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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2005
--------------------------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ___________to____________
Commission file number 1-3247
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CORNING INCORPORATED
--------------------
(Registrant)
New York 16-0393470
- ---------------------------------------- ------------------------------------
(State of incorporation) (I.R.S. Employer Identification No.)
One Riverfront Plaza, Corning, New York 14831
- ---------------------------------------- ------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 607-974-9000
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No ____
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Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes X No ____
---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
1,422,960,254 shares of Corning's Common Stock, $0.50 Par Value, were
outstanding as of April 15, 2005.
INDEX
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PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements
Page
----
Consolidated Statements of Operations (Unaudited) for the three
months ended March 31, 2005 and 2004 3
Consolidated Balance Sheets (Unaudited) at March 31, 2005 and
December 31, 2004 4
Consolidated Statements of Cash Flows (Unaudited) for the three
months ended March 31, 2005 and 2004 5
Notes to Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 19
Item 3. Quantitative and Qualitative Disclosures About Market Risk 30
Item 4. Controls and Procedures 30
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings 31
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 35
Item 4. Submission of Matters to a Vote of Security Holders 35
Item 6. Exhibits 36
Signatures 37
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in millions, except per share amounts)
For the three months ended
March 31,
-----------------------------
2005 2004
--------- ---------
Net sales $ 1,050 $ 844
Cost of sales 621 544
--------- ---------
Gross margin 429 300
Operating expenses:
Selling, general and administrative expenses 184 160
Research, development and engineering expenses 98 84
Amortization of purchased intangibles 5 10
Restructuring, impairment and other charges and (credits) (Note 2) 19 34
Asbestos settlement (Note 3) (16) 19
--------- ---------
Operating income (loss) 139 (7)
Interest income 10 6
Interest expense (37) (36)
Loss on repurchases and retirement of debt, net (23)
Other expense, net (Note 1) (9) (4)
--------- ---------
Income (loss) before income taxes 103 (64)
(Provision) benefit for income taxes (Note 4) (19) 12
--------- ---------
Income (loss) before minority interests and equity earnings 84 (52)
Minority interests (1)
Equity in earnings of associated companies 166 107
--------- ---------
Net income $ 249 $ 55
========= =========
Basic earnings per common share (Note 5) $ 0.18 $ 0.04
========= =========
Diluted earnings per common share (Note 5) $ 0.17 $ 0.04
========= =========
Shares used in computing per share amounts for (Note 5):
Basic earnings per common share 1,411 1,358
========= =========
Diluted earnings per common share 1,503 1,437
========= =========
The accompanying notes are an integral part of these statements.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Unaudited; in millions, except share and per share amounts)
March 31, December 31,
2005 2004
----------- -------------
Assets
Current assets:
Cash and cash equivalents $ 847 $ 1,009
Short-term investments, at fair value 700 872
--------- ---------
Total cash, cash equivalents and short-term investments 1,547 1,881
Trade accounts receivable, net of doubtful accounts and allowances - $28 and $30 621 585
Inventories (Note 6) 562 535
Deferred income taxes (Note 4) 90 94
Other current assets 208 188
--------- ---------
Total current assets 3,028 3,283
Investments (Note 7) 1,485 1,484
Property, net of accumulated depreciation - $3,559 and $3,532 4,096 3,941
Goodwill and other intangible assets, net (Note 8) 387 398
Deferred income taxes (Note 4) 478 472
Other assets 159 166
--------- ---------
Total Assets $ 9,633 $ 9,744
========= =========
Liabilities and Shareholders' Equity
Current liabilities:
Short-term borrowings, including current portion of long-term debt (Note 9) $ 288 $ 478
Accounts payable 667 682
Other accrued liabilities 1,001 1,178
--------- ---------
Total current liabilities 1,956 2,338
Long-term debt (Note 9) 2,125 2,214
Postretirement benefits other than pensions 595 600
Other liabilities 740 747
--------- ---------
Total liabilities 5,416 5,899
--------- ---------
Commitments and contingencies (Note 3)
Minority interests 29 29
Shareholders' equity:
Preferred stock - Par value $100.00 per share; Shares authorized: 10 million
Series C mandatory convertible preferred stock - Shares issued: 5.75 million;
Shares outstanding: 633 thousand and 637 thousand 63 64
Common stock - Par value $0.50 per share; Shares authorized: 3.8 billion;
Shares issued: 1,437 million and 1,424 million 719 712
Additional paid-in capital 10,484 10,363
Accumulated deficit (7,060) (7,309)
Treasury stock, at cost; Shares held: 15 million and 16 million (155) (162)
Accumulated other comprehensive income 137 148
--------- ---------
Total shareholders' equity 4,188 3,816
--------- ---------
Total Liabilities and Shareholders' Equity $ 9,633 $ 9,744
========= =========
The accompanying notes are an integral part of these statements.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)
For the three months ended
March 31,
-----------------------------
2005 2004
--------- ---------
Cash Flows from Operating Activities:
Income from continuing operations $ 249 $ 55
Adjustments to reconcile income from continuing operations to net
cash provided by operating activities:
Depreciation 120 120
Amortization of purchased intangibles 5 10
Asbestos settlement (16) 19
Restructuring, impairment and other charges and (credits) 19 34
Loss on repurchases and retirement of debt 23
Undistributed earnings of associated companies (23) (29)
Deferred taxes 3 (40)
Restructuring payments (9) (34)
Customer deposits 20
Changes in certain working capital items:
Trade accounts receivable (54) (17)
Inventories (39) (32)
Other current assets (16) 3
Accounts payable and other current liabilities, net of restructuring payments (151) (66)
Other, net 34 (1)
--------- ---------
Net cash provided by operating activities 142 45
--------- ---------
Cash Flows from Investing Activities:
Capital expenditures (323) (134)
Short-term investments - acquisitions (314) (544)
Short-term investments - liquidations 486 421
Other, net 2 11
--------- ---------
Net cash used in investing activities (149) (246)
--------- ---------
Cash Flows from Financing Activities:
Repayments of short-term borrowings and current portion of long-term debt (192) (2)
Proceeds from issuance of long-term debt, net 48 396
Retirements of long-term debt (2) (141)
Proceeds from issuance of common stock, net 12 11
Proceeds from the exercise of stock options 9 12
Other, net (5) (2)
--------- ---------
Net cash (used in) provided by financing activities (130) 274
--------- ---------
Effect of exchange rates on cash (25) (1)
--------- ---------
Net (decrease) increase in cash and cash equivalents (162) 72
Cash and cash equivalents at beginning of period 1,009 688
--------- ---------
Cash and cash equivalents at end of period $ 847 $ 760
========= =========
The accompanying notes are an integral part of these statements.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
General
In these notes, the terms "Corning," "Company," "we," "us," or "our" mean
Corning Incorporated and subsidiary companies.
The accompanying unaudited consolidated financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
(SEC) and in accordance with accounting principles generally accepted in the
United States of America (GAAP) for interim financial information. Certain
information and note disclosures normally included in financial statements
prepared in accordance with GAAP have been omitted or condensed. These interim
consolidated financial statements should be read in conjunction with Corning's
consolidated financial statements and notes thereto included in its Annual
Report on Form 10-K for the year ended December 31, 2004 (2004 Form 10-K).
Except as disclosed herein, there has been no material change in the information
disclosed in the notes to the consolidated financial statements included in the
2004 Form 10-K.
The unaudited consolidated financial statements reflect all adjustments which,
in the opinion of management, are necessary for a fair statement of the results
of operations, financial position and cash flows for the interim periods
presented. All such adjustments are of a normal recurring nature. The results
for interim periods are not necessarily indicative of results which may be
expected for any other interim period or for the full year.
Certain amounts for 2004 were reclassified to conform with 2005 classifications.
Additionally, we have reclassified the 2004 interim results to conform to the
2004 year-end classification of auction rate securities as short-term
investments instead of cash equivalents. These reclassifications had no impact
on results of operations or shareholders' equity.
Foreign Currency Translation and Transactions
Effective January 1, 2005, our Taiwan subsidiary changed its functional currency
from the new Taiwan dollar (its local currency) to the Japanese yen due to the
increased significance of Japanese yen based transactions of that subsidiary. As
a result of this change in functional currency, exchange rate gains and losses
are recognized on transactions in currencies other than the Japanese yen and
included in income for the period in which the exchange rates changed.
Stock-Based Compensation
We apply Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock
Issued to Employees" (APB 25), for our stock-based compensation plans. The
following table illustrates the effect on income and earnings per share if we
had applied the fair value recognition provisions of Financial Accounting
Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No.
123, "Accounting for Stock-Based Compensation" (SFAS 123), to stock-based
employee compensation.
(In millions, except per share amounts):
- ------------------------------------------------------------------------------------------------------------------------------------
For the three months ended March 31,
------------------------------------
2005 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Net income - as reported $ 249 $ 55
Add: Stock-based employee compensation expense
determined under APB 25, included in reported net income, net of tax 7 2
Less: Stock-based employee compensation expense determined
under fair value based method, net of tax (23) (29)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income - pro forma $ 233 $ 28
Earnings per common share:
Basic - as reported $ 0.18 $ 0.04
Basic - pro forma $ 0.17 $ 0.02
Diluted - as reported $ 0.17 $ 0.04
Diluted - pro forma $ 0.16 $ 0.02
- ------------------------------------------------------------------------------------------------------------------------------------
For purposes of SFAS 123 fair value disclosures, each option grant's fair value
is estimated on the grant date using the Black-Scholes option-pricing model. The
following are weighted-average assumptions used for grants under our stock
option plans:
- --------------------------------------------------------------------------------
For the three months ended March 31,
------------------------------------
2005 2004
- --------------------------------------------------------------------------------
Expected life in years 4 4
Risk free interest rate 3.7% 3.2%
Expected volatility 50.0% 50.0%
- --------------------------------------------------------------------------------
Changes in the status of outstanding options follow:
- --------------------------------------------------------------------------------
Number of Shares Weighted-Average
(in thousands) Exercise Price
- --------------------------------------------------------------------------------
Options outstanding December 31, 2004 139,023 $ 20.43
Options granted under plans 3,476 $ 11.40
Options exercised (1,450) $ 6.38
Options terminated (975) $ 33.72
-------
Options outstanding March 31, 2005 140,074 $ 20.26
=======
Options exercisable March 31, 2005 112,443 $ 23.01
- --------------------------------------------------------------------------------
New Accounting Standards
In December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-Based
Payment" (SFAS 123R), which replaces SFAS 123 and supercedes APB 25. SFAS 123R
requires all share-based payments to employees, including grants of employee
stock options, to be recognized in the financial statements at fair value. On
April 14, 2005, the SEC issued a new rule that amends the required effective
dates for SFAS 123R. As a result of the SEC amendment, Corning intends to adopt
SFAS 123R in the first quarter of 2006. The SEC amendment does not change the
accounting required under SFAS 123R.
Under SFAS 123R, Corning must determine the appropriate fair value model to be
used for valuing share-based payments, the amortization method for compensation
cost, and the transition method to be used at date of adoption. As we will
implement the provisions of SFAS 123R on January 1, 2006, we must select one of
the following transition method adoption alternatives permitted by the standard:
.. "Prospective adoption" would require Corning to begin expensing share-based
payments no later than January 1, 2006. Prior periods would not be
restated.
.. "Modified retrospective adoption" would require Corning to begin expensing
share-based payments no later than January 1, 2006. Prior periods would be
restated.
We are currently evaluating the impact that SFAS 123R will have on our
consolidated results of operations and financial condition, which in part will
be dependent on the amortization methods used to adopt the new rules in 2006.
Our current estimate is that our incremental share-based compensation pretax
expense would be approximately $60 million in 2006 and beyond.
In March 2005, the FASB issued Interpretation No. 47, "Accounting for
Conditional Asset Retirement Obligations - an interpretation of FASB Statement
No. 143," (FIN 47) which clarifies the term "conditional asset retirement
obligation" used in SFAS No. 143, "Accounting for Asset Retirement Obligations,"
and specifically when an entity would have sufficient information to reasonably
estimate the fair value of an asset retirement obligation. Corning is required
to adopt FIN 47 no later than December 31, 2005. Corning does not expect the
adoption of FIN 47 to have a material impact on its consolidated results of
operations and financial condition.
2. Restructuring, Impairment and Other Charges and (Credits)
2005 Actions
In the first quarter of 2005, we recorded a $19 million impairment charge for an
other than temporary decline in the fair value of our investment in Avanex
Corporation (Avanex) below its cost basis. Our investment in Avanex is accounted
for as an available-for-sale security under SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." At March 31, 2005, shares of
Avanex stock were trading at $1.30 per share compared to our average cost basis
of $2.40 per share. We intend to sell our shares of Avanex and, subject to
restrictions and the trading volume in Avanex stock, we expect to complete this
activity in early 2006. As we do not expect the market value of the Avanex
shares to recover in this timeframe, the impairment in the first quarter was
required.
The following table illustrates the charges, credits and balances of the
restructuring reserves as of and for the three months ended March 31, 2005 (in
millions):
- ------------------------------------------------------------------------------------------------------------------------------------
Quarter Remaining
ended March Cash reserve at
January 1, 31, 2005 payments March 31,
2005 charge in 2005 2005
- ------------------------------------------------------------------------------------------------------------------------------------
Restructuring charges:
Employee related costs $ 18 $ 5 $ 13
Other charges 77 4 73
---------------------------------------------------------
Total restructuring charges $ 95 $ 9 $ 86
---------------------------------------------------------
Other:
Impairment of available-for-sale securities $ 19
-------
Total restructuring, impairment and other charges and (credits) $ 19
- ------------------------------------------------------------------------------------------------------------------------------------
Cash payments for employee related costs will be substantially complete by the
end of 2005, while payments for exit activities will be substantially completed
by the end of 2008.
2004 Actions
In the first quarter of 2004, we recorded net charges of $34 million included in
restructuring, impairment and other charges and (credits). A summary of these
charges and credits follow:
.. We recorded $39 million of accelerated depreciation and $1 million of exit
costs relating to the final shutdown of our semiconductor materials
manufacturing facility in Charleston, South Carolina, which we announced in
the fourth quarter of 2003.
.. We recorded credits of $6 million, primarily related to proceeds in excess
of assumed salvage values for assets that were previously impaired.
The following table illustrates the charges, credits and balances of the
restructuring reserves as of and for the three months ended March 31, 2004 (in
millions):
- ------------------------------------------------------------------------------------------------------------------------------------
Quarter Remaining
ended March Revisions Net Cash reserve at
January 1, 31, 2004 to existing charges/ payments March 31,
2004 charge plans (reversals) in 2004 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Restructuring charges:
Employee related costs $ 78 $ (28) $ 50
Other charges 108 $ 1 $ 1 (6) 103
----------------------------------------------------------------------------------
Total restructuring charges $ 186 $ 1 $ 1 $ (34) $ 153
----------------------------------------------------------------------------------
Impairment of long-lived assets:
Assets to be disposed of by sale
or abandonment $ (6) $ (6)
Other:
Accelerated depreciation $ 39 $ 39
----------------------------------------
Total restructuring, impairment and
other charges and (credits) $ 40 $ (6) $ 34
- ------------------------------------------------------------------------------------------------------------------------------------
3. Commitments and Contingencies
Asbestos Settlement
On March 28, 2003, we announced that we had reached agreement with the
representatives of current and future asbestos claimants on a settlement
arrangement that was thereafter incorporated into the Pittsburgh Corning
Corporation (PCC) plan of reorganization (the PCC Plan). This settlement remains
subject to a number of contingencies, including approval by the bankruptcy
court. If the PCC Plan is approved and becomes effective, our settlement will
require the contribution of our equity interest in PCC, our one-half equity
interest in Pittsburgh Corning Europe N.V. (PCE), and 25 million shares of our
common stock. The common stock will be marked-to-market each quarter until the
PCC Plan is approved, thus resulting in adjustments to income and the settlement
liability as appropriate. Corning will also be making cash payments of $146
million (net present value as of March 31, 2005) in six installments beginning
one year after the plan is effective. In addition, we will assign insurance
policy proceeds from our primary insurance and a portion of our excess insurance
as part of the settlement. Two of Corning's primary insurers and several excess
insurers have commenced litigation for a declaration of the rights and
obligations of the parties under insurance policies, including rights that may
be affected by the settlement arrangement described above. Corning is vigorously
contesting these cases. Management is unable to predict the outcome of this
insurance litigation.
The PCC Plan received a favorable vote from creditors in March 2004. Hearings to
consider objections to the PCC Plan were held in the Bankruptcy Court in May
2004. The parties filed post-hearing briefs and made oral arguments to the
Bankruptcy Court in November 2004. The Bankruptcy Court allowed an additional
round of briefing to address current case law developments and heard additional
oral arguments on March 16, 2005. At this hearing, the court allowed the
proponents of the PCC Plan 60 days to consider amendments to the Plan or to
request rulings on the pending objections. The timing and outcome are uncertain.
If the Bankruptcy Court does not confirm the PCC Plan in its current form,
changes to the settlement agreement are reasonably possible. Further judicial
review is also reasonably possible. Although the confirmation of the PCC Plan is
subject to a number of contingencies, apart from the quarterly adjustment in the
value of 25 million shares of Corning common stock, management believes that the
likelihood of a material adverse impact to Corning's financial statements is
remote.
The following summarizes the charges (credits) we have recorded to
mark-to-market the value of our common stock (in millions):
- --------------------------------------------------------------------------------
For the three months ended March 31,
------------------------------------
2005 2004
- --------------------------------------------------------------------------------
Asbestos settlement (credit) charge $ (16) $ 19
- --------------------------------------------------------------------------------
Since March 28, 2003, we have recorded total net charges of $430 million to
reflect the initial settlement and subsequent mark-to-market adjustment for the
change in the value of our common stock.
The carrying value of our investment in PCE and the fair value of 25 million
shares of our common stock (totaling $300 million at March 31, 2005) is recorded
in the other accrued liabilities component in our consolidated balance sheets.
As the timing of this obligation's settlement will depend on future judicial
rulings (i.e., controlled by a third party and not Corning), this portion of the
PCC liability is considered a "due on demand" obligation. Accordingly, this
portion of the obligation has been classified as a current liability, even
though it is possible that the contribution could be made beyond one year. The
remaining portion of the settlement liability, representing the net present
value of the cash payments, is recorded in the other liabilities component in
our consolidated balance sheets.
Other Commitments and Contingencies
We provide financial guarantees and incur contingent liabilities in the form of
purchase price adjustments related to attainment of milestones, stand-by letters
of credit and performance bonds. These guarantees have various terms, and none
of these guarantees are individually significant. We have also agreed to provide
a credit facility to Dow Corning Corporation (Dow Corning) as discussed in Note
7 to the consolidated financial statements in our 2004 Form 10-K. The funding of
the Dow Corning $150 million credit facility is subject to events connected to
the Bankruptcy Plan. As of March 31, 2005, we were contingently liable for the
items described above totaling $364 million, compared with $368 million at
December 31, 2004. We believe a significant majority of these guarantees and
contingent liabilities will expire without being funded.
From time to time, we are subject to uncertainties and litigation and are not
always able to predict the outcome of these items with assurance. Various legal
actions (including the PCC matter discussed previously), claims and proceedings
are pending against us, including those arising out of alleged product defects,
product warranties, patents, asbestos and environmental matters. In the opinion
of management, the ultimate disposition of these matters will not have a
material adverse effect on Corning's consolidated financial position, liquidity
or results of operations.
4. Income Taxes
Our (provision) benefit for income taxes and the related tax rates follow (in
millions):
- --------------------------------------------------------------------------------
For the three months ended March 31,
-------------------------------------
2005 2004
- --------------------------------------------------------------------------------
(Provision) benefit for income taxes $ (19) $ 12
Effective (income tax) benefit rate (18.4)% 18.8%
- --------------------------------------------------------------------------------
For the three months ended March 31, 2005, the tax provision reflected the
impact of maintaining a valuation allowance on the majority of net deferred tax
assets. As a result, U.S. (federal, state and local) and certain foreign income
taxes attributable to pre-tax income or losses were not provided. The $19
million income tax provision included income taxes for certain foreign
operations that were favorably impacted by tax holiday benefits and investment
tax credits. For the U.S. and certain foreign operations, the income tax
provision or benefit attributable to pre-tax income or losses was recorded as an
adjustment to the valuation allowance.
At March 31, 2005, we had net deferred tax assets of $535 million, which are
primarily U.S. net deferred tax assets. We continue to believe it is more likely
than not that we could realize these U.S. net deferred tax assets through a
tax-planning strategy involving the sale of a non-strategic appreciated asset.
We expect to maintain a valuation allowance on future tax benefits until an
appropriate level of profitability, primarily in the U.S. and Germany, is
sustained or we are able to develop tax planning strategies that enable us to
conclude that it is more likely than not that a larger portion of our deferred
tax assets would be realizable, or if the PCC settlement is finalized earlier
than we anticipate. Until then, our tax provision will include only the net tax
expense attributable to certain foreign operations and the expense or benefit
from U.S. and certain foreign operations will be recorded as an adjustment to
the valuation allowance.
The effective benefit rate for the three months ended March 31, 2004 is lower
than the U.S. statutory income tax rate of 35%. Our effective benefit rate was
impacted by restructuring, impairment and other charges and (credits), asbestos
settlement charges and loss on repurchases and retirement of debt.
5. Earnings Per Common Share
The reconciliation of the amounts used in the basic and diluted earnings per
common share computations follow (in millions, except per share amounts):
- ------------------------------------------------------------------------------------------------------------------------------------
For the three months ended March 31,
-----------------------------------------------------------------------------------
2005 2004
---------------------------------------- ----------------------------------------
Net Weighted- Per Share Net Weighted- Per Share
Income Average Shares Amount Income Average Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------------
Basic earnings per common share $ 249 1,411 $ 0.18 $ 55 1,358 $ 0.04
- ------------------------------------------------------------------------------------------------------------------------------------
Effect of dilutive securities:
Stock options 31 37
7% mandatory convertible preferred stock 32 42
3.50% convertible debentures 2 29
- ------------------------------------------------------------------------------------------------------------------------------------
Diluted earnings per common share $ 251 1,503 $ 0.17 $ 55 1,437 $ 0.04
- ------------------------------------------------------------------------------------------------------------------------------------
The following potential common shares were excluded from the calculation of
diluted earnings per common share due to their anti-dilutive effect or, in the
case of stock options, because their exercise price was greater than the average
market price for periods presented (in millions):
- --------------------------------------------------------------------------------
For the three months ended March 31,
------------------------------------
2005 2004
- --------------------------------------------------------------------------------
Potential common shares excluded from the
calculation of diluted earnings per
common share:
3.50% convertible debentures 57
4.875% convertible notes 6 6
Zero coupon convertible debentures 3 4
-------- --------
Total 9 67
======== ========
Stock options excluded from the calculation
of diluted earnings (loss) per share
because the exercise price was
greater than the average market
price of the common shares 63 55
- --------------------------------------------------------------------------------
6. Inventories
Inventories comprise the following (in millions):
- --------------------------------------------------------------------------------
March 31, 2005 December 31, 2004
- --------------------------------------------------------------------------------
Finished goods $ 157 $ 136
Work in process 170 172
Raw materials and accessories 137 139
Supplies and packing materials 98 88
- --------------------------------------------------------------------------------
Total inventories $ 562 $ 535
- --------------------------------------------------------------------------------
7. Investments
Investments comprise the following (in millions):
- ------------------------------------------------------------------------------------------------------------------------------------
Ownership March 31, December 31,
Interest 2005 2004
-------- ----------- ---------------
Associated companies at equity
Samsung Corning Precision Glass Co., Ltd. 50% $ 562 $ 572
Dow Corning 50% 373 324
All other 25%-51% (a) 521 527
------- --------
1,456 1,423
Other investments (b) 29 61
------- --------
Total $ 1,485 $ 1,484
- ------------------------------------------------------------------------------------------------------------------------------------
(a) Amounts reflect Corning's direct ownership interests in the respective
associated companies. Corning does not control any such entities.
(b) Amounts reflect $22 million and $53 million at March 31, 2005 and December
31, 2004, respectively, of available-for-sale securities stated at market.
During the first quarter of 2005, Corning recorded an impairment charge of
$19 million for an other than temporary decline in the fair value of shares
of Avanex below their cost basis. This included the reversal of previously
unrecognized gains on Avanex shares of $14 million included in accumulated
other comprehensive income at December 31, 2004 on the consolidated balance
sheet. Refer to Note 2 (Restructuring, Impairment and Other Charges and
(Credits)) for additional information.
Summarized results of operations for our two significant investments accounted
for by the equity method follow:
Samsung Corning Precision Glass Co., Ltd. (Samsung Corning Precision)
- ---------------------------------------------------------------------
Samsung Corning Precision is a South Korea-based manufacturer of liquid crystal
display glass for flat panel displays. Samsung Corning Precision's results of
operations follow (in millions):
- ------------------------------------------------------------------------------------------------------------------------------------
For the three months ended March 31,
------------------------------------
2005 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Statement of Operations:
Net sales $ 317 $ 235
Gross profit $ 237 $ 179
Net income $ 165 $ 126
Corning's equity in earnings of Samsung Corning Precision $ 80 $ 65
Related Party Transactions:
Corning sales of inventory to Samsung Corning Precision $ 6
Corning purchases from Samsung Corning Precision $ 9 $ 22
Corning sales of machinery and equipment to Samsung Corning Precision $ 20 $ 23
- ------------------------------------------------------------------------------------------------------------------------------------
Balances due to and from Samsung Corning Precision were immaterial at March 31,
2005 and December 31, 2004.
Dow Corning
- -----------
Dow Corning is a U.S. based manufacturer of silicone products. Dow Corning's
results of operations follow (in millions):
- ------------------------------------------------------------------------------------------------------------------------------------
For the three months ended March 31,
------------------------------------
2005 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Statement of Operations:
Net sales $ 983 $ 814
Gross profit $ 346 $ 230
Net income $ 136 $ 52
Corning's equity in earnings of Dow Corning $ 68 $ 24
- ------------------------------------------------------------------------------------------------------------------------------------
8. Goodwill and Other Intangible Assets
The changes in the carrying amount of goodwill for the three months ended March
31, 2005 follow (in millions):
- ------------------------------------------------------------------------------------------------------------------------------------
Telecom- Display
munications Technologies Other (1) Total
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at January 1, 2005 $ 123 $ 9 $ 150 $ 282
Foreign currency translation & other (5) (5)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 2005 $ 118 $ 9 $ 150 $ 277
- ------------------------------------------------------------------------------------------------------------------------------------
(1) This balance relates to our Specialty Materials operating segment.
Other intangible assets follow (in millions):
- ------------------------------------------------------------------------------------------------------------------------------------
March 31, 2005 December 31, 2004
-------------------------------------------------------------------------------
Accumulated Accumulated
Gross Amortization Net Gross Amortization Net
- ------------------------------------------------------------------------------------------------------------------------------------
Amortized intangible assets:
Patents and trademarks $ 146 $ 81 $ 65 $ 148 $ 79 $ 69
Non-competition agreements 115 115 118 116 2
Other 4 1 3 4 1 3
----------------------------------- -----------------------------------
Total amortized intangible assets 265 197 68 270 196 74
----------------------------------- -----------------------------------
Unamortized intangible assets:
Intangible pension assets 42 42 42 42
----------------------------------- -----------------------------------
Total $ 307 $ 197 $ 110 $ 312 $ 196 $ 116
- ------------------------------------------------------------------------------------------------------------------------------------
Amortized intangible assets are primarily related to the Telecommunications
segment.
Estimated amortization expense related to these intangible assets is $13 million
in 2006, $12 million in 2007, $11 million in 2008, and insignificant thereafter.
9. Debt
In the first quarter of 2005, we completed the following debt transactions:
.. We obtained a loan of approximately $48 million, bearing interest at 2.1%,
from a Japanese bank. This loan is part of a 10-year loan agreement entered
into in 2004 to fund certain capital expansion activities in Japan.
.. We redeemed $100 million of our outstanding 3.50% convertible debentures.
The bondholders affected by this redemption elected to convert $98 million
of their debentures into Corning common stock at a conversion ratio of
103.3592 shares per $1,000 debenture, with the remaining $2 million repaid
in cash. Separately, bondholders elected to convert approximately $6
million of outstanding debentures into Corning common stock. In total, we
issued 11 million shares upon the conversion of the debentures, resulting
in an increase to equity of $105 million. At March 31, 2005, $191 million
of our 3.50% convertible debentures remained outstanding. We expect to
redeem these debentures, subject to market conditions, before December 31,
2005.
.. We repaid a total of $192 million of notes in accordance with their stated
repayment schedule. This was primarily comprised of our 5.625% Euro notes.
In addition, in the first quarter of 2005, we completed negotiations with a
group of banks on a new revolving credit facility. The new facility provides us
access to a $975 million unsecured multi-currency revolving line of credit and
expires in March 2010. The facility includes two financial covenants, including
a leverage test (debt to capital ratio) and an interest coverage ratio
(calculated on the most recent four quarters). As of March 31, 2005, we were in
compliance with these covenants. Concurrent with the closing of this credit
facility, we terminated our previous $2 billion revolving line of credit that
was set to expire in August 2005.
10. Customer Deposits
In 2005 and 2004, Corning and several customers entered into long-term purchase
and supply agreements in which the Display Technologies segment will supply
large-size glass substrates to the customers over periods of up to six years. As
part of the agreements, these customers have agreed to make advance cash
deposits to Corning for a portion of the contracted glass to be purchased.
During the current year, we received a total of $108 million of deposits against
orders, of which $20 million was received in the first quarter. Upon receipt of
the cash deposits made by customers, we record a customer deposit liability,
which will be applied in the form of credits against future product purchases
over the life of the agreements. As product is shipped to a customer, Corning
will recognize revenue at the selling price and issue a credit memorandum for an
agreed amount of the customer deposit liability. The credit memorandum will be
applied against customer receivables resulting from the sale of product, thus
reducing operating cash flows in later periods as credits are applied for cash
deposits received in earlier periods.
Customer deposits will be received in the following periods (in millions):
- ------------------------------------------------------------------------------------------------------------------------------------
For the three
months ended Remainder Estimated 2006
2004 March 31, 2005 of 2005 and Beyond Total
- ------------------------------------------------------------------------------------------------------------------------------------
Customer deposits received (a) $ 204 $ 20 $ 463 $ 295 $ 982
- ------------------------------------------------------------------------------------------------------------------------------------
(a) The majority of customer deposits will be received through 2006.
We had total customer deposit liabilities of $228 million and $215 million at
March 31, 2005 and December 31, 2004, respectively, of which $40 million and $18
million were recorded in the current liabilities - other accrued liabilities
component of our consolidated balance sheets.
In the event the customers do not make all customer deposit installment payments
or elect not to purchase the agreed upon quantities of product, subject to
specific conditions outlined in the agreements, we may retain certain amounts of
the customer deposits. If we do not deliver agreed upon product quantities,
subject to specific conditions outlined in the agreements, we may be required to
return certain amounts of the customer deposits.
11. Employee Retirement Plans
The following table summarizes the components of net periodic benefit cost for
our defined benefit pension and postretirement health care and life insurance
plans (in millions):
- ------------------------------------------------------------------------------------------------------------------------------------
Pension benefits Postretirement benefits
For the three months For the three months
ended March 31, ended March 31,
- ------------------------------------------------------------------------------------------------------------------------------------
2005 2004 2005 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Service cost $ 16 $ 11 $ 2 $ 2
Interest cost 45 38 12 13
Expected return on plan assets (52) (43)
Amortization of net loss 1 6 1 3
Amortization of prior service cost 10 3 (2) (2)
- ------------------------------------------------------------------------------------------------------------------------------------
Total expense $ 20 $ 15 $ 13 $ 16
- ------------------------------------------------------------------------------------------------------------------------------------
For 2005, we expect to contribute at least $100 million in cash or stock to our
domestic and international pension plans.
12. Comprehensive Income
Components of comprehensive income, on an after-tax basis where applicable,
follow (in millions):
- ------------------------------------------------------------------------------------------------------------------------------------
For the three months ended March 31,
------------------------------------
2005 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $ 249 $ 55
Other comprehensive income:
Change in unrealized gain (loss) on investments, net (33) 2
Reclassification adjustment relating to investments included in
net income, net 19
Change in unrealized gain (loss) on derivative instruments, net 26 (6)
Reclassification adjustment relating to derivatives, net (13) 7
Foreign currency translation adjustment, net (a) (12) 2
Change in minimum pension liability 2 (3)
- ------------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income $ 238 $ 57
- ------------------------------------------------------------------------------------------------------------------------------------
(a) The initial implementation of our Taiwan subsidiary's change in its
functional currency from the new Taiwan dollar to the Japanese yen
effective January 1, 2005 had the effect of increasing the U.S. dollar
value of its net assets and increasing accumulated other comprehensive
income by $23 million. The impact of this change is included in the foreign
currency translation adjustment, net amount.
13. Operating Segments
Our reportable operating segments follow:
.. Display Technologies - manufactures liquid crystal display glass for flat
panel displays;
.. Telecommunications - manufactures optical fiber and cable, and hardware and
equipment components for the telecommunications industry;
.. Environmental Technologies - manufactures ceramic substrates and filters
for automobile and diesel applications; and
.. Life Sciences - manufactures glass and plastic consumables for scientific
applications.
All other operating segments that do not meet the quantitative threshold for
separate reporting (e.g., Specialty Materials, Ophthalmic and Conventional Video
Components), certain corporate investments (e.g., Dow Corning and Steuben
Glass), discontinued operations, and unallocated expenses (including other
corporate items) have been grouped as "Unallocated and Other." Unallocated
expenses include the following: gains or losses on repurchases and retirement of
debt; charges related to the asbestos litigation; restructuring, impairment and
other charges and (credits) related to the corporate research and development or
staff organizations; and charges for increases in our tax valuation allowance.
Unallocated and Other also represents the reconciliation between the totals for
the reportable segments and our consolidated operating results.
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Segments Display Telecom- Environmental Life Unallocated Consolidated
(in millions) Technologies munications Technologies Sciences and Other Total
- ------------------------------------------------------------------------------------------------------------------------------------
For the three months ended March 31, 2005
Net sales $ 320 $ 427 $ 148 $ 74 $ 81 $ 1,050
Research, development and engineering
expenses (1) $ 25 $ 22 $ 26 $ 11 $ 14 $ 98
Restructuring, impairment and other charges
and (credits) $ 19 $ 19
Interest expense (2) $ 16 $ 11 $ 6 $ 1 $ 3 $ 37
(Provision) benefit for income taxes $ (17) $ (2) $ (19)
Income (loss) before minority interests and
equity earnings (3) $ 80 $ 9 $ (2) $ (2) $ (1) $ 84
Minority interests (1) (1)
Equity in earnings of associated
companies 81 85 166
------- -------- -------- ------- -------- --------
Net income (loss) $ 161 $ 9 $ (2) $ (2) $ 83 $ 249
- ------------------------------------------------------------------------------------------------------------------------------------
For the three months ended March 31, 2004
Net sales $ 230 $ 312 $ 141 $ 79 $ 82 $ 844
Research, development and engineering
expenses (1) $ 16 $ 25 $ 20 $ 9 $ 14 $ 84
Restructuring, impairment and other charges
and (credits) $ (4) $ 38 $ 34
Interest expense (2) $ 11 $ 16 $ 5 $ 1 $ 3 $ 36
(Provision) benefit for income taxes $ (26) $ 23 $ (3) $ (3) $ 21 $ 12
Income (loss) before minority interests and
equity earnings (3) $ 53 $ (47) $ 6 $ 5 $ (69) $ (52)
Minority interests 1 (1)
Equity in earnings of associated
companies 65 3 39 107
------- -------- -------- ------- -------- --------
Net income (loss) $ 118 $ (43) $ 6 $ 5 $ (31) $ 55
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Non-direct research, development and engineering expenses are allocated
based upon direct project spending for each segment.
(2) Interest expense is allocated to segments based on a percentage of segment
net operating assets. Consolidated subsidiaries with independent capital
structures do not receive additional allocations of interest expense.
(3) Many of Corning's administrative and staff functions are performed on a
centralized basis. Where practicable, Corning charges these expenses to
segments based upon the extent to which each business uses a centralized
function. Other staff functions, such as corporate finance, human resources
and legal are allocated to segments, primarily as a percentage of sales.
A reconciliation of reportable segment net income to consolidated net income
follows (in millions):
- ------------------------------------------------------------------------------------------------------------------------------------
For the three months ended March 31,
------------------------------------
2005 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Net income of reportable segments $ 166 $ 86
Non-reportable operating segments net income (loss) (1) 10 (18)
Unallocated amounts:
Non-segment loss and other (2) (2) (3)
Non-segment restructuring, impairment and
other (charges) and credits (3) (19)
Asbestos settlement 16 (19)
Interest income 10 6
Loss on repurchases of debt (23)
Benefit for income taxes (4) 2
Equity in earnings of associated companies (5) 68 24
--------- ---------
Net income $ 249 $ 55
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Non-reportable operating segments net income (loss) includes the results of
non-reportable operating segments.
(2) Non-segment loss and other includes the results of non-segment operations
and other corporate activities.
(3) For the first quarter of 2005, non-segment restructuring, impairment and
other (charges) and credits includes an impairment charge for the other
than temporary decline in the market value of Avanex shares.
(4) Benefit for income taxes includes taxes associated with non-segment
restructuring, impairment and other (charges) and credits.
(5) Equity in earnings of associated companies includes amounts derived from
corporate investments, primarily Dow Corning.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Our key priorities for 2005 remain unchanged from the previous year: protect our
financial health, improve our profitability, and invest in the future. During
the first quarter of 2005, we made the following progress against these
priorities:
Financial Health
Our balance sheet remains strong and we continue to generate positive cash flows
from operating activities. Significant activities during the quarter included
the following:
.. We reduced outstanding debt by $279 million. This included the scheduled
repayment of $192 million of debt and the early retirement of $106 million
of long-term debt, the majority of which was converted into Corning common
stock. As a result of these transactions, our debt to capital ratio
declined to 36%.
.. We entered into additional multi-year customer supply agreements in the
Display Technologies segment, and received $108 million in deposits against
orders, of which $20 million was received in the first quarter.
.. We completed negotiations with a group of banks on a new revolving credit
facility. The new facility provides us access to a $975 million revolving
line of credit and expires in March 2010. This facility replaces our
previous $2 billion revolving line of credit facility that was set to
expire in August 2005.
