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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________ .
Commission file number 0-20704
ACX TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Colorado 84-1208699
(State of incorporation) (IRS Employer Identification No.)
16000 Table Mountain Parkway, Golden, Colorado 80403
(Address of principal executive offices) (Zip Code)
(303) 271-7000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
None
Name of each exchange on which registered
None
Securities registered pursuant to Section 12(g) of the Act:
$.01 par value Common Stock
(Title of class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of March 1, 1998, there were 28,435,749 shares of common stock
outstanding. The aggregate market value of such shares, other than
shares held by persons who may be deemed affiliates of the
Registrant, was $359,771,300.
DOCUMENTS INCORPORATED BY REFERENCE
Registrant's Proxy Statement filed in connection with the 1998
Annual Meeting of Shareholders is incorporated by reference into
Part III.
ACX TECHNOLOGIES, INC.
Unless the context otherwise requires, references herein to
the Company include ACX Technologies, Inc. (ACX Technologies) and
its subsidiaries, including Coors Porcelain Company and its
subsidiaries (collectively referred to as Coors Ceramics),
Graphic Packaging Corporation and its subsidiaries (collectively
referred to as Graphic Packaging), Golden Technologies Company,
Inc. and its subsidiaries (collectively referred to as Golden
Technologies), and Golden Aluminum Company and its subsidiaries
(collectively referred to as Golden Aluminum).
Subsequent to January 14, 1998, references herein to the
Company also include Britton Group plc, which was acquired on
January 14, 1998, and its subsidiaries (collectively referred to
as Britton), Universal Packaging Corporation (referred to as
Universal Packaging), and the plastics division of Britton
(referred to as the plastics division).
PART I
ITEM 1. BUSINESS
(a) General Development of Business
The Company, through its wholly-owned subsidiaries,
manufactures advanced technical ceramics and other engineered
materials for industrial markets and high-performance consumer
and industrial packaging products. In addition to these core
businesses, the Company owns technology-based developmental
businesses, including a controlling interest in Photocomm, Inc.
(Photocomm) a publicly traded solar electric distribution
business. The Company's strategy is to maximize the competitive
positions and growth opportunities of its core businesses. The
strategy includes a review of business acquisitions, joint
ventures and dispositions of under-performing assets.
The Company was incorporated in Colorado in August 1992 as a
holding company for the ceramics, packaging. aluminum and
developmental businesses formerly owned by Adolph Coors Company
(ACCo). Effective December 27, 1992, ACCo distributed to its
shareholders all outstanding shares of the Company.
In January 1998, the Company acquired control of Britton
pursuant to a cash tender offer. Britton is an international
packaging group operating through two principal divisions:
folding carton and plastics. The folding carton division,
Universal Packaging, is a non-integrated manufacturer of folding
cartons in the United States, with capabilities in design,
printing and manufacturing of multicolor folding cartons. The
plastics division of Britton is in the business of extrusion,
conversion and printing of polyethylene into films and bags for
industrial customers. The results of the folding carton division
will be reflected in the accounts of the Company beginning
January 14, 1998. The plastics division will be accounted for as
a discontinued operation based on management's decision to sell
this business.
The Company has consummated several acquisitions during the prior
five years including four flexible packaging plants in 1994, a
folding carton packaging business and a controlling interest in a
solar energy distribution business in 1996 and a fluoropolymer
sealing system and component manufacturer in 1997. In addition,
in 1996, the Board of Directors adopted a plan to dispose of the
Company's aluminum rigid container sheet business, Golden
Aluminum. On March 1, 1997, the sale of Golden Aluminum was
completed for $70 million, $10 million of which was received at
closing and $60 million of which is due within two years. During
the two year period, the purchaser has the right to return Golden
Aluminum to the Company rather than pay the $60 million
obligation. The initial payment of $10 million is nonrefundable.
Nearly all of the working capital of Golden Aluminum, which was
not part of the sale agreement, was liquidated during 1997.
The Company's principal executive offices are located at
16000 Table Mountain Parkway, Golden, Colorado 80403. The
Company's telephone number is (303) 271-7000.
(b) Financial Information about Industry Segments, Foreign
Operations, and Export Sales.
Certain financial information for the Company's business segments
is included in the following summary:
Operating Depreciation Additions
Net Income and to
(In thousands) Sales (Loss) Assets Amortization Properties
-------- -------- -------- ------------ ----------
1997
Ceramics $304,824 $48,249 $261,471 $18,664 $28,812
Packaging 365,123 42,655 210,024 20,211 18,022
Developmental
businesses 61,138 (31,186) 81,071 3,451 9,068
Corporate --- (10,177) 148,258 337 311
Discontinued
operations --- --- 372 --- ---
-------- ------- -------- ------- -------
$731,085 $49,541 $701,196 $42,663 $56,213
======== ======= ======== ======= =======
1996
Ceramics $276,352 $44,204 $214,635 $16,159 $30,291
Packaging 346,547 41,048 205,705 19,959 13,314
Developmental
businesses 89,481 (48,447) 104,138 5,757 12,558
Corporate --- (8,169) 35,662 341 327
Discontinued
operations --- --- 116,552 7,307 1,036
-------- ------- -------- ------- -------
$712,380 $28,636 $676,692 $49,523 $57,526
======== ======= ======== ======= =======
1995
Ceramics $270,877 $47,395 $189,191 $14,046 $25,122
Packaging 308,109 34,551 197,587 16,945 20,149
Developmental
businesses 81,867 (13,740) 80,350 5,643 7,426
Corporate --- (9,500) 50,098 605 153
Discontinued
operations --- --- 268,260 12,618 7,177
-------- ------- -------- ------- -------
$660,853 $58,706 $785,486 $49,857 $60,027
======== ======= ======== ======= =======
Operating income (loss) for reportable segments is exclusive
of certain unallocated corporate expenses. Corporate assets for
1997 include cash and cash equivalents, a note receivable from
the sale of Golden Aluminum, an investment at cost in Britton,
deferred tax assets and certain properties.
Certain financial information regarding the Company's
domestic and foreign operations is included in the following
summary:
Operating
Income
(In thousands) Net Sales (loss) Assets
--------- --------- --------
1997
United States $651,630 $42,463 $623,215
Canada and other 79,455 7,078 77,981
-------- ------- --------
$731,085 $49,541 $701,196
======== ======= ========
1996
United States $643,764 $22,153 $609,014
Canada and other 68,616 6,483 67,678
-------- ------- --------
$712,380 $28,636 $676,692
======== ======= ========
1995
United States $589,986 $50,856 $717,411
Canada and Other 70,867 7,850 68,075
-------- ------- --------
$660,853 $58,706 $785,486
======== ======= ========
Included in United States sales are export sales primarily
to Western Europe, Canada and Asia of $82.1 million, $77.2
million and $67.8 million for 1997, 1996 and 1995, respectively.
(c) Narrative Description of Business Segments
Ceramics Business
General. Coors Ceramics develops, manufactures and sells
advanced technical ceramic and other engineered materials across
a wide range of product lines for a variety of applications.
Coors Ceramics, which has been in business for over 77 years, is
the largest U.S. owned independent manufacturer of advanced
technical ceramics. In addition, as part of its strategy to
broaden its material base, Coors Ceramics acquired Tetrafluor,
Inc. (Tetrafluor) in 1997. Tetrafluor manufactures Teflon[R]
fluoropolymer sealing systems and components for use in
aerospace, industrial and transportation industries.
Markets and Products. Coors Ceramics provides components to
23 of the 24 commonly recognized industrial markets.
Approximately 67% of its sales in 1997 were to the automotive,
beverage, telecommunications, semiconductor, power generation and
mining, petrochemical and pulp and paper industrial markets.
Ceramic products are diamond hard, can withstand extreme
temperatures and do not conduct electricity. These properties
make ceramic an ideal material for a variety of industrial
applications. While ceramics can be initially more expensive
than competing materials, such as plastics and metals, they can
provide higher value by contributing to longer product life and
enabling customers to enhance their technologies.
There are many and varied uses for ceramic components.
Examples include:
> Slitting knives and other processing and sizing
devices used in high-speed paper making machines;
> Seals and other pump components installed in auto-
mobiles, home appliances, chemical processing and
blood analysis equipment;
> Fixtures for processing of silicon wafers in semi-
conductor chip fabrication;
> Valves used in fluid handling;
> Precipitators used in pollution control equipment;
> Power tubes used in electrical power generation
installations;
> Linings for pipe used in the processing of coal
and other abrasive materials;
> Substrates (or bases) for various electronic
circuits, pressure sensors and semiconductor chips
which are critical components in computers, com-
munications systems, automotive controls and
military electronics;
> Passive electronic components, such as capacitors
and insulators, that are used in electrical devices,
and;
> Advanced electronic ceramic packages, which are
casings that surround a semiconductor chip, which
insulate and connect the chip to printed circuitry.
Products such as cellular telephones, pages and
radar detection devices require these packages due
to their need for high reliability.
Coors Ceramics' products are engineered and custom designed
to comply with specific customer requirements. Successful
product design requires consultation with customers in their
choice of the correct base material and selection by Coors
Ceramics of the appropriate manufacturing processes. Since
advanced ceramic products are sold primarily to industrial
manufacturers for incorporation into their products or processes,
the industry is sensitive to changes in economic conditions that
affect the end users of ceramic products. For example, sales
fluctuations in the domestic automobile industry could directly
affect Coors Ceramics' sales to the automotive market because an
American car currently contains approximately 17 ceramic
components.
Strategy. Coors Ceramics seeks to grow its business
profitably and to manage its sensitivity to changing economic
conditions. In order to achieve its goal, Coors Ceramics is
pursuing a strategy of devoting resources to new product and
material development, internally and through acquisitions, to
provide engineered solutions for component products to a
diversified customer base.
Among Coors Ceramics' most valuable assets for achieving
its strategy is its reputation for expert custom product design,
product quality and customer service. Coors Ceramics emphasizes
alliances with key customers in diverse industries to develop
value-added, engineered products. Coors Ceramics has cooperative
development and sole-supplier agreements with several major
customers. It continuously evaluates new materials, often in
partnership with customers, in order to anticipate and satisfy
customers' future needs and to offer a greater range of
products with improved performance characteristics. Coors
Ceramics continues to aggressively pursue new applications for
ceramic to replace metal and other conventional materials. Coors
Ceramics has developed zirconia, tungsten carbide, silicon
carbide and titanate based ceramic products and continues
developing other materials to complement and enhance its
conventional alumina based product lines. In 1997, Coors
Ceramics added Teflonr fluoropolymer components to its engineered
product line through its acquisition of Tetrafluor. Coors
Ceramics is a leader in introducing new commercial uses of
ceramic components to replace metal or plastics in applications,
such as components in paper making machines and valves for fluid
dispensing.
Coors Ceramics targets proven industrial markets and new
market segments that it expects to provide growth potential,
especially markets which are expected to grow more rapidly than
the overall economy. These markets include:
> Power distribution, both in actual distribution
equipment and in high temperature electrostatic
precipitators that remove particulates from
power plant emissions, and;
> Fluid handling, primarily in the area of ceramic
components in valves, pumps and flow meters for
chemical, food processing and petrochemical
applications.
Management also believes there are significant near-term
growth opportunities in the power tube and pressure sensor
markets and long-term growth opportunities in the semiconductor
industry.
Manufacturing and Raw Materials. Ceramic manufacturing
involves several successive operations. Initially, a powder such
as zirconia or alumina is mixed with a binding agent and other
materials that will provide the ultimate product with the desired
performance characteristics. The second step involves forming
operations, such as dry or isostatic pressing of powder or
casting of a liquefied form of base material. The ceramic
components may then undergo grinding or cutting operations to
approximate the desired final configuration. The parts are
usually then fired in a high temperature furnace and may require
further grinding, finishing, metal plating or additional firing,
depending upon component specifications. Coors Ceramics'
manufacturing operations involve extensive testing and quality
assurance procedures. The process for manufacturing
fluoropolymer-based parts is similar to that of ceramic except
that the parts are formed at a lower pressure and fired at a
lower temperature.
Raw materials used in Coors Ceramics' operations are readily
available from diverse sources. Coors Ceramics purchases alumina
powder, the primary raw material for its manufacturing process,
and other ceramic powders, binders and raw materials from
multiple sources.
Coors Ceramics owns or leases approximately 2.0 million
square feet of manufacturing space in the United States and
abroad. Overall, Coors Ceramics operated at approximately 71% of
its available capacity in 1997 primarily due to lower capacity
utilization at plants primarily servicing the power generation
and semiconductor industries. Capacity utilization, which is not
currently a major constraint, ranged between 37% and 91% at Coors
Ceramics' 22 manufacturing facilities in 1997. These facilities,
each of which specializes to some extent in a particular market,
are for the most part strategically located to optimize customer
service while minimizing manufacturing and transportation costs.
Coors Ceramics continues to invest in computerized, high
precision manufacturing equipment and believes it is well
positioned for growth opportunities in both domestic and foreign
markets. During 1997, Coors Ceramics invested in ceramic
material preparation equipment and completed capacity expansion
at certain locations. Additional capacity expansion is planned
at certain locations in 1998 as well as where production capacity
constraints have been identified.
Sales and Distribution. Products are sold primarily to
manufacturers, including original equipment manufacturers, for
incorporation into industrial applications and products. Sales
are made through direct sales employees located throughout the
United States and Europe and through manufacturers'
representatives. Coors Ceramics' sales personnel, many of whom
are engineers, receive substantial technical assistance and
engineering support because of the highly technical nature of its
products.
International sales, primarily in Western European and Far
East markets, constituted approximately 27%, 29% and 28% of
ceramic product sales in 1997, 1996 and 1995, respectively.
Although most of these sales are denominated in U.S. dollars,
Coors Ceramics selectively hedges the U.S. dollar against foreign
currencies used in these markets in order to mitigate the effects
of adverse currency fluctuations. The strength of the dollar
relative to the currency of its customers or competitors can have
an impact on Coors Ceramics' profit margins or sales to
international customers.
No single product line or class accounted for more than 10%
of the Company's consolidated net revenue although sales of
various product lines to the petrochemical, power generation and
mining, and semiconductor industries comprised 15.3%, 11.4% and
10.3%, respectively, of Coors Ceramics' 1997 consolidated net
revenue. Sales to the automotive and telecommunications
industries represented 9.4% and 8.7% of Coors Ceramics' 1997
consolidated net revenue, respectively.
Coors Ceramics' 25 largest customers accounted for
approximately 35% of its net sales for 1997, with no single
customer representing more than 10% of Coors Ceramics' annual
sales. Commitment to consistent high quality and customer
service has earned Coors Ceramics sole supplier status with
several major U.S. manufacturers and a dominant position with
several other major customers.
As of March 1, 1998, Coors Ceramics had backlog orders of
approximately $106.6 million, as compared to $95.5 million as of
March 1, 1997. Most of the 1998 backlog will be shipped before
the end of the second quarter of 1998. Customers may place
annual orders, with shipments scheduled over a twelve-month
period. Backlog orders can be higher for certain industrial
product segments due to longer time periods between order and
delivery dates under purchase orders. Sales are not seasonal,
although they are sensitive to overall economic conditions that
affect the users of advanced ceramic products. Backlog is not
necessarily indicative of past or future operating results.
Competition: Competition in the advanced ceramics industry
is vigorous and comes chiefly from Kyocera Corporation (Japan),
Morgan Crucible Co. (United Kingdom), NGK Insulators, Ltd.
(Japan) and CeramTec AG (Germany). Principal competitive factors
in the worldwide market are price (including the impact of
currency fluctuations), quality and delivery schedules. In
recent years, competitive pressures have caused former major
domestic manufacturers to go out of business or be acquired by
foreign entities. Coors Ceramics is a major competitor in most
of the markets it serves and enjoys a prominent position in some
product lines.
Coors Ceramics is the largest U.S owned independent
manufacturer of advanced technical ceramics. It has maintained
long standing relationships with major corporations based on
consistent high product quality and customer service, which
management believes is its advantage in domestic and certain
foreign markets.
Ceramic materials offer advantages over conventional
materials for applications in which certain properties are
important, such as high electrical resistivity, hardness, high-
temperature strength, wear and abrasion resistance and precise
machinability. Ceramic products, however, face competition from
metals and other materials. Plastics, for example, are being
substituted for ceramic in certain computer and
telecommunications applications because of their lower cost and
lighter weight. Coors Ceramics believes that the overall value
of ceramic products will continue to be attractive to customers.
Where appropriate and in accordance with its strategy outlined
above, Coors Ceramics will explore the development or acquisition
of companies with competing or complementary materials (like
Tetrafluor).
Product Development. New product and process improvement
efforts are continually undertaken within the manufacturing
operations including new or improved materials and processes.
For information about the Company's expenditures for research and
development and other information, see "Research and Development"
below.
Packaging Business
General. Graphic Packaging develops, manufactures and sells
value-added paperboard folding carton and flexible packaging
products. Value-added packaging has special characteristics such
as high-impact graphics, resistance to abrasion, and barriers to
moisture, gas penetration, solvent penetration and leakage.
Graphic Packaging's products are sold to manufacturers that use
them as primary packaging for end products.
Graphic Packaging's folding carton business began with a
single plant in 1974 as part of the vertical integration of
ACCo's beer business operated through its subsidiary, Coors
Brewing Company (Coors Brewing). Since that time, Graphic
Packaging has expanded its product capabilities and geographic
presence through several plant expansions and acquisitions
including the 1996 acquisition of a folding carton operation with
approximately $40 million in annual revenues. As of December 31,
1997, Graphic Packaging operated four folding carton facilities
and six flexible packaging facilities.
In January 1998, the Company acquired Britton, an
international packaging group operating two divisions: folding
cartons and plastics. The folding cartons division, Universal
Packaging, will be operated as an integral part of Graphic
Packaging. This business is a non-integrated manufacturer of
folding cartons in the United States, adding six facilities and
capabilities in web and sheet fed offset printing, electron beam
curing and rotary die cutting. With this acquisition, Graphic
Packaging expands into the food market and benefits from
Universal Packaging's blue-ribbon customer list.
Markets and Products. The product packaging industry
includes: paperboard packaging which consists of corrugated
products, folding cartons and food service containers such as
disposable plates and cups; and flexible packaging, such as
printed and laminated bags, pouches and roll stock films and
foils used for lids, overwraps and labels. Graphic Packaging
competes in the value added portion of the folding carton and
flexible packaging industries. The value added nature of these
operations generally allows Graphic Packaging to command higher
selling prices for their products but requires numerous and
complex operations that are not necessary in the production of
commodity packaging.
The folding carton industry is a $5 billion annual industry
that declined 1% in 1997 compared to 1996, primarily due to
continuing efforts to minimize package bulk. Between 1993 and
1996 this industry had grown at an annualized rate of about 2%
per year. From 1993 to 1997, the majority of Graphic
Packaging's internal folding carton growth came from packaging
for Coors Brewing, detergent, cereal, and premium bar soap
markets and promotional packages. In addition, the 1996 folding
carton acquisition added sales to the tobacco and quick service
restaurant markets. The concentrated detergent and premium bar
soap markets are now in their mature life cycle, which may result
in moderate continued growth.
In manufacturing folding cartons, Graphic Packaging uses an
internally developed, patented composite packaging technology,
Composipac[TM] (Composipac), which provides finished products
with high quality graphics that have enhanced abrasion protection
and moisture, air or other special barrier properties. Graphic
Packaging's Composipac technology is designed to meet the
continuing specialized needs of its beverage, powdered detergents
and soap customers. Graphic Packaging believes that this
technology also has applications in other market niches,
specifically the opportunities for promotional packaging.
The flexible packaging industry is nearly an $18 billion
annual industry which has grown approximately 4% on an annualized
basis between 1993 and 1997. The mid-1994 acquisition of four
flexible packaging plants contributed significantly to Graphic
Packaging's flexible sales increases during this period.
Flexible packaging offers advantages over other packaging
mediums, such as lightweight, high barrier protection and cost-
effectiveness.
Significant product lines for flexible packaging include
packages for pet foods and personal care products, laminated
rollstock for labels, bags for snack foods, candies, and
photographic development paper, as well as bags that resist
penetration of moisture and leakage of contents for use by
manufacturers of powdered herbicides, fertilizers and other
agricultural chemicals. These bags require complex laminations
and extensive printing and instructional labeling. Other
flexible packaging products made by Graphic Packaging include
coffee bag and beverage laminations and medical health care
packaging.
Graphic Packaging believes that recently completed capital
additions and upgrades to printing and bag making equipment puts
it in a position to increase sales in existing flexible packaging
markets.
Strategy. Graphic Packaging's strategy is to establish
market leadership in selected existing market segments by
increasing its customer base and adding significant new high-
margin products. Graphic Packaging intends to emphasize its
ability to provide innovative products with value added
characteristics to meet exacting customer specifications.
Graphic Packaging continues to focus on commercializing new
products and processes to serve existing and new markets, and to
pursue acquisitions that complement its existing business.
Graphic Packaging is in the process of developing a unique
packaging system, known as ComposiGard[TM] (a film-lined carton),
that management believes will provide a cost effective
alternative with numerous advantages over the conventional "bag-
in-box" packaging, such as cracker or cereal cartons. Graphic
Packaging has completed a pilot line to produce limited
quantities of ComposiGard[TM] and is in the process of discussing
applications with potential customers. Graphic Packaging
believes that this product has a strong market potential,
primarily in the food industry, although orders from consumer
products companies and the subsequent construction of a full-
scale production line are necessary before its potential can be
realized.
Manufacturing and Raw Materials. Graphic Packaging's
patented Composipac process involves multiple processing stages,
including extruding plastic film, color printing on the film,
laminating the film layer or layers to paperboard and cutting and
gluing the lamination to the final specifications.
Graphic Packaging's flexible packaging division produces
printed, laminated and coated bags, and pouches; laminated
materials in roll stock form; and other products. Its technical
capability centers around a proprietary line of heat sealed bags,
coating formulations and processes and other package
characteristics, such as reclosure and tamper evident features.
Graphic Packaging is a non-integrated, value added
manufacturer of packaging products using a variety of raw
materials, such as paper, paperboard, inks, aluminum foil,
plastic films, plastic resins, adhesives and other materials,
which are available from domestic and foreign suppliers.
Historically, Graphic Packaging has not experienced difficulty in
obtaining adequate supplies of raw materials and difficulty is
not anticipated in the future. While multiple sources of these
materials are available, Graphic Packaging prefers to develop
strategic long-standing alliances with vendors in order to
provide a guaranteed supply of materials, satisfy customer
specifications and obtain the best quality, service and price.
Business disruptions or financial difficulties of a sole source
supplier, which Graphic Packaging does not anticipate, could have
an adverse effect by increasing the cost of these materials and
causing delays in manufacturing while other suppliers are being
qualified.
Sales and Distribution. Products are sold primarily to
consumer product manufacturers in the United States and Canada.
Sales are made through direct sales employees working from
Graphic Packaging's manufacturing facilities and sales offices
around the United States, and through independent sales
representatives. Graphic Packaging's selling activities are
supported by its technical service and research staff.
Folding carton sales accounted for approximately 55%, 56%
and 50% of Graphic Packaging's total sales for each of the years
ended 1997, 1996 and 1995, respectively, with the remainder
coming from flexible packaging sales. Approximately 53%, 54% and
73% of folding carton sales were to Coors Brewing for the same
periods, with detergent, soap and tobacco manufacturers and quick
service restaurants accounting for most of the balance. Flexible
packaging sales during this period consisted primarily of
personal care, snack foods and beverage label products and
cookie, photographic and pet food bags.
Most of Graphic Packaging's sales are made under sales
contracts at prices that are subject to periodic adjustment for
raw material and other cost increases. Products are made in
accordance with customer specifications. Including the effect of
acquisitions, Graphic Packaging had approximately $108.9 million
in unshipped backlog orders, as compared to approximately $57.5
million as of March 1, 1998 and 1997 respectively. Of the 1998
backlog, most is expected to be shipped before the end of the
second quarter of 1998. The 1998 backlog includes Universal
Packaging. In addition, backlog numbers and comparisons vary
because of a number of factors and are not necessarily indicative
of past or future operating results.
Competition. Graphic Packaging is subject to strong
competition in most markets it serves. The packaging industry
continues to experience intense price pressures. The
installation of state of the art equipment by manufacturers
intensifies this competitive pricing situation. A relatively
small number of large suppliers dominate a significant portion of
the folding carton segment of the paperboard packaging market.
Major U.S. competitors in the paperboard packaging industry
include Jefferson Smurfit Corporation, Fort James Corporation,
Field Container Corporation, Mead, Gulf States, Riverwood
International Corporation, Westvaco and Shorewood International.
There are an increasing number of competitors offering packaging
with Composipac-like qualities for promotional packaging. The
flexible packaging market has numerous competitors, varying in
size. Graphic Packaging's flexible competitors include Bemis
Company, Inc., Printpack, Sealed Air, American National Can
Company and Union Camp Corporation. Although price is an
important factor in the packaging market, Graphic Packaging
believes that the quality, range and technical innovation of
products and the timeliness and quality of customer service are
also significant competitive factors.
Product Development. Graphic Packaging's research and
development staff works directly with the sales and marketing
staff in meeting with customers and pursuing new business.
Graphic Packaging's development efforts include extending shelf
life of evaporative bar soaps, reducing production costs and
enhancing package appearance through quality printing and other
graphics. Potential new product development efforts are expected
to involve sift-proof cartons, linerless cartons, liquid
containment packages and other packaging innovations.
Developmental Businesses
General. The Company's developmental operations are conducted
either directly through Golden Technologies or one of its
subsidiaries. These operations include a solar electric
distribution business; a corn starch business; a real estate
partnership; and a biodegradable polymer developmental operation.
Except for the solar energy distribution business, the Company's
strategy is to reduce its activities within the developmental
businesses and focus on the Company's two core business units.
The developmental businesses net sales were 8.4%, 12.6% and 12.4%
of the Company's consolidated net sales for 1997, 1996 and 1995,
respectively.
Solar electric systems. Golden Technologies assembles and
distributes solar electric and solar electric hybrid components
and systems primarily through its majority owned subsidiary
Photocomm, a publicly traded company on NASDAQ. Photocomm
purchases solar modules and related equipment from a variety of
suppliers and either distributes them through its dealer network
or integrates these modules and other components into solar
electric systems for sale in the United States and abroad.
Photocomm competes in two major markets, distribution and
industrial, which are outlined below.
Distribution Market. The distribution market
applications include remote electrification of rural homes,
recreational vehicles and boats, traffic signals, water
pumping, and lighting. Currently, distribution accounts for
approximately half of Photocomm's sales and is largely
domestic; however, management believes there is opportunity
for expanding and developing international markets.
Distribution sales are relatively steady throughout the
year, although there are seasonal swings in this largely
domestic market resulting in increased levels of sales in
the second and third quarters. As international growth
continues, Photocomm expects the seasonality to diminish.
International distribution is currently located in two
regional centers. The Central and South American markets
are serviced through an office in Florida, and on October 1,
1996, Photocomm opened an Australia office through a wholly-
owned subsidiary, Photocomm Pty., Ltd. Although these
offices are primarily focused on distribution sales,
Photocomm also plans to pursue future growth opportunities
in industrial applications worldwide.
Industrial Market. Industrial sales are focused
primarily on solar electric power supply solutions for off
grid applications within the telecommunications and the oil
and gas communications and exploration markets. Although
sales to these markets are typically not seasonal in nature,
Photocomm has participated in large projects within these
markets by developing relationships with local carriers and
larger original equipment manufacturers (OEMs).
Historically, these large projects have resulted in
unpredictable swings in sales from quarter to quarter.
However, it is Photocomm's strategy to develop these
relationships and new OEM customer relationships to generate
a more consistent level of this business. Additionally,
Photocomm expects sales in this market to continue to grow
as Photocomm develops new domestic customers and identifies
applications internationally. An increase in Photocomm's
international presence was recently accomplished through the
addition of contracts obtained from Integrated Power
Corporation.
On January 23, 1998, Photocomm acquired Utility Power Group
headquartered in Chatsworth, California, which manufactures,
integrates and installs utility grid interconnected solar
electric systems.
Corn Wet Milling. Golden Technologies' corn wet milling
plant, located in Johnstown, Colorado, produces and distributes
refined corn starch. Nearly all refined corn starch produced at
the Johnstown plant has been sold to Coors Brewing for use in
beer production. Starch is sold to Coors Brewing under an annual
contract with pricing determined by the price of corn. The major
raw material for the wet milling operations is corn, which is
purchased from various sources. Until 1997, the plant produced
and sold high-fructose corn syrup. In the first quarter of 1997,
the Company exited this business due to over capacity in the
industry and declining selling prices.
Other Operating Divisions. Under a marketing agreement with
Coors Brewing, Golden Technologies markets yeast and other
brewery by-products produced by Coors Brewing to the livestock
feed and pet food industries.
Real Estate Partnership. In connection with the Company's
spin-off from ACCo, a limited partnership was formed between
Coors Brewing, as the limited partner, and a subsidiary of Golden
Technologies, as the general partner. The partnership owns
certain real estate previously owned directly by ACCo or Coors
Brewing. The partnership's purpose is to own, develop or
maintain and dispose of the partnership's properties.
Research Projects. Golden Technologies is developing a
proprietary technology for the production and application of
biodegradable polymers. The major goal of the project is
developing a cost-effective manufacturing process that would
make biodegradable materials a viable choice for a wide variety
of uses such as consumer packaging, disposable hygiene products
and food service packaging. The Company is currently seeking a
strategic financial partner to work toward commercialization of
this project.
Dependence on Major Customer
At the time of the spin-off from ACCo, Graphic Packaging,
Golden Aluminum and Golden Technologies entered into five year
supply agreements with Coors Brewing, and have relied on these
agreements for a significant portion of their revenues. Sales to
Coors Brewing of packaging products and refined corn starch
accounted for approximately 15.5%, 16.7% and 19.0% of the
Company's consolidated sales for 1997, 1996 and 1995,
respectively; however, future sales may vary from historical
levels.
In early 1997, Graphic Packaging entered into a new supply
agreement with Coors Brewing to supply packaging products under a
three year, rolling term contract commencing January 1, 1997 that
provides stated quantity commitments and annual repricing. Of
Graphic Packaging's total sales for 1997, approximately 29%
consisted of sales to Coors Brewing. This percentage represented
a decrease from approximately 31% and 37% of Graphic Packaging's
total sales in 1996 and 1995, respectively. Sales of refined
corn starch to Coors Brewing were approximately $7 million in
1997, down from approximately $13 million in 1996 and 1995.
Golden Technologies also has a marketing arrangement with Coors
Brewing under which it purchases and resells yeast and other
brewery byproducts. These agreements with Golden Technologies
were extended through 1999, including provisions for early
termination with the payment of a cancellation penalty.
In recent years, Graphic Packaging has sought to increase
sales to unaffiliated customers to decrease its dependence on
Coors Brewing. With the addition of Universal Packaging in 1998,
Graphic Packaging expects to continue to decrease its dependence
on Coors Brewing in the future. There can be no assurance that
Graphic Packaging's or Golden Technologies' supply agreements
will be renewed or that the terms of renewal will be favorable to
the Company. The loss of Coors Brewing as a customer in the
foreseeable future could have a material adverse effect on the
Company's results of operations.
Research and Development
The Company's ability to commercialize its technologies and
compete effectively in its various markets depends significantly
on its continued and timely development of innovative technology,
materials, products and processes using advanced and cost-
efficient manufacturing processes. See "Packaging Business--
Product Development" and "Ceramics Business--Product
Development." See also "Patents, Proprietary Rights and
Licenses." Total research and development expenditures for the
Company were $15.6 million, $15.3 million and $16.3 million for
1997, 1996 and 1995, respectively. The Company's research and
development expenditures are expected to decrease as a percentage
of net sales in the foreseeable future due to the decisions to
reduce certain activities at Golden Technologies. The Company
believes the remaining expenditures will be adequate to meet the
strategic objectives of its two core businesses.
