Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2004

 

Commission file number 1-4119

 

NUCOR CORPORATION

(Exact name of registrant as specified in its charter)

 

Delaware   13-1860817
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)
2100 Rexford Road, Charlotte, North Carolina   28211
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code: (704) 366-7000

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class


 

Name of each exchange on
which registered


Common stock, par value $0.40 per share

  New York Stock Exchange

 

Securities registered pursuant to Section 12(g) of the Act:

 

None

 

Indication 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 twelve months, and (2) has been subject to such filing requirements for the past 90 days:    Yes  x    No  ¨

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K:  x

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act):    Yes  x    No  ¨

 

Aggregate market value of common stock held by non-affiliates was approximately $5.84 billion based upon the closing sales price of the registrant’s common stock on the last day of our most recently completed second fiscal quarter, July 3, 2004.

 

159,768,892 shares of common stock were outstanding at February 28, 2005.

 

Documents incorporated by reference include: Portions of 2004 Annual Report (Parts I, II and IV), and Notice of 2005 Annual Meeting of Stockholders and Proxy Statement (Part III).

 



Table of Contents

PART I

 

Item 1. Business

 

Nucor Corporation was incorporated in Delaware in 1958. The business of Nucor Corporation and its subsidiaries is the manufacture and sale of steel and steel products, which accounted for all of the sales and the majority of the earnings in 2004, 2003 and 2002. The earnings in 2004 and 2003 include other income of $1.6 million and $4.4 million, respectively, related to pre-tax gains on the sale of equipment. The earnings in 2003 and 2002 include a pre-tax gain of $7.1 million and $29.9 million, respectively, related to graphite electrodes anti-trust settlements.

 

Nucor is the nation’s largest recycler, using scrap steel as the primary material in producing our products. In 2004, we recycled over 17 million tons of scrap steel.

 

Nucor reports its results in two segments, steel mills and steel products. Net sales to external customers, intercompany sales, depreciation expense, earnings (loss) before income taxes, assets and capital expenditures by segment for each of the three years in the period ended December 31, 2004, are set forth in Note 15 of Notes to Consolidated Financial Statements of the 2004 Annual Report, which note is hereby incorporated by reference.

 

Principal products from the steel mills segment are hot-rolled steel (angles, rounds, flats, channels, sheet, wide-flange beams, pilings, billets, blooms, beam blanks and plate) and cold-rolled steel. Principal products from the steel products segment are steel joists and joist girders, steel deck, cold finished steel, steel fasteners, metal building systems and light gauge steel framing. Hot-rolled steel is manufactured principally from scrap, utilizing electric arc furnaces, continuous casting and automated rolling mills. Cold-rolled steel, cold finished steel, steel joists and joist girders, and steel fasteners are manufactured by further processing of hot-rolled steel. Steel deck is manufactured from cold-rolled steel.

 

In the steel mills segment, hot-rolled and cold-rolled sheet steel are produced to customer orders. In addition, other hot-rolled and cold-rolled steel are manufactured in standard sizes and inventories are maintained. In 2004, approximately 90% of the steel mills segment production was sold to non-affiliated customers; the remainder was used internally by the steel products segment. Hot-rolled steel and cold-rolled steel are sold primarily to steel service centers, fabricators and manufacturers throughout the United States. In 2004, approximately 50% of our sheet steel sales were made to contract customers with the balance of sales made in the spot market at prevailing prices at the time of sale. These contracts permit price adjustments to reflect changes in prevailing raw material costs and typically have terms ranging from six to twelve months. In the steel mills segment, Nucor’s backlog of orders was approximately $1.63 billion and $1.24 billion at December 31, 2004 and 2003, respectively. These orders are normally filled within one year.

 

In the steel products segment, steel joists and joist girders, and steel deck are sold to general contractors and fabricators throughout the United States. Substantially all work is to order and no unsold inventories of finished products are maintained. All sales contracts are firm fixed-price contracts and are normally competitively bid against other suppliers. Cold finished steel and steel fasteners are manufactured in standard sizes and inventories are maintained. Cold finished steel and steel fasteners are sold primarily to distributors and manufacturers throughout the United States. Nucor’s backlog of orders in the steel products segment was approximately $408.4 million and $234.5 million at December 31, 2004 and 2003, respectively. These orders are normally filled within one year.

 

The primary raw material for the steel mills segment is ferrous scrap, which is acquired from numerous sources throughout the country. The average scrap cost per ton purchased increased $99 (55%) from December 2003 to December 2004. In response to escalating scrap steel prices, Nucor successfully implemented a raw material sales price surcharge in 2004. This surcharge has helped offset the impact of significantly higher scrap prices and has ensured that we were able to purchase the scrap needed to fill our customers’ orders. The steel mills are also large consumers of electricity and natural gas. Nucor uses cash flow hedges and natural gas

 

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purchase contracts to partially manage its exposure to price risk of natural gas that is used during the manufacturing process. The primary raw material for the steel products segment is steel, which is primarily purchased from the steel mills segment. Supplies of raw materials and energy have been, and are expected to be, adequate to operate the facilities.

 

Products from both segments are marketed mainly through in-house sales forces. The principal competitive factors are price and service. The markets that Nucor serves are tied to capital and durable goods spending and are affected by changes in economic conditions. Considerable competition exists from numerous domestic manufacturers and foreign imports. Unfairly traded, illegally dumped steel imports have devastated the U.S. steel industry and its workers. In March 2002, the Bush Administration imposed a series of tariffs, known as Section 201, to help the domestic steel industry recover from the illegal and predatory trading practices of foreign trading competitors. In December 2003, the Administration chose to end the temporary steel safeguard tariffs prior to their scheduled expiration; however, we are optimistic about the Bush Administration’s commitment to strengthen and enforce existing U.S. trade laws and the President’s promise to work with Congress to achieve a long-term solution to illegal dumping and other unfair trade practices that necessitated Section 201. There can be no assurance that such solutions will be achieved. Nucor actively supports several organizations that promote free and fair trade and that oppose currency manipulation.

 

Nucor has historically focused on optimizing existing operations to ensure that they are among the most productive and efficient facilities in the United States. In recent years, however, our focus has expanded to include growing profitably through acquisitions, particularly in the steel mills segment.

 

In July 2002, Nucor’s wholly owned subsidiary, Nucor Steel Decatur, LLC, purchased substantially all of the assets of Trico Steel Company, LLC for a purchase price of $117.7 million. Located in Decatur, Alabama, the sheet steel facility originally began operations in 1997 and has an annual capacity of approximately 1,900,000 tons. The purchase strategy called for a major renovation of the facility. Capital expenditures for this facility have exceeded $100.0 million from acquisition through 2004. Although we experienced equipment problems early in 2003, we overcame these issues and generated an operating profit at this sheet mill in 2004. In August 2004, Nucor Steel Decatur, LLC purchased certain assets of Worthington Industries, Inc.’s cold rolling mill located adjacent to our steel mill for a cash purchase price of approximately $80.3 million. The assets purchased include all of the buildings, the pickle line, four-stand tandem cold mill, temper mill and annealing furnaces adjacent to the current Nucor Steel Decatur, LLC steel plant. This 1,000,000-ton cold mill facility has 600,000 tons of annealing capacity and provides expanded value-added products to our customers in the Southeast.

 

In December 2002, Nucor and certain of its wholly owned subsidiaries purchased substantially all of the assets of Birmingham Steel Corporation (“Birmingham Steel”) for a cash purchase price, excluding transaction costs, of approximately $615.0 million, including $116.9 million in inventory and receivables. Primary assets purchased were Birmingham Steel’s four operating mills in Birmingham, Alabama; Kankakee, Illinois; Seattle, Washington; and Jackson, Mississippi, with a combined annual capacity of approximately 2,200,000 tons. These mills made significant contributions to Nucor’s sales and earnings in 2003 and 2004.

 

In July 2004, Nucor’s wholly owned subsidiary, Nucor Steel Tuscaloosa, Inc., purchased substantially all of the steelmaking assets of Corus Tuscaloosa for a price of approximately $89.4 million. The facility is a coiled plate mill that manufactures pressure vessel steel coil, discrete plate and cut-to-length plate products with an annual capacity of approximately 800,000 tons. This acquisition was immediately accretive to earnings and made a significant operating contribution in the second half of 2004.

 

In February 2005, Nucor purchased the assets of Fort Howard Steel, Inc.’s operations in Oak Creek, Wisconsin, for a cash purchase price of approximately $44.2 million. This facility produces cold finished bar product and has approximately 140,000 tons of annual capacity.

 

Also in February 2005, Nucor announced plans for the addition of vacuum degassers at the sheet mills in Hickman, Arkansas, and Decatur, Alabama. The investment in these vacuum degassers will enable Nucor to

 

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produce higher grades of sheet steel for automotive and appliance customers in the southern United States and Mexico. The capital cost to install each of the degassers is estimated to be less than $20.0 million. The new vacuum degassers should be operational by the first half of 2006 and will increase total high quality, value-added annual capacity at the mills by an estimated 1,000,000 tons.

 

Nucor is also growing through “greenfield” projects using new technologies and growing globally through joint ventures.

 

Nucor began operations of its 100% owned Castrip® facility in Crawfordsville, Indiana, in 2002. This facility uses the breakthrough technology of strip casting, to which Nucor holds exclusive rights in the United States and Brazil. Strip casting involves the direct casting of molten steel into final shape and thickness without further hot or cold rolling, allowing lower investment and operating costs, reduced energy consumption and smaller scale plants than can be economically built with current technology. This process also reduces the overall environmental impact of producing steel by generating significantly lower emissions, particularly NOx. The Castrip process has achieved commercial viability and we are in the process of selecting a site for our second Castrip operation in the United States. We also plan to establish at least one joint venture with a partner overseas in 2005 to utilize the Castrip technology.

 

In 2004, Nucor purchased a one-half interest in Harris Steel, Inc., a wholly owned subsidiary of Harris Steel Group, Inc., for a cash purchase price of approximately $21.0 million. In addition, Harris Steel Group may receive up to an additional $6.0 million upon the achievement of certain operating results of the venture through 2008. The investment in this rebar fabricator complements our existing facilities by adding downstream integration from our bar mills into the value-added process.

 

Nucor’s raw materials strategy includes the goal of controlling approximately one-third of our iron units consumption, which currently equates to between 6,000,000 and 7,000,000 tons per year of high quality scrap substitutes. Three projects in particular represent Nucor’s initial steps towards achieving this goal: the HIsmelt® facility in Australia, the sustainable pig iron project in Brazil, and the direct reduced iron plant in Trinidad.

 

In 2002, Nucor entered a joint venture with The Rio Tinto Group, Mitsubishi Corporation and Chinese steelmaker, Shougang Corporation, to construct a commercial HIsmelt plant in Kwinana, Western Australia. The HIsmelt process converts iron ore fines and coal fines directly to liquid metal eliminating the need for a blast furnace, sinter/pellet plants and coke ovens. The HIsmelt technology would offer an alternative supply of high-quality iron units as a scrap substitute. Nucor has a 25% interest in the joint venture that owns the HIsmelt commercial plant. Construction is substantially completed and production is scheduled to begin in the second quarter of 2005. This plant will have an initial annual capacity of 800,000 metric tons.

 

In 2003, Nucor entered a joint venture with Companhia Vale do Rio Doce (“CVRD”) to construct and operate an environmentally responsible pig iron project in northern Brazil. The project, named Ferro Gusa Carajás S.A., will utilize two conventional mini-blast furnaces to produce about 380,000 metric tons of pig iron per year in its initial phase, using iron ore from CVRD’s Carajas mine in northern Brazil. The charcoal source will be exclusively from eucalyptus trees grown in a cultivated forest of 82,000 acres with the total forest encompassing approximately 200,000 acres in northern Brazil. The cultivated forest removes more carbon dioxide than the blast furnace process emits. It is anticipated that Nucor will purchase all of the production of the plant. Production is scheduled to begin in the third quarter of 2005.

 

In September 2004, Nucor exercised its option to acquire the idled assets of American Iron Reduction’s direct reduced iron (“DRI”) plant located in Convent, Louisiana. Nucor began dismantling and refurbishing the plant for relocation to Trinidad and to expand annual capacity to 1,800,000 metric tons per year. The Trinidad site will benefit from a low cost supply of natural gas and favorable logistics for receipt of Brazilian iron ore and shipment of DRI to the United States. Capital expenditures for this facility are expected to be approximately $225.0 million, and operations are expected to begin in early 2006.

 

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Nucor is subject to environmental laws and regulations established by federal, state and local authorities. In December 2000, Nucor entered into a consent decree with the United States Environmental Protection Agency and certain states in order to resolve alleged environmental violations. Under the terms of this decree, Nucor is conducting tests at some of its facilities, performing corrective action where necessary, and piloting certain pollution control technologies.

 

Nucor has a simple, streamlined organizational structure to allow our employees to make quick decisions and to be innovative. Our organization is highly decentralized, with most day-to-day operating decisions made by our division general managers and their staff. Only 59 employees are located in our executive offices. All of Nucor’s 10,600 employees are engaged in its steel mills and steel products businesses. None of our employees are represented by labor unions.

 

Additional information on Nucor’s business is incorporated by reference to Nucor’s 2004 Annual Report, pages 7 through 15.

 

Nucor’s annual report on Form 10-K, quarterly reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to these reports, are available without charge through Nucor’s website, www.nucor.com, as soon as reasonably practicable after Nucor files these reports electronically or furnishes them to the Securities and Exchange Commission (SEC). Except as otherwise stated in these reports, the information contained on our website or available by hyperlink from our website is not incorporated into this Annual Report on Form 10-K or other documents we file with, or furnish to, the Securities and Exchange Commission.

 

The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room located at 450 Fifth Street NW, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains electronic versions of our reports on its website, www.sec.gov.

 

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Item 2. Properties

 

Our principal operating facilities by segment are as follows:

 

Location


   Approximate
square footage
of facilities


   Principal products

Steel mills:

         

Blytheville, Arkansas

   2,180,000    Steel shapes

Berkeley County, South Carolina

   1,920,000    Flat-rolled steel, steel shapes

Crawfordsville, Indiana

   1,830,000    Flat-rolled steel

Decatur, Alabama

   1,500,000    Flat-rolled steel

Norfolk, Nebraska

   1,420,000    Steel shapes

Hickman, Arkansas

   1,360,000    Flat-rolled steel

Plymouth, Utah

   1,170,000    Steel shapes

Darlington, South Carolina

   1,170,000    Steel shapes

Jewett, Texas

   1,080,000    Steel shapes

Hertford County, North Carolina

   1,000,000    Steel plate

Seattle, Washington

   650,000    Steel shapes

Auburn, New York

   400,000    Steel shapes

Kankakee, Illinois

   370,000    Steel shapes

Jackson, Mississippi

   340,000    Steel shapes

Tuscaloosa, Alabama

   310,000    Steel plate

Birmingham, Alabama

   290,000    Steel shapes

Steel products:

         

Norfolk, Nebraska

   980,000    Joists, deck

Brigham City, Utah

   750,000    Joists

Grapeland, Texas

   660,000    Joists, deck

Chemung, New York

   550,000    Joists, deck

St. Joe, Indiana

   550,000    Joists, deck

Florence, South Carolina

   530,000    Joists, deck

Fort Payne, Alabama

   460,000    Joists, deck

 

Our steel mills segment also includes a distribution center in Pompano Beach, Florida. In the steel products segment, we have additional operating facilities in St. Joe and Waterloo, Indiana; Terrell and Denton, Texas; Dallas, Georgia; and Swansea, South Carolina. During 2004, the average utilization rates of all operating facilities in the steel mills and steel products segments were approximately 97% and 79% of production capacity, respectively.

 

Item 3. Legal Proceedings

 

Nucor is involved in various judicial and administrative proceedings as both plaintiff and defendant, arising in the ordinary course of business. Nucor does not believe that any such proceedings (including matters relating to contracts, torts, taxes, warranties and insurance) will have a material adverse effect on its business, operating results, financial condition or cash flows.

 

Item 4. Submission of Matters to a Vote of Security Holders

 

None during the quarter ended December 31, 2004.

 

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Executive Officers of the Registrant

 

The executive officers of Nucor as of February 28, 2005 are set forth below. Each holds the offices indicated until his successor is elected and qualified at the regular meeting of the Board of Directors to be held immediately following the 2005 Annual Meeting of Stockholders.

 

Daniel R. DiMicco (54) - Mr. DiMicco has been a director of Nucor since 2000 and was elected as Vice Chairman in June 2001. Mr. DiMicco’s term as director expires at the 2007 annual meeting. Mr. DiMicco has served as Nucor’s President and Chief Executive Officer since September 2000. He was an Executive Vice President of Nucor from 1999 to 2000 and Vice President from 1992 to 1999, serving as General Manager of Nucor-Yamato Steel Company. Mr. DiMicco began his career with Nucor in 1982 at Nucor Steel, Plymouth, Utah.

 

Terry S. Lisenby (53) - Mr. Lisenby has been Chief Financial Officer, Treasurer and Executive Vice President since January 2000. He previously served as a Vice President and Corporate Controller of Nucor from 1991 to 1999. Mr. Lisenby began his career with Nucor as Corporate Controller in 1985.

 

John J. Ferriola (52) - Mr. Ferriola has been an Executive Vice President of Nucor since January 2002 and was a Vice President from 1996 to 2001. He was General Manager of Nucor Steel, Crawfordsville, Indiana from 1998 to 2001; General Manager of Nucor Steel, Norfolk, Nebraska from 1995 to 1998; General Manager of Vulcraft, Grapeland, Texas in 1995; and Manager of Maintenance and Engineering at Nucor Steel, Jewett, Texas from 1992 to 1995.

