceedings, or (ii) the noncompliance with which would not result in fines, penalties, injunctive relief of other civil or criminal liabilities which, individually or in the aggregate, would have a Material Adverse Effect. (e) The Borrower and each Significant Subsidiary of the Borrower, to its knowledge, has not received notice of any asserted or threatened claim, action, suit, proceeding, hearing, investigation or request for information relating to any Environmental Matter, except for (i) matters set forth in Schedule 3.21(e) hereof, and (ii) matters which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. (f) The Borrower and each Significant Subsidiary of the Borrower, to its knowledge, has not received notice from any governmental authority that any of them is a potentially responsible party under any Requirements of Law at any disposal site containing Hazardous Materials, nor received any notice that any lien under any Requirements of Law against any property of the Borrower or Significant Subsidiary of the Borrower exists, except for (i) matters setting forth in Schedule 3.21(f) hereof, and (ii) matters, which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. Section 3.22. Year 2000. The Borrower has (a) initiated a review and assessment of all areas within its and each of its Subsidiaries' business and operations (including those affected by key suppliers and vendors) that could be adversely affected by the "Year 2000 Problem" (that is, the risk that computer applications used 37 43 by the Borrower or any of its Subsidiaries (or its key suppliers and vendors) may be unable to recognize and perform properly date-sensitive functions involving certain dates prior to and any date after December 31, 1999), (ii) developed a plan and timeline for addressing the Year 2000 Problem on a timely basis, and (iii) to the date hereof, implemented that plan in accordance with the timetable. The Borrower reasonably believes that all computer applications (including those of its key suppliers and vendors) that are material to its or any of its Subsidiaries' business and operations will on a timely basis be able to perform properly date-sensitive functions for all dates before and after January 1, 2000 (that is, be "Year 2000 compliant"), except to the extent that a failure to do so could not reasonably be expected to have a Material Adverse Effect. ARTICLE IV CONDITIONS OF LENDING Section 4.01. Conditions to Initial Loans. The obligation of each Lender to make Loans on the Closing Date is subject to the satisfaction, immediately prior to or concurrently with the making of such Loan, of the following conditions precedent, in addition to the conditions precedent set forth in Section 4.02 hereof: (a) Agreement; Notes. The Administrative Agent shall have received executed counterparts of this Agreement for each Lender, duly executed by each Credit Party, each Agent and each Lender, and executed Revolving Credit Notes and Competitive Bid Loan Notes conforming to the requirements hereof, duly executed on behalf of the Borrower for each Lender requesting the same. (b) Corporate Proceedings. The Administrative Agent shall have received, with copies for each Lender, certificates by the Secretary or Assistant Secretary of each Credit Party dated as of the Closing Date as to (i) true copies of the articles of incorporation and by-laws (or other constituent documents) of such Credit Party in effect on such date, (ii) true copies of all corporate action taken by such Credit Party relative to this Agreement and the other Loan Documents and (iii) the incumbency and signature of the respective officers of such Credit Party executing this Agreement and the other Loan Documents to which such Credit Party is a party, together with satisfactory evidence of the incumbency of such Secretary or Assistant Secretary. The Administrative Agent shall have received, with a copy for each Lender, certificates from the appropriate Secretary of State or other applicable Governmental Authority dated not more than 30 days before the Closing Date showing the good standing of each Credit Party in its state of incorporation. (c) Financial Statements. The Administrative Agent shall have received, with a copy for each Lender, copies of the consolidated financial statements referred to in Section 3.06 hereof. (d) Legal Opinion of Counsel to the Credit Parties. The Administrative Agent shall have received, with an executed counterpart for each Lender, opinions addressed to the Agents and each Lender, dated the Closing Date, of (i) Thomas R. O'Brien, Esquire, Senior Vice President and General Counsel of the Borrower, and (ii) White & Case LLP, special New York counsel to the Credit Parties, each in a form reasonably satisfactory to the Administrative Agent. (e) Fees, Expenses, Etc. All fees and other compensation required to be paid to each Agent or the Lenders pursuant hereto or pursuant to any other written agreement on or prior to the Closing Date shall have been paid or received. (f) Existing Credit Agreements. The Administrative Agent shall have received evidence of the termination of the Revolving Credit Agreement and the Short Term Revolving Credit Agreement, each dated as of September 20, 1995 among the Borrower, the lenders signatory thereto, Mellon Bank, N.A., as Funding Agent, and National Westminster Bank PLC, as Administrative Agent (the "Existing Credit Agreements"). (g) Year 2000 Review. The Administrative Agent shall have received and completed the review, with results reasonably satisfactory to the Agents and Lenders, of information confirming that (a) the Borrower and its Subsidiaries are taking all necessary and appropriate steps to ascertain the extent of, and successfully address, business and financial risks facing the Borrower and its Subsidiaries as a result of 38 44 what is commonly referred to as the "Year 2000 Problem" (i.e., the inability of certain computer applications to recognize correctly and perform date-sensitive functions involving certain dates prior to and after December 31, 1999), including risks resulting from the failure of key vendors and customers of the Borrower and its Subsidiaries to successfully address the Year 2000 Problem, and (b) the Borrower's and its Subsidiaries' material computer applications and those of its key vendors and customers will, on a timely basis, adequately address the Year 2000 Problem in all material respects. (h) Pledge. The Administrative Agent shall have received (i) executed counterparts of the Pledge Agreement, duly executed by each Guarantor and the collateral agent thereunder and (ii) as the collateral agent thereunder, the collateral pledged thereunder. (i) Additional Matters. All corporate and other proceedings, and all documents, instruments and other matters in connection with the transactions contemplated by this Agreement and the other Loan Documents shall be reasonably satisfactory in form and substance to each Agent. Section 4.02. Conditions to All Loans. The obligation of each Lender to make any Loan (including the initial Loans) is subject to satisfaction of the following further conditions precedent: (a) Notice. Appropriate notice of such Loan shall have been given by the Borrower as provided in Article II hereof. (b) Representations and Warranties. Each of the representations and warranties made by the Borrower herein shall be true and correct in all material respects on and as of such date as if made on and as of such date (except with respect to representations and warranties which specifically refer to an earlier date, which shall be true and correct in all material respects as of such earlier date), both before and after giving effect to the Loans requested to be made on such date, except that the foregoing shall not apply to the representations and warranties set forth in Section 3.08 hereof in the case of any Loans the proceeds of which are used solely to repay Loans maturing on such date. (c) No Defaults. No Event of Default or Potential Default shall have occurred and be continuing on such date or after giving effect to the Loans requested to be made on such date. (d) No Violations of Law, Etc. Neither the making nor use of the Loans shall cause any Lender to violate or conflict with any Law. Each request by the Borrower for any Loan (including the initial Loans) shall constitute a representation and warranty by the Borrower that the conditions set forth in this Section 4.02 have been satisfied as of the date of such request. Failure of the Administrative Agent to receive notice from the Borrower to the contrary before such Loan is made shall constitute a further representation and warranty by the Borrower that the conditions referred to in this Section 4.02 have been satisfied as of the date such Loan is made. ARTICLE V AFFIRMATIVE COVENANTS The Borrower hereby covenants to each Agent and each Lender as follows: Section 5.01. Basic Reporting Requirements. (a) Annual Audit Reports. The Borrower shall deliver to the Administrative Agent, with a copy for each Lender, as soon as available, but in any event within 90 days after the last day of each of its fiscal years, a consolidated balance sheet of the Borrower as at such last day of the fiscal year, and the related consolidated statement of income and retained earnings and changes in financial position, for such fiscal year, each prepared in accordance with GAAP (except as required by any change in accounting principles or concurred in by the Borrower's independent certified public accountants), in reasonable detail, and, as to the financial statements, certified without qualification (other than relating to a change in accounting principles with which such accountants concur and other than any other qualification which the Administrative Agent and the Required Lenders deem, in their reasonable judgment, to be immaterial) by PricewaterhouseCoopers LLP or another firm of independent certified public accountants reasonably satisfactory to the Administrative Agent as fairly presenting in all material respects the financial 39 45 position and the results of operations of the Borrower as at and for the year ending on such date and as having been prepared in accordance with GAAP. (b) Quarterly Consolidated Reports. The Borrower shall deliver to the Administrative Agent, with a copy for each Lender, as soon as available, but in any event within 45 days after the end of each of the Borrower's first three fiscal quarterly periods, a consolidated balance sheet of the Borrower as of the last day of such quarter and consolidated statement of income and retained earnings and changes in financial position, for such quarter, and on a comparative basis figures for the corresponding period of the immediately preceding fiscal year, all in reasonable detail, each such statement to be certified in a certificate of a Responsible Officer of the Borrower, as fairly presenting in all material respects the financial position and the results of operations of the Borrower as at such date and for such quarter and as having been prepared in accordance with GAAP (subject to customary year-end audit adjustments and the absence of footnotes). Such financial statement and the financial statement provided under clause (a) above shall (so long as the Borrower has not received a clean audit with respect to the Year 2000 Problem on or after the end of the first fiscal quarter of the Borrower in 2000): (i) include, or be accompanied by, a progress report as to the Year 2000 remediation efforts of the Borrower and its Subsidiaries; and (ii) indicate whether an auditor, regulator, or third party consultant has issued a management letter or other communication indicating the Borrower's and/or its Subsidiaries inability to remedy the Year 2000 Problem (to the extent not included in the Borrower's financial statements). (c) Quarterly Compliance Certificates. The Borrower shall deliver to the Administrative Agent, with a copy for each Lender, a Quarterly Compliance Certificate in substantially the form set forth as Exhibit F hereto, duly completed and signed by a Responsible Officer of the Borrower concurrently with the delivery of the financial statements referred to in subsections (a) and (b) of this Section 5.01. Each such Quarterly Compliance Certificate shall in addition include a listing, as of the end of the most recently completed fiscal quarter, showing the respective amounts of Indebtedness for borrowed money of each Subsidiary (other than any Special Purpose Subsidiary) of the Borrower which is organized under the laws of a jurisdiction outside the United States. To the extent such information is not included in the financial statements delivered pursuant to Section 5.01(a) hereof, each Quarterly Compliance Certificate with respect to the last quarter of a fiscal year shall in addition include a listing, as of the end of such quarter, of the respective amounts of Indebtedness for borrowed money of each Special Purpose Subsidiary of the Borrower which is organized under the laws of a jurisdiction outside the United States. (d) Certain Other Reports and Information. Promptly upon their becoming available to the Borrower, the Borrower shall deliver to the Administrative Agent, with a copy for each Lender, a copy of (i) all regular or special reports, registration statements and amendments to the foregoing which the Borrower or any Subsidiary shall file with the Securities and Exchange Commission (or any successor thereto) or any securities exchange, and (ii) all reports, proxy statements, financial statements and other information distributed by the Borrower to its stockholders or bondholders. (e) Further Information. The Borrower will promptly furnish to the Administrative Agent, with a copy for each Lender that has requested the same, such other information and in such form as any Agent or any Lender may reasonably request from time to time. (f) Notice of Certain Events. Promptly upon becoming aware of any of the following, the Borrower shall give the Administrative Agent notice thereof, together with a written statement of a Responsible Officer of the Borrower setting forth the details thereof and any action with respect thereto taken or proposed to be taken by the Borrower: (i) Any Event of Default or Potential Default; provided, however,that the Borrower shall not be required to deliver notice of any violation of any covenant contained in Article V hereof (other than Section 5.01 hereof) during the 30 days immediately following the first occurrence of such violation if the Borrower reasonably believes that such violation will be cured within such 30-day period; and provided, further, that the Borrower shall not be required to deliver notice of any violation of any covenant contained in Section 5.01 hereof (other than subparagraph (f)(i) thereof) during the first 10 days after the first occurrence of such violation if the Borrower reasonably believes that such violation will be cured within such 10-day period. 40 46 (ii) Any change in the business, operations or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole which could reasonably be expected to have a Material Adverse Effect. (iii) Any pending or threatened action, suit, proceeding or investigation by or before any Governmental Authority against the Borrower or any Subsidiary, except for matters that, if adversely decided, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. (iv) Any violation, breach or default by the Borrower or any Subsidiary of the Borrower of or under any agreement or instrument material to the business, operations or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole which could in the reasonable judgment of the Borrower have a Material Adverse Effect. (v) Any material correspondence with the PBGC, the Secretary of Labor or any representative of the IRS with respect to any Benefit Plan or Pension Plan, relating to an actual or threatened change or development which would materially and adversely affect the financial condition of the Borrower and its Subsidiaries taken as a whole; and copies of any notices from the PBGC to the Borrower with respect to the intent of the PBGC to institute involuntary proceedings. (vi) Any Environmental Claim pending or threatened against the Borrower or any Significant Subsidiary of the Borrower, or any past or present acts, omissions, events or circumstances (including but not limited to any dumping, leaching, deposition, removal, abandonment, escape, emission, discharge or release of any Hazardous Material at, on or under any facility or property now or previously owned, operated or leased by the Borrower or any Significant Subsidiary of the Borrower) that could form the basis of such Environmental Claim, which Environmental Claim, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. (vii) Any discovery or determination by the Borrower or its Subsidiary that any computer application (including those of its suppliers and vendors) that is material to the Borrower or any of its Subsidiaries' business and operations will not be Year 2000 compliant on a timely basis, except to the extent that such failure could not reasonably be expected to have a Material Adverse Effect. (g) Visitation; Verification. The Borrower shall, and shall cause each of its Subsidiaries to, permit the Lenders to make or cause to be made, at their own expense (and with respect to the Administrative Agent on behalf of the Lenders, after the occurrence of and during the continuance of an Event of Default, at the Borrower's expense), inspections and audits of any of its books, records and papers and to make extracts therefrom and copies thereof, or to make inspections and examinations of any of its properties and facilities (including, without limitation, any Project sites), on reasonable notice, at all such reasonable times and as often as any Lender may reasonably require, in order to assure that the Borrower and its Subsidiaries are and will be in compliance with their respective obligations under the Loan Documents or to evaluate the Lenders' investment in the then outstanding Notes. The Borrower shall have the right to have an authorized representative present during the inspection and examination of any of the Borrower's or any of its Subsidiaries' properties and facilities; provided, however, that the exercise of such right shall not delay or hinder the Lenders' right to such inspection and examination. The Administrative Agent shall promptly deliver to each Lender copies of all notices received pursuant to this Section 5.01. Section 5.02. Insurance. The Borrower shall, and shall cause each of its Subsidiaries to, maintain, at its expense, and keep in effect with responsible insurance companies, such liability insurance for bodily injury and third party property damage as is customary in the case of corporations engaged in the same or similar business or having similar properties, similarly situated, provided, however, that the Borrower may maintain a system of self-insurance in accordance with sound business practice as is customary for corporations having a similar net worth as the Borrower. The Borrower shall, and shall cause each of its Subsidiaries to, keep and maintain, at its expense, its material real and personal property insured against loss or damage by fire, theft, explosion, spoilage, and all other risks ordinarily insured against by other owners or users of such properties in similar businesses in an amount equal to the full replacement or cash value thereof, subject to deductible 41 47 amounts which the Borrower, in its reasonable judgment, deems prudent. The Borrower shall, and shall cause each of its Subsidiaries to, carry all insurance required by Law to cover its obligations to the PBGC. Section 5.03. Payment of Taxes and Other Potential Charges and Priority Claims. The Borrower shall, and shall cause each Subsidiary to, pay or discharge (a) on or prior to the date on which penalties are imposed by a taxing authority with respect thereto, all material taxes, assessments and other governmental charges imposed upon it or any of its properties; (b) on or prior to the date when due, all material lawful claims of materialmen, mechanics, carriers, warehousemen, landlords and other like Persons which, if unpaid, might result in the creation of a Lien upon any such property; and (c) on or prior to the date when due, all other material lawful claims which, if unpaid, might result in the creation of a Lien upon any such property or which, if unpaid, might give rise to a claim entitled to priority over general creditors of the Borrower or such Subsidiary in a case under Title 11 (Bankruptcy) of the United States Code, as amended; provided, that unless and until foreclosure, distraint, levy, sale or similar proceedings shall have been commenced the Borrower or such Subsidiary need not pay or discharge any such tax, assessment, charge or claim so long as (x) the validity thereof is contested in good faith and by appropriate proceedings diligently conducted and (y) such reserves or other appropriate provisions as may be required by GAAP shall have been made therefor. Section 5.04. Preservation of Corporate Status. The Borrower shall, and shall cause each of its Significant Subsidiaries to, do, or cause to be done, all things necessary to preserve and keep in full force and effect its corporate existence and all permits, rights and privileges necessary for the proper conduct of its business; provided, however, that nothing in this Section 5.04 shall prevent the withdrawal by the Borrower or any of its Significant Subsidiaries of its qualification as a foreign corporation in any jurisdiction where such withdrawal could not reasonably be expected to have a Material Adverse Effect; and provided further,that nothing in this Section 5.04 shall prevent the Borrower or any of its Significant Subsidiaries from failing to maintain or terminating any right, privilege or permit, if such failure or termination, is not in violation of or will not cause an Event of Default under, any provision of this Agreement and does not have a Material Adverse Effect. Section 5.05. Governmental Approvals and Filings. The Borrower shall, and shall cause each Subsidiary to, keep and maintain in full force and effect all Governmental Actions necessary in connection with execution and delivery of any Loan Document, consummation of the transactions hereon or therein contemplated, performance of or compliance with the terms and conditions hereof or thereof or to ensure the legality, validity, binding effect, enforceability or admissibility in evidence hereof or thereof. Section 5.06. Maintenance of Properties. The Borrower shall, and shall cause each Subsidiary to, maintain or cause to be maintained in good repair, working order and condition the properties now or hereafter owned, leased or otherwise possessed by it and shall make or cause to be made all needful and proper repairs, renewals, replacements and improvements thereto so that they are able to serve the functions for which they are currently being used, except to the extent that the failure to do so would not have a Material Adverse Effect. Section 5.07. Avoidance of Other Conflicts. The Borrower shall not, and shall not permit any of its Subsidiaries to, violate or conflict with, be in violation of or conflict with, or be or remain subject to any liability (contingent or otherwise) on account of any violation or conflict with: (a) any Law, (b) its articles of incorporation or by-laws (or other constituent documents), or (c) any agreement or instrument to which it is party or by which any of them or any of their respective Subsidiaries is a party or by which any of them or any of their respective properties (now owned or hereafter acquired) may be subject or bound), 42 48 except for matters which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. Section 5.08. Financial Accounting Practices. The Borrower shall, and shall cause each of its Subsidiaries to, keep proper books of record and account in accordance with normal business practice in which full and appropriate entries shall be made of all dealings or transactions in relation to its business and activities. Section 5.09. Use of Proceeds. The Borrower shall apply the proceeds of Loans hereunder for payment of all obligations of the Borrower under the Existing Credit Agreements, and for the general corporate purposes of the Borrower and