Patents, Proprietary Rights and Licenses
Graphic Packaging, Coors Ceramics and Golden Technologies
each hold a number of patents and pending patent applications in
the U.S. and in foreign countries. Their policy generally is to
pursue patent protection that they consider necessary or
advisable for the patentable inventions and technological
improvements of their respective businesses. They also rely
significantly on trade secrets, technical expertise and know-how,
continuing technological innovations and other means, such as
confidentiality agreements with employees, consultants and
customers, to protect and enhance their competitive positions in
their respective markets.
Coors Ceramics considers the name "Coors" and the goodwill
associated with it to be material to its customer recognition.
As part of the spin-off from ACCo, Coors Ceramics received
certain licensing rights to use the Coors name. In addition, the
patent protection of Composipac is significant to Graphic
Packaging's operations.
The Company believes that its subsidiaries own or have the
right to use the proprietary technology and other intellectual
property necessary to their operations. Except as noted above,
the Company does not believe that its success is materially
dependent on the existence or duration of any individual patent,
trademark or license or related group of patents, trademarks or
licenses. The developmental businesses also hold several patents
and patent applications and licenses related to their businesses
and technology development pursuits.
Environmental Matters
The Company's operations are subject to all federal, state
and local environmental, health and safety laws and regulations
and, in a few instances, foreign laws, that regulate health and
safety matters and the discharge of materials into air, land and
water, and govern the handling and disposal of solid and
hazardous wastes. The Company believes it is in substantial
compliance with applicable environmental and health and safety
laws and regulations and does not believe that costs of
compliance with these laws and regulations will have a material
effect upon its capital expenditures, earnings or competitive
position.
Coors Ceramics has received a demand for payment arising out
of contamination of a semiconductor manufacturing facility
formerly owned by a subsidiary of Coors Ceramics, Coors
Components, Inc. (CCI). Colorado State environmental authorities
are seeking clean up of soil and ground water contamination from
a subsequent owner. Coors Ceramics sold CCI in 1987. Coors
Ceramics believes that the contamination occurred prior to Coors
Ceramics' ownership of CCI and there are possible off site
sources of contamination. Although Coors Ceramics does not
believe it has any responsibility for the contamination or the
cleanup, and is seeking indemnification from the party from whom
it acquired the property, Coors Ceramics is participating in
mediation and discussions relating to appropriate remediation.
Coors Ceramics has received a Unilateral Administrative
Order issued by the Environmental Protection Agency (EPA)
relating to the Rocky Flats Industrial Park (RFIP) site and is
participating with the RFIP group to perform an Engineering
Evaluation/Cost Analysis on the property. The RFIP group is
attempting to allocate costs for groundwater cleanup, but as of
yet, there is no estimate of this cost.
The Company has received requests from the Environmental
Protection Agency for information related to other disposal
sites; however, the Company believes its potential liability is
minimal. Some of the Company's subsidiaries have been notified
that they may be potentially responsible parties (PRPs) under
CERCLA or similar state laws with respect to the remediation of
certain sites where hazardous substances have been released into
the environment. The law governing Superfund sites provides that
PRPs may be jointly and severally liable for the total costs of
remediation. Generally, however, liability is determined through
litigation and/or settlement among the PRPs based on equitable
factors including waste volume contribution. The ultimate
magnitude of liability for any PRP under CERCLA depends upon a
number of factors such as their equitable share of liability, the
selected method of remediation, the timing of work, the number of
financially solvent PRPs ultimately responsible for payment, the
effect of inflation, the ability to recover costs from former and
current insurance carriers and the development of new remediation
technologies. The Company cannot predict with certainty the
total costs of remediation, its share of the total costs, the
extent to which contributions will be available from other
parties, the amount of time necessary to complete the
remediation, or the availability of insurance. However, based on
investigations to date, the Company believes that any liability
with respect to these sites would not be material to the
financial condition and results of operations of the Company,
without consideration of insurance recoveries. There can be no
certainty, however, that the Company will not be named as a PRP
at additional Superfund sites or be subject to other
environmental matters in the future or that the costs associated
with those additional sites or matters would not be material.
The Clean Air Act Amendments of 1990 (CAAA) establish new
permitting requirements. Regulations promulgated and continuing
to be promulgated under Title V and Title III of the CAAA
required the Company to apply for new permits at several of its
facilities during 1996 and 1997. The Company's subsidiaries
continue to address the requirements under these regulations and,
until the permitting process is complete, the full economic
impact of these regulations cannot be determined.
Congress and state legislatures have considered and continue
to consider various proposals that, if passed, could impose
significant new requirements on the packaging industry related to
recyclability, recycled content or minimization of packaging
products. Although Graphic Packaging believes its products
compare favorably to known competitors' products in these areas,
these legislative requirements, if adopted, could adversely
affect Graphic Packaging's operations. The Company is unable to
predict whether, or when, such legislative changes, if any, may
be made. Graphic Packaging continually strives to minimize the
amount of material required to fabricate packaging for its
customers and to use recycled materials to produce packaging that
can be recycled or safely incinerated.
Various local, state and federal laws, rules and regulations
relating to the environment, health and safety are applicable to
the Company's ongoing operations. The complexity and number of
these regulations continue to proliferate. The resulting impact
of these actions increases the cost structure of the Company's
subsidiaries and the price of their products.
The Company seeks to proactively take steps to decrease its
potential for environmental liabilities, and has remediated
potential sites and taken actions to avoid using hazardous
substances.
Year 2000
Management has initiated an enterprise-wide program to
prepare the Company's computer and manufacturing systems and
applications for the year 2000. The Company expects to incur
internal staff costs as well as consulting and other expenses
related to the year 2000 project. At this point, the Company is
not able to determine the estimated cost for its year 2000
project and, if unresolved, whether the year 2000 issue will have
a material impact on the operations of the Company.
Employees
As of March 1, 1998, the Company had approximately 5,600
full-time employees. Management considers its employee relations
to be good.
ITEM 2. PROPERTIES
The Company believes that its facilities are well maintained
and suitable for their respective operations. The table below
lists the Company's plants and most other physical properties and
their locations and general character:
Facility Location Character
ACX Technologies:
Company Headquarters Golden, Colorado
Coors Ceramics:
Manufacturing Benton, Arkansas(1) Ceramic Products
Manufacturing Milpitas, California(2) Ceramic Products
Manufacturing Grand Junction, Colorado Ceramic Products
Manufacturing Chattanooga, Tennessee Ceramic Packages
Manufacturing Hillsboro, Oregon Ceramic Products
Manufacturing Lawrence, Pennsylvania(2) Ceramic Products
Manufacturing Norman, Oklahoma Ceramic Products
Manufacturing Oklahoma City, Oklahoma(5) Ceramic Products
Manufacturing Glenrothes, Scotland(5) Ceramic Products
Manufacturing Oak Ridge, Tennessee(3) Ceramic Products
Manufacturing Austin, Texas(2) Ceramic Products
Manufacturing Odessa, Texas Ceramic Products
Manufacturing El Segundo, California(2) Fluoropolymer Products
Manufacturing and Golden, Colorado(4) Ceramic Products
Company Offices
Graphic Packaging:
Manufacturing Boulder, Colorado(2) Folding Carton/Labels
Manufacturing Lawrenceburg, Tennessee Folding Carton
Manufacturing Richmond, Virginia Folding Carton
Manufacturing Bow, New Hampshire Folding Carton
Manufacturing Centralia, Illinois Folding Carton
Manufacturing Ft. Smith, Arkansas Folding Carton
Manufacturin Mitchell, South Dakota Folding Carton
Manufacturing Lumberton, North Carolina Folding Carton
Manufacturing Saratoga, New York Folding Carton
Manufacturing Golden, Colorado Labels
Manufacturing Malvern, Pennsylvania Flexible Packaging
Manufacturing Franklin, Ohio Flexible Packaging
Manufacturing Richmond, British Columbia(2) Flexible Packaging
Manufacturing Winnipeg, Manitoba Flexible Packaging
Manufacturing Mississauga, Ontario(2) Flexible Packaging
Manufacturing Charlotte, North Carolina Flexible Packaging
Company Offices Golden, Colorado(2)
Huntersville, North Carolina(2)
Bow, New Hampshire
Britton Group Plastics Division(6):
Manufacturing Winsford, Cheshire, England Polyethylene extruding
Manufacturing Louth, Lincolnshire, England (1) Polyethylene extruding
Manufacturing Letchworth, Herts, England Polyethylene extruding
Manufacturing Hartlepool, Cleveland, England Polyethylene extruding
Manufacturing Ilkeston, Derbyshire, England Polyethylene extruding
Manufacturing South-on-Sea, Essex, England Polyethylene extruding
Manufacturing Enfield, Middlesex, England Polyethylene extruding
Manufacturing Bletchley, Milton Keynes, England Polyethylene extruding
Company Offices London, England(2)
Developmental Businesses:
Grain Processing
Plant Johnstown, Colorado Refined Starch
Grain Elevator Johnstown, Colorado Corn Handling and
Storage
Research Facilities Johnstown, Colorado Research and Pilot
Operations
Research Facilities Golden, Colorado Research and Pilot
Operations
Integration and
Distribution Scottsdale, Arizona Solar Panel Integration
and Distribution
Manufacturing Safford, Arizona(2) Solar Panel Distribution
Manufacturing La Rioja, Argentina Solar Panel
Manufacturing
Integration and
Distribution Buenos Aires, Argentina Solar Panel Distribution
Company Offices Golden, Colorado(2)
(1) Two facilities.
(2) Leased facilities.
(3) Three facilities, one of which is leased.
(4) Four facilities, one of which is leased.
(5) Two facilities, one of which is leased.
(6) Management has decided to sell this division.
The operating facilities of the Company are not constrained
by capacity issues.
ITEM 3. LEGAL PROCEEDINGS
In the ordinary course of business, the Company's
subsidiaries are subject to various pending claims, lawsuits and
contingent liabilities, including claims by current or former
employees relating to employment, sexual harassment, or
termination. In addition, the Company brought suit in December
1996 in Colorado state court relating to a fixed-price
construction contract dispute in which a counterclaim has been
filed. In each of these cases, the Company is denying the
allegations made against it and is vigorously defending against
them. The Company does not believe that disposition of these
matters will have a material adverse effect on the Company's
consolidated financial position or results of operations. For
specific information regarding environmental legal proceedings,
see "Environmental Matters."
In 1996 several current and former employees of a defense
equipment manufacturer and their spouses brought a lawsuit
against Coors Ceramics and a beryllium supplier alleging that
they contracted chronic beryllium disease from products supplied
by Coors Ceramics and the beryllium supplier. After exchange of
information, plaintiffs dismissed Coors Ceramics from the suit.
In January 1997, Golden Technologies and several suppliers
of high fructose corn syrup were sued in the U.S. District Court
for the District of Oregon by a candy company claiming violation
of federal and state antitrust laws in sales of corn syrup.
Golden Technologies was only an occasional and minor supplier to
the plaintiff. The case was transferred for pre trial
proceedings only to the U.S. District Court for Central Illinois
as part of an existing consolidated class action. Golden
Technologies is vigorously defending against these allegations,
and, after the close of discovery in May 1998, if plaintiff does
not voluntarily dismiss Golden Technologies, Golden Technologies
intends to move for summary judgment.
As part of the 1994 acquisition of four flexible packaging
facilities, the former shareholders of the acquired company
deposited ACX Technologies' common stock, valued at $10 million
at the date of acquisition, into escrow and severally agreed to
indemnify the Company against certain liabilities including: (i)
environmental liabilities if the Company makes a successful claim
for indemnification by June 30, 2002; (ii) tax liabilities, if
the claim is made within 30 days after expiration of applicable
statutes of limitation or appeals; and (iii) other liabilities,
if the claim was made by June 30, 1996. In March 1995, an action
was brought against the Company in Calgary, Alberta for which the
Company is seeking indemnification under the escrow agreement in
the event that the Company suffers a loss. The action is being
held in abeyance until the resolution of the underlying tax issue
with Revenue Canada. The Company believes that it will prevail
in the litigation or be indemnified against a loss.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders
during the fourth quarter ended December 31, 1997.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The Company's common stock is currently quoted on the New
York Stock Exchange under the symbol ACX. The range of the high
and low sales price per share for each quarter of 1997 and 1996
were as follows:
Market Price 1997 1996
---------------------- ---------------------
High Low High Low
--------- -------- ------- -------
First Quarter $19 7/8 $17 3/4 $18 1/4 $14 5/8
Second Quarter $22 11/16 $17 3/4 $22 $17 1/2
Third Quarter $27 3/8 $22 5/8 $20 1/2 $16 3/8
Fourth Quarter $27 1/4 $24 7/16 $20 $16 7/8
During 1997 and 1996, no dividends were paid by the Company.
At this time, the Company anticipates that it will retain any
earnings and that the Company will not pay dividends to its
shareholders in the foreseeable future. Also, the Company's
credit facilities require maintenance of certain financial ratios
that may affect its ability to pay dividends.
On March 1, 1998, there were approximately 2,665
shareholders of record of the Company's common stock.
ITEM 6. SELECTED FINANCIAL DATA
Financial Highlights - Five Year Overview
In thousands, except per
share and ratio data 1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
Summary of Operations
Net sales $731,085 $712,380 $660,853 $578,705 $513,037
-------- -------- -------- -------- --------
Gross profit $178,611 $156,525 $152,824 $120,172 $ 98,689
Marketing, general and
administrative $ 91,632 $ 77,947 $ 75,071 $ 67,311 $ 60,886
Research and development 15,558 15,300 16,312 14,410 13,499
Asset impairment and
restructuring charges 21,880 34,642 2,735 --- ---
-------- -------- -------- -------- --------
Operating income $ 49,541 $ 28,636 $ 58,706 $ 38,451 $ 24,304
-------- -------- -------- -------- --------
Income from continuing
operations $ 27,716 $ 11,409 $ 31,247 $ 19,683 $ 13,014
-------- -------- -------- -------- --------
Per basic share of
common stock:[c]
Continuing operations $0.99 $0.41 $1.17 $0.75 $0.51
Net income (loss) $0.99 ($3.30) $0.89 $0.76 $0.49
Per diluted share of
common stock:[c]
Continuing operations[a] $0.96 $0.40 $1.14 $0.74 $0.51
Net income (loss)[a,b] $0.96 ($3.23) $0.87 $0.75 $0.49
Financial Position
Working capital $158,551 $154,626 $168,801 $146,678 $51,845
Total assets $701,196 $676,692 $785,486 $760,290 $656,217
Short-term debt --- --- --- $3,600 $71,000
Long-term debt $100,000 $100,000 $100,000 $108,295 ---
Shareholders' equity $430,531 $397,903 $488,374 $457,454 $418,602
Other Information
Total debt to
capitalization 18.8% 20.1% 17.0% 19.7% 14.5%
Net book value per share
of common stock $15.17 $14.24 $18.14 $17.19 $16.32
[a] Asset impairment and restructuring charges resulted in a
loss per diluted share impact of $0.47, $0.81 and $0.06 in
1997, 1996, and 1995, respectively.
[b] During 1996 the Company discontinued the operations of
Golden Aluminum Company. The income (loss) per diluted share for
Golden Aluminum was $(3.63), $(0.27), $0.01, and $(0.02) for
1996, 1995, 1994 and 1993, respectively.
[c] All earnings per share data have been restated in
accordance with Statement of Financial Accounting Standards No.
128, "Earnings per Share."
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General Overview
ACX Technologies, Inc. (the Company), together with its
subsidiaries, is a diversified, value added manufacturing
organization focused on pioneering differentiated customer
solutions. Two business segments compose the majority of the
Company's results from operations: the ceramics business,
operated through Coors Ceramics Company (Coors Ceramics), and the
packaging business, operated through Graphic Packaging
Corporation (Graphic Packaging).
Coors Ceramics develops, manufactures and sells advanced
technical ceramic products and other engineered materials across
a wide range of product lines for a variety of custom
applications. Coors Ceramics, which has been in business for
more than 77 years, is the largest U.S.-owned, independent
manufacturer of advanced technical ceramics. As part of its
strategy to broaden its material base, Coors Ceramics acquired
Tetrafluor, Inc. (Tetrafluor) in 1997. Tetrafluor manufactures
Teflonr fluoropolymer sealing systems and components for use in
aerospace, industrial and transportation industries. The
majority of Coors Ceramics' 1997 sales were to the petrochemical,
power generation and mining, semiconductor equipment, automotive,
telecommunications and pulp and paper industries.
Graphic Packaging manufactures both folding carton and
flexible packages and participates in the beverage, detergent,
cereal, tobacco, pet food, confection and personal care markets.
In 1996, Graphic Packaging acquired Gravure Packaging, Inc.
(Gravure) located in Richmond, Virginia. In January 1998, the
Company acquired control of Britton Group plc (Britton) pursuant
to a cash tender offer. Britton is an international packaging
group operating through two principal divisions: folding cartons
and plastics. The folding cartons division, Universal Packaging
Corporation (Universal Packaging), is a non-integrated
manufacturer of folding cartons in the United States, with
capabilities in design, printing and manufacturing of multicolor
folding cartons. The plastics division of Britton includes the
extrusion, conversion and printing of polyethylene into films and
bags for industrial customers. The results of the folding
cartons division will be reflected in the accounts of the Company
beginning January 14, 1998. The plastics division will be
accounted for as a discontinued operation based on management's
decision to sell this business.
In addition to the primary operating businesses, the Company
owns technology-based developmental businesses operated through
Golden Technologies Company, Inc. (Golden Technologies). Golden
Technologies' focus is on assembling and distributing solar
electric systems, serving as general partner for a real estate
development partnership, and developing biodegradable plastics,
for which the Company is seeking a strategic financial partner.
Additionally, the historical results for the developmental
businesses include the operations of a corn-wet milling facility
that produced high-fructose corn syrup and refined corn starch.
In 1997, the Company exited the high-fructose corn syrup business
due to rising corn costs and excess high-fructose corn syrup
supply. Effective March 31, 1997, the operations at the corn-wet
milling facility were converted to producing corn starch only.
This financial review presents the Company's operating
results for each of the three years in the period ended December
31, 1997, and its financial condition at December 31, 1997 and
1996. This review should be read in connection with the
information presented in the Consolidated Financial Statements
and the related notes thereto.
Discontinued Operations
In 1996, the Board of Directors adopted a plan to dispose of
the Company's aluminum rigid container sheet business operated by
Golden Aluminum Company (Golden Aluminum). In conjunction with
this decision, the Company recorded pretax charges of $155.0
million for anticipated losses upon the disposition and estimated
operating losses of the business through the disposition date.
In March of 1997, the sale of Golden Aluminum was completed for
$70.0 million, of which $10.0 million was paid at closing and
$60.0 million is due within two years. In accordance with the
purchase agreement, the purchaser has the right to return the
property, plant and equipment back to the Company during the two-
year period in discharge of the $60.0 million obligation. The
initial payment of $10.0 million is non-refundable.
The historical operating results and the estimated loss on
the sale of this business have been segregated as discontinued
operations on the accompanying Consolidated Income Statement for
all periods presented. The assets and liabilities of Golden
Aluminum which were held for sale as of December 31, 1996 have
been separately identified on the Consolidated Balance Sheet as
net current or noncurrent assets of discontinued operations. The
current assets consist primarily of accounts receivable and
inventory, partially offset by accounts payable. The noncurrent
assets are composed of the fixed assets of Golden Aluminum.
Substantially all the assets of Golden Aluminum have been sold as
of December 31, 1997.
Discontinued operations have not been segregated on the
Consolidated Statement of Cash Flows. Accordingly, the
Consolidated Statement of Cash Flows includes sources and uses of
cash for Golden Aluminum.
Results from Continuing Operations
Consolidated
Net sales for 1997 were $731.1 million, an increase of $18.7
million, or 2.6%, over 1996 net sales of $712.4 million. Solid
sales growth of 10.3% at Coors Ceramics and 5.4% at Graphic
Packaging contributed to this consolidated increase and resulted
in net sales records for both companies. Partially offsetting
these increases was a 31.7% decrease in net sales at Golden
Technologies, which is no longer producing or selling high-
fructose corn syrup. Net sales for 1996 of $712.4 million
increased 7.8% over 1995 net sales of $660.9 million. The
Company's sales growth for 1996 benefited from the Gravure
acquisition by Graphic Packaging in March of 1996. Coors
Ceramics' sales also grew in 1996, primarily due to internally
generated sales opportunities.
Net sales to Coors Brewing Company (Coors Brewing) consisted
of packaging products and refined corn starch and accounted for
15.5%, 16.7% and 19.0% of 1997, 1996 and 1995 total revenues,
respectively. The Company continues to pursue new markets and
customers in an effort to be less dependent upon Coors Brewing.
The Company's acquisition of Britton advances this strategy.
The Company had 1997 export sales, primarily to Western
European, Canadian and Asian markets, of $82.1 million, or 11.2%
of total net sales. This compares to export sales of $77.2
million, or 10.8% of total sales, in 1996. In 1995, export sales
accounted for $67.8 million, or 10.3% of total net sales.
Future years' sales growth is expected to be solid in both
the ceramics and packaging businesses, fostered by the pursuit of
niche acquisitions, additional base business revenues and the
strength of relationships with existing customers for their
future needs. Golden Technologies will focus its efforts on the
solar electric distribution business, with modest increases in
sales expected over the next few years.
Consolidated gross margin (gross profit as a percentage of
net sales) was 24.4%, 22.0% and 23.1% for 1997, 1996 and 1995,
respectively. Gross margin improved at Graphic Packaging during
1997, 1996 and 1995 due to increased sales volumes, productivity
gains, operating efficiencies and the Gravure acquisition.
Partially offsetting these gains, Coors Ceramics experienced
slight declines in margins in 1997, primarily due to lower
margins on certain sales resulting from currency influenced price
competition. Downturns in Coors Ceramics' telecommunication and
semiconductor businesses contributed to the lower consolidated
gross margins in 1996. During 1996, Golden Technologies impacted
consolidated margins when corn syrup prices fell sharply, while
the Company's decision to exit the corn syrup business in
February 1997 resulted in improved margins for 1997.
Marketing, general and administrative expenses for 1997,
1996 and 1995 were $91.6 million, $77.9 million and $75.1
million, which represented 12.5%, 10.9% and 11.4% of net sales,
respectively. The increase in 1997 is attributable to the
inclusion of a full year of expenses for the solar electric
businesses acquired in November 1996.
Research and development costs increased slightly to $15.6
million in 1997 from $15.3 million in 1996. The 1996 research and
development expenses represented a decrease of $1.0 million from
1995 expense of $16.3 million. Changes in research and
development expenses are attributable primarily to changes in
activity levels at Golden Technologies. Golden Technologies will
focus its future efforts on the solar electric distribution
business and anticipates a decline in future research and
development expenses.
Operating Income from
Continuing Operations by Segment
(In millions)
1997 1996 1995
------ ------ ------
Coors Ceramics $48.2 $44.2 $47.4
Graphic Packaging before
restructuring charges 44.8 41.0 34.5
Golden Technologies before
asset impairment and
restructuring charges (11.4) (13.8) (11.4)
Corporate (10.2) (8.2) (9.5)
----- ----- -----
Operating income before asset
impairment and
restructuring charges 71.4 63.2 61.0
Graphic Packaging
restructuring charges (2.1) --- ---
Golden Technologies asset
impairment and restructuring
charges (19.8) (34.6) (2.3)
----- ----- -----
Operating income after
asset impairment and
restructuring charges $49.5 $28.6 $58.7
===== ===== =====
Consolidated operating income for 1997 excluding asset
impairment and restructuring charges grew to $71.4 million, an
increase of $8.2 million, or 12.9%, over 1996 operating income
before asset impairment and restructuring charges. Record
operating income at both Coors Ceramics and Graphic Packaging
contributed to this gain. The comparable increase in operating
income in 1996 over 1995 was $2.2 million, primarily due to the
Gravure acquisition, offset in part by lower operating income at
Coors Ceramics resulting from downturns in the
telecommunications, semiconductor and data processing industries.
Asset impairment charges totaled $16.6 million and $32.2
million in 1997 and 1996, respectively. During 1997, the Company
adopted a plan to limit future funding and seek a strategic
financial partner to work toward commercialization for Golden
Technologies' biodegradable polymer project. This decision
reduced expected future cash flows for this activity to a level
below the carrying value of the manufacturing and intangible
assets of this project. In 1996, the Company recorded $32.2
million in asset impairment charges related to the corn-wet
milling business and the solar panel manufacturing activity. The
assets of the corn-wet milling business became impaired when
unfavorable market conditions in the high-fructose corn syrup
market reduced selling prices by half and decreased ongoing
customer purchase commitments and anticipated future net cash
flows. The solar panel manufacturing activity assets became
impaired due to a lack of a currently viable market for cadmium
telluride solar panels, the lack of an alternative use for panel
manufacturing assets and management's new focus on solar electric
distribution.
The Company recorded restructuring charges totaling $5.3
million and $2.4 million in 1997 and 1996, respectively. The
following table summarizes accruals related to these
restructuring charges:
Corn
Golden Biodegradable Syrup Graphic
Technologies Polymer Exit Exit Packaging
(In millions) Realignment Plan Plan Headquarters Total
---------- ----------- ----- ---------- -----
1996 restructuring
charges $2.4 $--- $--- $--- $2.4
Cash paid (0.2) --- --- --- (0.2)
Non-cash expenses (0.4) --- --- --- (0.4)
----- ----- ----- ----- -----
Balance,
December 31, 1996 1.8 --- --- --- 1.8
1997 restructuring
charges --- 0.9 2.3 2.1 5.3
Cash paid (1.8) (0.5) (1.4) (0.2) (3.9)
Non-cash expenses --- --- --- (0.2) (0.2)
----- ----- ----- ----- -----
Balance,
December 31, 1997 $--- $0.4 $0.9 $1.7 $3.0
===== ===== ===== ===== =====
During 1997, the Company eliminated 40 research and
administrative positions and recorded approximately $0.9 million
in severance and outplacement costs related to the Golden
Technologies' biodegradable polymer project. The Company made
cash outlays of approximately $0.5 million related to this plan
in 1997. Remaining cash costs of $0.4 million are expected to
be paid by mid-1998. The Company anticipates this plan will
improve the operating performance of Golden Technologies by
eliminating future losses associated with this project.
Due to significant over capacity and sharp price reductions
in the high-fructose corn syrup market, which resulted in
operating losses, the Company adopted a plan to exit this
business in the first quarter of 1997. As a result, the Company
eliminated approximately 70 manufacturing and administrative
positions and recorded $2.3 million in severance and other exit
costs. During 1997, the Company made approximately $1.4 million
in cash outlays related to this plan. The Company expects to
complete this restructuring plan and make remaining cash outlays
of approximately $0.9 million during 1998.
In December 1997, the Company recorded a $2.1 million
charge related to the closure of the Graphic Packaging corporate
offices in Wayne, Pennsylvania. Graphic Packaging has
established its new headquarters in Golden, Colorado. The
closure of the Wayne office resulted in severance and
outplacement costs of $1.1 million for approximately 22
administrative employees. During 1997, the Company made cash
payments of $0.2 million related to this plan. The Company
expects to complete this plan and make the remaining cash
outlays of $1.7 million in the first quarter of 1998. This
action is expected to result in annual savings of approximately
$2.0 million, primarily through reduced rent expense and state
tax savings.
In the fourth quarter of 1996, certain management
realignments were made at Golden Technologies and in the solar
electric distribution business resulting in the elimination of 16
administrative positions. Approximately $2.0 million was paid
for severance and other exit costs related to this charge. This
restructuring was substantially completed in 1997. This plan is
expected to improve operating results through reduced employee
expenses and improved management coordination.
Interest expense for 1997, 1996 and 1995 was $8.7 million,
$8.2 million and $9.3 million, respectively. The $0.5 million
increase in 1997 resulted primarily from lower capitalized
interest amounts associated with fewer large capital projects in
1997. The $1.1 million decrease in 1996 pertains to reduced
borrowing costs associated with the Company's $125.0 million
committed bank facility and fewer short-term borrowings during
the year.
The consolidated effective tax rate for the Company in 1997
was 39.9% compared to 49.1% in 1996 and 39.0% in 1995. The higher
tax rate in 1996 compared with 1997 and 1995 resulted from a
lower 1996 earnings base, which increased the impact of non-
deductible items. In addition, no tax benefit was taken for
built-in losses on a subsidiary experiencing tax losses and for
capital losses that may not be deductible due to a lack of
offsetting capital gains. The Company expects to maintain its
effective tax rate for future years at the historical rate of
approximately 40.0%.
Consolidated income from continuing operations improved to
$27.7 million in 1997, a $16.3 million improvement over $11.4
million of income from continuing operations for 1996. Excluding
asset impairment and restructuring charges discussed earlier,
income from continuing operations for 1997 was $41.3 million, or
$1.43 per diluted share, compared with $34.2 million, or $1.21
per diluted share, in 1996.
Coors Ceramics
Coors Ceramics' net sales for 1997 increased $28.4 million
to $304.8 million over 1996 net sales of $276.4 million. This
10.3% increase is primarily attributable to a rebound in the
telecommunications, semiconductor and data processing industries
and increased sales volumes to the petrochemical industry. The
August 1997 acquisition of Tetrafluor, a manufacturer of Teflonr
fluoropolymer parts, expanded Coors Ceramics' material base and
added $5.8 million in revenue for 1997. In 1996, net sales of
$276.4 million increased 2.0% over 1995 net sales of $270.9
million. Improved sales of power tubes, beverage valves,
precipitators and pulp and paper industry products accounted for
this sales growth, partially offset by downturns in the
telecommunications, semiconductor and data processing industries
in 1996. Coors Ceramics competes primarily on quality and thus
volume, not price, continues to be the catalyst for increases in
sales dollars. International sales as a percentage of total net
sales decreased slightly in 1997 to 27.0% from 28.9% in 1996 and
28.1% in 1995. The decrease in international sales in 1997 was
due to gains in domestic sales, lower sales dollars from some
international customers due to currency influenced price
competition and weaker demand from certain foreign mining
industry customers.
Operating margins decreased slightly in 1997 to 15.8%
compared to 16.0% in 1996 and 17.5% in 1995. The strength of the
U.S. dollar compared to certain foreign currencies resulted in
increased price competition in some foreign markets. The 1996
margin decline reflected downturns in the semiconductor and
telecommunications industries.
On the strength of sales increases, Coors Ceramics'
operating income for 1997 rose $4.0 million, or 9.1%, to a record
$48.2 million. Operating income for 1996 of $44.2 million was
$3.2 million, or 6.7%, less than the $47.4 million operating
income reported in 1995. The lower operating income in 1996 as
compared to 1995 resulted from the declines in the semiconductor,
telecommunications and data processing industries.
In 1998, Coors Ceramics will continue its efforts to grow
through new product development, expanded market share in its
current product lines and the addition of new materials to its
product mix. The 1998 outlook is also dependent upon the
continued strength of the U.S. and European economies, Coors
Ceramics' ability to compete despite the strong U.S. dollar and
effective capacity utilization. Additionally, Coors Ceramics is
currently evaluating the commercial viability of its C-4
developmental program.
Graphic Packaging
Graphic Packaging's net sales for 1997 were $365.1 million,
an increase of $18.6 million, or 5.4%, over 1996 net sales of
$346.5 million. The increase in net sales for 1997 was a result
of additional volume in several markets including confectionery,
bakery, snack food and detergent. Net sales for 1996 increased
12.5% over 1995 net sales of $308.1 million, primarily a result
of the Gravure acquisition in 1996. In 1997, 1996 and 1995,
folding carton sales accounted for 55%, 56% and 50%,
respectively, with flexible sales accounting for the balance of
the business. Sales to Coors Brewing were approximately 29%, 31%
and 37% of Graphic Packaging's net sales for 1997, 1996 and 1995,
respectively. In recent years, Graphic Packaging has sought to
increase sales to unaffiliated customers to decrease its
dependence on Coors Brewing. With the addition of Universal
Packaging in 1998, Graphic Packaging expects to continue to
further decrease its dependence on Coors Brewing in the future.