 

Hamilton Lott, Jr. (55) - Mr. Lott has been an Executive Vice President of Nucor since September 1999 and was a Vice President from 1988 to 1999. He was General Manager of Vulcraft, Florence, South Carolina from 1993 to 1999; General Manager of Vulcraft, Grapeland, Texas from 1987 to 1993; Sales Manager of Vulcraft, St. Joe, Indiana from January 1987 to May 1987 and Engineering Manager there from 1982 to 1986. Mr. Lott began his career with Nucor as Design Engineer at Vulcraft, Florence, South Carolina in 1975.

 

D. Michael Parrish (52) - Mr. Parrish has been an Executive Vice President of Nucor since November 1998 and was a Vice President from 1990 to 1998. He was General Manager of Nucor Steel, Hickman, Arkansas from 1995 to 1998; General Manager of Nucor Steel, Jewett, Texas from 1991 to 1995; General Manager of Vulcraft, Brigham City, Utah from 1989 to 1991; Production Manager of Vulcraft, Fort Payne, Alabama from 1986 to 1989; Engineering Manager of Vulcraft, Brigham City, Utah from 1981 to 1986; and Engineer at Vulcraft, St. Joe, Indiana from 1975 to 1981.

 

Joseph A. Rutkowski (50) - Mr. Rutkowski has been an Executive Vice President of Nucor since November 1998 and was a Vice President from 1993 to 1998. He was General Manager of Nucor Steel, Hertford County, North Carolina, from August 1998 to November 1998; General Manager of Nucor Steel, Darlington, South Carolina from 1992 to 1998; Manager of Melting and Casting of Nucor Steel, Plymouth, Utah from 1991 to 1992; and Manager of Nucor Cold Finish, Norfolk, Nebraska from 1989 to 1991.

 

James M. Coblin (61) - Mr. Coblin has been Vice President of Human Resources since January 2000. He previously served as Nucor’s General Manager of Human Resources from 1996 to 1999. Mr. Coblin began his career with Nucor as Manager of Personnel Service in 1986.

 

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PART II

 

Item 5. Market for Registrant’s Common Stock and Related Stockholder Matters

 

Nucor’s common stock is traded on the New York Stock Exchange under the ticker symbol NUE. In September 2004, Nucor’s Board of Directors approved a two-for-one stock split of common stock in the form of a stock dividend. As a result, on October 15, 2004, stockholders of record received one additional share for each share held as of the record date of September 30, 2004. The par value of Nucor’s common stock remains $0.40 per share. All share and per share amounts have been restated to reflect the two-for-one stock split.

 

Nucor has increased its cash dividend every year since it began paying dividends in 1973. We increased dividends twice in 2004, paying at the rate of $0.10 per share in the first quarter, $0.105 per share in the second and third quarters and $0.13 per share in the fourth quarter. On February 24, 2005, Nucor’s board of directors announced an increase in the base dividend to $0.15 per share and a supplemental dividend of $0.25 per share payable on May 11, 2005 to stockholders of record on March 31, 2005 for a total dividend of $0.40 per share. This additional dividend is the first installment of a total estimated supplemental dividend of $1.00 per share to be paid over four consecutive quarters. Nucor’s board of directors stated that it intends to increase the base cash dividend amount in the future as financial conditions and earnings permit. The payment of any future supplemental dividends will depend upon many factors, including Nucor’s earnings, cash flows and financial position.

 

Additional information regarding the market for Nucor’s common stock, quarterly market price ranges, the number of stockholders and dividend payments is incorporated by reference to Nucor’s 2004 Annual Report, pages 28 and 46.

 

Item 6. Selected Financial Data

 

Historical financial information is incorporated by reference to Nucor’s 2004 Annual Report, page 28.

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Information required by this item is incorporated by reference to Nucor’s 2004 Annual Report, page 2 (Forward-looking Statements) and pages 16 through 24.

 

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

 

In the ordinary course of business, Nucor is exposed to a variety of market risks. We continually monitor these risks and develop appropriate strategies to manage them.

 

Interest Rate Risk – Nucor manages interest rate risk by using a combination of variable-rate and fixed-rate debt. At December 31, 2004, 43% of Nucor’s long-term debt was in industrial revenue bonds that have variable interest rates that are adjusted weekly or annually. The remaining 57% of Nucor’s debt is at fixed rates. Future changes in interest rates are not expected to significantly impact earnings. From time to time, Nucor makes use of interest rate swaps to manage net exposure to interest rate changes. As of December 31, 2004, there were no such contracts outstanding. Nucor’s investment practice is to invest in securities that are highly liquid with short maturities. As a result, we do not expect changes in interest rates to have a significant impact on the value of our investment securities.

 

Commodity Price Risk – In the ordinary course of business, Nucor is exposed to market risk for price fluctuations of raw materials and energy, principally scrap steel, electricity and natural gas. We attempt to negotiate the best prices for our raw materials and energy requirements and to obtain prices for our steel products that match market price movements in response to supply and demand. In the first quarter of 2004, Nucor initiated a raw material surcharge designed to pass through the historically high cost of scrap steel and other raw materials. Our surcharge mechanism has worked effectively to reduce the time lag in passing through higher raw material costs so that we can maintain our gross margins.

 

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Nucor also uses derivative financial instruments to hedge a portion of our exposure to price risk related to natural gas purchases used in the production process when it is deemed prudent to do so by management. Gains and losses from the use of these instruments are deferred in accumulated other comprehensive loss on the consolidated balance sheets and recognized into cost of products sold in the same period as the underlying physical transaction. At December 31, 2004, accumulated other comprehensive loss includes $1.2 million in unrealized net-of-tax losses for the fair value of these derivative instruments. A sensitivity analysis of changes in the price of hedged natural gas purchases indicates that declines of 10% and 25% in natural gas prices would reduce the fair value of our natural gas hedge position by $11.7 million and $29.1 million, respectively. Any resulting changes in fair value would be recorded as adjustments to other comprehensive loss, net of tax. Because these instruments are structured and used as hedges, these hypothetical losses would be offset by the benefit of lower prices paid for the natural gas used in the normal production cycle.

 

Item 8. Financial Statements and Supplementary Data

 

Information required by this item is incorporated by reference to Nucor’s 2004 Annual Report, pages 29 through 43.

 

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

None.

 

Item 9A. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures – As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective. There were no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation or any corrective actions with regard to significant deficiencies or material weaknesses.

 

Changes in Internal Control Over Financial Reporting – There were no significant changes in our internal control over financial reporting during the quarter ended December 31, 2004 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Report on Internal Control Over Financial Reporting – Management’s report on internal control over financial reporting required by Section 404 of the Sarbanes-Oxley Act of 2002 and the attestation report thereon of PricewaterhouseCoopers LLP, an independent registered public accounting firm, are incorporated by reference to Nucor’s 2004 Annual Report, pages 29 through 30.

 

Item 9B. Other Information

 

None.

 

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PART III

 

Item 10. Directors and Executive Officers of the Registrant

 

The information regarding Nucor’s directors contained in the Notice of 2005 Annual Meeting of Stockholders and Proxy Statement (the “Proxy Statement”) under the heading Election of Directors and the information regarding Nucor’s directors and executive officers contained in the Proxy Statement under the caption Section 16(a) Beneficial Ownership Reporting Compliance is incorporated by reference. Pursuant to Item 401(b) of Regulation S-K, executive officers of Nucor are reported in Part I of this report. Information regarding the audit committee and the audit committee financial expert appearing under the heading Committees and Meetings of the Board of Directors in the Proxy Statement is incorporated by reference.

 

Nucor has adopted a Code of Ethics for Senior Financial Professionals (“Code of Ethics”) that applies to the Company’s Chief Executive Officer, Chief Financial Officer, Corporate Controller and other senior financial professionals, as well as Corporate Governance Principles for our Board of Directors and charters for our board committees. These documents are publicly available on our website, www.nucor.com. Copies of these documents are also available without charge upon written request to A. Rae Eagle, General Manager and Corporate Secretary, at our principal executive offices. If we make any substantive amendments to the Code of Ethics or grant any waiver, including any implicit waiver, from a provision of the Code of Ethics, we will disclose the nature of such amendment or waiver on our website.

 

Item 11. Executive Compensation

 

Information about director and executive compensation is incorporated by reference to Nucor’s Proxy Statement under the headings Executive Officer Compensation, Director Compensation, Report of the Compensation and Executive Development Committee on Senior Officer Compensation and Stock Performance Graph.

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

Information required by this item is incorporated by reference to Nucor’s Proxy Statement under the heading Security Ownership of Management and Certain Beneficial Owners.

 

The information regarding the number of securities issuable under equity compensation plans and the related weighted average exercise price is incorporated by reference to the Proxy Statement under the heading Equity Compensation Plan Information.

 

Item 13. Certain Relationships and Related Transactions

 

None.

 

Item 14. Principal Accountant Fees and Services

 

Information about the fees in 2004 and 2003 for professional services rendered by our independent registered public accounting firm is incorporated by reference to Nucor’s Proxy Statement under the heading Fees Paid to Independent Registered Public Accounting Firm. Our audit committee’s policy on pre-approval of audit and permissible non-audit services of our independent registered public accounting firm is also incorporated by reference from the section of the Proxy Statement captioned Fees Paid to Independent Registered Public Accounting Firm.

 

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PART IV

 

Item 15. Exhibits and Financial Statement Schedules

 

Financial Statements:

 

The following consolidated financial statements and the report of independent registered public accounting firm are incorporated by reference to Nucor Corporation’s 2004 Annual Report, pages 29 through 43:

 

    Management’s report on internal control over financial reporting

 

    Report of Independent Registered Public Accounting Firm

 

    Consolidated statements of earnings - Years ended December 31, 2004, 2003 and 2002

 

    Consolidated statements of stockholders’ equity - Years ended December 31, 2004, 2003 and 2002

 

    Consolidated balance sheets - December 31, 2004 and 2003

 

    Consolidated statements of cash flows - Years ended December 31, 2004, 2003 and 2002

 

    Notes to consolidated financial statements

 

Financial Statement Schedules:

 

The following financial statement schedule is included in this report as indicated:

 

     Page

Report of Independent Registered Public Accounting Firm on Financial Statement Schedule

   16

Schedule II – Valuation and Qualifying Accounts – Years ended December 31, 2004, 2003 and 2002

   17

 

All other schedules are omitted because they are not required, not applicable, or the information is furnished in the consolidated financial statements or notes.

 

Exhibits:

 

  2    Asset Purchase Agreement, dated May 30, 2002, by and between JAR Acquisition Corp., the Company, Birmingham Steel, Birmingham Southeast, LLC and Port Everglades Steel Corporation (incorporated by reference to Form 8-K dated December 20, 2002)
  2(i)    Purchase Agreement, dated as of September 26, 2002, between Nucor Corporation and Banc of America Securities LLC, Wachovia Securities, Inc., Banc One Capital Markets, Inc., CIBC World Markets Corp. and BNY Capital Markets, Inc. (incorporated by reference to Form S-4 filed December 13, 2002)
  2(ii)    Asset Purchase Agreement by and among Trico Steel Company, L.L.C., Nucor Steel Decatur, LLC (formerly Nucor Steel Alabama, LLC) and Nucor Corporation, dated as of November 9, 2001 (incorporated by reference to Form 10-K for year ended December 31, 2002)
  3    Restated Certificate of Incorporation (incorporated by reference to Form 10-K for year ended December 31, 1990)
  3(i)    Certificate of amendment dated May 14, 1992, to Restated Certificate of Incorporation (incorporated by reference to Form 10-K for year ended December 31, 1992)
  3(ii)    Certificate of amendment dated May 14, 1998, to Restated Certificate of Incorporation (incorporated by reference to Form 10-K for year ended December 31, 1998)
  3(iii)    Certificate of Designations dated March 8, 2001 to Restated Certificate of Incorporation (incorporated by reference to Form 10-K for year ended December 31, 2001)

 

11


Table of Contents
Exhibits, continued:
  3(iv)    By-Laws as amended December 4, 2001 (incorporated by reference to Form 10-K for year ended December 31, 2001)
  4    Rights Agreement, dated as of March 8, 2001, between Nucor Corporation and American Stock Transfer & Trust Co. (incorporated by reference to Exhibit 4 to Nucor’s Form 8-K filed March 9, 2001)
  4(i)    Indenture, dated as of January 12, 1999, between Nucor Corporation and The Bank of New York, as trustee (incorporated by reference to Form S-4 filed December 13, 2002)
  4(ii)    Second Supplemental Indenture, dated as of October 1, 2002, between Nucor Corporation and The Bank of New York, as trustee (incorporated by reference to Form S-4 filed December 13, 2002)
  4(iii)    Exchange and Registration Rights Agreement, dated as of October 1, 2002, by and among Nucor Corporation, Banc of America Securities LLC and Wachovia Securities, Inc. (incorporated by reference to Form S-4 filed December 13, 2002)
  4(iv)    Form of 4.875% Note due 2012 (included in Exhibit 4(ii) above) (incorporated by reference to Form S-4 filed December 13, 2002)
10    1997 Key Employees Incentive Stock Option Plan (incorporated by reference to Form 10-K for year ended December 31, 2000) (1)
10(i)    2003 Key Employees Incentive Stock Option Plan (as amended through Amendment 2003-1) (incorporated by reference to Form 10-Q for quarter ended October 4, 2003) (1)
10(ii)    Non-Employee Director Equity Plan (incorporated by reference to Form 10-K for year ended December 31, 2000) (1)
10(iii)    Employment Agreement of Daniel R. DiMicco (incorporated by reference to Form 10-Q for quarter ended June 30, 2001) (1)
10(iv)    Employment Agreement of Terry S. Lisenby (incorporated by reference to Form 10-Q for quarter ended June 30, 2001) (1)
10(v)    Employment Agreement of Hamilton Lott, Jr. (incorporated by reference to Form 10-Q for quarter ended June 30, 2001) (1)
10(vi)    Employment Agreement of D. Michael Parrish (incorporated by reference to Form 10-Q for quarter ended June 30, 2001) (1)
10(vii)    Employment Agreement of Joseph A. Rutkowski (incorporated by reference to Form 10-Q for quarter ended June 30, 2001) (1)
10(viii)    Employment Agreement of John J. Ferriola (incorporated by reference to Form 10-K for year ended December 31, 2001) (1)
10(ix)    Multi-Year Revolving Credit Agreement, dated as of October 4, 2002 (incorporated by reference to Amendment to Form S-4 dated February 28, 2003)
10(x) *    364-Day Revolving Credit Agreement, dated as of October 1, 2004
10(xi)    Senior Officers Severance Policy as Adopted by the Board of Directors, as amended on December 10, 2002 (incorporated by reference to Form 10-K for year ended December 31, 2002) (1)
10(xii)    Senior Officers Annual Incentive Plan (incorporated by reference to Form 10-Q for the quarter ended July 5, 2003) (1)
10(xiii)    Senior Officers Long-Term Incentive Plan (incorporated by reference to Form 10-Q for the quarter ended July 5, 2003) (1)
10(xiv)    Senior Officers Long-Term Incentive Plan, Amendment No. 1 (incorporated by reference to Form 10-K for the year ended December 31, 2003) (1)

 

12


Table of Contents
Exhibits, continued:
13 *    2004 Annual Report (portions incorporated by reference)
21 *    Subsidiaries
23 *    Consent of Independent Registered Public Accounting Firm
24 *    Powers of attorney
31 *    Certification of Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31(i) *    Certification of Principal Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32 *    Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32(i) *    Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 * Filed herewith.

 

(1) Indicates a management contract or compensatory plan or arrangement.

 

13


Table of Contents

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed (1) by the registrant, and (2) on behalf of the registrant, by its principal executive, financial and accounting officers, and its directors.

 

NUCOR CORPORATION

           

By

  /s/    DANIEL R. DIMICCO                   * PETER C. BROWNING        
    Daniel R. DiMicco       Peter C. Browning
    Vice Chairman, President and Chief Executive Officer       Non-Executive Chairman
/S/    DANIEL R. DIMICCO                   * CLAYTON C. DALEY, JR.        
Daniel R. DiMicco       Clayton C. Daley, Jr.
Vice Chairman, President and Chief Executive Officer       Director
/s/    TERRY S. LISENBY                   * HARVEY B. GANTT        
Terry S. Lisenby       Harvey B. Gantt
Chief Financial Officer, Treasurer and
Executive Vice President
      Director
/s/    JAMES D. FRIAS                   * VICTORIA F. HAYNES        
James D. Frias       Victoria F. Haynes
Corporate Controller and General Manager       Director
            * JAMES D. HLAVACEK        
        James D. Hlavacek
        Director
            * RAYMOND J. MILCHOVICH        
        Raymond J. Milchovich
        Director
            * THOMAS A. WALTERMIRE        
        Thomas A. Waltermire
        Director
       

      *By

  /s/    TERRY S. LISENBY        
            Terry S. Lisenby
            Attorney-in-fact

 

Dated: March 8, 2005

 

14


Table of Contents

NUCOR CORPORATION

Index to Financial Statement Schedule

 

     Page

Report of Independent Registered Public Accounting Firm on Financial Statement Schedule

   16

Schedule II – Valuation and Qualifying Accounts – Years ended December 31, 2004, 2003 and 2002

   17

 

15


Table of Contents

Report of Independent Registered Public Accounting Firm on Financial Statement Schedule

 

To the Board of Directors and Stockholders of

Nucor Corporation

 

Our audits of the consolidated financial statements, of management’s assessment of the effectiveness of internal control over financial reporting and of the effectiveness of internal control over financial reporting referred to in our report dated March 1, 2005 appearing in the December 31, 2004 Annual Report to Stockholders of Nucor Corporation and its subsidiaries (which report, consolidated financial statements, and assessment are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedule listed in Item 15 of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

 

/s/ PricewaterhouseCoopers LLP

 

PricewaterhouseCoopers LLP

Charlotte, North Carolina

March 1, 2005

 

16


Table of Contents

NUCOR CORPORATION

Financial Statement Schedule

 

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (in thousands)

 

Description


   Balance at
beginning of
year


   Additions
charged to
costs and
expenses


   Deductions

   Balance at
end of year


Year ended December 31, 2004

                           

LIFO Reserve

   $ 157,586    $ 375,898    $ —      $ 533,484

Year ended December 31, 2003

                           

LIFO Reserve

   $ 42,608    $ 114,978    $ —      $ 157,586

Year ended December 31, 2002

                           

LIFO Reserve

   $ 8,291    $ 34,317    $ —      $ 42,608

 

17


Table of Contents

NUCOR CORPORATION

List of Exhibits to Form 10-K – December 31, 2004

 

Exhibit No.