its Subsidiaries. The Borrower shall not use the proceeds of any Loans hereunder directly or indirectly for any unlawful purpose or in any manner inconsistent with any other provision of any Loan Document. Section 5.10. Continuation of or Change in Business. The Borrower and each of its Significant Subsidiaries shall continue to engage in substantially the same lines of business conducted and operated during the present and preceding fiscal year and reasonably related extensions thereof, and the Borrower shall not, and shall not permit any Significant Subsidiary to, substantially engage in any other unrelated businesses. Section 5.11. Consolidated Tax Return. The Borrower shall not, and shall not suffer any of its Subsidiaries to, file or consent to the filing of any consolidated income tax return with any Person other than the Borrower and its Subsidiaries. Section 5.12. Fiscal Year. The Borrower shall not, and shall not suffer any of its Subsidiaries to, change its fiscal year or fiscal quarter except in accordance with GAAP. Section 5.13. ERISA. The Borrower shall, and shall cause each of its Subsidiaries to, as soon as possible and, in any event, within 10 days after the Borrower knows or has reason to know that a Reportable Event has occurred with respect to a Pension Plan, that a transaction prohibited under ERISA, the Code or a foreign law of similar nature has occurred resulting in a material liability to a Benefit Plan, the Borrower or any of its Subsidiaries (or any entity which they have an obligation to indemnify), that an accumulated funding deficiency has been incurred or an application is to be or has been made to the Secretary of the Treasury for a waiver of the minimum funding standard with respect to an accumulation funding deficiency of $1,000,000 or more, that a failure to make timely contributions to a Pension Plan may give or has given rise to a lien in a material amount, that an amendment to a Pension Plan may require or requires the granting of a security interest in a material amount, that proceedings are likely to be or have been instituted to terminate a Pension Plan, or that the Borrower, any of its Significant Subsidiaries or a member of their respective Controlled Group will or may incur any material liability under Section 502(g) or any analogous provision relating to Section 515 or Title IV of ERISA, the Borrower will deliver to the Administrative Agent a certificate of a Responsible Officer setting forth details as to such occurrence and action, if any, which the Borrower, such Subsidiary or the respective member of their Controlled Group is required or proposes to take, together with any notices required or proposed to be filed with or by the Borrower, such Subsidiary or the member of their respective Controlled Group, the PBGC or the plan administrator with respect thereto. For purposes of this Section, an item is material if alone or taken with any other item in this Section, it results in a liability of $1,000,000 or more. Copies of any notices required to be delivered to the Administrative Agent hereunder shall be delivered not later than 10 days after the later of the date such notice has been filed with the IRS or the PBGC or received by the Borrower, any of its Subsidiaries or members of their respective Controlled Group. Upon the request of the Administrative Agent or any of the Lenders made from time to time, the Borrower will deliver a copy of the most recent actuarial report and annual report completed with respect to any Benefit Plan and any other financial information the Borrower has with respect to the Benefit Plan. Section 5.14. Ratings. In the event that the Borrower has no rated senior unsecured long-term debt outstanding, the Borrower will request Moody's to assign the Borrower a "hypothetical senior long-term debt rating" and will request S&P to assign the Borrower an "issuer credit rating," such request to be made (i) not later than thirty days after delivery to the Administrative Agent of the financial statements called for by Section 5.01(a) hereof and, in addition, (ii) not later than thirty days after instructions by the Required 43 49 Lenders to make such request, which instructions may be given no more frequently than once during any six-month period. Section 5.15. Subsidiary Guaranty. Obligations hereunder shall at all times be guaranteed by Foster Wheeler USA Corporation, Foster Wheeler Energy International, Inc. and Foster Wheeler Energy Corporation by the execution and delivery of this Agreement by such Subsidiaries. If at the end of any fiscal quarter of the Borrower, (i) the assets of the Guarantors constitute less than 90% of the consolidated domestic total assets of the Borrower and its consolidated Subsidiaries or (ii) the net income for such fiscal quarter of the Guarantors constitute less than 90% of the consolidated domestic net income of the Borrower and its consolidated Subsidiaries for such quarter, then the Borrower shall designate (x) one or more Material Domestic Subsidiaries and (y) to the extent the designation provided in clause (x) does not make up the short-fall in clause (i) or (ii) above, one or more other domestic Subsidiaries, so that assets and net income of such one or more Material Domestic Subsidiaries and such one or more other domestic Subsidiaries, together with such item of the existing Guarantors, constitute 90% of the consolidated domestic total assets and net income, respectively of the Borrower and its consolidated Subsidiaries. The Borrower shall deliver to the Administrative Agent, together with the Quarterly Compliance Certificate required under Section 5.01(c), a schedule setting forth the assets and net income of each Guarantor and the consolidated domestic assets and the consolidated domestic net income of the Borrower and its consolidated Subsidiaries. If a Material Domestic Subsidiary or any other domestic Subsidiary is required to become a Guarantor, unless the Required Lenders otherwise agree, the Borrower shall, promptly (i) cause such Subsidiary to execute a Subsidiary Guaranty Agreement, (ii) cause such Subsidiary to deliver documentation similar to that described in Sections 4.01(b) and (d) relating to the authorization for, execution and delivery of, and validity of such Subsidiary's obligations as a Guarantor under the Guaranty in form and substance satisfactory to the Administrative Agent. Except as otherwise required or permitted by the Indenture, the Guarantors' obligations under the Guaranty shall at all times be secured by the pledge of the "Collateral" (as defined in the Pledge Agreement) pursuant to the Pledge Agreement. Without limiting the restrictions set forth in Section 6.07, a merger of a Guarantor into the Borrower or into another Guarantor shall not constitute a violation of this Section 5.15 so long as the Guaranty of the surviving entity, in the case of a merger into another Guarantor, remains in effect. ARTICLE VI NEGATIVE COVENANTS The Borrower hereby covenants to each Agent and each Lender as follows: Section 6.01. Financial Covenants. (a) Consolidated Fixed Charges Coverage Ratio. The Consolidated Fixed Charges Coverage Ratio shall be greater than (i) 2.25 to 1 for each period of four consecutive fiscal quarters of the Borrower ending after the Closing Date and prior to January 1, 2001 and (ii) thereafter 2.40 to 1. For the purpose of this Section 6.01(a) only, calculations of such Ratio shall exclude the $47,014,000 charges to the Borrower's earnings taken in the third fiscal quarter of the Borrower in 1998. (b) Consolidated Leverage Ratio. The Consolidated Leverage Ratio shall not at the end of any fiscal quarter of the Borrower ending after the Closing Date exceed 0.50 to 1.00 provided, however, that in the calculation of Indebtedness solely for purposes of this Section 6.01(b), (i) Consolidated Indebtedness shall not include (to the extent otherwise included therein) indebtedness for money borrowed incurred solely for the purpose of hedging foreign currency exchange risk for which the sole source of repayment is a cash collateral deposit, (ii) Consolidated Indebtedness shall not include Indebtedness of any Special Purpose Subsidiary, (iii) with respect to Guarantees of obligations of any Special Purpose Subsidiary other than Guarantees solely for completion or operation of the related Project, an amount shall be included in Consolidated Indebtedness of the Borrower equal to the lesser of the Indebtedness of such Special Purpose Subsidiary so Guaranteed and the amount of such Guarantee, (iv) with respect to Guarantees of completion or operation obligations of any Special Purpose Subsidiary, an amount shall be included in Consolidated Indebtedness of the Borrower equal to 25% of the lesser of the outstanding amount of the Indebtedness of such Special Purpose Subsidiary so Guaranteed and the maximum amount payable by the Borrower pursuant to 44 50 such Guarantee (after giving effect to (and without duplication of) any Guarantee of obligations of such Special Purpose Subsidiaries included in clause (iii) above) until completion of the Project and operation thereof in accord with the operating standards required under the terms of the financing agreement of the Indebtedness of such Special Purpose Subsidiary, after which time no amount shall be included in such calculation, except that if at any time such Special Purpose Subsidiary is in default of its obligations (until such default is remedied or cured) under the financing agreement of such Indebtedness and the Borrower is obligated to make payments pursuant to such Guarantee, the amount to be included shall be 25% of the outstanding amount of the Indebtedness of such Special Purpose Subsidiary, and (v) Consolidated Indebtedness shall be calculated as if the Trust Preferred was not outstanding; and provided, further, that in the calculation of Consolidated Indebtedness of the Borrower solely for the purposes of this Section 6.01(b), an amount shall be included on account of letters of credit equal to monetary damages, if any, which are due but unpaid according to the terms of any Project documents to which the beneficiary of such letter of credit is entitled. Section 6.02. Liens. The Borrower shall not and shall not permit any of its Subsidiaries to create, or assume or permit to exist, any Lien on any of the properties or assets of the Borrower or any of its Subsidiaries (other than any Special Purpose Subsidiary), whether now owned or hereafter acquired except: (a) ERISA Liens and Liens not otherwise permitted under this Section 6.02 securing Indebtedness and other obligations of the Borrower or any of its Subsidiaries which Indebtedness and other obligations and, in the case of ERISA Liens, the amount of the ERISA Liens, in the aggregate at any time outstanding, does not exceed 15% of the Consolidated Net Worth of the Borrower; (b) Liens by the Borrower or a Subsidiary thereof on property or assets securing all or part of the purchase price or construction cost thereof (hereinafter referred to individually as a "Purchase Money Security Interest"); provided, however, that: (i) Such Purchase Money Security Interest is created before or within 180 days after the purchase of, or the completion of construction of, such property or assets by the Borrower or such Subsidiary; (ii) The transaction in which any Purchase Money Security Interest is proposed to be created is not then prohibited by this Agreement; (iii) Any Purchase Money Security Interest shall attach only to the property or asset so acquired or constructed in such transaction (and the proceeds thereof) or any addition thereto or replacement thereof and shall not extend to or cover any other assets or properties of the Borrower or any of its Subsidiaries; and (iv) The Indebtedness secured or covered by any Purchase Money Security Interest together with any other Indebtedness secured by the property or asset acquired shall not exceed 100% of the lesser of the cost or fair market value of the property or asset acquired or constructed and shall not be renewed, extended or prepaid from the proceeds of any borrowing by the Borrower or any of its Subsidiaries; (c) Liens on the property or assets of the Borrower and its Subsidiaries in existence immediately prior to the Closing Date as listed on Schedule 6.02 hereto, provided that no such Lien is spread to cover any additional property after the Closing Date and the amount of Indebtedness secured thereby is not increased, provided that the maturity of such Indebtedness may be extended or renewed; (d) Liens on all or any part of the property or the assets of any Subsidiary in favor of the Borrower or any other Subsidiary (other than a Special Purpose Subsidiary) as security for the Indebtedness owing to the Borrower or such other Subsidiary; (e) Liens (whether or not assumed) existing on property or assets at the time of purchase thereof by the Borrower or any Subsidiary, provided that: (i) such Lien is not created in contemplation of the purchase of such property by the Borrower or such Subsidiary, (ii) such Lien is confined solely to the 45 51 property so purchased, improvements thereto and proceeds thereof and (iii) the aggregate amount secured by all Liens permitted by this Section 6.02(e) shall not at any time exceed $10,000,000; and (f) Permitted Liens. Section 6.03. Indebtedness. The Borrower shall not, and shall not permit any Subsidiary to, at any time create, incur, assume or suffer to exist or have outstanding any Indebtedness if, immediately after giving effect to such Indebtedness and the receipt and application of any proceeds thereof, there would exist an Event of Default or Potential Default hereunder, or any Indebtedness of any domestic Subsidiary (other than a Special Purpose Subsidiary) other than (i) Indebtedness set forth on Schedule 3.07 hereof and refinancings and renewals thereof (provided that the amount of such Indebtedness so refinanced or renewed shall not exceed the lesser of (x) the amount of such Indebtedness as of the date hereof or (y) the amount of such Indebtedness at the time of refinancing or renewal), (ii) intercompany Indebtedness between or among the Borrower and its Subsidiaries, (iii) Indebtedness of domestic Subsidiaries (other than Special Purpose Subsidiaries) not otherwise permitted under clauses (i) or (ii) above which in the aggregate at any time does not exceed $20,000,000 and (iv) the Guaranty hereunder, the "Guaranty" under the Other Credit Agreement and the Guarantee of the Borrower's obligations in connection with securities issued under the Indenture. Section 6.04. Loans, Advances and Certain Investments. The Borrower shall not, and shall not permit any Subsidiary to, at any time make or suffer to exist or remain outstanding any Investment in any Special Purpose Subsidiary other than Investments by the Borrower and its Subsidiaries in Special Purpose Subsidiaries which do not exceed, in the aggregate at any time, 50% of the Borrower's Consolidated Net Worth. For the purposes of this Section 6.04, the Borrower's Consolidated Net Worth shall not include any amount on account of the Borrower's Trust Preferred. Section 6.05. Changes in Business. The Borrower shall not, and shall not permit any Significant Subsidiary to, (a) liquidate or dissolve itself (or suffer any liquidation or dissolution) (other than into the Borrower or any other Significant Subsidiary), or (b) convey, sell, assign, transfer or otherwise dispose of any capital stock of or other ownership interest in any Significant Subsidiaries (other than Special Purpose Subsidiaries) held by it (other than to the Borrower or any other Significant Subsidiary), provided that, so long as no Default or Event of Default has occurred and is continuing or would result therefrom, the Borrower may in any fiscal year convey, sell, assign, transfer or otherwise dispose of capital stock or other ownership interest in one or more Significant Subsidiaries which did not account for an aggregate of 10% of the consolidated assets of the Borrower at the end of the prior fiscal year. Section 6.06. Amendment of Certain Documents. The Borrower shall not, and shall not permit any Significant Subsidiary to, modify, amend, supplement or terminate, or agree to modify, amend, supplement or terminate its certificate of incorporation or by-laws or any other constituent documents, in any manner which would materially and adversely affect the interests of any of the Lenders hereunder. Section 6.07. Mergers; Acquisitions. The Borrower shall not, and shall not permit any of its Significant Subsidiaries to, merge or consolidate with any Person; provided, however, that the Borrower or any Significant Subsidiary thereof may merge with another Person if (i) in the case of a merger involving the Borrower, the Borrower is the surviving corporation, (ii) in the case of a merger involving a Significant Subsidiary, a Subsidiary of the Borrower or, if the Borrower is also party to such merger, the Borrower, is the surviving corporation, and (iii) after giving effect to such merger no Potential Default or Event of Default would then exist. Section 6.08. ERISA Obligations. The Borrower shall not, and shall not permit any of its Subsidiaries to, engage in a transaction in connection with which the Benefit Plans, the Borrower, any of its Subsidiaries or any entity which they have an obligation to indemnify could be subject to liability for either a civil penalty assessed pursuant to Section 502(i) or 502(1) of ERISA or a tax imposed by Section 4975 of the Code or any other material liability Plan or Benefit Plan, take any other action with respect to any such Pension Plan or Benefit Plan if such termination or other action could result in liability, or take any action or fail to take any action which could result in withdrawal liabilities under Title IV of ERISA or liability under Section 502(g) of ERISA or any analogous provision relating to Section 515 of ERISA; fail to make any payments on a 46 52 timely basis which are required under applicable Law (including Section 412 of the Code) to be paid as contributions to Pension Plans; incur an accumulated funding deficiency (as defined in Section 302 of ERISA and Section 412 of the Code), whether or not waived, with respect to any Pension Plan; amend any Pension Plan in a manner which would require the granting of a security interest to maintain the continued qualification of such Pension Plan under Section 401(a)(29) of the Code, if, in any case described herein, or together with any other event described herein, such action, failure to act, event or transaction would (i) result in an ERISA Lien exceeding the percentage limitations of Section 6.02(a) or (ii) have a Material Adverse Effect. Section 6.09. Principal Foreign Affiliates. The Borrower shall not permit any of its Principal Foreign Affiliates to create, assume or permit to exist any Indebtedness the terms of which, prior to a payment default thereunder, would restrict dividends to be paid with respect to the consolidated net income of such Affiliate for any fiscal year by more than 40% of the consolidated net income of such Affiliate for such fiscal year. For purposes of this Section, "Principal Foreign Affiliates" shall mean Foster Wheeler Limited (Reading), Foster Wheeler France, S.A., Foster Wheeler Italiana, S.p.A., Foster Wheeler Iberia, S.A., Foster Wheeler Energia, S.A. and their respective successors and any other foreign Affiliate of the Borrower which in the most recent fiscal year of the Borrower accounted for more than 10% of the consolidated assets of the Borrower and its Subsidiaries or which accounted for more than 5% of the consolidated income of the Borrower and its Subsidiaries for the most recent fiscal year of the Borrower; provided, however, that with respect to such foreign Affiliate created or acquired after the date hereof, if thereafter such entity, in a fiscal year, accounts for more than 10% of the consolidated assets of the Borrower and its Subsidiaries or accounts for more than 5% of the consolidated income of the Borrower and its Subsidiaries in such fiscal year, it shall be deemed to be a Principal Foreign Affiliate for such fiscal year. Section 6.10. Certain Agreements. The Borrower will not become or be a party to any agreement or instrument relating to Indebtedness for borrowed money (other than agreements and instruments relating to Indebtedness for borrowed money in an aggregate principal amount not exceeding $15,000,000 (individually or in the aggregate with respect to such agreements and instruments) at any time outstanding and other than (with respect to debt securities offered and sold in a public offering in a principal amount not exceeding $500,000,000 ($175,000,000 of which is outstanding under the Borrower's Trust Preferred)) the Indenture between the Borrower and Harris Trust and Savings Bank, as Trustee, as amended and supplemented from time to time (the "Indenture"), filed as an exhibit to the Borrower's Registration Statement on Form S-3 (registration no. 33-61809)) which contains any covenant or event of default which could result in such Indebtedness becoming or being declared to be due and payable prior to its stated maturity (including by a requirement for purchase or prepayment) upon the occurrence of an event or condition which is not an event or condition the occurrence of which could cause the Loans to become or be declared to be (other than pursuant to Section 7.01(f) hereto) due and payable prior to their stated maturity, unless the Borrower shall make an "Amendment Offer" (as hereinafter defined); provided that this covenant shall not be violated by (i) an agreement to pay the principal of and interest on such Indebtedness in accordance with its terms or to provide to the holders of such Indebtedness or an agent or trustee for such holders any information which the Borrower is obligated to provide to the Lender or an Agent hereunder or (ii) any agreement or instrument relating to Indebtedness on account of Capitalized Lease or secured by Purchase Money Security Interest, any covenant or event of default of which principally relates to the use, condition or disposition of the property financed or acquired or constructed with such Indebtedness. As used herein, an "Amendment Offer" is an effective offer by the Borrower to the Administrative Agent to amend this Agreement, which offer shall be made no later than ten days after the Borrower becoming party to an agreement or instrument referred to in the first sentence of this Section 6.10, to amend this Agreement (without deleting or overriding any term or provision of this Section 6.10) in a way that the first sentence of this Section would not otherwise be applicable to such agreement or instrument. The Administrative Agent, if so instructed by the Required Lenders, shall accept or decline such Amendment Offer within thirty days thereof, and a failure to so respond shall be deemed a declination of such Amendment Offer. Section 6.11. Restricted Payments. The Borrower shall not, and shall not suffer or permit any Subsidiary to, declare or make any Stock Payment; except that (i) any wholly-owned Subsidiary may declare 47 53 and make dividend payments or other distributions to the Borrower or to another wholly-owned Subsidiary; (ii) any non-wholly-owned Subsidiary may declare and make dividend payments or other distribution to its shareholders or other equity holders generally so long as the Borrower or its respective Subsidiary which owns the equity interest in the Subsidiary paying such dividends or other distributions receives at least its proportionate share thereof (based upon its relative holdings of the equity interest in the Subsidiary paying such dividends or other distributions and taking into account the relative preferences, if any, of the various classes of equity interest of such Subsidiary); (iii) the Borrower and any Subsidiary may declare and make dividend payments or other distributions, in each case, payable solely in its stock; and (iv) the Borrower and any Subsidiary may declare, pay or make cash Stock Payments so long as no Event of Default then exist or would result therefrom. Section 6.12. Transactions with Affiliates. The Borrower will not, and will not permit any of its Subsidiaries to, enter into any transaction or series of related transactions, whether or not in the ordinary course of business, with any Affiliate of the Borrower or any of its Subsidiaries, other than on terms and conditions substantially as favorable to the Borrower or such Subsidiary as would be obtainable by the Borrower or such Subsidiary at the time in a comparable arm's-length transaction with a Person other than an Affiliate. Notwithstanding the foregoing, the provisions of this Section 6.12 shall not prohibit (i) Stock Payments permitted under Section 6.11 hereof, (ii) loans and other advances that may from time to time be made to directors, officers and/or employees of the Borrower or any of its Subsidiaries in the ordinary course of business, (iii) customary fees paid to directors of the Borrower and its Subsidiaries, (iv) the entering into, and making payments under, employment agreements, employee benefit plans, indemnification provisions and other similar compensatory arrangements with directors, officers and/or employees of the Borrower and its Subsidiaries in the ordinary course of business and (v) transactions between or among the Borrower and its Subsidiaries to the extent that such transactions are not otherwise prohibited by the terms of this Agreement. Section 6.13. Capital Expenditures. The Borrower shall not, and shall not permit any of its Subsidiaries (other than Special Purpose Subsidiaries) to, make any Capital Expenditures, except that during any fiscal year of the Borrower, the Borrower and its Subsidiaries (other than Special Purpose Subsidiaries) may make Capital Expenditures so long as the aggregate amount of such Capital Expenditures does not exceed $75,000,000 in such fiscal year. "Capital Expenditures" shall mean any expenditure for fixed or capital assets (including, without limitation, expenditures for maintenance and repairs which are capitalized in accordance with GAAP and Capitalized Lease Obligations). ARTICLE VII DEFAULTS Section 7.01. Events of Default. An Event of Default shall mean the occurrence or existence of one or more of the following events or conditions (for any reason, whether voluntary, involuntary or effected or required by Law): (a) The Borrower shall fail to pay when due principal of any Loan. (b) The Borrower shall fail to pay when due interest on any Loan, any fees, indemnity or expenses, or any other amount due hereunder or under any other Loan Document and such failure shall have continued for a period of five Business Days. (c) Any representation or warranty made or deemed made by the Borrower or any Subsidiary of the Borrower in or pursuant to any Loan Document or in any certificate delivered thereunder, or any statement made by the Borrower or any Subsidiary of the Borrower in any financial statement, certificate, report, exhibit or document furnished by the Borrower or any Subsidiary of the Borrower to any Agent or any Lender pursuant to or in connection with any Loan Document, shall prove to have been false or misleading in any material respect as of the time when made or deemed made (including by omission of material information necessary to make such representation, warranty or statement not misleading). 