Graphic Packaging's operating income for 1997 was $42.7
million, an increase of $1.6 million, or 3.9%, over 1996
operating income. The increase in 1997 operating income is
primarily attributable to additional volume to the confectionery,
bakery, snack food and detergent markets, as well as productivity
improvements. Partially offsetting the increase in operating
income was a $2.1 million fourth quarter 1997 charge related to
the closure of Graphic Packaging's headquarters in Pennsylvania.
Graphic Packaging's operating income for 1996 was $41.0 million,
an increase of $6.5 million, or 18.8%, over 1995 operating income
of $34.5 million. The improvement in operating income in 1996
was a result of a combination of increased operating
efficiencies, the 1996 Gravure acquisition and a favorable
product mix. Operating margin was 11.7%, 11.8% and 11.2% for
1997, 1996 and 1995, respectively. Operating margin improvements
in 1997 related to the increased volumes discussed above, offset
by the 1997 restructuring charge. Operating margins in 1996 also
improved as a result of the increased operating efficiencies, the
1996 Gravure acquisition and a favorable product mix.
Graphic Packaging continues to focus on commercializing new
products and processes to serve existing and new markets, and to
pursue acquisitions that complement its existing business.
Graphic Packaging believes its strategy of being a value added
packaging provider for higher margin markets will continue to
sustain its profitable growth into the future. The combination
of innovative products, new state-of-the-art facilities and
focused acquisitions will continue to support its growth
objectives in a highly competitive, consolidating industry.
Golden Technologies
Golden Technologies' 1997 net sales were $61.1 million, a
decrease of $28.4 million or 31.7% compared to 1996 net sales of
$89.5 million. The decrease in sales in 1997 reflects the
Company's decision to exit the high-fructose corn syrup business,
partially offset by a full year of sales in the solar electric
distribution businesses acquired in November 1996. Net sales in
1996 increased $7.6 million compared to 1995 net sales of $81.9
million. The increase in sales in 1996 was attributable to the
November 1996 acquisition of the solar electric distribution
businesses. The remaining increase was the result of increased
selling prices for commodity byproducts of the high-fructose corn
syrup operation, offset in part by lower selling prices for
fructose.
Golden Technologies reported an operating loss of $31.2
million in 1997, which included the asset impairment and
restructuring charges discussed earlier. Operating losses for
1996 were $48.4 million, including $34.6 million in asset
impairment and restructuring costs. Excluding the impact of the
asset impairment and restructuring charges, Golden Technologies'
operating loss decreased 17.4%, or $2.4 million, from $13.8
million in 1996 to $11.4 million in 1997. The 1997 operating
results include a full year of results from the solar electric
distribution businesses and reflect the elimination of losses
associated with the corn syrup business, partially offset by
higher research and development expenses at the biodegradable
polymer project early in 1997. The 1996 operating loss of $13.8
million represented an increase over the 1995 operating loss of
$11.4 million. The 1995 results included approximately $5.0
million of operating income from the corn-wet milling business.
Financial Resources and Liquidity
ACX Technologies' liquidity is generated from both internal
and external sources and is used to fund short-term working
capital needs, capital expenditures and acquisitions. Internally
generated liquidity is measured by net cash from operations, as
discussed below, and working capital. At December 31, 1997, the
Company's working capital (excluding the discontinued operation)
was $158.2 million with a current ratio of 2.4 to 1.
During 1997, the Company established an unsecured, $417.0
million, 364-day revolving credit facility for the purpose of
funding the Company's acquisition of Britton. Amounts borrowed
under this facility bear interest at LIBOR plus a spread that
increases over the term of the facility. In addition, the
Company pays a commitment fee on the unused portion of the credit
line. There were no amounts outstanding at December 31, 1997.
Subsequent to December 31, 1997, the Company borrowed $276.0
million under this facility. The Company intends to replace this
credit line with permanent long-term financing prior to the
expiration date of the facility.
During 1997, the Company had access to a $125.0 million,
multiyear, unsecured revolving credit facility. No borrowings
were outstanding under this facility at December 31, 1997 or
1996. The Company currently is negotiating a new $75.0 million
credit facility to replace this line of credit which was
cancelled by the Company in January 1998.
In March of 1997, the Company completed the sale of Golden
Aluminum. This sale generated $10.0 million in cash at closing
and is expected to generate an additional $60.0 million in cash
within two years if the buyer does not return Golden Aluminum to
the Company as permitted by the purchase agreement. The working
capital of Golden Aluminum, which was not part of the sale
agreement, was liquidated in 1997.
As shown in the Consolidated Statement of Cash Flows, net
cash provided by operations was $117.4 million, $46.2 million and
$97.2 million for 1997, 1996 and 1995, respectively. The
increase between 1996 and 1997 resulted primarily from the
liquidation of the working capital of Golden Aluminum. The
decrease from 1995 to 1996 was primarily attributable to
increased losses experienced in discontinued operations as well
as declines in accounts payable.
During 1997, 1996 and 1995, net cash from operations was
used to fund capital requirements and acquisitions. Over this
three-year period, total capital expenditures for the Company,
excluding corporate, were $172.9 million, as follows:
(In millions) 1997 1996 1995
----- ----- -----
Coors Ceramics $28.8 $30.3 $25.1
Graphic Packaging 18.0 13.3 20.1
Golden Technologies 9.1 12.6 7.4
Golden Aluminum -
discontinued in 1996 --- 1.0 7.2
----- ----- -----
$55.9 $57.2 $59.8
===== ===== =====
Consolidated capital spending during 1997 has been primarily
for technological upgrades to machinery and equipment and related
computer systems as well as costs associated with facility
expansions and reconfigurations. The Company expects its capital
expenditures for 1998 to be between $70.0 million and $80.0
million, primarily at Coors Ceramics and Graphic Packaging.
Coors Ceramics has planned facility expansions and ongoing
equipment upgrades. Graphic Packaging's 1998 capital budget,
which includes expenditures for Universal Packaging, will be used
for performance improvements to existing equipment and increased
capacity for growing markets. Golden Technologies will not have
significant capital expenditures in 1998.
Acquisitions during 1997 utilized $44.7 million in cash,
primarily for the acquisition of Tetrafluor and the fourth
quarter purchase of approximately $28.9 million in Britton stock
in anticipation of the January 1998 acquisition. A future
strategy of the Company is to pursue value added acquisitions
that provide growth and synergies with the base businesses.
The Company currently expects that cash flows from
operations, the sale of certain assets and borrowings under its
credit facilities will be adequate to meet the Company's needs
for working capital, temporary financing for capital expenditures
and acquisitions.
The impact of inflation on the Company's financial position
and results of operations has been minimal and is not expected to
adversely affect future results.
Environmental
Coors Ceramics has received a demand for payment arising out
of contamination of a semiconductor manufacturing facility
formerly owned by a subsidiary of Coors Ceramics, Coors
Components, Inc. (CCI). Colorado State environmental authorities
are seeking clean up of soil and ground water contamination from
a subsequent owner. Coors Ceramics sold CCI in 1987. Coors
Ceramics believes that the contamination occurred prior to Coors
Ceramics' ownership of CCI and there are possible off site
sources of contamination. Although Coors Ceramics does not
believe it has any responsibility for the contamination or the
cleanup and is seeking indemnification from the party from whom
it acquired the property, Coors Ceramics is participating in
mediation and discussions relating to appropriate remediation.
Coors Ceramics has received a Unilateral Administrative
Order issued by the Environmental Protection Agency (EPA)
relating to the Rocky Flats Industrial Park (RFIP) site and is
participating with the RFIP group to perform an Engineering
Evaluation/Cost Analysis on the property. The RFIP group is
attempting to allocate costs for groundwater cleanup, but as of
yet there is no estimate of this cost.
The Company has received requests from the EPA for
information related to other disposal sites, however, the Company
believes its potential liability is minimal. In addition, the
Company seeks to proactively take steps to decrease its potential
for environmental liabilities, and has remediated potential sites
and taken actions to avoid using hazardous substances.
Year 2000
Management has initiated an enterprise-wide program to
prepare the Company's computer and manufacturing systems and
applications for the year 2000. The Company expects to incur
internal staff costs as well as consulting and other expenses
related to the year 2000 project. At this point, the Company is
not able to determine the estimated cost for its year 2000
project and, if unresolved, whether the year 2000 issue will have
a material impact on the operations of the Company.
Factors That May Affect Future Results
Certain statements in this document constitute "forward-
looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors
that may cause the actual results, performance or achievements of
ACX Technologies to be materially different from any future
results, performance or achievements expressed or implied by the
forward-looking statements. Specifically, 1) continued growth is
dependent upon general economic conditions, such as the position
of the U.S. dollar in relation to other currencies; 2) continued
growth is also dependent upon business conditions remaining
stable, or growing, within the Company's chosen markets and
without losing any major customers; 3) the Company's ability to
develop new products is exposed to the availability of
alternative materials such as metal or plastic; 4) the addition
of new materials to the product mix is dependent upon identifying
viable acquisition opportunities; 5) the Company's ability to
continue to provide innovative technology is dependent upon
maintaining certain patents and trademarks and engineering
expertise; 6) the adoption of practices at Universal Packaging is
dependent upon the Company's ability to maximize efficiencies
with equipment, sales, purchasing and employees, and the
Company's ability to successfully merge two corporate cultures;
and 7) the elimination of future losses at Golden Technologies is
dependent upon management's ability to execute its exit
strategies.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements
Consolidated Financial Statements: Page(s)
Report of Independent Accountants 27
Consolidated Income Statement for the years
ended December 31, 1997, 1996 and 1995 28-29
Consolidated Balance Sheet at December 31, 1997
and December 31, 1996 30-31
Consolidated Statement of Cash Flows for the years
ended December 31, 1997, 1996 and 1995 32
Consolidated Statement of Shareholders' Equity
for the years ended December 31, 1997,
1996 and 1995 33
Notes to Consolidated Financial Statements 34-50
Schedule II - Valuation and Qualifying Accounts
for the years ended December 31, 1997,
1996 and 1995 51
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of ACX Technologies, Inc.
In our opinion, the consolidated financial statements listed
in the accompanying index present fairly, in all material
respects, the financial position of ACX Technologies, Inc. and
its subsidiaries at December 31, 1997 and 1996, and the results
of their operations and their cash flows for each of the three
years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles. These financial
statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the
opinion expressed above.
PRICE WATERHOUSE LLP
Denver, Colorado
February 12, 1998
MANAGEMENT'S REPORT TO SHAREHOLDERS
Management is responsible for the preparation, integrity and
objectivity of the financial statements and all other financial
information included in this report. The financial statements
have been prepared in accordance with generally accepted
accounting principles. Where necessary, the amounts may reflect
estimates based on management's best judgment. Management
believes that all material uncertainties have been appropriately
accounted for and disclosed.
Management has established and maintains a system of accounting
procedures and related internal controls designed to provide
reasonable assurance regarding the safeguarding of assets against
loss and the reliability of the preparation and presentation of
its financial statements.
On the recommendation of management, Price Waterhouse LLP was
selected by the Board of Directors to conduct an objective,
independent audit of the consolidated financial statements. The
opinion of the independent accountants is shown above.
The Board of Directors, operating through its Audit Committee
composed of outside directors, monitors the Company's accounting
control systems and reviews the results of the auditing
activities. The Audit Committee meets regularly, either
separately or jointly, with representatives of management, Price
Waterhouse LLP and the Company's internal auditors. To ensure
complete independence, Price Waterhouse LLP and the Company's
internal auditors have full and free access to the Audit
Committee and may meet with or without the presence of
management.
JED J. BURNHAM BETH A. PARISH
Chief Financial Officer Controller and Principal
and Treasurer Accounting Officer
ACX TECHNOLOGIES, INC.
CONSOLIDATED INCOME STATEMENT
(In thousands, except per share data)
Years Ended December 31,
1997 1996 1995
-------- -------- --------
Sales $617,762 $593,493 $535,419
Sales to Coors Brewing 113,323 118,887 125,434
-------- -------- --------
Total sales 731,085 712,380 660,853
Costs and expenses:
Cost of goods sold 552,474 555,855 508,029
Marketing, general and
administrative 91,632 77,947 75,071
Research and development 15,558 15,300 16,312
Asset impairment and
restructuring charges 21,880 34,642 2,735
-------- -------- --------
Total operating expenses 681,544 683,744 602,147
-------- -------- --------
Operating income 49,541 28,636 58,706
Other income (expense):
Interest expense (8,666) (8,177) (9,306)
Interest income 5,688 1,254 1,395
Miscellaneous - net (447) 696 452
------- ------- -------
Total other expense (3,425) (6,227) (7,459)
Income from continuing operations 46,116 22,409 51,247
operations before income taxes
Income tax expense 18,400 11,000 20,000
------- ------- -------
Income from continuing
operations 27,716 11,409 31,247
------- ------- -------
Discontinued operations:
Loss from discontinued
operations of Golden
Aluminum Company --- (5,033) (7,376)
Loss on disposal of Golden
Aluminum Company --- (98,400) ---
------- -------- -------
Net income (loss) $27,716 ($92,024) $23,871
======= ======== =======
Net income (loss) per basic
share of common stock:
Continuing operations $0.99 $0.41 $1.17
Discontinued operations --- (3.71) (0.28)
------- ------- -------
Net income (loss) per basic share $0.99 ($3.30) $0.89
======= ======= =======
Weighted avg. shares
outstanding - basic 28,118 27,899 26,791
======= ======= =======
Net income (loss) per diluted
share of common stock:
Continuing operations $0.96 $0.40 $1.14
Discontinued operations --- (3.63) (0.27)
------- ------- -------
Net income (loss) per diluted
share $0.96 ($3.23) $0.87
======= ======= =======
Weighted avg. shares
outstanding - diluted 28,885 28,503 27,383
======= ======= =======
See Notes to Consolidated Financial Statements
ACX TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEET
(In thousands)
December 31,
1997 1996
-------- --------
ASSETS
Current assets
Cash and cash equivalents $49,355 $15,671
Accounts receivable, less
allowance for doubtful
accounts of $3,101 in 1997
and $2,085 in 1996 77,276 68,840
Accounts receivable from Coors
Brewing 4,083 3,046
Inventories 113,792 101,520
Deferred income taxes 10,946 18,218
Other assets 14,188 11,571
Net current assets of
discontinued operations 372 53,052
-------- --------
Total current assets 270,012 271,918
-------- --------
Properties, net 249,624 244,615
Notes receivable 56,549 ---
Goodwill, net 56,883 46,799
Other assets 68,128 49,860
Noncurrent assets of
discontinued operations --- 63,500
-------- --------
Total assets $701,196 $676,692
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $40,743 $33,021
Accounts payable to Coors Brewing 2,557 753
Accrued compensation 24,571 24,963
Taxes other than income 5,214 7,598
Accrued expenses and other
liabilities 38,376 50,957
-------- --------
Total current liabilities 111,461 117,292
Long-term debt 100,000 100,000
Accrued postretirement benefits 27,453 27,890
Other long-term liabilities 18,838 19,002
-------- --------
Total liabilities 257,752 264,184
Minority interest 12,913 14,605
Shareholders' equity
Preferred stock, non-voting,
$0.01 par value, 20,000,000
shares authorized and no
shares issued or outstanding --- ---
Common stock, $0.01 par value,
100,000,000 shares
authorized and 28,373,000
and 27,934,000 issued and
outstanding at December 31,
1997, and December 31, 1996 284 279
Paid-in capital 451,336 443,302
Accumulated deficit (19,555) (47,271)
Cumulative translation adjustment
and other (1,534) 1,593
-------- --------
Total shareholders' equity 430,531 397,903
-------- --------
Total liabilities and
shareholders' equity $701,196 $676,692
======== ========
See Notes to Consolidated Financial Statements
ACX TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
Years Ended December 31,
1997 1996 1995
------- -------- -------
Cash flows from operating activities:
Net income (loss) $27,716 ($92,024) $23,871
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Loss on disposal of discontinued
operations, net of tax --- 98,400 ---
Asset impairment and restructuring
charges 21,880 34,642 2,735
Depreciation and amortization 42,663 49,523 49,857
Change in deferred income taxes 12,335 (6,058) 731
Change in accrued postretirement
benefits (437) 882 1,309
(Gain)loss on sale of properties (391) 98 (476)
Change in current assets and
liabilities, net of effects
from acquisitions
Accounts receivable 11,603 10,882 5,343
Inventories 17,769 (2,893) 272
Other assets 7,349 (3,855) 8,549
Accounts payable (1,462) (13,561) 5,330
Accured expenses and
other liabilities (21,792) (31,656) (21)
Change in deferred items (1,408) 1,939 (121)
Other 1,587 (161) (195)
------- ------- ------
Net cash provided by
operating activities 117,412 46,158 97,184
------- ------- ------
Cash flows from investing
activities:
Additions to properties (56,213) (57,526) (60,027)
Acquisitions, net of cash acquired (44,718) (34,313) ---
Proceeds from sales of properties 13,594 8,764 13,253
Other (4,283) (1,250) (199)
------- ------- -------
Net cash used in
investing activities (91,620) (84,325) (46,973)
------- ------- -------
Cash flows from financing activities:
Stock option exercises and other 7,892 1,152 4,593
Payments on long-term debt --- --- (8,295)
Payments on short-term borrowings --- --- (3,600)
------- ------- -------
Net cash provided (used)
by financing activities 7,892 1,152 (7,302)
------- ------- -------
Cash and cash equivalents:
Net increase (decrease) in
cash and cash equivalents 33,684 (37,015) 42,909
Balance at beginning of year 15,671 52,686 9,777
------- ------- -------
Balance at end of year $49,355 $15,671 $52,686
======= ======= =======
See Notes to Consolidated Financial Statements
ACX TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(In thousands)
Retained
Common Paid-in Earnings
Stock Capital (Deficit) Other Total
------ -------- --------- ----- --------
Balance at December 31, 1994 $133 $435,817 $21,716 ($212) $457,454
Exercise of stock options 1 3,246 --- --- 3,247
Tax benefit of option
exercise --- 875 --- --- 875
Issuance of common stock --- 1,417 --- --- 1,417
Stock split 135 (135) --- --- ---
Net income --- --- 23,871 --- 23,871
Cumulative translation
adjustment and other --- --- --- 1,510 1,510
------ -------- --------- ------ -------
Balance at December 31, 1995 269 441,220 45,587 1,298 488,374
Exercise of stock options --- 308 --- --- 308
Tax benefit of option
exercise --- 48 --- --- 48
Issuance of common stock 10 1,726 --- --- 1,736
Net loss --- --- (92,024) --- (92,024)
Cumulative translation
adjustment and other --- --- (834) 295 (539)
------ -------- --------- ------ -------
Balance at December 31, 1996 279 443,302 (47,271) 1,593 397,903
Exercise of stock options 4 5,168 --- --- 5,172
Tax benefit of option
exercise --- 1,359 --- --- 1,359
Issuance of common stock 1 1,507 --- --- 1,508
Net income --- --- 27,716 --- 27,716
Cumulative translation
adjustment and other --- --- --- (3,127) (3,127)
------ -------- --------- ------- --------
Balance at December 31, 1997 $284 $451,336 ($19,555) ($1,534) $430,531
====== ======== ========= ======= ========
See Notes to Consolidated Financial Statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
Nature of Operations: The operations of ACX Technologies,
Inc. (the Company) include two primary business segments: Coors
Ceramics Company (Coors Ceramics) and Graphic Packaging
Corporation (Graphic Packaging). Coors Ceramics develops,
manufactures and sells advanced technical ceramic products across
a wide range of product lines for a variety of applications. The
majority of Coors Ceramics' 1997 sales were to the petrochemical,
power generation and mining, semiconductor equipment, automotive,
telecommunications and pulp and paper industries.
Graphic Packaging develops and sells value added paperboard
folding cartons and flexible packaging products. Primary folding
carton products include cartons for the beverage, concentrated
detergent, bar soap and cereal markets. The end uses for Graphic
Packaging's flexible packaging products are principally pet
foods, personal care, beverages, confections and baking/snacks.
Coors Ceramics and Graphic Packaging accounted for 42% and
50%, respectively, of 1997 consolidated revenues. In addition,
the Company owns technology-based developmental businesses
operated through Golden Technologies Company, Inc. (Golden
Technologies). The Company's markets include the United States,
Western Europe, Canada, South America and the Far East.
Prior to 1996, the Company operated a third business
segment, Golden Aluminum Company (Golden Aluminum), which
produced rigid container sheet used in making can lids, tabs and
bodies for the beverage and food can industry and other flat-
rolled aluminum products used principally in the building
industry. In 1996, the Company adopted a plan to dispose of this
business and began accounting for Golden Aluminum as a
discontinued operation. In March 1997, the sale of Golden
Aluminum was completed. (See Note 2.)
On January 14, 1998, the Company acquired Britton Group plc
(Britton) pursuant to a cash tender offer. Britton is an
international packaging group operating through two principal
divisions: folding cartons and plastics. The folding cartons
division, Universal Packaging Corporation (Universal Packaging),
is a non-integrated manufacturer of folding cartons in the United
States, with capabilities in design, printing and manufacturing
of multicolor folding cartons. The plastics division of Britton
includes the extrusion, conversion and printing of polyethylene
into films and bags for industrial customers. The results of the
folding cartons division will be reflected in the accounts of the
Company beginning January 14, 1998. The plastics division will
be accounted for as a discontinued operation, based on
management's decision to sell this business.
Consolidation: The consolidated financial statements
include the accounts of the Company and its wholly owned and
majority-owned subsidiaries. All material intercompany
transactions have been eliminated.
The consolidated financial statements have been prepared in
conformity with generally accepted accounting principles, using
management's best estimates and judgments where appropriate.
Significant estimates have been made by management with respect
to asset impairment and restructuring charges. Actual results
could differ from these estimates making it reasonably possible
that a change in these estimates could occur in the near term.
Revenue Recognition: Revenue is generally recognized when
goods are shipped or services are performed.
Inventories: Inventories are stated at the lower-of-cost or
market. Cost is determined by the first-in, first-out (FIFO)
method for the majority of inventories. At Graphic Packaging,
cost is determined on the last-in, first-out (LIFO) method for
certain inventories. For such inventories, FIFO cost, which
approximates replacement cost, exceeded LIFO cost by $2.3 million
and $2.4 million at December 31, 1997 and 1996, respectively.
The classification of inventories, in thousands, at December
31, was as follows:
1997 1996
-------- --------
Finished $48,607 $46,312
In process 34,754 28,837
Raw materials 30,431 26,371
-------- --------
Total inventories $113,792 $101,520
======== ========
Properties: Land, buildings and equipment are stated at
cost. Real estate properties are non-operating properties held
for sale. For financial reporting purposes, depreciation is
recorded principally on the straight-line method over the
estimated useful lives of the assets as follows:
Buildings 10 to 40 years
Machinery and equipment 3 to 10 years
Building and leasehold improvements The shorter of the useful
life, lease term or 20 years
The cost of properties and related accumulated depreciation,
in thousands, at December 31, consisted of the following:
1997 1996
--------- ---------
Land and improvements $ 11,161 $ 11,107
Buildings 100,739 90,136
Machinery and equipment 368,775 342,304
Real estate properties 12,533 10,261
Construction in progress 24,041 25,055
-------- --------
517,249 478,863
Less accumulated depreciation 267,625 234,248
-------- --------
Net properties $249,624 $244,615
======== ========
Accelerated depreciation methods are generally used for
income tax purposes. Expenditures for new facilities and
improvements that substantially extend the capacity or useful
life of an asset are capitalized. Ordinary repairs and
maintenance are expensed as incurred.
Impairment of Long-Lived Assets and Identifiable
Intangibles: The Company periodically reviews long-lived assets,
identifiable intangibles and goodwill for impairment whenever
events or changes in business circumstances indicate the carrying
amount of the assets may not be fully recoverable. Measurement
of the impairment loss is based on fair value of the asset. (See
Note 3.)
Start-Up Costs: Start-up costs that are unrelated to
construction and associated with manufacturing facilities are
expensed as incurred.
Goodwill and Other Intangibles: Goodwill and other
intangibles are amortized on a straight-line basis over the
estimated future periods to be benefited (not exceeding 40
years). Goodwill and other intangibles were $71.4 million at
December 31, 1997 and $65.1 million at December 31, 1996, less
accumulated amortization of $14.0 million and $14.1 million,
respectively.
Hedging Transactions: The Company periodically enters into
forward exchange contracts to hedge transactions and firm
commitments denominated in foreign currencies. Gains and losses
on foreign exchange contracts are deferred and recognized in the
basis of the transaction when completed. The Company also
periodically enters into forward, future and option contracts for
commodities to hedge its exposure to price fluctuations primarily
for raw materials used in the production of corn starch. The
gains and losses on qualified hedge contracts are deferred and
recognized in cost of goods sold as part of the product cost.
Statement of Cash Flows: The Company defines cash
equivalents as highly liquid investments with original maturities
of 90 days or less. The carrying value of the Company's cash
equivalents approximates their fair market value. Income taxes
paid were $6.0 million, $8.8 million and $13.9 million in 1997,
1996 and 1995, respectively.
Interest capitalized, expensed and paid, in thousands, for
the years ended December 31, were as follows:
1997 1996 1995
------ ------ -------
Total interest costs $9,126 $8,921 $10,381
Interest capitalized $460 $744 $1,075
Interest expense $8,666 $8,177 $9,306
Interest paid $8,536 $9,554 $9,421
Miscellaneous - net: Income attributable to minority
interests and activity for certain royalty arrangements are
included in "Miscellaneous - net" in the Consolidated Income
Statement.
Environmental Expenditures: Environmental expenditures that
relate to current operations are expensed or capitalized as
appropriate. Expenditures that relate to an existing condition
caused by past operations, and which do not contribute to current
or future revenue generation, are expensed. Liabilities are
recorded when environmental assessments and/or remedial efforts
are probable and the costs can be reasonably estimated.
Adoption of New Accounting Standards: Statement of Financial
Accounting Standards (SFAS) No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits," was issued in
February 1998. This statement revises the disclosure
requirements for pensions and other postretirement benefits. This
statement is effective for the Company's financial statements for
the year ended December 31, 1998 and the adoption of this
standard is not expected to have a material effect on the
Company's financial statements.
SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information," was issued in June 1997. This
statement establishes standards for the way public business
enterprises report information about operating segments. It also
establishes standards for related disclosure about products and
services, geographical areas and major customers. This statement
is effective for the Company's financial statements for the year
ended December 31, 1998 and the adoption of this standard is not
expected to have a material effect on the Company's financial
statements.
SFAS No. 130, "Reporting Comprehensive Income," was issued
in June 1997. The statement establishes standards for reporting
and display of comprehensive income in financial statements.
This statement is effective for the Company's financial
statements for the year ended December 31, 1998 and the adoption
of this standard is not expected to have a material effect on the
Company's financial statements.
SFAS No. 128, "Earnings per Share," was issued in February
1997. The Company adopted this new accounting standard in 1997.
(See Note 8.)
Note 2. Discontinued Aluminum Operations
In 1996, the Board of Directors adopted a plan to dispose of
the Company's aluminum rigid container sheet business operated by
Golden Aluminum. In conjunction with this decision, the Company
recorded pretax charges of $155 million for anticipated losses
upon the disposition and estimated operating losses of the
business through the disposition date. In March of 1997, the
sale of Golden Aluminum was completed for $70 million, of which
$10 million was paid at closing and $60 million is due within two
years. In accordance with the purchase agreement, the purchaser
has the right to return the property, plant and equipment to the
Company during the two-year period in discharge of the $60
million obligation. The initial payment of $10 million is non-
refundable.
The historical operating results and the estimated loss on
the sale of this business have been segregated as discontinued
operations on the accompanying Consolidated Income Statement for
all periods presented. The assets and liabilities of Golden
Aluminum which were held for sale at December 31, 1996 have been
separately identified on the Consolidated Balance Sheet as net
current or noncurrent assets of discontinued operations. The
current assets consist primarily of accounts receivable and
inventory, partially offset by accounts payable. The noncurrent
assets are composed of the fixed assets of Golden Aluminum.
Substantially all the assets of Golden Aluminum have been sold as
of December 31, 1997.
Discontinued operations have not been segregated on the
Consolidated Statement of Cash Flows. Accordingly, the
Consolidated Statement of Cash Flows includes sources and uses of
cash for Golden Aluminum.
Selected financial data for Golden Aluminum for the years
ended December 31, in thousands, are summarized as follows:
1997 1996 1995
------- --------- --------
Net sales $38,995 $168,446 $250,001
======= ========= ========
Loss from operations before
income taxes --- ($8,033) ($10,076)
Income tax benefit --- 3,000 2,700
------- --------- --------
Loss from operations --- (5,033) (7,376)
Loss on disposal before
income taxes --- (124,700) ---
Loss on operations during
disposition period
period before income taxes --- (30,300) ---
Income tax benefit --- 56,600 ---
------- --------- --------
Net loss --- ($103,433) ($7,376)
======= ========= ========
Per basic share of common stock:
Loss from operations --- ($0.18) ($0.28)
Loss on disposal --- (3.53) ---
------- --------- --------
Net loss per basic share --- ($3.71) ($0.28)
======= ========= ========
Per diluted share of common stock:
Loss from operations --- ($0.18) ($0.27)
Loss on disposal --- (3.45) ---
------- --------- --------
Net loss per diluted share --- ($3.63) ($0.27)
======= ========= ========
Note 3. Asset Impairment and Restructuring Charges
Asset Impairment Charges
The Company recorded a total of $16.6 million and $32.2
million in asset impairment charges in 1997 and 1996,
respectively. During 1997, Golden Technologies recorded $16.6
million in impairment charges related to its biodegradable
polymer project. The manufacturing and intangible assets of
this activity became impaired when the Company adopted a plan to
limit future funding for this project and seek a strategic
financial partner to work toward commercialization. This plan
reduced expected future cash flows to a level below the carrying
value of these assets.
In 1996, the Company recorded $32.2 million in asset
impairment charges at Golden Technologies. The charges related
primarily to the corn-wet milling business and the solar panel
manufacturing activity. The assets of the corn-wet milling
business became impaired when unfavorable market conditions in
the high-fructose corn syrup market reduced selling prices by
half and decreased ongoing customer purchase commitments and
anticipated future net cash flows. The solar panel
manufacturing activity assets became impaired due to the lack of
a currently viable market for cadmium telluride solar panels,
the lack of an alternative use for panel manufacturing assets
and management's new focus on solar electric distribution.
Restructuring Charges
The Company recorded $5.3 million and $2.4 million in
restructuring charges in 1997 and 1996, respectively. During
1997, the Company eliminated 40 research and administrative
positions and recorded approximately $0.9 million in severance
and outplacement costs related to the Golden Technologies'
biodegradable polymer project. The Company made cash outlays of
approximately $0.5 million related to this plan in 1997.
Remaining cash costs of $0.4 million are expected to be paid by
mid-1998.
The Company also adopted a plan to exit the high-fructose
corn syrup business at Golden Technologies during 1997. As a
result, the Company eliminated approximately 70 manufacturing
and administrative positions and recorded $2.3 million in
severance and other exit costs. During 1997, the Company paid
approximately $1.4 million in cash related to this plan. The
Company expects to complete this restructuring plan during 1998.
In December 1997, the Company recorded a $2.1 million
charge related to the closure of the Graphic Packaging corporate
offices in Wayne, Pennsylvania. Graphic Packaging has
established a new headquarters in Golden, Colorado. The closure
of the Wayne office resulted in severance and outplacement costs
of $1.1 million for approximately 22 administrative employees.
During 1997, the Company made cash payments of $0.2 million
related to this plan. The Company expects to complete this plan
and make the remaining cash outlays of $1.7 million in the first
quarter of 1998.
In the fourth quarter of 1996, the Company recorded $2.4
million in restructuring charges related to certain management
realignments made at Golden Technologies and in the solar
electric distribution business resulting in the elimination of
16 administrative positions. Approximately $2.0 million was
paid for severance and other exit costs related to this charge.
This restructuring was substantially completed in 1997.