 

Description of Exhibit


10(x)   364-Day Revolving Credit Agreement, dated as of October 1, 2004
13   2004 Annual Report (portions incorporated by reference)
21   Subsidiaries
23   Consent of Independent Registered Public Accounting Firm
24   Powers of attorney
31   Certification of Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31(i)   Certification of Principal Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32   Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32(i)   Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

18

364-DAY REVOLVING CREDIT AGREEMENT

Exhibit 10(x)

Nucor Corporation

2004 Form 10-K

 

Published CUSIP Nos. 67034VAA8

67034VAB6

 

364-DAY REVOLVING CREDIT AGREEMENT

 

Dated as of October 1, 2004

 

among

 

NUCOR CORPORATION,

as Borrower,

 

THE LENDERS NAMED HEREIN

 

AND

 

BANK OF AMERICA, N.A.,

as Administrative Agent

 

Arranged By:

 

BANC OF AMERICA SECURITIES LLC,

as Sole Lead Arranger and Sole Book-Manager

 


TABLE OF CONTENTS

 

ARTICLE I

    

DEFINITIONS

   1
    1.1    Definitions    1
    1.2    Computation of Time Periods and Dollar Equivalents    14
    1.3    Accounting Terms    14
    1.4    Exchange Rates; Currency Equivalents    14
    1.5    Redenomination of Certain Available Foreign Currencies    14
    1.6    Times of Day    15

ARTICLE II

    

CREDIT FACILITIES

   15
    2.1    Revolving Loans    15
    2.2    Competitive Loan Subfacility    17

ARTICLE III

    

OTHER PROVISIONS RELATING TO CREDIT FACILITIES

   20
    3.1    Default Rate    20
    3.2    Extension and Conversion    20
    3.3    Prepayments    20
    3.4    Termination and Reduction of the Revolving Commitment    21
    3.5    Fees    21
    3.6    LIBOR Reserve Compensation    22
    3.7    Capital Adequacy    22
    3.8    Unavailability    23
    3.9    Illegality    23
    3.10    Requirements of Law    24
    3.11    Inability To Determine Interest Rate    25
    3.12    Replacement of Lenders    26
    3.13    Taxes    26
    3.14    Indemnity    28
    3 15    Pro Rata Treatment    29
    3.16    Sharing of Payments    30
    3.17    Payments, Computations, Etc    31

 

i


    3.18   Obligation of Lenders to Mitigate    32
    3.19   Evidence of Debt    33

ARTICLE IV

    

CONDITIONS

   33
    4.1   Conditions to Closing    33
    4.2   Conditions to All Extensions of Credit    35

ARTICLE V

    

REPRESENTATIONS AND WARRANTIES

   36
    5.1   Financial Condition    36
    5.2   Organization; Existence    36
    5.3   Power; Authorization; Enforceable Obligations    36
    5.4   Conflict    37
    5.5   No Material Litigation    37
    5.6   No Default    37
    5.7   Taxes    37
    5.8   ERISA    37
    5.9   Governmental Regulations, Etc    38
    5.10   Purpose of Extensions of Credit    38
    5.11   Compliance with Laws; Contractual Obligations    39
    5.12   Accuracy and Completeness of Information    39
    5.13   Environmental Matters    39

ARTICLE VI

    

AFFIRMATIVE COVENANTS

   40
    6.1   Financial Statements    40
    6.2   Certificates; Other Information    41
    6.3   Notices    42
    6.4   Maintenance of Existence and Compliance with Law    42
    6.5   Maintenance of Property; Insurance    42
    6.6   Inspection of Property Books and Records; Discussions    43
    6.7   Consolidated Funded Debt to Total Capitalization Ratio    43
    6.8   Use of Proceeds    43

ARTICLE VII

    

NEGATIVE COVENANTS

   43

 

ii


    7.1   Funded Debt of Subsidiaries    43
    7.2   Negative Pledge    43
    7.3   Consolidation, Merger and Sale of Assets    45
    7.4   Transactions with Affiliates    45
    7.5   Permitted Investments    45
    7.6   Limitation on Certain Restrictions    46

ARTICLE VIII

    
    EVENTS OF DEFAULT    46
    8.1   Events of Default    46
    8.2   Acceleration; Remedies    48

ARTICLE IX

    
    AGENCY PROVISIONS    48
    9.1   Appointment    48
    9.2   Delegation of Duties    49
    9.3   Exculpatory Provisions    49
    9.4   Reliance on Communications    49
    9.5   Notice of Default    50
    9.6   Non-Reliance on Administrative Agent and Other Lenders    50
    9.7   Indemnification    51
    9.8   Administrative Agent in its Individual Capacity    51
    9.9   Successor Administrative Agent    51
    9.10   Arrangers and Book Managers    52

ARTICLE X

    
    MISCELLANEOUS    52
    10.1   Notices    52
    10.2   Right of Set-Off    52
    10.3   Benefit of Agreement    53
    10.4   No Waiver; Remedies Cumulative    55
    10.5   Expenses; Indemnification    55
    10.6   Amendments, Waivers and Consents    56
    10.7   Counterparts    57
    10.8   Headings    57
    10.9   Survival    57

 

iii


    10.10   Governing Law; Submission to Jurisdiction; Venue    57
    10.11   Confidentiality    58
    10.12   Severability    58
    10.13   Entirety    58
    10.14   Binding Effect; Termination    59
    10.15   Judgment Currency    59
    10.16   USA PATRIOT Act Notice    59

 

iv


 

SCHEDULES

 

Schedule 1.1(a)

  

Form of Account Designation Letter

Schedule 1.1(b)

  

Joint Ventures

Schedule 2.1(a)

  

Schedule of Lenders and Commitments

Schedule 2.1(b)(i)

  

Form of Notice of Borrowing

Schedule 2. 1(e)

  

Form of Revolving Note

Schedule 2. 2(b)-1

  

Form of Competitive Bid Request

Schedule 2.2(b)-2

  

Form of Notice of Receipt of Competitive Bid Request

Schedule 2.2(c)

  

Form of Competitive Bid

Schedule 2.2(e)

  

Form of Competitive Bid Accept/Reject Letter

Schedule 3.2

  

Form of Notice of Extension/Conversion

Schedule 3.17(b)

  

Place of Payments

Schedule 4.1(c)(v)

  

Secretary’s Certificate

Schedule 5.5

  

Description of Legal Proceedings

Schedule 5.7

  

Taxes

Schedule 5.13

  

Environmental Matters

Schedule 6.2(a)

  

Form of Officer’s Compliance Certificate

Schedule 7.1

  

Subsidiary Funded Debt

Schedule 7.2

  

Liens

Schedule 10.1

  

Notices

Schedule 10.3(b)

  

Form of Assignment and Acceptance

 

v


364-DAY REVOLVING CREDIT AGREEMENT

 

THIS 364-DAY REVOLVING CREDIT AGREEMENT dated as of October 1, 2004 (the “Credit Agreement”), is by and among NUCOR CORPORATION, a Delaware corporation (the “Borrower”), the lenders named herein and such other lenders as may become a party hereto (the “Lenders”), and BANK OF AMERICA, N.A., as Administrative Agent (in such capacity, the “Administrative Agent”).

 

W I T N E S S E T H

 

WHEREAS, the Borrower has requested that the Lenders provide a $125 million revolving credit facility for the purposes hereinafter set forth; and

 

WHEREAS, the Lenders have agreed to make the requested credit facility available to the Borrower on the terms and conditions hereinafter set forth;

 

NOW, THEREFORE, IN CONSIDERATION of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

1.1 Definitions. As used in this Credit Agreement, the following terms shall have the meanings specified below unless the context otherwise requires:

 

Account Designation Letter” means the Notice of Account Designation Letter dated the date hereof from the Borrower to the Administrative Agent in substantially the form attached hereto as Schedule 1.1(a).

 

Administrative Agent” shall have the meaning assigned to such term in the heading hereof, together with any successors or assigns.

 

Administrative Agent’s Fees” shall have the meaning assigned to such term in Section 3.5(c).

 

Affected Lender” means such term as defined in Section 3.9(a).

 

Affiliate” means as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, a Person shall be deemed to be “controlled by” a Person if such Person possesses, directly or indirectly, power either (a) to vote 10% or more of the securities having ordinary voting power for the election of directors of such Person or (b) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise.

 

Aggregate Revolving Committed Amount” means the aggregate amount of Revolving Commitments in effect from time to time, being initially ONE HUNDRED AND TWENTY-FIVE MILLION DOLLARS ($125,000,000).

 


Applicable Rate” means for any day, the rate per annum set forth below opposite the applicable rating for the Borrower’s senior unsecured (non-credit enhanced) long term debt then in effect, it being understood that the Applicable Rate for (i) Base Rate Loans shall be the percentage set forth under the column “Base Rate Margin”, (ii) LIBOR Loans shall be the percentage set forth under the column “LIBOR Margin”, (iii) the Facility Fee shall be the percentage set forth under the column “Facility Fee”; and (iv) the Utilization Fee shall be the percentage set forth under the column “Utilization Fee”:

 

Pricing

Level


  

Rating

(S&P/

Moody’s)


  

Facility

Fee


   

Base Rate

Margin


   

LIBOR

Margin


   

Utilization Fee

(> 50% Usage)


 
I    AA-/Aa3 or
better
   0.04 %   0.00 %   0.11 %   0.05 %
II    A+/A1    0.05 %   0.00 %   0.15 %   0.05 %
III    A/A2    0.07 %   0.00 %   0.18 %   0.075 %
IV    A-/A3    0.08 %   0.00 %   0.32 %   0.075 %
V    BBB+/Baa1
or lower
   0.10 %   0.00 %   0.40 %   0.10 %

 

The numerical classification set forth under the column “Pricing Level” shall be established based on the better of ratings by S&P and Moody’s for the Borrower’s senior unsecured (non-credit enhanced) long term debt (the “Debt Rating”), provided that such ratings are not more than one Pricing Level apart; and at the Pricing Level immediately above the lower of the ratings by S&P and Moody’s in the event the ratings are more than one Pricing Level apart. Initially, the Applicable Rate shall be determined based upon the Debt Rating specified in the certificate delivered pursuant to Section 4.1(j). Thereafter, the Applicable Rate shall be determined and adjusted quarterly on the date five (5) Business Days after the end of each calendar quarter (each a “Rate Determination Date”) based on the Debt Rating in effect on the last day of the preceding calendar quarter and shall be effective until the next Rate Determination Date. Adjustments in the Applicable Rate shall be effective as to all Loans, existing and prospective, from the date of adjustment. The Administrative Agent shall promptly notify the Lenders of changes in the Applicable Rate.

 

Attributed Principal Amount” means (i) in the case of Capital Leases, the amount of capital lease obligations determined in accordance with GAAP, (ii) in the case of Synthetic Leases, an amount determined by capitalization of the remaining lease payments thereunder as if it were a Capital Lease determined in accordance with GAAP, and (iii) in the case of Securitization Transactions, the outstanding principal amount of such financing, after taking into account and making appropriate adjustments, determined by the Administrative Agent in its reasonable judgment.

 

Available Foreign Currency” means (i) Euros, Canadian Dollars, British Pounds Sterling, Swiss Francs and Japanese Yen and (ii) any other freely available currency which is freely transferable and freely convertible into Dollars and in which dealings in deposits are carried on in the London interbank market, which shall be requested by the Borrower and approved by each Lender.

 

2


Average Outstanding Loans” means, for any Utilization Period, the sum of the aggregate principal amount of Loans outstanding under this Credit Agreement as of the end of each day during such Utilization Period, divided by the number of days in such Utilization Period.

 

Bank of America” means Bank of America, N.A. and its successors.

 

Bank Secrecy Act” means 31 U.S.C. §§ 5311 et seq., as amended from time to time, and any successor statute, and all rules and regulations from time to time promulgated thereunder.

 

Base Rate” means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest whole multiple of 1/100 of 1%) equal to the greater of (a) the Federal Funds Rate in effect on such day plus  1/2 of 1% or (b) the Prime Rate in effect on such day. If for any reason the Administrative Agent shall have reasonably determined (which determination shall be conclusive absent manifest error) that it is unable after due inquiry to ascertain the Federal Funds Rate for any reason, including the inability or failure of the Administrative Agent to obtain sufficient quotations in accordance with the terms hereof, the Base Rate shall be determined without regard to clause (a) of the first sentence of this definition until the circumstances giving rise to such inability no longer exist. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Rate shall be effective on the effective date of such change in the Prime Rate or the Federal Funds Rate, respectively.

 

Base Rate Loan” means any Loan bearing interest at a rate determined by reference to the Base Rate.

 

Borrower” means Nucor Corporation, a Delaware corporation, as referenced in the opening paragraph, its successors and permitted assigns.

 

Business Day” means any day other than a Saturday, Sunday or legal holiday on which commercial banks are open for business in Charlotte, North Carolina and New York, New York; except that when used in connection with a LIBOR Loan, such day shall also be a day on which dealings between banks are carried on in London, England in deposits of Dollars or Available Foreign Currencies, as applicable. “Business Day” shall also exclude any day on which banks are closed for dealings when used in connection with Foreign Currency Loans. “Business Day” shall also exclude any day on which banks are not open for foreign exchange dealings between banks in the exchange of the home country of such foreign currency.

 

Capital Lease” means, as applied to any Person, any lease of any Property (whether real, personal or mixed) by that Person as lessee which, in accordance with GAAP, is or should be accounted for as a capital lease on the balance sheet of that Person.

 

Code” means the Internal Revenue Code of 1986, as amended, and any successor statute thereto, as interpreted by the rules and regulations issued thereunder, in each case as in effect from time to time. References to sections of the Code shall be construed also to refer to any successor sections.

 

Commitment Period” means the period from and including the Effective Date to but not including the earlier of (i) the Termination Date, and (ii) the date on which the Revolving Commitments terminate in accordance with the provisions of this Credit Agreement.

 

3


Competitive Bid” means an offer by a Lender to make a Competitive Loan pursuant to the terms of Section 2.2.

 

Competitive Bid Rate” means, as to any Competitive Bid made by a Lender in accordance with the provisions of Section 2.2. the fixed rate of interest offered by the Lender making the Competitive Bid.

 

Competitive Bid Request” means a request by the Borrower for Competitive Bids in accordance with the provisions of Section 2.2(b).

 

Competitive Bid Request Fee” means such fee, if any, agreed upon by the Borrower and the Administrative Agent payable in connection with each Competitive Bid Request.

 

Competitive Loan” means a loan made by a Lender in its discretion pursuant to the provisions of Section 2.2.

 

Competitive Loan Lenders” means, at any time, those Lenders which have Competitive Loans outstanding.

 

Competitive Loan Maximum Amount” shall have the meaning assigned to such term in Section 2.2(a).

 

Consolidated Funded Debt” means Funded Debt of the Borrower and its subsidiaries on a consolidated basis in accordance with GAAP.

 

Consolidated Funded Debt to Total Capitalization Ratio” means the ratio of Consolidated Funded Debt to Consolidated Total Capitalization.

 

Consolidated Group” means the Borrower and its consolidated subsidiaries as determined in accordance with GAAP.

 

Consolidated Net Worth” means shareholders’ equity or net worth of the Borrower and its subsidiaries on a consolidated basis determined in accordance with GAAP.

 

Consolidated Total Capitalization” means the sum of Consolidated Funded Debt plus Consolidated Net Worth.

 

Credit Documents” means a collective reference to this Credit Agreement, the Notes, the Fee Letter and all other related agreements and documents issued or delivered hereunder or thereunder or pursuant hereto or thereto.

 

Debt Rating” shall have the meaning assigned to such term in the definition of “Applicable Rate”.

 

Default” means any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default.

 

Default Rate” means when used with respect to Loans, an interest rate equal to (a) the Base Rate plus (b) the Applicable Rate, if any, applicable to Base Rate Loans plus (c) 2% per

 

4


annum; provided, however, that with respect to a LIBOR Loan, the Default Rate shall be an interest rate equal to the interest rate (including any Applicable Rate) otherwise applicable to such Loan plus 2% per annum, in each case to the fullest extent permitted by applicable laws.

 

Defaulting Lender” means, at any time, any Lender that, at such time, (i) has failed to make a Loan or fund a participation interest required pursuant to the terms of this Credit Agreement, (ii) has failed to pay to the Administrative Agent or any Lender an amount owed by such Lender pursuant to the terms of the Credit Agreement or any other of the Credit Documents, or (iii) has been deemed insolvent or has become subject to a bankruptcy or insolvency proceeding or to a receiver, trustee or similar proceeding.

 

Determination Date” means with respect to any Extension of Credit:

 

(a) in connection with the origination of any new Extension of Credit, the Business Day which is the earliest of the date such credit is extended, the date the rate is set or the date the bid is accepted, as applicable;

 

(b) in connection with any extension or conversion or continuation of an existing Loan, the last Business Day of each month or the Business Day which is the earlier of the date such advance is extended, converted or continued, and the date the rate is set, as applicable, in connection with any extension, conversion or continuation; or

 

(c) the date of any reduction of the Revolving Committed Amount pursuant to the terms of Section 3.4; and

 

in addition to the foregoing, an additional date each month to be determined by the Administrative Agent. For purposes of determining availability hereunder, the rate of exchange for Available Foreign Currency shall be the Spot Rate.