We ended the first quarter of 2005 with $1.5 billion in cash, cash equivalents
and short-term investments. This represents a decrease of approximately $300
million from December 31, 2004, primarily due to capital spending in excess of
cash provided by operating activities and the net debt repayments.
Profitability
For the three months ended March 31, 2005, we generated net income of $249
million or $0.17 per share. This represents an improvement of $194 million over
the same period in 2004. This improvement in net income was primarily driven by
the following:
.. Growth in our Display Technologies segment, which continued to experience
strong market demand for LCD glass substrates. For 2005, net income for the
Display Technologies segment, including equity earnings from Samsung
Corning Precision Glass Co., Ltd. (Samsung Corning Precision), a South
Korea-based manufacturer of LCD glass substrates, increased $43 million, or
36%.
.. Improved performance in the Telecommunications segment. This segment
generated a modest profit of $9 million, which represented an improvement
of $52 million compared to the first quarter of 2004 net loss.
.. Strong equity earnings from Dow Corning Corporation (Dow Corning), a U.S.
based manufacturer of silicone products, of $68 million, which represented
a 183% increase over the amount recognized in the first quarter of 2004.
Investing in our Future
We continue to invest in a wide array of technologies, with our focus being LCD
glass substrates, diesel filters and substrates in response to tightening
emissions control standards, and optical fiber and cable and hardware and
equipment to enable fiber-to-the-premises.
Our research, development and engineering expenses have increased $14 million
compared to the first quarter of 2004, but are relatively constant as a
percentage of net sales. We believe our current spending levels are adequate to
enable us to execute our growth strategies.
Our capital expenditures are primarily focused on expanding manufacturing
capacity for LCD glass substrates in the Display Technologies segment and diesel
products in the Environmental Technologies segment. Total capital expenditures
for the first quarter of 2005 were $323 million, of which $283 million and $34
million was directed toward our Display Technologies and Environmental
Technologies segments, respectively.
RESULTS OF OPERATIONS
Selected highlights for the first quarter were as follows (dollars in millions):
- ------------------------------------------------------------------------------------------------------------------------------------
For the three months ended March 31, % Change
------------------------------------ ---------
2005 2004 05 vs. 04
- ------------------------------------------------------------------------------------------------------------------------------------
Net sales $ 1,050 $ 844 24%
Gross margin $ 429 $ 300 43%
(gross margin %) 41% 36%
Selling, general and administrative expenses $ 184 $ 160 15%
(as a % of net sales) 18% 19%
Research, development and engineering expenses $ 98 $ 84 17%
(as a % of net sales) 9% 10%
Restructuring, impairment and other charges and (credits) $ 19 $ 34 (44)%
(as a % of net sales) 2% 4%
Asbestos settlement $ (16) $ 19 (184)%
(as a % of net sales) (2)% 2%
Income (loss) before income taxes $ 103 $ (64) 261%
(as a % of net sales) 10% (8)%
(Provision) benefit for income taxes $ (19) $ 12 (258)%
(as a % of net sales) (2)% 1%
Equity in earnings of associated companies $ 166 $ 107 55%
(as a % of net sales) 16% 13%
Net income $ 249 $ 55 353%
(as a % of net sales) 24% 7%
- ------------------------------------------------------------------------------------------------------------------------------------
Net Sales
The net sales increase for the first quarter of 2005 was the result of demand
for products in our Telecommunications segment to support fiber-to-the-premises
projects and continued strong demand for LCD glass substrates in our Display
Technologies segment. The performance in all other segments of the company was
comparable to the year ago period. Movements in foreign exchange rates,
primarily the Japanese yen and Euro. Movements in foreign exchange rates,
primarily the Japanese yen and Euro, did not significantly impact the comparison
of net sales between 2005 and 2004.
Gross Margin
As a percentage of net sales, gross margin improved 5 points in the first
quarter of 2005. The improvement in overall dollars and as a percentage of net
sales was primarily driven by increased volume in our Telecommunications and
Display Technologies segments.
Selling, General and Administrative Expenses
The increase in selling, general and administrative expenses is primarily driven
by increases in compensation costs. As a percentage of net sales, selling,
general and administrative expenses have remained comparable to the year ago
period.
Research, Development and Engineering Expenses
Research, development and engineering expenses have increased $14 million over
2004, but have remained comparable as a percentage of net sales. Our
expenditures are focused on our Environmental Technologies, Display Technologies
and Telecommunications segments as we strive to capitalize on the current market
opportunities in those segments.
Restructuring, Impairment and Other Charges and (Credits)
In the first quarter of 2005, we recorded a $19 million impairment charge for an
other than temporary decline in the fair value of our investment in Avanex
Corporation (Avanex) below its cost basis. Our investment in Avanex is accounted
for as an available-for-sale security under SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." At March 31, 2005, shares of
Avanex stock were trading at $1.30 per share compared to our average cost basis
of $2.40 per share. We intend to sell our shares of Avanex and, subject to
restrictions and the trading volume in Avanex stock, we expect to complete this
activity in early 2006. As we do not expect the market value of the Avanex
shares to recover in this timeframe, the impairment in the first quarter was
required. The charge in the first quarter of 2004 was primarily due to the final
shutdown of our semiconductor manufacturing facility in Charleston, South
Carolina.
Asbestos Settlement
The asbestos settlement activity relates to the quarterly mark-to-market of our
common stock that will be contributed to the Pittsburgh Corning Corporation
(PCC) asbestos settlement agreement if the PCC Plan of Reorganization receives
judicial approval. For additional information on this matter, refer to Note 3 to
the consolidated financial statements and Part II - Other Information, Item 1.
Legal Proceedings.
Income (Loss) Before Income Taxes
In addition to the key drivers outlined above, the comparability of income
(loss) before income taxes between 2005 and 2004 was impacted by movements in
foreign exchange rates. In the first quarter of 2005, we incurred an exchange
rate loss of $26 million. This exchange rate loss was due to the impact of
currency movements on unhedged balance sheet exposures, most notably at our
Taiwan subsidiary which changed its functional currency from the new Taiwan
dollar (its local currency) to the Japanese yen in the first quarter of 2005.
Refer to Note 1 to the consolidated financial statements for additional
information. Movements in exchange rates did not significantly impact results
for the first quarter of 2004.
(Provision) Benefit for Income Taxes
Our (provision) benefit for income taxes and the related tax rates follow (in
millions):
- --------------------------------------------------------------------------------
For the three months ended March 31,
------------------------------------
2005 2004
- --------------------------------------------------------------------------------
(Provision) benefit for income taxes $ (19) $ 12
Effective (income tax) benefit rate (18.4)% 18.8%
- --------------------------------------------------------------------------------
For the three months ended March 31, 2005, the tax provision reflected the
impact of maintaining a valuation allowance on the majority of net deferred tax
assets. As a result, U.S. (federal, state and local) and certain foreign income
taxes attributable to pre-tax income were not provided. The $19 million income
tax provision included income taxes for certain foreign operations that were
favorably impacted by tax holiday benefits and investment tax credits. For the
U.S. and certain foreign operations, the income tax provision or benefit
attributable to pre-tax income or losses was recorded as an adjustment of the
valuation allowance.
At March 31, 2005, we had net deferred tax assets of $535 million, which are
primarily U.S. net deferred tax assets. We continue to believe it is more likely
than not that we could realize these U.S. net deferred tax assets through a
tax-planning strategy involving the sale of a non-strategic appreciated asset.
We expect to maintain a valuation allowance on future tax benefits until an
appropriate level of profitability, primarily in the U.S. and Germany, is
sustained or we are able to develop tax planning strategies that enable us to
conclude that it is more likely than not that a larger portion of our deferred
tax assets would be realizable, or if the Pittsburgh Corning Corporation
settlement is finalized earlier than we anticipate. Until then, our tax
provision will include only the net tax expense attributable to certain foreign
operations and the expense or benefit from U.S. and certain foreign operations
will be recorded as an adjustment to the valuation allowance.
The effective benefit rate for the three months ended March 31, 2004 is lower
than the U.S. statutory income tax rate of 35%. Our effective benefit rate was
impacted by restructuring, impairment and other charges and (credits), asbestos
settlement charges and loss on repurchases and retirement of debt.
Equity in Earnings of Associated Companies
The following provides a summary of equity in earnings of associated companies,
net of impairments (in millions):
- --------------------------------------------------------------------------------
For the three months ended March 31,
-----------------------------------
2005 2004
- --------------------------------------------------------------------------------
Samsung Corning Precision $ 80 $ 65
Dow Corning 68 24
All other 18 18
----- -----
Total equity earnings 166 $ 107
- --------------------------------------------------------------------------------
The improvement in equity earnings recognized from Samsung Corning Precision is
explained in the discussion of the performance of our Display Technologies
segment. The increase in 2005 equity earnings recognized from Dow Corning
compared to 2004 is largely attributed to record sales volumes and improved
pricing for Dow Corning in 2005.
Refer to Note 7 to the consolidated financial statements for additional
information relating to Samsung Corning Precision and Dow Corning's operating
results.
Net Income
As a result of the above, our net income and per share data follow (in millions,
except per share amounts):
- --------------------------------------------------------------------------------
For the three months ended March 31,
------------------------------------
2005 2004
- --------------------------------------------------------------------------------
Net income $ 249 $ 55
Basic earnings per common share $ 0.18 $ 0.04
Diluted earnings per common share $ 0.17 $ 0.04
Shares used in computing per share amounts:
Basic 1,411 1,358
Diluted 1,503 1,437
- --------------------------------------------------------------------------------
OPERATING SEGMENTS
Our reportable operating segments follow:
.. Display Technologies - manufactures liquid crystal display (LCD) glass for
flat panel displays;
.. Telecommunications - manufactures optical fiber and cable, and hardware and
equipment components for the telecommunications industry;
.. Environmental Technologies - manufactures ceramic substrates and filters
for automobile and diesel applications; and
.. Life Sciences - manufactures glass and plastic consumables for scientific
applications.
All other operating segments that do not meet the quantitative threshold for
separate reporting (e.g., Specialty Materials, Ophthalmic and Conventional Video
Components), certain corporate investments (e.g., Dow Corning and Steuben
Glass), discontinued operations, and unallocated expenses (including other
corporate items) have been grouped as "Unallocated and Other." Unallocated
expenses include the following: gains or losses on repurchases and retirement of
debt; charges related to the asbestos litigation; restructuring, impairment and
other charges and (credits) related to the corporate research and development or
staff organizations; and charges for increases in our tax valuation allowance.
Unallocated and Other also represents the reconciliation between the totals for
the reportable segments and our consolidated operating results.
Display Technologies
The following table provides net sales and other data for the Display
Technologies segment (in millions):
- ------------------------------------------------------------------------------------------------------------------------------------
For the three months ended March 31, % Change
------------------------------------ --------
2005 2004 05 vs. 04
- ------------------------------------------------------------------------------------------------------------------------------------
Net sales $ 320 $ 230 39%
Income before equity earnings $ 80 $ 53 51%
Equity earnings of associated companies $ 81 $ 65 25%
Net income $ 161 $ 118 36%
- ------------------------------------------------------------------------------------------------------------------------------------
The 2005 net sales increase is largely reflective of the overall LCD market
growth. During the first quarter of 2005, glass substrate volumes (measured in
square feet of glass sold) increased approximately 35%. Weighted average selling
prices increased modestly compared to 2004. Included in this weighted average
were selling price declines that were more than offset by increases in the
market demand for large-size glass substrates (generation 5 and above), which
carry a higher selling price per square foot. For the first quarter of 2005,
large-size glass substrates accounted for 58% of total sales volumes, compared
to 34% for the first quarter of 2004. The sales of the Display Technologies
segment are denominated in Japanese yen and, as such, our revenues are
susceptible to movements in the US dollar - Japanese yen exchange rates. Sales
growth benefited by approximately 3% from a weakening of the U.S. dollar
compared to 2004.
For 2005, the increase in income before equity earnings was the result of higher
volumes and ongoing improvements in manufacturing efficiencies. Net income
before equity earnings for the first quarter of 2005, includes approximately $20
million of exchange losses related to foreign currency denominated transactions.
The impact of this loss on the comparability of results was largely offset by a
lower effective tax rate in 2005 than in 2004. The increase in our equity
earnings from Samsung Corning Precision were largely driven by the same factors
identified for our wholly-owned business, excluding the foreign exchange loss.
The Display Technologies segment continues to have a concentrated customer base
comprised of LCD panel makers primarily located in Japan and Taiwan. The most
significant customers in these markets are AU Optronics Corp., Chi Mei
Optoelectronics Corp., Hannstar Display Corp., Quanta Display Inc., Sharp
Corporation, and Toppan CFI (Taiwan) Co., Ltd. For the three months ended March
31, 2005, these customers accounted for 79% of the Display Technologies segment
sales.
We expect the LCD market to continue to grow rapidly. We anticipate higher
demand for LCD televisions, for which our customers require large-size glass
substrates. During 2005 and 2004, Corning held discussions with several of its
customers to discuss how to meet this demand. As part of its discussions,
Corning has sought improved payment terms, including deposits against orders, to
provide a greater degree of assurance that we are effectively building capacity
to meet the needs of a rapidly growing industry.
In 2005 and 2004, Corning and several customers entered into long-term purchase
and supply agreements in which the Display Technologies segment will supply
large-size glass substrates to the customers over periods of up to six years. As
part of the agreements, these customers have agreed to make advance cash
deposits to Corning for a portion of the contracted glass to be purchased. We
now have customer deposit agreements with five customers of the Display
Technologies segment.
In the event the customers do not make all customer deposit installment payments
or elect not to purchase the agreed upon quantities of product, subject to
specific conditions outlined in the agreements, Corning may retain certain
amounts of the customer deposits. If Corning does not deliver agreed upon
product quantities, subject to specific conditions outlined in the agreements,
Corning may be required to return certain amounts of the customer deposits.
Outlook:
- --------
We expect to see a continuation of the overall industry growth and the trend
toward large size substrates. Full year 2005 volume growth for the LCD glass
market is anticipated to be greater than 50%, and we anticipate adding
sufficient capacity to meet market growth. This market growth is expected to
occur at varying rates in the principal LCD markets of Japan, Taiwan, China and
Korea. Sales of our wholly-owned business are primarily to panel manufacturers
in Japan, Taiwan, and China with customers in Korea being serviced by Samsung
Corning Precision. The actual growth rates in these markets will impact our
sales and earnings performance. For the second quarter of 2005, we expect
volumes for our wholly-owned business and Samsung Corning Precision may grow
between 10% and 20%, both individually and in the aggregate. We expect second
quarter pricing pressures to be slightly less than what occurred in the first
quarter, which experienced a sequential price decline of less than 4%. There can
be no assurance that the end-market rates of growth will continue at the high
rates experienced in recent quarters, that we will be able to pace our capacity
expansions to actual demand, or that the rate of cost declines will offset price
declines in any given period. While the industry has grown rapidly, consumer
preferences for panels of differing sizes, or price or other factors, may lead
to pauses in market growth, and it is possible that glass manufacturing capacity
may exceed demand from time to time. In addition, changes in foreign exchange
rates, principally the Japanese yen, will continue to impact the profitability
of this segment.
Telecommunications
The following table provides net sales and other data for the Telecommunications
segment (in millions):
- ------------------------------------------------------------------------------------------------------------------------------------
For the three months ended March 31, % Change
------------------------------------ --------
2005 2004 05 vs. 04
- ------------------------------------------------------------------------------------------------------------------------------------
Net sales:
Optical fiber and cable $ 212 $ 149 42%
Hardware and equipment 215 163 32%
--------- --------
Total net sales $ 427 $ 312 37%
========= ========
Net income (loss) $ 9 $ (43) 121%
- ------------------------------------------------------------------------------------------------------------------------------------
For the first quarter of 2005, fiber volumes increased 52% while prices declined
7% compared to the first quarter of 2004. The 2005 increase in fiber volumes was
largely driven by sales in North America and Europe, offset by lower volumes in
China. The stronger North America volumes were primarily due to increased sales
to Verizon Communications (Verizon) to support their fiber-to-the-premises
project. Sales to Verizon also accounted for the majority of the increase in
hardware and equipment product sales. In the first quarter of 2004, the
Telecommunications segment did not have any significant sales to Verizon for
their fiber-to-the-premises project. The lower volume in China was due to the
overall weakness in the market, which continues to suffer over capacity and
pricing pressure. Based on these market conditions, we have been unable to
regain the share we lost prior to the successful resolution of the 2004
anti-dumping preliminary determination. The comparison of sales of the
Telecommunications segment between 2005 and 2004 was negatively affected by the
2004 sale of our frequency controls business. During the first quarter of 2004,
the frequency controls business recorded sales of $22 million. Excluding the
impact of this divestiture, net sales for the Telecommunications segment
increased 47% for the first quarter of 2005 compared to the year ago period.
Movements in foreign exchange rates, primarily the Euro and Japanese yen, did
not have a significant impact on sales for 2005 compared to 2004.
Although showing a modest profit, the first quarter 2005 net income represented
a significant improvement over the loss incurred in the first quarter of 2004.
This improvement in performance is primarily driven by operational efficiencies
from the increase in sales volumes. Movements in exchange rates did not
significantly impact net income.
Outlook:
- --------
For the second quarter of 2005, we expect net sales to increase approximately 5%
compared to those of the first quarter. This sales performance primarily
reflects typical seasonal increases in North America and Europe, as well as
ongoing demand from fiber-to-the-premises projects. For China, we do not
anticipate any significant recovery during the second quarter. We expect fiber
volumes to be flat to up 10% and moderate pricing declines. Segment net sales
continue to be impacted by Verizon's fiber-to-the-premises project. We expect
the second quarter level of sales to Verizon to decline due to expected price
declines as this program enters its second year. Second quarter sales volumes
should be approximately flat with the first quarter. However,
fiber-to-the-premises sales to Verizon could decline more significantly in the
third and fourth quarters unless Verizon raises its announced targets for homes
passed and connected. Potential changes in Verizon's inventory of
fiber-to-the-premises products could also affect the sales level.
Environmental Technologies
The following table provides net sales and other data for the Environmental
Technologies segment (in millions):
- ------------------------------------------------------------------------------------------------------------------------------------
For the three months ended March 31, % Change
------------------------------------ --------
2005 2004 05 vs. 04
- ------------------------------------------------------------------------------------------------------------------------------------
Net sales:
Automotive $ 127 $ 125 2%
Diesel 21 16 31%
--------- --------
Total net sales $ 148 $ 141 5%
========= ========
Net (loss) income $ (2) $ 6 (133)%
- ------------------------------------------------------------------------------------------------------------------------------------
The 2005 increase in net sales is primarily the result of demand for our ceramic
filters and substrates for diesel emission control applications. We have
received several letters of intent from diesel engine manufacturers to supply
filters for their 2007 model year platforms, but they have not yet developed
into supply agreements. Negotiations with these diesel engine manufacturers will
continue through the next several quarters. For automotive products, volumes
were up slightly from 2004, and sales continue to benefit from a higher mix of
our thin-wall and ultra thin-wall substrates, which allow engine manufacturers
to meet increasingly tighter emissions control requirements in a more cost
effective manner. Strong sales to Asian auto manufacturers were largely offset
by weaker demand from U.S. auto manufacturers due to slowdowns in their
production. A portion of this segment's sales are susceptible to movements in
the U.S. dollar-Euro exchange rate. Movements in exchange rates did not have a
significant impact on sales for 2005 compared to 2004.
The 2005 decline in net income is primarily the result of increased development
costs and plant start-up costs to support our emerging diesel products. These
costs offset the gross margin benefits of increased volumes and the higher mix
of premium automotive products. Movements in exchange rates did not
significantly impact net income.
Outlook:
- --------
For the second quarter of 2005, we expect net sales to be comparable to those of
the first quarter. For automotive products, we expect to see stable demand based
on anticipated worldwide auto production and a continuation of the shift to
premium products, although at slightly slower rates than 2004. A portion of our
automotive products are sold to U.S. auto manufacturers, and as a result,
further slowdowns in automotive production by these manufacturers could
adversely impact sales. Diesel product sales are expected to grow in the quarter
as the retrofit market is anticipated to remain strong. The retrofit market is
volatile, and any unanticipated declines in demand could adversely impact sales.
Life Sciences
The following table provides net sales and other data for the Life Sciences
segment (in millions):
- ------------------------------------------------------------------------------------------------------------------------------------
For the three months ended March 31, % Change
------------------------------------ --------
2005 2004 05 vs. 04
- ------------------------------------------------------------------------------------------------------------------------------------
Net sales $ 74 $ 79 (6)%
Net (loss) income $ (2) $ 5 (140)%
- ------------------------------------------------------------------------------------------------------------------------------------
The 2005 decrease in net sales is primarily due to volume decreases as a result
of the change in our distribution channel previously disclosed in our 2004
Annual Report on Form 10-K. Movements in foreign exchange rates, primarily the
Euro, did not have a significant impact on the comparability of sales.
The 2005 decrease in net income is largely attributable to the gross margin
impact from the lower sales volumes. Additionally, the Life Science segment
incurred higher operating expenses to implement the change in distribution
channels and to support new product development efforts.
Outlook:
- --------
For the second quarter of 2005, we expect to see a modest decline in sales due
to the ongoing change in our distribution channel. The second quarter of 2005
will be the first full quarter of our channel migration as the distribution
agreement with one of our primary distributors expired in April. While we are
encouraged by the early results of our efforts to migrate sales previously made
through this distributor to our other primary distributor and other channels,
the adverse impact to sales is likely to increase in the second quarter of 2005.
There can be no assurance that we will be successful in migrating the majority
of our 2004 sales made through this distributor, as end user preferences for
distribution models, price or other factors may adversely impact sales in the
second half of 2005. For the full year, sales may be negatively impacted by as
much as 10% to 20% as a result of this change in our distribution channel.
LIQUIDITY AND CAPITAL RESOURCES
Customer Deposits
Certain customers of our Display Technologies segment have entered into
long-term supply agreements and agreed to make advance cash deposits to secure
supply of large-size glass substrates. The deposits will be applied in the form
of credits against future product purchases in later periods as credits are
applied for cash deposits received in earlier periods. For the current year, we
received a total of $108 million of deposits against orders, of which $20
million was received in the first quarter.
Customer deposits will be received in the following periods (in millions):
- ------------------------------------------------------------------------------------------------------------------------------------
For the three
months ended Remainder Estimated 2006
2004 March 31, 2005 of 2005 and Beyond Total
- ------------------------------------------------------------------------------------------------------------------------------------
Customer deposits received (a) $ 204 $ 20 $ 463 $ 295 $ 982
- ------------------------------------------------------------------------------------------------------------------------------------
(a) The majority of customer deposits will be received through 2006.
Financing Structure
In the first quarter of 2005, we completed the following debt transactions:
.. We obtained a loan of approximately $48 million, bearing interest at 2.1%,
from a Japanese bank. This loan is part of a 10-year loan agreement entered
into in 2004 to fund certain capital expansion activities in Japan.
.. We redeemed $100 million of our outstanding 3.50% convertible debentures.
The bondholders affected by this redemption elected to convert $98 million
of their debentures into Corning common stock at a conversion ratio of
103.3592 shares per $1,000 debenture, with the remaining $2 million repaid
in cash. Separately, bondholders elected to convert approximately $6
million of outstanding debentures into Corning common stock. In total, we
issued 11 million shares upon the conversion of the debentures, resulting
in an increase to equity of $105 million. At March 31, 2005, $191 million
of our 3.50% convertible debentures remained outstanding. We expect to
redeem these debentures, subject to market conditions, before December 31,
2005.
.. We repaid a total of $192 million of notes in accordance with their stated
repayment schedule. This was primarily comprised of our 5.625% Euro notes.
In addition, in the first quarter of 2005 we completed negotiations with a group
of banks on a new revolving credit facility. The new facility provides us access
to a $975 million unsecured multi-currency revolving line of credit and expires
in March 2010. The facility includes two financial covenants, a leverage test
(debt to capital ratio not greater than 50%) and an interest coverage ratio of
no less than 3.5 times (calculated on the most recent four quarters). As of
March 31, 2005, our interest coverage ratio was 8.4 times, and our debt to
capital ratio was 36%. Concurrent with the closing of this credit facility, we
terminated our previous $2 billion revolving line of credit that was set to
expire in August 2005.
Capital Spending
Capital spending totaled $323 million during the three months ended March 31,
2005. Our 2005 forecasted consolidated capital spending remains at $1.2 billion
to $1.4 billion. Of this amount, $900 million to $1 billion will be directed
toward expanding manufacturing capacity for LCD glass substrates in the Display
Technologies segment and approximately $150 million will be directed toward our
Environmental Technologies segment.
Restructuring
During the three months ended March 31, 2005, we made payments of $5 million
related to employee severance and termination costs and $4 million in other exit
costs resulting from prior years' restructuring actions. We expect additional
payments to approximate $9 million in the second quarter of 2005 for actions
taken from 2001 through 2004.
Key Balance Sheet Data
Balance sheet and working capital measures are provided in the following table
(dollars in millions):
- ------------------------------------------------------------------------------------------------------------------------------------
As of March 31, As of December 31,
--------------- ------------------
2005 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Working capital $ 1,072 $ 945
Working capital, excluding cash and short-term investments $ (475) $ (936)
Current ratio 1.5:1 1.4:1
Trade accounts receivable, net of allowances $ 621 $ 585
Days sales outstanding 53 52
Inventories $ 562 $ 535
Inventory turns 4.8 4.9
Days payable outstanding 95 67
Long-term debt $ 2,125 $ 2,214
Total debt to total capital 36% 41%
- ------------------------------------------------------------------------------------------------------------------------------------
Credit Rating
There has been no change in our credit ratings from those disclosed in our 2004
Form 10-K:
- ------------------------------------------------------------------------------------------------------------------------------------
RATING AGENCY Rating Outlook
Last Update Long-Term Debt Last Update
- ------------------------------------------------------------------------------------------------------------------------------------
Fitch BB+ Positive
August 12, 2004 August 12, 2004
Standard & Poor's (a) BB+ Stable
July 29, 2002 January 16, 2004
Moody's Ba2 Positive
July 29, 2002 January 14, 2005
- ------------------------------------------------------------------------------------------------------------------------------------
(a) Standard & Poor's placed Corning's credit rating on Credit Watch with
positive implications on February 8, 2005.
Management Assessment of Liquidity
Our major source of funding for 2005 and beyond will be our existing balance of
cash, cash equivalents and short-term investments. From time to time, we may
also issue debt or equity securities for general corporate purposes. We believe
we have sufficient liquidity for the next several years to fund operations,
restructuring, the asbestos settlement, research and development, capital
expenditures and scheduled debt repayments.
Contractual Obligations
There have been no material changes outside the ordinary course of business in
the contractual obligations disclosed in our 2004 Annual Report on Form 10-K
under the caption "Contractual Obligations."
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements requires management to make estimates
and assumptions that affect amounts reported therein. The estimates that
required management's most difficult, subjective or complex judgments are
described in our 2004 Annual Report on Form 10-K and remain unchanged through
the first quarter of 2005.
ENVIRONMENT
We have been named by the Environmental Protection Agency under the Superfund
Act, or by state governments under similar state laws, as a potentially
responsible party for 11 active hazardous waste sites. Under the Superfund Act,
all parties who may have contributed any waste to a hazardous waste site,
identified by such Agency, are jointly and severally liable for the cost of
cleanup unless the Agency agrees otherwise. It is our policy to accrue for the
estimated liability related to Superfund sites and other environmental
liabilities related to property owned and operated by us based on expert
analysis and continual monitoring by both internal and external consultants. We
have accrued $14 million for the estimated liability for environmental cleanup
and related litigation at March 31, 2005. Based upon the information developed
to date, we believe that the accrued amount is a reasonable estimate of our
liability and that the risk of an additional loss in an amount materially higher
than that accrued is remote.
FORWARD-LOOKING STATEMENTS
Many statements in this Quarterly Report on Form 10-Q are forward-looking
statements. These typically contain words such as "believes," "expects,"
"anticipates," "estimates," "forecasts," or similar expressions. These
forward-looking statements involve risks and uncertainties that may cause the
actual outcome to be materially different. Such risks and uncertainties include,
but are not limited to the following:
- - global economic and political conditions;
- - tariffs, import duties and currency fluctuations;
- - product demand and industry capacity;
- - competitive products and pricing;
- - sufficiency of manufacturing capacity and efficiencies;
- - availability and costs of critical components and materials;
- - new product development and commercialization;
- - order activity and demand from major customers;
- - fluctuations in capital spending by customers;
- - possible disruption in commercial activities due to terrorist activity,
armed conflict, political instability or major health concerns;
- - facility expansions and new plant start-up costs;
- - effect of regulatory and legal developments;
- - capital resource and cash flow activities;
- - ability to pace capital spending to anticipated levels of customer demand,
which may fluctuate;
- - interest costs;
- - credit rating and ability to obtain financing and capital on commercially
reasonable terms;
- - adequacy and availability of insurance;
- - financial risk management;
- - capital spending;
- - acquisition and divestiture activities;
- - rate of technology change;
- - level of excess or obsolete inventory;
- - ability to enforce patents;
- - adverse litigation;
- - product and components performance issues;
- - stock price fluctuations;
- - rate of substitution by end-users purchasing LCDs for notebook computers,
desktop monitors and televisions;
- - downturn in demand for LCD glass substrates;
- - customer ability, most notably in the Display Technologies segment, to
maintain profitable operations and obtain financing to fund their
manufacturing expansions;
- - fluctuations in supply chain inventory levels;
- - equity company activities, principally at Dow Corning Corporation and
Samsung Corning Co., Ltd.; and
- - other risks detailed in Corning's Securities and Exchange Commission
filings.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk Disclosures
There have been no material changes to our market risk exposures during the
first three months of 2005. For a discussion of our exposure to market risk,
refer to Item 7A, Quantitative and Qualitative Disclosures About Market Risks,
contained in our 2004 Annual Report on Form 10-K.
ITEM 4. CONTROLS AND PROCEDURES
Corning carried out an evaluation, under the supervision and with the
participation of Corning's management, including Corning's chief executive
officer and its chief financial officer, of the effectiveness of the design and
operation of Corning's disclosure controls and procedures as of March 31, 2005,
the end of the period covered by this report. Based upon the evaluation, the
chief executive officer and chief financial officer concluded that Corning's
disclosure controls and procedures are effective to ensure that information
required to be disclosed by Corning in reports that it files or submits under
the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in Securities and Exchange Commission rules and forms.
During the quarter ended March 31, 2005, there have been no changes in our
internal control over financial reporting that have materially affected or are
reasonably likely to materially affect our internal control over financial
reporting.
Part II - Other Information
ITEM 1. LEGAL PROCEEDINGS
Environmental Litigation. Corning has been named by the Environmental Protection
Agency under the Superfund Act, or by state governments under similar state
laws, as a potentially responsible party at 11 active hazardous waste sites.
Under the Superfund Act, all parties who may have contributed any waste to a
hazardous waste site, identified by such Agency, are jointly and severally
liable for the cost of cleanup unless the Agency agrees otherwise. It is
Corning's policy to accrue for its estimated liability related to Superfund
sites and other environmental liabilities related to property owned by Corning
based on expert analysis and continual monitoring by both internal and external
consultants. Corning has accrued $14 million for its estimated liability for
environmental cleanup and litigation at March 31, 2005. Based upon the
information developed to date, management believes that the accrued reserve is a
reasonable estimate of the Company's liability and that the risk of an
additional loss in an amount materially higher than that accrued is remote.
Schwinger and Stevens Toxins Lawsuits. In April 2002, Corning was named as a
defendant in two actions, Schwinger and Stevens, filed in the U.S. District
Court for the Eastern District of New York, which asserted various personal
injury and property damage claims against a number of corporate defendants.
These claims allegedly arise from the release of toxic substances from a
Sylvania nuclear materials processing facility near Hicksville, New York.
Amended complaints naming 205 plaintiffs and seeking damages in excess of $3
billion were served in September 2002. The sole basis of liability against
Corning was plaintiffs' claim that Corning was the successor to Sylvania-Corning
Nuclear Corporation (Sylvania-Corning), a Delaware corporation formed in 1957
and dissolved in 1960. Management intends to vigorously contest all claims
against Corning for the reason that Corning is not the successor to
Sylvania-Corning. Management will also defend on the grounds that almost all of
the wrongful death claims and personal injury claims are time-barred. At a
status conference in December 2002, the Court decided to "administratively
close" the Schwinger and Stevens cases and ordered plaintiffs' counsel to bring
new amended complaints with "bellwether" plaintiffs. In these actions, known as
Schwinger II and Astuto, the plaintiffs have not named Corning as a defendant.
Although it appears that plaintiffs may proceed only against the other corporate
defendants, the original Schwinger and Stevens cases remain pending, and no
order has been entered dismissing Corning. Based upon the information developed
to date, and recognizing that the outcome of litigation is uncertain, management
believes that the likelihood of a materially adverse impact to Corning's
financial statements is remote.
Dow Corning Bankruptcy. Corning and The Dow Chemical Company (Dow Chemical) each
own 50% of the common stock of Dow Corning, which was in reorganization
proceedings under Chapter 11 of the U.S. Bankruptcy Code between May 1995 and
June 2004. Dow Corning filed for bankruptcy protection to address pending and
claimed liabilities arising from many thousand breast-implant product lawsuits.
On June 1, 2004, Dow Corning emerged from Chapter 11 with a Plan of
Reorganization (the Plan) which provided for the settlement or other resolution
of implant claims and includes releases for Corning and Dow Chemical as
shareholders in exchange for contributions to the Plan.
Under the terms of the Plan, Dow Corning has established and is funding a
Settlement Trust and a Litigation Facility to provide a means for tort claimants
to settle or litigate their claims. Of the approximately $3.2 billion of
required funding, Dow Corning has paid approximately $1.6 billion (inclusive of
insurance) and expects to pay up to an additional $1.6 billion ($710 million
after-tax) over 16 years. Dow Corning has satisfied the claims of its commercial
creditors, except that certain commercial creditors continue to pursue an appeal
to the U.S. Court of Appeals of the Sixth Circuit seeking from Dow Corning an
additional sum of approximately $80 million for interest at default rates and
enforcement costs. Corning believes the risk of loss to Dow Corning (net of
amounts reserved) is remote.
In addition, Dow Corning has received a statutory notice of deficiency from the
United States Internal Revenue Service asserting tax deficiencies totaling
approximately $65 million relating to its federal income tax returns for the
1995 and 1996 calendar years. This matter is pending before the U.S. District
Court in Michigan. Dow Corning has also received a proposed adjustment from the
IRS (approximately $117 million) with respect to its federal income tax returns
for the 1997, 1998 and 1999 calendar years. Dow Corning is vigorously contesting
these deficiencies and proposed adjustments which it believes are excessive.
In 1995, Corning fully impaired its investment in Dow Corning upon its entry
into bankruptcy proceedings and did not recognize net equity earnings from the
second quarter of 1995 through the end of 2002. Corning began recognizing equity
earnings in the first quarter of 2003 when management concluded that its
emergence from bankruptcy protection was probable. Corning considers the
difference between the carrying value of its investment in Dow Corning and its
50% share of Dow Corning's equity to be permanent. This difference is $249
million. Subject to future rulings by the bankruptcy court and potential changes
in estimated bankruptcy-related liabilities, it is possible that Dow Corning may
record bankruptcy-related charges in the future.
Corning received no dividends from Dow Corning in the first quarter of 2005, but
anticipates that Dow Corning will begin to pay dividends later in 2005.
Federal Securities Cases. From December 2001 through April 2002, Corning and
three of its officers and directors were named defendants in lawsuits alleging
(a) violations of the U.S. securities laws in connection with Corning's November
2000 offering of 30 million shares of common stock and $2.7 billion zero coupon
convertible debentures, due November 2015 and (b) misleading disclosures and
non-disclosures that allegedly inflated the price of Corning's common stock in
the period from October 2000 through July 9, 2001. On April 12, 2004, the U.S.
District Court of the Western District of New York entered a decision and order
dismissing plaintiffs' complaint. That dismissal was affirmed by the U.S. Court
of Appeals of the Second Circuit by an order entered on March 30, 2005. Although
it is possible that plaintiffs may seek further judicial review, management
believes that the likelihood of a material adverse impact to Corning's financial
statements is remote.
Pittsburgh Corning Corporation. Corning and PPG Industries, Inc. ("PPG") each
own 50% of the capital stock of PCC. Over a period of more than two decades, PCC
and several other defendants have been named in numerous lawsuits involving
claims alleging personal injury from exposure to asbestos. On April 16, 2000,
PCC filed for Chapter 11 reorganization in the U.S. Bankruptcy Court for the
Western District of Pennsylvania. As of the bankruptcy filing, PCC had in excess
of 140,000 open claims and had insufficient remaining insurance and assets to
deal with its alleged current and future liabilities. More than 100,000
additional claims have been filed with PCC after its bankruptcy filing. As a
result of PCC's bankruptcy filing, Corning recorded an after-tax charge of $36
million in 2001 to fully impair its investment in PCC and discontinued
recognition of equity earnings. At the time PCC filed for bankruptcy protection,
there were approximately 12,400 claims pending against Corning in state court
lawsuits alleging various theories of liability based on exposure to PCC's
asbestos products and typically requesting monetary damages in excess of one
million dollars per claim. Corning has defended those claims on the basis of the
separate corporate status of PCC and the absence of any facts supporting claims
of direct liability arising from PCC's asbestos products. Corning is also
currently named in approximately 11,400 other cases (approximately 43,400
claims) alleging injuries from asbestos and similar amounts of monetary damages
per claim. Those cases have been covered by insurance without material impact to
Corning to date. Asbestos litigation is inherently difficult, and past trends in
resolving these claims may not be indicators of future outcomes.
In the bankruptcy court, PCC in April 2000 obtained a preliminary injunction
against the prosecution of asbestos actions arising from PCC's products against
its two shareholders to afford the parties a period of time in which to
negotiate a plan of reorganization for PCC ("PCC Plan").
On May 14, 2002, PPG announced that it had agreed with certain of its insurance
carriers and representatives of current and future asbestos claimants on the
terms of a settlement arrangement applicable to claims arising from PCC's
products.