The following table summarizes accruals related to
restructuring charges for 1997 and 1996:
Corn
Golden Biodegradable Syrup Graphic
Technologies Polymer Exit Exit Packaging
(In thousands) Realignment Plan Plan Headquarters Total
------------ ------------- ------ ------------ -----
1996 restructuring
charges $2,435 $--- $--- $--- $2,435
Cash paid (151) --- --- --- (151)
Non-cash expenses (445) --- --- --- (445)
------- ------ ----- ------ ------
Balance,
December 31, 1996 1,839 --- --- --- 1,839
1997 restructuring
charges --- 908 2,280 2,100 5,288
Cash paid (1,839) (470) (1,398) (190) (3,897)
Non-cash expenses --- --- --- (250) (250)
------- ------ ----- ------ ------
Balance,
December 31, 1997 $--- $438 $882 $1,660 $2,980
======= ====== ===== ====== ======
Note 4. Acquisitions
On January 14, 1998, the Company acquired control of Britton
pursuant to a previously announced cash tender offer. On
November 25, 1997, the Company announced the cash tender offer of
pounds 1.40 per common share and pounds 1.00 per convertible
share to purchase the entire issued share capital of Britton.
The total estimated purchase price, net of cash acquired, is
$420.0 million, inclusive of transaction costs and $92.5 million
of assumed debt. The offer was paid in cash, of which $276.0
million was funded through borrowings against a newly acquired
$417.0 million credit facility. From the November 25, 1997
announcement until December 31, 997, the Company acquired 11.8
million shares, or 8.5%, of Britton stock in open market trans-
actions at a cost of $28.9 million. The Company's $28.9 million
interest in Britton at December 31, 1997 is accounted for as an
investment at cost and is included in noncurrent other assets in
the 1997 Consolidated Balance Sheet. As of December 31, 1997, the
Company held forward contracts to buy pounds 90 million to hedge
the acquisition of Britton.
1997 Acquisition
In order to broaden its material base, Coors Ceramics
acquired Tetrafluor, Inc.(Tetrafluor) for $15.8 million in August
1997. Tetrafluor manufactures Teflon[R] fluoropolymer
sealing systems and components for use in the aerospace,
industrial and transportation industries. The acquisition was
accounted for under the purchase method of accounting and,
accordingly, the Company's results of operations for 1997 include
the results of Tetrafluor since the acquisition date. The
purchase price was allocated to the net assets acquired based
upon their estimated fair market values. The excess of the
purchase price over the estimated fair market values of the net
assets acquired was $10.7 million, which is being amortized over
15 years on a straight-line basis.
1996 Acquisitions
During 1996, the Company consummated several acquisitions,
including (1) a controlling interest in the stock of Photocomm,
Inc. (Photocomm), a publicly traded company headquartered in
Scottsdale, Arizona, engaged in the manufacture and marketing of
solar electric systems; and (2) the operating assets of H.B.
Company, Inc. (H.B. Company), a manufacturer of oil field pump
components based in Oklahoma City, Oklahoma. These acquisitions
were accounted for under the purchase method of accounting and,
accordingly, the Company's results of operations include the
results of Photocomm since November 21, 1996 and of H.B. Company
since March 19, 1996. The aggregate consideration in connection
with these acquisitions was $24.2 million, which was allocated to
the net assets acquired based upon their estimated fair market
values. The excess of the purchase price over the estimated fair
market values of the net assets acquired was $14.3 million, which
is being amortized over 15 years on a straight-line basis.
On March 1, 1996, the Company acquired Gravure Packaging,
Inc. (Gravure), a manufacturer of high-quality folding cartons
for the packaged consumer goods industry, based in Richmond,
Virginia. Under terms of the acquisition, which was accounted
for as a pooling of interests, the Company issued 911,000 shares
of its common stock and paid $2.4 million in exchange for all of
Gravure's stock. In addition, the Company paid $7.5 million at
closing to reduce the short-term borrowings of Gravure.
The 1996 acquisitions were not material to the Company's
balance sheet or results of operations. Accordingly, prior
period financial statements have not been restated to include the
results of the Gravure pooling of interests transaction.
Note 5. Operating Leases
The Company has leases for a variety of equipment and
facilities that expire in various years. Future minimum lease
payments, in thousands, required as of December 31, 1997, under
non-cancelable operating leases with terms exceeding one year,
are as follows:
1998 $4,993
1999 4,103
2000 2,926
2001 2,420
2002 and thereafter 2,998
-------
Total $17,440
=======
Operating lease rentals for warehouse, production and office
facilities and equipment amounted to $5.5 million in 1997, $6.2
million in 1996 and $4.6 million in 1995.
Note 6. Indebtedness
Long-term debt, in thousands, consisted of the following as
of December 31:
1997 1996
-------- --------
7.8% unsecured notes due November 1, 1999 $ 70,000 $ 70,000
8.1% unsecured notes due November 1, 2001 30,000 30,000
-------- --------
Total long-term debt $100,000 $100,000
======== ========
During 1997, the Company established an unsecured $417.0
million, 364-day revolving credit facility for the purpose of
funding the Company's acquisition of Britton. (See Note 4.)
Amounts borrowed under this facility bear interest at LIBOR plus
a spread that increases over the term of the facility. In
addition, the Company pays a commitment fee on the unused portion
of the credit line. As a condition for making this facility
available, the Company is required to comply with certain
financial and non-financial covenants. As of December 31, 1997,
the Company was in compliance with all required covenants, and
there were no amounts outstanding under this facility. The
Company intends to replace this credit line with permanent
financing prior to the expiration date of the facility.
The Company also had an unsecured $125.0 million revolving
credit facility under which no amounts were outstanding at
December 31, 1997 and 1996. The Company cancelled this facility
subsequent to December 31, 1997.
Note 7. Income Taxes
The components of income from continuing operations before income
taxes were:
Years Ended December 31,
(In thousands) 1997 1996 1995
------- ------- -------
Domestic $39,547 $14,694 $44,470
Foreign 6,569 7,715 6,777
------- ------- -------
Income from continuing
operations before
income taxes $46,116 $22,409 $51,247
======= ======= =======
The provision for income taxes included the following:
Years Ended December 31,
(In thousands) 1997 1996 1995
------- ------- -------
Current provision:
Federal $ --- $3,524 $ 9,549
State 2,723 2,995 3,232
Foreign 3,727 2,941 3,936
------- -------- -------
Total current tax expense $ 6,450 $9,460 $16,717
------- -------- -------
Deferred provision:
Federal $10,965 ($53,640) $1,064
State 1,278 (4,254) 53
Foreign (293) (166) (534)
------- -------- -------
Total deferred tax (benefit) 11,950 (58,060) 583
------- -------- -------
Total income tax expense
(benefit) $18,400 ($48,600) $17,300
======= ======== =======
The provision for income taxes included in the Consolidated
Income Statement is as follows:
Years Ended December 31,
(In thousands) 1997 1996 1995
------- -------- -------
Continuing operations $18,400 $11,000 $20,000
Discontinued operations --- (59,600) (2,700)
------- -------- -------
Total expense (benefit) $18,400 ($48,600) $17,300
======= ======== =======
Temporary differences that gave rise to a significant portion of
deferred tax assets (liabilities) at December 31, 1997 and 1996,
were as follows:
(In thousands) 1997 1996
-------- -------
Depreciation and other
property related ($14,490) ($9,324)
Amortization of intangibles 2,636 2,252
Pension and employee benefits 17,702 18,996
Tax credits 15,811 15,435
Capitalized interest (905) 3,044
Inventory 2,194 3,649
Accruals 11,115 11,478
Current nondeductible net
operating losses 3,582 ---
All other 911 1,607
------- -------
Gross deferred tax asset 38,556 47,137
Less valuation allowance 5,555 1,800
------- -------
Net deferred tax asset $33,001 $45,337
======= =======
The valuation allowance for deferred tax assets was
increased by $3.8 million and $1.8 million in 1997 and 1996,
respectively. The valuation allowance relates primarily to
uncertainty surrounding the ultimate deductibility of capital
loss carryforwards and net operating loss carryforwards of
acquired subsidiaries.
Approximately $8.5 million of net operating loss
carryforwards from subsidiaries which are not consolidated for
tax purposes remain at December 31, 1997. The carryforwards
expire in years 2000 through 2013.
The principal differences between the effective income
tax rate, attributable to continuing operations, and the
U.S. statutory federal income tax rate, were as follows:
Years Ended December 31,
1997 1996 1995
----- ----- -----
Expected tax rate 35.0% 35.0% 35.0%
State income taxes (net of
federal benefit) 4.6% 7.1% 4.0%
Nondeductible expenses and losses 1.7% 9.6% 0.1%
Foreign tax expense (net of
federal benefit) 0.8% 0.3% 0.8%
Change in deferred tax asset
valuation allowance 1.2% 7.6% ---
Research and development and other
tax credits (4.3%) (12.1%) ---
Other - net 0.9% 1.6% (0.9%)
----- ------ -----
Effective tax rate 39.9% 49.1% 39.0%
===== ====== =====
The Internal Revenue Service (IRS) has completed its
examination of the Company's federal income tax returns through
1992. The IRS currently is completing its review of the federal
income tax returns for 1993, 1994 and 1995. In the opinion of
management, adequate accruals have been provided for all income
tax matters and related interest.
The Company has not provided for U.S. or additional foreign
taxes on approximately $15.0 million of undistributed earnings of
foreign subsidiaries to the extent they are considered to be
reinvested indefinitely. If these earnings were distributed,
foreign tax credits should become available under current law to
reduce or eliminate the resulting U.S. income tax liability.
When the Company identifies exceptions to the general
reinvestment policy, additional taxes will be provided.
Note 8. Earnings per Share
Effective for the year ended December 31, 1997, earnings per
common share is computed using SFAS No. 128, "Earnings per
Share." All prior period earnings per share data have been
restated to conform to SFAS No. 128. Following is a
reconciliation between basic and diluted earnings per common
share for each of the three years in the period ended December
31, 1997 (in thousands, except per share information):
1997 1996 1995
--------------------- --------------------- ---------------------
Per Per Per
Share Share Share
Income Shares Amount Income Shares Amount Income Shares Amount
------- ------ ------ ------- ------ ------ ------- ------ ------
Income from
continuing
operations
-basic EPS $27,716 28,118 $0.99 $11,409 27,899 $0.41 $31,247 26,791 $1.17
Effect of
common
stock
equivalents 767 604 592
------- ------ ------- ------ ------- ------
Income from
continuing
operations
- diluted
EPS $27,716 28,885 $0.96 $11,409 28,503 $0.40 $31,247 27,383 $1.14
======= ====== ====== ======= ====== ====== ======= ====== =====
Note 9. Stock Compensation
The Company has an equity incentive plan that provides for
the granting of non-qualified stock options and incentive stock
options to certain key employees. The equity incentive plan also
provides for the granting of restricted stock, bonus shares,
stock units and offers to officers of the Company to purchase
stock. In 1992, the Company authorized 4.8 million shares for
issuance under this plan. In 1997, the Company's shareholders
approved an amendment to the plan to increase the number of
shares available for awards under the plan equal to 2% of the
Company's outstanding shares on each preceding December 31
beginning with 1997 and ending with 2001. Generally, options
outstanding under the Company's equity incentive plan are subject
to the following terms: (1) grant price equal to 100% of the
fair value of the stock on the date of grant; (2) ratable vesting
over either a three- or four-year service period; and (3) maximum
term of ten years from the date of grant.
Transactions in stock options for the three years ended
December 31, were as follows:
1997 1996 1995
--------------- --------------- ---------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
(Shares in thousands) Shares Price Shares Price Shares Price
------ -------- ------ -------- ------ --------
Options outstanding
at January 1 2,788 $15.96 2,374 $16.08 2,313 $15.27
Granted 404 $20.92 479 $15.29 369 $19.34
Exercised (375) $14.83 (29) $12.75 (271) $13.15
Expired or forfeited (201) $17.31 (36) $17.36 (37) $19.38
------ ------ ----- ------ ----- ------
Options outstanding
at December 31 2,616 $16.78 2,788 $15.96 2,374 $16.08
------ ------ ----- ------ ----- ------
Exercisable at
December 31 1,731 $15.75 1,593 $15.33 1,251 $14.81
------ ------ ----- ------ ----- ------
Available for future
grant 1,173 806 1,368
====== ===== =====
The following table summarizes information about stock options
outstanding at December 31, 1997:
(Shares in
thousands) Options Outstanding Options Exercisable
---------------------------------- ---------------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
Range of Outstanding Contractual Exercise Exercisable Exercise
Exercise Prices at 12/31/97 Life Price at 12/31/97 Price
- ---------------- ---------- ----------- -------- ----------- --------
$ 9.93 to $14.88 988 4.6 years $13.12 802 $12.71
$15.88 to $18.50 1,058 6.3 years $18.21 794 $18.18
$19.06 to $27.06 570 8.6 years $20.49 135 $19.53
---------- ---------- ------- ----------- --------
$ 9.93 to $27.06 2,616 6.1 years $16.78 1,731 $15.75
========== ========== ======= =========== ========
The Company applies Accounting Principles Board Opinion No.
25 and related interpretations in accounting for its stock-based
compensation plans. Accordingly, no compensation expense has
been recognized for its equity incentive plan and employee stock
purchase plan. If the Company had elected to recognize
compensation cost based on the fair value of the stock options at
grant date as allowed by SFAS No. 123, "Accounting for Stock-
Based Compensation," compensation expense of $1.7 million, $2.2
million and $0.5 million would have been recorded for 1997, 1996
and 1995, respectively. Net income and earnings per share would
have been reduced to the pro forma amounts indicated below:
1997 1996 1995
------- -------- -------
Net income (loss) in thousands:
As reported $27,716 ($92,024) $23,871
Pro forma $26,683 ($93,411) $23,591
Earnings (loss) per share - basic:
As reported $0.99 ($3.30) $0.89
Pro forma $0.95 ($3.35) $0.88
Earnings (loss) per share - diluted:
As reported $0.96 ($3.23) $0.87
Pro forma $0.92 ($3.28) $0.86
The fair value of each option grant is estimated on the date
of grant using the Black-Scholes option pricing model with the
following assumptions: (1) dividend yield of 0%; (2) expected
volatility of 23.2% in 1997 and 22.6% in 1996 and 1995; (3)
risk-free interest rate ranging from 5.3% to 5.7% in 1997, and
ranging from 5.2% to 6.8% in 1996 and 1995; and (4) expected life
of 3 to 6.23 years in 1997, and 3 to 6.37 years in 1996 and 1995.
The weighted average per share fair value of options granted
during 1997, 1996 and 1995 was $6.47, $5.16 and $6.65,
respectively.
Note 10. Employee Retirement Plans
The Company maintains several defined benefit pension plans
for the majority of the Company's employees. Benefits are based
on years of service and average base compensation levels over a
period of years. Plan assets consist primarily of equity, real
estate and interest-bearing investments. The Company's funding
policy is to contribute annually not less than the ERISA minimum
funding standards nor more than the maximum amount that can be
deducted for federal income tax purposes. Total expense for
these plans, the Company's 401(k) plan and other defined
contribution plans was $8.1 million in 1997, $8.3 million in 1996
and $6.7 million in 1995.
The funded status of the pension plans and amounts
recognized in the Consolidated Balance Sheet as of December 31,
were as follows:
(In thousands) 1997 1996
-------- --------
Actuarial present value of accumulated
plan benefits (including vested benefits
of $101,388 in 1997 and $84,093 in 1996) $107,584 $ 90,940
-------- --------
Projected benefit obligation for service
rendered to date $130,853 $118,505
Plan assets available for benefits 112,630 97,308
-------- --------
Plan assets less than projected benefit
obligation (18,223) (21,197)
Unrecognized net loss 3,856 11,798
Prior service cost not yet recognized 6,392 7,321
Unrecognized net assets being recognized
over 15 years (424) (689)
-------- -------
Net accrued pension liability ($8,399) ($2,767)
======== =======
The components of net pension expense for the years ended
December 31, were as follows:
(In thousands) 1997 1996 1995
------- ------- -------
Service cost for benefits earned
during the year $4,235 $4,196 $3,100
Interest cost on projected
benefit obligation 9,620 8,331 7,458
Actual gain on plan assets (18,497) (14,172) (14,877)
Net amortization and deferral 11,160 8,287 9,287
------- ------- -------
Net pension expense $6,518 $6,642 $4,968
======= ======= =======
Significant assumptions used in determining the valuation
of the projected benefit obligation were:
1997 1996 1995
---- ---- ----
Settlement rate 7.3% 7.8% 7.3%
Increase in compensation levels 4.8% 5.3% 5.3%
Rate of return on plan assets 9.8% 9.8% 9.8%
Note 11. Other Postretirement Benefits
Certain subsidiaries of the Company provide health care and
life insurance benefits to retirees and eligible dependents.
Eligible employees may receive these benefits after reaching age
55 with 10 years of service. Prior to reaching age 65, eligible
retirees may receive certain health care benefits identical to
those available to active employees. Retirees who meet the age
and service requirement necessary to retire early without any
actuarial reductions from the Company's retirement plan for early
retirement either pay no premium or the same premium as active
employees. Eligible retirees who do not meet this age and
service requirement pay a greater amount. These plans are not
funded.
The amounts recognized in the Consolidated Balance Sheet as
of December 31, were as follows:
(In thousands) 1997 1996
------- -------
Accumulated Postretirement Benefit
Obligation (APBO)
Retirees $8,774 $9,315
Fully eligible, active plan
participants 3,787 2,898
Other active plan participants 7,840 8,487
------- -------
20,401 20,700
Unrecognized net gain 4,176 3,872
Unrecognized prior service cost 3,988 4,443
------- -------
Accrued other postretirement
benefit cost $28,565 $29,015
======= =======
The components of net periodic other postretirement benefit
cost for the years ended December 31, were as follows:
(In thousands) 1997 1996 1995
------- ------- ------
Service cost for benefits earned
during the year $723 $891 $889
Interest cost on APBO 1,500 1,452 1,824
Recognized amortized gain (2,532) (428) (157)
------- ------- ------
Net periodic postretirement
benefit cost ($309) $1,915 $2,556
======= ======= ======
The accumulated postretirement benefit obligation was
determined based on the terms of the pertinent health and life
insurance plans, together with relevant actuarial assumptions and
health care cost trend rates ranging ratably from 8.0% in 1997 to
4.3% through the year 2005. The discount rate used to determine
the APBO at December 31, 1997 and 1996, was 7.3% and 7.8%,
respectively.
If the health care cost trend rate was increased 1%, the
APBO as of December 31, 1997, would have increased by
approximately $1.4 million. The effect of this change on the
ongoing annual cost would be approximately $0.3 million.
Note 12. Related Party Transactions
The Company sells packaging and refined corn starch products
to Coors Brewing Company (Coors Brewing), a subsidiary of Adolph
Coors Company (ACCo). Additionally, the Company sold aluminum
products to Coors Brewing until the sale of Golden Aluminum on
March 1, 1997. On December 28, 1992, the Company was spun off
from ACCo and since that time ACCo has had no ownership interest
in the Company. However, certain Coors family trusts have
significant interests in both the Company and ACCo. At the time
of spin-off from ACCo, the Company entered into agreements
(operating agreements) with Coors Brewing for the sale of
aluminum, packaging and starch products and the resale of brewery
byproducts. The operating agreements had a stated term of five
years and have resulted in substantial revenues to the Company.
During 1995, the Golden Aluminum operating agreement was
canceled. In early 1997, the supply agreement with Graphic
Packaging was modified to a three year, rolling term contract
that provides stated quantity commitments and annual repricing.
In addition, the corn starch and brewery byproduct agreements
were extended through 1999, and include an early termination
clause with payment of a cancellation penalty. The Company will
continue to attempt to increase its sales to unaffiliated
customers to decrease dependence on Coors Brewing.
Sales of packaging products and refined corn starch to Coors
Brewing accounted for approximately 15.5%, 16.7% and 19.0% of the
Company's consolidated net sales for 1997, 1996 and 1995,
respectively. Included in the results of discontinued operations
are sales of aluminum products to Coors Brewing of $3.2 million,
$25.9 million and $121.1 million for 1997, 1996 and 1995,
respectively. Sales were at terms comparable to those that could
have been obtained on an arms-length basis between unaffiliated
parties. The loss of Coors Brewing as a customer in the
foreseeable future could have a material effect on the Company's
results of operations.
In early 1997, the Company agreed to grant or guarantee a
line of credit for two years not to exceed $8.0 million for
National Empowerment Television, Inc. (NET) with a right to
purchase NET common stock at a discount. NET is a privately held
cable television network located in Washington, D.C. This
guarantee, with attendant rights, has been assumed by a Coors
family trust.
Note 13. Commitments and Contingencies
It is the policy of the Company generally to act as a self-
insurer for certain insurable risks consisting primarily of
employee health insurance programs. With respect to workers'
compensation, the Company uses a variety of fully or partially
self-funded insurance vehicles. The Company maintains certain
stop-loss and excess insurance policies that reduce overall risk
of financial loss.
The Company is named as defendant in various actions and
proceedings arising in the normal course of business, including
claims by current or former employees related to employment or
termination. In addition, the Company is a plaintiff in a fixed
price construction contract dispute under which a counterclaim
has been filed. In all of these cases, the Company is denying
the allegations made against it and is vigorously defending
against them. Although the eventual outcome of the various
lawsuits cannot be predicted, it is management's opinion that
these suits will not result in liabilities to such extent that
they would materially affect the Company's financial position or
results of operations.
Golden Technologies and several other defendants have been
sued by a candy company claiming violation of federal and state
antitrust laws in sales of corn syrup. The Company was only an
occasional and minor supplier to the plaintiff. After
substantial discovery, plaintiff has been unable to provide any
facts to support its claim. Golden Technologies continues to
vigorously defend against these allegations.
Britton and its subsidiaries are parties to various legal
proceedings, including actions by current and former employees
relating to employment, including sexual harassment, or
termination. Also, Britton has recently been sued by the Estate
of Norman Gordon for breach of contract to provide Mr. Gordon
with pounds 500,000 in life insurance coverage in connection
with the 1994 purchase by Britton of a business in which Mr.
Gordon was chief executive.
Coors Ceramics has received a demand for payment arising out
of contamination of a semiconductor manufacturing facility
formerly owned by a subsidiary of Coors Ceramics, Coors
Components, Inc. (CCI). Colorado State environmental authorities
are seeking clean up of soil and ground water contamination from
a subsequent owner. Coors Ceramics sold CCI in 1987. Coors
Ceramics believes that the contamination occurred prior to Coors
Ceramics' ownership of CCI and there are possible off site
sources of contamination. Although Coors Ceramics does not
believe it has any responsibility for the contamination or the
cleanup and is seeking indemnification from the party from whom
it acquired the property, Coors Ceramics is participating in
mediation and discussions relating to appropriate remediation.
Coors Ceramics has received a Unilateral Administrative
Order issued by the EPA relating to the Rocky Flats Industrial
Park (RFIP) Site, and is participating with the RFIP group to
perform an Engineering Evaluation/Cost Analysis on the property.
The RFIP group is attempting to allocate costs for groundwater
clean up, but as of yet there is no estimate of this cost.
Some of the Company's subsidiaries have been notified that
they may be potentially responsible parties (PRPs) under the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980 (CERCLA) or similar state laws with respect to the
remediation of certain sites where hazardous substances have been
released into the environment. The Company cannot predict with
certainty the total costs of remediation, its share of the total
costs, the extent to which contributions will be available from
other parties, the amount of time necessary to complete the
remediation or the availability of insurance. However, based on
investigations to date, the Company believes that any liability
with respect to these sites would not be material to the
financial condition and results of operations of the Company,
without consideration for insurance recoveries. There can be no
certainty, however, that the Company will not be named as a PRP
at additional sites or be subject to other environmental matters
in the future or that the costs associated with those additional
sites or matters would not be material.
Note 14. Quarterly Financial Information (Unaudited)
The following information summarizes selected quarterly
financial information, in thousands except per share data, for
each of the two years in the period ended December 31, 1997:
1997 First Second Third Fourth Year
-------- -------- -------- -------- --------
Net sales $173,458 $186,777 $186,458 $184,392 $731,085
-------- -------- -------- -------- --------
Cost of good sold 131,860 140,370 140,571 139,673 552,474
Marketing, general and
administrative 22,779 23,969 21,713 23,171 91,632
Research and development 3,917 4,499 4,085 3,057 15,558
Asset impairment and
restructuring charges 2,280 --- 17,500 2,100 21,880
Other expense 1,129 350 883 1,063 3,425
-------- -------- -------- -------- --------
Total costs and expenses 161,965 169,188 184,752 169,064 684,969
-------- -------- -------- -------- --------
Income before income taxes 11,493 17,589 1,706 15,328 46,116
Income tax expense 4,700 7,150 750 5,800 18,400
-------- -------- -------- -------- --------
Net income $6,793 $10,439 $956 $9,528 $27,716
======== ======== ======== ======== ========
Net income per basic
share $0.24 $0.38 $0.03 $0.34 $0.99
======== ======== ======== ======== ========
Net income per diluted
share $0.24 $0.36 $0.03 $0.33 $0.96
======== ======== ======== ======== ========
1996 First Second Third Fourth Year
-------- -------- -------- -------- --------
Net sales $177,138 $183,987 $175,154 $176,101 $712,380
-------- -------- -------- -------- --------
Cost of goods sold 138,478 142,585 137,218 137,574 555,855
Marketing, general and
administrative 19,588 19,507 18,459 20,393 77,947
Research and development 3,623 3,771 3,602 4,304 15,300
Asset impairment and
restructuring charges --- --- --- 34,642 34,642
Other expense 1,589 2,158 1,693 787 6,227
-------- -------- -------- -------- --------
Total costs and expenses 163,278 168,021 160,972 197,700 689,971
-------- -------- -------- -------- --------
Income (loss) from
continuing operations
before income taxes 13,860 15,966 14,182 (21,599) 22,409
Income tax expense
(benefit) 5,700 6,200 5,600 (6,500) 11,000
-------- -------- -------- -------- --------
Income (loss) from
continuing operations 8,160 9,766 8,582 (15,099) 11,409
-------- -------- -------- -------- --------
Discontinued operations:
Loss from discontinued
operations of
Golden Aluminum (5,033) --- --- --- (5,033)
Loss on disposal of
Golden Aluminum (70,000) --- --- (28,400) (98,400)
-------- -------- -------- -------- -------
Net income (loss) ($66,873) $9,766 $8,582 ($43,499) ($92,024)
======== ======== ======== ======== ========
Net income (loss) per
basic share of
common stock:
Continuing operations $0.29 $0.35 $0.31 ($0.54) $0.41
Discontinued
operations (2.69) --- --- (1.02) (3.71)
-------- -------- -------- -------- --------
Net income (loss) per
basic share of
common stock ($2.40) $0.35 $0.31 ($1.56) ($3.30)
======== ======== ======== ======== ========
Net income (loss) per
diluted share of
common stock:
Continuing operations $0.29 $0.34 $0.30 ($0.53) $0.40
Discontinued
operations (2.63) --- --- (1.00) (3.63)
-------- -------- -------- -------- --------
Net income (loss) per
diluted share of
common stock ($2.34) $0.34 $0.30 ($1.53) ($3.23)
======== ======== ======== ======== ========
Included in the 1997 fourth quarter was a $2.1 million
restructuring charge at Graphic Packaging. The after-tax effect
of this charge was $1.3 million, or $0.04 per basic and diluted
share. (See Note 3.)
Included in the 1996 fourth quarter were asset impairment and
restructuring charges of $34.6 million at Golden Technologies.
The after-tax effect of these charges was $22.8 million, or $0.82
per basic share and $0.81 per diluted share. (See Note 3.)
Note 15. Segment Information
Certain financial information for the Company's business
segments is included in the following summary:
Operating Depreciation Additions
Net Income and to
(In thousands) Sales (Loss) Assets Amortization Properties
-------- --------- ------- ------------ ----------
1997
Ceramics $304,824 $48,249 $261,471 $18,664 $28,812
Packaging 365,123 42,655 210,024 20,211 18,022
Developmental
businesses 61,138 (31,186) 81,071 3,451 9,068
Corporate --- (10,177) 148,258 337 311
Discontinued
operations --- --- 372 --- ---
-------- ------- -------- ------- -------
$731,085 $49,541 $701,196 $42,663 $56,213
======== ======= ======== ======= =======
1996
Ceramics $276,352 $44,204 $214,635 $16,159 $30,291
Packaging 346,547 41,048 205,705 19,959 13,314
Developmental
businesses 89,481 (48,447) 104,138 5,757 12,558
Corporate --- (8,169) 35,662 341 327
Discontinued
operations --- --- 116,552 7,307 1,036
-------- ------- -------- ------- -------
$712,380 $28,636 $676,692 $49,523 $57,526
======== ======= ======== ======= =======
1995
Ceramics $270,877 $47,395 $189,191 $14,046 $25,122
Packaging 308,109 34,551 197,587 16,945 20,149
Developmental
businesses 81,867 (13,740) 80,350 5,643 7,426
Corporate --- (9,500) 50,098 605 153
Discontinued
operations --- --- 268,260 12,618 7,177
-------- ------- -------- ------- -------
$660,853 $58,706 $785,486 $49,857 $60,027
======== ======= ======== ======= =======
Operating income (loss) for reportable segments is exclusive
of certain unallocated corporate expenses. Corporate assets for
1997 include cash and cash equivalents, a note receivable from
the sale of Golden Aluminum, an investment at cost in Britton,
deferred tax assets and certain properties.
Certain financial information regarding the Company's domestic
and foreign operations is included in the following summary:
Net Operating
(In thousands) Sales Income Assets
-------- --------- --------
1997
United States $651,630 $42,463 $623,215
Canada and other 79,455 7,078 77,981
-------- ------- --------
$731,085 $49,541 $701,196
======== ======= ========
1996
United States $643,764 $22,153 $609,014
Canada and other 68,616 6,483 67,678
-------- ------- --------
$712,380 $28,636 $676,692
======== ======= ========
1995
United States $589,986 $50,856 $717,411
Canada and Other 70,867 7,850 68,075
-------- ------- --------
$660,853 $58,706 $785,486
======== ======= ========
Included in United States sales are export sales
primarily to Western Europe, Canada and Asia of $82.1 million,
$77.2 million and $67.8 million for 1997, 1996 and 1995,
respectively.
SCHEDULE II
ACX TECHNOLOGIES, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Allowance for doubtful receivables
(deducted from accounts receivable)
Balance Additions
at charged to Balance
Year Ended beginning costs and at end
December 31, of year expenses Other Deductions of year
- ------------ --------- ---------- ----- ---------- -------
1995 $3,444 $742 $7 ($1,469) $2,724
1996 $2,724 $1,272 ($30) ($931) $3,035
1997 $3,035 $1,430 $60 ($1,424) $3,101
(1) The effect of translating foreign subsidiaries' financial
statements into U.S. dollars.
(2) Write-off of uncollectible accounts.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Within the last two years there have been no changes in the
Company's independent accountants or disagreements on accounting
and financial statement disclosure matters.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information regarding the Registrant's Directors is
incorporated by reference to the Proxy Statement in connection
with the 1998 Annual Meeting of Shareholders.
The following executive officers of the Company serve at the
pleasure of the Board:
Jeffrey H. Coors, 53, President of the Company since its
formation in August 1992. Chairman of Graphic Packaging and
Golden Technologies since 1985 and 1989, respectively; Executive
Vice President of ACCo from 1991 to 1992; President of Coors
Technology Companies from 1989 to 1992; Director of Photocomm,
Inc. since November 1996.
Joseph Coors, Jr., 56, President of the Company since its
formation in August 1992; President and Chief Executive Officer
of Coors Ceramics since March 1997 and Chairman of Coors Ceramics
since 1989; President of Coors Ceramics from 1985 to 1993;
Chairman of Golden Aluminum from 1993 to 1997; Executive Vice
President of ACCo from 1991 to 1992; also a director of Hecla
Mining Company.
Jed J. Burnham, 53, Chief Financial Officer and Treasurer of
the Company since March 1995 and August 1992, respectively; Chief
Credit Officer for non-metro Denver banks at Norwest Bank from
1990 to 1992; Director of Photocomm, Inc. since November 1996.