 

Dollar Amount” means (a) with respect to Dollars or an amount denominated in Dollars, such amount and (b) with respect to an amount of any Foreign Currency or an amount denominated in such Foreign Currency, the Dollar Equivalent of such amount on the applicable date contemplated in this Credit Agreement.

 

Dollar Equivalent” means, at any time, (a) with respect to any amount denominated in Dollars, such amount, and (b) with respect to any amount denominated in any Foreign Currency, the equivalent amount thereof in Dollars as determined by the Administrative Agent at such time on the basis of the Spot Rate (determined in respect of the most recent Revaluation Date and inclusive of all reasonable related costs of conversion, if any, that are actually incurred) for the purchase of Dollars with such Foreign Currency.

 

Dollars” and “$” means dollars in lawful currency of the United States of America.

 

Effective Date” means the date hereof.

 

EMU” means Economic and Monetary Union as contemplated in the Treaty on European Union.

 

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EMU Legislation” means legislative measures of the European Council (including without limitation European Council regulations) for the introduction of, changeover to or operation of a single or unified European currency (whether known as the Euro or otherwise), being in part the implementation of the third stage of EMU.

 

Environmental Laws” means any and all applicable foreign, federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements or any Governmental Authority or other Requirement of Law regulating, relating to or imposing liability or standards of conduct concerning protection of human health or the environment, as now or may at any time be in effect during the term of this Credit Agreement.

 

ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto, as interpreted by the rules and regulations thereunder, all as the same may be in effect from time to time. References to sections of ERISA shall be construed also to refer to any successor sections.

 

ERISA Affiliate” means an entity, whether or not incorporated, which is under common control with the Borrower within the meaning of Section 4001(a)(14) of ERISA, or is a member of a group which includes the Borrower and which is treated as a single employer under Sections 414(b) or (c) of the Code.

 

ERISA Event” means (i) with respect to any Single Employer Plan or Multiple Employer Plan, the occurrence of a Reportable Event; (ii) the withdrawal by the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a substantial employer (as such term is defined in Section 4001(a)(2) of ERISA), or the termination of a Multiple Employer Plan; (iii) the distribution of a notice of intent to terminate or the actual termination of a Plan pursuant to Section 4041(a)(2) or 4041A of ERISA; (iv) the institution of proceedings to terminate or the actual termination of a Plan by the PBGC under Section 4042 of ERISA; (v) any event or condition which could reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan; (vi) the complete or partial withdrawal of the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate from a Multiemployer Plan or the receipt by the Borrower, any Subsidiary or any ERISA Affiliate that a Multiemployer Plan is in reorganization; (vii) the conditions for imposition of a lien under Section 302(f) of ERISA exist with respect to any Plan; or (vii) the adoption of an amendment to any Plan requiring the provision of security to such Plan pursuant to Section 307 of ERISA.

 

Euro” means the single currency of Participating Member States of the European Union.

 

Euro Unit” means the currency unit of the Euro.

 

Event of Default” means such term as defined in Section 8.1.

 

Extension of Credit” means, as to any Lender, the making of a Loan by such Lender.

 

Facility Fee” shall have the meaning assigned to such term in Section 3.5.

 

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Fee Letter” means that certain letter agreement, dated as of September 22, 2004, between the Administrative Agent, Banc of America Securities LLC and the Borrower, as amended, modified, supplemented or replaced from time to time.

 

Fees” means all fees payable pursuant to Section 3.5.

 

Federal Funds Rate” means, for any day, the rate of interest per annum (rounded upwards, if necessary, to the nearest whole multiple of 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 Business Day next succeeding such day, provided that (A) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day and (B) if no such rate is so published on such next preceding Business Day, the Federal Funds Rate for such day shall be the average rate quoted to the Administrative Agent on such day on such transactions as reasonably determined by the Administrative Agent.

 

Foreign Currency” means Available Foreign Currency.

 

Foreign Currencies Committed Amount” shall have the meaning assigned to such term in Section 2.1(a).

 

Foreign Currency Equivalent” means, at any time, with respect to any amount denominated in Dollars, the equivalent amount thereof in the applicable Available Foreign Currency as determined by the Administrative Agent at such time on the basis of the Spot Rate (determined in respect of the most recent Revaluation Date) for the purchase of such Available Foreign Currency with Dollars.

 

Foreign Currency Loan” means any Loan denominated in an Available Foreign Currency.

 

Funded Debt” means, with respect to any Person, without duplication, (i) all indebtedness for borrowed money, (ii) all obligations evidenced by bonds, debentures, notes or similar instruments, or upon which interest payments are customarily made, (iii) all obligations to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) the Attributed Principal Amount of Capital Leases, Securitization Transactions and Synthetic Leases, (v) all Funded Debt of any partnership or joint venture, but only to the extent (A) of recourse to such Person for payment thereof or (B) that, for purposes of Section 6.7 hereof, such Funded Debt of such partnership or joint venture is consolidated, in accordance with GAAP, in the financial statements of the Consolidated Group, (vi) the maximum amount of standby letters of credit issued or bankers’ acceptance facilities created for the account of such Person, and (vii) Support Obligations in respect of Funded Debt of another Person in connection with, related to or supporting Funded Debt or issued as performance-based letters of credit (other than trade letters of credit).

 

GAAP” means generally accepted accounting principles in the United States applied on a consistent basis and subject to the terms of Section 1.3 hereof.

 

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Government Acts” has the meaning set forth in Section 3.20.

 

Governmental Authority” means any Federal, state, local or foreign court or governmental agency, authority, commission, instrumentality or regulatory body.

 

Interest Payment Date” means (a) as to any Base Rate Loan, the last day of each March, June, September and December, the date of repayment of principal of such Loan and the later of (i) the Termination Date and (ii) if applicable, the extended repayment date set forth in Section 2.1(g) and (b) as to any LIBOR Loan or Competitive Loan, the last day of each Interest Period for such Loan, the date of repayment of principal of such Loan and on the later of (i) the Termination Date and (ii) if applicable, the extended repayment date set forth in Section 2.1(g), and in addition where the applicable Interest Period is more than three months, then also on the date three months from the beginning of the Interest Period, and each three months thereafter. If an Interest Payment Date falls on a date which is not a Business Day, such Interest Payment Date shall be deemed to be the next succeeding Business Day, except that in the case of LIBOR Loans where the next succeeding Business Day falls in the next succeeding calendar month, then on the next preceding Business Day.

 

Interest Period” means, (a) as to any LIBOR Loan, a period of one, two, three or six month’s duration, as the Borrower may elect, commencing in each case, on the date of the borrowing (including conversions, extensions and renewals) and (b) as to any Competitive Loan, a period of not less than seven nor more than 180 days’ duration, as the Borrower may request and the Competitive Lender may agree in accordance with the provisions of Section 2.2; provided, however, (i) if any Interest Period would end on a day which is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day (except that in the case of LIBOR Loans where the next succeeding Business Day falls in the next succeeding calendar month, then on the next preceding Business Day), (ii) no Interest Period shall extend beyond the later of (x) the Termination Date and (y) if applicable, the extended repayment date set forth in Section 2. 1(g), and (iii) in the case of LIBOR Loans, where an Interest Period begins on a day for which there is no numerically corresponding day in the calendar month in which the Interest Period is to end, such Interest Period shall end on the last day of such calendar month.

 

Investment” means all investments, in cash or by delivery of property made, directly or indirectly in, to or from any Person, whether by acquisition of shares of capital stock or other equity interest, property, assets, indebtedness or other obligations or securities or by loan advance, capital contribution or otherwise.

 

Joint Ventures” means (i) those entities listed on Schedule 1.1(b) and (ii) any other non-public Subsidiaries in which the Borrower, directly or indirectly, owns and controls less than 80% of the capital stock or other equity interest having ordinary voting power to elect directors or other managers of such Subsidiary and where the remaining ownership and control of such Subsidiary is held by an independent entity with whom the Borrower, or one of its Subsidiaries, is engaged in a business venture.

 

Lenders” means each of the Persons identified as a “Lender” on the signature pages hereto, and their successors and assigns.

 

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LIBOR Loan” means any Loan bearing interest at a rate determined by reference to the LIBOR Rate.

 

LIBOR Rate” means for any Interest Period with respect to a LIBOR Loan, a rate per annum determined by the Administrative Agent pursuant to the following formula:

 

LIBOR Rate    =        LIBOR Base Rate     
   1.00 – LIBOR Reserve Percentage     

 

Where,

 

LIBOR Base Rate” means, for any Interest Period with respect to a LIBOR Loan, the rate per annum equal to the British Bankers Association LIBOR Rate (“BBA LIBOR”), as published by Reuters (or other commercially available source providing quotations of BBA LIBOR as designated by the Administrative Agent from time to time) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, for Dollar deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period. If such rate is not available at such time for any reason, then the “LIBOR Rate” for such Interest Period shall be the rate per annum determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the LIBOR Loan being made, continued or converted by Bank of America and with a term equivalent to such Interest Period would be offered by Bank of America’s London Branch to major banks in the London interbank eurodollar market at their request at approximately 11:00 a.m. (London time) two Business Days prior to the commencement of such Interest Period.

 

LIBOR Reserve Percentage” means for any day, that percentage (expressed as a decimal) which is in effect from time to time under Regulation D of the Board of Governors of the Federal Reserve System (or other applicable authority or any successor thereof), as such regulation may be amended from time to time or any successor regulation, as the maximum reserve requirement (including, without limitation, any basic, supplemental, emergency, special, or marginal reserves) applicable with respect to eurocurrency liabilities as that term is defined in Regulation D (or against any other category of liabilities that includes deposits by reference to which the interest rate of LIBOR Loans is determined), whether or not Lender has any eurocurrency liabilities subject to such reserve requirement at that time. LIBOR Loans shall be deemed to constitute eurocurrency liabilities and as such shall be deemed subject to reserve requirements without benefits of credits for proration, exceptions or offsets that may be available from time to time to a Lender. The LIBOR Rate shall be adjusted automatically on and as of the effective date of any change in the LIBOR Reserve Percentage.

 

Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, security interest, encumbrance, lien (statutory or otherwise), preference, priority or charge of any kind (including any conditional sale or other title retention agreement, any financing or similar statement or notice filed under the Uniform Commercial Code as adopted and in effect in the relevant jurisdiction or other similar recording or notice statute, and any lease in the nature thereof).

 

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Loan” or “Loans” means the Revolving Loans and/or Competitive Loans, as well as any term loan arising under Section 2.1(g).

 

Material Adverse Effect” means a material adverse effect on the business, operations, property or financial condition of the Borrower and its Subsidiaries taken as a whole.

 

Materials of Environmental Concern” shall mean any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances, materials, or wastes, defined or regulated as such in or under any Environmental Law, including, without limitation, asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.

 

Moody’s” means Moody’s Investors Service, Inc., or any successor or assignee of the business of such company in the business of rating securities.

 

Multiemployer Plan” means a Plan which is a multiemployer plan as defined in Sections 3(37) or 4001(a)(3) of ERISA.

 

Multiple Employer Plan” means a Plan which the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate and at least one employer other than the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate are contributing sponsors.

 

Multi-Year Credit Agreement” means that Multi-Year Revolving Credit Agreement dated as of October 4, 2002, as amended and modified, among the Borrower, the Lenders identified therein and Wachovia Bank, National Association, as Administrative Agent.

 

National Currency Unit” means a fraction or multiple of one Euro Unit expressed in units of the former national currency of a Participating Member State.

 

Non-Excluded Taxes” means such term as is defined in Section 3.13.

 

Note” or “Notes” means any Revolving Note.

 

Notice of Borrowing” means a written notice of borrowing in substantially the form of Schedule 2.1(b)(i), as required by Section 2.1(b)(i).

 

Notice of Extension/Conversion” means the written notice of extension or conversion in substantially the form of Schedule 3.2, as required by Section 3.2.

 

Participating Member State” means each country so described in any EMU Legislation.

 

Participation Interest” means the purchase by a Lender of a participation in Loans as provided in Section 3.16.

 

PBGC” means the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA and any successor thereof.

 

Person” means any individual, partnership, joint venture, firm, corporation, limited liability company, association, trust or other enterprise (whether or not incorporated) or any Governmental Authority.

 

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Plan” means any employee benefit plan (as defined in Section 3(3) of ERISA) which is covered by ERISA and with respect to which the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an “employer” within the meaning of Section 3(5) of ERISA.

 

Prime Rate” means the rate of interest per annum publicly announced from time to time by Bank of America as its prime rate in effect at its principal office in Charlotte, North Carolina, with each change in the Prime Rate being effective on the date such change is publicly announced as effective (it being understood and agreed that the Prime Rate is a reference rate used by Bank of America in determining interest rates on certain loans and is not intended to be the lowest rate of interest charged on any extension of credit by Bank of America to any debtor).

 

Property” means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible.

 

Proposed Lender” means such term as defined in Section 3.12.

 

Register” shall have the meaning given such term in Section 10.3(c).

 

Regulation T, U or X” means Regulation T, U or X, respectively, of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof.

 

Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the notice requirement has been waived by regulation.

 

Requesting Lender” shall have the meaning assigned to such term in Section 3.12.

 

Required Lenders” means, at any time, Lenders having more than fifty percent (50%) of the Revolving Commitment, or if the Revolving Commitments have been terminated, Lenders having more than fifty percent (50%) of the aggregate principal Dollar Amount (determined as of the most recent Determination Date) of Loans outstanding (taking into account in each case Participation Interests or obligation to participate therein); provided that the Revolving Commitment of, and outstanding principal Dollar Amount (determined as of the most recent Determination Date) of Loans (taking into account Participation Interests therein) owing to, a Defaulting Lender shall be excluded for purposes hereof in making a determination of Required Lenders.

 

Requirement of Law” means, as to any Person, the certificate of incorporation and by-laws or other organizational or governing documents of such Person, and any law (whether statutory or common), treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or to which any of its property is subject.

 

Responsible Officer” means the Chief Executive Officer, President, Chief Financial Officer, the Controller, any Vice President and the Treasurer of the Borrower.

 

Revaluation Date” means each of the following: (a) each date of a making of a LIBOR Loan denominated in an Available Foreign Currency, (b) each date of a continuation of a LIBOR

 

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Loan denominated in an Available Foreign Currency; and (c) such additional dates as the Administrative Agent or the Required Lenders shall specify.

 

Revolving Commitment” means, with respect to each Lender, the commitment of such Lender to make Revolving Loans in an aggregate principal Dollar Amount at any time outstanding of up to such Lender’s Revolving Committed Amount as specified in Schedule 2.1(a), as such amount may be reduced from time to time in accordance with the provisions hereof.

 

Revolving Commitment Percentage” means, for each Lender, a fraction (expressed as a decimal) the numerator of which is the Revolving Commitment of such Lender at such time and the denominator of which is the Aggregate Revolving Committed Amount at such time. The initial Revolving Commitment Percentages are set out on Schedule 2.1 (a).

 

Revolving Committed Amount” means, collectively, the aggregate amount of all of the Revolving Commitments and, individually, the amount of each Lender’s Revolving Commitment as specified in Schedule 2.1(a).

 

Revolving Loans” shall have the meaning assigned to such term in Section 2.1 (a).

 

Revolving Note” or “Revolving Notes” means the promissory notes of the Borrower in favor of each of the Lenders evidencing the Revolving Loans and Competitive Loans in substantially the form attached as Schedule 2.1 (e), individually or collectively, as appropriate, as such promissory notes may be amended, modified, supplemented, extended, renewed or replaced from time to time.

 

S&P” means Standard & Poor’s Ratings Group, a division of McGraw Hill, Inc., or any successor or assignee of the business of such division in the business of rating securities.

 

Securitization Transaction” means any financing transaction or series of financing transactions pursuant to which a member of the Consolidated Group may sell, convey or otherwise transfer, or grant a security interest in, accounts, payment receivables, rights to future lease payments or residuals or similar rights to payment (the “securitization receivables”) to a special purpose subsidiary or affiliate (a “securitization subsidiary”) or any other Person.

 

Single Employer Plan” means any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan or a Multiple Employer Plan.

 

Spot Rate” means the rate quoted by Bank of America as the spot rate for the applicable currency for the purchase by Bank of America of such currency with another currency through its principal foreign exchange trading office at approximately 11:00 a.m., Charlotte, North Carolina time, on the date two Business Days prior to the date as of which the foreign exchange computation is made.

 

Subsidiary” means, as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power to elect a majority of the directors or other managers of such corporation, partnership, limited liability company or other entity (irrespective of whether or not at the time,

 

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any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) are at the time owned by such Person directly or indirectly through Subsidiaries. Unless otherwise identified, “Subsidiary” or “Subsidiaries” shall mean Subsidiaries of the Borrower.

 

Support Obligations” means, with respect to any Person, without duplication, any obligations of such Person (other than endorsements in the ordinary course of business of negotiable instruments for deposit or collection) guaranteeing or intended to guarantee any indebtedness of any other Person in any manner, whether direct or indirect, and including without limitation any obligation, whether or not contingent, (i) to purchase any such indebtedness or any Property constituting security therefor, (ii) to advance or provide funds or other support for the payment or purchase of any such indebtedness or to maintain working capital, solvency or other balance sheet condition of such other Person (including without limitation keep well agreements, maintenance agreements, comfort letters or similar agreements or arrangements) for the benefit of any holder of indebtedness of such other Person, (iii) to lease or purchase Property, securities or services primarily for the purpose of assuring the holder of such indebtedness, or (iv) to otherwise assure or hold harmless the holder of such indebtedness against loss in respect thereof. The amount of any Support Obligation hereunder shall (subject to any limitations set forth therein) be deemed to be an amount equal to the outstanding principal amount (or maximum principal amount, if larger) of the indebtedness in respect of which such Support Obligation is made.