On March 28, 2003, Corning announced that it had also reached agreement with
representatives of current and future asbestos claimants on a settlement
arrangement that was thereafter incorporated into the PCC Plan. This settlement
remains subject to a number of contingencies, including approval by the
bankruptcy court. Corning's settlement will require the contribution, if the
Plan is approved and becomes effective, of its equity interest in PCC, its
one-half equity interest in PCE, and 25 million shares of Corning common stock.
The settlement also requires Corning to make cash payments of $146 million (net
present value as of March 31, 2005) in six installments beginning one year after
the Plan is effective. In addition, Corning will assign policy rights or
proceeds under primary insurance from 1962 through 1984, as well as rights to
proceeds under certain excess insurance, most of which falls within the period
from 1962 through 1973. In return for these contributions, Corning expects to
receive a release and an injunction channeling asbestos claims against it into a
settlement trust under the PCC Plan.
Corning recorded an initial charge of $298 million in the period ending March
31, 2003 to reflect the settlement terms. However, the amount of the charge for
this settlement requires adjustment each quarter based upon movement in
Corning's common stock price prior to contribution of the shares to the trust.
During the first quarter of 2005, Corning recorded a credit of $16 million to
reflect the mark-to-market of Corning common stock. Beginning with the first
quarter of 2003 and through March 31, 2005, Corning recorded total net charges
of $430 million to reflect the initial settlement and subsequent mark-to-market
adjustments for the change in the value of Corning common stock.
Two of Corning's primary insurers and several excess insurers have commenced
litigation for a declaration of the rights and obligations of the parties under
insurance policies, including rights that may be affected by the settlement
arrangement described above. Corning is vigorously contesting these cases.
Management is unable to predict the outcome of this insurance litigation.
The PCC Plan received a favorable vote from creditors in March 2004. Hearings to
consider objections to the Plan were held in the Bankruptcy Court in May 2004.
The parties filed post-hearing briefs and made final oral arguments to the
Bankruptcy Court in November 2004. The Bankruptcy Court allowed an additional
round of briefing to address current case law developments and heard additional
oral arguments on March 16, 2005. At this hearing, the court allowed the
proponents of the PCC Plan 60 days to consider amendments to the Plan or to
request rulings on the pending objections. The timing and outcome are uncertain.
If the Bankruptcy Court does not confirm the PCC Plan in its current form,
changes to the settlement agreement are reasonably possible. Further judicial
review is also reasonably possible. Although the confirmation of the PCC Plan is
subject to a number of contingencies, apart from the quarterly adjustment in the
value of 25 million shares of Corning common stock, management believes that the
likelihood of a material adverse impact to Corning's financial statements is
remote.
Astrium. In December of 2000, Astrium, SAS and Astrium, Ltd. filed a complaint
for negligence in the U.S. District Court for the Central District of California
against TRW, Inc., Pilkington Optronics Inc., Corning NetOptix, Inc. (NetOptix),
OFC Corporation and Optical Filter Corporation claiming damages in excess of
$150 million. The complaint alleges that certain cover glasses for solar arrays
used to generate electricity from solar energy on satellites sold by Astrium's
corporate successor were negligently coated by NetOptix or its subsidiaries
(prior to Corning's acquisition of NetOptix) in such a way that the amount of
electricity the satellite can produce and their effective life were materially
reduced. NetOptix has denied that the coatings produced by NetOptix or its
subsidiaries caused the damage alleged in the complaint, or that it is legally
liable for any damages that Astrium may have experienced. In April 2002, the
Court granted motions for summary judgment by NetOptix and other defendants to
dismiss the negligence claims, but permitted plaintiffs to add fraud and
negligent misrepresentation claims against all defendants and a breach of
warranty claim against NetOptix and its subsidiaries. In October 2002, the Court
again granted defendants' motions for summary judgment and dismissed the
negligent misrepresentation and breach of warranty claims. The intentional fraud
claims were dismissed against all non-settling defendants on February 25, 2003.
On March 19, 2003, Astrium appealed all of the Court's rulings regarding the
various summary judgment motions to the Ninth Circuit Court of Appeals. The
period of briefing the appeal was extended, and oral argument has not been
scheduled. Recognizing that the outcome of litigation is uncertain, management
believes that the likelihood of a materially adverse impact to Corning's
financial statements is remote.
Furukawa Electric Company. On February 3, 2003, The Furukawa Electric Company
(Furukawa) filed suit in the Tokyo District Court in Japan against Corning Cable
Systems International Corporation (CCS International) alleging infringement of
Furukawa's Japanese Patent No. 2,023,966 which relates to separable fiber ribbon
units used in optical cable. Furukawa's complaint requests slightly over 6
billion Japanese yen in damages (approximately $56 million) and an injunction
against further sales in Japan of these fiber ribbon units. CCS International
has denied the allegation of infringement, asserted that the patent is invalid,
and is defending vigorously against this lawsuit. On October 29, 2004, the Tokyo
District Court issued its ruling in favor of CCS on both non-infringement and
patent invalidity. Furukawa has filed an appeal from this ruling to the Tokyo
Court of Appeals. Management believes that the likelihood of a materially
adverse impact to Corning's financial statements is remote.
PicVue Electronics Ltd., PicVue OptoElectronics International, Inc. and
Eglasstrek Gmbh. In June 2002, Corning brought an action seeking to restrain the
use of its trade secrets and for copyright infringement relating to certain
aspects of the fusion draw machine used for liquid crystal display glass
melting. This action is pending in the U.S. District Court for the Western
District of New York against these three named defendants. The District Court in
July 2003 denied the PicVue motion to dismiss and granted a preliminary
injunction in favor of Corning, subject to posting a bond in an amount to be
determined. PicVue, a Taiwanese company, filed a counterclaim alleging
violations of the antitrust laws and claiming damages of more than $120 million
as well as requesting trebled damages. On PicVue's appeal from the District
Court's grant of the preliminary injunction, the Court of Appeals affirmed but
remanded the case for the District Court to clarify the scope of the injunction
and to consider what, if any, bond should be posted. The parties have submitted
papers to the District Court addressing the issues remanded. Recognizing that
the outcome of litigation is uncertain, management believes that the PicVue
counterclaim is without merit and that the likelihood of a materially adverse
impact to Corning's financial statements is remote.
Tyco Electronics Corporation and Tyco Technology Resources, Inc. On August 13,
2003, CCS Holdings Inc. (CCS), a Corning subsidiary, filed an action in the U.S.
District Court for the Middle District of North Carolina against Tyco
Electronics Corporation and Tyco Technology Resources, Inc. (Tyco), asking the
court to declare a Tyco patent invalid and not infringed by CCS. The patent
generally relates to a type of connector for optical fiber cables. Tyco has
responded with a motion to dismiss the action for lack of jurisdiction, but that
motion has been withdrawn. Tyco has filed an answer and counterclaims to CCS's
complaint. Tyco's counterclaims allege patent infringement by CCS and seeks
unspecified monetary damages and an injunction. Recognizing that the outcome of
litigation is uncertain, management believes that the risk of a material impact
on Corning's financial statements is remote.
Grand Jury Investigation of Conventional Cathode Ray Television Glass Business.
In August 2003, Corning Asahi Video Products Company (CAV) was served with a
federal grand jury document subpoena related to pricing, bidding and customer
practices involving conventional cathode ray television glass picture tube
components. A number of employees or former employees have received a related
subpoena. CAV is a general partnership, 51% owned by Corning and 49% owned by
Asahi Glass America, Inc. CAV's only manufacturing facility in State College,
Pennsylvania closed in the first half of 2003 due to declining sales. CAV is
cooperating with the government investigation. Management is not able to
estimate the likelihood that any charges will be filed as a result of the
investigation.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
This table provides information about our purchases of our common stock during
the fiscal first quarter of 2005:
Issuer Purchases of Equity Securities (a)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Average Total Number of Approximate Dollar
Number Price Shares Purchased as Value of Shares that
of Shares Paid per Part of Publicly May Yet Be Purchased
Period Purchased (b) Share (b) Announced Plan (a) Under the Plan (a)
- ------------------------------------------------------------------------------------------------------------------------------------
January 1-31, 2005 0 $0 0 $0
February 1-28, 2005 118,161 $11.43 0 $0
March 1-31, 2005 10,801 $11.81 0 $0
- ------------------------------------------------------------------------------------------------------------------------------------
Total 128,962 $11.46 0 $0
- ------------------------------------------------------------------------------------------------------------------------------------
(a) During the quarter ended March 31, 2005, we did not have a publicly
announced program for repurchase of shares of our common stock and did not
repurchase our common stock in open-market transactions outside of such a
program.
(b) These columns reflect the following transactions during the first quarter
of 2005: (i) the deemed surrender to us of 58,921 shares of common stock to
pay the exercise price and to satisfy tax withholding obligations in
connection with the exercise of employee stock options, and (ii) the
surrender to us of 70,041 shares of common stock to satisfy tax withholding
obligations in connection with the vesting of restricted stock issued to
employees.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
We will include voting results of our annual meeting of shareholders to be held
on April 28, 2005 as part of our Quarterly Report on Form 10-Q for the quarter
ended June 30, 2005, which we expect to file with the Securities and Exchange
Commission on or about July 26, 2005.
ITEM 6. EXHIBITS
Exhibits
Exhibit Number Exhibit Name
-------------- ------------
10 Five-Year Revolving Credit Agreement with Citibank, N.A.;
J.P. Morgan Chase Bank, N.A.; Bank of America, N.A.; Bank of
Tokyo - Mitsubishi, Ltd.; Wachovia Bank, National
Association; Barclays Bank PLC; and Deutsche Bank A.G. New
York branch Dated March 17, 2005
12 Computation of Ratio of Earnings to Fixed Charges
31.1 Certification Pursuant to Rule 13a-15(e) and 15d-15(e), As
adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
31.2 Certification Pursuant to Rule 13a-15(e) and 15d-15(e), As
adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
32 Certification Pursuant to 18 U.S.C. Section 1350, As adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CORNING INCORPORATED
(Registrant)
April 26, 2005 /s/ JAMES B. FLAWS
- ---------------- --------------------------------------------
Date James B. Flaws
Vice Chairman and Chief Financial Officer
(Principal Financial Officer)
April 26, 2005 /s/ KATHERINE A. ASBECK
- ---------------- --------------------------------------------
Date Katherine A. Asbeck
Senior Vice President and Controller
(Principal Accounting Officer)
EXHIBIT INDEX
-------------
Exhibit Number Exhibit Name
- -------------- ------------
10 Five-Year Revolving Credit Agreement with Citibank, N.A.; J.P.
Morgan Chase Bank, N.A.; Bank of America, N.A.; Bank of Tokyo -
Mitsubishi, Ltd.; Wachovia Bank, National Association; Barclays
Bank PLC; and Deutsche Bank A.G. New York branch Dated March 17,
2005
12 Computation of Ratio of Earnings to Fixed Charges
31.1 Certification of Chief Executive Officer Pursuant to Rule
13a-15(e) and 15d-15(e), As adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer Pursuant to Rule
13a-15(e) and 15d-15(e), As adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
32 Certification Pursuant to 18 U.S.C. Section 1350, As adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 10
TABLE OF CONTENTS
ARTICLE I
SECTION 1.01. Certain Defined Terms 42
SECTION 1.02. Computation of Time Periods 51
SECTION 1.03. Accounting Terms 51
ARTICLE II
SECTION 2.01. The Advances and Letters of Credit 52
SECTION 2.02. Making the Advances 52
SECTION 2.03. Issuance of and Drawings and Reimbursement Under Letters of Credit 53
SECTION 2.04. Fees 54
SECTION 2.05. Termination or Reduction of the Commitments 54
SECTION 2.06. Repayment of Advances and Letter of Credit Drawings 54
SECTION 2.07. Interest on Advances 55
SECTION 2.08. Interest Rate Determination 55
SECTION 2.09. Optional Conversion of Advances 56
SECTION 2.10. Prepayments of Advances 57
SECTION 2.11. Increased Costs 57
SECTION 2.12. Illegality 57
SECTION 2.13. Payments and Computations 58
SECTION 2.14. Taxes 59
SECTION 2.15. Sharing of Payments, Etc. 60
SECTION 2.16. Evidence of Debt 60
SECTION 2.17. Use of Proceeds 60
SECTION 2.18. Increase in the Aggregate Commitments 60
ARTICLE III
SECTION 3.01. Conditions Precedent to Effectiveness of Section 2.01 62
SECTION 3.02. Initial Advance to Each Designated Subsidiary 63
SECTION 3.03. Conditions Precedent to Each Borrowing, Issuance and Commitment Increase 63
SECTION 3.04. Determinations Under Section 3.01 63
ARTICLE IV
SECTION 4.01. Representations and Warranties of the Company 64
ARTICLE V
SECTION 5.01. Affirmative Covenants 65
SECTION 5.02. Negative Covenants 66
SECTION 5.03. Financial Covenants 68
ARTICLE VI
SECTION 6.01. Events of Default 69
SECTION 6.02. Actions in Respect of the Letters of Credit upon Default 70
ARTICLE VII
SECTION 7.01. Unconditional Guaranty 71
SECTION 7.02. Guaranty Absolute 71
SECTION 7.03. Waivers and Acknowledgements 72
SECTION 7.04. Subrogation 72
SECTION 7.05. Subordination 72
SECTION 7.06. Continuing Guaranty; Assignments 73
ARTICLE VIII
SECTION 8.01. Authorization and Action 73
SECTION 8.02. Agent's Reliance, Etc. 73
SECTION 8.03. Citibank and Affiliates 74
SECTION 8.04. Lender Credit Decision 74
SECTION 8.05. Indemnification 74
SECTION 8.06. Successor Agent 75
SECTION 8.07. Sub-Agent 75
SECTION 8.08. Other Agents 75
ARTICLE IX
SECTION 9.01. Amendments, Etc. 75
SECTION 9.02. Notices, Etc. 75
SECTION 9.03. No Waiver; Remedies 76
SECTION 9.04. Costs and Expenses 76
SECTION 9.05. Right of Set-off 77
SECTION 9.06. Binding Effect 77
SECTION 9.07. Assignments and Participations 77
SECTION 9.08. Confidentiality 79
SECTION 9.09. Designated Subsidiaries 79
SECTION 9.10. Governing Law 79
SECTION 9.11. Execution in Counterparts 79
SECTION 9.12. Judgment 79
SECTION 9.13. Jurisdiction, Etc. 80
SECTION 9.14. Substitution of Currency 80
SECTION 9.15. No Liability of the Issuing Banks 80
SECTION 9.16. Patriot Act Notice 80
SECTION 9.17. Power of Attorney 80
SECTION 9.18. Waiver of Jury Trial 81
Schedules
- ---------
Schedule I - List of Applicable Lending Offices
Schedule 2.01(b) - Existing Letters of Credit
Schedule 3.01(b) - Disclosed Litigation
Schedule 5.02(d) - Existing Debt
Exhibits
- --------
Exhibit A - Form of Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Assignment and Acceptance
Exhibit D - Form of Designation Agreement
Exhibit E - Form of Opinion of Counsel for the Borrower
CREDIT AGREEMENT
Dated as of March 17, 2005
CORNING INCORPORATED, a New York corporation (the "Company"), the
-------
banks, financial institutions and other institutional lenders (the "Initial
-------
Lenders") and issuers of letters of credit ("Initial Issuing Banks") listed on
- ------- ----------------------
the signature pages hereof, JPMORGAN CHASE BANK, N.A., as syndication agent,
BANK OF AMERICA, N.A., THE BANK OF TOKYO-MITSUBISHI, LTD., WACHOVIA BANK,
NATIONAL ASSOCIATION, BARCLAYS BANK PLC and DEUTSCHE BANK SECURITIES INC., as
documentation agents, CITIGROUP GLOBAL MARKETS INC. and J.P. MORGAN SECURITIES
INC., as joint lead arrangers and joint bookrunners, and CITIBANK, N.A.
("Citibank"), as administrative agent (the "Agent") for the Lenders (as
-------- -----
hereinafter defined), agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement,
----------------------
the following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):
"Adjusted Consolidated EBITDA" means Consolidated EBITDA plus any
----------------------------
net cash received from Equity Affiliates, minus any net cash paid to
Equity Affiliates, minus any income from Equity Affiliates plus any
income to Equity Affiliates.
"Advance" means an advance by a Lender to any Borrower as part of
-------
a Borrowing and refers to a Base Rate Advance or a Eurocurrency Rate
Advance (each of which shall be a "Type" of Advance).
----
"Affiliate" means, as to any Person, any other Person that,
---------
directly or indirectly, controls, is controlled by or is under common
control with such Person or is a director or officer of such Person.
For purposes of this definition, the term "control" (including the
terms "controlling", "controlled by" and "under common control with")
of a Person means the possession, direct or indirect, of the power to
vote 5% or more of the Voting Stock of such Person or to direct or
cause the direction of the management and policies of such Person,
whether through the ownership of Voting Stock, by contract or
otherwise.
"Agent's Account" means (a) in the case of Advances denominated
----------------
in Dollars, the account of the Agent maintained by the Agent at
Citibank at its office at 388 Greenwich Street, New York, New York
10013, Account No. 36852248, Attention: Bank Loan Syndications, (b) in
the case of Advances denominated in any Committed Currency, the
account of the Sub-Agent designated in writing from time to time by
the Agent to the Company and the Lenders for such purpose and (c) in
any such case, such other account of the Agent as is designated in
writing from time to time by the Agent to the Company and the Lenders
for such purpose.
"Applicable Lending Office" means, with respect to each Lender,
--------------------------
such Lender's Domestic Lending Office in the case of a Base Rate
Advance and such Lender's Eurocurrency Lending Office in the case of a
Eurocurrency Rate Advance.
"Applicable Margin" means, as of any date, a percentage per annum
-----------------
determined by reference to the Public Debt Rating in effect on such
date as set forth below:
- ------------------ --------------------- --------------------------
Public Debt Rating Applicable Margin for Applicable Margin for
S&P/Moody's Base Rate Advances Eurocurrency Rate Advances
- ------------------ --------------------- --------------------------
Level 1
- -------
A- or A3 or above 0.000% 0.410%
- ------------------ --------------------- --------------------------
Level 2
- -------
BBB+ or Baa1 0.000% 0.500%
- ------------------ --------------------- --------------------------
Level 3
- -------
BBB or Baa2 0.000% 0.600%
- ------------------ --------------------- --------------------------
Level 4
- -------
BBB- or Baa3 0.000% 0.825%
- ------------------ --------------------- --------------------------
Level 5
- -------
BB+ or Ba1 0.050% 1.050%
- ------------------ --------------------- --------------------------
Level 6
- -------
BB or Ba2 0.250% 1.250%
- ------------------ --------------------- --------------------------
Level 7
- -------
Lower than Level 6 0.700% 1.700%
- ------------------ --------------------- --------------------------
"Applicable Percentage" means, as of any date, a percentage per
----------------------
annum determined by reference to the Public Debt Rating in effect on
such date as set forth below:
------------------------- -----------------
Public Debt Rating Applicable
S&P/Moody's Percentage
------------------------- -----------------
Level 1
-------
A- or A3 or above 0.090%
------------------------- -----------------
Level 2
-------
BBB+ or Baa1 0.125%
------------------------- -----------------
Level 3
-------
BBB or Baa2 0.150%
------------------------- -----------------
Level 4
-------
BBB- or Baa3 0.175%
------------------------- -----------------
Level 5
-------
BB+ or Ba1 0.200%
------------------------- -----------------
Level 6
-------
BB or Ba2 0.250%
------------------------- -----------------
Level 7
-------
Lower than Level 6 0.300%
------------------------- -----------------
"Assignment and Acceptance" means an assignment and acceptance
---------------------------
entered into by a Lender and an Eligible Assignee, and accepted by the
Agent, in substantially the form of Exhibit C hereto.
"Assuming Lender" has the meaning specified in Section 2.18(d).
---------------
"Assumption Agreement" has the meaning specified in Section
---------------------
2.18(d)(ii).
"Available Amount" of any Letter of Credit means, at any time,
-----------------
the maximum amount available to be drawn under such Letter of Credit
at such time (assuming compliance at such time with all conditions to
drawing).
"Bankruptcy Law" means any proceeding of the type referred to in
---------------
Section 6.01(f) or Title 11, U.S. Code, or any similar foreign,
federal or state law for the relief of debtors.
"Base Rate" means a fluctuating interest rate per annum in effect
---------
from time to time, which rate per annum shall at all times be equal to
the higher of:
(a) the rate of interest announced publicly by Citibank in
New York, New York, from time to time, as Citibank's base rate;
(b) 1/2 of one percent per annum above the Federal Funds
Rate.
"Base Rate Advance" means an Advance denominated in Dollars that
-----------------
bears interest as provided in Section 2.07(a)(i).
"Borrowers" means, collectively, the Company and the Designated
---------
Subsidiaries from time to time.
"Borrowing" means a borrowing consisting of simultaneous Advances
---------
of the same Type made by each of the Lenders pursuant to Section
2.01(a).
"Borrowing Minimum" means, in respect of Advances denominated in
-----------------
Dollars, $10,000,000, in respect of Advances denominated in Sterling,
(pound)10,000,000, in respect of Advances denominated in Yen,
(Y)100,000,000 and, in respect of Advances denominated in Euros,
(euro)10,000,000.
"Borrowing Multiple" means, in respect of Advances denominated in
------------------
Dollars, $1,000,000 in respect of Advances denominated in Sterling,
(pound)1,000,000, in respect of Advances denominated in Yen,
(Y)10,000,000 and, in respect of Advances denominated in Euros,
(euro)1,000,000.
"Business Day" means a day of the year on which banks are not
-------------
required or authorized by law to close in New York City and, if the
applicable Business Day relates to any Eurocurrency Rate Advances, on
which dealings are carried on in the London interbank market and banks
are open for business in London and in the country of issue of the
currency of such Eurocurrency Rate Advance (or, in the case of an
Advance denominated in Euro, on which the Trans-European Automated
Real-Time Gross Settlement Express Transfer (TARGET) System is open).
"Commitment" means a Revolving Credit Commitment or a Letter of
----------
Credit Commitment.
"Commitment Date" has the meaning specified in Section 2.18(b).
---------------
"Commitment Increase" has the meaning specified in Section
--------------------
2.18(a).
"Committed Currencies" means lawful currency of the United
---------------------
Kingdom of Great Britain and Northern Ireland, lawful currency of
Japan and Euros.
"Company Information" has the meaning specified in Section 9.08.
-------------------
"Consolidated" refers to the consolidation of accounts in
------------
accordance with GAAP.
"Consolidated Debt for Borrowed Money" of any Person means all
---------------------------------------
items that, in accordance with GAAP, would be classified as
indebtedness on a Consolidated balance sheet of such Person.
"Consolidated EBITDA" means, with respect to any Person for any
--------------------
period, an amount equal to (a) Consolidated Net Income (before
discontinued operations) of such Person for such period plus (b) the
sum of, in each case to the extent included in the calculation of such
Consolidated Net Income of such Person for such period in accordance
with GAAP, but without duplication, (i) any provision for income
taxes, (ii) Consolidated Interest Expense, (iii) loss from
extraordinary items, (iv) depreciation, depletion and amortization of
intangibles or financing or acquisition costs, and (v) all other
non-cash charges and non-cash losses for such period (including, but
not limited to, stock option expense and restructuring and impairment
charges), minus (c) the sum of, in each case to the extent included in
the calculation of Consolidated Net Income of such Person for such
period in accordance with GAAP, but without duplication, (i) any
credit for income tax, (ii) gains from extraordinary items for such
period, (iii) any aggregate net gain from the sale, exchange or other
disposition of capital assets by such Person, (iv) cash payments for
previously reserved charges and (v) any other non-cash gains which
have been added in determining Consolidated Net Income.
"Consolidated Interest Expense" means, for any period for any
-------------------------------
Person, all items that, in accordance with GAAP, would be classified
as interest expense on a Consolidated statement of income of such
Person for such period.
"Consolidated Net Income" means, for any Person for any period,
------------------------
the net income (or loss) of such Person and its Subsidiaries for such
period, determined on a Consolidated basis in conformity with GAAP.
"Consolidated Net Worth" means, at any time, stockholders' equity
----------------------
as set forth or reflected on the most recent Consolidated balance
sheet of the Company and its Subsidiaries, plus the sum of minority
----
interests, convertible preferred securities, and preferred stock, all
determined in accordance with GAAP and consistently applied.
"Consolidated Total Capital" means, at any time, the sum of (i)
---------------------------
Consolidated Net Worth, and (ii) Consolidated Debt for Borrowed Money.
"Convert", "Conversion" and "Converted" each refers to a
------- ---------- ---------
conversion of Advances of one Type into Advances of the other Type
pursuant to Section 2.08 or 2.09.
"Debt" of any Person means, without duplication, (a) all
----
indebtedness of such Person for borrowed money, (b) all obligations of
such Person for the deferred purchase price of property or services
(other than trade payables not overdue by more than 90 days incurred
in the ordinary course of such Person's business), (c) all obligations
of such Person evidenced by notes, bonds, debentures or other similar
instruments, (d) all obligations of such Person created or arising
under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even though the rights
and remedies of the seller or lender under such agreement in the event
of default are limited to repossession or sale of such property), (e)
all obligations of such Person as lessee under leases that have been
or should be, in accordance with GAAP, recorded as capital leases, (f)
all obligations, contingent or otherwise, of such Person in respect of
acceptances, letters of credit or similar extensions of credit, (g)
all net obligations of such Person in respect of Hedge Agreements, (h)
all Debt of others referred to in clauses (a) through (g) above or
clause (i) below (collectively, "Guaranteed Debt") guaranteed directly
---------------
or indirectly in any manner by such Person, or in effect guaranteed
directly or indirectly by such Person through an agreement (1) to pay
or purchase such Guaranteed Debt or to advance or supply funds for the
payment or purchase of such Guaranteed Debt, (2) to purchase, sell or
lease (as lessee or lessor) property, or to purchase or sell services,
primarily for the purpose of enabling the debtor to make payment of
such Guaranteed Debt or to assure the holder of such Guaranteed Debt
against loss, (3) to supply funds to or in any other manner invest in
the debtor (including any agreement to pay for property or services
irrespective of whether such property is received or such services are
rendered) or (4) otherwise to assure a creditor against loss, and (i)
all Debt referred to in clauses (a) through (h) above (including
Guaranteed Debt) secured by (or for which the holder of such Debt has
an existing right, contingent or otherwise, to be secured by) any Lien
on property (including, without limitation, accounts and contract
rights) owned by such Person, even though such Person has not assumed
or become liable for the payment of such Debt.
"Default" means any Event of Default or any event that would
-------
constitute an Event of Default but for the requirement that notice be
given or time elapse or both.
"Designated Subsidiary" means any direct or indirect wholly-owned
---------------------
Subsidiary of the Company designated for borrowing privileges under
this Agreement pursuant to Section 9.09.
"Designation Agreement" means, with respect to any Designated
----------------------
Subsidiary, an agreement in the form of Exhibit D hereto signed by
such Designated Subsidiary and the Company.
"Disclosed Litigation" has the meaning specified in Section
---------------------
3.01(b).
"Dollars" and the "$" sign each means lawful currency of the
------- -
United States of America.
"Domestic Lending Office" means, with respect to any Lender, the
-----------------------
office of such Lender specified as its "Domestic Lending Office"
opposite its name on Schedule I hereto or in the Assumption Agreement
or the Assignment and Acceptance pursuant to which it became a Lender,
or such other office of such Lender as such Lender may from time to
time specify to the Company and the Agent.
"Effective Date" has the meaning specified in Section 3.01.
--------------
"Eligible Assignee" means (i) a Lender; (ii) an Affiliate of a
------------------
Lender; and (iii) any other Person approved by the Agent and, unless
an Event of Default has occurred and is continuing at the time any
assignment is effected in accordance with Section 9.07, the Company,
in each case, such approval not to be unreasonably withheld or
delayed; provided, however, that neither the Company nor an Affiliate
-------- -------
of the Company shall qualify as an Eligible Assignee.
"Environmental Action" means any action, suit, demand, demand
---------------------
letter, claim, notice of non-compliance or violation, notice of
liability or potential liability, investigation, proceeding, consent
order or consent agreement relating in any way to any Environmental
Law, Environmental Permit or Hazardous Materials or arising from
alleged injury or threat of injury to health, safety or the
environment, including, without limitation, (a) by any governmental or
regulatory authority for enforcement, cleanup, removal, response,
remedial or other actions or damages and (b) by any governmental or
regulatory authority or any third party for damages, contribution,
indemnification, cost recovery, compensation or injunctive relief.
"Environmental Law" means any federal, state, local or foreign
------------------
statute, law, ordinance, rule, regulation, code, order, judgment,
decree or judicial or agency interpretation, policy or guidance
relating to pollution or protection of the environment, health, safety
or natural resources, including, without limitation, those relating to
the use, handling, transportation, treatment, storage, disposal,
release or discharge of Hazardous Materials.
"Environmental Permit" means any permit, approval, identification
--------------------
number, license or other authorization required under any
Environmental Law.
"Equity Affiliate" means any Person which the Company accounts
-----------------
for in its Consolidated financial statements on an equity basis
pursuant to GAAP.
"Equivalent" in Dollars of any Committed Currency on any date
----------
means the equivalent in Dollars of such Committed Currency determined
by using the quoted spot rate at which the Sub-Agent's principal
office in London offers to exchange Dollars for such Committed
Currency in London prior to 4:00 P.M. (London time) (unless otherwise
indicated by the terms of this Agreement) on such date as is required
pursuant to the terms of this Agreement, and the "Equivalent" in any
Committed Currency of Dollars means the equivalent in such Committed
Currency of Dollars determined by using the quoted spot rate at which
the Sub-Agent's principal office in London offers to exchange such
Committed Currency for Dollars in London prior to 4:00 P.M. (London
time) (unless otherwise indicated by the terms of this Agreement) on
such date as is required pursuant to the terms of this Agreement.
"ERISA" means the Employee Retirement Income Security Act of
-----
1974, as amended from time to time, and the regulations promulgated
and rulings issued thereunder.
"ERISA Affiliate" means any Person that for purposes of Title IV
----------------
of ERISA is a member of the Company's controlled group, or under
common control with the Company, within the meaning of Section 414 of
the Internal Revenue Code.
"ERISA Event" means (a) (i) the occurrence of a reportable event,
-----------
within the meaning of Section 4043 of ERISA, with respect to any Plan
unless the 30-day notice requirement with respect to such event has
been waived by the PBGC, or (ii) the requirements of subsection (1) of
Section 4043(b) of ERISA (without regard to subsection (2) of such
Section) are met with respect to a contributing sponsor, as defined in
Section 4001(a)(13) of ERISA, of a Plan, and an event described in
paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is
reasonably expected to occur with respect to such Plan within the
following 30 days, unless the 30-day notice requirement with respect
to such event has been waived by the PBGC; (b) the application for a
minimum funding waiver with respect to a Plan; (c) the provision by
the administrator of any Plan of a notice of intent to terminate such
Plan pursuant to Section 4041(a)(2) of ERISA (including any such
notice with respect to a plan amendment referred to in Section 4041(e)
of ERISA); (d) the cessation of operations at a facility of the
Company or any ERISA Affiliate in the circumstances described in
Section 4062(e) of ERISA; (e) the withdrawal by the Company or any
ERISA Affiliate from a Multiple Employer Plan during a plan year for
which it was a substantial employer, as defined in Section 4001(a)(2)
of ERISA; (f) the conditions for the imposition of a lien under
Section 302(f) of ERISA shall have been met with respect to any Plan;
(g) the adoption of an amendment to a Plan requiring the provision of
security to such Plan pursuant to Section 307 of ERISA; or (h) the
institution by the PBGC of proceedings to terminate a Plan pursuant to
Section 4042 of ERISA, or the occurrence of any event or condition
described in Section 4042 of ERISA that constitutes grounds for the
termination of, or the appointment of a trustee to administer, a Plan.
"EURIBO Rate" means, for any Interest Period, the rate appearing
-----------
on Page 248 of the Moneyline Telerate Service (or on any successor or
substitute page of such Service, or any successor to or substitute for
such Service, providing rate quotations comparable to those currently
provided on such page of such Service, as determined by the Agent from
time to time for purposes of providing quotations of interest rates
applicable to deposits in Euro by reference to the Banking Federation
of the European Union Settlement Rates for deposits in Euro) at
approximately 10:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for deposits in Euro
with a maturity comparable to such Interest Period or, if for any
reason such rate is not available, the average (rounded upward to the
nearest whole multiple of 1/16 of 1% per annum, if such average is not
such a multiple) of the respective rates per annum at which deposits
in Euros are offered by the principal office of each of the Reference
Banks in London, England to prime banks in the London interbank market
at 11:00 A.M. (London time) two Business Days before the first day of
such Interest Period in an amount substantially equal to such
Reference Bank's Eurocurrency Rate Advance comprising part of such
Borrowing to be outstanding during such Interest Period and for a
period equal to such Interest Period (subject, however, to the
provisions of Section 2.08).
"Euro" means the lawful currency of the European Union as
----
constituted by the Treaty of Rome which established the European
Community, as such treaty may be amended from time to time and as
referred to in the EMU legislation.
"Eurocurrency Lending Office" means, with respect to any Lender,
----------------------------
the office of such Lender specified as its "Eurocurrency Lending
Office" opposite its name on Schedule I hereto or in the Assumption
Agreement or the Assignment and Acceptance pursuant to which it became
a Lender (or, if no such office is specified, its Domestic Lending
Office), or such other office of such Lender as such Lender may from
time to time specify to the Company and the Agent.
"Eurocurrency Liabilities" has the meaning assigned to that term
-------------------------
in Regulation D of the Board of Governors of the Federal Reserve
System, as in effect from time to time.
"Eurocurrency Rate" means, for any Interest Period for each
------------------
Eurocurrency Rate Advance comprising part of the same Borrowing, an
interest rate per annum equal to the rate per annum obtained by
dividing (a)(i) in the case of any Advance denominated in Dollars or
any Committed Currency other than Euro, the rate per annum (rounded
upward to the nearest whole multiple of 1/16 of 1% per annum)
appearing on Moneyline Telerate Markets Page 3750 (or any successor
page) as the London interbank offered rate for deposits in Dollars or
the applicable Committed Currency at approximately 11:00 A.M. (London
time) two Business Days prior to the first day of such Interest Period
for a term comparable to such Interest Period or, if for any reason
such rate is not available, the average (rounded upward to the nearest
whole multiple of 1/16 of 1% per annum, if such average is not such a
multiple) of the rate per annum at which deposits in Dollars or the
applicable Committed Currency is offered by the principal office of
each of the Reference Banks in London, England to prime banks in the
London interbank market at 11:00 A.M. (London time) two Business Days
before the first day of such Interest Period in an amount
substantially equal to such Reference Bank's Eurocurrency Rate Advance
comprising part of such Borrowing to be outstanding during such
Interest Period and for a period equal to such Interest Period or,
(ii) in the case of any Advance denominated in Euros, the EURIBO Rate
by (b) a percentage equal to 100% minus the Eurocurrency Rate Reserve
Percentage for such Interest Period. If the Moneyline Telerate Markets
Page 3750 (or any successor page) is unavailable, the Eurocurrency
Rate for any Interest Period for each Eurocurrency Rate Advance
comprising part of the same Borrowing shall be determined by the Agent
on the basis of applicable rates furnished to and received by the
Agent from the Reference Banks two Business Days before the first day
of such Interest Period, subject, however, to the provisions of
------- -------
Section 2.08.
"Eurocurrency Rate Advance" means an Advance denominated in
---------------------------
Dollars or a Committed Currency that bears interest as provided in
Section 2.07(a)(ii).
"Eurocurrency Rate Reserve Percentage" for any Interest Period
--------------------------------------
for all Eurocurrency Rate Advances comprising part of the same
Borrowing means the reserve percentage applicable two Business Days
before the first day of such Interest Period under regulations issued
from time to time by the Board of Governors of the Federal Reserve
System (or any successor) for determining the maximum reserve
requirement (including, without limitation, any emergency,
supplemental or other marginal reserve requirement) for a member bank
of the Federal Reserve System in New York City with respect to
liabilities or assets consisting of or including Eurocurrency
Liabilities (or with respect to any other category of liabilities that
includes deposits by reference to which the interest rate on
Eurocurrency Rate Advances is determined) having a term equal to such
Interest Period.
"Events of Default" has the meaning specified in Section 6.01.
-----------------
"Federal Funds Rate" means, for any period, a fluctuating
--------------------
interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day that is
a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
"GAAP" has the meaning specified in Section 1.03.
----
"Guaranteed Obligations" has the meaning specified in Section
-----------------------
7.01.
"Hazardous Materials" means (a) petroleum and petroleum products,
-------------------
byproducts or breakdown products, radioactive materials,
asbestos-containing materials, polychlorinated biphenyls and radon gas
and (b) any other chemicals, materials or substances designated,
classified or regulated as hazardous or toxic or as a pollutant or
contaminant under any Environmental Law.
"Hedge Agreements" means interest rate swap, cap or collar
-----------------
agreements, interest rate future or option contracts, currency swap
agreements, currency future or option contracts and other similar
agreements.
"Increase Date" has the meaning specified in Section 2.18(a).
-------------
"Increasing Lender" has the meaning specified in Section 2.18(b).
-----------------
"Information Memorandum" means the information memorandum dated
-----------------------
February 15, 2005 used by the Agent in connection with the syndication
of the Commitments.
"Interest Period" means, for each Eurocurrency Rate Advance
----------------
comprising part of the same Borrowing, the period commencing on the
date of such Eurocurrency Rate Advance or the date of the Conversion
of any Base Rate Advance into such Eurocurrency Rate Advance and
ending on the last day of the period selected by the Borrower
requesting such Borrowing pursuant to the provisions below and,
thereafter, each subsequent period commencing on the last day of the
immediately preceding Interest Period and ending on the last day of
the period selected by such Borrower pursuant to the provisions below.