Jill B. W. Sisson, 50, General Counsel and Secretary of the
Company since September 1992; Of Counsel to the Denver law firm
of Bearman Talesnick & Clowdus Professional Corporation from 1984
to 1992.
Beth A. Parish, 37, Controller and Principal Accounting
Officer of the Company since November 1997; Director of Financial
Reporting from 1994 to 1997; Treasury Manager from 1992 to 1994;
Tax Analyst for ACCo from 1987 to 1992.
ITEM 11. EXECUTIVE COMPENSATION
This information is incorporated by reference to the Proxy
Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
This information is incorporated by reference to the Proxy
Statement
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information is incorporated by reference to the Proxy
Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a)
Exhibit
Number Document Description
- ------- --------------------
2.1 Plan of disposition for Golden Aluminum Company.
(Incorporated by reference to Exhibit 2.1 to Form 10-Q
filed on May 3, 1996, file No. 0-20704)
2.2 Recommended Cash Offers by Baring Brothers International
Limited on behalf of ACX (UK) Limited, a wholly-owned
subsidiary of ACX Technologies, Inc. for Britton Group plc.
(Incorporated by reference to Exhibit 2 to Form 8-K filed
on January 29, 1998.)
3.1 Articles of Incorporation of Registrant.
(Incorporated by reference to Exhibit 3.1 to
Form 10 filed on October 6, 1992, file No. 0-20704)
3.1A Articles of Amendment to Articles of
Incorporation of Registrant. (Incorporated by
reference to Exhibit 3.1A to Form 8 filed on
December 3, 1992, file No. 0-20704)
3.2 Bylaws of Registrant, as amended.
(Incorporated by reference to Exhibit 3.2 to
Form 10-Q filed on November 7, 1996, file No. 0-20704)
4 Form of Stock Certificate of Common Stock.
(Incorporated by reference to Exhibit 4 to Form
10-K filed on March 7, 1996, file No. 0-20704)
10.1 Stock Purchase Agreement Among Golden
Aluminum Company, Crown Cork & Seal, Inc. and
ACX Technologies, Inc. (Incorporated by
reference to Exhibit 10.1 to 8-K filed on March
14, 1997, file No. 0-20704)
10.2 Supply Agreement between Graphic Packaging Corporation and
Coors Brewing Company, dated January 1, 1997. (Incorporated
by reference to Exhibit 10.2 to Form 10-K filed on March 24,
1997.) (Confidential treatment has been granted for portions
of this Exhibit).
10.3 Amended and Restated Credit Agreement among ACX
Technologies, Inc., Morgan Guaranty Trust Company of New
York, as agent, and other banks party thereto.
10.6 Gravure International Capital Corporation
Purchase Agreement. (Incorporated by reference
to Form 8-K filed on July 1, 1994, file No. 0-20704)
10.7* Description of Officers' Life
Insurance Program. (Incorporated by reference
to Exhibit 10.7 to Form 10-K filed on March 24,
1997.)
10.8* Form of Officers' Salary Continuation
Agreement, as amended. (Incorporated by
reference to Exhibit 10.10 to Form 10-K filed
on March 20, 1995, file No. 0-20704)
10.9* ACX Technologies, Inc. Equity
Incentive Plan, as amended. (Incorporated by
reference to Exhibit 10.9 to Form 10-K filed on
March 7, 1996, file No. 0-20704)
10.10* ACX Technologies, Inc. Equity
Compensation Plan for Non-Employee Directors,
as amended. (Incorporated by reference to
Exhibit A to the Proxy Statement filed in
connection with the May 17, 1994, Annual
Meeting of Shareholders)
10.11* ACX Technologies, Inc. Phantom Equity
Plan. (Incorporated by reference to Exhibit
10.11 to Form 8 filed on November 19, 1992,
file No. 0-20704)
10.15* ACX Technologies, Inc. Deferred
Compensation Plan, as amended. (Incorporated
by reference to Exhibit 10.15 to Form 10-K
filed on March 7, 1996, file No. 0-20704)
10.16* ACX Technologies, Inc. Executive
Incentive Plan. (Incorporated by reference to
Exhibit 10.16 to Form 10-K filed on March 7,
1996, file No. 0-20704)
12 Statement of Computation of Ratio of
Earnings to Fixed Charges.
21 Subsidiaries of Registrant.
23 Consent of Price Waterhouse LLP.
27 Financial Data Schedule
* Management contracts or compensatory plans,
contracts or arrangements required to be filed as an
Exhibit pursuant to Item 14(c).
The Registrant will furnish to a requesting security holder any
Exhibit requested upon payment of the Registrant's reasonable
copying charges and expenses in furnishing the Exhibit.
(b) Reports on Form 8-K.
On December 2, 1997, the Company filed a Current Report on
Form 8-K regarding the Company's announcement on November 25,
1997 of its $420 million cash tender offer to acquire Britton.
(c) Other Exhibits.
No exhibits in addition to those previously filed or listed in
Item 14(a)(3) are filed herein.
(d) Other Financial Statement Schedules.
No additional financial statement schedules are required.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ACX TECHNOLOGIES, INC.
Date: March 23, 1998 By /s/ Jeffrey H. Coors
--------------------------
Jeffrey H. Coors
President
Date: March 23, 1998 By /s/ Joseph Coors, Jr.
--------------------------
Joseph Coors, Jr.
President
Date: March 23, 1998 By /s/ Jed J. Burnham
--------------------------
Jed J. Burnham
Chief Financial Officer
and Treasurer
Date: March 23, 1998 By /s/ Beth A. Parish
--------------------------
Beth A. Parish
Controller and Principal
Accounting Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the date indicated.
Date: March 23, 1998 By /s/ William K. Coors
--------------------------
William K. Coors
Chairman of the Board
of Directors and Director
Date: March 23, 1998 By /s/ John D. Beckett
--------------------------
John D. Beckett
Director
Date: March 23, 1998 By /s/ Jeffrey H. Coors
--------------------------
Jeffrey H. Coors
Principal Executive Officer
and Director
Date: March 23, 1998 By /s/ John K. Coors
--------------------------
John K. Coors
Director
Date: March 23, 1998 By /s/ Joseph Coors, Jr.
--------------------------
Joseph Coors, Jr.
Principal Executive Officer
and Director
Date: March 23, 1998 By /s/ Richard P. Godwin
--------------------------
Richard P. Godwin
Director
Date: March 23, 1998 By /s/ John H. Mullin, III
--------------------------
John H. Mullin, III
Director
Date: March 23, 1998 By /s/ John Hoyt Stookey
--------------------------
John Hoyt Stookey
Director
Date: March 23, 1998 By /s/ James K. Peterson
--------------------------
James K. Peterson
Director
EX-10.3
2
Exhibit 10.3
$417,000,000
AMENDED AND RESTATED
CREDIT AGREEMENT
dated as of
January 9, 1998
among
ACX Technologies, Inc.
The Banks Party Hereto
and
Morgan Guaranty Trust Company of New York,
as Agent
___________________________________
Bank of America National Trust
and Savings Association,
as Co-Agent
J.P. Morgan Securities Inc.,
Arranger
TABLE OF CONTENTS
PAGE
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions 1
SECTION 1.02. Accounting Terms and Determinations 14
ARTICLE 2
THE CREDITS
SECTION 2.01. Commitments to Lend 14
SECTION 2.02. Method of Borrowing 15
SECTION 2.03. Maturity of Loans 16
SECTION 2.04. Interest Rates 16
SECTION 2.05. Method of Electing Interest Rates 19
SECTION 2.06. Commitment Fees 20
SECTION 2.07. Termination or Reduction of Commitments 21
SECTION 2.08. Optional Prepayments 21
SECTION 2.09. General Provisions as to Payments 21
SECTION 2.10. Funding Losses 22
SECTION 2.11. Computation of Interest and Fees 22
SECTION 2.12. Notes 23
SECTION 2.13. Regulation D Compensation 23
SECTION 2.14. Commitment Reduction Events 23
ARTICLE 3
CONDITIONS
SECTION 3.01. Effective Date 24
SECTION 3.02. Consequence of Effectiveness 25
SECTION 3.03. Borrowings to Finance Acquisition of
Target Shares 25
SECTION 3.04. Borrowings for Other Corporate Purposes 26
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Corporate Existence and Power 27
SECTION 4.02. Corporate and Governmental Authorization;
No Contraventio 27
SECTION 4.03. Binding Effect 27
SECTION 4.04. Financial Information 27
SECTION 4.05. Litigation 28
SECTION 4.06. Compliance with ERISA 28
SECTION 4.07. Environmental Matters 28
SECTION 4.08. Taxes 29
SECTION 4.09. Subsidiaries 29
SECTION 4.10. No Regulatory Restrictions on Borrowing 29
SECTION 4.11. Full Disclosure 29
ARTICLE 5
COVENANTS
SECTION 5.01. Information 30
SECTION 5.02. Payment of Obligations 32
SECTION 5.03. Maintenance of Property; Insurance 32
SECTION 5.04. Conduct of Business and Maintenance of
Existence 32
SECTION 5.05. Compliance with Laws 32
SECTION 5.06. Inspection of Property, Books and Records 33
SECTION 5.07. Mergers and Sales of Assets 33
SECTION 5.08. Use of Proceeds 33
SECTION 5.09. Negative Pledge 33
SECTION 5.10. Debt to Total Capital 34
SECTION 5.11. Restricted Debt of Subsidiaries 34
SECTION 5.12. Cash Flow Ratio 35
SECTION 5.13. Restricted Payments 35
SECTION 5.14. Lease Payments 35
SECTION 5.15. Investments 35
SECTION 5.16. Transactions with Affiliates 35
ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default 36
SECTION 6.02. Notice of Default 39
ARTICLE 7
THE AGENT AND CO-AGENT
SECTION 7.01. Appointment and Authorization 39
SECTION 7.02. Agent and Affiliates 39
SECTION 7.03. Action by Agent 39
SECTION 7.04. Consultation with Experts 39
SECTION 7.05. Liability of Agent 39
SECTION 7.06. Indemnification 40
SECTION 7.07. Credit Decision 40
SECTION 7.08. Successor Agent 40
SECTION 7.09. Agent's Fee 41
SECTION 7.10. Co-Agent 41
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate
Inadequate or Unfair 41
SECTION 8.02. Illegality 42
SECTION 8.03. Increased Cost and Reduced Return 42
SECTION 8.04. Taxes 43
SECTION 8.05. Base Rate Loans Substituted for Affected
Fixed Rate Loans 45
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices 46
SECTION 9.02. No Waivers 46
SECTION 9.03. Expenses; Indemnification 46
SECTION 9.04. Sharing of Set-offs 47
SECTION 9.05. Amendments and Waivers 47
SECTION 9.06. Successors; Participations and Assignments 47
SECTION 9.07. No Reliance on Margin Stock 49
SECTION 9.08. Governing Law; Submission to Jurisdiction 49
SECTION 9.09. Counterparts; Integration 49
SECTION 9.10. WAIVER OF JURY TRIAL 49
COMMITMENT SCHEDULE
EXHIBIT A - Note
EXHIBIT B - Opinion of Counsel for the Borrower
EXHIBIT C - Opinion of Special Counsel for the Agent
EXHIBIT D - Assignment and Assumption Agreement
AMENDED AND RESTATED CREDIT AGREEMENT
AGREEMENT dated as of January 9, 1998 among ACX
TECHNOLOGIES, INC., the BANKS party hereto and MORGAN GUARANTY
TRUST COMPANY OF NEW YORK, as Agent.
WHEREAS, the Borrower and Morgan Guaranty Trust Company of
New York, are parties to a Credit Agreement dated as of November
24, 1997;
WHEREAS, the parties thereto desire to amend and restate
said Credit Agreement as provided in this Agreement and, upon
satisfaction of the conditions specified in Section 3.01, said
Credit Agreement will be so amended and restated; and
WHEREAS, the New Banks (as defined herein) desire to become
parties to said Credit Agreement (as so amended and restated) as
Banks with Commitments as provided herein;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
Definitions
Section 1.01. Definitions. The following terms, as used
herein, have the following meanings:
"Acquisition Subsidiary" means ACX (UK) Limited, a wholly-
owned Subsidiary of the Borrower formed in order to implement the
Offers.
"Adjusted CD Rate" has the meaning set forth in Section
2.04(b).
"Administrative Questionnaire" means, with respect to each
Bank, an administrative questionnaire in the form prepared by the
Agent, completed by such Bank and returned to the Agent (with a
copy to the Borrower).
"Affiliate" means (i) any Person that directly, or
indirectly through one or more intermediaries, controls the
Borrower (a "Controlling Person") or (ii) any Person (other than
the Borrower or a Subsidiary) which is controlled by or is under
common control with a Controlling Person. As used herein, the
term "control" means possession, directly or indirectly, of the
power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
"Agent" means Morgan Guaranty Trust Company of New York in
its capacity as agent for the Banks hereunder, and its successors
in such capacity.
"Agreement", when used with reference to this Agreement,
means this Amended and Restated Credit Agreement dated as of
January 9, 1998, as it may be amended from time to time.
"Applicable Lending Office" means, with respect to any Bank,
(i) in the case of its Domestic Loans, its Domestic Lending
Office and (ii) in the case of its Euro-Dollar Loans, its Euro-
Dollar Lending Office.
"Assessment Rate" has the meaning set forth in Section
2.04(b).
"Asset Sale" means any sale, lease or other disposition
(including any such transaction effected by way of merger or
consolidation) by the Borrower or any of its Subsidiaries (except
Golden Properties) of any asset, including without limitation any
sale-leaseback transaction, whether or not involving a capital
lease, but excluding (i) dispositions of inventory, cash, cash
equivalents and other cash management investments and obsolete,
unused or unnecessary equipment and undeveloped real estate, in
each case in the ordinary course of business, and (ii)
dispositions to the Borrower or a Subsidiary of the Borrower.
"Assignee" has the meaning set forth in Section 9.06(c).
"Bank" means (i) each bank listed on the Commitment
Schedule, ii) each Assignee which becomes a Bank pursuant to
Section 2.06(c) and (iii) their respective successors.
"Base Rate" means, for any day, a rate per annum equal to
the higher of (i) the Prime Rate for such day and (ii) the sum of
1/2 of 1% plus the Federal Funds Rate for such day.
"Base Rate Loan" means a Loan which bears interest at the
Base Rate pursuant to the applicable Notice of Borrowing or
Notice of Interest Rate Election or the provisions of Section
2.05(a) or Article 8.
"Borrower" means ACX Technologies, Inc., a Colorado
corporation, and its successors.
"Borrower's Latest Form 10-Q" means the Borrower's quarterly
report on Form 10-Q for the quarter ended September 30, 1997, as
filed with the SEC pursuant to the Exchange Act.
"Borrower's 1996 Form 10-K" means the Borrower's annual
report on Form 10-K for 1996, as filed with the SEC pursuant to
the Exchange Act.
"Borrowing" means a borrowing hereunder consisting of Loans
made to the Borrower on the same day pursuant to Article 2, all
of which Loans are of the same type (subject to Article 8) and,
except in the case of Base Rate Loans, have the same initial
Interest Period. A Borrowing is a Domestic Borrowing if such
Loans are Domestic Loans or a Euro-Dollar Borrowing if such Loans
are Euro-Dollar Loans. A Domestic Borrowing is a CD Borrowing if
such Domestic Loans are CD Loans or a Base Rate Borrowing if such
Domestic Loans are Base Rate Loans.
"Cash Flow Ratio" means, at the end of any Fiscal Quarter,
the ratio of (i) Consolidated Debt at the end of such Fiscal
Quarter to (ii) Consolidated EBITDA for the four consecutive
Fiscal Quarters then ended.
"CD Base Rate" has the meaning set forth in Section 2.04(b).
"CD Loan" means a Loan which bears interest at a CD Rate
pursuant to the applicable Notice of Borrowing or Notice of
Interest Rate Election.
"CD Margin" has the meaning set forth in Section 2.04(b).
"CD Rate" means a rate of interest determined pursuant to
Section 2.04(b) on the basis of an Adjusted CD Rate.
"CD Reference Bank" means Morgan Guaranty Trust Company of
New York.
"Co-Agent" means Bank of America National Trust and Savings
Association, in its capacity as co-agent hereunder.
"Commitment" means (i) with respect to each Bank listed on
the Commitment Schedule, the amount set forth opposite such
Bank's name on the Commitment Schedule, and (ii) with respect to
any Assignee which becomes a Bank pursuant to Section 9.06(c),
the amount of the transferor Bank's Commitment assigned to it
pursuant to Section 9.06(c), in each case as such amount may be
changed from time to time pursuant to Section 2.07 or 9.06(c);
provided that, if the context so requires, the term "Commitment"
means the obligation of a Bank to extend credit up to such amount
to the Borrower hereunder.
"Commitment Reduction Event" means (i) any Asset Sale, (ii)
the incurrence of any Debt by the Borrower or any of its
Subsidiaries in the form of long-term debt securities, other than
any such Debt which is secured by a Lien permitted by Section
5.09, (iii) the issuance of any equity securities by the Borrower
or any of its Subsidiaries (other than equity securities issued
to the Borrower or any of its Subsidiaries) or (iv) the receipt
of any distribution from Golden Properties. The description of
any transaction as falling within the above definition does not
affect any limitation on such transaction imposed by Article 5 of
this Agreement.
"Commitment Schedule" means the Commitment Schedule attached
hereto.
"Completion Procedures" means procedures pursuant to section
428 et seq. Companies Act 1985 whereby Acquisition Subsidiary,
after having validly acquired or agreed to acquire at least 90%
in nominal value of the ordinary shares and/or of the Convertible
Preference Shares to which the Offers relate and having complied
with certain other requirements, may acquire the remainder of
such ordinary shares or Convertible Preference Shares, as the
case may be.
"Consolidated Debt" means, at any date, the Debt of the
Borrower and its Consolidated Subsidiaries, determined on a
consolidated basis as of such date.
"Consolidated EBITDA" means, for any period, Consolidated
Net Income for such period plus, to the extent deducted in
determining Consolidated Net Income for such period, the
aggregate amount of (i) Consolidated Interest Expense, (ii)
income tax expense and (iii) depreciation, amortization and other
similar non-cash charges; provided that, for any period or
portion of a period prior to the date on which Target and its
Subsidiaries become Consolidated Subsidiaries, Consolidated
EBITDA shall be determined on a combined basis, i.e., with
respect to each relevant amount, by combining (x) such relevant
amount determined with respect to the Borrower and its
Consolidated Subsidiaries on a consolidated basis and (y) such
relevant amount determined with respect to Target and its
consolidated subsidiaries on a consolidated basis.
"Consolidated Intangible Assets" means at any date the
amount of (i) all write-ups (except write-ups resulting from
foreign currency translations and write-ups of assets of a going
concern business made within twelve months after the acquisition
of such business) after September 30, 1997 in the book value of
any asset owned by the Borrower or a Consolidated Subsidiary and
(ii) all unamortized debt discount and expense, unamortized
deferred charges, goodwill, patents, trademarks, service marks,
trade names, anticipated future benefit of tax loss carry-
forwards, copyrights, organization or developmental expenses and
other intangible assets of the Borrower and its Consolidated
Subsidiaries as of such date.
"Consolidated Interest Expense" means, for any period, the
interest expense of the Borrower and its Consolidated
Subsidiaries, determined on a consolidated basis for such period.
"Consolidated Net Income" means, for any period, the net
income of the Borrower and its Consolidated Subsidiaries,
determined on a consolidated basis for such period, adjusted to
exclude the effect of any extraordinary or other non-recurring
gain (but not loss).
"Consolidated Subsidiary" means, at any date, any Subsidiary
or other entity the accounts of which would be consolidated with
those of the Borrower in its consolidated financial statements if
such statements were prepared as of such date.
"Consolidated Tangible Assets" means, at any date, the
consolidated assets of the Borrower and its Consolidated
Subsidiaries less Consolidated Intangible Assets, all determined
as of such date.
"Consolidated Tangible Net Worth" means, at any date, the
consolidated stockholders' equity of the Borrower and its
Consolidated Subsidiaries less Consolidated Intangible Assets,
all determined as of such date.
"Credit Exposure" means, with respect to any Bank at any
time, (i) the amount of its Commitment (whether used or unused)
at such time or (ii) if the Commitments have terminated in their
entirety, the aggregate outstanding principal amount of its Loans
at such time.
"Debt" of any Person means, at any date, without
duplication, (i) all obligations of such Person for borrowed
money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all
obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in
the ordinary course of business, (iv) all obligations of such
Person as lessee which are capitalized in accordance with GAAP,
(v) all non-contingent obligations (and, for purposes of Section
5.09 and the definitions of Material Debt and Material Financial
Obligations, all contingent obligations) of such Person to
reimburse any bank or other Person in respect of amounts paid
under a letter of credit or similar instrument, (vi) all Debt
secured by a Lien on any asset of such Person, whether or not
such Debt is otherwise an obligation of such Person, and (vii)
all Guarantees by such Person of Debt of another Person (each
such Guarantee to constitute Debt in an amount equal to the
amount of such other Person's Debt Guaranteed thereby).
"Default" means any condition or event which constitutes an
Event of Default or which with the giving of notice or lapse of
time or both would, unless cured or waived, become an Event of
Default.
"Derivatives Obligations" of any Person means all
obligations of such Person in respect of any rate swap
transaction, basis swap, forward rate transaction, commodity
swap, commodity option, equity or equity index swap, equity or
equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar
transaction, currency swap transaction, cross-currency rate swap
transaction, currency option or any other similar transaction
(including any option with respect to any of the foregoing
transactions) or any combination of the foregoing transactions.
"Domestic Business Day" means any day except a Saturday,
Sunday or other day on which commercial banks in New York City
are authorized or required by law to close.
"Domestic Lending Office" means, as to each Bank, its office
located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire
as its Domestic Lending Office) or such other office as such Bank
may hereafter designate as its Domestic Lending Office by notice
to the Borrower and the Agent; provided that any Bank may so
designate separate Domestic Lending Offices for its Base Rate
Loans, on the one hand, and its CD Loans, on the other hand, in
which case all references herein to the Domestic Lending Office
of such Bank shall be deemed to refer to either or both of such
offices, as the context may require.
"Domestic Loans" means CD Loans or Base Rate Loans or both.
"Domestic Reserve Percentage" has the meaning set forth in
Section 2.04(b).
"Effective Date" means the date this Agreement becomes
effective in accordance with Section 3.01.
"Environmental Laws" means any and all federal, state, local
and foreign statutes, laws, judicial decisions, regulations,
ordinances, rules, judgments, orders, decrees, plans,
injunctions, permits, concessions, grants, franchises, licenses,
agreements and other governmental restrictions relating to the
environment or the effect of the environment on human health or
to emissions, discharges or releases of pollutants, contaminants,
Hazardous Substances or wastes into the environment, including
(without limitation) ambient air, surface water, ground water or
land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, Hazardous Substances or
wastes or the clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, or any successor statute.
"ERISA Group" means the Borrower, any Subsidiary and all
members of a controlled group of corporations and all trades or
businesses (whether or not incorporated) under common control
which, together with the Borrower or any Subsidiary, are treated
as a single employer under Section 414 of the Internal Revenue
Code.
"Euro-Dollar Business Day" means any Domestic Business Day
on which commercial banks are open for international business
(including dealings in Dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank, its
office, branch or affiliate located at its address set forth in
its Administrative Questionnaire (or identified in its
Administrative Questionnaire as its Euro-Dollar Lending Office)
or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Euro-Dollar Lending Office by notice
to the Borrower and the Agent.
"Euro-Dollar Loan" means a Loan which bears interest at a
Euro-Dollar Rate pursuant to the applicable Notice of Borrowing
or Notice of Interest Rate Election.
"Euro-Dollar Margin" has the meaning set forth in Section
2.04(c).
"Euro-Dollar Rate" means a rate of interest determined
pursuant to Section 2.04(c) on the basis of a London Interbank
Offered Rate.
"Euro-Dollar Reference Bank" means the principal London
office of Morgan Guaranty Trust Company of New York.
"Euro-Dollar Reserve Percentage" means, for any day, that
percentage (expressed as a decimal) which is in effect on such
day, as prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum
reserve requirement for a member bank of the Federal Reserve
System in New York City with deposits exceeding five billion
dollars in respect of "Eurocurrency liabilities" (or in respect
of any other category of liabilities which includes deposits by
reference to which the interest rate on Euro-Dollar Loans is
determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any
Bank to United States residents).
"Events of Default" has the meaning set forth in Section
6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
"Existing Credit Agreement" means the Credit Agreement dated
as of November 24, 1997 between the Borrower, and Morgan Guaranty
Trust Company of New York, as in effect from time to time prior
to the Effective Date.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upward, if necessary, to the nearest 1/100 of 1%) equal
to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged
by Federal funds brokers on such day, as published by the Federal
Reserve Bank of New York on the Domestic Business Day next
succeeding such day; provided that (i) if such day is not a
Domestic Business Day, the Federal Funds Rate for such day shall
be such rate on such transactions on the next preceding Domestic
Business Day as so published on the next succeeding Domestic
Business Day and (ii) if no such rate is so published on such
next succeeding Domestic Business Day, the Federal Funds Rate for
such day shall be the average rate quoted to Morgan Guaranty
Trust Company of New York on such day on such transactions as
determined by the Agent.
"Fiscal Quarter" means a fiscal quarter of the Borrower.
"Fiscal Year" means a fiscal year of the Borrower.
"Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or
both.
"GAAP" means generally accepted accounting principles as in
effect from time to time, applied on a basis consistent (except
for changes concurred in by the Borrower's independent public
accountants) with the most recent audited consolidated financial
statements of the Borrower and its Consolidated Subsidiaries
delivered to the Banks.
"Golden Properties" means Golden Properties, Ltd., a
partnership in which the Borrower is the general partner and has
a 50% interest on the date hereof and which is in the business of
developing and selling real property.
"Group of Loans" means, at any time, a group of Loans
consisting of (i) all Loans which are Base Rate Loans at such
time, (ii) all Euro-Dollar Loans having the same Interest Period
at such time or (iii) all CD Loans which have the same Interest
Period at such time; provided that, if a Loan of any particular
Bank is converted to or made as a Base Rate Loan pursuant to
Article 8, such Loan shall be included in the same Group or
Groups of Loans from time to time as it would have been in if it
had not been so converted or made.
"Guarantee" by any Person means any obligation, contingent
or otherwise, of such Person directly or indirectly guaranteeing
any Debt of any other Person and, without limiting the generality
of the foregoing, any obligation, direct or indirect, contingent
or otherwise, of such Person (i) to purchase or pay (or advance
or supply funds for the purchase or payment of) such Debt
(whether arising by virtue of partnership arrangements, by
agreement to keep-well, to purchase assets, goods, securities or
services, to take-or-pay, or to maintain financial statement
conditions or otherwise), (ii) to reimburse a bank for amounts
drawn under a letter of credit for the purpose of paying such
Debt or (iii) entered into for the purpose of assuring in any
other manner the holder of such Debt of the payment thereof or to
protect such holder against loss in respect thereof (in whole or
in part); provided that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of
business. The term Guarantee used as a verb has a corresponding
meaning.
"Hazardous Substances" means any toxic, radioactive, caustic
or otherwise hazardous substance, including petroleum, its
derivatives, by-products and other hydrocarbons, or any substance
having any constituent elements displaying any of the foregoing
characteristics.
"Indemnitee" has the meaning set forth in Section 9.03(b).
"Interest Period" means: (1) with respect to each Euro-
Dollar Loan, the period commencing on the date of borrowing
specified in the applicable Notice of Borrowing or on the date
specified in an applicable Notice of Interest Rate Election and
ending one, two, three or six months thereafter, as the Borrower
may elect in such notice; provided that:
(a) any Interest Period (except an Interest Period
determined pursuant to clause (c) below) which would otherwise
end on a day which is not a Euro-Dollar Business Day shall
be extended to the next succeeding Euro-Dollar Business Day
unless such Euro-Dollar Business Day falls in another calendar
month, in which case such Interest Period shall end on the
next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last
Euro- Dollar Business Day in a calendar month (or on a day
for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall,
subject to clause c) below, end on the last Euro-Dollar
Business Day in a calendar month; and
(c) any Interest Period which would otherwise end after
the Termination Date shall end on the Termination Date;
(2) with respect to each CD Loan, the period commencing
on the date of borrowing specified in the applicable Notice of
Borrowing or on the date specified in an applicable Notice of
Interest Rate Election and ending 30, 60, 90 or 180 days there-
after, as the Borrower may elect in such notice; provided that:
(a) any Interest Period which would otherwise end on a
day which is not a Euro-Dollar Business Day shall be
extended to the next succeeding Euro-Dollar Business Day;
and
(b) any Interest Period which would otherwise end
after the Termination Date shall end on the Termination
Date.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended, or any successor statute.
"Investment" means any investment in any Person, whether by
means of share purchase, capital contribution, loan, Guarantee,
time deposit or otherwise (but not including any demand deposit).
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind, or
any other type of preferential arrangement that has substantially
the same practical effect as a security interest, in respect of
such asset. For purposes hereof, the Borrower or any Subsidiary
shall be deemed to own subject to a Lien any asset which it has
acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other
title retention agreement relating to such asset.
"Loan" means a loan made by a Bank pursuant to Section 2.01;
provided that, if any Loan or Loans (or portions thereof) are
combined or subdivided pursuant to a Notice of Interest Rate
Election, the term "Loan" shall refer to the combined principal
amount resulting from such combination or to each of the separate
principal amounts resulting from such subdivision, as the case
may be.
"London Interbank Offered Rate" has the meaning set forth in
Section 2.04(c).
"Material Debt" means Debt (except Debt outstanding
hereunder) of the Borrower and/or one or more of its
Subsidiaries, arising in one or more related or unrelated
transactions, in an aggregate principal or face amount exceeding
$10,000,000.
"Material Financial Obligations" means a principal or face
amount of Debt (other than the Loans) and/or payment or
collateralization obligations in respect of Derivatives
Obligations of the Borrower and/or one or more of its
Subsidiaries, arising in one or more related or unrelated
transactions, exceeding in the aggregate $10,000,000.
"Material Plan" means, at any time, a Plan or Plans having
aggregate Unfunded Liabilities in excess of $25,000,000.
"Multiemployer Plan" means, at any time, an employee pension
benefit plan within the meaning of Section 4001(a)(3) of ERISA to
which any member of the ERISA Group is then making or accruing an
obligation to make contributions or has within the preceding five
plan years made contributions, including for these purposes any
Person which ceased to be a member of the ERISA Group during such
five year period.
"Net Cash Proceeds" means, with respect to any Commitment
Reduction Event, an amount equal to the cash proceeds received by
the Borrower or any of its Subsidiaries from or in respect of
such Commitment Reduction Event (including any cash proceeds
received as income or other proceeds of any noncash proceeds of
any Asset Sale), less:
(x) any expenses reasonably incurred by such Person in
respect of such Commitment Reduction Event and
(y) if such Commitment Reduction Event is an Asset
Sale, (i) the amount of any Debt secured by a Lien on any
asset disposed of in such Asset Sale and discharged from the
proceeds thereof and (ii) any taxes actually paid or to be
payable by such Person (as estimated by a senior financial
or accounting officer of the Borrower, giving effect to the
overall tax position of the Borrower) in respect of such
Asset Sale.
"New Banks" means the banks listed on the Commitment
Schedule, other than Morgan Guaranty Trust Company of New York.
"Notes" means promissory notes of the Borrower,
substantially in the form of Exhibit A hereto, evidencing the
Borrower's obligation to repay the Loans, and "Note" means any
one of such promissory notes issued hereunder.
"Notice of Borrowing" has the meaning set forth in Section
2.02.
"Notice of Interest Rate Election" has the meaning set
forth in Section 2.05.
"Offers" means the respective offers by Acquisition
Subsidiary to purchase all outstanding ordinary shares and
Convertible Preference Shares of Target on the terms and
conditions specified in the form of offer heretofore delivered
by the Borrower to the Banks.