 

Synthetic Lease” means any synthetic lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing product where the transaction is considered borrowed money indebtedness for tax purposes, but is classified as a operating lease under GAAP.

 

TARGET” means the Trans-European Automated Real-time Gross settlement Express Transfer system.

 

TARGET Business Day” means a day when TARGET is scheduled to be open for business.

 

Termination Date” means the date 364 days following the Effective Date.

 

Treaty on European Union” means the Treaty of Rome of March 25, 1957, as amended by the Single European Act 1986 and the Maastricht Treaty (which was signed at Maastricht on February 1, 1992 and came into force on November 1, 1993), as amended from time to time.

 

Utilization Fee” shall have the meaning assigned to such term in Section 3.5(d).

 

Utilization Period” means each calendar quarter, except that the initial Utilization Period shall commence on the Effective Date and the final Utilization Period shall end on the Termination Date.

 

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1.2 Computation of Time Periods and Dollar Equivalents.

 

For purposes of computation of periods of time hereunder, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding”.

 

References herein to minimum Dollar Amounts and integral multiples stated in Dollars, where they shall also be applicable to Foreign Currency, shall be deemed to refer to approximate Foreign Currency Equivalents.

 

1.3 Accounting Terms.

 

Except as otherwise expressly provided herein, all accounting terms used herein shall be interpreted, and all financial statements and certificates and reports as to financial matters required to be delivered to the Lenders hereunder shall be prepared, in accordance with GAAP applied on a consistent basis. All calculations made for the purposes of determining compliance with this Credit Agreement shall (except as otherwise expressly provided herein) be made by application of GAAP applied on a basis consistent with the most recent annual or quarterly financial statements delivered pursuant to Section 6.1 hereof (or, prior to the delivery of the first financial statements pursuant to Section 6.1 hereof, consistent with the annual audited financial statements referenced in Section 5.1(a) hereof); provided, however, if (a) the Borrower shall object to determining such compliance on such basis at the time of delivery of such financial statements due to any change in GAAP or the rules promulgated with respect thereto or (b) the Administrative Agent or the Required Lenders shall so object in writing within 30 days after delivery of such financial statements, then such calculations shall be made on a basis consistent with the most recent financial statements delivered by the Borrower to the Lenders as to which no such objection shall have been made.

 

1.4 Exchange Rates; Currency Equivalents.

 

(a) The Administrative Agent shall determine the Spot Rates as of each Revaluation Date to be used for calculating Dollar Equivalent amounts of Extensions of Credit and amounts outstanding hereunder denominated in Available Foreign Currencies. Such Spot Rates shall become effective as of such Revaluation Date and shall be the Spot Rates employed in converting any amounts between the applicable currencies until the next Revaluation Date to occur. Except for purposes of financial statements delivered by the Borrower hereunder or calculating financial covenants hereunder or except as otherwise provided herein, the applicable amount of any currency for purposes of the Credit Documents shall be such Dollar Equivalent amount as so determined by the Administrative Agent.

 

(b) Wherever in this Credit Agreement in connection with an Extension of Credit, conversion, continuation or prepayment of a Loan, an amount, such as a required minimum or multiple amount, is expressed in Dollars, but such Extension of Credit or Loan is denominated in an Available Foreign Currency, such amount shall be the relevant Foreign Currency Equivalent of such Dollar amount (rounded to the nearest 1,000 units of such Available Foreign Currency), as determined by the Administrative Agent.

 

1.5 Redenomination of Certain Available Foreign Currencies.

 

(a) Each obligation of the Borrower to make a payment denominated in the national currency unit of any member state of the European Union that adopts the Euro as its lawful

 

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currency after the date hereof shall be redenominated into Euro at the time of such adoption (in accordance with the EMU Legislation). If, in relation to the currency of any such member state, the basis of accrual of interest expressed in this Credit Agreement in respect of that currency shall be inconsistent with any convention or practice in the London interbank market for the basis of accrual of interest in respect of the Euro, such expressed basis shall be replaced by such convention or practice with effect from the date on which such member state adopts the Euro as its lawful currency; provided that if any Extension of Credit in the currency of such member state is outstanding immediately prior to such date, such replacement shall take effect, with respect to such Extension of Credit, at the end of the then current Interest Period.

 

(b) Each provision of this Credit Agreement shall be subject to such reasonable changes of construction as the Administrative Agent may from time to time specify to be appropriate to reflect the adoption of the Euro by any member state of the European Union and any relevant market conventions or practices relating to the Euro.

 

1.6 Times of Day. Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable).

 

ARTICLE II

 

CREDIT FACILITIES

 

2.1 Revolving Loans.

 

(a) Revolving Commitment. During the Commitment Period, subject to the terms and conditions hereof, each Lender severally agrees to make revolving credit loans in Dollars and Available Foreign Currencies (the “Revolving Loans”) to the Borrower from time to time in the amount of such Lender’s Revolving Commitment Percentage of such Revolving Loans for the purposes hereinafter set forth; provided that (i) with regard to the Lenders collectively, the aggregate principal Dollar Amount (determined as of the most recent Determination Date) of Loans outstanding at any time shall not exceed the Aggregate Revolving Committed Amount, (ii) with regard to each Lender individually, the aggregate principal Dollar Amount (determined as of the most recent Determination Date) of such Lender’s Revolving Commitment Percentage of Revolving Loans outstanding at any time shall not exceed such Lender’s Revolving Committed Amount, and (iii) the aggregate principal Dollar Amount (determined as of the most recent Determination Date) of Loans in Available Foreign Currencies shall not at any time exceed EIGHTY-FIVE MILLION DOLLARS ($85,000,000) (the “Foreign Currencies Committed Amount”). Revolving Loans may consist of Base Rate Loans or LIBOR Loans, or a combination thereof, as the Borrower may request, and Revolving Loans denominated in Available Foreign Currencies shall consist solely of LIBOR Loans, and may be repaid and reborrowed in accordance with the provisions hereof.

 

(b) Revolving Loan Borrowings.

 

(i) Notice of Borrowing. The Borrower shall request a Revolving Loan borrowing by written notice (or telephone notice promptly confirmed in writing) to the Administrative Agent not later than 11:00 A.M. (Charlotte, North Carolina time) on the Business Day of the requested borrowing in the case of Base Rate Loans denominated in

 

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Dollars, on the third Business Day prior to the date of the requested borrowing in the case of LIBOR Loans denominated in Dollars, and on the fifth Business Day prior to the date of the requested borrowing in the case of all Loans denominated in Available Foreign Currencies. Each such request for borrowing shall be irrevocable and shall specify (A) that a Revolving Loan is requested, (B) the date of the requested borrowing (which shall be a Business Day), (C) the currency and aggregate principal amount to be borrowed, and (D) whether the borrowing shall be comprised of Base Rate Loans, LIBOR Loans or a combination thereof, and if LIBOR Loans are requested, the Interest Period(s) therefor. If the Borrower shall fail to specify in any such Notice of Borrowing (I) an applicable Interest Period in the case of a LIBOR Loan, then such notice shall be deemed to be a request for an Interest Period of one month, or (II) the type of Revolving Loan requested, then such notice shall be deemed to be a request for a Base Rate Loan hereunder, in the case of Revolving Loans denominated in Dollars, or a LIBOR Loan in any other case. The Administrative Agent shall give notice to each Lender promptly upon receipt of each Notice of Borrowing pursuant to this Section 2.1(b)(i), the contents thereof and each such Lender’s share of any borrowing to be made pursuant thereto.

 

(ii) Minimum Amounts. Each Revolving Loan shall be in a minimum aggregate principal Dollar Amount of $5,000,000, in the case of LIBOR Loans, or $1,000,000 (or the remaining Revolving Committed Amount, if less), in the case of Base Rate Loans, and integral multiples of $1,000,000 in excess thereof.

 

(iii) Advances. Each Lender will make its Revolving Commitment Percentage of each Revolving Loan borrowing available to the Administrative Agent for the account of the Borrower as specified in Section 3.17(b). or in such other manner as the Administrative Agent may specify in writing, by 12:00 noon (Charlotte, North Carolina time or local time where the deposit is to be made in Available Foreign Currency) on the date specified in the applicable Notice of Borrowing in funds immediately available to the Administrative Agent. Such borrowing will then be made available to the Borrower by the Administrative Agent by crediting the account designated by the Borrower with the aggregate of the amounts made available to the Administrative Agent by the Lenders and in like funds as received by the Administrative Agent.

 

(c) Repayment. The principal amount of all Revolving Loans shall be due and payable in full on the earlier of (i) the Termination Date and (ii) the date that the Loans are accelerated pursuant to Section 8.2. Additionally, Revolving Loan payments may be due in part in accordance with Section 3.3(b).

 

(d) Interest. Subject to the provisions of Section 3.1:

 

(i) Base Rate Loans. During such periods as Revolving Loans shall comprise in whole or in part Base Rate Loans, such Base Rate Loans shall bear interest at a per annum rate equal to the Base Rate plus the Applicable Rate;

 

(ii) LIBOR Loans. During such periods as Revolving Loans shall comprise in whole or in part LIBOR Loans, such LIBOR Loans shall bear interest at a per annum rate equal to the LIBOR Rate plus the Applicable Rate.

 

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Interest on Revolving Loans shall be payable in arrears on each applicable Interest Payment Date (or at such other times as may be specified herein).

 

(e) Revolving Notes. The Revolving Loans shall, at the option of each Lender, be evidenced by a duly executed Revolving Note in favor of each Lender in the form of Schedule 2.1(e) attached hereto.

 

(f) Maximum Number of LIBOR Loans. The Borrower will be limited to a maximum number of eight (8) LIBOR Loans outstanding at any time. For purposes hereof, LIBOR Loans with separate or different Interest Periods will be considered as separate LIBOR Loans even if their Interest Periods expire on the same date.

 

(g) Term Out Option. The Borrower may convert the outstanding Revolving Loans to a term loan effective on the Termination Date, which shall be due and payable in full on the date that is 364 days subsequent to such Termination Date; provided that (i) the Borrower shall have delivered to the Administrative Agent a written notice electing such conversion at least thirty (30) days prior to the Termination Date and (ii) no Event of Default exists and is continuing on the date the notice is provided or on the Termination Date. Initially, the Applicable Rate on Loans outstanding during the period of the term loan as set forth herein shall be determined based upon the Debt Rating on the Termination Date plus the Utilization Fee. Thereafter, the Applicable Rate shall be determined and adjusted quarterly on the date five (5) Business Days after the next Rate Determination Date based on the Debt Rating in effect on the last day of the preceding calendar quarter and shall be effective until the next succeeding Rate Determination Date. A Facility Fee will be payable during such period. No additional borrowings may be made during the period of the term loan and any amounts repaid on the Revolving Loans outstanding during such period may not be reborrowed. The Administrative Agent shall promptly forward any written notice received from the Borrower pursuant to this subsection to the Lenders.

 

2.2 Competitive Loan Subfacility.

 

(a) Competitive Loans. Subject to the terms and conditions hereof and in reliance upon the representations and warranties set forth herein, the Borrower may, during the Commitment Period, request and each Lender may, in its sole discretion, agree to make, Competitive Loans in Dollars and Available Foreign Currencies to the Borrower; provided, however, that (i) the aggregate principal Dollar Amount (determined as of the most recent Determination Date) of outstanding Competitive Loans shall not at any time exceed SIXTY-FIVE MILLION DOLLARS ($65,000,000) (the “Competitive Loan Maximum Amount”), and (ii) with regard to the Lenders collectively, the aggregate principal Dollar Amount (determined as of the most recent Determination Date) of Loans outstanding at any time shall not exceed the Aggregate Revolving Committed Amount. Each Competitive Loan shall be in an aggregate principal Dollar Amount not less than $5,000,000 and integral multiples of $1,000,000 in excess thereof (or the remaining portion of the Competitive Loan Maximum Amount, if less).

 

(b) Competitive Bid Requests. The Borrower may solicit Competitive Bids by delivery of a Competitive Bid Request substantially in the form of Schedule 2. 2(b)-1 to the Administrative Agent by 12:00 Noon (Charlotte, North Carolina time) on a Business Day not less than three (3) nor more than four (4) Business Days prior to the date of a requested

 

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Competitive Loan borrowing. A Competitive Bid Request shall specify (i) the date of the requested Competitive Loan borrowing (which shall be a Business Day), (ii) the currency and amount of the requested Competitive Loan borrowing and (iii) the applicable Interest Periods requested. The Administrative Agent shall, promptly following its receipt of a Competitive Bid Request under this subsection (b), notify the affected Lenders of its receipt and the contents thereof and invite the Lenders to submit Competitive Bids in response thereto. The form of such notice is provided in Schedule 2.2(b)-2. No more than three (3) Competitive Bid Requests (i.e., the Borrower may request Competitive Bids for no more than three (3) different Interest Periods at any one time) shall be submitted at any one time and Competitive Bid Requests may be made no more frequently than once every five (5) Business Days.

 

(c) Competitive Bid Procedure. Each Lender may, in its sole discretion, make one or more Competitive Bids to the Borrower in response to a Competitive Bid Request. Each Competitive Bid must be received by the Administrative Agent not later than 10:00 A.M. (Charlotte, North Carolina time) on the Business Day next succeeding the date of receipt by the Administrative Agent of the related Competitive Bid Request. A Lender may offer to make all or part of the requested Competitive Loan borrowing and may submit multiple Competitive Bids in response to a Competitive Bid Request. The Competitive Bid shall specify (i) the particular Competitive Bid Request as to which the Competitive Bid is submitted, (ii) the currency and the minimum (which shall be not less than $1,000,000 and integral multiples of $500,000 in excess thereof) and maximum principal Dollar Amounts of the requested Competitive Loan or Loans as to which the Lender is willing to make, and (iii) the applicable interest rate or rates and Interest Period or Periods therefor. The form of such Competitive Bid is provided in Schedule 2.2(c). A Competitive Bid submitted by a Lender in accordance with the provisions hereof shall be irrevocable. The Administrative Agent shall promptly notify, but in no event later than 10:30 A.M. (Charlotte, North Carolina time), the Borrower of all Competitive Bids made and the terms thereof. The Administrative Agent shall send a copy of each of the Competitive Bids to the Borrower for its records as soon as practicable (and in any event within two (2) Business Days following receipt of the bids).

 

(d) Submission of Competitive Bids by Agent. If the Administrative Agent, in its capacity as a Lender, elects to submit a Competitive Bid in response to any Competitive Bid Request, it shall submit such Competitive Bid directly to the Borrower one-half of an hour earlier than the latest time at which the other Lenders are required to submit their Competitive Bids to the Administrative Agent in response to such Competitive Bid Request pursuant to subsection (c) above.

 

(e) Acceptance of Competitive Bids. The Borrower may, in its sole and absolute discretion, subject only to the provisions of this subsection (e), accept or refuse any Competitive Bid offered to it. To accept a Competitive Bid, the Borrower shall give telephone notification, which shall be binding, by 11:30 A.M. (Charlotte, North Carolina time) and confirmed with written notification substantially in the form of Schedule 2.2(e) of its acceptance of any or all such Competitive Bids to the Administrative Agent by 1:30 P.M. (Charlotte, North Carolina time) on the latest date on which notice of election to make a Competitive Bid is to be given to the Administrative Agent by the Lenders; provided, however, (i) the failure by the Borrower to give timely notice of its acceptance of a Competitive Bid shall be deemed to be a refusal thereof, (ii) the Borrower may accept Competitive Bids within any one Interest Period only in ascending order of rates, (iii) the aggregate amount of Competitive Bids accepted by the Borrower shall not

 

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exceed the principal amount specified in the Competitive Bid Request, (iv) the Borrower may accept a portion of a Competitive Bid in the event, and to the extent, acceptance of the entire amount thereof would cause the Borrower to exceed the principal amount specified in the Competitive Bid Request, subject however to the minimum amounts provided herein (and provided that where two or more Lenders submit such a Competitive Bid at the same Competitive Bid Rate and for the same Interest Period, then pro rata between or among such Lenders) and (v) no bid shall be accepted for a Competitive Loan unless such Competitive Loan is in a minimum principal Dollar Amount of $1,000,000 and integral multiples of $500,000 in excess thereof, except that where a portion of a Competitive Bid is accepted in accordance with the provisions of subsection (iv) hereof, then in a minimum principal Dollar Amount of $500,000 and integral multiples of $100,000 in excess thereof (but not in any event less than the minimum amount specified in the Competitive Bid), and in calculating the pro rata allocation of acceptances of portions of multiple bids at a particular Competitive Bid Rate pursuant to subsection (iv) hereof, the amounts shall be rounded to integral multiples of $100,000 in a manner which shall be in the discretion of the Borrower. A notice of acceptance of a Competitive Bid given by the Borrower in accordance with the provisions hereof shall be irrevocable. The Administrative Agent shall, not later than 12:00 Noon (Charlotte, North Carolina time) on the date of receipt by the Administrative Agent of a notification from the Borrower of its acceptance and/or refusal of Competitive Bids, notify each affected Lender of its receipt and the contents thereof. Upon its receipt from the Administrative Agent of notification of the Borrower’s acceptance of its Competitive Bid in accordance with the terms of this subsection (e), each successful bidding Lender will thereupon become bound, subject to the other applicable conditions hereof, to make the Competitive Loan in respect of which its bid has been accepted.

 

(f) Funding of Competitive Loans. Each Lender which is to make a Competitive Loan shall make its Competitive Loan borrowing available to the Administrative Agent for the account of the Borrower at the office of the Administrative Agent specified in Schedule 10.1, or at such other office as the Administrative Agent may designate in writing, by 1:30 P.M. (Charlotte, North Carolina time) on the date specified in the Competitive Bid Request in funds immediately available to the Administrative Agent. Such borrowing will then be made available to the Borrower by crediting the account designated by the Borrower.