The duration of each such Interest Period shall be one, two, three or
six months, and subject to clause (c) of this definition, nine or
twelve months, as such Borrower may, upon notice received by the Agent
not later than 11:00 A.M. (New York City time) on the third Business
Day prior to the first day of such Interest Period, select; provided,
--------
however, that:
-------
(a) such Borrower may not select any Interest Period that
ends after the Termination Date;
(b) Interest Periods commencing on the same date for
Eurocurrency Rate Advances comprising part of the same Borrowing
shall be of the same duration;
(c) in the case of any such Borrowing, such Borrower shall
not be entitled to select an Interest Period having duration of
nine or twelve months unless, by 2:00 P.M. (New York City time)
on the third Business Day prior to the first day of such Interest
Period, each Lender notifies the Agent that such Lender will be
providing funding for such Borrowing with such Interest Period
(the failure of any Lender to so respond by such time being
deemed for all purposes of this Agreement as an objection by such
Lender to the requested duration of such Interest Period);
provided that, if any or all of the Lenders object to the
requested duration of such Interest Period, the duration of the
Interest Period for such Borrowing shall be one, two, three or
six months, as specified by such Borrower in the applicable
Notice of Borrowing as the desired alternative to an Interest
Period of nine or twelve months;
(d) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day
of such Interest Period shall be extended to occur on the next
succeeding Business Day, provided, however, that, if such
-------- -------
extension would cause the last day of such Interest Period to
occur in the next following calendar month, the last day of such
Interest Period shall occur on the next preceding Business Day;
and
(e) whenever the first day of any Interest Period occurs on
a day of an initial calendar month for which there is no
numerically corresponding day in the calendar month that succeeds
such initial calendar month by the number of months equal to the
number of months in such Interest Period, such Interest Period
shall end on the last Business Day of such succeeding calendar
month.
"Internal Revenue Code" means the Internal Revenue Code of 1986,
----------------------
as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"Investment Grade Rating Date" means the first date after the
-------------------------------
date hereof date on which the Public Debt Rating is BBB- or better
from S&P and Baa3 or better from Moody's.
"Issuance" with respect to any Letter of Credit means the
--------
issuance, amendment, renewal or extension of such Letter of Credit.
"Issuing Bank" means an Initial Issuing Bank or any Eligible
-------------
Assignee to which a portion of the Letter of Credit Commitment
hereunder has been assigned pursuant to Section 9.07 so long as such
Eligible Assignee expressly agrees to perform in accordance with their
terms all of the obligations that by the terms of this Agreement are
required to be performed by it as an Issuing Bank and notifies the
Agent of its Applicable Lending Office (which information shall be
recorded by the Agent in the Register), for so long as such Initial
Issuing Bank or Eligible Assignee, as the case may be, shall have a
Letter of Credit Commitment.
"L/C Cash Deposit Account" means an interest bearing cash deposit
------------------------
account to be established and maintained by the Agent, over which the
Agent shall have sole dominion and control, upon terms as may be
satisfactory to the Agent and the Company.
"L/C Related Documents" has the meaning specified in Section
-----------------------
2.06(b)(i).
"Lenders" means each Initial Lender, each Issuing Bank, each
-------
Assuming Lender that shall become a party hereto pursuant to Section
2.18 and each Person that shall become a party hereto pursuant to
Section 9.07.
"Letter of Credit" has the meaning specified in Section 2.01(b).
----------------
"Letter of Credit Agreement" has the meaning specified in Section
--------------------------
2.03(a).
"Letter of Credit Commitment" means, with respect to each Issuing
---------------------------
Bank, the obligation of such Issuing Bank to issue Letters of Credit
for the account of the Borrowers and their specified Subsidiaries in
(a) the Dollar amount set forth opposite the Issuing Bank's name on
the signature pages hereto under the caption "Letter of Credit
Commitment" or (b) if such Issuing Bank has entered into one or more
Assignment and Acceptances, the Dollar amount set forth for such
Issuing Bank in the Register maintained by the Agent pursuant to
Section 9.07(d) as such Issuing Bank's "Letter of Credit Commitment",
in each case as such amount may be reduced prior to such time pursuant
to Section 2.05.
"Letter of Credit Facility" means, at any time, an amount equal
--------------------------
to the least of (a) the aggregate amount of the Issuing Banks' Letter
of Credit Commitments at such time, (b) $200,000,000 and (c) the
aggregate amount of the Revolving Credit Commitments, as such amount
may be reduced at or prior to such time pursuant to Section 2.05.
"Lien" means any lien, security interest or other charge or
----
encumbrance of any kind, or any other type of preferential
arrangement, including, without limitation, the lien or retained
security title of a conditional vendor and any easement, right of way
or other encumbrance on title to real property.
"Material Adverse Change" means any material adverse change in
-------------------------
the business, condition (financial or otherwise), operations or
prospects of the Company and its Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on (a)
------------------------
the business, condition (financial or otherwise) or operations of the
Company and its Subsidiaries taken as a whole, (b) the rights and
remedies of the Agent or any Lender under this Agreement or any Note
or (c) the ability of any Borrower to perform its obligations under
this Agreement or any Note.
"Moody's" means Moody's Investors Service, Inc.
-------
"Multiemployer Plan" means a multiemployer plan, as defined in
-------------------
Section 4001(a)(3) of ERISA, to which the Company or any ERISA
Affiliate is making or accruing an obligation to make contributions,
or has within any of the preceding five plan years made or accrued an
obligation to make contributions.
"Multiple Employer Plan" means a single employer plan, as defined
----------------------
in Section 4001(a)(15) of ERISA, that (a) is maintained for employees
of the Company or any ERISA Affiliate and at least one Person other
than the Company and the ERISA Affiliates or (b) was so maintained and
in respect of which the Company or any ERISA Affiliate could have
liability under Section 4064 or 4069 of ERISA in the event such plan
has been or were to be terminated.
"Note" means a promissory note of any Borrower payable to the
----
order of any Lender, delivered pursuant to a request made under
Section 2.16 in substantially the form of Exhibit A hereto, evidencing
the aggregate indebtedness of such Borrower to such Lender resulting
from the Advances made by such Lender to such Borrower.
"Notice of Borrowing" has the meaning specified in Section
---------------------
2.02(a).
"Notice of Issuance" has the meaning specified in Section
--------------------
2.03(a).
"Patriot Act" means the Uniting and Strengthening America by
------------
Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001, Pub. L. 107-56, signed into law October 26,
2001.
"Payment Office" means, for any Committed Currency, such office
--------------
of Citibank as shall be from time to time selected by the Agent and
notified by the Agent to the Company and the Lenders.
"PBGC" means the Pension Benefit Guaranty Corporation (or any
----
successor).
"Permitted Liens" means such of the following as to which no
----------------
enforcement, collection, execution, levy or foreclosure proceeding
shall have been commenced: (a) Liens for taxes, assessments and
governmental charges or levies to the extent not required to be paid
under Section 5.01(b) hereof; (b) Liens imposed by law, such as
materialmen's, mechanics', carriers', workmen's and repairmen's Liens
and other similar Liens arising in the ordinary course of business
securing obligations that are not overdue for a period of more than 30
days or which are being contested in good faith by appropriate
proceedings and as to which appropriate reserves are being maintained
in accordance with generally accepted accounting practices; (c)
pledges or deposits to secure obligations under workers' compensation
laws or similar legislation or to secure public or statutory
obligations, performance bids, surety bonds, performance bonds and
other obligations of a like nature incurred in the ordinary course of
business; (d) easements, rights of way and other encumbrances on title
to real property that do not render title to the property encumbered
thereby unmarketable or materially adversely affect the use of such
property for its present purposes; (e) judgment bonds so long as the
enforcement of such liens is effectively stayed and the claims secured
thereby are being contested in good faith by appropriate proceedings
and as to which appropriate reserves are being maintained in
accordance with generally accepted accounting practices; (f) liens of
a lessor or sublessor with respect to property under an operating
lease and any restriction or encumbrance to which the interest or
title of such lessor or sublessor may be subject; and (g) so long as
such liens do not secure Debt, liens arising under standard custodial,
bailee or depositary arrangements (including deposit accounts with
banks or other financial institutions).
"Person" means an individual, partnership, corporation (including
------
a business trust), joint stock company, trust, unincorporated
association, joint venture, limited liability company or other entity,
or a government or any political subdivision or agency thereof.
"Plan" means a Single Employer Plan or a Multiple Employer Plan.
----
"Post-Petition Interest" has the meaning specified in Section
-----------------------
7.05.
"Public Debt Rating" means, as of any date, the rating that has
------------------
been most recently announced by either S&P or Moody's, as the case may
be, for any class of non-credit enhanced long-term senior unsecured
debt issued by the Company or, if any such rating agency shall have
issued more than one such rating, the lowest such rating issued by
such rating agency. For purposes of the foregoing, (a) if only one of
S&P and Moody's shall have in effect a Public Debt Rating, the
Applicable Margin and the Applicable Percentage shall be determined by
reference to the available rating; (b) if neither S&P nor Moody's
shall have in effect a Public Debt Rating, the Applicable Margin and
the Applicable Percentage will be set in accordance with Level 7 under
the definition of "Applicable Margin" or "Applicable Percentage", as
----------------- ----------------------
the case may be; (c) if the ratings established by S&P and Moody's
shall fall within different levels, the Applicable Margin and the
Applicable Percentage shall be based upon the higher rating unless the
such ratings differ by two or more levels, in which case the
applicable level will be deemed to be one level above the lower of
such levels; (d) if any rating established by S&P or Moody's shall be
changed, such change shall be effective as of the date on which such
change is first announced publicly by the rating agency making such
change; and (e) if S&P or Moody's shall change the basis on which
ratings are established, each reference to the Public Debt Rating
announced by S&P or Moody's, as the case may be, shall refer to the
then equivalent rating by S&P or Moody's, as the case may be.
"Ratable Share" of any amount means, with respect to any Lender
--------------
at any time, the product of such amount times a fraction the numerator
of which is the amount of such Lender's Revolving Credit Commitment at
such time (or, if the Revolving Credit Commitments shall have been
terminated pursuant to Section 2.07 or 6.01, such Lender's Revolving
Credit Commitment as in effect immediately prior to such termination)
and the denominator of which is the aggregate amount of all Revolving
Credit Commitments at such time (or, if the Revolving Credit
Commitments shall have been terminated pursuant to Section 2.07 or
6.01, the aggregate amount of all Revolving Credit Commitments as in
effect immediately prior to such termination).
"Reference Banks" means Citibank, JPMorgan Chase Bank, N.A. and
----------------
The Bank of Tokyo-Mitsubishi, Ltd.
"Register" has the meaning specified in Section 9.07(d).
--------
"Required Lenders" means at any time Lenders owed at least a
-----------------
majority in interest of the then aggregate unpaid principal amount
(based on the Equivalent in Dollars at such time) of the Advances
owing to Lenders, or, if no such principal amount is then outstanding,
Lenders having at least a majority in interest of the Revolving Credit
Commitments.
"Revolving Credit Commitment" means as to any Lender (a) the
-----------------------------
Dollar amount set forth opposite such Lender's name on the signature
pages hereof as such Lender's "Revolving Credit Commitment", (b) if
such Lender has become a Lender hereunder pursuant to an Assumption
Agreement, the Dollar amount set forth in such Assumption Agreement or
(c) if such Lender has entered into an Assignment and Acceptance, the
Dollar amount set forth for such Lender in the Register maintained by
the Agent pursuant to Section 9.07(d), as such amount may be reduced
pursuant to Section 2.05 or increased pursuant to Section 2.18.
"S&P" means Standard & Poor's, a division of The McGraw-Hill
---
Companies, Inc.
"Single Employer Plan" means a single employer plan, as defined
---------------------
in Section 4001(a)(15) of ERISA, that (a) is maintained for employees
of the Company or any ERISA Affiliate and no Person other than the
Company and the ERISA Affiliates or (b) was so maintained and in
respect of which the Company or any ERISA Affiliate could have
liability under Section 4069 of ERISA in the event such plan has been
or were to be terminated.
"Solvent" and "Solvency" mean, with respect to any Person on a
------- --------
particular date, that on such date (a) the fair value of the property
of such Person is greater than the total amount of liabilities,
including, without limitation, contingent liabilities, of such Person,
(b) the present fair salable value of the assets 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 does not intend to, and does not believe that
it will, incur debts or liabilities beyond such Person's ability to
pay such debts and liabilities as they mature and (d) such Person is
not engaged in business or a transaction, and is not about to engage
in business or a transaction, for which such Person's property would
constitute an unreasonably small capital. The amount of contingent
liabilities at any time shall be computed as the amount that, in the
light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an
actual or matured liability.
"Sub-Agent" means Citibank International plc.
---------
"Subordinated Obligations" has the meaning specified in Section
-------------------------
7.05.
"Subsidiary" of any Person means any corporation, partnership,
----------
joint venture or limited liability company of which (or in which) more
than 50% of (a) the issued and outstanding capital stock having
ordinary voting power to elect a majority of the Board of Directors of
such corporation (irrespective of whether at the time capital stock of
any other class or classes of such corporation shall or might have
voting power upon the occurrence of any contingency) or (b) the
interest in the capital or profits of such limited liability company,
partnership or joint venture is at the time directly or indirectly
owned or controlled by such Person, by such Person and one or more of
its other Subsidiaries or by one or more of such Person's other
Subsidiaries.
"Termination Date" means the earlier of March 17, 2010 and the
-----------------
date of termination in whole of the Commitments pursuant to Section
2.05 or 6.01.
"Unissued Letter of Credit Commitment" means, with respect to any
------------------------------------
Issuing Bank, the obligation of such Issuing Bank to issue Letters of
Credit for the account of the Borrowers or their specified
Subsidiaries in an amount equal to the excess of (a) the amount of its
Letter of Credit Commitment over (b) the aggregate Available Amount of
all Letters of Credit issued by such Issuing Bank.
"Unused Commitment" means, with respect to each Lender at any
------------------
time, (a) such Lender's Revolving Credit Commitment at such time minus
-----
(b) the sum of (i) the aggregate principal amount of all Advances made
by such Lender (in its capacity as a Lender) and outstanding at such
time, plus (ii) such Lender's Ratable Share of (A) the aggregate
----
Available Amount of all the Letters of Credit outstanding at such time
and (B) the aggregate principal amount of all Advances made by each
Issuing Bank pursuant to Section 2.03(c) that have not been ratably
funded by such Lender and outstanding at such time.
"Voting Stock" means capital stock issued by a corporation, or
-------------
equivalent interests in any other Person, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the
election of directors (or persons performing similar functions) of
such Person, even if the right so to vote has been suspended by the
happening of such a contingency.
SECTION 1.02. Computation of Time Periods. In this Agreement in
---------------------------
the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each mean "to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms not
------------------
specifically defined herein shall be construed in accordance with generally
accepted accounting principles consistent with those applied in the preparation
of the financial statements referred to in Section 4.01(e) ("GAAP").
----
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES AND LETTERS OF CREDIT
SECTION 2.01. The Advances and Letters of Credit. (a) The
--------------------------------------- ---
Advances. Each Lender severally agrees, on the terms and conditions hereinafter
- --------
set forth, to make Advances to any Borrower from time to time on any Business
Day during the period from the Effective Date until the Termination Date in an
aggregate amount (based in respect of any Advances to be denominated in a
Committed Currency by reference to the Equivalent thereof in Dollars determined
on the date of delivery of the applicable Notice of Borrowing) not to exceed
such Lender's Unused Commitment. Each Borrowing shall be in an amount not less
than the Borrowing Minimum or the Borrowing Multiple in excess thereof and shall
consist of Advances of the same Type and in the same currency made on the same
day by the Lenders ratably according to their respective Revolving Credit
Commitments. Within the limits of each Lender's Commitment, the Borrowers may
borrow under this Section 2.01(a), prepay pursuant to Section 2.10 and reborrow
under this Section 2.01(a).
(b) Letters of Credit. Each Issuing Bank agrees, on the terms and
-----------------
conditions hereinafter set forth, in reliance upon the agreements of the other
Lenders set forth in this Agreement, to issue letters of credit (each, a "Letter
------
of Credit") denominated in Dollars for the account of any Borrower and its
- ----------
specified Subsidiaries from time to time on any Business Day during the period
from the Effective Date until 30 days before the Termination Date in an
aggregate Available Amount (i) for all Letters of Credit issued by each Issuing
Bank not to exceed at any time the lesser of (x) the Letter of Credit Facility
at such time and (y) such Issuing Bank's Letter of Credit Commitment at such
time and (ii) for each such Letter of Credit not to exceed an amount equal to
the Unused Commitments of the Lenders at such time. No Letter of Credit shall
have an expiration date (including all rights of the applicable Borrower or the
beneficiary to require renewal) later than 10 Business Days before the
Termination Date. Within the limits referred to above, the Borrowers may from
time to time request the Issuance of Letters of Credit under this Section
2.01(b). Each letter of credit listed on Schedule 2.01(b) shall be deemed to
constitute a Letter of Credit issued hereunder, and each Lender that is an
issuer of such a Letter of Credit shall, for purposes of Section 2.03, be deemed
to be an Issuing Bank for each such letter of credit, provided than any renewal
--------
or replacement of any such letter of credit shall be issued by an Issuing Bank
pursuant to the terms of this Agreement.
SECTION 2.02. Making the Advances. (a) Except as otherwise
---------------------
provided in Section 2.03(c), each Borrowing shall be made on notice, given not
later than (x) 11:00 A.M. (New York City time) on the third Business Day prior
to the date of the proposed Borrowing in the case of a Borrowing consisting of
Eurocurrency Rate Advances denominated in Dollars, (y) 4:00 P.M. (London time)
on the third Business Day prior to the date of the proposed Borrowing in the
case of a Borrowing consisting of Eurocurrency Rate Advances denominated in any
Committed Currency, or (z) 11:00 A.M. (New York City time) on the date of the
proposed Borrowing in the case of a Borrowing consisting of Base Rate Advances,
by any Borrower to the Agent (and, in the case of a Borrowing consisting of
Eurocurrency Rate Advances, simultaneously to the Sub-Agent), which shall give
to each Lender prompt notice thereof by telecopier. Each such notice of a
Borrowing (a "Notice of Borrowing") shall be by telephone, confirmed immediately
-------------------
in writing, or telecopier in substantially the form of Exhibit B hereto,
specifying therein the requested (i) date of such Borrowing, (ii) Type of
Advances comprising such Borrowing, (iii) aggregate amount of such Borrowing,
and (iv) in the case of a Borrowing consisting of Eurocurrency Rate Advances,
initial Interest Period and currency for each such Advance. Each Lender shall,
before 2:00 P.M. (New York City time) on the date of such Borrowing, in the case
of a Borrowing consisting of Advances denominated in Dollars, and before 11:00
A.M. (London time) on the date of such Borrowing, in the case of a Borrowing
consisting of Eurocurrency Rate Advances denominated in any Committed Currency,
make available for the account of its Applicable Lending Office to the Agent at
the applicable Agent's Account, in same day funds, such Lender's ratable portion
of such Borrowing. After the Agent's receipt of such funds and upon fulfillment
of the applicable conditions set forth in Article III, the Agent will make such
funds available to the Borrower requesting the Borrowing at the Agent's address
referred to in Section 9.02 or at the applicable Payment Office, as the case may
be.
(b) Anything in subsection (a) above to the contrary
notwithstanding, (i) no Borrower may select Eurocurrency Rate Advances for any
Borrowing if the aggregate amount of such Borrowing is less than the Borrowing
Minimum or if the obligation of the Lenders to make Eurocurrency Rate Advances
shall then be suspended pursuant to Section 2.08 or 2.12 and (ii) the
Eurocurrency Rate Advances may not be outstanding as part of more than six
separate Borrowings.
(c) Each Notice of Borrowing shall be irrevocable and binding on
the Borrower requesting the Borrowing. In the case of any Borrowing that the
related Notice of Borrowing specifies is to be comprised of Eurocurrency Rate
Advances, the Borrower requesting the Borrowing shall indemnify each Lender
against any loss, cost or expense incurred by such Lender as a result of any
failure to fulfill on or before the date specified in such Notice of Borrowing
for such Borrowing the applicable conditions set forth in Article III,
including, without limitation, any loss (excluding loss of anticipated profits),
cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such Lender to fund the Advance to be made
by such Lender as part of such Borrowing when such Advance, as a result of such
failure, is not made on such date.
(d) Unless the Agent shall have received notice from a Lender
prior to the time of any Borrowing that such Lender will not make available to
the Agent such Lender's ratable portion of such Borrowing, the Agent may assume
that such Lender has made such portion available to the Agent on the date of
such Borrowing in accordance with subsection (a) of this Section 2.02 and the
Agent may, in reliance upon such assumption, make available to the Borrower
requesting the Borrowing on such date a corresponding amount. If and to the
extent that such Lender shall not have so made such ratable portion available to
the Agent, such Lender and such Borrower severally agree to repay to the Agent
forthwith on demand such corresponding amount together with interest thereon,
for each day from the date such amount is made available to such Borrower until
the date such amount is repaid to the Agent, at (i) in the case of such
Borrower, the higher of (A) the interest rate applicable at the time to Advances
comprising such Borrowing and (B) the cost of funds incurred by the Agent in
respect of such amount and (ii) in the case of such Lender, (A) the Federal
Funds Rate in the case of Advances denominated in Dollars or (B) the cost of
funds incurred by the Agent in respect of such amount in the case of Advances
denominated in Committed Currencies. If such Lender shall repay to the Agent
such corresponding amount, such amount so repaid shall constitute such Lender's
Advance as part of such Borrowing for purposes of this Agreement.
(e) The failure of any Lender to make the Advance to be made by
it as part of any Borrowing shall not relieve any other Lender of its
obligation, if any, hereunder to make its Advance on the date of such Borrowing,
but no Lender shall be responsible for the failure of any other Lender to make
the Advance to be made by such other Lender on the date of any Borrowing.
SECTION 2.03. Issuance of and Drawings and Reimbursement Under
--------------------------------------------------
Letters of Credit. (a) Request for Issuance. (i) Each Letter of Credit shall be
- -----------------
issued upon notice, given not later than 11:00 A.M. (New York City time) on the
fifth Business Day prior to the date of the proposed Issuance of such Letter of
Credit (or on such shorter notice as the applicable Issuing Bank may agree), by
any Borrower to any Issuing Bank, and such Issuing Bank shall give the Agent,
prompt notice thereof. Each such notice by a Borrower of Issuance of a Letter of
Credit (a "Notice of Issuance") shall be by telecopier or telephone, confirmed
------------------
immediately in writing, specifying therein the requested (A) date of such
Issuance (which shall be a Business Day), (B) Available Amount of such Letter of
Credit, (C) expiration date of such Letter of Credit (which shall not be later
than 10 Business Days before the Termination Date), (D) name and address of the
beneficiary of such Letter of Credit and (E) form of such Letter of Credit, such
Letter of Credit shall be issued pursuant to such application and agreement for
letter of credit as such Issuing Bank and the applicable Borrower shall agree
for use in connection with such requested Letter of Credit (a "Letter of Credit
----------------
Agreement"). If the requested form of such Letter of Credit is acceptable to
- ---------
such Issuing Bank in its reasonable discretion (it being understood that any
such form shall have only explicit documentary conditions to draw and shall not
include discretionary conditions), such Issuing Bank will, upon fulfillment of
the applicable conditions set forth in Section 3.03, make such Letter of Credit
available to the applicable Borrower at its office referred to in Section 9.02
or as otherwise agreed with such Borrower in connection with such Issuance. In
the event and to the extent that the provisions of any Letter of Credit
Agreement shall conflict with this Agreement, the provisions of this Agreement
shall govern.
(b) Participations. By the Issuance of a Letter of Credit (or an
--------------
amendment to a Letter of Credit increasing or decreasing the amount thereof) and
without any further action on the part of the applicable Issuing Bank or the
Lenders, such Issuing Bank hereby grants to each Lender, and each Lender hereby
acquires from such Issuing Bank, a participation in such Letter of Credit equal
to such Lender's Ratable Share of the Available Amount of such Letter of Credit.
Each Borrower hereby agrees to each such participation. In consideration and in
furtherance of the foregoing, each Lender hereby absolutely and unconditionally
agrees to pay to the Agent, for the account of such Issuing Bank, such Lender's
Ratable Share of each drawing made under a Letter of Credit funded by such
Issuing Bank and not reimbursed by the applicable Borrower on the date made, or
of any reimbursement payment required to be refunded to such Borrower for any
reason, which amount will be advanced, and deemed to be an Advance to such
Borrower hereunder, regardless of the satisfaction of the conditions set forth
in Section 3.03. Each Lender acknowledges and agrees that its obligation to
acquire participations pursuant to this paragraph in respect of Letters of
Credit is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including any amendment, renewal or extension of any
Letter of Credit or the occurrence and continuance of a Default or reduction or
termination of the Revolving Credit Commitments, and that each such payment
shall be made without any offset, abatement, withholding or reduction
whatsoever. Each Lender further acknowledges and agrees that its participation
in each Letter of Credit will be automatically adjusted to reflect such Lender's
Ratable Share of the Available Amount of such Letter of Credit at each time such
Lender's Revolving Credit Commitment is amended pursuant to an assignment in
accordance with Section 9.07 or otherwise pursuant to this Agreement.
(c) Drawing and Reimbursement. The payment by an Issuing Bank of
-------------------------
a draft drawn under any Letter of Credit which is not reimbursed by the
applicable Borrower on the date made shall constitute for all purposes of this
Agreement the making by any such Issuing Bank of an Advance, which shall be a
Base Rate Advance, in the amount of such draft, without regard to whether the
making of such an Advance would exceed such Issuing Bank's Unused Commitment.
Each Issuing Bank shall give prompt notice of each drawing under any Letter of
Credit issued by it to the applicable Borrower and the Agent. Upon written
demand by such Issuing Bank, with a copy of such demand to the Agent and the
applicable Borrower, each Lender shall pay to the Agent such Lender's Ratable
Share of such outstanding Advance pursuant to Section 2.03(b). Each Lender
acknowledges and agrees that its obligation to make Advances pursuant to this
paragraph in respect of Letters of Credit is absolute and unconditional and
shall not be affected by any circumstance whatsoever, including any amendment,
renewal or extension of any Letter of Credit or the occurrence and continuance
of a Default or reduction or termination of the Revolving Credit Commitments,
and that each such payment shall be made without any offset, abatement,
withholding or reduction whatsoever. Promptly after receipt thereof, the Agent
shall transfer such funds to such Issuing Bank. Each Lender agrees to fund its
Ratable Share of an outstanding Advance on (i) the Business Day on which demand
therefor is made by such Issuing Bank, provided that notice of such demand is
--------
given not later than 11:00 A.M. (New York City time) on such Business Day, or
(ii) the first Business Day next succeeding such demand if notice of such demand
is given after such time. If and to the extent that any Lender shall not have so
made the amount of such Advance available to the Agent, such Lender agrees to
pay to the Agent forthwith on demand such amount together with interest thereon,
for each day from the date of demand by any such Issuing Bank until the date
such amount is paid to the Agent, at the Federal Funds Rate for its account or
the account of such Issuing Bank, as applicable. If such Lender shall pay to the
Agent such amount for the account of any such Issuing Bank on any Business Day,
such amount so paid in respect of principal shall constitute an Advance made by
such Lender on such Business Day for purposes of this Agreement, and the
outstanding principal amount of the Advance made by such Issuing Bank shall be
reduced by such amount on such Business Day.
(d) Letter of Credit Reports. Each Issuing Bank shall furnish (A)
------------------------
to the Agent and each Lender (with a copy to the Company) on the first Business
Day of each month a written report summarizing Issuance and expiration dates of
Letters of Credit issued by such Issuing Bank during the preceding month and
drawings during such month under all Letters of Credit and (B) to the Agent and
each Lender (with a copy to the Company) on the first Business Day of each
calendar quarter a written report setting forth the average daily aggregate
Available Amount during the preceding calendar quarter of all Letters of Credit
issued by such Issuing Bank.
(e) Failure to Make Advances. The failure of any Lender to make
-------------------------
the Advance to be made by it on the date specified in Section 2.03(c) shall not
relieve any other Lender of its obligation hereunder to make its Advance on such
date, but no Lender shall be responsible for the failure of any other Lender to
make the Advance to be made by such other Lender on such date.
SECTION 2.04. Fees. (a) Facility Fee. The Company agrees to pay
---- ------------
to the Agent for the account of each Lender a facility fee on the aggregate
amount of such Lender's Revolving Credit Commitment from the Effective Date in
the case of each Initial Lender and from the effective date specified in the
Assumption Agreement or in the Assignment and Acceptance pursuant to which it
became a Lender in the case of each other Lender until the Termination Date at a
rate per annum equal to the Applicable Percentage in effect from time to time,
payable in arrears quarterly on the last day of each March, June, September and
December, commencing March 31, 2005, and on the Termination Date.
(b) Letter of Credit Fees. (i) Each Borrower shall pay to the
----------------------
Agent for the account of each Lender a commission on such Lender's Ratable Share
of the average daily aggregate Available Amount of all Letters of Credit issued
for the account of such Borrower and outstanding from time to time at a rate per
annum equal to the Applicable Margin for Eurocurrency Rate Advances in effect
from time to time during such calendar quarter, payable in arrears quarterly on
the last day of each March, June, September and December, commencing with the
quarter ended March 31, 2005, and on the Termination Date; provided that the
--------
Applicable Margin shall be 1% above the Applicable Margin in effect upon the
occurrence and during the continuation of an Event of Default if such Borrower
is required to pay default interest pursuant to Section 2.07(b).
(ii) Each Borrower shall pay to each Issuing Bank, for its own
account, a fronting fee equal to 0.125% per annum of the Available
Amount of each Letter of Credit issued by such Issuing Bank, payable
in arrears quarterly on the last day of each March, June, September
and December, and such other commissions, issuance fees, transfer fees
and other fees and charges in connection with the Issuance or
administration of each Letter of Credit as such Borrower and such
Issuing Bank shall agree.
(c) Agent's Fees. The Company shall pay to the Agent for its own
------------
account such fees as may from time to time be agreed between the Company and the
Agent.
SECTION 2.05. Optional Termination or Reduction of the
-----------------------------------------------
Commitments. The Company shall have the right, upon at least three Business
- -----------
Days' notice to the Agent, to terminate in whole or permanently reduce ratably
in part the Unused Commitments or the Unissued Letter of Credit Commitments of
the Lenders, provided that each partial reduction shall be in the aggregate
--------
amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof.
SECTION 2.06. Repayment of Advances and Letter of Credit Drawings
---------------------------------------------------
(a) Each Borrower shall repay to the Agent for the ratable account of the
Lenders on the Termination Date the aggregate principal amount of the Advances
made to such Borrower then outstanding.
(b) The obligations of each Borrower under any Letter of Credit
Agreement and any other agreement or instrument relating to any Letter of Credit
issued for the account of such Borrower shall be unconditional and irrevocable,
and shall be paid strictly in accordance with the terms of this Agreement, such
Letter of Credit Agreement and such other agreement or instrument under all
circumstances, including, without limitation, the following circumstances (it
being understood that any such payment by such Borrower is without prejudice to,
and does not constitute a waiver of, any rights such Borrower might have or
might acquire as a result of the payment by any Lender of any draft or the
reimbursement by such Borrower thereof):
(i) any lack of validity or enforceability of this Agreement, any
Note, any Letter of Credit Agreement, any Letter of Credit or any
other agreement or instrument relating thereto (all of the foregoing
being, collectively, the "L/C Related Documents");
---------------------
(ii) any change in the time, manner or place of payment of, or in
any other term of, all or any of the obligations of such Borrower in
respect of any L/C Related Document or any other amendment or waiver
of or any consent to departure from all or any of the L/C Related
Documents;
(iii) the existence of any claim, set-off, defense or other right
that such Borrower may have at any time against any beneficiary or any
transferee of a Letter of Credit (or any Persons for which any such
beneficiary or any such transferee may be acting), any Issuing Bank,
the Agent, any Lender or any other Person, whether in connection with
the transactions contemplated by the L/C Related Documents or any
unrelated transaction;
(iv) any statement or any other document presented under a 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;
(v) payment by any Issuing Bank under a Letter of Credit against
presentation of a draft or certificate that does not strictly comply
with the terms of such Letter of Credit;
(vi) any exchange, release or non-perfection of any collateral,
or any release or amendment or waiver of or consent to departure from
any guarantee, for all or any of the obligations of such Borrower in
respect of the L/C Related Documents; or
(vii) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing, including, without limitation,
any other circumstance that might otherwise constitute a defense
available to, or a discharge of, such Borrower or a guarantor.
SECTION 2.07. Interest on Advances. (a) Scheduled Interest. Each
-------------------- ------------------
Borrower shall pay interest on the unpaid principal amount of each Advance owing
to each Lender from the date of such Advance until such principal amount shall
be paid in full, at the following rates per annum:
(i) Base Rate Advances. During such periods as such Advance is a
------------------
Base Rate Advance, a rate per annum equal at all times to the sum of
(x) the Base Rate in effect from time to time plus (y) the Applicable
----
Margin in effect from time to time, payable in arrears quarterly on
the last day of each March, June, September and December during such
periods and on the date such Base Rate Advance shall be Converted or
paid in full.
(ii) Eurocurrency Rate Advances. During such periods as such
----------------------------
Advance is a Eurocurrency Rate Advance, a rate per annum equal at all
times during each Interest Period for such Advance to the sum of (x)
the Eurocurrency Rate for such Interest Period for such Advance plus
----
(y) the Applicable Margin in effect from time to time, payable in
arrears on the last day of such Interest Period and, if such Interest
Period has a duration of more than three months, on each day that
occurs during such Interest Period every three months from the first
day of such Interest Period and on the date such Eurocurrency Rate
Advance shall be Converted or paid in full.
(b) Default Interest. Upon the occurrence and during the
-----------------
continuance of an Event of Default, the Agent may with the consent, and shall
upon the request, of the Required Lenders, require the Borrowers to pay interest
("Default Interest") on (i) the unpaid principal amount of each Advance owing to
----------------
each Lender, payable in arrears on the dates referred to in clause (a)(i) or
(a)(ii) above, at a rate per annum equal at all times to 1% per annum above the
rate per annum required to be paid on such Advance pursuant to clause (a)(i) or
(a)(ii) above and (ii) to the fullest extent permitted by law, the amount of any
interest, fee or other amount payable hereunder that is not paid when due, from
the date such amount shall be due until such amount shall be paid in full,
payable in arrears on the date such amount shall be paid in full and on demand,
at a rate per annum equal at all times to 1% per annum above the rate per annum
required to be paid on Base Rate Advances pursuant to clause (a)(i) above;
provided, however, that following acceleration of the Advances pursuant to
- -------- -------
Section 6.01, Default Interest shall accrue and be payable hereunder whether or
not previously required by the Agent.
SECTION 2.08. Interest Rate Determination. (a) Each Reference
----------------------------
Bank agrees, if requested by the Agent, to furnish to the Agent timely
information for the purpose of determining each Eurocurrency Rate. If any one or
more of the Reference Banks shall not furnish such timely information to the
Agent for the purpose of determining any such interest rate, the Agent shall
determine such interest rate on the basis of timely information furnished by the
remaining Reference Banks. The Agent shall give prompt notice to the Company and
the Lenders of the applicable interest rate determined by the Agent for purposes
of Section 2.07(a)(i) or (ii), and the rate, if any, furnished by each Reference
Bank for the purpose of determining the interest rate under Section 2.07(a)(ii).
(b) If, with respect to any Eurocurrency Rate Advances, the
Required Lenders notify the Agent that (i) they are unable to obtain matching
deposits in the London inter-bank market at or about 11:00 A.M. (London time) on
the second Business Day before the making of a Borrowing in sufficient amounts
to fund their respective Advances as a part of such Borrowing during its
Interest Period or (ii) the Eurocurrency Rate for any Interest Period for such
Advances will not adequately reflect the cost to such Required Lenders of
making, funding or maintaining their respective Eurocurrency Rate Advances for
such Interest Period, the Agent shall forthwith so notify the Company and the
Lenders, whereupon (A) the Borrower of such Eurocurrency Advances will, on the
last day of the then existing Interest Period therefor, (1) if such Eurocurrency
Rate Advances are denominated in Dollars, either (x) prepay such Advances or (y)
Convert such Advances into Base Rate Advances and (2) if such Eurocurrency Rate
Advances are denominated in any Committed Currency, either (x) prepay such
Advances or (y) exchange such Advances into an Equivalent amount of Dollars and
Convert such Advances into Base Rate Advances and (B) the obligation of the
Lenders to make, or to Convert Advances into, Eurocurrency Rate Advances shall
be suspended until the Agent shall notify the Company and the Lenders that the
circumstances causing such suspension no longer exist.
(c) If any Borrower shall fail to select the duration of any
Interest Period for any Eurocurrency Rate Advances in accordance with the
provisions contained in the definition of "Interest Period" in Section 1.01, the
Agent will forthwith so notify such Borrower and the Lenders and such Advances
will automatically, on the last day of the then existing Interest Period
therefor, (i) if such Eurocurrency Rate Advances are denominated in Dollars,
Convert into Base Rate Advances and (ii) if such Eurocurrency Rate Advances are
denominated in a Committed Currency, be exchanged for an Equivalent amount of
Dollars and Convert into Base Rate Advances.
(d) On the date on which the aggregate unpaid principal amount of
Eurocurrency Rate Advances comprising any Borrowing shall be reduced, by payment
or prepayment or otherwise, to less than the Borrowing Minimum, such Advances
shall automatically (i) if such Eurocurrency Rate Advances are denominated in
Dollars, Convert into Base Rate Advances and (ii) if such Eurocurrency Rate
Advances are denominated in a Committed Currency, be exchanged for an Equivalent
amount of Dollars and Convert into Base Rate Advances.
(e) Upon the occurrence and during the continuance of any Event
of Default, (i) each Eurocurrency Rate Advance will automatically, on the last
day of the then existing Interest Period therefor, (A) if such Eurocurrency Rate
Advances are denominated in Dollars, be Converted into Base Rate Advances and
(B) if such Eurocurrency Rate Advances are denominated in any Committed
Currency, be exchanged for an Equivalent amount of Dollars and be Converted into
Base Rate Advances and (ii) the obligation of the Lenders to make, or to Convert
Advances into, Eurocurrency Rate Advances shall be suspended.