"Offer Termination Date" means the earliest date on which
all of the following have occurred: (i) all payments in respect
of acceptances of the Offers have been made in full, (ii) no
further such acceptances are possible and (iii) all Completion
Procedures which are capable of being implemented have been
completed and all payments pursuant thereto to shareholders in
Target have been made in full.
"Parent" means, with respect to any Bank, any Person
controlling such Bank.
"Participant" has the meaning set forth in Section 9.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a limited
liability company, a partnership, an association, a trust or any
other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Plan" means, at any time, an employee pension benefit plan
(other than a Multiemployer Plan) which is covered by Title IV of
ERISA or subject to the minimum funding standards under Section
412 of the Internal Revenue Code and either (i) is maintained, or
contributed to, by any member of the ERISA Group for employees of
any member of the ERISA Group or (ii) has at any time within the
preceding five years been maintained, or contributed to, by any
Person which was at such time a member of the ERISA Group for
employees of any Person which was at such time a member of the
ERISA Group.
"Prime Rate" means the rate of interest publicly announced
by Morgan Guaranty Trust Company of New York in New York City
from time to time as its Prime Rate.
"Quarterly Payment Dates" means each February 1, May 1,
August 1 and November 1.
"Reference Bank" means the CD Reference Bank or the
Euro-Dollar Reference Bank, as the context may require.
"Regulation U" means Regulation U of the Board of Governors
of the Federal Reserve System, as in effect from time to time.
"Required Banks" means, at any time, Banks having more than
50% of the aggregate amount of the Credit Exposures at such time.
"Restricted Debt of Subsidiaries" means at any time the
aggregate principal or face amount of all Debt of Subsidiaries,
except (i) Debt of a Subsidiary owed to the Borrower or to a
wholly-owned Subsidiary and (ii) Debt of Target and its
Subsidiaries outstanding when the Offers are declared
unconditional in all respects.
"Restricted Payment" means (i) any dividend or other
distribution on any shares of the Borrower's capital stock
(except dividends payable solely in shares of its capital stock)
or (ii) any payment on account of the purchase, redemption,
retirement or acquisition of (a) any shares of the Borrower's
capital stock or (b) any option, warrant or other right to
acquire shares of the Borrower's capital stock (but not including
payments of principal, premium (if any) or interest made pursuant
to the terms of convertible debt securities prior to conversion).
"Revolving Credit Period" means the period from and
including the Effective Date to but not including the Termination
Date.
"SEC" means the Securities and Exchange Commission.
"Subsidiary" means, as to any Person, any corporation or
other entity of which securities or other ownership interests
having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at
the time directly or indirectly owned by such Person. Unless
otherwise specified, "Subsidiary" means a Subsidiary of the
Borrower.
"Target" means Britton Group plc, an English company.
"Target Shares" means the ordinary shares and the
Convertible Preference Shares of Target.
"Temporary Cash Investment" means any Investment in (i)
direct obligations of the United States or any agency thereof or
obligations guaranteed by the United States or any agency
thereof, (ii) commercial paper rated at least A-1 by Standard &
Poor's Ratings Services and P-1 by Moody's Investors Services,
Inc., (iii) time deposits with, including certificates of deposit
issued by, any office located in the United States or the United
Kingdom of any bank or trust company which is organized or
licensed under the laws of the United States or any State thereof
or the laws of the United Kingdom and which in each case has
capital, surplus and undivided profits aggregating at least
$1,000,000,000 or (iv) repurchase agreements with respect to
securities described in clause (i) above entered into an office
of a bank or trust company meeting the criteria specified in
clause (iii) above, provided in each case that such Investment
matures within one year after it is acquired by the Borrower or a
Subsidiary.
"Termination Date" means January 8, 1999, or, if such day is
not a Euro-Dollar Business Day, the next preceding Euro-Dollar
Business Day.
"Total Capital" means, at any date, the sum of (x)
Consolidated Debt plus (y) consolidated stockholders' equity of
the Borrower and its Consolidated Subsidiaries (including for
this purpose any amount attributable to stock which is required
to be redeemed or is redeemable at the option of the holder, if
certain events or conditions occur or exist or otherwise), in
each case determined at such date.
"Unfunded Liabilities" means, with respect to any Plan at
any time, the amount (if any) by which (i) the value of all
benefit liabilities under such Plan, determined on a plan
termination basis using the assumptions prescribed by the PBGC
for purposes of Section 4044 of ERISA, exceeds (ii) the fair
market value of all Plan assets allocable to such liabilities
under Title IV of ERISA (excluding any accrued but unpaid
contributions), all determined as of the then most recent
valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA
Group to the PBGC or any other Person under Title IV of ERISA.
"United States" means the United States of America.
Section 1.02. Accounting Terms and Determinations. Unless
otherwise specified herein, all accounting terms used herein
shall be interpreted, all accounting determinations hereunder
shall be made, and all financial statements required to be
delivered hereunder shall be prepared in accordance with GAAP;
provided that, if the Borrower notifies the Agent that the
Borrower wishes to amend any provision hereof to eliminate the
effect of any change in GAAP (or if the Agent notifies the
Borrower that the Required Banks wish to amend any provision
hereof for such purpose), then such provision shall be applied
on the basis of GAAP in effect immediately before the relevant
change in GAAP became effective, until either such notice is
withdrawn or such provision is amended in a manner satisfactory
to the Borrower and the Required Banks.
ARTICLE 2
The Credits
Section 2.01. Commitments to Lend. Each Bank severally
agrees, on the terms and conditions set forth in this Agreement,
to make loans to the Borrower from time to time during the
Revolving Credit Period; provided that, immediately after each
such loan is made, the aggregate outstanding principal amount of
such Bank's Loans shall not exceed its Commitment. Each
Borrowing under this Section shall be in an aggregate principal
amount of $20,000,000 or any larger multiple of $1,000,000
(except that any such Borrowing may be in the aggregate amount of
the unused Commitments) and shall be made from the several Banks
ratably in proportion to their respective Commitments. Within
the foregoing limits, the Borrower may borrow under this Section,
prepay Loans to the extent permitted by Section 2.08 and reborrow
at any time during the Revolving Credit Period under this
Section.
Section 2.02. Method of Borrowing. (a) The Borrower shall
give the Agent notice (a "Notice of Borrowing") not later than
11:00 A.M. (New York City time) on (x) the date of each Base Rate
Borrowing, (y) the second Domestic Business Day before each CD
Borrowing and (z) the third Euro-Dollar Business Day before each
Euro-Dollar Borrowing, specifying:
(i) the date of such Borrowing, which shall be a
Domestic Business Day in the case of a Domestic Borrowing
or a Euro-Dollar Business Day in the case of a Euro-Dollar
Borrowing;
(ii) the aggregate amount of such Borrowing;
(iii) whether the Loans comprising such Borrowing are
to bear terest initially at the Base Rate, a CD Rate or a
Euro-Dollar Rate; and
(iv) in the case of a CD Borrowing or a Euro-Dollar
Borrowing, the duration of the initial Interest Period
applicable thereto, subject to the provisions of the
definition of Interest Period.
(b) Promptly after receiving a Notice of Borrowing, the
Agent shall notify each Bank of the contents thereof and of such
Bank's ratable share of such Borrowing and such Notice of
Borrowing shall not thereafter be revocable by the Borrower.
(c) Not later than 12:00 Noon (New York City time) on the
date of each Borrowing, each Bank shall make available its
ratable share of such Borrowing, in Federal or other funds
immediately available in New York City, to the Agent at its
address specified in or pursuant to Section 9.01. Unless the
Agent determines that any applicable condition specified in
Article 3 has not been satisfied, the Agent will make the funds
so received from the Banks available to the Borrower at the
Agent's aforesaid address.
(d) Unless the Agent shall have received notice from a Bank
before the date of any Borrowing that such Bank will not make
available to the Agent such Bank's share of such Borrowing, the
Agent may assume that such Bank has made such share available to
the Agent on the date of such Borrowing in accordance with
subsection (b) of this Section and the Agent may, in reliance
upon such assumption, make available to the Borrower on such date
a corresponding amount. If and to the extent that such Bank
shall not have so made such share available to the Agent, such
Bank and the 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 the Borrower until the date such amount is repaid to
the Agent, at (i) if such amount is repaid by the Borrower, a
rate per annum equal to the higher of the Federal Funds Rate and
the interest rate applicable thereto pursuant to Section 2.04 and
(ii) if such amount is repaid by such Bank, the Federal Funds
Rate. If such Bank shall repay such corresponding amount to the
Agent , the Borrower shall not be required to repay such amount
and the amount so repaid by such Bank shall constitute such
Bank's Loan included in such Borrowing for purposes of this
Agreement. If the Borrower shall repay such corresponding amount
to the Agent, the advance and repayment thereof shall not affect
any rights that the Borrower would otherwise have against such
Bank hereunder in connection with its failure to make such Loan.
Section 2.03. Maturity of Loans. Each Loan shall mature,
and the principal amount thereof shall be due and payable
(together with interest accrued thereon), on the Termination
Date.
Section 2.04. Interest Rates. (a) Each Base Rate Loan
shall bear interest on the outstanding principal amount thereof,
for each day from the date such Loan is made until it becomes
due, at a rate per annum equal to the Base Rate for such day.
Such interest shall be payable quarterly in arrears on each
Quarterly Payment Date and at maturity. Any overdue principal of
or interest on any Base Rate Loan shall bear interest, payable on
demand, for each day until paid at a rate per annum equal to the
sum of 2% plus the Base Rate for such day.
(b) Each CD Loan shall bear interest on the outstanding
principal amount thereof, for each day during each Interest
Period applicable thereto, at a rate per annum equal to the sum
of the CD Margin for such day plus the Adjusted CD Rate
applicable to such Interest Period; provided that if any CD Loan
shall, as a result of clause (2)(b) of the definition of Interest
Period, have an Interest Period of less than 30 days, such CD
Loan shall bear interest for each day during such Interest Period
at the Base Rate for such day. Such interest shall be payable
for each Interest Period on the last day thereof and, if such
Interest Period is longer than 90 days, at intervals of 90 days
after the first day thereof. Any overdue principal of or
interest on any CD Loan shall bear interest, payable on demand,
for each day until paid at a rate per annum equal to the sum of
2% plus the higher of (i) the Base Rate for such day and (ii) the
sum of the CD Margin plus the Adjusted CD Rate applicable to such
Loan on the day before such payment was due.
"CD Margin" means (i) prior to the date which is four months
after the date of this Agreement, 0.725%, (ii) on and after the
date which is four months after the date of this Agreement and
prior to the date which is eight months after the date of this
Agreement, 0.875% and (iii) on and after the date which is eight
months after the date of this Agreement, 1.125%.
The "Adjusted CD Rate" applicable to any Interest Period
means a rate per annum determined pursuant to the following
formula:
[ CDBR ]*
ACDR = [ ----- ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
__________
* The amount in brackets being rounded upward, if
necessary, to the next higher 1/100 of 1%
The "CD Base Rate" applicable to any Interest Period is the
rate of interest determined by the Agent to be the prevailing
rate per annum bid at 10:00 A.M. (New York City time) (or as soon
thereafter as practicable) on the first day of such Interest
Period by two or more New York certificate of deposit dealers of
recognized standing for the purchase at face value from the CD
Reference Bank of its certificates of deposit in an amount
comparable to the principal amount of the CD Loan of the CD
Reference Bank to which such Interest Period applies and having a
maturity comparable to such Interest Period.
"Domestic Reserve Percentage" means for any day that
percentage (expressed as a decimal) which is in effect on such
day, as prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum
reserve requirement (including without limitation any basic,
supplemental or emergency reserves) for a member bank of the
Federal Reserve System in New York City with deposits exceeding
five billion dollars in respect of new non-personal time deposits
in dollars in New York City having a maturity comparable to the
related Interest Period and in an amount of $100,000 or more.
The Adjusted CD Rate shall be adjusted automatically on and as of
the effective date of any change in the Domestic Reserve
Percentage.
"Assessment Rate" means for any day the annual assessment
rate in effect on such day which is payable by a member of the
Bank Insurance Fund classified as adequately capitalized and
within supervisory subgroup "A" (or a comparable successor
assessment risk classification) within the meaning of 12 C.F.R.
Section 327.4(a) (or any successor provision) to the Federal
Deposit Insurance Corporation (or any successor) for such
Corporation's (or such successor's) insuring time deposits at
offices of such institution in the United States. The Adjusted
CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Assessment Rate.
(c) Each Euro-Dollar Loan shall bear interest on the
outstanding principal amount thereof, for each day during each
Interest Period applicable thereto, at a rate per annum equal to
the sum of the Euro-Dollar Margin for such day plus the London
Interbank Offered Rate applicable to such Interest Period. Such
interest shall be payable for each Interest Period on the last
day thereof and, if such Interest Period is longer than three
months, at intervals of three months after the first day thereof.
"Euro-Dollar Margin" means (i) prior to the date which is
four months after the date of this Agreement, 0.60%, (ii) on and
after the date which is four months after the date of this
Agreement and prior to the date which is eight months after the
date of this Agreement, 0.75% and (iii) on and after the date
which is eight months after the date of this Agreement, 1.00%.
The "London Interbank Offered Rate" applicable to any
Interest Period means the rate per annum at which deposits in
dollars are offered to the Euro-Dollar Reference Bank in the
London interbank market at approximately 11:00 A.M. (London time)
two Euro-Dollar Business Days before the first day of such
Interest Period in an amount approximately equal to the principal
amount of the Euro-Dollar Loan of the Euro-Dollar Reference Bank
to which such Interest Period is to apply and for a period of
time comparable to such Interest Period.
(d) Any overdue principal of or interest on any Euro-Dollar
Loan shall bear interest, payable on demand, for each day until
paid at a rate per annum equal to the higher of (i) the sum of 2%
plus the Euro-Dollar Margin for such day plus the London
Interbank Offered Rate applicable to such Loan on the day before
such payment was due and (ii) the sum of 2% plus the Euro-Dollar
Margin for such day plus a rate per annum equal to the quotient
obtained (rounded upward, if necessary, to the next higher 1/100
of 1%) by dividing (x) the average (rounded upward, if necessary,
to the next higher 1/16 of 1%) of the respective rates per annum
at which one day (or, if such amount due remains unpaid more than
three Euro-Dollar Business Days, then for such other period of
time not longer than three months as the Agent may select)
deposits in dollars in an amount approximately equal to such
overdue payment due to the Euro-Dollar Reference Bank are offered
to the Euro-Dollar Reference Bank in the London interbank market
for the applicable period determined as provided above by (y)
1.00 minus the Euro-Dollar Reserve Percentage (or, if the
circumstances described in clause (a) or (b) of Section 8.01
shall exist, at a rate per annum equal to the sum of 2% plus the
Base Rate for such day).
(e) The Agent shall determine each interest rate applicable
to the Loans hereunder. The Agent shall promptly notify the
Borrower and the participating Banks of each rate of interest so
determined, and its determination thereof shall be conclusive in
the absence of manifest error.
(f) The Reference Bank agrees to use its best efforts to
furnish quotations to the Agent as contemplated by this Section.
If the Reference Bank does not furnish a timely quotation, the
provisions of Section 8.01 shall apply.
Section 2.05. Method of Electing Interest Rates. (a) The
Loans included in each Borrowing shall bear interest initially at
the type of rate specified by the Borrower in the applicable
Notice of Borrowing. Thereafter, the Borrower may from time to
time elect to change or continue the type of interest rate borne
by each Group of Loans (subject to subsection (d) of this Section
and the provisions of Article 8), as follows:
(i) if such Loans are Base Rate Loans, the Borrower may
elect to convert such Loans to CD Loans as of any Domestic
Business Day or to Euro-Dollar Loans as of any Euro-Dollar
Business Day;
(ii) if such Loans are CD Loans, the Borrower may elect
to convert such Loans to Base Rate Loans as of any Domestic
Business Day or convert such Loans to Euro-Dollars Loans
as of any Euro-Dollar Business Day or continue such Loans
as CD Loans for an additional Interest Period, subject to
Section 2.10 if any such converstion is effective on any
day other than the last day of an Interest Period applicable
to such Loans; and
(iii) if such Loans are Euro-Dollar Loans, the Borrower
may elect to convert such Loans to Base Rate Loans as of
any Domestic Business Day or convert such Loans to CD Loans
as of any Euro-Dollar Business Day or elect to continue such
Loans as Euro-Dollars Loans for an additional Interest
Period, subject to Section 2.10 if any such conversion is
effective on any day other than the last day of an Interest
Period applicable to such Loans.
Each such election shall be made by delivering a notice (a
"Notice of Interest Rate Election") to the Agent not later than
11:00 A.M. (New York City time) on the third Euro-Dollar Business
Day before the conversion or continuation selected in such notice
is to be effective (unless the relevant Loans are to be converted
from Domestic Loans of one type to Domestic Loans of the other
type or are CD Loans to be continued as CD Loans for an
additional Interest Period, in which case such notice shall be
delivered to the Agent not later than 11:00 A.M. (New York City
time) on the second Domestic Business Day before such conversion
or continuation is to be effective). A Notice of Interest Rate
Election may, if it so specifies, apply to only a portion of the
aggregate principal amount of the relevant Group of Loans;
provided that (i) such portion is allocated ratably among the
Loans comprising such Group and (ii) the portion to which such
Notice applies, and the remaining portion to which it does not
apply, are each at least $20,000,000 (unless such portion is
comprised of Base Rate Loans). If no such notice is timely
received before the end of an Interest Period for any Group of CD
Loans or Euro-Dollar Loans, the Borrower shall be deemed to have
elected that such Group of Loans be converted to Base Rate Loans
at the end of such Interest Period.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to
which such notice applies;
(ii) the date on which the conversion or
continuation selected in such notice is to be effective,
which shall comply with the applicable clause of
subsection (a) above;
(iii) if the Loans comprising such Group are to
be converted, the new type of Loans and, if the Loans
resulting from such conversion are to be CD Loans or
Euro-Dollars Loans, the duration of the next succeeding
Interest Period applicable thereto; and
(iv) if such Loans are to be continued as CD
Loans or Euro-Dollars Loans for an additional Interest
Period, the duration of such additional Interest Period.
Each Interest Period specified in a Notice of Interest Rate
Election shall comply with the provisions of the definition of
Interest Period.
(c) Promptly after receiving a Notice of Interest Rate
Election from the Borrower pursuant to subsection (a) above, the
Agent shall notify each Bank of the contents thereof and such
notice shall not thereafter be revocable by the Borrower.
(d) The Borrower shall not be entitled to elect to convert
any Loans to, or continue any Loans for an additional Interest
Period as, CD Loans or Euro-Dollar Loans if (i) the aggregate
principal amount of any Group of CD Loans or Euro-Dollar Loans
created or continued as a result of such election would be less
than $20,000,000 or (ii) a Default shall have occurred and be
continuing when the Borrower delivers notice of such election to
the Agent.
(e) If any Loan is converted to a different type of Loan,
the Borrower shall pay, on the date of such conversion, the
interest accrued to such date on the principal amount being
converted.
Section 2.06. Commitment Fees. The Borrower shall pay to
the Agent, for the account of the Banks ratably in proportion to
their Commitments, a commitment fee at the rate of 0.20% per
annum on the daily average amount by which the aggregate amount
of the Commitments exceeds the aggregate outstanding principal
amount of the Loans. Such commitment fee shall accrue from and
including the Effective Date to but excluding the date on which
the Commitments terminate in their entirety. Fees accrued for
the account of the Banks under this Section shall be payable
quarterly in arrears on each Quarterly Payment Date and on the
day on which the Commitments terminate in their entirety.
Section 2.07. Termination or Reduction of Commitments. (a)
The Borrower may, upon at least three Domestic Business Days'
notice to the Agent, terminate the Commitments at any time, if
no Loans are outstanding at such time, or ratably reduce from
time to time by an aggregate amount of $10,000,000 or a larger
multiple of $1,000,000, the aggregate amount of the Commitments
in excess of the aggregate outstanding principal amount of the
Loans. Promptly after receiving a notice pursuant to this
subsection, the Agent shall notify each Bank of the contents
thereof.
(b) At the close of business on April 24, 1998, if the
Offers shall not theretofore have been declared unconditional in
all respects, the Commitments shall automatically be ratably
reduced to the extent required so that the aggregate amount of
the Commitments does not exceed the lesser of $100,000,000 and
the aggregate principal amount of the Loans then outstanding.
(c) Unless previously terminated, the Commitments shall
terminate in their entirety on the Termination Date.
Section 2.08. Optional Prepayments. (a) Subject in the
case of Fixed Rate Loans to Section 2.10, the Borrower may, upon
at least one Domestic Business Day's notice to the Agent, prepay
any Group of Domestic Loans or upon at least three Euro-Dollar
Business Days' notice to the Agent, prepay any Group of Euro-
Dollar Loans, in each case in whole at any time, or from time to
time in part in amounts aggregating $10,000,000 or any larger
multiple of $1,000,000, by paying the principal amount to be
prepaid together with interest accrued thereon to the date of
prepayment. Each such optional prepayment shall be applied to
prepay ratably the Loans of the several Banks included in such
Group of Loans.
(b) Promptly after receiving a notice of prepayment
pursuant to this Section, the Agent shall notify each Bank of
the contents thereof and of such Bank's ratable share of such
prepayment, and such notice shall not thereafter be revocable
by the Borrower.
Section 2.09. General Provisions as to Payments. (a) The
Borrower shall make each payment of principal of, and interest
on, the Loans and of fees hereunder not later than 12:00 Noon
(New York City time) on the date when due, in Federal or other
funds immediately available in New York City, to the Agent at its
address specified in or pursuant to Section 9.01. The Agent will
promptly distribute to each Bank its ratable share of each such
payment received by the Agent for the account of the Banks.
Whenever any payment of principal of, or interest on, the
Domestic Loans or any payment of fees shall be due on a day which
is not a Domestic Business Day, the date for payment thereof
shall be extended to the next succeeding Domestic Business Day.
Whenever any payment of principal of, or interest on, the
Euro-Dollar Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be
extended to the next succeeding Euro-Dollar Business Day unless
such Euro-Dollar Business Day falls in another calendar month, in
which case the date for payment thereof shall be the next
preceding Euro-Dollar Business Day. If the date for any payment
of principal is extended by operation of law or otherwise,
interest thereon shall be payable for such extended time.
(b) Unless the Borrower notifies the Agent before the date
on which any payment is due to the Banks hereunder that the
Borrower will not make such payment in full, the Agent may assume
that the Borrower has made such payment in full to the Agent on
such date and the Agent may, in reliance on such assumption,
cause to be distributed to each Bank on such due date an amount
equal to the amount then due such Bank. If and to the extent
that the Borrower shall not have so made such payment, each Bank
shall repay to the Agent forthwith on demand such amount
distributed to such Bank together with interest thereon, for each
day from the date such amount is distributed to such Bank until
the date such Bank repays such amount to the Agent, at the
Federal Funds Rate.
Section 2.10. Funding Losses. If the Borrower makes any
payment of principal with respect to any Fixed Rate Loan or any
Fixed Rate Loan is continued for an additional Interest Period or
converted to a different type of Loan (whether such payment,
continuation or conversion is pursuant to Article 2, 6 or 8 or
otherwise) on any day other than the last day of an Interest
Period applicable thereto, or the last day of an applicable
period fixed pursuant to Section 2.04(d), or if the Borrower
fails to borrow, prepay, convert or continue any Fixed Rate Loans
after notice has been given to any Bank in accordance with
Section 2.02(b), 2.05(c) or 2.08(b), the Borrower shall reimburse
each Bank within 15 days after demand for any resulting loss or
expense incurred by it (or by an existing or prospective
Participant in the related Loan), including (without limitation)
any loss incurred in obtaining, liquidating or employing deposits
from third parties, but excluding loss of margin for the period
after such payment or conversion or failure to borrow, prepay,
convert or continue; provided that such Bank shall have delivered
to the Borrower a certificate as to the amount of such loss or
expense, which certificate shall be conclusive in the absence of
manifest error.
Section 2.11. Computation of Interest and Fees. Interest
based on the Prime Rate hereunder shall be computed on the basis
of a year of 365 days (or 366 days in a leap year) and paid for
the actual number of days elapsed (including the first day but
excluding the last day). All other interest and fees shall be
computed on the basis of a year of 360 days and paid for the
actual number of days elapsed (including the first day but
excluding the last day).
Section 2.12. Notes. (a) The Borrower's obligation to
repay the Loans of each Bank shall be evidenced by a single Note
payable to the order of such Bank for the account of its
Applicable Lending Office.
(b) Each Bank may, by notice to the Borrower and the Agent,
request that the Borrower's obligation to repay such Bank's Loans
of a particular type be evidenced by a separate Note. Each such
Note shall be in substantially the form of Exhibit A hereto with
appropriate modifications to reflect the fact that it relates
solely to Loans of the relevant type. Each reference in this
Agreement to the "Note" of such Bank shall be deemed to refer to
and include any or all of such Notes, as the context may require.
(c) Promptly after it receives each Bank's Note pursuant to
Section 3.01(a), the Agent shall forward such Note to such Bank.
Each Bank shall record the date, amount and type of each Loan
made by it and the date and amount of each payment of principal
made by the Borrower with respect thereto, and may, if such Bank
so elects in connection with any transfer or enforcement of its
Note, endorse on the schedule forming a part thereof appropriate
notations to evidence the foregoing information with respect to
each such Loan then outstanding; provided that a Bank's failure
to make (or any error in making) any such recordation or
endorsement shall not affect the Borrower's obligations hereunder
or under the Notes. Each Bank is hereby irrevocably authorized
by the Borrower so to endorse its Note and to attach to and make
a part of its Note a continuation of any such schedule as and
when required.
Section 2.13. Regulation D Compensation. Each Bank may
require the Borrower to pay, contemporaneously with each payment
of interest on the Euro-Dollar Loans, additional interest on the
related Euro-Dollar Loan of such Bank at a rate per annum
determined by such Bank up to but not exceeding the excess of (i)
(A) the applicable London Interbank Offered Rate divided by (B)
one minus the Euro-Dollar Reserve Percentage over (ii) the
applicable London Interbank Offered Rate. Any Bank wishing to
require payment of such additional interest (x) shall so notify
the Borrower and the Agent, in which case such additional
interest on the Euro-Dollar Loans of such Bank shall be payable
to such Bank at the place indicated in such notice with respect
to each Interest Period commencing at least three Euro-Dollar
Business Days after such Bank gives such notice and (y) shall
notify the Borrower at least five Euro-Dollar Business Days
before each date on which interest is payable on the Euro-Dollar
Loans of the amount then due it under this Section.
Section 2.14. Commitment Reduction Events. (a) Within
five Domestic Business Days after the Borrower or any Subsidiary
receives any Net Cash Proceeds of a Commitment Reduction Event,
the Commitments shall be reduced ratably by an aggregate amount
equal to the amount of such Net Cash Proceeds; provided that:
(i) if the amount of such reduction is less than
$2,000,000, such reduction shall be deferred until the
aggregate amount by which the Commitments are required to be
reduced pursuant to this Section (including such deferred
amounts) is not less than $2,000,000; and
(ii) if, by reason of any such reduction, subsection
(b) of this Section would otherwise require Fixed Rate Loans
or portions thereof to be prepaid prior to the last day of
the applicable Interest Period, such reduction shall be
deferred to such last day unless the Agent otherwise
notifies the Borrower upon the instruction of the Required
Banks.
The Borrower shall give the Agent at least three Domestic
Business Days' notice of each reduction of the Commitments
pursuant to this Section.
(b) If, after giving effect to any reduction of the
Commitments pursuant to subsection (a) of this Section, the
aggregate outstanding principal amount of the Loans would exceed
the aggregate amount of the Commitments, the Borrower shall
prepay, pursuant to and in accordance with Section 2.08, a
sufficient aggregate principal amount of the Loans to eliminate
such excess.
ARTICLE 3
Conditions
Section 3.01. Effective Date. This Agreement shall become
effective when all of the following conditions have been
satisfied:
(a) the Agent shall have received from each of the
parties listed on the signature pages hereof either a
counter part hereof signed by such party or facsimile or
other written confirmation satisfactory to the Agent
confirming that such party has signed a counterpart hereof;
(b) the Agent shall have received a duly executed Note
for the account of each Bank dated on or before the Effective
Date and complying with the provisions of Section 2.12;
(c) the Agent shall have received an opinion of Holme
Roberts & Owen LLP, counsel for the Borrower, substantially
in the form of Exhibit B hereto, dated the Effective Date
and covering such additional matters relating to the
transactions contemplated hereby as the Required Banks
may reasonably request;
(d) the Agent shall have received an opinion of Davis
Polk & Wardwell, special counsel for the Agent, substantially
in the form of Exhibit C hereto, dated the Effective
Date and covering such additional matters relating to the
transactions contemplated hereby as the Required Banks
may reasonably request;
(e) the Borrower shall have paid in full (or made
arrangements satisfactory to the Agent for paying in full) on
the Effective Date all fees accrued under the Existing Credit
Agreement to but excluding the Effective Date and all other
amounts (if any) then due and payable by the Borrower
thereunder;
(f) the Agent shall have received all documents the
Agent may reasonably request relating to the existence of the
Borrower, the corporate authority for and the validity of
this Agreement and the Notes, and any other matters relevant
hereto, all in form and substance satisfactory to the Agent.
Promptly after the Effective Date occurs, the Agent shall notify
the Borrower and the Banks thereof, and such notice shall be
conclusive and binding on all parties hereto.
Section 3.02. Consequence of Effectiveness. (a) On the
Effective Date, without further action by any of the parties
thereto, the Existing Credit Agreement will be automatically
amended and restated to read as this Agreement reads.
(b) On and after the Effective Date, the rights and
obligations of the parties hereto shall be governed by the
provisions hereof. The rights and obligations of the parties to
the Existing Credit Agreement with respect to the period prior to
the Effective Date shall continue to be governed by the
provisions thereof as in effect prior to the Effective Date,
except that all fees accrued under the Existing Credit Agreement
to but excluding the Effective Date shall be paid on the
Effective Date.
Section 3.03. Borrowings to Finance Acquisition of Target
Shares. The obligation of any Bank to make a Loan on the
occasion of any Borrowing for the purposes (and only for the
purposes) of (i) financing the acquisition of Target Shares
pursuant to the Offers and the Completion Procedures and (ii)
financing open market purchases of Target Shares while the Offers
are continuing is subject to the satisfaction of the following
conditions:
(a) the Effective Date shall have occurred on or
before January 24, 1998;
(b) the Agent shall have received a Notice of
Borrowing as required by Section 2.02;
(c) immediately before and after such Borrowing, no
Event of Default described in clause (g) or (h) of Section
6.01 shall have occurred and be continuing with respect to
the Borrower;
(d) the representations and warranties of the Borrower
set forth in Sections 4.01, 4.02 and 4.03 shall be true on
and as of the date of such Borrowing;
(e) Acquisition Subsidiary shall not have amended or
modified in any material respect any material term or
condition of either of the Offers, other than any extension
of time for acceptance of the Offers;
(f) Acquisition Subsidiary shall not have decided,
declared or accepted that valid acceptances in respect of
less than 90 percent in nominal value of the ordinary shares
to which the Offers relate shall be required for the
satisfaction of the condition set forth in paragraph 1(a) of
Appendix 1 to the press release by which the Offers are
announced; provided that the Required Banks shall waive
this condition precedent if it is shown to their reasonable
satisfaction that Acquisition Subsidiary will obtain
acceptances sufficient to enable it to give notice under
section 429 Companies Act 1985 with respect to such ordinary
shares; and
(g) if the aggregate outstanding principal amount of
the Loans immediately after such Borrowing will exceed
$100,000,000, each of the Offers shall have been declared
unconditional in all respects and the Agent shall have
received a certified copy of the announcement to such
effect.
Each Borrowing described in this Section shall be deemed to be a
representation and warranty by the Borrower that the conditions
specified in this Section are satisfied on the date of such
Borrowing.