48 54 (d) The Borrower shall default in the performance or observance of any covenant contained in Article VI hereof which shall remain unremedied for a period of five days after the occurrence thereof or the Borrower shall default in the observance of any covenant contained in Section 5.01(f) hereof. (e) The Borrower shall default in the performance or observance of any other covenant, agreement or duty under this Agreement or any other Loan Document and such default shall have continued for a period of 30 days after notice of such default from the Administrative Agent to the Borrower. (f) (i) The Borrower or any Guarantor (other than a Special Purpose Subsidiary) or any Significant Subsidiary (other than a Special Purpose Subsidiary) of the Borrower shall fail to perform or observe any term, condition or covenant of any bond, note, debenture, loan or letter of credit agreement, indenture, guaranty, trust agreement, mortgage or similar instrument to which the Borrower or any such Guarantor (other than Special Purpose Subsidiary) or any such Significant Subsidiary (other than a Special Purpose Subsidiary) is a party or by which it is bound, or by which any of its properties or assets may be affected (a "Debt Instrument"), so that, as a result of any such failure to perform, the Indebtedness included therein or secured or covered thereby may at the time be declared due and payable prior to the date on which such Indebtedness would otherwise become due and payable; or (ii) any event or condition referred to in any Debt Instrument shall occur or fail to occur, so that, as a result thereof, the Indebtedness included therein or secured or covered thereby may at such time be declared due and payable prior to the date on which such Indebtedness would otherwise become due and payable; or (iii) the Borrower or any Guarantor (other than Special Purpose Subsidiary) or any Significant Subsidiary of the Borrower (other than any Special Purpose Subsidiary) shall fail to pay any Indebtedness when due, pursuant to demand under any Debt Instrument or otherwise, subject to any applicable grace period; provided, however, that the provisions of this Section 7.01(f) shall not be applicable to Indebtedness or any Debt Instrument or Debt Instruments which relate to or evidence Indebtedness which, on the date this Section 7.01(f) would otherwise be applicable thereto, is in the principal amount of less than $10,000,000 (or its equivalent in any foreign currencies) in the aggregate. (g) One or more final, non-appealable judgments for the payment of money shall have been entered against the Borrower or any Significant Subsidiary (other than a Special Purpose Subsidiary), which judgment or judgments exceed $15,000,000 (or its equivalent in any foreign currencies) in the aggregate, and such judgment or judgments shall have remained unpaid, undischarged and unstayed for a period of sixty consecutive days. (h) One or more final, non-appealable writs or warrants of attachment, garnishment, execution, distraint or similar process exceeding in value the aggregate amount of $15,000,000 (or its equivalent in any foreign currencies) shall have been issued against the Borrower or any Significant Subsidiary (other than a Special Purpose Subsidiary) or any of their respective properties and shall have remained undischarged and unstayed for a period of sixty consecutive days. (i) This Agreement or any term or provision hereof shall cease to be in full force and effect, or any Credit Party shall, or shall purport to, terminate, repudiate, declare voidable or void or otherwise contest, this Agreement or any term or provision thereof or any obligation or liability of the Credit Parties hereunder. (j) (i) Any Pension Plan is terminated pursuant to Section 4041 or 4042 of ERISA and the benefit liabilities exceed the assets based upon the assumptions used by the PBGC on plan termination by an amount such that the termination of such Pension Plan would have a Material Adverse Effect; (ii) the Borrower or any of its Subsidiaries (or a member of their respective Controlled Group) incur a liability under Section 4062, 4063 or 4064 of ERISA for an amount that such liability would materially and adversely affect the financial condition of the Borrower and its Subsidiaries taken as a whole; or (iii) any other event or events shall occur with respect to any employee benefit plan whether or not subject to ERISA which individually or in the aggregate results in a Material Adverse Effect. (k) A proceeding shall have been instituted in respect of the Borrower or any Significant Subsidiary (other than a Special Purpose Subsidiary) (i) seeking to have an order for relief entered in respect of such Person, or seeking a declaration or entailing a finding that such Person is insolvent or a similar declaration or finding, or 49 55 seeking dissolution, winding-up, charter revocation or forfeiture, liquidation, reorganization, arrangement, adjustment, composition or other similar relief with respect to such Person, its assets or its debts under any Law relating to bankruptcy, insolvency, relief of debtors or protection of creditors, termination of legal entities or any other similar Law now or hereafter in effect, or (ii) seeking appointment of a receiver, trustee, liquidator, assignee, sequestrator or other custodian for such Person or for all or any substantial part of its property and such proceeding shall result in the entry, making or grant of any such order for relief, declaration, finding, relief or appointment, or such proceeding shall remain undismissed and unstayed for a period of 60 consecutive days. (1) The Borrower or any Significant Subsidiary (other than a Special Purpose Subsidiary) shall voluntarily suspend transaction of its business; shall make a general assignment for the benefit of creditors; shall institute (or fail to controvert in a timely and appropriate manner) a proceeding described in Section 7.01(k)(i) hereof, or (whether or not any such proceeding has been instituted) shall consent to or acquiesce in any such order for relief, declaration, finding or relief described therein; shall institute (or fail to controvert in a timely and appropriate manner) a proceeding described in Section 7.01(k)(ii) hereof, or (whether or not any such proceeding has been instituted) shall consent to or acquiesce in any such appointment or to the taking of possession by any such custodian of all or any substantial part of its or his property; shall dissolve, wind-up, revoke or forfeit its charter (or other constituent documents) or liquidate itself or any substantial part of its property; or shall take any corporate or similar action in furtherance of any of the foregoing. Section 7.02. Consequences of an Event of Default. (a) If an Event of Default specified in subsections (a) through (j) of Section 7.01 hereof, or in subsections (k) and (l) with respect to a Significant Subsidiary, shall occur and be continuing or shall exist, then, in addition to all other rights and remedies which any Agent or any Lender may have hereunder or under any other Loan Document, at law, in equity or otherwise, the Lenders shall be under no further obligation to make Loans hereunder, and the Administrative Agent may, and upon the written request of the Required Lenders shall, by notice to the Borrower, from time to time do any or all of the following: (i) Declare the Commitments terminated, whereupon the Commitments will terminate and any fees hereunder shall be immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby waived, and an action therefor shall immediately accrue. (ii) Declare the unpaid principal amount of the Loans, interest accrued thereon and all other Obligations to be immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby waived, and an action therefor shall immediately accrue. (b) If an Event of Default specified in subsection (k) or (1) of Section 7.01 hereof shall occur or exist with respect to the Borrower, then, in addition to all other rights and remedies which any Agent or any Lender may have hereunder or under any other Loan Document, at law, in equity or otherwise, the Commitments shall automatically terminate and the Lenders shall be under no further obligation to make Loans, and the unpaid principal amount of the Loans, interest accrued thereon and all other Obligations shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby waived, and an action therefor shall immediately accrue. ARTICLE VIII THE AGENTS Section 8.01. Appointment. Each Lender hereby irrevocably appoints Bank of America National Trust and Savings Association to act as Administrative Agent for such Lender under this Agreement and the other Loan Documents. Each Lender hereby irrevocably authorizes the Administrative Agent to take such action on behalf of such Lender under the provisions of this Agreement and the other Loan Documents, and to exercise such powers and to perform such duties, as are expressly delegated to or required of the Administrative Agent 50 56 by the terms hereof or thereof, together with such powers as are reasonably incidental thereto. Bank of America National Trust and Savings Association hereby agrees to act as Administrative Agent on behalf of the Lenders on the terms and conditions set forth in this Agreement and the other Loan Documents, subject to its right to resign as provided in Section 8.10 hereof. Each Lender hereby irrevocably authorizes the Administrative Agent to execute and deliver each of the Loan Documents and to accept delivery of such of the other Loan Documents as may not require execution by the Administrative Agent. Each Lender agrees that the rights and remedies granted to the Administrative Agent under the Loan Documents shall be exercised exclusively by the Administrative Agent, and that no Lender shall have any right individually to exercise any such right or remedy, except to the extent expressly provided herein or therein. Section 8.02. General Nature of Agents' Duties. Notwithstanding anything to the contrary elsewhere in this Agreement or in any other Loan Document: (a) No Agent shall have duties or responsibilities except those expressly set forth in this Agreement and the other Loan Documents, and no implied duties or responsibilities on the part of any Agent shall be read into this Agreement or any Loan Document or shall otherwise exist. (b) The duties and responsibilities of each Agent under this Agreement and the other Loan Documents shall be mechanical and administrative in nature, and no Agent shall have a fiduciary relationship in respect of any Lender. (c) Each Agent is and shall be solely the agent of the Lenders. No Agent assumes, and shall not at any time be deemed to have, any relationship of agency or trust with or for, or any other duty or responsibility to, the Borrower, any Subsidiary of the Borrower or any other Person (except only for its relationship as agent for, and its express duties and responsibilities to, the Lenders as provided in this Agreement and the other Loan Documents). (d) No Agent shall be under any obligation to take any action hereunder or under any other Loan Document if such Agent believes in good faith after consultation with counsel that taking such action may conflict with any Law or any provision of this Agreement or any other Loan Document, or may require such Agent to qualify to do business in any jurisdiction where it is not then so qualified. Section 8.03. Exercise of Powers. Each Agent shall take any action of the type specified in this Agreement or any other Loan Document as being within such Agent's rights, powers or discretion in accordance with directions from the Required Lenders (or, to the extent this Agreement or such Loan Document expressly requires the direction or consent of some other Person or set of Persons, then instead in accordance with the directions of such other Person or set of Persons). In the absence of such directions, each Agent shall have the authority (but under no circumstances shall be obligated), in its sole discretion, to take any such action, except to the extent this Agreement or such Loan Document expressly requires the direction or consent of the Required Lenders (or some other Person or set of Persons), in which case such Agent shall not take such action absent such direction or consent. Any action or inaction pursuant to such direction, discretion or consent shall be binding on all the Lenders. No Agent shall have any liability to any Person as a result of (x) any Agent acting or refraining from acting in accordance with the directions of the Required Lenders (or other applicable Person or set of Persons), (y) any Agent refraining from acting in the absence of instructions to act from the Required Lenders (or other applicable Person or set of Persons), whether or not such Agent has discretionary power to take such action, or (z) any Agent taking discretionary action it is authorized to take under this Section. Section 8.04. Certain Provisions. Notwithstanding anything to the contrary elsewhere in this Agreement or any other Loan Document: (a) No Agent shall be liable for any action taken or omitted to be taken by it under or in connection with this Agreement or any other Loan Document, unless caused by its own gross negligence or willful misconduct. (b) No Agent shall be responsible for (i) the execution, delivery, effectiveness, enforceability, genuineness, validity or adequacy of this Agreement or any other Loan Document, (ii) any recital, 51 57 representation, warranty, document, certificate, report or statement in, provided for in, or received under or in connection with, this Agreement or any other Loan Document or (iii) any failure of the Borrower or any Subsidiary of the Borrower or Lender to perform any of their respective obligations under this Agreement or any other Loan Document. (c) No Agent shall be under any obligation to ascertain, inquire or give any notice relating to (i) the performance or observance of any of the terms or conditions of this Agreement or any other Loan Document on the part of the Borrower or any Subsidiary of the Borrower, (ii) the business, operations, condition (financial or otherwise) or prospects of the Borrower or any other Person, or (iii) except to the extent set forth in Section 8.05(f) hereof, the existence of any Event of Default or Potential Default. (d) No Agent shall be under any obligation, either initially or on a continuing basis, to provide any Lender with any notices, reports or information of any nature, whether in its possession presently or hereafter, except for such notices, reports and other information expressly required by this Agreement or any other Loan Document to be furnished by such Agent to such Lender. Section 8.05. Administration by the Agents. (a) Any Agent may rely in good faith upon any notice or other communication of any nature (written or oral, including but not limited to telephone conversations, whether or not such notice or other communication is made in a manner permitted or required by this Agreement or any Loan Document) purportedly made by or on behalf of the proper party or parties, and no Agent shall have any duty to verify the identity or authority of any Person giving such notice or other communication. (b) Each Agent may consult with legal counsel (including, without limitation, in-house counsel for such Agent or in-house or other counsel for the Borrower), independent public accountants and any other experts selected by it from time to time, and such Agent shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts. (c) Each Agent may conclusively rely upon the truth of the statements and the correctness of the opinions expressed in any certificates or opinions furnished to such Agent in accordance with the requirements of this Agreement or any other Loan Document. Whenever any Agent shall deem it necessary or desirable that a matter be proved or established with respect to the Borrower or any Lender, such matter may be established by a certificate of the Borrower or Lender, as the case may be, and such Agent may conclusively rely upon such certificate (unless other evidence with respect to such matter is specifically prescribed in this Agreement or another Loan Document). (d) Any Agent may fail or refuse to take any action unless it shall be indemnified to its reasonable satisfaction from time to time against any and all amounts, liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature which may be imposed on, incurred by or asserted against such Agent by reason of taking or continuing to take any such action. (e) Any Agent may perform any of its duties under this Agreement or any other Loan Document by or through agents or attorneys-in-fact. No Agent shall be responsible for the negligence or misconduct of any agents or attorneys-in fact selected by it with reasonable care. (f) No Agent shall be deemed to have any knowledge or notice of the occurrence of any Event of Default or Potential Default unless such Agent has actual knowledge or has received notice from a Lender or the Borrower referring to this Agreement, describing such Event of Default or Potential Default, and stating that such notice is a "notice of default." If any Agent receives such a notice, such Agent shall give prompt notice thereof to the other Agent and each Lender. Section 8.06. Lender Not Relying on Agents or Other Lenders. Each Lender acknowledges as follows: (a) No Agent nor any other Lender has made any representations or warranties to it, and no act taken hereafter by any Agent or any other Lender shall be deemed to constitute any representation or warranty by such Agent or such other Lender to it. 52 58 (b) It has, independently and without reliance upon any Agent or any other Lender, and based upon such documents and information as it has deemed appropriate, made its own credit and legal analysis and decision to enter into this Agreement and the other Loan Documents. (c) It will, independently and without reliance upon any Agent or any other Lender, and based upon such documents and information as it shall deem appropriate at the time, make its own decisions to take or not take action under or in connection with this Agreement and the other Loan Documents. Section 8.07. Indemnification. Each Lender agrees to reimburse and indemnify each Agent and its directors, officers, employees and agents (to the extent not reimbursed by the Borrower and without limitation of the obligations of the Borrower to do so), Pro Rata, from and against any and all amounts, losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements of any kind or nature (including, without limitation, the fees and disbursements of counsel for such Agent or such other Person in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Agent or such other Person shall be designated a party thereto) that may at any time be imposed on, incurred by or asserted against such Agent or such other Person as a result of, or arising out of, or in any way related to or by reason of, this Agreement, any other Loan Document, any transaction from time to time contemplated hereby or thereby, or any transaction financed in whole or in part or directly or indirectly with the proceeds of any Loan, provided that no Lender shall be liable for any portion of such amounts, losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements resulting solely from the gross negligence or willful misconduct of such Agent or such other Person, as finally determined by a court of competent jurisdiction. Section 8.08. Agents In Their Individual Capacities. With respect to its Commitments and the obligations owing to it, each Agent shall have the same rights and powers under this Agreement and each other Loan Document as any other Lender and may exercise the same as though it were not an Agent, and the terms "Lenders," "holders of Notes" and like terms shall include each Agent in its individual capacity as such. Each Agent and its affiliates may, without liability to account, make loans to, accept deposits from, acquire debt or equity interests in, act as trustee under indentures of, and engage in any other business with, the Borrower and any stockholder, Subsidiary or Affiliate of the Borrower, as though such Agent were not an Agent hereunder. Section 8.09. Holders of Notes. Each Agent may deem and treat the Lender which is payee of a Note as the owner and holder of such Note for all purposes hereof unless and until a Transfer Supplement with respect to the assignment or transfer thereof shall have been filed with the Administrative Agent in accordance with Section 10.14 hereof. Any authority, direction or consent of any Person who at the time of giving such authority, direction or consent is shown in the Register as being a Lender shall be conclusive and binding on each present and subsequent holder, transferee or assignee of any Note or Notes payable to such Lender or of any Note or Notes issued in exchange therefor. Section 8.10. Successor Agents. Any Agent may resign at any time by giving 30 days' written notice thereof to the Lenders and the Borrower. Any Agent may be removed by the Required Lenders at any time by giving 10 days' prior written notice thereof to such Agent, the other Lenders and the Borrower. Upon any such resignation or removal, the Borrower shall have the right to appoint a successor