(f) If Moneyline Telerate Markets Page 3750 is unavailable and
fewer than two Reference Banks furnish timely information to the Agent for
determining the Eurocurrency Rate for any Eurocurrency Rate Advances after the
Agent has requested such information,
(i) the Agent shall forthwith notify the applicable Borrower and
the Lenders that the interest rate cannot be determined for such
Eurocurrency Rate Advances,
(ii) each such Advance will automatically, on the last day of the
then existing Interest Period therefor, (A) if such Eurocurrency Rate
Advance is denominated in Dollars, Convert into a Base Rate Advance
and (B) if such Eurocurrency Rate Advance is denominated in any
Committed Currency, be prepaid by the applicable Borrower or be
automatically exchanged for an Equivalent amount of Dollars and be
Converted into a Base Rate Advance (or if such Advance is then a Base
Rate Advance, will continue as a Base Rate Advance), and
(iii) the obligation of the Lenders to make Eurocurrency Rate
Advances or to Convert Advances into Eurocurrency Rate Advances shall
be suspended until the Agent shall notify the Company and the Lenders
that the circumstances causing such suspension no longer exist.
SECTION 2.09. Optional Conversion of Advances. The Borrower of
--------------------------------
any Advance may on any Business Day, upon notice given to the Agent not later
than 11:00 A.M. (New York City time) on the third Business Day prior to the date
of the proposed Conversion and subject to the provisions of Sections 2.08 and
2.12, Convert all Advances denominated in Dollars of one Type comprising the
same Borrowing into Advances denominated in Dollars of the other Type; provided,
--------
however, that any Conversion of Eurocurrency Rate Advances into Base Rate
- -------
Advances shall be made only on the last day of an Interest Period for such
Eurocurrency Rate Advances, any Conversion of Base Rate Advances into
Eurocurrency Rate Advances shall be in an amount not less than the minimum
amount specified in Section 2.02(b) and no Conversion of any Advances shall
result in more separate Borrowings than permitted under Section 2.02(b). Each
such notice of a Conversion shall, within the restrictions specified above,
specify (i) the date of such Conversion, (ii) the Dollar denominated Advances to
be Converted, and (iii) if such Conversion is into Eurocurrency Rate Advances,
the duration of the initial Interest Period for each such Advance. Each notice
of Conversion shall be irrevocable and binding on the Borrower giving such
notice.
SECTION 2.10. Prepayments of Advances. (a) Optional. Each
------------------------- --------
Borrower may, upon notice at least two Business Days' prior to the date of such
prepayment, in the case of Eurocurrency Rate Advances, and not later than 11:00
A.M. (New York City time) on the date of such prepayment, in the case of Base
Rate Advances, to the Agent stating the proposed date and aggregate principal
amount of the prepayment, and if such notice is given, such Borrower shall,
prepay the outstanding principal amount of the Advances comprising part of the
same Borrowing in whole or ratably in part, together with accrued interest to
the date of such prepayment on the principal amount prepaid; provided, however,
-------- -------
that (x) each partial prepayment shall be in an aggregate principal amount of
not less than the Borrowing Minimum or a Borrowing Multiple in excess thereof
and (y) in the event of any such prepayment of a Eurocurrency Rate Advance, such
Borrower shall be obligated to reimburse the Lenders in respect thereof pursuant
to Section 9.04(c).
(b) Mandatory. (i) If, on any date, the Agent notifies the
---------
Company that, on any interest payment date, the sum of (A) the aggregate
principal amount of all Advances denominated in Dollars plus the aggregate
Available Amount of all Letters of Credit then outstanding plus (B) the
Equivalent in Dollars (determined on the third Business Day prior to such
interest payment date) of the aggregate principal amount of all Advances
denominated in Committed Currencies then outstanding exceeds 103% of the
aggregate Commitments of the Lenders on such date, the Borrowers shall, as soon
as practicable and in any event within two Business Days after receipt of such
notice, prepay the outstanding principal amount of any Advances owing by the
Borrowers in an aggregate amount sufficient to reduce such sum to an amount not
to exceed 100% of the aggregate Commitments of the Lenders on such date.
(ii) Each prepayment made pursuant to this Section 2.10(b) shall
be made together with any interest accrued to the date of such prepayment on the
principal amounts prepaid and, in the case of any prepayment of a Eurocurrency
Rate Advance on a date other than the last day of an Interest Period or at its
maturity, any additional amounts which the Borrowers shall be obligated to
reimburse to the Lenders in respect thereof pursuant to Section 9.04(c). The
Agent shall give prompt notice of any prepayment required under this Section
2.10(b) to the Company and the Lenders.
SECTION 2.11. Increased Costs. (a) If, due to either (i) the
----------------
introduction of or any change in or in the interpretation of any law or
regulation or (ii) the compliance with any guideline or request from any central
bank or other governmental authority including, without limitation, any agency
of the European Union or similar monetary or multinational authority (whether or
not having the force of law), there shall be any increase in the cost to any
Lender of agreeing to make or making, funding or maintaining Eurocurrency Rate
Advances or of agreeing to issue or of issuing or maintaining or participating
in Letters of Credit (excluding for purposes of this Section 2.11 any such
increased costs resulting from (i) Taxes or Other Taxes (as to which Section
2.14 shall govern) and (ii) changes in the basis of taxation of overall net
income or overall gross income by the United States or by the foreign
jurisdiction or state under the laws of which such Lender is organized or has
its Applicable Lending Office or any political subdivision thereof), then the
Company shall from time to time, upon demand by such Lender (with a copy of such
demand to the Agent), pay to the Agent for the account of such Lender additional
amounts sufficient to compensate such Lender for such increased cost; provided,
--------
however, that before making any such demand, each Lender agrees to use
- -------
reasonable efforts (consistent with its internal policy and legal and regulatory
restrictions) to designate a different Applicable Lending Office if the making
of such designation would avoid the need for, or reduce the amount of, such
increased cost and would not, in the reasonable judgment of such Lender, be
otherwise disadvantageous to such Lender. A certificate as to the amount of such
increased cost, submitted to the Company and the Agent by such Lender, shall be
conclusive and binding for all purposes, absent manifest error.
(b) If any Lender determines that compliance with any law or
regulation or any guideline or request from any central bank or other
governmental authority (whether or not having the force of law) affects or would
affect the amount of capital required or expected to be maintained by such
Lender or any corporation controlling such Lender and that the amount of such
capital is increased by or based upon the existence of such Lender's commitment
to lend or to issue or participate in Letters of Credit hereunder and other
commitments of such type or the Issuance or maintenance of or participation in
the Letters of Credit (or similar contingent obligations), then, upon demand by
such Lender (with a copy of such demand to the Agent), the Company shall pay to
the Agent for the account of such Lender, from time to time as specified by such
Lender, additional amounts sufficient to compensate such Lender or such
corporation in the light of such circumstances, to the extent that such Lender
reasonably determines such increase in capital to be allocable to the existence
of such Lender's commitment to lend or to issue or participate in Letters of
Credit hereunder or to the Issuance or maintenance of or participation in any
Letters of Credit. A certificate as to such amounts submitted to the Company and
the Agent by such Lender shall be conclusive and binding for all purposes,
absent manifest error.
SECTION 2.12. Illegality. Notwithstanding any other provision of
----------
this Agreement, if any Lender shall notify the Agent that the introduction of or
any change in or in the interpretation of any law or regulation makes it
unlawful, or any central bank or other governmental authority asserts that it is
unlawful, for any Lender or its Eurocurrency Lending Office to perform its
obligations hereunder to make Eurocurrency Rate Advances in Dollars or any
Committed Currency or to fund or maintain Eurocurrency Rate Advances in Dollars
or any Committed Currency hereunder, (a) each Eurocurrency Rate Advance will
automatically, upon such demand (i) if such Eurocurrency Rate Advance is
denominated in Dollars, be Converted into a Base Rate Advance and (ii) if such
Eurocurrency Rate Advance is denominated in any Committed Currency, be exchanged
into an Equivalent amount of Dollars and be Converted into a Base Rate Advance
and (b) the obligation of the Lenders to make Eurocurrency Rate Advances or to
Convert Advances into Eurocurrency Rate Advances shall be suspended until the
Agent shall notify the Company and the Lenders that the circumstances causing
such suspension no longer exist; provided, however, that before making any such
-------- -------
demand, each Lender agrees to use reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions) to designate a different
Eurocurrency Lending Office if the making of such designation would allow such
Lender or its Eurocurrency Lending Office to continue to perform its obligations
to make Eurocurrency Rate Advances or to continue to fund or maintain
Eurocurrency Rate Advances and would not, in the judgment of such Lender, be
otherwise disadvantageous to such Lender.
SECTION 2.13. Payments and Computations. (a) Each Borrower shall
-------------------------
make each payment hereunder (except with respect to principal of, interest on,
and other amounts relating to, Advances denominated in a Committed Currency),
not later than 11:00 A.M. (New York City time) on the day when due in Dollars to
the Agent at the applicable Agent's Account in same day funds and irrespective
of any right of counterclaim or set-off. Each Borrower shall make each payment
hereunder with respect to principal of, interest on, and other amounts relating
to, Advances denominated in a Committed Currency, not later than 11:00 A.M. (at
the Payment Office for such Committed Currency) on the day when due in such
Committed Currency to the Agent, by deposit of such funds to the applicable
Agent's Account in same day funds and irrespective of any right of counterclaim
or set-off. The Agent will promptly thereafter cause to be distributed like
funds relating to the payment of principal, interest, facility fees or
commissions ratably (other than amounts payable pursuant to Section 2.03, 2.11,
2.14 or 9.04(c)) to the Lenders for the account of their respective Applicable
Lending Offices, and like funds relating to the payment of any other amount
payable to any Lender to such Lender for the account of its Applicable Lending
Office, in each case to be applied in accordance with the terms of this
Agreement. Upon any Assuming Lender becoming a Lender hereunder as a result of a
Commitment Increase pursuant to Section 2.18, and upon the Agent's receipt of
such Lender's Assumption Agreement and recording of the information contained
therein in the Register, from and after the applicable Increase Date, the Agent
shall make all payments hereunder and under any Notes issued in connection
therewith in respect of the interest assumed thereby to the Assuming Lender.
Upon its acceptance of an Assignment and Acceptance and recording of the
information contained therein in the Register pursuant to Section 9.07(c), from
and after the effective date specified in such Assignment and Acceptance, the
Agent shall make all payments hereunder and under the Notes in respect of the
interest assigned thereby to the Lender assignee thereunder, and the parties to
such Assignment and Acceptance shall make all appropriate adjustments in such
payments for periods prior to such effective date directly between themselves.
(b) Each Borrower hereby authorizes each Lender, if and to the
extent payment owed to such Lender is not made when due hereunder or under the
Note held by such Lender, to charge from time to time against any or all of such
Borrower's accounts with such Lender any amount so due.
(c) All computations of interest based on the Base Rate shall be
made by the Agent on the basis of a year of 365 or 366 days, as the case may be,
all computations of interest based on the Eurocurrency Rate or the Federal Funds
Rate and of facility fees and Letter of Credit commissions shall be made by the
Agent on the basis of a year of 360 days (or, in each case of Advances
denominated in Committed Currencies where market practice differs, in accordance
with market practice), in each case for the actual number of days (including the
first day but excluding the last day) occurring in the period for which such
interest, facility fees or commissions are payable. Each determination by the
Agent of an interest rate hereunder shall be conclusive and binding for all
purposes, absent manifest error.
(d) Whenever any payment hereunder or under the Notes shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of interest, facility fee or
commission, as the case may be; provided, however, that, if such extension would
-------- -------
cause payment of interest on or principal of Eurocurrency Rate Advances to be
made in the next following calendar month, such payment shall be made on the
next preceding Business Day.
(e) Unless the Agent shall have received notice from any Borrower
prior to the date on which any payment is due to the Lenders hereunder that such
Borrower will not make such payment in full, the Agent may assume that such
Borrower has made such payment in full to the Agent on such date and the Agent
may, in reliance upon such assumption, cause to be distributed to each Lender on
such due date an amount equal to the amount then due such Lender. If and to the
extent such Borrower shall not have so made such payment in full to the Agent,
each Lender shall repay to the Agent forthwith on demand such amount distributed
to such Lender together with interest thereon, for each day from the date such
amount is distributed to such Lender until the date such Lender repays such
amount to the Agent, at (i) the Federal Funds Rate in the case of Advances
denominated in Dollars or (ii) the cost of funds incurred by the Agent in
respect of such amount in the case of Advances denominated in Committed
Currencies.
(f) To the extent that the Agent receives funds for application
to the amounts owing by any Borrower under or in respect of this Agreement or
any Note in currencies other than the currency or currencies required to enable
the Agent to distribute funds to the Lenders in accordance with the terms of
this Section 2.13, the Agent shall be entitled to convert or exchange such funds
into Dollars or into a Committed Currency or from Dollars to a Committed
Currency or from a Committed Currency to Dollars, as the case may be, to the
extent necessary to enable the Agent to distribute such funds in accordance with
the terms of this Section 2.13; provided that each Borrower and each of the
Lenders hereby agree that the Agent shall not be liable or responsible for any
loss, cost or expense suffered by such Borrower or such Lender as a result of
any conversion or exchange of currencies affected pursuant to this Section
2.13(f) or as a result of the failure of the Agent to effect any such conversion
or exchange; and provided further that each Borrower agrees to indemnify the
Agent and each Lender, and hold the Agent and each Lender harmless, for any and
all losses, costs and expenses incurred by the Agent or any Lender for any
conversion or exchange of currencies (or the failure to convert or exchange any
currencies) in accordance with this Section 2.13(f).
SECTION 2.14. Taxes. (a) Any and all payments by each Borrower to
-----
or for the account of any Lender or the Agent hereunder or under the Notes or
any other documents to be delivered hereunder shall be made, in accordance with
Section 2.13 or the applicable provisions of such other documents, free and
clear of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Lender and the Agent, taxes imposed on
---------
its overall net income, and franchise taxes imposed on it in lieu of net income
taxes, by the jurisdiction under the laws of which such Lender or the Agent (as
the case may be) is organized or any political subdivision thereof and, in the
case of each Lender, taxes imposed on its overall net income, and franchise
taxes imposed on it in lieu of net income taxes, by the jurisdiction of such
Lender's Applicable Lending Office or any political subdivision thereof (all
such non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities in respect of payments hereunder or under the Notes being
hereinafter referred to as "Taxes"). If any Borrower shall be required by law to
-----
deduct any Taxes from or in respect of any sum payable hereunder or under any
Note or any other documents to be delivered hereunder to any Lender or the
Agent, (i) the sum payable shall be increased as may be necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 2.14) such Lender or the Agent (as the case may
be) receives an amount equal to the sum it would have received had no such
deductions been made, (ii) such Borrower shall make such deductions and (iii)
such Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.
(b) In addition, the Company shall pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies that arise from any payment made hereunder or under the Notes any
other documents to be delivered hereunder or from the execution, delivery or
registration of, performing under, or otherwise with respect to, this Agreement
or the Notes or any other documents to be delivered hereunder (hereinafter
referred to as "Other Taxes").
-----------
(c) Each Borrower shall indemnify each Lender and the Agent for
and hold it harmless against the full amount of Taxes or Other Taxes (including,
without limitation, taxes of any kind imposed or asserted by any jurisdiction on
amounts payable under this Section 2.14) imposed on or paid by such Lender or
the Agent (as the case may be) and any liability (including penalties, interest
and expenses) arising therefrom or with respect thereto. This indemnification
shall be made within 30 days from the date such Lender or the Agent (as the case
may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, each
Borrower shall furnish to the Agent, at its address referred to in Section 9.02,
the original or a certified copy of a receipt evidencing such payment to the
extent such a receipt is issued therefor, or other written proof of payment
thereof that is reasonably satisfactory to the Agent. In the case of any payment
hereunder or under the Notes or any other documents to be delivered hereunder by
or on behalf of such Borrower through an account or branch outside the United
States or by or on behalf of such Borrower by a payor that is not a United
States person, if such Borrower determines that no Taxes are payable in respect
thereof, such Borrower shall furnish, or shall cause such payor to furnish, to
the Agent, at such address, an opinion of counsel acceptable to the Agent
stating that such payment is exempt from Taxes. For purposes of this subsection
(d) and subsection (e), the terms "United States" and "United States person"
-------------- ---------------------
shall have the meanings specified in Section 7701 of the Internal Revenue Code.
(e) Each Lender organized under the laws of a jurisdiction
outside the United States, on or prior to the date of its execution and delivery
of this Agreement in the case of each Initial Lender and on the date of the
Assumption Agreement or the Assignment and Acceptance pursuant to which it
becomes a Lender in the case of each other Lender, and from time to time
thereafter as reasonably requested in writing by the Company (but only so long
as such Lender remains lawfully able to do so), shall provide each of the Agent
and the Company with two original Internal Revenue Service Forms W-8BEN or
W-8ECI, as appropriate, or any successor or other form prescribed by the
Internal Revenue Service, certifying that such Lender is exempt from or entitled
to a reduced rate of United States withholding tax on payments pursuant to this
Agreement or the Notes. If the form provided by a Lender at the time such Lender
first becomes a party to this Agreement indicates a United States interest
withholding tax rate in excess of zero, withholding tax at such rate shall be
considered excluded from Taxes unless and until such Lender provides the
appropriate forms certifying that a lesser rate applies, whereupon withholding
tax at such lesser rate only shall be considered excluded from Taxes for periods
governed by such form; provided, however, that, if at the date of the Assignment
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and Acceptance pursuant to which a Lender assignee becomes a party to this
Agreement, the Lender assignor was entitled to payments under subsection (a) in
respect of United States withholding tax with respect to interest paid at such
date, then, to such extent, the term Taxes shall include (in addition to
withholding taxes that may be imposed in the future or other amounts otherwise
includable in Taxes) United States withholding tax, if any, applicable with
respect to the Lender assignee on such date. If any form or document referred to
in this subsection (e) requires the disclosure of information, other than
information necessary to compute the tax payable and information required on the
date hereof by Internal Revenue Service Form W-8BEN or W-8ECI, that the Lender
reasonably considers to be confidential, the Lender shall give notice thereof to
the Company and shall not be obligated to include in such form or document such
confidential information.
(f) For any period with respect to which a Lender has failed to
provide the Company with the appropriate form, certificate or other document
described in Section 2.14(e) (other than if such failure is due to a change in
----- ----
law, or in the interpretation or application thereof, occurring subsequent to
the date on which a form, certificate or other document originally was required
to be provided, or if such form, certificate or other document otherwise is not
required under subsection (e) above), such Lender shall not be entitled to
indemnification under Section 2.14(a) or (c) with respect to Taxes imposed by
the United States by reason of such failure; provided, however, that should a
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Lender become subject to Taxes because of its failure to deliver a form,
certificate or other document required hereunder, the Company shall take such
steps as the Lender shall reasonably request to assist the Lender to recover
such Taxes.
(g) Any Lender claiming any additional amounts payable pursuant
to this Section 2.14 agrees to use reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions) to change the
jurisdiction of its Eurocurrency Lending Office if the making of such change
would avoid the need for, or reduce the amount of, any such additional amounts
that may thereafter accrue and would not, in the reasonable judgment of such
Lender, be otherwise disadvantageous to such Lender.
SECTION 2.15. Sharing of Payments, Etc. If any Lender shall
--------------------------
obtain any payment (whether voluntary, involuntary, through the exercise of any
right of set-off, or otherwise) on account of the Advances owing to it (other
than as payment of an Advance made by an Issuing Bank pursuant to the first
sentence of Section 2.03(c) or pursuant to Section 2.11, 2.14 or 9.04(c)) in
excess of its ratable share of payments on account of the Advances obtained by
all the Lenders, such Lender shall forthwith purchase from the other Lenders
such participations in the Advances owing to them as shall be necessary to cause
such purchasing Lender to share the excess payment ratably with each of them;
provided, however, that if all or any portion of such excess payment is
- -------- -------
thereafter recovered from such purchasing Lender, such purchase from each Lender
shall be rescinded and such Lender shall repay to the purchasing Lender the
purchase price to the extent of such recovery together with an amount equal to
such Lender's ratable share (according to the proportion of (i) the amount of
such 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. Each Borrower
agrees that any Lender so purchasing a participation from another Lender
pursuant to this Section 2.15 may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of set-off) with respect
to such participation as fully as if such Lender were the direct creditor of
such Borrower in the amount of such participation.
SECTION 2.16. Evidence of Debt (a) Each Lender shall maintain in
----------------
accordance with its usual practice an account or accounts evidencing the
indebtedness of each Borrower to such Lender resulting from each Advance owing
to such Lender from time to time, including the amounts of principal and
interest payable and paid to such Lender from time to time hereunder in respect
of Advances. Each Borrower agrees that upon notice by any Lender to such
Borrower (with a copy of such notice to the Agent) to the effect that a Note is
required or appropriate in order for such Lender to evidence (whether for
purposes of pledge, enforcement or otherwise) the Advances owing to, or to be
made by, such Lender, such Borrower shall promptly execute and deliver to such
Lender a Note payable to the order of such Lender in a principal amount up to
the Revolving Credit Commitment of such Lender.
(b) The Register maintained by the Agent pursuant to Section
9.07(d) shall include a control account, and a subsidiary account for each
Lender, in which accounts (taken together) shall be recorded (i) the date and
amount of each Borrowing made hereunder, the Type of Advances comprising such
Borrowing and, if appropriate, the Interest Period applicable thereto, (ii) the
terms of each Assumption Agreement and each Assignment and Acceptance delivered
to and accepted by it, (iii) the amount of any principal or interest due and
payable or to become due and payable from each Borrower to each Lender hereunder
and (iv) the amount of any sum received by the Agent from such Borrower
hereunder and each Lender's share thereof.
(c) Entries made in good faith by the Agent in the Register
pursuant to subsection (b) above, and by each Lender in its account or accounts
pursuant to subsection (a) above, shall be prima facie evidence of the amount of
----- -----
principal and interest due and payable or to become due and payable from each
Borrower to, in the case of the Register, each Lender and, in the case of such
account or accounts, such Lender, under this Agreement, absent manifest error;
provided, however, that the failure of the Agent or such Lender to make an
- -------- -------
entry, or any finding that an entry is incorrect, in the Register or such
account or accounts shall not limit or otherwise affect the obligations of any
Borrower under this Agreement.
SECTION 2.17. Use of Proceeds. The proceeds of the Advances shall
---------------
be available (and each Borrower agrees that it shall use such proceeds) solely
for general corporate purposes of such Borrower and its Subsidiaries, including
commercial paper backstop.
SECTION 2.18. Increase in the Aggregate Commitments. (a) The
---------------------------------------
Company may, at any time but in any event not more than twice in any calendar
year prior to the Termination Date, by notice to the Agent, request that the
aggregate amount of the Commitment be increased in minimum increments of
$25,000,000 (each a "Commitment Increase") to be effective as of a date that is
--------------------
at least 90 days prior to the scheduled Termination Date then in effect (the
"Increase Date") as specified in the related notice to the Agent; provided,
-------------- --------
however that (i) in no event shall the aggregate amount of the Commitments at
- -------
any time exceed $1,250,000,000 and (ii) on the date of any request by the
Company for a Commitment Increase and on the related Increase Date the
applicable conditions set forth in Article III shall be satisfied.
(b) The Agent shall promptly notify the Lenders of a request by
the Company for a Commitment Increase, which notice shall include (i) the
proposed amount of such requested Commitment Increase, (ii) the proposed
Increase Date and (iii) the date by which Lenders wishing to participate in the
Commitment Increase must commit to an increase in the amount of their respective
Commitments (the "Commitment Date"). Each Lender that is willing to participate
----------------
in such requested Commitment Increase (each an "Increasing Lender") shall, in
------------------
its sole discretion, give written notice to the Agent on or prior to the
Commitment Date of the amount by which it is willing to increase its Commitment.
If the Lenders notify the Agent that they are willing to increase the amount of
their respective Commitments by an aggregate amount that exceeds the amount of
the requested Commitment Increase, the requested Commitment Increase shall be
allocated among the Lenders willing to participate therein in such amounts as
are agreed between the Company and the Agent.
(c) Promptly following each Commitment Date, the Agent shall
notify the Company as to the amount, if any, by which the Lenders are willing to
participate in the requested Commitment Increase. If the aggregate amount by
which the Lenders are willing to participate in any requested Commitment
Increase on any such Commitment Date is less than the requested Commitment
Increase, then the Company may extend offers to one or more Eligible Assignees
to participate in any portion of the requested Commitment Increase that has not
been committed to by the Lenders as of the applicable Commitment Date; provided,
--------
however, that the Commitment of each such Eligible Assignee shall be in a
- -------
minimum amount of $10,000,000.
(d) On each Increase Date, each Eligible Assignee that accepts an
offer to participate in a requested Commitment Increase in accordance with
Section 2.18(b) (each such Eligible Assignee, an "Assuming Lender") shall become
---------------
a Lender party to this Agreement as of such Increase Date and the Commitment of
each Increasing Lender for such requested Commitment Increase shall be so
increased by such amount (or by the amount allocated to such Lender pursuant to
the last sentence of Section 2.18(b)) as of such Increase Date; provided,
--------
however, that the Agent shall have received on or before such Increase Date the
- -------
following, each dated such date:
(i) (A) certified copies of resolutions of the Board of Directors
of the Company or the Executive Committee of such Board approving the
Commitment Increase and the corresponding modifications to this
Agreement and (B) an opinion of counsel for the Company (which may be
in-house counsel), in substantially the form of Exhibit E hereto;
(ii) an assumption agreement from each Assuming Lender, if any,
in form and substance satisfactory to the Company and the Agent (each
an "Assumption Agreement"), duly executed by such Eligible Assignee,
---------------------
the Agent and the Company; and
(iii) confirmation from each Increasing Lender of the increase in
the amount of its Commitment in a writing satisfactory to the Company
and the Agent.
On each Increase Date, upon fulfillment of the conditions set forth in the
immediately preceding sentence of this Section 2.18(d), the Agent shall notify
the Lenders (including, without limitation, each Assuming Lender) and the
Company, on or before 1:00 P.M. (New York City time), by telecopier, of the
occurrence of the Commitment Increase to be effected on such Increase Date and
shall record in the Register the relevant information with respect to each
Increasing Lender and each Assuming Lender on such date. Each Increasing Lender
and each Assuming Lender shall, before 2:00 P.M. (New York City time) on the
Increase Date, make available for the account of its Applicable Lending Office
to the Agent at the Agent's Account, in same day funds, in the case of such
Assuming Lender, an amount equal to such Assuming Lender's ratable portion of
the Borrowings then outstanding (calculated based on its Revolving Credit
Commitment as a percentage of the aggregate Revolving Credit Commitments
outstanding after giving effect to the relevant Commitment Increase) and, in the
case of such Increasing Lender, an amount equal to the excess of (i) such
Increasing Lender's ratable portion of the Borrowings then outstanding
(calculated based on its Revolving Credit Commitment as a percentage of the
aggregate Revolving Credit Commitments outstanding after giving effect to the
relevant Commitment Increase ) over (ii) such Increasing Lender's ratable
portion of the Borrowings then outstanding (calculated based on its Revolving
Credit Commitment (without giving effect to the relevant Commitment Increase) as
a percentage of the aggregate Revolving Credit Commitments (without giving
effect to the relevant Commitment Increase). After the Agent's receipt of such
funds from each such Increasing Lender and each such Assuming Lender, the Agent
will promptly thereafter cause to be distributed like funds to the other Lenders
for the account of their respective Applicable Lending Offices in an amount to
each other Lender such that the aggregate amount of the outstanding Advances
owing to each Lender after giving effect to such distribution equals such
Lender's ratable portion of the Borrowings then outstanding (calculated based on
its Revolving Credit Commitment as a percentage of the aggregate Revolving
Credit Commitments outstanding after giving effect to the relevant Commitment
Increase), and the Company shall pay such Lender any amounts due pursuant to
Section 9.04.
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness of Section
--------------------------------------------------
2.01. Section 2.01 of this Agreement shall become effective on and as of the
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first date (the "Effective Date") on which the following conditions precedent
---------------
have been satisfied:
(a) There shall have occurred no Material Adverse Change since
December 31, 2004.
(b) There shall exist no action, suit, investigation, litigation
or proceeding affecting the Company or any of its Subsidiaries pending
or, to the knowledge of the Company, threatened before any court,
governmental agency or arbitrator that (i) could be reasonably likely
to have a Material Adverse Effect other than the matters described on
Schedule 3.01(b) hereto (the "Disclosed Litigation") or (ii) purports
---------------------
to affect the legality, validity or enforceability of this Agreement
or any Note or the consummation of the transactions contemplated
hereby, and there shall have been no adverse change in the status, or
financial effect on the Company or any of its Subsidiaries, of the
Disclosed Litigation from that described on Schedule 3.01(b) hereto.
(c) All governmental and third party consents and approvals
necessary in connection with the transactions contemplated hereby
shall have been obtained (without the imposition of any conditions
that are not acceptable to the Lenders) and shall remain in effect,
and no law or regulation shall be applicable in the reasonable
judgment of the Lenders that restrains, prevents or imposes materially
adverse conditions upon the transactions contemplated hereby.
(d) The Company shall have notified each Lender and the Agent in
writing as to the proposed Effective Date.
(e) The Company shall have paid all accrued and invoiced fees and
expenses of the Agent and the Lenders (including the accrued and
invoiced fees and expenses of counsel to the Agent).
(f) On the Effective Date, the following statements shall be true
and the Agent shall have received for the account of each Lender a
certificate signed by a duly authorized officer of the Company, dated
the Effective Date, stating that:
(i) The representations and warranties contained in Section
4.01 are correct on and as of the Effective Date, and
(ii) No event has occurred and is continuing that
constitutes a Default.
(g) The Agent shall have received on or before the Effective Date
the following, each dated such day, in form and substance satisfactory
to the Agent and (except for the Notes) in sufficient copies for each
Lender:
(i) The Notes to the order of the Lenders to the extent
requested by any Lender pursuant to Section 2.16.
(ii) Certified copies of the resolutions of the Board of
Directors of the Company approving this Agreement and the Notes,
and of all documents evidencing other necessary corporate action
and governmental approvals, if any, with respect to this
Agreement and the Notes.
(iii) A certificate of the Secretary or an Assistant
Secretary of the Company certifying the names and true signatures
of the officers of the Company authorized to sign this Agreement
and the Notes and the other documents to be delivered hereunder.
(iv) A favorable opinion of William D. Eggers, Senior Vice
President and General Counsel of the Company, substantially in
the form of Exhibit E hereto.
(v) A favorable opinion of Shearman & Sterling LLP, counsel
for the Agent, in form and substance satisfactory to the Agent.
(h) Simultaneously with the Effective Date, the Company shall
have terminated the commitments of the lenders and repaid or prepaid
all of the obligations under, the Credit Agreement dated as of August
17, 2000 among the Company, the lenders parties thereto and Citibank,
N.A., as administrative agent, and each of the Lenders that is a party
to such credit facility hereby waives, upon execution of this
Agreement, any notice required by said Credit Agreement relating to
the termination of commitments thereunder.
SECTION 3.02. Initial Advance to Each Designated Subsidiary. The
---------------------------------------------
obligation of each Lender to make an initial Advance to each Designated
Subsidiary following any designation of such Designated Subsidiary as a Borrower
hereunder pursuant to Section 9.08 is subject to the Agent's receipt on or
before the date of such initial Advance of each of the following, in form and
substance satisfactory to the Agent and dated such date, and (except for the
Notes) in sufficient copies for each Lender:
(a) The Notes of such Designated Subsidiary to the order of the
Lenders to the extent requested by any Lender pursuant to Section
2.16.
(b) Certified copies of the resolutions of the Board of Directors
of such Designated Subsidiary (with a certified English translation if
the original thereof is not in English) approving this Agreement and
the Notes to be delivered by it, and of all documents evidencing other
necessary corporate action and governmental approvals, if any, with
respect to this Agreement.
(c) A certificate of a proper officer of such Designated
Subsidiary certifying the names and true signatures of the officers of
such Designated Subsidiary authorized to sign its Designation
Agreement and the Notes to be delivered by it and the other documents
to be delivered by it hereunder.
(d) A certificate signed by a duly authorized officer of the
Company, certifying that such Designated Subsidiary has obtained all
governmental and third party authorizations, consents, approvals
(including exchange control approvals) and licenses required under
applicable laws and regulations necessary for such Designated
Subsidiary to execute and deliver its Designation Agreement and the
Notes to be delivered by it and to perform its obligations hereunder
and thereunder.
(e) A Designation Agreement duly executed by such Designated
Subsidiary and the Company.
(f) A favorable opinion of counsel (which may be in-house
counsel) to such Designated Subsidiary substantially in the form of
Exhibit E hereto, and as to such other matters as any Lender through
the Agent may reasonably request.
(g) Such other approvals, opinions or documents as any Lender
through the Agent may reasonably request.
SECTION 3.03. Conditions Precedent to Each Borrowing, Issuance
--------------------------------------------------
and Commitment Increase. The obligation of each Lender to make an Advance (other
- -----------------------
than an Advance made by any Issuing Bank or any Lender pursuant to Section
2.03(c)) on the occasion of each Borrowing, the obligation of each Issuing Bank
to issue a Letter of Credit and each Commitment Increase shall be subject to the
conditions precedent that the Effective Date shall have occurred and on the date
of such Borrowing, such Issuance or the applicable Increase Date (as the case
may be) the following statements shall be true (and each of the giving of the
applicable Notice of Borrowing, Notice of Issuance or request for Commitment
Increase and the acceptance by any Borrower of the proceeds of such Borrowing,
such Issuance or such Increase Date shall constitute a representation and
warranty by such Borrower that on the date of such Borrowing, such Issuance or
such Increase Date such statements are true):
(a) the representations and warranties contained in Section 4.01
(except, in the case of Borrowings and Issuances, the representations
set forth in the last sentence of subsection (e) thereof and in
subsection (f)(i) thereof and, if the Public Debt Rating is BBB- or
higher by S&P or Baa3 or higher from Moody's, except the
representation set forth in subsection (n) thereof) are correct on and
as of such date, before and after giving effect to such Borrowing,
such Issuance or such Commitment Increase and to the application of
the proceeds therefrom, as though made on and as of such date, and
additionally, if such Borrowing or Issuance shall have been requested
by a Designated Subsidiary, the representations and warranties of such
Designated Subsidiary contained in its Designation Agreement are
correct on and as of the date of such Borrowing or such Issuance,
before and after giving effect to such Borrowing, such Issuance or
such Commitment Increase and to the application of the proceeds
therefrom, as though made on and as of such date, and
(b) no event has occurred and is continuing, or would result from
such Borrowing, such Issuance or such Commitment Increase or from the
application of the proceeds therefrom, that constitutes a Default.
SECTION 3.04. Determinations Under Section 3.01. For purposes of
---------------------------------
determining compliance with the conditions specified in Section 3.01, each
Lender shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lenders unless an officer
of the Agent responsible for the transactions contemplated by this Agreement
shall have received notice from such Lender prior to the date that the Company,
by notice to the Lenders, designates as the proposed Effective Date or the date
of the initial Advance to the applicable Designated Subsidiary, as the case may
be, specifying its objection thereto. The Agent shall promptly notify the
Lenders of the occurrence of the Effective Date and each date of initial Advance
to a Designated Subsidiary, as applicable.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Company. The
---------------------------------------------
Company represents and warrants as follows:
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of New York.
(b) The execution, delivery and performance by the Company of
this Agreement and the Notes to be delivered by it, and the
consummation of the transactions contemplated hereby, are within the
Company's corporate powers, have been duly authorized by all necessary
corporate action, and do not contravene (i) the Company's charter or
by-laws or (ii) law or any contractual restriction binding on or
affecting the Company.
(c) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory
body or any other third party is required for the due execution,
delivery and performance by the Company of this Agreement or the Notes
to be delivered by it.
(d) This Agreement has been, and each of the Notes to be
delivered by it when delivered hereunder will have been, duly executed
and delivered by the Company. This Agreement is, and each of the Notes
when delivered hereunder will be, the legal, valid and binding
obligation of the Company enforceable against the Company in
accordance with their respective terms.
(e) The Consolidated balance sheet of the Company and its
Subsidiaries as at December 31, 2004, and the related Consolidated
statements of income and cash flows of the Company and its
Subsidiaries for the fiscal year then ended, accompanied by an opinion
of PricewaterhouseCoopers LLP, an independent registered public
accounting firm, copies of which have been furnished to each Lender,
fairly present the Consolidated financial condition of the Company and
its Subsidiaries as at such date and the Consolidated results of the
operations of the Company and its Subsidiaries for the period ended on
such date all in accordance with generally accepted accounting
principles consistently applied. Since December 31, 2004, there has
been no Material Adverse Change.
(f) There is no pending or, to the knowledge of the Company,
threatened action, suit, investigation, litigation or proceeding,
including, without limitation, any Environmental Action, affecting the
Company or any of its Subsidiaries before any court, governmental
agency or arbitrator that (i) could be reasonably likely to have a
Material Adverse Effect (other than the Disclosed Litigation) or (ii)
purports to affect the legality, validity or enforceability of this
Agreement or any Note or the consummation of the transactions
contemplated hereby.
(g) The Company is not engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U issued by the Board of Governors of the
Federal Reserve System), and no proceeds of any Advance will be used
to purchase or carry any margin stock or to extend credit to others
for the purpose of purchasing or carrying any margin stock.
(h) The Company is not an "investment company", or a company
"controlled" by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended.
(i) No ERISA Event exists or is reasonably expected to occur with
respect to any Plan that could reasonably be expected to result in a
material liability to the Company.
(j) The operations and properties of the Company and its
Subsidiaries taken as a whole comply in all material respects with all
applicable Environmental Laws and Environmental Permits, all past
non-compliance with such Environmental Laws and Environmental Permits
has been resolved or is being contested in good faith by appropriate
proceedings, and no circumstances exist that would be reasonably
likely to form the basis of an Environmental Action against the
Company or any of its Subsidiaries or any of their properties that
could reasonably be expected to have a Material Adverse Effect.
(k) With such exceptions as are not material, the Company has
filed, has caused to be filed or has been included in all tax returns
(federal, State, local and foreign) required to be filed and has paid
all taxes shown thereon to be due, together with applicable interest
and penalties.
(l) The Company has title to its properties sufficient for the
conduct of business, and none of such property is subject to any Lien
except for Liens permitted by Section 5.02(a) hereof.
