-----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, HDjPczz6YtGX5HNwI9e9HxWG7EMMmjQbPiNFdQvygV8X796gjCYowUGvZavXYRj/ DrCI9zjyoQdrTQ1/dpUP1g== 0000950149-01-501235.txt : 20010815 0000950149-01-501235.hdr.sgml : 20010815 ACCESSION NUMBER: 0000950149-01-501235 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GRANITE CONSTRUCTION INC CENTRAL INDEX KEY: 0000861459 STANDARD INDUSTRIAL CLASSIFICATION: HEAVY CONSTRUCTION OTHER THAN BUILDING CONST - CONTRACTORS [1600] IRS NUMBER: 770239383 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12911 FILM NUMBER: 1711626 BUSINESS ADDRESS: STREET 1: 585 WEST BEACH ST CITY: WATSONVILLE STATE: CA ZIP: 95076 BUSINESS PHONE: 8317241011 MAIL ADDRESS: STREET 1: 585 WEST BEACH ST CITY: WATSONVILLE STATE: CA ZIP: 95076 10-Q 1 f74922e10-q.txt GRANITE CONSTRUCTION INCORPORATED FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark one) (X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 FOR THE QUARTER ENDED JUNE 30, 2001 ( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _____________ to _____________ Commission File No. 1-12911 GRANITE CONSTRUCTION INCORPORATED State of Incorporation: I.R.S. Employer Identification Delaware Number: 77-0239383 Corporate Administration: 585 West Beach Street Watsonville, California 95076 (831) 724-1011 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 shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of August 9, 2001. Class Outstanding ----------------------------- ----------------- Common Stock, $0.01 par value 41,107,115 shares 2 GRANITE CONSTRUCTION INCORPORATED INDEX
Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets as of June 30, 2001 and December 31, 2000...............................................................4 Condensed Consolidated Statements of Income for the Three Months and Six Months Ended June 30, 2001 and 2000..........................................................5 Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2001 and 2000....................................................6 Notes to the Condensed Consolidated Financial Statements.........................................................7-11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...............................................................12-18 Item 3. Quantitative and Qualitative Disclosures about Market Risk.....................19 PART II. OTHER INFORMATION Item 1. Legal Proceedings..............................................................21 Item 2. Changes in Securities..........................................................21 Item 3. Defaults upon Senior Securities................................................21 Item 4. Submission of Matters to a Vote of Security Holders............................................................22 Item 5. Other Information..............................................................23 Item 6. Exhibits and Reports on Form 8-K...............................................23 Exhibit Index..................................................................24
2 3 PART I. FINANCIAL INFORMATION 3 4 GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
JUNE 30, December 31, 2001 2000 ----------- ------------ (UNAUDITED) ASSETS Current assets Cash and cash equivalents $ 92,282 $ 57,759 Short-term investments 33,453 42,972 Accounts receivable 267,667 221,374 Costs and estimated earnings in excess of billings 25,154 19,473 Inventories 23,972 16,747 Deferred income taxes 15,881 15,857 Equity in construction joint ventures 32,541 25,151 Other current assets 15,998 12,295 --------- --------- Total current assets 506,948 411,628 --------- --------- Property and equipment 267,116 249,077 --------- --------- Investments in affiliates 49,943 40,052 --------- --------- Other assets 11,493 10,385 --------- --------- $ 835,500 $ 711,142 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Current maturities of long-term debt $ 745 $ 1,130 Accounts payable 100,816 90,111 Billings in excess of costs and estimated earnings 87,149 57,412 Accrued expenses and other current liabilities 81,311 82,924 --------- --------- Total current liabilities 270,021 231,577 --------- --------- Long-term debt 138,364 63,891 --------- --------- Other long-term liabilities 9,607 6,370 --------- --------- Deferred income taxes 31,540 31,540 --------- --------- Commitments and contingencies --------- --------- Stockholders' equity Preferred stock, $0.01 par value, authorized 3,000,000 shares, none outstanding -- -- Common stock, $0.01 par value, authorized 100,000,000 shares; issued and outstanding 41,107,224 shares in 2001 and 40,881,908 in 2000 411 409 Additional paid-in capital 61,421 56,381 Retained earnings 338,066 330,172 Accumulated other comprehensive loss (112) -- --------- --------- 399,786 386,962 Unearned compensation (13,818) (9,198) --------- --------- 385,968 377,764 --------- --------- $ 835,500 $ 711,142 ========= =========
The accompanying notes are an integral part of these condensed consolidated financial statements. 4 5 GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED - IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------------- ------------------------- 2001 2000 2001 2000 --------- --------- --------- --------- Revenue Construction $ 326,735 $ 301,274 $ 524,682 $ 494,623 Material sales 49,947 42,438 79,615 65,519 --------- --------- --------- --------- Total revenue 376,682 343,712 604,297 560,142 --------- --------- --------- --------- Cost of revenue Construction 289,058 258,371 467,692 426,819 Material sales 41,213 35,668 67,938 57,275 --------- --------- --------- --------- Total cost of revenue 330,271 294,039 535,630 484,094 --------- --------- --------- --------- GROSS PROFIT 46,411 49,673 68,667 76,048 General and administrative expenses 26,843 26,925 51,287 49,784 --------- --------- --------- --------- OPERATING INCOME 19,568 22,748 17,380 26,264 --------- --------- --------- --------- Other income (expense) Interest income 1,932 2,486 4,763 5,663 Interest expense (2,341) (2,273) (3,903) (3,985) Gain on sales of property and equipment 633 1,397 4,924 2,378 Other, net 1,019 1,550 175 1,318 --------- --------- --------- --------- 1,243 3,160 5,959 5,374 --------- --------- --------- --------- INCOME BEFORE PROVISION FOR INCOME TAXES 20,811 25,908 23,339 31,638 Provision for income taxes 7,908 9,975 8,869 13,481 --------- --------- --------- --------- NET INCOME $ 12,903 $ 15,933 $ 14,470 $ 18,157 ========= ========= ========= ========= Net income per share Basic $ 0.32 $ 0.40 $ 0.36 $ 0.46 Diluted $ 0.32 $ 0.39 $ 0.36 $ 0.45 Weighted average shares of common stock Basic 39,833 39,494 39,760 39,413 Diluted 40,766 40,377 40,611 40,233 Dividends per share $0.08 $0.07 $0.16 $0.17 ========= ========= ========= =========
The accompanying notes are an integral part of these condensed consolidated financial statements. 5 6 GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED - IN THOUSANDS)
SIX MONTHS ENDED JUNE 30, 2001 2000 -------- -------- Operating Activities Net income $ 14,470 $ 18,157 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 23,169 21,894 Gain on sales of property and equipment (4,924) (2,378) Gain on sale of investment -- (636) Increase in deferred income tax (24) -- Amortization of unearned compensation 2,454 3,021 Equity in loss of affiliates and other 678 381 Changes in assets and liabilities: Accounts and notes receivable (48,197) (5,774) Inventories (7,225) (4,682) Equity in construction joint ventures (7,390) 4,719 Other assets (210) 1,407 Accounts payable 10,705 (366) Billings in excess of costs and estimated earnings, net 24,056 (29,184) Accrued expenses 2,903 (2,530) -------- -------- Net cash provided by operating activities 10,465 4,029 -------- -------- Investing Activities Purchases of short-term investments (44,828) (32,610) Maturities of short-term investments 54,235 50,280 Additions to property and equipment (46,757) (31,347) Proceeds from sales of property and equipment 5,745 4,192 Proceeds from sale of investment -- 5,001 Investment in affiliates (9,952) (13,976) Development and sale of land and other investing activities (343) 874 -------- -------- Net cash used by investing activities (41,900) (17,586) -------- -------- Financing Activities Additions of long-term debt 85,000 -- Repayments of long-term debt (10,912) (5,735) Employee stock options exercised -- 406 Repurchase of common stock (2,118) (1,193) Dividends paid (6,012) (6,255) -------- -------- Net cash provided (used) by financing activities 65,958 (12,777) -------- -------- Increase (decrease) in cash and cash equivalents 34,523 (26,334) Cash and cash equivalents at beginning of period 57,759 61,832 -------- -------- Cash and cash equivalents at end of period $ 92,282 $ 35,498 ======== ======== Supplementary Information Cash paid during the period for: Interest $ 1,943 $ 2,735 Income taxes 1,922 4,195 Noncash investing and financing activity: Restricted stock issued for services $ 7,074 $ 6,912 Dividends accrued but not paid 3,289 2,729 Undisbursed escrow funds available 7,286 --
The accompanying notes are an integral part of these condensed consolidated financial statements. 6 7 Granite Construction Incorporated NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In Thousands, Except Per Share Data) 1. BASIS OF PRESENTATION: The condensed consolidated financial statements included herein have been prepared by Granite Construction Incorporated (the "Company"), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted, although the Company believes the disclosures which are made are adequate to make the information presented not misleading. Further, the condensed consolidated financial statements reflect, in the opinion of management, all normal recurring adjustments necessary to present fairly the financial position at June 30, 2001 and the results of operations and cash flows for the periods presented. The December 31, 2000 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. Interim results are subject to significant seasonal variations and the results of operations for the six months ended June 30, 2001 are not necessarily indicative of the results to be expected for the full year. 2. INVENTORIES: Inventories consist primarily of quarry products valued at the lower of average cost or market. 3. PROPERTY AND EQUIPMENT:
JUNE 30, December 31, 2001 2000 ----------- ------------ (UNAUDITED) Land $ 37,352 $ 38,113 Quarry property 45,104 45,080 Buildings and leasehold improvements 38,664 38,753 Equipment and vehicles 541,494 508,976 Office furniture and equipment 8,656 8,597 -------- -------- 671,270 639,519 Less accumulated depreciation, depletion and amortization 404,154 390,442 -------- -------- $267,116 $249,077 ======== ========
7 8 Granite Construction Incorporated NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In Thousands, Except Per Share Data) 4. EARNINGS PER SHARE:
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, -------------------- -------------------- 2001 2000 2001 2000 ------- ------- ------- ------- NUMERATOR - BASIC AND DILUTED EARNINGS PER SHARE Net income $12,903 $15,933 $14,470 $18,157 ======= ======= ======= ======= DENOMINATOR - BASIC EARNINGS PER SHARE Common stock outstanding 41,106 40,934 40,974 40,746 Less restricted stock outstanding 1,273 1,440 1,214 1,333 ------- ------- ------- ------- TOTAL 39,833 39,494 39,760 39,413 ------- ------- ------- ------- Basic earnings per share $ 0.32 $ 0.40 $ 0.36 $ 0.46 ======= ======= ======= ======= DENOMINATOR - DILUTED EARNINGS PER SHARE Denominator - Basic Earnings per Share 39,833 39,494 39,760 39,413 Effect of Dilutive Securities: Common stock options 17 11 17 12 Warrants 213 154 201 142 Restricted stock 703 718 633 666 ------- ------- ------- ------- TOTAL 40,766 40,377 40,611 40,233 ------- ------- ------- ------- Diluted earnings per share $ 0.32 $ 0.39 $ 0.36 $ 0.45 ======= ======= ======= =======
5. COMPREHENSIVE INCOME: The components of comprehensive income, net of tax, are as follows:
THREE MONTHS ENDED SIX MONTHS ENDED ------------------ ---------------- JUNE 30, 2001 ---------------------------- Net income $12,903 $ 14,470 Other comprehensive income (loss): Changes in net unrealized losses on investments 46 (112) ------- -------- TOTAL COMPREHENSIVE INCOME $12,949 $ 14,358 ------- --------
6. CONTINGENCIES AND CONTINGENCIES: DISCLOSURE OF SIGNIFICANT ESTIMATES - LITIGATION: The Company is a party to a number of legal proceedings and believes that the nature and number of these proceedings are typical for a construction firm of its size and scope, and that none of these proceedings are material to the Company's financial position. The Company's litigation typically involves claims regarding public liability or contract related issues. 7. RECLASSIFICATIONS: Certain prior year financial statement items have been reclassified to conform to the current year's presentation. 8 9 Granite Construction Incorporated NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In Thousands, Except Per Share Data) 8. STOCK SPLIT: On February 21, 2001, the Company announced a three for two stock split in the form of a 50% stock dividend payable April 13, 2001. All references in the financial statements to number of shares and per share amounts of the Company's common stock have been retroactively restated to reflect the increased number of shares outstanding. 9. INVESTMENT IN WILDER CONSTRUCTION: On February 23, 2001, the Company purchased an additional 450,000 shares of Wilder Construction Company ("Wilder") common stock for a purchase price of approximately $4.6 million. The Company currently holds a 48% minority interest in Wilder. At June 30, 2001 the Company held 1,949,746 shares of Wilder stock. 10. LONG-TERM DEBT: In May 2001 the Company issued long-term debt in the amount of $75.0 million to a group of institutional holders. The notes are due in nine equal annual installments beginning in 2005 and bear interest at 6.96% per annum. Restrictive covenants under the agreement require the maintenance of consolidated net worth (as defined) of approximately $289,000. The funds will be used for general corporate purposes. 11. BUSINESS SEGMENT INFORMATION: The Company has two reportable segments: the Branch Division and the Heavy Construction Division ("HCD"). The Branch Division is comprised of branch offices that serve local markets, while HCD pursues major infrastructure projects throughout the nation. HCD generally has large heavy-civil projects with contract amounts in excess of $15 million and contract durations greater than two years, while the Branch Division projects are typically smaller in size and shorter in duration. HCD has been the primary participant in the Company's construction joint ventures. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates performance based on operating profit or loss which does not include income taxes, interest income, interest expense or other income (expense). Information about Profit and Assets:
THREE MONTHS ENDED JUNE 30, HCD BRANCH TOTAL --------- -------- -------- 2001 Revenues from external customers $ 103,091 $273,591 $376,682 Intersegment revenue transfer (2,585) 2,585 -- --------- -------- -------- Net revenue 100,506 276,176 376,682 Depreciation and amortization 2,182 8,079 10,261 Operating profit 1,952 26,334 28,286 --------- -------- -------- 2000 Revenues from external customers $ 95,058 $248,654 $343,712 Intersegment revenue transfer (4,269) 4,269 -- --------- -------- -------- Net revenue 90,789 252,923 343,712 Depreciation and amortization 1,814 8,062 9,876 Operating profit 8,130 23,430 31,560 --------- -------- --------
9 10 Granite Construction Incorporated NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In Thousands, Except Per Share Data) 11. BUSINESS SEGMENT INFORMATION, CONTINUED: Information about Profit and Assets, continued:
SIX MONTHS ENDED JUNE 30, HCD BRANCH TOTAL --------- -------- -------- 2001 Revenues from external customers $ 180,801 $423,496 $604,297 Intersegment revenue transfer (4,317) 4,317 -- --------- -------- -------- Net revenue 176,484 427,813 604,297 Depreciation and amortization 4,347 16,013 20,360 Operating profit 1,853 32,213 34,066 Property and equipment 38,140 208,336 246,476 --------- -------- -------- 2000 Revenues from external customers $ 185,087 $375,055 $560,142 Intersegment revenue transfer (7,821) 7,821 -- --------- -------- -------- Net revenue 177,266 382,876 560,142 Depreciation and amortization 3,681 15,787 19,468 Operating profit 17,457 24,201 41,658 Property and equipment 26,006 200,003 226,009 --------- -------- --------
Reconciliation of Segment Profit to the Company's Consolidated Totals:
THREE MONTHS ENDED JUNE 30, 2001 2000 -------- -------- Profit: Total profit for reportable segments $ 28,286 $ 31,560 Other income 1,243 3,160 Unallocated other corporate expenses (8,718) (8,812) -------- -------- Income before provision for income taxes $ 20,811 $ 25,908 ======== ========
SIX MONTHS ENDED JUNE 30, 2001 2000 -------- -------- Profit: Total profit for reportable segments $ 34,066 $ 41,658 Other income 5,959 5,374 Unallocated other corporate expenses (16,686) (15,394) -------- -------- Income before provision for income taxes $ 23,339 $ 31,638 ======== ========
10 11 Granite Construction Incorporated NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In Thousands, Except Per Share Data) 12. RECENT ACCOUNTING PRONOUNCEMENTS: In July 2001, the Financial Accounting and Standards Board ("FASB") issued Statements of Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations," and No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets." SFAS 141 requires that all business combinations initiated after June 30, 2001 be accounted for under a single method--the purchase method. Use of the pooling-of-interests method is no longer permitted. SFAS 142 requires that goodwill no longer be amortized to earnings, but instead be reviewed for impairment upon initial adoption of the Statement and on an annual basis going forward. The amortization of goodwill will cease upon adoption of SFAS 142. The provisions of SFAS 142 will be effective for fiscal years beginning after December 15, 2001. The Company is currently evaluating the impact, if any, of adopting SFAS 141 and 142. 13. SUBSEQUENT EVENT: On July 1, 2001 the Company acquired 100% of the common stock of Halmar Builders of New York, Inc., a Mt. Vernon, New York heavy-civil construction company ("Halmar") for a cash purchase price of approximately $19.0 million, subject to final closing adjustments. The new entity will operate under the name Granite Halmar Construction Company, Inc. ("Granite Halmar") as a wholly owned subsidiary of Granite Construction Incorporated. If Granite Halmar achieves certain predetermined financial results over a two-year period, the Company will pay the former Halmar shareholders up to an additional $2.0 million. Halmar is one of the largest heavy-civil construction firms operating in the metropolitan New York City area. In 2000, Halmar had revenues of approximately $200 million. The acquisition will be accounted for using the purchase method of accounting in accordance with SFAS 141. The Company is currently in the process of preparing the purchase price allocation and determining the useful lives of the assets acquired. 11 12 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING DISCLOSURE: This report contains forward-looking statements; such as statements related to the impact of government regulations on the Company's operations, the existence of bidding opportunities and the impact of legislation, availability of highway funds and economic conditions on the Company's future results. Additionally, forward-looking statements include statements that can be identified by the use of forward-looking terminology such as "believes," "expects," "appears," "may," "will," "should," or "anticipates" or the negative thereof or comparable terminology, or by discussions of strategy. All such forward-looking statements are subject to risks and uncertainties that could cause actual results of operations and financial condition and other events to differ materially from those expressed or implied in such forward-looking statements. Specific risk factors include, without limitation, changes in the composition of applicable federal and state legislation appropriation committees; federal and state appropriation changes for infrastructure spending; the general state of the economy; weather conditions; competition and pricing pressures; and state referendums and initiatives. RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, --------------------------------------------- REVENUE (IN MILLIONS) 2001 2000 VARIANCE % ------ ------ -------- ------ By Division Branch Division $276.2 $252.9 $ 23.3 9.2% Heavy Construction Division 100.5 90.8 9.7 10.7% ------ ------ ------ ------ 376.7 343.7 33.0 9.6% ====== ====== ====== ======
SIX MONTHS ENDED JUNE 30, --------------------------------------------- REVENUE (IN MILLIONS) 2001 2000 VARIANCE % ------ ------ -------- ------ By Division Branch Division $427.8 $382.8 $ 45.0 11.8% Heavy Construction Division 176.4 177.3 (0.9) -0.5% ------ ------ ------ ------ 604.2 560.1 44.1 7.9% ====== ====== ====== ======
Revenue: Revenue for the quarter ended June 30, 2001 increased in both the Branch Division and the HCD over the corresponding quarter in 2000. The Branch Division saw increased revenue from its public sector projects in both the quarter and six month periods in 2001 reflecting increases in funding for public infrastructure projects due primarily to the impact of TEA-21 funding. Partially offsetting the increased public sector revenue in the Branch Division was a decrease in private sector revenue of $18.1 million and $13.2 million for the 2001 quarter and six month periods, respectively, from the same periods in 2000. As further discussed in the "Outlook" section, the Company believes there has been some softening of the private sector market. The increased HCD revenue for the quarter ended June 30, 2001 over the corresponding 2000 quarter is a reflection of the division's strong backlog of public sector projects. HCD's private sector revenue decreased $13.9 million in the second quarter of 2001 as compared to the second quarter of 2000 due to the completion of two large private sector projects in 2000. For the six month period ended 12 13 June 30, 2001, HCD private sector revenue decreased $24.6 million compared to the corresponding six month period in 2000 due to lower first quarter 2001 revenue which reflected the large percentage of contracts - particularly design/build contracts - awarded in late 2000 that were in their start-up phase. Design/build projects experience a longer lead time and therefore a slower start than a typical bid/build project.
JUNE 30, MARCH 31, JUNE 30, -------- --------- -------- BACKLOG (IN MILLIONS) 2001 2001 2000 -------- -------- -------- By Market Sector Federal $ 56.4 $ 67.4 $ 88.3 State 956.0 1,049.3 531.0 Local 310.0 161.5 137.3 -------- -------- -------- Total public sector 1,322.4 1,278.2 756.6 Private sector 113.9 75.7 138.9 -------- -------- -------- $1,436.3 $1,353.9 $ 895.5 -------- -------- -------- By Geographic Area California $ 442.7 $ 414.3 $ 290.4 West (excluding California) 395.0 272.6 217.0 Midwest 186.0 198.4 -- South/East 412.6 468.6 388.1 -------- -------- -------- $1,436.3 $1,353.9 $ 895.5 ======== ======== ========
Backlog: The Company's backlog was $1,436.3 million at June 30, 2001, an increase of $540.8 million from June 30, 2000 and an increase of $82.4 million from March 31, 2001. New awards for the quarter included the Company's $119.8 million share of a design/build highway reconstruction project in Arizona and a $15.4 million interstate reconstruction project in Utah. 13 14
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, GROSS PROFIT ------------------ ------------------- IN MILLIONS 2001 2000 2001 2000 ------ ------ ------ ------- Total Gross Profit $46.4 $49.7 $68.7 $76.0 % of Revenue 12.3% 14.5% 11.4% 13.6% ===== ===== ===== =====
Gross Profit: Gross profit as a percent of revenue decreased to 12.3% in the second quarter 2001 from 14.5% in the second quarter 2000 and to 11.4% for the six months ended June 30, 2001 from 13.6% in the corresponding 2000 period. The lower gross profit margin is primarily due to a higher amount of revenue recognized from projects less than 25% complete, particularly in HCD. The Company recognizes revenue only to the extent of cost incurred until a project reaches 25% complete. The amount of revenue generated in the quarter by jobs below the 25% completion threshold was approximately $58.0 million versus $20.0 million in the same period in 2000. The increase is primarily due to several HCD projects that were awarded in late 2000 and early 2001 including three that are not expected to reach 25% complete in 2001. The $153.0 million Las Vegas Monorail Project, the $164.6 million Hiawatha Light Rail Project in Minneapolis and the $65.9 million St. John's River Bridge in Florida are not expected to reach 25% complete until the first half of 2002. In addition, HCD gross profit margin in the second quarter 2001 was impacted by a reduction in the forecasted profitability of a non-sponsored joint venture project on the East Coast. The profit reduction reflects the acceleration of work to complete the project on time to avoid paying liquidated damages. The Company recorded a pretax loss of approximately $2.5 million for its portion of the expected reduced profitability of the project. Cost of revenue consists of direct costs on contracts; including labor and materials, amounts payable to subcontractors, direct overhead costs, and equipment expense (primarily depreciation, maintenance and repairs). The Company has experienced some upward pressure on costs associated with labor markets, however, the Company's gross profit margins were not significantly impacted by such changes during the first six months of 2001.
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, GENERAL AND ADMINISTRATIVE EXPENSES --------------------- --------------------- IN MILLIONS 2001 2000 2001 2000 ------- ------- ------- ------- Salaries and related expenses $ 11.9 $ 11.8 $ 25.4 $ 23.6 Incentive compensation, discretionary profit sharing and pension 4.3 6.5 6.8 9.4 Other general and administrative expenses 10.6 8.6 19.1 16.8 ------- ------- ------- ------- Total $ 26.8 $ 26.9 $ 51.3 $ 49.8 ------- ------- ------- ------- Percent of revenue 7.1% 7.8% 8.5% 8.9% ======= ======= ======= =======
General and Administrative Expenses: Salaries and related expenses increased for the three and six months ended June 30, 2001 over the comparable periods in 2000 due primarily to increased staffing to support the Company's current and expected growth. Incentive compensation and discretionary profit sharing and pension costs decreased as a function of the Company's lower profitability in 2001. Increases in other general and administrative expenses primarily result from costs associated with the pursuit of new business opportunities and the support of the Company's continued growth, none of which exceeds 10% of total general and administrative expenses. 14 15
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, OPERATING INCOME --------------------- --------------------- IN MILLIONS 2001 2000 2001 2000 ------- ------- ------- ------- Branch Division $ 26.3 $ 23.4 $ 32.2 $ 24.2 Heavy Construction Division 2.0 8.1 1.9 17.5 Unallocated corporate expenses (8.7) (8.8) (16.7) (15.4) ------- ------- ------- ------- Total $ 19.6 $ 22.7 $ 17.4 $ 26.3 ======= ======= ======= =======
Operating Income: The Heavy Construction Division's contribution to operating income decreased in the second quarter 2001 compared to the second quarter 2000 due primarily to the decreased gross profit margin described in "Gross Profit" above. The Branch Division's contribution to operating income increased in both the three months and six months ended June 30, 2001 due primarily to the increases in revenue described in "Revenue and Backlog" above.
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, OTHER INCOME (EXPENSE) --------------------- --------------------- IN MILLIONS 2001 2000 2001 2000 ------- ------- ------- ------- Interest income $ 1.9 $ 2.5 $ 4.8 $ 5.7 Interest expense (2.3) (2.3) (3.9) (4.0) Gain on sales of property and equipment 0.6 1.4 4.9 2.4 Other, net 1.0 1.6 0.2 1.3 ------- ------- ------- ------- Total $ 1.2 $ 3.2 $ 6.0 $ 5.4 ======= ======= ======= =======
Other Income (Expense): Other income increased $0.6 million to $6.0 million for the six months ended June 30, 2001 over the same period in 2000. The increase was due primarily to a $2.2 million gain from the sale of developed property in Texas in the first quarter 2001, partially offset by lower interest income due primarily to reduced interest rates and the absence of a $0.6 million gain recorded in the second quarter 2000 from the repurchase by T.I.C. Holdings, Inc. ("TIC") of certain TIC shares held by the Company.
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, PROVISION FOR INCOME TAXES ---------------------- ---------------------- IN MILLIONS 2001 2000 2001 2000 ------- ------- ------- ------- Provision for income taxes $ 7.9 $ 10.0 $ 8.9 $ 13.5 ------- ------- ------- ------- Effective tax rate 38.0% 38.5% 38.0% 42.6% ======= ======= ======= =======
Provision for Income Taxes: The Company's effective tax rate decreased to 38.0% for the three months ended June 30, 2001 from 38.5% in the same period in 2000. The decrease relates primarily to the expected changes in the relationship of permanent differences such as the percentage depletion deduction to pretax earnings for the year. Additionally, the decrease in the effective tax rate for the six months ended June 30, 2001 reflects the absence of additional tax expense recognized in the first quarter of 2000 related to the Company reaching an agreement with TIC to divest its investment over a three and one-half year period. 15 16 OUTLOOK The Company continues to experience a sizeable increase in new awards. New awards for the second quarter ended June 30, 2001 totaled $459.1 million, leading to a record backlog at June 30, 2001 of $1.44 billion, an increase of 60.4 percent over the backlog at June 30, 2000. The second quarter 2001 backlog does not include the approximately $200.0 million backlog the Company assumed with the acquisition of Halmar Builders of New York Inc., which closed July 1, 2001. The Company believes its backlog is a quality backlog that will provide a springboard for revenue and earnings growth in 2002 and beyond. As the Company pointed out in a press release dated July 24, 2001, earnings expectations for 2001 will be lower than previously expected. The primary reason for this is that it now anticipates that three large HCD projects will not reach 25 percent complete this year. The $153.0 million Las Vegas Monorail Project, the $164.6 million Hiawatha Light Rail Project in Minnesota and the $65.9 million St. John's River Bridge in Florida are not expected to reach 25 percent complete until the first half of 2002. Even though the Company has reduced its earnings expectations for the year, the fundamentals of its public sector business are still extremely strong. The bulk of the Company's new awards continue to come from its public marketplace. Fueled by record level expenditures from federal, state and local sources, the Company expects that the public sector market will remain strong as the year continues to unfold. As it has noted in the past, the public marketplace that the Company is currently experiencing allows it to be very selective in its bidding, looking at those projects where it may have competitive advantages in terms of resources or expertise. The visibility of the Company's private sector business, however, is less clear at this point in time. The Company has witnessed some softening in this marketplace, particularly in California, where the bulk of its private sector business is derived. Granite believes that this is due primarily to a weaker economy, which has prompted private developers to delay planned commercial and residential projects. The potential effect on Granite's business is a decrease in private sector bidding opportunities and the probability of increased competition in the public sector. The Company, however, is unable at this time to identify how much increased public sector opportunities might offset diminished opportunities in the private sector and what, if any impact this will have on full year 2001 results. As previously mentioned, the Company closed its acquisition of Halmar Builders of New York, Inc. on July 1, 2001. The Mt. Vernon, New York-based heavy civil contractor campaigns the New York Metropolitan area, focusing primarily on transportation-related projects such as airports, highways and mass transit facilities. Halmar, in 2000, had revenues of approximately $200.0 million. The New York area heavy-civil construction marketplace is estimated to yield about $6.0 billion per year in bidding opportunities. Granite believes Halmar's contribution to its 2001 earnings will be neutral to slightly accretive. In the Outlook section of the Company's Form 10-Q for the quarter ended March 31, 2001, the Company discussed the potential impact on Granite's business and markets from the electricity crisis in California. To date, milder than normal temperatures and substantial conservation measures 16 17 on the part of California electric users have mitigated the need for rolling blackouts or the necessity to borrow more money from various internal accounts, including the highway account, to purchase power. As of this writing, the state has not borrowed any money from the highway account. Under the confines of Proposition 2, any money borrowed from the highway account by law has to be paid back within one year, with interest. California took a large step forward last month in formulating a solution to its long-term transportation-funding problem. As part of the state's budget negotiations, the legislature agreed to place a constitutional amendment on the March, 2002 ballot to permanently divert the sales tax on gasoline from the state's general fund to the transportation fund, starting in 2003. If passed by the voters, this would earmark an additional $1.0 to $1.5 billion per year for highway and mass transit projects in California, according to the California Franchise Tax Board. At the federal level, the Senate earlier this month approved its version of FY2002 transportation appropriations bill. The measure would provide approximately $60.0 billion for federal transportation programs, including $31.9 billion for the core federal highway program and $6.8 billion for the federal transit program. Both investment levels exceed the Bush Administration's budget request and the amounts guaranteed by TEA-21. The bill would also provide $3.3 billion for federal airport construction activities as required by AIR-21. The House has passed its own version of the transportation appropriations bill with similar funding levels and is expected to reconcile any differences with the Senate version in a conference committee in the near future. In summary, the Company's outlook for the short-term is for a reduction in profitability in 2001 compared to the year 2000, but an increase in both earnings and revenue in 2002, based on a large, quality backlog and strong public sector funding going forward. LIQUIDITY AND CAPITAL RESOURCES
SIX MONTHS ENDED JUNE 30, ------------------------- (IN MILLIONS) 2001 2000 ----- ----- Cash and cash equivalents $92.3 $35.5 Net cash provided (used) by: Operating activities 10.5 4.0 Investing activities (41.9) (17.6) Financing activities 66.0 (12.8) Capital expenditures $46.8 $31.3
Cash provided by operating activities of $10.5 million for the six months ended June 30, 2001 represents a $6.5 million increase over the same period in 2000. Changes in cash from operating activities primarily reflects seasonal variations based on the amount and progress of work being performed. Accounts Receivable at June 30, 2001 increased over the balance at December 31, 2000 due primarily to the Company's revenue growth in the latter half of the second quarter of 2001 over the latter half of the fourth quarter of 2000. Billings in excess of costs and estimated earnings at June 30, 2001 increased over the balance at December 31, 2000 due to cash timing differences on several large projects in the early stages of construction. 17 18 Cash used by investing activities for the six month period in 2001 increased $24.3 million over the corresponding 2000 period due primarily to higher purchases of property and equipment and greater amounts invested in short-term investments versus cash equivalents as well as the absence of the $5.0 million proceeds from the second quarter 2000 TIC divestiture. The Company generated cash from financing activities in the six months ended June 30, 2001 due to additions to long-term debt which includes $75.0 million received in May 2001 under a new senior credit facility with a group of institutional holders. The borrowing is due in nine equal annual installments beginning in 2005 and bears interest at 6.96% per annum. The funds from this borrowing will be used for general corporate purposes. The Company has budgeted $58.3 million for capital expenditures in 2001, which includes amounts for construction equipment, aggregate and asphalt plants, buildings, leasehold improvements and the purchase of land and aggregate reserves. The Company anticipates that cash generated internally and amounts available under its existing credit facilities will be sufficient to meet its capital and other requirements, including contributions to employee benefit plans, for the foreseeable future. The Company currently has access to funds under its revolving credit agreement which allow it to borrow up to $60.0 million, of which $48.4 million was available at June 30, 2001. RECENT ACCOUNTING PRONOUNCEMENTS In July 2001, the Financial Accounting and Standards Board ("FASB") issued Statements of Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations," and No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets." SFAS 141 requires that all business combinations initiated after June 30, 2001 be accounted for under a single method--the purchase method. Use of the pooling-of-interests method is no longer permitted. SFAS 142 requires that goodwill no longer be amortized to earnings, but instead be reviewed for impairment upon initial adoption of the Statement and on an annual basis going forward. The amortization of goodwill will cease upon adoption of SFAS 142. The provisions of SFAS 142 will be effective for fiscal years beginning after December 15, 2001. The Company is currently evaluating the impact, if any, of adopting SFAS 141 and 142. SUBSEQUENT EVENT On July 1, 2001 the Company acquired 100% of the common stock of Halmar Builders of New York, Inc., a Mt. Vernon, New York heavy-civil construction company ("Halmar") for a cash purchase price of approximately $19.0 million, subject to final closing adjustments. The new entity will operate under the name Granite Halmar Construction Company, Inc. ("Granite Halmar") as a wholly owned subsidiary of Granite Construction Incorporated. If Granite Halmar achieves certain predetermined financial results over a two-year period, the Company will pay the former Halmar shareholders up to an additional $2.0 million. Halmar is one of the largest heavy-civil construction firms operating in the metropolitan New York City area. In 2000, Halmar had revenues of approximately $200 million. The acquisition will be accounted for using the purchase method of accounting in accordance with the newly issued SFAS 141. The Company is currently in the process of preparing the purchase price allocation and determining the useful lives of the assets acquired. 18 19 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There has been no material change in the Company's exposure to market risk since December 31, 2000. 19 20 PART II. OTHER INFORMATION 20 21 ITEM 1. LEGAL PROCEEDINGS None ITEM 2. CHANGES IN SECURITIES None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None 21 22 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At the Company's Annual Meeting of Shareholders on May 21, 2001, the following members were elected to the Board of Directors:
VOTES WITHHELD AFFIRMATIVE NEGATIVE -------------------------- VOTES VOTES ABSTAINED NONVOTE ----------- -------- --------- ------- Brian C. Kelly 38,228,882 -- 1,110,863 -- Rebecca A. McDonald 38,153,255 -- 1,186,490 -- George B. Searle 38,001,140 -- 1,338,605 --
The following proposals were approved at the Company's Annual Meeting:
VOTES WITHHELD AFFIRMATIVE NEGATIVE ----------------------- VOTES VOTES ABSTAINED NONVOTE ----------- --------- --------- --------- To amend the Certificate of Incorporation of the Company 35,227,716 1,607,003 106,928 2,398,098 To ratify the appointment of PricewaterhouseCoopers LLP as the independent accountants of the Company for the fiscal year ending December 31, 2001. 39,137,618 129,228 72,899 --
22 23 ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits
Exhibit No. Description - ----------- ----------- 3.1 Certificate of Amendment of Certificate of Incorporation of Granite Construction Incorporated filed May 25, 2001 3.1.a Certificate of Incorporation of Granite Construction Incorporated, as Amended 10.1 Credit Agreement dated and effective June 29, 2001 10.2 Continuing Guaranty Agreement from the Subsidiaries of Granite Construction Incorporated as Guarantors of financial accommodations pursuant to the terms of the Credit Agreement dated June 29, 2001 10.3 Note Purchase Agreement between Granite Construction Incorporated and certain purchasers dated May 1, 2001 10.4 Subsidiary Guaranty Agreement from the Subsidiaries of Granite Construction Incorporated as Guarantors of the Guaranty of Notes and Note Agreement and the Guaranty of Payment and Performance dated May 1, 2001
b) Reports on Form 8-K None 23 24 SIGNATURES Pursuant to the requirements 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. GRANITE CONSTRUCTION INCORPORATED Date: August 14, 2001 By: /s/ William E. Barton --------------------------------- William E. Barton Senior Vice President and Chief Financial Officer 24 25 EXHIBIT INDEX
Exhibit No. Description Page No. 3.1 Certificate of Amendment of Certificate of Incorporation of Granite Construction Incorporated filed May 25, 2001........................................................... -- 3.1.a Certificate of Incorporation of Granite Construction Incorporated, as Amended............. -- 10.1 Credit Agreement dated and effective June 29, 2001........................................ -- 10.2 Continuing Guaranty Agreement from the Subsidiaries of Granite Construction Incorporated as Guarantors of financial accommodations pursuant to the terms of the Credit Agreement dated June 29, 2001....................................................................... -- 10.3 Note Purchase Agreement between Granite Construction Incorporated and certain purchasers dated May 1, 2001......................................................................... -- 10.4 Subsidiary Guaranty Agreement from the Subsidiaries of Granite Construction Incorporated as Guarantors of the Guaranty of Notes and Note Agreement and the Guaranty of Payment and Performance dated May 1, 2001............................................................. --
25 EX-3.1 3 f74922ex3-1.txt EXHIBIT 3.1 1 EXHIBIT 3.1 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF GRANITE CONSTRUCTION INCORPORATED Granite Construction Incorporated, a Delaware corporation (the "Corporation"), does hereby certify: FIRST: That Article Eighth of the Certificate of Incorporation of the Corporation is hereby amended to read in its entirety as follows: EIGHTH: [Intentionally omitted] SECOND:That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware In witness whereof, Granite Construction Incorporated has caused this Certificate to be signed by its duly authorized officer, this 23rd day of May, 2001. By: /s/ MICHAEL FUTCH ------------------------------------ Michael Futch Secretary EX-3.1.A 4 f74922ex3-1_a.txt EXHIBIT 3.1.A 1 EXHIBIT 3.1.a CERTIFICATE OF INCORPORATION OF GRANITE CONSTRUCTION INCORPORATED AS AMENDED (Effective May 25, 2001) FIRST: The name of the Corporation is Granite Construction Incorporated (hereinafter sometimes referred to as the "Corporation"). SECOND:The address of the registered office of the Corporation in the State of Delaware is Incorporating Services, Ltd., 15 East North Street, in the City of Dover, County of Kent. The name of the registered agent at that address is Incorporating Services, Ltd. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of Delaware. FOURTH: A. Capitalization. The total number of shares of all classes of stock which the Corporation shall have authority to issue is one hundred three million (103,000,000): (1) Three million (3,000,000) shares of Preferred Stock, par value one cent ($0.01) per share (the "Preferred Stock"); and (2) One hundred million (100,000,000) shares of Common Stock, par value one cent ($0.01) per share (the "Common Stock"). B. Series of Preferred Stock. The Board of Directors is authorized, subject to any limitations prescribed by law, to provide for the issuance of the shares of Preferred Stock in series, and by filing a certificate pursuant to the applicable law of the State of Delaware, to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences, and rights of the shares of each such series and any qualifications, limitations or restrictions thereof. FIFTH: The following provisions are inserted for the management of the business and the conduct of the affairs of the Corporation, and for further definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders: A. Powers of Directors. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. In addition to the powers and authority expressly conferred upon them by statute or by this Certificate of Incorporation or the 1 2 Bylaws of the Corporation, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation. B. Ballot Unnecessary. The directors of the Corporation need not be elected by written ballot unless the Bylaws so provide. C. Stockholders Must Meet to Act. Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders. D. Call of Special Meeting of Stockholders. Special meetings of stockholders of the Corporation may be called only (1) by the Board of Directors Pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board for adoption) or (2) by the holders of not less than ten percent (10%) of all of the shares entitled to cast votes at the meeting. The procedure for calling a special meeting of stockholders will be as set forth in this Certificate of Incorporation or the Bylaws. SIXTH: A. Classification of Directors. The directors shall be divided into three classes, as nearly equal in number as reasonably possible, with the term of office of the first class to expire at the 1991 annual meeting of stockholders, the term of office of the second class to expire at the 1992 annual meeting of stockholders and the term of office of the third class to expire at the 1993 annual meeting of stockholders. At each annual meeting of stockholders following such initial classification and election, directors shall be elected to succeed those directors whose terms expire for a term of office to expire at the third succeeding annual meeting of stockholders after their election. All directors shall hold office until the expiration of the term for which elected, and until their respective successors are elected, except in the case of the death, resignation, or removal of any director. B. Filling Vacancies on the Board. Subject to the rights of the holders of any series of Preferred Stock then outstanding, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, removal from office, disqualification or other cause may be filled only by a majority vote of the directors then in office, though less than a quorum, and directors so chosen shall hold office for a term expiring at the annual meeting of stockholders at which the term of office of the class to which they have been elected expires. C. Removal of Directors. Subject to the rights of the holders of any series of Preferred Stock then outstanding, any directors, or the entire Board of Directors, may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least a majority of the voting power of all of the then outstanding shares of capital 2 3 stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class. SEVENTH: Power to Amend Bylaws. The Board of Directors is expressly empowered to adopt, amend or repeal Bylaws of the Corporation. Any adoption, amendment or repeal of Bylaws of the Corporation by the Board of Directors shall require the approval of a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any resolution providing for adoption, amendment or repeal is presented to the Board) The stockholders shall also have power to adopt, amend or repeal the Bylaws of the Corporation In addition to any vote of the holders of any class or series of stock of this Corporation required by law or by this Certificate of Incorporation, the affirmative vote of the holders of at least 66-2/3 percent of the combined voting power of the outstanding shares of stock of all classes and series of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to adopt, amend or repeal any provision of the Bylaws of the Corporation. EIGHTH:[Intentionally omitted] NINTH: Board Discretion Regarding Certain Transactions. The Board of Directors of the Corporation (the "Board"), when evaluating any offer to another party (a) to make a tender or exchange offer for any capital stock of the Corporation or (b) to effect any merger, consolidation, or sale of all or substantially all of the assets of the Corporation, shall, in connection with the exercise of its judgment in determining what is in the best interests of the Corporation as a whole, be authorized to give due consideration to such factors as the Board determines to be relevant, including, without limitation: (i) the interests of the Corporation's stockholders; (ii) whether the proposed transaction might violate federal or state laws; (iii) not only the consideration being offered in the proposed transaction, in relation to the then current market price for the outstanding capital stock of the Corporation, but also in relation to the market price for the capital stock of the Corporation over a period of years, the estimated price that will be achieved in a negotiated sale of the Corporation as a whole or in part or through orderly liquidation, the premiums over market price for the securities of other corporations in similar transactions, current political, economic and other factors bearing on securities prices and the Corporation's financial condition and future prospects; and (iv) the social, legal and economic effects upon employees, suppliers, customers and others having similar relationships with the Corporation, and the communities in which the Corporation conducts its business. In connection with any such evaluation, the Board is authorized to conduct such investigations and to engage in such legal proceedings as the Board may determine. 3 4 TENTH: Elimination of Monetary Liability. The liability of the directors of the Corporation for monetary damages shall be eliminated to the fullest extent permissible under Delaware law. Any repeal or modification of the foregoing provisions of this Article TENTH by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. ELEVENTH: Future Amendments. The Corporation reserves the right to amend or repeal any provision contained in this Certificate of Incorporation in the manner prescribed by the laws of the State of Delaware and all rights conferred upon stockholders are granted subject to this reservation; provided, however, that, notwithstanding any other provision of this Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any vote of the holders of any class or series of the stock of this Corporation required by law or by this Certificate of Incorporation, the affirmative vote of the holders of at least 66-2/3 percent of the combined voting power of the outstanding shares of stock of all classes and series of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend, repeal or adopt any provision inconsistent with Article FIFTH (except Section D thereof), SIXTH (except Section C thereof), SEVENTH, EIGHTH, NINTH, TENTH or this Article ELEVENTH. TWELFTH: The name and mailing address of the sole incorporator is as follows:
Name Mailing Address ---- --------------- David H. Watts 585 West Beach St. Watsonville, CA 95076
I, THE UNDERSIGNED, being the president, do certify that the facts herein stated are true and, accordingly, have hereto set my hand this 23rd day of May, 2001. By: /s/ DAVID H. WATTS ------------------------------------ David H. Watts 4 EX-10.1 5 f74922ex10-1.txt EXHIBIT 10.1 1 EXHIBIT 10.1 - ------------------------------------------------------------------------------- [BANK OF AMERICA LOGO] CREDIT AGREEMENT Dated as of June 29, 2001 among GRANITE CONSTRUCTION INCORPORATED, as the Borrower, BANK OF AMERICA, N.A., as Administrative Agent, as a Lender, and as L/C Issuer, and The Other Lenders Party Hereto BANC OF AMERICA SECURITIES LLC, as Sole Lead Arranger and Sole Book Manager - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
Section Page - ------- ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS.... ................................ 1 1.01 DEFINED TERMS................................................................ 1 1.02 OTHER INTERPRETIVE PROVISIONS................................................ 16 1.03 ACCOUNTING TERMS............................................................. 16 1.04 ROUNDING..................................................................... 17 1.05 REFERENCES TO AGREEMENTS AND LAWS............................................ 17 ARTICLE II THE COMMITMENTS AND CREDIT EXTENSIONS................................ 17 2.01 LOANS........................................................................ 17 2.02 BORROWINGS, CONVERSIONS AND CONTINUATIONS OF LOANS........................... 17 2.03 LETTERS OF CREDIT............................................................ 19 2.04 PREPAYMENTS.................................................................. 24 2.05 REDUCTION OR TERMINATION OF COMMITMENTS...................................... 25 2.06 REPAYMENT OF LOANS........................................................... 25 2.07 INTEREST..................................................................... 25 2.08 FEES......................................................................... 26 2.09 COMPUTATION OF INTEREST AND FEES............................................. 26 2.10 EVIDENCE OF DEBT............................................................. 27 2.11 PAYMENTS GENERALLY........................................................... 27 2.12 SHARING OF PAYMENTS.......................................................... 28 2.13 GUARANTY OF OBLIGATIONS...................................................... 29 ARTICLE III. TAXES, YIELD PROTECTION AND ILLEGALITY .............................. 29 3.01 TAXES........................................................................ 29 3.02 ILLEGALITY................................................................... 30 3.03 INABILITY TO DETERMINE RATES................................................. 31 3.04 INCREASED COST AND REDUCED RETURN; CAPITAL ADEQUACY; RESERVES ON EURODOLLAR RATE LOANS.................................................................. 31 3.05 FUNDING LOSSES............................................................... 32 3.06 MATTERS APPLICABLE TO ALL REQUESTS FOR COMPENSATION.......................... 32 3.07 SURVIVAL..................................................................... 32 ARTICLE IV. CONDITIONS PRECEDENT TO CREDIT EXTENSIONS............................ 33 4.01 CONDITIONS TO EFFECTIVENESS AND INITIAL CREDIT EXTENSION..................... 33 4.02 CONDITIONS TO ALL CREDIT EXTENSIONS AND CONVERSIONS AND CONTINUATIONS........ 34 ARTICLE V. REPRESENTATIONS AND WARRANTIES....................................... 34 5.01 EXISTENCE, QUALIFICATION AND POWER; COMPLIANCE WITH LAWS..................... 35 5.02 AUTHORIZATION; NO CONTRAVENTION.............................................. 35 5.03 GOVERNMENTAL AUTHORIZATION................................................... 35 5.04 BINDING EFFECT............................................................... 35 5.05 FINANCIAL STATEMENTS; NO MATERIAL ADVERSE EFFECT............................. 35 5.06 LITIGATION................................................................... 36 5.07 NO DEFAULT................................................................... 36 5.08 OWNERSHIP OF PROPERTY; LIENS................................................. 36 5.09 ENVIRONMENTAL COMPLIANCE..................................................... 36 5.10 INSURANCE.................................................................... 37 5.11 TAXES........................................................................ 37 5.12 ERISA COMPLIANCE............................................................. 37 5.13 SUBSIDIARIES................................................................. 38 5.14 MARGIN REGULATIONS; INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT.......................................................................... 38
i 3 5.15 DISCLOSURE.................................................................. 38 5.16 INTELLECTUAL PROPERTY; LICENSES, ETC. ...................................... 38 5.17 SWAP CONTRACTS.............................................................. 39 5.18 LABOR RELATIONS............................................................. 39 5.19 USE OF PROCEEDS............................................................. 39 5.20 SOLVENCY.................................................................... 39 ARTICLE VI. AFFIRMATIVE COVENANTS............................................... 39 6.01 FINANCIAL STATEMENTS........................................................ 39 6.02 CERTIFICATES; OTHER INFORMATION............................................. 40 6.03 NOTICES..................................................................... 41 6.04 PAYMENT OF OBLIGATIONS...................................................... 42 6.05 PRESERVATION OF EXISTENCE, ETC. ............................................ 42 6.06 MAINTENANCE OF PROPERTIES................................................... 42 6.07 MAINTENANCE OF INSURANCE.................................................... 42 6.08 COMPLIANCE WITH LAWS........................................................ 42 6.09 BOOKS AND RECORDS........................................................... 43 6.10 INSPECTION RIGHTS........................................................... 43 6.11 COMPLIANCE WITH ERISA....................................................... 43 6.12 ENVIRONMENTAL LAWS.......................................................... 43 6.13 USE OF PROCEEDS............................................................. 43 6.14 TAX CLEARANCE CERTIFICATES.................................................. 44 ARTICLE VII. NEGATIVE COVENANTS.................................................. 44 7.01 LIENS....................................................................... 44 7.02 INVESTMENTS................................................................. 45 7.03 INDEBTEDNESS................................................................ 46 7.04 FUNDAMENTAL CHANGES......................................................... 47 7.05 DISPOSITIONS................................................................ 47 7.06 LEASE OBLIGATIONS........................................................... 48 7.07 RESTRICTED PAYMENTS......................................................... 48 7.08 ERISA....................................................................... 49 7.09 CHANGE IN NATURE OF BUSINESS OR IN STRUCTURE................................ 49 7.10 TRANSACTIONS WITH AFFILIATES................................................ 49 7.11 BURDENSOME AGREEMENTS....................................................... 49 7.12 USE OF PROCEEDS............................................................. 50 7.13 FINANCIAL COVENANTS......................................................... 50 ARTICLE VIII. EVENTS OF DEFAULT AND REMEDIES...................................... 50 8.01 EVENTS OF DEFAULT........................................................... 50 8.02 REMEDIES UPON EVENT OF DEFAULT.............................................. 52 ARTICLE IX. ADMINISTRATIVE AGENT................................................ 53 9.01 APPOINTMENT AND AUTHORIZATION OF ADMINISTRATIVE AGENT....................... 53 9.02 DELEGATION OF DUTIES........................................................ 53 9.03 LIABILITY OF ADMINISTRATIVE AGENT........................................... 53 9.04 RELIANCE BY ADMINISTRATIVE AGENT............................................ 54 9.05 NOTICE OF DEFAULT........................................................... 54 9.06 CREDIT DECISION; DISCLOSURE OF INFORMATION BY ADMINISTRATIVE AGENT.......... 54 9.07 INDEMNIFICATION OF ADMINISTRATIVE AGENT..................................... 55 9.08 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY............................. 55 9.09 SUCCESSOR ADMINISTRATIVE AGENT.............................................. 56 ARTICLE X. GENERAL PROVISIONS.................................................. 56 10.01 AMENDMENTS, ETC. .................................................... 56 10.02 NOTICES AND OTHER COMMUNICATIONS; FACSIMILE COPIES................... 57
ii 4 10.03 NO WAIVER; CUMULATIVE REMEDIES....................................... 58 10.04 ATTORNEY COSTS, EXPENSES AND TAXES................................... 58 10.05 INDEMNIFICATION BY THE BORROWER...................................... 59 10.06 PAYMENTS SET ASIDE................................................... 59 10.07 SUCCESSORS AND ASSIGNS............................................... 60 10.08 CONFIDENTIALITY...................................................... 62 10.09 SET-OFF.............................................................. 63 10.10 INTEREST RATE LIMITATION............................................. 63 10.11 COUNTERPARTS......................................................... 63 10.12 INTEGRATION.......................................................... 64 10.13 SURVIVAL OF REPRESENTATIONS AND WARRANTIES........................... 64 10.14 SEVERABILITY......................................................... 64 10.15 FOREIGN LENDERS...................................................... 64 10.16 REMOVAL AND REPLACEMENT OF LENDERS................................... 65 10.17 GOVERNING LAW........................................................ 65 10.18 WAIVER OF RIGHT TO TRIAL BY JURY..................................... 66 10.19 TIME OF THE ESSENCE.................................................. 66 SIGNATURES...................................................................S-1
iii 5 SCHEDULES A Existing Letters of Credit B Guarantors 2.01 Commitments and Pro Rata Shares 5.06 Litigation 5.09 Environmental Matters 5.13 Subsidiaries and Other Equity Investments 5.16 Intellectual Property Matters 7.01 Existing Liens 7.02 Existing Investments 7.03 Existing Indebtedness 7.06 Existing Leases 10.02 Eurodollar and Domestic Lending Offices; Addresses for Notices EXHIBITS Exhibit A Form of Loan Notice Exhibit B Form of Note Exhibit C Form of Compliance Certificate Exhibit D Form of Assignment and Assumption Agreement Exhibit E Form of Guaranty Exhibit F Form of Opinion of Counsel iv 6 CREDIT AGREEMENT This CREDIT AGREEMENT, dated as of June 29, 2001, is entered into among Granite Construction Incorporated, a Delaware corporation (the "Borrower"), each lender from time to time party hereto (collectively, the "Lenders" and, individually, a "Lender"), and BANK OF AMERICA, N.A., as Administrative Agent and as L/C Issuer. The Borrower has requested that the Lenders provide the Borrower with a senior unsecured revolving credit facility of up to $60,000,000, and the Lenders are willing to do so on the terms and conditions set forth herein. In consideration of the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the parties hereto covenant and agree as follows: ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS 1.01 DEFINED TERMS. As used in this Agreement, the following terms shall have the meanings set forth below: "Administrative Agent" means the sole administrative agent under the Loan Documents or any successor administrative agent, which, initially, shall be Bank of America. "Administrative Agent's Office" means the Administrative Agent's address and, as appropriate, account as set forth on Schedule 10.02, or such other address or account as the Administrative Agent may from time to time notify to the Borrower and the Lenders. "Affiliate" means, as to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person. A Person shall be deemed to be "controlled by" any other Person if such other Person possesses, directly or indirectly, power (a) to vote 5% or more of the securities having ordinary voting power for the election of directors or managing general partners; or (b) to direct or cause the direction of the management and policies of such Person whether by voting securities, through the ownership of contract or otherwise. "Agent-Related Persons" means the Administrative Agent (including any successor administrative agent), together with its Affiliates (including, in the case of Bank of America in its capacity as the Administrative Agent, the Arranger), and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates. "Aggregate Commitments" means, as of any date of determination, the aggregate amount of all Lenders' Commitments hereunder. "Agreement" means this Credit Agreement. "Applicable Rate" means, with respect to commitment fees, Base Rate Loans, Eurodollar Rate Loans and utilization fees, as applicable, the following percentages per annum (expressed in basis points per annum), each based upon the Pricing Level Leverage Ratio as set forth in the most recent Compliance Certificate received by the Administrative Agent pursuant to Section 6.02(b): 1 7
- ---------------------------------------------------------------------------------------------- PRICING PRICING LEVEL APPLICABLE APPLICABLE APPLICABLE APPLICABLE LEVEL LEVERAGE RATIO RATE RATE RATE (BASE RATE (COMMITMENT (EURODOLLAR RATE LOANS) (UTILIZATION FEE) RATE LOANS) FEE) - ---------------------------------------------------------------------------------------------- 1 Less than 0.50 to 25.0 100.0 00.0 12.5 1.00 - ---------------------------------------------------------------------------------------------- Less than 1.00 to 30.0 125.0 00.0 12.5 2 1.00 but greater than or equal to 0.50 to 1.00 - ---------------------------------------------------------------------------------------------- Less than 1.50 to 35.0 137.5 00.0 12.5 3 1.00 but greater than or equal to 1.00 to 1.00 - ---------------------------------------------------------------------------------------------- Greater than or 40.0 162.5 00.0 12.5 4 equal to 1.50 to 1.00 - ----------------------------------------------------------------------------------------------
Any increase or decrease in the Applicable Rate resulting from a change in the Pricing Level Leverage Ratio shall become effective as of the date that is the earlier of: (a) the last date by which the Borrower is otherwise required to deliver a Compliance Certificate in accordance with Section 6.02(b) with reference to Section 6.01 for a given fiscal period (each such date, a "Calculation Date"); and (b) the date that is two (2) Business Days after the date (prior to the related Calculation Date) on which the Borrower actually delivers a Compliance Certificate in accordance with Section 6.02(b) with reference to Section 6.01 for such fiscal period; provided that the Applicable Rate in effect from the Closing Date to the date that is two (2) Business Days following receipt by the Administrative Agent of a timely delivered Compliance Certificate with respect to the fiscal quarter ended June 30, 2001 shall be determined based upon Pricing Level 1; provided further that, if any Compliance Certificate for any fiscal period is not delivered to the Administrative Agent on or before the related Calculation Date, then Pricing Level 4 shall apply, effective on the related Calculation Date until two (2) Business Days after such Compliance Certificate is actually received by the Administrative Agent. "Approved Fund" has the meaning set forth in Section 10.07(h). "Arranger" means the Person acting as sole lead arranger and sole book manager, which, initially, shall be Banc of America Securities LLC. "Assignment and Assumption Agreement" means an Assignment and Assumption Agreement substantially in the form of Exhibit D. "Attorney Costs" means and includes all fees and disbursements of any law firm or other external counsel and the allocated cost of internal legal services and all disbursements of internal counsel. "Attributable Indebtedness" means, on any date, (a) in respect of any capital lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP, and (b) in respect of any Synthetic Lease Obligation, the capitalized amount of the remaining lease payments under the relevant lease that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease were accounted for as a capital lease. 2 8 "Audited Financial Statements" means the audited consolidated balance sheet of the Borrower and its Subsidiaries for the fiscal year ended December 31, 2000, and the related consolidated statements of income or operations, shareholders' equity and cash flows for such fiscal year of the Borrower and its Subsidiaries. "Auto-Renewal Letter of Credit" has the meaning set forth in Section 2.03(b)(iii). "Bank of America" means Bank of America, N.A. "Bankruptcy Code" means the federal Bankruptcy Reform Act of 1978 (11 U.S.C. Section 101 et seq.). "Base Rate" means for any day a fluctuating rate per annum equal to the higher of (a) the Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its "prime rate." Bank of America's "prime 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 such 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. "Base Rate Loan" means a Loan that bears interest based on the Base Rate. "Borrower" has the meaning set forth in the introductory paragraph hereto. "Borrowing" means a borrowing consisting of simultaneous Loans of the same Type and having the same Interest Period made by each of the Lenders pursuant to Section 2.01. "Business Day" means any day other than a Saturday, Sunday, or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the state where the Administrative Agent's Office is located and, if such day relates to any Eurodollar Rate Loan, means any such day on which dealings in Dollar deposits are conducted by and between banks in the London interbank eurodollar market. "Calculation Date" has the meaning set forth in the definition of "Applicable Rate" contained herein. "Capital Expenditures" means for any period and with respect to any Person, the aggregate of all expenditures by such Person and its Subsidiaries for the acquisition or leasing of fixed or capital assets or additions to equipment (including replacements, capitalized repairs and improvements during such period) which should be capitalized under GAAP on a consolidated balance sheet of such Person and its Subsidiaries, minus net proceeds from sales of fixed or capital assets received by such Person or any of its Subsidiaries during such period. For the purpose of this definition, the purchase price of equipment which is purchased simultaneously with the trade-in of existing equipment owned by such Person or any of its Subsidiaries or with insurance proceeds shall be included in Capital Expenditures only to the extent of the gross amount of such purchase price less the credit granted by the seller of such equipment for such equipment being traded in at such time, or the amount of such proceeds, as the case may be. "Cash Collateralize" means to pledge and deposit with or deliver to the Administrative Agent, for the benefit of the L/C Issuer and the Lenders, as collateral for the L/C Obligations, cash or deposit account balances pursuant to documentation in form and substance satisfactory to the Administrative Agent and the L/C Issuer (which documents are hereby consented to by the Lenders). Derivatives of such 3 9 term shall have corresponding meaning. The Borrower hereby grants the Administrative Agent, for the benefit of the L/C Issuer and the Lenders, a Lien on all such cash and deposit account balances. Cash collateral shall be maintained in blocked, non-interest bearing deposit accounts at Bank of America. "Change of Control" means, with respect to any Person, an event or series of events by which: (a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act, but excluding any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person or group shall be deemed to have "beneficial ownership" of all securities that such person or group has the right to acquire (such right, an "option right"), whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of 25% or more of the equity securities of such Person entitled to vote for members of the board of directors or equivalent governing body of such Person on a partially-diluted basis (i.e., taking into account all such securities that such person or group has the right to acquire pursuant to any option right); or (b) during any period of 12 consecutive months, a majority of the members of the board of directors or other equivalent governing body of such Person cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body. "Closing Date" means the first date on which all the conditions precedent in Section 4.01 are satisfied or waived in accordance with Section 4.01 (or, in the case of Section 4.01(b), waived by the Person entitled to receive the applicable payment). "Code" means the Internal Revenue Code of 1986. "Commitment" means, as to each Lender as of any date of determination, its obligation to (a) make Loans to the Borrower pursuant to Section 2.01, and (b) purchase participations in L/C Obligations, in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Lender's name on Schedule 2.01, as such amount may be reduced or adjusted from time to time in accordance with this Agreement. "Compensation Period" has the meaning set forth in Section 2.11(d)(ii). "Compliance Certificate" means a certificate substantially in the form of Exhibit C. "Consolidated EBITDA" means, for any period, for the Borrower and its Subsidiaries on a consolidated basis, an amount equal to the sum of (a) the operating income for such period plus (b) the amount of depreciation and amortization expense deducted in determining the operating income for such period. "Consolidated Funded Indebtedness" means, as of any date of determination, for the Borrower and its Subsidiaries on a consolidated basis, the sum of (a) the outstanding principal amount of all 4 10 obligations, whether current or long-term, for borrowed money (including Obligations hereunder) and all obligations evidenced by bonds, debentures, notes, loan agreements or other similar instruments, plus (b) Attributable Indebtedness in respect of capital leases and Synthetic Lease Obligations, plus (c) without duplication, all Guaranty Obligations with respect to Indebtedness of the types specified in subsections (a) and (b) above of Persons other than the Borrower or any Subsidiary. "Consolidated Interest Expense" means, for any period, for the Borrower and its Subsidiaries on a consolidated basis, the sum of (a) all interest, premium payments, fees, charges and related expenses of the Borrower and its Subsidiaries in connection with borrowed money (including capitalized interest) or in connection with the deferred purchase price of assets, in each case to the extent treated as interest in accordance with GAAP, plus (b) the portion of rent expense of the Borrower and its Subsidiaries with respect to such period under capital leases that is treated as interest in accordance with GAAP. "Consolidated Net Income" means, for any period, for the Borrower and its Subsidiaries on a consolidated basis, the net income of the Borrower and its Subsidiaries from continuing operations after extraordinary items (excluding gains or losses from Dispositions of assets) for that period. "Consolidated Shareholders' Equity" means, as of any date of determination for the Borrower and its Subsidiaries on a consolidated basis, shareholders' equity as of that date determined in accordance with GAAP. "Consolidated Tangible Net Worth" means, as of any date of determination, the amount equal to Consolidated Shareholders' Equity on that date minus the Intangible Assets of the Borrower and its Subsidiaries (determined on a consolidated basis in accordance with GAAP) on that date. "Contractual Obligation" means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. "Credit Extension" means each of the following: (a) a Borrowing; and (b) an L/C Credit Extension. "Debtor Relief Laws" means the Bankruptcy Code, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States of America or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally. "Default" means any event that, with the giving of any notice, the passage of time, or both, would be an Event of Default. "Default Rate" means a fluctuating interest rate per annum equal to (a) the Base Rate plus (b) the Applicable Rate, if any, applicable to Base Rate Loans plus (c) 2% per annum. "Disposition" or "Dispose" means the sale, transfer, license or other disposition (including any sale and leaseback transaction) of any property by any Person, including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith. "Dollar" and "$" means lawful money of the United States of America. "Eligible Assignee" has the meaning set forth in Section 10.07(h). 5 11 "Environmental Claims" means all claims, however asserted, by any Governmental Authority or any other Person alleging potential liability or responsibility for violation of any Environmental Law or for release or injury to the environment or threat to public health, personal injury (including sickness, disease or death), property damage, natural resources damage, or otherwise alleging liability or responsibility for damages (punitive or otherwise), cleanup, removal, remedial or response costs, restitution, civil or criminal penalties, injunctive relief, or other type of relief, resulting from or based upon (a) the presence, placement, discharge, emission or release (including intentional and unintentional, negligent and non-negligent, sudden or non-sudden, accidental or non-accidental placement, spills, leaks, discharges, emissions or releases) of any Hazardous Material at, in or from property, whether or not owned by the Borrower or any of its Subsidiaries, or (b) any other circumstances forming the basis of any violation, or alleged violation, of any Environmental Law. "Environmental Laws" means any and all federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including those related to hazardous substances or wastes, air emissions and discharges to waste or public systems. "Environmental Permits" has the meaning set forth in Section 5.09(b). "ERISA" means the Employee Retirement Income Security Act of 1974 and any regulations issued pursuant thereto. "ERISA Affiliate" means any trade or business (whether or not incorporated) under common control with the Borrower within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code). "ERISA Event" means any of the following: (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by the Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Borrower or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Sections 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Borrower or any ERISA Affiliate. "Eurodollar Rate" means for any Interest Period with respect to any Eurodollar Rate Loan: (a) the rate per annum equal to the rate determined by the Administrative Agent to be the offered rate that appears on the page of the Telerate screen (or any successor thereto) that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of such Interest Period, or 6 12 (b) if the rate referenced in the preceding subsection (a) does not appear on such page or service or such page or service shall cease to be available, the rate per annum equal to the rate determined by the Administrative Agent to be the offered rate on such other page or other service that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of such Interest Period, or (c) if the rates referenced in the preceding subsections (a) and (b) are not available, the rate per annum determined by the Administrative Agent as the rate of interest (rounded upward to the next 1/100th of 1%) at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the Eurodollar Rate Loan being made, continued or converted by Bank of America and with a term equivalent to such Interest Period would be offered by Bank of America's London Branch to major banks in the London interbank eurodollar market at their request at approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of such Interest Period. "Eurodollar Rate Loan" means a Loan that bears interest at a rate based on the Eurodollar Rate. "Event of Default" means any of the events or circumstances specified in Article VIII, Section 8.01. "Exchange Act" means the Securities Exchange Act of 1934 and the regulations promulgated thereunder. "Existing Letters of Credit" means the letters of credit issued by Bank of America (as the financial institution issuing letters of credit under the Prior Credit Facility) that are outstanding immediately prior to the effectiveness of this Agreement, as more particularly described on Schedule A. "Federal Funds Rate" means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the "Federal Funds Rate" for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the "Federal Funds Rate" for such day shall be the average rate charged to Bank of America on such day on such transactions as determined by the Administrative Agent. "Fee Letter" means that certain letter agreement, dated as of April 18, 2001, among the Borrower, the Arranger and the Administrative Agent. "Fixed Charge Coverage Ratio" means, as of any date of determination, the ratio of (a) the sum of (i) Consolidated EBITDA, measured for the period consisting of the four consecutive fiscal quarters ending on such day, plus (ii) interest income for such period (to the extent not included in Consolidated EBITDA for such period), minus (iii) all Capital Expenditures actually made during such period minus (iv) all taxes actually paid in cash during such period to (b) the sum of (i) Consolidated Interest Expense, measured for the period consisting of the four consecutive fiscal quarters ending on such day, which was deductible in determining the operating income for such period plus (ii) the current portion (determined in accordance with GAAP) of Consolidated Funded Indebtedness. 7 13 "Foreign Lender" has the meaning set forth in Section 10.15. "FRB" means the Board of Governors of the Federal Reserve System of the United States of America. "Fund" has the meaning set forth in Section 10.07(h). "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession, that are applicable to the circumstances as of the date of determination, consistently applied. "Governmental Authority" means any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, administrative tribunal, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. "Guarantors" means all of the Subsidiaries listed on Schedule B and all other Persons who, following the Closing Date, execute and deliver a guaranty, substantially in the form of Exhibit E, in favor of the Administrative Agent on behalf of the Lenders. "Guaranty" means the Guaranty, substantially in the form of Exhibit E, made by the Guarantors listed on Schedule B in favor of the Administrative Agent on behalf of the Lenders. "Guaranty Obligation" means, as to any Person, any (a) any obligation, contingent or otherwise, of such Person guarantying or having the economic effect of guarantying any Indebtedness or other obligation payable or performable by another Person (the "primary obligor") in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other obligation of the payment or performance of such Indebtedness or other obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or other obligation of any other Person, whether or not such Indebtedness or other obligation is assumed by such Person. The amount of any Guaranty Obligation shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guaranty Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guarantying Person in good faith. "Hazardous Materials" means, collectively, as of any date: (a) any petroleum or petroleum products, flammable explosives, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation, and transformers or other equipment that contain dielectric fluid containing polychlorinated biphenyls (PCB's); (b) any chemicals or other materials or substances which as of such date are defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants," "contaminants," "infectious wastes," "pollutants" or words of similar 8 14 import under any Environmental Law; and (c) any other chemical or other material or substance, exposure to which or use of which as of such date is prohibited, limited or regulated under any Environmental Law. "Honor Date" has the meaning set forth in Section 2.03(c)(i). "Indebtedness" means, as to any Person at a particular time, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP: (a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments; (b) all direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), reimbursement agreements, bankers' acceptances, bank guaranties, surety bonds and similar instruments (in each case, whether or not such obligations are contingent or absolute, provided that, for purposes of calculations made under Section 7.13, only surety bonds under which a breach or default has occurred and letters of credit which have been drawn and for which reimbursement must be made are to be included as "Indebtedness"); (c) net obligations under any Swap Contract in an amount equal to the Swap Termination Value thereof; (d) all obligations of such Person to pay the deferred purchase price of property or services (other than trade accounts payable in the Ordinary Course of Business); (e) indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse; (f) capital leases and Synthetic Lease Obligations; and (g) all Guaranty Obligations of such Person in respect of any of the foregoing. For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made non-recourse to such Person (subject only to customary exceptions acceptable to the Required Lenders). The amount of any capital lease or Synthetic Lease Obligation as of any date shall be deemed to be the amount of Attributable Indebtedness in respect thereof as of such date. "Indemnified Liabilities" has the meaning set forth in Section 10.05. "Indemnitees" has the meaning set forth in Section 10.05. "Information" has the meaning set forth in Section 10.08. "Intangible Assets" means assets that are considered to be intangible assets under GAAP, including customer lists, goodwill, computer software, copyrights, trade names, trade marks, patents, unamortized deferred charges, unamortized debt discount and capitalized research and development costs. 9 15 "Interest Payment Date" means, (a) as to any Eurodollar Rate Loan, the last day of each Interest Period applicable to such Loan; provided that, if any Interest Period for a Eurodollar Rate Loan exceeds three months, the respective dates that fall every three months after the beginning of such Interest Period shall also be Interest Payment Dates; and (b) as to any Base Rate Loan, the last Business Day of each March, June, September and December and the Maturity Date. "Interest Period" means, as to each Eurodollar Rate Loan, the period commencing on the date such Eurodollar Rate Loan is disbursed or converted to or continued as a Eurodollar Rate Loan and ending on the date one, two, three or six months thereafter, as selected by the Borrower in its Loan Notice; provided that: (a) any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless, in the case of a Eurodollar Rate Loan, such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day; (b) any Interest Period pertaining to a Eurodollar Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and (c) no Interest Period shall extend beyond the scheduled Maturity Date. "Investment" means, as to any Person, any acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of capital stock or other securities of another Person, (b) a loan, advance or capital contribution to, guaranty of debt of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person, or (c) the purchase or other acquisition (in one transaction or a series of transactions) of assets of another Person that constitute a business unit. For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment. "IP Rights" has the meaning set forth in Section 5.16. "IRS" means the United States Internal Revenue Service. "Joint Venture" means a single-purpose corporation, partnership, limited liability company, joint venture or other similar legal arrangement (whether created by contract or conducted through a separate legal entity) now or hereafter formed by one Person with another Person in order to conduct a common venture or enterprise with such Person. "Laws" means, collectively, all international, foreign, federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law. "L/C Advance" means, with respect to each Lender, such Lender's participation in any L/C Borrowing in accordance with its Pro Rata Share. 10 16 "L/C Borrowing" means an extension of credit resulting from a drawing under any Letter of Credit which has not been reimbursed on the date when made or refinanced as a Borrowing. "L/C Credit Extension" means, with respect to any Letter of Credit, the issuance thereof or extension of the expiry date thereof, or the renewal or increase of the amount thereof. "L/C Issuer" means the financial institution acting as issuer of Letters of Credit hereunder (or any successor issuer of Letters of Credit hereunder), which initially shall be Bank of America. "L/C Obligations" means, as at any date of determination, the aggregate undrawn face amount of all outstanding Letters of Credit plus the aggregate of all Unreimbursed Amounts, including all L/C Borrowings. "Lender" has the meaning set forth in the introductory paragraph hereto and, as the context requires, includes the L/C Issuer. "Lending Office" means, as to any Lender, the office or offices of such Lender described as such on Schedule 10.02, or such other office or offices as a Lender may from time to time notify the Borrower and the Administrative Agent. "Letter of Credit" means any standby letter of credit issued hereunder and shall include each Existing Letter of Credit. A "Letter of Credit" may not be a commercial letter of credit. "Letter of Credit Application" means an application and agreement for the issuance or amendment of a standby letter of credit in the form from time to time in use by the L/C Issuer. "Letter of Credit Expiration Date" means the day that is five (5) Business Days prior to the Maturity Date (or, if such day is not a Business Day, the next preceding Business Day). "Letter of Credit Sublimit" means an amount equal to the lesser of the Aggregate Commitments and $50,000,000. The Letter of Credit Sublimit is part of, and not in addition to, the Aggregate Commitments. "Leverage Ratio" means, as of any date of determination, the ratio of (a) Consolidated Funded Indebtedness to (b) Consolidated Funded Indebtedness plus Consolidated Tangible Net Worth. "Lien" means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the Uniform Commercial Code or comparable Laws of any jurisdiction), including the interest of a purchaser of accounts receivable. "Loan" means an extension of credit by a Lender to the Borrower under Article II in the form of a loan. "Loan Documents" means this Agreement, all Notes, the Fee Letter, all Requests for Credit Extensions, all Compliance Certificates, the Guaranty and all other agreements, documents and instruments (with the exception of Swap Contracts except to the extent expressly required pursuant to the terms hereof), executed and delivered by a Loan Party in connection with the transactions contemplated hereby in favor of the Administrative Agent, the Arranger, the L/C Issuer or any Lender. 11 17 "Loan Notice" means a notice of (a) a Borrowing, (b) a conversion of Loans from one Type to the other, or (c) a continuation of Loans as the same Type, pursuant to Section 2.02(a), which, if in writing, shall be substantially in the form of Exhibit A. "Loan Parties" means, collectively, the Borrower and each Guarantor. "Material Adverse Effect" means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, condition (financial or otherwise) or prospects of the Borrower or the Borrower and its Subsidiaries taken as a whole; (b) a material impairment of the ability of any Loan Party to perform its obligations under any Loan Document to which it is a party; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against any Loan Party of any Loan Document to which it is a party. "Material Subsidiary" means any Subsidiary that meets either of the following conditions: (a) such Subsidiary's total net revenues for the period of the immediately preceding four fiscal quarters is equal to or greater than 10% of the consolidated total net revenues of the Borrower and its Subsidiaries for such period, determined in accordance with GAAP, in each case as reflected in the most recent annual or quarterly financial statements of the Borrower required to be delivered pursuant to Section 6.01; or (b) such Subsidiary's total assets, as of the last day of the immediately preceding fiscal quarter, are equal to or greater than 10% of the consolidated total assets of the Borrower and its Subsidiaries as of such date, determined in accordance with GAAP, in each case as reflected in the most recent annual or quarterly (as applicable) financial statements of the Borrower required to be delivered pursuant to Section 6.01. "Maturity Date" means: (a) three (3) years from the date of execution and delivery of this Credit Agreement; or (b) such earlier date upon which the Aggregate Commitments are terminated in accordance with the terms hereof. "Maximum Rate" has the meaning set forth in Section 10.10. "Multiemployer Plan" means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding three calendar years, has made or been obligated to make contributions. "Non-Guarantor Subsidiary" has the meaning set forth in Section 2.13. "Nonrenewal Notice Date" has the meaning set forth in Section 2.03(b)(iii). "Note" means a promissory note, substantially in the form of Exhibit B, made by the Borrower in favor of a Lender evidencing the Loans made by such Lender. "Obligations" means all advances to, and debts, liabilities, obligations, covenants and duties of, any Loan Party arising under any Loan Document, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest that accrues after the commencement by or against any Loan Party or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding. "Ordinary Course of Business" means, in respect of any transaction involving the Borrower or any Subsidiary of the Borrower, (a) the ordinary course of such Person's business, substantially as 12 18 conducted by any such Person prior to or as of the Closing Date, and undertaken by such Person in good faith and not for purposes of evading any covenant or restriction in any Loan Document, or (b) transactions outside the ordinary course of such Person's then-existing business, as long as the Borrower provides written notice to the Administrative Agent and the Lenders prior to such Person undertaking such business, provided that the Required Lenders shall not have delivered written objections to the Administrative Agent within five (5) Business Days after their receipt of such written notice. "Organization Documents" means: (a) with respect to any corporation, such Person's certificate or articles of incorporation and its bylaws; (b) with respect to any limited liability company, such Person's articles of formation and operating agreement; and (c) with respect to any partnership, Joint Venture, trust or other form of business entity, such Person's applicable agreement of formation and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation with the secretary of state or other department in the state of its formation, in each case as amended from time to time. "Other Taxes" has the meaning set forth in Section 3.01(b). "Outstanding Amount" means: (a) with respect to Loans on any date, the aggregate outstanding principal amount thereof after giving effect to any borrowings and prepayments or repayments of Loans occurring on such date; and (b) with respect to any L/C Obligations on any date, the amount of such L/C Obligations on such date after giving effect to any L/C Credit Extension occurring on such date and any other changes in the aggregate amount of the L/C Obligations as of such date, including as a result of any reimbursements of outstanding unpaid drawings under any Letters of Credit or any reductions in the maximum amount available for drawing under Letters of Credit taking effect on such date. "Participant" has the meaning set forth in Section 10.07(d). "PBGC" means the Pension Benefit Guaranty Corporation. "Pension Plan" means any "employee pension benefit plan" (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by the Borrower or any ERISA Affiliate or to which the Borrower or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer plan (as described in Section 4064(a) of ERISA) has made contributions at any time during the immediately preceding five plan years. "Person" means any individual, trustee, corporation, general partnership, limited partnership, limited liability company, joint stock company, trust, unincorporated organization, bank, business association, firm, Joint Venture or Governmental Authority. "Plan" means any "employee benefit plan" (as such term is defined in Section 3(3) of ERISA) established by the Borrower or any ERISA Affiliate. "Pricing Level Leverage Ratio" means, as of any date of determination, the ratio of (a) Consolidated Funded Indebtedness as of such date to (b) Consolidated EBITDA for the period of the four fiscal quarters ending on such date. "Prior Credit Facility" means that certain Credit Agreement, dated as of June 30, 1997, as amended, modified or supplemented prior to the date hereof, among the Borrower, the financial institutions party thereto, and Bank of America, as administrative agent. 