 

(g) Maturity of Competitive Loans. Each Competitive Loan shall mature and be due and payable in full on the last day of the Interest Period applicable thereto, unless accelerated sooner pursuant to Section 8.2. Unless the Borrower shall give notice to the Administrative Agent otherwise, the Borrower shall be deemed to have requested a Revolving Loan borrowing in the principal amount and currency of the maturing Competitive Loan, the proceeds of which will be used to repay such Competitive Loan.

 

(h) Interest on Competitive Loans. Subject to the provisions of Section 3.1, Competitive Loans shall bear interest in each case at the Competitive Bid Rate applicable thereto. Interest on Competitive Loans shall be payable in arrears on each Interest Payment Date.

 

(i) Competitive Loan Notes. The Competitive Loans made by each Lender shall be evidenced by a Revolving Note.

 

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ARTICLE III

 

OTHER PROVISIONS RELATING TO CREDIT FACILITIES

 

3.1 Default Rate. Upon the occurrence, and during the continuance, of an Event of Default, any principal of and, to the extent permitted by law, interest on the Loans and any other amounts then due and owing hereunder or under the other Credit Documents shall, at the discretion of the Required Lenders or the Administrative Agent, bear interest, payable on demand, at a fluctuating interest rate per annum at all times equal to the Default Rate.

 

3.2 Extension and Conversion. The Borrower shall have the option, on any Business Day, to extend existing Loans into a subsequent permissible Interest Period or to convert Loans into Loans of another interest rate type; provided, however, that (i) except as provided in Sections 3.8, 3.9 and 3.11, LIBOR Loans may be converted into Base Rate Loans only on the last day of the Interest Period applicable thereto, (ii) any LIBOR loan may be extended, and any Base Rate Loan may be converted to a LIBOR Loan only if the conditions in Section 4.2 have been satisfied, (iii) Loans extended as, or converted into, LIBOR Loans shall be subject to the terms of the definition of “Interest Period” set forth in Section 1.1 and shall be in such minimum amounts as provided in Section 2.1(b)(ii), and (iv) any request for extension of or conversion to a LIBOR Loan which shall fail to specify an Interest Period shall be deemed to be a request for an Interest Period of one month. Each such extension or conversion shall be effected by the Borrower by giving a Notice of Extension/Conversion (or telephone notice promptly confirmed in writing) to the Administrative Agent prior to 11:00 A.M. (Charlotte, North Carolina time) on the Business Day of, in the case of the conversion of a LIBOR Loan into a Base Rate Loan, and on the third Business Day prior to, in the case of the extension of a LIBOR Loan as, or conversion of a Base Rate Loan into, a LIBOR Loan, the date of the proposed extension or conversion, specifying (A) the date of the proposed extension or conversion, (B) the Loans to be so extended or converted, (C) the types of Loans into which such Loans are to be converted and, if appropriate, (D) the applicable Interest Periods with respect thereto. Each request for extension or conversion shall be irrevocable and shall constitute a representation and warranty by the Borrower of the matters specified in subsections (a) through (d) of Section 4.2. In the event the Borrower fails to request extension of or conversion to any LIBOR Loan in accordance with this Section, or any such conversion or extension is not permitted or required by this Section, then (i) in the case of a LIBOR Loan denominated in Dollars, such LIBOR Loan shall be continued as a LIBOR Loan denominated in Dollars at the end of the Interest Period applicable thereto for an Interest Period of one month, and (ii) in the case of LIBOR Loans in an Available Foreign Currency, such LIBOR Loan shall be automatically continued as a LIBOR Loan in the same Available Foreign Currency, for an Interest Period of one month. The Administrative Agent shall give each Lender notice as promptly as practicable of any such proposed extension or conversion affecting any Loan.

 

3.3 Prepayments.

 

(a) Voluntary Prepayments. Loans may be repaid in whole or in part without premium or penalty; provided that (i) LIBOR Loans and Competitive Loans may be prepaid only upon three (3) Business Days’ prior written notice to the Administrative Agent, and Base Rate Loans may be prepaid only upon at least one (1) Business Day’s prior written notice to the Administrative Agent, (ii) prepayments of LIBOR Loans must be accompanied by payment of

 

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any amounts owing under Section 3.14, and (iii) partial prepayments shall be in minimum principal Dollar Amounts of $5,000,000, and in integral multiples of $1,000,000 in excess thereof.

 

(b) Mandatory Prepayments. If at any time, (A) the aggregate principal Dollar Amount (determined as of the most recent Determination Date) of Loans shall exceed the Aggregate Revolving Committed Amount, (B) the aggregate principal Dollar Amount (determined as of the most recent Determination Date) of Loans in Available Foreign Currencies shall exceed the Foreign Currencies Committed Amount or (C) the aggregate principal Dollar Amount (determined as of the most recent Determination Date) of Competitive Loans shall exceed the Competitive Loan Maximum Amount, the Borrower shall immediately make payment on the Loans in an amount sufficient to eliminate such excess amount.

 

(c) Application of Mandatory Repayments. Mandatory prepayments made pursuant to Section 3.3(b) shall be applied first to Revolving Loans which are Base Rate Loans, and then to Revolving Loans which are LIBOR Loans in direct order of Interest Period maturities, and then (after all Revolving Loans have been repaid) to Competitive Loans in direct order of Interest Period maturities. All mandatory prepayments made pursuant to Section 3.3(b) shall be subject to Section 3.14 and be accompanied by interest on the principal amount prepaid through the date of prepayment. Amounts prepaid hereunder may be reborrowed in accordance with the provisions hereof.

 

3.4 Termination and Reduction of the Revolving Commitment.

 

(a) Voluntary Reductions. The Revolving Commitments may be terminated or permanently reduced by the Borrower in whole or in part upon three (3) Business Days’ prior written notice to the Administrative Agent, provided that (i) after giving effect to any voluntary reduction, the aggregate principal Dollar Amount (determined as of the most recent Determination Date) of Loans outstanding shall not exceed the Aggregate Revolving Committed Amount, as reduced, and (ii) partial reductions shall be in minimum principal Dollar Amounts of $5,000,000, and in integral multiples of $1,000,000 in excess thereof.

 

(b) Mandatory Reduction. The Revolving Commitments hereunder shall terminate on the Termination Date.

 

3.5 Fees.

 

(a) Facility Fee. In consideration of the Revolving Commitments hereunder, the Borrower agrees to pay to the Administrative Agent for the ratable benefit of each Lender in accordance with its Applicable Rate a facility fee (the “Facility Fee”) equal to the Applicable Rate multiplied by the average daily Aggregate Revolving Committed Amount in effect from time to time, regardless of usage. The Facility Fee shall be payable quarterly in arrears on the 15th day following the last day of each calendar quarter for the immediately preceding quarter (or portion thereof), calculated on an actual/360-day basis, beginning with the first such date to occur after the Effective Date and ending on the later of (i) the Termination Date and (ii) if applicable, the extended repayment date set forth in Section 2.1(g). The Facility Fee shall be calculated quarterly in arrears, and if there is any change in the Applicable Rate during any

 

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quarter, the actual daily amount shall be computed and multiplied by the Applicable Rate separately for each period during such quarter that such Applicable Rate was in effect.

 

(b) Competitive Bid Request Fee. The Borrower agrees to pay to the Administrative Agent such fees (the “Competitive Bid Request Fee”) in connection with Competitive Bid Requests hereunder as may be agreed upon between the Borrower and the Administrative Agent. Unless otherwise agreed, the Competitive Bid Request Fee shall be paid quarterly in arrears.

 

(c) Administrative Agent’s Fees. The Borrower agrees to pay to the Administrative Agent, for its own account, an annual administrative fee and such other fees, if any, referred to in the Fee Letter (collectively, the “Administrative Agent’s Fees”).

 

(d) Utilization Fee. The Borrower agrees to pay to the Administrative Agent for the account of each Lender in accordance with its Revolving Commitment a utilization fee (the “Utilization Fee”) equal to the Applicable Rate multiplied by the average daily Loans outstanding under this Agreement when the Average Outstanding Loans for any Utilization Period equals or exceeds 50% of the average of the daily Aggregate Revolving Committed Amount for such Utilization Period. The Utilization Fee shall be due and payable quarterly in arrears on the 15th day following the last day of each calendar quarter for the immediately preceding quarter (or portion thereof), calculated on an actual/360-day basis, beginning with the first such date to occur after the Effective Date. The Utilization Fee shall be calculated quarterly in arrears and if there is any change in the Applicable Rate during any quarter, the daily amount shall be computed and multiplied by the Applicable Rate for each period during which such Applicable Rate was in effect.

 

3.6 LIBOR Reserve Compensation. For so long as any Lender maintains reserves against “eurocurrency liabilities” (or any other category of liabilities which includes deposits by reference to which the interest rate on any LIBOR Loans is determined), and, as a result, the cost to such Lender of making or maintaining any of its LIBOR Loans is increased, then such Lender may require the Borrower to pay, contemporaneously with each payment of interest on such LIBOR Loans of such Lender, additional interest at a rate per annum up to but not exceeding the excess of (i) (A) the applicable LIBOR Rate divided by (B) one minus the LIBOR Reserve Percentage over (ii) the applicable LIBOR Rate. Any Lender wishing to require payment of such additional interest (x) shall so notify the Borrower and the Administrative Agent, in which case such additional interest on the LIBOR Loans of such Lender shall be payable to such Lender at the place indicated in such notice with respect to each Interest Period commencing at least three (3) Business Days after the giving of such notice and (y) shall furnish to the Borrower at least five (5) Business Days prior to each date on which interest is payable on the LIBOR Loans a certificate setting forth the amount to which such Lender is then entitled under this Section 3.6 (which shall be consistent with such Lender’s good faith estimate of the level at which the related reserves are maintained by it). Each such certificate shall be accompanied by such information as the Borrower may reasonably request as to the computation set forth therein.

 

3.7 Capital Adequacy. If any Lender has determined, after the date hereof, that the adoption or the becoming effective of, or any change in, or any change by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof in the interpretation or administration of, any applicable law, rule or regulation regarding capital adequacy, or compliance by such Lender with any request or directive regarding capital

 

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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 such Lender’s capital or assets as a consequence of its commitments or obligations hereunder to a level below that which such Lender could have achieved but for such adoption, effectiveness, change or compliance (taking into consideration such Lender’s policies with respect to capital adequacy), then, upon notice from such Lender to the Borrower, the Borrower shall be obligated to pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction. Each determination by any such Lender of amounts owing under this Section shall, absent manifest error, be conclusive and binding on the parties hereto. Such Lender will, upon request, provide a certificate in reasonable detail as to the amount of such increased cost or reduction in amount received and method of calculation.

 

3.8 Unavailability. In the event, and on each occasion, that on the day two (2) Business Days prior to the commencement of any Interest Period for a LIBOR Loan of any amount, Interest Period or currency, the Administrative Agent shall have determined or shall have been notified by the Required Lenders (a) that deposits in the relevant amount in the relevant currency and for the relevant Interest Period are not available in the relevant market to any Lender, or that reasonable means do not exist for ascertaining the LIBOR Rate for any such Loan, or (b) that the rates at which such deposits are being offered will not adequately and fairly reflect the cost to any Lender of making or maintaining its LIBOR Loan during such Interest Period, the Administrative Agent shall promptly give written or telecopy notice of such determination to the Borrower and the Lenders. In the event of any such determination, until the Administrative Agent shall have advised the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, any request by the Borrower for a LIBOR Loan of the affected amount, Interest Period or currency, or a conversion to or continuation of a LIBOR Loan of the affected amount, Interest Period or currency shall be deemed rescinded. If the Administrative Agent at any time determines that: (i) the euro has ceased to be utilized as the basic accounting unit of the European Community; (ii) for reasons affecting the market in euros generally, euros are not freely traded between banks internationally; or (iii) it is illegal, impossible or impracticable for payments to be made hereunder in euro, then the Administrative Agent may, in its discretion declare (such declaration to be binding on all the parties hereto) that any payment made or to be made thereafter which, but for this provision, would have been payable in the euro shall be made in a component currency of the euro or Dollars (as selected by the Administrative Agent (the “Selected Currency”‘) and the amount to be so paid shall be calculated on the basis of the equivalent of the euro in the Selected Currency). Each determination by the Administrative Agent hereunder shall be conclusive absent manifest error.

 

3.9 Illegality.

 

(a) Notwithstanding any other provision herein, if (i) the adoption of or any change in any Requirement of Law or in the interpretation or application thereof occurring after the Effective Date shall make it unlawful for any Lender to make or maintain LIBOR Loans as contemplated by this Credit Agreement, or (ii) there shall have occurred any change in national or international financial, political or economic conditions (including the imposition of or any change in exchange controls) or currency exchange rates which would make it unlawful or impossible for any Lender to make Loans denominated in any Available Foreign Currency to the Borrower, as contemplated by this Credit Agreement, then such Lender, together with Lenders

 

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giving notice under Sections 3.8 and 3.10, shall be an “Affected Lender” and by written notice to the Borrower and to the Administrative Agent:

 

(i) such Lender may declare that LIBOR Loans (in the affected currency or currencies) will not thereafter (for the duration of such unlawfulness or impossibility) be made by such Lender hereunder, whereupon any request for a LIBOR Loan (in the affected currency or currencies) shall, as to such Lender only (A) if such Loan is not a Foreign Currency Loan, be deemed a request for a Base Rate Loan (unless it should also be illegal for the Affected Lender to provide a Base Rate Loan, in which case such Loan shall bear interest at a commensurate rate to be agreed upon by the Administrative Agent and the Affected Lender, and so long as no Event of Default shall have occurred and be continuing, the Borrower), unless such declaration shall be subsequently withdrawn and (B) if such Loan is a Foreign Currency Loan, be deemed to have been withdrawn, unless such declaration shall be subsequently withdrawn; and

 

(ii) such Lender may require that all outstanding LIBOR Loans or Foreign Currency Loans (in the affected currency or currencies), as the case may be, made by it be (A) if such Loans are not Foreign Currency Loans, converted to Base Rate Loans, in which event all such LIBOR Loans shall be automatically converted to Base Rate Loans as of the effective date of such notice as provided in paragraph (b) below or (B) if such Loans are Foreign Currency Loans, repaid immediately, in which event all such Foreign Currency Loans (in the affected currency or currencies) shall be required to be repaid in full by the Borrower as of the effective date of such notice as provided in paragraph (b) below.

 

In the event any Lender shall exercise its rights under clauses (i) or (ii) above with respect to any Loans with are not Foreign Currency Loans, all payments and prepayments of principal which would otherwise have been applied to repay the LIBOR Loans that would have been made by such Lender or the converted LIBOR Loans of such Lender shall instead be applied to repay the Base Rate Loans made by such Lender in lieu of, or resulting from the conversion, of such LIBOR Loans.

 

(b) For purposes of this Section 3.9. a notice to the Borrower by any Lender shall be effective as to each such Loan, if lawful, on the last day of the Interest Period currently applicable to such Loan; in all other cases such notice shall be effective on the date of receipt by the Borrower.

 

3.10 Requirements of Law. If, after the date hereof, the adoption of or any change in any Requirement of Law or in the interpretation or application thereof applicable to any Lender, or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority, in each case made subsequent to the Effective Date (or, if later, the date on which such Lender becomes a Lender):

 

(a) shall subject such Lender to any tax of any kind whatsoever with respect to any LIBOR Loans made by it or its obligation to make LIBOR Loans, or change the basis of taxation of payments to such Lender in respect thereof (except for (i) Non-Excluded Taxes covered by Section 3.13 (including Non-Excluded Taxes imposed solely by reason of any failure of such Lender to comply with its obligations under Section 3.13(b)) and (ii) changes in taxes measured

 

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by or imposed upon the overall net income, or franchise tax (imposed in lieu of such net income tax), of such Lender or its applicable lending office, branch, or any affiliate thereof));

 

(b) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender which is not otherwise included in the determination of the LIBOR Rate hereunder; or

 

(c) shall impose on such Lender any other condition (excluding any tax of any kind whatsoever);

 

and the result of any of the foregoing is to increase the cost to such Lender, by an amount which such Lender deems to be material, of making, converting into, continuing or maintaining LIBOR Loans or to reduce any amount receivable hereunder in respect thereof, then, in any such case, upon notice to the Borrower from such Lender, through the Administrative Agent, in accordance herewith, the Borrower shall be obligated to promptly pay such Lender, upon its demand, any additional amounts necessary to compensate such Lender for such increased cost or reduced amount receivable, provided that, in any such case, the Borrower may elect to convert the LIBOR Loans made by such Lender hereunder to Base Rate Loans by giving the Administrative Agent at least one Business Day’s notice of such election, in which case the Borrower shall promptly pay to such Lender, upon demand, without duplication, such amounts, if any, as may be required pursuant to Section 3.13. If any Lender becomes entitled to claim any additional amounts pursuant to this subsection, it shall provide prompt notice thereof to the Borrower, through the Administrative Agent, certifying (x) that one of the events described in this paragraph (a) has occurred and describing in reasonable detail the nature of such event, (y) as to the increased cost or reduced amount resulting from such event and (z) as to the additional amount demanded by such Lender and a reasonably detailed explanation of the calculation thereof. Such a certificate as to any additional amounts payable pursuant to this subsection submitted by such Lender, through the Administrative Agent, to the Borrower shall be conclusive and binding on the parties hereto in the absence of manifest error. This covenant shall survive the termination of this Credit Agreement and the payment of the Loans and all other amounts payable hereunder.