(m) Neither the Information Memorandum nor any other information,
exhibit or report furnished by or on behalf of the Company to the
Agent or any Lender in connection with the negotiation and syndication
of this Agreement or pursuant to the terms of this Agreement, taken as
a whole, contained any untrue statement of a material fact or omitted
to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, when taken as a
whole, not misleading; provided that with respect to projected
--------
financial information, the Company represents only that such
information was prepared in good faith based upon assumptions believed
to be reasonable at the time and does not omit information that would
render such projections misleading in any material respect.
(n) The Borrowers and their respective Subsidiaries, taken as a
whole, are Solvent.
ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.01. Affirmative Covenants. So long as any Advance shall
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remain unpaid, and Letter of Credit is outstanding or any Lender shall have any
Commitment hereunder, the Company will:
(a) Compliance with Laws, Etc. Comply, and cause each of its
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Subsidiaries to comply, with all applicable laws, rules, regulations
and orders, such compliance to include, without limitation, compliance
with ERISA, Environmental Laws and the Patriot Act except in each case
to the extent that the failure to so comply would not reasonably be
expected to have a Material Adverse Effect.
(b) Payment of Taxes, Etc. Pay and discharge, and cause each of
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its Subsidiaries to pay and discharge, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges or
levies imposed upon it or upon its property and (ii) all lawful claims
that, if unpaid, might by law become a Lien upon its property;
provided, however, that neither the Company nor any of its
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Subsidiaries shall be required to pay or discharge (A) any taxes,
assessments, reassessments, charges, levies or claims that, either
individually or in the aggregate, do not exceed $5,000,000 (or the
equivalent thereof in one or more foreign currencies) at any time or
(B) any such tax, assessment, charge or claim that is being contested
in good faith and by proper proceedings and as to which appropriate
reserves are being maintained, unless and until any Lien resulting
therefrom attaches to its property and becomes enforceable against its
other creditors.
(c) Maintenance of Insurance. Maintain, and cause each of its
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Subsidiaries to maintain, insurance with responsible and reputable
insurance companies or associations in such amounts and covering such
risks as is usually carried by companies engaged in similar businesses
and owning similar properties in the same general areas in which the
Company or such Subsidiary operates.
(d) Preservation of Corporate Existence, Etc. Preserve and
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maintain, and cause each of its Subsidiaries to preserve and maintain,
its corporate existence, rights (charter and statutory) and
franchises; provided, however, that the Company and its Subsidiaries
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may consummate any merger or consolidation permitted under Section
5.02(b) and provided further that neither the Company nor any of its
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Subsidiaries shall be required to preserve any right or franchise or
the existence of any Subsidiary if the preservation thereof is no
longer material to the conduct of the business of the Company and its
Subsidiaries, taken as a whole.
(e) Visitation Rights. At any reasonable time, upon reasonable
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notice and from time to time, permit the Agent or any of the Lenders
or any agents or representatives thereof (at their sole cost and
expense), to examine and make copies of and abstracts from the records
and books of account of, and visit the properties of, the Company and
any of its Subsidiaries, and to discuss the affairs, finances and
accounts of the Company and any of its Subsidiaries with any of their
officers or directors and with their independent certified public
accountants.
(f) Keeping of Books. Keep, and cause each of its Subsidiaries to
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keep, proper books of record and account, in which full and correct
entries shall be made of all financial transactions and the assets and
business of the Company and each such Subsidiary in accordance with,
and to the extent required by, generally accepted accounting
principles in effect from time to time.
(g) Maintenance of Properties, Etc. Maintain and preserve, and
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cause each of its Subsidiaries to maintain and preserve, all of its
properties that are used or useful in the conduct of its business in
good working order and condition, ordinary wear and tear excepted,
except to the extent that the failure to do so would not reasonably be
expected to have a Material Adverse Effect.
(h) Transactions with Affiliates. Conduct, and cause each of its
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Subsidiaries to conduct, all transactions otherwise permitted under
this Agreement with any of their Affiliates on terms that are fair and
reasonable and no less favorable to the Company or such Subsidiary in
any material respect than it would obtain in a comparable arm's-length
transaction with a Person not an Affiliate.
(i) Reporting Requirements. Furnish to the Lenders:
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(i) as soon as available and in any event within 45 days
after the end of each of the first three quarters of each fiscal
year of the Company, the Consolidated balance sheet of the
Company and its Subsidiaries as of the end of such quarter and
Consolidated statements of income and cash flows of the Company
and its Subsidiaries for the period commencing at the end of the
previous fiscal year and ending with the end of such quarter,
duly certified (subject to year-end audit adjustments) by the
chief financial officer of the Company as having been prepared in
accordance with generally accepted accounting principles and
certificates of the chief financial officer of the Company as to
compliance with the terms of this Agreement and setting forth in
reasonable detail the calculations necessary to demonstrate
compliance with Section 5.03, provided that in the event of any
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change in generally accepted accounting principles used in the
preparation of such financial statements, the Company shall also
provide, if necessary for the determination of compliance with
Section 5.03, a statement of reconciliation conforming such
financial statements to GAAP;
(ii) as soon as available and in any event within 90 days
after the end of each fiscal year of the Company, a copy of the
annual audit report for such year for the Company and its
Subsidiaries, containing the Consolidated balance sheet of the
Company and its Subsidiaries as of the end of such fiscal year
and Consolidated statements of income and cash flows of the
Company and its Subsidiaries for such fiscal year, in each case
accompanied by an opinion reasonably acceptable to the Required
Lenders by PricewaterhouseCoopers LLP or other independent public
accountants reasonably acceptable to the Required Lenders and
certificates of the chief financial officer of the Company as to
compliance with the terms of this Agreement and setting forth in
reasonable detail the calculations necessary to demonstrate
compliance with Section 5.03, provided that in the event of any
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change in generally accepted accounting principles used in the
preparation of such financial statements, the Company shall also
provide, if necessary for the determination of compliance with
Section 5.03, a statement of reconciliation conforming such
financial statements to GAAP;
(iii) as soon as possible and in any event within five days
after the occurrence of each Default continuing on the date of
such statement, a statement of the chief financial officer of the
Company setting forth details of such Default and the action that
the Company has taken and proposes to take with respect thereto;
(iv) promptly after the sending or filing thereof, copies of
all quarterly and annual reports and proxy solicitations that the
Company sends to its public securityholders, and copies of all
reports on Form 8-K (or their equivalents) and registration
statements for the public offering of securities that the Company
or any Subsidiary files with the Securities and Exchange
Commission (the "SEC") or any national securities exchange;
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(v) promptly after the commencement thereof, notice of all
actions and proceedings before any court, governmental agency or
arbitrator affecting the Company or any of its Subsidiaries of
the type described in Section 4.01(f); and
(vi) such other information respecting the Company or any of
its Subsidiaries as any Lender through the Agent may from time to
time reasonably request.
Financial reports required to be delivered pursuant to
clauses (i), (ii) and (iv) above shall be deemed to have been
delivered on the date on which such report is posted on the SEC's
website at www.sec.gov, and such posting shall be deemed to
satisfy the financial reporting requirements of clauses (i), (ii)
and (iv) above, provided, that, in each instance the Company
shall provide all other reports and certificates required to be
delivered under this Section 5.01(i) in the manner set forth in
Section 9.02.
SECTION 5.02. Negative Covenants. So long as any Advance shall
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remain unpaid, and Letter of Credit is outstanding or any Lender shall have any
Commitment hereunder, the Company will not:
(a) Liens, Etc. Create or suffer to exist, or permit any of its
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Subsidiaries to create or suffer to exist, any Lien on or with respect
to any of its properties, whether now owned or hereafter acquired, or
assign, or permit any of its Subsidiaries to assign, any right to
receive income, other than:
(i) Permitted Liens,
(ii) purchase money Liens upon or in any assets acquired or
held by the Company or any Subsidiary to secure the purchase
price of such assets or to secure Debt incurred solely for the
purpose of financing the acquisition, improvement or construction
of such assets (including any Liens placed on such assets within
180 days after the latest of the acquisition, completion of
construction or improvement of such assets), or Liens existing on
such assets at the time of its acquisition (other than any such
Liens created in contemplation of such acquisition that were not
incurred to finance the acquisition of such assets) or
extensions, renewals or replacements of any of the foregoing for
the same or a lesser amount, provided, however, that no such Lien
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shall extend to or cover any assets of any character other than
the assets being acquired, improved or constructed and no such
extension, renewal or replacement shall extend to or cover any
assets not theretofore subject to the Lien being extended,
renewed or replaced, provided further that the aggregate
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principal amount of the indebtedness secured by the Liens
referred to in this clause (ii) shall not exceed $50,000,000 at
any time outstanding prior to the Investment Grade Rating Date
and shall not exceed $100,000,000 at any time outstanding on or
after the Investment Grade Rating Date,
(iii) the Liens existing on the Effective Date securing Debt
outstanding on the Effective Date in an aggregate amount not
exceeding $50,000,000,
(iv) Liens on property of a Person existing at the time such
Person is acquired by, merged into or consolidated with the
Company or any Subsidiary of the Company or becomes a Subsidiary
of the Company; provided that such Liens were not created in
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contemplation of such merger, consolidation or acquisition and do
not extend to any assets other than those of the Person so merged
into or consolidated with the Company or such Subsidiary or
acquired by the Company or such Subsidiary,
(v) Liens securing Debt owing by any Subsidiary of the
Company to the Company,
(vi) Liens securing Debt of Subsidiaries of the Company
organized under the laws of any country other than the United
States of America or a State thereof,
(vii) Liens created under any capital lease on the assets
that are the subject of such lease,
(viii) Liens arising out of the L/C Cash Deposit Account or
any Liens securing obligations under this Agreement,
(ix) other Liens securing Debt in an aggregate principal
amount not to exceed the amount specified therefor in Section
5.02(d)(viii) at any time outstanding,
(x) assignments of the right to receive income and Liens
that arise in connection with limited recourse or non-recourse
sales, transfers or other dispositions of accounts receivable
(together with related rights of collection or credit
enhancements thereof) having a face amount of not more than
$75,000,000 in any calendar year, and
(xi) the replacement, extension or renewal of any Lien
permitted by clause (iii) or (iv) above upon or in the same
property theretofore subject thereto, so long as the principal
amount of Debt secured by any such Lien is not increased in
connection with any such replacement, extension or renewal of the
Debt secured thereby.
(b) Mergers, Etc. Merge or consolidate with or into, or convey,
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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, any Person, or permit
any of its Subsidiaries to do so, except that (i) any Subsidiary of
the Company may merge or consolidate with or into, or dispose of
assets to, any other Subsidiary of the Company, (ii) any Subsidiary of
the Company may merge into or dispose of assets to the Company and
(iii) the Company may merge with any other Person so long as the
Company is the surviving corporation, provided, in each case, that no
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Default shall have occurred and be continuing at the time of such
proposed transaction or would result therefrom.
(c) Accounting Changes. Make or permit, or permit any of its
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Subsidiaries to make or permit, any change in accounting policies or
reporting practices, except as required or permitted by generally
accepted accounting principles.
(d) Subsidiary Debt. Permit any of its Subsidiaries to create or
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suffer to exist, any Debt other than:
(i) Debt owed to the Company or to a wholly owned Subsidiary
of the Company or Debt owed under this Agreement,
(ii) Debt existing on the Effective Date that is described
on Schedule 5.02(d) hereto or the principal or face amount of
which does not exceed $10,000,000 individually or $25,000,000 in
the aggregate (the "Existing Debt"), and any Debt extending the
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maturity of, or refunding or refinancing, in whole or in part,
the Existing Debt, provided that the principal amount of such
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Existing Debt shall not be increased above the principal amount
thereof outstanding immediately prior to such extension,
refunding or refinancing, as a result of or in connection with
such extension, refunding or refinancing,
(iii) Debt incurred by Subsidiaries of the Company organized
under the laws of any country other than the United States of
America or a State thereof aggregating for all such Subsidiaries
of not more than $300,000,000 at any one time outstanding prior
to the Investment Grade Rating Date and shall not exceed
$500,000,000 at any one time outstanding on or after the
Investment Grade Rating Date,
(iv) guarantees of Debt of the Company or any other
Subsidiary of the Company,
(v) guarantees of Debt of any Person (other than the Company
or any of its Subsidiaries), provided that the aggregate
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principal amount of such Debt shall not exceed $25,000,000 at any
one time outstanding,
(vi) obligations of any Subsidiary of the Company organized
under the laws of any country other than the United States of
America or a State thereof under any Hedge Agreements entered
into in the ordinary course of business to protect the Company
and its Subsidiaries against fluctuations in interest or exchange
rates;
(vii) endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of
business, and
(viii) other Debt aggregating for all of the Company's
Subsidiaries, together with Debt secured by Liens permitted under
Section 5.02(a)(ix), an amount not to exceed $100,000,000 at any
one time outstanding prior to the Investment Grade Rating Date
and shall not exceed $150,000,000 at any one time outstanding on
or after the Investment Grade Rating Date.
(e) Change in Nature of Business. Make any material change in the
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nature of the business of the Company and its Subsidiaries, taken as a
whole, as carried on at the date hereof.
(f) Dividends, Etc. Declare any dividend payment or other
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distribution of assets, properties, cash, rights, obligations or
securities on account of any shares of any class of capital stock of
the Company, or purchase, redeem or otherwise acquire for value (or
permit any of its Subsidiaries to do so) any shares of any class of
capital stock of the Company or any warrants, rights or options to
acquire any such shares, now or hereafter outstanding, unless no
Default under Section 5.03 or Event of Default under Section 6.01(a)
shall have occurred and be continuing at the time of any such action
described above or would result therefrom.
SECTION 5.03. Financial Covenants. So long as any Advance shall
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remain unpaid, and Letter of Credit is outstanding or any Lender shall have any
Commitment hereunder, the Company will:
(a) Leverage Ratio. Maintain, as at the end of each fiscal
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quarter, a ratio of Consolidated Debt for Borrowed Money to
Consolidated Total Capital of not greater than 0.50 to 1.00.
(b) Interest Coverage Ratio. Maintain, as at the end of each
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fiscal quarter, a ratio of Consolidated Adjusted EBITDA for the period
of four fiscal quarters then ended of the Company and its Subsidiaries
to Consolidated Interest Expense of the Company and its Subsidiaries
during such period of not less than 3.50:1.00.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following events
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("Events of Default") shall occur and be continuing:
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(a) The Company or any other Borrower shall fail to pay any
principal of any Advance when the same becomes due and payable; or the
Company or any other Borrower shall fail to pay any interest on any
Advance or make any other payment of fees or other amounts payable
under this Agreement or any Note within five days after the same
becomes due and payable; or
(b) Any representation or warranty made by any Borrower herein or
by any Borrower (or any of its officers) in connection with this
Agreement or by any Designated Subsidiary in the Designation Agreement
pursuant to which such Designated Subsidiary became a Borrower
hereunder shall prove to have been incorrect in any material respect
when made; or
(c) (i) The Company shall fail to perform or observe any term,
covenant or agreement contained in Section 5.01(d), (e), (h) or (i),
5.02 or 5.03, or (ii) the Company shall fail to perform or observe any
other term, covenant or agreement contained in this Agreement on its
part to be performed or observed if such failure shall remain
unremedied for 30 days after written notice thereof shall have been
given to the Company by the Agent or any Lender; or
(d) The Company or any of its Subsidiaries shall fail to pay any
principal of or premium or interest on any Debt that is outstanding in
a principal or net amount of at least $50,000,000 in the aggregate
(but excluding Debt outstanding hereunder) of the Company or such
Subsidiary (as the case may be), when the same becomes due and payable
(whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise), and such failure shall continue after the
applicable grace period, if any, specified in the agreement or
instrument relating to such Debt; or any other event shall occur or
condition shall exist under any agreement or instrument relating to
any such Debt and shall continue after the applicable grace period, if
any, specified in such agreement or instrument, if the effect of such
event or condition is to accelerate, or to permit the acceleration of,
the maturity of such Debt; or any such Debt shall be declared to be
due and payable, or required to be prepaid or redeemed (other than by
a regularly scheduled required prepayment or redemption), purchased or
defeased, or an offer to prepay, redeem, purchase or defease such Debt
shall be required to be made, in each case prior to the stated
maturity thereof; or
(e) The Company or any of its Subsidiaries shall generally not
pay its debts as such debts become due, or shall admit in writing its
inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or any proceeding shall be
instituted by or against the Company or any of its Subsidiaries
seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, custodian or other similar
official for it or for any substantial part of its property and, in
the case of any such proceeding instituted against it (but not
instituted by it), either such proceeding shall remain undismissed or
unstayed for a period of 60 days, or any of the actions sought in such
proceeding (including, without limitation, the entry of an order for
relief against, or the appointment of a receiver, trustee, custodian
or other similar official for, it or for any substantial part of its
property) shall occur; or the Company or any of its Subsidiaries shall
take any corporate action to authorize any of the actions set forth
above in this subsection (e); or
(f) Judgments or orders for the payment of money in excess of
$50,000,000 in the aggregate shall be rendered against the Company or
any of its Subsidiaries and either (i) enforcement proceedings shall
have been commenced by any creditor upon such judgment or order or
(ii) there shall be any period of 10 consecutive days during which a
stay of enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect; provided, however, that
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any such judgment or order shall not be an Event of Default under this
Section 6.01(f) if and for so long as (i) the amount of such judgment
or order is covered by a valid and binding policy of insurance between
the defendant and the insurer covering payment thereof and (ii) such
insurer, which shall be rated at least "A-" by A.M. Best Company, has
been notified of, and has not disputed the claim made for payment of,
the amount of such judgment or order; or
(g) (i) Any Person or two or more Persons acting in concert shall
have acquired beneficial ownership (within the meaning of Rule 13d-3
of the Securities and Exchange Commission under the Securities
Exchange Act of 1934), directly or indirectly, of Voting Stock of the
Company (or other securities convertible into such Voting Stock)
representing 30% or more of the combined voting power of all Voting
Stock of the Company; or (ii) during any period of up to 24
consecutive months, commencing after the date of this Agreement,
individuals who at the beginning of such 24-month period were
directors of the Company shall cease for any reason (other than due to
death or disability) to constitute a majority of the board of
directors of the Company (except to the extent that individuals who at
the beginning of such 24-month period were replaced by individuals (x)
elected by a majority of the remaining members of the board of
directors of the Company or (y) nominated for election by a majority
of the remaining members of the board of directors of the Company and
thereafter elected as directors by the shareholders of the Borrower);
or
(h) The Company or any of its ERISA Affiliates shall incur, or
shall be reasonably likely to incur liability in excess of $75,000,000
in the aggregate as a result of one or more of the following: (i) the
occurrence of any ERISA Event; (ii) the partial or complete withdrawal
of the Company or any of its ERISA Affiliates from a Multiemployer
Plan; or (iii) the reorganization or termination of a Multiemployer
Plan; or
(j) so long as any Subsidiary of the Company is a Designated
Subsidiary, any provision of Article VII shall for any reason cease to
be valid and binding on or enforceable against the Company, or the
Company shall so state in writing; then, and in any such event, the
Agent (i) shall at the request, or may with the consent, of the
Required Lenders, by notice to the Borrowers, declare the obligation
of each Lender to make Advances (other than Advances by an Issuing
Bank or a Lender pursuant to Section 2.03(c)) and of the Issuing Banks
to issue Letters of Credit to be terminated, whereupon the same shall
forthwith terminate, and (ii) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Borrowers, declare
the Advances, all interest thereon and all other amounts payable under
this Agreement to be forthwith due and payable, whereupon the
Advances, all such interest and all such amounts shall become and be
forthwith due and payable, without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived
by each Borrower; provided, however, that in the event of an actual or
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deemed entry of an order for relief with respect to the Company or any
other Borrower under the Federal Bankruptcy Code, (A) the obligation
of each Lender to make Advances (other than Advances by an Issuing
Bank or a Lender pursuant to Section 2.03(c)) and of the Issuing Banks
to issue Letters of Credit shall automatically be terminated and (B)
the Advances, all such interest and all such amounts shall
automatically become and be due and payable, without presentment,
demand, protest or any notice of any kind, all of which are hereby
expressly waived by each Borrower.
SECTION 6.02. Actions in Respect of the Letters of Credit upon
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Default. If any Event of Default shall have occurred and be continuing, the
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Agent may with the consent, or shall at the request, of the Required Lenders,
irrespective of whether it is taking any of the actions described in Section
6.01 or otherwise, make demand upon the Borrowers to, and forthwith upon such
demand the Borrowers will, (a) pay to the Agent on behalf of the Lenders in same
day funds at the Agent's office designated in such demand, for deposit in the
L/C Cash Deposit Account, an amount equal to the aggregate Available Amount of
all Letters of Credit then outstanding or (b) make such other arrangements in
respect of the outstanding Letters of Credit as shall be acceptable to the
Required Lenders and not more disadvantageous to the Borrowers than clause (a);
provided, however, that in the event of an actual or deemed entry of an order
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for relief with respect to any Borrower under the Federal Bankruptcy Code, an
amount equal to the aggregate Available Amount of all outstanding Letters of
Credit shall be immediately due and payable to the Agent for the account of the
Lenders without notice to or demand upon the Borrowers, which are expressly
waived by each Borrower, to be held in the L/C Cash Deposit Account. If at any
time an Event of Default is continuing the Agent determines that any funds held
in the L/C Cash Deposit Account are subject to any right or claim of any Person
other than the Agent and the Lenders or that the total amount of such funds is
less than the aggregate Available Amount of all Letters of Credit, the Borrowers
will, forthwith upon demand by the Agent, pay to the Agent, as additional funds
to be deposited and held in the L/C Cash Deposit Account, an amount equal to the
excess of (a) such aggregate Available Amount over (b) the total amount of
funds, if any, then held in the L/C Cash Deposit Account that the Agent
determines to be free and clear of any such right and claim. Upon the drawing of
any Letter of Credit, to the extent funds are on deposit in the L/C Cash Deposit
Account, such funds shall be applied to reimburse the Issuing Banks to the
extent permitted by applicable law. After all such Letters of Credit shall have
expired or been fully drawn upon and all other obligations of the Borrowers
hereunder and under the Notes shall have been paid in full, the balance, if any,
in such LC Cash Deposit Account shall be returned to the Borrowers.
ARTICLE VII
GUARANTY
SECTION 7.01. Unconditional Guaranty. The Company hereby
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absolutely, unconditionally and irrevocably guarantees the punctual payment when
due, whether at scheduled maturity or on any date of a required prepayment or by
acceleration, demand or otherwise, of all obligations of each other Borrower now
or hereafter existing under or in respect of this Agreement and the Notes
(including, without limitation, any extensions, modifications, substitutions,
amendments or renewals of any or all of the foregoing obligations), whether
direct or indirect, absolute or contingent, and whether for principal, interest,
premiums, fees, indemnities, contract causes of action, costs, expenses or
otherwise (such obligations being the "Guaranteed Obligations"), and agrees to
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pay any and all expenses (including, without limitation, fees and expenses of
counsel) incurred by the Agent or any Lender in enforcing any rights under this
Agreement. Without limiting the generality of the foregoing, the Company's
liability shall extend to all amounts that constitute part of the Guaranteed
Obligations and would be owed by such Borrower to the Agent or any Lender under
or in respect of this Agreement and the Notes but for the fact that they are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving such Borrower.
SECTION 7.02. Guaranty Absolute. (a) The Company guarantees that
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the Guaranteed Obligations will be paid strictly in accordance with the terms of
this Agreement and the Notes, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Agent or any Lender with respect thereto. The obligations of the
Company under or in respect of this Guaranty are independent of the Guaranteed
Obligations or any other obligations of any other Borrower under or in respect
of this Agreement and the Notes, and a separate action or actions may be brought
and prosecuted against the Company to enforce this Guaranty, irrespective of
whether any action is brought against any Borrower or whether any Borrower is
joined in any such action or actions. The liability of the Company under this
Guaranty shall be irrevocable, absolute and unconditional irrespective of, and
the Company hereby irrevocably waives any defenses it may now have or hereafter
acquire in any way relating to, any or all of the following:
(a) any lack of validity or enforceability of this Agreement, any
Note or any agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Guaranteed Obligations or any
other obligations of any Borrower under or in respect of this
Agreement and the Notes, or any other amendment or waiver of or any
consent to departure from this Agreement or any Note, including,
without limitation, any increase in the Guaranteed Obligations
resulting from the extension of additional credit to any Borrower or
any of its Subsidiaries or otherwise;
(c) any taking, exchange, release or non-perfection of any
collateral, or any taking, release or amendment or waiver of, or
consent to departure from, any other guaranty, for all or any of the
Guaranteed Obligations;
(d) any manner of application of any collateral, or proceeds
thereof, to all or any of the Guaranteed Obligations, or any manner of
sale or other disposition of any collateral for all or any of the
Guaranteed Obligations or any other obligations of any Borrower under
this Agreement and the Notes or any other assets of any Borrower or
any of its Subsidiaries;
(e) any change, restructuring or termination of the corporate
structure or existence of any Borrower or any of its Subsidiaries;
(f) any failure of the Agent or any Lender to disclose to the
Company any information relating to the business, condition (financial
or otherwise), operations, performance, properties or prospects of any
Borrower now or hereafter known to the Agent or such Lender (the
Company waiving any duty on the part of the Agent and the Lenders to
disclose such information);
(g) the failure of any other Person to execute or deliver this
Guaranty or any other guaranty or agreement or the release or
reduction of liability of the Company or other guarantor or surety
with respect to the Guaranteed Obligations; or
(h) any other circumstance (including, without limitation, any
statute of limitations) or any existence of or reliance on any
representation by the Agent or any Lender that might otherwise
constitute a defense available to, or a discharge of, any Borrower or
any other guarantor or surety.
This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by the Agent or any Lender or any other Person
upon the insolvency, bankruptcy or reorganization of any Borrower or otherwise,
all as though such payment had not been made.
SECTION 7.03. Waivers and Acknowledgments. (a) The Company hereby
---------------------------
unconditionally and irrevocably waives promptness, diligence, notice of
acceptance, presentment, demand for performance, notice of nonperformance,
default, acceleration, protest or dishonor and any other notice with respect to
any of the Guaranteed Obligations and this Guaranty and any requirement that the
Agent or any Lender protect, secure, perfect or insure any Lien or any property
subject thereto or exhaust any right or take any action against any Borrower or
any other Person or any collateral.
(b) The Company hereby unconditionally and irrevocably waives any
right to revoke this Guaranty and acknowledges that this Guaranty is
continuing in nature and applies to all Guaranteed Obligations,
whether existing now or in the future.
(c) The Company hereby unconditionally and irrevocably waives (i)
any defense arising by reason of any claim or defense based upon an
election of remedies by the Agent or any Lender that in any manner
impairs, reduces, releases or otherwise adversely affects the
subrogation, reimbursement, exoneration, contribution or
indemnification rights of the Company or other rights of the Company
to proceed against any Borrower, any other guarantor or any other
Person or any collateral and (ii) any defense based on any right of
set-off or counterclaim against or in respect of the obligations of
the Company hereunder.
(d) The Company hereby unconditionally and irrevocably waives any
duty on the part of the Agent or any Lender to disclose to the Company
any matter, fact or thing relating to the business, condition
(financial or otherwise), operations, performance, properties or
prospects of any Borrower or any of its Subsidiaries now or hereafter
known by the Agent or such Lender.
(e) The Company acknowledges that it will receive substantial
direct and indirect benefits from the financing arrangements
contemplated by this Agreement and the Notes and that the waivers set
forth in Section 7.02 and this Section 7.03 are knowingly made in
contemplation of such benefits.
SECTION 7.04. Subrogation. The Company hereby unconditionally and
-----------
irrevocably agrees not to exercise any rights that it may now have or hereafter
acquire against any Borrower or any other insider guarantor that arise from the
existence, payment, performance or enforcement of the Company's obligations
under or in respect of this Guaranty, including, without limitation, any right
of subrogation, reimbursement, exoneration, contribution or indemnification and
any right to participate in any claim or remedy of the Agent or any Lender
against any Borrower or any other insider guarantor or any collateral, whether
or not such claim, remedy or right arises in equity or under contract, statute
or common law, including, without limitation, the right to take or receive from
any Borrower or any other insider guarantor, directly or indirectly, in cash or
other property or by set-off or in any other manner, payment or security on
account of such claim, remedy or right, unless and until all of the Guaranteed
Obligations and all other amounts payable under this Guaranty shall have been
paid in full in cash, all Letters of Credit shall have expired or been
terminated and the Commitments shall have expired or been terminated. If any
amount shall be paid to the Company in violation of the immediately preceding
sentence at any time prior to the latest of (a) the payment in full in cash of
the Guaranteed Obligations and all other amounts payable under this Guaranty,
(b) the Termination Date and (c) the latest date of expiration or termination of
all Letters of Credit, such amount shall be received and held in trust for the
benefit of the Agent and the Lenders, shall be segregated from other property
and funds of the Company and shall forthwith be paid or delivered to the Agent
in the same form as so received (with any necessary endorsement or assignment)
to be credited and applied to the Guaranteed Obligations and all other amounts
payable under this Guaranty, whether matured or unmatured, in accordance with
the terms of this Agreement and the Notes, or to be held as collateral for any
Guaranteed Obligations or other amounts payable under this Guaranty thereafter
arising. If (i) the Company shall make payment to the Agent or any Lender of all
or any part of the Guaranteed Obligations, (ii) all of the Guaranteed
Obligations and all other amounts payable under this Guaranty shall have been
paid in full in cash, (iii) the Termination Date shall have occurred and (iv)
all Letters of Credit shall have expired or been terminated, the Agent and the
Lenders will, at the Company's request and expense, execute and deliver to the
Company appropriate documents, without recourse and without representation or
warranty, necessary to evidence the transfer by subrogation to the Company of an
interest in the Guaranteed Obligations resulting from such payment made by the
Company pursuant to this Guaranty.
SECTION 7.05. Subordination. The Company hereby subordinates any
-------------
and all debts, liabilities and other obligations owed to the Company by any
Borrower (the "Subordinated Obligations") to the Guaranteed Obligations to the
-------------------------
extent and in the manner hereinafter set forth in this Section 7.05:
(a) Prohibited Payments, Etc. Except during the continuance of an
------------------------
Event of Default under Section 6.01(a) or (e) (including the
commencement and continuation of any proceeding under any Bankruptcy
Law relating to such Borrower), the Company may receive regularly
scheduled payments from such Borrower on account of the Subordinated
Obligations. After the occurrence and during the continuance of any
Event of Default under Section 6.01(a) or (e) (including the
commencement and continuation of any proceeding under any Bankruptcy
Law relating to such Borrower), however, unless the Required Lenders
otherwise agree, the Company shall not demand, accept or take any
action to collect any payment on account of the Subordinated
Obligations.
(b) Prior Payment of Guaranteed Obligations. In any proceeding
----------------------------------------
under any Bankruptcy Law relating to such Borrower, the Company agrees
that the Agent and the Lenders shall be entitled to receive payment in
full in cash of all Guaranteed Obligations (including all interest and
expenses accruing after the commencement of a proceeding under any
Bankruptcy Law, whether or not constituting an allowed claim in such
proceeding ("Post Petition Interest")) before the Company receives
-----------------------
payment of any Subordinated Obligations.
(c) Turn-Over. After the occurrence and during the continuance of
---------
any Event of Default under Section 6.01(a) or (e) (including the
commencement and continuation of any proceeding under any Bankruptcy
Law relating to such Borrower), the Company shall, if the Agent so
requests, collect, enforce and receive payments on account of the
Subordinated Obligations as trustee for the Agent and the Lenders and
deliver such payments to the Agent on account of the Guaranteed
Obligations (including all Post Petition Interest), together with any
necessary endorsements or other instruments of transfer, but without
reducing or affecting in any manner the liability of the Company under
the other provisions of this Guaranty.
(d) Agent Authorization. After the occurrence and during the
--------------------
continuance of any Event of Default under Section 6.01(a) or (e)
(including the commencement and continuation of any proceeding under
any Bankruptcy Law relating to such Borrower), the Agent is authorized
and empowered (but without any obligation to so do), in its
discretion, (i) in the name of the Company, to collect and enforce,
and to submit claims in respect of, Subordinated Obligations and to
apply any amounts received thereon to the Guaranteed Obligations
(including any and all Post Petition Interest), and (ii) to require
the Company (A) to collect and enforce, and to submit claims in
respect of, Subordinated Obligations and (B) to pay any amounts
received on such obligations to the Agent for application to the
Guaranteed Obligations (including any and all Post Petition Interest).
SECTION 7.06. Continuing Guaranty; Assignments. This Guaranty is
---------------------------------
a continuing guaranty and shall (a) remain in full force and effect until the
latest of (i) the payment in full in cash of the Guaranteed Obligations and all
other amounts payable under this Guaranty, (ii) the Termination Date and (iii)
the latest date of expiration or termination of all Letters of Credit, (b) be
binding upon the Company, its successors and assigns and (c) inure to the
benefit of and be enforceable by the Agent and the Lenders and their successors,
transferees and assigns. Without limiting the generality of clause (c) of the
immediately preceding sentence, the Agent or any Lender may assign or otherwise
transfer all or any portion of its rights and obligations under this Agreement
(including, without limitation, all or any portion of its Commitments, the
Advances owing to it and the Note or Notes held by it) to any other Person, and
such other Person shall thereupon become vested with all the benefits in respect
thereof granted to the Agent or such Lender herein or otherwise, in each case as
and to the extent provided in Section 9.07.
ARTICLE VIII
THE AGENT
SECTION 8.01. Authorization and Action. Each Lender (in its
--------------------------
capacities as a Lender and Issuing Bank, as applicable) hereby appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers and discretion under this Agreement as are delegated to the Agent by
the terms hereof, together with such powers and discretion as are reasonably
incidental thereto. As to any matters not expressly provided for by this
Agreement (including, without limitation, enforcement or collection of the
Notes), the Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Required Lenders, and such instructions shall be binding upon all Lenders
and all holders of Notes; provided, however, that the Agent shall not be
-------- -------
required to take any action that exposes the Agent to personal liability or that
is contrary to this Agreement or applicable law. The Agent agrees to give to
each Lender prompt notice of each notice given to it by the Company or any other
Borrower pursuant to the terms of this Agreement.
SECTION 8.02. Agent's Reliance, Etc. Neither the Agent nor any of
---------------------
its directors, officers, agents or employees shall be liable for any action
taken or omitted to be taken by it or them under or in connection with this
Agreement, except for its or their own gross negligence or willful misconduct.
Without limitation of the generality of the foregoing, the Agent: (i) may treat
the Lender that made any Advance as the holder of the Debt resulting therefrom
until the Agent receives and accepts an Assumption Agreement entered into by an
Assuming Lender as provided in Section 2.18 or an Assignment and Acceptance
entered into by such Lender, as assignor, and an Eligible Assignee, as assignee,
as provided in Section 9.07; (ii) may consult with legal counsel (including
counsel for the Company), independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (iii) makes no warranty or representation to any Lender
and shall not be responsible to any Lender for any statements, warranties or
representations (whether written or oral) made in or in connection with this
Agreement; (iv) shall not have any duty to ascertain or to inquire as to the
performance, observance or satisfaction of any of the terms, covenants or
conditions of this Agreement on the part of any Borrower or the existence at any
time of any Default or to inspect the property (including the books and records)
of the Company or any other Borrower; (v) shall not be responsible to any Lender
for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of, or the perfection or priority of any lien or security
interest created or purported to be created under or in connection with, this
Agreement or any other instrument or document furnished pursuant hereto; and
(vi) shall incur no liability under or in respect of this Agreement by acting
upon any notice, consent, certificate or other instrument or writing (which may
be by telecopier or telegram) believed by it to be genuine and signed or sent by
the proper party or parties.
SECTION 8.03. Citibank and Affiliates. With respect to its
-------------------------
Commitments, the Advances made by it and the Note issued to it, Citibank shall
have the same rights and powers under this Agreement as any other Lender and may
exercise the same as though it were not the Agent; and the term "Lender" or
"Lenders" shall, unless otherwise expressly indicated, include Citibank in its
individual capacity. Citibank and its Affiliates may accept deposits from, lend
money to, act as trustee under indentures of, accept investment banking
engagements from and generally engage in any kind of business with, the Company,
any of its Subsidiaries and any Person who may do business with or own
securities of the Company or any such Subsidiary, all as if Citibank were not
the Agent and without any duty to account therefor to the Lenders. The Agent
shall have no duty to disclose any information obtained or received by it or any
of its Affiliates relating to the Company or any of its Subsidiaries to the
extent such information was obtained or received in any capacity other than as
Agent.
SECTION 8.04. Lender Credit Decision. Each Lender acknowledges
----------------------
that it has, independently and without reliance upon the Agent or any other
Lender and based on the financial statements referred to in Section 4.01 and
such other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the Agent or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement.
SECTION 8.05. Indemnification. (a) Each Lender severally agrees
---------------
to indemnify the Agent (to the extent not reimbursed by the Company) from and
against such Lender's Ratable Share of any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever that may be imposed on, incurred
by, or asserted against the Agent in any way relating to or arising out of this
Agreement or any action taken or omitted by the Agent under this Agreement
(collectively, the "Indemnified Costs"), provided that no Lender shall be liable
----------------- --------
for any portion of the Indemnified Costs resulting from the Agent's gross
negligence or willful misconduct. Without limitation of the foregoing, each
Lender agrees to reimburse the Agent promptly upon demand for its ratable share
of any out-of-pocket expenses (including counsel fees) incurred by the 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, to the extent that the Agent is not
reimbursed for such expenses by the Company. In the case of any investigation,
litigation or proceeding giving rise to any Indemnified Costs, this Section 8.05
applies whether any such investigation, litigation or proceeding is brought by
the Agent, any Lender or a third party.
(b) Each Lender severally agrees to indemnify the Issuing Banks
(to the extent not promptly reimbursed by the Company) from and
against such Lender's Ratable Share of any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever that
may be imposed on, incurred by, or asserted against any such Issuing
Bank in any way relating to or arising out of the Loan Documents or
any action taken or omitted by such Issuing Bank hereunder or in
connection herewith; provided, however, that no Lender shall be liable
-------- -------
for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from such Issuing Bank's gross negligence or willful
misconduct. Without limitation of the foregoing, each Lender agrees to
reimburse any such Issuing Bank promptly upon demand for its Ratable
Share of any costs and expenses (including, without limitation, fees
and expenses of counsel) payable by the Company under Section 9.04, to
the extent that such Issuing Bank is not promptly reimbursed for such
costs and expenses by the Company.