13 19 "Pro Rata Share" means, with respect to each Lender, the percentage (carried out to the ninth decimal place) of the Aggregate Commitments set forth opposite the name of such Lender on Schedule 2.01, as such share may be adjusted as contemplated herein. "Register" has the meaning set forth in Section 10.07(c). "Release" means any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration into the indoor or outdoor environment, including the movement of Hazardous Materials through ambient air, soil, surface water, ground water, wetlands, land or subsurface strata. "Reportable Event" means any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30 day notice period has been waived. "Request for Credit Extension" means (a) with respect to a Borrowing, conversion or continuation of Loans, a Loan Notice, and (b) with respect to an L/C Credit Extension, a Letter of Credit Application. "Required Lenders" means, as of any date of determination, Lenders whose Voting Percentages aggregate more than 50%. "Responsible Officer" means the president, chief operating officer, chief executive officer, chief financial officer, treasurer, assistant treasurer or secretary of a Loan Party. Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party. "Restricted Payment" means any dividend or other distribution (whether in cash, securities or other property) with respect to any capital stock of the Borrower or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such capital stock or of any option, warrant or other right to acquire any such capital stock. "SEC" means the Securities and Exchange Commission or any successor or similar Governmental Authority. "Solvent" means, as to any Person at any time, that: (a) the fair value of the property of such Person is greater than the amount of such Person's liabilities (including disputed, contingent and unliquidated liabilities) as such value is established and liabilities evaluated for purposes of section 101(32) of the Bankruptcy Code and, in the alternative, for purposes of the California Uniform Fraudulent Transfer Act; (b) the present fair saleable value of the property of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured; (c) such Person is able to realize upon its property and pay its debts and other liabilities (including disputed, contingent and unliquidated liabilities) as they mature in the normal course of business; (d) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature; and (e) such Person is not engaged in business or a transaction for which such Person's property would constitute unreasonably small capital. "Subsidiary" of a Person means a corporation, partnership, Joint Venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having 14 20 ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise specified, all references herein to a "Subsidiary" or to "Subsidiaries" shall refer to a Subsidiary or Subsidiaries of the Borrower. "Swap Contract" means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a "Master Agreement"), including any such obligations or liabilities under any Master Agreement. "Swap Termination Value" means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a) the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include any Lender). "Synthetic Lease Obligation" means the monetary obligation of a Person under (a) a so-called synthetic, off-balance sheet or tax retention lease, or (b) an agreement for the use or possession of property creating obligations that do not appear on the balance sheet of such Person but which, upon the insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment). "Taxes" has the meaning set forth in Section 3.01(a). "Type" means, with respect to a Loan, its character as a Base Rate Loan or a Eurodollar Rate Loan. "Unfunded Pension Liability" means the excess of a Pension Plan's benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Pension Plan's assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year. "Unreimbursed Amount" has the meaning set forth in Section 2.03(c)(i). "Voting Percentage" means, as to any Lender, (a) at any time when the Aggregate Commitments are in effect, such Lender's Pro Rata Share and (b) at any time after the termination of the Aggregate Commitments, the percentage (carried out to the ninth decimal place) which (i) the sum of (A) the Outstanding Amount of such Lender's Loans, plus (B) such Lender's Pro Rata Share of the Outstanding Amount of L/C Obligations, then comprises of (ii) the Outstanding Amount of all Loans and L/C 15 21 Obligations; provided that, if any Lender has failed to fund any portion of the Loans, participations in L/C Obligations required to be funded by it hereunder, such Lender's Voting Percentage shall be deemed to be zero, and the respective Pro Rata Shares and Voting Percentages of the other Lenders shall be recomputed for purposes of this definition and the definition of "Required Lenders" without regard to such Lender's Commitment or the outstanding amount of its Loans and L/C Advances, as the case may be. 1.02 OTHER INTERPRETIVE PROVISIONS. With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document: (a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms. (b) (i) The words "herein" and "hereunder" and words of similar import when used in any Loan Document shall refer to such Loan Document as a whole and not to any particular provision thereof. (ii) Article, Section, Exhibit and Schedule references are to the Loan Document in which such reference appears. (iii) The term "including" is by way of example and not limitation. (iv) The term "documents" includes any and all instruments, documents, agreements, certificates, notices, reports, financial statements and other writings, however evidenced, whether in physical or electronic form. (c) In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including;" the words "to" and "until" each mean "to but excluding;" and the word "through" means "to and including." (d) Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document. (e) Unless otherwise expressly provided herein: (i) references to agreements (including this Agreement) and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of any Loan Document; and (ii) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting the statute or regulation. 1.03 ACCOUNTING TERMS. (a) All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to time, applied in a manner consistent with that used in preparing the Audited Financial Statements, except as otherwise specifically prescribed herein. (b) If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either the Borrower or the Required Lenders shall so 16 22 request, the Administrative Agent, the Lenders and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders); provided that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Borrower shall provide to the Administrative Agent and the Lenders financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP. 1.04 ROUNDING. Any financial ratios required to be maintained by the Borrower pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number). 1.05 REFERENCES TO AGREEMENTS AND LAWS. Unless otherwise expressly provided herein, (a) references to agreements (including the Loan Documents) and other contractual instruments shall be deemed to include all subsequent amendments, restatements, extensions, supplements and other modifications thereto, but only to the extent that such amendments, restatements, extensions, supplements and other modifications are not prohibited by any Loan Document; and (b) references to any Law shall include all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting such Law. ARTICLE II. THE COMMITMENTS AND CREDIT EXTENSIONS 2.01 LOANS. Subject to the terms and conditions set forth herein, each Lender severally agrees to make loans to the Borrower from time to time on any Business Day during the period from the Closing Date to the Maturity Date in an aggregate amount not to exceed at any time outstanding the amount of such Lender's Commitment; provided that, after giving effect to any Borrowing, (i) the aggregate Outstanding Amount of all Loans and L/C Obligations shall not exceed the Aggregate Commitments, and (ii) the aggregate Outstanding Amount of the Loans of any Lender plus such Lender's Pro Rata Share of the Outstanding Amount of all L/C Obligations shall not exceed such Lender's Commitment. Within the limits of each Lender's Commitment, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.01, prepay under Section 2.04, and reborrow under this Section 2.01. Loans may be Base Rate Loans or Eurodollar Rate Loans, as further provided herein. 2.02 BORROWINGS, CONVERSIONS AND CONTINUATIONS OF LOANS. (a) Each Borrowing, each conversion of Loans from one Type to a different Type and each continuation of Loans as the same Type shall be made upon the Borrower's irrevocable notice to the Administrative Agent, which may be given by telephone. Each such notice must be received by the Administrative Agent not later than 9:00 a.m., San Francisco time, (i) three (3) Business Days prior to the requested date of any Borrowing of, conversion to or continuation of Eurodollar Rate Loans or of any conversion of Eurodollar Rate Loans to Base Rate Loans, and (ii) on the requested date of any Borrowing of Base Rate Loans. Each such telephonic notice must be confirmed immediately by delivery to the Administrative Agent of a written Loan Notice (which may be sent by facsimile), appropriately 17 23 completed and signed by two (2) Responsible Officers of the Borrower. Each Borrowing of Loans, each conversion of Loans from one Type to another Type, and each continuation of Eurodollar Rate Loans shall be in a principal amount of $3,000,000 or a whole multiple of $1,000,000 in excess thereof. Each Loan Notice (whether telephonic or written) shall specify (i) whether the Borrower is requesting a Borrowing, a conversion of Loans from one Type to the other, or a continuation of Loans as the same Type, (ii) the requested date of the Borrowing, conversion or continuation, as the case may be (which shall be a Business Day), (iii) the principal amount of Loans to be borrowed, converted or continued, (iv) the Type of Loans to be borrowed or to which existing Loans are to be converted, and (v) if applicable, the duration of the Interest Period with respect thereto. If the Borrower fails to specify a Type of Loan in a Loan Notice or if the Borrower fails to give a timely notice requesting a conversion or continuation, then the applicable Loans shall be made or continued as, or converted to, Base Rate Loans. Any such automatic conversion to Base Rate Loans shall be effective as of the last day of the Interest Period then in effect with respect to the applicable Eurodollar Rate Loans. If the Borrower requests a Borrowing of, conversion to, or continuation of Eurodollar Rate Loans in any such Loan Notice, but fails to specify an Interest Period, it will be deemed to have specified an Interest Period of one month. (b) Following receipt of a Loan Notice, the Administrative Agent shall promptly notify each Lender of its Pro Rata Share of the applicable Loans, and if no timely notice of a conversion or continuation is provided by the Borrower, the Administrative Agent shall notify each Lender of the details of any automatic conversion to Base Rate Loans described in the preceding subsection. In the case of a Borrowing, each Lender shall make the amount of its Loan available to the Administrative Agent in immediately available funds at the Administrative Agent's Office not later than 11:00 a.m., San Francisco time, on the Business Day specified in the applicable Loan Notice. Upon satisfaction of the applicable conditions set forth in Section 4.02 (and, if such Borrowing is the initial Credit Extension, Section 4.01), the Administrative Agent shall make all funds so received available to the Borrower in like funds as received by the Administrative Agent either by (i) crediting the account of the Borrower on the books of Bank of America with the amount of such funds or (ii) wire transfer of such funds, in each case in accordance with instructions provided to the Administrative Agent by the Borrower; provided that, if, on the date of the Borrowing, there are L/C Borrowings outstanding, then the proceeds of such Borrowing shall be applied, first, to the payment in full of any such L/C Borrowings and, second, to the Borrower as provided above. (c) Except as otherwise provided herein, a Eurodollar Rate Loan may be continued or converted only on the last day of the Interest Period for such Eurodollar Rate Loan. During the existence of a Default or Event of Default, no Loans may be requested as, converted to or continued as Eurodollar Rate Loans without the consent of the Required Lenders, and the Required Lenders may demand that any or all of the then outstanding Eurodollar Rate Loans be converted immediately to Base Rate Loans. (d) The Administrative Agent shall promptly notify the Borrower and the Lenders of the interest rate applicable to any Eurodollar Rate Loan upon determination of such interest rate. The determination of the Eurodollar Rate by the Administrative Agent shall be conclusive in the absence of manifest error. The Administrative Agent shall notify the Borrower and the Lenders of any change in Bank of America's prime rate used in determining the Base Rate promptly following the public announcement of such change. (e) After giving effect to all Borrowings, all conversions of Loans from one Type to the other, and all continuations of Loans as the same Type, there shall not be more than ten Interest Periods in effect with respect to Loans. 18 24 2.03 LETTERS OF CREDIT. (a) The Letter of Credit Commitment. (i) Subject to the terms and conditions set forth herein, (A) the L/C Issuer agrees, in reliance upon the agreements of the other Lenders set forth in this Section 2.03, (1) from time to time on any Business Day during the period from the Closing Date until the Letter of Credit Expiration 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 subsection (b) below, and (2) to honor drafts under the Letters of Credit; and (B) the Lenders severally agree to participate in Letters of Credit issued for the account of the Borrower; provided that the L/C Issuer shall not be obligated to make any L/C Credit Extension with respect to any Letter of Credit, and no Lender shall be obligated to participate in, any Letter of Credit if as of the date of such L/C Credit Extension, (x) the Outstanding Amount of all L/C Obligations and all Loans would exceed the Aggregate Commitments, (y) the sum of the aggregate Outstanding Amount of the Loans of any Lender plus such Lender's Pro Rata Share of the Outstanding Amount of all L/C Obligations would exceed such Lender's Commitment, or (z) the Outstanding Amount of the L/C Obligations would exceed the Letter of Credit Sublimit. Within the foregoing limits, and subject to the terms and conditions hereof, the Borrower's ability to obtain Letters of Credit shall be fully revolving, and accordingly the Borrower may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit that have expired or that have been drawn upon and reimbursed. All Existing Letters of Credit shall be deemed to have been issued pursuant hereto and, from and after the Closing Date, shall be subject to and governed by the terms and conditions hereof. (ii) The L/C Issuer shall be under no obligation to issue any Letter of Credit if: (A) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the L/C Issuer from issuing such Letter of Credit, or any Law applicable to the L/C Issuer or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the L/C Issuer shall prohibit, or request that the L/C Issuer refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the L/C Issuer with respect to such Letter of Credit any restriction, reserve or capital requirement (for which the L/C Issuer is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon the L/C Issuer any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which the L/C Issuer in good faith deems material to it; (B) subject to clause (C) below and subject to Section 2.03(b)(iii), the expiry date of any Letter of Credit would occur more than one year after the date of issuance or last renewal, unless the Required Lenders have approved such expiry date; (C) the expiry date of such requested Letter of Credit would occur after the Letter of Credit Expiration Date, unless all the Lenders have approved such expiry date; (D) the issuance of such Letter of Credit would violate one or more policies of the L/C Issuer or such Letter of Credit does not provide for drafts; (E) the face amount of any Letter of Credit (other than an Existing Letter of Credit) is less than $1,000,000; 19 25 (F) such Letter of Credit is for the purpose of supporting the issuance of any letter of credit issued by any other Person; or (G) such Letter of Credit is denominated in a currency other than Dollars. (iii) The L/C Issuer shall be under no obligation to amend any Letter of Credit if (A) the L/C Issuer would have no obligation at such time to issue such Letter of Credit in its amended form under the terms hereof, or (B) the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit. (b) Procedures for Issuance and Amendment of Letters of Credit; Auto-Renewal Letters of Credit. (i) Each Letter of Credit shall be issued or amended, as the case may be, upon the request of the Borrower delivered to the L/C Issuer (with a copy to the Administrative Agent) in the form of a Letter of Credit Application, appropriately completed and signed by two (2) Responsible Officers of the Borrower. Such L/C Application must be received by the L/C Issuer and the Administrative Agent not later than 9:00 a.m., San Francisco time, at least two (2) Business Days (or such later date and time as the L/C Issuer may agree in a particular instance in its sole discretion) prior to the proposed issuance date or date of amendment, as the case may be. In the case of a request for an initial issuance of a Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the L/C Issuer: (A) the proposed issuance date of the requested Letter of Credit (which shall be a Business Day); (B) the amount thereof; (C) the expiry date thereof; (D) the name and address of the beneficiary thereof; (E) the documents to be presented by such beneficiary in case of any drawing thereunder; (F) the full text of any certificate to be presented by such beneficiary in case of any drawing thereunder; and (G) such other matters as the L/C Issuer may require. In the case of a request for an amendment of any outstanding Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the L/C Issuer (A) the Letter of Credit to be amended; (B) the proposed date of amendment thereof (which shall be a Business Day); (C) the nature of the proposed amendment; and (D) such other matters as the L/C Issuer may require. (ii) Promptly after receipt of any Letter of Credit Application, the L/C Issuer will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has received a copy of such Letter of Credit Application from the Borrower and, if not, the L/C Issuer will provide the Administrative Agent with a copy thereof. Upon receipt by the L/C Issuer of confirmation from the Administrative Agent that the requested issuance or amendment is permitted in accordance with the terms hereof, then, subject to the terms and conditions hereof, the L/C Issuer shall, on the requested date, issue a Letter of Credit for the account of the Borrower or enter into the applicable amendment, as the case may be, in each case in accordance with the L/C Issuer's usual and customary business practices. 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 L/C Issuer a risk participation in such Letter of Credit in an amount equal to the product of such Lender's Pro Rata Share times the amount of such Letter of Credit. (iii) If the Borrower so requests in any applicable Letter of Credit Application, the L/C Issuer may, in it sole and absolute discretion, agree to issue a Letter of Credit that has automatic renewal provisions (each, an "Auto-Renewal Letter of Credit"); provided that any such Auto-Renewal Letter of Credit must permit the L/C Issuer to prevent any such renewal at least 20 26 once in each twelve-month period (commencing with the date of issuance of such Letter of Credit) by giving prior notice to the beneficiary thereof not later than a day (the "Nonrenewal Notice Date") in each such twelve-month period to be agreed upon at the time such Letter of Credit is issued. Unless otherwise directed by the L/C Issuer, the Borrower shall not be required to make a specific request to the L/C Issuer for any such renewal. Once an Auto-Renewal Letter of Credit has been issued, the Lenders shall be deemed to have authorized (but may not require) the L/C Issuer to permit the renewal of such Letter of Credit at any time to a date not later than the Letter of Credit Expiration Date; provided that the L/C Issuer shall not permit any such renewal if (A) the L/C Issuer would have no obligation at such time to issue such Letter of Credit in its renewed form under the terms hereof, or (B) it has received notice (which shall be in writing, including by facsimile) on or before the Business Day immediately preceding the Nonrenewal Notice Date (1) from the Administrative Agent that the Required Lenders have elected not to permit such renewal or (2) from the Administrative Agent, any Lender or the Borrower that one or more of the applicable conditions specified in Section 4.02 is not then satisfied. Notwithstanding anything to the contrary contained herein, the L/C Issuer shall have no obligation to permit the renewal of any Auto-Renewal Letter of Credit at any time. (iv) Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit to an advising bank with respect thereto or to the beneficiary thereof, the L/C Issuer will also deliver to the Borrower and the Administrative Agent a true and complete copy of such Letter of Credit or amendment. (c) Drawings and Reimbursements; Funding of Participations. (i) Upon any drawing under any Letter of Credit, the L/C Issuer shall notify the Borrower and the Administrative Agent thereof. Not later than 9:00 a.m., San Francisco time, on the date of any payment by the L/C Issuer under a Letter of Credit (each such date, an "Honor Date"), the Borrower shall reimburse the L/C Issuer through the Administrative Agent in an amount equal to the amount of such drawing. If the Borrower fails to so reimburse the L/C Issuer by such time, the Administrative Agent shall promptly notify each Lender of the Honor Date, the amount of the unreimbursed drawing (the "Unreimbursed Amount"), and such Lender's Pro Rata Share thereof. In such event, the Borrower shall be deemed to have requested a Borrowing of Base Rate Loans to be disbursed on the Honor Date in an amount equal to the Unreimbursed Amount, without regard to the minimum and multiples specified in Section 2.02 for the principal amount of Base Rate Loans, but subject to the amount of the unutilized portion of the Aggregate Commitments and the conditions set forth in Section 4.02 (other than the delivery of a Loan Notice). Any notice given by the L/C Issuer or the Administrative Agent pursuant to this Section 2.03(c)(i) may be given by telephone if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice. (ii) Each Lender (including the Lender acting as L/C Issuer) shall upon any notice pursuant to Section 2.03(c)(i) make funds available to the Administrative Agent for the account of the L/C Issuer at the Administrative Agent's Office in an amount equal to its Pro Rata Share of the Unreimbursed Amount not later than 11:00 a.m., San Francisco time, on the Business Day specified in such notice by the Administrative Agent, whereupon, subject to the provisions of Section 2.03(c)(iii), each Lender that so makes funds available shall be deemed to have made a Base Rate Loan to the Borrower in such amount. The Administrative Agent shall remit the funds so received to the L/C Issuer. 21 27 (iii) With respect to any Unreimbursed Amount that is not fully refinanced by a Borrowing of Base Rate Loans because the conditions set forth in Section 4.02 cannot be satisfied or for any other reason, the Borrower shall be deemed to have incurred from the L/C Issuer an L/C Borrowing in the amount of the Unreimbursed Amount that is not so refinanced, which L/C Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the Default Rate. In such event, each Lender's payment to the Administrative Agent for the account of the L/C Issuer pursuant to Section 2.03(c)(ii) shall be deemed payment in respect of its participation in such L/C Borrowing and shall constitute an L/C Advance from such Lender in satisfaction of its participation obligation under this Section 2.03. (iv) Until each Lender funds its Loan or L/C Advance pursuant to this Section 2.03(c) to reimburse the L/C Issuer for any amount drawn under any Letter of Credit, interest in respect of such Lender's Pro Rata Share of such amount shall be solely for the account of the L/C Issuer. (v) Each Lender's obligation to make Loans or L/C Advances to reimburse the L/C Issuer for amounts drawn under Letters of Credit, as contemplated by this Section 2.03(c), shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against the L/C Issuer, the Borrower or any other Person for any reason whatsoever; (B) the occurrence or continuance of a Default or Event of Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing. Any reimbursement pursuant to this Section 2.03 shall not relieve or otherwise impair the obligation of the Borrower to reimburse the L/C Issuer for the amount of any payment made by the L/C Issuer under any Letter of Credit, together with interest as provided herein. (vi) If any Lender fails to make available to the Administrative Agent for the account of the L/C Issuer any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 2.03(c) by the time specified in Section 2.03(c)(ii), the L/C Issuer shall be entitled to recover from such Lender (acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to the L/C Issuer at a rate per annum equal to the Federal Funds Rate from time to time in effect. A certificate of the L/C Issuer submitted to any Lender (through the Administrative Agent) with respect to any amounts owing under this clause (vi) shall be conclusive absent manifest error. (d) Repayment of Participations. (i) At any time after the L/C Issuer has made a payment under any Letter of Credit and has received from any Lender such Lender's L/C Advance in respect of such payment in accordance with Section 2.03(c), if the Administrative Agent receives for the account of the L/C Issuer any payment related to such Letter of Credit (whether directly from the Borrower or otherwise, including proceeds of Cash Collateral applied thereto by the Administrative Agent), or any payment of interest thereon, the Administrative Agent will distribute to such Lender its Pro Rata Share thereof in the same funds as those received by the Administrative Agent. (ii) If any payment received by the Administrative Agent for the account of the L/C Issuer pursuant to Section 2.03(c)(i) is required to be returned, each Lender shall pay to the Administrative Agent for the account of the L/C Issuer its Pro Rata Share thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned by such Lender, at a rate per annum equal to the Federal Funds Rate from time to time in effect. 22 28 (e) Obligations Absolute. The obligation of the Borrower to reimburse the L/C Issuer for each drawing under each Letter of Credit, and to repay each L/C Borrowing and each drawing under a Letter of Credit that is refinanced by a Borrowing of Loans, shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following: (i) any lack of validity or enforceability of such Letter of Credit, this Agreement, or any other agreement or instrument relating thereto; (ii) the existence of any claim, counterclaim, set-off, defense or other right that the Borrower may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), the L/C Issuer or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction; (iii) any draft, demand, certificate or other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit; (iv) any payment by the L/C Issuer under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; or any payment made by the L/C Issuer under such Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of such Letter of Credit, including any arising in connection with any proceeding under any Debtor Relief Law; or (v) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower. The Borrower shall promptly examine a copy of each Letter of Credit and each amendment thereto that is delivered to it and, in the event of any claim of noncompliance with the Borrower's instructions or other irregularity, the Borrower will immediately notify the L/C Issuer. The Borrower shall be conclusively deemed to have waived any such claim against the L/C Issuer and its correspondents unless such notice is given as aforesaid. (f) Role of L/C Issuer. Each Lender and the Borrower agree that, in paying any drawing under a Letter of Credit, the L/C Issuer shall not have any responsibility to obtain any document (other than any sight draft, certificates and documents expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document. No Agent-Related Person nor any of the respective correspondents, participants or assignees of the L/C Issuer shall be liable to any Lender for (i) any action taken or omitted in connection herewith at the request or with the approval of the Lenders or the Required Lenders, as applicable; (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; or (iii) the due execution, effectiveness, validity or enforceability of any document or instrument related to any Letter of Credit or Letter of Credit Application. The Borrower hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided that this 23 29 assumption is not intended to, and shall not, preclude the Borrower's pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement. No Agent-Related Person, nor any of the respective correspondents, participants or assignees of the L/C Issuer, shall be liable or responsible for any of the matters described in clauses (i) through (v) of Section 2.03(e); provided that, notwithstanding anything in such clauses to the contrary, the Borrower may have a claim against the L/C Issuer, and the L/C Issuer may be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by the Borrower which the Borrower proves were caused by the L/C Issuer's willful misconduct or gross negligence or the L/C Issuer's willful failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of a Letter of Credit. In furtherance and not in limitation of the foregoing, the L/C Issuer may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary, and the L/C Issuer shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason. (g) Cash Collateral. Upon the request of the Administrative Agent, (i) if the L/C Issuer has honored any full or partial drawing request under any Letter of Credit and such drawing has resulted in an L/C Borrowing, or (ii) if, as of the Letter of Credit Expiration Date, any Letter of Credit may for any reason remain outstanding and partially or wholly undrawn, the Borrower shall immediately Cash Collateralize the then Outstanding Amount of all L/C Obligations (in an amount equal to such Outstanding Amount). (h) Applicability of ISP98. Unless otherwise expressly agreed by the L/C Issuer and the Borrower when a Letter of Credit is issued (including any such agreement applicable to an Existing Letter of Credit), the rules of the "International Standby Practices 1998" published by the Institute of International Banking Law & Practice (or such later version thereof as may be in effect at the time of issuance) shall apply to each standby Letter of Credit. (i) Letter of Credit Fees. The Borrower shall pay to the Administrative Agent for the account of each Lender in accordance with its Pro Rata Share a Letter of Credit fee for each Letter of Credit equal to the Applicable Rate (for Eurodollar Rate Loans) multiplied by the actual daily maximum amount available to be drawn under such Letter of Credit. Such fee for each Letter of Credit shall be due and payable on the last Business Day of each March, June, September and December, commencing with the first such date to occur after the issuance of such Letter of Credit, and on the Letter of Credit Expiration Date. (j) Fronting Fee and Documentary and Processing Charges Payable to L/C Issuer. The Borrower shall pay directly to the L/C Issuer for its own account a fronting fee with respect to each Letter of Credit in the amounts and at the times specified in the Fee Letter. In addition, the Borrower shall pay directly to the L/C Issuer for its own account the customary issuance, presentation, amendment and other processing fees, and other standard costs and charges, of the L/C Issuer relating to letters of credit as from time to time in effect. Such fees and charges are due and payable on demand and are nonrefundable. (k) Conflict with Letter of Credit Application. In the event of any conflict between the terms hereof and the terms of any Letter of Credit Application, the terms hereof shall control. 2.04 PREPAYMENTS. 24 30 (a) The Borrower may, upon notice to the Administrative Agent, at any time or from time to time voluntarily prepay Loans in whole or in part without premium or penalty; provided that (i) such notice must be received by the Administrative Agent not later than 9:00 a.m., San Francisco time, (A) three (3) Business Days prior to any date of prepayment of Eurodollar Rate Loans, and (B) on the date of prepayment of Base Rate Loans; and (ii) any prepayment of Loans shall be in a principal amount of $3,000,000 or a whole multiple of $1,000,000 in excess thereof. Each such notice shall specify the date and amount of such prepayment and the Type(s) of Loans to be prepaid. The Administrative Agent will promptly notify each Lender of its receipt of each such notice, and of such Lender's Pro Rata Share of such prepayment. If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein. Any prepayment of a Eurodollar Rate Loan shall be accompanied by all accrued interest thereon, together with any additional amounts required pursuant to Section 3.05. Each such prepayment shall be applied to the Loans of the Lenders in accordance with their respective Pro Rata Shares. (b) If for any reason the Outstanding Amount of all Loans and L/C Obligations at any time exceeds the Aggregate Commitments then in effect, the Borrower shall immediately prepay Loans and/or Cash Collateralize the L/C Obligations in an aggregate amount equal to such excess. 2.05 REDUCTION OR TERMINATION OF COMMITMENTS. The Borrower may, upon notice to the Administrative Agent, terminate the Aggregate Commitments, or permanently reduce the Aggregate Commitments to an amount not less than the then Outstanding Amount of all Loans and L/C Obligations; provided that (i) any such notice shall be received by the Administrative Agent not later than 9:00 a.m., San Francisco time, five (5) Business Days prior to the date of termination or reduction, and (ii) any such partial reduction shall be in an aggregate amount of $10,000,000 or any whole multiple of $1,000,000 in excess thereof. The Administrative Agent shall promptly notify the Lenders of any such notice of reduction or termination of the Aggregate Commitments. Once reduced in accordance with this Section, the Aggregate Commitments may not be increased. Any reduction of the Aggregate Commitments shall be applied to the Commitment of each Lender according to its Pro Rata Share. All fees accrued until the effective date of any termination of the Aggregate Commitments shall be paid on the effective date of such termination. 2.06 REPAYMENT OF LOANS. The Borrower shall repay to the Lenders on the Maturity Date the aggregate principal amount of Loans outstanding on such date. 2.07 INTEREST. (a) Subject to the provisions of subsection (b) below, (i) each Eurodollar Rate Loan shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the Eurodollar Rate for such Interest Period plus the Applicable Rate; and (ii) each Base Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Rate. (b) While any Event of Default exists or after acceleration, the Borrower shall pay interest on the principal amount of all outstanding Obligations at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Law. Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable upon demand. 25 31 (c) Interest on each Loan shall be due and payable in arrears on each Interest Payment Date applicable thereto and at such other times as may be specified herein. Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law. 2.08 FEES. In addition to certain fees described in subsections (i) and (j) of Section 2.03: (a) Commitment Fee. The Borrower shall pay to the Administrative Agent for the account of each Lender in accordance with its Pro Rata Share, a commitment fee equal to the Applicable Rate multiplied by the actual daily amount by which the Aggregate Commitments exceed the sum of (i) the Outstanding Amount of Loans and (ii) the Outstanding Amount of L/C Obligations during a quarterly period. The commitment fee shall accrue at all times from the Closing Date until the Maturity Date and shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December, commencing with the first such date to occur after the Closing Date, and on the Maturity Date. The commitment fee shall be calculated quarterly in arrears, and, if there is any change in the Applicable Rate during any quarter, the actual daily amount shall be computed and multiplied by the Applicable Rate separately for each period during such quarter that such Applicable Rate was in effect. The commitment fee shall accrue at all times, including at any time during which one or more of the conditions in Article IV is not met. (b) Utilization Fee. The Borrower shall pay to the Administrative Agent for the account of each Lender in accordance with its Pro Rata Share, a utilization fee equal to the Applicable Rate multiplied by the actual daily aggregate Outstanding Amount of Loans and L/C Obligations on each day that such aggregate Outstanding Amount exceeds 33% of the Aggregate Commitments. The utilization fee shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December, commencing with the first such date to occur after the Closing Date, and on the Maturity Date. The utilization fee shall be calculated quarterly in arrears. The utilization fee shall accrue at all times, including at any time during which one or more of the conditions in Article IV is not met. (c) Arrangement and Agency Fees. The Borrower shall pay an arrangement fee to the Arranger for the Arranger's own account, and shall pay an agency fee to the Administrative Agent for the Administrative Agent's own account, in the amounts and at the times specified in the Fee Letter. Such fees shall be fully earned when paid and shall be nonrefundable for any reason whatsoever. (d) Lenders' Upfront Fees. On the Closing Date, the Borrower shall pay to the Administrative Agent, for the account of the Lenders in accordance with their respective Pro Rata Shares, an upfront fee in an amount set forth in the Fee Letter. Such upfront fees are for the credit facilities committed by the Lenders under this Agreement and are fully earned on the date paid. The upfront fee paid to each Lender is solely for its own account and is nonrefundable for any reason whatsoever. 2.09 COMPUTATION OF INTEREST AND FEES. Interest on Base Rate Loans shall be calculated on the basis of a year of 365 or 366 days, as the case may be, and the actual number of days elapsed. Computation of all other types of interest and all fees shall be calculated on the basis of a year of 360 days and the actual number of days elapsed, which results in a higher yield to the payee thereof than a method based on a year of 365 or 366 days. Interest shall accrue on each Loan for the day on which the Loan is made and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan (or any such portion) is paid; provided that any Loan that is repaid on the same day on which it is made shall bear interest for one day. 26 32 2.10 EVIDENCE OF DEBT. (a) The Credit Extensions made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and by the Administrative Agent in the ordinary course of business. The accounts or records maintained by the Administrative Agent and each Lender shall be conclusive (absent manifest error) of the amount of the Credit Extensions made by the Lenders to the Borrower and all interest and payments thereon. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Loans or the L/C Obligations. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of such Lender shall control. Upon the request of any Lender made through the Administrative Agent, such Lender's Loans may be evidenced by a Note in addition to such accounts or records. Each Lender may attach schedules to its Note(s) and endorse thereon the date, Type (if applicable), amount and maturity of the applicable Loans and payments with respect thereto. (b) In addition to the accounts and records referred to in subsection (a), each Lender and the Administrative Agent shall maintain in accordance with its usual practice accounts or records evidencing the purchases and sales by such Lender of participations in Letters of Credit. In the event of any conflict between the accounts and records maintained by the Administrative Agent and the accounts and records of any Lender in respect of such matters, the accounts and records of the Administrative Agent shall control. 2.11 PAYMENTS GENERALLY. (a) All payments to be made by the Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all payments by the Borrower hereunder shall be made to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, at the Administrative Agent's Office in Dollars and in immediately available funds not later than 11:00 a.m., San Francisco time, on the date specified herein. The Administrative Agent will promptly distribute to each Lender its Pro Rata Share (or other applicable share as provided herein) of such payment in like funds as received by wire transfer to such Lender's Lending Office. All payments received by the Administrative Agent after 11:00 a.m., San Francisco time, shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue. (b) Subject to the definition of "Interest Period" contained in Section 1.01, if any payment to be made by the Borrower shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be. (c) If at any time the funds received by and available to the Administrative Agent are not sufficient to pay fully all amounts of principal, L/C Borrowings, interest and fees then due hereunder, such funds shall be applied (i) first, toward costs and expenses (including Attorney Costs and amounts payable under Article III) incurred by the Administrative Agent and each Lender, (ii) second, toward repayment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (iii) third, toward repayment of principal and L/C Borrowings then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and L/C Borrowings then due to such parties. 27 33 (d) Unless the Borrower or any Lender has notified the Administrative Agent prior to the date any payment is required to be made by it to the Administrative Agent hereunder, that the Borrower or such Lender, as the case may be, will not make such payment, the Administrative Agent may assume that the Borrower or such Lender, as the case may be, has timely made such payment and may (but shall not be so required to), in reliance thereon, make available a corresponding amount to the Person entitled thereto. If and to the extent that such payment was not in fact made to the Administrative Agent in immediately available funds, then: (i) if the Borrower failed to make such payment, each Lender shall forthwith on demand repay to the Administrative Agent the portion of such assumed payment that was made available to such Lender in immediately available funds, together with interest thereon in respect of each day from and including the date such amount was made available by the Administrative Agent to such Lender to the date such amount is repaid to the Administrative Agent in immediately available funds, at the Federal Funds Rate from time to time in effect; and (ii) if any Lender failed to make such payment, such Lender shall forthwith on demand pay to the Administrative Agent the amount thereof in immediately available funds, together with interest thereon for the period from the date such amount was made available by the Administrative Agent to the Borrower to the date such amount is recovered by the Administrative Agent (the "Compensation Period") at a rate per annum equal to the Federal Funds Rate from time to time in effect. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender's Loan included in the applicable Borrowing. If such Lender does not pay such amount forthwith upon the Administrative Agent's demand therefor, the Administrative Agent may make a demand therefor upon the Borrower, and the Borrower shall pay such amount to the Administrative Agent, together with interest thereon for the Compensation Period at a rate per annum equal to the rate of interest applicable to the applicable Borrowing. Nothing herein shall be deemed to relieve any Lender from its obligation to fulfill its Commitment or to prejudice any rights which the Administrative Agent or the Borrower may have against any Lender as a result of any default by such Lender hereunder. A notice of the Administrative Agent to any Lender with respect to any amount owing under this subsection (d) shall be conclusive, absent manifest error. (e) If any Lender makes available to the Administrative Agent funds for any Loan to be made by such Lender as provided in the foregoing provisions of this Article II, and the conditions to the applicable Credit Extension set forth in Article IV are not satisfied or waived in accordance with the terms hereof, the Administrative Agent shall return such funds (in like funds as received from such Lender) to such Lender, without interest. (f) The obligations of the Lenders hereunder to make Loans and to fund participations in Letters of Credit are several and not joint. The failure of any Lender to make any Loan or to fund any such participation on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Loan or purchase its participation. (g) Nothing herein shall be deemed to obligate any Lender to obtain the funds for any Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Loan in any particular place or manner. 2.12 SHARING OF PAYMENTS. 28 34 If, other than as expressly provided elsewhere herein, any Lender shall obtain on account of the Loans made by it, or the participations in L/C Obligations held by it, any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) in excess of its ratable share (or other share contemplated hereunder) thereof, such Lender shall immediately (a) notify the Administrative Agent of such fact, and (b) purchase from the other Lenders such participations in the Loans made by them and/or such subparticipations in the participations in L/C Obligations held by them, as the case may be, as shall be necessary to cause such purchasing Lender to share the excess payment in respect of such Loans or such participations, as the case may be, pro rata with each of them; provided that if all or any portion of such excess payment is thereafter recovered from the purchasing Lender, such purchase shall to that extent be rescinded and each other Lender shall repay to the purchasing Lender the purchase price paid therefor, together with an amount equal to such paying Lender's ratable share (according to the proportion of (i) the amount of such paying Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off, but subject to Section 10.09 with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. The Administrative Agent will keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased under this Section and will in each case notify the Lenders following any such purchases or repayments. Each Lender that purchases a participation pursuant to this Section shall from and after such purchase have the right to give all notices, requests, demands, directions and other communications under this Agreement with respect to the portion of the Obligations purchased to the same extent as though the purchasing Lender were the original owner of the Obligations purchased. 2.13 GUARANTY OF OBLIGATIONS. The Obligations shall be jointly and severally guaranteed by the Guarantors pursuant to one or more Guaranties. Promptly after the date on which any Person becomes a Material Subsidiary of the Borrower, and, in any event, within ten (10) Business Days following receipt by the Borrower from the Administrative Agent of a request therefor, the Borrower will cause such Person to execute and deliver to the Administrative Agent, on behalf of the Lenders, a guaranty of the Obligations in substantially the form of the Guaranty. In addition, promptly after any date that the total revenues or total assets of all Subsidiaries that are at such time not Guarantors (each, a "Non-Guarantor Subsidiary") together exceed 20% of the total revenues or total assets, as the case may be, of the Borrower and its Subsidiaries, determined on a consolidated basis, and in any event, within ten (10) Business Days following receipt by the Borrower from the Administrative Agent of a request therefor, the Borrower will cause one or more Non-Guarantor Subsidiaries to execute and deliver to the Administrative Agent, on behalf of the Lenders, a guaranty of the Obligations in substantially the form of a Guaranty, so that, after delivery of such guaranty or guarantees, the total revenues and total assets of all remaining Non-Guarantor Subsidiaries together are less than 20% of the total revenues or total assets, as the case may be, of the Borrower and its Subsidiaries, determined on a consolidated basis. In all of the foregoing instances, the Borrower shall deliver or cause to be delivered such other agreements, documents, instruments and other information and items as are reasonably requested by the Administrative Agent, at the request of any Lender, in connection with the foregoing, including resolutions, incumbency and officers' certificates and opinions of counsel. ARTICLE III. TAXES, YIELD PROTECTION AND ILLEGALITY 3.01 TAXES. 29 35 (a) Any and all payments by the Borrower to or for the account of the Administrative Agent or any Lender under any Loan Document shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges, and all liabilities with respect thereto, excluding, in the case of the Administrative Agent and each Lender, taxes imposed on or measured by its net income, and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the Laws of which the Administrative Agent or such Lender, as the case may be, is organized or maintains a lending office (all such non-excluded taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges, and liabilities with respect thereto being hereinafter collectively referred to as "Taxes"). If the Borrower shall be required by any Laws to deduct any Taxes from or in respect of any sum payable under any Loan Document to the Administrative Agent or any Lender, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section), the Administrative Agent and such Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable Laws, and (iv) within 30 days after the date of such payment, the Borrower shall furnish to the Administrative Agent (which shall forward the same to such Lender) the original or a certified copy of a receipt evidencing payment thereof. (b) In addition, the Borrower agrees to pay any and all present or future stamp, court or documentary taxes and any other excise or property taxes or charges or similar levies which arise from any payment made under any Loan Document or from the execution, delivery, performance, enforcement or registration of, or otherwise with respect to, any Loan Document (hereinafter referred to as "Other Taxes"). (c) If the Borrower shall be required to deduct or pay any Taxes or Other Taxes from or in respect of any sum payable under any Loan Document to the Administrative Agent or any Lender, the Borrower shall also pay to the Administrative Agent (for the account of such Lender) or to such Lender, at the time interest is paid, such additional amount that such Lender specifies is necessary to preserve the after-tax yield (after factoring in all taxes, including taxes imposed on or measured by net income) such Lender would have received if such Taxes or Other Taxes had not been imposed. (d) The Borrower agrees to indemnify the Administrative Agent and each Lender for (i) the full amount of Taxes and Other Taxes (including any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section) paid by the Administrative Agent and such Lender, (ii) amounts payable under Section 3.01(c) and (iii) any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, in each case whether or not such Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. Payment under this subsection (d) shall be made within 30 days after the date the Lender or the Administrative Agent makes a demand therefor. 3.02 ILLEGALITY. If any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make, maintain or fund Eurodollar Rate Loans, or to determine or charge interest rates based upon the Eurodollar Rate, then, on notice thereof by such Lender to the Borrower through the Administrative Agent, any obligation of such Lender to make or continue Eurodollar Rate Loans or to convert Base Rate Loans to Eurodollar Rate Loans shall be suspended until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrower shall, upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if 30 36 applicable, convert all Eurodollar Rate Loans of such Lender to Base Rate Loans, either on the last day of the Interest Period thereof, if such Lender may lawfully continue to maintain such Eurodollar Rate Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such Eurodollar Rate Loans. Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted. Each Lender agrees to designate a different Lending Office if such designation will avoid the need for such notice and will not, in the good faith judgment of such Lender, otherwise be materially disadvantageous to such Lender. 3.03 INABILITY TO DETERMINE RATES. If the Administrative Agent determines in connection with any request for a Eurodollar Rate Loan or a conversion to or continuation thereof that (a) Dollar deposits are not being offered to banks in the London interbank eurodollar market for the applicable amount and Interest Period of such Eurodollar Rate Loan, (b) adequate and reasonable means do not exist for determining the Eurodollar Rate for such Eurodollar Rate Loan, or (c) the Eurodollar Rate for such Eurodollar Rate Loan does not adequately and fairly reflect the cost to the Lenders of funding such Eurodollar Rate Loan, the Administrative Agent will promptly notify the Borrower and all Lenders. Thereafter, the obligation of the Lenders to make or maintain Eurodollar Rate Loans shall be suspended until the Administrative Agent revokes such notice. Upon receipt of such notice, the Borrower may revoke any pending request for a Borrowing, conversion or continuation of Eurodollar Rate Loans or, failing that, will be deemed to have converted such request into a request for a Borrowing of Base Rate Loans in the amount specified therein. 3.04 INCREASED COST AND REDUCED RETURN; CAPITAL ADEQUACY; RESERVES ON EURODOLLAR RATE LOANS. (a) If any Lender determines that as a result of the introduction of or any change in or in the interpretation of any Law, or such Lender's compliance therewith, there shall be any increase in the cost to such Lender of agreeing to make or making, funding or maintaining Eurodollar Rate Loans or (as the case may be) issuing or participating in Letters of Credit, or a reduction in the amount received or receivable by such Lender in connection with any of the foregoing (excluding for purposes of this subsection (a) any such increased costs or reduction in amount resulting from (i) Taxes or Other Taxes (as to which Section 3.01 shall govern), (ii) changes in the basis of taxation of overall net income or overall gross income by the United States or any foreign jurisdiction or any political subdivision of either thereof under the Laws of which such Lender is organized or has its Lending Office, and (iii) reserve requirements contemplated by Section 3.04(c), then from time to time upon demand of such Lender (with a copy of such demand to the Administrative Agent), the Borrower shall pay to such Lender such additional amounts as will compensate such Lender for such increased cost or reduction. (b) If any Lender determines that the introduction of any Law regarding capital adequacy or any change therein or in the interpretation thereof, or compliance by such Lender (or its Lending Office) therewith, has the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of such Lender's obligations hereunder (taking into consideration its policies with respect to capital adequacy and such Lender's desired return on capital), then from time to time upon demand of such Lender (with a copy of such demand to the Administrative Agent), the Borrower shall pay to such Lender such additional amounts as will compensate such Lender for such reduction. (c) The Borrower shall pay to each Lender, as long as such Lender shall be required to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits (currently known as "Eurocurrency liabilities"), additional interest on the unpaid principal amount of each Eurodollar Rate Loan equal to the actual costs of such reserves allocated to such Loan by 31 37 such Lender (as determined by such Lender in good faith, which determination shall be conclusive), which shall be due and payable on each date on which interest is payable on such Loan, provided the Borrower shall have received at least 15 days prior notice (with a copy to the Administrative Agent) of such additional interest from such Lender. If a Lender fails to give notice 15 days prior to the relevant Interest Payment Date, such additional interest shall be due and payable 15 days from receipt of such notice. 3.05 FUNDING LOSSES. Upon demand of any Lender (with a copy to the Administrative Agent) from time to time, the Borrower shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense incurred by it as a result of: (a) any continuation, conversion, payment or prepayment of any Loan other than a Base Rate Loan on a day other than the last day of the Interest Period for such Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise); (b) any failure by the Borrower (for a reason other than the failure of such Lender to make a Loan) to prepay, borrow, continue or convert any Loan other than a Base Rate Loan on the date or in the amount notified by the Borrower; or (c) any assignment of a Eurodollar Rate Loan on a day other than the last day of the Interest Period therefor as a result of a request by the Borrower pursuant to Section 10.16; including any loss of anticipated profits and any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate the deposits from which such funds were obtained. The Borrower shall also pay any customary administrative fees charged by such Lender in connection with the foregoing. For purposes of calculating amounts payable by the Borrower to the Lenders under this Section 3.05, each Lender shall be deemed to have funded each Eurodollar Rate Loan made by it at the Eurodollar Rate for such Loan by a matching deposit or other borrowing in the London interbank eurodollar market for a comparable amount and for a comparable period, whether or not such Eurodollar Rate Loan was in fact so funded. 3.06 MATTERS APPLICABLE TO ALL REQUESTS FOR COMPENSATION. (a) A certificate of the Administrative Agent or any Lender claiming compensation under this Article III and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, the Administrative Agent or such Lender may use any reasonable averaging and attribution methods. (b) Upon any Lender's making a claim for compensation under Section 3.01 or 3.04, the Borrower may remove or replace such Lender in accordance with Section 10.16. 3.07 SURVIVAL. All of the Borrower's obligations under this Article III shall survive termination of the Aggregate Commitments and repayment of all other Obligations. 32 38 ARTICLE IV. CONDITIONS PRECEDENT TO CREDIT EXTENSIONS 4.01 CONDITIONS TO EFFECTIVENESS AND INITIAL CREDIT EXTENSION. The effectiveness of this Agreement and the obligation of each Lender to make its initial Credit Extension hereunder are subject to satisfaction of the following conditions precedent: (a) Unless waived by all the Lenders (or by the Administrative Agent with respect to immaterial matters or items specified in clause (v) or (vi) below with respect to which the Borrower has given assurances satisfactory to the Administrative Agent that such items shall be delivered promptly following the Closing Date), the Administrative Agent's receipt of the following, each of which shall be originals or facsimiles (followed promptly by originals) unless otherwise specified, each properly executed by a Responsible Officer of the signing Loan Party, each dated the Closing Date (or, in the case of certificates of governmental officials, a recent date before the Closing Date acceptable to the Administrative Agent) and each in form and substance satisfactory to the Administrative Agent, the Lenders and their respective legal counsel: (i) executed counterparts of this Agreement and the Guaranty, sufficient in number for distribution to the Administrative Agent, each Lender and the Borrower; (ii) if requested by a Lender, a Note executed by the Borrower in favor of such Lender, such Note to be in an original face amount equal to such Lender's Commitment; (iii) such certificates respecting resolutions or other actions, incumbency certificates and/or other certificates of Responsible Officers of each Loan Party as the Administrative Agent or any Lender may require to establish the identities of and verify the authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Loan Party is a party; (iv) such evidence as the Administrative Agent and/or any Lender may require to verify that each Loan Party is duly organized or formed, validly existing, in good standing and qualified to engage in business in each jurisdiction in which it is required to be qualified to engage in business, including certified copies of each Loan Party's Organization Documents, certificates of good standing and qualification to engage in business and tax clearance certificates; provided that, to the extent that any of the tax clearance certificates required under this sub-paragraph (iv) have not been received by the Borrower prior to June 29, 2001, the Borrower shall only be required to deliver such tax clearance certificates in accordance with Section 6.14; (v) a certificate signed by a Responsible Officer of the Borrower certifying (A) that the conditions specified in Sections 4.02(a) and (b) have been satisfied, and (B) that there has been no event or circumstance since the date of the Audited Financial Statements which has or could be reasonably expected to have a Material Adverse Effect; (vi) an opinion of counsel to each Loan Party substantially in the form of Exhibit F in form and substance satisfactory to the Administrative Agent, the Lenders and their respective legal counsel; (vii) evidence satisfactory to the Administrative Agent that the Prior Credit Facility has been or concurrently with the Closing Date is being terminated (with all Indebtedness 33 39 thereunder being repaid in full) and all Liens securing obligations under the Prior Credit Facility have been or concurrently with the Closing Date are being released; and (viii) such other assurances, certificates, documents, consents, approvals, materials or opinions as the Administrative Agent, the L/C Issuer or any Lender reasonably may require. (b) Any fees required to be paid on or before the Closing Date shall have been paid. (c) Unless waived by the Administrative Agent, the Borrower shall have paid all reasonable Attorney Costs of the Administrative Agent to the extent invoiced prior to or on the Closing Date, plus such additional amounts of reasonable Attorney Costs as shall constitute its reasonable estimate of such Attorney Costs incurred or to be incurred by it through the closing proceedings, provided that such estimate shall not thereafter preclude a final settling of accounts between the Borrower and the Administrative Agent. Notwithstanding anything to the contrary contained in this Section 4.01, neither this Agreement nor any of the other Loan Documents shall become effective or be binding on any party unless the preceding conditions have been satisfied (or waived, as appropriate), on or before 9:00 a.m., San Francisco time, on June 29, 2001. 4.02 CONDITIONS TO ALL CREDIT EXTENSIONS AND CONVERSIONS AND CONTINUATIONS. The obligation of each Lender to honor any Request for Credit Extension is subject to the following conditions precedent: (a) The representations and warranties of the Borrower contained in Article V, or which are contained in any document furnished at any time under or in connection herewith, shall be true and correct on and as of the date of such Credit Extension, conversion or continuation, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date. (b) No Default or Event of Default shall exist or would result from such Credit Extension, conversion or continuation. (c) The Administrative Agent and, if applicable, the L/C Issuer shall have received a Request for Credit Extension in accordance with the requirements hereof. (d) The Administrative Agent shall have received, in form and substance satisfactory to it, such other assurances, certificates, documents or consents related to the foregoing as the Administrative Agent or the Required Lenders reasonably may require. Each Request for Credit Extension submitted by the Borrower shall be deemed to be a representation and warranty that the conditions specified in Sections 4.02(a) and (b) have been satisfied on and as of the date of the applicable Credit Extension. ARTICLE V. REPRESENTATIONS AND WARRANTIES 34 40 The Borrower represents and warrants to the Administrative Agent and the Lenders that: 5.01 EXISTENCE, QUALIFICATION AND POWER; COMPLIANCE WITH LAWS. Each Loan Party (a) is a corporation, partnership or limited liability company, duly organized or formed, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority and all governmental licenses, authorizations, consents and approvals to own its assets, carry on its business and to execute, deliver, and perform its obligations under the Loan Documents to which it is a party, (c) is duly qualified and is licensed and in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license, and (d) is in compliance with all Laws, except in each case referred to in subsections (c) or this subsection (d), to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect. 5.02 AUTHORIZATION; NO CONTRAVENTION. The execution, delivery and performance by each Loan Party of each Loan Document to which such Person is party, have been duly authorized by all necessary corporate or other organizational action, and do not and will not (a) contravene the terms of any of such Person's Organization Documents; (b) conflict with or result in any breach or contravention of, or the creation of any Lien under, any Contractual Obligation to which such Person is a party or any order, injunction, writ or decree of any Governmental Authority to which such Person or its property is subject; or (c) violate any Law. 5.03 GOVERNMENTAL AUTHORIZATION. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority is necessary or required in connection with the execution, delivery or performance by, or enforcement against, any Loan Party of this Agreement or any other Loan Document. 5.04 BINDING EFFECT. This Agreement has been, and each other Loan Document, when delivered hereunder, will have been, duly executed and delivered by each Loan Party that is party thereto. This Agreement constitutes, and each other Loan Document when so delivered will constitute, a legal, valid and binding obligation of such Loan Party, enforceable against each Loan Party that is party thereto in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws generally affecting the rights of creditors, and subject to equitable principles of general application. 5.05 FINANCIAL STATEMENTS; NO MATERIAL ADVERSE EFFECT. (a) The Audited Financial Statements (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) fairly present the financial condition of the Borrower and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; and (iii) show all material indebtedness and other liabilities, direct or contingent, of the Borrower and its consolidated Subsidiaries as of the date thereof, including liabilities for taxes, material commitments and Indebtedness. (b) The unaudited consolidated financial statements of the Borrower and its Subsidiaries, dated March 31, 2001, contained in the related quarterly report on Form 10-Q filed with the SEC (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as 35 41 otherwise expressly noted therein, and subject to ordinary, good faith year end audit adjustments; (ii) fairly present the financial condition of the Borrower and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby; and (iii) show all material indebtedness and other liabilities, direct or contingent, of the Borrower and its consolidated Subsidiaries as of the date thereof, including liabilities for taxes, material commitments and Indebtedness. (c) Since the date of the Audited Financial Statements, there has been no event or circumstance that has had or could reasonably be expected to have a Material Adverse Effect. 5.06 LITIGATION. Except as specifically disclosed on Schedule 5.06, there are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Borrower after due and diligent investigation, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, by or against the Borrower or any of its Subsidiaries or against any of their properties or revenues that (a) purport to affect or pertain to this Agreement or any other Loan Document, or any of the transactions contemplated hereby, or (b) if determined adversely, could reasonably be expected to have a Material Adverse Effect. 5.07 NO DEFAULT. Neither the Borrower nor any Subsidiary is in default under or with respect to any Contractual Obligation that could be reasonably expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing or would result from the consummation of the transactions contemplated by this Agreement or any other Loan Document. 5.08 OWNERSHIP OF PROPERTY; LIENS. Each of the Borrower and its Subsidiaries has good record and marketable title in fee simple to, or valid leasehold interests in, all real property necessary or used in the ordinary conduct of its business, except for such defects in title as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. As of the Effective Date, the property of the Borrower and its Subsidiaries is not subject to any Lien, other than Liens permitted by Section 7.01. 5.09 ENVIRONMENTAL COMPLIANCE. (a) The on-going operations of the Borrower and each of its Subsidiaries, after the Closing Date, comply in all respects with all Environmental Laws, except such non-compliance that would not result in liability in excess of $2,000,000 in the aggregate. (b) Except as specifically identified on Schedule 5.09, and except to the extent that noncompliance would not result in liability in excess of $300,000 in the aggregate, the Borrower and each of its Subsidiaries have obtained all licenses, permits, authorizations and registrations required under any Environmental Law ("Environmental Permits") necessary for their respective operations, and all such Environmental Permits are in good standing, and the Borrower and each of its Subsidiaries are in compliance with all terms and conditions of such Environmental Permits. (c) Except as specifically identified on Schedule 5.09, none of the Borrower or any of its Subsidiaries or any of their present property or operations is subject to any outstanding written order from or agreement with any Governmental Authority or other Person, nor is subject to any judicial or docketed administrative proceeding respecting any Environmental Law, Environmental Claim or Hazardous Material. 36 42 (d) There are no conditions or circumstances relating to any property of the Borrower or its Subsidiaries, or arising from operations of the Borrower or its Subsidiaries conducted prior to the Closing Date that, together with all other such conditions and circumstances relating to all other properties and operations, may give rise to Environmental Claims with a potential liability as to the Borrower and its Subsidiaries together in excess of $15,000,000 in the aggregate. Schedule 5.09 contains the Borrower's good faith estimate of clean-up costs associated with hydrocarbon contamination at the properties described therein. Notwithstanding the foregoing, (i) neither the Borrower nor any of its Subsidiaries has any underground storage tanks (x) that are not properly registered or permitted under applicable Environmental Laws or (y) that are leaking or disposing of Hazardous Materials off-site, (ii) the Borrower and its Subsidiaries have notified all of their employees of the existence, if any, of any health hazard arising from the conditions of their employment and have met all notification requirements under all applicable Environmental Laws, and (iii) no Hazardous Materials have been Released at, on or under any site, facility or vessel now or previously owned, operated or leased by the Borrower or any of its Subsidiaries that would have a Material Adverse Effect. (e) Except as specifically identified on Schedule 5.09, the Borrower has no knowledge of any oral or written notification of a Release of a Hazardous Material has been filed by or on behalf of the Borrower or any of its Subsidiaries and no site, facility or vessel now or previously owned, operated or leased by the Borrower or any of its Subsidiaries is listed or proposed for listing on any federal or state list of sites requiring investigation or clean-up. 5.10 INSURANCE. The properties of the Borrower and its Subsidiaries are insured with financially sound and reputable insurance companies not Affiliates of the Borrower, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where the Borrower or its Subsidiaries operate. 5.11 TAXES. The Borrower and its Subsidiaries have filed all Federal, state and other material tax returns and reports required to be filed, and have paid all Federal, state and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings and for which adequate reserves have been provided in accordance with GAAP. There is no proposed tax assessment against the Borrower or any Subsidiary that would, if made, have a Material Adverse Effect. 5.12 ERISA COMPLIANCE. (a) Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal or state Laws. Each Plan that is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS or an application for such a letter is currently being processed by the IRS with respect thereto and, to the best knowledge of the Borrower, nothing has occurred which would prevent, or cause the loss of, such qualification. The Borrower and each ERISA Affiliate have made all required contributions to each Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan. (b) There are no pending or, to the best knowledge of the Borrower, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that could be 37 43 reasonably be expected to have a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or could reasonably be expected to result in a Material Adverse Effect. (c) (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) neither the Borrower nor any ERISA Affiliate has engaged in a transaction that could be subject to Sections 4069 or 4212(c) of ERISA. 5.13 SUBSIDIARIES. As of the Closing Date, the Borrower has no Subsidiaries other than those specifically disclosed in Part (a) of Schedule 5.13 and those of whom the Borrower has notified the Administrative Agent in writing following the Closing Date pursuant to Section 2.13 and has no equity investments in any other corporation or entity other than those specifically disclosed in Part (b) of Schedule 5.13. 5.14 MARGIN REGULATIONS; INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT. (a) The Borrower is not engaged and will not engage, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U issued by the FRB), or extending credit for the purpose of purchasing or carrying margin stock. (b) None of the Borrower, any Person controlling the Borrower, or any Subsidiary (i) is a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, or (ii) is or is required to be registered as an "investment company" under the Investment Company Act of 1940, the Federal Power Act, the Interstate Commerce Act, any state public utilities code or any other federal or state statute or regulation limiting its ability to incur Indebtedness. 5.15 DISCLOSURE. The documents, certificates and written statements (including the Loan Documents) furnished to the Administrative Agent and the Lenders by the Borrower or any Subsidiary for use in connection with the transactions contemplated by this Agreement, taken as a whole, do not contain any untrue statement of a material fact or omit to state a material fact (known to the Borrower in the case of any document not furnished by it) necessary in order to make the statements contained herein or therein not misleading (it being recognized by the Administrative Agent and the Lenders that projections and forecasts provided to them by the Borrower are not to be viewed as facts and that actual results during the period or periods covered by any such projections and forecasts may differ from the projected or forecasted results). 5.16 INTELLECTUAL PROPERTY; LICENSES, ETC. The Borrower and its Subsidiaries own, or possess the right to use, all of the trademarks, service marks, trade names, copyrights, patents, patent rights, franchises, licenses and other intellectual property 38 44 rights (collectively, "IP Rights") that are reasonably necessary for the operation of their respective businesses, without conflict with the rights of any other Person. To the best knowledge of the Borrower, no slogan or other advertising device, product, process, method, substance, part or other material employed or contemplated to be employed by the Borrower or any Subsidiary infringes upon any rights held by any other Person. Except as specifically disclosed in Schedule 5.16, no claim or litigation regarding any of the foregoing is pending or, to the best knowledge of the Borrower, threatened, and no patent, invention, device, application, principle or any statute, law, rule, regulation, standard or code is pending or, to the knowledge of the Borrower, proposed, which, in either case, could reasonably be expected to have a Material Adverse Effect. 5.17 SWAP CONTRACTS. The Borrower and its Subsidiaries have each voluntarily entered into each Swap Contract to which it is a party based upon its own independent assessment of its consolidated assets, liabilities and commitments in each case as an appropriate means of mitigating and managing risks associated with such matters. 5.18 LABOR RELATIONS. There are no strikes, lockouts or other labor disputes against the Borrower or any of its Subsidiaries, or, to the best of the Borrower's knowledge, threatened against or affecting the Borrower or any of its Subsidiaries, and no significant unfair labor practice complaint is pending against the Borrower or any of its Subsidiaries or, to the best knowledge of the Borrower, threatened against any of them before any Governmental Authority, which could reasonably be expected to result in a Material Adverse Effect. 5.19 USE OF PROCEEDS. The Borrower shall use the proceeds of the Credit Extensions solely for working capital and other general corporate purposes (including stock repurchases and acquisitions not prohibited hereunder) not in contravention of any Loan Document or any Law. 5.20 SOLVENCY. The Borrower is and shall continue to be, and shall cause each of its Subsidiaries to be, Solvent. ARTICLE VI. AFFIRMATIVE COVENANTS So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding, the Borrower shall, and shall (except in the case of the covenants set forth in Sections 6.01, 6.02, 6.03 and 6.11) cause each Subsidiary to: 6.01 FINANCIAL STATEMENTS. Deliver to the Administrative Agent and each Lender, in form and detail satisfactory to the Administrative Agent and the Required Lenders: (a) as soon as available, but in any event within 90 days after the end of each fiscal year of the Borrower: (i) a consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal year, and the related consolidated statements of income or operations, shareholders' equity and cash 39 45 flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail, audited and accompanied by a report and opinion of an independent certified public accountant of nationally recognized standing reasonably acceptable to the Required Lenders, which report and opinion shall be prepared in accordance with GAAP and shall not be subject to any qualifications or exceptions as to the scope of the audit nor to any qualifications and exceptions not reasonably acceptable to the Required Lenders; or (ii) an SEC Form 10-K for the Borrower (excluding the exhibits thereto) relating to such fiscal year; and (b) as soon as available, but in any event within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower: (i) a consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal quarter, and the related consolidated statements of income or operations, shareholders' equity and cash flows for such fiscal quarter and for the portion of the Borrower's fiscal year then ended, setting forth in each case in comparative form the figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding portion of the previous fiscal year, all in reasonable detail and certified by a Responsible Officer of the Borrower as fairly presenting the financial condition, results of operations and cash flows of the Borrower and its Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes; or (ii) an SEC Form 10-Q for the Borrower (excluding the exhibits thereto) relating to such fiscal quarter. 6.02 CERTIFICATES; OTHER INFORMATION. Deliver to the Administrative Agent and each Lender, in form and detail satisfactory to the Administrative Agent and the Required Lenders: (a) concurrently with the delivery of the financial statements referred to in Section 6.01(a) (unless included in the applicable SEC Form 10-K), a certificate of its independent certified public accountants certifying such financial statements; (b) concurrently with the delivery of the financial statements referred to in Sections 6.01(a) and (b), a duly completed Compliance Certificate signed by a Responsible Officer of the Borrower; (c) promptly after the same are available, copies of each annual report, proxy or financial statement or other report or communication sent to the stockholders of the Borrower, and copies of all annual, regular, periodic and special reports and registration statements which the Borrower may file or be required to file with the SEC under Section 13 or 15(d) of the Exchange Act, and not otherwise required to be delivered to the Administrative Agent pursuant hereto; and (d) promptly, such additional information regarding the business, financial or corporate affairs of the Borrower or any Subsidiary as the Administrative Agent, at the request of any Lender, may from time to time request. Reports required to be delivered pursuant to Sections 6.01(a) or (b) or 6.02(b) shall be deemed to have been delivered on the date on which the Borrower posts such reports on the Borrower's website on the Internet at the website address listed on Schedule 10.02 or when such report is posted on the SEC's website at www.sec.gov; provided that (x) the Borrower shall deliver paper copies of such reports to the Administrative Agent or any Lender who requests the Borrower to deliver such paper copies until written request to cease delivering paper copies is given by the Administrative Agent or such Lender, (y) the Borrower shall notify by facsimile the Administrative Agent and each Lender of the posting of any such reports, and (z) in every instance, the Borrower shall provide paper copies of the Compliance Certificates required by Section 6.02(b) to the Administrative Agent and each of the Lenders. Except for such 40 46 Compliance Certificates, the Administrative Agent shall not have any obligation to request the delivery or to maintain copies of the reports referred to above (and, in any event, the Administrative Agent shall not have any responsibility to monitor compliance by the Borrower with any such request for delivery), and each Lender shall be solely responsible for requesting delivery to it, or maintaining its copies, of such reports. 6.03 NOTICES. Promptly notify the Administrative Agent and each Lender: (a) of the occurrence of any Default or Event of Default; (b) of any matter that has resulted or could reasonably be expected to result in a Material Adverse Effect, including (i) breach or non-performance of, or any default under, a Contractual Obligation of the Borrower or any Subsidiary; (ii) any dispute, litigation, investigation, proceeding or suspension between the Borrower or any Subsidiary and any Governmental Authority; or (iii) the commencement of, or any material development in, any litigation or proceeding affecting the Borrower or any Subsidiary, including pursuant to any applicable Environmental Laws; (c) of any litigation, investigation or proceeding affecting any Loan Party (i) in which the amount of damages claimed and not fully covered by insurance equals or exceeds $5,000,000 (or its equivalent in another currency or currencies), or in which injunctive relief or similar relief is sought, which relief, if granted, could reasonably be expected to have a Material Adverse Effect or (ii) within four days after reporting the same to the SEC if the Borrower is required to report the same to such entity under applicable Law; (d) of the occurrence of any ERISA Event; (e) of any material change in accounting policies or financial reporting practices by the Borrower or any Subsidiary; (f) within three (3) Business Days after the date of such occurrence, (i) if any Subsidiary or other Person shall become a Material Subsidiary of the Borrower, or (ii) if the total revenues or total assets of all Non-Guarantor Subsidiaries shall at any time together exceed 20% of the total revenues or total assets, as the case may be, of the Borrower and its Subsidiaries, determined on a consolidated basis; (g) if applicable, upon the request from time to time of the Administrative Agent, of the Swap Termination Values, together with a description of the method by which such values were determined, relating to any Swap Contracts then outstanding to which the Borrower or any of its Subsidiaries is a party; (h) upon becoming aware thereof, of any labor controversy resulting in or threatening to result in, any strike, work stoppage, boycott, shutdown or other labor disruption against or involving the Borrower or any Subsidiary that would materially impact the operations of the Borrower or any Subsidiary; and (i) upon, but in no event later than ten days after, becoming aware of (i) any and all enforcement, cleanup, removal or other governmental or regulatory actions involving a potential liability in excess of $5,000,000 in the aggregate instituted, completed or threatened against the Borrower or any Subsidiary or any of their properties pursuant to any applicable Environmental Laws, (ii) all other Environmental Claims involving the Borrower or a Subsidiary with a potential liability in excess of 41 47 $5,000,000 in the aggregate, and (iii) any environmental or similar condition on any real property adjoining or in the vicinity of the property of the Borrower or any Subsidiary that could reasonably be anticipated to cause such property or any part thereof to be subject to any restrictions on the ownership, occupancy, transferability or use of such property under any Environmental Laws and involving a potential liability in excess of $5,000,000 in the aggregate. Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer of the Borrower setting forth details of the occurrence referred to therein and stating what action the Borrower has taken and proposes to take with respect thereto. Each notice pursuant to Section 6.03(a) shall describe with particularity any and all provisions of this Agreement or other Loan Document that have been breached. 6.04 PAYMENT OF OBLIGATIONS. Pay and discharge as the same shall become due and payable (a) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings and adequate reserves in accordance with GAAP are being maintained by the Borrower or such Subsidiary; (b) all lawful claims which, if unpaid, would by law become a Lien upon its property; and (c) all Indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness. 6.05 PRESERVATION OF EXISTENCE, ETC. Preserve, renew and maintain in full force and effect its legal existence and good standing under the Laws of the jurisdiction of its organization; take all reasonable action to maintain all rights, privileges, permits, licenses and franchises necessary or desirable in the normal conduct of its business, except in a transaction permitted by Section 7.04 or 7.05; and preserve or renew all of its registered patents, trademarks, trade names and service marks, the non-preservation of which could reasonably be expected to have a Material Adverse Effect. 6.06 MAINTENANCE OF PROPERTIES. (a) Maintain, preserve and protect all of its material properties and equipment necessary in the operation of its business in good working order and condition, ordinary wear and tear excepted; (b) make all necessary repairs thereto and renewals and replacements thereof except where the failure to do so could not reasonably be expected to have a Material Adverse Effect; and (c) use the standard of care typical in the industry in the operation and maintenance of its facilities. 6.07 MAINTENANCE OF INSURANCE. Maintain with financially sound and reputable insurance companies not Affiliates of the Borrower, insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts as are customarily carried under similar circumstances by such other Persons. 6.08 COMPLIANCE WITH LAWS. Comply in all material respects with the requirements of all Laws applicable to it or to its business or property, except in such instances in which (i) such requirement of Law is being contested in good faith or a bona fide dispute exists with respect thereto; or (ii) the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect. 42 48 6.09 BOOKS AND RECORDS. (a) Maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of the Borrower or such Subsidiary, as the case may be; and (b) maintain such books of record and account in material conformity with all applicable requirements of any Governmental Authority having regulatory jurisdiction over the Borrower or such Subsidiary, as the case may be. 6.10 INSPECTION RIGHTS. Permit representatives and independent contractors of the Administrative Agent and each Lender to visit and inspect any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and accounts with its directors, officers, and independent public accountants, all at the expense of the Borrower and at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Borrower; provided that when an Event of Default exists the Administrative Agent or any Lender (or any of their respective representatives or independent contractors) may do any of the foregoing at the expense of the Borrower at any time during normal business hours and without advance notice. 6.11 COMPLIANCE WITH ERISA. Do, and cause each of its ERISA Affiliates to do, each of the following: (a) maintain each Plan in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal or state law; (b) cause each Plan which is qualified under Section 401(a) of the Code to maintain such qualification; and (c) make all required contributions to any Plan subject to Section 412 of the Code. 6.12 ENVIRONMENTAL LAWS. (a) The Borrower shall, and shall cause each of its Subsidiaries to, conduct its operations and keep and maintain its property in compliance with all Environmental Laws. (b) Upon written request of the Administrative Agent or any Lender, the Borrower shall submit and cause each of its Subsidiaries to submit, to the Administrative Agent and such Lender, at the Borrower's sole cost and expense and at reasonable intervals, a report providing an update of the status of any environmental, health or safety compliance, hazard or liability issue identified in any notice or report required pursuant to Section 6.03(i) and any other environmental, health or safety compliance obligation, remedial obligation or liability, that could, individually or in the aggregate, result in liability in excess of $1,000,000. 6.13 USE OF PROCEEDS. Use the proceeds of the Credit Extensions for working capital and other general corporate purposes not in contravention of any Law or of any Loan Document. 