Agent; provided, that the Required Lenders or the remaining Agents shall have the right, acting reasonably, to disapprove such successor Agent. If no successor Agent shall have been so appointed and consented to, and shall have accepted such appointment, within 30 days after such notice of resignation or removal, then any of the remaining Agents shall succeed to the obligations of such Agent hereunder. Each successor Agent shall be a commercial bank or trust company organized or licensed under the laws of the United States of America or any State thereof and having a combined capital and surplus of at least $1,000,000,000. Upon the acceptance by a successor Agent of its appointment as Agent hereunder, such successor Agent shall thereupon succeed to and become vested with all the properties, rights, powers, privileges and duties of the former Agent, without further act, deed or conveyance. Upon the effective date of resignation or removal of a retiring Agent, such Agent shall be discharged from its duties under this Agreement and the other Loan Documents, but the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted by it while it was 53 59 Agent under this Agreement. If and so long as no successor Agent shall have been appointed, then any notice or other communication required or permitted to be given by the retiring Agent shall be sufficiently given if given by the Required Lenders, all notices or other communications required or permitted to be given to the Agent shall be given to each Lender, and all payments to be made to the retiring Agent shall be made directly to the Borrower or Lender for whose account such payment is made. Section 8.11. Calculations. No Agent shall be liable for any calculation, apportionment or distribution of payments made by it in good faith. If such calculation, apportionment or distribution is subsequently determined to have been made in error, the sole recourse of any Lender to whom payment was due but not made shall be to recover from the other Lenders any payment in excess of the amount to which they are determined to be entitled or, if the amount due was not paid by the Borrower, to recover such amount from the Borrower. Section 8.12. Funding by Administrative Agent. Unless the Administrative Agent shall have been notified in writing by any Lender not later than the close of business on the day before the day on which Loans are requested by the Borrower to be made that such Lender will not make its ratable share of such Loans, the Administrative Agent may assume that such Lender will make its ratable share of the Loans, and in reliance upon such assumption the Administrative Agent may (but in no circumstances shall be required to) make available to the Borrower a corresponding amount. If and to the extent that any Lender fails to make such payment to the Administrative Agent on such date, such Lender shall pay such amount on demand (or, if such Lender fails to pay such amount on demand, the Borrower shall pay such amount on demand), together with interest, for the Administrative Agent's own account, for each day from and including the date of the Administrative Agent's payment to and including the date of repayment to the Administrative Agent (before and after judgment) at the Federal Funds Effective Rate for the first day and thereafter at the rate or rates per annum applicable to such Loans. All payments to the Administrative Agent under this Section shall be made to the Administrative Agent at its Office in Dollars in funds immediately available at such Office, without set-off, withholding, counterclaim or other deduction of any nature. Section 8.13. Syndication Agent and Documentation Agent. Nothing in this Agreement shall impose upon the Syndication Agent or the Documentation Agent, in their respective capacities as such, any duty or responsibility whatsoever. ARTICLE IX GUARANTY Section 9.01. The Guaranty. In order to induce the Lenders to enter into this Agreement and to extend credit hereunder to the Borrower and in recognition of the direct benefits to be received by the Borrower and each Guarantor from the proceeds of the Loans to the Borrower, each Guarantor hereby agrees with the Lenders as follows: each Guarantor hereby unconditionally and irrevocably guarantees as primary obligor and not merely as surety the full and prompt payment when due, whether upon maturity, by acceleration or otherwise, of any and all of the Guaranteed Obligations to the Creditors. If any or all of the Guaranteed Obligations to the Creditors becomes due and payable hereunder, each Guarantor unconditionally promises to pay such Guaranteed Obligations to the Creditors in the same currency in which such Guaranteed Obligations are denominated, or order, on demand, together with any and all reasonable expenses which may be incurred by the Administrative Agent or the Creditors in collecting any of the Guaranteed Obligations. Section 9.02. Bankruptcy. Additionally, each Guarantor unconditionally and irrevocably guarantees the payment of any and all of the Guaranteed Obligations to the Creditors whether or not then due or payable by the Borrower upon the occurrence in respect of the Borrower of any of the events specified in Section 7.01(k) or (l), and unconditionally and irrevocably promises to pay such Guaranteed Obligations to the Creditors, or order, on demand, in the same currency in which such Guaranteed Obligations are denominated. Section 9.03. Nature of Liability. The liability of each Guarantor hereunder is exclusive and independent of any security for or other guaranty of the Guaranteed Obligations whether executed by such 54 60 Guarantor, any other guarantor or by any other party, and the liability of each Guarantor hereunder shall not be affected or impaired by (a) any direction as to application of payment by the Borrower or by any other party, or (b) any other continuing or other guaranty, undertaking or maximum liability of a guarantor or of any other party as to the Guaranteed Obligations of the Borrower, or (c) any payment on or in reduction of any such other guaranty or undertaking, or (d) any dissolution, termination or increase, decrease or change in personnel by any Borrower, or (e) any payment made to the Administrative Agent or the other Creditors on the indebtedness which the Administrative Agent or such other Creditors repay the Borrower pursuant to court order in any bankruptcy, reorganization, arrangement, moratorium or other debtor relief proceeding (the Guaranty shall be reinstated in the case of any such disgorgement), and each Guarantor waives any right to the deferral or modification of its obligations hereunder by reason of any such proceeding. Section 9.04. Independent Obligation. The obligations of each Guarantor hereunder are independent of the obligations of any other guarantor or the Borrower, and a separate action or actions may be brought and prosecuted against each Guarantor whether or not action is brought against any other guarantor or the Borrower and whether or not any other Guarantor or the Borrower be joined in any such action or actions. Each Guarantor waives, to the fullest extent permitted by law, the benefit of any statute of limitations affecting its liability hereunder or the enforcement thereof. Any payment by the Borrower or other circumstance which operates to toll any statute of limitations as to the Borrower shall operate to toll the statute of limitations as to each Guarantor. Section 9.05. Authorization. Each Guarantor authorizes the Creditors without notice or demand (except as shall be required by applicable law and cannot be waived), and without affecting or impairing its liability hereunder, from time to time to: (a) change the manner, place or terms of payment of, and/or change or extend the time of payment of, renew, increase, accelerate or alter, any of the Guaranteed Obligations (including any increase or decrease in the rate of interest thereon), any security therefor, or any liability incurred directly or indirectly in respect thereof, and the guaranty herein made shall apply to the Guaranteed Obligations as so changed, extended, renewed or altered; (b) take and hold security for the payment of the Guaranteed Obligations and sell, exchange, release, surrender, realize upon or otherwise deal with in any manner and in any order any property by whomsoever at any time pledged or mortgaged to secure, or howsoever securing, the Guaranteed Obligations or any liabilities (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and/or any offset there against; (c) exercise or refrain from exercising any rights against the Borrower or others or otherwise act or refrain from acting; (d) release or substitute any one or more endorsers, guarantors, the Borrower or other obligors; (e) settle or compromise any of the Guaranteed Obligations, any security therefor or any liability (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and may subordinate the payment of all or any part thereof to the payment of any liability (whether due or not) of the Borrower to its creditors other than the Creditors; (f) apply any sums by whomsoever paid or howsoever realized to any liability or liabilities of the Borrower to the Creditors regardless of what liability or liabilities of the Borrower remain unpaid; (g) consent to or waive any breach of, or any act, omission or default under, this Agreement or any of the instruments or agreements referred to herein, or otherwise amend, modify or supplement this Agreement or any of such other instruments or agreements; and/or (h) take any other action which would, under otherwise applicable principles of common law, give rise to a legal or equitable discharge of such Guarantor from its liabilities under this Section 9. Section 9.06. Reliance. It is not necessary for the Creditors to inquire into the capacity or powers of the Borrower or the officers, directors, partners or agents acting or purporting to act on its behalf, and any 55 61 Guaranteed Obligations made or created in reliance upon the professed exercise of such powers shall be guaranteed hereunder. Section 9.07. Subordination. Any of the indebtedness of the Borrower now or hereafter owing to a Guarantor is hereby subordinated to the Guaranteed Obligations of the Borrower owing to the Creditors; and if the Administrative Agent so requests at a time when an Event of Default exists, all such indebtedness of the Borrower to a Guarantor shall be collected, enforced and received by the Borrower for the benefit of the Creditors and be paid over to the Administrative Agent on behalf of the Creditors on account of the Guaranteed Obligations of the Borrower to the Creditors, but without affecting or impairing in any manner the liability of such Guarantor under the other provisions of this Guaranty. Prior to the transfer by any Guarantor of any note or negotiable instrument evidencing any of the indebtedness of the Borrower to such Guarantor, such Guarantor shall mark such note or negotiable instrument with a legend that the same is subject to this subordination. Without limiting the generality of the foregoing, each Guarantor hereby agrees with the Creditors that it will not exercise any right of subrogation or contribution which it may at any time otherwise have as a result of this Guaranty (whether contractual, under Section 509 of the Bankruptcy Code or otherwise) against the Borrower or any other Guarantor until all Guaranteed Obligations have been irrevocably paid in full in cash. The Guaranteed Obligations shall not be deemed to be paid in full unless the Creditors shall have received all amounts set forth in the definition of "Guaranteed Obligations", including, in the event of a bankruptcy proceeding, all interest, fees and expenses accruing and arising after the filing of the bankruptcy petition. Section 9.08. Waiver. (a) Each Guarantor waives any right (except as shall be required by applicable law and cannot be waived) to require the Creditors to (i) proceed against the Borrower or any other party, (ii) proceed against or exhaust any security held from the Borrower or any other party or (iii) pursue any other remedy in the Administrative Agent's or any other Creditors' power whatsoever. Each Guarantor waives any defense based on or arising out of any defense of the Borrower or any other party, other than payment in full of the Guaranteed Obligations, based on or arising out of the disability of the Borrower, any other guarantor or any other party, or the unenforceability of the Guaranteed Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower other than payment in full of the Guaranteed Obligations. To the greatest extent permitted by law the Creditors may, at their election, foreclose on any security held by the Administrative Agent or any other Creditors by one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable (to the extent such sale is permitted by applicable law), or exercise any other right or remedy the Administrative Agent and any other Creditors may have against the Borrower or any other party, or any security, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent the Guaranteed Obligations have been paid. Each Guarantor waives any defense arising out of any such election by the Creditors, even though such election operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of such Guarantor against the Borrower or any other Guarantor or any other party or any security. (b) Each Guarantor waives all presentments, demands for performance, protests and notices (except as otherwise expressly provided for herein), including without limitation notices of nonperformance, notices of protest, notices of dishonor, notices of acceptance of this Guaranty, and notices of the existence, creation or incurring of new or additional Guaranteed Obligations. Each Guarantor assumes all responsibility for being and keeping itself informed of the Borrower's financial condition and assets, and of all circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations and the nature, scope and extent of the risks which each Guarantor assumes and incurs hereunder, and agrees that the Creditors shall have no duty to advise any Guarantor of information known to them regarding such circumstances or risks. Section 9.09. Nature of Liability. It is the desire and intent of the Guarantors and the Creditors that this Guaranty shall be enforced against each Guarantor to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. If, however, and to the extent that, the obligations of any Guarantor under this Guaranty shall be adjudicated to be invalid or unenforceable for any reason (including, without limitation, because of any applicable state or federal law relating to fraudulent conveyances or transfers), then the amount of the Guaranteed Obligations of such Guarantor shall be deemed 56 62 to be reduced and such Guarantor shall pay the maximum amount of the Guaranteed Obligations which would be permissible under applicable law. Section 9.10. Judgments Binding. If claim is ever made upon any Creditor or any subsequent holder of a Note of the Borrower for repayment or recovery of any amount or amounts received in payment or on account of any of the Guaranteed Obligations and any of the aforesaid payees repays all or part of said amount by reason of (a) any judgment, decree or order of any court or administrative body having jurisdiction over such payee or any of its property, or (b) any settlement or compromise of any such claim effected by such payee with any such claimant, then and in such event each Guarantor agrees that any such judgment, decree, order, settlement or compromise shall be binding upon each Guarantor, notwithstanding any revocation hereof or the cancellation of any Note or other instrument evidencing any liability of any Borrower, and each Guarantor shall be and remain liable to the aforesaid payees hereunder for the amount so repaid or recovered to the same extent as if such amount had never originally been received by any such payee. ARTICLE X MISCELLANEOUS Section 10.01. Holidays. Whenever any payment or action to be made or taken hereunder or under any other Loan Document shall be stated to be due on a day which is not a Business Day, such payment or action shall be made or taken on the next following Business Day and such extension of time shall be included in computing interest or fees, if any, in connection with such payment or action. Section 10.02. Records. The unpaid principal amount of the Loans owing to each Lender, the unpaid interest accrued thereon, the interest rate or rates applicable to such unpaid principal amount, the duration of such applicability, each Lender's Revolving Credit Committed Amount shall at all times be ascertained from the records of the Administrative Agent, which shall be conclusive absent manifest error. Section 10.03. Amendments and Waivers. Neither this Agreement nor any other Loan Document may be amended, modified or supplemented except in accordance with the provisions of this Section. The Required Lenders and the Borrower may from time to time amend, modify or supplement the provisions of this Agreement or any other Loan Document for the purpose of amending, adding to, or waiving any provisions or changing in any manner the rights and duties of the Borrower, any Agent or any Lender. Any such amendment, modification or supplement made by the Borrower and the Required Lenders, in accordance with the provisions of this Section shall be binding upon the Borrower, each Lender and each Agent. The Agents shall enter into such amendments, modifications, supplements or waivers from time to time as directed by the Required Lenders, and only as so directed, provided, that no such amendment, modification, waiver or supplement may be made which will: (a) Increase the Revolving Credit Committed Amount of any Lender over the amount thereof then in effect, or extend the Revolving Credit Maturity Date or the Competitive Bid Loan Expiration Date without the written consent of each Lender affected thereby, or increase the Total Revolving Commitment Amount to exceed $100,000,000; (b) Reduce the principal amount of or extend the time for any payment of any Loan, or reduce the amount of or rate of interest or extend the time for payment of interest borne by any Loan or extend the time for payment of or reduce the amount of any Facility Fee or reduce or postpone the date for payment of any other fees, expenses, indemnities or amounts payable under any Loan Document, without the written consent of each Lender affected thereby; (c) Change the definition of "Required Lenders" or amend this Section 10.03, Section 10.13 hereof or any provision of this Agreement that states a requirement for the consent of all the Lenders, without the written consent of all the Lenders; (d) Release any of the Guarantors without the written consent of all the Lenders; or 57 63 (e) Amend or waive any of the provisions of Article VIII hereof, or impose additional duties upon any Agent or otherwise adversely affect the rights, interests or obligations of any Agent, without the written consent of such Agent, and provided further, that Transfer Supplements may be entered into in the manner provided in Section 10.14 hereof. Any such amendment, modification or supplement must be in writing and shall be effective only to the extent set forth in such writing. Any Event of Default or Potential Default waived or consented to in any such amendment, modification or supplement shall be deemed to be cured and not continuing to the extent and for the period set forth in such waiver or consent, but no such waiver or consent shall extend to any other or subsequent Event of Default or Potential Default or impair any right consequent thereto. Section 10.04. No Implied Waiver; Cumulative Remedies. No course of dealing and no delay or failure of any Agent or any Lender in exercising any right, power or privilege under this Agreement or any other Loan Document shall affect any other or future exercise thereof or exercise of any other right, power or privilege; nor shall any single or partial exercise of any such right, power or privilege or any abandonment or discontinuance of steps to enforce such a right, power or privilege preclude any further exercise thereof or of any other right, power or privilege. The rights and remedies of the Agents and the Lenders under this Agreement and any other Loan Document are cumulative and not exclusive of any rights or remedies which any Agent or any Lender would otherwise have hereunder or thereunder, at law, in equity or otherwise. Section 10.05. Notices. (a) Except to the extent otherwise expressly permitted hereunder or thereunder, all notices, requests, demands, directions and other communications (collectively "notices") under this Agreement or any other Loan Document shall be in writing (including telexed and telecopied communication) and shall be sent by first-class mail, or by nationally-recognized overnight courier, or by telex or telecopier (with confirmation in writing mailed first-class or sent by such an overnight courier), or by personal delivery. All notices shall be sent to the applicable party at the address stated on the signature pages hereof or in accordance with the last unrevoked written direction from such party to the other parties hereto, in all cases with postage or other charges prepaid. Any such properly given notice shall be effective on the earliest to occur of receipt, telephone confirmation of receipt of telex or telecopy communication, one Business Day after delivery to a nationally-recognized overnight courier, or three Business Days after deposit in the mail. (b) Any Lender giving any notice to the Borrower shall simultaneously send a copy thereof to each Agent, and each Agent shall promptly notify the other Lenders of the receipt by it of any such notice. (c) Each Agent and each Lender may rely on any notice (whether or not such notice is made in a manner permitted or required by this Agreement or any Loan Document) purportedly made by or on behalf of the Borrower, and neither Agent nor any Lender shall have any duty to verify the identity or authority of any Person giving such notice. Section 10.06. Expenses; Taxes; Indemnity. (a) The Borrower agrees to pay or cause to be paid and to save each Agent and, in the case of clause (iii) below, each of the Lenders harmless against liability for the payment of all reasonable out-of-pocket costs and expenses (including but not limited to reasonable fees and expenses of one counsel to the Agents and auditors, consulting engineers, appraisers, and all other professional, accounting, evaluation and consulting costs approved by the Borrower and, with respect to costs incurred by the Agents or any Lender pursuant to clause (iii) below, reasonable fees and expenses of counsel (including allocated costs of in-house counsel to the extent that outside counsel has not been retained by such Lender)) incurred by the Agents or, in the case of clause (iii) below any Lender from time to time arising from or relating to (i) the negotiation, preparation, execution, delivery, administration and performance of this Agreement and the other Loan Documents, (ii) any requested amendments, modifications, supplements, waivers or consents (whether or not ultimately entered into or granted) to this Agreement or any other Loan Document, and (iii) following the occurrence of an Event of Default, the enforcement or preservation of rights under this Agreement or any other Loan Document (including but not limited to any such costs or expenses arising from or relating to (A) collection or enforcement of an outstanding Loan or any other amount owing hereunder or thereunder by any Agent or any Lender, and (B) any litigation, proceeding, dispute, work-out, restructuring or rescheduling related in any way to this Agreement or the other Loan Documents). 