(c) The failure of any Lender to reimburse the Agent or any
Issuing Bank promptly upon demand for its Ratable Share of any amount
required to be paid by the Lenders to the Agent as provided herein
shall not relieve any other Lender of its obligation hereunder to
reimburse the Agent or any Issuing Bank for its Ratable Share of such
amount, but no Lender shall be responsible for the failure of any
other Lender to reimburse the Agent or any Issuing Bank for such other
Lender's Ratable Share of such amount. Without prejudice to the
survival of any other agreement of any Lender hereunder, the agreement
and obligations of each Lender contained in this Section 9.05 shall
survive the payment in full of principal, interest and all other
amounts payable hereunder and under the Notes. Each of the Agent and
each Issuing Bank agrees to return to the Lenders their respective
Ratable Shares of any amounts paid under this Section 9.05 that are
subsequently reimbursed by the Company.
SECTION 8.06. Successor Agent. The Agent may resign at any time
----------------
by giving written notice thereof to the Lenders and the Company and may be
removed at any time with or without cause by the Required Lenders. Upon any such
resignation or removal, the Required Lenders shall have the right to appoint a
successor Agent. If no successor Agent shall have been so appointed by the
Required Lenders, and shall have accepted such appointment, within 30 days after
the retiring Agent's giving of notice of resignation or the Required Lenders'
removal of the retiring Agent, then the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent, which shall be a commercial bank organized
under the laws of the United States of America or of any State thereof and
having a combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, discretion, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations under this
Agreement. After any retiring Agent's resignation or removal hereunder as Agent,
the provisions of this Article VIII shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement.
SECTION 8.07. Sub-Agent. The Sub-Agent has been designated under
---------
this Agreement to carry out duties of the Agent. The Sub-Agent shall be subject
to each of the obligations in this Agreement to be performed by the Sub-Agent,
and each of the Company, each other Borrower and the Lenders agrees that the
Sub-Agent shall be entitled to exercise each of the rights and shall be entitled
to each of the benefits of the Agent under this Agreement as relate to the
performance of its obligations hereunder.
SECTION 8.08. Other Agents. Each Lender hereby acknowledges that
------------
none of the arrangers, syndication agent, documentation agents nor any other
Lender designated as any "Agent" (other than the Agent) on the signature pages
or the cover page hereof has any liability hereunder other than in its capacity
as a Lender.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Amendments, Etc. No amendment or waiver of any
----------------
provision of this Agreement or the Notes, nor consent to any departure by any
Borrower therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Required Lenders, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given; provided, however, that no amendment, waiver or consent shall,
-------- -------
unless in writing and signed by all the Lenders, do any of the following: (a)
waive any of the conditions specified in Section 3.01, (b) increase the
Commitments of the Lenders other than in accordance with Section 2.18, (c)
reduce the principal of, or interest on, the Advances or any fees or other
amounts payable hereunder, (d) postpone any date fixed for any payment of
principal of, or interest on, the Advances or any fees or other amounts payable
hereunder, (e) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Advances, or the number of Lenders, that shall be
required for the Lenders or any of them to take any action hereunder, (f)
release the Company from any of its obligations under Article VII or (g) amend
this Section 9.01; and provided further that (x) no amendment, waiver or consent
-------- -------
shall, unless in writing and signed by the Agent in addition to the Lenders
required above to take such action, affect the rights or duties of the Agent
under this Agreement or any Note and (y) no amendment, waiver or consent shall,
unless in writing and signed by the Issuing Banks in addition to the Lenders
required above to take such action, adversely affect the rights or obligations
of the Issuing Banks in their capacities as such under this Agreement.
SECTION 9.02. Notices, Etc. (a) All notices and other
--------------
communications provided for hereunder shall be either (x) in writing (including
telecopier or telegraphic communication) and mailed, telecopied, telegraphed or
delivered or (y) as and to the extent set forth in Section 9.02(b) and in the
proviso to this Section 9.02(a), if to the Company or to any Designated
Subsidiary at the Company's address at One Riverfront Plaza, Corning, NY 14831,
Facsimile number (607) 974-6686, Telephone number (607) 974-9000 Attention:
Secretary; if to any Initial Lender, at its Domestic Lending Office specified
opposite its name on Schedule I hereto; if to any other Lender, at its Domestic
Lending Office specified in the Assumption Agreement or the Assignment and
Acceptance pursuant to which it became a Lender; and if to the Agent, at its
address at Two Penns Way, New Castle, Delaware 19720, Attention: Bank Loan
Syndications Department; or, as to any Borrower or the Agent, at such other
address as shall be designated by such party in a written notice to the other
parties and, as to each other party, at such other address as shall be
designated by such party in a written notice to the Company and the Agent,
provided that materials required to be delivered pursuant to Section 5.01(i)(i),
- --------
(ii) or (iv) shall be delivered to the Agent as specified in Section 9.02(b) or
as otherwise specified to the Company by the Agent. All such notices and
communications shall, when mailed, telecopied, telegraphed or e-mailed, be
effective when deposited in the mails, telecopied, delivered to the telegraph
company or confirmed by e-mail, respectively, except that notices and
communications to the Agent pursuant to Article II, III or VIII shall not be
effective until received by the Agent. Delivery by telecopier of an executed
counterpart of any amendment or waiver of any provision of this Agreement or the
Notes or of any Exhibit hereto to be executed and delivered hereunder shall be
effective as delivery of a manually executed counterpart thereof.
(b) So long as Citibank or any of its Affiliates is the Agent and
except as otherwise provided in Section 5.01(i), materials required to
be delivered pursuant to Section 5.01(i)(i), (ii) and (iv) shall be
delivered to the Agent in an electronic medium in a format acceptable
to the Agent and the Lenders by e-mail at
oploanswebadmin@citigroup.com. The Company agrees that the Agent may
make such materials, as well as any other written information,
documents, instruments and other material relating to the Company, any
of its Subsidiaries or any other materials or matters relating to this
Agreement, the Notes or any of the transactions contemplated hereby
(other than notices delivered under Article II) (collectively, the
"Communications") available to the Lenders by posting such notices on
--------------
Intralinks or a substantially similar electronic system (the
"Platform"), provided that the Lenders and any other Person given
--------
access to the Platform by the Agent shall have agreed in writing to
the provisions of Section 9.08. The Company acknowledges that (i) the
distribution of material through an electronic medium is not
necessarily secure and that there are confidentiality and other risks
associated with such distribution, (ii) the Platform is provided "as
is" and "as available" and (iii) neither the Agent nor any of its
Affiliates warrants the accuracy, adequacy or completeness of the
Communications or the Platform and each expressly disclaims liability
for errors or omissions in the Communications or the Platform. No
warranty of any kind, express, implied or statutory, including,
without limitation, any warranty of merchantability, fitness for a
particular purpose, non-infringement of third party rights or freedom
from viruses or other code defects, is made by the Agent or any of its
Affiliates in connection with the Platform.
(c) Each Lender agrees that notice to it (as provided in the next
sentence) (a "Notice") specifying that any Communications have been
------
posted to the Platform shall constitute effective delivery of such
information, documents or other materials to such Lender for purposes
of this Agreement; provided that if requested by any Lender the Agent
--------
shall deliver a copy of the Communications to such Lender by email or
telecopier. Each Lender agrees (i) to notify the Agent in writing of
such Lender's e-mail address to which a Notice may be sent by
electronic transmission (including by electronic communication) on or
before the date such Lender becomes a party to this Agreement (and
from time to time thereafter to ensure that the Agent has on record an
effective e-mail address for such Lender) and (ii) that any Notice may
be sent to such e-mail address.
SECTION 9.03. No Waiver; Remedies. No failure on the part of any
--------------------
Lender or the Agent to exercise, and no delay in exercising, any right hereunder
or under any Note shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
SECTION 9.04. Costs and Expenses. (a) The Company agrees to pay
------------------
on demand all reasonable costs and expenses of the Agent in connection with the
preparation, execution, delivery, administration, modification and amendment of
this Agreement, the Notes and the other documents to be delivered hereunder,
including, without limitation, (A) all due diligence, syndication (including
printing, distribution and bank meetings), transportation, computer,
duplication, appraisal, consultant, and audit expenses and (B) the reasonable
fees and expenses of counsel for the Agent with respect thereto and with respect
to advising the Agent as to its rights and responsibilities under this
Agreement. The Company further agrees to pay on demand all out of pocket costs
and expenses of the Agent and the Lenders, if any (including, without
limitation, reasonable counsel fees and expenses), in connection with the
enforcement (whether through negotiations, legal proceedings or otherwise) of
this Agreement, the Notes and the other documents to be delivered hereunder,
including, without limitation, reasonable fees and expenses of counsel for the
Agent and each Lender in connection with the enforcement of rights under this
Section 9.04(a).
(b) The Company agrees to indemnify and hold harmless the Agent
and each Lender and each of their Affiliates and their officers,
directors, employees, agents and advisors (each, an "Indemnified
-----------
Party") from and against any and all claims, damages, losses,
-----
liabilities and expenses (including, without limitation, reasonable
fees and expenses of counsel) incurred by or asserted or awarded
against any Indemnified Party, in each case arising out of or in
connection with or by reason of (including, without limitation, in
connection with any investigation, litigation or proceeding or
preparation of a defense in connection therewith) (i) the Notes, this
Agreement, any of the transactions contemplated herein or the actual
or proposed use of the proceeds of the Advances or (ii) the actual or
alleged presence of Hazardous Materials on any property of the Company
or any of its Subsidiaries or any Environmental Action relating in any
way to the Company or any of its Subsidiaries, except to the extent
such claim, damage, loss, liability or expense is found in a final,
non-appealable judgment by a court of competent jurisdiction to have
resulted from such Indemnified Party's gross negligence or willful
misconduct. In the case of an investigation, litigation or other
proceeding to which the indemnity in this Section 9.04(b) applies,
such indemnity shall be effective whether or not such investigation,
litigation or proceeding is brought by the Company, its directors,
equityholders or creditors or an Indemnified Party or any other
Person, whether or not any Indemnified Party is otherwise a party
thereto and whether or not the transactions contemplated hereby are
consummated. The Company also agrees not to assert any claim for
special, indirect, consequential or punitive damages against the
Agent, any Lender, any of their Affiliates, or any of their respective
directors, officers, employees, attorneys and agents, on any theory of
liability, arising out of or otherwise relating to the Notes, this
Agreement, any of the transactions contemplated herein or the actual
or proposed use of the proceeds of the Advances. In furtherance of the
foregoing, the Company agrees to pay any civil penalty or fine
assessed by the U.S. Department of the Treasury's Office of Foreign
Assets Control ("OFAC") against, and all reasonable costs and expenses
----
(including reasonable counsel fees and disbursements) incurred in
connection with the defense thereof by, the Agent or any Lender solely
as a result of conduct of the Company or any of its Subsidiaries that
violates a sanction enforced by OFAC.
(c) If any payment of principal of, or Conversion of, any
Eurocurrency Rate Advance is made by any Borrower to or for the
account of a Lender (i) other than on the last day of the Interest
Period for such Advance, as a result of a payment or Conversion
pursuant to Section 2.08, 2.10, 2.12 or 2.18, acceleration of the
maturity of the Notes pursuant to Section 6.01 or for any other
reason, or by an Eligible Assignee to a Lender other than on the last
day of the Interest Period for such Advance upon an assignment of
rights and obligations under this Agreement pursuant to Section 9.07
as a result of a demand by the Company pursuant to Section 9.07(a) or
(ii) as a result of a payment or Conversion pursuant to Section 2.08,
2.10 or 2.12, the applicable Borrower shall, upon demand by such
Lender (with a copy of such demand to the Agent), pay to the Agent for
the account of such Lender any amounts required to compensate such
Lender for any additional losses, costs or expenses that it may
reasonably incur as a result of such payment or Conversion, including,
without limitation, any loss (excluding loss of anticipated profits),
cost or expense incurred by reason of the liquidation or reemployment
of deposits or other funds acquired by any Lender to fund or maintain
such Advance. If the amount of the Committed Currency purchased by any
Lender in the case of a Conversion or exchange of Advances in the case
of Section 2.08 or 2.12 exceeds the sum required to satisfy such
Lender's liability in respect of such Advances, such Lender agrees to
remit to the Company such excess.
(d) Without prejudice to the survival of any other agreement of
the Borrowers hereunder, the agreements and obligations of the
Borrowers contained in Sections 2.11, 2.14 and 9.04 shall survive the
payment in full of principal, interest and all other amounts payable
hereunder and under the Notes.
SECTION 9.05. Right of Set-off. Upon (i) the occurrence and
-----------------
during the continuance of any Event of Default and (ii) the making of the
request or the granting of the consent specified by Section 6.01 to authorize
the Agent to declare the Advances due and payable pursuant to the provisions of
Section 6.01, each Lender and each of its Affiliates is hereby authorized at any
time and from time to time, 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 and other indebtedness at any time owing by such
Lender or such Affiliate to or for the credit or the account of the Company or
any Borrower against any and all of the obligations of the Company or any
Borrower now or hereafter existing under this Agreement and the Note held by
such Lender, whether or not such Lender shall have made any demand under this
Agreement or such Note and although such obligations may be unmatured. Each
Lender agrees promptly to notify the appropriate Borrower after any such set-off
and application, provided that the failure to give such notice shall not affect
--------
the validity of such set-off and application. The rights of each Lender and its
Affiliates under this Section are in addition to other rights and remedies
(including, without limitation, other rights of set-off) that such Lender and
its Affiliates may have.
SECTION 9.06. Binding Effect. This Agreement shall become
---------------
effective (other than Sections 2.01 and 2.03, which shall only become effective
upon satisfaction of the conditions precedent set forth in Section 3.01) when it
shall have been executed by the Company and the Agent and when the Agent shall
have been notified by each Initial Lender that such Initial Lender has executed
it and thereafter shall be binding upon and inure to the benefit of the Company,
the Agent and each Lender and their respective successors and assigns, except
that neither the Company nor any other Borrower shall have the right to assign
its rights hereunder or any interest herein without the prior written consent of
the Lenders.
SECTION 9.07. Assignments and Participations. (a) Each Lender may
------------------------------
with the consent of each Issuing Bank (which consent shall not be unreasonably
withheld or delayed) and, if demanded by the Company (so long as no Default
shall have occurred and be continuing and following a demand by such Lender
pursuant to Section 2.11 or 2.14) upon at least five Business Days' notice to
such Lender and the Agent, will assign to one or more Persons all or a portion
of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Revolving Credit Commitment, its Unissued
Letter of Credit Commitment, the Advances owing to it, its participations in
Letters of Credit and the Note or Notes held by it); provided, however, that (i)
-------- -------
each such assignment shall be of a constant, and not a varying, percentage of
all rights and obligations under this Agreement, (ii) except in the case of an
assignment to a Person that, immediately prior to such assignment, was a Lender
or an assignment of all of a Lender's rights and obligations under this
Agreement, the amount of (x) the Revolving Credit Commitment of the assigning
Lender being assigned pursuant to each such assignment (determined as of the
date of the Assignment and Acceptance with respect to such assignment) shall in
no event be less than $10,000,000 or an integral multiple of $1,000,000 in
excess thereof and (y) the Unissued Letter of Credit Commitment of the assigning
Lender being assigned pursuant to each such assignment (determined as of the
date of the Assignment and Acceptance with respect to such assignment) shall in
no event be less than $5,000,000 or an integral multiple of $1,000,000 in excess
thereof, in each case, unless the Company and the Agent otherwise agree (iii)
each such assignment shall be to an Eligible Assignee, (iv) each such assignment
made as a result of a demand by the Company pursuant to this Section 9.07(a)
shall be arranged by the Company after consultation with the Agent and shall be
either an assignment of all of the rights and obligations of the assigning
Lender under this Agreement or an assignment of a portion of such rights and
obligations made concurrently with another such assignment or other such
assignments that together cover all of the rights and obligations of the
assigning Lender under this Agreement, (v) no Lender shall be obligated to make
any such assignment as a result of a demand by the Company pursuant to this
Section 9.07(a) unless and until such Lender shall have received one or more
payments from either the Borrowers or one or more Eligible Assignees in an
aggregate amount at least equal to the aggregate outstanding principal amount of
the Advances owing to such Lender, together with accrued interest thereon to the
date of payment of such principal amount and all other amounts payable to such
Lender under this Agreement, and (vi) the parties to each such assignment shall
execute and deliver to the Agent, for its acceptance and recording in the
Register, an Assignment and Acceptance, together with any Note subject to such
assignment and a processing and recordation fee of $3,500 payable by the parties
to each such assignment, provided, however, that in the case of each assignment
-------- -------
made as a result of a demand by the Company, such recordation fee shall be
payable by the Company except that no such recordation fee shall be payable in
the case of an assignment made at the request of the Company to an Eligible
Assignee that is an existing Lender. Upon such execution, delivery, acceptance
and recording, from and after the effective date specified in each Assignment
and Acceptance, (x) the assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, have the rights and obligations of a Lender
hereunder and (y) the Lender assignor thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights (other than its rights under
Sections 2.11, 2.14 and 9.04 to the extent any claim thereunder relates to an
event arising prior to such assignment) and be released from its obligations
(other than its obligations under Section 8.04 to the extent any claim
thereunder relates to an event arising prior to such assignment) under this
Agreement (and, in the case of an Assignment and Acceptance covering all or the
remaining portion of an assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto).
(b) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as provided
in such Assignment and Acceptance, such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of, or the perfection or priority of any lien or security interest created
or purported to be created under or in connection with, this Agreement or any
other instrument or document furnished pursuant hereto; (ii) such assigning
Lender makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Company or any other Borrower or the
performance or observance by the Company or any other Borrower of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has received a copy of
this Agreement, together with copies of the financial statements referred to in
Section 4.01 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently and without
reliance upon the Agent, such assigning Lender 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
this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi)
such assignee appoints and authorizes the Agent to take such action as agent on
its behalf and to exercise such powers and discretion under this Agreement as
are delegated to the Agent by the terms hereof, together with such powers and
discretion as are reasonably incidental thereto; and (vii) such assignee agrees
that it will perform in accordance with their terms all of the obligations that
by the terms of this Agreement are required to be performed by it as a Lender.
(c) Upon its receipt of an Assignment and Acceptance executed by
an assigning Lender and an assignee representing that it is an Eligible
Assignee, together with any Note or Notes subject to such assignment, the Agent
shall, if such Assignment and Acceptance has been completed and is in
substantially the form of Exhibit C hereto, (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in the Register and
(iii) give prompt notice thereof to the Company.
(d) The Agent shall maintain at its address referred to in
Section 9.02 a copy of each Assumption Agreement and each Assignment and
Acceptance delivered to and accepted by it and a register for the recordation of
the names and addresses of the Lenders and the Commitment of, and principal
amount of the Advances owing to, each Lender from time to time (the "Register").
--------
The entries in the Register shall be conclusive and binding for all purposes,
absent manifest error, and the Borrowers, the Agent and the Lenders may treat
each Person whose name is recorded in the Register as a Lender hereunder for all
purposes of this Agreement. The Register shall be available for inspection by
the Company or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(e) Each Lender may sell participations to one or more banks or
other entities (other than the Company or any of its Affiliates) in or to all or
a portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment, the Advances owing to it and any
Note or Notes held by it); provided, however, that (i) such Lender's obligations
-------- -------
under this Agreement (including, without limitation, its Commitment to the
Borrowers hereunder) shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, (iii) such Lender shall remain the holder of any such Note for all
purposes of this Agreement, (iv) the Company, the other Borrowers, the 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 and
(v) no participant under any such participation shall have any right to approve
any amendment or waiver of any provision of this Agreement or any Note, or any
consent to any departure by the Company or any other Borrower therefrom, except
to the extent that such amendment, waiver or consent would reduce the principal
of, or interest on, the Notes or any fees or other amounts payable hereunder, in
each case to the extent subject to such participation, or postpone any date
fixed for any payment of principal of, or interest on, the Notes or any fees or
other amounts payable hereunder, in each case to the extent subject to such
participation.
(f) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
9.07, disclose to the assignee or participant or proposed assignee or
participant, any information relating to any Borrower furnished to such Lender
by or on behalf of such Borrower; provided that, prior to any such disclosure,
--------
the assignee or participant or proposed assignee or participant shall agree to
preserve the confidentiality of any Company Information relating to any Borrower
received by it from such Lender.
(g) Notwithstanding any other provision set forth in this
Agreement, any Lender may at any time create a security interest in all or any
portion of its rights under this Agreement (including, without limitation, the
Advances owing to it and any Note or Notes held by it) in favor of any Federal
Reserve Bank in accordance with Regulation A of the Board of Governors of the
Federal Reserve System.
SECTION 9.08. Confidentiality. Neither the Agent nor any Lender
---------------
may disclose to any Person any confidential, proprietary or non-public
information of the Company furnished to the Agent or the Lenders by the Company
(such information being referred to collectively herein as the "Company
-------
Information"), except that each of the Agent and each of the Lenders may
- -----------
disclose Company Information (i) to its and its affiliates' employees, officers,
directors, agents and advisors (it being understood that the Persons to whom
such disclosure is made will be informed of the confidential nature of such
Company Information and such person shall have agreed to keep such Company
Information confidential on substantially the same terms as provided herein),
(ii) to the extent requested by any regulatory authority, (iii) to the extent
required by applicable laws or regulations or by any subpoena or similar legal
process or requested by any self-regulatory authority, provided that, to the
--------
extent practicable, the Company is given prompt written notice of such
requirement or request prior to such disclosure and assistance in obtaining an
order protecting such information from public disclosure, (iv) to any other
party to this Agreement, (v) 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, (vi) subject to an agreement containing
provisions substantially the same as those of this Section 9.08, to any assignee
or participant or prospective assignee or participant, (vii) to the extent such
Company Information (A) is or becomes generally available to the public on a
non-confidential basis other than as a result of a breach of this Section 9.08
by the Agent or such Lender, or (B) is or becomes available to the Agent or such
Lender on a nonconfidential basis from a source other than the Company and not,
to the knowledge of the Agent or such Lender, in breach of such third party's
obligations of confidentiality and (viii) with the consent of the Company.
SECTION 9.09. Designated Subsidiaries. (a) Designation. The
------------------------ -----------
Company may at any time, and from time to time, by delivery to the Agent of a
Designation Agreement duly executed by the Company and the respective Subsidiary
and substantially in the form of Exhibit D hereto, designate such Subsidiary as
a "Designated Subsidiary" for purposes of this Agreement and such Subsidiary
shall thereupon become a "Designated Subsidiary" for purposes of this Agreement
and, as such, shall have all of the rights and obligations of a Borrower
hereunder. The Agent shall promptly notify each Lender of each such designation
by the Company and the identity of the respective Subsidiary.
(b) Termination. Upon the indefeasible payment and performance in
-----------
full of all of the indebtedness, liabilities and obligations under this
Agreement of any Designated Subsidiary then, so long as at the time no Notice of
Borrowing in respect of such Designated Subsidiary is outstanding, such
Subsidiary's status as a "Designated Subsidiary" shall terminate upon notice to
such effect from the Agent to the Lenders (which notice the Agent shall give
promptly, and only upon its receipt of a request therefor from the Company).
Thereafter, the Lenders shall be under no further obligation to make any Advance
hereunder to such Designated Subsidiary.
SECTION 9.10. Governing Law. This Agreement and the Notes shall
--------------
be governed by, and construed in accordance with, the laws of the State of New
York.
SECTION 9.11. Execution in Counterparts. This Agreement may be
--------------------------
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 9.12. Judgment (a) If for the purposes of obtaining
--------
judgment in any court it is necessary to convert a sum due hereunder in Dollars
into another currency, the parties hereto agree, to the fullest extent that they
may effectively do so, that the rate of exchange used shall be that at which in
accordance with normal banking procedures the Agent could purchase Dollars with
such other currency at Citibank's principal office in London at 11:00 A.M.
(London time) on the Business Day preceding that on which final judgment is
given.
(b) If for the purposes of obtaining judgment in any court it is
necessary to convert a sum due hereunder in a Committed Currency into Dollars,
the parties agree to the fullest extent that they may effectively do so, that
the rate of exchange used shall be that at which in accordance with normal
banking procedures the Agent could purchase such Committed Currency with Dollars
at Citibank's principal office in London at 11:00 A.M. (London time) on the
Business Day preceding that on which final judgment is given.
(c) The obligation of any Borrower in respect of any sum due from
it in any currency (the "Primary Currency") to any Lender or the Agent hereunder
----------------
shall, notwithstanding any judgment in any other currency, be discharged only to
the extent that on the Business Day following receipt by such Lender or the
Agent (as the case may be), of any sum adjudged to be so due in such other
currency, such Lender or the Agent (as the case may be) may in accordance with
normal banking procedures purchase the applicable Primary Currency with such
other currency; if the amount of the applicable Primary Currency so purchased is
less than such sum due to such Lender or the Agent (as the case may be) in the
applicable Primary Currency, each Borrower agrees, as a separate obligation and
notwithstanding any such judgment, to indemnify such Lender or the Agent (as the
case may be) against such loss, and if the amount of the applicable Primary
Currency so purchased exceeds such sum due to any Lender or the Agent (as the
case may be) in the applicable Primary Currency, such Lender or the Agent (as
the case may be) agrees to remit to such Borrower such excess.
SECTION 9.13. Jurisdiction, Etc. (a) Each of the parties hereto
------------------
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of any New York State court or federal court of
the United States of America sitting in New York City, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement or the Notes, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally agrees that
all claims in respect of any such action or proceeding may be heard and
determined in any such New York State court or, to the extent permitted by law,
in such federal court. Each Designated Subsidiary hereby agrees that service of
process in any such action or proceeding brought in the any such New York State
court or in such federal court may be made upon the Company and each Designated
Subsidiary hereby irrevocably appoints the Company its authorized agent to
accept such service of process, and agrees that the failure of the Company to
give any notice of any such service shall not impair or affect the validity of
such service or of any judgment rendered in any action or proceeding based
thereon. The Company and each Designated Subsidiary hereby further irrevocably
consent to the service of process in any action or proceeding in such courts by
the mailing thereof by any parties hereto by registered or certified mail,
postage prepaid, to the Company at its address specified pursuant to Section
9.02. Each of the parties hereto agrees that a final judgment in any such action
or proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Agreement shall affect any right that any party may otherwise have to bring any
action or proceeding relating to this Agreement or the Notes in the courts of
any jurisdiction. To the extent that each Designated Subsidiary has or hereafter
may acquire any immunity from jurisdiction of any court or from any legal
process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) with respect to itself
or its property, each Designated Subsidiary hereby irrevocably waives such
immunity in respect of its obligations under this Agreement.
(b) Each of the parties hereto irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or the Notes
in any New York State or federal court. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
SECTION 9.14. Substitution of Currency. If a change in any
--------------------------
Committed Currency occurs pursuant to any applicable law, rule or regulation of
any governmental, monetary or multi-national authority, this Agreement
(including, without limitation, the definition of Eurocurrency Rate) will be
amended to the extent determined by the Agent (acting reasonably and in
consultation with the Company) to be necessary to reflect the change in currency
and to put the Lenders and the Borrowers in the same position, so far as
possible, that they would have been in if no change in such Committed Currency
had occurred.
SECTION 9.15. No Liability of the Issuing Banks. The Borrowers
----------------------------------
assume all risks of the acts or omissions of any beneficiary or transferee of
any Letter of Credit with respect to its use of such Letter of Credit. Neither
an Issuing Bank nor any of its officers or directors shall be liable or
responsible for: (a) the use that may be made of any Letter of Credit or any
acts or omissions of any beneficiary or transferee in connection therewith; (b)
the validity, sufficiency or genuineness of documents, or of any endorsement
thereon, even if such documents should prove to be in any or all respects
invalid, insufficient, fraudulent or forged; or (c) any other circumstances
whatsoever in making or failing to make payment under any Letter of Credit,
except that the applicable Borrower shall have a claim against such Issuing
Bank, and such Issuing Bank shall be liable to such Borrower, to the extent of
any direct, but not consequential, damages suffered by such Borrower that such
Borrower proves were caused by such Issuing Bank's willful misconduct or gross
negligence when determining whether drafts and other documents presented under a
Letter of Credit comply with the terms thereof. In furtherance and not in
limitation of the foregoing, such Issuing Bank 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; provided that nothing
--------
herein shall be deemed to excuse such Issuing Bank if it acts with gross
negligence or willful misconduct in accepting such documents.
SECTION 9.16. Patriot Act Notice. Each Lender and the Agent (for
------------------
itself and not on behalf of any Lender) hereby notifies each Borrower that
pursuant to the requirements of the Patriot Act, it is required to obtain,
verify and record information that identifies each Borrower, which information
includes the name and address of each Borrower and other information that will
allow such Lender or the Agent, as applicable, to identify each Borrower in
accordance with the Patriot Act. Each Borrower shall provide such information
and take such actions as are reasonably requested by the Agent or any Lenders in
order to assist the Agent and the Lenders in maintaining compliance with the
Patriot Act.
SECTION 9.17. Power of Attorney. Each Subsidiary of the Company
-----------------
may from time to time authorize and appoint the Company as its attorney-in-fact
to execute and deliver (a) any amendment, waiver or consent in accordance with
Section 9.01 on behalf of and in the name of such Subsidiary and (b) any notice
or other communication hereunder, on behalf of and in the name of such
Subsidiary. Such authorization shall become effective as of the date on which
such Subsidiary delivers to the Agent a power of attorney enforceable under
applicable law and any additional information to the Agent as necessary to make
such power of attorney the legal, valid and binding obligation of such
Subsidiary.
SECTION 9.18. Waiver of Jury Trial Each of the Company, each
---------------------
other Borrower, the Agent and the Lenders hereby irrevocably waives all right to
trial by jury in any action, proceeding or counterclaim (whether based on
contract, tort or otherwise) arising out of or relating to this Agreement or the
Notes or the actions of the Agent or any Lender in the negotiation,
administration, performance or enforcement thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly authorized, as of the
date first above written.
CORNING INCORPORATED
By /s/ Mark S. Rogus
---------------------------------
Title: Senior Vice President and Treasurer
CITIBANK, N.A.,
as Agent
By /s/ Maureen Maroney
---------------------------------
Title: Director
Lenders
-------
Letter of Credit Commitment
- ---------------------------
$100,000,000 CITIBANK, N.A.
By /s/ Maureen Maroney
---------------------------------
Title: Director
$100,000,000 JPMORGAN CHASE BANK, N.A.
By /s/ Joan M. Fitzgibbon
---------------------------------
Title: Managing Director
$200,000,000 Total of the Letter of Credit Commitments
Revolving Credit Commitment
- ---------------------------
$125,000,000 CITIBANK, N.A.
By /s/ Maureen Maroney
---------------------------------
Title: Director
$125,000,000 JPMORGAN CHASE BANK, N.A.
By /s/ Joan M. Fitzgibbon
---------------------------------
Title: Managing Director
Agents
------
$100,000,000 BANK OF AMERICA, N.A.
By /s/ Kevin McMahon
---------------------------------
Title: Senior Vice President
$100,000,000 THE BANK OF TOKYO-MITSUBISHI, LTD.
By /s/ Andrew Bernstein
---------------------------------
Title: Authorized Signatory
$100,000,000 WACHOVIA BANK, NATIONAL ASSOCIATION
By /s/ James F. Heatwole
---------------------------------
Title: Director
$100,000,000 BARCLAYS BANK PLC
By /s/ Nicholas Bell
---------------------------------
Title: Director
$100,000,000 DEUTSCHE BANK AG NEW YORK BRANCH
By /s/ Andreas Neumeier
---------------------------------
Title: Director
By /s/ David Dickinson Jr.
Title: Director
Lenders
-------
$75,000,000 MIZUHO CORPORATE BANK, LTD.
By /s/ Bertram H. Tang
---------------------------------
Title: Vice President & Team Leader
$50,000,000 GOLDMAN SACHS CREDIT PARTNERS LP
By /s/ Walter A. Jackson
---------------------------------
Title: Authorized Signatory
$50,000,000 STANDARD CHARTERED BANK
By /s/ Richard L. Van de Berghe, Jr.
---------------------------------
Title: Senior Vice President
By /s/ Robert K. Reddington
---------------------------------
Title: AVP/Credit Documentation
$50,000,000 SUMITOMO MITSUI BANKING CORPORATION
By /s/ Edward McColly
---------------------------------
Title: Vice President & Department Head
$975,000,000 Total of the Revolving Credit Commitments
SCHEDULE I
CORNING INCORPORATED
FIVE YEAR CREDIT AGREEMENT
APPLICABLE LENDING OFFICES
Name of Initial Lender Domestic Lending Office Eurocurrency Lending Office
- ---------------------- ----------------------- ---------------------------
SCHEDULE 2.01(d)
Existing Letters of Credit
None
SCHEDULE 3.01(b)
Disclosed Litigation
Environmental Litigation. Corning has been named by the Environmental Protection
Agency under the Superfund Act, or by state governments under similar state
laws, as a potentially responsible party at 11 active hazardous waste sites.
Under the Superfund Act, all parties who may have contributed any waste to a
hazardous waste site, identified by such Agency, are jointly and severally
liable for the cost of cleanup unless the Agency agrees otherwise. It is
Corning's policy to accrue for its estimated liability related to Superfund
sites and other environmental liabilities related to property owned by Corning
based on expert analysis and continual monitoring by both internal and external
consultants. Corning has accrued approximately $14 million for its estimated
liability for environmental cleanup and litigation at December 31, 2004.
Schwinger and Stevens Toxins Lawsuits. In April 2002, Corning was named as a
defendant in two actions, Schwinger and Stevens, filed in the U.S. District
Court for the Eastern District of New York, which asserted various personal
injury and property damage claims against a number of corporate defendants.
These claims allegedly arise from the release of toxic substances from a
Sylvania nuclear materials processing facility near Hicksville, New York.
Amended complaints naming 205 plaintiffs and seeking damages in excess of $3
billion were served in September 2002. The sole basis of liability against
Corning was plaintiffs' claim that Corning was the successor to Sylvania-Corning
Nuclear Corporation, a Delaware corporation formed in 1957 and dissolved in
1960. Management intends to vigorously contest all claims against Corning for
the reason that Corning is not the successor to Sylvania-Corning. Management
will also defend on the grounds that almost all of the wrongful death claims and
personal injury claims are time-barred. At a status conference in December 2002,
the Court decided to "administratively close" the Schwinger and Stevens cases
and ordered plaintiffs' counsel to bring new amended complaints with
"bellwether" plaintiffs. In these actions, known as Schwinger II and Astuto, the
plaintiffs have not named Corning as a defendant. Although it appears that
plaintiffs may proceed only against the other corporate defendants, the original
Schwinger and Stevens cases remain pending and no order has been entered
dismissing Corning.
Dow Corning Bankruptcy. Corning and Dow Chemical each own 50% of the common
stock of Dow Corning, which was in reorganization proceedings under Chapter 11
of the U.S. Bankruptcy Code between May 1995 and June 2004. Dow Corning filed
for bankruptcy protection to address pending and claimed liabilities arising
from many thousand breast-implant product lawsuits each of which typically
sought damages in excess of one million dollars. On November 8, 1998, Dow
Corning and the Tort Claimants Committee jointly filed a revised Plan of
Reorganization (Joint Plan) which provided for the settlement or other
resolution of implant claims. After review and approvals by the Bankruptcy Court
and the U.S. District Court of the Eastern District of Michigan, and an appeal,
the District Court on April 2, 2004 entered an order establishing June 1, 2004
as the effective date of the Joint Plan.
Under the terms of the Joint Plan, Dow Corning has established and is funding a
Settlement Trust and a Litigation Facility to provide a means for tort claimants
to settle or litigate their claims. Of the approximately $3.2 billion of
required funding, Dow Corning has paid approximately $1.6 billion (inclusive of
insurance) and expects to pay up to an additional $1.6 billion ($710 million
after-tax and net of expected insurance recoveries) over 16 years. Corning and
Dow Chemical have each agreed to provide a credit facility to Dow Corning of up
to $150 million ($300 million in the aggregate), subject to the terms and
conditions stated in the Joint Plan. As required by the Joint Plan, Dow Corning
has fully satisfied (or reserved for) the claims of its commercial creditors in
accordance with a March 31, 2004 ruling of the District Court determining the
amount of pendency interest allowed on the $810 million in principal owing on
such claims. In the second quarter of 2004, Dow Corning recorded a $47 million
pre-tax adjustment to its interest liabilities relating to this matter; Corning
recognized $14 million in its second quarter equity earnings for its after tax
share of this adjustment. Certain commercial creditors have appealed that ruling
to the U.S. Court of Appeals of the Sixth Circuit seeking from Dow Corning an
additional sum of approximately $80 million for interest at default rates and
enforcement costs.
In addition, Dow Corning has received a statutory notice of deficiency from the
United States Internal Revenue Service asserting tax deficiencies totaling
approximately $65.3 million relating to its federal income tax returns for the
1995 and 1996 calendar years. This matter is pending before the U.S. District
Court in Michigan. Dow Corning has also received a proposed adjustment from the
IRS (approximately $116.9 million) with respect to its federal income tax
returns for the 1997, 1998 and 1999 calendar years. Dow Corning is vigorously
contesting these deficiencies and proposed adjustments which it believes are
excessive.
Subject to future rulings by the bankruptcy court and potential changes in
estimated bankruptcy-related liabilities, it is possible that Dow Corning may
record bankruptcy-related charges in the future.
The Joint Plan includes releases for Corning and Dow Chemical as shareholders in
exchange for contributions to the Joint Plan. Although claims against the
shareholders were included in several thousand state and federal lawsuits filed
pre-bankruptcy, alleging injuries arising from Dow Corning's implant products,
Corning was awarded summary judgment in federal court and in several state
jurisdictions. The remaining claims against Corning will be channeled by the
Joint Plan into facilities established by the Joint Plan.
Federal Securities Cases. From December 2001 through April 2002, Corning and
three of its officers and directors were named defendants in lawsuits alleging
violations of the U.S. securities laws in connection with Corning's November
2000 offering of 30 million shares of common stock and $2.7 billion zero coupon
convertible debentures, due November 2015. In addition, the Company and the same
three officers and directors were named in lawsuits alleging misleading
disclosures and non-disclosures that allegedly inflated the price of Corning's
common stock in the period from October 2000 through July 9, 2001. The
plaintiffs in these actions seek to represent classes of purchasers of Corning's
stock in all or part of the period indicated. On August 2, 2002, the U.S.