43 49 6.14 TAX CLEARANCE CERTIFICATES. On or before the date that is thirty calendar days following the Closing Date, the Borrower shall provide to the Administrative Agent all tax clearance certificates not delivered to the Administrative Agent under Section 4.01(a)(iv) and permitted by such section to be delivered under this Section 6.14; provided that, if the Borrower is unable to deliver any such certificate by virtue of a delay in the ability of any applicable Governmental Authority to provide such certificate in the ordinary course (and not by virtue of any Loan Party not being in tax good standing) and the Borrower has provided to the Administrative Agent reasonable evidence of such inability, then the Borrower shall have such additional time to deliver such certificate(s) as the Administrative Agent shall reasonably determine. ARTICLE VII. NEGATIVE COVENANTS So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding, the Borrower shall not, nor shall it permit any Subsidiary to, directly or indirectly: 7.01 LIENS. Create, incur, assume or suffer to exist, any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than the following: (a) Liens pursuant to any Loan Document; (b) Liens existing on the date hereof and listed on Schedule 7.01 and any renewals or extensions thereof, provided that the property covered thereby is not increased and any renewal or extension of the obligations secured or benefited thereby is permitted by Section 7.03(b); (c) Liens for taxes not yet due or which are being contested in good faith and by appropriate proceedings, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP; (d) carriers', landlords', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the Ordinary Course of Business which are not overdue for a period of more than 30 days or which are being contested in good faith and by appropriate proceedings, if adequate reserves with respect thereto are maintained on the books of the applicable Person; (e) pledges or deposits in the Ordinary Course of Business in connection with workers' compensation, unemployment insurance and other social security legislation, other than any Lien imposed by ERISA; (f) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the Ordinary Course of Business, provided that all such deposits in the aggregate could not reasonably be expected to result in a Material Adverse Effect; (g) easements, rights-of-way, restrictions and other similar encumbrances affecting real property which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the applicable Person; 44 50 (h) Liens securing or arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under Section 8.01(h); (i) Liens securing Indebtedness permitted under Section 7.03(d), provided that (i) such Liens do not at any time encumber any property other than the property financed by such Indebtedness; (ii) such Liens attach to the subject property within 30 days after the acquisition thereof and (iii) the Indebtedness secured thereby does not exceed the cost or fair market value, whichever is lower, of the property being acquired on the date of acquisition; (j) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; (k) Liens securing reimbursement obligations of the Borrower or its Subsidiaries with respect to commercial letters of credit obtained in the Ordinary Course of Business and not prohibited hereby, provided that such Liens shall attach only to documents or other property relating to such letters of credit and products and proceeds thereof; and (l) Liens arising solely by virtue of any statutory or common law provision relating to banker's liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution, provided that (i) such deposit account is not a dedicated cash collateral account and is not subject to restrictions against access by the Borrower in excess of those set forth by regulations promulgated by the FRB, and (ii) such deposit account is not intended by the Borrower or any Subsidiary to provide collateral to the depository institution. 7.02 INVESTMENTS. Make any Investments, except: (a) Investments other than those permitted by subsections (b) through (h) that are existing on the date hereof and listed on Schedule 7.02; (b) Investments held by the Borrower or any of its Subsidiaries in the form of cash equivalents or short-term marketable securities; (c) Investments consisting of extensions of credit by the Borrower to any of its wholly owned Subsidiaries or by any of its wholly owned Subsidiaries to the Borrower or to another of its wholly owned Subsidiaries; (d) Investments consisting of extensions of credit in the nature of accounts receivable or notes receivable arising from the sale or lease of goods or services in the Ordinary Course of Business, and Investments received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss; (e) Guaranty Obligations permitted by Section 7.03; (f) Investments resulting by virtue of transactions otherwise permitted by Section 7.07; (g) Investments managed by Granite Land Company, a Subsidiary of the Borrower, in an aggregate amount not to exceed at any time $25,000,000; and 45 51 (h) Investments not otherwise permitted pursuant to subsections (a) through (g) of this Section 7.02 in the equity of any Subsidiary or the capital stock, assets, obligations or other securities of or interests in any other Person in an aggregate amount not to exceed at any time $100,000,000. 7.03 INDEBTEDNESS. Create, incur, assume or suffer to exist any Indebtedness, except: (a) Indebtedness under the Loan Documents; (b) Indebtedness outstanding on the date hereof and listed on Schedule 7.03 and any refinancings, refundings, renewals or extensions thereof, provided that the amount of such Indebtedness is not increased at the time of such refinancing, refunding, renewal or extension except by an amount equal to a reasonable premium or other reasonable amount paid, and fees and expenses reasonably incurred, in connection with such refinancing and by an amount equal to any existing commitments unutilized thereunder; (c) obligations (contingent or otherwise) of the Borrower or any Subsidiary existing or arising under any Swap Contract, provided that (i) such obligations are (or were) entered into by such Person in the Ordinary Course of Business for the purpose of directly mitigating risks associated with liabilities, commitments, investments, assets, or property held or reasonably anticipated by such Person, or changes in the value of securities issued by such Person and not for purposes of speculation or taking a "market view;" and (ii) such Swap Contract does not contain any provision exonerating the non-defaulting party from its obligation to make payments on outstanding transactions to the defaulting party; (d) Indebtedness in respect of capital leases, Synthetic Lease Obligations and purchase money Indebtedness for fixed or capital assets within the limitations set forth in Section 7.01(i); provided that the aggregate amount of (i) all purchase money Indebtedness for fixed or capital assets that may be incurred by the Borrower or any of its then existing Subsidiaries in any fiscal year of the Borrower shall not exceed $10,000,000; (ii) all Indebtedness in respect of capital leases and Synthetic Lease Obligations to finance the acquisition of fixed or capital assets incurred by the Borrower or any of its then existing Subsidiaries in any fiscal year shall not exceed $10,000,000; and (iii) all Indebtedness in respect of capital leases, Synthetic Lease Obligations and purchase money Indebtedness for fixed or capital assets of Persons immediately prior to such Persons becoming Subsidiaries or being merged with or into (or otherwise becoming acquired by the Borrower or any of its Subsidiaries) following the Closing Date shall not exceed $30,000,000; provided that none of such Indebtedness was incurred in anticipation of any such acquisition; (e) Indebtedness arising as a consequence of Investments pursuant to Section 7.02(c); (f) Indebtedness respecting (i) letters of credit (other than Letters of Credit) issued for the account of the Borrower or any Subsidiary in the Ordinary Course of Business in an aggregate outstanding amount not to exceed $25,000,000 at any time; and (ii) the obligation of a subcontractor of the Borrower or its Subsidiaries on a construction project, provided that the Borrower or such Subsidiary determines in good faith that such financial arrangement best serves the Borrower's or such Subsidiary's financial interests; (g) Indebtedness incurred in the Ordinary Course of Business in connection with (i) securing the performance of bids, trade contracts (other than for borrowed money), and statutory obligations, (ii) obligations on surety and appeal bonds, and (iii) other obligations of a like nature incurred in the Ordinary 46 52 Course of Business, in each of the foregoing cases to the extent not otherwise prohibited by the terms of any Loan Document; and (h) additional Indebtedness, comprised solely of (i) the outstanding principal amount of obligations, whether current or long-term, for borrowed money and all obligations evidenced by bonds (other than performance, surety and appeal bonds), debentures, notes, loan agreements or other similar instruments, (ii) Attributable Indebtedness in respect of capital leases and Synthetic Lease Obligations, or (iii) without duplication, Guaranty Obligations with respect to Indebtedness of the types specified in the immediately preceding clauses (i) and (ii), in an aggregate amount outstanding not to exceed $100,000,000 at any time; provided that no such Indebtedness shall be permitted under this clause (h) if such Indebtedness represents Indebtedness of any co-joint venturer in any Joint Venture to which the Borrower or any Subsidiary is a party is that is assumed by the Borrower or any of Subsidiary if such Indebtedness was not originally incurred by such co-joint venturer in connection with (and relate solely to) the subject Joint Venture. 7.04 FUNDAMENTAL CHANGES. Merge, consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person or enter into any Joint Venture, except that, so long as no Default or Event of Default exists at the time or would occur as a result thereof: (a) any Subsidiary may merge with (i) the Borrower, provided that the Borrower shall be the continuing or surviving Person, (ii) any one or more Subsidiaries, provided that, when any wholly-owned Subsidiary is merging with another Subsidiary, the wholly-owned Subsidiary shall be the continuing or surviving Person, or (iii) any other Person, provided that the Subsidiary shall be the continuing or surviving Person or immediately upon such merger, consolidation or combination, the surviving Person shall be a wholly-owned Subsidiary of the Borrower; (b) any Subsidiary may sell all or substantially all of its assets (upon voluntary liquidation or otherwise), to the Borrower or to another Subsidiary; provided that if the seller in such a transaction is a wholly-owned Subsidiary, then the purchaser must either be the Borrower or a wholly-owned Subsidiary; (c) the Borrower may merge, consolidate or combine with another entity if the Borrower is the corporation surviving the merger; and (d) the Borrower or any of its Subsidiaries may enter into any Joint Venture or partnership with any Person in the Ordinary Course of Business. 7.05 DISPOSITIONS. Sell, lease or make any Disposition or enter into any agreement to make any Disposition, except so long as no Default or Event of Default exists at the time or would occur as a result thereof: (a) Dispositions of obsolete or worn out property, whether now owned or hereafter acquired, in the Ordinary Course of Business; (b) Dispositions of inventory in the Ordinary Course of Business; (c) Dispositions of equipment or real property to the extent that (i) such property is exchanged for credit against the purchase price of similar replacement property for use in the Ordinary 47 53 Course of Business, (ii) the proceeds of such Disposition are reasonably promptly applied to the purchase price of such replacement property for use in the Ordinary Course of Business or (iii) the board of directors or senior management of the Borrower or such Subsidiary has determined in good faith that the failure to replace such property will not be detrimental to the business of the Borrower or such Subsidiary; (d) Dispositions of property by any Subsidiary to the Borrower or to a wholly-owned Subsidiary of the Borrower; (e) Dispositions permitted by Section 7.04; (f) non-exclusive licenses of IP Rights in the Ordinary Course of Business and substantially consistent with past practice for terms not exceeding five years; and (g) other Dispositions or property (other than accounts and notes receivable) not described in subsections (a) through (f) of this Section 7.05; provided that the aggregate consideration from such Dispositions received by the Borrower and its Subsidiaries, including aggregate cash received and the aggregate fair market value of non-cash property received, shall not exceed 5% of the total assets of the Borrower (determined on a consolidated basis in accordance with GAAP) as of the end of the Borrower's most recently ended fiscal year; provided that any Disposition pursuant to subsections (a) through (g) shall be for fair market value. 7.06 LEASE OBLIGATIONS. Create or suffer to exist any obligations for the payment of rent for any property under lease or agreement to lease, except: (a) leases in existence on the date hereof and listed on Schedule 7.06, and any renewal, extension or refinancing thereof; (b) operating leases (other than those constituting Synthetic Lease Obligations) entered into or assumed by the Borrower or any Subsidiary after the date hereof in the Ordinary Course of Business; (c) leases in connection with any sale-leaseback arrangement permitted hereby; and (d) capital leases and Synthetic Lease Obligations to the extent permitted by Section 7.03. 7.07 RESTRICTED PAYMENTS. Declare or make, directly or indirectly, any Restricted Payment (including, but not limited to, dividends, redemptions and repurchases of common stock), or incur any obligation (contingent or otherwise) to do so, except that: (a) each Subsidiary may make Restricted Payments to the Borrower and to wholly-owned Subsidiaries (and, in the case of a Restricted Payment by a non-wholly-owned Subsidiary, to the Borrower and any Subsidiary and to each other owner of capital stock of such Subsidiary on a pro rata basis based on their relative ownership interests); (b) the Borrower and each Subsidiary may declare and make dividend payments or other distributions payable solely in the common stock of such Person; 48 54 (c) so long as no Default or Event of Default exists or would result by virtue thereof, the Borrower and each Subsidiary may purchase, redeem or otherwise acquire shares of its common stock or warrants or options to acquire any such shares with the proceeds received from the substantially concurrent issue of new shares of its common stock; (d) so long as no Default or Event of Default exists or would result by virtue thereof, the Borrower may purchase, redeem or otherwise acquire shares of common stock for cash in order to contribute such shares to the Borrower's employee stock ownership plan, provided the aggregate amount paid by the Borrower in connection with such transactions does not exceed in any fiscal year an amount equal to 15% of plan compensation (as such term is interpreted for purposes of Section 401(a)(17) of the Code) paid by the Borrower in such fiscal year, and such shares are promptly so contributed; (e) so long as no Default or Event of Default exists or would result by virtue thereof, the Borrower may purchase, redeem or otherwise acquire shares of its capital stock, or warrants, rights or options to acquire any such shares for cash in an aggregate amount not to exceed $50,000,000 computed on a cumulative basis during the term of this Agreement; and (f) so long as no Default or Event of Default exists or would result by virtue thereof, the Borrower may declare and make dividend payments in cash. 7.08 ERISA. At any time engage in a transaction which could be subject to Section 4069 or 4212(c) of ERISA, or permit any Plan to (a) engage in any non-exempt "prohibited transaction" (as defined in Section 4975 of the Code); (b) fail to comply with ERISA or any other applicable Laws; or (c) incur any material "accumulated funding deficiency" (as defined in Section 302 of ERISA), which, with respect to each event listed above, could reasonably be expected to have a Material Adverse Effect. 7.09 CHANGE IN NATURE OF BUSINESS OR IN STRUCTURE. (a) Engage in any material line of business substantially different from those lines of business conducted by the Borrower and its Subsidiaries on the date hereof; and (b) Except as otherwise permitted under Section 7.04, make any change in the Borrower's capital structure (including in the terms of its outstanding capital stock) or amend its certificate of incorporation or bylaws if, as a result, there would be a reasonably likelihood of the occurrence of a Material Adverse Effect. 7.10 TRANSACTIONS WITH AFFILIATES. Enter into any transaction of any kind with any Affiliate of the Borrower, other than arm's-length transactions with Affiliates that are otherwise permitted hereunder. 7.11 BURDENSOME AGREEMENTS. (a) Limiting Contracts. Enter into any Contractual Obligation that limits the ability (i) of any Subsidiary to make Restricted Payments to the Borrower or to otherwise transfer property to the Borrower or (ii) of the Borrower or any Subsidiary to create, incur, assume or suffer to exist Liens on property of such Person; and 49 55 (b) Employment Contracts. Enter into any employment contracts or other arrangements who terms, including salaries, benefits and other compensation, are different from those previously entered into by it in the Ordinary Course of Business. 7.12 USE OF PROCEEDS. Use the proceeds of any Credit Extension, whether directly or indirectly, and whether immediately, incidentally or ultimately, to purchase or carry margin stock (within the meaning of Regulation U of the FRB), to extend credit to others for the purpose of purchasing or carrying margin stock or to refund indebtedness originally incurred for such purpose, or to acquire any security in any transaction that is subject to Section 13 or 14 of the Exchange Act. 7.13 FINANCIAL COVENANTS. (a) Consolidated Tangible Net Worth. Permit Consolidated Tangible Net Worth as of the end of any fiscal quarter of the Borrower to be less than the sum of (a) $318,866,000 plus (b) an amount equal to 50% of the Consolidated Net Income earned in each fiscal quarter ending after March 31, 2001 (with no deduction for a net loss in any such fiscal quarter) plus (c) an amount equal to 50% of the aggregate increases in Consolidated Shareholders' Equity after the date hereof by reason of the issuance and sale of capital stock of the Borrower (including upon any conversion of debt securities of the Borrower into such capital stock). (b) Fixed Charge Coverage Ratio. Permit the Fixed Charge Coverage Ratio as of the end of any fiscal quarter of the Borrower to be less than 1.50 to 1.00. (c) Leverage Ratio. Permit the Leverage Ratio as of the end of any fiscal quarter of the Borrower to be greater than 0.55 to 1.00. ARTICLE VIII. EVENTS OF DEFAULT AND REMEDIES 8.01 EVENTS OF DEFAULT. Any of the following shall constitute an "Event of Default": (a) Non-Payment. The Borrower fails to pay (i) when and as required to be paid herein, any amount of principal of any Loan or any L/C Obligation, or (ii) within three (3) Business Days after the same becomes due, any interest on any Loan or on any L/C Obligation, any commitment, utilization or other fee due hereunder, or any other amount payable hereunder or under any other Loan Document; or (b) Specific Covenants. The Borrower fails to perform or observe any term, covenant or agreement contained in any of Section 6.01, 6.02, 6.03, 6.05, 6.10, 6.12 or 6.13 or Article VII; or (c) Other Defaults. Any Loan Party fails to perform or observe any other covenant or agreement (not specified in subsection (a) or (b) above) contained in any Loan Document on its part to be performed or observed and such failure continues for 30 days; or (d) Representations and Warranties. Any representation or warranty made or deemed made by the Borrower or any other Loan Party herein, in any other Loan Document, or in any document delivered in connection herewith or therewith proves to have been incorrect when made or deemed made; or 50 56 (e) Cross-Default. (i) The Borrower or any Material Subsidiary or any Guarantor (A) fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Indebtedness or Guaranty Obligation (other than Indebtedness hereunder and Indebtedness under Swap Contracts) having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than $5,000,000, or (B) fails to observe or perform any other agreement or condition relating to any such Indebtedness or Guaranty Obligation or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is to cause, or to permit the holder or holders of such Indebtedness or the beneficiary or beneficiaries of such Guaranty Obligation (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to be demanded or to become due or to be repurchased or redeemed (automatically or otherwise) prior to its stated maturity, or such Guaranty Obligation to become payable or cash collateral in respect thereof to be demanded; or (ii) there occurs under any Swap Contract an Early Termination Date (as defined in such Swap Contract) resulting from (A) any event of default under such Swap Contract as to which the Borrower or any Material Subsidiary or any Guarantor is the Defaulting Party (as defined in such Swap Contract) or (B) any Termination Event (as so defined) under such Swap Contract as to which the Borrower or any Material Subsidiary is an Affected Party (as so defined) and, in either event, the Swap Termination Value owed by the Borrower or such Material Subsidiary as a result thereof is greater than $5,000,000; or (f) Insolvency Proceedings, Etc. Any Loan Party or any of its Subsidiaries institutes or consents to the institution of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for 60 calendar days; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any part of its property is instituted without the consent of such Person and continues undismissed or unstayed for 60 calendar days, or an order for relief is entered in any such proceeding; or (g) Inability to Pay Debts; Attachment. (i) Any Loan Party or any of its Subsidiaries becomes unable or admits in writing its inability or fails generally to pay its debts as they become due, or (ii) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of any such Person and is not released, vacated or fully bonded within 30 days after its issue or levy; or (h) Judgments. There is entered against any Loan Party or any Subsidiary (i) a final judgment or order for the payment of money in an aggregate amount exceeding $5,000,000 (to the extent not covered by independent third-party insurance as to which the insurer does not dispute coverage), or (ii) any non-monetary final judgment that has, or could reasonably be expected to have, a Material Adverse Effect and, in either case, (A) enforcement proceedings are commenced by any creditor upon such judgment or order, or (B) there is a period of 10 consecutive days during which a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, is not in effect; or (i) ERISA. (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of the Borrower under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of $1,000,000, or (ii) the Borrower or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability 51 57 under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of the $1,000,000; or (j) Invalidity of Loan Documents. Any Loan Document, at any time after its execution and delivery and for any reason other than the agreement of all the Lenders or satisfaction in full of all the Obligations, ceases to be in full force and effect, or is declared by a court of competent jurisdiction to be null and void, invalid or unenforceable in any respect; or any Loan Party denies that it has any or further liability or obligation under any Loan Document, or purports to revoke, terminate or rescind any Loan Document; or (k) Loss of Material Licenses, Permits or Intellectual Property. Any Governmental Authority revokes or fails to renew any material license, permit or franchise of the Borrower or any of its Subsidiaries, or the Borrower or any of its Subsidiaries for any reason loses any material license, permit or franchise, or the Borrower or any of its Subsidiaries suffers the imposition of any restraining order, escrow, suspension or impound of funds in connection with any proceeding (judicial or administrative) with respect to any material license, permit or franchise; or (l) Change of Control. There occurs any Change of Control; or (m) Material Adverse Effect. There occurs any event or circumstance that has a Material Adverse Effect. 8.02 REMEDIES UPON EVENT OF DEFAULT. If any Event of Default occurs, the Administrative Agent shall, at the request of, or may, with the consent of, the Required Lenders: (a) declare the commitment of each Lender to make Loans and any obligation of the L/C Issuer to make L/C Credit Extensions to be terminated, whereupon such commitments and obligation shall be terminated; (b) declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower; (c) require that the Borrower Cash Collateralize the L/C Obligations (in an amount equal to the then Outstanding Amount thereof); and (d) exercise on behalf of itself and the Lenders all rights and remedies available to it and the Lenders under the Loan Documents or applicable law; provided that, upon the occurrence of any event specified in subsection (f) of Section 8.01, the obligation of each Lender to make Loans and any obligation of the L/C Issuer to make L/C Credit Extensions shall automatically terminate, the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable, the obligation of the Borrower to Cash Collateralize the L/C Obligations as aforesaid shall automatically become effective, all payment obligations under the Guaranty of each Guarantor shall automatically become due and payable, in each case without further act of the Administrative Agent or any Lender. 52 58 ARTICLE IX. ADMINISTRATIVE AGENT 9.01 APPOINTMENT AND AUTHORIZATION OF ADMINISTRATIVE AGENT. (a) Each Lender hereby irrevocably appoints, designates and authorizes the Administrative Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere herein or in any other Loan Document, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Administrative Agent have or be deemed to have any fiduciary relationship with any Lender or participant, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent. Without limiting the generality of the foregoing sentence, the use of the term "agent" herein and in the other Loan Documents with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties. (b) The L/C Issuer shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith until such time (and except for so long) as the Administrative Agent may agree at the request of the Required Lenders to act for the L/C Issuer with respect thereto; provided that the L/C Issuer shall have all of the benefits and immunities (i) provided to the Administrative Agent in this Article IX with respect to any acts taken or omissions suffered by the L/C Issuer in connection with Letters of Credit issued by it or proposed to be issued by it and the application and agreements for letters of credit pertaining to the Letters of Credit as fully as if the term "Administrative Agent" as used in this Article IX included the L/C Issuer with respect to such acts or omissions, and (ii) as additionally provided herein with respect to the L/C Issuer. 9.02 DELEGATION OF DUTIES. The Administrative Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel and other consultants or experts concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects in the absence of gross negligence or willful misconduct. 9.03 LIABILITY OF ADMINISTRATIVE AGENT. No Agent-Related Person shall (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct in connection with its duties expressly set forth herein), or (b) be responsible in any manner to any Lender or participant for any recital, statement, representation or warranty made by any Loan Party or any officer thereof, contained herein or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of any Loan Party or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Lender or participant to ascertain or to inquire as to the 53 59 observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party or any Affiliate thereof. 9.04 RELIANCE BY ADMINISTRATIVE AGENT. (a) The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, communication, signature, resolution, representation, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to any Loan Party), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under any Loan Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Required Lenders or all the Lenders, if required hereunder, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and participants. Where this Agreement expressly permits or prohibits an action unless the Required Lenders otherwise determine, the Administrative Agent shall, and in all other instances, the Administrative Agent may, but shall not be required to, initiate any solicitation for the consent or a vote of the Lenders. (b) For purposes of determining compliance with the conditions specified in Section 4.01, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter either sent by the Administrative Agent to such Lender for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender. 9.05 NOTICE OF DEFAULT. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Administrative Agent for the account of the Lenders, unless the Administrative Agent shall have received written notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default." The Administrative Agent will notify the Lenders of its receipt of any such notice. The Administrative Agent shall take such action with respect to such Default or Event of Default as may be directed by the Required Lenders in accordance with Article VIII; provided that unless and until the Administrative Agent has received any such direction, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of the Lenders. 9.06 CREDIT DECISION; DISCLOSURE OF INFORMATION BY ADMINISTRATIVE AGENT. Each Lender acknowledges that no Agent-Related Person has made any representation or warranty to it, and that no act by the Administrative Agent hereafter taken, including any consent to and acceptance of any assignment or review of the affairs of any Loan Party or any Affiliate thereof, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Lender as to any matter, including whether Agent-Related Persons have disclosed material information in their possession. 54 60 Each Lender represents to the Administrative Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Loan Parties and their respective Subsidiaries, and all applicable bank or other regulatory Laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the Borrower and the other Loan Parties hereunder. Each Lender also represents that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Borrower and the other Loan Parties. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent herein, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of any of the Loan Parties or any of their respective Affiliates which may come into the possession of any Agent-Related Person. 9.07 INDEMNIFICATION OF ADMINISTRATIVE AGENT. Whether or not the transactions contemplated hereby are consummated, the Lenders shall indemnify upon demand each Agent-Related Person (to the extent not reimbursed by or on behalf of any Loan Party and without limiting the obligation of any Loan Party to do so), pro rata, and hold harmless each Agent-Related Person from and against any and all Indemnified Liabilities incurred by it; provided that no Lender shall be liable for the payment to any Agent-Related Person of any portion of such Indemnified Liabilities determined in a final, nonappealable judgment by a court of competent jurisdiction to have been caused primarily by such Person's own gross negligence or willful misconduct; provided that no action taken in accordance with the directions of the Required Lenders shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section. Without limitation of the foregoing, each Lender shall reimburse the Administrative Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including reasonable Attorney Costs and costs and expenses in connection with the use of the Internet, IntraLinks or other similar information transmission systems in connection with this Agreement) incurred by the Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that the Administrative Agent is not reimbursed for such expenses by or on behalf of the Borrower. The undertaking in this Section shall survive termination of the Aggregate Commitments, the payment of all Obligations hereunder and the resignation or replacement of the Administrative Agent. 9.08 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. Bank of America and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with each of the Loan Parties and their respective Affiliates as though Bank of America were not the Administrative Agent or the L/C Issuer hereunder and without notice to or consent of the Lenders. The Lenders acknowledge that, pursuant to such activities, Bank of America or its Affiliates may receive information regarding any Loan Party or its Affiliates (including information that may be subject to confidentiality obligations in favor of such Loan Party or such Affiliate) and acknowledge that the Administrative Agent shall be under no obligation to provide 55 61 such information to them. With respect to its Loans, Bank of America shall have the same rights and powers under this Agreement as any other Lender and may exercise such rights and powers as though it were not the Administrative Agent or the L/C Issuer, and the terms "Lender" and "Lenders" include Bank of America in its individual capacity. 9.09 SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may resign as Administrative Agent upon 30 days prior notice to the Lenders; provided that any such resignation by Bank of America shall also constitute its resignation as L/C Issuer. If the Administrative Agent resigns under this Agreement, the Required Lenders shall appoint from among the Lenders a successor administrative agent for the Lenders which successor administrative agent shall be consented to by the Borrower at all times other than during the existence of an Event of Default (which consent of the Borrower shall not be unreasonably withheld or delayed). If no successor administrative agent is appointed prior to the effective date of the resignation of the Administrative Agent, then the Administrative Agent may appoint, after consulting with the Lenders and the Borrower, a successor administrative agent from among the Lenders. Upon the acceptance of its appointment as successor administrative agent hereunder, the Person acting as such successor administrative agent shall succeed to all the rights, powers and duties of the retiring Administrative Agent and L/C and the respective terms "Administrative Agent" and "L/C Issuer" shall mean such successor administrative agent and Letter of Credit issuer, and the retiring Administrative Agent's appointment, powers and duties as Administrative Agent shall be terminated and the retiring L/C Issuer's rights, powers and duties as such shall be terminated, without any other or further act or deed on the part of such retiring L/C Issuer or any other Lender, other than the obligation of the successor L/C Issuer to issue letters of credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Article IX and Sections 10.03 and 10.13 shall inure to such Person's benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. If no successor administrative agent has accepted appointment as Administrative Agent by the date which is 30 days following a retiring Administrative Agent's notice of resignation, the retiring Administrative Agent's resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above. ARTICLE X. GENERAL PROVISIONS 10.01 AMENDMENTS, ETC. No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by the Borrower or any other Loan Party therefrom, shall be effective unless in writing signed by the Required Lenders and the Borrower or the applicable Loan Party, as the case may be, and acknowledged by the Administrative Agent, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that no such amendment, waiver or consent shall, unless in writing and signed by each of the Lenders directly affected thereby and by the Borrower, and acknowledged by the Administrative Agent, do any of the following: (a) extend or increase the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 8.02; 56 62 (b) postpone any date fixed by this Agreement or any other Loan Document for any payment or mandatory prepayment of principal, interest, fees or other amounts due to the Lenders (or any of them) hereunder or under any other Loan Document; (c) reduce the principal of, or the rate of interest specified herein on, any Loan or L/C Borrowing, or (subject to clause (iv) of the proviso below) any fees or other amounts payable hereunder or under any other Loan Document, or change the manner of computation of any financial covenant used in determining the Applicable Rate that would result in a reduction of any interest rate on any Loan; provided that only the consent of the Required Lenders shall be necessary to amend the definition of "Default Rate" contained in Section 1.01 or to waive any obligation of the Borrower to pay interest at the Default Rate; (d) change the percentage of the Aggregate Commitments or of the aggregate unpaid principal amount of the Loans and L/C Obligations which is required for the Lenders or any of them to take any action hereunder; (e) change the Pro Rata Share or Voting Percentage of any Lender (except for any change resulting from Section 3.06(b)); (f) amend this Section, or Section 2.12, or any provision herein providing for consent or other action by all the Lenders; or (g) release any Guarantor from the Guaranty; provided further that (i) no amendment, waiver or consent shall, unless in writing and signed by the L/C Issuer in addition to the Required Lenders or each directly-affected Lender, as the case may be, affect the rights or duties of the L/C Issuer under this Agreement or any Letter of Credit Application relating to any Letter of Credit issued or to be issued by it; (ii) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Required Lenders or each directly-affected Lender, as the case may be, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan Document; and (iii) the Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed only by the respective parties thereto. Notwithstanding anything to the contrary herein, any Lender that has a Voting Percentage of zero shall not have any right to approve or disapprove any amendment, waiver or consent hereunder, except that the Pro Rata Share of such Lender may not be increased (except for any such increase resulting from Section 3.06(b)) without the consent of such Lender. 10.02 NOTICES AND OTHER COMMUNICATIONS; FACSIMILE COPIES. (a) General. Unless otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including by facsimile transmission) and mailed, faxed or delivered, to the address, facsimile number or (subject to subsection (c) below) electronic mail address specified for notices on Schedule 10.02; or, in the case of the Borrower, the Administrative Agent or the L/C Issuer, to such other address as shall be designated by such party in a notice to the other parties, and in the case of any other party, to such other address as shall be designated by such party in a notice to the Borrower, the Administrative Agent and the L/C Issuer. All such notices and other communications shall be deemed to be given or made upon the earlier to occur of (i) actual receipt by the intended recipient and (ii) (A) if delivered by hand or by courier, when signed for by the intended recipient; (B) if delivered by mail, four (4) Business Days after deposit in the mails, postage prepaid; (C) if delivered by facsimile, when sent and receipt has been confirmed by telephone; and (D) if delivered by electronic mail (which form of delivery is subject to the provisions of subsection (c) below), when 57 63 delivered; provided that notices and other communications to the Administrative Agent and the L/C Issuer pursuant to Article II shall be in writing (including by facsimile) and shall not be effective until actually received by such Person. Any notice or other communication permitted to be given, made or confirmed by telephone hereunder shall be given, made or confirmed by means of a telephone call to the intended recipient at the number specified on Schedule 10.02, it being understood and agreed that a voicemail message shall in no event be effective as a notice, communication or confirmation hereunder. (b) Effectiveness of Facsimile Documents and Signatures. Loan Documents may be transmitted and/or signed by facsimile. The effectiveness of any such documents and signatures shall, subject to applicable Law, have the same force and effect as manually-signed originals and shall be binding on all Loan Parties, the Administrative Agent and the Lenders. The Administrative Agent may also require that any such documents and signatures be confirmed by a manually-signed original thereof; provided that the failure to request or deliver the same shall not limit the effectiveness of any facsimile document or signature. (c) Limited Use of Electronic Mail. Electronic mail and internet and intranet websites may be used only to distribute routine communications, such as financial statements and other information, and to distribute Loan Documents for execution by the parties thereto, and may not be used for any other purpose. (d) Reliance by Administrative Agent and Lenders. The Administrative Agent and the Lenders shall be entitled to rely and act upon any notices (including telephonic Loan Notices) purportedly given by or on behalf of the Borrower even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof. The Borrower shall indemnify each Agent-Related Person and each Lender from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Borrower. All telephonic notices to and other communications with the Administrative Agent may be recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording. 10.03 NO WAIVER; CUMULATIVE REMEDIES. No failure by any Lender or the Administrative Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein or therein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 10.04 ATTORNEY COSTS, EXPENSES AND TAXES. The Borrower agrees (a) to pay or reimburse the Administrative Agent for all costs and expenses incurred in connection with the development, preparation, negotiation and execution of this Agreement and the other Loan Documents and any amendment, waiver, consent or other modification of the provisions hereof and thereof (whether or not the transactions contemplated hereby or thereby are consummated), and the consummation and administration of the transactions contemplated hereby and thereby, including all reasonable Attorney Costs (including non-duplicative allocated costs of in-house counsel) and costs and expenses in connection with the use of internet, IntraLinks or other similar information transmission systems in connection with this Agreement, and (b) to pay or reimburse the Administrative Agent, the Arranger and each Lender for all costs and expenses (including Attorney Costs) incurred in connection with the enforcement, attempted enforcement, or preservation of any rights 58 64 or remedies under this Agreement, the other Loan Documents or applicable Law (including all such costs and expenses incurred during any "workout" or restructuring in respect of the Obligations and during any legal proceeding, including any proceeding under any Debtor Relief Law). The foregoing costs and expenses shall include all search, filing, recording, title insurance and appraisal charges and fees and taxes related thereto, and other out-of-pocket expenses incurred by the Administrative Agent and the cost of independent public accountants and other outside experts retained by the Administrative Agent or any Lender. The agreements in this Section shall survive the termination of the Aggregate Commitments and repayment of all other Obligations. 10.05 INDEMNIFICATION BY THE BORROWER. Whether or not the transactions contemplated hereby are consummated, the Borrower agrees to indemnify, save and hold harmless, each Agent-Related Person, each Lender and their respective Affiliates, directors, officers, employees, counsel, agents and attorneys-in-fact (collectively the "Indemnitees") from and against: (a) any and all claims, demands, actions or causes of action that are asserted against any Indemnitee by any Person (other than the Administrative Agent or any Lender) relating directly or indirectly to a claim, demand, action or cause of action that such Person asserts or may assert against any Loan Party, any Affiliate of any Loan Party or any of their respective officers or directors arising out of or relating to the Loan Documents, any predecessor loan documents, any Commitment, the use or contemplated use of the proceeds of any Credit Extension, or the relationship of any Loan Party, the Administrative Agent and the Lenders under this Agreement or any other Loan Document, (b) any and all claims, demands, actions or causes of action that may at any time (including at any time following repayment of the Obligations and the resignation or removal of the Administrative Agent or the replacement of any Lender) be asserted or imposed against any Indemnitee arising out of or relating to the Loan Documents, any predecessor loan documents, any Commitment, the use or contemplated use of the proceeds of any Credit Extension, or the relationship of any Loan Party, the Administrative Agent and the Lenders under this Agreement or any other Loan Document; (c) any administrative or investigative proceeding by any Governmental Authority arising out of or related to a claim, demand, action or cause of action described in subsection (a) or (b) above; and (d) any and all liabilities (including liabilities under indemnities), losses, costs or expenses (including Attorney Costs) that any Indemnitee suffers or incurs as a result of the assertion of any foregoing claim, demand, action, cause of action or proceeding, or as a result of the preparation of any defense in connection with any foregoing claim, demand, action, cause of action or proceeding, in all cases, whether or not arising out of the negligence of an Indemnitee, and whether or not an Indemnitee is a party to such claim, demand, action, cause of action or proceeding (all the foregoing, collectively, the "Indemnified Liabilities"); provided that no Indemnitee shall be entitled to indemnification for any claim determined in a final, nonappealable judgment by a court of competent jurisdiction to have been caused primarily by its own gross negligence or willful misconduct or for any loss asserted against it by another Indemnitee. No Indemnitee shall be liable for any damages arising from the use by others of any information or other materials obtained through internet, Intralinks or other similar information transmission systems in connection with this Agreement. The agreements in this Section shall survive the termination of the Aggregate Commitments and repayment of all other Obligations. 10.06 PAYMENTS SET ASIDE. To the extent that the Borrower makes a payment to the Administrative Agent or any Lender, or the Administrative Agent or any Lender exercises its right of set-off, and such payment or the proceeds of such set-off or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Administrative Agent or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the 59 65 obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such set-off had not occurred, and (b) each Lender severally agrees to pay to the Administrative Agent upon demand its applicable share of any amount so recovered from or repaid by the Administrative Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect. 10.07 SUCCESSORS AND ASSIGNS. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Indemnitees) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) Any Lender may, with the prior written consent of the Administrative Agent and, so long as no Default or Event of Default has occurred and is continuing, the Borrower (whose consent, if required, shall not be unreasonably withheld or delayed), assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans (including for purposes of this subsection (b), participations in L/C Obligations) at the time owing to it); provided that (i) except in the case of an assignment of the entire remaining amount of the assigning Lender's Commitment and the Loans at the time owing to it or in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund with respect to a Lender, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding hereunder) subject to each such assignment, determined as of the date the Assignment and Assumption Agreement with respect to such assignment is delivered to the Administrative Agent, shall not be less than $5,000,000 unless the Administrative Agent and, so long as no Default or Event of Default has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed), (ii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement with respect to the Loans or the Commitment assigned and (iii) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption Agreement and shall pay to the Administrative Agent a processing and recordation fee in an amount equal to $3,500. Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c) of this Section, from and after the effective date specified in each Assignment and Assumption Agreement, the Eligible Assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption Agreement, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption Agreement, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption Agreement covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 3.07, 10.04 and 10.05). Upon request, the Borrower (at its expense) shall execute and deliver new or replacement Notes to the assigning Lender and the assignee Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with subsection (d) of this Section. 60 66 (c) The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at the Administrative Agent's Office a copy of each Assignment and Assumption Agreement delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amount of the Loans and L/C Obligations owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice. (d) Any Lender may, without the consent of, or notice to, the Borrower or the Administrative Agent, sell participations to one or more banks or other Persons (a "Participant") in all or a portion of such Lender's rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or Loans (including such Lender's participations in L/C Obligations) owing to it); provided that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification that would (i) postpone any date upon which any payment of money is scheduled to be paid to such Participant, (ii) reduce the principal, interest, fees or other amounts payable to such Participant or (iii) release any Guarantor from the Guaranty. Subject to subsection (e) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.01, 3.04 and 3.05 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to subsection (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.09 as though it were a Lender, provided such Participant agrees to be subject to Section 2.14 as though it were a Lender. (e) A Participant shall not be entitled to receive any greater payment under Section 3.01 or 3.04 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower's prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 3.01 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 10.15 as though it were a Lender. (f) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Notes, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. (g) If the consent of the Borrower to an assignment or to an Eligible Assignee is required hereunder (including a consent to an assignment which does not meet the minimum assignment threshold specified in clause (i) of the proviso to the first sentence of Section 10.07(b)), the Borrower shall be deemed to have given its consent five (5) Business Days after the date notice thereof has been delivered by the assigning Lender (through the Administrative Agent) unless such consent is expressly refused by the Borrower prior to such fifth (5th) Business Day. 61 67 (h) As used herein, the following terms have the following meanings: "Approved Fund" means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender. "Eligible Assignee" means (a) a Lender; (b) an Affiliate of a Lender; (c) an Approved Fund; and (d) any other Person (other than a natural Person) approved by (i) the Administrative Agent, in the case of any assignment of a Loan, (ii) the L/C Issuer, and (iii) unless (A) such Person is taking delivery of an assignment in connection with physical settlement of a credit derivatives transaction or (B) an Event of Default has occurred and is continuing, the Borrower (each such approval referred to in clauses (i) through (iii) not to be unreasonably withheld or delayed). "Fund" means any Person (other than a natural Person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business. (i) Notwithstanding anything to the contrary contained herein, if at any time Bank of America assigns all of its Commitment and Loans pursuant to subsection (b) above, Bank of America may, upon 30 days prior written notice to the Borrower and the Lenders, resign as L/C Issuer. In the event of any such resignation as L/C Issuer, the Borrower shall be entitled to appoint from among the Lenders a successor L/C Issuer hereunder, provided that no failure by the Borrower to appoint any such successor shall affect the resignation of Bank of America as L/C Issuer. Bank of America shall retain all of the rights and obligations of the L/C Issuer hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as L/C Issuer and all L/C Obligations with respect thereto (including the right to require the Lenders to make Base Rate Loans or fund participations in Unreimbursed Amounts pursuant to Section 2.04(c)). Until such time, if at all, as Bank of America shall have resigned as "L/C Issuer" hereunder, no other Person shall be, shall be entitled to be or shall be deemed to be an "L/C Issuer" or additional or co- "L/C Issuer" hereunder. 10.08 CONFIDENTIALITY. Each of the Administrative Agent and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential); (b) to the extent requested by any regulatory authority; (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process; (d) to any other party to this Agreement; (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder; (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any Eligible Assignee of or Participant in, or any prospective Eligible Assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any direct or indirect contractual counterparty or prospective counterparty (or such contractual counterparty's or prospective counterparty's professional advisor) to any credit derivative transaction relating to obligations of the Borrower; (g) with the consent of the Borrower; (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to the Administrative Agent or any Lender on a non-confidential basis from a source other than the Borrower; or (i) to the National Association of Insurance Commissioners or any other similar organization or any nationally 62 68 recognized rating agency that requires access to information about a Lender's or its Affiliates' investment portfolio in connection with ratings issued with respect to such Lender or its Affiliates. In addition, the Administrative Agent and the Lenders may disclose the existence of this Agreement and information about this Agreement to market data collectors, similar service providers to the lending industry, and service providers to the Administrative Agent and the Lenders in connection with the administration and management of this Agreement, the other Loan Documents, the Commitments, and the Credit Extensions. For the purposes of this Section, "Information" means all information received from the Borrower relating to the Borrower or its business, other than any such information that is available to the Administrative Agent or any Lender on a non-confidential basis prior to disclosure by the Borrower; provided that, in the case of information received from the Borrower after the date hereof, such information is clearly identified in writing at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. 10.09 SET-OFF. In addition to any rights and remedies of the Lenders provided by law, upon the occurrence and during the continuance of any Event of Default, each Lender is authorized at any time and from time to time, without prior notice to the Borrower or any other Loan Party, any such notice being waived by the Borrower (on its own behalf and on behalf of each Loan Party) to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other indebtedness at any time owing by, such Lender to or for the credit or the account of the respective Loan Parties against any and all Obligations owing to such Lender, now or hereafter existing, irrespective of whether or not the Administrative Agent or such Lender shall have made demand under this Agreement or any other Loan Document and although such Obligations may be contingent or unmatured. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such set-off and application made by such Lender; provided that the failure to give such notice shall not affect the validity of such set-off and application. 10.10 INTEREST RATE LIMITATION. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the "Maximum Rate"). If the Administrative Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrower. In determining whether the interest contracted for, charged, or received by the Administrative Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations. 10.11 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 63 69 10.12 INTEGRATION. This Agreement, together with the other Loan Documents, comprises the complete and integrated agreement of the parties on the subject matter hereof and thereof and supersedes all prior agreements, written or oral, on such subject matter. In the event of any conflict between the provisions of this Agreement and those of any other Loan Document, the provisions of this Agreement shall control; provided that the inclusion of supplemental rights or remedies in favor of the Administrative Agent or the Lenders in any other Loan Document shall not be deemed a conflict with this Agreement. Each Loan Document was drafted with the joint participation of the respective parties thereto and shall be construed neither against nor in favor of any party, but rather in accordance with the fair meaning thereof. 10.13 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations and warranties have been or will be relied upon by the Administrative Agent and each Lender, regardless of any investigation made by the Administrative Agent or any Lender or on their behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default or Event of Default at the time of any Credit Extension, and shall continue in full force and effect as long as any Loan or any other Obligation shall remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding. 10.14 SEVERABILITY. Any provision of this Agreement and the other Loan Documents to which the Borrower is a party that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions thereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 10.15 FOREIGN LENDERS. Each Lender that is not a "United States person" within the meaning of Section 7701(a)(30) of the Code (a "Foreign Lender") shall deliver to the Administrative Agent, prior to receipt of any payment subject to withholding under the Code (or upon accepting an assignment of an interest herein), two duly signed completed copies of either IRS Form W-8BEN or any successor thereto (relating to such Person and entitling it to an exemption from, or reduction of, withholding tax on all payments to be made to such Person by the Borrower pursuant to this Agreement) or IRS Form W-8ECI or any successor thereto (relating to all payments to be made to such Person by the Borrower pursuant to this Agreement) or such other evidence satisfactory to the Borrower and the Administrative Agent that such Person is entitled to an exemption from, or reduction of, U.S. withholding tax. Thereafter and from time to time, each such Person shall (a) promptly submit to the Administrative Agent such additional duly completed and signed copies of one of such forms (or such successor forms as shall be adopted from time to time by the relevant United States taxing authorities) as may then be available under then current United States laws and regulations to avoid, or such evidence as is satisfactory to the Borrower and the Administrative Agent of any available exemption from or reduction of, United States withholding taxes in respect of all payments to be made to such Person by the Borrower pursuant to this Agreement, (b) promptly notify the Administrative Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction, and (c) take such steps as shall not be materially disadvantageous to it, in the reasonable judgment of such Lender, and as may be reasonably necessary (including the re-designation of its Lending Office) to avoid any requirement of applicable Laws that the Borrower make any deduction or 64 70 withholding for taxes from amounts payable to such Person. If such Person fails to deliver the above forms or other documentation, then the Administrative Agent may withhold from any interest payment to such Person an amount equivalent to the applicable withholding tax imposed by Sections 1441 and 1442 of the Code, without reduction. If any Governmental Authority asserts that the Administrative Agent did not properly withhold any tax or other amount from payments made in respect of such Person, such Person shall indemnify the Administrative Agent therefor, including all penalties and interest, any taxes imposed by any jurisdiction on the amounts payable to the Administrative Agent under this Section, and costs and expenses (including reasonable Attorney Costs) of the Administrative Agent. The obligation of the Lenders under this Section shall survive the termination of the Aggregate Commitments, repayment of all Obligations and the resignation or replacement of the Administrative Agent. 10.16 REMOVAL AND REPLACEMENT OF LENDERS. (a) Under any circumstances set forth herein providing that the Borrower shall have the right to remove or replace a Lender as a party to this Agreement, the Borrower may, upon notice to such Lender and the Administrative Agent, (i) remove such Lender by terminating such Lender's Commitment or (ii) replace such Lender by causing such Lender to assign its Commitment (without payment of any assignment fee) pursuant to Section 10.07(b) to one or more other Lenders or Eligible Assignees procured by the Borrower; provided that if the Borrower elects to exercise such right with respect to any Lender pursuant to Section 3.06(b), it shall be obligated to remove or replace, as the case may be, all Lenders that have made similar requests for compensation pursuant to Section 3.01 or 3.04. The Borrower shall (x) pay in full all principal, interest, fees and other amounts owing to such Lender through the date of removal or replacement (including any amounts payable pursuant to Section 3.05), (y) provide appropriate assurances and indemnities (which may include letters of credit) to the L/C Issuer as each may reasonably require with respect to any continuing obligation to purchase participation interests in any L/C Obligations then outstanding, and (z) release such Lender from its obligations under the Loan Documents. Any Lender being replaced shall execute and deliver an Assignment and Assumption Agreement with respect to such Lender's Commitment and outstanding Credit Extensions. The Administrative Agent shall distribute an amended Schedule 2.01, which shall be deemed incorporated into this Agreement, to reflect changes in the identities of the Lenders and adjustments of their respective Commitments and/or Pro Rata Shares resulting from any such removal or replacement. (b) In order to make all the Lenders' interests in any outstanding Credit Extensions ratable in accordance with any revised Pro Rata Shares after giving effect to the removal or replacement of a Lender, the Borrower shall pay or prepay, if necessary, on the effective date thereof, all outstanding Loans of all Lenders, together with any amounts due under Section 3.05. The Borrower may then request Loans from the Lenders in accordance with their revised Pro Rata Shares. The Borrower may net any payments required hereunder against any funds being provided by any Lender or Eligible Assignee replacing a terminating Lender. The effect for purposes of this Agreement shall be the same as if separate transfers of funds had been made with respect thereto. (c) This section shall supersede any provision in Section 10.01 to the contrary. 10.17 GOVERNING LAW. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, the LAW OF THE STATE OF CALIFORNIA applicable to agreements made and to be performed entirely within such State; PROVIDED THAT THE ADMINISTRATIVE Agent AND EACH LENDER SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW. 65 71 (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA SITTING IN THE CITY AND COUNTY OF SAN FRANCISCO, CALIFORNIA OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF SUCH STATE, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER, THE ADMINISTRATIVE Agent AND EACH LENDER CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. THE BORROWER, THE ADMINISTRATIVE Agent AND EACH LENDER IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF ANY LOAN DOCUMENT OR OTHER DOCUMENT RELATED THERETO. THE BORROWER, THE ADMINISTRATIVE Agent AND EACH LENDER WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY THE LAW OF SUCH STATE. 10.18 WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. 10.19 TIME OF THE ESSENCE. Time is of the essence of the Loan Documents. 66 72 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first written above. GRANITE CONSTRUCTION INCORPORATED, a Delaware corporation, as the Borrower By: /s/ DAVID H. WATTS ------------------------------------------------------- Name: David H. Watts Title: President By: /s/ WILLIAM E. BARTON ------------------------------------------------------- Name: William E. Barton Title: Chief Financial Officer BANK OF AMERICA, N.A., as Administrative Agent, as a Lender and as L/C Issuer By: /s/ FRED L. THORNE ------------------------------------------------------- Name: Fred L. Thorne Title: Managing Director BNP PARIBAS, as a Lender By: /s/ PIERRE NICOLAS ROGERS /s/ SANDRA F. BERTRAM ------------------------------------------------------- Name: Pierre Nicholas Rogers Sandra F Bertram Title: Managing Director Associate FIRST UNION NATIONAL BANK, as a Lender By: /s/ ROY O. YOUNG ------------------------------------------------------- Name: Roy O. Young Title: Vice President UNION BANK OF CALIFORNIA, N.A., as a Lender By: /s/ ALLAN B. MINER ------------------------------------------------------- Name: Allan B. Miner Title: Vice President U.S. BANK NATIONAL ASSOCIATION, as a Lender By: /s/ LORI EDWARDS ----------------------------------------- Name: Lori Edwards Title: Senior Vice President 73 SCHEDULE A EXISTING LETTERS OF CREDIT (Previously issued by Bank of America, N.A. for the account of Granite Construction Incorporated)
- ------------------------------------------------------------------------------------------------- L/C NO. ORIG. ISSUE DATE BENEFICIARY EXPIRY DATE FACE AMT. AS OF 6-29-01 - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- 3016467 5-25-99 Bank Texas (Austin, Texas) 5-25-02 $10,016,400.00 - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- 1171 6-29-96 State of California 3-15-02 $1,366,472.00 Self-Insurance Plans - ------------------------------------------------------------------------------------------------- 138514 7-1-96 Banque Nationale de 7-14-01 $3,299,861.30 Paris - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------
74 SCHEDULE B GUARANTORS Granite Construction Company, a California corporation Granite Land Company, a California corporation G.G. & R., Inc., a Utah corporation Intermountain Slurry Seal, Inc., a Wyoming corporation Pozzolan Products Company (P.P.C.), a Utah corporation GILC, L.P., a California limited partnership 75 SCHEDULE 2.01 COMMITMENTS AND PRO RATA SHARES
LENDER COMMITMENT PRO RATA SHARE - --------------------------------------------- ----------------------------- --------------------- Bank of America, N.A. $13,000,000.00 21.666666667 BNP Paribas $12,500,000.00 20.833333333 Union Bank of California, N.A. $12,500,000.00 20.833333333 First Union National Bank $12,000,000.00 20.000000000 U.S. Bank National Association $10,000,000.00 16.666666667 - ------------------------------ -------------- ------------ Total $60,000,000.00 100.000000000%
76 SCHEDULE 5.06 Litigation None 77 SCHEDULE 5.09 Environmental Matters Granite Construction in the normal course of business utilizes petroleum (hydrocarbon) products which may be considered hazardous materials when encountered at regulatory levels established by the Federal EPA or the Regional State EPA. The utilization of these asphalt products, diesel, and gasoline over the years of operations have the potential of creating exposure to environmental clean up requirements. All underground tanks meet current requirements. There are no pending governmental ordered clean up requirements. However, the following represents estimates based on construction industry housekeeping practices as encountered during our normal course of business. Except as indicated with an " * ", these costs do not represent actual identified exposures.
Locations Description Amount --------- ----------- ------ Arvin, CA Asphalt Batch Plant 100,000 Arvin, CA Surface Spills 50,000 Bakersfield, CA Surface Spills 100,000 Bakersfield, CA Diesel Aboveground Storage Tanks 25,000 Bakersfield, CA Asphalt Batch Plant 100,000 Coalinga, CA Asphalt Batch Plant 50,000 Felton, Ca Asphalt Batch plant 200,000 French Camp, CA Diesel/Gasoline Underground Storage Tanks 100,000 Gardnerville, NV Surface Spills 25,000 Gardnerville, NV Asphalt Batch Plant 50,000 Indio, CA Massey Shop/Smitty's Garage Cleanup 50,0000 Palmdale, CA Surface Spills 10,000 Palmdale, CA Asphalt Batch Plant 50,000 Patrick, NV Asphalt Batch Plant 75,000 Patrick, NV Surface Spills 50,000 Sacramento, CA Diesel/Gasoline Underground Storage Tanks 50,000 Sacramento, CA Asphalt Batch Plant 300,000 Sacramento, CA Surface Spills 200,000 Sacramento, CA Diesel Aboveground Storage Tanks 50,000 Sacramento, CA Shop Area Cleanup 50,000 Salinas, CA Surface Spills 250,000 Santa Barbara, CA Surface Spills 200,000 Santa Barbara, CA Diesel/Gasoline Underground Storage Tanks 75,000 Santa Barbara, CA Asphalt Batch Plant 50,000 Santa Cruz, CA Santa Cruz Yard Cleanup 250,000 Sparks, NV Diesel/Gasoline Underground Storage Tanks 100,000 Tracy, CA Asphalt Batch Plant 75,000 Tracy, CA Surface Spills 25,000 Tucson, AZ Surface Spills 25,000 Tucson, AZ Diesel/Gasoline Underground Storage Tanks 50,000 Watsonville, CA Diesel/Gasoline Underground Storage Tanks 150,000 Watsonville, CA Surface Spills 50,000 Webb, UT * Asphalt Batch Plant 500,000 Whitehall, UT * Asphalt Batch Plant 55,000 Salt Lake City, UT * Concrete Batch Plant 250,000 Salt Lake County, UT * Surface Spills 30,000 Weber County, UT (Ogden) * Surface Spills 100,000 Salt Lake County, UT (CPC) * Aggregate and smelter site 1,250,000 Cahoon, UT * Surface Spills 100,000 Fireclay Battery, UT * Surface Spills 25,000 --------- 5,295,000
78 SCHEDULE 5.13 Subsidiaries and other Equity Investments
Part (a) Jurisdiction of Ownership By Company and/or Name Organization Capital Structure Subsidiary Granite Construction Company California Corporation 100% wholly owned subsidiary of GCI Wilcott Corporation Colorado Corporation 100% wholly owned subsidiary of GCI Granite Land Company California Corporation 100% wholly owned subsidiary of GCI Granite SR9l Corporation California Corporation 100% wholly owned subsidiary of GCI Granite SR91 L.P. California Limited Partnership 99% limited partner of GCI and 1% general partner of SR91 Corporation GILC Incorporated California Corporation 100% wholly owned subsidiary of GCI GILC L.P. California Limited Partnership 99% limited partner of GCC and 1% general partner of GILC Incorporated G. G. & R, Inc. Utah Corporation 100% wholly owned subsidiary of GCI Intermountain Slurry Seal, Inc. Wyoming Corporation 100% wholly owned subsidiary of G. G.& R Pozzolan Products Company Utah Corporation 100% wholly owned subsidiary of G. G.& R GTC, Inc. Texas Corporation 100% wholly owned subsidiary of GCI Granite Construction International California Corporation 100% wholly owned subsidiary of GCI Waters Ridge II, LTD Texas LP 69% Interest owned by GCI Granite Mandalay Finance California LLC 70% Interest owned by GLC Granite/Kiewit (Tongue River) Montana Joint Venture 76% partnership interest by GCC Granite/Sundt (I-17) Arizona Joint Venture 55% partnership interest by GCC Minn.Transit Constrs (Light Rail) Minnesota Joint Venture 56.5% partnership interest by GCC Granite Rizzani (Hathaway Bridge) Florida Joint Venture 60% partnership interest by GCC River Mountain Constructors Arkansas Joint Venture 60% partnership interest by GCC Granite Groves California Joint Venture 60% partnership interest by GCC Granite2 Sundt (Supersition Hwy) Arizona Joint Venture 65% partnership interest by GCC Granite/PCL (I-4 St Johns River) Florida Joint Venture 64.6% partnership interest by GCC Part (b) Paramount-Nevada Asphalt California LLP 50% Interest owned by GCI Wilders Construction Company Washington Minority Interest 46% Interest owned by GCC TIC Holidings, Inc. Delaware Minority Interest 30% Interest owned by GCI Williamson Ranch Plaza California LP 25% Interest owned by GLC Oly Mandalay Bay California LLC 9% Interest owned by GLC Granite Regional Park California LP 25% partnership interest by GLC CPTC L.P. California LLP 22% Interest owned by GCI Kiewit/Granite (TCA) California Joint Venture 30% partnership interest by GCC KG Leasing (TCA) California Joint Venture 30% partnership interest by GCC Kiewit/Granite (East Dam) California Joint Venture 25% partnership interest by GCC Kiewit/Granite/Washington (Wasatch) Utah Joint Venture 23% partnership interest by GCC KGW Leasing (Wasatch) Utah Joint Venture 23% partnership interest by GCC Yonkers/Granite (Atlantic City) New Jersey Joint Venture 40% partnership interest by GCC Western Summit/TIC/Granite (UTOY) Georgia Joint Venture 15% partnership interest by GCC Sampson/Granite (Cabrillo College) California Joint Venture 40% partnership interest by GCC Washington Granite California Joint Venture 40% partnership interest by GCC Las Vegas Monorail (Light Rail) Nevada Joint Venture 44.8% partnership interest by GCC
79 SCHEDULE 5.16 Intellectual Property Matters None 80 SCHEDULE 7.01 Existing Liens There are approximately 5 UCC-1 liens filed against Granite Construction Company with respect to rental leases for construction equipment. 81 SCHEDULE 7.02 Existing Investments
Company Descriptions Market 05/31/01 Perini Corporation Common Stock 2,878 Vulcan Materials Company Common Stock 2,813 Cascade Corporation Common Stock 2,384 Paramount-Nevada Asphalt LLP 4,649,128 Wilder Construction Company Minority Interest 17,738,190 TIC Holdings, Inc. Minority Interest 21,890,787 Waters Ridge 11, LTD LP 754,920 Williamson Ranch Plaza LP 708,223 Granite Mandalay Bay LLC 1,695,357 Granite Mandalay Finance LLC 1,800,000 Granite Regional Park LP 226,200 CPTC L.P./SR91 L.P. LP 1,121,915 Granite/Groves Joint Venture 184,894 Kiewit/Granite (TCA) Joint Venture 324,236 Kiewit/Granite (KG Leasing) Joint Venture 1,459,589 Kiewit/Granite (E. Dam) Joint Venture 411,564 Kiewit/Granite (Wasatch) Joint Venture 2,535,620 Kiewit/Granite (KGW Leasing) Joint Venture 6,698,970 Yonkers/Granite (Atlantic City) Joint Venture 10,658,003 Western Summit/TIC/Granite Joint Venture 158,649 Granite/Kiewit (Tongue River) Joint Venture 105,964 Granite/Sundt (I-17) Joint Venture 257,000 Washington Granite Joint Venture 120,000 Sampson/Granite (Cabrillo College) Joint Venture 187,257 Minnesta Transit Constructors (Light Rail) Joint Venture 1,500,381 River Mountain Constructors Joint Venture 3,500 Granite2/Sundt (Supersition Hwy) Joint Venture 0 Las Vegas Monorail (Light Rail) Joint Venture 0 $75,198,422
82 SCHEDULE 7.03 Existing Indebtedness
Balance Description Interest Rate Maturity 6/01/01 Aggregate property 6.50% 04/14/02 1,579,633 Real Estate property 6.50% 12/01/07 1,438,937 Aggregate property 8.82% 06/01/01 1,700,000 Refinance debt & general corporate purposes 6.54% 03/15/10 60,000,000 Refinance debt & general corporate purposes 6.96% 05/01/13 75,000,000 Self insured Workers Compensation 100.0 bps 04/30/02 1,562,962 Aggregate property 8.00% 05/12/01 260,000 $141,541,532
83 SCHEDULE 7.06 Existing Leases Leases: (Halmar Builder's of NY, Inc. as Lessee) *
Annual Lessor Description Maturity Payments Union State Bank Construction Equipment 12/20/02 46,800 Heller Financial, Inc. Construction Equipment 08/01/01 16,380 Heller Financial, Inc. Construction Equipment 06/01/01 23,472 Heller Financial, Inc. Construction Equipment 11/01/01 22,980 Heller Financial, Inc. Construction Equipment 08/01/01 52,020 Caterpillar Financial Services Corporation Construction Equipment 09/16/03 71,724 Caterpillar Financial Services Corporation Construction Equipment 09/16/03 71,724 M&T Credit Corporation Construction Equipment 04/26/03 38,652 M&T Credit Corporation Construction Equipment 07/01/03 114,612 M&T Credit Corporation Construction Equipment 12/01/03 45,288 M&T Credit Corporation Construction Equipment 07/01/02 91,992 Resource Capital Corporation Construction Equipment 12/10/01 5,100 The Bank of New York Office Building 08/01/02 37,980 $638,724
*Note: These leases will become part of Granite Halmar Construction Company, Inc. once the acquisition is closed on 07/01/01. 84 SCHEDULE 10.02 EURODOLLAR AND DOMESTIC LENDING OFFICES; ADDRESSES FOR NOTICES BORROWER: GRANITE CONSTRUCTION INCORPORATED Granite Construction Incorporated P. O. Box 50085 Watsonville, CA 95077 Attention: William Barton, Vice President/Chief Financial Officer Telephone: (831) 761-4704 Facsimile (831) 722-9657 Email: bbarton@gcinc.com Website: http://www.graniteconstruction.com WITH A COPY TO: Granite Construction Incorporated 585 West Beach Street Watsonville, CA 95076 Attention: Roxane Allbritton, Treasurer Telephone: (831) 761-4772 Facsimile (831) 728-1701 Email: rallbritton@granite-net.com ADMINISTRATIVE AGENT: BANK OF AMERICA, N.A. (for lending and administrative notices (including payments and Requests for Credit Extensions)): Bank of America, N.A. Mail Code: CA4-706-05-09 Agency Administrative Services #5596 1850 Gateway Boulevard, 5th Floor Concord, CA 94520 Attention: Sally Escosa Telephone: (925) 675-8421 Facsimile: (925) 969-2901 Email: rosalia.m.escosa@bankofamerica.com Account No.: 3750836479 Ref: Granite Construction ABA# 111000012 85 (for all purposes other than lending and administrative notices): Bank of America, N.A. Mail Code: CA5-705-12-14 555 California Street, 12th Floor San Francisco, CA 94104-1502 Attention: Kenneth J. Beck, Principal Telephone: (415) 953-5753 Facsimile: (415) 622-4585 Email: kenneth.j.beck@bankofamerica.com L/C ISSUER: BANK OF AMERICA, N.A. Bank of America, N.A. Trade Operations-Los Angeles #22621 333 S. Beaudry Avenue, 19th Floor Mail Code: CA9-703-19-23 Los Angeles, CA 90017-1466 Attention: Sandra Leon, Vice President Telephone: (213) 345-5231 Facsimile: (213) 345-6694 Email: sandra.leon@bankofamerica.com LENDERS: BANK OF AMERICA, N.A.: Bank of America, N.A. Mail Code: CA5-705-12-14 555 California Street, 12th Floor San Francisco, CA 94104-1502 Attention: Kenneth J. Beck, Principal Telephone: (415) 953-5753 Facsimile (415) 622-4585 Email: kenneth.j.beck@bankofamerica.com BNP PARIBAS: BNP Paribas 4th Floor, 180 Montgomery Street, San Francisco, CA 94104 Attention: Debra Wright, Vice President Telephone: (415) 772-1331 Facsimile: (415) 296-8954 Email: debra.wright@americas.bnpparibas.com 86 FIRST UNION NATIONAL BANK: First Union National Bank Care Of: First Union Securities, Inc. 11th Fl., Trans. & Construc. Indus. 1 South Penn Square, PA4827 Philadelphia, PA 19101 Attention: Roy O. Young, Vice President Telephone: (215) 973-5866 Facsimile: (215) 786-7704 Email: roy.young@capmark.funb.com UNION BANK OF CALIFORNIA, N.A.: Union Bank of California, N.A. 99 Almaden Blvd., Suite 200 San Jose, CA 95113-1687 Attention: William Hinch Telephone: (408) 279-7730 Facsimile: (408) 280-7163 Email: william.hinch@UBOC.com U.S. BANK NATIONAL ASSOCIATION: U.S. Bank National Association 2890 North Main Street Walnut Creek, CA 94596 Attention: Dan Stevens Telephone: (925) 472-5791 Facsimile: (925) 945-6919 Email: daniel.stevens@usbank.com 87 EXHIBIT A FORM OF LOAN NOTICE Date: ___________, _____ To: Bank of America, N.A., as Administrative Agent Ladies and Gentlemen: Reference is made to that certain Credit Agreement, dated as of June 29, 2001 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the "Agreement"; the terms defined therein being used herein as therein defined), among Granite Construction Incorporated, a Delaware corporation (the "Borrower"), the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent and L/C Issuer. The undersigned hereby requests (select one): [ ] A Borrowing of . -------------------------- [Type of Loans requested] [ ] A conversion of Loans from _____ to ______ [ ] A continuation of . ----------------------- [Type of Loans requested] 1. On (a Business Day). ---------------------------------------- 2. In the amount of $ . ------------------------ 3. Comprised of . ----------------------------- [Type of Loans requested] 4. With an Interest Period of ___ months. The Borrowing requested herein complies with the proviso to the first sentence of Section 2.01 of the Agreement. GRANITE CONSTRUCTION INCORPORATED By: ------------------------------ Name: ---------------------------- Title: --------------------------- By: ------------------------------ Name: ---------------------------- 88 Title: --------------------------- 89 EXHIBIT B FORM OF NOTE $_______________________ _______________________ FOR VALUE RECEIVED, the undersigned (the "Borrower"), hereby promises to pay to the order of _____________________________ (the "Lender"), on the Maturity Date (as defined in the Credit Agreement referred to below) the principal amount of __________________Dollars ($____________), or such lesser principal amount of Loans (as defined in such Credit Agreement) due and payable by the Borrower to the Lender on the Maturity Date under that certain Credit Agreement, dated as of June 29, 2001 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the "Agreement"; the terms defined therein being used herein as therein defined), among the Borrower, the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent and L/C Issuer. The Borrower promises to pay interest on the unpaid principal amount of each Loan from the date of such Loan until such principal amount is paid in full, at such interest rates, and at such times as are specified in the Agreement. All payments of principal and interest shall be made to the Administrative Agent for the account of the Lender in Dollars in immediately available funds at the Administrative Agent's Office. If any amount is not paid in full when due hereunder, such unpaid amount shall bear interest, to be paid upon demand, from the due date thereof until the date of actual payment (and before as well as after judgment) computed at the per annum rate set forth in the Agreement. This Note is one of the Notes referred to in the Agreement, is entitled to the benefits thereof and is subject to optional and mandatory prepayment in whole or in part as provided therein. This Note is also entitled to the benefits of the Guaranties. Upon the occurrence of one or more of the Events of Default specified in the Agreement, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable all as provided in the Agreement. Loans made by the Lender shall be evidenced by one or more loan accounts or records maintained by the Lender in the ordinary course of business. The Lender may also attach schedules to this Note and endorse thereon the date, amount and maturity of its Loans and payments with respect thereto. The Borrower, for itself, its successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and non-payment of this Note. 90 THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE; PROVIDED THAT LENDER SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW. GRANITE CONSTRUCTION INCORPORATED By: ------------------------------ Name: ---------------------------- Title: --------------------------- By: ------------------------------ Name: ---------------------------- Title: --------------------------- 91 EXHIBIT C FORM OF COMPLIANCE CERTIFICATE Financial Statement Date:________, 200__ The undersigned refers to that certain Credit Agreement, dated as of June 29, 2001 (as amended, modified and/or supplemented from time to time, the "Credit Agreement"), among Granite Construction Incorporated, a Delaware corporation (the "Borrower"), the financial institutions from time to time party thereto (collectively, the "Lenders") and Bank of America, National Association, as Administrative Agent (the "Administrative Agent"). Unless otherwise defined herein, each capitalized term used herein has the meaning assigned thereto in the Credit Agreement. The undersigned Responsible Officer of the Borrower hereby certifies as of the date hereof that s/he holds the office of _____________________ with the Borrower, that, as such, s/he is authorized to execute and deliver this Certificate to the Bank on behalf of the Borrower and its Subsidiaries, and that: 1. [ ] Attached hereto or [ ] posted on the Borrower's website or [ ] posted on the website of the Securities and Exchange Commission at www.sec.gov is: [ ] a consolidated balance sheet of the Borrower and its Subsidiaries as at the end of the fiscal year ended [____________, 200_] (the "Subject Fiscal Year"), and the related consolidated statements of income or operations, shareholders' equity and cash flows for the Subject Fiscal Year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail, audited and accompanied by a report and opinion of an independent certified public accountant of nationally recognized standing reasonably acceptable to the Required Lenders, which report and opinion have been prepared in accordance with GAAP and are not subject to any qualifications or exceptions as to the scope of the audit nor to any qualifications and exceptions that are not reasonably acceptable to the Required Lenders; or [ ] an SEC Form 10-K for the Borrower (excluding the exhibits thereto) relating to the fiscal year ended [____________, 200_]; or [ ] a consolidated balance sheet of the Borrower and its Subsidiaries as at the end of the fiscal quarter ended [____________, 200_] (the "Subject Fiscal Quarter"), and the related consolidated statements of income or operations, shareholders' equity and cash flows for the Subject Fiscal Quarter and for the portion of the Borrower's fiscal year then ended, setting forth in each case in comparative form the figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding portion of the previous fiscal year, all in reasonable detail and certified by a Responsible Officer of the Borrower as fairly presenting the financial condition, results of operations and cash flows of the Borrower and its Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes; or [ ] an SEC Form 10-Q for the Borrower (excluding the exhibits thereto) relating to the fiscal quarter ended [____________, 200_]. 2. The financial statements referred to in Paragraph 1 fairly present, in all material respects, the consolidated financial position and the results of operations of the Borrower and its Subsidiaries. C-1 92 3. The undersigned has reviewed and is familiar with the terms of the Credit Agreement and the other Loan Documents and has made, or has caused to be made under my supervision, a detailed review of the transactions and conditions (financial or otherwise) of the Borrower and its Subsidiaries during the accounting period covered by the attached financial statements. 4. To the best of the undersigned's knowledge, the Borrower and each of its Subsidiaries have, during such period, observed, performed and/or satisfied and/or have caused to be observed, performed and/or satisfied all of their respective covenants and other agreements contained in the Loan Documents to which they are a party, and have satisfied every condition in the Loan Documents to which they are a party to be observed, performed and/or satisfied by them, and the undersigned has no knowledge of any condition, event or occurrence, which constitutes a Default or Event of Default, except as set forth below: [Describe below (or in a separate attachment to this Certificate) the exceptions, if any, to paragraph 4 above by listing, in detail and with reference to specific sections of the Credit Agreement, the nature of the condition, event or occurrence, the period during which it has existed and the actions that the Borrower has taken, is taking or proposes to take with respect to such condition, event or occurrence.] 5. The financial covenant and other compliance analyses and information set forth on Schedule 1 attached hereto are true, complete and accurate on and as of the date of this Certificate. The foregoing certifications, together with the computations set forth in Schedule 1 hereto, are made and delivered, and the financial statements referenced above are made or posted, as applicable, this ____ day of _____, 200_, pursuant to the provisions of the Credit Agreement. By: ____________________________________ Title: ____________________________________ of Granite Construction Incorporated C-2 93 SCHEDULE 1 TO COMPLIANCE CERTIFICATE 1. DISPOSITIONS OF ASSETS. Section 7.05(g) A. The aggregate consideration from Dispositions received by the Borrower and its Subsidiaries pursuant to Section 7.05(g) during the current fiscal year: $_____________ B. The amount equal to 5% of the total assets of the Borrower (determined on a consolidated basis in accordance with GAAP) as of the end of the Borrower's most recently ended fiscal year: $_____________ REQUIREMENT: THE AMOUNT IN A MAY NOT EXCEED THE AMOUNT IN B. 2. INVESTMENTS - INVESTMENTS MANAGED BY GRANITE LAND COMPANY, A SUBSIDIARY OF THE BORROWER. Section 7.02(g) A. The aggregate amount of Investments managed by Granite Land Company, a Subsidiary of the Borrower: $_____________ REQUIREMENT: THE AMOUNT IN A MAY NOT EXCEED $25,000,000. 3. INVESTMENTS - OTHER INVESTMENTS. Section 7.02(h) A. The aggregate amount of Investments not otherwise permitted pursuant to subsections (a) through (g) of Section 7.02 in the equity of any Subsidiary or the capital stock, assets, obligations or other securities of or interests in any other Person: $_____________ REQUIREMENT: THE AMOUNT IN A MAY NOT EXCEED $100,000,000. 4. INDEBTEDNESS - INDEBTEDNESS IN RESPECT OF CAPITAL LEASES; SYNTHETIC LEASE OBLIGATIONS; PURCHASE MONEY INDEBTEDNESS. Section 7.03(d) A. The aggregate amount of all purchase money Indebtedness for fixed or capital assets incurred by the Borrower or any of its Subsidiaries in the current fiscal year (under Section 7.03(d)(i)): $_____________ B. The aggregate amount of all Indebtedness in respect of capital leases and Synthetic Lease Obligations to finance the acquisition of fixed or capital assets incurred by the Borrower or any of its Subsidiaries in the current fiscal year (under Section 7.03(d)(ii)): $_____________ C. The aggregate amount of all Indebtedness in respect of capital leases and Synthetic Lease Obligations and purchase money Indebtedness for fixed or capital assets of Persons immediately prior to such Persons becoming Subsidiaries or being merged with or into (or otherwise being acquired by) the Borrower or its Subsidiaries following June 29, 2001 (under Section 7.03(d)(iii)): $_____________ REQUIREMENTS: THE AMOUNT IN A MAY NOT EXCEED $10,000,000. Section 7.03(d)(i) THE AMOUNT IN B MAY NOT EXCEED $10,000,000. Section 7.03(d)(ii) THE AMOUNT IN C MAY NOT EXCEED $30,000,000. Section 7.03(d)(iii)
C-3 94 5. INDEBTEDNESS - INDEBTEDNESS IN RESPECT OF CERTAIN LETTERS OF CREDIT. Section 7.03(f) A. The aggregate outstanding amount of Indebtedness respecting letters of credit (other than Letters of Credit) issued for the account of the Borrower or any Subsidiary in the Ordinary Course of Business: $_____________ REQUIREMENT: THE AMOUNT IN A MAY NOT EXCEED $25,000,000. 6. INDEBTEDNESS - OTHER INDEBTEDNESS. Section 7.03(h) A. Additional Indebtedness (not otherwise permitted under Section 7.03), comprised solely of (i) the outstanding principal amount of obligations, whether current or long-term, for borrowed money and all obligations evidenced by bonds (other than performance, surety and appeal bonds), debentures, notes, loan agreements or other similar instruments, (ii) Attributable Indebtedness in respect of capital leases and Synthetic Lease Obligations, or (iii) without duplication, Guaranty Obligations with respect to Indebtedness of the types specified in the immediately preceding clauses (i) and (ii); provided that none of the foregoing includes Indebtedness of any co-joint venturer in any Joint Venture to which the Borrower or any Subsidiary is a party that has been assumed by the Borrower or any of Subsidiary if such Indebtedness was not originally incurred by such co-joint venturer in connection with (and relates solely to) the subject Joint Venture: $_____________ REQUIREMENT: THE AMOUNT IN A MAY NOT EXCEED $100,000,000. 7. RESTRICTED PAYMENTS. Section 7.07 A. The aggregate amount paid by Borrower in connection with the purchase, redemption or other acquisition of shares of common stock for cash to contribute to the Borrower's employee stock ownership plan (Section 7.07(d)): $______________ REQUIREMENT: THE AMOUNT IN A MAY NOT EXCEED AN AMOUNT EQUAL TO 15% OF PLAN COMPENSATION. B. The aggregate amount Borrower may purchase, redeem or otherwise acquire shares of its capital stock, or warrants, rights or options to acquire any such shares for cash (Section 7.07(e)): $______________ REQUIREMENT: THE AMOUNT IN B MAY NOT EXCEED $50,000,000. 8. MINIMUM CONSOLIDATED TANGIBLE NET WORTH. Section 7.13(a) A. Consolidated Tangible Net Worth (A (i) - (A)(ii) below): $______________ (i) Consolidated Shareholder's Equity: $______________ minus (ii) Intangible Assets of the Borrower and its Subsidiaries: $______________
C-4 95
B. Calculation of Minimum Consolidated Tangible Net Worth (B(i) + B(ii) + B(iii) below): $______________ (i) $318,866,000 $318,866,000 ----------- plus (ii) 50% of Consolidated Net Income (no deduction allowed for a net loss) in each fiscal quarter ending after March 31, 2001: $______________ plus (iii) 50% of the aggregate increases in Consolidated Shareholder's Equity after June 29, 2001 by reason of the issuance and sale of the capital stock of the Borrower: $______________ REQUIREMENT: THE AMOUNT IN A MAY NOT BE LESS THAN THE AMOUNT IN B. 9. MINIMUM FIXED CHARGE COVERAGE RATIO. Section 7.13(b) A. (i) Consolidated EBITDA for the period consisting of the four consecutive fiscal quarters ending on the date of determination: $______________ plus (ii) interest income for such period (to the extent not included in Consolidated EBITDA for such period): $______________ minus (iii) all Capital Expenditures actually made during such period: $______________ minus (iv) all taxes actually paid in cash during such period: $______________ Total: $______________ B. (i) Consolidated Interest Expense for the period consisting of the four consecutive fiscal quarters ending on the date of determination: $______________ plus (ii) The current portion of Consolidated Funded Indebtedness: $______________ Total: $______________ C. Ratio of A to B: _________ to 1.00 REQUIREMENT: THE RATIO IN C (I.E., THE RATIO OF A TO B) MAY NOT BE LESS THAN 1.50 TO 1.00.