Section 3.04 Borrowings for Other Corporate Purposes. The
obligation of any Bank to make a Loan on the occasion of any
Borrowing for a purpose other than those specified in Section
3.02 is subject to the satisfaction of the following conditions:
(a) the Effective Date shall have occurred on or before
January 24, 1998;
(b) the Agent shall have received a Notice of Borrowing
as required by Section 2.02;
(c) immediately before and after such Borrowing, no
Default shall have occurred and be continuing; and
(d) the representations and warranties of the Borrower
set forth in this Agreement shall be true on and as of the
date of such Borrowing.
Each Borrowing described in this Section shall be deemed to be a
representation and warranty by the Borrower that the conditions
specified in clauses (c) and (d) of this Section are satisfied on
the date of such Borrowing.
ARTICLE 4
Representations and Warranties
The Borrower represents and warrants that:
Section 4.01. Corporate Existence and Power. The Borrower
is a corporation duly incorporated, validly existing and in good
standing under the laws of Colorado and has all corporate powers
and all material governmental licenses, consents, authorizations
and approvals required to carry on its business as now conducted.
Section 4.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the
Borrower of this Agreement and the Notes are within the
Borrower's corporate powers, have been duly authorized by all
necessary corporate action, require no action by or in respect
of, or filing with, any governmental body, agency or official and
do not contravene, or constitute a default under, any provision
of applicable law or regulation or of the Borrower's articles of
incorporation or by-laws or of any agreement, judgment,
injunction, order, decree or other instrument binding upon the
Borrower or any Subsidiary or result in the creation or
imposition of any Lien on any asset of the Borrower or any
Subsidiary.
Section 4.03. Binding Effect. This Agreement constitutes a
valid and binding agreement of the Borrower and each Note, when
executed and delivered in accordance with this Agreement, will
constitute a valid and binding obligation of the Borrower, in
each case enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally and general principles of equity.
Section 4.04. Financial Information. (a) The consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries
as of December 31, 1996 and the related consolidated statements
of income and cash flows for the Fiscal Year then ended, reported
on by Price Waterhouse LLP and set forth in the Borrower's 1996
Form 10-K, a copy of which has been delivered to each of the
Banks, fairly present, in conformity with GAAP, the consolidated
financial position of the Borrower and its Consolidated
Subsidiaries as of such date and their consolidated results of
operations and cash flows for such Fiscal Year.
(b) The unaudited consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as of September 30,
1997 and the related unaudited consolidated statements of income
and cash flows for the nine months then ended, set forth in the
Borrower's Latest Form 10-Q, a copy of which has been delivered
to each of the Banks, fairly present, on a basis consistent with
the financial statements referred to in subsection (a) of this
Section, the consolidated financial position of the Borrower and
its Consolidated Subsidiaries as of such date and their
consolidated results of operations and cash flows for such nine-
month period (subject to normal year-end adjustments).
(c) Since September 30, 1997 there has been no material
adverse change in the business, financial position, results of
operations or prospects of the Borrower and its Consolidated
Subsidiaries, considered as a whole.
Section 4.05. Litigation. There is no action, suit or
proceeding pending against, or to the Borrower's knowledge
threatened against or affecting, the Borrower or any Subsidiary
before any court or arbitrator or any governmental body, agency
or official in which there is a reasonable possibility of an
adverse decision which could materially adversely affect the
business, consolidated financial position or consolidated results
of operations of the Borrower and its Consolidated Subsidiaries,
considered as a whole, or which in any manner draws into question
the validity or enforceability of this Agreement or the Notes.
Section 4.06. Compliance with ERISA. Each member of the
ERISA Group has fulfilled its obligations under the minimum
funding standards of ERISA and the Internal Revenue Code with
respect to each Plan and is in compliance in all material
respects with the presently applicable provisions of ERISA and
the Internal Revenue Code with respect to each Plan. No member
of the ERISA Group has (i) sought a waiver of the minimum funding
standard under Section 412 of the Internal Revenue Code in
respect of any Plan, (ii) failed to make any contribution or
payment to any Plan or Multiemployer Plan, or made any amendment
to any Plan, which has resulted or could result in the imposition
of a Lien or the posting of a bond or other security under ERISA
or the Internal Revenue Code or (iii) incurred any liability
under Title IV of ERISA other than a liability to the PBGC for
premiums under Section 4007 of ERISA.
Section 4.07. Environmental Matters. In the ordinary
course of its business, the Borrower conducts an ongoing review
of the effect of Environmental Laws on the business, operations
and properties of the Borrower and its Subsidiaries, in the
course of which it identifies and evaluates associated
liabilities and costs (including, without limitation, any capital
or operating expenditures required for clean-up or closure of
properties presently or previously owned, any capital or
operating expenditures required to achieve or maintain compliance
with environmental protection standards imposed by law or as a
condition of any license, permit or contract, any related
constraints on operating activities, including any periodic or
permanent shutdown of any facility or reduction in the level of
or change in the nature of operations conducted thereat, any
costs or liabilities in connection with off-site disposal of
wastes or Hazardous Substances and any actual or potential
liabilities to third parties, including employees, and any
related costs and expenses). On the basis of this review, the
Borrower has reasonably concluded that such associated
liabilities and costs, including the costs of complying with
Environmental Laws, are unlikely to have a material adverse
effect on the business, financial condition or results of
operations of the Borrower and its Consolidated Subsidiaries,
considered as a whole.
Section 4.08. Taxes. The Borrower and its Subsidiaries
have filed all United States Federal income tax returns and all
other material tax returns which are required to be filed by them
and have paid all taxes due pursuant to such returns or pursuant
to any assessment received by the Borrower or any Subsidiary.
The charges, accruals and reserves on the books of the Borrower
and its Subsidiaries in respect of taxes or other governmental
charges are, in the Borrower's opinion, adequate.
Section 4.09. Subsidiaries. Each of the Borrower's
corporate Subsidiaries is a corporation duly incorporated,
validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all corporate powers and
all material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted.
Section 4.10. No Regulatory Restrictions on Borrowing. The
Borrower is not (i) an "investment company" within the meaning of
the Investment Company Act of 1940, as amended, (ii) a "holding
company" or a "subsidiary company" of a holding company within
the meaning of the Public Utility Holding Company Act of 1935, as
amended, or (iii) otherwise subject to any regulatory scheme
which restricts its ability to incur debt.
Section 4.11. Full Disclosure. All information heretofore
furnished by the Borrower to the Agent or any Bank for purposes
of or in connection with this Agreement or any transaction
contemplated hereby is, and all such information hereafter
furnished by the Borrower to the Agent or any Bank will be, true
and accurate in all material respects on the date as of which
such information is stated or certified. The Borrower has
disclosed to the Banks in writing any and all facts which
materially and adversely affect, or may affect (to the extent the
Borrower can now reasonably foresee), the business, operations or
financial condition of the Borrower and its Consolidated
Subsidiaries, taken as a whole, or the Borrower's ability to
perform its obligations under this Agreement.
ARTICLE 5
Covenants
The Borrower agrees that, so long as any Bank has any Credit
Exposure hereunder or any interest or fees accrued hereunder
remain unpaid:
Section 5.01. Information. The Borrower will deliver to
each of the Banks:
(a) as soon as available and in any event within 95 days
after the end of each Fiscal Year, a consolidated balance sheet
of the Borrower and its Consolidated Subsidiaries as of the end
of such Fiscal Year and the related consolidated statements of
income and cash flows for such Fiscal Year, setting forth in each
case in comparative form the figures for the previous Fiscal
Year, all reported on in a manner acceptable to the SEC by Price
Waterhouse LLP or other independent public accountants of
nationally recognized standing;
(b) as soon as available and in any event within 50 days
after the end of each of the first three Fiscal Quarters of each
Fiscal Year, a consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of the end of such Fiscal Quarter,
the related consolidated statement of income for such Fiscal
Quarter and the related consolidated statement of cash flows for
the portion of the Fiscal Year ended at the end of such Fiscal
Quarter, setting forth in the case of each such statement of
income and cash flows in comparative form the figures for the
corresponding period in the previous Fiscal Year, all certified
(subject to normal year-end adjustments) as to fairness of
presentation and consistency with GAAP by the Borrower's chief
financial officer or chief accounting officer;
(c) simultaneously with the delivery of each set of
financial statements referred to in clauses (a) and (b) above, a
certificate of the Borrower's chief financial officer or chief
accounting officer (i) setting forth in reasonable detail the
calculations required to establish whether the Borrower was in
compliance with the requirements of Sections 5.09 to 5.15,
inclusive, on the date of such financial statements and (ii)
stating whether any Default exists on the date of such
certificate and, if any Default then exists, setting forth the
details thereof and the action which the Borrower is taking or
proposes to take with respect thereto;
(d) simultaneously with the delivery of each set of
financial statements referred to in clause (a) above, a statement
of the firm of independent public accountants which reported on
such statements stating whether anything has come to their
attention to cause them to believe that any Default existed on
the date of such statements;
(e) within five Domestic Business Days after any officer of
the Borrower obtains knowledge of any Default, if such Default is
then continuing, a certificate of the Borrower's chief financial
officer or chief accounting officer setting forth the details
thereof and the action which the Borrower is taking or proposes
to take with respect thereto;
(f) promptly after the mailing thereof to the Borrower's
shareholders generally, copies of all financial statements,
reports and proxy statements so mailed;
(g) promptly after the filing thereof, copies of all
registration statements (other than the exhibits thereto and any
registration statements on Form S-8 or its equivalent) and
reports on Forms 10-K, 10-Q and 8-K (or their equivalents) filed
by the Borrower with the SEC;
(h) if and when any member of the ERISA Group (i) gives of
is required to give notice to the PBGC of any "reportable event"
(as defined in Section 4043 of ERISA) with respect to any Plan
which might constitute grounds for a termination of such Plan
under Title IV of ERISA, or knows that the plan administrator of
any Plan has given or is required to give notice of any such
reportable event, a copy of the notice of such reportable event
given or required to be given to the PBGC; (ii) receives notice
of complete or partial withdrawal liability under Title IV of
ERISA or notice that any Multiemployer Plan is in reorganization,
is insolvent or has been terminated, a copy of such notice; (iii)
receives notice from the PBGC under Title IV of ERISA of an
intent to terminate, impose liability (other than for premiums
under Section 4007 of ERISA) in respect of, or appoint a trustee
to administer any Plan, a copy of such notice; (iv) applies for a
waiver of the minimum funding standard under Section 412 of the
Internal Revenue Code, a copy of such application; (v) gives
notice of intent to terminate any Plan under Section 4041(c) of
ERISA, a copy of such notice and other information filed with the
PBGC; (vi) gives notice of withdrawal from any Plan pursuant to
Section 4063 of ERISA, a copy of such notice; or (vii) fails to
make any payment or contribution to any Plan or Multiemployer
Plan or makes any amendment to any Plan which has resulted or
could result in the imposition of a Lien or the posting of a bond
or other security, a certificate of the Borrower's chief
financial officer or chief accounting officer setting forth
details as to such occurrence and the action, if any, which the
Borrower or applicable member of the ERISA Group is required or
proposes to take; and
(i) from time to time such additional information regarding
the financial position or business of the Borrower and its
Subsidiaries as the Agent, at the request of any Bank, may
reasonably request.
Section 5.02. Payment of Obligations. The Borrower will
pay and discharge, and will cause each Subsidiary to pay and
discharge, at or before maturity, all their respective material
obligations and liabilities (including, without limitation, tax
liabilities and claims of materialmen, warehousemen and the like
which if unpaid might by law give rise to a Lien), except where
the same are contested in good faith by appropriate proceedings,
and will maintain, and will cause each Subsidiary to maintain, in
accordance with GAAP, appropriate reserves for the accrual
thereof.
Section 5.03. Maintenance of Property; Insurance. (a) The
Borrower will keep, and will cause each Subsidiary to keep, all
property useful and necessary in its business in good working
order and condition, ordinary wear and tear excepted.
(b) The Borrower will, and will cause each Subsidiary to,
maintain (either in the Borrower's name or in such Subsidiary's
own name) with financially sound and responsible insurance
companies, insurance on all their respective properties in at
least such amounts (with no greater risk retention) and against
at least such risks as are usually maintained, retained or
insured against in the same general area by companies of
established repute engaged in the same or a similar business.
The Borrower will furnish to the Banks, upon request from the
Agent, information presented in reasonable detail as to the
insurance so carried.
Section 5.04. Conduct of Business and Maintenance of
Existence. The Borrower and its Subsidiaries will continue to
engage in business of the same general type as now conducted by
the Borrower and its Subsidiaries, and will preserve, renew and
keep in full force and effect their respective corporate
existences and their respective rights, privileges and franchises
necessary or desirable in the normal conduct of business;
provided that nothing in this Section shall prohibit:
(i) the merger of a Subsidiary into the Borrower if,
after giving effect thereto, no Default shall have occurred
and be continuing;
(ii) the merger or consolidation of a Subsidiary with
or into a Person other than the Borrower if the corporation
surviving such consolidation or merger is a Subsidiary and,
after giving effect thereto, no Default shall have occurred
and be continuing or
(iii) the termination of the corporate existence of a
Subsidiary if the Borrower in good faith determines that
such termination is in the best interest of the Borrower and
is not materially disadvantageous to the Banks.
Section 5.05. Compliance with Laws. The Borrower will
comply, and will cause each Subsidiary to comply, in all material
respects with all applicable laws, ordinances, rules, regulations
and requirements of governmental authorities (including, without
limitation, Environmental Laws and ERISA and the rules and
regulations thereunder), except where the necessity of compliance
therewith is contested in good faith by appropriate proceedings.
Section 5.06 Inspection of Property, Books and Records.
The Borrower will keep, and will cause each Subsidiary to keep,
proper books of record and account in which full and correct
entries shall be made of all dealings and transactions in
relation to its business and activities; and will permit, and
will cause each Subsidiary to permit, representatives of any Bank
at such Bank's expense to visit and inspect any of their
respective properties, to examine and make abstracts from any of
their respective books and records and to discuss their
respective affairs, finances and accounts with their respective
officers, employees and independent public accountants, all at
such reasonable times and as often as may reasonably be
requested.
Section 5.07. Mergers and Sales of Assets. (a) The
Borrower will not consolidate or merge with or into any other
Person; provided that the Borrower may merge with another Person
if (i) the Borrower is the corporation surviving such merger and
(ii) after giving effect to such merger, no Default shall have
occurred and be continuing.
(b) The Borrower and its Subsidiaries will not sell, lease
or otherwise transfer, directly or indirectly, all or any
substantial part of the assets of the Borrower and its
Subsidiaries, taken as a whole, to any other Person; provided
that this subsection (b) shall not apply to any sale, lease or
other transfer of the assets of Target's plastics division or the
capital stock of any Subsidiary included in Target's plastics
division.
Section 5.08. Use of Proceeds. The proceeds of the Loans
will be used by the Borrower (i) to finance the acquisition of
Target Shares pursuant to the Offers and the Completion
Procedures, (ii) to finance open market purchases of Target
Shares while the Offers are continuing, (iii) to refinance Debt
incurred to finance the acquisition of Target Shares before the
Offers are declared unconditional in all respects and (iv) for
general corporate purposes. None of such proceeds will be used,
directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of buying or carrying any "margin stock"
within the meaning of Regulation U.
Section 5.09. Negative Pledge. Neither the Borrower nor
any Subsidiary (other than Golden Properties) will create, assume
or suffer to exist any Lien on any asset now owned or hereafter
acquired by it, except:
(a) Liens existing on the date of this Agreement
securing Debt outstanding on the date of this Agreement in
an aggregate principal or face amount not exceeding
$10,000,000;
(b) any Lien existing on any asset of any Person at
the time such Person becomes a Subsidiary and not created
in contemplation of such event;
(c) any Lien on any asset securing Debt incurred or
assumed for the purpose of financing all or any part of the
cost of acquiring such asset, provided that such Lien
attaches to such asset concurrently with or within 180 days
after the acquisition thereof;
(d) any Lien on any asset of any Person existing at
the time such Person is merged or consolidated with or
into the Borrower or a Subsidiary and not created in
contemplation of such event;
(e) any Lien existing on any asset prior to the
acquisition thereof by the Borrower or a Subsidiary and not
created in contemplation of such acquisition;
(f) any Lien arising out of the refinancing, extension,
renewal or refunding of any Debt secured by any Lien
permitted by any of the foregoing clauses of this Section,
provided that such Debt is not increased and is not secured
by any additional assets;
(g) Liens arising in the ordinary course of its
business which (i) do not secure Debt or Derivatives Obliga-
tions and (ii) do not secure any single obligation (or class
of obligations having a common cause) in an amount exceeding
$25,000,000;
(h) Liens on cash and cash equivalents securing
Derivatives Obligations, provided that the aggregate amount
of cash and cash equivalents subject to such Liens may
at no time exceed $25,000,000; and
(i) Liens not otherwise permitted by the foregoing
clauses of this Section; provided that the aggregate out-
standing principal or face amount of (x) all Debt of the
Borrower secured by Liens permitted solely by this clause
(i) and (y) all Restricted Debt of Subsidiaries shall not
not at any time exceed 10% of Consolidated Tangible Assets.
Section 5.10. Debt to Total Capital. The ratio of
Consolidated Debt to Total Capital will at no time exceed 60%.
Section 5.11. Restricted Debt of Subsidiaries. The
aggregate outstanding principal or face amount of (x) all
Restricted Debt of Subsidiaries and (y) all Debt of the Borrower
secured by Liens permitted solely by clause (i) of Section 5.09
will not at any time exceed 10% of Consolidated Tangible Assets.
Section 5.12. Cash Flow Ratio. At the end of each Fiscal
Quarter, the Cash Flow Ratio will not exceed 400%.
Section 5.13. Restricted Payments. Neither the Borrower
nor any Subsidiary will declare or make any Restricted Payment
unless, after giving effect thereto, the aggregate of all
Restricted Payments declared or made subsequent to September 30,
1997 does not exceed the sum of (i) $50,000,000 plus (ii) 75% of
cumulative consolidated net income (or minus 100% of cumulative
consolidated net loss) of the Borrower and its Consolidated
Subsidiaries for the period from October 1, 1997 through the end
of the most recent full Fiscal Quarter (treated for this purpose
as a single accounting period).
Section 5.14. Lease Payments. Neither the Borrower nor any
Subsidiary will incur or assume (whether pursuant to a Guarantee
or otherwise) any liability for rental payments under a lease
with a lease term (as defined in Financial Accounting Standards
Board Statement No. 13, as in effect on the date hereof) of five
years or more if, after giving effect thereto, the aggregate
amount of minimum lease payments that the Borrower and its
Subsidiaries have so incurred or assumed will exceed $10,000,000
for any calendar year under all such leases (excluding capital
leases).
Section 5.15. Investments. Neither the Borrower nor any
Subsidiary will hold, make or acquire any Investment in any
Person other than:
(a) Investments existing on the date hereof in Persons
which are Subsidiaries on the date hereof and, subject to
the limitations of Section 5.04, additional Investments on
or after the date hereof in such Subsidiaries and in
Subsidiaries formed or acquired after the date hereof;
(b) Investments in Target Shares permitted to be
financed or refinanced with the proceeds of Loans hereunder;
(c) Temporary Cash Investments;
(d) loans and advances to employees of the Borrower or
a Subsidiary in the ordinary course of business in an
aggregate outstanding amount at no time exceeding
$2,000,000; and
(e) any Investment not otherwise permitted by the
foregoing clauses of this Section if, immediately after such
Investment is made or acquired, the aggregate net book value
of all Investments permitted by this clause (e) does not
exceed 15% of Consolidated Tangible Net Worth.
Section 5.16. Transactions with Affiliates. The Borrower
will not, and will not permit any Subsidiary to, directly or
indirectly, pay any funds to or for the account of, make any
investment (whether by acquisition of stock or indebtedness, by
loan, advance, transfer of property, guarantee or other agreement
to pay, purchase or service, directly or indirectly, any Debt, or
otherwise) in, lease, sell, transfer or otherwise dispose of any
assets, tangible or intangible, to, or participate in, or effect,
any transaction with, any Affiliate except on an arms-length
basis on terms at least as favorable to the Borrower or such
Subsidiary as could have been obtained from a third party that
was not an Affiliate; provided that the foregoing provisions of
this Section shall not prohibit any such Person from declaring or
paying any lawful dividend or other payment ratably in respect of
all its capital stock of the relevant class so long as, after
giving effect thereto, no Default shall have occurred and be
continuing.
ARTICLE 6
Defaults
Section 6.01. Events of Default. If one or more of the
following events ("Events of Default") shall have occurred and be
continuing:
(a) the Borrower shall fail to pay when due any
principal of any Loan or shall fail to pay within five days
of the due date thereof any interest, fee or other amount
payable by it hereunder;
(b) the Borrower shall fail to observe or perform any
covenant contained in Article 5, other than those contained
in Sections 5.01 through 5.06;
(c) the Borrower shall fail to observe or perform any
covenant or agreement (other than those covered by clause
(a) or (b) above) contained in this Agreement or any
amendment hereof for 30 days after the Agent gives notice
thereof to the Borrower at the request of any Bank;
(d) any representation, warranty, certification or
statement made by the Borrower in this Agreement or any
amendment hereof or in any certificate, financial
statement or other document delivered pursuant to this
Agreement shall prove to have been incorrect in any
material respect when made (or deemed made);
(e) the Borrower or any Subsidiary shall fail to make
one or more payments in respect of Material Financial
Obligations when due or within any applicable grace period;
(f) any event or condition shall occur which results
in the acceleration of the maturity of any Material Debt or
enables (or, with the giving of notice or lapse of time or
both, would enable) the holder of such Debt or any Person
acting on such holder's behalf to accelerate the maturity
thereof;
(g) the Borrower or any Subsidiary shall commence a
voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its
debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or
shall consent to any such relief or to the appoint of or
taking possession by any such official in an involuntary
case or other proceeding commenced against it, or shall
make a general assignment for the benefit of creditors, or
shall fail generally to pay its debts as they become due,
or shall take any corporate action to authorize any of the
foregoing;
(h) an involuntary case or other proceeding shall be
commenced against the Borrower or any Subsidiary seeking
liquidation, reorganization or other relief with respect to
it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its
property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60
days; or an order for relief shall be entered against the
Borrower or any Subsidiary under the federal bankruptcy
laws as now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay
when due an amount or amounts aggregating in excess of
$10,000,000 which it shall have become liable to pay under
Title IV of ERISA; or notice of intent to terminate a
Material Plan shall be filed under Title IV of ERISA by any
member of the ERISA Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute
proceedings under Title IV of ERISA to terminate, to impose
liability (other than for premiums under Section 4007 of
ERISA) in respect of, or to cause a trustee to be appointed
to administer, any Material Plan; or a condition shall exist
by reason of which the PBGC would be entitled to obtain a
decree adjudicating that any Material Plan must be terminated;
or there shall occur a complete or partial withdrawal from,
or a default, within the meaning of Section 4219(c)(5) of
ERISA, with respect to, one or more Multiemployer Plans which
could cause one or more members of the ERISA Group to incur
a current payment obligation in excess of $25,000,000;
(j) judgments or orders for the payment of money
exceeding $10,000,000 in aggregate amount shall be rendered
against the Borrower or any Subsidiary and such judgments
or orders shall continue unsatisfied and unstayed for a
period of 10 days; or
(k) any person or group of persons (within the meaning
of Section 13 or 14 of the Exchange Act) shall have acquired
beneficial ownership (within the meaning of Rule 13d-3
promulgated by the SEC under said Act) of 30% or more of the
outstanding shares of common stock of the Borrower; or,
during any period of 12 consecutive calendar months,
individuals who were directors of the Borrower on the first
day of such period shall cease to constitute a majority of
the Borrower's board of directors;
then, and in every such event, the Agent shall:
(i) if requested by Banks having more than 50% in
aggregate amount of the Commitments, by notice to the
Borrower terminate the Commitments or reduce the Commit-
ments ratably to an aggregate amount specified in such
notice, whereupon the Commitments shall be so terminated
or reduced forthwith; provided that, until either all
Target Shares have been acquired pursuant to the Offers
and the Completion Procedures or the Offer Termination
Date has occurred, the Commitments shall not be terminated
pursuant to this clause (i) or reduced pursuant to this
clause (i) to an aggregate amount less than the maximum
aggregate amount from time to time remaining to be paid
(on the assumption that all outstanding Target Shares will
be acquired) to accepting shareholders pursuant to the
Offers and the Completion Procedures; and
(ii) if requested by Banks holding more than 50% of the
aggregate unpaid principal amount of the Loans, by notice
to the Borrower declare the Loans (together with accrued
interest thereon) to be, and the Loans (together with
accrued interest thereon) shall thereupon become, immedi-
iately due and payable without presentment, demand, protest
or other notice of any kind, all of which are hereby waived
by the Borrower;
provided that, if any Event of Default specified in clause (g) or
(h) of this Section occurs with respect to the Borrower, then
without any notice to the Borrower or any other act by the Agent
or the Banks, the Commitments shall thereupon terminate and the
Loans (together with accrued interest thereon) shall become
immediately due and payable without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by
the Borrower. Except as provided in the foregoing proviso,
neither the Agent nor any Bank shall, at any time before the
Offer Termination Date, be entitled to (i) enjoin the funding of
the Offers, (ii) exercise any right of rescission or set-off or
similar right or (iii) attempt in any other manner to obtain
payment from funds drawn hereunder to fund the Offers and the
Completion Procedures, in each case if and to the extent that to
do so would prevent the funding of the Offers and the Completion
Procedures as contemplated hereby upon satisfaction of the
conditions set forth in Section 3.02.
Section 6.02. Notice of Default. The Agent shall give
notice to the Borrower under Section 6.01(c) promptly upon being
requested to do so by any Bank and shall thereupon notify all the
Banks thereof.
ARTICLE 7
The Agent and Co-Agent
Section 7.01. Appointment and Authorization. Each Bank
irrevocably appoints and authorizes the Agent to take such action
as agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Agent by the terms hereof or
thereof, together with all such powers as are reasonably
incidental thereto.
Section 7.02. Agent and Affiliates. Morgan Guaranty Trust
Company of New York shall have the same rights and powers under
this Agreement as any other Bank and may exercise or refrain from
exercising the same as though it were not the Agent, and Morgan
Guaranty Trust Company of New York and its affiliates may accept
deposits from, lend money to and generally engage in any kind of
business with the Borrower or any Subsidiary or affiliate of the
Borrower as if it were not the Agent.
Section 7.03. Action by Agent. The obligations of the Agent
hereunder are only those expressly set forth herein. Without
limiting the generality of the foregoing, the Agent shall not be
required to take any action with respect to any Default, except
as expressly provided in Article 6.
Section 7.04. Consultation with Experts. The Agent may
consult with legal counsel (who may be counsel for the Borrower),
independent public accountants and other experts selected by it
and shall not be liable for any action taken or omitted to be
taken by it in good faith in accordance with the advice of such
counsel, accountants or experts.
Section 7.05. Liability of Agent. None of the Agent or any
of its affiliates or any of their respective directors, officers,
agents or employees shall be liable for any action taken or not
taken by it in connection herewith (i) with the consent or at the
request of the Required Banks (or such different number of Banks
as any provision hereof expressly requires for such consent or
request) or (ii) in the absence of its own gross negligence or
willful misconduct. Neither the Agent nor any of its affiliates
nor any of their respective directors, officers, agents or
employees shall be responsible for or have any duty to ascertain,
inquire into or verify (i) any statement, warranty or
representation made in connection with this Agreement or any
borrowing hereunder; (ii) the performance or observance of any of
the covenants or agreements of the Borrower; (iii) the
satisfaction of any condition specified in Article 3, except
receipt of items required to be delivered to the Agent; or (iv)
the validity, effectiveness or genuineness of this Agreement, the
Notes or any other instrument or writing furnished in connection
herewith. The Agent shall not incur any liability by acting in
reliance upon any notice, consent, certificate, statement or
other writing (which may be a bank wire, telex, facsimile or
similar writing) believed by it to be genuine or to be signed by
the proper party or parties. Without limiting the generality of
the foregoing, the use of the term "agent" in this Agreement with
reference to the Agent or the Co-Agent is not intended to connote
any fiduciary or other implied (or express) obligations arising
under agency doctrine of any applicable law. Instead, such term
is used merely as a matter of market custom and, in the case of
the Agent, is intended to create or reflect only an
administrative relationship between independent contracting
parties.
Section 7.06. Indemnification. The Banks shall, ratably in
proportion to their Credit Exposures, indemnify the Agent, its
affiliates and their respective directors, officers, agents and
employees (to the extent not reimbursed by the Borrower) against
any cost, expense (including counsel fees and disbursements),
claim, demand, action, loss or liability (except such as result
from such indemnitees' gross negligence or willful misconduct)
that such indemnitees may suffer or incur in connection with this
Agreement or any action taken or omitted by such indemnitees
hereunder.
Section 7.07. Credit Decision. Each Bank acknowledges that
it has, independently and without reliance on the Agent, the
Co-Agent or any other Bank, and based on such documents and
information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Bank
also acknowledges that it will, independently and without reliance
on the Agent, the Co-Agent or any other Bank, 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
any action under this Agreement.
Section 7.08. Successor Agent. The Agent may resign at any
time by giving notice thereof to the Banks and the Borrower. Upon
any such resignation, the Required Banks shall have the right to
appoint a successor Agent; provided that, unless a Default shall
have occurred and be continuing, the Borrower shall have approved
such successor Agent. If no successor Agent shall have been so
appointed by the Required Banks, and shall have accepted such
appointment, within 30 days after the retiring Agent gives notice
of resignation, then the retiring Agent may, on behalf of the
Banks, appoint a successor Agent, which shall be a commercial
bank organized or licensed under the laws of the United States or
of any State thereof and having a combined capital and surplus of
at least $100,000,000. Upon the acceptance of its appointment as
Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights and
duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations hereunder. After any
retiring Agent resigns as Agent hereunder, the provisions of this
Article shall inure to its benefit as to actions taken or omitted
to be taken by it while it was Agent.
Section 7.09. Agent's Fee. The Borrower shall pay to the
Agent for its own account fees in the amounts and at the times
previously agreed upon by the Borrower and the Agent.
Section 7.10. Co-Agent. The Bank identified on the facing
page or signature pages of this Agreement as Co-Agent shall not
have any right, power, obligation, liability, responsibility or
duty under this Agreement other than those applicable to all
Banks as such.
ARTICLE 8
Change in Circumstances
Section 8.01. Basis for Determining Interest Rate
Inadequate or Unfair. If on or before the first day of any
Interest Period for any CD Loan or Euro-Dollar Loan:
(a) the Agent is advised by the Reference Bank that
deposits in dollars (in the applicable amounts) are not
being offered to the Reference Bank in the relevant market
for such Interest Period, or
(b) Banks holding 50% or more of the aggregate prin-
cipal amount of the affected Loans advise the Agent that
the Adjusted CD Rate or the London Interbank Offered Rate,
as the case may be, as determined by the Agent will not
adequately and fairly reflect the cost to such Banks of
funding their CD Loans or Euro-Dollar Loans, as the case
may be, for such Interest Period,
the Agent shall forthwith give notice thereof to the Borrower and
the Banks, whereupon until the Agent notifies the Borrower that
the circumstances giving rise to such suspension no longer exist,
(i) the obligations of the Banks to make CD Loans or Euro-Dollar
Loans, as the case may be, or to continue or convert outstanding
Loans as or into CD Loans or Euro-Dollar Loans, as the case may
be, shall be suspended and (ii) each outstanding CD Loan or Euro-
Dollar Loan, as the case may be, shall be converted into a Base
Rate Loan on the last day of the then current Interest Period
applicable thereto. Unless the Borrower notifies the Agent at
least two Domestic Business Days before the date of any affected
Borrowing for which a Notice of Borrowing has previously been
given that it elects not to borrow on such date, such Borrowing
shall instead be made as a Base Rate Borrowing.