District Court of the Western District of New York entered an order
consolidating these actions for all purposes, designating lead plaintiffs and
lead counsel, and directing service of a consolidated complaint. The
consolidated amended complaint requests substantial damages in an unspecified
amount to be proved at trial. In February 2003, defendants filed a motion to
dismiss the complaint for failure to allege the requisite elements of the claims
with particularity. The Court heard arguments on May 29 and June 9, 2003 and on
April 9, 2004 entered a Decision and Order dismissing the complaint. Plaintiffs
appealed to the U.S. Court of Appeals of the Second Circuit. Oral argument was
held on February 2, 2005, and the Court reserved decision.
Pittsburgh Corning Corporation. Corning and PPG Industries, Inc. ("PPG") each
own 50% of the capital stock of PCC. Over a period of more than two decades, PCC
and several other defendants have been named in numerous lawsuits involving
claims alleging personal injury from exposure to asbestos. On April 16, 2000,
PCC filed for Chapter 11 reorganization in the U.S. Bankruptcy Court for the
Western District of Pennsylvania. As of the bankruptcy filing, PCC had in excess
of 140,000 open claims and had insufficient remaining insurance and assets to
deal with its alleged current and future liabilities. More than 100,000
additional claims have been filed with PCC after its bankruptcy filing. At the
time PCC filed for bankruptcy protection, there were approximately 12,400 claims
pending against Corning in state court lawsuits alleging various theories of
liability based on exposure to PCC's asbestos products and typically requesting
monetary damages in excess of one million dollars per claim. Corning has
defended those claims on the basis of the separate corporate status of PCC and
the absence of any facts supporting claims of direct liability arising from
PCC's asbestos products. Corning is also currently named in approximately 11,400
other cases (approximately 43,400 claims) alleging injuries from asbestos and
similar amounts of monetary damages per claim.
In the bankruptcy court, PCC in April 2000 obtained a preliminary injunction
against the prosecution of asbestos actions arising from PCC's products against
its two shareholders to afford the parties a period of time (the Injunction
Period) in which to negotiate a plan of reorganization for PCC ("PCC Plan").
On May 14, 2002, PPG announced that it had agreed with certain of its insurance
carriers and representatives of current and future asbestos claimants on the
terms of a settlement arrangement applicable to claims arising from PCC's
products.
On March 28, 2003, Corning announced that it had also reached agreement with
representatives of current and future asbestos claimants on a settlement
arrangement that was thereafter incorporated into the PCC Plan. This settlement
remains subject to a number of contingencies, including approval by the
bankruptcy court. Corning's settlement will require the contribution, if the
Plan is approved and becomes effective, of its equity interest in PCC, its
one-half equity interest in PCE, and 25 million shares of Corning common stock.
The settlement also requires Corning to make cash payments of $144 million (net
present value as of December 31, 2004) in six installments beginning one year
after the Plan is effective. In addition, Corning will assign policy rights or
proceeds under primary insurance from 1962 through 1984, as well as rights to
proceeds under certain excess insurance, most of which falls within the period
from 1962 through 1973. In return for these contributions, and subject to
receiving court approval of the PCC Plan, Corning expects to receive a release
and an injunction channeling asbestos claims against it into a settlement trust
under the PCC Plan.
Corning recorded an initial charge of $298 million in the period ending March
31, 2003 to reflect the settlement terms. However, the amount of the charge for
this settlement requires adjustment each quarter based upon movement in
Corning's common stock price prior to contribution of the shares to the trust.
During 2004, Corning recorded a charge of $33 million to reflect the
mark-to-market of Corning common stock. Beginning with the first quarter of 2003
and through December 31, 2004, Corning recorded total net charges of $446
million to reflect the initial settlement and mark-to-market the value of
Corning common stock.
Two of Corning's primary insurers and several excess insurers have commenced
litigation for a declaration of the rights and obligations of the parties under
insurance policies, including rights that may be affected by the settlement
arrangement described above. Corning is vigorously contesting these cases.
The PCC Plan received a favorable vote from creditors in March 2004. Hearings to
consider objections to the Plan were held in the Bankruptcy Court in May 2004.
The parties filed post-hearing briefs and made final oral arguments to the
Bankruptcy Court in November 2004. The Bankruptcy Court has allowed an
additional round of briefing to address current case law developments, and heard
additional oral arguments at a hearing on March 16, 2005. At this hearing, the
court allowed the proponents of the PCC Plan 60 days to consider amendments to
the Plan or to request rulings on the pending objections. The timing and outcome
are uncertain. If the Bankruptcy Court does not confirm the PCC Plan in its
current form, changes to the settlement agreement are reasonably possible.
Further judicial review is also reasonably possible.
Astrium. In December of 2000, Astrium, SAS and Astrium, Ltd. filed a complaint
for negligence in the U.S. District Court for the Central District of California
against TRW, Inc., Pilkington Optronics Inc., Corning NetOptix, Inc., OFC
Corporation and Optical Filter Corporation claiming damages in excess of $150
million. The complaint alleges that certain cover glasses for solar arrays used
to generate electricity from solar energy on satellites sold by Astrium's
corporate successor were negligently coated by NetOptix or its subsidiaries
(prior to Corning's acquisition of NetOptix) in such a way that the amount of
electricity the satellite can produce and their effective life were materially
reduced. NetOptix has denied that the coatings produced by NetOptix or its
subsidiaries caused the damage alleged in the complaint, or that it is legally
liable for any damages that Astrium may have experienced. In April 2002, the
Court granted motions for summary judgment by NetOptix and other defendants to
dismiss the negligence claims, but permitted plaintiffs to add fraud and
negligent misrepresentation claims against all defendants and a breach of
warranty claim against NetOptix and its subsidiaries. In October 2002, the Court
again granted defendants' motions for summary judgment and dismissed the
negligent misrepresentation and breach of warranty claims. The intentional fraud
claims were dismissed against all non-settling defendants on February 25, 2003.
On March 19, 2003, Astrium appealed all of the Court's Rulings regarding the
various summary judgment motions to the Ninth Circuit Court of Appeals. The
period of briefing the appeal was extended, and oral argument has not been
scheduled.
Furukawa Electric Company. On February 3, 2003, The Furukawa Electric Company
filed suit in the Tokyo District Court in Japan against Corning Cable Systems
International Corporation ("CCS International") alleging infringement of
Furukawa's Japanese Patent No. 2,023,966 which relates to separable fiber ribbon
units used in optical cable. Furukawa's complaint requests slightly over (Y)6
billion in damages (approximately $56 million) and an injunction against further
sales in Japan of these fiber ribbon units. CCS International has denied the
allegation of infringement, asserted that the patent is invalid, and is
defending vigorously against this lawsuit. On October 29, 2004, the Tokyo
District Court issued it's ruling in favor of CCS on both non-infringement and
patent invalidity. Furukawa has filed an appeal from this ruling.
PicVue Electronics Ltd., PicVue OptoElectronics International, Inc. and
Eglasstrek Gmbh. In June 2002, Corning brought an action seeking to restrain the
use of its trade secrets and for copyright infringement relating to certain
aspects of the fusion draw machine used for liquid crystal display glass
melting. This action is pending in the U.S. District Court for the Western
District of New York against these three named defendants. The District Court in
July 2003 denied the PicVue motion to dismiss and granted a preliminary
injunction in favor of Corning, subject to posting a bond in an amount to be
determined. PicVue, a Taiwanese company, responded in July 2003 with a
counterclaim alleging violations of the antitrust laws and claiming damages of
more than $120 million as well as requesting trebled damages. PicVue has
appealed the District Court's ruling and the District Court has deferred ruling
on the bond amount until the completion of such appeal. The appellate court
affirmed the grant of the preliminary injunction, but remanded the case for the
District Court to clarify the scope of the injunction and to consider what, if
any, bond should be posted. The parties have submitted papers to the District
Court addressing the issues remanded. Additional proceedings in the District
Court are expected in the first half of 2005.
Tyco Electronics Corporation and Tyco Technology Resources, Inc. On August 13,
2003, CCS Holdings Inc. ("CCS"), a Corning subsidiary, filed an action in the
U.S. District Court for the Middle District of North Carolina against Tyco
Electronics Corporation and Tyco Technology Resources, Inc. ("Tyco"), asking the
court to declare a Tyco patent invalid and not infringed by CCS. The patent
generally relates to a type of connector for optical fiber cables. Tyco has
responded with a motion to dismiss the action for lack of jurisdiction, but that
motion has been withdrawn. Tyco has filed an answer and counterclaims to CCS's
complaint. Tyco's counterclaims allege patent infringement by CCS and seek
unspecified monetary damages and an injunction.
Grand Jury Investigation of Conventional Cathode Ray Television Glass Business.
In August 2003, CAV was served with a federal grand jury document subpoena
related to pricing, bidding and customer practices involving conventional
cathode ray television glass picture tube components. Seventeen employees or
former employees have each received a related subpoena. CAV is a general
partnership, 51% owned by Corning and 49% owned by Asahi Glass America, Inc.
CAV's only manufacturing facility in State College, Pennsylvania closed in the
first half of 2003 due to declining sales.
SCHEDULE 5.02(d)
Existing Subsidiary Debt
Borrower Maturity BV @2/28/05
- -----------------------------------------------------------
Corning Japan KK 6/25/2013 $11,966,924
Corning Japan KK 10/5/2013 11,581,356
Corning Japan KK 9/5/2014 33,095,035
Corning Japan KK 6/5/2015 31,131,447
Corning Japan KK 1/5/2015 47,659,900
Corning Japan KK 7/9/2014 47,659,900
- -----------------------------------------------------------
TOTAL $183,094,561
===========================================================
EXHIBIT A - FORM OF
PROMISSORY NOTE
U.S.$_______________ Dated: _______________, 200_
FOR VALUE RECEIVED, the undersigned, [NAME OF BORROWER], a
_________________________ corporation (the "Borrower"), HEREBY PROMISES TO PAY
--------
to the order of _________________________ (the "Lender") for the account of its
------
Applicable Lending Office on the Termination Date (each as defined in the Credit
Agreement referred to below) the principal sum of U.S.$[amount of the Lender's
Commitment in figures] or, if less, the aggregate principal amount of the
Advances made by the Lender to the Borrower pursuant to the Credit Agreement
dated as of March 17, 2005 among the Borrower, [Corning Incorporated,] the
Lender and certain other lenders parties thereto, and Citibank, N.A. as Agent
for the Lender and such other lenders (as amended or modified from time to time,
the "Credit Agreement"; the terms defined therein being used herein as therein
-----------------
defined) outstanding on such date.
The Borrower promises to pay interest on the unpaid principal
amount of each Advance from the date of such Advance until such principal amount
is paid in full, at such interest rates, and payable at such times, as are
specified in the Credit Agreement.
Both principal and interest in respect of each Advance (i) in
Dollars are payable in lawful money of the United States of America to the Agent
at its account maintained at 388 Greenwich Street, New York, New York 10013, in
same day funds and (ii) in any Committed Currency are payable in such currency
at the applicable Payment Office in same day funds. Each Advance owing to the
Lender by the Borrower pursuant to the Credit Agreement, and all payments made
on account of principal thereof, shall be recorded by the Lender and, prior to
any transfer hereof, endorsed on the grid attached hereto which is part of this
Promissory Note.
This Promissory Note is one of the Notes referred to in, and is
entitled to the benefits of, the Credit Agreement. The Credit Agreement, among
other things, (i) provides for the making of Advances by the Lender to the
Borrower from time to time in an aggregate amount not to exceed at any time
outstanding the U.S. dollar amount first above mentioned, the indebtedness of
the Borrower resulting from each such Advance being evidenced by this Promissory
Note, (ii) contains provisions for determining the Dollar Equivalent of Advances
denominated in Committed Currencies and (iii) contains provisions for
acceleration of the maturity hereof upon the happening of certain stated events
and also for prepayments on account of principal hereof prior to the maturity
hereof upon the terms and conditions therein specified.
The Borrower hereby waives presentment, demand, protest and
notice of any kind. No failure to exercise, and no delay in exercising, any
rights hereunder on the part of the holder hereof shall operate as a waiver of
such rights.
This Promissory Note shall be governed by, and construed in
accordance with, the laws of the State of New York.
[NAME OF BORROWER]
By
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Title:
ADVANCES AND PAYMENTS OF PRINCIPAL
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Amount of
Date Amount of Principal Paid Unpaid Principal Notation
Advance or Prepaid Balance Made By
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EXHIBIT B - FORM OF NOTICE OF
BORROWING
Citibank, N.A., as Agent
for the Lenders parties
to the Credit Agreement
referred to below
Two Penns Way
New Castle, Delaware 19720
[Date]
Attention: Bank Loan Syndications Department
Ladies and Gentlemen:
The undersigned, [Name of Borrower], refers to the Credit
Agreement, dated as of March 17, 2005 (as amended or modified from time to time,
the "Credit Agreement", the terms defined therein being used herein as therein
-----------------
defined), among the undersigned, [Corning Incorporated,] certain Lenders parties
thereto and Citibank, N.A., as Agent for said Lenders, and hereby gives you
notice, irrevocably, pursuant to Section 2.02 of the Credit Agreement that the
undersigned hereby requests a Borrowing under the Credit Agreement, and in that
connection sets forth below the information relating to such Borrowing (the
"Proposed Borrowing") as required by Section 2.02(a) of the Credit Agreement:
------------------
(i) The Business Day of the Proposed Borrowing is
_______________, 200_.
(ii) The Type of Advances comprising the Proposed Borrowing is
[Base Rate Advances] [Eurocurrency Rate Advances].
(iii) The aggregate amount of the Proposed Borrowing is
$_______________][for a Borrowing in a Committed Currency, list
currency and amount of Borrowing].
[(iv) The initial Interest Period for each Eurocurrency Rate
Advance made as part of the Proposed Borrowing is _____ month[s].]
The undersigned hereby certifies that the following statements
are true on the date hereof, and will be true on the date of the Proposed
Borrowing:
(A) the representations and warranties contained in Section 4.01
of the Credit Agreement (except the representations set forth in the
last sentence of subsection (e) thereof and in subsection (f)(i)
thereof and, if the Public Debt Rating is BBB- or higher by S&P or
Baa3 or higher from Moody's, the representation set forth in
subsection (n) thereof) are correct, before and after giving effect to
the Proposed Borrowing and to the application of the proceeds
therefrom, as though made on and as of such date, and additionally, if
the undersigned is a Designated Subsidiary, the representations and
warranties contained in its Designation Agreement are correct, before
and after giving effect to the Proposed Borrowing and to the
application of the proceeds therefrom, as though made on and as of
such date; and
(B) no event has occurred and is continuing, or would result from
such Proposed Borrowing or from the application of the proceeds
therefrom, that constitutes a Default.
Very truly yours,
[NAME OF BORROWER]
By
------------------------
Title:
EXHIBIT C - FORM OF
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement dated as of March 17,
2005 (as amended or modified from time to time, the "Credit Agreement") among
-----------------
Corning Incorporated, a New York corporation (the "Company"), the Lenders (as
-------
defined in the Credit Agreement) and Citibank, N.A., as agent for the Lenders
(the "Agent"). Terms defined in the Credit Agreement are used herein with the
-----
same meaning.
The "Assignor" and the "Assignee" referred to on Schedule I
hereto agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, an interest in and to
the Assignor's rights and obligations under the [Credit Agreement as of the date
hereof] [the Letter of Credit Facility] equal to the percentage interest
specified on Schedule 1 hereto of [all outstanding rights and obligations under
the Credit Agreement together with participations in Letters of Credit held by
the Assignor on the date hereof] [such Assignor's Unissued Letter of Credit
Commitment]. After giving effect to such sale and assignment, the Assignee's
[Revolving Credit Commitment and the amount of the Advances owing to the
Assignee] [Letter of Credit Commitment] will be as set forth on Schedule 1
hereto.
2. The Assignor (i) represents and warrants that it is the legal
and beneficial owner of the interest being assigned by it hereunder and that
such interest is free and clear of any adverse claim; (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of, or the perfection or priority of any lien
or security interest created or purported to be created under or in connection
with, the Credit Agreement or any other instrument or document furnished
pursuant thereto; (iii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Company or any
other Borrower or the performance or observance by the Company or any other
Borrower of any of its obligations under the Credit Agreement or any other
instrument or document furnished pursuant thereto; and (iv) attaches the Note[,
if any,] held by the Assignor [and requests that the Agent exchange such Note
for a new Note payable to the order of [the Assignee in an amount equal to the
Revolving Credit Commitment assumed by the Assignee pursuant hereto or new Notes
payable to the order of the Assignee in an amount equal to the Revolving Credit
Commitment assumed by the Assignee pursuant hereto and] the Assignor in an
amount equal to the Revolving Credit Commitment retained by the Assignor under
the Credit Agreement[, respectively,] as specified on Schedule 1 hereto].
3. The Assignee (i) confirms that it has received a copy of the
Credit Agreement, together with copies of the financial statements referred to
in Section 4.01 thereof 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 Acceptance; (ii) agrees that it will, independently and
without reliance upon the 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 Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv)
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers and discretion under the Credit Agreement as are
delegated to the Agent by the terms thereof, together with such powers and
discretion as are reasonably incidental thereto; (v) agrees that it will perform
in accordance with their terms all of the obligations that by the terms of the
Credit Agreement are required to be performed by it as a Lender; and (vi)
attaches any U.S. Internal Revenue Service forms required under Section 2.14 of
the Credit Agreement.
4. Following the execution of this Assignment and Acceptance, it
will be delivered to the Agent for acceptance and recording by the Agent. The
effective date for this Assignment and Acceptance (the "Effective Date") shall
---------------
be the date of acceptance hereof by the Agent, unless otherwise specified on
Schedule 1 hereto.
5. Upon such acceptance and recording by the Agent, as of the
Effective Date, (i) the Assignee shall be a party to the Credit Agreement and,
to the extent provided in this Assignment and Acceptance, have the rights and
obligations of a Lender thereunder and (ii) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by the Agent, from and
after the Effective Date, the Agent shall make all payments under the Credit
Agreement and the Notes in respect of the interest assigned hereby (including,
without limitation, all payments of principal, interest and facility fees with
respect thereto) to the Assignee. The Assignor and Assignee shall make all
appropriate adjustments in payments under the Credit Agreement and the Notes for
periods prior to the Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of New York.
8. This Assignment and Acceptance may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement. Delivery of an
executed counterpart of Schedule 1 to this Assignment and Acceptance by
telecopier shall be effective as delivery of a manually executed counterpart of
this Assignment and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused
Schedule 1 to this Assignment and Acceptance to be executed by their officers
thereunto duly authorized as of the date specified thereon.
Schedule 1
to
Assignment and Acceptance
Percentage interest assigned: _____%
[Assignee's Revolving Credit Commitment: $______
Aggregate outstanding principal amount of Advances assigned: $______
Principal amount of Note payable to Assignee: $______
Principal amount of Note payable to Assignor: $______]
[Assignee's Letter of Credit Commitment: $______]
Effective Date*: _______________, 200_
[NAME OF ASSIGNOR], as Assignor
By
------------------------
Title:
Dated: _______________, 200_
[NAME OF ASSIGNEE], as Assignee
By
------------------------
Title:
Dated: _______________, 200_
Domestic Lending Office:
[Address]
Eurocurrency Lending Office:
[Address]
Accepted [and Approved]** this
__________ day of _______________, 200_
CITIBANK, N.A., as Agent
By
------------------------------------------
Title:
[Approved this __________ day
of _______________, 200_
CORNING INCORPORATED
By ]*
------------------------------------------
Title:
* This date should be no earlier than five Business Days after the delivery
of this Assignment and Acceptance to the Agent.
** Required if the Assignee is an Eligible Assignee solely by reason of clause
(iii) of the definition of "Eligible Assignee".
* Required if the Assignee is an Eligible Assignee solely by reason of clause
(iii) of the definition of "Eligible Assignee".
EXHIBIT D - FORM OF
DESIGNATION AGREEMENT
[DATE]
To each of the Lenders parties
to the Credit Agreement dated
as of March 17, 2005
among Corning Incorporated,
said Lenders and Citibank, N.A.,
as Agent for said Lenders
Ladies and Gentlemen:
Reference is made to the Credit Agreement dated as of March 17,
2005 (as amended or modified from time to time, the "Credit Agreement") among
-----------------
Corning Incorporated (the "Company"), the Lenders (as defined in the Credit
-------
Agreement) and Citibank, N.A., as agent for the Lenders (the "Agent"). Terms
-----
used herein and defined in the Credit Agreement shall have the respective
meanings ascribed to such terms in the Credit Agreement.
Please be advised that the Company hereby designates its
undersigned Subsidiary, ____________ ("Designated Subsidiary"), as a "Designated
---------------------
Subsidiary" under and for all purposes of the Credit Agreement.
The Designated Subsidiary, in consideration of each Lender's
agreement to extend credit to it under and on the terms and conditions set forth
in the Credit Agreement, does hereby assume each of the obligations imposed upon
a "Designated Subsidiary" and a "Borrower" under the Credit Agreement and agrees
to be bound by the terms and conditions of the Credit Agreement. In furtherance
of the foregoing, the Designated Subsidiary hereby represents and warrants to
each Lenders as follows:
1. The Designated Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of the State of
_______________.
2. The execution, delivery and performance by the Designated
Subsidiary of this Designation Agreement, the Credit Agreement and the
Notes to be delivered by it, and the consummation of the transactions
contemplated hereby, are within the Designated Subsidiary's corporate
powers, have been duly authorized by all necessary corporate action,
and do not contravene (i) the Designated Subsidiary's charter or
by-laws or (ii) law or any contractual restriction binding on or
affecting the Designated Subsidiary.
3. No authorization or approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body or
any other third party is required for the due execution, delivery and
performance by the Designated Subsidiary of this Designation
Agreement, the Credit Agreement or the Notes to be delivered by it or
the consummation of the transactions contemplated thereby.
4. This Designation Agreement and each of the Notes of the
Designated Subsidiary, when delivered, will have been duly executed
and delivered, and this Designation Agreement, the Credit Agreement
and each of the Notes of the Designated Subsidiary, when delivered,
will constitute the legal, valid and binding obligation of the
Designated Subsidiary enforceable against the Designated Subsidiary in
accordance with their respective terms.
5. There is no pending or, to the knowledge of the Designated
Subsidiary, threatened action, suit, investigation, litigation or
proceeding, including, without limitation, any Environmental Action,
affecting the Designated Subsidiary or any of its Subsidiaries before
any court, governmental agency or arbitrator that (i) could be
reasonably likely to have a Material Adverse Effect or (ii) purports
to affect the legality, validity or enforceability of this Designation
Agreement, the Credit Agreement, any Note of the Designated Subsidiary
or the consummation of the transactions contemplated thereby.
6. The Designated Subsidiary is not engaged in the business of
extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation U issued by the Board of
Governors of the Federal Reserve System), and no proceeds of any
Advance will be used to purchase or carry any margin stock or to
extend credit to others for the purpose of purchasing or carrying any
margin stock.
7. The Designated Subsidiary is not an "investment company", or a
company "controlled" by an "investment company", within the meaning of
the Investment Company Act of 1940, as amended.
8. The operations and properties of the Designated Subsidiary and
each of its Subsidiaries comply in all material respects with all
applicable Environmental Laws and Environmental Permits, all past
non-compliance with such Environmental Laws and Environmental Permits
has been resolved without ongoing obligations or costs, and no
circumstances exist that would be reasonably likely to form the basis
of an Environmental Action against the Designated Subsidiary or any of
its Subsidiaries or any of their properties that could have a Material
Adverse Effect.
9. With such exceptions as are not material, the Designated
Subsidiary and each of its Subsidiaries has filed, has caused to be
filed or has been included in all tax returns (federal, State, local
and foreign) required to be filed and has paid all taxes shown thereon
to be due, together with applicable interest and penalties.
10. The Designated Subsidiary and each of its Subsidiaries has
title to its properties sufficient for the conduct of business, and
none of such property is subject to any Lien except for Liens
permitted under Section 5.02(a) of the Credit Agreement.
The Designated Subsidiary hereby agrees that service of process
in any action or proceeding brought in any New York State court or in federal
court may be made upon the Company at its offices at One Riverfront Plaza,
Corning, New York 14831, Attention: Secretary (the "Process Agent") and the
--------------
Designated Subsidiary hereby irrevocably appoints the Process Agent to give any
notice of any such service of process, and agrees that the failure of the
Process Agent to give any notice of any such service shall not impair or affect
the validity of such service or of any judgment rendered in any action or
proceeding based thereon.
The Company hereby accepts such appointment as Process Agent and
agrees with you that (i) the Company will maintain an office in Corning, New
York through the Termination Date and will give the Agent prompt notice of any
change of address of the Company, (ii) the Company will perform its duties as
Process Agent to receive on behalf of the Designated Subsidiary and its property
service of copies of the summons and complaint and any other process which may
be served in any action or proceeding in any New York State or federal court
sitting in New York City arising out of or relating to the Credit Agreement and
(iii) the Company will forward forthwith to the Designated Subsidiary at its
address at ___________________ or, if different, its then current address,
copies of any summons, complaint and other process which the Company received in
connection with its appointment as Process Agent.
Very truly yours,
CORNING INCORPORATED
By _________________________
Name:
Title:
[THE DESIGNATED SUBSIDIARY]
By__________________________
Name:
Title:
EXHIBIT E - FORM OF
OPINION OF COUNSEL
FOR THE COMPANY
March 17, 2005
To each of the Lenders parties
to the Credit Agreement dated
as of March 17, 2005
among Corning Incorporated,
said Lenders and Citibank, N.A.,
as Agent for said Lenders, and
to Citibank, N.A., as Agent
Ladies and Gentlemen:
I am Senior Vice President and General Counsel of Corning Incorporated, a
New York corporation (the "Company"), and am familiar with the authorization,
execution and delivery of the Credit Agreement, dated March 17, 2005 (the
"Credit Agreement"), between the Company and the Lenders parties thereto and
Citibank, N.A., as Agent, for said Lenders. This opinion is being furnished to
you pursuant to Section 3.01(g) (iv) of the Credit Agreement. All capitalized
and undefined terms used herein shall have the meanings assigned to them in the
Credit Agreement.
I have examined executed copies of the Credit Agreement, the documents
furnished by the Company pursuant to Article III of the Credit Agreement, the
Restated Certificate of Incorporation of the Company and all amendments thereto
(the "Charter"), the Bylaws of the Company and all amendments thereto (the
"Bylaws"), a certificate of the Secretary of State of New York, dated
__________, 2005, attesting to the continued corporate existence and good
standing of the Company in the State of New York, and such other documents as I,
in my professional judgment, deemed necessary or appropriate as a basis for the
opinions set forth below. I have also examined the originals or copies,
certified or otherwise identified to my satisfaction, of such documents and
records of the Company and such public documents and records as I have deemed
necessary as a basis for the opinions hereinafter expressed.
In rendering the opinions set forth below, I have assumed the authenticity
of all documents submitted to me as originals, the genuineness of all signatures
and the conformity to authentic originals of all documents submitted to me as
copies. I have also assumed the legal capacity for all purposes relevant hereto
of all natural persons and, with respect to all parties to agreements or
instruments relevant thereto other than the Company, that such parties had the
requisite power and authority (corporate or otherwise) to execute, deliver and
perform such agreements or instruments, that such agreements or instruments have
been duly authorized by all requisite action (corporate or otherwise), executed
and delivered by such parties and that such agreements or instruments are the
valid, binding and enforceable obligations of such parties.
Based upon the foregoing and having regard for such legal considerations as
I have deemed relevant, it is my opinion that:
1. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of New York.
2. The execution, delivery and performance by the Company of the Credit
Agreement and the Notes, and the consummation of the transactions
contemplated thereby, are within the Company's corporate powers, have been
duly authorized by all necessary corporate action, and do not contravene
(i) the Charter or the By-laws or (ii) any law, rule or regulation
applicable to the Company (including, without limitation, Regulation X of
the Board of Governors of the Federal Reserve System) or (iii) any
contractual or legal restriction contained in any document, known to me,
including, without limitation, any indentures, loans or credit agreements,
leases, guarantees, mortgages, security agreements, bonds, notes and other
agreements or instruments, that affect or purport to affect the Company's
right to borrow money or the Company's obligations under the Credit
Agreement or the Notes.
3. No authorization, approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body or any other third
party is required for the due execution, delivery and performance by the
Company of the Credit Agreement and the Notes.
4. The Credit Agreement is, and after giving effect to the initial Borrowing,
the Notes when delivered will be, valid and binding obligations of the
Company enforceable against the Company in accordance with their respective
terms.
5. To the best of my knowledge and other than as set forth in Schedule 3.01(b)
of the Credit Agreement, there are no pending or overtly threatened actions
or proceedings against the Company or any of its Subsidiaries before any
court, governmental agency or arbitrator that purport to affect the
validity, binding effect or enforceability of the Credit Agreement or any
of the Notes or the consummation of the transactions contemplated thereby
or that are likely to have a material adverse effect upon the financial
condition or operations of the Company and its Subsidiaries taken as a
whole.
The opinions set forth above are subject to the following qualifications:
(i) My opinion in paragraph 4 above is subject to the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium, bank
conservatorship or receivership or other similar laws of general application
affecting creditors' rights.
(ii) My opinion in paragraphs 4 above is subject to the effect of general
principles of equity, including (without limitation) concepts of materiality,
reasonableness, good faith and fair dealing and other similar equitable
doctrines affecting the enforceability of agreements generally (regardless of
whether considered in a proceeding in equity or at law).
(iii) I express no opinion as to Section 2.14 of the Credit Agreement
insofar as it provides that any Lender purchasing a participation from another
Lender pursuant thereto may exercise set-off or similar rights with respect to
such participation.
This opinion is limited to the United States federal law and the laws of
the state of New York and I express no opinion as to the effect of the law of
any other jurisdiction wherein any Lender may be located or wherein enforcement
of the Credit Agreement or the Notes may be sought that limits the rates of
interest legally chargeable or collectible.
The foregoing opinion is being furnished to you solely for your benefit and
may not be relied upon by, nor may copies be delivered to, any other person
without my prior written consent.
Very truly yours,
EXHIBIT F - FORM OF
OPINION OF COUNSEL
TO A DESIGNATED SUBSIDIARY
[Date]
To each of the Lenders parties
to the Credit Agreement dated
as of March __, 2005
among Corning Incorporated,
said Lenders and Citibank, N.A.,
as Agent for said Lenders
[Name of the Designated Subsidiary]
---------------------------------
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 3.02(g) of the
Credit Agreement, dated as of March __, 2005 (the "Credit Agreement"), among
-----------------
Corning Incorporated (the "Company"), the Lenders parties thereto and Citibank,
-------
N.A., as Agent for said Lenders. Terms defined in the Credit Agreement are used
herein as therein defined.
We have acted as counsel to ____________ (the "Designated
----------
Subsidiary") in connection with the preparation, execution and delivery of the
- ----------
Designation Agreement (as defined in the Credit Agreement) executed by the
Designated Subsidiary.
In that connection, we have examined:
(1) The Designation Agreement executed by the Designated
Subsidiary.
(2) The Credit Agreement.
(3) The documents furnished by the Designated Subsidiary pursuant
to Article III of the Credit Agreement.
(4) The [Articles] [Certificate] of Incorporation of the
Designated Subsidiary and all amendments thereto (the "Charter").
-------
(5) The by-laws of the Designated Subsidiary and all amendments
thereto (the "By-laws").
-------
(6) A certificate of the Secretary of State of _______________,
dated __________, 2005, attesting to the continued corporate existence
and good standing of the Designated Subsidiary in that State.
In addition, we have examined the originals, or copies certified to our
satisfaction, of such other corporate records of the Designated Subsidiary,
certificates of public officials and of officers of the Designated Subsidiary,
and agreements, instruments and other documents, as we have deemed necessary as
a basis for the opinions expressed below. As to questions of fact material to
such opinions, we have, when relevant facts were not independently established
by us, relied upon certificates of the Designated Subsidiary or its officers or
of public officials. We have assumed the due execution and delivery, pursuant to
due authorization, of the Credit Agreement by the Initial Lenders and the Agent.
Our opinions expressed below are limited to the law of the State
of New York, [the General Corporation Law of the State of Delaware] and the
Federal law of the United States.
Based upon the foregoing and upon such investigation as we have
deemed necessary, we are of the following opinion:
1. The Designated Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of
_______________.
2. The execution, delivery and performance by the Designated
Subsidiary of the Credit Agreement, its Designation Agreement and the
Notes, and the consummation of the transactions contemplated thereby,
are within the Designated Subsidiary's corporate powers, have been
duly authorized by all necessary corporate action, and do not
contravene (i) the Charter or the By-laws or (ii) any law, rule or
regulation applicable to the Designated Subsidiary (including, without
limitation, Regulation X of the Board of Governors of the Federal
Reserve System) or (iii) any contractual or legal restriction
contained in any document, including, without limitation, the
indentures, loan or credit agreements, leases, guarantees, mortgages,
security agreements, bonds, notes and other agreements or instruments,
and all of the orders, writs, judgments, awards, injunctions and
decrees, that affect or purport to affect the Designated Subsidiary's
right to borrow money or the Designated Subsidiary's obligations under
the Credit Agreement, its Designation Agreement or the Notes. The
Credit Agreement, the Designation Agreement and the Notes have been
duly executed and delivered on behalf of the Designated Subsidiary.
3. No authorization, approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body or
any other third party is required for the due execution, delivery and
performance by the Designated Subsidiary of the Credit Agreement, the
Designation Agreement and the Notes.
4. The Credit Agreement and the Designation Agreement are, and
after giving effect to the initial Borrowing of the Designated
Subsidiary, the Notes will be, legal, valid and binding obligations of
the Designated Subsidiary enforceable against the Designated
Subsidiary in accordance with their respective terms.
5. To the best of our knowledge, there are no pending or overtly
threatened actions or proceedings against the Designated Subsidiary or
any of its Subsidiaries before any court, governmental agency or
arbitrator that purport to affect the legality, validity, binding
effect or enforceability of the Credit Agreement, the Designation
Agreement or any of the Notes or the consummation of the transactions
contemplated thereby or, that are likely to have a materially adverse
effect upon the financial condition or operations of the Designated
Subsidiary or any of its Subsidiaries.
The opinions set forth above are subject to the following
qualifications:
(a) Our opinion in paragraph 4 above as to enforceability is
subject to the effect of any applicable bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or similar law affecting
creditors' rights generally.
(b) Our opinion in paragraph 4 above as to enforceability is
subject to the effect of general principles of equity, including,
without limitation, concepts of materiality, reasonableness, good
faith and fair dealing (regardless of whether considered in a
proceeding in equity or at law).
(c) We express no opinion as to (i) Section 2.14 of the Credit
Agreement insofar as it provides that any Lender purchasing a
participation from another Lender pursuant thereto may exercise
set-off or similar rights with respect to such participation, and (ii)
the effect of the law of any jurisdiction other than the State of New
York wherein any Lender may be located or wherein enforcement of the
Credit Agreement or the Notes may be sought that limits the rates of
interest legally chargeable or collectible.
Very truly yours
EXECUTION COPY
U.S. $975,000,000
CREDIT AGREEMENT
Dated as of March 17, 2005
Among
CORNING INCORPORATED
as Borrower
-- --------
and
THE INITIAL LENDERS NAMED HEREIN
as Initial Lenders
-- ------- -------
and
CITIBANK, N.A.
as Administrative Agent
-- -------------- -----
and
JPMORGAN CHASE BANK, N.A.
as Syndication Agent
-- ----------- -----
and
BANK OF AMERICA, N.A.
THE BANK OF TOKYO-MITSUBISHI, LTD.
WACHOVIA BANK, NATIONAL ASSOCIATION
and
BARCLAYS BANK PLC
DEUTSCHE BANK SECURITIES INC.
as Documentation Agents
-- ------------- ------
and
CITIGROUP GLOBAL MARKETS INC.
and
J.P. MORGAN SECURITIES INC.
as Joint Lead Arrangers and Joint Bookrunners
-- ------------------------------------------
Exhibit 12
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In millions, except ratios)
For the three months ended
March 31, 2005
--------------------------
Income before income taxes $ 103
Adjustments:
Distributed income of equity investees 143
Fixed charges net of capitalized interest 43
-----------
Income before taxes and fixed charges, as adjusted $ 289
===========
Fixed charges:
Interest expense (a) $ 37
Portion of rent expense which represents an
appropriate interest factor (b) 6
Capitalized interest 4
-----------
Total fixed charges 47
Capitalized interest (4)
-----------
Total fixed charges, net of capitalized interest $ 43
===========
Ratio of earnings to fixed charges 6.1x
===========
(a) Interest expense includes amortization expense for capitalized interest and
debt costs.
(b) One-third of net rent expense is the portion deemed representative of the
interest factor.
Exhibit 31.1
CHIEF EXECUTIVE OFFICER CERTIFICATION
I, James R. Houghton, Chairman and Chief Executive Officer of Corning
Incorporated, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Corning Incorporated
(the registrant);
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b) designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;
c) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent function):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls over financial reporting.
April 26, 2005
/s/ James R. Houghton
------------------------------------------------
James R. Houghton
Chairman and Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
CHIEF FINANCIAL OFFICER CERTIFICATION
I, James B. Flaws, Vice Chairman and Chief Financial Officer, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Corning Incorporated
(the registrant);
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b) designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;
c) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent function):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls over financial reporting.
April 26, 2005
/s/ James B. Flaws
------------------------------------------------
James B. Flaws
Vice Chairman and Chief Financial Officer
(Principal Financial Officer)
Exhibit 32
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Corning Incorporated (the Company) on
Form 10-Q for the period ended March 31, 2005 as filed with the Securities and
Exchange Commission on the date hereof (the Report), we, James R. Houghton,
Chairman and Chief Executive Officer, and James B. Flaws, Vice Chairman and
Chief Financial Officer, of the Company, certify, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d)
of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Dated: April 26, 2005
/s/ James R. Houghton
--------------------------------------------
James R. Houghton
Chairman and Chief Executive Officer
/s/ James B. Flaws
--------------------------------------------
James B. Flaws
Vice Chairman and Chief Financial Officer