C-5 96 10. MINIMUM LEVERAGE RATIO. Section 7.13(c) A. Consolidated Funded Indebtedness: $______________ B. (i) Consolidated Funded Indebtedness: $______________ plus (ii) Consolidated Tangible Net Worth (from line 8A above): $______________ Total: $______________ C. Ratio of A to B: _________ to 1.00 REQUIREMENT: THE RATIO IN C (I.E., THE RATIO OF A TO B) MAY NOT EXCEED 0.55 TO 1.00.
C-6 97 EXHIBIT D FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT This Assignment and Assumption Agreement (this "Assignment") is dated as of the Effective Date set forth below and is entered into by and between __________ (the "Assignor") and _______________ (the "Assignee"). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (the "Credit Agreement"), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment as if set forth herein in full. For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below, the interest in and to all of the Assignor's rights and obligations under the Credit Agreement and any other documents or instruments delivered pursuant thereto that represents the amount and percentage interest identified below of all of the Assignor's outstanding rights and obligations under the respective facilities identified below (including, to the extent included in any such facilities and Letters of Credit) (the "Assigned Interest"). Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment, without representation or warranty by the Assignor. 1. Assignor: ______________________________ 2. Assignee: ______________________________ [and is an Affiliate/Approved Fund] 3. Borrower(s): Granite Construction Incorporated 4. Administrative Agent: Bank of America, N.A., as the administrative agent under the Credit Agreement 5. Credit Agreement: The Credit Agreement, dated as of June 29, 2001, among Granite Construction Incorporated, the Lenders parties thereto, and Bank of America, N.A., as Administrative Agent and as L/C Issuer 6. Assigned Interest:
- ------------------------------------------------------------------------------------------------- Aggregate Amount of Amount of Percentage Commitment/Loans Commitment/Loans Assigned of Facility Assigned for all Lenders Assigned Commitment/Loans - ------------------------------------------------------------------------------------------------- _____________ $________________ $________________ ______________% - ------------------------------------------------------------------------------------------------- _____________ $________________ $________________ ______________% - ------------------------------------------------------------------------------------------------- _____________ $________________ $________________ ______________% - -------------------------------------------------------------------------------------------------
Effective Date: __________________, 200__ [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.] D-1 98 The terms set forth in this Assignment are hereby agreed to: ASSIGNOR [NAME OF ASSIGNOR] By: _____________________________ Title: ASSIGNEE [NAME OF ASSIGNEE] By: _____________________________ Title: Consented to and Accepted: BANK OF AMERICA, N.A., as Administrative Agent By: _________________________________ Title: GRANITE CONSTRUCTION INCORPORATED, as Borrower By: _________________________________ Title: D-2 99 ANNEX 1 TO ASSIGNMENT AND ASSUMPTION AGREEMENT [___________________](1) STANDARD TERMS AND CONDITIONS FOR ASSIGNMENT AND ASSUMPTION AGREEMENT 1. Representations and Warranties. 1.1 Assignor. The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with any Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document delivered pursuant thereto, other than this Assignment (herein collectively the "Loan Documents"), or any collateral thereunder, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Loan Document. 1.2 Assignee. The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it meets all requirements of an Eligible Assignee under the Credit Agreement, (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 6.01 thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and to purchase the Assigned Interest on the basis of which it has made such analysis and decision, and (v) if it is a Foreign Lender, attached hereto is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, the Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender. 1.3 Assignee's Address for Notices, etc. Attached hereto as Schedule 1 is all contact information, address, account and other administrative information relating to the Assignee. 2. Payments. From and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignee whether such amounts have accrued prior to or on or after the Effective Date. The Assignor and the Assignee shall make all appropriate adjustments in payments by the Administrative Agent for periods prior to the Effective Date or with respect to the making of this assignment directly between themselves. - -------- (1) Describe Credit Agreement at option of Administrative Agent. D-3 100 3. General Provisions. This Assignment shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment. THIS ASSIGNMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE; PROVIDED THAT THE PARTIES HERETO SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW. D-4 101 SCHEDULE 1 TO ASSIGNMENT AND ASSUMPTION AGREEMENT ADMINISTRATIVE DETAILS (Assignee to list names of credit contacts, addresses, phone and facsimile numbers, electronic mail addresses and account and payment information) D-5 102 EXHIBIT E FORM OF CONTINUING GUARANTY AGREEMENT CONTINUING GUARANTY AGREEMENT This CONTINUING GUARANTY AGREEMENT (this "Agreement"), dated as of [], 200[_], is made by each of the undersigned (each, a "Guarantor" and, collectively, the "Guarantors"), in favor of each Guaranteed Party (as hereinafter defined). WHEREAS, Granite Construction Incorporation, a Delaware corporation (the "Company"), Bank of America, N.A., as Administrative Agent, as L/C Issuer and as a Lender, and the other financial institutions as are, or may from time to time become, parties thereto have entered into or are in the process of entering into that certain Credit Agreement, dated as of June 29, 2001 (as amended, modified and/or supplemented from time to time, the "Credit Agreement"), pursuant to which the Lenders have provided the Commitments and agreed to make Loans to the Company and to participate in Letters of Credit issued by the L/C Issuer for the account of the Company or its Subsidiaries on the terms and conditions contained therein; and WHEREAS, to induce the Lenders and the L/C Issuer to provide and to continue to provide financial accommodations to the Company pursuant to the terms of the Credit Agreement and the other Loan Documents, the Guarantors have each agreed to enter into this Agreement; NOW, THEREFORE, for good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), and intending to be legally bound hereby, each Guarantor irrevocably and unconditionally undertakes and agrees for the benefit of Guaranteed Party as follows: ARTICLE I CERTAIN DEFINITIONS AND RULES OF CONSTRUCTION Section 1.1 Certain Definitions. Each capitalized term used but not otherwise defined herein has the meaning ascribed thereto in the Credit Agreement. As used herein, the term "Guaranteed Party" means, as the context may require, the Administrative Agent, the L/C Issuer and each Lender (and each of such Person's respective successors, transferees and assigns). Section 1.2 Construction. For purposes of this Agreement and unless otherwise specified herein: (a) references to the plural include the singular and to the singular include the plural, references to any gender include any other gender, the part includes the whole, the term "including" is not limiting, and the term "or" has, except where otherwise indicated, the inclusive meaning represented by the phrase "and/or"; (b) references in this Agreement to any determination by the Guaranteed Party include good faith estimates (in the case of quantitative determinations) and good faith beliefs (in the case of qualitative determinations) by any Guaranteed Party; any determination made in good faith by any Guaranteed Party shall be conclusive absent manifest error; (c) the words "hereof," "herein," "hereby," and "hereunder," and any other similar words, refer to this Agreement as a whole and not to any particular provision of this Agreement; (d) article, section, subsection, clause, exhibit and schedule references are to this Agreement; and (e) any reference to this Agreement or any other Loan Document includes all permitted alterations, amendments, changes, extensions, modifications, renewals, or supplements thereto or thereof, as applicable. E-1 103 ARTICLE II GUARANTY BY GUARANTORS Section 2.1 Promise to Pay and Perform. Each Guarantor jointly and severally unconditionally and irrevocably guarantees to each Guaranteed Party the payment and performance of all Obligations when and as the same shall become due and payable (whether at stipulated or any accelerated or earlier date of maturity (including the date of any required prepayment)) (the "Guaranteed Obligations"), it being each Guarantor's intent that such Guarantor's guaranty is a guaranty of payment and not a guaranty of collection. If the Company fails to pay or perform any Guaranteed Obligation on or before the date when due (whether at stipulated or any accelerated or earlier date of maturity (including the date of any required prepayment)), each Guarantor shall jointly and severally unconditionally and immediately make such payment or render such performance upon written demand therefor by any Guaranteed Party. Section 2.2 Cumulative Obligations; Continuing Guaranty. The obligations of each Guarantor hereunder are in addition to any other obligations of such Guarantor under any other guaranties of the Indebtedness or other obligations of the Company or any other Person at any time given to any Guaranteed Party. This Agreement shall not affect or invalidate any such other guaranties. This Agreement is a continuing guaranty and shall remain in full force and effect notwithstanding the fact that, at any particular time, no Guaranteed Obligations may be outstanding. Section 2.3 Joint and Several Obligation; Independent Obligation. Each Guarantor is directly, jointly and severally with all other guarantors of the Guaranteed Obligations or any portion thereof, liable to the Guaranteed Parties. The obligations of each Guarantor hereunder are direct and primary and are independent of the obligations of the Company or any other such guarantor, and a separate action may be brought against each Guarantor irrespective of whether an action is brought against the Company or any other such other guarantor or whether the Company or any such other guarantor is joined in such action. Each Guarantor's liability hereunder shall not be contingent upon the exercise or enforcement by the Guaranteed Parties of any remedies they may have against the Company or any other guarantor or the enforcement of any Lien or realization upon any security the Guaranteed Parties may at any time possess. Any release that may be given by the Guaranteed Parties to the Company or any other guarantor shall not release any Guarantor hereunder unless such release expressly so provides. Section 2.4 Limit of Liability. Notwithstanding anything to the contrary contained herein, each Guarantor shall be liable hereunder only for the largest amount that would not render such Guarantor's obligations hereunder subject to avoidance under Section 548 of the Bankruptcy Code or comparable provisions of any applicable state law; provided that such amount shall be presumed to be the entire amount of the Guaranteed Obligations. If, any Guarantor claims that such Guarantor's liability hereunder is less than the entire amount of the Guaranteed Obligations, such Guarantor shall have the burden of proving, by clear and convincing evidence, that such Guarantor's liability hereunder should be so limited since the information concerning, and the circumstances of, the financial condition of such Guarantor are more readily available to and are under the control of such Guarantor. All payments received by any Guaranteed Party from any Person other than a Guarantor on account of the Guaranteed Obligations shall be deemed as having been applied to Guaranteed Obligations that, pursuant to this Section 2.4, are in excess of the amounts guaranteed hereunder. E-2 104 ARTICLE III PAYMENTS Section 3.1 Nature and Application of Payments. Each Guarantor shall make all payments hereunder in immediately available lawful money of the United States, without deduction or withholding (whether for taxes (whether income, excise, or otherwise) or offset). Without regard to the form in which received, the Guaranteed Parties may apply any payment with respect to the Guaranteed Obligations or any other amounts due hereunder in such order as the Guaranteed Parties shall in their sole and absolute discretion determine, irrespective of any contrary instructions received from any other Person. Section 3.2 Indefeasible Payment; Revival. If any portion of any payment to the Guaranteed Parties is set aside and repaid by any Guaranteed Party for any reason after being made by any Guarantor, the amount so set aside shall be revived as a Guaranteed Obligation and each Guarantor shall be liable for the full amount the Guaranteed Parties are, or any Guaranteed Party is, required to repay plus all costs and expenses (including attorneys' fees, costs, and expenses) incurred by the Guaranteed Parties in connection therewith. ARTICLE IV CERTAIN REPRESENTATIONS AND WARRANTIES OF GUARANTORS Each Guarantor represents and warrants as follows (which representations and warranties shall be true, correct, and complete at all times): Section 4.1 No Contravention; No Default. The execution, delivery, and performance by such Guarantor of this Agreement do not and will not: (a) conflict with or result in any breach or contravention of, or the creation of any Lien under, any contractual obligation to which such Guarantor is a party or any order, injunction, writ, or decree of any governmental authority to which such Guarantor or such Guarantor's properties are subject; or (b) violate any law, rule, or regulation of any governmental authority. Section 4.2 Binding Effect. This Agreement constitutes the legal, valid, and binding obligation of such Guarantor, enforceable against such Guarantor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability. Section 4.3 Litigation. Except as set forth on Schedule 5.06 to the Credit Agreement, there are no actions, suits, proceedings, claims, or disputes pending, or, to the best knowledge of such Guarantor, threatened in writing, at law, in equity, in arbitration, or before any governmental authority, against such Guarantor or any of such Guarantor's properties which purport to affect or pertain to this Agreement, any of the other Loan Documents, or any of the transactions contemplated hereby or thereby. Section 4.4 Regulated Entity. Neither such Guarantor nor any Person controlling such Guarantor is: (a) an "investment company" within the meaning of the Investment Company Act of 1940; or (b) subject to regulation by any federal or state statute or regulation limiting such Guarantor's ability to incur such Guarantor's obligations hereunder. Section 4.5 No Action Required. No consent, license, permit, approval or authorization of, exemption by, notice or report to, or registration, filing, or declaration with any governmental authority or of, to, or with any other Person, is or will be required for: (a) the execution, delivery, or performance of E-3 105 this Agreement by such Guarantor; or (b) the exercise by the Guaranteed Parties of any of their respective rights and remedies provided for herein. Section 4.6 Changes Affecting the Guaranteed Obligations. Such Guarantor has taken and is taking all steps in such Guarantor's opinion necessary or appropriate to be informed on a continuing basis of changes or potential changes affecting the Guaranteed Obligations. Without limiting the generality of the foregoing, such Guarantor hereby confirms that it has received and reviewed the Credit Agreement, the Fee Letter and all other Loan Documents (and all other agreements, documents and instruments related thereto) that such Guarantor, in such Guarantor's sole determination, has deemed necessary or appropriate to receive and review. Section 4.7 Reliance by Guarantor; Financial Condition of the Company. This Agreement is not made by such Guarantor in reliance on any representation or warranty, express or implied, by any Guaranteed Party concerning the financial condition of the Company, the nature, value, or extent of any security for the Guaranteed Obligations, or any other matter. Such Guarantor is presently informed of the financial condition of the Company and of all other circumstances that a diligent inquiry would reveal and which bear upon the risk of nonpayment of the Guaranteed Obligations. Such Guarantor has reviewed each of the Loan Documents. Section 4.8 Adequate Consideration. The consideration given or provided, or to be given or provided, by the Guaranteed Parties in connection with this Agreement is adequate and satisfactory in all respects, and represents reasonably equivalent value, to support this Agreement and such Guarantor's obligations hereunder. ARTICLE V CERTAIN COVENANTS OF GUARANTORS Section 5.1 Knowledge of Financial Condition. Each Guarantor shall keep informed of the Company's financial condition, the status of any guarantors or of any security for the Guaranteed Obligations, and all other circumstances that bear upon the risk of nonpayment of the Guaranteed Obligations. Section 5.2 Further Assurances. Each Guarantor shall, from time to time, at the expense of such Guarantor, promptly execute and deliver all further documents and take all further action that may be necessary, or that the Guaranteed Parties (or any of them) may reasonably request, to enable the Guaranteed Parties (or any of them) to exercise and enforce their respective rights and remedies hereunder. Section 5.3 Sales, Dispositions, etc. Each Guarantor will not, without the prior written consent of the Guaranteed Party, sell, lease, assign, encumber, hypothecate, transfer or otherwise dispose of all of substantially all of such Guarantor's properties or assets, or any interest therein, except as otherwise permitted by the Credit Agreement. ARTICLE VI CERTAIN ACKNOWLEDGEMENTS AND AGREEMENTS OF GUARANTORS Section 6.1 Modifications to Loan Documents and Guaranteed Obligations. Each Guarantor acknowledges and agrees that, without notice to such Guarantor and without affecting or impairing the obligations of such Guarantor hereunder, the Guaranteed Parties (or any of them) may, by action or E-4 106 inaction, compromise or settle, extend the period of duration or the time for the payment, or discharge the performance of, or may refuse to, or otherwise not enforce, or may, by action or inaction, release all or any one or more parties to, any one or more of the Loan Documents or otherwise with respect to the Guaranteed Obligations or may grant other indulgences to the Company in respect thereof, or may amend or modify in any manner and at any time (or from time to time) any one or more of the Loan Documents or otherwise with respect to the Guaranteed Obligations, or may, by action or inaction, release or substitute any guarantor, if any, of the Guaranteed Obligations, or may enforce, exchange, release, or waive, by action or inaction, any security for the Guaranteed Obligations or any guaranty of the Guaranteed Obligations, or any portion thereof. Section 6.2 Subordination. Each Guarantor agrees that any and all present and future indebtedness of the Company owing to such Guarantor is postponed in favor of and subordinated to indefeasible payment, in full, in cash, of the Guaranteed Obligations. In this regard, upon the occurrence and during the continuance of a Default or an Event of Default, no payment of any kind whatsoever shall be made with respect to such indebtedness until the Guaranteed Obligations have been indefeasibly paid in full. Any payment received by any Guarantor in respect of such indebtedness shall be held by such Guarantor as trustee for the Guaranteed Parties and promptly paid over to the Guaranteed Parties on account of the Guaranteed Obligations but without reducing or affecting in any manner the liability of such Guarantor under the other provisions of this Agreement. Section 6.3 Administrative Agent as Each Guarantor's Attorney-in-Fact. Each Guarantor irrevocably appoints the Administrative Agent as such Guarantor's attorney-in-fact, with full authority in the place and stead and name of such Guarantor, from time to time at the Administrative Agent's discretion but only following the occurrence and during the continuation of an Event of Default, to take any action and to execute any instrument which the Guaranteed Parties (or any of them) may, in accordance with the provisions of the Loan Documents or this Agreement, require as necessary or advisable to accomplish the purposes of this Agreement. ARTICLE VII GENERAL PROVISIONS Section 7.1 Notices. All notices, requests, and other communications to any party under this Agreement shall be in writing (including telegraphic, telex, telefacsimile, or cable communication) and mailed, telegraphed, telexed, sent by telefacsimile, cabled, or delivered to such party at its address or telefacsimile number set forth, in the case of each Guarantor, on the signature pages hereof, or, in the case of the Guaranteed Parties, on Schedule 10.02 to the Credit Agreement, or such other address or telefacsimile number as such party may hereafter specify for the purpose by notice to the other party given in accordance with this Section 7.1. Each such notice, request or other communication shall be deemed to have been received: (a) if mailed as provided above by any method other than overnight delivery service, on the third Business Day after deposit in the mails; (b) if mailed by overnight delivery service, telegraphed, telexed, sent by telefacsimile, or cable, when delivered for overnight delivery, delivered to the telegraph company, confirmed by telex answerback, transmitted by telefacsimile (with electronic confirmation), or delivered to the cable company, respectively; or (c) if delivered by hand, upon delivery. If any conflict exists between any oral communication to any Guaranteed Party and the written confirmation thereof, the oral communication shall control if any Guaranteed Party has acted thereon prior to actual receipt of such written confirmation. Section 7.2 Amendments, Waivers, and Consents. No amendments or waivers of any provision of this Agreement nor any consent to any departure by any Guarantor from the terms hereof shall in any event be effective unless the same shall be in writing and signed by the Administrative Agent E-5 107 (or all Guaranteed Parties if required by the terms of the Credit Agreement) and the Guarantors. Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Section 7.3 No Waiver; Cumulative Nature of Remedies. No failure or delay on the part of any Guaranteed Party in exercising any of its rights and remedies under this Agreement, any of the Loan Documents, or otherwise with respect to any of the Guaranteed Obligations shall operate as a waiver thereof; nor shall any single or partial exercise of any right under this Agreement, the Loan Documents, or otherwise with respect to the Guaranteed Obligations preclude any other or further exercise thereof or the exercise of any other right or remedies. The rights and remedies provided in this Agreement and otherwise with respect to the Guaranteed Obligations are cumulative and not exclusive of any rights and remedies provided by law. Section 7.4 Costs and Expenses. Each Guarantor shall pay or reimburse the Guaranteed Parties on demand for all fees, costs, and expenses incurred by the Guaranteed Parties in connection with the enforcement or attempted enforcement of this Agreement, the preservation of any rights or remedies under this Agreement, or in any action, case, or proceeding (whether at law or in equity) relating to this Agreement. Without limiting the generality of the foregoing, such fees, costs, and expenses shall include reasonable Attorney Costs actually incurred by the Guaranteed Parties or any of them (irrespective of whether the Company is liable therefor), whether or not suit is brought, in connection therewith. Section 7.5 Successors and Assigns. This Agreement shall: (a) be binding upon each Guarantor and each Guarantor's successors and assigns; and (b) inure to the benefit of each Guaranteed Party and its successors and assigns (all to the extent permitted by the Loan Documents). Without limiting the generality of the foregoing subsection (b) but subject to the provisions of the Credit Agreement, any Guaranteed Party may assign or otherwise transfer all or any part of the Guaranteed Obligations owed to it to any other Person. Section 7.6 Headings. Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement and shall not be given any substantive effect. Section 7.7 Ambiguities. Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved using any presumption against any Guarantor or any Guaranteed Party, whether under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by each Guarantor and each Guaranteed Party and their respective counsel. In case of any ambiguity or uncertainty, this Agreement shall be construed and interpreted according to the ordinary meaning of the words used to accomplish fairly the purposes and intentions of all parties hereto. Section 7.8 Severability. In case any provision in or obligation under this Agreement shall be invalid, illegal, or unenforceable in any jurisdiction, the validity, legality, and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. In addition, all agreements and covenants herein shall be given independent effect such that, if a particular action or condition is prohibited by the terms of any such agreement or covenant, the fact that such action or condition would be permitted by another agreement or covenant shall not be construed as allowing such action to be taken or condition to exist. Section 7.9 Counterparts; Telefacsimile Signatures. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Each Guarantor may effect execution and delivery of this Agreement by executing a counterpart hereof and sending the signature page bearing such Guarantor's signature to the E-6 108 Administrative Agent by telefacsimile and, thereafter, promptly sending by mail or delivering such signature page to the Administrative Agent; provided that the failure to deliver such signature page by such Guarantor shall not affect the validity, enforceability, or binding effect of this Agreement against such Guarantor. Section 7.10 Entire Agreement. This Agreement and the Credit Agreement embody the entire agreement and understanding concerning the Guarantors and the Guaranteed Parties relating to the subject matter hereof and supersede all prior agreements and understandings relating to the subject matter hereof. No course of prior dealing between any Guarantor and the Guaranteed Parties (or any of them), no usage of the trade, and no parol or extrinsic evidence of any nature, shall be used or be relevant to supplement, explain or modify any term used herein. ARTICLE VIII CERTAIN WAIVERS BY GUARANTORS EACH GUARANTOR MAKES THE FOLLOWING WAIVERS WITH FULL KNOWLEDGE AND UNDERSTANDING THAT SUCH WAIVERS, IF NOT SO MADE, MIGHT OTHERWISE RESULT IN SUCH GUARANTOR BEING ABLE TO AVOID OR LIMIT SUCH GUARANTOR'S LIABILITY HEREUNDER EITHER IN WHOLE OR IN PART. Section 8.1 Notices. Each Guarantor absolutely, unconditionally, knowingly, and expressly waives: (a) notice of the acceptance by the Guaranteed Parties of this Agreement; (b) notice of any Credit Extensions consisting Guaranteed Obligations; (c) notice of the amount of the Guaranteed Obligations, subject, however, to such Guarantor's right to make inquiry, at any reasonable time, of any Guaranteed Party to ascertain the amount of the Guaranteed Obligations owing to such Guaranteed Party; (d) notice of any adverse change in the financial condition of the Company, of any change in value, or the release, of any collateral, or of any other fact that might increase such Guarantor's risk hereunder; (e) notice of presentment for payment, demand, protest, and notice thereof as to any instrument; (f) notice of any Default or Event of Default; and (g) all other notices (except if such notice is expressly required to be given to such Guarantor under this Agreement) and demands to which guarantor might otherwise be entitled. Section 8.2 Revocation. Each Guarantor absolutely, unconditionally, knowingly, and expressly waives any right to revoke such Guarantor's guaranty obligation hereunder as to future Guaranteed Obligations and, in light thereof, all protection afforded such Guarantor under Section 2815 of the California Civil Code. Each Guarantor fully realizes and understands that, upon execution of this Agreement, such Guarantor will not have any right to revoke this Agreement as to any future indebtedness and, thus, may have no control over such Guarantor's ultimate responsibility for the amount and nature of the Guaranteed Obligations. Section 8.3 Defenses of the Company. Each Guarantor absolutely, unconditionally, knowingly, and expressly waives any defense arising by reason of any disability or other defense (other than the defense that the Guaranteed Obligations shall have been fully and finally performed and indefeasibly paid) of the Company or by reason of the cessation from any cause whatsoever (including any act or failure to act by the Company or the Guaranteed Parties) of the liability of the Company in respect thereof, including any such defense or cessation of liability arising from or as a result of: (a) any statute of limitations; (b) any lack of power or authority of the Company or any Person acting or purporting to act on the Company's behalf; (c) the operation of Sections 580a, 580b, 580d, or 726 of the California Code of Civil Procedure or any similar law of the State of California or any other jurisdiction; or (d) any claim of fraudulent transfer or preference. E-7 109 Section 8.4 Suretyship and Certain Other Rights and Defenses of Guarantors. Each Guarantor absolutely, unconditionally, knowingly, and expressly waives: (a) any right to assert against the Guaranteed Parties (or any of them) any defense (legal or equitable), set-off, counterclaim, or claim which such Guarantor may now or at any time hereafter have against the Company or any other Person liable to the Guaranteed Parties (or any of them); (b) any defense, set-off, counterclaim, or claim, of any kind or nature, arising directly or indirectly from the present or future lack of perfection, sufficiency, validity, or enforceability of any of the Guaranteed Obligations or any security therefor or from any failure of the Guaranteed Parties (or any of them) to act in a commercially reasonable manner; (c) any defense arising by reason of or deriving from any claim or defense based upon an election of remedies by the Guaranteed Parties (or any of them) (including a nonjudicial foreclosure sale of any real property collateral which destroys, diminishes, or otherwise adversely affects any Guarantor's rights of subrogation, reimbursement, indemnity, or contribution or other rights against the Company or any other Person), including any defense based upon an election of remedies by any Guaranteed Party under the provisions of Sections 580a, 580b, 580d, and 726 of the California Code of Civil Procedure or any similar law of the State of California or any other jurisdiction. In making this waiver, each Guarantor specifically acknowledges that it understands and is aware that, under Sections 580b and 580d of the California Code of Civil Procedure, if the Guaranteed Parties (or any of them) conducted a nonjudicial foreclosure sale of real property collateral: (i) such Guaranteed Party(ies) would lose the right to pursue the Company for any deficiency that might remain following such sale; (ii) if such Guarantor were to pay such deficiency following such sale, it would be precluded from pursuing the Company for reimbursement; and (iii) as a result, such Guaranteed Party(ies) would be prevented from pursuing such Guarantor for such deficiency following such sale; (d) the benefit of any statute of limitations affecting such Guarantor's liability hereunder (or the enforcement thereof); (e) any defense based on any alteration, impairment, or release of the Guaranteed Obligations or any security therefor, irrespective of whether resulting from any act or failure to act by the Guaranteed Parties (or any of them); and (f) any right to require the Guaranteed Parties (or any of them): (i) to institute suit or otherwise proceed against the Company or any other Person; or (ii) to exhaust any rights and remedies which the Guaranteed Parties (or any of them) have or may have against the Company or any other Person. Section 8.5 Marshalling. Each Guarantor absolutely, unconditionally, knowingly, and expressly waives any rights it has to require the Guaranteed Parties (or any of them) to marshal, foreclose upon, sell, or otherwise realize upon or collect or apply any particular part of any other assets securing any of the Guaranteed Obligations (including any rights arising by virtue of Sections 2899 and 3433 of the California Civil Code). Section 8.6 Claims Against the Company and Others. Each Guarantor absolutely, unconditionally, knowingly, and expressly agrees that, until the Guaranteed Obligations have been indefeasibly repaid in full, such Guarantor will not in any manner enforce or pursue, or seek to enforce or pursue, any or all of the following rights (it being expressly agreed that all such rights are subordinate to any claims of the Guaranteed Parties (or any of them)): (a) any right of subrogation, indemnity, or E-8 110 contribution such Guarantor has or may have as against the Company or any other Person with respect to any of the Guaranteed Obligations; (b) any right to proceed against the Company or any other Person, now or hereafter, for contribution, indemnity, reimbursement, or any other suretyship rights and claims (irrespective of whether direct or indirect, liquidated or contingent) with respect to any of the Guaranteed Obligations; and (c) any right to proceed or to seek recourse against or with respect to any assets of the Company or any other Person with respect to any of the Guaranteed Obligations. Section 8.7 Certain Additional Statutory Rights. Without limiting the generality of any other waiver or other provision set forth in this agreement, each Guarantor absolutely, unconditionally, knowingly, and expressly waives any and all benefits or defenses, if any, arising directly or indirectly under any one or more of Sections 2799, 2808, 2809, 2810, 2815, 2819, 2820, 2821, 2822, 2838, 2839, 2845, 2848, 2849, and 2850 of the California Civil Code, Sections 580a, 580b, 580c, 580d, and 726 of the California Code of Civil Procedure, and Sections 3116, 3118, 3119, 3419, 3605, 9504, 9505, and 9507 of the California Uniform Commercial Code. ARTICLE IX GOVERNING LAW; JURISDICTION AND VENUE; WAIVER OF TRIAL BY JURY Section 9.1 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAW OF THE STATE OF CALIFORNIA, PROVIDED THAT THE GUARANTEED PARTIES SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW. Section 9.2 Jurisdiction. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH GUARANTOR AND EACH OF THE GUARANTEED PARTIES CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THOSE COURTS. EACH GUARANTOR AND EACH OF THE GUARANTEED PARTIES IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. EACH GUARANTOR AND EACH OF THE GUARANTEED PARTIES WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY CALIFORNIA LAW. Section 9.3. Waiver of Jury Trial. EACH GUARANTOR AND EACH OF THE GUARANTEED PARTIES WAIVES ITS RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY INDEMNIFIED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH GUARANTOR AND EACH OF THE GUARANTEED PARTIES AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH E-9 111 SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. EACH GUARANTOR WARRANTS AND AGREES THAT EACH OF THE WAIVERS SET FORTH ABOVE IS MADE WITH SUCH GUARANTOR'S FULL KNOWLEDGE OF ITS SIGNIFICANCE AND CONSEQUENCE AND THAT, UNDER THE CIRCUMSTANCES, THE WAIVERS ARE REASONABLE AND NOT CONTRARY TO PUBLIC POLICY OR LAW. IF ANY SUCH WAIVER IS DETERMINED TO BE CONTRARY TO ANY APPLICABLE LAW OR PUBLIC POLICY, SUCH WAIVER SHALL BE EFFECTIVE ONLY TO THE EXTENT, BUT TO THE FULLEST EXTENT, PERMITTED BY LAW OR PUBLIC POLICY. EACH GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT THIS AGREEMENT IS EFFECTIVE UPON SUCH GUARANTOR'S EXECUTION AND DELIVERY OF THIS AGREEMENT TO THE ADMINISTRATIVE AGENT ON BEHALF OF ALL OF THE GUARANTEED PARTIES (AND THE SATISFACTION OF ALL OF THE CONDITIONS SET FORTH IN SECTION 5.1 OF THE CREDIT AGREEMENT). NO FORMAL ACCEPTANCE BY THE GUARANTEED PARTIES IS NECESSARY TO MAKE THIS AGREEMENT EFFECTIVE. E-10 112 IN WITNESS WHEREOF, each Guarantor has executed this Agreement as of the date first written above. [_______________________________], a [_____________] By: _________________________ Name: _________________________ Title: _________________________ Notice Information: Attn: ___________________ Telephone: ___.___.____ Telefacsimile: ___.___.____ E-11 113 EXHIBIT F FORM OF OPINION OF COUNSEL June 29, 2001 Bank of America, N.A., as Agent for the Banks from time to time party to the Credit Agreement referred to below, and to the Banks Mail Code: CA5-705-12-14 555 California Street, 12th Floor San Francisco, CA 94104 Ladies and Gentlemen: I have acted as counsel for Granite Construction Incorporated, a Delaware corporation ("Borrower"), in connection with (a) that certain Credit Agreement dated as of June 29, 2001 including Exhibits and Schedules (the "Credit Agreement"), by and among Borrower, the several financial institutions parties to the Credit Agreement (the "Banks") and Bank of America, N.A., as agent for the Banks (the "Agent") and as the L/C Issuer; and (b) (i) the Note, dated June 29, 2001, in the original principal amount of Twelve Million Dollars (U.S. $12,000,000.00), issued by the Borrower to the order of First Union National Bank and (ii) the Note, Dated June 29, 2001, in the original principal amount of Twelve Million Five Hundred Thousand Dollars (U.S. $12,500,000.00), issued by the Borrower to the order of Union Bank of California, N.A. (collectively, the "Notes"). I have also represented each of Granite Construction Company, a California corporation ("GCC"), Granite Land Company, a California corporation ("GLC"), G.G. & R., Inc., a Utah corporation ("GG&R"), Intermountain Slurry Seal, Inc., a Wyoming corporation ("Intermountain"), Pozzolan Products Company (P.P.C.), a Utah corporation ("Pozzolan"), and GILC, L.P., a California limited partnership ("GILC", and together with GCC, GLC, GG&R, Intermountain, and Pozzolan, the "Subsidiaries"), each of which is a direct or indirect wholly-owned subsidiary of Borrower, in connection with the Guaranty given by each of the Subsidiaries in favor of the Agent for the benefit of Banks guaranteeing the obligations of Borrower under the Credit Agreement. I am rendering this opinion pursuant to subsection 4.01(a)(vi) of the Credit Agreement. Except as otherwise defined herein, capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement. As used herein, the term "Loan Documents" shall mean the Credit Agreement, the Notes and the Guaranty. I am admitted to practice law only in the State of California, and I express no opinion concerning any law other than the law of the State of California, the Delaware General Corporation law, the law of the United States of America, and, to the extent necessary to render my opinion in paragraphs 1(c), 1(d), the second sentence of paragraph 3 and paragraphs 5(d), 6 and 8, the Utah Revised Business Corporation Act and the Wyoming Business Corporation Act. In so far as the opinions contained herein purport to relate to the Delaware General Corporation Law, the Utah Revised Business Corporation Act and the Wyoming Business Corporation Act (collectively, the "laws"), I have relied on such laws as reported in standard compilations. F-1 114 Bank of America, N.A. as Agent for the Banks from time to time party to the Credit Agreement referred to below, and to the Banks June 29, 2001 Page 2 In rendering this Opinion, I have assumed the genuineness and authenticity of all signatures (other than that of Borrower and each Subsidiary) on original documents; the authenticity of all documents submitted to me as originals; the conformity of originals to all documents submitted to me as copies; the accuracy, completeness and authenticity of certificates of public officials; the due authorization, execution and delivery of all documents (except the due authorization, execution and delivery by Borrower of the Credit Agreement and by each Subsidiary of the Guaranty) where authorization, execution and delivery are prerequisites to the effectiveness of such documents; the power and authority of the Banks to enter into and perform their obligations under the Loan Documents; that the Banks are duly qualified in the State of California to do business of the type contemplated by the Loan Documents; that each of the Banks qualifies for the exemption from the otherwise applicable interest rate limitations of California law for loans or forbearances by, as the case may be: (i) national banks provided by Article XV, Section 1 of the California Constitution; or (ii) certain "foreign (other nation) banks" provided by California Financial Code Section 1716; or (iii) state banks provided by Article XV, Section 1 of the California Constitution; that all loans under the Credit Agreement will be made by the Banks for their own accounts or for the account of another person or entity that qualifies for an exemption from the interest rate limitations of California law, and there is no present agreement or plan, express or implied, on the part of the Banks to sell participations or any other interest in the loans to be made under the Credit Agreement to any person or entity other than a person or entity that also qualifies for an exemption from the interest rate limitations of California law; and with respect to matters of fact (as distinguished from matters of law), I also have relied upon and assumed that the representations of the Borrower and each Subsidiary and the other parties set forth in the Loan Documents and any other certificates, instruments or agreements executed in connection therewith or delivered to me are true, correct, complete and not misleading, although to my knowledge the representations of the Borrower and each Subsidiary set forth in the Loan Documents and any such other certificates, instruments and agreements are true, correct, complete and not misleading. I have also assumed that all individuals executing and delivering documents on behalf of the Banks and Agent had the legal capacity to so execute and deliver and that the Loan Documents are obligations binding upon Banks and Agent. With respect to my opinions in paragraph 4(c) and 5(c) below, I have relied solely upon copies, supplied to me by the Borrower or a Subsidiary, of each undertaking, contract, indenture, mortgage, deed of trust or other instrument, document or agreement listed in Exhibit A, (i) of the Borrower listed on the Index to Form 10K Exhibits to the Borrower's Annual Report on Form 10K for the fiscal year ending December 31, 2000 and (ii) of the Borrower involving amounts in excess of $50,000,000 to which Borrower or any Subsidiary is a party or by which Borrower or any Subsidiary is bound. In rendering my opinion in paragraph 6, I have relied solely on a certificate of good standing from each of the Secretary of State's office of each of the states listed below the Borrower's and each Subsidiary's name on Exhibit B. Where I render an opinion "to the best of my knowledge" or concerning an item "known to me" or my opinion otherwise refers to my "knowledge," it is intended to indicate that during the course of my representation of Borrower and the Subsidiaries, no information that would give me current actual knowledge of the inaccuracy of such statement has come to my attention in rendering legal services to Borrower or the Subsidiaries. F-2 115 Bank of America, N.A. as Agent for the Banks from time to time party to the Credit Agreement referred to below, and to the Banks June 29, 2001 Page 3 On the basis of the foregoing, in reliance thereon, and with the foregoing qualifications, I am of the opinion that: 1. (a) Borrower is a corporation, duly incorporated and validly existing under the laws of Delaware and has the requisite corporate power and authority to own its property and to conduct the business in which it is currently engaged; (b) Each of GCC and GLC is a corporation duly incorporated and validly existing under the laws of California and has the requisite corporate power and authority to own its property and to conduct the business in which it is currently engaged; (c) Each of GG&R and Pozzolan is a corporation duly incorporated and validly existing under the laws of Utah and has the requisite corporate power and authority to own its property and to conduct the business in which it is currently engaged; (d) Intermountain is a corporation duly incorporated and validly existing under the laws of Wyoming and has the requisite corporate power and authority to own its property and to conduct the business in which it is currently engaged; (e) GILC is a California limited partnership validly existing under the laws of California and has the requisite partnership power and authority to own its property and to conduct the business in which it is currently engaged. 2. Borrower (a) has taken all necessary and appropriate corporate action to authorize the execution, delivery and performance of the Credit Agreement and the Notes, and (b) has the corporate power and authority to execute, deliver and perform the Credit Agreement. Each Subsidiary (a) has taken all necessary and appropriate corporate action or partnership action, as applicable, to authorize the execution, delivery and performance of the Guaranty, and (b) has the corporate power or partnership power, as applicable, and authority to execute, deliver and perform the Guaranty. 3. The Credit Agreement and the Notes have been duly executed and delivered by the Borrower. The Guaranty has been duly executed and delivered by each of the Subsidiaries. The Credit Agreement and the Notes constitute legal, valid and binding obligations of Borrower, enforceable against Borrower in accordance with their terms. The Guaranty constitutes a legal, valid and binding obligation of each Subsidiary, enforceable against each Subsidiary in accordance with its terms. 4. The execution, delivery and performance by Borrower of the Credit Agreement and the Notes do not: (a) violate or contravene any injunction, order, writ, judgment, decree, determination or award of any United States or California Governmental Authority as presently in effect applicable to Borrower; (b) conflict with or result in a breach of or constitute a default under the certificate of incorporation and bylaws of Borrower; (c) violate or result in a breach of or constitute any default under any agreements of Borrower set forth in Exhibit A, and, do not result in or require the creation or imposition of any lien on any of Borrower's properties or revenues pursuant to any injunction, order, decree or undertaking as presently in effect or any such agreements of Borrower set forth in Exhibit A; or (d) result in or require the creation or imposition of any lien on any of its properties or revenues pursuant to any provision of any law, rule or regulation as presently in effect. 5. The execution, delivery and performance by each Subsidiary of the Guaranty do not: (a) violate or contravene any injunction, order. writ, judgment, decree, determination or award of any United States or California Governmental Authority as presently in effect applicable to each Subsidiary; (b) conflict with or result in a breach of or constitute a default under the articles/certificates of incorporation F-3 116 Bank of America, N.A. as Agent for the Banks from time to time party to the Credit Agreement referred to below, and to the Banks June 29, 2001 Page 4 and bylaws or partnership agreement, as applicable, of each Subsidiary; (c) violate or result in a breach of or constitute any default under any agreements of each Subsidiary set forth in Exhibit A, and do not result in or require the creation or imposition of any lien on any Subsidiary's its properties or revenues pursuant to any injunction, order, decree or undertaking as presently in effect or any such agreements of each Subsidiary; or (d) result in or require the creation or imposition of any lien on any of its properties or revenues pursuant to any provision of any law, rule or regulation as presently in effect. 6. Each of Borrower and the Subsidiaries is duly qualified to do business and is in good standing in the states listed below its name on Exhibit B hereto. 7. No authorization, consent, approval, license, qualification or formal exemption from, nor notice to, nor any filing, recordation, declaration or registration with, any United States or California Governmental Authority, or to my knowledge any other Governmental Authority, is necessary or required on the part of Borrower in connection with the execution, delivery, or performance by Borrower of the Credit Agreement and the Notes. 8. No authorization, consent, approval, license, qualification or formal exemption from, nor notice to, nor any filing, recordation, declaration or registration with any United States or California Governmental Authority, or to my knowledge any other Governmental Authority, is necessary or required on the part of each Subsidiary in connection with the execution, delivery, or performance by each Subsidiary of the Guaranty. 9. There is no claim, dispute, injunction, temporary restraining order, action, litigation, investigation or proceeding pending or, to the best of my knowledge, threatened against Borrower before any court, arbitrator, administrative agency or Governmental Authority of any kind (a) with respect to the Credit Agreement and the Notes or (b) which, if adversely determined, would have a Material Adverse Effect. 10. There is no claim, dispute, injunction, temporary restraining order, action, litigation, investigation or proceeding pending or, to the best of my knowledge, threatened against any Subsidiary before any court, arbitrator, administrative agency or Governmental Authority of any kind (a) with respect to the Guaranty or (b) which, if adversely determined, would have a Material Adverse Effect. 11. Neither the Borrower nor any Subsidiary is an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. Neither the Borrower nor any Subsidiary is subject to regulation under the Public Utility Holding Company Act of 1935, the Interstate Commerce Act (49 U.S.C Sections 10101 et seq. (Supp. 1992)) or the Federal Power Act which would limit its ability to incur Indebtedness. 12. Neither the Borrower nor any Subsidiary is generally engaged in the business of purchasing or selling Margin Stock or extending credit for the purpose of purchasing or carrying Margin Stock. The aggregate value of all Margin Stock directly or indirectly owned by the Borrower and its Subsidiaries is less than 25% of the aggregate value of the consolidated assets of the Borrower and its Subsidiaries. F-4 117 Bank of America, N.A. as Agent for the Banks from time to time party to the Credit Agreement referred to below, and to the Banks June 29, 2001 Page 5 13. The only subsidiaries of Borrower are the Subsidiaries and GILC Incorporated, a California corporation, GTC, Inc., a Texas corporation, Wilcott Corporation, a Colorado corporation, Granite Construction International, a California corporation, Granite SR 91 Corporation, a California corporation and Granite SR 91 L.P., a California limited partnership, of which Granite SR91 Corporation is the general partner and the Borrower is the sole limited partner. The opinions expressed in this letter are qualified to the extent that the validity, binding nature or enforceability of any provisions of the Loan Documents may be limited or otherwise affected by: a. The effects of bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium, or other similar laws now or hereafter in effect limiting the validity or enforceability of creditor's rights and remedies generally; b. General principles of equity, regardless of whether considered in proceedings in equity or at law; c. The covenant of good faith and fair dealing implied in every agreement under common law (and to similar provisions of federal law, where applicable); and d. The effect of any law or legal principle which provides that a court may refuse to enforce, or may limit the application of; a contract or any clause thereof which the court finds as a matter of law to have been unconscionable at the time it was made. e. The opinions expressed in this letter are further qualified to the extent that the validity, binding nature or enforceability of any provisions of the Loan Documents may be limited or otherwise affected by: i. The unenforceability under certain circumstances under California or federal law or court decisions of provisions (i) releasing a party against liability for wrongful or negligent acts, (ii) indemnifying a party to the extent that the events giving rise to the indemnity arise in whole or in part from the wrongful or negligent acts of the indemnitee, or (iii) where such release or indemnification is contrary to public policy, including but not limited to indemnification and/or releases relating to any issues of securities laws; ii. The effect of California Civil Code Section 1717 and other applicable statutes and judicial decisions which provide, among other things, that a court may limit the granting of attorneys' fees to those attorneys' fees which are determined by the court to be reasonable and that attorneys' fees may be granted only to a prevailing party and that a contractual provision for attorneys' fees is deemed to extend to both parties (notwithstanding that such provision by its express terms benefits only one party); iii. The assumption that, if the Agent or the Banks enforce their remedies, they will do so in a commercially reasonable manner; F-5 118 Bank of America, N.A. as Agent for the Banks from time to time party to the Credit Agreement referred to below, and to the Banks June 29, 2001 Page 6 iv. The effect of California court decisions invoking statutes or principles of equity which have held that certain covenants and provisions of agreements are unenforceable where (i) the breach of such covenants or provisions imposes restrictions or burdens upon the debtor, including the acceleration of indebtedness due under debt instruments, and it cannot be demonstrated that the enforceability of such restrictions or burdens is reasonably necessary for the protection of the creditors, or (ii) the creditor's enforcement of such covenants or provisions under the circumstances would violate the creditor's implied covenants of good faith and fair dealing; v. The unenforceability under certain circumstances of contractual provisions self-help or summary remedies; and vi. Decisions by California courts admitting evidence extrinsic to a written agreement between the parties thereto that the parties intended a meaning contrary to that expressed by the parties in writing. The foregoing opinions are also subject to the following additional assumptions, limitations, qualifications and exceptions: a. Provisions in the Loan Documents requiring Borrower or any Subsidiary to execute, in the future, additional instruments and documents may be unenforceable. b. Any provision contained in the Loan Documents that purports to require that any action or decision of Agent or Banks is conclusively binding upon Borrower or any Subsidiary may be unenforceable. c. You are advised that any provision in the Loan Documents purporting to waive, limit or restrict the right of Borrower or Subsidiary to offset against obligations owing under the Loan Documents may not be enforceable. d. Those provisions in the Loan Documents imposing late charges (interest or otherwise) and/or additional interest in the event of default are governed by the rules relating to "liquidated damages" as set forth in California Civil Code Sections 1671 et seq., and relevant case law (see, e.g., Garrett v. Coast and Southern Federal Savings & Loan, 9 Cal.3d 731(1973)). I express no opinion as to the effect of judicial decisions and statutes limiting the enforceability of provisions imposing penalties, forfeitures, late payment charges, an increase in interest rate, or payment of other additional consideration, (i) upon prepayment, late payment, maturity, default or a lender's election to accelerate a loan, particularly in cases where the occurrence of a default or waiving the benefit of a statutory right bears no reasonable relation to the damage suffered by the lender or is otherwise held to be a penalty; or (ii) as a consequence of costs incurred by the lender or imposition of governmental charges, taxes, levies or requirements upon a lender. e. Those provisions in the Loan Documents requiring the consent of Agent and Banks or allowing Agent or Banks to take certain actions may be interpreted by a court to contain an implied covenant of reasonableness and/or fair dealing (see, e.g., Kendall v. Pestana, 40 Cal. 3d 488 (1985); Cohen v. Ratinoff 147 Cal. App. 3d 321(1983)). F-6 119 Bank of America, N.A. as Agent for the Banks from time to time party to the Credit Agreement referred to below, and to the Banks June 29, 2001 Page 7 f. You should be aware of the unenforceability, under certain circumstances, of provisions waiving broadly or vaguely stated rights or unknown future rights, or rights which may not be waived on statutory or public policy grounds, or provisions stating that rights or remedies are not exclusive, that every right or remedy is cumulative and may be exercised in addition to or with any other right or remedy or that the election of some particular remedy or remedies does not preclude recourse to one or more others. g. You should be aware of limitations based on public policy on provisions stating that a borrower's obligations are unaffected by reason of any default or failure on the part of a lender to perform or comply with the terms of the subject loan documents. h. I express no opinion as to the enforceability of the consent to service, jurisdiction or forum of any claim, demand, action or cause of action arising under or related to the Loan Documents or the transactions contemplated therein. i. I express no opinion as to the enforceability of any right of any creditor to collect any payment due under the Loan Documents to the extent that such payment constitutes a penalty or forfeiture. j. I express no opinion as to the enforceability of provisions in the Loan Documents creating presumptions or creating rights of set-off. k. I express no opinion on the accuracy of any representations or warranties of Borrower or any Subsidiary. Furthermore I express no opinion as to the survivability of any warranties, indemnities or other obligations. l. I express no opinion as to the enforceability of those provisions in the Loan Documents purporting to appoint the Agent or Banks as attorney-in-fact for Borrower or to grant an irrevocable power of attorney to Agent or Banks. m. I express no opinion as to the enforceability of provisions in the Loan Documents purporting to provide that any approval, consent, authorization or satisfaction required of Agent or Banks or any notice given by or other action taken by Agent or Banks under the Loan Documents shall be presumed to be reasonable. n. I express no opinion as to the effect of laws and judicial decisions that provide that in certain circumstances a surety may be exonerated if the creditor materially alters the original obligation of the principal without the surety's consent, or otherwise takes any action without notifying the surety that materially prejudices the surety. o. I express no opinion as to any securities, anti-trust, tax, land use, safety, environmental, hazardous materials, insurance company or banking laws, rules or regulations, or laws, rules or regulations applicable to Agent or Banks. F-7 120 Bank of America, N.A. as Agent for the Banks from time to time party to the Credit Agreement referred to below, and to the Banks June 29, 2001 Page 8 p. I express no opinion as to any provision providing for the exclusive jurisdiction of a particular court or purporting to waive rights to trial by jury, service of process or objections to the laying of venue or to forum on the basis of forum non conveniens in connection with any litigation arising out of or pertaining to the Loan Documents. q. I express no opinion as to the effect of California Civil Code Section 1698 and similar statutes and federal laws and judicial decisions (a) providing that oral modifications to a contract or waivers of contractual provisions may be enforceable, if the modification was performed, notwithstanding any express provision in the agreement that the agreement may only be modified or an obligation thereunder waived in writing, or (b) creating an implied agreement from trade practices or course of conduct. r. I express no opinion as to the effect of certain rights, remedies and waivers contained in the Loan Documents being limited or rendered ineffective by applicable statutory law or judicial decisions governing such provisions, but such laws and judicial decisions do not render the Loan Documents unenforceable as a whole, and there exists, in the Loan Documents and pursuant to applicable law, legally adequate remedies for realization of the principal benefits purported to be afforded by the Loan Documents. s. With respect to my opinions expressed in paragraphs 4(d), 5(d), 7 and 8, I have not conducted any special investigation of statutes laws, rules or regulations and my opinion with respect thereto are limited to such laws that to my knowledge and as in my experience are of general application to transactions of the sort contemplated by the Loan Documents. I further advise you that: a. The enforceability of the Guaranty against a Subsidiary may be subject to California statutory provisions and case law to the effect that a guarantor may be exonerated if the beneficiary of the guaranty alters the original obligation of the principal, fails to inform the guarantor of material information pertinent to the principal or any collateral, elects remedies that may impair the subrogation rights of the guarantor against the principal or that may impair the value of the collateral, fails to accord the guarantor the protections afforded a debtor under the Uniform Commercial Code or otherwise takes any action that materially prejudices the guarantor unless, in any such case, the guarantor validly waives such rights or the consequences of any such action. See, e.g., California Civil Code Section 2799 through Section 2855; Sumitomo Bank of California v. Iwasaki, 70 Cal. 2d 81, 73 Cal. Rptr. 564 (1968); Union Bank v. Gradsky, 265 Cal. App. 2d 40, 71 Cal. Rptr 64 (1968); Connolly v. Bank of Sonoma County, 184, 2 Cal. App. 3d 1119, 29 Cal. Rptr. 396 (1986); C.I.T. Corp. v. Anwright Corp., 191 Cal. App. 3d 1420, 237 Cal. Rptr. 108 (1987), American National Bank V. Perma-Tile Roof Co., 200 Cal. App. 3d 889, 246 Cal. Rptr. 381(1988), In re Kirkland, 915 F. 2d 1236 (9th Cir. 1990); and Cathay Bank v. Lee, 18 Cal. Rptr. 2d 420 (1993). While express and specific waivers of a guarantor's right to be exonerated, such as those contained in the Guaranty, are generally enforceable under California law, we express no opinion as to whether the Guaranty contains an express and specific waiver of each exoneration defense a guarantor might assert or as to whether each of the waivers contained in the Guaranty is fully enforceable. F-8 121 Bank of America, N.A. as Agent for the Banks from time to time party to the Credit Agreement referred to below, and to the Banks June 29, 2001 Page 9 b. It could be contended that the Guaranty has not been given for a fair or reasonably equivalent consideration, that a Subsidiary is, or, by entering into the Guaranty may become, insolvent, and that the Guaranty may be voidable by creditors of a Subsidiary or by a trustee or receiver of a Subsidiary in bankruptcy or similar proceedings pursuant to applicable bankruptcy, fraudulent conveyance or similar laws. Because of these possible contentions, my opinions are further limited by and subject to the effect of such laws. This opinion is intended solely for the benefit of the Agent, and the Banks and their Assignees and Participants, as defined in Section 10.07(d) of the Credit Agreement, and is not to be made available to or relied upon by any other person, firm, or entity, other than regulatory authorities in connection with bank examinations, without our prior written consent. Very truly yours, Michael Futch Vice President, Secretary and General Counsel MF:pb Encl. F-9 122 EXHIBIT A GRANITE CONSTRUCTION INCORPORATED MATERIAL AGREEMENTS IN EXCESS OF $50,000,000
JOB NUMBER DESCRIPTION AMOUNT - ------ ----------- ------- 300136 DALLAS CO IH45 50,739,000 370804 ST. JOHN'S RIVER BRIDGE-JOINT VENTURE 65,943,000 330001 DURHAM 185 BROAD TO CAMDEN 73,300,000 300122 HILLSBOROUGH CO. I-4 S1 80,568,000 300161 HATHAWAY BRIDGE REPLACE 81,520,000 300823 ATLANTIC CITY DESIGN BUILD-JOINT VENTURE 85,690,000 216666 I-80 TRUCKEE TO FLORISTON 86,396,096 300146 DALLAS CO SH190/IH35 95,146,000 300875 LAS VEGAS MONORAIL-JOINT VENTURE 153,958,000 300866 HIAWATHA LIGHT RAIL-JOINT VENTURE 164,584,644 300819 I-15 UTAH HIGHWAY REBUILD-JOINT VENTURE 315,621,617 NA Private Placement Due 03/15/10 60,000,000 NA Private Placement Due 05/01/13 75,000,000
F-10 123 EXHIBIT B
================================================================================== STATE OF ARTICLE XI. COMPANY INCORPORATION/QUALIFICATION ================================================================================== Granite Construction Delaware* Incorporated (Borrower) California ---------------------------------------------------------------------------------- 11.01 Granite Construction Company California* ---------------------------------------- Arizona ---------------------------------------- Colorado ---------------------------------------- Florida ---------------------------------------- Georgia ---------------------------------------- Idaho ---------------------------------------- Minnesota ---------------------------------------- Missouri ---------------------------------------- Nevada ---------------------------------------- New Jersey ---------------------------------------- New Mexico ---------------------------------------- North Carolina ---------------------------------------- Texas ---------------------------------------- Utah ---------------------------------------- Wyoming ---------------------------------------------------------------------------------- 11.02 Granite Land Company California* ---------------------------------------------------------------------------------- GILC, L.P. California* ---------------------------------------- Arizona ---------------------------------------- Colorado ---------------------------------------- Florida ---------------------------------------- Georgia ---------------------------------------- Idaho ---------------------------------------- Missouri ---------------------------------------- Nevada ---------------------------------------- New Mexico ---------------------------------------- Texas ---------------------------------------- Utah ---------------------------------------- Wyoming ---------------------------------------------------------------------------------- G.G. & R., Inc. Utah* ---------------------------------------------------------------------------------- Intermountain Slurry Seal, Inc. Wyoming* ---------------------------------------- California ---------------------------------------- Colorado ---------------------------------------- Idaho ---------------------------------------- Nevada ---------------------------------------- New Mexico ---------------------------------------- Utah ---------------------------------------------------------------------------------- Pozzolan Products Company Utah* (P.P.C.) ---------------------------------------- California ---------------------------------------- Colorado ---------------------------------------- Idaho ======================================== ========================================= *State of Incorporation/Organization
F-11 124 NOTE $ 12,000,000.00 June 29, 2001 FOR VALUE RECEIVED, the undersigned (the "Borrower"), hereby promises to pay to the order of FIRST UNION NATIONAL BANK (the "Lender"), on the Maturity Date (as defined in the Credit Agreement referred to below) the principal amount of Twelve Million Dollars ($12,000,000.00), or such lesser principal amount of Loans (as defined in such Credit Agreement) due and payable by the Borrower to the Lender on the Maturity Date under that certain Credit Agreement, dated as of June 29, 2001 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the "Agreement"; the terms defined therein being used herein as therein defined), among the Borrower, the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent and L/C Issuer. The Borrower promises to pay interest on the unpaid principal amount of each Loan from the date of such Loan until such principal amount is paid in full, at such interest rates, and at such times as are specified in the Agreement. All payments of principal and interest shall be made to the Administrative Agent for the account of the Lender in Dollars in immediately available funds at the Administrative Agent's Office. If any amount is not paid in full when due hereunder, such unpaid amount shall bear interest, to be paid upon demand, from the due date thereof until the date of actual payment (and before as well as after judgment) computed at the per annum rate set forth in the Agreement. This Note is one of the Notes referred to in the Agreement, is entitled to the benefits thereof and is subject to optional and mandatory prepayment in whole or in part as provided therein. This Note is also entitled to the benefits of the Guaranties. Upon the occurrence of one or more of the Events of Default specified in the Agreement, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable all as provided in the Agreement. Loans made by the Lender shall be evidenced by one or more loan accounts or records maintained by the Lender in the ordinary course of business. The Lender may also attach schedules to this Note and endorse thereon the date, amount and maturity of its Loans and payments with respect thereto. The Borrower, for itself, its successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and non-payment of this Note. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE; PROVIDED THAT LENDER SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW. GRANITE CONSTRUCTION INCORPORATED By: /s/ WILLIAM E. BARTON --------------------------------------- William E. Barton Chief Financial Officer By: /s/ R.C. ALLBRITTON --------------------------------------- R.C. Allbritton Treasurer 125 $12,500,000.00 June 29, 2001 FOR VALUE RECEIVED, the undersigned (the "Borrower"), hereby promises to pay to the order of UNION BANK OF CALIFORNIA, N.A. (the "Lender"), on the Maturity Date (as defined in the Credit Agreement referred to below) the principal amount of Twelve Million Five Hundred Thousand Dollars ($12,500,000.00), or such lesser principal amount of Loans (as defined in such Credit Agreement) due and payable by the Borrower to the Lender on the Maturity Date under that certain Credit Agreement, dated as of June 29, 2001 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the "Agreement"; the terms defined therein being used herein as therein defined), among the Borrower, the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent and L/C Issuer. The Borrower promises to pay interest on the unpaid principal amount of each Loan from the date of such Loan until such principal amount is paid in full, at such interest rates, and at such times as are specified in the Agreement. All payments of principal and interest shall be made to the Administrative Agent for the account of the Lender in Dollars in immediately available funds at the Administrative Agent's Office. If any amount is not paid in full when due hereunder, such unpaid amount shall bear interest, to be paid upon demand, from the due date thereof until the date of actual payment (and before as well as after judgment) computed at the per annum rate set forth in the Agreement. This Note is one of the Notes referred to in the Agreement, is entitled to the benefits thereof and is subject to optional and mandatory prepayment in whole or in part as provided therein. This Note is also entitled to the benefits of the Guaranties. Upon the occurrence of one or more of the Events of Default specified in the Agreement, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable all as provided in the Agreement. Loans made by the Lender shall be evidenced by one or more loan accounts or records maintained by the Lender in the ordinary course of business. The Lender may also attach schedules to this Note and endorse thereon the date, amount and maturity of its Loans and payments with respect thereto. The Borrower, for itself, its successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and non-payment of this Note. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE; PROVIDED THAT LENDER SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW. GRANITE CONSTRUCTION INCORPORATED By: /s/ WILLIAM E. BARTON ------------------------------------ William E. Barton Chief Financial Officer By: /s/ R.C. ALLBRITTON ------------------------------------ R.C. Allbritton Treasurer EX-10.2 6 f74922ex10-2.txt EXHIBIT 10.2 1 EXHIBIT 10.2 CONTINUING GUARANTY AGREEMENT This CONTINUING GUARANTY AGREEMENT (this "Agreement"), dated as of June 29, 2001, is made by each of the undersigned (each, a "Guarantor" and, collectively, the "Guarantors"), in favor of each Guaranteed Party (as hereinafter defined). WHEREAS, Granite Construction Incorporation, a Delaware corporation (the "Company"), Bank of America, N.A., as Administrative Agent, as L/C Issuer and as a Lender, and the other financial institutions as are, or may from time to time become, parties thereto have entered into or are in the process of entering into that certain Credit Agreement, dated as of June 29, 2001 (as amended, modified and/or supplemented from time to time, the "Credit Agreement"), pursuant to which the Lenders have provided the Commitments and agreed to make Loans to the Company and to participate in Letters of Credit issued by the L/C Issuer for the account of the Company or its Subsidiaries on the terms and conditions contained therein; and WHEREAS, to induce the Lenders and the L/C Issuer to provide and to continue to provide financial accommodations to the Company pursuant to the terms of the Credit Agreement and the other Loan Documents, the Guarantors have each agreed to enter into this Agreement; NOW, THEREFORE, for good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), and intending to be legally bound hereby, each Guarantor irrevocably and unconditionally undertakes and agrees for the benefit of Guaranteed Party as follows: ARTICLE I CERTAIN DEFINITIONS AND RULES OF CONSTRUCTION Section 1.1 Certain Definitions. Each capitalized term used but not otherwise defined herein has the meaning ascribed thereto in the Credit Agreement. As used herein, the term "Guaranteed Party" means, as the context may require, the Administrative Agent, the L/C Issuer and each Lender (and each of such Person's respective successors, transferees and assigns). Section 1.2 Construction. For purposes of this Agreement and unless otherwise specified herein: (a) references to the plural include the singular and to the singular include the plural, references to any gender include any other gender, the part includes the whole, the term "including" is not limiting, and the term "or" has, except where otherwise indicated, the inclusive meaning represented by the phrase "and/or"; (b) references in this Agreement to any determination by the Guaranteed Party include good faith estimates (in the case of quantitative determinations) and good faith beliefs (in the case of qualitative determinations) by any Guaranteed Party; any determination made in good faith by any Guaranteed Party shall be conclusive absent manifest error; (c) the words "hereof," "herein," "hereby," and "hereunder," and any other similar words, refer to this Agreement as a whole and not to any particular provision of this Agreement; (d) article, section, subsection, clause, exhibit and schedule references are to this Agreement; and (e) any reference to this Agreement or any other Loan Document includes all permitted alterations, amendments, changes, extensions, modifications, renewals, or supplements thereto or thereof, as applicable. 2 ARTICLE II GUARANTY BY GUARANTORS Section 2.1 Promise to Pay and Perform. Each Guarantor jointly and severally unconditionally and irrevocably guarantees to each Guaranteed Party the payment and performance of all Obligations when and as the same shall become due and payable (whether at stipulated or any accelerated or earlier date of maturity (including the date of any required prepayment)) (the "Guaranteed Obligations"), it being each Guarantor's intent that such Guarantor's guaranty is a guaranty of payment and not a guaranty of collection. If the Company fails to pay or perform any Guaranteed Obligation on or before the date when due (whether at stipulated or any accelerated or earlier date of maturity (including the date of any required prepayment)), each Guarantor shall jointly and severally unconditionally and immediately make such payment or render such performance upon written demand therefor by any Guaranteed Party. Section 2.2 Cumulative Obligations; Continuing Guaranty. The obligations of each Guarantor hereunder are in addition to any other obligations of such Guarantor under any other guaranties of the Indebtedness or other obligations of the Company or any other Person at any time given to any Guaranteed Party. This Agreement shall not affect or invalidate any such other guaranties. This Agreement is a continuing guaranty and shall remain in full force and effect notwithstanding the fact that, at any particular time, no Guaranteed Obligations may be outstanding. Section 2.3 Joint and Several Obligation; Independent Obligation. Each Guarantor is directly, jointly and severally with all other guarantors of the Guaranteed Obligations or any portion thereof, liable to the Guaranteed Parties. The obligations of each Guarantor hereunder are direct and primary and are independent of the obligations of the Company or any other such guarantor, and a separate action may be brought against each Guarantor irrespective of whether an action is brought against the Company or any other such other guarantor or whether the Company or any such other guarantor is joined in such action. Each Guarantor's liability hereunder shall not be contingent upon the exercise or enforcement by the Guaranteed Parties of any remedies they may have against the Company or any other guarantor or the enforcement of any Lien or realization upon any security the Guaranteed Parties may at any time possess. Any release that may be given by the Guaranteed Parties to the Company or any other guarantor shall not release any Guarantor hereunder unless such release expressly so provides. Section 2.4 Limit of Liability. Notwithstanding anything to the contrary contained herein, each Guarantor shall be liable hereunder only for the largest amount that would not render such Guarantor's obligations hereunder subject to avoidance under Section 548 of the Bankruptcy Code or comparable provisions of any applicable state law; provided that such amount shall be presumed to be the entire amount of the Guaranteed Obligations. If, any Guarantor claims that such Guarantor's liability hereunder is less than the entire amount of the Guaranteed Obligations, such Guarantor shall have the burden of proving, by clear and convincing evidence, that such Guarantor's liability hereunder should be so limited since the information concerning, and the circumstances of, the financial condition of such Guarantor are more readily available to and are under the control of such Guarantor. All payments received by any Guaranteed Party from any Person other than a Guarantor on account of the Guaranteed Obligations shall be deemed as having been applied to Guaranteed Obligations that, pursuant to this Section 2.4, are in excess of the amounts guaranteed hereunder. 3 ARTICLE III PAYMENTS Section 3.1 Nature and Application of Payments. Each Guarantor shall make all payments hereunder in immediately available lawful money of the United States, without deduction or withholding (whether for taxes (whether income, excise, or otherwise) or offset). Without regard to the form in which received, the Guaranteed Parties may apply any payment with respect to the Guaranteed Obligations or any other amounts due hereunder in such order as the Guaranteed Parties shall in their sole and absolute discretion determine, irrespective of any contrary instructions received from any other Person. Section 3.2 Indefeasible Payment; Revival. If any portion of any payment to the Guaranteed Parties is set aside and repaid by any Guaranteed Party for any reason after being made by any Guarantor, the amount so set aside shall be revived as a Guaranteed Obligation and each Guarantor shall be liable for the full amount the Guaranteed Parties are, or any Guaranteed Party is, required to repay plus all costs and expenses (including attorneys' fees, costs, and expenses) incurred by the Guaranteed Parties in connection therewith. ARTICLE IV CERTAIN REPRESENTATIONS AND WARRANTIES OF GUARANTORS Each Guarantor represents and warrants as follows (which representations and warranties shall be true, correct, and complete at all times): Section 4.1 No Contravention; No Default. The execution, delivery, and performance by such Guarantor of this Agreement do not and will not: (a) conflict with or result in any breach or contravention of, or the creation of any Lien under, any contractual obligation to which such Guarantor is a party or any order, injunction, writ, or decree of any governmental authority to which such Guarantor or such Guarantor's properties are subject; or (b) violate any law, rule, or regulation of any governmental authority. Section 4.2 Binding Effect. This Agreement constitutes the legal, valid, and binding obligation of such Guarantor, enforceable against such Guarantor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability. Section 4.3 Litigation. Except as set forth on Schedule 5.06 to the Credit Agreement, there are no actions, suits, proceedings, claims, or disputes pending, or, to the best knowledge of such Guarantor, threatened in writing, at law, in equity, in arbitration, or before any governmental authority, against such Guarantor or any of such Guarantor's properties which purport to affect or pertain to this Agreement, any of the other Loan Documents, or any of the transactions contemplated hereby or thereby. Section 4.4 Regulated Entity. Neither such Guarantor nor any Person controlling such Guarantor is: (a) an "investment company" within the meaning of the Investment Company Act of 1940; or (b) subject to regulation by any federal or state statute or regulation limiting such Guarantor's ability to incur such Guarantor's obligations hereunder. Section 4.5 No Action Required. No consent, license, permit, approval or authorization of, exemption by, notice or report to, or registration, filing, or declaration with any governmental authority or of, to, or with any other Person, is or will be required for: (a) the execution, delivery, or performance of 4 this Agreement by such Guarantor; or (b) the exercise by the Guaranteed Parties of any of their respective rights and remedies provided for herein. Section 4.6 Changes Affecting the Guaranteed Obligations. Such Guarantor has taken and is taking all steps in such Guarantor's opinion necessary or appropriate to be informed on a continuing basis of changes or potential changes affecting the Guaranteed Obligations. Without limiting the generality of the foregoing, such Guarantor hereby confirms that it has received and reviewed the Credit Agreement, the Fee Letter and all other Loan Documents (and all other agreements, documents and instruments related thereto) that such Guarantor, in such Guarantor's sole determination, has deemed necessary or appropriate to receive and review. Section 4.7 Reliance by Guarantor; Financial Condition of the Company. This Agreement is not made by such Guarantor in reliance on any representation or warranty, express or implied, by any Guaranteed Party concerning the financial condition of the Company, the nature, value, or extent of any security for the Guaranteed Obligations, or any other matter. Such Guarantor is presently informed of the financial condition of the Company and of all other circumstances that a diligent inquiry would reveal and which bear upon the risk of nonpayment of the Guaranteed Obligations. Such Guarantor has reviewed each of the Loan Documents. Section 4.8 Adequate Consideration. The consideration given or provided, or to be given or provided, by the Guaranteed Parties in connection with this Agreement is adequate and satisfactory in all respects, and represents reasonably equivalent value, to support this Agreement and such Guarantor's obligations hereunder. ARTICLE V CERTAIN COVENANTS OF GUARANTORS Section 5.1 Knowledge of Financial Condition. Each Guarantor shall keep informed of the Company's financial condition, the status of any guarantors or of any security for the Guaranteed Obligations, and all other circumstances that bear upon the risk of nonpayment of the Guaranteed Obligations. Section 5.2 Further Assurances. Each Guarantor shall, from time to time, at the expense of such Guarantor, promptly execute and deliver all further documents and take all further action that may be necessary, or that the Guaranteed Parties (or any of them) may reasonably request, to enable the Guaranteed Parties (or any of them) to exercise and enforce their respective rights and remedies hereunder. Section 5.3 Sales, Dispositions, etc. Each Guarantor will not, without the prior written consent of the Guaranteed Party, sell, lease, assign, encumber, hypothecate, transfer or otherwise dispose of all of substantially all of such Guarantor's properties or assets, or any interest therein, except as otherwise permitted by the Credit Agreement. ARTICLE VI CERTAIN ACKNOWLEDGEMENTS AND AGREEMENTS OF GUARANTORS Section 6.1 Modifications to Loan Documents and Guaranteed Obligations. Each Guarantor acknowledges and agrees that, without notice to such Guarantor and without affecting or impairing the obligations of such Guarantor hereunder, the Guaranteed Parties (or any of them) may, by action or 5 inaction, compromise or settle, extend the period of duration or the time for the payment, or discharge the performance of, or may refuse to, or otherwise not enforce, or may, by action or inaction, release all or any one or more parties to, any one or more of the Loan Documents or otherwise with respect to the Guaranteed Obligations or may grant other indulgences to the Company in respect thereof, or may amend or modify in any manner and at any time (or from time to time) any one or more of the Loan Documents or otherwise with respect to the Guaranteed Obligations, or may, by action or inaction, release or substitute any guarantor, if any, of the Guaranteed Obligations, or may enforce, exchange, release, or waive, by action or inaction, any security for the Guaranteed Obligations or any guaranty of the Guaranteed Obligations, or any portion thereof. Section 6.2 Subordination. Each Guarantor agrees that any and all present and future indebtedness of the Company owing to such Guarantor is postponed in favor of and subordinated to indefeasible payment, in full, in cash, of the Guaranteed Obligations. In this regard, upon the occurrence and during the continuance of a Default or an Event of Default, no payment of any kind whatsoever shall be made with respect to such indebtedness until the Guaranteed Obligations have been indefeasibly paid in full. Any payment received by any Guarantor in respect of such indebtedness shall be held by such Guarantor as trustee for the Guaranteed Parties and promptly paid over to the Guaranteed Parties on account of the Guaranteed Obligations but without reducing or affecting in any manner the liability of such Guarantor under the other provisions of this Agreement. Section 6.3 Administrative Agent as Each Guarantor's Attorney-in-Fact. Each Guarantor irrevocably appoints the Administrative Agent as such Guarantor's attorney-in-fact, with full authority in the place and stead and name of such Guarantor, from time to time at the Administrative Agent's discretion but only following the occurrence and during the continuation of an Event of Default, to take any action and to execute any instrument which the Guaranteed Parties (or any of them) may, in accordance with the provisions of the Loan Documents or this Agreement, require as necessary or advisable to accomplish the purposes of this Agreement. ARTICLE VII GENERAL PROVISIONS Section 7.1 Notices. All notices, requests, and other communications to any party under this Agreement shall be in writing (including telegraphic, telex, telefacsimile, or cable communication) and mailed, telegraphed, telexed, sent by telefacsimile, cabled, or delivered to such party at its address or telefacsimile number set forth, in the case of each Guarantor, on the signature pages hereof, or, in the case of the Guaranteed Parties, on Schedule 10.02 to the Credit Agreement, or such other address or telefacsimile number as such party may hereafter specify for the purpose by notice to the other party given in accordance with this Section 7.1. Each such notice, request or other communication shall be deemed to have been received: (a) if mailed as provided above by any method other than overnight delivery service, on the third Business Day after deposit in the mails; (b) if mailed by overnight delivery service, telegraphed, telexed, sent by telefacsimile, or cable, when delivered for overnight delivery, delivered to the telegraph company, confirmed by telex answerback, transmitted by telefacsimile (with electronic confirmation), or delivered to the cable company, respectively; or (c) if delivered by hand, upon delivery. If any conflict exists between any oral communication to any Guaranteed Party and the written confirmation thereof, the oral communication shall control if any Guaranteed Party has acted thereon prior to actual receipt of such written confirmation. Section 7.2 Amendments, Waivers, and Consents. No amendments or waivers of any provision of this Agreement nor any consent to any departure by any Guarantor from the terms hereof shall in any event be effective unless the same shall be in writing and signed by the Administrative Agent 6 (or all Guaranteed Parties if required by the terms of the Credit Agreement) and the Guarantors. Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Section 7.3 No Waiver; Cumulative Nature of Remedies. No failure or delay on the part of any Guaranteed Party in exercising any of its rights and remedies under this Agreement, any of the Loan Documents, or otherwise with respect to any of the Guaranteed Obligations shall operate as a waiver thereof; nor shall any single or partial exercise of any right under this Agreement, the Loan Documents, or otherwise with respect to the Guaranteed Obligations preclude any other or further exercise thereof or the exercise of any other right or remedies. The rights and remedies provided in this Agreement and otherwise with respect to the Guaranteed Obligations are cumulative and not exclusive of any rights and remedies provided by law. Section 7.4 Costs and Expenses. Each Guarantor shall pay or reimburse the Guaranteed Parties on demand for all fees, costs, and expenses incurred by the Guaranteed Parties in connection with the enforcement or attempted enforcement of this Agreement, the preservation of any rights or remedies under this Agreement, or in any action, case, or proceeding (whether at law or in equity) relating to this Agreement. Without limiting the generality of the foregoing, such fees, costs, and expenses shall include reasonable Attorney Costs actually incurred by the Guaranteed Parties or any of them (irrespective of whether the Company is liable therefor), whether or not suit is brought, in connection therewith. Section 7.5 Successors and Assigns. This Agreement shall: (a) be binding upon each Guarantor and each Guarantor's successors and assigns; and (b) inure to the benefit of each Guaranteed Party and its successors and assigns (all to the extent permitted by the Loan Documents). Without limiting the generality of the foregoing subsection (b) but subject to the provisions of the Credit Agreement, any Guaranteed Party may assign or otherwise transfer all or any part of the Guaranteed Obligations owed to it to any other Person. Section 7.6 Headings. Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement and shall not be given any substantive effect. Section 7.7 Ambiguities. Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved using any presumption against any Guarantor or any Guaranteed Party, whether under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by each Guarantor and each Guaranteed Party and their respective counsel. In case of any ambiguity or uncertainty, this Agreement shall be construed and interpreted according to the ordinary meaning of the words used to accomplish fairly the purposes and intentions of all parties hereto. Section 7.8 Severability. In case any provision in or obligation under this Agreement shall be invalid, illegal, or unenforceable in any jurisdiction, the validity, legality, and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. In addition, all agreements and covenants herein shall be given independent effect such that, if a particular action or condition is prohibited by the terms of any such agreement or covenant, the fact that such action or condition would be permitted by another agreement or covenant shall not be construed as allowing such action to be taken or condition to exist. Section 7.9 Counterparts; Telefacsimile Signatures. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Each Guarantor may effect execution and delivery of this Agreement by executing a counterpart hereof and sending the signature page bearing such Guarantor's signature to the 7 Administrative Agent by telefacsimile and, thereafter, promptly sending by mail or delivering such signature page to the Administrative Agent; provided that the failure to deliver such signature page by such Guarantor shall not affect the validity, enforceability, or binding effect of this Agreement against such Guarantor. Section 7.10 Entire Agreement. This Agreement and the Credit Agreement embody the entire agreement and understanding concerning the Guarantors and the Guaranteed Parties relating to the subject matter hereof and supersede all prior agreements and understandings relating to the subject matter hereof. No course of prior dealing between any Guarantor and the Guaranteed Parties (or any of them), no usage of the trade, and no parol or extrinsic evidence of any nature, shall be used or be relevant to supplement, explain or modify any term used herein. ARTICLE VIII CERTAIN WAIVERS BY GUARANTORS EACH GUARANTOR MAKES THE FOLLOWING WAIVERS WITH FULL KNOWLEDGE AND UNDERSTANDING THAT SUCH WAIVERS, IF NOT SO MADE, MIGHT OTHERWISE RESULT IN SUCH GUARANTOR BEING ABLE TO AVOID OR LIMIT SUCH GUARANTOR'S LIABILITY HEREUNDER EITHER IN WHOLE OR IN PART. Section 8.1 Notices. Each Guarantor absolutely, unconditionally, knowingly, and expressly waives: (a) notice of the acceptance by the Guaranteed Parties of this Agreement; (b) notice of any Credit Extensions consisting Guaranteed Obligations; (c) notice of the amount of the Guaranteed Obligations, subject, however, to such Guarantor's right to make inquiry, at any reasonable time, of any Guaranteed Party to ascertain the amount of the Guaranteed Obligations owing to such Guaranteed Party; (d) notice of any adverse change in the financial condition of the Company, of any change in value, or the release, of any collateral, or of any other fact that might increase such Guarantor's risk hereunder; (e) notice of presentment for payment, demand, protest, and notice thereof as to any instrument; (f) notice of any Default or Event of Default; and (g) all other notices (except if such notice is expressly required to be given to such Guarantor under this Agreement) and demands to which guarantor might otherwise be entitled. Section 8.2 Revocation. Each Guarantor absolutely, unconditionally, knowingly, and expressly waives any right to revoke such Guarantor's guaranty obligation hereunder as to future Guaranteed Obligations and, in light thereof, all protection afforded such Guarantor under Section 2815 of the California Civil Code. Each Guarantor fully realizes and understands that, upon execution of this Agreement, such Guarantor will not have any right to revoke this Agreement as to any future indebtedness and, thus, may have no control over such Guarantor's ultimate responsibility for the amount and nature of the Guaranteed Obligations. Section 8.3 Defenses of the Company. Each Guarantor absolutely, unconditionally, knowingly, and expressly waives any defense arising by reason of any disability or other defense (other than the defense that the Guaranteed Obligations shall have been fully and finally performed and indefeasibly paid) of the Company or by reason of the cessation from any cause whatsoever (including any act or failure to act by the Company or the Guaranteed Parties) of the liability of the Company in respect thereof, including any such defense or cessation of liability arising from or as a result of: (a) any statute of limitations; (b) any lack of power or authority of the Company or any Person acting or purporting to act on the Company's behalf; (c) the operation of Sections 580a, 580b, 580d, or 726 of the California Code of Civil Procedure or any similar law of the State of California or any other jurisdiction; or (d) any claim of fraudulent transfer or preference. 8 Section 8.4 Suretyship and Certain Other Rights and Defenses of Guarantors. Each Guarantor absolutely, unconditionally, knowingly, and expressly waives: (a) any right to assert against the Guaranteed Parties (or any of them) any defense (legal or equitable), set-off, counterclaim, or claim which such Guarantor may now or at any time hereafter have against the Company or any other Person liable to the Guaranteed Parties (or any of them); (b) any defense, set-off, counterclaim, or claim, of any kind or nature, arising directly or indirectly from the present or future lack of perfection, sufficiency, validity, or enforceability of any of the Guaranteed Obligations or any security therefor or from any failure of the Guaranteed Parties (or any of them) to act in a commercially reasonable manner; (c) any defense arising by reason of or deriving from any claim or defense based upon an election of remedies by the Guaranteed Parties (or any of them) (including a nonjudicial foreclosure sale of any real property collateral which destroys, diminishes, or otherwise adversely affects any Guarantor's rights of subrogation, reimbursement, indemnity, or contribution or other rights against the Company or any other Person), including any defense based upon an election of remedies by any Guaranteed Party under the provisions of Sections 580a, 580b, 580d, and 726 of the California Code of Civil Procedure or any similar law of the State of California or any other jurisdiction. In making this waiver, each Guarantor specifically acknowledges that it understands and is aware that, under Sections 580b and 580d of the California Code of Civil Procedure, if the Guaranteed Parties (or any of them) conducted a nonjudicial foreclosure sale of real property collateral: (i) such Guaranteed Party(ies) would lose the right to pursue the Company for any deficiency that might remain following such sale; (ii) if such Guarantor were to pay such deficiency following such sale, it would be precluded from pursuing the Company for reimbursement; and (iii) as a result, such Guaranteed Party(ies) would be prevented from pursuing such Guarantor for such deficiency following such sale; (d) the benefit of any statute of limitations affecting such Guarantor's liability hereunder (or the enforcement thereof); (e) any defense based on any alteration, impairment, or release of the Guaranteed Obligations or any security therefor, irrespective of whether resulting from any act or failure to act by the Guaranteed Parties (or any of them); and (f) any right to require the Guaranteed Parties (or any of them): (i) to institute suit or otherwise proceed against the Company or any other Person; or (ii) to exhaust any rights and remedies which the Guaranteed Parties (or any of them) have or may have against the Company or any other Person. Section 8.5 Marshalling. Each Guarantor absolutely, unconditionally, knowingly, and expressly waives any rights it has to require the Guaranteed Parties (or any of them) to marshal, foreclose upon, sell, or otherwise realize upon or collect or apply any particular part of any other assets securing any of the Guaranteed Obligations (including any rights arising by virtue of Sections 2899 and 3433 of the California Civil Code). Section 8.6 Claims Against the Company and Others. Each Guarantor absolutely, unconditionally, knowingly, and expressly agrees that, until the Guaranteed Obligations have been indefeasibly repaid in full, such Guarantor will not in any manner enforce or pursue, or seek to enforce or pursue, any or all of the following rights (it being expressly agreed that all such rights are subordinate to any claims of the Guaranteed Parties (or any of them)): (a) any right of subrogation, indemnity, or 9 contribution such Guarantor has or may have as against the Company or any other Person with respect to any of the Guaranteed Obligations; (b) any right to proceed against the Company or any other Person, now or hereafter, for contribution, indemnity, reimbursement, or any other suretyship rights and claims (irrespective of whether direct or indirect, liquidated or contingent) with respect to any of the Guaranteed Obligations; and (c) any right to proceed or to seek recourse against or with respect to any assets of the Company or any other Person with respect to any of the Guaranteed Obligations. Section 8.7 Certain Additional Statutory Rights. Without limiting the generality of any other waiver or other provision set forth in this agreement, each Guarantor absolutely, unconditionally, knowingly, and expressly waives any and all benefits or defenses, if any, arising directly or indirectly under any one or more of Sections 2799, 2808, 2809, 2810, 2815, 2819, 2820, 2821, 2822, 2838, 2839, 2845, 2848, 2849, and 2850 of the California Civil Code, Sections 580a, 580b, 580c, 580d, and 726 of the California Code of Civil Procedure, and Sections 3116, 3118, 3119, 3419, 3605, 9504, 9505, and 9507 of the California Uniform Commercial Code. ARTICLE IX GOVERNING LAW; JURISDICTION AND VENUE; WAIVER OF TRIAL BY JURY Section 9.1 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAW OF THE STATE OF CALIFORNIA, PROVIDED THAT THE GUARANTEED PARTIES SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW. Section 9.2 Jurisdiction. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH GUARANTOR AND EACH OF THE GUARANTEED PARTIES CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THOSE COURTS. EACH GUARANTOR AND EACH OF THE GUARANTEED PARTIES IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. EACH GUARANTOR AND EACH OF THE GUARANTEED PARTIES WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY CALIFORNIA LAW. Section 9.3. Waiver of Jury Trial. EACH GUARANTOR AND EACH OF THE GUARANTEED PARTIES WAIVES ITS RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY INDEMNIFIED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH GUARANTOR AND EACH OF THE GUARANTEED PARTIES AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH 10 SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. EACH GUARANTOR WARRANTS AND AGREES THAT EACH OF THE WAIVERS SET FORTH ABOVE IS MADE WITH SUCH GUARANTOR'S FULL KNOWLEDGE OF ITS SIGNIFICANCE AND CONSEQUENCE AND THAT, UNDER THE CIRCUMSTANCES, THE WAIVERS ARE REASONABLE AND NOT CONTRARY TO PUBLIC POLICY OR LAW. IF ANY SUCH WAIVER IS DETERMINED TO BE CONTRARY TO ANY APPLICABLE LAW OR PUBLIC POLICY, SUCH WAIVER SHALL BE EFFECTIVE ONLY TO THE EXTENT, BUT TO THE FULLEST EXTENT, PERMITTED BY LAW OR PUBLIC POLICY. [Document continues with signature page] 11 EACH GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT THIS AGREEMENT IS EFFECTIVE UPON SUCH GUARANTOR'S EXECUTION AND DELIVERY OF THIS AGREEMENT TO THE ADMINISTRATIVE AGENT ON BEHALF OF ALL OF THE GUARANTEED PARTIES (AND THE SATISFACTION OF ALL OF THE CONDITIONS SET FORTH IN SECTION 5.1 OF THE CREDIT AGREEMENT). NO FORMAL ACCEPTANCE BY THE GUARANTEED PARTIES IS NECESSARY TO MAKE THIS AGREEMENT EFFECTIVE. IN WITNESS WHEREOF, each Guarantor has executed this Agreement as of the date first written above. Granite Construction Company, a California corporation By: /s/ WILLIAM E. BARTON -------------------------------- William E. Barton Chief Financial Officer Granite Land Company, a California corporation By: /s/ WILLIAM E. BARTON -------------------------------- William E. Barton Chief Financial Officer G.G. & R., Inc., a Utah corporation By: /s/ WILLIAM E. BARTON -------------------------------- William E. Barton Chief Financial Officer Intermountain Slurry Seal, Inc., a Wyoming corporation By: /s/ MICHAEL L. THOMAS -------------------------------- Michael L. Thomas Chief Executive Officer 12 Pozzolan Products company (P.P.C.), a Utah corporation By: /s/ MICHAEL L. THOMAS -------------------------------- Michael L. Thomas Chief Executive Officer GILC, L.P., a California limited partnership By: GILC Incorporated Its General Partner a California corporation By: /s/ WILLIAM E. BARTON -------------------------------- William E. Barton Chief Executive Officer 13 NOTICE INFORMATION FOR ALL GUARANTORS c/o Granite Construction Incorporated P. O. Box 50085 Watsonville, CA 95077 Attention: William Barton, Vice President/Chief Financial Officer Telephone: (831) 761-4704 Facsimile: (831) 722-9657 Email: bbarton@gcinc.com Website: http:/www.graniteconstruction.com WITH A COPY TO: Granite Construction Incorporated 585 West Beach Street Watsonville, CA 95076 Attention: Roxane Allbritton, Treasurer Telephone: (831) 761-4772 Facsimile: (831) 761-1701 Email: rallbritton@granite-net.com EX-10.3 7 f74922ex10-3.txt EXHIBIT 10.3 1 EXHIBIT 10.3 EXECUTION COPY ================================================================================ GRANITE CONSTRUCTION INCORPORATED $75,000,000 6.96% Senior Notes due May 1, 2013 ------------------------------------ NOTE PURCHASE AGREEMENT ------------------------------------ Dated as of May 1, 2001 ================================================================================ THE INFORMATION SET FORTH ON SCHEDULES 5.15, 5.16 AND 5.18 TO THIS NOTE PURCHASE AGREEMENT IS "CONFIDENTIAL INFORMATION" SUBJECT TO THE REQUIREMENTS OF SECTION 20 HEREOF. 2 TABLE OF CONTENTS
SECTION HEADING PAGE SECTION 1. AUTHORIZATION OF NOTES.................................................1 SECTION 2. SALE AND PURCHASE OF NOTES; GUARANTY...................................1 Section 2.1. Sale and Purchase of Notes.............................................1 Section 2.2. Guaranty of Notes......................................................1 SECTION 3. CLOSING................................................................2 SECTION 4. CONDITIONS TO CLOSING..................................................2 Section 4.1. Representations and Warranties.........................................2 Section 4.2. Performance; No Default................................................2 Section 4.3. Compliance Certificates................................................2 Section 4.4. Guaranty Agreement.....................................................3 Section 4.5. Opinions of Counsel....................................................3 Section 4.6. Purchase Permitted by Applicable Law, Etc..............................3 Section 4.7. Payment of Special Counsel Fees........................................3 Section 4.8. Private Placement Number...............................................4 Section 4.9. Changes in Corporate Structure.........................................4 Section 4.10. Proceedings and Documents..............................................4 SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................4 Section 5.1. Organization; Power and Authority......................................4 Section 5.2. Authorization, Etc.....................................................4 Section 5.3. Disclosure.............................................................4 Section 5.4. Organization and Ownership of Shares of Subsidiaries; Affiliates.......5 Section 5.5. Financial Statements...................................................5 Section 5.6. Compliance with Laws, Other Instruments, Etc...........................5 Section 5.7. Governmental Authorizations, Etc.......................................6 Section 5.8. Litigation; Observance of Agreements, Statutes and Orders..............6 Section 5.9. Taxes..................................................................6 Section 5.10. Title to Property; Leases..............................................6 Section 5.11. Licenses, Permits, Etc.................................................7 Section 5.12. Compliance with ERISA..................................................7 Section 5.13. Private Offering by the Company........................................8 Section 5.14. Use of Proceeds; Margin Regulations....................................8 Section 5.15. Existing Debt..........................................................8 Section 5.16. Existing Investments...................................................8 Section 5.17. Status under Certain Statutes..........................................8 Section 5.18. Environmental Matters..................................................8 Section 5.19. Foreign Assets Control Regulations, Etc................................9
-i- 3 SECTION 6. REPRESENTATIONS OF THE PURCHASERS......................................9 Section 6.1. Purchase for Investment................................................9 Section 6.2. Source of Funds........................................................9 SECTION 7. INFORMATION AS TO COMPANY.............................................11 Section 7.1. Financial and Business Information....................................11 Section 7.2. Officer's Certificate.................................................13 Section 7.3. Inspection............................................................14 SECTION 8. PREPAYMENT OF THE NOTES...............................................14 Section 8.1. Required Prepayments..................................................14 Section 8.2. Optional Prepayments with Make-Whole Amount...........................14 Section 8.3. Allocation of Partial Prepayments.....................................15 Section 8.4. Maturity; Surrender, Etc..............................................15 Section 8.5. Purchase of Notes.....................................................15 Section 8.6. Make-Whole Amount.....................................................15 SECTION 9. AFFIRMATIVE COVENANTS.................................................17 Section 9.1. Compliance with Law...................................................17 Section 9.2. Insurance.............................................................17 Section 9.3. Maintenance of Properties.............................................17 Section 9.4. Payment of Taxes and Claims...........................................17 Section 9.5. Corporate Existence, Etc..............................................17 Section 9.6. Guaranty Agreement....................................................18 SECTION 10. NEGATIVE COVENANTS....................................................19 Section 10.1. Nature of Business....................................................19 Section 10.2. Consolidated Net Worth................................................19 Section 10.3. Incurrence of Debt....................................................19 Section 10.4. Subsidiary Debt.......................................................19 Section 10.5. Liens.................................................................20 Section 10.6. Restrictions on Dividends of Subsidiaries, Etc........................22 Section 10.7. Mergers, Consolidations, Etc..........................................22 Section 10.8. Sale of Assets, Etc...................................................23 Section 10.9. Disposal of Ownership of a Subsidiary.................................24 Section 10.10. Sale-and-Leasebacks...................................................24 Section 10.11. Transactions with Affiliates..........................................24 SECTION 11. EVENTS OF DEFAULT.....................................................24 SECTION 12. REMEDIES ON DEFAULT, ETC..............................................26 Section 12.1. Acceleration..........................................................26 Section 12.2. Other Remedies........................................................27
-ii- 4 Section 12.3. Rescission............................................................27 Section 12.4. No Waivers or Election of Remedies, Expenses, Etc.....................27 SECTION 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.........................28 Section 13.1. Registration of Notes.................................................28 Section 13.2. Transfer and Exchange of Notes........................................28 Section 13.3. Replacement of Notes..................................................28 SECTION 14. PAYMENTS ON NOTES.....................................................29 Section 14.1. Place of Payment......................................................29 Section 14.2. Home Office Payment...................................................29 SECTION 15. EXPENSES, ETC.........................................................29 Section 15.1. Transaction Expenses..................................................29 Section 15.2. Survival..............................................................30 SECTION 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT..........30 SECTION 17. AMENDMENT AND WAIVER..................................................30 Section 17.1. Requirements..........................................................30 Section 17.2. Solicitation of Holders of Notes......................................30 Section 17.3. Binding Effect, Etc...................................................31 Section 17.4. Notes Held by Company, Etc............................................31 SECTION 18. NOTICES...............................................................31 SECTION 19. REPRODUCTION OF DOCUMENTS.............................................32 SECTION 20. CONFIDENTIAL INFORMATION..............................................32 SECTION 21. SUBSTITUTION OF A PURCHASER...........................................33 SECTION 22. MISCELLANEOUS.........................................................33 Section 22.1. Successors and Assigns................................................33 Section 22.2. Payments Due on Non-Business Days.....................................33 Section 22.3. Severability..........................................................33 Section 22.4. Construction..........................................................34 Section 22.5. Counterparts..........................................................34 Section 22.6. Governing Law.........................................................34
-iii- 5 ATTACHMENTS TO THE NOTE PURCHASE AGREEMENT: SCHEDULE A -- Information Relating to Purchasers SCHEDULE B -- Defined Terms SCHEDULE 4.9 -- Changes in Corporate Structure SCHEDULE 5.3 -- Disclosure Materials SCHEDULE 5.4 -- Subsidiaries of the Company and Ownership of Subsidiary Stock SCHEDULE 5.5 -- Financial Statements SCHEDULE 5.8 -- Certain Litigation SCHEDULE 5.11 -- Patents, Etc. SCHEDULE 5.14 -- Use of Proceeds SCHEDULE 5.15 -- Existing Debt SCHEDULE 5.16 -- Existing Investments SCHEDULE 5.18 -- Environmental Matters EXHIBIT 1 -- Form of 6.96% Senior Note due May 1, 2013 EXHIBIT 2 -- Form of Guaranty Agreement EXHIBIT 3 -- Investment Policy Guidelines EXHIBIT 4.5(a) -- Form of Opinion of General Counsel for the Company and the Guarantors EXHIBIT 4.5(b) -- Form of Opinion of Special Counsel for the Company and the Guarantors EXHIBIT 4.5(c) -- Form of Opinion of Special Counsel for the Purchasers -iv- 6 GRANITE CONSTRUCTION INCORPORATED 585 WEST BEACH STREET WATSONVILLE, CALIFORNIA 95076 6.96% Senior Notes due May 1, 2013 Dated as of May 1, 2001 TO THE PURCHASERS LISTED IN THE ATTACHED SCHEDULE A: Ladies and Gentlemen: GRANITE CONSTRUCTION INCORPORATED, a Delaware corporation (the "Company"), agrees with the Purchasers listed in the attached Schedule A as follows: SECTION 1. AUTHORIZATION OF NOTES. The Company will authorize the issue and sale of $75,000,000 aggregate principal amount of its 6.96% Senior Notes due May 1, 2013 (the "Notes," such term to include any such notes issued in substitution therefor pursuant to Section 13 of this Agreement (as hereinafter defined)). The Notes shall be substantially in the form set out in Exhibit 1, with such changes therefrom, if any, as may be approved by each Purchaser and the Company. Certain capitalized terms used in this Agreement are defined in Schedule B; references to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule or an Exhibit attached to this Agreement. SECTION 2. SALE AND PURCHASE OF NOTES; GUARANTY. Section 2.1. Sale and Purchase of Notes. Subject to the terms and conditions of this Agreement, the Company will issue and sell to each Purchaser and each Purchaser will purchase from the Company, at the Closing provided for in Section 3, Notes in the principal amount specified opposite such Purchaser's name in Schedule A at the purchase price of 100% of the principal amount thereof. The obligations of each Purchaser hereunder are several and not joint obligations and each Purchaser shall have no obligation and no liability to any Person for the performance or nonperformance by any other Purchaser hereunder. Section 2.2. Guaranty of Notes. The payment by the Company of all amounts due with respect to the Notes and the performance by the Company of its obligations under this Agreement are fully and unconditionally guaranteed by Granite Construction Company, a California corporation, Wilcott Corporation, a Colorado corporation, Granite Land Company, a California corporation, Granite SR 91 Corporation, a California corporation, Intermountain Slurry Seal, Inc., a Wyoming corporation, Pozzolan Products Company, a Utah corporation, 7 GILC Incorporated, a California corporation, Granite SR 91, L.P., a California limited partnership, GILC, L.P., a California limited partnership, G.G.&R., Inc., a Utah corporation, and GTC, Inc., a Texas corporation, and each other from time to time Material Subsidiary (collectively, the "Guarantors") pursuant to that certain Subsidiary Guaranty Agreement dated as of May 1, 2001 (the "Guaranty Agreement") from the initial Guarantors to each Purchaser and each other from time to time holder of Notes substantially in the form attached hereto as Exhibit 2. SECTION 3. CLOSING. The sale and purchase of the Notes to be purchased by each Purchaser shall occur at the offices of Schiff Hardin & Waite, 6600 Sears Tower, Chicago, Illinois 60606, at 10:00 A.M. Chicago time, at a closing on May 14, 2001 (the "Closing"). At the Closing, the Company will deliver to each Purchaser the Notes to be purchased by such Purchaser in the form of a single Note (or such greater number of Notes in denominations of at least $1,000,000 as such Purchaser may request) dated the date of the Closing and registered in such Purchaser's name (or in the name of such Purchaser's nominee), against delivery by such Purchaser to the Company or its order of immediately available funds in the amount of the purchase price therefor by wire transfer of immediately available funds for the account of the Company to account number 12334-16946 at Bank of America National Trust and Savings Association Bank, NAD Corporate Service Center #1233, ABA No. 121000358. If at the Closing the Company shall fail to tender such Notes to any Purchaser as provided above in this Section 3, or any of the conditions specified in Section 4 shall not have been fulfilled to any Purchaser's satisfaction, such Purchaser shall, at such Purchaser's election, be relieved of all further obligations under this Agreement, without thereby waiving any rights such Purchaser may have by reason of such failure or such nonfulfillment. SECTION 4. CONDITIONS TO CLOSING. The obligation of each Purchaser to purchase and pay for the Notes to be sold to such Purchaser at the Closing is subject to the fulfillment to such Purchaser's satisfaction, prior to or at the Closing, of the following conditions: Section 4.1. Representations and Warranties. (a) The representations and warranties of the Company in this Agreement shall be correct when made and at the time of the Closing. (b) The representations and warranties of each Guarantor in the Guaranty Agreement shall be correct when made and at the time of the Closing. Section 4.2. Performance; No Default. The Company shall have performed and complied with all agreements and conditions contained in this Agreement required to be performed or complied with by it prior to or at the Closing, and after giving effect to the issue and sale of the Notes (and the application of the proceeds thereof as contemplated by Schedule 5.14), no Default or Event of Default shall exist. -2- 8 Section 4.3. Compliance Certificates. (a) Officer's Certificate. (1) The Company shall have delivered to such Purchaser an Officer's Certificate, dated the date of the Closing, certifying that the conditions specified in Sections 4.1(a), 4.2 and 4.9 have been fulfilled. (2) Each Guarantor shall have delivered to such Purchaser a certificate of an authorized officer, dated the date of the Closing, certifying that the condition specified in Section 4.1(b) has been fulfilled. (b) Secretary's Certificate. (1) The Company shall have delivered to such Purchaser a certificate certifying as to the resolutions attached thereto and other corporate proceedings relating to the authorization, execution and delivery of the Notes and this Agreement. (2) Each Guarantor shall have delivered to such Purchaser a certificate certifying as to the resolutions attached thereto and the other corporate or partnership proceedings relating to the authorization, execution and delivery of the Guaranty Agreement. (c) ERISA Certificate. If such Purchaser shall have made the disclosures referred to in Section 6.2(b), (c) or (e), such Purchaser shall have received the certificate from the Company described in the penultimate paragraph of Section 6.2 and such certificate shall state that (1) the Company is neither a "party in interest" nor a "disqualified person" (as defined in Section 4975(e)(2) of the Code), with respect to any plan identified pursuant to Section 6.2(b) or (e) or (2) with respect to any plan, identified pursuant to Section 6.2(c), neither the Company nor any "affiliate" (as defined in Section V(c) of the QPAM Exemption) has, at such time or during the immediately preceding one year, exercised the authority to appoint or terminate the QPAM as manager of the assets of any plan identified in writing pursuant to Section 6.2(c) or to negotiate the terms of said QPAM's management agreement on behalf of any such identified plans. Section 4.4. Guaranty Agreement. The Guaranty Agreement shall have been duly authorized, executed and delivered by each Guarantor and shall be in full force and effect. Section 4.5. Opinions of Counsel. Such Purchaser shall have received opinions in form and substance satisfactory to such Purchaser, dated the date of the Closing (a) from Michael Futch, Esq., General Counsel for the Company and the Guarantors, covering the matters set forth in Exhibit 4.5(a) and covering such other matters incident to the transactions contemplated hereby as such Purchaser or such Purchaser's counsel may reasonably request, (b) from Gray Cary Ware & Freidenrich, special counsel for the Company and the Guarantors, covering the matters set forth in Exhibit 4.5(b) and covering such other matters incident to the transactions contemplated hereby as such Purchaser or such Purchaser's counsel may reasonably request (and the Company hereby instructs its counsel to deliver such opinion to such Purchaser) and (c) from Schiff Hardin & Waite, such Purchaser's special counsel in connection with such transactions, -3- 9 substantially in the form set forth in Exhibit 4.5(c) and covering such other matters incident to such transactions as such Purchaser may reasonably request. Section 4.6. Purchase Permitted by Applicable Law, Etc. On the date of the Closing, such Purchaser's purchase of Notes shall (a) be permitted by the laws and regulations of each jurisdiction to which such Purchaser is subject, without recourse to provisions (such as Section 1405(a)(8) of the New York Insurance Law) permitting limited investments by insurance companies without restriction as to the character of the particular investment, (b) not violate any applicable law or regulation (including, without limitation, Regulation T, U or X of the Board of Governors of the Federal Reserve System) and (c) not subject such Purchaser to any tax, penalty or liability under or pursuant to any applicable law or regulation. If requested by such Purchaser, such Purchaser shall have received an Officer's Certificate certifying as to such matters of fact as such Purchaser may reasonably specify to enable such Purchaser to determine whether such purchase is so permitted. Section 4.7. Payment of Special Counsel Fees. Without limiting the provisions of Section 15.1, the Company shall have paid on or before the Closing the fees, charges and disbursements of Schiff Hardin & Waite, the Purchasers' special counsel referred to in Section 4.5 and the only counsel retained by the Purchasers in connection with the preparation, negotiation, execution and delivery of this Agreement, to the extent reflected in a statement of such counsel rendered to the Company at least one Business Day prior to the Closing. Section 4.8. Private Placement Number. A Private Placement Number issued by Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities Valuation Office of the National Association of Insurance Commissioners) shall have been obtained for the Notes. Section 4.9. Changes in Corporate Structure. Except as specified in Schedule 4.9, the Company shall not have changed its jurisdiction of incorporation or been a party to any merger or consolidation and shall not have succeeded to all or any substantial part of the liabilities of any other entity, at any time following the date of the most recent financial statements referred to in Schedule 5.5. Section 4.10. Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated by this Agreement and all documents and instruments incident to such transactions shall be satisfactory to such Purchaser and such Purchaser's special counsel, and such Purchaser and such Purchaser's special counsel shall have received all such counterpart originals or certified or other copies of such documents as such Purchaser or such Purchaser's special counsel may reasonably request. SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to each Purchaser that: Section 5.1. Organization; Power and Authority. The Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of -4- 10 incorporation, and is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has the corporate power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts and proposes to transact, to execute and deliver this Agreement and the Notes and to perform the provisions hereof and thereof. Section 5.2. Authorization, Etc. This Agreement and the Notes have been duly authorized by all necessary corporate action on the part of the Company, and this Agreement constitutes, and upon execution and delivery thereof each Note will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). Section 5.3. Disclosure. The Company, through its agent, Banc of America Securities LLC, has delivered to each Purchaser a copy of a Private Placement Memorandum, dated April 2001 (the "Memorandum"), relating to the transactions contemplated hereby. The Memorandum fairly describes, in all material respects, the general nature of the business and principal properties of the Company and its Subsidiaries. This Agreement, the Memorandum, the documents, certificates or other writings identified in Schedule 5.3 and the financial statements listed in Schedule 5.5, taken as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made. Except as disclosed in the Memorandum or as expressly described in Schedule 5.3, or in one of the documents, certificates or other writings identified therein, or in the financial statements listed in Schedule 5.5, since December 31, 2000, there has been no adverse Material change in the financial condition, operations, business, properties or prospects of the Company or any of its Subsidiaries, taken as a whole. Section 5.4. Organization and Ownership of Shares of Subsidiaries; Affiliates. (a) Schedule 5.4 contains (except as noted therein) complete and correct lists (1) of the Company's Subsidiaries, showing, as to each Subsidiary, the correct name thereof, the jurisdiction of its organization, and the percentage of shares of each class of its capital stock or similar equity interests outstanding owned by the Company and each other Subsidiary, (2) of the Company's Affiliates, other than Subsidiaries and (3) of the Company's directors and senior officers. (b) All of the outstanding shares of capital stock or similar equity interests of each Subsidiary shown in Schedule 5.4 as being owned by the Company and its Subsidiaries have been validly issued, are fully paid and nonassessable and are owned by the Company or another Subsidiary free and clear of any Lien (except as otherwise disclosed in Schedule 5.4). -5- 11 (c) Each Subsidiary identified in Schedule 5.4 is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation or other legal entity and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each such Subsidiary has the corporate or other power and authority to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact. (d) No Subsidiary is a party to, or otherwise subject to, any legal restriction or any agreement or instrument (other than this Agreement, the agreements listed on Schedule 5.4 and customary limitations imposed by corporate law statutes) restricting the ability of such Subsidiary to pay dividends out of profits or make any other similar distributions of profits to the Company or any of its Subsidiaries that own outstanding shares of capital stock or similar equity interests of such Subsidiary. Section 5.5. Financial Statements. The Company has delivered to each Purchaser copies of the consolidated financial statements of the Company listed on Schedule 5.5. All of said financial statements (including in each case the related schedules and notes) fairly present in all material respects the consolidated financial position of the Company and its Subsidiaries as of the respective dates specified in such financial statements and the consolidated results of their operations and cash flows for the respective periods so specified and have been prepared in accordance with GAAP consistently applied throughout the periods involved except as set forth in the notes thereto (subject, in the case of any interim financial statements, to normal year-end adjustments). Section 5.6. Compliance with Laws, Other Instruments, Etc. The execution, delivery and performance by the Company of this Agreement and the Notes will not (a) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of the Company or any Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate charter or by-laws, or any other agreement or instrument to which the Company or any Subsidiary is bound or by which the Company or any Subsidiary or any of their respective properties may be bound or affected, (b) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to the Company or any Subsidiary or (c) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to the Company or any Subsidiary. Section 5.7. Governmental Authorizations, Etc. No consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in connection with the execution, delivery or performance by the Company of this Agreement or the Notes. Section 5.8. Litigation; Observance of Agreements, Statutes and Orders. (a) Except as disclosed in Schedule 5.8, there are no actions, suits or proceedings pending or, to the -6- 12 knowledge of the Company, threatened against or affecting the Company or any Subsidiary or any property of the Company or any Subsidiary in any court or before any arbitrator of any kind or before or by any Governmental Authority that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. (b) Neither the Company nor any Subsidiary is in default under any term of any agreement or instrument to which it is a party or by which it is bound, or any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in violation of any applicable law, ordinance, rule or regulation (including, without limitation, Environmental Laws) of any Governmental Authority, which default or violation, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. Section 5.9. Taxes. The Company and its Subsidiaries have filed all income tax returns that are required to have been filed in any jurisdiction, and have paid all taxes shown to be due and payable on such returns and all other taxes and assessments payable by them, to the extent such taxes and assessments have become due and payable and before they have become delinquent, except for any taxes and assessments (a) the amount of which is not individually or in the aggregate Material or (b) the amount, applicability or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which the Company or a Subsidiary, as the case may be, has established adequate reserves in accordance with GAAP. The Company knows of no basis for any other tax or assessment that could reasonably be expected to have a Material Adverse Effect. The charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of Federal, state or other taxes for all fiscal periods are adequate. The Federal income tax liabilities of the Company and its Subsidiaries have been determined by the Internal Revenue Service up to and including the fiscal year ended December 31, 1991 and the Federal income tax liabilities of the Company and its Subsidiaries have been paid for all fiscal years up to and including the fiscal year ended December 31, 1999. Section 5.10. Title to Property; Leases. The Company and its Subsidiaries have good and sufficient title to their respective properties that individually or in the aggregate are Material, including all such properties reflected in the most recent audited balance sheet referred to in Section 5.5 or purported to have been acquired by the Company or any Subsidiary after said date (except as sold or otherwise disposed of in the ordinary course of business), in each case free and clear of Liens prohibited by this Agreement. All leases that individually or in the aggregate are Material are valid and subsisting and are in full force and effect in all material respects. Section 5.11. Licenses, Permits, Etc. Except as disclosed in Schedule 5.11, (a) the Company and its Subsidiaries own or possess all Material licenses, permits, franchises, authorizations, patents, copyrights, service marks, trademarks and trade names, or rights thereto; (b) to the best knowledge of the Company, no product of the Company or any Subsidiary infringes in any material respect any license, permit, franchise, authorization, patent, copyright, service mark, trademark, trade name or other right with respect thereto owned by any other Person; and -7- 13 (c) to the best knowledge of the Company, there is no Material violation by any Person of any right of the Company or any of its Subsidiaries with respect to any patent, copyright, service mark, trademark, trade name or other right with respect thereto owned or used by the Company or any of its Subsidiaries. Section 5.12. Compliance with ERISA. (a) The Company and each ERISA Affiliate have operated and administered each Plan in compliance with all applicable laws in all material respects. Neither the Company nor any ERISA Affiliate has incurred any Material liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans (as defined in Section 3 of ERISA), and no event, transaction or condition has occurred or exists that could reasonably be expected to result in the incurrence of any such Material liability by the Company or any ERISA Affiliate, or in the imposition of any Material Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions or to Section 401(a)(29) or 412 of the Code. (b) The present value of the aggregate benefit liabilities under each of the Plans (other than Multiemployer Plans), determined as of the end of such Plan's most recently ended plan year on the basis of the actuarial assumptions specified for funding purposes in such Plan's most recent actuarial valuation report, did not exceed the aggregate current value of the assets of such Plan allocable to such benefit liabilities by more than $5,000,000 in the aggregate for all Plans. The term "benefit liabilities" has the meaning specified in Section 4001 of ERISA and the terms "current value" and "present value" have the meanings specified in Section 3 of ERISA. (c) The Company and its ERISA Affiliates have not incurred Material withdrawal liabilities (and are not subject to Material contingent withdrawal liabilities) under Section 4201 or 4204 of ERISA in respect of Multiemployer Plans. (d) The expected postretirement benefit obligation (determined as of the last day of the Company's most recently ended fiscal year in accordance with Financial Accounting Standards Board Statement No. 106, without regard to liabilities attributable to continuation coverage mandated by Section 4980B of the Code) of the Company and its Subsidiaries is not Material. (e) The execution and delivery of this Agreement and the issuance and sale of the Notes hereunder will not involve any transaction that is subject to the prohibitions of Section 406 of ERISA or in connection with which a tax could be imposed pursuant to Section 4975(c)(1)(A)-(D) of the Code. The representation by the Company in the first sentence of this Section 5.12(e) is made in reliance upon and subject to the accuracy of each Purchaser's representation in Section 6.2 as to the source of the funds to be used to pay the purchase price of the Notes to be purchased by such Purchaser. Section 5.13. Private Offering by the Company. Neither the Company nor anyone acting on its behalf has offered the Notes or the Guaranty Agreement or any similar Securities for sale to, or solicited any offer to buy any of the same from, or otherwise approached or negotiated in respect thereof with, any Person other than the Purchasers and not more than five other -8- 14 Institutional Investors, each of which has been offered the Notes and the Guaranty Agreement at a private sale for investment pursuant to an exemption from the registration requirements under the Securities Act. Neither the Company nor anyone acting on its behalf has taken, or will take, any action that would subject the issuance or sale of the Notes or the delivery of the Guaranty Agreement to the registration requirements of Section 5 of the Securities Act. Section 5.14. Use of Proceeds; Margin Regulations. The Company will apply the proceeds of the sale of the Notes as set forth in Schedule 5.14. No part of the proceeds from the sale of the Notes hereunder will be used, directly or indirectly, for the purpose of buying or carrying any margin stock within the meaning of Regulation U of the Board of Governors of the Federal Reserve System (12 CFR 221), or for the purpose of buying or carrying or trading in any Securities under such circumstances as to involve the Company in a violation of Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a violation of Regulation T of said Board (12 CFR 220). The Company does not own any margin stock and the Company does not have any present intention to acquire any margin stock; provided, however, that, pursuant to the Bank Credit Agreement, the Company may acquire margin stock in an amount not to exceed 25% of the value of the consolidated assets of the Company and its Subsidiaries. As used in this Section, the terms "margin stock" and "purpose of buying or carrying" shall have the meanings assigned to them in said Regulation U. Section 5.15. Existing Debt. Except as described therein, Schedule 5.15 sets forth a complete and correct list of all outstanding Debt of the Company and its Subsidiaries as of May 1, 2001, since which date there has been no Material change in the amounts, interest rates, sinking funds, installment payments or maturities of the Debt of the Company or its Subsidiaries. Neither the Company nor any Subsidiary is in default and no waiver of default is currently in effect, in the payment of any principal or interest on any Debt of the Company or such Subsidiary and no event or condition exists with respect to any Debt of the Company or any Subsidiary that would permit (or that with notice or the lapse of time, or both, would permit) one or more Persons to cause such Debt to become due and payable before its stated maturity or before its regularly scheduled dates of payment. Section 5.16. Existing Investments. Schedule 5.16 sets forth a complete and correct list of all outstanding Investments of the Company and its Subsidiaries as of March 31, 2001, since which date there has been no Material change in the amounts of such Investments. Section 5.17. Status under Certain Statutes. Neither the Company nor any Subsidiary is an "investment company" registered or required to be registered under the Investment Company Act of 1940, as amended, or is subject to regulation under the Public Utility Holding Company Act of 1935, as amended, the ICC Termination Act of 1995, as amended, or the Federal Power Act, as amended. Section 5.18. Environmental Matters. Neither the Company nor any Subsidiary has knowledge of any Material claim or has received any notice of any Material claim, and no proceeding has been instituted raising any Material claim against the Company or any of its Subsidiaries or any of their respective real properties now or formerly owned, leased or operated -9- 15 by any of them or other assets, alleging any damage to the environment or violation of any Environmental Laws. Except as otherwise disclosed in Schedule 5.18: (a) neither the Company nor any Subsidiary has knowledge of any facts which would give rise to any Material claim, public or private, or Material violation of Environmental Laws or damage to the environment emanating from, occurring on or in any way related to real properties now or formerly owned, leased or operated by any of them or to other assets or their use; (b) neither the Company nor any of its Subsidiaries (1) has stored any Hazardous Materials on real properties now or formerly owned, leased or operated by any of them or (2) has disposed of any Hazardous Materials in a manner contrary to any Environmental Laws; in each case in any manner that could reasonably be expected to result in a Material Adverse Effect; and (c) all buildings on all real properties now owned, leased or operated by the Company or any of its Subsidiaries are in material compliance with applicable Environmental Laws. Section 5.19. Foreign Assets Control Regulations, Etc. Neither the sale of the Notes by the Company hereunder nor its use of the proceeds thereof will violate the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto. SECTION 6. REPRESENTATIONS OF THE PURCHASERS. Section 6.1. Purchase for Investment. Each Purchaser represents that it is purchasing the Notes for its own account or for one or more separate accounts maintained by it or for the account of one or more pension or trust funds and not with a view to the distribution thereof, provided that the disposition of such Purchaser's or such pension or trust funds' property shall at all times be within such Purchaser's or such pension or trust funds' control. Each Purchaser understands that the Notes have not been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, except under circumstances where neither such registration nor such an exemption is required by law, and that the Company is not required to register the Notes. Section 6.2. Source of Funds. Each Purchaser represents that at least one of the following statements is an accurate representation as to each source of funds (a "Source") to be used by it to pay the purchase price of the Notes to be purchased by it hereunder: (a) the Source is an "insurance company general account" within the meaning of Department of Labor Prohibited Transaction Exemption ("PTE") 95-60 (issued July 12, 1995) and, as of the date of the Closing or as of the date of transfer, as applicable, there is no employee benefit plan, treating as a single plan, all plans maintained by -10- 16 the same employer or employee organization or affiliate thereof, with respect to which the amount of the general account reserves and liabilities for all contracts held by or on behalf of such plan, exceeds 10% of the total reserves and liabilities of such general account (exclusive of separate account liabilities) plus surplus, as set forth in the NAIC Annual Statement filed with such Purchaser's state of domicile; or (b) the Source is either (1) an insurance company pooled separate account, within the meaning of PTE 90-1 (issued January 29, 1990), or (2) a bank collective investment fund, within the meaning of the PTE 91-38 (issued July 12, 1991) and, as of the date of the Closing or as of the date of transfer, as applicable, except as such Purchaser has disclosed to the Company in writing pursuant to this paragraph (b), no employee benefit plan or group of plans maintained by the same employer or employee organization or affiliate thereof beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; or (c) the Source constitutes assets of an "investment fund" (within the meaning of Part V of the QPAM Exemption) managed by a "qualified professional asset manager" or "QPAM" (within the meaning of Part V of the QPAM Exemption), no employee benefit plan's assets that are included in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, exceed 20% of the total client assets managed by such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a Person controlling or controlled by the QPAM (applying the definition of "control" in Section V(e) of the QPAM Exemption) owns a 5% or more interest in the Company and (1) the identity of such QPAM and (2) the names of all employee benefit plans whose assets are included in such investment fund have been disclosed to the Company in writing pursuant to this paragraph (c); or (d) the Source is a governmental plan; or (e) the Source is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee benefit plans, each of which has been identified to the Company in writing pursuant to this paragraph (e); or (f) the Source does not include assets of any employee benefit plan, other than a plan exempt from the coverage of ERISA. If any Purchaser or any subsequent transferee of the Notes indicates that such Purchaser or such transferee is relying on any representation contained in paragraph (b), (c) or (e) above, the Company shall deliver on the date of the Closing or on the date of transfer, as applicable, a certificate, which shall state whether (i) it is a party in interest or a "disqualified person" (as defined in Section 4975(e)(2) of the Internal Revenue Code of 1986, as amended), with respect to any plan identified pursuant to paragraphs (b) or (e) above, or (ii) with respect to any plan, identified pursuant to paragraph (c) above, whether it or any "affiliate" (as defined in -11- 17 Section V(c) of the QPAM Exemption) has at such time, and during the immediately preceding one year, exercised the authority to appoint or terminate the QPAM as manager of any plan identified in writing pursuant to paragraph (c) above or to negotiate the terms of said QPAM's management agreement on behalf of any such identified plan. As used in this Section 6.2, the terms "employee benefit plan," "governmental plan," "party in interest" and "separate account" shall have the respective meanings assigned to such terms in Section 3 of ERISA. SECTION 7. INFORMATION AS TO COMPANY. Section 7.1. Financial and Business Information. The Company shall deliver to each holder of Notes that is an Institutional Investor: (a) Quarterly Statements -- within 60 days after the end of each quarterly fiscal period in each fiscal year of the Company (other than the last quarterly fiscal period of each such fiscal year), duplicate copies of, (1) a consolidated balance sheet of the Company and its Subsidiaries as at the end of such quarter, and (2) consolidated statements of income, stockholders' equity and cash flows of the Company and its Subsidiaries, for such quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter, setting forth in each case in comparative form the figures for the corresponding periods in the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP applicable to quarterly financial statements generally, and certified by a Senior Financial Officer as fairly presenting, in all material respects, the financial position of the companies being reported on and their results of operations and cash flows, subject to changes resulting from year-end adjustments, provided that delivery within the time period specified above of copies of the Company's Quarterly Report on Form 10-Q prepared in compliance with the requirements therefor and filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this Section 7.1(a); (b) Annual Statements -- within 105 days after the end of each fiscal year of the Company, duplicate copies of, (1) a consolidated balance sheet of the Company and its Subsidiaries, as at the end of such year, and (2) consolidated statements of income, stockholders' equity and cash flows of the Company and its Subsidiaries, for such year, -12- 18 setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP, and accompanied by (i) an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall state that such financial statements present fairly, in all material respects, the financial position of the companies being reported upon and their results of operations and cash flows and have been prepared in conformity with GAAP, and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and that such audit provides a reasonable basis for such opinion in the circumstances, provided that the delivery within the time period specified above of the Company's Annual Report on Form 10-K for such fiscal year (together with the Company's annual report to shareholders, if any, prepared pursuant to Rule 14a-3 under the Exchange Act) prepared in accordance with the requirements therefor and filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this Section 7.1(b), and (ii) a certificate of such accountants stating that they have reviewed this Agreement and stating further whether, in making their audit, they have become aware of any condition or event that then constitutes a Default or an Event of Default, and, if they are aware that any such condition or event then exists, specifying the nature and period of the existence thereof (it being understood that such accountants shall not be liable, directly or indirectly, for any failure to obtain knowledge of any Default or Event of Default unless such accountants should have obtained knowledge thereof in making an audit in accordance with generally accepted auditing standards or did not make such an audit); (c) SEC and Other Reports -- promptly upon their becoming available, one copy of (1) each financial statement, report, notice or proxy statement sent by the Company or any Subsidiary to public Securities holders generally, (2) each regular or periodic report, each registration statement that shall have become effective (without exhibits except as expressly requested by such holder), and each final prospectus and all amendments thereto filed by the Company or any Subsidiary with the Securities and Exchange Commission and (3) all press releases and other statements made available generally by the Company or any Subsidiary to the public concerning developments that are Material; (d) Notice of Default or Event of Default -- promptly, and in any event within five Business Days after a Responsible Officer becoming aware of the existence of any Default or Event of Default, a written notice specifying the nature and period of existence thereof and what action the Company is taking or proposes to take with respect thereto; (e) ERISA Matters -- promptly, and in any event within five Business Days after a Responsible Officer becoming aware of any of the following, a written notice -13- 19 setting forth the nature thereof and the action, if any, that the Company or an ERISA Affiliate proposes to take with respect thereto: (1) with respect to any Plan, any reportable event, as defined in Section 4043(b) of ERISA and the regulations thereunder, for which notice thereof has not been waived pursuant to such regulations as in effect on the date hereof; or (2) the taking by the PBGC of steps to institute, or the threatening by the PBGC of the institution of, proceedings under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by the Company or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by the PBGC with respect to such Multiemployer Plan; or (3) any event, transaction or condition that could result in the incurrence of any liability by the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or such penalty or excise tax provisions, if such liability or Lien, taken together with any other such liabilities or Liens then existing, would exceed $5,000,000 in the aggregate; (f) Notices from Governmental Authority -- promptly, and in any event within 30 days of receipt thereof, copies of any notice to the Company or any Subsidiary from any Federal or state Governmental Authority relating to any order, ruling, statute or other law or regulation that could reasonably be expected to have a Material Adverse Effect; (g) Rule 144A -- except at such times as the Company is a reporting company under Section 13 or 15(d) of the Exchange Act or has complied with the requirements for the exemption from registration under the Exchange Act set forth in Rule 12g3-2(b) under the Exchange Act, such financial or other information as any holder of Notes or any Person designated by such holder may reasonably determine is required to permit such holder to comply with the requirements of Rule 144A promulgated under the Exchange Act in connection with the resale by it of the Notes, in any such case promptly after the same is requested; and (h) Requested Information -- with reasonable promptness, such other data and information relating to the business, operations, affairs, financial condition, assets or properties of the Company or any of its Subsidiaries or relating to the ability of the Company to perform its obligations hereunder and under the Notes as from time to time may be reasonably requested by any such holder of Notes. -14- 20 Section 7.2. Officer's Certificate. Each set of financial statements delivered to a holder of Notes pursuant to Section 7.1(a) or Section 7.1(b) hereof shall be accompanied by a certificate of a Senior Financial Officer setting forth: (a) Covenant Compliance -- the information (including detailed calculations) required in order to establish whether the Company was in compliance with the requirements of Section 10.2 through Section 10.5 hereof, inclusive, Section 10.8 and Section 10.10 during the quarterly or annual period covered by the statements then being furnished (including with respect to each such Section, where applicable, the calculations of the maximum or minimum amount, ratio or percentage, as the case may be, permissible under the terms of such Sections, and the calculation of the amount, ratio or percentage then in existence); and (b) Event of Default -- a statement that such officer has reviewed the relevant terms hereof and has made, or caused to be made, under his or her supervision, a review of the transactions and conditions of the Company and its Subsidiaries from the beginning of the quarterly or annual period covered by the statements then being furnished to the date of the certificate and that such review shall not have disclosed the existence during such period of any condition or event that constitutes a Default or an Event of Default or, if any such condition or event existed or exists (including, without limitation, any such event or condition resulting from the failure of the Company or any Subsidiary to comply with any Environmental Law), specifying the nature and period of existence thereof and what action the Company shall have taken or proposes to take with respect thereto. Section 7.3. Inspection. The Company shall permit the representatives of each holder of Notes that is an Institutional Investor: (a) No Default -- if no Default or Event of Default then exists, at the expense of such holder and upon reasonable prior notice to the Company, to visit the principal executive office of the Company, to discuss the affairs, finances and accounts of the Company and its Subsidiaries with the Company's officers, and, with the consent of the Company (which consent will not be unreasonably withheld) to visit the other offices and properties of the Company and each Subsidiary, all at such reasonable times and as often as may be reasonably requested in writing; and (b) Default -- if a Default or Event of Default then exists, at the expense of the Company, to visit and inspect any of the offices or properties of the Company or any Subsidiary, to examine all their respective books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss their respective affairs, finances and accounts with their respective officers and independent public accountants (and by this provision the Company authorizes said accountants to discuss the affairs, finances and accounts of the Company and its Subsidiaries), all at such times and as often as may be requested. -15- 21 SECTION 8. PREPAYMENT OF THE NOTES. Section 8.1. Required Prepayments. On May 1, 2005 and on each May 1 thereafter to and including May 1, 2012 the Company will prepay $8,333,333 principal amount (or such lesser principal amount as shall then be outstanding) of the Notes at par and without payment of the Make-Whole Amount or any premium, provided that upon any partial prepayment of the Notes pursuant to Section 8.2 or purchase of the Notes permitted by Section 8.5 the principal amount of each required prepayment of the Notes becoming due under this Section 8.1 on and after the date of such prepayment or purchase shall be reduced in the same proportion as the aggregate unpaid principal amount of the Notes is reduced as a result of such prepayment or purchase. Section 8.2. Optional Prepayments with Make-Whole Amount. The Company may, at its option, upon notice as provided below, prepay at any time all, or from time to time any part of, the Notes, in an amount not less than $1,000,000 in the case of a partial prepayment, at 100% of the principal amount so prepaid, together with interest accrued thereon to the date of such prepayment, plus the Make-Whole Amount determined for the prepayment date with respect to such principal amount. The Company will give each holder of Notes written notice of each optional prepayment under this Section 8.2 not less than 30 days and not more than 60 days prior to the date fixed for such prepayment. Each such notice shall specify such date, the aggregate principal amount of the Notes to be prepaid on such date, the principal amount of each Note held by such holder to be prepaid (determined in accordance with Section 8.3), and the interest to be paid on the prepayment date with respect to such principal amount being prepaid, and shall be accompanied by a certificate of a Senior Financial Officer as to the estimated Make-Whole Amount due in connection with such prepayment (calculated as if the date of such notice were the date of the prepayment), setting forth the details of such computation. Five Business Days prior to such prepayment, the Company shall deliver to each holder of Notes a certificate of a Senior Financial Officer (the "Make-Whole Amount Calculation Certificate") specifying the method of computation and the calculation of such Make-Whole Amount in respect of such holder's Notes as of the specified prepayment date. The method of computation of the Make-Whole Amount in respect of the Notes set forth in the Make-Whole Amount Calculation Certificate shall be subject to the review and approval of the holders of the Notes and, in the case of any disagreement between the Required Holders and the Company with respect to such method of computation, the conclusion of the Required Holders shall, in the absence of manifest error, be deemed binding and conclusive. The calculation of the Make-Whole Amount in respect of the Note or Notes set forth in a Make-Whole Amount Calculation Certificate shall also be subject to the review and approval of the holder of such Note or Notes and, in the case of any disagreement between such holder and the Company with respect to such calculation, the conclusion of such holder shall, in the absence of manifest error, be deemed binding and conclusive. It is understood and agreed that the failure of any holder to respond to the Make-Whole Amount Calculation Certificate in respect of its Notes by the date fixed for prepayment shall be deemed to be a concurrence by such holder to the method of computation and the calculation of the Make-Whole Amount in respect of such Notes. Section 8.3. Allocation of Partial Prepayments. In the case of each partial prepayment of the Notes, the principal amount of the Notes to be prepaid shall be allocated -16- 22 among all of the Notes at the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts thereof not theretofore called for prepayment. Section 8.4. Maturity; Surrender, Etc. In the case of each prepayment of Notes pursuant to this Section 8, the principal amount of each Note to be prepaid shall mature and become due and payable on the date fixed for such prepayment, together with interest on such principal amount accrued to such date and the applicable Make-Whole Amount, if any. From and after such date, unless the Company shall fail to pay such principal amount when so due and payable, together with the interest and Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall cease to accrue. Any Note paid or prepaid in full shall be surrendered to the Company and cancelled and shall not be reissued, and no Note shall be issued in lieu of any prepaid principal amount of any Note. Section 8.5. Purchase of Notes. The Company will not, and will not permit any Affiliate to, purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of the outstanding Notes except (a) upon the payment or prepayment of the Notes in accordance with the terms of this Agreement and the Notes or (b) pursuant to an offer to purchase made by the Company or an Affiliate pro rata to the holders of all Notes at the time outstanding upon the same terms and conditions. Any such offer shall provide each holder with sufficient information to enable it to make an informed decision with respect to such offer, and shall remain open for at least 30 Business Days. If the holders of more than 10% of the principal amount of the Notes then outstanding accept such offer, the Company shall promptly notify the remaining holders of such fact and the expiration date for the acceptance by holders of Notes of such offer shall be extended by the number of days necessary to give each such remaining holder at least 30 Business Days from its receipt of such notice to accept such offer. The Company will promptly cancel all Notes acquired by it or any Affiliate pursuant to any payment, prepayment or purchase of Notes pursuant to any provision of this Agreement and no Notes may be issued in substitution or exchange for any such Notes. Section 8.6. Make-Whole Amount. The term "Make-Whole Amount" means, with respect to any Note, an amount equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments with respect to the Called Principal of such Note over the amount of such Called Principal, provided that the Make-Whole Amount may in no event be less than zero. For the purposes of determining the Make-Whole Amount, the following terms have the following meanings: "Called Principal" shall mean, with respect to any Note, the principal of such Note that is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires. "Discounted Value" shall mean, with respect to the Called Principal of any Note, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on the Notes is payable) equal to the Reinvestment Yield with respect to such Called Principal. -17- 23 "Reinvestment Yield" shall mean, with respect to the Called Principal of any Note, .50% over the yield to maturity implied by (a) the yields reported, as of 10:00 a.m. (New York City time) on the fifth Business Day preceding the Settlement Date with respect to such Called Principal, on the applicable "PX" page of the Bloomberg Financial Market Service's Screen (or such other page as may replace the applicable PX page of the Bloomberg Financial Market Service's Screen) for actively traded U.S. Treasury Securities having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date, or (b) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable, the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the fifth Business Day preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. Treasury Securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date. Such implied yield in clauses (a) and (b) above will be determined, if necessary, by (1) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (2) interpolating linearly between (i) the actively traded U.S. Treasury Security with the maturity closest to and greater than the Remaining Average Life and (ii) the actively traded U.S. Treasury Security with the maturity closest to and less than the Remaining Average Life. "Remaining Average Life" shall mean, with respect to any Called Principal, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (a) such Called Principal into (b) the sum of the products obtained by multiplying (1) the principal component of each Remaining Scheduled Payment with respect to such Called Principal by (2) the number of years (calculated to the nearest one-twelfth year) that will elapse between the Settlement Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment. "Remaining Scheduled Payments" shall mean, with respect to the Called Principal of any Note, all payments of such Called Principal and interest thereon that would be due after the Settlement Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date, provided that if such Settlement Date is not a date on which interest payments are due to be made under the terms of the Notes, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Settlement Date and required to be paid on such Settlement Date pursuant to Section 8.2 or 12.1. "Settlement Date" shall mean, with respect to the Called Principal of any Note, the date on which such Called Principal is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires. -18- 24 SECTION 9. AFFIRMATIVE COVENANTS. The Company covenants that so long as any of the Notes are outstanding: Section 9.1. Compliance with Law. The Company will, and will cause each of its Subsidiaries to, comply with all laws, ordinances or governmental rules or regulations to which each of them is subject, including, without limitation, Environmental Laws, and will obtain and maintain in effect all licenses, certificates, permits, franchises and other governmental authorizations necessary to the ownership of their respective properties or to the conduct of their respective businesses, in each case to the extent necessary to ensure that non-compliance with such laws, ordinances or governmental rules or regulations or failures to obtain or maintain in effect such licenses, certificates, permits, franchises and other governmental authorizations could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. Section 9.2. Insurance. The Company will, and will cause each of its Subsidiaries to, maintain, with financially sound and reputable insurers, insurance with respect to their respective properties and businesses against such casualties and contingencies, of such types, on such terms and in such amounts (including deductibles, co-insurance and self-insurance, if adequate reserves are maintained with respect thereto) as is customary in the case of entities of established reputations engaged in the same or a similar business and similarly situated. Section 9.3. Maintenance of Properties. The Company will, and will cause each of its Subsidiaries to, maintain and keep, or cause to be maintained and kept, their respective properties in good repair, working order and condition (other than ordinary wear and tear), so that the business carried on in connection therewith may be properly conducted at all times, provided that this Section shall not prevent the Company or any Subsidiary from discontinuing the operation and the maintenance of any of its properties if such discontinuance is desirable in the conduct of its business and the Company has concluded that such discontinuance could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. Section 9.4. Payment of Taxes and Claims. The Company will, and will cause each of its Subsidiaries to, file all tax returns required to be filed in any jurisdiction and to pay and discharge all taxes shown to be due and payable on such returns and all other taxes, assessments, governmental charges, or levies imposed on them or any of their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent and all claims for which sums have become due and payable that have or might become a Lien on properties or assets of the Company or any Subsidiary, provided that neither the Company nor any Subsidiary need pay any such tax or assessment or claims if (a) the amount, applicability or validity thereof is contested by the Company or such Subsidiary on a timely basis in good faith and in appropriate proceedings, and the Company or a Subsidiary has established adequate reserves therefor in accordance with GAAP on the books of the Company or such Subsidiary or (b) the nonpayment of any such taxes or assessments could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. Section 9.5. Corporate Existence, Etc. The Company will at all times preserve and keep in full force and effect its corporate existence. Subject to Sections 10.7, 10.8 and 10.9, the -19- 25 Company will at all times preserve and keep in full force and effect the corporate existence of each of its Subsidiaries (unless merged into the Company or a Wholly-Owned Subsidiary) and all rights and franchises of the Company and its Subsidiaries unless, in the good faith judgment of the Company, the termination of or failure to preserve and keep in full force and effect such corporate existence, right or franchise would not, individually or in the aggregate, have a Material Adverse Effect. Section 9.6. Guaranty Agreement. (a) (1) The Company shall promptly, and in any event within three Business Days after (i) a Subsidiary becomes a Material Subsidiary, (ii) the formation or acquisition of a new Subsidiary that is a Material Subsidiary or (iii) the occurrence of any other event creating a new Subsidiary that is a Material Subsidiary, cause such Material Subsidiary to execute and deliver a supplement to the Guaranty Agreement in the form of Exhibit A to the Guaranty Agreement. (2) Within ten Business Days of any Material Subsidiary being required to execute and deliver a supplement to the Guaranty Agreement pursuant to Section 9.6(a)(1), the Company shall cause such Material Subsidiary to deliver to each holder of Notes (i) such documents and evidence with respect to such Material Subsidiary as any holder may reasonably request in order to establish the existence and good standing of such Material Subsidiary and evidence that the Board of Directors of such Material Subsidiary has adopted resolutions authorizing the execution and delivery of a supplement to the Guaranty Agreement, (ii) evidence of compliance with such Material Subsidiary's outstanding debt instruments in the form of (A) a compliance certificate from such Material Subsidiary to the effect that such Material Subsidiary has complied with all terms and conditions of its outstanding debt instruments, (B) consents or approvals of the holder or holders of any evidence of Debt or Security, and/or (C) amendments of agreements pursuant to which any evidence of Debt or Security may have been issued, all as may be reasonably deemed necessary by the holders of Notes to permit the execution and delivery of a supplement to the Guaranty Agreement by such Material Subsidiary, (iii) an opinion of counsel to the effect that (A) such Material Subsidiary is a corporation or other business entity, duly organized, validly existing and in good standing, if applicable, under the laws of its jurisdiction of organization, has the power and the authority to execute and deliver a supplement to the Guaranty Agreement and to perform the Guaranty Agreement, (B) the execution and delivery of a supplement to the Guaranty Agreement and performance of the Guaranty Agreement has been duly authorized by all necessary action on the part of such Material Subsidiary, a supplement to the Guaranty Agreement has been duly executed and delivered by such Material Subsidiary and the Guaranty Agreement constitutes the legal, valid and binding contract of such Material Subsidiary enforceable against such Material Subsidiary in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance or similar laws affecting creditors' rights generally, and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law), (C) the execution and delivery of a supplement to the Guaranty Agreement and the performance by such Material Subsidiary of the Guaranty Agreement do not conflict with or result in any breach of any of the provisions of or constitute a default under or result in the creation of a Lien upon any of the property of such Material Subsidiary pursuant to the provisions of its charter documents or any agreement or other instrument known to such counsel to which such Material Subsidiary is a party to or by which such Material Subsidiary may be bound and (D) no approval, consent or withholding of objection on the part of, or filing, registration or qualification with, any governmental body, Federal or -20- 26 state, is necessary in connection with the lawful execution and delivery of a supplement to the Guaranty Agreement by such Material Subsidiary or the performance of the Guaranty Agreement by such Material Subsidiary, which opinion may contain such assumptions and qualifications as are reasonably acceptable to the Required Holders, and (iv) all other documents and showings reasonably requested by the holders of Notes in connection with the execution and delivery of a supplement to the Guaranty Agreement, which documents shall be satisfactory in form and substance to such holders and their special counsel, and each holder of Notes shall have received a copy (executed or certified as may be appropriate) of all of the foregoing legal documents. (b) If at any time, pursuant to the terms and conditions of the Bank Credit Agreement, any Guarantor is released from its liability under the Bank Guaranty and (1) such Guarantor is not a co-obligor under the Bank Credit Agreement, (2) such Guarantor does not qualify as a Material Subsidiary under clause (a) or (b) of the definition thereof and (3) the Company shall have delivered to each holder of Notes an Officer's Certificate certifying that (i) the conditions specified in clauses (1) and (2) above have been satisfied and (ii) immediately preceding the release of such Guarantor from the Guaranty Agreement and after giving effect thereto, no Default or Event of Default shall have existed or would exist, then, upon receipt by the holders of Notes of such Officer's Certificate, such Guarantor shall be discharged from its obligations under the Guaranty Agreement. SECTION 10. NEGATIVE COVENANTS. The Company covenants that so long as any of the Notes are outstanding: Section 10.1. Nature of Business. The Company will not, and will not permit any Subsidiary to, engage in any business if, as a result thereof, the general nature of the business, taken on a consolidated basis, which would then be engaged in by the Company and its Subsidiaries would be substantially changed from the general nature of the business engaged in by the Company and its Subsidiaries on the date of the Closing. Section 10.2. Consolidated Net Worth. The Company will not, at any time, permit Consolidated Net Worth to be less than the sum of (a) $275,000,000, plus (b) an aggregate amount equal to 50% of its Consolidated Net Income (but, in each case, only if a positive number) for each completed fiscal quarter beginning with the fiscal quarter ended December 31, 2000. Section 10.3. Incurrence of Debt. The Company will not, and will not permit any Subsidiary to, directly or indirectly, create, incur, assume, guarantee, or otherwise become directly or indirectly liable with respect to, any Debt, unless on the date the Company or such Subsidiary becomes liable with respect to any such Debt and immediately after giving effect thereto and the concurrent retirement of any other Debt, (a) no Default or Event of Default exists, and -21- 27 (b) Consolidated Total Debt does not exceed 55% of Consolidated Total Capitalization. For the purposes of this Section 10.3, any Person becoming a Subsidiary after the date of the Closing shall be deemed, at the time it becomes a Subsidiary, to have incurred all of its then outstanding Debt, and any Person extending, renewing or refunding any Debt shall be deemed to have incurred such Debt at the time of such extension, renewal or refunding. Section 10.4. Subsidiary Debt. The Company will not at any time permit any Subsidiary to, directly or indirectly, create, incur, assume, guarantee, have outstanding, or otherwise become or remain directly or indirectly liable with respect to, any Debt other than: (a) Debt of a Subsidiary (1) outstanding on the date of the Closing and disclosed in Schedule 5.15, provided that such Debt may not be extended, renewed or refunded except as otherwise permitted by this Agreement and (2) outstanding pursuant to the Guaranty Agreement; (b) Debt of a Subsidiary owed to the Company or a Wholly-Owned Subsidiary; (c) Debt of a Subsidiary outstanding at the time such Subsidiary becomes a Subsidiary, provided that (1) such Debt shall not have been incurred in contemplation of such Subsidiary becoming a Subsidiary and (2) immediately after such Subsidiary becomes a Subsidiary no Default or Event of Default would exist, and provided, further, that such Debt may not be extended, renewed or refunded except as otherwise permitted by this Agreement; and (d) Debt of a Subsidiary in addition to that otherwise permitted by the foregoing provisions of this Section 10.4, provided that on the date the Subsidiary incurs or otherwise becomes liable with respect to any such additional Debt and immediately after giving effect thereto and the concurrent retirement of any other Debt, (1) no Default or Event of Default exists, and (2) Priority Debt does not exceed 20% of Consolidated Net Worth determined at such time. Section 10.5. Liens. The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly create, incur, assume or permit to exist (upon the happening of a contingency or otherwise) any Lien on or with respect to any property or asset (including, without limitation, any document or instrument in respect of goods or accounts receivable) of the Company or any such Subsidiary, whether now owned or held or hereafter acquired, or any income or profits therefrom, or assign or otherwise convey any right to receive income or profits, except: -22- 28 (a) Liens for taxes, assessments or other governmental charges which are not yet due and payable or the payment of which is not at the time required by Section 9.4; (b) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other similar Liens, in each case, incurred in the ordinary course of business for sums not yet due and payable; (c) Liens (other than any Lien imposed by ERISA) incurred or deposits made in the ordinary course of business (1) in connection with workers' compensation, unemployment insurance and other types of social security or retirement benefits, or (2) to secure (or to obtain letters of credit that secure) the performance of tenders, statutory obligations, surety bonds, appeal bonds, bids, leases (other than Capital Leases), performance bonds, purchase, construction or sales contracts and other similar obligations, in each case not incurred or made in connection with the borrowing of money, the obtaining of advances or credit or the payment of the deferred purchase price of property; (d) any attachment or judgment Lien, unless the judgment it secures shall not, within 60 days after the entry thereof, have been discharged or execution thereof stayed expiration of any such stay; (e) leases or subleases granted to others, easements, rights-of-way, restrictions and other similar charges or encumbrances, in each case incidental to, and not interfering with, the ordinary conduct of the business of the Company or any of its Subsidiaries, provided that such Liens do not, in the aggregate, materially detract from the value of such property; (f) Liens on property or assets of the Company or any of its Subsidiaries securing Debt owing to the Company or to a Wholly-Owned Subsidiary; (g) Liens existing on the date of the Closing and securing the Debt of the Company and its Subsidiaries referred to on Schedule 5.15; (h) any Lien created to secure all or any part of the purchase price, or to secure Debt incurred or assumed to pay all or any part of the purchase price or cost of construction, of property acquired or constructed by the Company or a Subsidiary after the date of the Closing, provided that (1) any such Lien shall extend solely to the item or items of such property so acquired or constructed, (2) the principal amount of the Debt secured by any such Lien shall at no time exceed an amount equal to the lesser of (i) the cost to the Company or such Subsidiary of the property so acquired or constructed and (ii) the Fair Market Value -23- 29 Value (as determined in good faith by the Board of Directors of the Company) of such property at the time of such acquisition or construction, (3) any such Lien shall be created contemporaneously with, or within 180 days after, the acquisition or construction of such property, and (4) immediately after giving effect the creation of such Lien and giving effect thereto, (i) no Default or Event of Default would exist and (ii) the Company would be permitted by the provisions of Section 10.3(b) to incur at least $1.00 of additional