 

3.11 Inability To Determine Interest Rate. If prior to the first day of any Interest Period, the Administrative Agent shall have reasonably determined that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the LIBOR Rate for such Interest Period, the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the Lenders as soon as practicable thereafter. If such notice is given (a) any Foreign Currency Loans requested to be made on the first day of such Interest Period shall be made, at the sole option of the Borrower, in Dollars as Base Rate Loans or such request shall be cancelled, (b) any affected LIBOR Loans requested to be made on the first day of such Interest Period shall be made, at the sole option of the Borrower, in Dollars as Base Rate Loans and (c) any affected Loans that were to have been converted on the first day of such Interest Period to or continued as LIBOR Loans shall be converted to or continued, at the sole option of the Borrower, in Dollars as Base Rate Loans. Until such notice has been withdrawn by the Administrative Agent, no further LIBOR Loans in the affected

 

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currency shall be made or continued as such, nor shall the Borrower have the right to convert Base Rate Loans to such affected LIBOR Loans.

 

3.12 Replacement of Lenders. If any Lender requests compensation pursuant to Section 3.6, 3.7, 3.10 or 3.13, or any Lender’s obligation to make or continue, or to convert Loans of any type into the other type of Loan, shall be suspended pursuant to Section 3.8, 3.9 or 3.11 (any such Lender requesting such compensation, or whose obligations are so suspended, being herein called a “Requesting Lender”), the Borrower, upon three Business Days’ notice, may require that such Requesting Lender transfer all of its right, title and interest under this Credit Agreement and such Requesting Lender’s Revolving Note to any bank or other financial institution (a “Proposed Lender”) identified by the Borrowers that is reasonably satisfactory to the Administrative Agent (i) if such Proposed Lender agrees to assume all of the obligations of such Requesting Lender hereunder, and to purchase all of such Requesting Lender’s Loans hereunder for consideration equal to the aggregate outstanding principal amount of such Requesting Lender’s Loans, together with interest accrued thereon to the date of such purchase, and satisfactory arrangements are made for payment to such Requesting Lender of all other amounts payable hereunder to such Requesting Lender on or prior to the date of such transfer (including any fees accrued hereunder and any amounts that would be payable under Article III as if all of such Requesting Lender’s Loans were being prepaid in full on such date) and (ii) if such Requesting Lender has requested compensation pursuant to Section 3.6, 3.7, 3.10 or 3.13, such Proposed Lender’s aggregate requested compensation, if any, pursuant to said Section 3.6, 3.7 or 3.10 with respect to such Requesting Lender’s Loans is lower than that of the Requesting Lender. Subject to the provisions of Section 10.3, such Proposed Lender shall be a “Lender” for all purposes hereunder. Without prejudice to the survival of any other agreement of the Borrower hereunder the agreements of the Borrower contained in Sections 3.6, 3.7, 3.10, 3.13 and 10.5 (without duplication of any payments made to such Requesting Lender by the Borrower or the Proposed Lender) shall survive for the benefit of such Requesting Lender under this Section 3.12 with respect to the time prior to such replacement.

 

3.13 Taxes.

 

(a) Except as provided below in this subsection, all payments made by the Borrower under this Credit Agreement and any Notes shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any court, or governmental body, agency or other official, excluding (A) taxes measured by or imposed upon the overall net income of any Lender or its applicable lending office, or any branch or affiliate thereof, and (B) all franchise taxes, branch taxes, taxes on doing business or taxes on the overall capital or net worth of any Lender or its applicable lending office, or any branch or affiliate thereof, in each case imposed in lieu of net income taxes, imposed: (i) by the jurisdiction under the laws of which such Lender, applicable lending office, branch or affiliate is organized or is located, or in which its principal executive office is located, or any nation within which such jurisdiction is located or any political subdivision thereof; or (ii) by reason of any present or former connection between the jurisdiction imposing such tax and such Lender, applicable lending office, branch or affiliate other than a connection arising solely from such Lender having executed, delivered or performed its obligations, or received payment under or enforced, this Credit Agreement or any Notes. If any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or withholdings

 

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(“Non-Excluded Taxes”) are required to be withheld from any amounts payable to the Administrative Agent or any Lender hereunder or under any Notes, (A) the amounts so payable to the Administrative Agent or such Lender shall be increased to the extent necessary to yield to the Administrative Agent or such Lender (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Credit Agreement and any Notes, provided, however, that the Borrower shall be entitled to deduct and withhold any Non-Excluded Taxes and shall not be required to increase any such amounts payable to any Lender that is not incorporated under the laws of the United States of America or a state thereof if such Lender fails to comply with the requirements of paragraph (b) of this subsection whenever any Non-Excluded Taxes are payable by the Borrower, and (B) as promptly as possible thereafter the Borrower shall send to the Administrative Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an original official receipt received by the Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent the required receipts or other required documentary evidence, the Borrower shall indemnify the Administrative Agent and the Lenders for any incremental taxes, interest or penalties that may become payable by the Administrative Agent or any Lender as a result of any such failure. The agreements in this subsection shall survive the termination of this Credit Agreement and the payment of the Loans and all other amounts payable hereunder.

 

(b) Each Lender that is not incorporated under the laws of the United States of America or a state thereof shall:

 

(i) (A) on or before the date of any payment by the Borrower under this Credit Agreement or Notes to such Lender, deliver to the Borrower and the Administrative Agent two (2) duly completed copies of applicable United States Internal Revenue Service Form W-8BEN or W-8ECI, or successor applicable form, as the case may be, certifying that it is entitled to receive payments under this Credit Agreement and any Notes without deduction or withholding of any United States federal income taxes;

 

(B) deliver to the Borrower and the Administrative Agent two (2) further copies of any such form or certification on or before the date that any such form or certification expires or becomes obsolete and after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrower; and

 

(C) obtain such extensions of time for filing and complete such forms or certifications as may reasonably be requested by the Borrower or the Administrative Agent; or

 

(ii) in the case of any such Lender that is not a “bank” within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code, (i) represent to the Borrower (for the benefit of the Borrower and the Administrative Agent) that it is not a bank within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code, (ii) agree to furnish to the Borrower on or before the date of any payment by the Borrower, with a copy to the Administrative Agent two (2) accurate and complete original signed copies of Internal Revenue Service Form W-8BEN, or successor applicable form certifying to such

 

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Lender’s legal entitlement at the date of such certificate to an exemption from U.S. withholding tax under the provisions of Section 881(c) of the Internal Revenue Code with respect to payments to be made under this Credit Agreement and any Notes (and to deliver to the Borrower and the Administrative Agent two (2) further copies of such form on or before the date it expires or becomes obsolete and after the occurrence of any event requiring a change in the most recently provided form and, if necessary, obtain any extensions of time reasonably requested by the Borrower or the Administrative Agent for filing and completing such forms), and (iii) agree, to the extent legally entitled to do so, upon reasonable request by the Borrower, to provide to the Borrower (for the benefit of the Borrower and the Administrative Agent) such other forms as may be reasonably required in order to establish the legal entitlement of such Lender to an exemption from withholding with respect to payments under this Credit Agreement and any Notes;

 

unless in any such case any change in treaty, law or regulation has occurred after the date such Person becomes a Lender hereunder which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender so advises the Borrower and the Administrative Agent. Each Person that shall become a Lender or a participant of a Lender pursuant to Section 10.3 shall, upon the effectiveness of the related transfer, be required to provide all of the forms, certifications and statements required pursuant to this subsection, provided that in the case of a participant of a Lender the obligations of such participant of a Lender pursuant to this subsection (b) shall be determined as if the participant of a Lender were a Lender except that such participant of a Lender shall furnish all such required forms, certifications and statements to the Lender from which the related participation shall have been purchased.

 

3.14 Indemnity. The Borrower shall pay to each Lender and hold each Lender harmless from any loss or expense which such Lender may sustain or incur (excluding loss of profit and other than through such Lender’s gross negligence or willful misconduct) as a consequence of (a) default by the Borrower in making a borrowing of, conversion into or continuation of LIBOR Loans and Competitive Loans after the Borrower has given a notice requesting the same in accordance with the provisions of this Credit Agreement, (b) default by the Borrower in making any prepayment of a LIBOR Loan or a Competitive Loan after the Borrower has given a notice thereof in accordance with the provisions of this Credit Agreement or (c) the making of a prepayment of LIBOR Loans or Competitive Loans on a day which is not the last day of an Interest Period with respect thereto. With respect to LIBOR Loans and Competitive Loans, such payment may include an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of the applicable Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Loans provided for herein (excluding, however, the Applicable Rate included therein, if any) over (ii) the amount of interest (as reasonably determined by such Lender) which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank LIBOR market (but excluding loss of profits). The covenants of the Borrower set forth in this Section 3.14 shall survive the termination of this Credit Agreement and the payment of the Loans and all other amounts payable hereunder.

 

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3.15 Pro Rata Treatment. Except to the extent otherwise provided herein:

 

(a) Loans. Each Revolving Loan, each payment or prepayment of principal of any Revolving Loan, each payment of interest on the Revolving Loans, each payment of Facility Fees, each reduction of the Revolving Committed Amount and each conversion or extension of any Revolving Loan, shall be allocated pro rata among the Lenders in accordance with the respective principal amounts of their outstanding Revolving Loans and Participation Interests. With respect to Competitive Loans, if the Borrower fails to specify the particular Competitive Loan or Loans as to which any payment or other amount should be applied and it is not otherwise clear as to the particular Competitive Loan or Loans to which such payment or other amounts relate, or any such payment or other amount is to be applied to Competitive Loans without regard to any such direction by the Borrower, then each payment or prepayment of principal on Competitive Loans and each payment of interest or other amount on or in respect of Competitive Loans, shall be allocated to (i) the Competitive Loan bearing the highest interest rate, (ii) if two or more Competitive Loans each bear the same interest rate, which is the highest interest rate among all Competitive Loans then outstanding, then pro rata among such Competitive Loans (iii) should such prepayment extinguish such Competitive Loans, then any remaining prepayment shall be applied to each of the remaining Competitive Loans with the highest interest rate and (iv) any remaining payment or prepayment shall be allocated pro rata among the relevant Competitive Loan Lenders in accordance with the then outstanding amounts of their respective Competitive Loans.

 

(b) Advances.

 

(i) Funding by Lenders; Presumption by Administrative Agent. No Lender shall be responsible for the failure or delay by any other Lender in its obligation to make its ratable share of a borrowing hereunder; provided, however, that the failure of any Lender to fulfill its obligations hereunder shall not relieve any other Lender of its obligations hereunder. Unless the Administrative Agent shall have been notified in writing by any Lender prior to a borrowing that such Lender will not make the amount that would constitute its ratable share of such borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender is making such amount available to the Administrative Agent, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not made available to the Administrative Agent by such Lender within the time period specified therefor hereunder, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate equal to the Federal Funds Rate for a period of two (2) Business Days, and thereafter at the Base Rate, for the period until such Lender makes such amount immediately available to the Administrative Agent. If such Lender does not pay such amounts to the Administrative Agent forthwith upon demand, the Administrative Agent may notify the Borrower and request the Borrower to pay such amount to the Administrative Agent with interest at the Base Rate not later than 4:00 P.M. (Charlotte, North Carolina time) on the following Business Day. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error. Nothing in the preceding shall act or be construed as a waiver of any claims or right of action that the Borrower may have against any Lender that defaults on the payment to the Administrative Agent thereby causing the Borrower to repay the Administrative Agent such amount advanced.

 

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(ii) Payments by Borrowers; Presumptions by Administrative Agent. Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender, in immediately available funds with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

 

A notice of the Administrative Agent to any Lender or the Borrower with respect to any amount owing under this subsection (b) shall be conclusive, absent manifest error.

 

3.16 Sharing of Payments. The Lenders agree among themselves that, in the event that any Lender shall obtain payment in respect of any Loan or any other obligation owing to such Lender under this Credit Agreement through the exercise of a right of setoff, banker’s lien or counterclaim, or pursuant to a secured claim under Section 506 of Title 11 of the United States Code or other security or interest arising from, or in lieu of, such secured claim, received by such Lender under any applicable bankruptcy, insolvency or other similar law or otherwise, or by any other means, in excess of its pro rata share of such payment as provided for in this Credit Agreement, such Lender shall promptly purchase from the other Lenders a participation in such Loans and other obligations in such amounts, and make such other adjustments from time to time, as shall be equitable to the end that all Lenders share such payment in accordance with their respective ratable shares as provided for in this Credit Agreement. The Lenders further agree among themselves that if payment to a Lender obtained by such Lender through the exercise of a right of setoff, banker’s lien, counterclaim or other event as aforesaid shall be rescinded or must otherwise be restored, each Lender which shall have shared the benefit of such payment shall, by repurchase of a participation theretofore sold, return its share of that benefit (together with its share of any accrued interest payable with respect thereto) to each Lender whose payment shall have been rescinded or otherwise restored. The Borrower agrees that any Lender so purchasing such a participation may, to the fullest extent permitted by law, exercise all rights of payment, including setoff, banker’s lien or counterclaim, with respect to such participation as fully as if such Lender were a holder of such Loan or other obligation in the amount of such participation. Except as otherwise expressly provided in this Credit Agreement, if any Lender or the Administrative Agent shall fail to remit to the Administrative Agent or any other Lender an amount payable by such Lender or the Administrative Agent to the Administrative Agent or such other Lender pursuant to this Credit Agreement on the date when such amount is due, such payments shall be made together with interest thereon for each date from the date such amount is due until the date such amount is paid to the Administrative Agent or such other Lender at a rate per annum equal to the Federal Funds Rate. If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section 3.16 applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders under this Section 3.16 to share in the benefits of any recovery on such secured claim.

 

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3.17 Payments, Computations, Etc.

 

(a) Each payment on account of an amount due from the Borrower hereunder or under any other Credit Document shall be made by the Borrower to the Administrative Agent for the pro rata account of the Lenders entitled to receive such payment as provided herein in the currency in which such amount is denominated and in such funds as are customary at the place and time of payment for the settlement of international payments in such currency. Without limiting the terms of the preceding sentence, accrued interest on any Loans denominated in a Foreign Currency shall be payable in the same Foreign Currency as such Loan. Upon request, the Administrative Agent will give the Borrower a statement showing the computation used in calculating such amount, which statement shall be conclusive in the absence of manifest error. The obligation of the Borrower to make each payment on account of such amount in the currency in which such amount is denominated shall not be discharged or satisfied by any tender, or any recovery pursuant to any judgment, which is expressed in or converted into any other currency, except to the extent such tender or recovery shall result in the actual receipt by the Administrative Agent of the full amount in the appropriate currency payable hereunder. The Borrower agrees that its obligation to make each payment on account of such amount in the currency in which such amount is denominated shall be enforceable as an additional or alternative claim for recovery in such currency of the amount (if any) by which such actual receipt shall fall short of the full amount of such currency payable hereunder, and shall not be affected by judgment being obtained for such amount.

 

(b) Except as otherwise specifically provided herein, all payments hereunder shall be made to the Administrative Agent in immediately available funds, without offset, deduction, counterclaim or withholding of any kind, not later than 2:00 P.M. (local time in the place where such payment is required to be made pursuant to this subsection (b)) on the date when due, to the account specified on Schedule 3.17(b) or at such other place as may be designated by the Administrative Agent to the Borrower in writing. Payments received after such time shall be deemed to have been received on the next succeeding Business Day. In the event that Borrower desires to make any payments hereunder by wire transfer initiated outside of the United States that is originated by any Person other than the Borrower, the Borrower shall provide the Administrative Agent with one Business Day’s prior written notice containing the name, address, telephone and facsimile numbers of the wire transfer originator and the originator’s relationship to the Borrower. The Borrower shall, at the time it makes any payment under this Credit Agreement, specify to the Administrative Agent the Loans, Fees, interest or other amounts payable by the Borrower hereunder to which such payment is to be applied (and in the event that it fails so to specify, or if such application would be inconsistent with the terms hereof, the Administrative Agent shall distribute such payment to the Lenders subject to the terms of Section 3.15(a)). The Administrative Agent will distribute such payments to such Lenders, if any such payment is received prior to 12:00 Noon (Charlotte, North Carolina time) on a Business Day in like funds as received prior to the end of such Business Day and otherwise the Administrative Agent will distribute such payment to such Lenders on the next succeeding Business Day. Whenever any payment hereunder shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day (subject to accrual of interest and Fees for the period of such extension), except that in the case of LIBOR Loans, if the extension would cause the payment to be made in the next following calendar month, then such payment shall instead be made on the next preceding Business Day. Except as

 

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expressly provided otherwise herein, all computations of interest and fees shall be made on the basis of actual number of days elapsed over a year of 360 days, except with respect to computation of interest on Base Rate Loans which shall be calculated based on a year of 365 or 366 days, as appropriate. Interest shall accrue from and include the date of borrowing, but exclude the date of payment.

 

(c) Allocation of Payments After Event of Default. Notwithstanding any other provisions of this Credit Agreement to the contrary, after the occurrence and during the continuance of an Event of Default, all amounts collected or received by the Administrative Agent or any Lender on account of the Loans or any other amounts outstanding under any of the Credit Documents shall be paid over or delivered as follows:

 

FIRST, to the payment of all reasonable out-of-pocket costs and expenses (including without limitation reasonable attorneys’ fees) of the Administrative Agent in connection with enforcing the rights of the Lenders under the Credit Documents;

 

SECOND, to payment of any fees owed to the Administrative Agent pursuant to the terms of the Credit Documents;

 

THIRD, to the payment of all permitted reasonable out-of-pocket costs and expenses (including without limitation, reasonable attorneys’ fees) of each of the Lenders in connection with enforcing its rights under the Credit Documents with respect to the Loans owing to such Lender;

 

FOURTH, to the payment of all accrued interest and fees on or in respect of Loans under the Credit Documents;

 

FIFTH, to the payment of the outstanding principal amount of the Loans under the Credit Documents;

 

SIXTH, to all other obligations which shall have become due and payable under the Credit Documents or otherwise and not repaid pursuant to clauses “FIRST” through “FIFTH” above; and

 

SEVENTH, to the payment of the surplus, if any, to whomever may be lawfully entitled to receive such surplus.