58 64 (b) The Borrower hereby agrees to pay all stamp, document, transfer, recording, filing, registration, search, sales and excise fees and taxes and all similar impositions now or hereafter determined by any Agent or any Lender to be payable in connection with this Agreement or any other Loan Documents or any other documents, instruments or transactions pursuant to or in connection herewith or therewith, and the Borrower agrees to save each Agent and each Lender harmless from and against any and all present or future claims, liabilities or losses with respect to or resulting from any omission to pay or delay in paying any such fees, taxes or impositions. (c) The Borrower hereby agrees to reimburse and indemnify each of the Indemnified Parties from and against any and all losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel (including, without duplication, allocated costs of in-house counsel) for such Indemnified Party in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnified Party shall be designated a party thereto) that may at any time be imposed on, asserted against or incurred by such Indemnified Party as a result of, or arising out of, or in any way related to or by reason of, this Agreement or any other Loan Document, any transaction from time to time contemplated hereby or thereby, or any transaction financed in whole or in part or directly or indirectly with the proceeds of any Loan (and without in any way limiting the generality of the foregoing, including any violation or breach of any Requirement of Law or any other Law by the Borrower or any Subsidiary); or any exercise by any Agent or any Lender of any of its rights or remedies under this Agreement or any other Loan Document); but excluding any such losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements resulting primarily from the gross negligence or willful misconduct of such Indemnified Party. If and to the extent that the foregoing obligations of the Borrower under this subsection (c), or any other indemnification obligation of the Borrower hereunder or under any other Loan Document, are unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable Law. Section 10.07. Severability. The provisions of this Agreement are intended to be severable. If any provision of this Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability thereof in any other jurisdiction or the remaining provisions hereof in any jurisdiction. Section 10.08. Prior Understandings. This Agreement and the other Loan Documents supersede all prior and contemporaneous understandings and agreements other than with regard to any upfront fees, whether written or oral, among the parties hereto relating to the transactions provided for herein and therein. Section 10.09. Duration; Survival. All representations and warranties of the Borrower contained herein or in any other Loan Document or made in connection herewith shall survive the making of, and shall not be waived by the execution and delivery, of this Agreement or any other Loan Document, any investigation by or knowledge of any Agent or any Lender, the making of any Loan, or any other event or condition whatever. All covenants and agreements of the Credit Parties contained herein or in any other Loan Document shall continue in full force and effect from and after the date hereof so long as the Borrower may borrow hereunder and until payment in full of all Obligations other than indemnity obligations not yet due and payable. Without limitation, all obligations of the Borrower hereunder or under any other Loan Document to make payments to or indemnify each Agent or any Lender shall survive the payment in full of all other obligations, termination of the Borrower's right to borrow hereunder, and all other events and conditions whatever. In addition, all obligations of each Lender to make payments to or indemnify the Agents shall survive the payment in full by the Borrower of all Obligations, termination of the Borrower's right to borrow hereunder, and all other events or conditions whatever. Section 10.10. Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument. 59 65 Section 10.11. Limitation on Payments. The parties hereto intend to conform to all applicable Laws in effect from time to time limiting the maximum rate of interest that may be charged or collected. Accordingly, notwithstanding any other provision hereof or of any other Loan Document, the Borrower shall not be required to make any payment to or for the account of any Lender, and each Lender shall refund any payment made by the Borrower, to the extent that such requirement or such failure to refund would violate or conflict with nonwaivable provisions of applicable Laws limiting the maximum amount of interest which may be charged or collected by such Lender. Section 10.12. Set-Off. Each Credit Party hereby agrees that, to the fullest extent permitted by law, if any Obligation of the Borrower shall be due and payable (by acceleration or otherwise), each Lender shall have the right, without notice to the Borrower, such Credit Party or any other Person, to set-off against and to appropriate and apply to the Obligation any indebtedness, liability or obligation of any nature owing to such Credit Party by such Lender, including but not limited to all deposits (whether time or demand, general or special, provisionally credited or finally credited, whether or not evidenced by a certificate of deposit and in whatever currency denominated) now or hereafter maintained by such Credit Party with such Lender. Such right shall be absolute and unconditional in all circumstances and, without limitation, shall exist whether or not such Lender or any other Person shall have given notice or made any demand to the Borrower, such other Credit Party or any other Person, whether such indebtedness, obligation or liability owed to such Credit Party is contingent, absolute, matured or unmatured (it being agreed that such Lender may deem such indebtedness, obligation or liability to be then due and payable at the time of such setoff), and regardless of the existence or adequacy of any collateral, guaranty or any other security, right or remedy available to any Lender or any other Person. Each Credit Party hereby agrees that, to the fullest extent permitted by law, any Participant and any branch, subsidiary or affiliate of any Lender or any Participant shall have the same rights of set-off as a Lender as provided in this Section (regardless of whether such Participant, branch, subsidiary or affiliate would otherwise be deemed in privity with or a direct creditor of the Borrower). The rights provided by this Section are in addition to all other rights of set-off and banker's lien and all other rights and remedies which any Lender (or any such Participant, branch, subsidiary or affiliate) may otherwise have under this Agreement, any other Loan Document, at law or in equity, or otherwise, and nothing in this Agreement or any Loan Document shall be deemed a waiver or prohibition of or restriction on the rights of set-off or bankers' lien of any such Person. Section 10.13. Sharing of Collections. The Lenders hereby agree among themselves that if any Lender shall receive (by voluntary payment, realization upon security, set-off or from any other source) any amount on account of the Loans, interest thereon, or any other Obligation contemplated by this Agreement or the other Loan Documents to be made by the Borrower pro rata to all Lenders in greater proportion than any such amount received by any other Lender, then the Lender receiving such proportionately greater payment shall notify each other Lender and the Agents of such receipt, and equitable adjustment will be made in the manner stated in this Section so that, in effect, all such excess amounts will be shared ratably among all of the Lenders. The Lender receiving such excess amount shall purchase (which it shall be deemed to have done simultaneously upon the receipt of such excess amount) for cash from the other Lenders a participation in the applicable Obligations owed to such other Lenders in such amount as shall result in a ratable sharing by all Lenders of such excess amount (and to such extent the receiving Lender shall be a Participant). If all or any portion of such excess amount is thereafter recovered from the Lender making such purchase, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, together with interest or other amounts, if any, required by Law to be paid by the Lender making such purchase. The Borrower hereby consents to and confirms the foregoing arrangements. Each Participant shall be bound by this Section as fully as if it were a Lender hereunder. Section 10.14. Successors and Assigns; Participations; Assignments. (a) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Borrower, the Lenders, all future holders of the Notes, each Agent and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights hereunder or interests herein without the prior written consent of all the Lenders and each Agent, and any purported assignment without such consent shall be void. 60 66 (b) Participations. Any Lender may, in accordance with applicable Law, at any time sell participations to one or more commercial banks or other Persons (each a "Participant") in all or a portion of its rights and obligations under this Agreement and the other Loan Documents (including, without limitation, all or a portion of its Commitments and the Loans owing to it and any Note held by it); provided, that (i) any such Lender's obligations under this Agreement and the other Loan Documents shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the parties hereto shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and each of the other Loan Documents, (iv) such Participant shall be bound by the provisions of Sections 10.13 and 10.16 hereof, and the Lender selling such participation shall obtain from such Participant a written confirmation of its agreement to be so bound, (v) no Participant (unless such Participant is an affiliate of such Lender, or is itself a Lender) shall be entitled to require such Lender to take or refrain from taking action under this Agreement or under any other Loan Document, except that such Lender may agree with such Participant that such Lender will not, without such Participant's consent, take action of the type described in subsections (a), (b), (c) or (d) of Section 10.03 hereof to the extent relating to such Participant's participation; notwithstanding the foregoing, in no event shall any participation by any Lender have the effect of releasing such Lenders from its obligations hereunder, and (vi) no Participant shall be an Affiliate of any Credit Party. The Borrower agrees that any such Participant shall be entitled to the benefits of Sections 2.14, 2.16 and 10.06 with respect to its participation in the Commitments and the Loans outstanding from time to time but only to the extent such Participant sustains such losses; provided, that no such Participant shall be entitled to receive any greater amount pursuant to such Sections than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred to such Participant had no such transfer occurred and nothing in this Section shall relieve such transferor Lender from its obligations under Section 2.17 hereof. (c) Assignments. Any Lender may, in the ordinary course of its commercial banking business and in accordance with applicable Law, at any time assign all or a portion of its rights and obligations under this Agreement and the other Loan Documents (including, without limitation, all or any portion of its Commitments and Loans owing to it and any Note held by it) to any Eligible Assignee (each a "Purchasing Lender"); provided, that (i) any such assignment to a Purchasing Lender which is not a Lender shall be made only with the consent of the Borrower (provided that such consent of the Borrower shall not be required during the occurrence of and continuation of an Event of Default) and each Agent which with respect to each Agent shall not be unreasonably withheld, (ii) if a Lender makes such an assignment of less than all of its then remaining rights and obligations under this Agreement and the other Loan Documents, such transferor Lender shall retain, after such assignment, a minimum principal amount of $5,000,000 of the Commitments and Loans then outstanding, and such assignment shall be in a minimum aggregate principal amount of $5,000,000 of the Commitments and Loans then outstanding, (iii) each such assignment shall be of a constant, and not a varying, percentage of each Commitment of the transferor Lender and of all of the transferor Lender's rights and obligations under this Agreement and the other Loan Documents, (iv) each such assignment shall be made pursuant to a Transfer Supplement in substantially the form of Exhibit G to this Agreement, duly completed (a "Transfer Supplement"); and 61 67 (v) to the extent the Other Credit Agreement is in effect, the assigning Lender shall assign the same percentage of its "Commitment" under the Other Credit Agreement concurrently with such assignment. In order to effect any such assignment, the transferor Lender and the Purchasing Lender shall execute and deliver to the Administrative Agent a duly completed Transfer Supplement (including the consents required by clause (i) of the preceding sentence) with respect to such assignment, together with any Note or Notes subject to such assignment (the "Transferor Lender Notes") and (except in the case of a transfer required by the Borrower under Section 10.17 hereof) a processing and recording fee of $3,500; and, upon receipt thereof, the Administrative Agent shall accept such Transfer Supplement. Notwithstanding the foregoing, no such processing and recording fee shall be payable in the case of a replacement of a Lender pursuant to Section 2.18 or 10.17. Upon receipt of the Purchase Price Receipt Notice pursuant to such Transfer Supplement, the Administrative Agent shall record such acceptance in the Register. Upon such execution, delivery, acceptance and recording, from and after the Transfer Effective Date specified in such Transfer Supplement (x) the Purchasing Lender shall be a party hereto and, to the extent provided in such Transfer Supplement, shall have the rights and obligations of a Lender hereunder, and (y) the transferor Lender thereunder shall be released from its obligations under this Agreement to the extent so transferred (and, in the case of an Transfer Supplement covering all or the remaining portion of a transferor Lender's rights and obligations under this Agreement, such transferor Lender shall cease to be a party to this Agreement) from and after the Transfer Effective Date. To the extent requested by the Purchasing Lender, on or prior to the Transfer Effective Date specified in an Transfer Supplement, the Borrower, at its expense, shall execute and deliver to the Administrative Agent (for delivery to the Purchasing Lender) new Notes evidencing such Purchasing Lender's assigned Commitments or Loans and (for delivery to the transferor Lender) replacement Notes in the principal amount of the Loans or Commitments retained by the transferor Lender (such Notes to be in exchange for, but not in payment of, those Notes then held by such transferor Lender). Each such Note shall be dated the date and be substantially in the form of the predecessor Note. The Administrative Agent shall mark the predecessor Notes, if any, "exchanged" and deliver them to the Borrower. Accrued interest and accrued fees shall be paid to the Purchasing Lender at the same time or times provided in the predecessor Notes and this Agreement. A transfer by a Lender of its rights under this Agreement from one of such Lender's branches to another of its branches shall not be considered to be an assignment for the purposes of this Section 10.14 and shall be permitted without the consent of the Borrower or of the Agents, provided that to the extent such transfer would, at the time of such transfer, result in increased costs under Section 2.14 or 2.16 from those being charged by the transferring branch, the Borrower shall not be obligated to pay such increased costs (although the Borrower shall be obligated to pay any other increased costs of the type described above resulting from changes after the date of the respective transfer). The foregoing proviso shall also apply to such transfer from a Lender to another Lender or any affiliate thereof or of an affiliate of such transferor Lender or to a Person which will become a Lender. (d) Register. The Administrative Agent shall maintain at its office a copy of each Transfer Supplement delivered to it and a register (the "Register") for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Loans owing to, each Lender from time to time. The entries in the Register shall be conclusive absent manifest error and the Borrower, the Agents and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of the 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) Financial and Other Information. The Borrower authorizes each Agent and each Lender to disclose to any Participant or Purchasing Lender (each, a "transferee") and any prospective transferee any and all financial and other information in such Person's possession concerning the Borrower and its Subsidiaries and Affiliates which has been or may be delivered to such Person by or on behalf of the Borrower 62 68 in connection with this Agreement or any other Loan Document or such Person's credit evaluation of the Borrower and its Subsidiaries and Affiliates; subject, however, to the provisions of Section 10.16 hereof. (f) Notwithstanding anything to the contrary contained herein, any Lender (a "Granting Lender") may grant to a special purpose funding vehicle (an "SPC") of such Granting Lender, identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower, the option to provide to the Borrower all or any part of any Loan that such Granting Lender would otherwise be obligated to make to the Borrower pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to make any Loan, (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof and (iii) no SPC or Granting Lender shall be entitled to receive any greater amount pursuant to Section 2.14 or 2.16 than the Granting Lender would have been entitled to receive had the Granting Lender not otherwise granted such SPC the option to provide any Loan to the Borrower. The making of any Revolving Credit Loan by an SPC hereunder shall utilize the Revolving Credit Commitment of the Granting Lender (and, if such Loan is a Competitive Bid Loan, shall be deemed to utilize the Total Revolving Credit Commitment of all the Lenders) to the same extent, and as if, such Loan were made by the Granting Lender. Each party hereto hereby agrees that no SPC shall be liable for any obligation of any kind with respect to this Agreement under any circumstances whatsoever, including without limitation whether or not the related Granting Lender makes such payment. The foregoing shall not release the Granting Lender from any obligation hereunder; and the Granting Lender's liability shall be determined as if no grant to an SPC had been made by it. Each party hereto hereby acknowledges and agrees that no SPC shall have any voting rights hereunder and that the voting rights attributable to any extensions of credit made by an SPC shall be exercised only by the relevant Granting Lender. Each Granting Lender shall serve as the administrative agent and attorney-in-fact for its SPC and shall on behalf of its SPC: (i) receive any and all payments made for the benefit of such SPC and (ii) give and receive all communications and notices and take all actions hereunder to the extent, if any, such SPC shall have any rights hereunder. To the extent an SPC shall have the right to receive or give any such notice or take any such action in writing, it shall be signed by its Granting Lender as administrative agent and attorney-in-fact for such SPC and need not be signed by such SPC on its own behalf. The Borrower, the Guarantors, the Administrative Agent and the Lenders may rely thereon without any requirement that the SPC sign or acknowledge the same. In addition, notwithstanding anything to the contrary contained in this Section 10.14, any SPC may (i) with notice to, but without the prior written consent of, the Borrower or the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loans to its Granting Lender or to any financial institutions providing liquidity and/or credit facilities to or for the account of such SPC to fund the Loans made by such SPC or to support the securities (if any) issued by such SPC to fund such Loans and (ii) disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider or a surety, guarantee or credit or liquidity enhancement to such SPC. In the event that an SPC extends a Loan to the Borrower as contemplated above, the Borrower shall repay such Loan to the SPC through the Administrative Agent in full on the maturity date thereof, notwithstanding any provision for repayments being affected on a basis of re-borrowings. The foregoing shall not release the Granting Lender from any obligation hereunder, the Granting Lender's liability to be determined as if no grant to an SPC had been made by it. Each party hereto agrees that until the 369th day following the maturity of the last maturing commercial paper note issued or to be issued by an SPC, it will not institute, or join with others in instituting, against the SPC any involuntary bankruptcy or insolvency proceeding under any applicable bankruptcy reorganization, insolvency or similar law, as now or hereafter in effect. In the event that an SPC makes a Loan hereunder, the Borrower shall repay the full amount of such Loan to the SPC through the Administrative Agent on the maturity date thereof, notwithstanding any provision contained in this Agreement with respect to netting of amounts payable by the Borrower against amounts being borrowed by the Borrower on the same day. Section 10.15. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial. (a) Governing Law. THIS AGREEMENT AND ALL OTHER LOAN DOCUMENTS (EXCEPT TO THE EXTENT, IF ANY, OTHERWISE EXPRESSLY STATED IN SUCH OTHER LOAN DOCUMENTS) SHALL BE 63 69 GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CHOICE OF LAW PRINCIPLES. (b) Certain Waivers. THE BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY: (i) AGREES THAT ANY ACTION, SUIT OR PROCEEDING BY ANY PERSON ARISING FROM OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY STATEMENT, COURSE OF CONDUCT, ACT, OMISSION, OR EVENT OCCURRING IN CONNECTION HEREWITH OR THEREWITH (COLLECTIVELY, "RELATED LITIGATION") MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION SITTING IN THE CITY AND COUNTY OF NEW YORK, NEW YORK, SUBMITS TO THE JURISDICTION OF SUCH COURTS, AND TO THE FULLEST EXTENT PERMITTED BY LAW AGREES THAT IT WILL NOT BRING ANY RELATED LITIGATION IN ANY OTHER FORUM (BUT NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT OR ANY LENDER TO BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM); (ii) WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY RELATED LITIGATION BROUGHT IN ANY SUCH COURT, WAIVES ANY CLAIM THAT ANY SUCH RELATED LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM, AND WAIVES ANY RIGHT TO OBJECT, WITH RESPECT TO ANY RELATED LITIGATION BROUGHT IN ANY SUCH COURT, THAT SUCH COURT DOES NOT HAVE JURISDICTION OVER THE BORROWER; (iii) CONSENTS AND AGREES TO SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER LEGAL PROCESS IN ANY RELATED LITIGATION BY REGISTERED OR CERTIFIED U.S. MAIL, POSTAGE PREPAID, TO THE BORROWER AT THE ADDRESS FOR NOTICES DESCRIBED IN SECTION 10.05 HEREOF, AND CONSENTS AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE IN EVERY RESPECT VALID AND EFFECTIVE SERVICE (BUT NOTHING HEREIN SHALL AFFECT THE VALIDITY OR EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER MANNER PERMITTED BY LAW); AND (iv) WAIVES THE RIGHT TO TRIAL BY JURY IN ANY RELATED LITIGATION. Section 10.16. Confidentiality. Except as may be required by Law, each Lender and each Agent covenants and agrees to use its best efforts not to permit any data or information relating to the Borrower or any of its Subsidiaries or the business of the Borrower or any of its Subsidiaries (other than any data or information which is otherwise publicly available or which is received by any such party in a capacity in which such party is not bound by any restriction of a nature similar to that imposed by this Section 10.16), which data or information such Lender or any Agent possesses due to such party's relation to the transactions contemplated by the Loan Documents, to be out of such party's possession or the contents thereof to be divulged to any other Person; provided, however, that such data or information may be disclosed to the lawyers or accountants of such Lender or any Agent and to any Person empowered by Law to examine the records of any such Person and to any potential participant in, or assignee or transferee of, its rights under any Loan Documents which potential participant, assignee or transferee shall have, in each case, agreed with such party to comply with the terms of this Section 10.16. Section 10.17. Replacement of Lenders. If (a) the Borrower is required to make a payment to a particular Lender pursuant to Sections 2.14 or 2.16 hereof (or pursuant to a comparable provision in any agreement with respect to the Borrower's Indebtedness for borrowed money between the Borrower, such Lender and at least five other lenders) or (b) the Borrower is precluded from requesting Loans of any type from a particular Lender pursuant to Section 2.08(e) hereof, the Borrower may, upon not less than 15 Business Days' notice to the Administrative Agent, either (x) immediately terminate the Commitments of such Lender, prepay (subject to Section 2.14(b) hereof) such Lender's Loans, together with interest accrued thereon and all other amounts payable with respect thereto, and pay all other amounts then due and owing to such Lender (in which event the Total Revolving Credit Commitment shall be reduced by the amount of such 64 70 Lender's Revolving Credit Committed Amount) or (y) cause a Replacement Lender reasonably satisfactory to the Administrative Agent (which may be one of the other Lenders) to purchase all of such Lender's interests in accordance with the provisions of Section 10.14(c) hereof. In such event, to the extent the Other Credit Agreement is in effect, the Borrower must also terminate such Lender's "Commitment" under the Other Credit Agreement and such Replacement Lender must purchase such Lender's interest under the Other Credit Agreement. Section 10.18. Judgment Currency. (a) The Borrower's obligation hereunder and under the other Loan Documents to make payments in Dollars or any other currency (the "Obligation Currency") shall not be discharged or satisfied by any tender or recovery pursuant to any judgment expressed in or converted into any currency other than the Obligation Currency, except to the extent that such tender or recovery results in the effective receipt by the Administrative Agent or the respective Lender of the full amount of the Obligation Currency expressed to be payable to the Administrative Agent or such Lender under this Agreement or the other Loan Documents. If for the purpose of obtaining or enforcing judgment against the Borrower in any court or in any jurisdiction, it becomes necessary to convert into or from any currency other than the Obligation Currency (such other currency being hereinafter referred to as the "Judgment Currency") an amount due in the Obligation Currency, the conversion shall be made, at the rate of exchange (as quoted by the Administrative Agent or if the Administrative Agent does not quote a rate of exchange on such currency, by a known dealer in such currency designated by the Administrative Agent) determined, in each case, as of the day immediately preceding the day on which the judgment is given (such Business Day being hereinafter referred to as the "Judgment Currency Conversion Date"). (b) If there is a change in the rate of exchange prevailing between the Judgment Currency Conversion Date and the date of actual payment of the amount due, the Borrower covenants and agrees to pay, or cause to be paid, such additional amounts, if any (but in any event not a lesser amount) as may be necessary to ensure that the amount paid in the Judgment Currency, when converted at the rate of exchange prevailing on the date of payment, will produce the amount of the Obligation Currency which could have been purchased with the amount of Judgment Currency stipulated in the judgment or judicial award at the rate or exchange prevailing on the Judgment Currency Conversion Date. (c) For purposes of determining any rate of exchange for this Section 10.18, such amounts shall include any premium and costs payable in connection with the purchase of the Obligation Currency. IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly authorized, have executed and delivered this Agreement as of the date first above written. ATTEST: FOSTER WHEELER CORPORATION By By ------------------------------------------ -------------------------------------------- Title: Title: Address For Notices: Perryville Corporate Park Clinton, NJ 08809-4000 Attn: Vice President And Treasurer Telephone: 908-713-2945 Telecopier: 908-713-2953
65 71 EXHIBIT J PLEDGE AGREEMENT PLEDGE AGREEMENT, dated as of February 12, 1999 (as amended, modified or supplemented from time to time, this "Agreement"), made by each of the undersigned pledgors (each a "Pledgor", and together with any entity that becomes a party hereto pursuant to Section 19 hereof, the "Pledgors"), in favor of BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as collateral agent, for the benefit of the Secured Creditors (as defined below) (in such capacity and together with any successor thereto, the "Pledgee"). Except as otherwise defined herein, terms used herein and defined in the Credit Agreements (as defined below) shall be used herein as therein defined. W I T N E S S E T H: WHEREAS, Foster Wheeler Corporation (the "Borrower"), the Guarantors from time to time party thereto, various lenders from time to time party thereto (the "Banks"), ABN AMRO Bank N.V. and First Union National Bank, as Documentation Agent and Syndication Agent, respectively (in such capacity, the "Documentation Agent" and the "Syndication Agent", respectively), and Bank of America National Trust and Savings Association, as Administrative Agent (in such capacity and together with any successor thereto, the "Administrative Agent" and, together with the Pledgee, the Documentation Agent, the Syndication Agent and the Banks and their respective successors and assigns, the "Bank Creditors"), have entered into a Revolving Credit Agreement and a Short Term Revolving Credit Agreement, each dated as of February 12, 1999, providing for the extensions of credit to the Borrower as contemplated therein (as used herein, the term "Credit Agreements" means the Credit Agreements described above in this paragraph, as the same may be amended, modified, extended, renewed, replaced, restated, supplemented or refinanced from time to time, and including any agreement extending the maturity of, or refinancing or restructuring (including, but not limited to, the inclusion of additional borrowers or guarantors thereunder or any increase in the amount borrowed) all or any portion of, the indebtedness under such agreement or any successor agreement, whether or not with the same agent, trustee, representative, lenders or holders; WHEREAS, pursuant to the Guaranty, the Guarantors have jointly and severally guaranteed to the Bank Creditors the payment when due of all obligations and liabilities of the Borrower under or with respect to the Loan Documents; WHEREAS, the Borrower on November 15, 1995 issued $200,000,000 in aggregate principal amount of its 6 3/4% Notes due November 15, 2005 (the "6 3/4% Notes") (with the holders from time to time of such 6 3/4% Notes being herein called the "Noteholders") pursuant to an Indenture, dated as of November 15, 1995, by and between the Borrower and Harris Trust and Savings Bank, as trustee (together with any successor thereto, the "Trustee") on behalf of the Noteholders (as amended, modified or supplemented from time to time, the "Indenture"); WHEREAS, the Pledgors have issued guarantees of the payment when due of all of the obligations and liabilities of the Borrower under or with respect to the 6 3/4% Notes and the Indenture (with any such guarantees, together with the 6 3/4% Notes and Indenture being herein collectively called the "Note Documents"); WHEREAS, it is a condition precedent to the extensions of credit under the Credit Agreements, and the Indenture requires, concurrently with the execution and delivery of the Credit Agreements by the Guarantors, that each Pledgor shall have executed and delivered to the Pledgee this Agreement; WHEREAS, it is contemplated that the Pledged Instruments (as defined below) will be pledged to secure the "Credit Document Obligations" and the "Note Obligations" and all other amounts comprising "Obligations" (as each such term is hereinafter defined) on an equal and ratable basis, as contemplated hereby, and that in connection therewith, the Pledgee, as collateral agent hereunder, shall act as the 72 "Collateral Agent" for the benefit of the Bank Creditors, the Noteholders and the other Secured Creditors; and WHEREAS, each Pledgor desires to execute this Agreement to satisfy the conditions described in the second preceding paragraph; NOW, THEREFORE, in consideration of the benefits accruing to each Pledgor, the receipt and sufficiency of which are hereby acknowledged, each Pledgor hereby makes the following representations and warranties to the Pledgee and hereby covenants and agrees with the Pledgee as follows: SECTION 1. Security For Obligations; Definitions. (a) This Agreement is made by each Pledgor in favor of the Pledgee for the benefit of the Bank Creditors, the Noteholders and the Trustee (collectively, together with the Pledgee, the "Secured Creditors"), to secure on an equal and ratable basis: (i) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due (the "Bankruptcy Code" as used herein shall mean Title 11 of the United States Code entitled "Bankruptcy" as now or hereafter in effect, or any successor thereto) and liabilities (including, without limitation, indemnities, fees and interest thereon) of such Pledgor to the Bank Creditors, whether now existing or hereafter incurred under, arising out of or in connection with the Credit Agreements and all other Loan Documents to which it is at any time a party (including, without limitation, all such obligations and liabilities of such Pledgor under the Credit Agreements (if a party thereto) and under any guaranty by it of the obligations under the Credit Agreements) and the due performance and compliance by such Pledgor with the terms of each such Loan Document (all such obligations and liabilities under this clause (i) being herein collectively called the "Credit Document Obligations"); (ii) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities (including, without limitation, indemnities, fees and interest thereon) of such Pledgor to the Noteholders and the Trustee, whether now existing or hereafter incurred under, arising out of or in connection with the Note Documents to which such Pledgor is at any time a party (including, without limitation, all such obligations and liabilities of such Pledgor under the Indenture or any guaranty by it of the obligations under the Indenture) and the due performance and compliance by such Pledgor with all of the terms, conditions and agreements on its part contained in each such Note Document (all such obligations and liabilities under this clause (ii) being herein collectively called the "Note Obligations"); (iii) any and all sums advanced by the Pledgee in order to preserve the Collateral (as hereinafter defined) or preserve its security interest in the Collateral; (iv) in the event of any proceeding for the collection or enforcement of any indebtedness, obligations, or liabilities referred to in clauses (i) through (iii) above, after an Event of Default (such term, as used in this Agreement, shall mean (a) any "Event of Default" at any time under, and as defined in, either of the Credit Agreements, and (b) any payment default (after the expiration of any applicable grace period) on any of the Obligations secured hereunder at such time) shall have occurred and be continuing, the reasonable expenses of retaking, holding, preparing for sale or otherwise disposing or realizing on the Collateral, or of any exercise by the Pledgee of its rights hereunder, together with reasonable attorneys' fees and court costs; and (v) all amounts paid by any Secured Creditor as to which such Secured Creditor has the right to reimbursement under Section 9 of this Agreement; all such obligations, liabilities, sums and expenses set forth in clauses (i) through (v) of this Section 1, being herein collectively called the "Obligations," it being acknowledged and agreed that the "Obligations" shall 2 73 include extensions of credit of the type described above, whether outstanding on the date of this Agreement or extended from time to time after the date of this Agreement. (b) As used herein, the term "Instruments" shall mean (i) a promissory note dated February 10, 1999 of Foster Wheeler Constructors, Inc. ("Constructors") in the amount of $10,000,000 payable to the order of Foster Wheeler USA Corporation; (ii) a promissory note dated February 10, 1999 of Constructors in the amount of $10,000,000 payable to the order of Foster Wheeler Energy International, Inc. and (iii) a promissory note dated February 10, 1999 of Constructors in the amount of $10,000,000 payable to the order of Foster Wheeler Energy Corporation. (c) All Instruments at any time pledged or required to be pledged hereunder is hereinafter called the "Pledged Instruments," which together with (i) all proceeds thereof, including any instruments, securities and moneys received and at the time held by the Pledgee hereunder, and (ii) all principal, interest, cash, rights, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Instruments are hereinafter called the "Collateral". SECTION 2. Pledge of Instruments. To secure all Obligations of such Pledgor and for the purposes set forth in Section 1 hereof, each Pledgor hereby: (i) grants to the Pledgee a first priority security interest in all of the Collateral owned by such Pledgor; (ii) pledges and deposits as security with the Pledgee the Pledged Instruments owned by such Pledgor on the date hereof, and delivers to the Pledgee such Pledged Instruments, duly endorsed in blank by such Pledgor, or such other instruments of transfer as are reasonably acceptable to the Pledgee; and (iii) assigns, transfers, hypothecates, mortgages, charges and sets over to the Pledgee all of such Pledgor's right, title and interest in and to such Pledged Instrument, to be held by the Pledgee, upon the terms and conditions set forth in this Agreement. SECTION 3. Rights, Etc., While no Event of Default. Unless and until an Event of Default shall have occurred and be continuing, each Pledgor shall be entitled to exercise any and all rights pertaining to the Pledged Instruments; provided, that no action shall be taken which would violate or be inconsistent with any of the terms of this Agreement or any other Secured Debt Agreement (as hereinafter defined). All such rights of such Pledgor shall cease in case an Event of Default shall occur and be continuing, and Section 5 hereof shall become applicable. SECTION 4. Interest and Other Distributions. Except as provided in Section 5 hereof, all payments in respect of the Pledged Instruments shall be paid to the respective Pledgor. SECTION 5. Remedies in Case of Event of Default. In case an Event of Default shall have occurred and be continuing, the Pledgee shall be entitled to exercise all of its rights, powers and remedies (whether vested in it by this Agreement, by any other Loan Document, or by any Note Document (with all of the Documents listed above being herein collectively called the "Secured Debt Agreements") or by law) for the protection and enforcement of its rights in respect of the Collateral, and the Pledgee shall be entitled to exercise all the rights and remedies of a secured party under the Uniform Commercial Code and also shall be entitled, without limitation, to exercise the following rights, which each Pledgor hereby agrees to be commercially reasonable: (i) to receive all amounts payable in respect of the Collateral otherwise payable to such Pledgor under Section 4 hereof; (ii) to instruct makers of the Pledged Instruments to make any and all payments in respect of the Pledged Instruments directly to the Pledgee; 3 74 (iii) to transfer all or any part of the Pledged Instruments into the Pledgee's name or the name of its nominee or nominees; (iv) to take any action in respect of the Collateral and otherwise act with respect thereto as though it were the outright owner thereof; and (v) at any time or from time to time to sell, assign and deliver, or grant options to purchase, all or any part of the Collateral, or any interest therein, at any public or private sale, without demand of performance, advertisement or notice of intention to sell or of the time or place of sale or adjournment thereof or to redeem or otherwise (all of which are hereby waived by each Pledgor), for cash, on credit or for other property, for immediate or future delivery without any assumption of credit risk, and for such price or prices and on such terms as the Pledgee in its absolute discretion may determine; provided, that at least 10 Business Days' notice of the time and place of any such sale shall be given to such Pledgor. Each Pledgor hereby waives and releases to the fullest extent permitted by law any right or equity of redemption with respect to the Collateral, whether before or after sale hereunder, and all rights, if any, of marshalling the Collateral and any other security for the Obligations or otherwise. At any such sale, unless prohibited by applicable law, the Pledgee on behalf of the Secured Creditors may bid for and purchase all or any part of the Collateral so sold free from any such right or equity of redemption. Each purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of any Pledgor, and each Pledgor hereby waives (to the extent permitted by law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. The Pledgee may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Each Pledgor hereby waives any claims against the Pledgee arising by reason of the fact that the price at which any Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if the Pledgee accepts the first offer received and does not offer such Collateral to more than one offeree. If the proceeds of any sale or other disposition of the Collateral are insufficient to pay all the Obligations, the Pledgors shall be liable for the deficiency and the fees of any attorneys employed by the Pledgee to collect such deficiency. Neither the Pledgee nor any other Secured Creditor shall be liable for failure to collect or realize upon any or all of the Collateral or for any delay in so doing nor shall any of them be under any obligation to take any action whatsoever with regard thereto. SECTION 6. Remedies, Etc., Cumulative. Each right, power and remedy of the Pledgee provided for in this Agreement or in any other Secured Debt Agreement or now or hereafter existing at law or in equity or by statute shall be cumulative and concurrent and shall be in addition to every other such right, power or remedy. The exercise or beginning of the exercise by the Pledgee or any other Secured Creditor of any one or more of the rights, powers or remedies provided for in this Agreement or in any other Secured Debt Agreement or now or hereafter existing at law or in equity or by statute or otherwise shall not preclude the simultaneous or later exercise by the Pledgee or any other Secured Creditor of all such other rights, powers or remedies, and no failure or delay on the part of the Pledgee or any other Secured Creditor to exercise any such right, power or remedy shall operate as a waiver thereof. The Secured Creditors agree that this Agreement may be enforced only by the Pledgee acting upon the instructions of the Required Secured Creditors (as defined in Annex A hereto) and that no other Secured Creditor shall have any right individually to seek to enforce or to enforce this Agreement or to realize upon the security to be granted hereby, it being understood and agreed that such rights and remedies may be exercised by the Pledgee for the benefit of the Secured Creditors upon the terms of this Agreement. 4 75 SECTION 7. Application of Proceeds. (a) All moneys collected by the Pledgee upon any sale or other disposition of the Collateral of each Pledgor, together with all other moneys received by the Pledgee hereunder, shall be applied as follows: (i) first, to the payment of all Obligations owing to the Pledgee of the type provided in clauses (iii), (iv) and (v) of the definition of Obligations in Section 1 hereof; (ii) second, to the extent proceeds remain after the application pursuant to the preceding clause (i), an amount equal to the outstanding Obligations shall be paid to the Secured Creditors as provided in Section 7(d) hereof, with each Secured Creditor receiving an amount equal to its outstanding Obligations of such Pledgor or, if the proceeds are insufficient to pay in full all such Obligations, its Pro Rata Share (as hereinafter defined) of the amount remaining to be distributed; and (iii) third, to the extent proceeds remain after the application pursuant to the preceding clauses (i) and (ii), inclusive, and following the termination of this Agreement pursuant to Section 15 hereof, to the relevant Pledgor or to whomever may be lawfully entitled to receive such surplus. (b) For purposes of this Agreement, "Pro Rata Share" shall mean, when calculating a Secured Creditor's portion of any distribution or amount, that amount (expressed as a percentage) equal to a fraction the numerator of which is the then unpaid amount of such Secured Creditor's Obligations and the denominator of which is the then outstanding amount of all Obligations. (c) If the Bank Creditors are to receive a distribution in accordance with the procedures set forth above in this Section 7 on account of undrawn amounts with respect to letters of credit issued under the Credit Agreements, such amounts shall be paid to the Administrative Agent under the Credit Agreements and held by it, for the equal and ratable benefit of the Bank Creditors as such. If any amounts are held as cash security pursuant to the immediately preceding sentence, then upon the termination of all outstanding letters of credit, and after the application of all such cash security to the repayment of all Obligations owing to the Bank Creditors after giving effect to the termination of all such letters of credit, if there remains any excess cash, such excess cash shall be returned by the Administrative Agent to the Pledgee for distribution in accordance with Section 7(a) hereof. (d) Except as set forth in Section 7(c) hereof, all payments required to be made hereunder shall be made (i) if to the Bank Creditors, to the Administrative Agent under the Credit Agreements for the account of the Bank Creditors, and (ii) if to any other Secured Creditors (other than the Pledgee), to the Trustee or paying agent (each a "Representative") for such Secured Creditors or, in the absence of such a Representative, directly to the other Secured Creditors. (e) For purposes of applying payments received in accordance with this Section 7, the Pledgee shall be entitled to rely upon (i) the Administrative Agent under the Credit Agreements and (ii) the Representative for any other Secured Creditors or, in the absence of such a Representative, upon the respective Secured Creditors for a determination (which the Administrative Agent, each Representative for any other Secured Creditors and the Secured Creditors agree (or shall agree) to provide upon request of the Pledgee) of the outstanding Primary Obligations and Secondary Obligations owed to the Secured Creditors. (f) It is understood and agreed that each Pledgor shall remain liable to the extent of any deficiency between the amount of the proceeds of the Collateral pledged by it hereunder and the aggregate amount of the Obligations of such Pledgor. SECTION 8. Purchasers of Collateral. Upon any sale of the Collateral by the Pledgee hereunder (whether by virtue of the power of sale herein granted, pursuant to judicial process or otherwise), the receipt of the Pledgee or the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold, and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Pledgee or such officer or be answerable in any way for the misapplication or nonapplication thereof. 