Debt; (i) any Lien existing on property of a Person immediately prior to its being consolidated with or merged into the Company or a Subsidiary, or any Lien existing on any property acquired by the Company or any Subsidiary at the time such property is so acquired (whether or not the Debt secured thereby shall have been assumed), provided that (1) no such Lien shall have been created or assumed in contemplation of such consolidation or merger or such acquisition of property, (2) each such Lien shall extend solely to the item or items of property so acquired and (3) immediately after giving effect to the acquisition of the property subject to such Lien and giving effect thereto, (i) no Default or Event of Default would exist and (ii) the Company would be permitted by the provisions of Section 10.3(b) to incur at least $1.00 of additional Debt; (j) any Lien renewing, extending or refunding any Lien permitted by paragraphs (g), (h) or (i) of this Section 10.5, provided that (1) the principal amount of Debt secured by such Lien immediately prior to such extension, renewal or refunding is not increased or the maturity thereof reduced, (2) such Lien is not extended to any other property and (3) immediately after such extension, renewal or refunding no Default or Event of Default would exist; and (k) other Liens not otherwise permitted by paragraphs (a) through (i), provided that, after giving effect thereto and to the application of the proceeds of any Debt secured thereby, Priority Debt does not exceed 20% of Consolidated Net Worth determined at such time. For the purposes of this Section 10.5, any Person becoming a Subsidiary after the date of the Closing shall be deemed to have incurred all of its then outstanding Liens at the time it becomes a Subsidiary, and any Person extending, renewing or refunding any Debt secured by any Lien shall be deemed to have incurred such Lien at the time of such extension, renewal or refunding. Section 10.6. Restrictions on Dividends of Subsidiaries, Etc. The Company will not, and will not permit any of its Subsidiaries to, enter into any agreement which would restrict any Subsidiary's ability or right to pay dividends to, or make advances to or Investments in, the Company or, if such Subsidiary is not directly owned by the Company, the "parent" Subsidiary of such Subsidiary. -24- 30 Section 10.7. Mergers, Consolidations, Etc. The Company will not, and will not permit any Subsidiary to, consolidate with or merge with any other corporation or convey, transfer or lease substantially all of its assets in a single transaction or series of transactions to any Person; provided that the foregoing restriction does not apply to: (a) the consolidation or merger of a Subsidiary with, or the conveyance, transfer or lease of substantially all of the assets of a Subsidiary to, the Company or a Wholly-Owned Subsidiary; or (b) the consolidation or merger of a Subsidiary with any Person other than the Company or a Wholly-Owned Subsidiary; provided that such Subsidiary shall be the surviving Person and immediately after giving effect to such transaction (1) no Default or Event of the Default would exist, (2) the Company would be permitted by the provisions of Section 10.3(b) to incur at least $1.00 of additional Debt, (3) such Subsidiary would be permitted by the provisions of Section 10.4(d)(2) to incur at least $1.00 of additional Priority Debt and (4) the Company shall own the same percentage of the equity or voting interests in such Subsidiary as the Company owned in such Subsidiary immediately preceding such transaction; or (c) the conveyance, transfer or lease of all of the assets of a Subsidiary to a Person other than the Company or a Wholly-Owned Subsidiary in compliance with the provisions of Section 10.8 and Section 10.9; or (d) the consolidation or merger of the Company with, or the conveyance, transfer or lease of substantially all of the assets of the Company in a single transaction or series of transactions to, any Person so long as: (1) the successor formed by such consolidation or the survivor of such merger or the Person that acquires by conveyance, transfer or lease substantially all of the assets of the Company as an entirety, as the case may be (the "Successor Corporation"), shall be a solvent corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia; (2) if the Company is not the Successor Corporation, (i) such corporation shall have executed and delivered to each holder of the Notes its assumption of the due and punctual performance and observance of each covenant and condition of this Agreement and the Notes (pursuant to such agreements and instruments as shall be reasonably satisfactory to the Required Holders), (ii) the Company shall have caused to be delivered to each holder of the Notes an opinion of nationally recognized independent counsel, or other independent counsel reasonably satisfactory to the Required Holders, to the effect that all agreements or instruments effecting such assumption are enforceable in accordance with their terms and comply with the terms hereof and (iii) each Guarantor shall have delivered to each holder of the Notes a certificate whereby such Guarantor shall have reaffirmed its obligations under the Guaranty Agreement; and -25- 31 (3) immediately after giving effect to such transaction (i) no Default or Event of Default would exist and (ii) the Successor Corporation would be permitted by the provisions of Section 10.3(b) to incur at least $1.00 of additional Debt. No such conveyance, transfer or lease of substantially all of the assets of the Company shall have the effect of releasing the Company or any Successor Corporation from its liability under this Agreement or the Notes. Section 10.8. Sale of Assets, Etc. Except as permitted under Section 10.7, Section 10.9 and Section 10.10, the Company will not, and will not permit any Subsidiary to, make any Asset Disposition unless: (a) in the good faith opinion of the Company, the Asset Disposition is in exchange for consideration having a Fair Market Value at least equal to that of the property exchanged and is in the best interest of the Company or such Subsidiary; (b) immediately after giving effect to the Asset Disposition, no Default or Event of Default would exist; and (c) immediately after giving effect to the Asset Disposition, the Disposition Value of all property that was the subject of any Asset Disposition occurring during the immediately preceding 12 consecutive calendar month period would not exceed 15% of Consolidated Total Assets determined as of the end of the then most recently ended fiscal year of the Company. If the Net Proceeds Amount for any Transfer is applied to a Debt Prepayment Application or a Property Reinvestment Application within 180 days after such Transfer, then such Transfer, only for the purpose of determining compliance with subsection (c) of this Section 10.8 as of any date on or after the Net Proceeds Amount is so applied, shall be deemed not to be an Asset Disposition. Section 10.9. Disposal of Ownership of a Subsidiary. The Company will not, and will not permit any Subsidiary to, sell or otherwise dispose of any shares of Subsidiary Stock, nor will the Company permit any such Subsidiary to issue, sell or otherwise dispose of any shares of its own Subsidiary Stock, provided that the foregoing restrictions do not apply to: (a) the issue of directors' qualifying shares by any such Subsidiary; (b) any such Transfer of Subsidiary Stock constituting a Transfer described in clause (a) of the definition of "Asset Disposition"; and (c) the Transfer of all of the Subsidiary Stock of a Subsidiary owned by the Company and its other Subsidiaries if: -26- 32 (1) such Transfer satisfies the requirements of Section 10.8 hereof, (2) in connection with such Transfer the entire Investment (whether represented by stock, Debt, claims or otherwise) of the Company and its other Subsidiaries in such Subsidiary is sold, transferred or otherwise disposed of to a Person other than (i) the Company, (ii) another Subsidiary not being simultaneously disposed of or (iii) an Affiliate, and (3) the Subsidiary being disposed of has no continuing Investment in any other Subsidiary of the Company not being simultaneously disposed of or in the Company. Section 10.10. Sale-and-Leasebacks. The Company will not, and will not permit any Subsidiary to, enter into any Sale-and-Leaseback Transaction unless, (a) the lease which is the subject of such Sale-and-Leaseback Transaction is not a Long-Term Lease or (b) immediately after giving effect to such Sale-and-Leaseback Transaction, the aggregate amount of Priority Debt does not exceed 20% of Consolidated Net Worth determined at such time. Section 10.11. Transactions with Affiliates. The Company will not, and will not permit any Subsidiary to, enter into directly or indirectly any Material transaction or Material group of related transactions (including, without limitation, the purchase, lease, sale or exchange of properties of any kind or the rendering of any service) with any Affiliate (other than the Company or another Subsidiary), except upon fair and reasonable terms no less favorable to the Company or such Subsidiary than would be obtainable in a comparable arm's-length transaction with a Person not an Affiliate. SECTION 11. EVENTS OF DEFAULT. An "Event of Default" shall exist if any of the following conditions or events shall occur and be continuing: (a) the Company defaults in the payment of any principal or Make-Whole Amount, if any, on any Note when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise; or (b) the Company defaults in the payment of any interest on any Note for more than five Business Days after the same becomes due and payable; or (c) the Company defaults in the performance of or compliance with any term contained in Sections 10.1 through 10.4, inclusive, or Sections 10.6 through 10.9, inclusive; or (d) the Company defaults in the performance of or compliance with any term contained herein (other than those referred to in paragraphs (a), (b) and (c) of this Section 11) and such default is not remedied within 30 days after the earlier of (1) a -27- 33 Responsible Officer obtaining actual knowledge of such default and (2) the Company receiving written notice of such default from any holder of a Note (any such written notice to be identified as a "notice of default" and to refer specifically to this paragraph (d) of Section 11); or (e) any representation or warranty made in writing by or on behalf of the Company or any Guarantor or by any officer of the Company or any Guarantor in this Agreement or in the Guaranty Agreement, respectively, or in any writing furnished in connection with the transactions contemplated hereby or thereby proves to have been false or incorrect in any material respect on the date as of which made; or (f) (1) the Company or any Subsidiary is in default (as principal or as guarantor or other surety) in the payment of any principal of or premium or make-whole amount or interest on any Debt that is outstanding in an aggregate principal amount of at least $10,000,000 beyond any period of grace provided with respect thereto, or (2) the Company or any Subsidiary is in default in the performance of or compliance with any term of any evidence of any Debt in an aggregate outstanding principal amount of at least $10,000,000 or of any mortgage, indenture or other agreement relating thereto or any other condition exists, and as a consequence of such default or condition such Debt has become, or has been declared due and payable before its stated maturity or before its regularly scheduled dates of payment or (3) as a consequence of the occurrence or continuation of any event or condition (other than the passage of time or the right of the holder of Debt to convert such Debt into equity interests), (i) the Company or any Subsidiary has become obligated to purchase or repay Debt before its regular maturity or before its regularly scheduled dates of payment in an aggregate outstanding principal amount of at least $10,000,000 or (ii) one or more Persons have the right to require the Company or any Subsidiary so to purchase or repay such Debt; or (g) the Company or any Subsidiary (1) is generally not paying, or admits in writing its inability to pay, its debts as they become due, (2) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (3) makes an assignment for the benefit of its creditors, (4) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, (5) is adjudicated as insolvent or to be liquidated or (6) takes corporate action for the purpose of any of the foregoing; or (h) a court or governmental authority of competent jurisdiction enters an order appointing, without consent by the Company or any of its Subsidiaries, a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, or constituting an order for relief or approving a petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of the Company or any of its Subsidiaries, or -28- 34 any such petition shall be filed against the Company or any of its Subsidiaries and such petition shall not be dismissed within 60 days; or (i) a final judgment or judgments for the payment of money aggregating in excess of $5,000,000 are rendered against one or more of the Company and its Subsidiaries and which judgments are not fully covered by insurance or, within 60 days after entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within 60 days after the expiration of such stay; or (j) If (1) any Plan shall fail to satisfy the minimum funding standards of ERISA or the Code for any plan year or part thereof or a waiver of such standards or extension of any amortization period is sought or granted under Section 412 of the Code, (2) a notice of intent to terminate any Plan shall have been or is reasonably expected to be filed with the PBGC or the PBGC shall have instituted proceedings under ERISA Section 4042 to terminate or appoint a trustee to administer any Plan or the PBGC shall have notified the Company or any ERISA Affiliate that a Plan may become a subject of any such proceedings, (3) the aggregate "amount of unfunded benefit liabilities" (within the meaning of Section 4001(a)(18) of ERISA) under all Plans, determined in accordance with Title IV of ERISA, shall exceed $5,000,000, (4) the Company or any ERISA Affiliate shall have incurred or is reasonably expected to incur any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, (5) the Company or any ERISA Affiliate withdraws from any Multiemployer Plan or (6) the Company or any ERISA Affiliate establishes or amends any employee welfare benefit plan that provides post-employment welfare benefits in a manner that would increase the liability of the Company or any ERISA Affiliate thereunder; and any such event or events described in clauses (1) through (6) above, either individually or together with any other such event or events, would reasonably be expected to have a Material Adverse Effect; or (k) (1) default shall occur under the Guaranty Agreement and such default shall continue beyond the period of grace, if any, allowed with respect thereto or (2) the Guaranty Agreement shall cease to be in full force and effect for any reason whatsoever, including, without limitation, a determination by any Governmental Authority or court that such agreement is invalid, void or unenforceable or any Guarantor shall contest or deny in writing the validity or enforceability of any of its obligations under the Guaranty Agreement. As used in Section 11(j), the terms "employee benefit plan" and "employee welfare benefit plan" shall have the respective meanings assigned to such terms in Section 3 of ERISA. SECTION 12. REMEDIES ON DEFAULT, ETC. Section 12.1. Acceleration. (a) If an Event of Default with respect to the Company described in paragraph (g) or (h) of Section 11 (other than an Event of Default described in clause (1) of paragraph (g) or described in clause (6) of paragraph (g) by virtue of the fact that -29- 35 such clause encompasses clause (1) of paragraph (g)) exists, all the Notes then outstanding shall automatically become immediately due and payable. (b) If any other Event of Default exists, any holder or holders of more than 25% in principal amount of the Notes at the time outstanding may at any time at its or their option, by notice or notices to the Company, declare all the Notes then outstanding to be immediately due and payable. (c) If any Event of Default described in paragraph (a) or (b) of Section 11 exists, any holder or holders of Notes at the time outstanding affected by such Event of Default may at any time, at its or their option, by notice or notices to the Company, declare all the Notes held by it or them to be immediately due and payable. Upon any Note's becoming due and payable under this Section 12.1, whether automatically or by declaration, such Note will forthwith mature and the entire unpaid principal amount of such Note, plus (1) all accrued and unpaid interest thereon and (2) the Make-Whole Amount determined in respect of such principal amount (to the full extent permitted by applicable law), shall all be immediately due and payable, in each and every case without presentment, demand, protest or further notice, all of which are hereby waived. The Company acknowledges, and the parties hereto agree, that each holder of a Note has the right to maintain its investment in the Notes free from repayment by the Company (except as herein specifically provided for) and that the provision for payment of a Make-Whole Amount by the Company in the event that the Notes are prepaid or are accelerated as a result of an Event of Default, is intended to provide compensation for the deprivation of such right under such circumstances. Section 12.2. Other Remedies. If any Event of Default exists, and irrespective of whether any Notes have become or have been declared immediately due and payable under Section 12.1, the holder of any Note at the time outstanding may proceed to protect and enforce the rights of such holder by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein or in any Note, or for an injunction against a violation of any of the terms hereof or thereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise. Section 12.3. Rescission. At any time after any Notes have been declared due and payable pursuant to clause (b) or (c) of Section 12.1, the holders of not less than 76% in principal amount of the Notes then outstanding, by written notice to the Company, may rescind and annul any such declaration and its consequences if (a) the Company has paid all overdue interest on the Notes, all principal of and Make-Whole Amount, if any, on any Notes that are due and payable and are unpaid other than by reason of such declaration, and all interest on such overdue principal and Make-Whole Amount, if any, and (to the extent permitted by applicable law) any overdue interest in respect of the Notes, at the Default Rate, (b) all Events of Default and Defaults, other than non-payment of amounts that have become due solely by reason of such declaration, have been cured or have been waived pursuant to Section 17 and (c) no judgment or decree has been entered for the payment of any monies due pursuant hereto or to the Notes. No rescission and annulment under this Section 12.3 will extend to or affect any subsequent Event of Default or Default or impair any right consequent thereon. -30- 36 Section 12.4. No Waivers or Election of Remedies, Expenses, Etc. No course of dealing and no delay on the part of any holder of any Note in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice such holder's rights, powers or remedies. No right, power or remedy conferred by this Agreement or by any Note upon any holder thereof shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. Without limiting the obligations of the Company under Section 15, the Company will pay to the holder of each Note on demand such further amount as shall be sufficient to cover all costs and expenses of such holder incurred in any enforcement or collection under this Section 12, including, without limitation, reasonable attorneys' fees, expenses and disbursements. SECTION 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES. Section 13.1. Registration of Notes. The Company shall keep at its principal executive office a register for the registration and registration of transfers of Notes. The name and address of each holder of one or more Notes, each transfer thereof and the name and address of each transferee of one or more Notes shall be registered in such register. Prior to due presentment for registration of transfer, the Person in whose name any Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes hereof, and the Company shall not be affected by any notice or knowledge to the contrary. The Company shall give to any holder of a Note that is an Institutional Investor promptly upon request therefor, a complete and correct copy of the names and addresses of all registered holders of Notes. Section 13.2. Transfer and Exchange of Notes. Upon surrender of any Note at the principal executive office of the Company for registration of transfer or exchange (and in the case of a surrender for registration of transfer, duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of such Note or its attorney duly authorized in writing and accompanied by the address for notices of each transferee of such Note or part thereof), the Company shall execute and deliver, at the Company's expense (except as provided below), one or more new Notes (as requested by the holder thereof) in exchange therefor, in an aggregate principal amount equal to the unpaid principal amount of the surrendered Note. Each such new Note shall be payable to such Person as such holder may request and shall be substantially in the form of Exhibit 1. Each such new Note shall be dated and bear interest from the date to which interest shall have been paid on the surrendered Note or dated the date of the surrendered Note if no interest shall have been paid thereon. The Company may require payment of a sum sufficient to cover any stamp tax or governmental charge imposed in respect of any such transfer of Notes. Notes shall not be transferred in denominations of less than $1,000,000, provided that if necessary to enable the registration of transfer by a holder of its entire holding of Notes, one Note may be in a denomination of less than $1,000,000. Any transferee, by its acceptance of a Note registered in its name (or the name of its nominee), shall be deemed to have made the representation set forth in Section 6.2, provided, however, that, such transferee will not be deemed to have chosen the options set forth in Section 6.2(b), (c) or (e) unless such transferee shall have made the disclosures referred to therein at least five Business Days prior to its acceptance of such Note and shall have received prior to such acceptance of such Note the certificate provided for in the penultimate paragraph of Section 6.2 and such certificate shall contain the statement set forth in either Section 4.3(c)(1) or (2), as applicable; and provided, -31- 37 further, that, such transferee will not be deemed to have chosen an option set forth in Section 6.2(a), (b) or (d) unless the applicable Class Exemption referred to therein remains in effect at that time or another similar Class Exemption is then available. The Company shall exercise reasonable due diligence as is necessary to respond to any such disclosure, provided that, if the Company shall not respond within five Business Days following receipt of any such disclosure, it shall be deemed to have made the statement set forth in either Section 4.3(c)(1) or (2), as applicable. Section 13.3. Replacement of Notes. Upon receipt by the Company of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Note (which evidence shall be, in the case of an Institutional Investor, notice from such Institutional Investor of such ownership and such loss, theft, destruction or mutilation), and (a) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it (provided that if the holder of such Note is, or is a nominee for, an original Purchaser or another holder of a Note with a minimum net worth of at least $50,000,000, such Person's own unsecured agreement of indemnity shall be deemed to be satisfactory) or (b) in the case of mutilation, upon surrender and cancellation thereof, the Company at its own expense shall execute and deliver, in lieu thereof, a new Note, dated and bearing interest from the date to which interest shall have been paid on such lost, stolen, destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or mutilated Note if no interest shall have been paid thereon. SECTION 14. PAYMENTS ON NOTES. Section 14.1. Place of Payment. Subject to Section 14.2, payments of principal, Make-Whole Amount, if any, and interest becoming due and payable on the Notes shall be made in Chicago, Illinois at the principal office of Bank of America in such jurisdiction. The Company may at any time, by notice to each holder of a Note, change the place of payment of the Notes so long as such place of payment shall be either the principal office of the Company in such jurisdiction or the principal office of a bank or trust company in such jurisdiction. Section 14.2. Home Office Payment. So long as any Purchaser or such Purchaser's nominee shall be the holder of any Note, and notwithstanding anything contained in Section 14.1 or in such Note to the contrary, the Company will pay all sums becoming due on such Note for principal, Make-Whole Amount, if any, and interest by the method and at the address specified for such purpose for such Purchaser on Schedule A, or by such other method or at such other address as such Purchaser shall have from time to time specified to the Company in writing for such purpose, without the presentation or surrender of such Note or the making of any notation thereon, except that upon written request of the Company made concurrently with or reasonably promptly after payment or prepayment in full of any Note, such Purchaser shall surrender such Note for cancellation, reasonably promptly after any such request, to the Company at its principal -32- 38 executive office or at the place of payment most recently designated by the Company pursuant to Section 14.1. Prior to any sale or other disposition of any Note held by any Purchaser or such Purchaser's nominee such Purchaser will, at its election, either endorse thereon the amount of principal paid thereon and the last date to which interest has been paid thereon or surrender such Note to the Company in exchange for a new Note or Notes pursuant to Section 13.2. The Company will afford the benefits of this Section 14.2 to any Institutional Investor that is the direct or indirect transferee of any Note purchased by any Purchaser under this Agreement and that has made the same agreement relating to such Note as such Purchaser has made in this Section 14.2. SECTION 15. EXPENSES, ETC. Section 15.1. Transaction Expenses. Whether or not the transactions contemplated hereby are consummated, the Company will pay all costs and expenses (including reasonable attorneys' fees of a special counsel and, if reasonably required, local or other counsel) incurred by each Purchaser or holder of a Note in connection with such transactions and in connection with any amendments, waivers or consents under or in respect of this Agreement, the Guaranty Agreement or the Notes (whether or not such amendment, waiver or consent becomes effective), including, without limitation: (a) the costs and expenses incurred in enforcing or defending (or determining whether or how to enforce or defend) any rights under this Agreement, the Guaranty Agreement or the Notes or in responding to any subpoena or other legal process or informal investigative demand issued in connection with this Agreement, the Guaranty Agreement or the Notes, or by reason of being a holder of any Note or a beneficiary of the Guaranty Agreement, and (b) the costs and expenses, including financial advisors' fees, incurred in connection with the insolvency or bankruptcy of the Company or any Subsidiary or in connection with any work-out or restructuring of the transactions contemplated hereby, by the Guaranty Agreement and by the Notes. The Company will pay, and will save each Purchaser and each other holder of a Note harmless from, all claims in respect of any fees, costs or expenses if any, of brokers and finders (other than those retained by such Purchaser or holder). Section 15.2. Survival. The obligations of the Company under this Section 15 will survive the payment or transfer of any Note, the enforcement, amendment or waiver of any provision of this Agreement or the Notes, and the termination of this Agreement. SECTION 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT. All representations and warranties contained herein shall survive the execution and delivery of this Agreement and the Notes, the purchase or transfer by any Purchaser of any Note or portion thereof or interest therein and the payment of any Note, and may be relied upon by any subsequent holder of a Note, regardless of any investigation made at any time by or on behalf of such Purchaser or any other holder of a Note. All statements contained in any certificate or other instrument delivered by or on behalf of the Company pursuant to this Agreement shall be deemed representations and warranties of the Company under this Agreement. Subject to the preceding sentence, this Agreement and the Notes embody the entire agreement and understanding between -33- 39 each Purchaser and the Company and supersede all prior agreements and understandings relating to the subject matter hereof. SECTION 17. AMENDMENT AND WAIVER. Section 17.1. Requirements. This Agreement and the Notes may be amended, and the observance of any term hereof or of the Notes may be waived (either retroactively or prospectively), with (and only with) the written consent of the Company and the Required Holders, except that (a) no amendment or waiver of any of the provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any defined term (as it is used therein), will be effective as to any Purchaser unless consented to by such Purchaser in writing, and (b) no such amendment or waiver may, without the written consent of the holder of each Note at the time outstanding affected thereby, (1) subject to the provisions of Section 12 relating to acceleration or rescission, change the amount or time of any prepayment or payment of principal of, or reduce the rate or change the time of payment or method of computation of interest or of the Make-Whole Amount on, the Notes, (2) change the percentage of the principal amount of the Notes the holders of which are required to consent to any such amendment or waiver or (3) amend any of Sections 8, 11(a), 11(b), 12, 17 or 20. Section 17.2. Solicitation of Holders of Notes. (a) Solicitation. The Company will provide each holder of the Notes (irrespective of the amount of Notes then owned by it) with sufficient information, sufficiently far in advance of the date a decision is required, to enable such holder to make an informed and considered decision with respect to any proposed amendment, waiver or consent in respect of any of the provisions hereof or of the Notes. The Company will deliver executed or true and correct copies of each amendment, waiver or consent effected pursuant to the provisions of this Section 17 to each holder of outstanding Notes promptly following the date on which it is executed and delivered by, or receives the consent or approval of, the requisite holders of Notes. (b) Payment. The Company will not directly or indirectly pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, or grant any security, to any holder of Notes as consideration for or as an inducement to the entering into by any holder of Notes of any waiver or amendment of any of the terms and provisions hereof unless such remuneration is concurrently paid, or security is concurrently granted, on the same terms, ratably to each holder of Notes then outstanding even if such holder did not consent to such waiver or amendment. Section 17.3. Binding Effect, Etc. Any amendment or waiver consented to as provided in this Section 17 applies equally to all holders of Notes and is binding upon them and upon each future holder of any Note and upon the Company without regard to whether such Note has been marked to indicate such amendment or waiver. No such amendment or waiver will extend to or affect any obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or impair any right consequent thereon. No course of dealing between the Company and the holder of any Note nor any delay in exercising any rights hereunder or under any Note shall operate as a waiver of any rights of any holder of such Note. As used herein, the term "this -34- 40 Agreement" and references thereto shall mean this Agreement as it may from time to time be amended or supplemented. Section 17.4. Notes Held by Company, Etc. Solely for the purpose of determining whether the holders of the requisite percentage of the aggregate principal amount of Notes then outstanding approved or consented to any amendment, waiver or consent to be given under this Agreement or the Notes, or have directed the taking of any action provided herein or in the Notes to be taken upon the direction of the holders of a specified percentage of the aggregate principal amount of Notes then outstanding, Notes directly or indirectly owned by the Company or any of its Affiliates shall be deemed not to be outstanding. SECTION 18. NOTICES. All notices and communications provided for hereunder shall be in writing and sent (a) by telefacsimile if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or (b) by registered or certified mail with return receipt requested (postage prepaid), or (c) by a recognized overnight delivery service (with charges prepaid). Any such notice must be sent: (1) if to a Purchaser or such Purchaser's nominee, to such Purchaser or such Purchaser's nominee at the address specified for such communications in Schedule A, or at such other address as such Purchaser or such Purchaser's nominee shall have specified to the Company in writing, (2) if to any other holder of any Note, to such holder at such address as such other holder shall have specified to the Company in writing, or (3) if to the Company, to the Company at its address set forth at the beginning hereof to the attention of Chief Financial Officer, or at such other address as the Company shall have specified to the holder of each Note in writing. Notwithstanding the foregoing, in the case of communications required to be delivered pursuant to Section 7.1(c)(3), the Company may provide notice by electronic mail, provided that the recipient of such communication shall have previously provided the Company with an electronic mail address for such purpose. Notices under this Section 18 will be deemed given only when actually received. SECTION 19. REPRODUCTION OF DOCUMENTS. This Agreement and all documents relating hereto, including, without limitation, (a) consents, waivers and modifications that may hereafter be executed, (b) documents received by each Purchaser at the Closing (except the Notes themselves) and (c) financial statements, certificates and other information previously or hereafter furnished to each Purchaser, may be reproduced by such Purchaser by any photographic, photostatic, microfilm, microcard, miniature -35- 41 photographic or other similar process and such Purchaser may destroy any original document so reproduced. The Company agrees and stipulates that, to the extent permitted by applicable law, any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by such Purchaser in the regular course of business) and any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. This Section 19 shall not prohibit the Company or any other holder of Notes from contesting any such reproduction to the same extent that it could contest the original, or from introducing evidence to demonstrate the inaccuracy of any such reproduction. SECTION 20. CONFIDENTIAL INFORMATION. For the purposes of this Section 20, "Confidential Information" means information delivered to any Purchaser by or on behalf of the Company or any Subsidiary in connection with the transactions contemplated by or otherwise pursuant to this Agreement that is proprietary in nature and that was clearly marked or labeled or otherwise adequately identified when received by such Purchaser as being confidential information of the Company or such Subsidiary, provided that such term does not include information that (a) was publicly known or otherwise known to such Purchaser prior to the time of such disclosure, (b) subsequently becomes publicly known through no act or omission by such Purchaser or any Person acting on such Purchaser's behalf, (c) otherwise becomes known to such Purchaser other than through disclosure by the Company or any Subsidiary or (d) constitutes financial statements delivered to such Purchaser under Section 7.1 that are otherwise publicly available. Each Purchaser will maintain the confidentiality of such Confidential Information in accordance with procedures adopted by such Purchaser in good faith to protect confidential information of third parties delivered to such Purchaser, provided that such Purchaser may deliver or disclose Confidential Information to (1) such Purchaser's directors, trustees, officers, employees, agents, attorneys and affiliates (to the extent such disclosure reasonably relates to the administration of the investment represented by such Purchaser's Notes), (2) such Purchaser's financial advisors and other professional advisors who agree to hold confidential the Confidential Information substantially in accordance with the terms of this Section 20, (3) any other holder of any Note, (4) any Institutional Investor to which such Purchaser sells or offers to sell such Note or any part thereof or any participation therein (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (5) any Person from which such Purchaser offers to purchase any Security of the Company (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (6) any Federal or state regulatory authority having jurisdiction over such Purchaser, (7) the National Association of Insurance Commissioners or any similar organization, or any nationally recognized rating agency that requires access to information about such Purchaser's investment portfolio or (8) any other Person to which such delivery or disclosure may be necessary or appropriate (i) to effect compliance with any law, rule, regulation or order applicable to such Purchaser, (ii) in response to any subpoena or other legal process, (iii) in connection with any litigation to which such Purchaser is a party or (iv) if an Event of Default has occurred and is continuing, to the extent such Purchaser may reasonably determine such delivery and disclosure to be necessary or appropriate in the enforcement or for the protection of the rights and remedies under such Purchaser's Notes and this Agreement. Each holder of a Note, by its acceptance of a -36- 42 Note, will be deemed to have agreed to be bound by and to be entitled to the benefits of this Section 20 as though it were a party to this Agreement. On reasonable request by the Company in connection with the delivery to any holder of a Note of information required to be delivered to such holder under this Agreement or requested by such holder (other than a holder that is a party to this Agreement or its nominee), such holder will enter into an agreement with the Company embodying the provisions of this Section 20. SECTION 21. SUBSTITUTION OF A PURCHASER. Each Purchaser shall have the right to substitute any one of such Purchaser's Affiliates as the purchaser of the Notes that such Purchaser has agreed to purchase hereunder, by written notice to the Company, which notice shall be signed by both such Purchaser and such Purchaser's Affiliate, shall contain such Affiliate's agreement to be bound by this Agreement and shall contain a confirmation by such Affiliate of the accuracy with respect to it of the representations set forth in Section 6. Upon receipt of such notice, wherever the word "Purchaser" is used in this Agreement (other than in this Section 21), such word shall be deemed to refer to such Affiliate in lieu of such Purchaser. In the event that such Affiliate is so substituted as a purchaser hereunder and such Affiliate thereafter transfers to such Purchaser all of the Notes then held by such Affiliate, upon receipt by the Company of notice of such transfer, wherever the word "Purchaser" is used in this Agreement (other than in this Section 21), such word shall no longer be deemed to refer to such Affiliate, but shall refer to such Purchaser, and such Purchaser shall have all the rights of an original holder of the Notes under this Agreement. SECTION 22. MISCELLANEOUS. Section 22.1. Successors and Assigns. All covenants and other agreements contained in this Agreement by or on behalf of any of the parties hereto bind and inure to the benefit of their respective successors and assigns (including, without limitation, any subsequent holder of a Note) whether so expressed or not. Section 22.2. Payments Due on Non-Business Days. Anything in this Agreement or the Notes to the contrary notwithstanding, any payment of principal of or Make-Whole Amount or interest on any Note that is due on a date other than a Business Day shall be made on the next succeeding Business Day without including the additional days elapsed in the computation of the interest payable on such next succeeding Business Day. Section 22.3. Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall (to the full extent permitted by law) not invalidate or render unenforceable such provision in any other jurisdiction. Section 22.4. Construction. (a) Each covenant contained herein shall be construed (absent express provision to the contrary) as being independent of each other covenant contained herein, so that compliance with any one covenant shall not (absent such an express contrary -37- 43 provision) be deemed to excuse compliance with any other covenant. Where any provision herein refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person. (b) Where the character or amount of any asset or liability or item of income or expense is required to be determined or any consolidation or other accounting computation is required to be made for the purposes of this Agreement, the same shall be done in accordance with GAAP, to the extent applicable, except where such principles are inconsistent with the requirements of this Agreement. Section 22.5. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto. Section 22.6. Governing Law. This Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of Illinois excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. * * * * * -38- 44 The execution hereof by the Purchasers shall constitute a contract among the Company and the Purchasers for the uses and purposes hereinabove set forth. This Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement. Very truly yours, GRANITE CONSTRUCTION INCORPORATED By /s/ DAVID H. WATTS ------------------------------------ David H. Watts Its President By /s/ WILLIAM E. BARTON ------------------------------------- William E. Barton Its Senior Vice President -39- 45 Accepted as of May 1, 2001: ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK By /s/ ROBERT B. BODETT ------------------------------------- Name: Robert B. Bodett By /s/ PATRICIA W. WILSON ------------------------------------- Name: Patricia W. Wilson Authorized Signatories UNITED OF OMAHA LIFE INSURANCE COMPANY By /s/ EDWIN H. GARRISON, JR. ------------------------------------- Its First Vice President COMPANION LIFE INSURANCE COMPANY By /s/ EDWIN H. GARRISON, JR. ------------------------------------- Its Assistant Treasurer LUTHERAN BROTHERHOOD By /s/ KERI L. REICH ------------------------------------- Keri L. Reich Its Portfolio Manager -40- 46 Accepted as of May 1, 2001: CONNECTICUT GENERAL LIFE INSURANCE COMPANY By: CIGNA INVESTMENTS, INC. ------------------------------------ By /s/ STEPHEN A. OSBORN ------------------------------------- Stephen A. Osborn Its Managing Director NATIONWIDE LIFE INSURANCE COMPANY By /s/ MARK W. POEPPELMAN ------------------------------------- Mark W. Poeppelman Its Associate Vice President NATIONWIDE INDEMNITY COMPANY By /s/ MARK W. POEPPELMAN ------------------------------------- Mark W. Poeppelman Its Associate Vice President NATIONWIDE MUTUAL FIRE INSURANCE COMPANY By /s/ MARK W. POEPPELMAN ------------------------------------- Mark W. Poeppelman Its Associate Vice President NATIONWIDE MUTUAL INSURANCE COMPANY By /s/ MARK W. POEPPELMAN ------------------------------------- Mark W. Poeppelman Its Associate Vice President ALLSTATE LIFE INSURANCE COMPANY By /s/ ROBERT B. BODETT ------------------------------------- Name: Robert B. Bodett By /s/ PATRICIA W. WILSON ------------------------------------- Name: Patricia W. Wilson Authorized Signatories -41- 47
PRINCIPAL AMOUNT OF NAMES OF PURCHASER NOTES TO BE PURCHASED CONNECTICUT GENERAL LIFE $10,000,000 INSURANCE COMPANY $3,500,000 c/o CIGNA Investments, Inc. $3,300,000 Hartford, Connecticut 06152 $3,000,000 Attention: Private Securities Division $1,200,000 $1,000,000
Payments All payments on or in respect of the Notes to be by Federal Funds Wire Transfer to: Chase NYC/CTR/ BNF = CIGNA Private Placements/AC=9009001802 ABA #021000021 OBI = Granite Construction Incorporated 6.96% Senior Notes due May 1, 2013, PPN 387328 A@ 6 principal premium or interest; contact name and phone. Address for Notices Related to Payments: CIG & Co. c/o CIGNA Investments, Inc. Attention: Securities Processing S-309 900 Cottage Grove Road Hartford, Connecticut 06152-2309 CIG & Co. c/o CIGNA Investments, Inc. Attention: Private Securities S-307 Operations Group 900 Cottage Grove Road Hartford, Connecticut 06152-2307 Fax: 860-726-7203 with a copy to: Chase Manhattan Bank Private Placement Servicing P.O. Box 1508 Bowling Green Station New York, New York 10081 Attention: CIGNA Private Placements Fax: 212-552-3107/1005 Address for All Other Notices: CIG & Co. c/o CIGNA Investments, Inc. SCHEDULE A (to Note Purchase Agreement) 48 Attention: Private Securities Division - S-307 900 Cottage Grove Road Hartford, Connecticut 06152-2307 Fax: 860-726-7203 Name of Nominee in which Notes are to be issued: CIG & Co. Taxpayer I.D. Number for CIG & Co.: 13-3574027 A-2 49
PRINCIPAL AMOUNT OF NAMES OF PURCHASER NOTES TO BE PURCHASED NATIONWIDE LIFE INSURANCE COMPANY $10,000,000 One Nationwide Plaza (1-33-07) Columbus, Ohio 43215-2220 Attention: Corporate Fixed-Income Securities
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Granite Construction Incorporated, 6.96% Senior Notes due May 1, 2013, PPN 387328 A@ 6, principal, premium or interest") to: The Bank of New York ABA #021-000-018 BNF: IOC566 F/A/O Nationwide Life Insurance Company Attention: P&I Department PPN #383723 A@ 6 Security Description: ______________________ Notices All notices of payment on or in respect of the Notes and written confirmation of each such payment to: Nationwide Life Insurance Company c/o The Bank of New York P. O. Box 19266 Newark, New Jersey 07195 Attention: P&I Department With a copy to: Nationwide Life Insurance Company One Nationwide Plaza (1-32-05) Columbus, Ohio 43215-2220 Attention: Investment Accounting All notices and communications other than those in respect to payments to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 31-4156830 A-3 50
PRINCIPAL AMOUNT OF NAMES OF PURCHASER NOTES TO BE PURCHASED NATIONWIDE INDEMNITY COMPANY $5,000,000 One Nationwide Plaza (1-33-07) Columbus, Ohio 43215-2220 Attention: Corporate Fixed-Income Securities
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Granite Construction Incorporated, 6.96% Senior Notes due May 1, 2013, PPN 387328 A@ 6, principal, premium or interest") to: The Bank of New York ABA #021-000-018 BNF: IOC566 F/A/O Nationwide Indemnity Company Attention: P&I Department PPN #387328 A@ 6 Security Description: ____________ Notices All notices of payment on or in respect of the Notes and written confirmation of each such payment to: Nationwide Indemnity Company c/o The Bank of New York P. O. Box 19266 Newark, New Jersey 07195 Attention: P&I Department With a copy to: Nationwide Indemnity Company One Nationwide Plaza (1-32-05) Columbus, Ohio 43215-2220 Attention: Investment Accounting All notices and communications other than those in respect to payments to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 31-1399201 A-4 51
PRINCIPAL AMOUNT OF NAMES OF PURCHASER NOTES TO BE PURCHASED NATIONWIDE MUTUAL FIRE INSURANCE COMPANY $4,000,000 One Nationwide Plaza (1-33-07) Columbus, Ohio 43215-2220 Attention: Corporate Fixed-Income Securities
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Granite Construction Incorporated, 6.96% Senior Notes due May 1, 2013, PPN 387328 A@ 6, principal, premium or interest") to: The Bank of New York ABA #021-000-018 BNF: IOC566 F/A/O Nationwide Mutual Fire Insurance Company Attention: P&I Department PPN # 387328 A@ 6 Security Description: ________________ Notices All notices of payment on or in respect of the Notes and written confirmation of each such payment to: Nationwide Mutual Fire Insurance Company c/o The Bank of New York P. O. Box 19266 Newark, New Jersey 07195 Attention: P&I Department With a copy to: Nationwide Mutual Fire Insurance Company One Nationwide Plaza (1-32-05) Columbus, Ohio 43215-2220 Attention: Investment Accounting All notices and communications other than those in respect to payments to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 31-4177110 A-5 52
PRINCIPAL AMOUNT OF NAMES OF PURCHASER NOTES TO BE PURCHASED NATIONWIDE MUTUAL INSURANCE COMPANY $3,000,000 One Nationwide Plaza (1-33-07) Columbus, Ohio 43215-2220 Attention: Corporate Fixed-Income Securities
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Granite Construction Incorporated, 6.96% Senior Notes due May 1, 2013, PPN 387328 A@ 6, principal, premium or interest") to: The Bank of New York ABA #021-000-018 BNF: IOC566 F/A/O Nationwide Mutual Insurance Company Attention: P&I Department PPN # 387328 A@ 6 Security Description: ____________________ Notices All notices of payment on or in respect of the Notes and written confirmation of each such payment to: Nationwide Mutual Insurance Company c/o The Bank of New York P. O. Box 19266 Newark, New Jersey 07195 Attention: P&I Department With a copy to: Nationwide Mutual Insurance Company One Nationwide Plaza (1-32-05) Columbus, Ohio 43215-2220 Attention: Investment Accounting All notices and communications other than those in respect to payments to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 31-4177100 A-6 53
PRINCIPAL AMOUNT OF NAMES OF PURCHASER NOTES TO BE PURCHASED ALLSTATE LIFE INSURANCE COMPANY $9,000,000 3075 Sanders Road, STE G5D Northbrook, Illinois 60062-7127 Attention: Private Placements Department Telecopier Number: (847) 402-3092 Telephone Number: (847) 402-8922
Payments All payments on or in respect of the Notes to be made by Fedwire transfer of immediately available funds (identifying each payment with name of the Issuer, the Private Placement Number preceded by "DPP" and the payment as principal, interest or premium) in the exact format as follows: BBK = Harris Trust and Savings Bank ABA #071000288 BNF = Allstate Life Insurance Company Collection Account #168-117-0 ORG = Granite Construction Incorporated OBI = DPP - 387328 A@ 6 -- Payment Due Date (MM/DD/YY) -- P _____ (enter "P" and the amount of principal being remitted, for example, P5000000.00) -- I _____ (enter "I" and the amount of interest being remitted, for example, I225000.00) Notices All notices of scheduled payments and written confirmation of each such payment, to be addressed: Allstate Insurance Company Investment Operations--Private Placements 3075 Sanders Road, STE G4A Northbrook, Illinois 60062-7127 Telephone: (847) 402-2769 Telecopy: (847) 326-5040 All financial reports, compliance certificates and all other written communications, including notice of prepayments to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 36-2554642 A-7 54
PRINCIPAL AMOUNT OF NAMES OF PURCHASER NOTES TO BE PURCHASED ALLSTATE LIFE INSURANCE COMPANY $9,000,000 OF NEW YORK c/o Allstate Life Insurance Company 3075 Sanders Road, STE G5D Northbrook, Illinois 60062-7127 Attention: Private Placements Department Telephone Number: (847) 402-8922 Telefacsimile Number: (847) 402-3092
Payments All payments on or in respect of the Notes to be made by Fedwire transfer of immediately available funds (identifying each payment with name of the Issuer (and the Credit, if any), the Private Placement Number preceded by "DPP" and the payment as principal, interest or premium) in the exact format as follows: BBK = Harris Trust and Savings Bank ABA #071000288 BNF = Allstate Life Insurance Company of New York Collection Account #168-120-4 ORG = Granite Construction Incorporated OBI = DPP - 387328 A@ 6 -- Payment Due Date (MM/DD/YY) -- P _____ (enter "P" and the amount of principal being remitted, for example, P5000000.00) -- I _____ (enter "I" and the amount of interest being remitted, for example, I225000.00) Notices All notices of scheduled payments and written confirmation of each such payment, to be addressed: Allstate Insurance Company Investment Operations--Private Placements 3075 Sanders Road, STE G4A Northbrook, Illinois 60062-7127 Telephone: (847) 402-2769 Telecopy: (847) 326-5040 All financial reports, compliance certificates and all other written communications, including notice of prepayments to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 36-2608394 A-8 55
PRINCIPAL AMOUNT OF NAMES OF PURCHASER NOTES TO BE PURCHASED UNITED OF OMAHA LIFE INSURANCE COMPANY $6,000,000 Mutual of Omaha Plaza Omaha, Nebraska 68175-1011 Attention: Investment Division/Securities Accounting Telecopier Number: (402) 351-2913 Telephone Number (402) 351-2504
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Granite Construction Incorporated, 6.96% Senior Notes due May 1, 2013") to: Chase Manhattan Bank ABA #021000021 Private Income Processing for credit to: United of Omaha Life Insurance Company Account Number 900-9000200 a/c: G07097 CUSIP/PPN: 387328 A@ 6 Interest Amount: ___________ Principal Amount: __________ Notices All notices in respect of payment of principal and interest, corporate actions and reorganization notifications to: The Chase Manhattan Bank 4 New York Plaza - 13th Floor New York, New York 10004 Attn: Income Processing - J. Piperatto a/c: G07097 All other communications to: 4-Investment Loan Administration Mutual of Omaha Insurance Company Mutual of Omaha Plaza Omaha, Nebraska 68175-1011 Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 47-0322111 A-9 56
PRINCIPAL AMOUNT OF NAMES OF PURCHASER NOTES TO BE PURCHASED COMPANION LIFE INSURANCE COMPANY $2,000,000 c/o Mutual of Omaha Insurance Company Mutual of Omaha Plaza Omaha, Nebraska 68175-1011 Attention: 4 - Investment Loan Administration Telefacsimile: (402) 351-2913 Confirmation: (402) 351-2583
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds to: Chase Manhattan Bank ABA #021000021 Private Income Processing for credit to: Companion Life Insurance Company Account Number 900-9000200 a/c G07903 PPN: 387328 A@ 6 Interest Amount: __________________ Principal Amount: _________________ Notices All notices of payments, on or in respect of the Notes and written confirmation of each such payment, corporate actions and reorganization notifications to: The Chase Manhattan Bank 4 New York Plaza-11th Floor New York, New York 10004 Attention: Income Processing-J. Pipperato a/c: G07903 All other notices and communications (i.e., quarterly/annual reports, tax filings, modifications, waivers regarding the indenture) to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 13-1595128 A-10 57
PRINCIPAL AMOUNT OF NAMES OF PURCHASER NOTES TO BE PURCHASED LUTHERAN BROTHERHOOD $5,000,000 625 Fourth Avenue South, 10th Floor Minneapolis, Minnesota 55415 Attention: Investment Division Telecopier Number: (612) 340-5756 Telephone Number: (612) 340-5757
Payments All payments of principal, interest and premium on the account of the Notes shall be made by bank wire transfer (in immediately available funds) to: Norwest Bank Minnesota, N.A. ABA #091000019 For Credit to Trust Clearing Account #08-40-245 Attention: Sarah Corcoran For credit to: Lutheran Brotherhood Account Number 12651300 All payments must include the following information: A/C Lutheran Brotherhood Account No.: 12561300 Security Description PPN Number Reference Purpose of Payment Interest and/or Principal Breakdown Notices All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 41-0385700 A-11 58 DEFINED TERMS As used herein, the following terms have the respective meanings set forth below or set forth in the Section hereof following such term: "Affiliate" shall mean, at any time, and with respect to any Person, (a) any other Person that at such time directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person, (b) any other Person beneficially owning or holding, directly or indirectly, 10% or more of any class of voting or equity interests of such first Person or any other Person of which such first Person beneficially owns or holds, in the aggregate, directly or indirectly, 10% or more of any class of voting or equity interests and (c) any officer or director of such first Person and any Person fulfilling an equivalent function of an officer or director; provided that "Affiliate," in relation to the Company, shall not include any Subsidiary. As used in this definition, "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting Securities, by contract or otherwise. Unless the context otherwise clearly requires, any reference to an "Affiliate" is a reference to an Affiliate of the Company. "Asset Disposition" shall mean any Transfer except: (a) any (1) Transfer from a Subsidiary to the Company or to a Wholly-Owned Subsidiary; and (2) Transfer from the Company to a Wholly-Owned Subsidiary so long as immediately before and immediately after the consummation of any such Transfer and after giving effect thereto, no Default or Event of Default would exist; (b) any Transfer made in the ordinary course of business and involving only property that is either (1) inventory held for sale or (2) equipment, fixtures, supplies or materials no longer required in the operation of the business of the Company or any of its Subsidiaries or that is obsolete; and (c) any Transfer in one lot of all of the voting Securities of TIC, directly or indirectly, owned or held by the Company to TIC pursuant to that certain Stock Purchase Agreement dated as of December 23, 1996 between the Company and TIC, as amended, supplemented, restated or otherwise modified from time to time. "Attributable Debt" shall mean, as to any particular Long-Term Lease relating to a Sale-and-Leaseback Transaction, the present value of all Lease Rentals required to be paid by the Company or any Subsidiary under such lease during the remaining term thereof (determined in accordance with generally accepted financial practice using a discount factor equal to the interest rate implicit in such lease if known or, if not known, of 12% per annum). "Bank Credit Agreement" shall mean that certain Credit Agreement dated as of June 30, 1997 among the Company, Bank of America National Trust and Savings Association, as agent, and each of the financial institutions a party thereto, as amended by that certain First Amendment SCHEDULE B (to Note Purchase Agreement) 59 to Credit Agreement dated as of January 16, 1998, that certain Second Amendment to Credit Agreement dated as of June 30, 1998 and that certain Third Amendment to Credit Agreement dated as of June 30, 1999 as the same may be further amended, supplemented, restated or otherwise modified from time to time, and any credit agreement or other like agreement entered into by the Company which is substantially similar to or replaces the Credit Agreement. "Bank Guaranty" shall mean any Guaranty of the Debt outstanding under the Bank Credit Agreement by a Subsidiary. "Business Day" shall mean (a) for the purposes of Section 8.6 only, any day other than a Saturday, a Sunday or a day on which commercial banks in New York City are required or authorized to be closed and (b) for the purposes of any other provision of this Agreement, any day other than a Saturday, a Sunday or a day on which commercial banks in Chicago, Illinois or San Francisco, California are required or authorized to be closed. "Capital Lease" shall mean, at any time, a lease with respect to which the lessee is required concurrently to recognize the acquisition of an asset and the incurrence of a liability in accordance with GAAP. "Capital Lease Obligation" shall mean, with respect to any Person and a Capital Lease, the amount of the obligation of such Person as the lessee under such Capital Lease which would, in accordance with GAAP, appear as a liability on a balance sheet of such Person. "Closing" is defined in Section 3. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations promulgated thereunder from time to time. "Company" shall mean Granite Construction Incorporated, a Delaware corporation, and any Person who succeeds to all, or substantially all, of the assets and business of Granite Construction Incorporated. "Confidential Information" is defined in Section 20. "Consolidated Net Income" for any period shall mean the gross revenues of the Company and its Subsidiaries for such period less all expenses and other proper charges (including taxes on income), determined on a consolidated basis after eliminating earnings or losses attributable to outstanding Minority Interests, but excluding in any event: (a) any gains or losses on the sale or other disposition of Investments or fixed or capital assets (other than fixed or capital assets sold or disposed of in the ordinary course of business), and any taxes on such excluded gains and any tax deductions or credits on account of any such excluded losses; (b) the proceeds of any life insurance policy; (c) net earnings and losses of any Subsidiary accrued prior to the date it became a Subsidiary; B-2 60 (d) net earnings and losses of any corporation (other than a Subsidiary), substantially all the assets of which have been acquired in any manner by the Company or any Subsidiary, realized by such corporation prior to the date of such acquisition; (e) net earnings and losses of any corporation (other than a Subsidiary) with which the Company or a Subsidiary shall have consolidated or which shall have merged into or with the Company or a Subsidiary prior to the date of such consolidation or merger; (f) net earnings of any business entity (other than a Subsidiary or a joint venture) in which the Company or any Subsidiary has an ownership interest unless such net earnings shall have actually been received by the Company or such Subsidiary in the form of cash distributions; (g) earnings resulting from any reappraisal, revaluation or write-up of assets; (h) any deferred or other credit representing any excess of the equity in any Subsidiary at the date of acquisition thereof over the amount invested in such Subsidiary; (i) any gain arising from the acquisition of any Securities of the Company or any Subsidiary; and (j) any other extraordinary gain or loss. "Consolidated Net Worth" shall mean, as of the date of any determination thereof, (a) the sum of (1) the par value (or value stated on the books of the corporation) of the capital stock (but excluding treasury stock and capital stock subscribed and unissued) of the Company and its Subsidiaries plus (2) the amount of the paid-in capital and retained earnings of the Company and its Subsidiaries, in each case as such amounts would be shown on a consolidated balance sheet of the Company and its Subsidiaries as of such time prepared in accordance with GAAP, minus (b) unearned compensation, minus (c) to the extent included in clause (a) above, all amounts properly attributable to Minority Interests, if any, in the stock and surplus of Subsidiaries, minus (d) the book value of all Restricted Investments of the Company and its Subsidiaries acquired after the date of the Closing in excess of an amount equal to 10% of the amount determined pursuant to clauses (a), (b) and (c) of this definition. "Consolidated Total Assets" shall mean, as of the date of any determination thereof, (a) the total assets of the Company and its Subsidiaries which would be shown as assets on a consolidated balance sheet of the Company and its Subsidiaries as of such time prepared in accordance with GAAP, after eliminating all amounts properly attributable to Minority Interests, if any, in the stock and surplus of Subsidiaries. B-3 61 "Consolidated Total Capitalization" shall mean, as the date of any determination thereof, the sum of (a) Consolidated Net Worth and (b) Consolidated Total Debt. "Consolidated Total Debt" shall mean, as of the date of any determination thereof, the total of all Debt of the Company and its Subsidiaries (including, without limitation, all Subsidiaries that are organized as joint ventures) outstanding on such date, after eliminating all offsetting debits and credits between the Company and its Subsidiaries, and all other items required to be eliminated in the course of the preparation of consolidated financial statements of the Company and its Subsidiaries in accordance with GAAP. "Debt" shall mean, with respect to any Person, without duplication, (a) its liabilities for borrowed money and its redemption obligations in respect of mandatorily redeemable Preferred Stock; (b) its liabilities for the deferred purchase price of property acquired by such Person (excluding accounts payable arising in the ordinary course of business but including, without limitation, all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property); (c) its Capitalized Lease Obligations; (d) all liabilities for borrowed money secured by any Lien with respect to any property owned by such Person (whether or not it has assumed or otherwise become liable for such liabilities); (e) all its liabilities in respect of letters of credit or instruments serving a similar function issued or accepted for its account by banks and other financial institutions (whether or not representing obligations for borrowed money); (f) Swaps of such Person; (g) its recourse obligations under Receivables Securitization Transactions; (h) in respect of the Company or any Subsidiary, its Attributable Debt; and (i) any Guaranty of such Person with respect to liabilities of a type described in any of clauses (a) through (h) hereof in an amount equal to the amount guaranteed. Debt of any Person shall include all obligations of such Person of the character described in clauses (a) through (i) to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is deemed to be extinguished under GAAP. "Debt Prepayment Application" shall mean, with respect to any Transfer of property, the application by the Company or its Subsidiaries of cash in an amount equal to the Net Proceeds Amount with respect to such Transfer to pay Senior Debt (other than Senior Debt owing to the Company, any of its Subsidiaries or any Affiliate). B-4 62 "Default" shall mean an event or condition the occurrence or existence of which would, with the lapse of time or the giving of notice or both, become an Event of Default. "Default Rate" shall mean that rate of interest that is the greater of (a) 2% per annum above the rate of interest stated in clause (a) of the first paragraph of the Notes and (b) 2% over the rate of interest publicly announced by Bank of America in San Francisco, California as its "reference" rate. "Disposition Value" shall mean, as of any date of determination, with respect to any property (a) in the case of property that does not constitute Subsidiary Stock, the Fair Market Value thereof, valued at the time of such disposition in good faith by the Company, and (b) in the case of property that constitutes Subsidiary Stock, an amount equal to that percentage of book value of the assets of the Subsidiary that issued such stock as is equal to the percentage that the book value of such Subsidiary Stock represents of the book value of all of the outstanding capital stock of such Subsidiary (assuming, in making such calculations, that all Securities convertible into such capital stock are so converted and giving full effect to all transactions that would occur or be required in connection with such conversion) determined at the time of the disposition thereof in good faith by the Company. "Environmental Laws" shall mean any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including but not limited to those related to hazardous substances or wastes, air emissions and discharges to waste or public systems. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect. "ERISA Affiliate" shall mean any trade or business (whether or not incorporated) that is treated as a single employer together with the Company under Section 414 of the Code. "Event of Default" is defined in Section 11. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Fair Market Value" shall mean, as of any date of determination and with respect to any property, the sale value of such property that would be realized in an arm's-length sale at such time between an informed and willing buyer and an informed and willing seller (neither being under a compulsion to buy or sell). "GAAP" shall mean generally accepted accounting principles as in effect from time to time in the United States of America. B-5 63 "Governmental Authority" shall mean (a) the government of (1) the United States of America or any State or other political subdivision thereof, or (2) any jurisdiction in which the Company or any Subsidiary conducts all or any part of its business, or which asserts jurisdiction over any properties of the Company or any Subsidiary, or (b) any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, any such government. "Guarantors" is defined in Section 2.2. "Guaranty Agreement" is defined in Section 2.2. "Guaranty" shall mean, with respect to any Person, any obligation (except the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or in effect guaranteeing any Debt, dividend or other obligation of any other Person in any manner, whether directly or indirectly, including (without limitation) obligations incurred through an agreement, contingent or otherwise, by such Person: (a) to purchase such Debt or obligation or any property constituting security therefor; (b) to advance or supply funds (1) for the purchase or payment of such Debt or obligation, or (2) to maintain any working capital or other balance sheet condition or any income statement condition of any other Person or otherwise to advance or make available funds for the purchase or payment of such Debt or obligation; (c) to lease properties or to purchase properties or services primarily for the purpose of assuring the owner of such Debt or obligation of the ability of any other Person to make payment of the Debt or obligation; or (d) otherwise to assure the owner of such Debt or obligation against loss in respect thereof. In any computation of the Debt or other liabilities of the obligor under any Guaranty, the Debt or other obligations that are the subject of such Guaranty shall be assumed to be direct obligations of such obligor. "Hazardous Material" shall mean any and all pollutants, toxic or hazardous wastes or any other substances that might pose a hazard to health or safety, the removal of which may be required or the generation, manufacture, refining, production, processing, treatment, storage, handling, transportation, transfer, use, disposal, release, discharge, spillage, seepage, or filtration of which is or shall be restricted, prohibited or penalized by any applicable law (including, without limitation, asbestos, urea formaldehyde foam insulation and polychlorinated biphenyls). B-6 64 "holder" shall mean, with respect to any Note, the Person in whose name such Note is registered in the register maintained by the Company pursuant to Section 13.1. "Institutional Investor" shall mean (a) any original purchaser of a Note, (b) any holder of a Note holding more than 5% of the aggregate principal amount of the Notes then outstanding, and (c) any bank, trust company, savings and loan association or other financial institution, any pension plan, any investment company, any insurance company, any broker or dealer, or any other similar financial institution or entity, regardless of legal form. "Investment" shall mean any investment, made in cash or by delivery of property, by the Company or any of its Subsidiaries (a) in any Person, whether by acquisition of stock, Debt or other obligation or Security, or by loan, Guaranty, advance, capital contribution or otherwise, or (b) in any property. "Lease Rentals" shall mean, with respect to any period, the sum of the rental and other obligations required to be paid during such period by the Company or any Subsidiary, as lessee, under all leases of real or personal property (other than Capital Leases), excluding any amount required to be paid by the lessee (whether or not therein designated as rental or additional rental) on account of maintenance and repairs, insurance, taxes, assessments, water rates and similar charges, provided that, if at the date of determination, any such rental or other obligations (or portion thereof) are contingent or not otherwise definitely determinable by the terms of the related lease, the amount of such obligations (or such portion thereof) (1) shall be assumed to be equal to the amount of such obligations for the period of 12 consecutive calendar months immediately preceding the date of determination or (2) if the related lease was not in effect during such preceding 12-month period, shall be the amount estimated by a Senior Financial Officer of the Company on a reasonable basis and in good faith. "Lien" shall mean, with respect to any Person, any mortgage, lien, pledge, charge, security interest or other encumbrance, or any interest or title of any vendor, lessor, lender or other secured party to or of such Person under any conditional sale or other title retention agreement or Capital Lease, upon or with respect to any property or asset of such Person (including in the case of stock, stockholder agreements, voting trust agreements and all similar arrangements). "Long-Term Lease" shall mean any lease of property having an original term, including any period for which the lease may be renewed or extended at the option of the lessee, of more than three years. "Make-Whole Amount" is defined in Section 8.6. "Make-Whole Amount Calculation Certificate" is defined in Section 8.2. "Material" shall mean material in relation to the business, operations, affairs, financial condition, assets, properties or prospects of the Company and its Subsidiaries taken as a whole. "Material Adverse Effect" shall mean a material adverse effect on (a) the business, operations, affairs, financial condition, assets, properties or prospects of the Company and its Subsidiaries taken as a whole, or (b) the ability of the Company to perform its obligations under this Agreement and the Notes, or (c) the validity or enforceability of this Agreement, the Guaranty Agreement or the Notes. B-7 65 "Material Subsidiary" shall mean each Subsidiary identified as a Material Subsidiary on Schedule 5.4, each Subsidiary that is an obligor or guarantor of any Debt existing under the Bank Credit Agreement and each other Subsidiary which meets either of the following conditions: (a) such Subsidiary's total net revenues for the period of the immediately preceding four fiscal quarters is equal to or greater than 10% of the consolidated total net revenues of the Company and its Subsidiaries for such period determined in accordance with GAAP, in each case as reflected in the most recent annual or quarterly financial statements of the Company and its Subsidiaries; or (b) such Subsidiary's total assets, as of the last day of the immediately preceding fiscal quarter, is equal to or greater than 10% of consolidated total assets of the Company and its Subsidiaries as of such date determined in accordance with GAAP, in each case as reflected in the most recent annual or quarterly financial statements of the Company and its Subsidiaries. "Memorandum" is defined in Section 5.3. "Minority Interests" shall mean any shares of stock of any class of a Subsidiary (other than directors' qualifying shares as required by law) that are not owned by the Company and/or one or more of its Subsidiaries. Minority Interests shall be valued by valuing Minority Interests constituting preferred stock at the voluntary or involuntary liquidating value of such preferred stock, whichever is greater, and by valuing Minority Interests constituting common stock at the book value of capital and surplus applicable thereto adjusted, if necessary, to reflect any changes from the book value of such common stock required by the foregoing method of valuing Minority Interests in preferred stock. "Multiemployer Plan" shall mean any Plan that is a "multiemployer plan" (as such term is defined in Section 4001(a)(3) of ERISA). "Net Proceeds Amount" shall mean, with respect to any Transfer of any property by any Person, an amount equal to the difference of (a) the aggregate amount of the consideration (valued at the Fair Market Value of such consideration at the time of the consummation of such Transfer) allocated to such Person in respect of such Transfer, net of any applicable taxes incurred in connection with such Transfer, minus (b) all ordinary and reasonable out-of-pocket costs and expenses actually incurred by such Person in connection with such Transfer. "Notes" is defined in Section 1. "Officer's Certificate" shall mean a certificate of a Senior Financial Officer or of any other officer of the Company whose responsibilities extend to the subject matter of such certificate. "PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA or any successor thereto. B-8 66 "Person" shall mean an individual, partnership, corporation, limited liability company, association, trust, unincorporated organization, or a government or agency or political subdivision thereof. "Plan" shall mean an "employee benefit plan" (as defined in Section 3(3) of ERISA) that is or, within the preceding five years, has been established or maintained, or to which contributions are or, within the preceding five years, have been made or required to be made, by the Company or any ERISA Affiliate or with respect to which the Company or any ERISA Affiliate may have any liability. "Preferred Stock" shall mean any class of capital stock of a corporation that is preferred over any other class of capital stock of such corporation as to the payment of dividends or the payment of any amount upon liquidation or dissolution of such corporation. "Priority Debt" shall mean the sum of (a) all Debt of the Company secured by Liens permitted by Section 10.5(k), (b) all Debt of Subsidiaries permitted by Section 10.4(d), and (c) all Attributable Debt of the Company and its Subsidiaries permitted by Section 10.10(b). "property" or "properties" shall mean, unless otherwise specifically limited, real or personal property of any kind, tangible or intangible, choate or inchoate. "Property Reinvestment Application" shall mean, with respect to any Transfer of property, the application of an amount equal to the Net Proceeds Amount with respect to such Transfer to the acquisition by the Company or any Subsidiary of operating assets of the Company or any Subsidiary to be used in the principal business of such Person. "PTE" is defined in Section 6.2(a). "QPAM Exemption" shall mean Prohibited Transaction Class Exemption 84-14 issued by the United States Department of Labor. "Receivables Securitization Transaction" shall mean any transaction pursuant to which (a) accounts receivables are sold or transferred and (b) the seller either (1) retains an interest in the receivables so sold or transferred or (2) assumes any liability in connection with such sale or transfer. "Required Holders" shall mean, at any time, the holders of at least 51% in principal amount of the Notes at the time outstanding (exclusive of Notes then owned by the Company, any of its Subsidiaries or any of its Affiliates). "Responsible Officer" shall mean any Senior Financial Officer and any other officer of the Company with responsibility for the administration of the relevant portion of this Agreement. "Restricted Investments" (a) shall mean all Investments except the following: (1) property to be used in the ordinary course of business of the Company and its Subsidiaries; B-9 67 (2) current assets arising from the sale of goods and services in the ordinary course of business of the Company and its Subsidiaries; (3) Investments in one or more Subsidiaries or any Person that concurrently with such Investment becomes a Subsidiary; (4) Investments existing on the date of the Closing and disclosed in Schedule 5.16; (5) Investments permitted by the Company's "Investment Policy Guidelines" as in effect on the date hereof set forth on Exhibit 3 attached hereto and such additional Investments as may from time to time be permitted under the Company's investment policy guidelines; provided that the Required Holders shall have consented to such additional Investments; and (6) Investments in Wilder Construction, a Washington corporation, made after the date of Closing in an aggregate amount not to exceed $30,000,000. (b) As of any date of determination, each Restricted Investment shall be valued at the greater of: (1) the amount at which such Restricted Investment is shown on the books of the Company or any of its Subsidiaries (or zero if such Restricted Investment is not shown on any such books); and (2) either (i) in the case of any Guaranty of the obligation of any Person, the amount which the Company or any of its Subsidiaries has paid on account of such obligation less any recoupment by the Company or such Subsidiary of any such payments, or (ii) in the case of any other Restricted Investment, the excess of (A) the greater of (I) the amount originally entered on the books of the Company or any of its Subsidiaries with respect thereto and (II) the cost thereof to the Company or its Subsidiary over (B) any return of capital (after income taxes applicable thereto) upon such Restricted Investment through the sale or other liquidation thereof or part thereof or otherwise. (c) As used in this definition of "Restricted Investments": "Acceptable Bank" shall mean any bank or trust company (1) which is organized under the laws of the United States of America or any State thereof, (2) which has capital, surplus and undivided profits aggregating at least $250,000,000, and (3) whose long-term unsecured debt obligations (or the long-term unsecured debt obligations of the bank holding company owning all of the capital stock of such bank or trust company) are given one of the two highest ratings by Moody's or S&P or another credit rating agency of recognized national standing. "Moody's" shall mean Moody's Investors Service, Inc. B-10 68 "S&P" shall mean Standard & Poor's Ratings Services, a division of The McGraw Hill Companies, Inc. "United States Governmental Security" shall mean any direct obligation of, or obligation guaranteed by, the United States of America, or any agency controlled or supervised by or acting as an instrumentality of the United States of America pursuant to authority granted by the Congress of the United States of America, so long as such obligation or guarantee shall have the benefit of the full faith and credit of the United States of America which shall have been pledged pursuant to authority granted by the Congress of the United States of America. "Sale-and-Leaseback Transaction" shall mean a transaction or series of transactions pursuant to which the Company or any Subsidiary shall sell or transfer to any Person (other than the Company or a Subsidiary) any property, whether now owned or hereafter acquired, and, as part of the same transaction or series of transactions, the Company or any Subsidiary shall, within 180 days of such sale or transfer, rent or lease, as lessee, (other than pursuant to a Capital Lease), or similarly acquire the right to possession or use of, such property or one or more properties which it intends to use for the same purpose or purposes as such property. "Securities Act" means the Securities Act of 1933, as amended from time to time. "Security" has the meaning set forth in Section 2(1) of the Securities Act of 1933, as amended. "Senior Debt" shall mean all Debt of the Company, other than Subordinated Debt. "Senior Financial Officer" shall mean the chief financial officer, principal accounting officer, treasurer or controller of the Company. "Subordinated Debt" shall mean any Debt of the Company that is in any manner subordinated in right of payment or security in any respect to the Debt evidenced by the Notes. "Source" is defined in Section 6.2. "Subsidiary" shall mean, as to any Person, any corporation, association or other business entity in which such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such entity, and any partnership or joint venture if more than a 50% interest in the profits or capital thereof is owned by such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries (unless such partnership can and does ordinarily take major business actions without the prior approval of such Person or one or more of its Subsidiaries). Unless the context otherwise clearly requires, any reference to a "Subsidiary" is a reference to a Subsidiary of the Company. "Subsidiary Stock" shall mean, with respect to any Person, the stock (or any options or warrants to purchase stock or other Securities exchangeable for or convertible into stock) of any Subsidiary of such Person. "Successor Corporation" is defined in Section 10.7(d). B-11 69 "Swaps" shall mean, with respect to any Person, payment obligations with respect to interest rate swaps, currency swaps and similar obligations obligating such Person to make payments, whether periodically or upon the happening of a contingency. For the purposes of this Agreement, the amount of the obligation under any Swap shall be the amount determined in respect thereof as of the end of the then most recently ended fiscal quarter of such Person, based on the assumption that such Swap had terminated at the end of such fiscal quarter, and in making such determination, if any agreement relating to such Swap provides for the netting of amounts payable by and to such Person thereunder or if any such agreement provides for the simultaneous payment of amounts by and to such Person, then in each such case, the amount of such obligation shall be the net amount so determined. For purposes of this Agreement, any such interest rate swap, currency swap, or other similar obligation which is or will be entered into and is being or will be used by such Person in the ordinary course of its business to hedge an existing or future risk or exposure of such Person in respect of its liabilities or assets (and not for speculative purposes) shall not be deemed a "Swap" for purposes of this definition. "TIC" shall mean TIC Holdings, Inc., a Delaware corporation. "Transfer" shall mean, with respect to any Person, any transaction in which such Person sells, conveys, transfers or leases (as lessor) any of its property, including, without limitation, Subsidiary Stock. For purposes of determining the application of the Net Proceeds Amount in respect of any Transfer, the Company may designate any Transfer as one or more separate Transfers each yielding a separate Net Proceeds Amount. In any such case, (a) the Disposition Value of any property subject to each such separate Transfer and (b) the amount of Consolidated Total Assets attributable to any property subject to each such separate Transfer shall be determined by ratably allocating the aggregate Disposition Value of, and the aggregate Consolidated Total Assets attributable to, all property subject to all such separate Transfers to each such separate Transfer on a proportionate basis. "Wholly-Owned" when used in connection with any Subsidiary shall mean, at any time, any Subsidiary one hundred percent (100%) of all of the equity interests (except directors' qualifying shares) and voting interests of which are owned by any one or more of the Company and the Company's other Wholly-Owned Subsidiaries at such time. B-12 70 CHANGES IN CORPORATE STRUCTURE NONE SCHEDULE 4.9 (to Note Purchase Agreement) 71 DISCLOSURE MATERIALS NONE SCHEDULE 5.3 (to Note Purchase Agreement) 72 SUBSIDIARIES OF THE COMPANY AND OWNERSHIP OF SUBSIDIARY STOCK* 1. Subsidiaries - Organization and Capital Structure
OWNERSHIP BY JURISDICTION OF COMPANY AND/OR NAME ORGANIZATION CAPITAL STRUCTURE SUBSIDIARIES Granite Construction California Corporation 100% wholly owned Company* subsidiary of GCI Wilcott Corporation* Colorado Corporation 100% wholly owned subsidiary of GCI Granite Land Company* California Corporation 100% wholly owned subsidiary of GCI Granite SR 91 California Corporation 100% wholly owned Corporation* subsidiary of GCI Granite SR 91, L.P.* California Limited Partnership 99% limited partner of GCI and 1% general partner of Granite SR 91 Corporation GILC Incorporated* California Corporation 100% wholly owned subsidiary of GCI GILC, L.P.* California Limited Partnership 99% limited partner of GCC and 1% general partner of GILC Incorporated G.G. & R., Inc.* Utah Corporation 100% wholly owned subsidiary of GCI Intermountain Slurry Wyoming Corporation 100% wholly owned Seal, Inc.* subsidiary of G.G. & R., Inc. Pozzolan Products Utah Corporation 100% wholly owned Company* subsidiary of G.G. & R., Inc. GTC, Inc.* Texas Corporation 100% wholly owned subsidiary of GCI Granite Construction California Corporation 100% wholly owned International subsidiary of GCI Waters Ridge II Texas Limited Partnership 69% interest owned by GCI
- ------------ * Material Subsidiary SCHEDULE 5.4 (to Note Purchase Agreement) 73 Granite Mandalay Finance California Limited Liability Company 70% interest owned by GLC Granite/Kiewit (Tongue Montana Joint Venture 76% partnership River) interest by GCC Granite/Sundt (I-17) Arizona Joint Venture 55% partnership interest by GCC Minn.Transit Constrs Minnesota Joint Venture 56.5% partnership (Light Rail) interest by GCC Granite Rizzani Florida Joint Venture 60% partnership (Hathaway Bridge) interest by GCC River Mountain Arkansas Joint Venture 60% partnership Constructors interest by GCC Granite2 Sundt Arizona Joint Venture 65% partnership (Supersition Hwy) interest by GCC Granite/PCL (I-4 St Florida Joint Venture 64.6% partnership Johns River) interest by GCC
S-5.4-2 74 2. Affiliates - Organization and Capital Structure
OWNERSHIP BY JURISDICTION OF COMPANY AND/OR NAME ORGANIZATION CAPITAL STRUCTURE SUBSIDIARIES Paramount-Nevada California LLP 50% Interest owned by Asphalt GCI Wilders Construction Washington Minority Interest 46% Interest owned by GCI Company TIC Holdings, Inc. Delaware Minority Interest 30% Interest owned by GCI Williamson Ranch Plaza California LP 25% Interest owned by GLC Oly Mandalay Bay California LLC 9% Interest owned by GLC Granite Regional Park California LP 25% partnership interest by GLC CPTC L.P. California LLP 22% Interest owned by GCI Kiewit/Granite (TCA) California Joint Venture 30% partnership interest by GCC KG Leasing (TCA) California Joint Venture 30% partnership interest by GCC Kiewit/Granite California Joint Venture 25% partnership (East Dam) interest by GCC Kiewit/Granite/ Utah Joint Venture 23% partnership Washington(Wasatch) interest by GCC KGW Leasing (Wasatch) Utah Joint Venture 23% partnership interest by GCC Yonkers/Granite (Atlantic New Jersey Joint Venture 40% partnership City) interest by GCC Western Summit/TIC/ Granite Georgia Joint Venture 15% partnership (UTOY) interest by GCC Sampson/Granite (Cabrillo California Joint Venture 40% partnership College) interest by GCC Washington Granite California Joint Venture 40% partnership interest by GCC Las Vegas Monorail (Light Nevada Joint Venture 44.8% partnership Rail) interest by GCC
3. The Company's Directors and Officers
DIRECTORS OFFICERS Watts, David H. Watts, David H. Barclay, Joseph J. Dorey, William G.