Section 8.02. Illegality. If, on or after the date hereof,
the adoption of any applicable law, rule or regulation, or any
change in any applicable law, rule or regulation, or any change
in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance
by any Bank (or its Euro-Dollar Lending Office) with any request
or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency, shall make it
unlawful or impossible for any Bank (or its Euro-Dollar Lending
Office) to make, maintain or fund its Euro-Dollar Loans and such
Bank shall so notify the Agent, the Agent shall forthwith give
notice thereof to the other Banks and the Borrower, whereupon
until such Bank notifies the Borrower and the Agent that the
circumstances giving rise to such suspension no longer exist, the
obligation of such Bank to make Euro-Dollar Loans, or to convert
outstanding Loans into Euro-Dollar Loans or continue outstanding
Loans as Euro-Dollar Loans, shall be suspended. Before giving
any notice to the Agent pursuant to this Section, such Bank shall
designate a different Euro-Dollar Lending Office if such
designation will avoid the need for giving such notice and will
not, in the judgment of such Bank, be otherwise disadvantageous
to such Bank. If such notice is given, each Euro-Dollar Loan of
such Bank then outstanding shall be converted to a Base Rate Loan
either (a) on the last day of the then current Interest Period
applicable to such Euro-Dollar Loan if such Bank may lawfully
continue to maintain and fund such Loan as a Euro-Dollar Loan to
such day or (b) immediately if such Bank shall determine that it
may not lawfully continue to maintain and fund such Loan as a
Euro-Dollar Loan to such day.
Section 8.03. Increased Cost and Reduced Return. (a) If
on or after the date hereof, the adoption of any applicable law,
rule or regulation, or any change in any applicable law, rule or
regulation, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof,
or compliance by any Bank (or its Applicable Lending Office) with
any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency, shall
impose, modify or deem applicable any reserve (including, without
limitation, any such requirement imposed by the Board of
Governors of the Federal Reserve System, but excluding (i) with
respect to any CD Loan any such requirement included in an
applicable Domestic Reserve Percentage and (ii) with respect to
any Euro-Dollar Loan any such requirement with respect to which
such Bank is entitled to compensation during the relevant
Interest Period under Section 2.13), special deposit, insurance
assessment (excluding, with respect to any CD Loan, any such
requirement reflected in an applicable Assessment Rate) or
similar requirement against assets of, deposits with or for the
account of, or credit extended by, any Bank (or its Applicable
Lending Office) or shall impose on any Bank (or its Applicable
Lending Office) or on the United States market for certificates
of deposit or the London interbank market any other condition
affecting its Fixed Rate Loans, its Notes or its obligation to
make Fixed Rate Loans and the result of any of the foregoing is
to increase the cost to such Bank (or its Applicable Lending
Office) of making or maintaining any Fixed Rate Loan, or to
reduce the amount of any sum received or receivable by such Bank
(or its Applicable Lending Office) under this Agreement or under
its Note with respect thereto, by an amount deemed by such Bank
to be material, then, within 15 days after demand by such Bank
(with a copy to the Agent), the Borrower shall pay to such Bank
such additional amount or amounts as will compensate such Bank
for such increased cost or reduction.
(b) If any Bank shall have determined that, after the date
hereof, the adoption of any applicable law, rule or regulation
regarding capital adequacy, or any change in any such law, rule
or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or
administration thereof, or any request or directive regarding
capital adequacy (whether or not having the force of law) of any
such authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on capital of such
Bank (or its Parent) as a consequence of such Bank's obligations
hereunder to a level below that which such Bank (or its Parent)
could have achieved but for such adoption, change, request or
directive (taking into consideration its policies with respect to
capital adequacy) by an amount deemed by such Bank to be
material, then from time to time, within 15 days after demand by
such Bank (with a copy to the Agent), the Borrower shall pay to
such Bank such additional amount or amounts as will compensate
such Bank (or its Parent) for such reduction.
(c) Each Bank will promptly notify the Borrower and the
Agent of any event of which it has knowledge, occurring after the
date hereof, which will entitle such Bank to compensation
pursuant to this Section and will designate a different
Applicable Lending Office if such designation will avoid the need
for, or reduce the amount of, such compensation and will not, in
the judgment of such Bank, be otherwise disadvantageous to it. A
certificate of any Bank claiming compensation under this Section
and setting forth the additional amount or amounts to be paid to
it hereunder shall be conclusive in the absence of manifest
error. In determining such amount, such Bank may use any
reasonable averaging and attribution methods.
Section 8.04. Taxes. (a) For the purposes of this Section,
the following terms have the following meanings:
"Taxes" means any and all present or future taxes, duties,
levies, imposts, deductions, charges or withholdings with respect
to any payment by the Borrower pursuant to this Agreement or
under any Note, and all liabilities with respect thereto,
excluding (i) in the case of each Bank, taxes imposed on its net
income, and franchise or similar taxes imposed on it, by a
jurisdiction under the laws of which such Bank or the Agent (as
the case may be) is organized or in which its principal executive
office is located or, in the case of each Bank, in which its
Applicable Lending Office is located and (ii) in the case of each
Bank, any United States withholding tax imposed on such payment,
but not excluding any portion of such tax that exceeds the United
States withholding tax which would have been imposed on such a
payment to such Bank under the laws and treaties in effect when
such Bank first becomes a party to this Agreement.
"Other Taxes" means any present or future stamp or
documentary taxes and any other excise or property taxes, or
similar charges or levies, which arise from any payment made
pursuant to this Agreement or under any Note or from the
execution, delivery, registration or enforcement of, or otherwise
with respect to, this Agreement or any Note.
(b) All payments by the Borrower to or for the account of
any Bank or the Agent hereunder or under any Note shall be made
without deduction for any Taxes or Other Taxes; provided that, if
the Borrower shall be required by law to deduct any Taxes or
Other Taxes from any such payment, (i) the sum payable shall be
increased as necessary so that after making all required
deductions (including deductions applicable to additional sums
payable under this Section) such Bank 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) the Borrower
shall make such deductions, (iii) the Borrower shall pay the full
amount deducted to the relevant taxation authority or other
authority in accordance with applicable law and (iv) the Borrower
shall promptly furnish to the Agent, at its address specified in
or pursuant to Section 9.01, the original or a certified copy of
a receipt evidencing payment thereof.
(c) The Borrower agrees to indemnify each Bank and the
Agent for the full amount of Taxes and Other Taxes (including,
without limitation, any Taxes or Other Taxes imposed or asserted
(whether or not correctly) by any jurisdiction on amounts payable
under this Section) paid by such Bank 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 paid within 15 days after such Bank or
the Agent (as the case may be) makes demand therefor.
(d) Each Bank organized under the laws of a jurisdiction
outside the United States, before it signs and delivers this
Agreement in the case of each Bank listed on the signature pages
hereof and before it becomes a Bank in the case of each other
Bank, and from time to time thereafter if requested in writing by
the Borrower (but only so long as such Bank remains lawfully able
to do so), shall provide each of the Borrower and the Agent with
Internal Revenue Service form 1001 or 4224, as appropriate, or
any successor form prescribed by the Internal Revenue Service,
certifying that such Bank is entitled to benefits under an income
tax treaty to which the United States is a party which exempts
such Bank from United States withholding tax or reduces the rate
of withholding tax on payments of interest for the account of
such Bank or certifying that the income receivable by it pursuant
to this Agreement is effectively connected with the conduct of a
trade or business in the United States.
(e) For any period with respect to which a Bank has failed
to provide the Borrower or the Agent with the appropriate form
referred to in Section 8.04(d) (unless such failure is due to a
change in treaty, law or regulation occurring after the date on
which such form originally was required to be provided), such
Bank shall not be entitled to indemnification under Section
8.04(b) or (c) with respect to Taxes imposed by the United
States; provided that if a Bank, that is otherwise exempt from or
subject to a reduced rate of withholding tax, becomes subject to
Taxes because of its failure to deliver a form required
hereunder, the Borrower shall take such steps as such Bank shall
reasonably request to assist such Bank to recover such Taxes.
(f) If the Borrower is required to pay additional amounts
to or for the account of any Bank pursuant to this Section as a
result of a change in law or treaty occurring after such Bank
first became a party to this Agreement, then such Bank will, at
the Borrower's request, change the jurisdiction of its Applicable
Lending Office if, in the judgment of such Bank, such change (i)
will eliminate or reduce any such additional payment which may
thereafter accrue and (ii) is not otherwise disadvantageous to
such Bank.
SECTION 8.05. Base Rate Loans Substituted for Affected
Fixed Rate Loans. If (i) the obligation of any Bank to make, or
to continue or convert outstanding Loans as or to, Euro-Dollar
Loans has been suspended pursuant to Section 8.02 (ii) any Bank
has demanded compensation under Section 8.03 or 8.04 with respect
to its CD Loans or Euro-Dollar Loans, and in any such case the
Borrower shall, by at least five Euro-Dollar Business Days'
prior notice to such Bank through the Agent, have elected that
the provisions of this Section shall apply to such Bank, then,
unless and until such Bank notifies the Borrower that the
circumstances giving rise to such suspension or demand for
compensation no longer exist, all Loans which would otherwise be
made by such Bank as (or continued as or converted to) CD Loans
or Euro-Dollar Loans, as the case may be, shall instead be Base
Rate Loans (on which interest and principal shall be payable
contemporaneously with the related CD Loans or Euro-Dollar Loans
of the other Banks). If such Bank notifies the Borrower the
circumstances giving rise to such suspension or demand for
compensation no longer exist, the principal amount of each such
Base Rate Loan shall be converted into a CD Loan or Euro-Dollar
Loan, as the case may be, on the first day of the next succeeding
Interest Period applicable to the related CD Loans or Euro-Dollar
Loans of the other Banks.
ARTICLE 9
Miscellaneous
Section 9.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing
(including bank wire, telex, facsimile or similar writing) and
shall be given to such party: (a) in the case of the Borrower or
the Agent, at its address, facsimile number or telex number set
forth on the signature pages hereof, (b) in the case of any Bank,
at its address, facsimile number or telex number set forth in its
Administrative Questionnaire or (c) in the case of any party, at
such other address, facsimile number or telex number as such
party may hereafter specify for the purpose by notice to the
Agent and the Borrower. Each such notice, request or other
communication shall be effective (i) if given by telex, when
transmitted to the telex number referred to in this Section and
the appropriate answerback is received, (ii) if given by
facsimile, when transmitted to the facsimile number referred to
in this Section and confirmation of receipt is received, (iii) if
given by mail, 72 hours after such communication is deposited in
the mails with first class postage prepaid, addressed as
aforesaid or (iv) if given by any other means, when delivered at
the address referred to in this Section; provided that notices to
the Agent under Article 2 or Article 8 shall not be effective
until received.
Section 9.02. No Waivers. No failure or delay by the Agent
or any Bank in exercising any right, power or privilege hereunder
or under any Note shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided
by law.
Section 9.03. Expenses; Indemnification. (a) The Borrower
shall pay (i) all out-of-pocket expenses of the Agent, including
fees and disbursements of special counsel for the Agent, in
connection with the preparation and administration of this
Agreement, any waiver or consent hereunder or any amendment
hereof or any Default or alleged Default hereunder and (ii) if an
Event of Default occurs, all out-of-pocket expenses incurred by
the Agent and each Bank, including (without duplication) the fees
and disbursements of outside counsel and the allocated cost of
inside counsel, in connection with such Event of Default and
collection, bankruptcy, insolvency and other enforcement
proceedings resulting therefrom.
(b) The Borrower agrees to indemnify the Agent and each
Bank, their respective affiliates and the respective directors,
officers, agents and employees of the foregoing (each an
"Indemnitee") and hold each Indemnitee harmless from and against
any and all liabilities, losses, damages, costs and expenses of
any kind, including, without limitation, the reasonable fees and
disbursements of counsel, which may be incurred by such
Indemnitee in connection with any investigative, administrative
or judicial proceeding (whether or not such Indemnitee shall be
designated a party thereto) brought or threatened relating to or
arising out of this Agreement or any actual or proposed use of
proceeds of Loans hereunder; provided that no Indemnitee shall
have the right to be indemnified hereunder for such Indemnitee's
own gross negligence or willful misconduct as determined by a
court of competent jurisdiction.
Section 9.04. Sharing of Set-offs. Each Bank agrees that
if it shall, by exercising any right of set-off or counterclaim
or otherwise, receive payment of a proportion of the aggregate
amount of principal and interest then due with respect to the
Loans held by it which is greater than the proportion received
by any other Bank in respect of the aggregate amount of principal
and interest then due with respect to the Loans held by such
other Bank, the Bank receiving such proportionately greater
payment shall purchase such participations in the Loans held by
the other Banks, and such other adjustments shall be made, as may
be required so that all such payments of principal and interest
with respect to the Loans held by the Banks shall be shared by
the Banks pro rata; provided that nothing in this Section shall
impair the right of any Bank to exercise any right of set-off or
counterclaim it may have and to apply the amount subject to such
exercise to the payment of indebtedness of the Borrower other
than its indebtedness in respect of the Loans. The Borrower
agrees, to the fullest extent it may effectively do so under
applicable law, that any holder of a participation in a Loan,
whether or not acquired pursuant to the foregoing arrangements,
may exercise rights of set-off or counterclaim and other rights
with respect to such participation as fully as if such holder of
a participation were a direct creditor of the Borrower in the
amount of such participation.
Section 9.05. Amendments and Waivers. Any provision of
this Agreement or the Notes may be amended or waived if, but only
if, such amendment or waiver is in writing and is signed by the
Borrower and the Required Banks (and, if the rights or duties of
the Agent are affected thereby, by the Agent); provided that no
such amendment or waiver shall, unless signed by all the Banks,
(i) increase or decrease the Commitment of any Bank (except for a
ratable decrease in the Commitments of all Banks) or subject any
Bank to any additional obligation, (ii) reduce the principal of
or rate of interest on any Loan or any fees hereunder, (iii)
postpone the date fixed for any payment of principal of or
interest on any Loan or any fees hereunder or for the termination
of any Commitment or (iv) change the percentage of the
Commitments or of the aggregate unpaid principal amount of the
Loans, or the number of Banks, which shall be required for the
Banks or any of them to take any action under this Section or any
other provision of this Agreement.
Section 9.06. Successors; Participations and Assignments.
(a) The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Borrower may not assign
or otherwise transfer any of its rights under this Agreement
without the prior written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or
other institutions (each a "Participant") participating interests
in its Commitment or any or all of its Loans. If a Bank grants
any such participating interest to a Participant, whether or not
upon notice to the Borrower and the Agent, such Bank shall remain
responsible for the performance of its obligations hereunder, and
the Borrower and the Agent shall continue to deal solely and
directly with such Bank in connection with such Bank's rights and
obligations under this Agreement. Any agreement pursuant to
which any Bank may grant such a participating interest shall
provide that such Bank shall retain the sole right and
responsibility to enforce the obligations of the Borrower
hereunder including, without limitation, the right to approve any
amendment, modification or waiver of any provision of this
Agreement; provided that such participation agreement may provide
that such Bank will not agree to any modification, amendment or
waiver of this Agreement described in clause (i), (ii) or (iii)
of Section 9.05 without the consent of the Participant. The
Borrower agrees that each Participant shall, to the extent
provided in its participation agreement, be entitled to the
benefits of Section 2.13 and Article 8 with respect to its
participating interest. An assignment or other transfer which is
not permitted by subsection (c) or (d) below shall be given
effect for purposes of this Agreement only to the extent of a
participating interest granted in accordance with this
subsection.
(c) Any Bank may at any time assign to one or more banks or
other institutions (each an "Assignee") all, or a proportionate
part (equivalent to an initial Commitment of not less than
$10,000,000) of all, of its rights and obligations under this
Agreement and its Note, and such Assignee shall assume such
rights and obligations, pursuant to an Assignment and Assumption
Agreement substantially in the form of Exhibit D hereto signed by
such Assignee and such transferor Bank, with (and subject to) the
subscribed consent of the Borrower (which shall not be
unreasonably withheld) and the Agent; provided that if an
Assignee is an affiliate of such transferor Bank or was a Bank
immediately before such assignment, no such consent shall be
required. When such instrument has been signed and delivered by
the parties thereto and such Assignee has paid to such transferor
Bank the purchase price agreed between them, such Assignee shall
be a Bank party to this Agreement and shall have all the rights
and obligations of a Bank with a Commitment as set forth in such
instrument of assumption, and the transferor Bank shall be
released from its obligations hereunder to a corresponding
extent, and no further consent or action by any party shall be
required. Upon the consummation of any assignment pursuant to
this subsection, the transferor Bank, the Agent and the Borrower
shall make appropriate arrangements so that, if required, a new
Note is issued to the Assignee. In connection with any such
assignment, the transferor Bank shall pay to the Agent an
administrative fee for processing such assignment in the amount
of $2,500. If the Assignee is not incorporated under the laws of
the United States or a State thereof, it shall deliver to the
Borrower and the Agent certification as to exemption from
deduction or withholding of any United States federal income
taxes in accordance with Section 8.04.
(d) Any Bank may at any time assign all or any portion of
its rights under this Agreement and its Note to a Federal Reserve
Bank. No such assignment shall release the transferor Bank from
its obligations hereunder.
(e) No Assignee, Participant or other transferee of any
Bank's rights shall be entitled to receive any greater payment
under Section 8.03 or 8.04 than such Bank would have been
entitled to receive with respect to the rights transferred,
unless such transfer is made with the Borrower's prior written
consent or by reason of the provisions of Section 8.02, 8.03 or
8.04 requiring such Bank to designate a different Applicable
Lending Office under certain circumstances or at a time when the
circumstances giving rise to such greater payment did not exist.
Section 9.07. No Reliance on Margin Stock. Each of the
Banks represents to the Agent and each of the other Banks that it
in good faith is not relying upon any "margin stock" (as defined
in Regulation U) as collateral in the extension or maintenance
of the credit provided for in this Agreement.
Section 9.08. Governing Law; Submission to Jurisdiction.
This Agreement and each Note shall be governed by and construed
in accordance with the laws of the State of New York. The
Borrower hereby submits to the nonexclusive jurisdiction of the
United States District Court for the Southern District of New
York and of any New York State court sitting in New York City for
purposes of all legal proceedings arising out of or relating to
this Agreement or the transactions contemplated hereby. The
Borrower irrevocably waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the
laying of the venue of any such proceeding brought in such a
court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum.
Section 9.09. Counterparts; Integration. This Agreement
may be signed in any number of counterparts, each of which shall
be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Agreement
constitutes the entire agreement and understanding among the
parties hereto and supersedes any and all prior agreements and
understandings, oral or written, relating to the subject matter
hereof.
Section 9.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWER,
THE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.
ACX TECHNOLOGIES, INC.
By /s/ Beth A. Parish
-----------------------------
Name: Beth A. Parish
Title: Controller
Address: 16000 Table Mountain Parkway
Golden, CO 80401
Facsimile: 303-271-7055
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ James E. Condon
-----------------------------
Name: James E. Condon
Title: Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Co-Agent
and as Bank
By /s/ Kevin C. Leader
-----------------------------
Name: Kevin C. Leader
Title: Vice President
WACHOVIA BANK, N.A.
By /s/ Michael S. Sims
----------------------------
Name: Micheal S. Sims
Title: Vice President
ABN-AMRO BANK, N.V.
By /s/ John E. Robertson
-----------------------------
Name: John E. Robertson
Title: Vice President
By /s/ Mary L. Honda
-----------------------------
Name: Mary L. Honda
Title: Vice President
TORONTO DOMINION (TEXAS), INC.
By /s/ Darlene Riedel
-----------------------------
Name: Darlene Riedel
Title: Vice President
NORWEST BANK COLORADO, NATIONAL
ASSOCIATION
By /s/ Sandra A. Sauer
-----------------------------
Name: Sandra A. Sauer
Title: Vice President
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By /s/ James E. Condon
-----------------------------
Name: James E. Condon
Title: Vice President
Address: 60 Wall Street
New York, New York 10260
Attention: Loan Department
Facsimile: (212) 648-5018
COMMITMENT SCHEDULE
Bank Commitment
---- ------------
Morgan Guaranty Trust Company of New York $87,000,000
Bank of America National Trust and Savings
Association $85,000,000
Wachovia Bank, N.A. $85,000,000
ABN-AMRO Bank, N.V. $65,000,000
Toronto Dominion (Texas), Inc. $65,000,000
Norwest Bank Colorado, National Association $30,000,000
------------
Total $417,000,000
EXHIBIT A - Note
Note
New York, New York
___________ __, _____
For value received, ACX Technologies, Inc., a Colorado
corporation (the "Borrower"), promises to pay to the order of
______________________ (the "Bank"), for the account of its
Applicable Lending Office, the unpaid principal amount of each
Loan made by the Bank to the Borrower pursuant to the Credit
Agreement referred to below on the maturity date provided for in
the Credit Agreement. The Borrower promises to pay interest on
the unpaid principal amount of each such Loan on the dates and at
the rate or rates provided for in the Credit Agreement. All such
payments of principal and interest shall be made in lawful money
of the United States in Federal or other immediately available
funds at the office of Morgan Guaranty Trust Company of New York,
60 Wall Street, New York, New York.
All Loans made by the Bank, the respective types thereof and
all repayments of the principal thereof shall be recorded by the
Bank and, if the Bank so elects in connection with any transfer
or enforcement hereof, appropriate notations to evidence the
foregoing information with respect to each such Loan then
outstanding may be endorsed by the Bank on the schedule attached
hereto, or on a continuation of such schedule attached to and
made a part hereof; provided that the failure of the Bank to make
any such recordation or endorsement shall not affect the
Borrower's obligations hereunder or under the Credit Agreement.
This note is one of the Notes referred to in the Amended and
Restated Credit Agreement dated as of January 9, 1998 among ACX
Technologies, Inc., the Banks party thereto and Morgan Guaranty
Trust Company of New York, as Agent (as the same may be amended
from time to time, the "Credit Agreement"). Terms defined in the
Credit Agreement are used herein with the same meanings.
Reference is made to the Credit Agreement for provisions for the
prepayment hereof and the acceleration of the maturity hereof.
ACX TECHNOLOGIES, INC.
By
--------------------------
Name:
Title:
Loans and Payments of Principal
Date Amount Type Amount of Notation
Of of Principal Made By
Loan Loan Repaid
--------- --------- --------- --------- ----------
--------- --------- --------- --------- ----------
--------- --------- --------- --------- ----------
--------- --------- --------- --------- ----------
--------- --------- --------- --------- ----------
--------- --------- --------- --------- ----------
EXHIBIT B - Opinion of Counsel for the Borrower
Opinion of
Holme Roberts & Owen LLP
Counsel for the Borrower
________________, _____
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
We have acted as counsel for ACX Technologies, Inc. (the
"Borrower") in connection with the Amended and Restated Credit
Agreement dated as of January 9, 1998 (the "Credit Agreement")
among the Borrower, the Banks party thereto and Morgan Guaranty
Trust Company of New York ("Morgan"), as Agent. Terms defined in
the Credit Agreement are used herein as therein defined. This
opinion is being rendered to you at the request of our client
pursuant to Section 3.01(c) of the Credit Agreement.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate
records, certificates of public officials and other instruments
and have conducted such other investigations of fact and law as
we have deemed necessary or advisable for purposes of this
opinion.
Upon the basis of the foregoing, we are of the opinion that:
1. The Borrower is a corporation duly incorporated, validly
existing and in good standing under the laws of Colorado and has
all corporate powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its
business as now conducted.
2. The execution, delivery and performance by the Borrower
of the Credit Agreement and the Notes are within the Borrower's
corporate powers, have been duly authorized by all necessary
corporate action, require no action by or in respect of, or
filing with, any governmental body, agency or official and do not
contravene, or constitute a default under, any provision of
applicable law or regulation or of the Borrower's articles of
incorporation or by-laws or of any agreement, judgment,
injunction, order, decree or other instrument binding upon the
Borrower or any Subsidiary or result in the creation or
imposition of any Lien on any asset of the Borrower or any
Subsidiary.
3. The Credit Agreement constitutes a valid and binding
agreement of the Borrower and each Note issued thereunder today
constitutes a valid and binding obligation of the Borrower, in
each case enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally and general principles of equity.
4. To the best of our knowledge, there is no action, suit
or proceeding pending or threatened against or affecting the
Borrower or any Subsidiary before any court or arbitrator or any
governmental body, agency or official, in which there is a
reasonable possibility of an adverse decision which could
materially adversely affect the business, consolidated financial
position or consolidated results of operations of the Borrower
and its Consolidated Subsidiaries, considered as a whole, or
which in any manner draws into question the validity of the
Credit Agreement or the Notes.
5. We express no opinion as to the choice of law provision
contained in the Credit Agreement. Generally, Colorado courts
follow the conflict of laws' principles contained in the
Restatement (Second) Conflicts of Law (1971 [Amended 1988]) (the
"Restatement"). Section 187 of the Restatement provides that the
choice of law of contracting parties should be upheld by a court
so long as there is a reasonable basis for the parties' selection
of the particular law and application of the chosen law would not
contravene a fundamental public policy of a different state's
court. If, however, a court of competent jurisdiction were to
determine that the Credit Agreement or the Notes should be
governed by and construed in accordance with the internal laws of
the State of Colorado, our opinions expressed above would remain
unchanged. To our actual knowledge, nothing in the Credit
Agreement has come to our attention as contravening a fundamental
public policy of the State of Colorado relating to choice of law.
We note as a factual matter that (i) Morgan is located in New
York State, (ii) payments by the Borrower under the Credit
Agreement are to be made to Morgan in New York under the terms of
the Credit Agreement and (iii) the delivery of the documentation
to consummate the closing of the financing pursuant to the Credit
Agreement is taking place in New York.
We are qualified to practice in the State of Colorado and do
not purport to be experts on any laws other than the laws of the
United States and the State of Colorado, and this opinion is
rendered only with respect to such laws. We have made no
independent investigation of the laws of any other jurisdiction.
Very truly yours,
EXHIBIT C - Opinion of Special Counsel for the Agent
Opinion of
Davis Polk & Wardwell
Special Counsel for the Agent
________________, _____
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
We have participated in the preparation of the Amended and
Restated Credit Agreement dated as of January 9, 1998 (the
"Credit Agreement") among ACX Technologies, Inc., a Colorado
corporation (the "Borrower"), the Banks party thereto and Morgan
Guaranty Trust Company of New York, as Agent, and have acted as
special counsel for the Agent for the purpose of rendering this
opinion pursuant to Section 3.01(d) the Credit Agreement. Terms
defined in the Credit Agreement are used herein as therein
defined.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate
records, certificates of public officials and other instruments
and have conducted such other investigations of fact and law as
we have deemed necessary or advisable for purposes of this
opinion. We have assumed for purposes of this opinion that the
execution, delivery and performance by the Borrower of the Credit
Agreement and the Notes are within the Borrower's corporate
powers and have been duly authorized by all necessary corporate
action. We note that an opinion to such effect is being delivered
to you by Holme Roberts & Owen LLP today.
Upon the basis of the foregoing, we are of the opinion that
the Credit Agreement constitutes a valid and binding agreement of
the Borrower and each Note issued thereunder today constitutes a
valid and binding obligation of the Borrower, in each case
enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency or similar laws affecting creditors'
rights generally and general principles of equity.
We are members of the Bar of the State of New York and the
foregoing opinion is limited to the laws of the State of New York
and the federal laws of the United States. In giving the
foregoing opinion, we express no opinion as to the effect (if
any) of any law of any jurisdiction (except the State of New
York) in which any Bank is located which limits the rate of
interest that such Bank may charge or collect.
This opinion is rendered solely to you in connection with
the above matter. This opinion may not be relied upon by you for
any other purpose or relied upon by any other Person without our
prior written consent.
Very truly yours,
EXHIBIT D - Assignment and Assumption Agreement
Assignment and Assumption Agreement
AGREEMENT dated as of _________, 19__ among
ASSIGNOR> (the "Assignor") and [NAME OF ASSIGNEE] (the
"Assignee").
WHEREAS, this Assignment and Assumption Agreement (the
"Agreement") relates to the Amended and Restated Credit Agreement
dated as of January 9, 1998 among the Borrower, the Assignor and
the other Banks party thereto and Morgan Guaranty Trust Company
of New York, as Agent (the "Agent") (as amended from time to
time, the "Credit Agreement");
WHEREAS, as provided under the Credit Agreement, the
Assignor has a Commitment to make Loans to the Borrower in an
aggregate principal amount at any time outstanding not to exceed
$____________;
WHEREAS, Loans made to the Borrower by the Assignor under
the Credit Agreement in the aggregate principal amount of
$__________ are outstanding at the date hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all
of the rights of the Assignor under the Credit Agreement in
respect of a portion of its Commitment thereunder in an amount
equal to $__________ (the "Assigned Amount"), together with a
corresponding portion of each of its outstanding Loans, and the
Assignee proposes to accept such assignment and assume the
corresponding obligations of the Assignor under the Credit
Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements contained herein, the parties hereto agree as
follows:
SECTION 1. Definitions. All capitalized terms not
otherwise defined herein have the respective meanings set forth
in the Credit Agreement.
SECTION 2. Assignment. The Assignor hereby assigns and
sells to the Assignee all of the rights of the Assignor under the
Credit Agreement to the extent of the Assigned Amount and a
corresponding portion of each of its outstanding Loans, and the
Assignee hereby accepts such assignment from the Assignor and
assumes all of the obligations of the Assignor under the Credit
Agreement to the extent of the Assigned Amount. Upon the
execution and delivery hereof by the Assignor and the Assignee
[and the execution of the consent attached hereto by the Borrower
and the Agent]1 and the payment of the amounts specified in
Section 3 hereof required to be paid on the date hereof
(i) the Assignee shall, as of the date hereof, succeed to
the rights and be obligated to perform the obligations of a Bank
under the Credit Agreement with a Commitment in an amount equal
to the Assigned Amount and acquire the rights of the Assignor
with respect to a corresponding portion of each of its
outstanding Loans and (ii) the Commitment of the Assignor shall,
as of the date hereof, be reduced by the Assigned Amount, and the
Assignor shall be released from its obligations under the Credit
Agreement to the extent such obligations have been assumed by the
Assignee. The assignment provided for herein shall be without
recourse to the Assignor.
SECTION 3. Payments. As consideration for the assignment
and sale contemplated in Section 2 hereof, the Assignee shall pay
to the Assignor on the date hereof in Federal funds the amount
heretofore agreed between them.2 Commitment fees accrued before
the date hereof are for the account of the Assignor and such fees
accruing on and after the date hereof with respect to the
Assigned Amount are for the account of the Assignee. Each of the
Assignor and the Assignee agrees that if it receives any amount
under the Credit Agreement which is for the account of the other
party hereto, it shall receive the same for the account of such
other party to the extent of such other party's interest therein
and promptly pay the same to such other party.
[SECTION 4. Consent of the Borrower and the Agent. This
Agreement is conditioned upon the consent of the Borrower and the
Agent pursuant to Section 9.06 of the Credit Agreement.]3
SECTION 5. Non-Reliance on Assignor. The Assignor makes no
representation or warranty in connection with, and shall have no
responsibility with respect to, the solvency, financial condition
or statements of the Borrower, or the validity and enforceability
of the Borrower's obligations under the Credit Agreement or any
Note. The Assignee acknowledges that it has, independently and
without reliance on the Assignor, and based on such documents and
information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and will
continue to be responsible for making its own independent
appraisal of the business, affairs and financial condition of the
Borrower.
SECTION 6. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New
York.
SECTION 7. Counterparts. This Agreement may be signed in
any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were
upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered by their duly authorized
officers as of the date first above written.
By
------------------------------
Name:
Title:
By
------------------------------
Name:
Title:
[The undersigned consent to the foregoing assignment.
ACX TECHNOLOGIES, INC.
By
-----------------------------
Name:
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By
-----------------------------
Name:
Title:]4
_______________________________
1 Delete if consent is not required pursuant to Section 9.06(c)
of the Credit Agreement.
2 Amount should combine principal together with accrued interest
and breakage compensation, if any, to be paid by the Assignee,
net of any portion of any upfront fee to be paid by the
Assignor to the Assignee. It may be preferable in an appro-
priate case to specify these amounts generically or by
formula rather than as a fixed sum.
3 Delete if consent is not required.
4 Delete if consent is not required.