5 76 SECTION 9. Indemnity. Each Pledgor jointly and severally agrees (i) to indemnify and hold harmless the Pledgee in such capacity and each Representative of a Secured Creditor in its capacity as such from and against any and all claims, demands, losses, judgments and liabilities of whatsoever kind or nature, and (ii) to reimburse the Pledgee in such capacity and each Representative of a Secured Creditor in its capacity as such for all reasonable costs and expenses, including reasonable attorneys' fees, in each case to the extent growing out of or resulting from the exercise by the Pledgee of any right or remedy granted to it hereunder except, with respect to clauses (i) and (ii) above, to the extent arising from the Pledgee's or such other Secured Creditor's gross negligence or willful misconduct. In no event shall the Pledgee be liable, in the absence of gross negligence or willful misconduct on its part, for any matter or thing in connection with this Agreement other than to account for moneys actually received by it in accordance with the terms hereof. If and to the extent that the obligations of the Pledgors under this Section 9 are unenforceable for any reason, each Pledgor hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law. SECTION 10. Further Assurances; Power of Attorney. (a) Each Pledgor agrees that it will join with the Pledgee in executing and, at such Pledgor's own expense, file and refile under the applicable Uniform Commercial Code or such other law such financing statements, continuation statements and other documents in such offices as the Pledgee may reasonably deem necessary or appropriate and wherever required or permitted by law in order to perfect and preserve the Pledgee's security interest in the Collateral and hereby authorizes the Pledgee to file financing statements and amendments thereto relative to all or any part of the Collateral without the signature of such Pledgor where permitted by law, and agrees to do such further acts and things and to execute and deliver to the Pledgee such additional conveyances, assignments, agreements and instruments as the Pledgee may reasonably deem necessary or advisable to carry into effect the purposes of this Agreement or to further assure and confirm unto the Pledgee its rights, powers and remedies hereunder. (b) Each Pledgor hereby appoints the Pledgee such Pledgor's attorney-in-fact, with full authority in the place and stead of such Pledgor and in the name of such Pledgor or otherwise, to act from time to time after the occurrence and during the continuance of an Event of Default in the Pledgee's reasonable discretion to take any action and to execute any instrument which the Pledgee may deem necessary or advisable to accomplish the purposes of this Section 10. SECTION 11. The Pledgee as Agent. The Pledgee will hold in accordance with this Agreement all items of the Collateral at any time received under this Agreement. It is expressly understood and agreed that the obligations of the Pledgee as holder of the Collateral and interests therein and with respect to the disposition thereof, and otherwise under this Agreement, are only those expressly set forth in this Agreement. The Pledgee shall act hereunder on the terms and conditions set forth herein and in Annex A hereto, the terms of which shall be deemed incorporated herein by reference as fully as if same were set forth herein in their entirety. SECTION 12. Transfer by Pledgors. No Pledgor will sell or otherwise dispose of, grant any option with respect to, or mortgage, pledge or otherwise encumber any of the Collateral or any interest therein (except in accordance with the terms of this Agreement and as permitted by the terms of the Secured Debt Agreements). SECTION 13. Representations, Warranties and Covenants of Pledgors. (a) Each Pledgor represents, warrants and covenants that: (i) it is the legal, record and beneficial owner of, and has good title to, all Pledged Instruments purported to be owned by such Pledgor, subject to no Lien, except the Liens created by this Agreement; 6 77 (ii) it has full power, authority and legal right to pledge all the Pledged Instruments; (iii) this Agreement has been duly authorized, executed and delivered by such Pledgor and constitutes the legal, valid and binding obligation of such Pledgor enforceable in accordance with its terms, except to the extent that the enforceability hereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and by equitable principles (regardless of whether enforcement is sought in equity or at law); (iv) no consent of any other party (including, without limitation, any stockholder or creditor of such Pledgor or any of its Subsidiaries) and no consent, license, permit, approval or authorization of, exemption by, notice or report to, or registration, filing or declaration with, any governmental authority is required to be obtained by such Pledgor in connection with the execution, delivery or performance of this Agreement, or in connection with the exercise of its rights and remedies pursuant to this Agreement, in each case except those which have been obtained or made or as may be required by laws affecting the offer and sale of securities generally in connection with the exercise by the Pledgee of certain of its remedies hereunder; (v) the execution, delivery and performance of this Agreement by such Pledgor does not violate any provision of any applicable law or regulation or of any order, judgment, writ, award or decree of any court, arbitrator or governmental authority, domestic or foreign, or of the certificate of incorporation or by-laws (or analogous organizational documents) of such Pledgor or of any securities issued by such Pledgor or any of its Subsidiaries, or of any mortgage, indenture, lease, deed of trust, credit agreement or loan agreement, or any other material agreement, contract or instrument to which such Pledgor or any of its Subsidiaries is a party or which purports to be binding upon such Pledgor or any of its Subsidiaries or upon any of their respective assets and will not result in the creation or imposition (or the obligation to create or impose) of any lien or encumbrance on any of the assets of such Pledgor or any of its Subsidiaries except as contemplated by this Agreement; (vi) all Pledged Instruments have been duly and validly issued; and (vii) the pledge, assignment and delivery (which delivery has been made) to the Pledgee of the Pledged Instruments creates a valid and perfected first priority security interest in such Pledged Instruments, subject to no prior lien or encumbrance or to any agreement purporting to grant to any third party (except the Secured Creditors) a lien or encumbrance on the property or assets of such Pledgor which would include the Instruments. Each Pledgor covenants and agrees that it will defend the Pledgee's right, title and security interest in and to the Collateral and the proceeds thereof against the claims and demands of all persons whomsoever; and such Pledgor covenants and agrees that it will have like title to and right to pledge any other property at any time hereafter pledged to the Pledgee as Collateral hereunder and will likewise defend the right thereto and security interest therein of the Pledgee and the other Secured Creditors. (b) The Pledgors hereby agree that the rights created by the subordinated provisions of the guarantees executed by the Pledgors related to the Note Documents and the subordination provisions of the Guaranty which each provide for the subordination of the indebtedness of the Borrower owing to any Pledgor to the Obligations of the Borrower owing to the Secured Creditors shall be on a parity basis for the equal and ratable benefit of the Secured Creditors. SECTION 14. Pledgors' Obligations Absolute, Etc. The obligations of each Pledgor under this Agreement shall be absolute and unconditional and shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, terminated or otherwise affected by, any circumstance or occurrence whatsoever, including, without limitation: (i) any renewal, extension, amendment or modification of or addition or supplement to or deletion from any Secured Debt Agreement or any other instrument or agreement referred to therein, or any assignment or transfer of any thereof; (ii) any waiver, consent, extension, indulgence or other action or inaction under or in respect of any such agreement or instrument or this Agreement; (iii) any furnishing of any additional security to the Pledgee 7 78 or its assignee or any acceptance thereof or any release of any security by the Pledgee or its assignee; (iv) any limitation on any party's liability or obligations under any such instrument or agreement or any invalidity or unenforceability, in whole or in part, of any such instrument or agreement or any term thereof; (v) any limitation on any other Pledgor's liability or obligations under this Agreement or under any other Secured Debt Agreement or any invalidity or unenforceability, in whole or in part, of this Agreement or any other Secured Debt Agreement or any term thereof; or (vi) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to such Pledgor or any Subsidiary of such Pledgor, or any action taken with respect to this Agreement by any trustee or receiver, or by any court, in any such proceeding, whether or not such Pledgor shall have notice or knowledge of any of the foregoing. SECTION 15. Termination, Release. (a) After the Termination Date (as defined below), this Agreement shall terminate (provided that all indemnities set forth herein including, without limitation, in Section 9 hereof shall survive any such termination) and the Pledgee, at the request and expense of the respective Pledgor, will promptly execute and deliver to such Pledgor a proper instrument or instruments acknowledging the satisfaction and termination of this Agreement, and will duly assign, transfer and deliver to such Pledgor (without recourse and without any representation or warranty) such of the Collateral as may be in the possession of the Pledgee and as has not theretofore been sold or otherwise applied or released pursuant to this Agreement. As used in this Agreement, "Termination Date" shall mean the earliest of (i) the date upon which the Total Revolving Credit Commitment has been terminated, no Note under the Credit Agreements is outstanding and all other Credit Document Obligations (excluding normal continuing indemnity obligations which survive in accordance with their terms, so long as no amounts are then due and payable in respect thereof) have been indefeasibly paid in full, (ii) the date upon which the Credit Documents are amended to release all Collateral subject to this Agreement and (iii) the date on which the Indenture no longer requires equal and ratable security or the 6 3/4% Notes have been paid in full. (b) In the event that any part of the Collateral is sold (other than to any Credit Party) in connection with a sale permitted by the Secured Debt Agreements or is otherwise released at the direction of the Required Secured Creditors, the Pledgee, at the request and expense of such Pledgor will promptly execute and deliver to such Pledgor a proper instrument or instruments acknowledging such release, and will duly assign, transfer and deliver to such Pledgor (without recourse and without any representation or warranty) such of the Collateral as is then being (or has been) so sold, distributed or released and as may be in possession of the Pledgee and has not theretofore been released pursuant to this Agreement. (c) At any time that a Pledgor desires that Collateral be released as provided in the foregoing Section 15(a) or (b), it shall deliver to the Pledgee a certificate signed by an authorized officer of such Pledgor stating that the release of the respective Collateral is permitted pursuant to Section 15(a) or (b), and the Pledgee shall be entitled (but not required) to conclusively rely thereon. SECTION 16. Notices, Etc. Except as otherwise specified herein, all notices, requests, demands or other communications to or upon the respective parties hereto shall be deemed to have been given or made when delivered to the party to which such notice, request, demand or other communication is required or permitted to be given or made under this Agreement, addressed as follows: (a) if to any Pledgor, at: Perryville Corporate Park Clinton, New Jersey 08809-4000 Attention: Vice President and Treasurer Telephone No.: (908) 713-2945 Telecopier No.: (908) 713-2953 8 79 (b) if to the Pledgee, at: Bank of America National Trust and Savings Association 1850 Gateway Boulevard, 5th Floor Concord, California 94520 Attention: Glenis Croucher Telephone No.: (925) 675-8447 Telecopier No.: (925) 675-8500 (c) if to any Bank Creditor (other than the Pledgee), (x) to the Administrative Agent, at the address of the Administrative Agent specified in the Credit Agreements or (y) at such address as such Bank Creditor shall have specified in the Credit Agreements; (d) if to any other Secured Creditor, (x) to the Representative for such Secured Creditor or (y) if there is no such Representative, at such address as such Secured Creditor shall have specified in writing to each Pledgor and the Pledgee; or at such other address as shall have been furnished in writing by any Person described above to the party required to give notice hereunder. SECTION 17. Waiver; Amendment. None of the terms and conditions of this Agreement may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by each Pledgor directly affected thereby (it being understood that additional Pledgors may be added as parties hereto from time to time in accordance with Section 19 hereof and Pledgors may be released as parties hereto in accordance with Sections 15 and 18 hereof and that no consent of any other Pledgor or of the Secured Creditors shall be required in connection therewith) and the Pledgee (with the written consent of the Required Lenders (or all the Lenders if required by Section 10.03 of the Credit Agreements); provided, that the Borrower certifies that any such change, waiver, modification or variance is otherwise permitted by the terms of the respective Secured Debt Agreements or, if not so permitted, that the requisite consents therefor have been obtained. Notwithstanding anything to the contrary contained above, it is understood and agreed that the Required Lenders may agree to modifications to this Agreement for the purpose, among other things, of securing additional extensions of credit (including, without limitation, pursuant to the Credit Agreements or any refinancing or extension thereof), with such changes not being subject to the proviso to the immediately preceding sentence. Furthermore, the proviso to the second preceding sentence shall not apply to any release of Collateral effected in accordance with the requirements of Section 18 of this Agreement, or any other release of Collateral or termination of this Agreement so long as the Borrower certifies that such actions will not violate the terms of any Secured Debt Agreement then in effect. SECTION 18. Release of Guarantors. In the event any Pledgor party to the Guaranty is released from the Guaranty, such Pledgor shall be released from this Agreement and this Agreement shall, as to such Pledgor only, have no further force or effect. SECTION 19. Additional Pledgors. Pursuant to Section 5.15 of the Credit Agreements, certain Subsidiaries of the Borrower may after the date hereof be required to enter into this Agreement as a Pledgor. Upon execution and delivery, after the date hereof, by the Pledgee and such Subsidiary of an instrument in the form of Exhibit A-2, such Subsidiary shall become a Pledgor hereunder with the same force and effect as if originally named as a Pledgor hereunder. Each Subsidiary which is required to become a party to this Agreement shall so execute and deliver a copy of Exhibit A-2 to the Pledgee and, at such time, shall execute a Pledge and Security Agreement Supplement in the form of Exhibit A-1 to this Agreement with respect to all Collateral of such Pledgor required to be pledged hereunder, which Supplement shall be completed in accordance with Exhibit A-1. The execution and delivery 9 80 of any such instrument shall not require the consent of any other Pledgor hereunder. Upon the execution and delivery by the Pledgee and such Subsidiary of an instrument in the form of Exhibit A-2 as provided above, it is understood and agreed that the pledge and security interests hereunder shall apply to all Collateral of such additional Pledgor as provided in Section 2 hereof regardless of any failure of any additional Pledgor to deliver, or any inaccurate information stated in, the Pledge and Security Agreement Supplement. SECTION 20. Recourse. This Agreement is made with full recourse to the Pledgors and pursuant to and upon all representations, warranties, covenants and agreements on the part of the Pledgors contained herein and otherwise in writing in connection herewith. SECTION 21. Pledgee Not Bound. (a) The Pledgee shall not be obligated to perform or discharge any obligation of any Pledgor as a result of the collateral assignment hereby effected. (b) The acceptance by the Pledgee of this Agreement, with all the rights, powers, privileges and authority so created, shall not at any time or in any event obligate the Pledgee to appear in or defend any action or proceeding relating to the Collateral to which it is not a party, or to take any action hereunder or thereunder, or to expend any money or incur any expenses or perform or discharge any obligation, duty or liability under the Collateral. SECTION 22. Continuing Pledgors. The rights and obligations of each Pledgor (other than the respective released Pledgor in the case of following clause (y)) hereunder shall remain in full force and effect notwithstanding (x) the addition of any new Pledgor as a party to this Agreement as contemplated by Section 19 hereof or otherwise and/or (y) the release of any Pledgor under this Agreement as contemplated by Section 18 hereof or otherwise. SECTION 23. No Fraudulent Conveyance. Each Pledgor hereby confirms that it is its intention that this Agreement not constitute a fraudulent transfer or conveyance for purposes of any bankruptcy, insolvency or similar law, the Uniform Fraudulent Conveyance Act or any similar Federal, state or foreign law. To effectuate the foregoing intention, each Pledgor hereby irrevocably agrees that its obligations and liabilities hereunder shall be limited to the maximum amount as will, after giving effect to such maximum amount and all other (contingent or otherwise) liabilities of such Pledgor that are relevant under such laws, result in the obligations and liabilities of such Pledgor hereunder in respect of such maximum amount not constituting a fraudulent transfer or conveyance. SECTION 24. Miscellaneous. This Agreement shall be binding upon the successors and assigns of each Pledgor and shall inure to the benefit of and be enforceable by the Pledgee and its successors and assigns; provided that no Pledgor may assign any of its rights or obligations hereunder without the prior written consent of the Pledgee (with the consent of the Required Lenders and, if required by Section 10.03 of the Credit Agreement, all Lenders). THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS). The headings in this Agreement are for purposes of reference only and shall not limit or define the meaning hereof. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which shall constitute one instrument. 10 81 IN WITNESS WHEREOF, each Pledgor has caused this Agreement to be duly executed and delivered by its duly authorized officer on the date first above written. FOSTER WHEELER USA CORPORATION BY: ------------------------------------ TITLE: FOSTER WHEELER ENERGY INTERNATIONAL, INC. BY: ------------------------------------ TITLE: FOSTER WHEELER ENERGY CORPORATION BY: ------------------------------------ TITLE: ACCEPTED AND AGREED TO: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Collateral Agent and Pledgee BY: ------------------------------------ TITLE: 11 82 ANNEX A TO PLEDGE AND SECURITY AGREEMENT THE PLEDGEE 1. Appointment. The Secured Creditors, by their acceptance of the benefits of the Pledge Agreement to which this Annex A is attached (the "Pledge Agreement") hereby irrevocably designate Bank of America National Trust and Savings Association (and any successor Pledgee) to act as specified herein and therein. Unless otherwise defined herein, all capitalized terms used herein (x) and defined in the Pledge Agreement, are used herein as therein defined and (y) not defined in the Pledge Agreement, are used herein as defined in the Credit Agreements referenced in the Pledge Agreement. Each Secured Creditor hereby irrevocably authorizes, and each holder of any Obligation by the acceptance of such Obligation and by the acceptance of the benefits of the Pledge Agreement shall be deemed irrevocably to authorize, the Pledgee to take such action on its behalf under the provisions of the Pledge Agreement and any instruments and agreements referred to therein and to exercise such powers and to perform such duties thereunder as are specifically delegated to or required of the Pledge Agreement by the terms thereof and such other powers as are reasonably incidental thereto. The Pledgee may perform any of its duties hereunder or thereunder by or through its authorized agents, sub-agents or employees. 2. Nature of Duties. (a) The Pledgee shall have no duties or responsibilities except those expressly set forth herein or in the Pledge Agreement. The duties of the Pledgee shall be mechanical and administrative in nature; the Pledgee shall not have by reason of the Pledge Agreement or any other Secured Debt Agreement a fiduciary relationship in respect of any Secured Creditor; and nothing in the Pledge Agreement or any other Secured Debt Agreement, expressed or implied, is intended to or shall be so construed as to impose upon the Pledgee any obligations in respect of the Pledge Agreement except as expressly set forth herein and therein. (b) The Pledgee shall not be responsible for insuring the Collateral or for the payment of taxes, charges or assessments or discharging of Liens upon the Collateral or otherwise as to the maintenance of the Collateral. (c) The Pledgee shall not be required to ascertain or inquire as to the performance by any Pledgor of any of the covenants or agreements contained in the Pledge Agreement or any other Secured Debt Agreement. (d) The Pledgee shall be under no obligation or duty to take any action under, or with respect to, the Pledge Agreement if taking such action (i) would subject the Pledgee to a tax in any jurisdiction where it is not then subject to a tax or (ii) would require the Pledgee to qualify to do business, or obtain any license, in any jurisdiction where it is not then so qualified or licensed or (iii) would subject the Pledgee to in personam jurisdiction in any locations where it is not then so subject. (e) Notwithstanding any other provision of this Annex A, neither the Pledgee nor any of its officers, directors, employees, affiliates or agents shall, in its individual capacity, be personally liable for any action taken or omitted to be taken by it in accordance with, or pursuant to this Annex A or the Pledge Agreement except for its own gross negligence or willful misconduct. 3. Lack of Reliance on the Pledgee. Independently and without reliance upon the Pledgee, each Secured Creditor, to the extent it deems appropriate, has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of each Pledgor and its Subsidiaries in connection with the making and the continuance of the Obligations and the taking or not taking of any action in connection therewith, and (ii) its own appraisal of the creditworthiness of each Pledgor and its Subsidiaries, and the Pledgee shall have no duty or responsibility, either initially or on a continuing basis, to provide any Secured Creditor with any credit or other information with respect thereto, whether coming into its possession before the extension of any Obligations or the purchase of any notes or at any time or times thereafter. The Pledgee shall not be responsible in any manner whatsoever to any Secured Creditor for the correctness of any recitals, statements, information, representations or warranties herein or in any document, certificate or other writing delivered in connection herewith or for the execution, effectiveness, genuineness, validity, enforceabil- 83 ity, perfection, collectibility, priority or sufficiency of the Pledge Agreement or the security interests granted hereunder or the financial condition of any Pledgor or any Subsidiary of any Pledgor or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of the Pledge Agreement, or the financial condition of any Pledgor or any Subsidiary of any Pledgor, or the existence or possible existence of any default or Event of Default. The Pledgee makes no representations as to the value or condition of the Collateral or any part thereof, or as to the title of any Pledgor thereto or as to the security afforded by the Pledge Agreement. 