S-5.4-3 75 Brooks, Richard M. Costanzo, Patrick M. Griego, Linda Barton, William E. Kelly, Brian C. Boitano, Mark E. McDonald, Rebecca Allbritton, R.C. Miles, Raymond E. Futch, Michael Niebla, J. F. Higdem, Garry M. Searle, George Roberts, James H. Thomas, Michael L. Grazian, David R. McCann-Jenni, Mary Cady, James
S-5.4-4 76 4. Agreements Restricting Dividend Payments NONE S-5.4-5 77 FINANCIAL STATEMENTS SEC Form 10-K for the fiscal years ended December 31, 1995 December 31, 1996 December 31, 1997 December 31, 1998 December 31, 1999 December 31, 2000 SEC Form 10-Q for the fiscal quarters ended September 30, 1999 September 30, 2000 SCHEDULE 5.5 (to Note Purchase Agreement) 78 CERTAIN LITIGATION NONE SCHEDULE 5.8 (to Note Purchase Agreement) 79 PATENTS, ETC. NONE SCHEDULE 5.11 (to Note Purchase Agreement) 80 USE OF PROCEEDS The proceeds from the sale of the Notes will be used to refinance existing Debt and for general corporate purposes. SCHEDULE 5.14 (to Note Purchase Agreement) 81 EXISTING DEBT
ITEM BALANCE NO. LENDER'S NAME DESCRIPTION INTEREST RATE MATURITY MAY 1, 2001 1. Benna Investments Aggregate 6.50% 04/14/02 $1,579,633 property 2. Benna Investments Real Estate 6.50% 12/01/07 1,438,937 property 3. Rosemary's Mountain Aggregate property 8.82% 06/01/01 1,700,000 4. Private Placement Due Refinance debt & 6.54% 03/15/10 60,000,000 03/15/10 general corporate purposes 5. Bank of America Letter Self insured 100.0 bps 04/30/02 1,562,962 of Credit Worker's Compensation 6. Bank of America Letter SR91 L.P. 50.0 bps 07/14/01 3,299,861 of Credit 7. Bank of America Letter Camino Columbia 87.5 bps 05/25/01 10,016,400 of Credit Toll Road (performance LC) 8. Raymond Flaschbarth Aggregate property 8.00% 05/12/01 260,000 9. Syndicated Bank Facility For general 5.50% 06/01/01 10,000,000 (Revolver) corporate purposes Total $89,857,793
SCHEDULE 5.15 (to Note Purchase Agreement) 82 EXISTING INVESTMENTS
MARKET VALUE COMPANY DESCRIPTIONS MARCH 31, 2001 Perini Corporation Common Stock $2,878 Vulcan Materials Company Common Stock 2,813 Cascade Corporation Common Stock 2,384 Paramount-Nevada Asphalt LLP 3,026,591 Wilder Construction Company Minority Interest 17,738,190 TIC Holdings, Inc. Minority Interest 21,899,250 Williamson Ranch Plaza LP 534,488 Oly Mandalay Bay LLC 1,695,357 Granite Regional Park LP 224,525 CPTC L.P./SR91 L.P. Joint Venture 1,239,835 Granite/Groves Joint Venture 184,893 Kiewit/Granite (TCA) Joint Venture 324,236 Kiewit/Granite (KG Leasing) Joint Venture 1,459,589 Kiewit/Granite (E. Dam) Joint Venture 385,438 Kiewit/Granite (Wasatch) Joint Venture 2,024,960 Kiewit/Granite (KGW Leasing) Joint Venture 6,698,970 Yonkers/Granite (Atlantic City) Joint Venture 11,464,330 Western Summit/TIC/Granite Joint Venture 109,351 Sampson/Granite Joint Venture 251,320 Washington Granite Joint Venture 0 Las Vegas Monorail (Light Rail) Joint Venture 0 Total $69,269,398
SCHEDULE 5.16 (to Note Purchase Agreement) 83 ENVIRONMENTAL MATTERS Granite Construction in the normal course of business utilizes petroleum (hydrocarbon) products which may be considered hazardous materials when encountered at regulatory levels established by the Federal EPA or the Regional State EPA. The utilization of these asphalt products, diesel, and gasoline over the years has the potential of creating exposure to environmental clean up requirements. All underground tanks meet current requirements. There is no pending governmental ordered clean up. However, the following represents estimates based on construction industry housekeeping practices as encountered during our normal course of business. Except as indicated with an "*", these costs do not represent actual identified exposures.
LOCATIONS DESCRIPTIONS AMOUNT Arvin, CA Asphalt Batch Plant $100,000 Arvin, CA Surface Spills 50,000 Bakersfield, CA Surface Spills 100,000 Bakersfield, CA Diesel Aboveground Storage Tanks 25,000 Bakersfield, CA Asphalt Batch Plant 100,000 Coalinga, CA Asphalt Batch Plant 50,000 Felton, Ca Asphalt Batch plant 200,000 French Camp, CA Diesel/Gasoline Underground Storage Tanks 100,000 Gardnerville, NV Surface Spills 25,000 Gardnerville, NV Asphalt Batch Plant 50,000 Indio, CA Massey Shop/Smitty's Garage Cleanup 50,000 Palmdale, CA Surface Spills 10,000 Palmdale, CA Asphalt Batch Plant 50,000 Patrick, NV Asphalt Batch Plant 75,000 Patrick, NV Surface Spills 50,000 Sacramento, CA Diesel/Gasoline Underground Storage Tanks 50,000 Sacramento, CA Asphalt Batch Plant 300,000 Sacramento, CA Surface Spills 200,000 Sacramento, CA Diesel Aboveground Storage Tanks 50,000 Sacramento, CA Shop Area Cleanup 50,000 Salinas, CA Surface Spills 250,000 Santa Barbara, CA Surface Spills 200,000 Santa Barbara, CA Diesel/Gasoline Underground Storage Tanks 75,000 Santa Barbara, CA Asphalt Batch Plant 50,000 Santa Cruz, CA Santa Cruz Yard Cleanup 250,000 Sparks, NV Diesel/Gasoline Underground Storage Tanks 100,000 Tracy, CA Asphalt Batch Plant 75,000 Tracy, CA Surface Spills 25,000 Tucson, AZ Surface Spills 25,000 Tucson, AZ Diesel/Gasoline Underground Storage Tanks 50,000 Watsonville, CA Diesel/Gasoline Underground Storage Tanks 150,000 Watsonville, CA Surface Spills 50,000 Webb, UT *Asphalt Batch Plant 500,000 Whitehall, UT *Asphalt Batch Plant 55,000 Salt Lake City, UT *Concrete Batch Plant 250,000 Salt Lake County, UT *Surface Spills 30,000 Weber County, UT (Ogden) *Surface Spills 100,000 Salt Lake County, UT (CPC) *Aggregate and smelter site 1,250,000 Cahoon, UT *Surface Spills 100,000 Fireclay Battery, UT *Surface Spills 25,000
SCHEDULE 5.18 (to Note Purchase Agreement) 84
LOCATIONS DESCRIPTIONS AMOUNT Total $5,295,000
S-5.18-2 85 FORM OF NOTE GRANITE CONSTRUCTION INCORPORATED 6.96% Senior Note due May 1, 2013 No.________ ___________, 20__ $____________ PPN 387328 A@ 6 FOR VALUE RECEIVED, the undersigned, GRANITE CONSTRUCTION INCORPORATED (herein called the "Company"), a corporation organized and existing under the laws of the State of Delaware, hereby promises to pay to _____________________ or registered assigns, the principal sum of ______________ DOLLARS on May 1, 2013 with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 6.96% per annum from the date hereof, payable semiannually, on the first day of May and November in each year, commencing with the May 1 or November 1 next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreement referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 8.96% or (ii) 2% over the rate of interest publicly announced by Bank of America from time to time in San Francisco, California as its "reference" rate. Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of Bank of America in Chicago, Illinois or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreement referred to below. This Note is one of a series of Senior Notes (herein called the "Notes") issued pursuant to that certain Note Purchase Agreement, dated as of May 1, 2001 (as from time to time amended, the "Note Purchase Agreement"), between the Company and each of the respective Purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement and (ii) to have made the representation set forth in Section 6.2 of the Note Purchase Agreement to the extent provided in Section 13.2 of the Note Purchase Agreement. This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. This Note and the holders hereof are entitled equally and ratably with the holders of all other Notes to the rights and benefits provided pursuant to the terms and provisions of the EXHIBIT 1 (to Note Purchase Agreement) 86 Guaranty Agreement (as such term is defined in the Note Purchase Agreement). Reference is hereby made to the Guaranty Agreement for a statement of the nature and extent of the benefits and security for the Notes afforded thereby and the rights of the holders of the Notes and the Company in respect thereof. The Company will make required prepayments of principal on the dates and in the amounts specified in the Note Purchase Agreement. This Note is also subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement, but not otherwise. If an Event of Default, as defined in the Note Purchase Agreement, exists, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreement. This Note shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of Illinois, excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. GRANITE CONSTRUCTION INCORPORATED By ------------------------------------- Its By ------------------------------------- Its E-1-2 87 GRANITE CONSTRUCTION INCORPORATED INVESTMENT POLICY GUIDELINES FOR WORKING CAPITAL PORTFOLIO EFFECTIVE: JANUARY 1, 2001 PURPOSE Within the spectrum of activities of this Corporation, it is necessary to provide a framework for the regular and continuous management of its investment funds. Short term and intermediate term investments provide earnings on excess cash while maintaining liquidity and working funds for the present and future operations. INVESTMENT OBJECTIVES In order to provide control of all investments and cash, the Corporation has established the following objectives regarding its investment policy: - - Safety - the primary objective of the investment activities of the Corporation is protection of capital. Each investment transaction shall seek to first ensure that capital losses are avoided, whether they are from securities defaults or erosion of market value. - - Liquidity - the investment portfolio must be structured in a manner that will provide sufficient liquidity to pay the obligations of the Corporation. Any excess cash above the aforementioned requirements may be invested in instruments with longer maturity. - - Diversification - the investment activity must ensure diversification of investments that minimizes risk exposure to any one security and/or issuer. - - Investment Return - the Corporation seeks to maximize the return on all investments within the constraints of safety and liquidity. DURATION The duration of the portfolio including escrows and deposits shall be consistent with the cash needs as determined by the cash forecast. Cash investments are restricted to the average duration of one (1) year from date of settlement. Any investments with longer maturity than one year must be invested in instruments issued by, guaranteed by, or insured by the U.S. Government or any of its agencies. The average portfolio duration of escrows and deposit agreements shall not exceed five (5) years. Short-term investments shall be defined as instruments maturing in ninety-one (91) days or more. MARKETABILITY Holdings should be of sufficient size and held in issues, which are traded actively (except time deposits, loan participation, and master notes) to facilitate transactions at minimum cost and accurate market valuations. TRADING The following individuals are authorized traders: EXHIBIT 3 (to Note Purchase Agreement) 88 [FORM OF SUBSIDIARY GUARANTY AGREEMENT] SUBSIDIARY GUARANTY AGREEMENT Dated as of May 1, 2001 Re: $75,000,000 6.96% Senior Notes Due May l, 2013 of Granite Construction Incorporated EXHIBIT 2 (to Note Purchase Agreement) 89 TABLE OF CONTENTS (Not a part of the Agreement)
Section Heading Page Parties 1 Recitals 1 SECTION 1 DEFINITIONS 2 SECTION 2. GUARANTY OF NOTES AND NOTE AGREEMENT 2 SECTION 3. GUARANTY OF PAYMENT AND PERFORMANCE 2 SECTION 4. GENERAL PROVISIONS RELATING TO THE GUARANTY 3 SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE GUARANTORS 8 SECTION 6 AMENDMENTS, WAMRS AND CONSENTS 12 SECTION 7 NOTICES 13 Signature 15 ATTACHMENTS TO SUBSIDIARY GUARANTY AGREEMENT: Exhibit A - Subsidiary Guaranty Supplement
90 SUBSIDIARY GUARANTY AGREEMENT Re: $75,000,000 6.96% Senior Notes Due May 1, 2013 of Granite Construction Incorporated This SUBSIDIARY GUARANTY AGREEMENT dated as of May 1, 2001 (the or this "Guaranty") is entered into on a joint and several basis by each of the undersigned, together with any entity which may become a party hereto by execution and delivery of a Subsidiary Guaranty Supplement in substantially the form set forth as Exhibit A hereto (a "Guaranty Supplement") (which parties are hereinafter referred to individually as a "Guarantor" and collectively as the "Guarantors"). RECITALS A. Each Guarantor is a subsidiary of Granite Construction incorporated, a Delaware corporation (the "Company"), and a Material Subsidiary (as defined in the hereinafter defined Note Agreement). B. "In order to refinance existing Debt (as defined in the Note Agreement) and for general corporate purposes, the Company has entered into that certain Note Purchase Agreement dated as of May 1, 2001 (the "Note Agreement") between the Company and each of the purchasers named on Schedule A attached to said Note Agreement (the "Initial Note Purchasers," together with their successors and assigns, the "Holders"), providing for, among other things, the issue and sale by the Company to the Initial Note Purchasers of the Company's 6.96% Senior Notes, due May 1, 2013 in the aggregate principal amount of $75,000,000 (the "Notes"). C. The initial Note Purchasers have required as a condition of their purchase of the Notes that the Company cause each of the undersigned to enter into this Guaranty and to cause each from time to time Material Subsidiary to enter into a Guaranty Supplement, in each case as security for the Notes, and the Company has agreed to cause each of the undersigned to execute this Guaranty and to cause each from time to time Material Subsidiary to execute a Guaranty Supplement, in each case in order to induce the Initial Note Purchasers to purchase the Notes and thereby benefit the Company and its Subsidiaries (as defined in the Note Agreement) by providing funds to enable the Company to refinance existing Debt and to enable the Company and its Subsidiaries to have funds available for general corporate purposes. NOW, THEREFORE, as required by Section 4.4 of the Note Agreement and in consideration of the premises and other good and valuable consideration, the receipt and 91 sufficiency whereof are hereby acknowledged, each Guarantor does hereby covenant and agree, jointly and severally, as follows: SECTION 1. DEFINITIONS. Capitalized terms used herein shall have the meanings set forth in the Note Agreement unless herein defined or the context shall otherwise require. SECTION 2. GUARANTY OF NOTES AND NOTE AGREEMENT. (a) Each Guarantor jointly and severally does hereby irrevocably, absolutely and unconditionally guarantee unto the Holders: (1) the full and prompt payment of the principal of, premium, if any, and interest on the Notes from time to time outstanding, as and when such payments shall become due and payable whether by lapse of time, upon redemption or prepayment, by extension or by acceleration or declaration or otherwise (including (to the extent legally enforceable) interest due on overdue payments of principal, premium, if any, or interest at the rate set forth in the Notes) in Federal or other immediately available funds of the United States of America which at the time of payment or demand therefor shall be legal tender for the payment of public and private debts, (2) the full and prompt performance and observance by the Company of each and all of the obligations, covenants and agreements required to be performed or owed by the Company under the terms of the Notes and the Note Agreement and (3) the full and prompt payment, upon demand by any Holder of all costs and expenses, legal or otherwise (including reasonable attorneys' fees), if any, as shall have been expended or incurred in the protection or enforcement of any rights, privileges or liabilities in favor of the Holders under or in respect of the Notes, the Note Agreement or under this Guaranty or in any consultation or action in connection therewith or herewith. (b) The liability of each Guarantor under this Guaranty shall not exceed an amount equal to a maximum amount as will, after giving effect to such maximum amount and all other liabilities of such Guarantor, contingent or otherwise, result in the obligations of such Guarantor hereunder not constituting a fraudulent transfer, obligation or conveyance. SECTION 3. GUARANTY OF PAYMENT AND PERFORMANCE. This is a guarantee of payment and performance and each Guarantor hereby waives, to the fullest extent permitted by law, any right to require that any action on or in respect of any Note or the Note Agreement be brought against the Company or any other Person or that resort be had to any direct or indirect security for the Notes or for this Guaranty or any other remedy. Any Holder may, at its option, proceed hereunder against any Guarantor in the first instance to collect monies when due, the payment of which is guaranteed hereby, without first proceeding against the Company or any other Person and without first resorting to any direct or indirect security for the Notes or for this Guaranty or any other remedy. The liability of each Guarantor hereunder shall in no way be affected or impaired by any acceptance by any Holder of any direct or indirect security for, or other guaranties of; any Debt, liability or obligation of the Company or any other Person to any Holder or by any failure, delay, neglect or omission by any Holder to realize upon E-2-2 92 or protect any such guarantees, Debt, liability or obligation or any notes or other instruments evidencing the same or any direct or indirect security therefor or by any approval, consent, waiver, or other action taken, or omitted to be taken by any such Holder. The covenants and agreements on the part of the Guarantors herein contained shall take effect as joint and several covenants and agreements, and references to the Guarantors shall take effect as references to each of them and none of them shall be released from liability hereunder by reason of the guarantee ceasing to be binding as a continuing security on any other of them. SECTION 4. GENERAL PROVISIONS RELATING TO THE GUARANTY. (a) Each Guarantor hereby consents and agrees that any Holder or Holders from time to time, with or without any further notice to or assent from any other Guarantor may, without in any manner affecting the liability of any Guarantor under this Guaranty, and upon such terms and conditions as any such Holder or Holders may deem advisable: (1) extend in whole or in part (by renewal or otherwise), modify, change, compromise, release or extend the duration of the time for the performance or payment of any Debt, liability or obligation of the Company or of any other Person secondarily or otherwise liable for any Debt, liability or obligations of the Company on the Notes, or waive any Default with respect thereto, or waive, modify, amend or change any provision of any other agreement or waive this Guaranty; or (2) sell, release, surrender, modify, impair, exchange or substitute any and all property, of any nature and from whomsoever received, held by, or for the benefit of, any such Holder as direct or indirect security for the payment or performance of any Debt, liability or obligation of the Company or of any other Person secondarily or otherwise liable for any Debt, liability or obligation of the Company on the Notes; or (3) settle, adjust or compromise any claim of the Company against any other Person secondarily or otherwise liable for any Debt, liability or obligation of the Company on the Notes. Each Guarantor hereby ratifies and confirms any such extension, renewal, change, sale, release, waiver, surrender, exchange, modification, amendment, impairment, substitution, settlement, adjustment or compromise and that the same shall be binding upon it, and hereby waives, to the fullest extent permitted by law, any and all defenses, counterclaims or offsets which it might or could have by reason thereof, it being understood that such Guarantor shall at all times be bound by this Guaranty and remain liable hereunder. (b) Each Guarantor hereby waives, to the fullest extent permitted by law: (1) notice of acceptance of this Guaranty by the Holders or of the creation, renewal or accrual of any liability of the Company, present or future, or of the reliance of such Holders upon this Guaranty (it being understood that every Debt, liability and E-2-3 93 obligation described in Section 2 hereof shall conclusively be presumed to have been created, contracted or incurred in reliance upon the execution of this Guaranty); (2) demand of payment by any Holder from the Company or any other Person indebted in any manner on or for any of the Debt, liabilities or obligations hereby guaranteed; and (3) presentment for the payment by any Holder or any other Person of the Notes or any other instrument, protest thereof and notice of its dishonor to any party thereto and to such Guarantor. The obligations of each Guarantor under this Guaranty and the rights of any Holder to enforce such obligations by any proceedings, whether by action at law, suit in equity or otherwise, shall not be subject to any reduction, limitation, impairment or termination, whether by reason of any claim of any character whatsoever or otherwise and shall not be subject to any defense, set-off, counterclaim (other than any compulsory counterclaim), recoupment or termination whatsoever. (c) The obligations of the Guarantors hereunder shall be binding upon the Guarantors and their successors and assigns, and shall remain in full force and effect irrespective of: (1) the genuineness, validity, regularity or enforceability of the Notes, the Note Agreement or any other agreement or any of the terms of any thereof; the continuance of any obligation on the part of the Company or any other Person on or in respect of the Notes or under the Note Agreement or any other agreement or the power or authority or the lack of power or authority of the Company to issue the Notes or the Company to execute and deliver the Note Agreement or any other agreement or of any Guarantor to execute and deliver this Guaranty or to perform any of its obligations hereunder or the existence or continuance of the Company or any other Person as a legal entity; or (2) any default, failure or delay, willful or otherwise, in the performance by the Company, any Guarantor or any other Person of any obligations of any kind or character whatsoever under the Notes, the Note Agreement, this Guaranty or any other agreement; or (3) any creditors' rights, bankruptcy, receivership or other insolvency proceeding of the Company, any Guarantor or any other Person or in respect of the property of the Company, any Guarantor or any other Person or any merger, consolidation, reorganization, dissolution, liquidation, the sale of all or substantially all of the assets of or winding up of the Company, any Guarantor or any other Person; or (4) impossibility or illegality of performance on the part of the Company, any Guarantor or any other Person of its obligations under the Notes, the Note Agreement, this Guaranty or any other agreements; or E-2-4 94 (5) in respect of the Company or any other Person, any change of circumstances, whether or not foreseen or foreseeable, whether or not imputable to the Company or any other Person, or other impossibility of performance through fire, explosion, accident, labor disturbance, floods, droughts, embargoes, wars (whether or not declared), civil commotion, acts of God or the public enemy, delays or failure of suppliers or carriers, inability to obtain materials, action of any Federal or state regulatory body or agency, change of law or any other causes affecting performance, or any other force majeure, whether or not beyond the control of the Company or any other Person and whether or not of the kind hereinbefore specified; or (6) any attachment, claim, demand, charge, Lien, order, process, encumbrance or any other happening or event or reason, similar or dissimilar to the foregoing, or any withholding or diminution at the source, by reason of any taxes, assessments, expenses, Debt, obligations or liabilities of any character, foreseen or unforeseen, and whether or not valid, incurred by or against the Company, any Guarantor or any other Person or any claims, demands, charges or Liens of any nature, foreseen or unforeseen, incurred by the Company, any Guarantor or any other Person, or against any sums payable in respect of the Notes or under the Note Agreement or this Guaranty, so that such sums would be rendered inadequate or would be unavailable to make the payments herein provided; or (7) any order, judgment, decree, ruling or regulation (whether or not valid) of any court of any nation or of any political subdivision thereof or any body, agency, department, official or administrative or regulatory agency of any thereof or any other action, happening, event or reason whatsoever which shall delay, interfere with, hinder or prevent, or in any way adversely affect, the performance by the Company, any Guarantor or any other Person of its respective obligations under or in respect of the Notes, the Note Agreement, this Guaranty or any other agreement; or (8) the failure of any Guarantor to receive any benefit from or as a result of its execution, delivery and performance of this Guaranty; or (9) any failure or lack of diligence in collection or protection, failure in presentment or demand for payment, protest, notice of protest, notice of default and of nonpayment, any failure to give notice to any Guarantor of failure of the Company, any Guarantor or any other Person to keep and perform any obligation, covenant or agreement under the terms of the Notes, the Note Agreement, this Guaranty or any other agreement or failure to resort for payment to the Company, any Guarantor or to any other Person or to any other guaranty or to any property, security, Liens or other rights or remedies; or (10) the acceptance of any additional security or other guaranty, the advance of additional money to the Company or any other Person, the renewal or extension of the Notes or amendments, modifications, consents or waivers with respect to the Notes, the Note Agreement or any other agreement, or the sale, release, substitution or exchange of any security for the Notes; or E-2-5 95 (11) any merger or consolidation of the Company, any Guarantor or any other Person into or with any other Person or any sale, lease, transfer or other disposition of any of the assets of the Company, any Guarantor or any other Person to any other Person, or any change in the ownership of any shares of the Company, any Guarantor or any other Person; or (12) any defense whatsoever that: (i) the Company or any other Person might have to the payment of the Notes (principal, premium, if any, or interest), other than payment thereof in Federal or other immediately available funds or (ii) the Company or any other Person might have to the performance or observance of any of the provisions of the Notes, the Note Agreement or any other agreement, whether through the satisfaction or purported satisfaction by the Company or any other Person of its debts due to any cause such as bankruptcy, insolvency, receivership, merger, consolidation, reorganization, dissolution, liquidation, winding-up or otherwise; or (13) any act or failure to act with regard to the Notes, the Note Agreement, this Guaranty or any other agreement or anything which might vary the risk of any Guarantor or any other Person; or (14) any other circumstance which might otherwise constitute a defense available to, or a discharge of, any Guarantor or any other Person in respect of the obligations of any Guarantor or other Person under this Guaranty or any other agreement; provided that the specific enumeration of the above-mentioned acts, failures or omissions shall not be deemed to exclude any other acts, failures or omissions, though not specifically mentioned above, it being the purpose and intent of this Guaranty and the parties hereto that the obligations of each Guarantor shall be absolute and unconditional and shall not be discharged, impaired or varied except by the payment of the principal of, premium, if any, and interest on the Notes in accordance with their respective terms whenever the same shall become due and payable as in the Notes provided, at the place specified in and all in the manner and with the effect provided in the Notes and the Note Agreement, as each may be amended or modified from time to time. Without limiting the foregoing, it is understood that repeated and successive demands may be made and recoveries may be had hereunder as and when, from time to time, the Company shall default under or in respect of the terms of the Notes or the Note Agreement and that notwithstanding recovery hereunder for or in respect of any given default or defaults by the Company under the Notes or the Note Agreement, this Guaranty shall remain in full force and effect and shall apply to each and every subsequent default. (d) All rights of any Holder may be transferred or assigned at any time and shall be considered to be transferred or assigned at any time or from time to time upon the transfer of such Note whether with or without the consent of or notice to the Guarantors under this Guaranty or to the Company. (e) To the extent of any payments made under this Guaranty, the Guarantors shall be subrogated to the rights of the Holder or Holders upon whose Notes such payment was made, but each Guarantor covenants and agrees that such right of subrogation shall be junior and E-2-6 96 subordinate in right of payment to the prior indefeasible final payment in cash in full of all amounts due and owing by the Company with respect to the Notes and the Note Agreement and by the Guarantors under this Guaranty, and the Guarantors shall not take any action to enforce such right of subrogation, and the Guarantors shall not accept any payment in respect of such right of subrogation, until all amounts due and owing by the Company under or in respect of the Notes and the Note Agreement and all amounts due and owing by the Guarantors hereunder have indefeasibly been finally paid in cash in full. If any amount shall be paid to any Guarantor in violation of the preceding sentence at any time prior to the later of the indefeasible payment in cash in full of the Notes and all other amounts payable under the Notes, the Note Agreement and this Guaranty, such amount shall be held in trust for the benefit of the Holders and shall forthwith be paid to the Holders to be credited and applied to the amounts due or to become due with respect to the Notes and all other amounts payable under the Note Agreement and this Guaranty, whether matured or unmatured. (f) Each Guarantor agrees that to the extent the Company or any other Person makes any payment on any Note, which payment or any part thereof is subsequently invalidated, voided, declared to be fraudulent or preferential, set aside, recovered, rescinded or is required to be retained by or repaid to a trustee, receiver, or any other Person under any bankruptcy code, common law, or equitable cause, then and to the extent of such payment, the obligation or the part thereof intended to be satisfied shall be revived and continued in full force and effect with respect to the Guarantors' obligations hereunder, as if said payment had not been made. The liability of the Guarantors hereunder shall not be reduced or discharged, in whole or in part, by any payment to any Holder from any source that is thereafter paid, returned or refunded in whole or in part by reason of the assertion of a claim of any kind relating thereto, including, but not limited to, any claim for breach of contract, breach of warranty, preference, illegality, invalidity or fraud asserted by any account debtor or by any other Person. (g) No Holder shall be under any obligation: (1) to marshall any assets in favor of the Guarantors or in payment of any or all of the liabilities of the Company under or in respect of the Notes or the obligations of the Guarantors hereunder or (2) to pursue any other remedy that the Guarantors may or may not be able to pursue themselves and that may lighten the Guarantors' burden, any right to which each Guarantor hereby expressly waives. SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE GUARANTORS. Each Guarantor represents and warrants to each Holder that: (a) Such Guarantor is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation or other legal entity and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a material adverse effect on (1) the business, operations, affairs, financial condition, assets, properties or prospects of such Guarantor and its subsidiaries, taken as a whole, or (2) the ability of such Guarantor to perform its obligations under this Guaranty or (3) the validity or enforceability of this Guaranty (herein in this Section 5, a "Material Adverse E-2-7 97 Effect"). Such Guarantor has the power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts and proposes to transact, to execute and deliver this Guaranty and to perform the provisions hereof. (b) Each subsidiary of such Guarantor is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation or other legal entity and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each subsidiary of such Guarantor has the power and authority to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact. (c) This Guaranty has been duly authorized by all necessary action on the part of such Guarantor, and this Guaranty constitutes a legal, valid and binding obligation of such Guarantor enforceable against such Guarantor in accordance with its terms, except as such enforceability may be limited by (1) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (2) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). (d) This Guaranty, the documents, certificates or other writings identified in Schedule 5.3 to the Note Agreement and the financial statements listed in Schedule 5.5 to the Note Agreement, taken as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made. Except as disclosed in the Memorandum or as expressly described in Schedule 5.3 to the Note Agreement, or in one of the documents, certificates or other writings identified therein, or in the financial statements listed in Schedule 5.5 to the Note Agreement, since December 31, 2000, there has been no adverse Material (as hereinafter defined) change in the financial condition, operations, business, properties or prospects of such Guarantor or any of its subsidiaries, taken as a whole. (e) The execution, delivery and performance by such Guarantor of this Guaranty will not (1) contravene, result in any breach of; or constitute a default under, or result in the creation of any Lien in respect of any property of such Guarantor or any of its subsidiaries under any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, charter document or by-law, or any other agreement or instrument to which such Guarantor or any of its subsidiaries is bound or by which such Guarantor or any of its subsidiaries or any of their respective -properties may be bound or affected, (2) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to such Guarantor or any of its subsidiaries or (3) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to such Guarantor or any of its subsidiaries. E-2-8 98 (f) No consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in connection with the execution, delivery or performance by such Guarantor of this Guaranty. (g) (1) Except as disclosed in Schedule 5.8 to the Note Agreement, there are no actions, suits or proceedings pending or, to the knowledge of such Guarantor, threatened against or affecting such Guarantor or any of its subsidiaries or any property of such Guarantor or any of its subsidiaries in any court or before any arbitrator of any kind or before or by any Governmental Authority that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. (2) Neither such Guarantor nor any of its subsidiaries is in default under any term of any agreement or instrument to which it is a party or by which it is bound, or any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in violation of any applicable law, ordinance, Rule or regulation (including without limitation Environmental Laws) of any Governmental Authority, which default or violation, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. (h) Such Guarantor and its subsidiaries have filed all income tax returns that are required to have been filed in any jurisdiction, and have paid all taxes shown to be due and payable on such returns and all other taxes and assessments payable by them, to the extent such taxes and assessments have become due and payable and before they have become delinquent, except for any taxes and assessments (1) the amount of which is not individually or in the aggregate material to the business, operations, affairs, financial condition, assets, properties or prospects of such Guarantor and its subsidiaries taken as a whole (herein in this Section 5, "Material") or (2) the amount, applicability or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which such Guarantor or one of its subsidiaries, as the case may be, has established adequate reserves in accordance with GAAP. Such Guarantor knows of no basis for any other tax or assessment that could reasonably be expected to have a Material Adverse Effect. The charges, accruals and reserves on the books of such Guarantor and its subsidiaries in respect of Federal, state or other taxes for all fiscal periods are adequate. The Federal income tax liabilities of such Guarantor and its subsidiaries have been determined by the Internal Revenue Service up to and including the fiscal year ended December 31, 1991 and the Federal income tax liabilities of such Guarantor and its subsidiaries have been paid for all fiscal years up to and including the fiscal year ended December 31, 1999. (i) Such Guarantor and its subsidiaries have good and sufficient title to their respective properties that individually or in the aggregate are Material, including all such properties reflected in the most recent audited balance sheet referred to in Section 5.5 of the Note Agreement or purported to have been acquired by such Guarantor or any of its subsidiaries after said date (except as sold or otherwise disposed of in the ordinary course of business), in each case free and clear of Liens prohibited by the Note Agreement. All leases that individually or in the aggregate are Material are valid and subsisting and are in full force and effect in all material respects. (j) Except as disclosed in Schedule 5.11 to the Note Agreement, E-2-9 99 (1) such Guarantor and its subsidiaries own or possess all Material licenses, permits, franchises, authorizations, patents, copyrights, service marks, trademarks and trade names, or rights thereto; (2) to the best knowledge of such Guarantor, no product of such Guarantor or any of its subsidiaries infringes in any material respect any license, permit, franchise, authorization, patent, copyright, service mark, trademark, trade name or other right with respect thereto owned by any other Person; and (3) to the best knowledge of such Guarantor, there is no Material violation by any Person of any right of such Guarantor or any of its subsidiaries with respect to any patent, copyright, service mark, trademark, trade name or other right with respect thereto owned or used by such Guarantor or any of its subsidiaries. (k) (1) Such Guarantor and each ERISA Affiliate have operated and administered each Plan in compliance with all applicable laws in all material respects. Neither such Guarantor nor any ERISA Affiliate has incurred any Material liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans (as defined in Section 3 of ERISA), and no event, transaction or condition has occurred or exists that could reasonably be expected to result in the incurrence of any such Material liability by such Guarantor or any ERISA Affiliate, or in the imposition of any Material Lien on any of the rights, properties or assets of such Guarantor or any ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions or to Section 401(a)(29) or 412 of the Code. (2) The present value of the aggregate benefit liabilities under each of the Plans (other than Multiemployer Plans), determined as of the end of such Plan's most recently ended plan year on the basis of the actuarial assumptions specified for funding purposes in such Plan's most recent actuarial valuation report, did not exceed the aggregate current value of the assets of such Plan allocable to such benefit liabilities by more than $5,000,000 in the aggregate for all Plans. The term "benefit liabilities" has the meaning specified in Section 4001 of ERISA and the terms "current value" and "present value" have the meanings specified in Section 3 of ERISA. (3) Such Guarantor and its ERISA Affiliates have not incurred Material withdrawal liabilities (and are not subject to Material contingent withdrawal liabilities) under Section 4201 or 4204 of ERISA in respect of Multiemployer Plans. (4) The expected postretirement benefit obligation (determined as of the last day of such Guarantor's most recently ended fiscal year in accordance with Financial Accounting Standards Board Statement No. 106, without regard to liabilities attributable to continuation coverage mandated by Section 4980B of the Code) of such Guarantor and its subsidiaries is not Material. (5) The execution and delivery of this Guaranty will not involve any transaction that is subject to the prohibitions of Section 406 of ERISA or in connection with E-2-10 100 which a tax could be imposed pursuant to Section 4975(c)(1)(A)-(D) of the Code. The representation by such Guarantor in the first sentence of this Section 5(k)(5) is made in reliance upon and subject to the accuracy of each Holder's representation in Section 6.2 of the Note Agreement as to the source of the funds to be used to pay the purchase price of the Notes to be purchased by such Holder. (l) Neither such Guarantor nor any of its subsidiaries is an "investment company" registered or required to be registered under the Investment Company Act of 1940, as amended, or is subject to regulation under the Public Utility Holding Company Act of 1935, as amended, the ICC Termination Act of 1995, as amended, or the Federal Power Act, as amended. (m) Neither such Guarantor nor any of its subsidiaries has knowledge of any Material claim or has received any notice of any Material claim, and no proceeding has been instituted raising any Material claim against such Guarantor or any of its subsidiaries or any of their respective real properties now or formerly owned, leased or operated by any of them or other assets, alleging any damage to the environment or violation of any Environmental Laws. Except as otherwise disclosed in Schedule 5.18 to the Note Agreement: (1) neither such Guarantor nor any of its subsidiaries has knowledge of any facts which would give rise to any Material claim, public or private, or Material violation of Environmental Laws or damage to the environment emanating from, occurring on or in any way related to real properties now or formerly owned, leased or operated by any of them or to other assets or their use; (2) neither the Company nor any of its subsidiaries (i) has stored any Hazardous Materials on real properties now or formerly owned, leased or operated by any of them or (ii) has disposed of any Hazardous Materials in a manner contrary to any Environmental Laws; in each case in any manner that could reasonably be expected to result in a Material Adverse Effect; and (3) all buildings on all real properties now owned, leased or operated by such Guarantor or any of its subsidiaries are in material compliance with applicable Environmental Laws. (n) Such Guarantor, when viewed on a consolidated basis with the Company and its other Subsidiaries, is solvent, has capital not unreasonably small in relation to its business or any contemplated or undertaken transaction and has assets having a value both at fair valuation and at present fair salable value greater than the amount required to pay its debts as they become due and greater than the amount that will be required to pay its probable liability on its existing debts as they become absolute and matured. Such Guarantor does not intend to incur, or believe or should have believed that it will incur, debts beyond its ability to pay such debts as they become due. Such Guarantor, when viewed on a consolidated basis with the Company and its other Subsidiaries, will not be rendered insolvent by the execution and delivery of' and performance of its obligations under, this Guaranty. Such Guarantor does not intend to hinder, delay or defraud its creditors by or through the execution and delivery of' or performance of its obligations under, this Guaranty. E-2-11 101 SECTION 6. AMENDMENTS, WAIVERS AND CONSENTS. (a) This Guaranty may be amended, and the observance of any term hereof may be waived (either retroactively or prospectively), with (and only with) the written consent of each Guarantor and the Required Holders, except that (1) no amendment or waiver of any of the provisions of Sections 3, 4 or 5, or any defined term (as it is used therein), will be effective as to any Holder unless consented to by such Holder in writing, and (2) no such amendment or waiver may, without the written consent of each Holder, (i) change the percentage of the principal amount of the Notes the Holders of which are required to consent to any such amendment or waiver, or (ii) amend Section 2 or this Section 6. (b) The Guarantors will provide each Holder (irrespective of the amount of Notes then owned by it) with sufficient information, sufficiently far in advance of the date a decision is required, to enable such Holder to make an informed and considered decision with respect to any proposed amendment, waiver or consent in respect of any of the provisions hereof. The Guarantors will deliver executed or true and correct copies of each amendment, waiver or consent effected pursuant to the provisions of this Section 6 to each Holder promptly following the date on which it is executed and delivered by, or receives the consent or approval of; the requisite Holders. (c) The Company will not directly or indirectly pay or cause to be paid any remuneration, whether by way of fee or otherwise, or grant any security, to any Holder as consideration for or as an inducement to the entering into by any Holder of any waiver or amendment of any of the terms and provisions hereof unless such remuneration is concurrently paid, or security is concurrently granted, on the same terms, ratably to each Holder even if such Holder did not consent to such waiver or amendment. (d) Any amendment or waiver consented to as provided in this Section 6 applies equally to all Holders and is binding upon them and upon each future holder and upon the Guarantors. No such amendment or waiver will extend to or affect any obligation, covenant or agreement not expressly amended or waived or impair any right consequent thereon. No course of dealing between the Guarantors and any Holder nor any delay in exercising any rights hereunder shall operate as a waiver of any rights of any Holder. As used herein, the term "this Guaranty" and references thereto shall mean this Guaranty as it may from time to time be amended or supplemented. (e) Solely for the purpose of determining whether the Holders of the requisite percentage of the aggregate principal amount of Notes then outstanding approved or consented to any amendment, waiver or consent to be given under this Guaranty, Notes directly or indirectly owned by any Guarantor, the Company or any of their respective subsidiaries or Affiliates shall be deemed not to be outstanding. E-2-12 102 SECTION 7. NOTICES. All notices and communications provided for hereunder shall be in writing and sent (a) by telefacsimile if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or (b) by registered or certified mail with return receipt requested (postage prepaid) or (c) by a recognized overnight delivery service (with charges prepaid). Any such notice must be sent: (1) if to an Initial Note Purchaser or such Initial Note Purchaser's nominee, to such initial Note Purchaser or such Initial Note Purchaser's nominee at the address specified for such communications below such Initial Note Purchaser's signature at the foot of the Note Agreement, or at such other address as such Initial Note Purchaser or such Initial Note Purchaser's nominee shall have specified to any Guarantor or the Company in writing, (2) if to any other Holder, to such Holder at such address as such Holder shall have specified to any Guarantor or the Company in writing, or (3) if to any Guarantor, to such Guarantor c/o the Company at its address set forth at the beginning of the Note Agreement to the attention of Chief Financial Officer, or at such other address as such Guarantor shall have specified to the Holders in writing. Notices under this Section 7 will be deemed given only when actually received. SECTION 8. MISCELLANEOUS. (a) No remedy herein conferred upon or reserved to any Holder is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Guaranty now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon any default, omission or failure of performance hereunder shall impair any such right or power or shall be construed to be a waiver thereof but any such right or power may be exercised from time to time and as often as may be deemed expedient. in order to entitle any Holder to exercise any remedy reserved to it under the Guaranty, it shall not be necessary for such Holder to physically produce its Note in any proceedings instituted by it or to give any notice, other than such notice as may be herein expressly required. (b) The Guarantors will pay all sums becoming due under this Guaranty by the method and at the address specified for such purpose below each Holder's signature at the foot of the Note Agreement, or by such other method or at such other address as any Holder shall have from time to time specified to the Guarantors in writing for such purpose, without the presentation or surrender of this Guaranty or any Note. (c) Any provision of this Guaranty that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or E-2-13 103 unenforceability without invalidating the remaining provisions hereof and any such prohibition or unenforceability in any jurisdiction shall (to the full extent permitted by law) not invalidate or render unenforceable such provision in any other jurisdiction. (d) If the whole or any part of this Guaranty shall be now or hereafter become unenforceable against any one or more of the Guarantors for any reason whatsoever or if it is not executed by any one or more of the Guarantors, this Guaranty shall nevertheless be and remain fully binding upon and enforceable against each other Guarantor as if it had been made and delivered only by such other Guarantors. (e) This Guaranty shall be binding upon each Guarantor and its successors and assigns and shall inure to the benefit of each Holder and its successors and assigns so long as its Notes remain outstanding and unpaid. (f) This Guaranty may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof each signed by less than all, but together signed by all, of the parties hereto. (g) This Guaranty shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of Illinois excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. E-2-14 104 IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be duly executed by an authorized representative as of this ______ day of May, 2001. GRANITE CONSTRUCTION COMPANY By _______________________________ Its By _______________________________ Its WILCOTT CORPORATION By _______________________________ Its By _______________________________ Its GRANITE LAND COMPANY By _______________________________ Its By _______________________________ Its E-2-15 105 GRANITE SR 91 CORPORATION By _______________________________ Its By _______________________________ Its INTERMOUNTAIN SLURRY SEAL, INC. By _______________________________ Its POZZOLAN PRODUCTS COMPANY By _______________________________ Its GILC INCORPORATED By _______________________________ Its By _______________________________ Its E-2-16 106 GRANITE SR 91, L.P. By: Granite SR 91 Corporation, its sole General Partner By _______________________________ Its By _______________________________ Its GILC, L.P. By: GILC Incorporated, its sole General Partner By _______________________________ Its By _______________________________ Its G.G.&R., INC. By _______________________________ Its By _______________________________ Its E-2-17 107 GTC, INC. By _______________________________ Its By _______________________________ Its E-2-18 108 SUBSIDIARY GUARANTY SUPPLEMENT To the Holders of the 6.96% Senior Notes due May 1, 2013 of Granite Construction Incorporated (the "Company") Ladies and Gentlemen: WHEREAS, in order to refinance existing indebtedness and for general corporate purposes, the Company issued its 6.96% Senior Notes due May 1, 3013 in the aggregate principal amount of $75,000,000 (the "Notes") pursuant to that certain Note Purchase Agreement dated as of May 1, 2001 (the "Note Agreement") between the Company and each of the purchasers named on Schedule A attached to said Note Agreement (the "Initial Note Purchasers"). WHEREAS, as a condition precedent to their purchase of the Notes, the Initial Note Purchasers required that certain from time to time subsidiaries of the Company enter into a Subsidiary Guaranty Agreement as security for the Notes (the "Subsidiary Guaranty"). Pursuant to Section 9.6 of the Note Agreement, the Company has agreed to cause the undersigned, _____________, a corporation organized under the laws of ________________ (the "Additional Guarantor"), to join in the Subsidiary Guaranty. In accordance with the requirements of the Subsidiary Guaranty, the Additional Guarantor desires to amend the definition of Guarantor (as the same may have been heretofore amended) set forth in the Subsidiary Guaranty attached hereto so that at all times from and after the date hereof, the Additional Guarantor shall be jointly and severally liable as set forth in the Subsidiary Guaranty for the obligations of the Company under the Note Agreement and Notes to the extent and in the manner set forth in the Subsidiary Guaranty. The undersigned is the duly elected ______________ of the Additional Guarantor, a subsidiary of the Company, and is duly authorized to execute and deliver this Guaranty Supplement to each of you. The execution by the undersigned of this Guaranty Supplement shall evidence its consent to and acknowledgment and approval of the terms set forth herein and in the Subsidiary Guaranty and by such execution the Additional Guarantor shall be Exhibit A (to Subsidiary Guaranty Agreement) 109 deemed to have made in favor of the Holders the representations and warranties set forth in Section 5 of the Subsidiary Guaranty. Upon execution of this Subsidiary Guaranty Supplement, the Subsidiary Guaranty shall be deemed to be amended as set forth above. Except as amended herein, the terms and provisions of the Subsidiary Guaranty are hereby ratified, confirmed and approved in all respects. Any and all notices, requests, certificates and other instruments (including the Notes) may refer to the Subsidiary Guaranty without making specific reference to this Subsidiary Guaranty Supplement, but nevertheless all such references shall be deemed to include this Subsidiary Guaranty Supplement unless the context shall otherwise require. Dated: __________________, 20__. [NAME OF ADDITIONAL GUARANTOR] By _________________________________ Its A-2 110 Roxane C. Allbritton, Vice President/Treasurer Jigisha Desai, Cash Manager Michael D. Kevorkian, Treasury Analyst Mary McCann-Jenni, Controller Any individual transaction conforming to the policy set forth herein or, any transaction of an Investment Manager not conforming to the respective Investment Manager's policy shall be approved by one of the following officers or, any transaction not conforming to the policy set forth herein must be approved by any two of the following officers: D. H. Watts W. E. Barton P. M. Costanzo W. G. Dorey M. E. Boitano DEALERS AND BANKS FOR TRADING The following institutions are authorized dealers: BA Securities Lehman Brothers Merrill Lynch Salomon Smith Barney All purchased investments will be delivered to Bank of New York for safekeeping and paid for upon receipt. SAFEKEEPING The banks designated as safekeeping depositories in order of choice are: Bank of America, Glendale, CA (Wentworth, Hauser & Violich) Bank of New York (BNY Western Trust Company) Each financial institution must provide timely confirmation/safekeeping receipts on all investment transactions and provide monthly transaction reports. ESCROW Escrows in lieu of retention are allowed at the following: Bank of America (formerly Nations Bank, Texas)* Bank One, Arizona* Comerica Bank* First Union Bank of North Carolina* Merrill Lynch Trust Company Nevada Highway Fund (State of Nevada Treasury)* SunTrust Bank, Georgia* Union Bank of California US Trust of California Zions Bank, Utah* *Required by Owner E-3-2 111 The types of investments will be guided by the terms of the escrow, but in all cases the investment will be governed by the investment policy. *Required by Owner. Banks not listed, but required by escrow agreement, will also be acceptable. REPORTING - - Daily - An investment transaction sheet, sequentially numbered will be processed for approval by an authorized offer. - - Weekly and Monthly - A portfolio will be provided to the President, Chief Operating Officer, Chief Financial Officer and all traders. - - Monthly - The fixed income portfolio will be monitored against the performance of Merrill Lynch U.S. Domestic Master 1-3 years index. - - For FASB 115 purposes, the Corporation classifies all fixed income investments as "Held to Maturity." E-3-3 112 GRANITE CONSTRUCTION INCORPORATED INVESTMENT POLICY GUIDELINES FOR WORKING CAPITAL PORTFOLIO EFFECTIVE: JANUARY 1, 2001
- -------------------------------------------------------------------------------------------------- ELIGIBLE INVESTMENTS MINIMUM CREDIT QUALITY CONCENTRATION CONCENTRATION BY BY PORTFOLIO ISSUER - -------------------------------------------------------------------------------------------------- Obligations issued by U.S. N/A No Maximum No Maximum Government limited to: U.S. Treasury Bills/Bonds/Notes - -------------------------------------------------------------------------------------------------- Obligations of agencies of N/A $ 5,000,000 or 40% the U.S. Government limited 10% of total to: portfolio (whichever is Federal Farm Credit Bank greater) Federal Home Loan Bank Federal Home Loan Mortgage Corp. Federal National Mortgage Association Student Loan Marketing Association - -------------------------------------------------------------------------------------------------- Obligations collateralized Fully collateralized by $ 5,000,000 or 25% by U.S. Government U.S. Gov't and Agency 10% of total securities limited to: securities included in portfolio these guidelines. (whichever is Repurchase Agreements Collateral value plus greater) Reverse Repurchase Agreements accrued interest must exceed and be maintained at level exceeding value of agreement. - -------------------------------------------------------------------------------------------------- Obligations issued by U.S. Limited to Top 25 U.S. $ 5,000,000 or 50% owned domestic commercial Banks by deposit and 10% of total banks limited to: assets. portfolio Short-Term rating of (whichever is Banker's Acceptance A-1/P-1, or greater) Certificate of Deposit Long-Term rating of AAA/NR or AA/Aa (at the time of purchase) - -------------------------------------------------------------------------------------------------- Obligations issued by U.S. Limited to Top 25 World $ 5,000,000 or 40% bank subsidiaries of Non Banks by deposit and 10% of total U.S. Bank limited to: assets. portfolio Short-Term rating of (whichever is Yankee Banker's Acceptance A-1/P-1, or greater) Yankee Certificates of Long-Term rating of Deposit AAA/NR or AA/Aa (all securities U.S. dollar (at the time of purchase) denominated) - --------------------------------------------------------------------------------------------------
E-3-4 113 GRANITE CONSTRUCTION INCORPORATED INVESTMENT POLICY GUIDELINES FOR WORKING CAPITAL PORTFOLIO EFFECTIVE: JANUARY 1, 2001
- -------------------------------------------------------------------------------------------------- ELIGIBLE INVESTMENTS MINIMUM CREDIT QUALITY CONCENTRATION CONCENTRATION BY BY PORTFOLIO ISSUER - -------------------------------------------------------------------------------------------------- Obligations of major U.S. Any TWO of three rating $5,000,000 or 10% 75% corporations and U.S. services: of total holding companies limited to: A-1/P-1/D-1 portfolio S&P, Moody's, Duff & (whichever is Commercial Paper Phelps greater) (at the time of purchase) Any split-rated of three $5,000,000 or 10% 30% of Overall rating services: A1/P2, of Commercial Commercial Paper A2/P1 Paper portfolio portfolio S&P, Moody's, Duff & (whichever is or Phelps greater) 22.5% of Total (at the time of purchase) Portfolio Must be publicly traded Corporation Must have at least $20B in Market Capitalization (at the time of purchase) Any TWO of three rating $5,000,000 or 10% 20% of Overall services: of Commercial Commercial Paper A-2/P-2/D-2 S&P, Paper portfolio portfolio Moody's, Duff & Phelps (whichever is or Must be publicly traded greater) 15% of Total Corporation Portfolio Must have at least $20B in Market Capitalization (at the time of purchase) Loan Participation Same as commercial paper $5,000,000 or 25% Master Notes credit quality 10% of total requirements portfolio (whichever is greater) - -------------------------------------------------------------------------------------------------- Money Market Funds Any TWO of three rating $5,000,000 or 50% services: AAAm/Aaa/AAA 10% of total S&P, Moody's, Duff & portfolio Phelps (whichever is (at the time of purchase) greater) - -------------------------------------------------------------------------------------------------- Tax-exempt investments S&P: A-1, AA or better, $5,000,000 or 25% limited to: Sp-1 10% of total AND portfolio Commercial Paper Moody's: P-1, Aa or (whichever is Floating Rate Put Bonds better, VMIG-1 greater) Floating Rate Put Notes Municipal Notes Municipal Bonds - --------------------------------------------------------------------------------------------------
E-3-5 114 GRANITE CONSTRUCTION INCORPORATED INVESTMENT POLICY GUIDELINES FOR HIGH-YIELD PORTFOLIO EFFECTIVE: FEBRUARY 1, 2001 STATEMENT OF PURPOSE Cash is the major source of working capital for the present and future operations of Granite. Managing the cash to ensure the liquidity necessary to meet Granite's business needs is of paramount importance. Any cash balances above those necessary for day-to-day working capital requirements are available for longer-term investments. These investments can be held for a longer interval to enhance the portfolio yield, and add diversification, without loosing sight of capital preservation within this policy's guidelines. INVESTMENT OBJECTIVES The investment objective of this portfolio is to seek consistency of investment return with emphasis on capital appreciation and secondarily capital preservation with a goal of either equaling or exceeding the Composite Policy Index. The Composite Policy Index is defined, as an Index comprised of several indices corresponding to the various mutual funds being used in this portfolio as per the asset allocation study. Therefore, the investment objectives are: - Investment Return: Optimize the investment returns within the constraints of this policy. - Safety: Emphasize preservation of capital assets over economic business cycles. - Diversification: - Provide investments in mutual fund companies that have sufficient number of funds with different investment characteristics. - Select funds from mutual fund companies that provide a balanced investment approach that can be diversified among the major assets classes and will provide sufficiently varied risk/return characteristics (see Exhibit A). PERFORMANCE MEASUREMENT GUIDELINES Normally, investment performance should be judged over a complete economic cycle (typically 3 to 5 years). Since short-term results are not usually meaningful, true investment success will be looked at as a long-term proposition. To accomplish this, the performance measurement guidelines are: - - To manage the concentration in any one class of mutual funds, the portfolio will be invested based on an asset allocation study prepared by an outside investment advisory firm and managed accordingly. Periodically, the Composite Policy Index will be modified to coincide to the most recent asset allocation study. - - To invest in funds that will have ratings from Morningstar of 3, 4, or 5 and will be comparable in performance to the respective indices, e.g. growth fund index, growth and income index, etc. (see Exhibit B) - - To determine if the investment guidelines are being followed, a review of fund performance will be prepared each quarter by an outside investment advisory firm. The review will take into consideration overall economic conditions as well as the risk and return objectives of these guidelines. MARKETABILITY E-3-6 115 Investments should be of sufficient size and be held in issues, which are traded actively to facilitate transactions at minimum cost and accurate market valuations. TRADING The following individuals are authorized traders: Roxane C. Allbritton, Vice President/Treasurer Jigisha Desai, Cash Manager Michael D. Kevorkian, Treasury Analyst Mary McCann-Jenni, Controller Any individual transaction conforming to the policy set forth herein shall be approved by one of the following officers or, any transaction not conforming to the policy set forth herein must be approved by any two of the following officers: D. H. Watts W. E. Barton P.M. Costanzo W. G. Dorey M. E. Boitano MUTUAL FUNDS The following mutual funds are authorized: Franklin Small Cap Fund Loomis Sayles Pimco Bond Fund Putnam Mutual Funds All purchased investments will be delivered to the custodian bank for safekeeping and paid for upon receipt. SAFEKEEPING The institutions designated as a safekeeping depository are: Fleet Bank Merrill Lynch The custodian bank must provide timely confirmation/safekeeping receipts on all investment transactions and provide monthly transaction reports. REPORTING - Daily - Upon a settlement of trade, an investment transaction sheet, sequentially numbered will be processed for approval by an authorized officer. - Monthly and quarterly - Financial reporting requirements for GAAP. E-3-7 116 - Monthly - The mutual fund portfolio will be evaluated based on a unit-based performance analysis and will be distributed to the President, Chief Operating Officer, Chief Financial Officer and all traders. - Quarterly - A risk-adjusted performance analysis and a composite policy index analysis of funds will be prepared by an outside advisory firm. - Quarterly - An asset allocation status, indicating out of balance funds rebalancing (if any) that is required. - An outside firm will do an asset allocation study every three (3) years. - For FASB 115 purposed, the Corporation classifies mutual fund investments as "Available for Sale." E-3-8 117 FORM OF OPINION OF GENERAL COUNSEL TO THE COMPANY AND THE GUARANTORS The closing opinion of Michael Futch, Esq., General Counsel for the Company and the Guarantors, which is called for by Section 4.5(a) of the Agreement, shall be dated the date of the Closing and addressed to each Purchaser, shall be satisfactory in scope and form to each Purchaser and shall be to the effect that: 1. The Company is duly licensed or qualified and is in good standing as a foreign corporation in each jurisdiction in which the character of the properties owned or leased by it or the nature of the business transacted by it makes such licensing or qualification necessary. 2. Each Subsidiary which is not organized under the laws of the State of California (the "Non-California Subsidiaries") is a corporation or other business entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and is duly licensed or qualified and is in good standing in each jurisdiction in which the character of the properties owned or leased by it or the nature of the business transacted by it makes such licensing or qualification. 3. The issuance and sale of the Notes and the execution, delivery and performance by the Company of the Agreement do not conflict with or result in any breach of any of the provisions of or constitute a default under or result in the creation or imposition of any Lien upon any of the property of the Company pursuant to the provisions of any agreement or other instrument to which the Company is a party or by which the Company may be bound. 4. The execution, delivery and performance by each Guarantor of the Guaranty Agreement do not conflict with or result in any breach of any of the provisions of or constitute a default under or result in the creation or imposition of any Lien upon any of the property of such Guarantor pursuant to the provisions of any agreement or other instrument to which such Guarantor is a party or by which such Guarantor may be bound. The opinion of Michael Futch, Esq., shall cover such other matters relating to the sale of the Notes as any Purchaser may reasonably request. With respect to matters of fact on which such opinion is based, such counsel shall be entitled to rely on appropriate certificates of public officials and officers of the Company and the Guarantors. EXHIBIT 4.5(a) (to Note Purchase Agreement) 118 FORM OF OPINION OF SPECIAL COUNSEL TO THE COMPANY AND THE GUARANTORS The closing opinion of Gray Cary Ware & Freidenrich, special counsel for the Company and the Guarantors, which is called for by Section 4.5(b) of the Agreement, shall be dated the date of the Closing and addressed to each Purchaser, shall be satisfactory in scope and form to each Purchaser and shall be to the effect that: 1. The Company is a corporation, duly incorporated, validly existing and in good standing under the laws of the State of Delaware, has the corporate power and the corporate authority to execute and perform the Agreement and to issue the Notes and has the full corporate power and the corporate authority to conduct the activities in which it is now engaged and is duly licensed or qualified and is in qualification as a foreign corporation in California. 2. Each Subsidiary organized under the laws of the State of California (the "California Subsidiaries") is a corporation or other business entity duly organized, validly existing and in good standing under the laws of the State of California. Each Subsidiary is duly licensed or qualified and is in good standing in each jurisdiction in which the character of the properties owned or leased by it or the nature of the business transacted by it makes such licensing or qualification necessary. All of the issued and outstanding shares of capital stock or other equity interests of each Subsidiary have been duly issued, are fully paid and non-assessable and are owned by the Company, by one or more Subsidiaries, or by the Company and one or more Subsidiaries. 3. The Agreement has been duly authorized by all necessary corporate action on the part of the Company, has been duly executed and delivered by the Company and constitutes the legal, valid and binding contract of the Company enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance and similar laws affecting creditors' rights generally, and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law). 4. The Notes have been duly authorized by all necessary corporate action on the part of the Company, have been duly executed and delivered by the Company and constitute the legal, valid and binding obligations of the Company enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent conveyance and similar laws affecting creditors' rights generally, and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law). 5. No approval, consent or withholding of objection on the part of, or filing, registration or qualification with, any governmental body, Federal or state, is necessary in connection with the execution and delivery by the Company of the Agreement or the Notes. EXHIBIT 4.5(b) (to Note Purchase Agreement) 119 6. The issuance and sale of the Notes and the execution, delivery and performance by the Company of the Agreement do not conflict with or result in any breach of any of the provisions of or constitute a default under or result in the creation or imposition of any Lien upon any of the property of the Company pursuant to the provisions of the Certificate of Incorporation or By-laws of the Company or any agreement or other instrument known to such counsel to which the Company is a party or by which the Company may be bound. 7. Each Guarantor has the power and the authority to execute, deliver and perform the Guaranty Agreement and has the full power and the authority to conduct the activities in which it is now engaged. 8. The Guaranty Agreement has been duly authorized by all necessary action on the part of each Guarantor, has been duly executed and delivered by each Guarantor and constitutes the legal, valid and binding contract of each Guarantor enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance and similar laws affecting creditors' rights generally, and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law). 9. No approval, consent or withholding of objection on the part of, or filing, registration or qualification with, any governmental body, Federal or state, is necessary in connection with the execution and delivery by any Guarantor of the Guaranty Agreement. 10. The execution, delivery and performance by each Guarantor of the Guaranty Agreement do not conflict with or result in any breach of any of the provisions of or constitute a default under or result in the creation or imposition of any Lien upon any of the property of such Guarantor pursuant to the provisions of the charter documents or by-laws of such Guarantor or any agreement or other instrument known to such counsel to which such Guarantor is a party or by which such Guarantor may be bound. 11. The issuance, sale and delivery of the Notes and the issuance and delivery of the Guaranty Agreement under the circumstances contemplated by the Agreement do not, under existing law, require the registration of the Notes or the Guaranty Agreement under the Securities Act or the qualification of an indenture under the Trust Indenture Act of 1939, as amended. The opinion of Gray Cary Ware & Freidenrich shall cover such other matters relating to the sale of the Notes as any Purchaser may reasonably request. With respect to matters of fact on which such opinion is based, such counsel shall be entitled to rely on appropriate certificates of public officials and officers of the Company and the Guarantors. E-4.5(b)-2 120 FORM OF OPINION OF SPECIAL COUNSEL TO THE PURCHASERS The closing opinion of Schiff Hardin & Waite, special counsel to the Purchasers, called for by Section 4.5(c) of the Agreement, shall be dated the date of the Closing and addressed to the Purchasers, shall be satisfactory in form and substance to the Purchasers and shall be to the effect that: 1. The Company is a corporation, validly existing and in good standing under the laws of the State of Delaware and has the corporate power and the corporate authority to execute and deliver the Agreement and to issue the Notes. 2. The Agreement has been duly authorized by all necessary corporate action on the part of the Company, has been duly executed and delivered by the Company and constitutes the legal, valid and binding contract of the Company enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance and similar laws affecting creditors' rights generally, and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law). 3. The Notes have been duly authorized by all necessary corporate action on the part of the Company, and the Notes being delivered on the date hereof have been duly executed and delivered by the Company and constitute the legal, valid and binding obligations of the Company enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent conveyance and similar laws affecting creditors' rights generally, and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law). 4. The issuance, sale and delivery of the Notes under the circumstances contemplated by the Agreement do not, under existing law, require the registration of the Notes under the Securities Act or the qualification of an indenture under the Trust Indenture Act of 1939, as amended. The opinion of Schiff Hardin & Waite shall also state that the opinions of Michael Futch, Esq., and Gray Cary Ware & Freidenrich are satisfactory in scope and form to Schiff Hardin & Waite and that, in their opinion, the Purchasers are justified in relying thereon. In rendering the opinion set forth in paragraph 1 above, Schiff Hardin & Waite may rely, as to matters referred to in paragraph 1, solely upon an examination of the Certificate of Incorporation certified by, and a certificate of good standing of the Company from, the Secretary of State of the State of Delaware, the By-laws of the Company and the general business corporation law of the State of Delaware. The opinion of Schiff Hardin & Waite is limited to the laws of the State of Illinois, the general business corporation law of the State of Delaware and the Federal laws of the United States. With respect to matters of fact upon which such opinion is based, Schiff Hardin & Waite may rely on appropriate certificates of public officials and officers of the Company and upon representations of the Company and the Purchasers delivered in connection with the issuance and sale of the Notes. EXHIBIT 4.5(c) (to Note Purchase Agreement) 121 GRANITE CONSTRUCTION INCORPORATED 6.96% Senior Note due May 1, 2013 No. R-1 May 14, 2001 $10,000,000 PPN 387328 A@ 6 FOR VALUE RECEIVED, the undersigned, GRANITE CONSTRUCTION INCORPORATED (herein called the "Company"), a corporation organized and existing under the laws of the State of Delaware, hereby promises to pay to NATIONWIDE LIFE INSURANCE COMPANY or registered assigns, the principal sum of TEN MILLION DOLLARS on May 1, 2013 with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 6.96% per annum from the date hereof, payable semiannually, on the first day of May and November in each year, commencing with the May 1 or November 1 next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreement referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 8.96% or (ii) 2% over the rate of interest publicly announced by Bank of America from time to time in San Francisco, California as its "reference" rate. Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of Bank of America in Chicago, Illinois or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreement referred to below. This Note is one of a series of Senior Notes (herein called the "Notes") issued pursuant to that certain Note Purchase Agreement, dated as of May 1, 2001 (as from time to time amended, the "Note Purchase Agreement"), between the Company and each of the respective Purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement and (ii) to have made the representation set forth in Section 6.2 of the Note Purchase Agreement to the extent provided in Section 13.2 of the Note Purchase Agreement. This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. 122 This Note and the holders hereof are entitled equally and ratably with the holders of all other Notes to the rights and benefits provided pursuant to the terms and provisions of the Guaranty Agreement (as such term is defined in the Note Purchase Agreement). Reference is hereby made to the Guaranty Agreement for a statement of the nature and extent of the benefits and security for the Notes afforded thereby and the rights of the holders of the Notes and the Company in respect thereof. The Company will make required prepayments of principal on the dates and in the amounts specified in the Note Purchase Agreement. This Note is also subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement, but not otherwise. If an Event of Default, as defined in the Note Purchase Agreement, exists, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreement. This Note shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of Illinois, excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. GRANITE CONSTRUCTION INCORPORATED By /s/ WILLIAM E. BARTON ------------------------------------- Its Senior Vice President By /s/ R. C. ALLBRITTON ------------------------------------- Its Treasurer -2- 123 GRANITE CONSTRUCTION INCORPORATED 6.96% Senior Note due May 1, 2013 No. R-2 May 14, 2001 $5,000,000 PPN 387328 A@ 6 FOR VALUE RECEIVED, the undersigned, GRANITE CONSTRUCTION INCORPORATED (herein called the "Company"), a corporation organized and existing under the laws of the State of Delaware, hereby promises to pay to NATIONWIDE INDEMNITY COMPANY or registered assigns, the principal sum of FIVE MILLION DOLLARS on May 1, 2013 with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 6.96% per annum from the date hereof, payable semiannually, on the first day of May and November in each year, commencing with the May 1 or November 1 next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreement referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 8.96% or (ii) 2% over the rate of interest publicly announced by Bank of America from time to time in San Francisco, California as its "reference" rate. Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of Bank of America in Chicago, Illinois or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreement referred to below. This Note is one of a series of Senior Notes (herein called the "Notes") issued pursuant to that certain Note Purchase Agreement, dated as of May 1, 2001 (as from time to time amended, the "Note Purchase Agreement"), between the Company and each of the respective Purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement and (ii) to have made the representation set forth in Section 6.2 of the Note Purchase Agreement to the extent provided in Section 13.2 of the Note Purchase Agreement. This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. 