4. Certain Rights of the Pledgee. (a) No Secured Creditor shall have the right to cause the Pledgee to take any action with respect to the Collateral, with only the Required Secured Creditors having the right to direct the Pledgee to take any such action. If the Pledgee shall request instructions from the Required Secured Creditors, with respect to any act or action (including failure to act) in connection with the Pledge Agreement, the Pledgee shall be entitled to refrain from such act or taking such action unless and until it shall have received instructions from the Required Secured Creditors and to the extent requested, appropriate indemnification in respect of actions to be taken, and the Pledgee shall not incur liability to any Person by reason of so refraining. Without limiting the foregoing, no Secured Creditor shall have any right of action whatsoever against the Pledgee as a result of the Pledgee acting or refraining from acting hereunder in accordance with the instructions of the Required Secured Creditors. As used herein, the term "Required Secured Creditors" shall mean the holders of at least a majority of the then outstanding Credit Document Obligations. (b) Notwithstanding anything to the contrary contained herein, the Pledgee is authorized, but not obligated, (i) to take any action reasonably required to perfect or continue the perfection of the liens on the Collateral for the benefit of the Secured Creditors and (ii) when instructions from the Required Secured Creditors have been requested by the Pledgee but have not yet been received, to take any action which the Pledgee, in good faith, believes to be reasonably required to promote and protect the interests of the Secured Creditors in the Collateral; provided that once instructions have been received, the actions of the Pledgee shall be governed thereby and the Pledgee shall not take any further action which would be contrary thereto. (c) Notwithstanding anything to the contrary contained herein or in the Pledge Agreement, the Pledgee shall not be required to take any action that exposes or, in the good faith judgment of the Pledgee may expose, the Pledgee or its officers, directors, agents or employees to personal liability, unless the Pledgee shall be adequately indemnified as provided herein, or that is, or in the good faith judgment of the Pledgee may be, contrary to the Pledge Agreement, any Secured Debt Agreement or applicable law. 5. Reliance. The Pledgee shall be entitled to rely, and shall be fully protected in relying, upon, any note, writing, resolution, notice, statement, certificate, telex, teletype or telescopes message, cablegram, radiogram, order or other document or telephone message signed, sent or made by the proper Person or entity, and, with respect to all legal matters pertaining hereto or to the Pledge Agreement and its duties thereunder and hereunder, upon advice of counsel selected by it. 6. Indemnification. To the extent the Pledgee is not reimbursed and indemnified by the Pledgors under the Pledge Agreement, the Bank Creditors will reimburse and indemnify the Pledgee, in proportion to their respective outstanding principal amounts of Obligations, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Pledgee in performing its duties hereunder, or in any way relating to or arising out of its actions as Pledgee in respect of the Pledge Agreement except for those resulting solely from the Pledgee's own gross negligence or willful misconduct. The indemnities set forth in this Section 6 shall survive the repayment of all Obligations, with the respective indemnification at such time to be based upon the outstanding principal amounts (determined as described above) of Obligations at the time of the respective occurrence upon which the claim against the Pledgee is based or, if same is not reasonably determinable, based upon the outstanding principal amounts (determined as described above) of Obligations as in effect immediately prior to the termination of the Pledge Agreement. The indemnities set forth in this Section 6 are in addition to any indemnities provided by the Banks to the Pledgee pursuant to the Credit Agreements. 2 84 7. The Pledgee in its Individual Capacity. With respect to its obligations as a lender under the Credit Agreements and any other Loan Documents to which the Pledgee is a party, and to act as agent under one or more of such Loan Documents, the Pledgee shall have the rights and powers specified therein and herein for a "Lender", or the "Administrative Agent", as the case may be, and may exercise the same rights and powers as though it were not performing the duties specified herein; and the terms "Banks," "Required Lenders," "holders of Notes," or any similar terms shall, unless the context clearly otherwise indicates, include the Pledgee in its individual capacity. The Pledgee and its affiliates may accept deposits from, lend money to, and generally engage in any kind of banking, investment banking, trust or other business with any Pledgor or any Affiliate or Subsidiary of any Pledgor as if it were not performing the duties specified herein or in the other Loan Documents, and may accept fees and other consideration from the Pledgors for services in connection with the Credit Agreements, the other Loan Documents and otherwise without having to account for the same to the Secured Creditors. 8. Holders. The Pledgee may deem and treat the payee of any note as the owner thereof for all purposes hereof unless and until written notice of the assignment, transfer or endorsement thereof, as the case may be, shall have been filed with the Pledgee. Any request, authority or consent of any person or entity who, at the time of making such request or giving such authority or consent, is the holder of any note, shall be final and conclusive and binding on any subsequent holder, transferee, assignee or endorsee, as the case may be, of such note or of any note or notes issued in exchange therefor. 9. Resignation by the Pledgee. (a) The Pledgee may resign from the performance of all of its functions and duties hereunder and under the Pledge Agreement at any time by giving 15 Business Days' prior or written notice to the Borrower, the Banks and Representatives for the other Secured Creditors or, if there is no such Representative, directly to such Secured Creditors. Such resignation shall take effect upon the appointment of a successor Pledgee pursuant to clause (b) or (c) below. (b) If a successor Pledgee shall not have been appointed within said 15 Business Day period by the Required Secured Creditors, the Pledgee, with the consent of the Borrower, which consent shall not be unreasonably withheld or delayed, shall then appoint a successor Pledgee who shall serve as Pledgee hereunder or thereunder until such time, if any, as the Required Secured Creditors appoint a successor Pledgee as provided above. (c) If no successor Pledgee has been appointed pursuant to clause (b) above by the 20th Business Day after the date of such notice of resignation was given by the Pledgee, as a result of a failure by the Borrower to consent to the appointment of such a successor Pledgee, the Required Secured Creditors shall then appoint a successor Pledgee who shall serve as Pledgee hereunder or thereunder until such time, if any, as the Required Secured Creditors appoint a successor Pledgee as provided above. 3 85 EXHIBIT A-1 TO PLEDGE AND SECURITY AGREEMENT FORM OF PLEDGE AND SECURITY AGREEMENT SUPPLEMENT PLEDGE AND SECURITY SUPPLEMENT, dated as of (this "Supplement"), made by , a (the "Pledgor"), in favor of BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Pledgee and as collateral agent (in such capacities, the "Pledgee") for the Secured Creditors (such term and each other capitalized term used but not defined having the meaning given in the Pledge Agreement referred to below). 1. Reference is hereby made to that certain Pledge Agreement, dated as of February 12, 1999 (as amended, supplemented or otherwise modified as of the date hereof, the "Pledge Agreement"), made by the Pledgors party thereto in favor of the Pledgee for the benefit of the Secured Creditors described therein. 2. The Pledgor hereby confirms and reaffirms the security interest in the Collateral granted to the Pledgee for the benefit of the Secured Creditors under the Pledge Agreement, and, as additional collateral security for the prompt and complete payment when due (whether at stated maturity, by acceleration or otherwise) of the Obligations and in order to induce the Secured Creditors to make loans and other extensions of credit constituting Obligations, the Pledgor hereby delivers to the Pledgee, for the benefit of the Secured Creditors, all of the property listed in Schedule I hereto (the "Additional Collateral"; as used in the Pledge Agreement as supplemented by this Supplement, "Collateral" shall be deemed to include the Additional Collateral), and hereby grants to the Pledgee, for the benefit of the Secured Creditors, a first priority security interest in the Additional Collateral and all proceeds thereof. 3. The Pledgor hereby represents and warrants that the representations and warranties contained in Section 13 of the Pledge Agreement are true and correct on the date of this Supplement with references therein to the "Collateral" to include the Additional Collateral and with references therein to the "Pledge Agreement" to mean the Pledge Agreement as supplemented by this Supplement. 4. This Supplement is supplemental to the Pledge Agreement, forms a part thereof and is subject to the terms thereof and the Pledge Agreement is hereby supplemented as provided herein. Without limiting the foregoing, "Collateral" subject to the Pledge Agreement shall hereby be deemed to include each item listed on Schedule I to this Supplement. IN WITNESS WHEREOF, the Pledgor and the Pledgee have caused this Supplement to be duly executed and delivered on the date first set forth above. [PLEDGOR] By: ------------------------------------ Name: Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Pledgee By: ------------------------------------ Name: Title: 2 86 SCHEDULE I TO PLEDGE AND SECURITY AGREEMENT SUPPLEMENT ADDITIONAL COLLATERAL 3 87 EXHIBIT A-2 TO PLEDGE AGREEMENT SUPPLEMENT NO. dated as of , to the Pledge Agreement dated as of February 12, 1999 (the "Pledge Agreement"), among the Pledgors party thereto (immediately before giving effect to this Supplement) and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION as collateral agent and as pledgee (in such capacities, the "Pledgee") for the Secured Creditors (such term and each other capitalized term used but not defined having the meaning given it in the Pledge Agreement referred to below). A. The Pledgors have entered into the Pledge Agreement in order to induce the Secured Creditors to make loans and other extensions of credit constituting Obligations as defined in the Pledge Agreement. Pursuant to Section 5.15 of the Credit Agreements, certain Subsidiaries of the Borrower are, after the date of the Pledge Agreement, required to enter into the Pledge Agreement as a Pledgor. Section 19 of the Pledge Agreement provides that additional Subsidiaries may become Pledgors under the Pledge Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned (the "New Pledgor") is a Subsidiary of the Borrower and is executing this Supplement in accordance with the requirements of the Credit Agreements and/or the Pledge Agreement to become a Pledgor under the Pledge Agreement in order to induce the Secured Creditors to extend, or maintain, Obligations. Accordingly, the Pledgee and the New Pledgor agree as follows: Section 1. The New Pledgor by its signature below becomes a Pledgor under the Pledge Agreement with the same force and effect as if originally named therein as a Pledgor and the New Pledgor hereby agrees to all the terms and provisions of the Pledge Agreement applicable to it as a Pledgor thereunder. Each reference to a "Pledgor" in the Pledge Agreement shall be deemed to include the New Pledgor. The Pledge Agreement is hereby incorporated herein by reference. Section 2. The New Pledgor represents and warrants to the Secured Creditors that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to the effects of applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally and equitable principles of general applicability. Section 3. This Supplement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute but one instrument. This Supplement shall become effective when the Pledgee shall have received counterparts of this Supplement that, when taken together, bear the signatures of the New Pledgor and the Pledgee. Section 4. Except as expressly supplemented hereby, the Pledge Agreement shall remain in full force and effect. Section 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. Section 6. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, neither party hereto shall be required to comply with such provision for so long as such provision is held to be invalid, illegal or unenforceable, but the validity, legality and enforceability of the remaining provisions contained herein and in the Pledge Agreement shall not in any way be affected or impaired. The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. Section 7. All communications and notices hereunder shall be in writing and given as provided in the Pledge Agreement. All communications and notices hereunder to the New Pledgor shall be given to it at the address set forth under its signature, with a copy to the Borrower. 88 IN WITNESS WHEREOF, the New Pledgor and the Pledgee have duly executed this Supplement to the Pledge Agreement as of the day and year first above written. [NAME OF NEW PLEDGOR] By: ------------------------------------ Name: Title: Address: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Pledgee By: ------------------------------------ Name: Title: 2 89 IN WITNESS WHEREOF, each Pledgor has caused this Agreement to be duly executed and delivered by its duly authorized officer on the date first above written. FOSTER WHEELER USA CORPORATION By ------------------------------------ Title: FOSTER WHEELER ENERGY INTERNATIONAL, INC. By ------------------------------------ Title: FOSTER WHEELER ENERGY CORPORATION By ------------------------------------ Title: S- 1 (Pledge Agreement) 90 ACCEPTED AND AGREED TO: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Collateral Agent and Pledgee By ------------------------------------ Title: S- 2 (Pledge Agreement) EX-12 4 STATEMENT OF COMPUTATION OF CONSOLIDATED RATIO ETC 1 EXHIBIT 12 FOSTER WHEELER CORPORATION STATEMENT OF COMPUTATION OF CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES AND COMBINED FIXED CHARGES AND PREFERRED SHARE DIVIDEND REQUIREMENTS ($000'S)
Fiscal Year 1998 1997 1996 1995 1994 ---- ---- ---- ---- ---- Earnings: Net (Loss)/Earnings $(31,506) $5,624 $82,240 $28,534 $65,410 Taxes on Income 79,295 13,892 44,626 41,129 41,457 Total Fixed Charges 88,994 84,541 74,002 60,920 45,412 Capitalized Interest (9,749) (10,379) (6,362) (1,634) (467) Capitalized Interest Amortized 2,265 2,184 2,528 2,273 2,189 Equity Earnings of non-consolidated associated companies accounted for by the equity method, net of dividends (7,869) (9,796) (1,474) (1,578) (623) -------- ------- -------- -------- -------- $121,430 $86,066 $195,560 $129,644 $153,378 ======== ======= ======== ======== ======== Fixed Charges: Interest Expense $62,535 $54,675 $54,940 $49,011 $34,978 Capitalized Interest 9,749 10,379 6,362 1,634 467 Imputed Interest on non-capitalized lease payment 16,710 19,487 12,700 10,275 9,967 -------- ------- -------- -------- -------- $88,994 $84,541 $74,002 $60,920 $45,412 ======== ======= ======== ======== ======== Ratio of Earnings to Fixed Charges 1.36 1.02 2.64 2.13 3.38 ======== ======= ======== ======== ========
---------- *There were no preferred shares outstanding during any of the periods indicated and therefore the consolidated ratio of earnings to fixed charges and combined fixed charges and preferred share dividend requirements would have been the same as the consolidated ratio of earnings to fixed charges and combined fixed charges for each period indicated. EX-21 5 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT FOSTER WHEELER CORPORATION (PARENT) PRINCIPAL CONSOLIDATED, WHOLLY OWNED SUBSIDIARIES (DIRECTLY OR INDIRECTLY) LISTED BY JURISDICTION OF ORGANIZATION AUSTRALIA Foster Wheeler Australia Pty. Ltd., Melbourne BERMUDA FW Management Operations, Ltd., Hamilton Foster Wheeler Trading Co. Ltd., Hamilton Perryville Service Company Ltd., Hamilton Power Systems International, Ltd., Hamilton York Jersey Liability Ltd., Hamilton Continental Finance Company, Ltd., Hamilton BRAZIL Foster Wheeler do Brasil Ltda., Rio De Janeiro CANADA Foster Wheeler Limited, St. Catharines Chapleau Co-Generation Ltd., Chapleau Foster Wheeler Canadian Resources Limited, Alberta Foster Wheeler Fired Heaters, Ltd., Calgary La Societe D'Energie Foster Wheeler Ltd., Quebec CHANNEL ISLANDS FW Channel Islands Limited, Jersey CHILE Constructora Foster Wheeler Concepcion Limitada, Santiago Foster Wheeler Chile, S.A., Santiago CHINA, PEOPLES REPUBLIC OF Foster Wheeler Power Machinery Company Limited, Guangdong Province ENGLAND Foster Wheeler Limited, Reading Foster Wheeler Energy Ltd., Reading Foster Wheeler (Pacific) Ltd., Reading Foster Wheeler Petroleum Development Ltd., Reading Foster Wheeler World Services, Ltd., Reading FW Management Operations (U.K.) Ltd., Reading Foster Wheeler (Indonesia) Ltd., Reading Foster Wheeler Environmental (U.K.) Ltd., Reading Foster Wheeler Petroleum Development & Associates Ltd., Reading Foster Wheeler Petroleum Development (Norway) Ltd., Reading FINLAND Foster Wheeler Energia Oy, Helsinki Foster Wheeler Service Oy, Kouvola FRANCE Foster Wheeler France, S.A., Paris GERMANY Foster Wheeler Energie GmbH, Dusseldorf GREECE Foster Wheeler Hellas Engineering and Construction AE, Athens HUNGARY Foster Wheeler Supply Limited Liability Company, Budapest INDIA Foster Wheeler India Private Limited, Chennai INDONESIA Foster Wheeler (Indonesia) Ltd., Jakarta ITALY Foster Wheeler Italiana, S.p.A., Milan Steril, S.p.A., Milan FW Financial Services S.p.A., Milan Foster Wheeler Continental Europe, S.r.l., Milan Foster Wheeler Environmental Italia, Srl, Milan Lomellina Energia Operator S.r.l., Milan World Services Italia S.p.A., Milan MALAYSIA Foster Wheeler (Malaysia) Sdn. Bhd., Kuala Lumpur MAURITIUS P.E. Consultants, Inc., Port Louis MEXICO Foster Wheeler Ingenieros y Constructores, S.A. de C.V. Guadalajara Foster Wheeler Constructors de Mexico, S.de R.L. de C.V., M Mexico City 2 NETHERLANDS ANTILLES Foster Wheeler N.V., Curacao NETHERLANDS FW Europe B.V., Amsterdam Foster Wheeler Continental B.V., Amsterdam Foster Wheeler Europe B.V., Amsterdam FW Energie B.V., Amsterdam FW Netherlands C.V., Amsterdam PHILIPPINES Foster Wheeler (Philippines) Corporation, Makati City POLAND Foster Wheeler Energia Polska Sp. Zo.o., Warsaw PORTUGAL F.W. Gestao E Servicos, S.A., Sao Pedro SINGAPORE (REPUBLIC OF) Foster Wheeler Eastern Private, Ltd., Singapore Foster Wheeler Energy Pte. Ltd., Singapore Foster Wheeler Vietnam Private Ltd., Singapore SOUTH AFRICA Foster Wheeler South Africa (Pty.) Ltd., Midrand SPAIN Foster Wheeler Iberia, S.A., Madrid Foster Wheeler Energia, S.A., Madrid Foster Wheeler Power Systems, S.A., Madrid SWEDEN Foster Wheeler Energi AB, Norrkoping UNITED STATES Camden County Energy Recovery Associates, Delaware Camden County Energy Recovery Corporation, Delaware Equipment Consultants, Inc., Delaware Foster Wheeler Adirondack, Inc., Delaware Foster Wheeler Andes, Inc., Delaware Foster Wheeler Arabia Ltd., Delaware Foster Wheeler Asia Ltd., Delaware Foster Wheeler Avon, Inc., Delaware Foster Wheeler Bedminster, Inc., Delaware Foster Wheeler Bridgewater, Inc., Delaware Foster Wheeler Broome County, Inc., Delaware Foster Wheeler Canoas, Inc., Delaware Foster Wheeler Capital & Finance Corporation, Delaware Foster Wheeler Charleston Resource Recovery, Inc., Delaware Foster Wheeler China, Inc., Delaware Foster Wheeler Constructors, Inc., Delaware Foster Wheeler Continental U.S. Inc., Delaware Foster Wheeler Development Corporation, Delaware Foster Wheeler (Emirates) Corporation, Delaware Foster Wheeler Energy Corporation, Delaware Foster Wheeler Energy International, Inc., Delaware Foster Wheeler Energy Manufacturing, Inc., Delaware Foster Wheeler Energy Services, Inc., California Foster Wheeler Environmental Corporation, Texas Foster Wheeler Facilities Management, Inc., Delaware Foster Wheeler Funding Corporation, Delaware Foster Wheeler Hudson Falls, Inc., Delaware Foster Wheeler Hungarian Energy, Inc., Delaware Foster Wheeler Hydrobras, Inc., Delaware Foster Wheeler Hydroven, Inc., Delaware Foster Wheeler Hydrox, Inc., Delaware Foster Wheeler Illinois, Inc., Delaware Foster Wheeler Intercontinental Corporation, Delaware Foster Wheeler International Corporation, Delaware Foster Wheeler Korea, Ltd., Delaware Foster Wheeler Martinez, Inc., Delaware Foster Wheeler Middle East Services, Inc., Delaware Foster Wheeler Midwest, Inc., Delaware Foster Wheeler Mt. Carmel, Inc., Delaware Foster Wheeler Passaic, Inc., Delaware Foster Wheeler Penn Resources, Inc., Delaware Foster Wheeler Power Corporation, Delaware Foster Wheeler Power Systems, Inc., Delaware Foster Wheeler Pyropower, Inc., New York Foster Wheeler Real Estate Development Corporation, Delaware Foster Wheeler Robbins, Inc., Delaware Foster Wheeler Santiago, Inc., Delaware Foster Wheeler Timokhovo, Inc., Delaware Foster Wheeler Twin Cities, Inc., Delaware Foster Wheeler USA Corporation, Delaware Foster Wheeler Virgin Islands, Inc., Delaware Foster Wheeler Wood Resources, Inc., Delaware Foster Wheeler World Services Corp., Delaware Foster Wheeler Zack, Inc., Delaware FWPS Specialty Products, Inc., Delaware Hartman Consulting Corporation, Delaware GTC Technology Corporation, Delaware Process Consultants, Inc., Delaware POSCO Gilberton, Inc., California Pyropower Operating Services Company, Inc., California THAILAND Foster Wheeler (Thailand) Limited, Sriracha 3 TURKEY Foster Wheeler BIMAS Birlesik Insaat Ve Muhendislik, A. S., Istanbul U.S. VIRGIN ISLANDS Foster Wheeler F.S.C., Inc., St. Thomas VENEZUELA Foster Wheeler Caribe Corporation, C.A., Caracas PRINCIPAL AFFILIATED COMPANIES (PERCENT DIRECTLY OR INDIRECTLY OWNED BY FOSTER WHEELER CORPORATION) BERMUDA The Hydrogen Company of Paraguana Ltd., Hamilton (50%) CHILE Compania de Hidrogeno de Talcahuano, Santiago (51%) COLOMBIA Foster Wheeler Andina, S.A., Bogota (77.7%) FINLAND Oy Bioflow A.B., Varkhaus (51%) ITALY Centro Energia Operator Teverola, S.r.l., Teverola (50%) Centro Energia Gas S.p.A., Milan (50%) Centro Energia Operator Ferrara S.r.l., Milan (50%) JAPAN Foster Wheeler K.K., Tokyo (85%) NIGERIA Foster Wheeler (Nigeria) Ltd., Lagos (60%) Foster Wheeler Environmental Company Nigeria Limited, Lagos (87%) NORWAY Sorco Holdings AS, Stavanger (33.3%) OMAN Chiyoda-Foster Wheeler and Company LLC, Muscat (17.5%) POLAND Foster Wheeler Energy FAKOP Ltd., Sosnowiec (51%) THAILAND Thai Maintenance Contracting Company Limited, Rayong (49%) UNITED STATES CeraFilter Systems, Inc., Delaware (50%) Thermo Energy Environmental Corporation, New Jersey (50%) VENEZUELA OTEPI FW, S.A., Caracas (50%) EX-27 6 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY OF FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEET AND STATEMENT OF EARNINGS FOR THE YEAR ENDED DECEMBER 25, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-25-1998 DEC-27-1997 DEC-25-1998 180,068 61,223 857,005 0 478,481 1,672,842 1,251,703 340,622 3,495,019 1,498,677 990,714 0 0 40,748 531,370 3,495,019 4,536,765 4,596,992 4,419,658 4,419,658 0 0 62,535 47,789 79,295 (31,506) 0 0 0 (31,506) (0.77) (0.77)
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