124 This Note and the holders hereof are entitled equally and ratably with the holders of all other Notes to the rights and benefits provided pursuant to the terms and provisions of the Guaranty Agreement (as such term is defined in the Note Purchase Agreement). Reference is hereby made to the Guaranty Agreement for a statement of the nature and extent of the benefits and security for the Notes afforded thereby and the rights of the holders of the Notes and the Company in respect thereof. The Company will make required prepayments of principal on the dates and in the amounts specified in the Note Purchase Agreement. This Note is also subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement, but not otherwise. If an Event of Default, as defined in the Note Purchase Agreement, exists, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreement. This Note shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of Illinois, excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. GRANITE CONSTRUCTION INCORPORATED By /s/ WILLIAM E. BARTON ------------------------------------- William E. Barton Its Senior Vice President By /s/ R. C. ALLBRITTON ------------------------------------- R. C. Allbritton Its Treasurer -2- 125 GRANITE CONSTRUCTION INCORPORATED 6.96% Senior Note due May 1, 2013 No. R-3 May 14, 2001 $4,000,000 PPN 387328 A@ 6 FOR VALUE RECEIVED, the undersigned, GRANITE CONSTRUCTION INCORPORATED (herein called the "Company"), a corporation organized and existing under the laws of the State of Delaware, hereby promises to pay to NATIONWIDE MUTUAL FIRE INSURANCE COMPANY or registered assigns, the principal sum of FOUR MILLION DOLLARS on May 1, 2013 with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 6.96% per annum from the date hereof, payable semiannually, on the first day of May and November in each year, commencing with the May 1 or November 1 next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreement referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 8.96% or (ii) 2% over the rate of interest publicly announced by Bank of America from time to time in San Francisco, California as its "reference" rate. Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of Bank of America in Chicago, Illinois or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreement referred to below. This Note is one of a series of Senior Notes (herein called the "Notes") issued pursuant to that certain Note Purchase Agreement, dated as of May 1, 2001 (as from time to time amended, the "Note Purchase Agreement"), between the Company and each of the respective Purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement and (ii) to have made the representation set forth in Section 6.2 of the Note Purchase Agreement to the extent provided in Section 13.2 of the Note Purchase Agreement. This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the 126 purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. This Note and the holders hereof are entitled equally and ratably with the holders of all other Notes to the rights and benefits provided pursuant to the terms and provisions of the Guaranty Agreement (as such term is defined in the Note Purchase Agreement). Reference is hereby made to the Guaranty Agreement for a statement of the nature and extent of the benefits and security for the Notes afforded thereby and the rights of the holders of the Notes and the Company in respect thereof. The Company will make required prepayments of principal on the dates and in the amounts specified in the Note Purchase Agreement. This Note is also subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement, but not otherwise. If an Event of Default, as defined in the Note Purchase Agreement, exists, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreement. This Note shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of Illinois, excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. GRANITE CONSTRUCTION INCORPORATED By /s/ WILLIAM E. BARTON ------------------------------------- Its Senior Vice President By /s/ R. C. ALLBRITTON ------------------------------------- Its Treasurer -2- 127 GRANITE CONSTRUCTION INCORPORATED 6.96% Senior Note due May 1, 2013 No. R-4 May 14, 2001 $3,000,000 PPN 387328 A@ 6 FOR VALUE RECEIVED, the undersigned, GRANITE CONSTRUCTION INCORPORATED (herein called the "Company"), a corporation organized and existing under the laws of the State of Delaware, hereby promises to pay to NATIONWIDE MUTUAL INSURANCE COMPANY or registered assigns, the principal sum of THREE MILLION DOLLARS on May 1, 2013 with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 6.96% per annum from the date hereof, payable semiannually, on the first day of May and November in each year, commencing with the May 1 or November 1 next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreement referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 8.96% or (ii) 2% over the rate of interest publicly announced by Bank of America from time to time in San Francisco, California as its "reference" rate. Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of Bank of America in Chicago, Illinois or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreement referred to below. This Note is one of a series of Senior Notes (herein called the "Notes") issued pursuant to that certain Note Purchase Agreement, dated as of May 1, 2001 (as from time to time amended, the "Note Purchase Agreement"), between the Company and each of the respective Purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement and (ii) to have made the representation set forth in Section 6.2 of the Note Purchase Agreement to the extent provided in Section 13.2 of the Note Purchase Agreement. This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. 128 This Note and the holders hereof are entitled equally and ratably with the holders of all other Notes to the rights and benefits provided pursuant to the terms and provisions of the Guaranty Agreement (as such term is defined in the Note Purchase Agreement). Reference is hereby made to the Guaranty Agreement for a statement of the nature and extent of the benefits and security for the Notes afforded thereby and the rights of the holders of the Notes and the Company in respect thereof. The Company will make required prepayments of principal on the dates and in the amounts specified in the Note Purchase Agreement. This Note is also subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement, but not otherwise. If an Event of Default, as defined in the Note Purchase Agreement, exists, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreement. This Note shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of Illinois, excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. GRANITE CONSTRUCTION INCORPORATED By /s/ WILLIAM E. BARTON ------------------------------------- Its Senior Vice President By /s/ R. C. ALLBRITTON ------------------------------------- Its Treasurer -2- 129 GRANITE CONSTRUCTION INCORPORATED 6.96% Senior Note due May 1, 2013 No. R-5 May 14, 2001 $3,300,000 PPN 387328 A@ 6 FOR VALUE RECEIVED, the undersigned, GRANITE CONSTRUCTION INCORPORATED (herein called the "Company"), a corporation organized and existing under the laws of the State of Delaware, hereby promises to pay to CIG & CO. or registered assigns, the principal sum of THREE MILLION THREE HUNDRED THOUSAND DOLLARS on May 1, 2013 with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 6.96% per annum from the date hereof, payable semiannually, on the first day of May and November in each year, commencing with the May 1 or November 1 next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreement referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 8.96% or (ii) 2% over the rate of interest publicly announced by Bank of America from time to time in San Francisco, California as its "reference" rate. Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of Bank of America in Chicago, Illinois or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreement referred to below. This Note is one of a series of Senior Notes (herein called the "Notes") issued pursuant to that certain Note Purchase Agreement, dated as of May 1, 2001 (as from time to time amended, the "Note Purchase Agreement"), between the Company and each of the respective Purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement and (ii) to have made the representation set forth in Section 6.2 of the Note Purchase Agreement to the extent provided in Section 13.2 of the Note Purchase Agreement. This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. 130 This Note and the holders hereof are entitled equally and ratably with the holders of all other Notes to the rights and benefits provided pursuant to the terms and provisions of the Guaranty Agreement (as such term is defined in the Note Purchase Agreement). Reference is hereby made to the Guaranty Agreement for a statement of the nature and extent of the benefits and security for the Notes afforded thereby and the rights of the holders of the Notes and the Company in respect thereof. The Company will make required prepayments of principal on the dates and in the amounts specified in the Note Purchase Agreement. This Note is also subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement, but not otherwise. If an Event of Default, as defined in the Note Purchase Agreement, exists, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreement. This Note shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of Illinois, excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. GRANITE CONSTRUCTION INCORPORATED By /s/ WILLIAM E. BARTON ------------------------------------- Its Senior Vice President By /s/ R. C. ALLBRITTON ------------------------------------- Its Treasurer -2- 131 GRANITE CONSTRUCTION INCORPORATED 6.96% Senior Note due May 1, 2013 No. R-6 May 14, 2001 $3,500,000 PPN 387328 A@ 6 FOR VALUE RECEIVED, the undersigned, GRANITE CONSTRUCTION INCORPORATED (herein called the "Company"), a corporation organized and existing under the laws of the State of Delaware, hereby promises to pay to CIG & CO. or registered assigns, the principal sum of THREE MILLION FIVE HUNDRED THOUSAND DOLLARS on May 1, 2013 with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 6.96% per annum from the date hereof, payable semiannually, on the first day of May and November in each year, commencing with the May 1 or November 1 next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreement referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 8.96% or (ii) 2% over the rate of interest publicly announced by Bank of America from time to time in San Francisco, California as its "reference" rate. Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of Bank of America in Chicago, Illinois or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreement referred to below. This Note is one of a series of Senior Notes (herein called the "Notes") issued pursuant to that certain Note Purchase Agreement, dated as of May 1, 2001 (as from time to time amended, the "Note Purchase Agreement"), between the Company and each of the respective Purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement and (ii) to have made the representation set forth in Section 6.2 of the Note Purchase Agreement to the extent provided in Section 13.2 of the Note Purchase Agreement. This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. 132 This Note and the holders hereof are entitled equally and ratably with the holders of all other Notes to the rights and benefits provided pursuant to the terms and provisions of the Guaranty Agreement (as such term is defined in the Note Purchase Agreement). Reference is hereby made to the Guaranty Agreement for a statement of the nature and extent of the benefits and security for the Notes afforded thereby and the rights of the holders of the Notes and the Company in respect thereof. The Company will make required prepayments of principal on the dates and in the amounts specified in the Note Purchase Agreement. This Note is also subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement, but not otherwise. If an Event of Default, as defined in the Note Purchase Agreement, exists, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreement. This Note shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of Illinois, excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. GRANITE CONSTRUCTION INCORPORATED By /s/ WILLIAM E. BARTON ------------------------------------- Its Senior Vice President By /s/ R. C. ALLBRITTON ------------------------------------- Its Treasurer -2- 133 GRANITE CONSTRUCTION INCORPORATED 6.96% Senior Note due May 1, 2013 No. R-7 May 14, 2001 $1,000,000 PPN 387328 A@ 6 FOR VALUE RECEIVED, the undersigned, GRANITE CONSTRUCTION INCORPORATED (herein called the "Company"), a corporation organized and existing under the laws of the State of Delaware, hereby promises to pay to CIG & CO. or registered assigns, the principal sum of ONE MILLION DOLLARS on May 1, 2013 with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 6.96% per annum from the date hereof, payable semiannually, on the first day of May and November in each year, commencing with the May 1 or November 1 next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreement referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 8.96% or (ii) 2% over the rate of interest publicly announced by Bank of America from time to time in San Francisco, California as its "reference" rate. Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of Bank of America in Chicago, Illinois or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreement referred to below. This Note is one of a series of Senior Notes (herein called the "Notes") issued pursuant to that certain Note Purchase Agreement, dated as of May 1, 2001 (as from time to time amended, the "Note Purchase Agreement"), between the Company and each of the respective Purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement and (ii) to have made the representation set forth in Section 6.2 of the Note Purchase Agreement to the extent provided in Section 13.2 of the Note Purchase Agreement. This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. 134 This Note and the holders hereof are entitled equally and ratably with the holders of all other Notes to the rights and benefits provided pursuant to the terms and provisions of the Guaranty Agreement (as such term is defined in the Note Purchase Agreement). Reference is hereby made to the Guaranty Agreement for a statement of the nature and extent of the benefits and security for the Notes afforded thereby and the rights of the holders of the Notes and the Company in respect thereof. The Company will make required prepayments of principal on the dates and in the amounts specified in the Note Purchase Agreement. This Note is also subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement, but not otherwise. If an Event of Default, as defined in the Note Purchase Agreement, exists, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreement. This Note shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of Illinois, excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. GRANITE CONSTRUCTION INCORPORATED By /s/ WILLIAM E. BARTON ------------------------------------- Its Senior Vice President By /s/ R. C. ALLBRITTON ------------------------------------- Its Treasurer -2- 135 GRANITE CONSTRUCTION INCORPORATED 6.96% Senior Note due May 1, 2013 No. R-8 May 14, 2001 $3,000,000 PPN 387328 A@ 6 FOR VALUE RECEIVED, the undersigned, GRANITE CONSTRUCTION INCORPORATED (herein called the "Company"), a corporation organized and existing under the laws of the State of Delaware, hereby promises to pay to CIG & CO. or registered assigns, the principal sum of THREE MILLION DOLLARS on May 1, 2013 with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 6.96% per annum from the date hereof, payable semiannually, on the first day of May and November in each year, commencing with the May 1 or November 1 next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreement referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 8.96% or (ii) 2% over the rate of interest publicly announced by Bank of America from time to time in San Francisco, California as its "reference" rate. Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of Bank of America in Chicago, Illinois or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreement referred to below. This Note is one of a series of Senior Notes (herein called the "Notes") issued pursuant to that certain Note Purchase Agreement, dated as of May 1, 2001 (as from time to time amended, the "Note Purchase Agreement"), between the Company and each of the respective Purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement and (ii) to have made the representation set forth in Section 6.2 of the Note Purchase Agreement to the extent provided in Section 13.2 of the Note Purchase Agreement. This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. 136 This Note and the holders hereof are entitled equally and ratably with the holders of all other Notes to the rights and benefits provided pursuant to the terms and provisions of the Guaranty Agreement (as such term is defined in the Note Purchase Agreement). Reference is hereby made to the Guaranty Agreement for a statement of the nature and extent of the benefits and security for the Notes afforded thereby and the rights of the holders of the Notes and the Company in respect thereof. The Company will make required prepayments of principal on the dates and in the amounts specified in the Note Purchase Agreement. This Note is also subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement, but not otherwise. If an Event of Default, as defined in the Note Purchase Agreement, exists, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreement. This Note shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of Illinois, excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. GRANITE CONSTRUCTION INCORPORATED By /s/ WILLIAM E. BARTON ------------------------------------- Its Senior Vice President By /s/ R. C. ALLBRITTON ------------------------------------- Its Treasurer -2- 137 GRANITE CONSTRUCTION INCORPORATED 6.96% Senior Note due May 1, 2013 No. R-9 May 14, 2001 $1,200,000 PPN 387328 A@ 6 FOR VALUE RECEIVED, the undersigned, GRANITE CONSTRUCTION INCORPORATED (herein called the "Company"), a corporation organized and existing under the laws of the State of Delaware, hereby promises to pay to CIG & CO. or registered assigns, the principal sum of ONE MILLION TWO HUNDRED THOUSAND DOLLARS on May 1, 2013 with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 6.96% per annum from the date hereof, payable semiannually, on the first day of May and November in each year, commencing with the May 1 or November 1 next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreement referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 8.96% or (ii) 2% over the rate of interest publicly announced by Bank of America from time to time in San Francisco, California as its "reference" rate. Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of Bank of America in Chicago, Illinois or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreement referred to below. This Note is one of a series of Senior Notes (herein called the "Notes") issued pursuant to that certain Note Purchase Agreement, dated as of May 1, 2001 (as from time to time amended, the "Note Purchase Agreement"), between the Company and each of the respective Purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement and (ii) to have made the representation set forth in Section 6.2 of the Note Purchase Agreement to the extent provided in Section 13.2 of the Note Purchase Agreement. This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. 138 This Note and the holders hereof are entitled equally and ratably with the holders of all other Notes to the rights and benefits provided pursuant to the terms and provisions of the Guaranty Agreement (as such term is defined in the Note Purchase Agreement). Reference is hereby made to the Guaranty Agreement for a statement of the nature and extent of the benefits and security for the Notes afforded thereby and the rights of the holders of the Notes and the Company in respect thereof. The Company will make required prepayments of principal on the dates and in the amounts specified in the Note Purchase Agreement. This Note is also subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement, but not otherwise. If an Event of Default, as defined in the Note Purchase Agreement, exists, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreement. This Note shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of Illinois, excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. GRANITE CONSTRUCTION INCORPORATED By /s/ WILLIAM E. BARTON ------------------------------------- Its Senior Vice President By /s/ R. C. ALLBRITTON ------------------------------------- Its Treasurer -2- 139 GRANITE CONSTRUCTION INCORPORATED 6.96% Senior Note due May 1, 2013 No. R-10 May 14, 2001 $10,000,000 PPN 387328 A@ 6 FOR VALUE RECEIVED, the undersigned, GRANITE CONSTRUCTION INCORPORATED (herein called the "Company"), a corporation organized and existing under the laws of the State of Delaware, hereby promises to pay to CIG & CO. or registered assigns, the principal sum of TEN MILLION DOLLARS on May 1, 2013 with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 6.96% per annum from the date hereof, payable semiannually, on the first day of May and November in each year, commencing with the May 1 or November 1 next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreement referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 8.96% or (ii) 2% over the rate of interest publicly announced by Bank of America from time to time in San Francisco, California as its "reference" rate. Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of Bank of America in Chicago, Illinois or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreement referred to below. This Note is one of a series of Senior Notes (herein called the "Notes") issued pursuant to that certain Note Purchase Agreement, dated as of May 1, 2001 (as from time to time amended, the "Note Purchase Agreement"), between the Company and each of the respective Purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement and (ii) to have made the representation set forth in Section 6.2 of the Note Purchase Agreement to the extent provided in Section 13.2 of the Note Purchase Agreement. This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. 140 This Note and the holders hereof are entitled equally and ratably with the holders of all other Notes to the rights and benefits provided pursuant to the terms and provisions of the Guaranty Agreement (as such term is defined in the Note Purchase Agreement). Reference is hereby made to the Guaranty Agreement for a statement of the nature and extent of the benefits and security for the Notes afforded thereby and the rights of the holders of the Notes and the Company in respect thereof. The Company will make required prepayments of principal on the dates and in the amounts specified in the Note Purchase Agreement. This Note is also subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement, but not otherwise. If an Event of Default, as defined in the Note Purchase Agreement, exists, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreement. This Note shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of Illinois, excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. GRANITE CONSTRUCTION INCORPORATED By /s/ WILLIAM E. BARTON ------------------------------------- Its Senior Vice President By /s/ R. C. ALLBRITTON ------------------------------------- Its Treasurer -2- 141 GRANITE CONSTRUCTION INCORPORATED 6.96% Senior Note due May 1, 2013 No. R-11 May 14, 2001 $9,000,000 PPN 387328 A@ 6 FOR VALUE RECEIVED, the undersigned, GRANITE CONSTRUCTION INCORPORATED (herein called the "Company"), a corporation organized and existing under the laws of the State of Delaware, hereby promises to pay to ALLSTATE LIFE INSURANCE COMPANY or registered assigns, the principal sum of NINE MILLION DOLLARS on May 1, 2013 with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 6.96% per annum from the date hereof, payable semiannually, on the first day of May and November in each year, commencing with the May 1 or November 1 next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreement referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 8.96% or (ii) 2% over the rate of interest publicly announced by Bank of America from time to time in San Francisco, California as its "reference" rate. Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of Bank of America in Chicago, Illinois or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreement referred to below. This Note is one of a series of Senior Notes (herein called the "Notes") issued pursuant to that certain Note Purchase Agreement, dated as of May 1, 2001 (as from time to time amended, the "Note Purchase Agreement"), between the Company and each of the respective Purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement and (ii) to have made the representation set forth in Section 6.2 of the Note Purchase Agreement to the extent provided in Section 13.2 of the Note Purchase Agreement. This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. 142 This Note and the holders hereof are entitled equally and ratably with the holders of all other Notes to the rights and benefits provided pursuant to the terms and provisions of the Guaranty Agreement (as such term is defined in the Note Purchase Agreement). Reference is hereby made to the Guaranty Agreement for a statement of the nature and extent of the benefits and security for the Notes afforded thereby and the rights of the holders of the Notes and the Company in respect thereof. The Company will make required prepayments of principal on the dates and in the amounts specified in the Note Purchase Agreement. This Note is also subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement, but not otherwise. If an Event of Default, as defined in the Note Purchase Agreement, exists, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreement. This Note shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of Illinois, excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. GRANITE CONSTRUCTION INCORPORATED By /s/ WILLIAM E. BARTON ------------------------------------- Its Senior Vice President By /s/ R. C. ALLBRITTON ------------------------------------- Its Treasurer -2- 143 GRANITE CONSTRUCTION INCORPORATED 6.96% Senior Note due May 1, 2013 No. R-12 May 14, 2001 $9,000,000 PPN 387328 A@ 6 FOR VALUE RECEIVED, the undersigned, GRANITE CONSTRUCTION INCORPORATED (herein called the "Company"), a corporation organized and existing under the laws of the State of Delaware, hereby promises to pay to ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK or registered assigns, the principal sum of NINE MILLION DOLLARS on May 1, 2013 with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 6.96% per annum from the date hereof, payable semiannually, on the first day of May and November in each year, commencing with the May 1 or November 1 next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreement referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 8.96% or (ii) 2% over the rate of interest publicly announced by Bank of America from time to time in San Francisco, California as its "reference" rate. Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of Bank of America in Chicago, Illinois or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreement referred to below. This Note is one of a series of Senior Notes (herein called the "Notes") issued pursuant to that certain Note Purchase Agreement, dated as of May 1, 2001 (as from time to time amended, the "Note Purchase Agreement"), between the Company and each of the respective Purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement and (ii) to have made the representation set forth in Section 6.2 of the Note Purchase Agreement to the extent provided in Section 13.2 of the Note Purchase Agreement. This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the 144 purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. This Note and the holders hereof are entitled equally and ratably with the holders of all other Notes to the rights and benefits provided pursuant to the terms and provisions of the Guaranty Agreement (as such term is defined in the Note Purchase Agreement). Reference is hereby made to the Guaranty Agreement for a statement of the nature and extent of the benefits and security for the Notes afforded thereby and the rights of the holders of the Notes and the Company in respect thereof. The Company will make required prepayments of principal on the dates and in the amounts specified in the Note Purchase Agreement. This Note is also subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement, but not otherwise. If an Event of Default, as defined in the Note Purchase Agreement, exists, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreement. This Note shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of Illinois, excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. GRANITE CONSTRUCTION INCORPORATED By /s/ WILLIAM E. BARTON ------------------------------------- Its Senior Vice President By /s/ R. C. ALLBRITTON ------------------------------------- Its Treasurer -2- 145 GRANITE CONSTRUCTION INCORPORATED 6.96% Senior Note due May 1, 2013 No. R-13 May 14, 2001 $6,000,000 PPN 387328 A@ 6 FOR VALUE RECEIVED, the undersigned, GRANITE CONSTRUCTION INCORPORATED (herein called the "Company"), a corporation organized and existing under the laws of the State of Delaware, hereby promises to pay to UNITED OF OMAHA LIFE INSURANCE COMPANY or registered assigns, the principal sum of SIX MILLION DOLLARS on May 1, 2013 with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 6.96% per annum from the date hereof, payable semiannually, on the first day of May and November in each year, commencing with the May 1 or November 1 next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreement referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 8.96% or (ii) 2% over the rate of interest publicly announced by Bank of America from time to time in San Francisco, California as its "reference" rate. Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of Bank of America in Chicago, Illinois or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreement referred to below. This Note is one of a series of Senior Notes (herein called the "Notes") issued pursuant to that certain Note Purchase Agreement, dated as of May 1, 2001 (as from time to time amended, the "Note Purchase Agreement"), between the Company and each of the respective Purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement and (ii) to have made the representation set forth in Section 6.2 of the Note Purchase Agreement to the extent provided in Section 13.2 of the Note Purchase Agreement. This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. 146 This Note and the holders hereof are entitled equally and ratably with the holders of all other Notes to the rights and benefits provided pursuant to the terms and provisions of the Guaranty Agreement (as such term is defined in the Note Purchase Agreement). Reference is hereby made to the Guaranty Agreement for a statement of the nature and extent of the benefits and security for the Notes afforded thereby and the rights of the holders of the Notes and the Company in respect thereof. The Company will make required prepayments of principal on the dates and in the amounts specified in the Note Purchase Agreement. This Note is also subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement, but not otherwise. If an Event of Default, as defined in the Note Purchase Agreement, exists, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreement. This Note shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of Illinois, excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. GRANITE CONSTRUCTION INCORPORATED By /s/ WILLIAM E. BARTON ------------------------------------- Its Senior Vice President By /s/ R. C. ALLBRITTON ------------------------------------- Its Treasurer -2- 147 GRANITE CONSTRUCTION INCORPORATED 6.96% Senior Note due May 1, 2013 No. R-14 May 14, 2001 $2,000,000 PPN 387328 A@ 6 FOR VALUE RECEIVED, the undersigned, GRANITE CONSTRUCTION INCORPORATED (herein called the "Company"), a corporation organized and existing under the laws of the State of Delaware, hereby promises to pay to COMPANION LIFE INSURANCE COMPANY or registered assigns, the principal sum of TWO MILLION DOLLARS on May 1, 2013 with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 6.96% per annum from the date hereof, payable semiannually, on the first day of May and November in each year, commencing with the May 1 or November 1 next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreement referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 8.96% or (ii) 2% over the rate of interest publicly announced by Bank of America from time to time in San Francisco, California as its "reference" rate. Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of Bank of America in Chicago, Illinois or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreement referred to below. This Note is one of a series of Senior Notes (herein called the "Notes") issued pursuant to that certain Note Purchase Agreement, dated as of May 1, 2001 (as from time to time amended, the "Note Purchase Agreement"), between the Company and each of the respective Purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement and (ii) to have made the representation set forth in Section 6.2 of the Note Purchase Agreement to the extent provided in Section 13.2 of the Note Purchase Agreement. This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. 148 This Note and the holders hereof are entitled equally and ratably with the holders of all other Notes to the rights and benefits provided pursuant to the terms and provisions of the Guaranty Agreement (as such term is defined in the Note Purchase Agreement). Reference is hereby made to the Guaranty Agreement for a statement of the nature and extent of the benefits and security for the Notes afforded thereby and the rights of the holders of the Notes and the Company in respect thereof. The Company will make required prepayments of principal on the dates and in the amounts specified in the Note Purchase Agreement. This Note is also subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement, but not otherwise. If an Event of Default, as defined in the Note Purchase Agreement, exists, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreement. This Note shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of Illinois, excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. GRANITE CONSTRUCTION INCORPORATED By /s/ WILLIAM E. BARTON ------------------------------------- Its Senior Vice President By /s/ R. C. ALLBRITTON ------------------------------------- Its Treasurer -2- 149 GRANITE CONSTRUCTION INCORPORATED 6.96% Senior Note due May 1, 2013 No. R-15 May 14, 2001 $5,000,000 PPN 387328 A@ 6 FOR VALUE RECEIVED, the undersigned, GRANITE CONSTRUCTION INCORPORATED (herein called the "Company"), a corporation organized and existing under the laws of the State of Delaware, hereby promises to pay to LUTHERAN BROTHERHOOD or registered assigns, the principal sum of FIVE MILLION DOLLARS on May 1, 2013 with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 6.96% per annum from the date hereof, payable semiannually, on the first day of May and November in each year, commencing with the May 1 or November 1 next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreement referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 8.96% or (ii) 2% over the rate of interest publicly announced by Bank of America from time to time in San Francisco, California as its "reference" rate. Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of Bank of America in Chicago, Illinois or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreement referred to below. This Note is one of a series of Senior Notes (herein called the "Notes") issued pursuant to that certain Note Purchase Agreement, dated as of May 1, 2001 (as from time to time amended, the "Note Purchase Agreement"), between the Company and each of the respective Purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement and (ii) to have made the representation set forth in Section 6.2 of the Note Purchase Agreement to the extent provided in Section 13.2 of the Note Purchase Agreement. This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. 150 This Note and the holders hereof are entitled equally and ratably with the holders of all other Notes to the rights and benefits provided pursuant to the terms and provisions of the Guaranty Agreement (as such term is defined in the Note Purchase Agreement). Reference is hereby made to the Guaranty Agreement for a statement of the nature and extent of the benefits and security for the Notes afforded thereby and the rights of the holders of the Notes and the Company in respect thereof. The Company will make required prepayments of principal on the dates and in the amounts specified in the Note Purchase Agreement. This Note is also subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement, but not otherwise. If an Event of Default, as defined in the Note Purchase Agreement, exists, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreement. This Note shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of Illinois, excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. GRANITE CONSTRUCTION INCORPORATED By /s/ WILLIAM E. BARTON ------------------------------------- Its Senior Vice President By /s/ R. C. ALLBRITTON ------------------------------------- Its Treasurer -2- EX-10.4 8 f74922ex10-4.txt EXHIBIT 10.4 1 EXHIBIT 10.4 EXECUTION COPY ================================================================================ SUBSIDIARY GUARANTY AGREEMENT Dated as of May 1, 2001 Re: $75,000,000 6.96% Senior Notes -------------------------------------------------------- Due May 1, 2013 of Granite Construction Incorporated ================================================================================ 2 TABLE OF CONTENTS (Not a part of the Agreement)
Section Heading Page Parties......................................................................................1 Recitals.....................................................................................1 SECTION 1 DEFINITIONS............................................................2 SECTION 2. GUARANTY OF NOTES AND NOTE AGREEMENT...................................2 SECTION 3. GUARANTY OF PAYMENT AND PERFORMANCE....................................2 SECTION 4. GENERAL PROVISIONS RELATING TO THE GUARANTY............................3 SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE GUARANTORS.......................8 SECTION 6. AMENDMENTS, WAIVERS AND CONSENTS......................................12 SECTION 7. NOTICES...............................................................13 Signature...................................................................................15
ATTACHMENTS TO SUBSIDIARY GUARANTY AGREEMENT: Exhibit A -- Subsidiary Guaranty Supplement 3 SUBSIDIARY GUARANTY AGREEMENT Re: $75,000,000 6.96% Senior Notes Due May 1, 2013 of Granite Construction Incorporated ----------------------------------------------------------------------- This SUBSIDIARY GUARANTY AGREEMENT dated as of May 1, 2001 (the or this "Guaranty") is entered into on a joint and several basis by each of the undersigned, together with any entity which may become a party hereto by execution and delivery of a Subsidiary Guaranty Supplement in substantially the form set forth as Exhibit A hereto (a "Guaranty Supplement") (which parties are hereinafter referred to individually as a "Guarantor" and collectively as the "Guarantors"). RECITALS A. Each Guarantor is a subsidiary of Granite Construction Incorporated, a Delaware corporation (the "Company"), and a Material Subsidiary (as defined in the hereinafter defined Note Agreement). B. In order to refinance existing Debt (as defined in the Note Agreement) and for general corporate purposes, the Company has entered into that certain Note Purchase Agreement dated as of May 1, 2001 (the "Note Agreement") between the Company and each of the purchasers named on Schedule A attached to said Note Agreement (the "Initial Note Purchasers," together with their successors and assigns, the "Holders"), providing for, among other things, the issue and sale by the Company to the Initial Note Purchasers of the Company's 6.96% Senior Notes, due May 1, 2013 in the aggregate principal amount of $75,000,000 (the "Notes"). C. The Initial Note Purchasers have required as a condition of their purchase of the Notes that the Company cause each of the undersigned to enter into this Guaranty and to cause each from time to time Material Subsidiary to enter into a Guaranty Supplement, in each case as security for the Notes, and the Company has agreed to cause each of the undersigned to execute this Guaranty and to cause each from time to time Material Subsidiary to execute a Guaranty Supplement, in each case in order to induce the Initial Note Purchasers to purchase the Notes and thereby benefit the Company and its Subsidiaries (as defined in the Note Agreement) by providing funds to enable the Company to refinance existing Debt and to enable the Company and its Subsidiaries to have funds available for general corporate purposes. NOW, THEREFORE, as required by Section 4.4 of the Note Agreement and in consideration of the premises and other good and valuable consideration, the receipt and sufficiency whereof are hereby acknowledged, each Guarantor does hereby covenant and agree, jointly and severally, as follows: 4 SECTION 1. DEFINITIONS. Capitalized terms used herein shall have the meanings set forth in the Note Agreement unless herein defined or the context shall otherwise require. SECTION 2. GUARANTY OF NOTES AND NOTE AGREEMENT. (a) Each Guarantor jointly and severally does hereby irrevocably, absolutely and unconditionally guarantee unto the Holders: (1) the full and prompt payment of the principal of, premium, if any, and interest on the Notes from time to time outstanding, as and when such payments shall become due and payable whether by lapse of time, upon redemption or prepayment, by extension or by acceleration or declaration or otherwise (including (to the extent legally enforceable) interest due on overdue payments of principal, premium, if any, or interest at the rate set forth in the Notes) in Federal or other immediately available funds of the United States of America which at the time of payment or demand therefor shall be legal tender for the payment of public and private debts, (2) the full and prompt performance and observance by the Company of each and all of the obligations, covenants and agreements required to be performed or owed by the Company under the terms of the Notes and the Note Agreement and (3) the full and prompt payment, upon demand by any Holder of all costs and expenses, legal or otherwise (including reasonable attorneys' fees), if any, as shall have been expended or incurred in the protection or enforcement of any rights, privileges or liabilities in favor of the Holders under or in respect of the Notes, the Note Agreement or under this Guaranty or in any consultation or action in connection therewith or herewith. (b) The liability of each Guarantor under this Guaranty shall not exceed an amount equal to a maximum amount as will, after giving effect to such maximum amount and all other liabilities of such Guarantor, contingent or otherwise, result in the obligations of such Guarantor hereunder not constituting a fraudulent transfer, obligation or conveyance. SECTION 3. GUARANTY OF PAYMENT AND PERFORMANCE. This is a guarantee of payment and performance and each Guarantor hereby waives, to the fullest extent permitted by law, any right to require that any action on or in respect of any Note or the Note Agreement be brought against the Company or any other Person or that resort be had to any direct or indirect security for the Notes or for this Guaranty or any other remedy. Any Holder may, at its option, proceed hereunder against any Guarantor in the first instance to collect monies when due, the payment of which is guaranteed hereby, without first proceeding against the Company or any other Person and without first resorting to any direct or indirect security for the Notes or for this Guaranty or any other remedy. The liability of each Guarantor hereunder shall in no way be affected or impaired by any acceptance by any Holder of any direct or indirect security for, or other guaranties of, any Debt, liability or obligation of the Company or any other Person to any Holder or by any failure, delay, neglect or omission by any Holder to realize upon or protect any such guarantees, Debt, liability or obligation or any notes or other instruments evidencing the same or any direct or indirect security therefor or by any approval, consent, waiver, or other action taken, or omitted to be taken by any such Holder. The covenants and agreements on the part of the Guarantors herein contained shall take effect as joint and several covenants and agreements, and references to the Guarantors shall take effect as references to each of them and none of them shall be released from liability hereunder by reason of the guarantee ceasing to be binding as a continuing security on any other of them. -2- 5 SECTION 4. GENERAL PROVISIONS RELATING TO THE GUARANTY. (a) Each Guarantor hereby consents and agrees that any Holder or Holders from time to time, with or without any further notice to or assent from any other Guarantor may, without in any manner affecting the liability of any Guarantor under this Guaranty, and upon such terms and conditions as any such Holder or Holders may deem advisable: (1) extend in whole or in part (by renewal or otherwise), modify, change, compromise, release or extend the duration of the time for the performance or payment of any Debt, liability or obligation of the Company or of any other Person secondarily or otherwise liable for any Debt, liability or obligations of the Company on the Notes, or waive any Default with respect thereto, or waive, modify, amend or change any provision of any other agreement or waive this Guaranty; or (2) sell, release, surrender, modify, impair, exchange or substitute any and all property, of any nature and from whomsoever received, held by, or for the benefit of, any such Holder as direct or indirect security for the payment or performance of any Debt, liability or obligation of the Company or of any other Person secondarily or otherwise liable for any Debt, liability or obligation of the Company on the Notes; or (3) settle, adjust or compromise any claim of the Company against any other Person secondarily or otherwise liable for any Debt, liability or obligation of the Company on the Notes. Each Guarantor hereby ratifies and confirms any such extension, renewal, change, sale, release, waiver, surrender, exchange, modification, amendment, impairment, substitution, settlement, adjustment or compromise and that the same shall be binding upon it, and hereby waives, to the fullest extent permitted by law, any and all defenses, counterclaims or offsets which it might or could have by reason thereof, it being understood that such Guarantor shall at all times be bound by this Guaranty and remain liable hereunder. (b) Each Guarantor hereby waives, to the fullest extent permitted by law: (1) notice of acceptance of this Guaranty by the Holders or of the creation, renewal or accrual of any liability of the Company, present or future, or of the reliance of such Holders upon this Guaranty (it being understood that every Debt, liability and obligation described in Section 2 hereof shall conclusively be presumed to have been created, contracted or incurred in reliance upon the execution of this Guaranty); (2) demand of payment by any Holder from the Company or any other Person indebted in any manner on or for any of the Debt, liabilities or obligations hereby guaranteed; and (3) presentment for the payment by any Holder or any other Person of the Notes or any other instrument, protest thereof and notice of its dishonor to any party thereto and to such Guarantor. The obligations of each Guarantor under this Guaranty and the rights of any Holder to enforce such obligations by any proceedings, whether by action at law, suit in equity or otherwise, shall not be subject to any reduction, limitation, impairment or termination, whether -3- 6 by reason of any claim of any character whatsoever or otherwise and shall not be subject to any defense, set-off, counterclaim (other than any compulsory counterclaim), recoupment or termination whatsoever. (c) The obligations of the Guarantors hereunder shall be binding upon the Guarantors and their successors and assigns, and shall remain in full force and effect irrespective of: (1) the genuineness, validity, regularity or enforceability of the Notes, the Note Agreement or any other agreement or any of the terms of any thereof, the continuance of any obligation on the part of the Company or any other Person on or in respect of the Notes or under the Note Agreement or any other agreement or the power or authority or the lack of power or authority of the Company to issue the Notes or the Company to execute and deliver the Note Agreement or any other agreement or of any Guarantor to execute and deliver this Guaranty or to perform any of its obligations hereunder or the existence or continuance of the Company or any other Person as a legal entity; or (2) any default, failure or delay, willful or otherwise, in the performance by the Company, any Guarantor or any other Person of any obligations of any kind or character whatsoever under the Notes, the Note Agreement, this Guaranty or any other agreement; or (3) any creditors' rights, bankruptcy, receivership or other insolvency proceeding of the Company, any Guarantor or any other Person or in respect of the property of the Company, any Guarantor or any other Person or any merger, consolidation, reorganization, dissolution, liquidation, the sale of all or substantially all of the assets of or winding up of the Company, any Guarantor or any other Person; or (4) impossibility or illegality of performance on the part of the Company, any Guarantor or any other Person of its obligations under the Notes, the Note Agreement, this Guaranty or any other agreements; or (5) in respect of the Company or any other Person, any change of circumstances, whether or not foreseen or foreseeable, whether or not imputable to the Company or any other Person, or other impossibility of performance through fire, explosion, accident, labor disturbance, floods, droughts, embargoes, wars (whether or not declared), civil commotion, acts of God or the public enemy, delays or failure of suppliers or carriers, inability to obtain materials, action of any Federal or state regulatory body or agency, change of law or any other causes affecting performance, or any other force majeure, whether or not beyond the control of the Company or any other Person and whether or not of the kind hereinbefore specified; or (6) any attachment, claim, demand, charge, Lien, order, process, encumbrance or any other happening or event or reason, similar or dissimilar to the foregoing, or any withholding or diminution at the source, by reason of any taxes, assessments, expenses, Debt, obligations or liabilities of any character, foreseen or unforeseen, and whether or not valid, incurred by or against the Company, any Guarantor or any other Person or any claims, demands, charges or Liens of any nature, foreseen or unforeseen, incurred by the Company, any Guarantor or any other Person, or against any sums payable in respect of the Notes or under the Note Agreement or this Guaranty, so that such sums would be rendered inadequate or would be unavailable to make the payments herein provided; or -4- 7 (7) any order, judgment, decree, ruling or regulation (whether or not valid) of any court of any nation or of any political subdivision thereof or any body, agency, department, official or administrative or regulatory agency of any thereof or any other action, happening, event or reason whatsoever which shall delay, interfere with, hinder or prevent, or in any way adversely affect, the performance by the Company, any Guarantor or any other Person of its respective obligations under or in respect of the Notes, the Note Agreement, this Guaranty or any other agreement; or (8) the failure of any Guarantor to receive any benefit from or as a result of its execution, delivery and performance of this Guaranty; or (9) any failure or lack of diligence in collection or protection, failure in presentment or demand for payment, protest, notice of protest, notice of default and of nonpayment, any failure to give notice to any Guarantor of failure of the Company, any Guarantor or any other Person to keep and perform any obligation, covenant or agreement under the terms of the Notes, the Note Agreement, this Guaranty or any other agreement or failure to resort for payment to the Company, any Guarantor or to any other Person or to any other guaranty or to any property, security, Liens or other rights or remedies; or (10) the acceptance of any additional security or other guaranty, the advance of additional money to the Company or any other Person, the renewal or extension of the Notes or amendments, modifications, consents or waivers with respect to the Notes, the Note Agreement or any other agreement, or the sale, release, substitution or exchange of any security for the Notes; or (11) any merger or consolidation of the Company, any Guarantor or any other Person into or with any other Person or any sale, lease, transfer or other disposition of any of the assets of the Company, any Guarantor or any other Person to any other Person, or any change in the ownership of any shares of the Company, any Guarantor or any other Person; or (12) any defense whatsoever that: (i) the Company or any other Person might have to the payment of the Notes (principal, premium, if any, or interest), other than payment thereof in Federal or other immediately available funds or (ii) the Company or any other Person might have to the performance or observance of any of the provisions of the Notes, the Note Agreement or any other agreement, whether through the satisfaction or purported satisfaction by the Company or any other Person of its debts due to any cause such as bankruptcy, insolvency, receivership, merger, consolidation, reorganization, dissolution, liquidation, winding-up or otherwise; or (13) any act or failure to act with regard to the Notes, the Note Agreement, this Guaranty or any other agreement or anything which might vary the risk of any Guarantor or any other Person; or (14) any other circumstance which might otherwise constitute a defense available to, or a discharge of, any Guarantor or any other Person in respect of the obligations of any Guarantor or other Person under this Guaranty or any other agreement; provided that the specific enumeration of the above-mentioned acts, failures or omissions shall not be deemed to exclude any other acts, failures or omissions, though not specifically mentioned above, it being the purpose and intent of this Guaranty and the parties hereto that the obligations -5- 8 of each Guarantor shall be absolute and unconditional and shall not be discharged, impaired or varied except by the payment of the principal of, premium, if any, and interest on the Notes in accordance with their respective terms whenever the same shall become due and payable as in the Notes provided, at the place specified in and all in the manner and with the effect provided in the Notes and the Note Agreement, as each may be amended or modified from time to time. Without limiting the foregoing, it is understood that repeated and successive demands may be made and recoveries may be had hereunder as and when, from time to time, the Company shall default under or in respect of the terms of the Notes or the Note Agreement and that notwithstanding recovery hereunder for or in respect of any given default or defaults by the Company under the Notes or the Note Agreement, this Guaranty shall remain in full force and effect and shall apply to each and every subsequent default. (d) All rights of any Holder may be transferred or assigned at any time and shall be considered to be transferred or assigned at any time or from time to time upon the transfer of such Note whether with or without the consent of or notice to the Guarantors under this Guaranty or to the Company. (e) To the extent of any payments made under this Guaranty, the Guarantors shall be subrogated to the rights of the Holder or Holders upon whose Notes such payment was made, but each Guarantor covenants and agrees that such right of subrogation shall be junior and subordinate in right of payment to the prior indefeasible final payment in cash in full of all amounts due and owing by the Company with respect to the Notes and the Note Agreement and by the Guarantors under this Guaranty, and the Guarantors shall not take any action to enforce such right of subrogation, and the Guarantors shall not accept any payment in respect of such right of subrogation, until all amounts due and owing by the Company under or in respect of the Notes and the Note Agreement and all amounts due and owing by the Guarantors hereunder have indefeasibly been finally paid in cash in full. If any amount shall be paid to any Guarantor in violation of the preceding sentence at any time prior to the later of the indefeasible payment in cash in full of the Notes and all other amounts payable under the Notes, the Note Agreement and this Guaranty, such amount shall be held in trust for the benefit of the Holders and shall forthwith be paid to the Holders to be credited and applied to the amounts due or to become due with respect to the Notes and all other amounts payable under the Note Agreement and this Guaranty, whether matured or unmatured. (f) Each Guarantor agrees that to the extent the Company or any other Person makes any payment on any Note, which payment or any part thereof is subsequently invalidated, voided, declared to be fraudulent or preferential, set aside, recovered, rescinded or is required to be retained by or repaid to a trustee, receiver, or any other Person under any bankruptcy code, common law, or equitable cause, then and to the extent of such payment, the obligation or the part thereof intended to be satisfied shall be revived and continued in full force and effect with respect to the Guarantors' obligations hereunder, as if said payment had not been made. The liability of the Guarantors hereunder shall not be reduced or discharged, in whole or in part, by any payment to any Holder from any source that is thereafter paid, returned or refunded in whole or in part by reason of the assertion of a claim of any kind relating thereto, including, but not limited to, any claim for breach of contract, breach of warranty, preference, illegality, invalidity or fraud asserted by any account debtor or by any other Person. (g) No Holder shall be under any obligation: (1) to marshall any assets in favor of the Guarantors or in payment of any or all of the liabilities of the Company under or in respect of the Notes or the obligations of the Guarantors hereunder or (2) to pursue any other remedy that the Guarantors may or may not be able to pursue themselves and that may lighten the Guarantors' burden, any right to which each Guarantor hereby expressly waives. -6- 9 SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE GUARANTORS. Each Guarantor represents and warrants to each Holder that: (a) Such Guarantor is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation or other legal entity and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a material adverse effect on (1) the business, operations, affairs, financial condition, assets, properties or prospects of such Guarantor and its subsidiaries, taken as a whole, or (2) the ability of such Guarantor to perform its obligations under this Guaranty or (3) the validity or enforceability of this Guaranty (herein in this Section 5, a "Material Adverse Effect"). Such Guarantor has the power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts and proposes to transact, to execute and deliver this Guaranty and to perform the provisions hereof. (b) Each subsidiary of such Guarantor is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation or other legal entity and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each subsidiary of such Guarantor has the power and authority to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact. (c) This Guaranty has been duly authorized by all necessary action on the part of such Guarantor, and this Guaranty constitutes a legal, valid and binding obligation of such Guarantor enforceable against such Guarantor in accordance with its terms, except as such enforceability may be limited by (1) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (2) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). (d) This Guaranty, the documents, certificates or other writings identified in Schedule 5.3 to the Note Agreement and the financial statements listed in Schedule 5.5 to the Note Agreement, taken as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made. Except as disclosed in the Memorandum or as expressly described in Schedule 5.3 to the Note Agreement, or in one of the documents, certificates or other writings identified therein, or in the financial statements listed in Schedule 5.5 to the Note Agreement, since December 31, 2000, there has been no adverse Material (as hereinafter defined) change in the financial condition, operations, business, properties or prospects of such Guarantor or any of its subsidiaries, taken as a whole. (e) The execution, delivery and performance by such Guarantor of this Guaranty will not (1) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of such Guarantor or any of its subsidiaries under any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, charter document or by-law, or any other agreement or instrument to which such Guarantor or any of its subsidiaries is bound or by which such Guarantor or any of its subsidiaries or any of their respective properties may be bound or affected, (2) conflict with or result in a breach of any of the terms, -7- 10 conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to such Guarantor or any of its subsidiaries or (3) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to such Guarantor or any of its subsidiaries. (f) No consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in connection with the execution, delivery or performance by such Guarantor of this Guaranty. (g) (1) Except as disclosed in Schedule 5.8 to the Note Agreement, there are no actions, suits or proceedings pending or, to the knowledge of such Guarantor, threatened against or affecting such Guarantor or any of its subsidiaries or any property of such Guarantor or any of its subsidiaries in any court or before any arbitrator of any kind or before or by any Governmental Authority that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. (2) Neither such Guarantor nor any of its subsidiaries is in default under any term of any agreement or instrument to which it is a party or by which it is bound, or any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in violation of any applicable law, ordinance, Rule or regulation (including without limitation Environmental Laws) of any Governmental Authority, which default or violation, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. (h) Such Guarantor and its subsidiaries have filed all income tax returns that are required to have been filed in any jurisdiction, and have paid all taxes shown to be due and payable on such returns and all other taxes and assessments payable by them, to the extent such taxes and assessments have become due and payable and before they have become delinquent, except for any taxes and assessments (1) the amount of which is not individually or in the aggregate material to the business, operations, affairs, financial condition, assets, properties or prospects of such Guarantor and its subsidiaries taken as a whole (herein in this Section 5, "Material") or (2) the amount, applicability or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which such Guarantor or one of its subsidiaries, as the case may be, has established adequate reserves in accordance with GAAP. Such Guarantor knows of no basis for any other tax or assessment that could reasonably be expected to have a Material Adverse Effect. The charges, accruals and reserves on the books of such Guarantor and its subsidiaries in respect of Federal, state or other taxes for all fiscal periods are adequate. The Federal income tax liabilities of such Guarantor and its subsidiaries have been determined by the Internal Revenue Service up to and including the fiscal year ended December 31, 1991 and the Federal income tax liabilities of such Guarantor and its subsidiaries have been paid for all fiscal years up to and including the fiscal year ended December 31, 1999. (i) Such Guarantor and its subsidiaries have good and sufficient title to their respective properties that individually or in the aggregate are Material, including all such properties reflected in the most recent audited balance sheet referred to in Section 5.5 of the Note Agreement or purported to have been acquired by such Guarantor or any of its subsidiaries after said date (except as sold or otherwise disposed of in the ordinary course of business), in each case free and clear of Liens prohibited by the Note Agreement. All leases that individually or in the aggregate are Material are valid and subsisting and are in full force and effect in all material respects. (j) Except as disclosed in Schedule 5.11 to the Note Agreement, -8- 11 (1) such Guarantor and its subsidiaries own or possess all Material licenses, permits, franchises, authorizations, patents, copyrights, service marks, trademarks and trade names, or rights thereto; (2) to the best knowledge of such Guarantor, no product of such Guarantor or any of its subsidiaries infringes in any material respect any license, permit, franchise, authorization, patent, copyright, service mark, trademark, trade name or other right with respect thereto owned by any other Person; and (3) to the best knowledge of such Guarantor, there is no Material violation by any Person of any right of such Guarantor or any of its subsidiaries with respect to any patent, copyright, service mark, trademark, trade name or other right with respect thereto owned or used by such Guarantor or any of its subsidiaries. (k) (1) Such Guarantor and each ERISA Affiliate have operated and administered each Plan in compliance with all applicable laws in all material respects. Neither such Guarantor nor any ERISA Affiliate has incurred any Material liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans (as defined in Section 3 of ERISA), and no event, transaction or condition has occurred or exists that could reasonably be expected to result in the incurrence of any such Material liability by such Guarantor or any ERISA Affiliate, or in the imposition of any Material Lien on any of the rights, properties or assets of such Guarantor or any ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions or to Section 401(a)(29) or 412 of the Code. (2) The present value of the aggregate benefit liabilities under each of the Plans (other than Multiemployer Plans), determined as of the end of such Plan's most recently ended plan year on the basis of the actuarial assumptions specified for funding purposes in such Plan's most recent actuarial valuation report, did not exceed the aggregate current value of the assets of such Plan allocable to such benefit liabilities by more than $5,000,000 in the aggregate for all Plans. The term "benefit liabilities" has the meaning specified in Section 4001 of ERISA and the terms "current value" and "present value" have the meanings specified in Section 3 of ERISA. (3) Such Guarantor and its ERISA Affiliates have not incurred Material withdrawal liabilities (and are not subject to Material contingent withdrawal liabilities) under Section 4201 or 4204 of ERISA in respect of Multiemployer Plans. (4) The expected postretirement benefit obligation (determined as of the last day of such Guarantor's most recently ended fiscal year in accordance with Financial Accounting Standards Board Statement No. 106, without regard to liabilities attributable to continuation coverage mandated by Section 4980B of the Code) of such Guarantor and its subsidiaries is not Material. (5) The execution and delivery of this Guaranty will not involve any transaction that is subject to the prohibitions of Section 406 of ERISA or in connection with which a tax could be imposed pursuant to Section 4975(c)(1)(A)-(D) of the Code. The representation by such Guarantor in the first sentence of this Section 5(k)(5) is made in reliance upon and subject to the accuracy of each Holder's representation in Section 6.2 of the Note Agreement as to the source of the funds to be used to pay the purchase price of the Notes to be purchased by such Holder. -9- 12 (l) Neither such Guarantor nor any of its subsidiaries is an "investment company" registered or required to be registered under the Investment Company Act of 1940, as amended, or is subject to regulation under the Public Utility Holding Company Act of 1935, as amended, the ICC Termination Act of 1995, as amended, or the Federal Power Act, as amended. (m) Neither such Guarantor nor any of its subsidiaries has knowledge of any Material claim or has received any notice of any Material claim, and no proceeding has been instituted raising any Material claim against such Guarantor or any of its subsidiaries or any of their respective real properties now or formerly owned, leased or operated by any of them or other assets, alleging any damage to the environment or violation of any Environmental Laws. Except as otherwise disclosed in Schedule 5.18 to the Note Agreement: (1) neither such Guarantor nor any of its subsidiaries has knowledge of any facts which would give rise to any Material claim, public or private, or Material violation of Environmental Laws or damage to the environment emanating from, occurring on or in any way related to real properties now or formerly owned, leased or operated by any of them or to other assets or their use; (2) neither the Company nor any of its subsidiaries (i) has stored any Hazardous Materials on real properties now or formerly owned, leased or operated by any of them or (ii) has disposed of any Hazardous Materials in a manner contrary to any Environmental Laws; in each case in any manner that could reasonably be expected to result in a Material Adverse Effect; and (3) all buildings on all real properties now owned, leased or operated by such Guarantor or any of its subsidiaries are in material compliance with applicable Environmental Laws. (n) Such Guarantor, when viewed on a consolidated basis with the Company and its other Subsidiaries, is solvent, has capital not unreasonably small in relation to its business or any contemplated or undertaken transaction and has assets having a value both at fair valuation and at present fair salable value greater than the amount required to pay its debts as they become due and greater than the amount that will be required to pay its probable liability on its existing debts as they become absolute and matured. Such Guarantor does not intend to incur, or believe or should have believed that it will incur, debts beyond its ability to pay such debts as they become due. Such Guarantor, when viewed on a consolidated basis with the Company and its other Subsidiaries, will not be rendered insolvent by the execution and delivery of, and performance of its obligations under, this Guaranty. Such Guarantor does not intend to hinder, delay or defraud its creditors by or through the execution and delivery of, or performance of its obligations under, this Guaranty. SECTION 6. AMENDMENTS, WAIVERS AND CONSENTS. (a) This Guaranty may be amended, and the observance of any term hereof may be waived (either retroactively or prospectively), with (and only with) the written consent of each Guarantor and the Required Holders, except that (1) no amendment or waiver of any of the provisions of Sections 3, 4 or 5, or any defined term (as it is used therein), will be effective as to any Holder unless consented to by such Holder in writing, and (2) no such amendment or waiver may, without the written consent of each Holder, (i) change the percentage of the principal amount of the Notes the Holders of which are required to consent to any such amendment or waiver, or (ii) amend Section 2 or this Section 6. -10- 13 (b) The Guarantors will provide each Holder (irrespective of the amount of Notes then owned by it) with sufficient information, sufficiently far in advance of the date a decision is required, to enable such Holder to make an informed and considered decision with respect to any proposed amendment, waiver or consent in respect of any of the provisions hereof. The Guarantors will deliver executed or true and correct copies of each amendment, waiver or consent effected pursuant to the provisions of this Section 6 to each Holder promptly following the date on which it is executed and delivered by, or receives the consent or approval of, the requisite Holders. (c) The Company will not directly or indirectly pay or cause to be paid any remuneration, whether by way of fee or otherwise, or grant any security, to any Holder as consideration for or as an inducement to the entering into by any Holder of any waiver or amendment of any of the terms and provisions hereof unless such remuneration is concurrently paid, or security is concurrently granted, on the same terms, ratably to each Holder even if such Holder did not consent to such waiver or amendment. (d) Any amendment or waiver consented to as provided in this Section 6 applies equally to all Holders and is binding upon them and upon each future holder and upon the Guarantors. No such amendment or waiver will extend to or affect any obligation, covenant or agreement not expressly amended or waived or impair any right consequent thereon. No course of dealing between the Guarantors and any Holder nor any delay in exercising any rights hereunder shall operate as a waiver of any rights of any Holder. As used herein, the term "this Guaranty" and references thereto shall mean this Guaranty as it may from time to time be amended or supplemented. (e) Solely for the purpose of determining whether the Holders of the requisite percentage of the aggregate principal amount of Notes then outstanding approved or consented to any amendment, waiver or consent to be given under this Guaranty, Notes directly or indirectly owned by any Guarantor, the Company or any of their respective subsidiaries or Affiliates shall be deemed not to be outstanding. SECTION 7. NOTICES. All notices and communications provided for hereunder shall be in writing and sent (a) by telefacsimile if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or (b) by registered or certified mail with return receipt requested (postage prepaid) or (c) by a recognized overnight delivery service (with charges prepaid). Any such notice must be sent: (1) if to an Initial Note Purchaser or such Initial Note Purchaser's nominee, to such Initial Note Purchaser or such Initial Note Purchaser's nominee at the address specified for such communications below such Initial Note Purchaser's signature at the foot of the Note Agreement, or at such other address as such Initial Note Purchaser or such Initial Note Purchaser's nominee shall have specified to any Guarantor or the Company in writing, (2) if to any other Holder, to such Holder at such address as such Holder shall have specified to any Guarantor or the Company in writing, or -11- 14 (3) if to any Guarantor, to such Guarantor c/o the Company at its address set forth at the beginning of the Note Agreement to the attention of Chief Financial Officer, or at such other address as such Guarantor shall have specified to the Holders in writing. Notices under this Section 7 will be deemed given only when actually received. SECTION 8. MISCELLANEOUS. (a) No remedy herein conferred upon or reserved to any Holder is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Guaranty now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon any default, omission or failure of performance hereunder shall impair any such right or power or shall be construed to be a waiver thereof but any such right or power may be exercised from time to time and as often as may be deemed expedient. In order to entitle any Holder to exercise any remedy reserved to it under the Guaranty, it shall not be necessary for such Holder to physically produce its Note in any proceedings instituted by it or to give any notice, other than such notice as may be herein expressly required. (b) The Guarantors will pay all sums becoming due under this Guaranty by the method and at the address specified for such purpose below each Holder's signature at the foot of the Note Agreement, or by such other method or at such other address as any Holder shall have from time to time specified to the Guarantors in writing for such purpose, without the presentation or surrender of this Guaranty or any Note. (c) Any provision of this Guaranty that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall (to the full extent permitted by law) not invalidate or render unenforceable such provision in any other jurisdiction. (d) If the whole or any part of this Guaranty shall be now or hereafter become unenforceable against any one or more of the Guarantors for any reason whatsoever or if it is not executed by any one or more of the Guarantors, this Guaranty shall nevertheless be and remain fully binding upon and enforceable against each other Guarantor as if it had been made and delivered only by such other Guarantors. (e) This Guaranty shall be binding upon each Guarantor and its successors and assigns and shall inure to the benefit of each Holder and its successors and assigns so long as its Notes remain outstanding and unpaid. (f) This Guaranty may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto. (g) This Guaranty shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of Illinois excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. -12- 15 IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be duly executed by an authorized representative as of this 1st day of May, 2001. GRANITE CONSTRUCTION COMPANY By /s/ DAVID H. WATTS ------------------------------------- David H. Watts President By /s/ WILLIAM E. BARTON ------------------------------------- William E. Barton Senior Vice President WILCOTT CORPORATION By /s/ DAVID H. WATTS ------------------------------------- David H. Watts President By /s/ WILLIAM E. BARTON ------------------------------------- William E. Barton Senior Vice President GRANITE LAND COMPANY By /s/ DAVID H. WATTS ------------------------------------- David H. Watts President By /s/ WILLIAM E. BARTON ------------------------------------- William E. Barton Senior Vice President -13- 16 GRANITE SR 91 CORPORATION By /s/ DAVID H. WATTS ------------------------------------- David H. Watts President By /s/ MICHAEL FUTCH ------------------------------------- MIchael Futch Vice President INTERMOUNTAIN SLURRY SEAL, INC. By /s/ MICHAEL L. THOMAS ------------------------------------- Michael L. Thomas President POZZOLAN PRODUCTS COMPANY By /s/ MICHAEL L. THOMAS ------------------------------------- Michael L. Thomas President GILC INCORPORATED By /s/ WILLIAM E. BARTON ------------------------------------- William E. Barton President By /s/ MICHAEL FUTCH ------------------------------------- Michael Futch Vice President -14- 17 GRANITE SR 91, L.P. By: Granite SR 91 Corporation, its sole General Partner By /s/ DAVID H. WATTS ------------------------------------- David H. Watts President By /s/ MICHAEL FUTCH ------------------------------------- Michael Futch Vice President GILC, L.P. By: GILC Incorporated, its sole General Partner By /s/ WILLIAM E. BARTON ------------------------------------- William E. Barton President By /s/ MICHAEL FUTCH ------------------------------------- Michael Futch Vice President G.G.&R., INC. By /s/ DAVID H. WATTS ------------------------------------- David H. Watts President By /s/ MICHAEL FUTCH ------------------------------------- Michael Futch Vice President -15- 18 GTC, INC. By /s/ WILLIAM E. BARTON ------------------------------------- William E. Barton President By /s/ MICHAEL FUTCH ------------------------------------- Michael Futch Vice President -16- 19 SUBSIDIARY GUARANTY SUPPLEMENT To the Holders of the 6.96% Senior Notes due May 1, 2013 of Granite Construction Incorporated (the "Company") Ladies and Gentlemen: WHEREAS, in order to refinance existing indebtedness and for general corporate purposes, the Company issued its 6.96% Senior Notes due May 1, 2013 in the aggregate principal amount of $75,000,000 (the "Notes") pursuant to that certain Note Purchase Agreement dated as of May 1, 2001 (the "Note Agreement") between the Company and each of the purchasers named on Schedule A attached to said Note Agreement (the "Initial Note Purchasers"). WHEREAS, as a condition precedent to their purchase of the Notes, the Initial Note Purchasers required that certain from time to time subsidiaries of the Company enter into a Subsidiary Guaranty Agreement as security for the Notes (the "Subsidiary Guaranty"). Pursuant to Section 9.6 of the Note Agreement, the Company has agreed to cause the undersigned, ____________, a corporation organized under the laws of ______________ (the "Additional Guarantor"), to join in the Subsidiary Guaranty. In accordance with the requirements of the Subsidiary Guaranty, the Additional Guarantor desires to amend the definition of Guarantor (as the same may have been heretofore amended) set forth in the Subsidiary Guaranty attached hereto so that at all times from and after the date hereof, the Additional Guarantor shall be jointly and severally liable as set forth in the Subsidiary Guaranty for the obligations of the Company under the Note Agreement and Notes to the extent and in the manner set forth in the Subsidiary Guaranty. The undersigned is the duly elected ____________ of the Additional Guarantor, a subsidiary of the Company, and is duly authorized to execute and deliver this Guaranty Supplement to each of you. The execution by the undersigned of this Guaranty Supplement shall evidence its consent to and acknowledgment and approval of the terms set forth herein and in the Subsidiary Guaranty and by such execution the Additional Guarantor shall be deemed to have made in favor of the Holders the representations and warranties set forth in Section 5 of the Subsidiary Guaranty. Upon execution of this Subsidiary Guaranty Supplement, the Subsidiary Guaranty shall be deemed to be amended as set forth above. Except as amended herein, the terms and provisions of the Subsidiary Guaranty are hereby ratified, confirmed and approved in all respects. Exhibit A (to Subsidiary Guaranty Agreement) 20 Any and all notices, requests, certificates and other instruments (including the Notes) may refer to the Subsidiary Guaranty without making specific reference to this Subsidiary Guaranty Supplement, but nevertheless all such references shall be deemed to include this Subsidiary Guaranty Supplement unless the context shall otherwise require. Dated: _________________, 20 . [NAME OF ADDITIONAL GUARANTOR] By -------------------------------------- Its A-2 -----END PRIVACY-ENHANCED MESSAGE-----