 

In carrying out the foregoing, (i) amounts received shall be applied in the numerical order provided until exhausted prior to application to the next succeeding category; and (ii) each of the Lenders shall receive an amount equal to its pro rata share (based on the proportion that the then outstanding Loans held by such Lender bears to the aggregate then outstanding Loans) of amounts available to be applied pursuant to clauses “FOURTH” and “SIXTH” above.

 

3.18 Obligation of Lenders to Mitigate. Each Lender agrees that, as promptly as practicable after such Lender becomes aware of the occurrence of an event or the existence of a condition that would cause such Lender to become an Affected Lender or that would entitle such Lender to receive payments under Sections 3.7 or 3.13, it will, to the extent not inconsistent with any applicable legal or regulatory restrictions, use reasonable efforts (i) to make, issue, fund or

 

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maintain the Revolving Commitment of such Lender or the affected Loans of such Lender through another lending office of such Lender, or (ii) take such other measures as such Lender may deem reasonable, if as a result thereof the circumstances which would cause such Lender to be an Affected Lender would cease to exist or the additional amounts which would otherwise be required to be paid to such Lender pursuant to Sections 3.7 or 3.13 would be reduced and if, as determined by such Lender in its sole discretion, the making, issuing, funding or maintaining of such Revolving Commitment or Loans through such other lending office or in accordance with such other measures, as the case may be, would not otherwise materially adversely affect such Revolving Commitment or Loans or would not be otherwise disadvantageous to the interests of such Lender.

 

3.19 Evidence of Debt.

 

(a) Each Lender shall maintain an account or accounts evidencing each Loan made by such Lender to the Borrower from time to time, including the amounts and currencies of principal and interest payable and paid to such Lender from time to time under this Credit Agreement. Each Lender will make diligent efforts to maintain the accuracy of its account or accounts and to promptly update its account or accounts from time to time, as necessary.

 

(b) The Administrative Agent shall maintain the Register pursuant to Section 10.3(c) hereof, and a subaccount for each Lender, in which Register and subaccounts (taken together) shall be recorded (i) the amount, currency, type and Interest Period of each such Loan hereunder, (ii) the amount of any principal or interest due and payable or to become due and payable to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder from or for the account of the Borrower and each Lender’s share thereof. The Administrative Agent will make diligent efforts to maintain the accuracy of the subaccounts referred to in the preceding sentence and to promptly update such subaccounts from time to time, as necessary.

 

ARTICLE IV

 

CONDITIONS

 

4.1 Conditions to Closing. This Credit Agreement shall become effective upon, and the obligation of each Lender to make the initial Extensions of Credit hereunder is subject to, the satisfaction of the following conditions precedent:

 

(a) Execution of Credit Agreement and Credit Documents. Receipt of (i) multiple counterparts of this Credit Agreement and (ii) a Revolving Note for each Lender, in each case executed by a duly authorized officer of each party thereto and in each case conforming to the requirements of this Credit Agreement.

 

(b) Legal Opinion. Receipt of multiple counterparts of a legal opinion of counsel to the Borrower, relating to this Credit Agreement and the other Credit Documents and the transactions contemplated herein and therein, in form and substance reasonably acceptable to the Administrative Agent which opinion shall include, without limitation, an opinion that the execution, delivery and performance of the Credit Documents and the performance of the transactions contemplated thereby will not conflict with, result in a breach of, require any

 

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consent or permit any acceleration of (or require repayment of) any indebtedness of the Borrower or under any of the Borrower’s corporate instruments and material agreements.

 

(c) Corporate Documents. Receipt of the following (or their equivalent) for the Borrower:

 

(i) Articles of Incorporation. Copies of the certificate of incorporation or charter documents certified to be true and complete as of a recent date by the appropriate governmental authority of the state of its incorporation.

 

(ii) Resolutions. Copies of resolutions of the Board of Directors or comparable managing body approving and adopting the respective Credit Documents, the transactions contemplated therein and authorizing execution and delivery thereof, certified by a secretary or assistant secretary as of the Effective Date to be true and correct and in force and effect as of such date.

 

(iii) Bylaws. Copies of the bylaws or comparable operating agreement certified by a secretary or assistant secretary as of the Effective Date to be true and correct and in force and effect as of such date.

 

(iv) Good Standing. A certificate of good standing, existence or its equivalent certified as of a recent date by the appropriate governmental authority of the state of organization.

 

(v) Secretary’s Certificate. A Secretary’s certificate for the Borrower dated as of the Effective Date substantially in the form of Schedule 4.1(c)(v) with appropriate insertions and attachments.

 

(d) Fees. Receipt of all fees, if any, then owing pursuant to the Fee Letter, Section 3.5 or pursuant to any Credit Documents.

 

(e) Section 4.2 Conditions. The conditions specified in Section 4.2 shall be satisfied if an Extension of Credit is made on the Effective Date.

 

(f) Account Designation Letter. Receipt by the Administrative Agent of an executed counterpart of the Account Designation Letter.

 

(g) Payment Instructions. Receipt by the Administrative Agent of payment instructions with respect to each wire transfer to be made by the Administrative Agent on behalf of the Lenders or the Borrower on the Effective Date setting forth the amount of such transfer, the purpose of such transfer, the name and number of the account to which such transfer is to be made, the name and ABA number of the bank or other financial institution where such account is located and the name and telephone number of an individual that can be contacted to confirm receipt of such transfer.

 

(h) Financial Information. Receipt by the Administrative Agent of the consolidated financial statements of the Borrower and its consolidated subsidiaries referred to in Section 5.1; provided, that financial statements required to be delivered pursuant to this sentence may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date

 

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(i) on which the Borrower posts such documents, or provides a link thereto, on the Borrower’s website on the Internet or (ii) on which such documents are posted on the Borrower’s behalf on an Internet or intranet website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent).

 

(i) No Material Adverse Effect. Receipt by the Administrative Agent of a certificate signed by a Responsible Officer certifying (i) no Material Adverse Effect has occurred since July 3, 2004 and (ii) there is no pending litigation, proceeding or bankruptcy with respect to the Borrower that would reasonably be expected to have a Material Adverse Effect.

 

(j) Debt Rating. Receipt by the Administrative Agent of a certificate signed by a Responsible Officer certifying the current Debt Rating.

 

4.2 Conditions to All Extensions of Credit. The obligation of each Lender to make any Extension of Credit hereunder (including the initial Loan to be made hereunder) is subject to the satisfaction of the following conditions precedent on the date of making such Extension of Credit:

 

(a) Representations and Warranties. The representations and warranties made by the Borrower herein or in any other Credit Document or which are contained in any certificate furnished at any time under or in connection herewith or therewith shall be true and correct in all material respects on and as of the date of such Extension of Credit as if made on and as of such date (except for those which expressly relate to an earlier date, which shall be true and correct in all material respects as of such earlier date, and except for those made in certificates which have been superseded or replaced by more recent certificates, so long as those made in superseded or replaced certificates were true and correct in all material respects on the date made).

 

(b) No Default or Event of Default. No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the Extension of Credit to be made on such date unless such Default or Event of Default shall have been waived in accordance with this Credit Agreement.

 

(c) Additional Conditions to Revolving Loans. If a Revolving Loan is requested pursuant to Section 2.1, all conditions set forth therein shall have been satisfied.

 

(d) Additional Conditions to Competitive Loans. If a Competitive Loan is requested pursuant to Section 2.2, all conditions set forth therein shall have been satisfied.

 

(e) Officer’s Certificate. With respect only to the initial Loan made hereunder, the Administrative Agent shall have received a Notice of Borrowing and a certificate of a Responsible Officer certifying that (i) the Borrower is solvent as of the date the initial Loan is made, (ii) the Borrower is in pro forma compliance with the covenant in Section 6.7 both before and after giving effect to any Loans to be made on the date the initial Loan is made; and (iii) the Borrower has satisfied any other conditions mutually agreeable to the parties.

 

(f) Each request for an Extension of Credit and each acceptance by the Borrower of an Extension of Credit shall be deemed to constitute a representation and warranty by each of the

 

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Borrower as of the date of such Loan that the conditions in paragraphs (a) through (e) of this Section have been satisfied.

 

ARTICLE V

 

REPRESENTATIONS AND WARRANTIES

 

To induce the Lenders to enter into this Credit Agreement and to make Extensions of Credit herein provided for, the Borrower hereby represents and warrants to the Administrative Agent and to each Lender that:

 

5.1 Financial Condition. Each of the financial statements described below (copies of which have heretofore been provided to the Administrative Agent for distribution to the Lenders), have been prepared in accordance with GAAP consistently applied throughout the periods covered thereby, are complete and correct in all material respects and present fairly the financial condition and results from operations of the entities and for the periods specified, subject in the case of interim company-prepared statements to normal year-end adjustments:

 

(a) audited consolidated balance sheet of the Borrower and its consolidated subsidiaries dated as of December 31, 2003, together with related statements of income and cash flows certified by PricewaterhouseCoopers LLP, certified public accountants; and

 

(b) a company-prepared consolidated condensed balance sheet of the Borrower and its consolidated subsidiaries dated as of July 3, 2004, together with related consolidated condensed statements of income and cash flows.

 

5.2 Organization; Existence. The Borrower (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the corporate or other necessary power and authority, and the legal right to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged and (c) is duly qualified as a foreign entity and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, other than in such jurisdictions where the failure to be so qualified and in good standing would not, in the aggregate, have a Material Adverse Effect.

 

5.3 Power; Authorization; Enforceable Obligations. The Borrower has the corporate or other necessary power and authority, and the legal right, to make, deliver and perform the Credit Documents and has taken all necessary corporate or other action to authorize the execution, delivery and performance by it of the Credit Documents. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with acceptance of extensions of credit by the Borrower or with the execution, delivery or performance of any Credit Documents by the Borrower (other than those which have been obtained, such filings as are required by the Securities and Exchange Commission (or the laws, rules and regulations administered by it), and to fulfill other reporting requirements with Governmental Authorities) or with the validity or enforceability of any Credit Document against the Borrower. Each Credit Document to which it is a party and all materials provisions therein constitute valid and legally binding obligations of the Borrower enforceable in accordance with their respective terms and shall provide the Administrative Agent and/or the

 

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Lenders the rights, powers and privileges purported to be created thereby, subject in each case to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles,.

 

5.4 Conflict. The execution, delivery and performance of the Credit Documents, the borrowings hereunder and the use of the proceeds of the Extensions of Credit will not (a) violate in any material respect any Requirement of Law applicable to the Borrower (except those as to which waivers or consents have been obtained), (b) conflict with, result in a breach of or constitute a default under (i) the articles of incorporation, bylaws or other organizational documents of such Person, (ii) any material indenture, agreement or other instrument to which such Person is a party or by which any of its properties may be bound or (iii) any approval of any Governmental Authority relating to such Person, or (c) result in, or require, the creation or imposition of any Lien on any of their respective properties or revenues pursuant to any Requirement of Law.

 

5.5 No Material Litigation. Except as set forth on Schedule 5.5 no claim, litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Borrower, threatened by or against the Borrower or any member of the Consolidated Group or against any of their respective properties which (a) relates to the Credit Documents or any of the transactions contemplated hereby or thereby or (b) is reasonably likely to have a Material Adverse Effect.

 

5.6 No Default. No Default or Event of Default has occurred and is continuing.

 

5.7 Taxes. Except for such tax-related litigation disclosed on Schedule 5.7, the Borrower and each of its Subsidiaries have timely filed or caused to be filed all United States federal income tax returns and all other material tax returns which, to the best knowledge of the Borrower, are required to be filed and has paid (a) all taxes shown to be due and payable on said returns or (b) all taxes shown to be due and payable on any assessments of which it has received notice made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any (i) taxes, fees or other charges with respect to which the failure to pay, in the aggregate, would not have a Material Adverse Effect or (ii) taxes, fees or other charges the amount or validity of which are currently being contested and with respect to which reserves in conformity with GAAP have been provided on the books of such Person), and no tax Lien has been filed with respect to any such tax, fee or other charge.

 

5.8 ERISA. Except as is not reasonably likely to have a Material Adverse Effect:

 

(a) (i) No ERISA Event has occurred during the five-year period ending on the date this representation is made or deemed made or is reasonably expected to occur, with respect to any Plan; (ii) no “accumulated funding deficiency,” as such term is defined in Section 302 of ERISA and Section 412 of the Code, whether or not waived, has occurred with respect to any Plan (other than a Multiemployer Plan) and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan (other than a Multiemployer Plan); (iii) each Plan (other than a Multiemployer Plan) has been maintained, operated, and funded in compliance with its own terms and in material compliance with the provisions of ERISA, the Code, and any other applicable federal or state

 

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laws; (iv) each Plan (other than a Multiemployer Plan) that is intended to qualify under Section 401 (a) of the Code has received a favorable determination letter from the IRS or an application for such a letter is currently being processed by the IRS with respect thereto and, to the knowledge of the Borrower, nothing has occurred which would prevent, or cause the loss of, such qualification, and (v) no lien in favor of the PBGC or a Plan has arisen or is reasonably likely to arise on account of any Plan.

 

(b) No member of the Consolidated Group nor any ERISA Affiliate has incurred, or, to the knowledge of the Borrower, could be reasonably expected to incur, any liability under Title IV of ERISA with respect to any Single Employer Plan, or any withdrawal liability under ERISA to any Multiemployer Plan or Multiple Employer Plan.

 

(c) No prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) or breach of fiduciary responsibility has occurred with respect to a Plan which has subjected or may subject any member of the Consolidated Group or any ERISA Affiliate to any liability under Sections 406, 409, 502(i), or 502(1) of ERISA or Section 4975 of the Code, or under any agreement or other instrument pursuant to which any member of the Consolidated Group or any ERISA Affiliate has agreed or is required to indemnify any person against any such liability. There are no pending, or to the knowledge of the Borrower, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan.

 

(d) No member of the Consolidated Group nor any ERISA Affiliate has any material liability with respect to “expected post-retirement benefit obligations” within the meaning of the Financial Accounting Standards Board Statement No. 106.

 

5.9 Governmental Regulations, Etc.

 

(a) Neither the Borrower nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of purchasing or carrying any “margin stock” within the meaning given such term under Regulations T, U and X of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations thereunder, and no part of the proceeds of any Loan will be used to purchase or carry any margin stock in violation of Regulation U or to extend credit to others for the purpose of purchasing or carrying any margin stock, or be used for any purpose which violates, or which is inconsistent with, the provisions of Regulation X.

 

(b) The Borrower is not (i) an “investment company” registered or required to be registered under the Investment Company Act of 1940, as amended, and is not controlled by such a company, or (ii) a “holding company”, or a “subsidiary company” of a “holding company”, or an “affiliate” of a “holding company” or of a “subsidiary” of a “holding company”, within the meaning of the Public Utility Holding Company Act of 1935, as amended.

 

5.10 Purpose of Extensions of Credit. The Extensions of Credit will be used solely (a) to refinance certain existing indebtedness of the Borrower, (b) to provide general working capital and (c) for other general corporate purposes, including acquisitions.

 

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5.11 Compliance with Laws; Contractual Obligations. The Borrower and its Subsidiaries are in compliance with all Requirements of Law, except to the extent that the failure to comply therewith would not, in the aggregate, reasonably be expected to have a Material Adverse Effect. Neither the Borrower nor its Subsidiaries are in default under or with respect to any of its contractual obligations in any respect which could reasonably be expected to have a Material Adverse Effect.

 

5.12 Accuracy and Completeness of Information. All factual information heretofore, contemporaneously or hereafter furnished by the Borrower in writing to the Administrative Agent or any Lender for purposes of or in connection with this Credit Agreement or any other Credit Document, or any transaction contemplated hereby or thereby, is or will be true and accurate in all material respects as of the date stated therein and not incomplete by omitting to state any material fact necessary to make such information not misleading, except for inaccuracies or omissions which could not reasonably be expected to have a Material Adverse Effect. There is no fact now known to the Borrower which could reasonably be expected to have a Material Adverse Effect which fact has not been set forth herein, in the financial statements of the Borrower and its Subsidiaries furnished to the Administrative Agent and/or the Lenders prior to the date hereof, or in any certificate, opinion or other written statement made or furnished by the Borrower to the Administrative Agent and/or the Lenders prior to the date hereof.

 

5.13 Environmental Matters.

 

Except as set forth on Schedule 5.13:

 

(a) To the knowledge of the Borrower or except where such violation or liability could not reasonably be expected to have a Material Adverse Effect, the facilities and properties owned, leased or operated by the Borrower (the “Properties”) do not contain any Materials of Environmental Concern in amounts or concentrations which (i) constitute a violation of, or (ii) have resulted in liability under, any Environmental Law.

 

(b) To the knowledge of the Borrower or except where such violation or contamination could not reasonably be expected to have a Material Adverse Effect, the Properties and all operations of the members of the Consolidated Group at the Properties are in compliance, and have in the last five years been in compliance, in all respects with all applicable Environmental Laws, and there is no contamination by Materials of Environmental Concern at or under the Properties or violation of any Environmental Law with respect to the Properties or the business operated by the members of the Consolidated Group (the “Business”).

 

(c) Except where such violation or liability could not reasonably be expected to have a Material Adverse Effect, none of the members of the Consolidated Group has received any written notice of violation, alleged violation, non-compliance, liability or potential liability arising under Environmental Laws with regard to any of the Properties or the Business.

 

(d) To the knowledge of the Borrower or except where such violation or liability could not reasonably be expected to have a Material Adverse Effect, Materials of Environmental Concern have not been transported or disposed of from the Properties in violation of, or in a manner or to a location which has given rise to liability under any Environmental Law, nor have any Materials of Environmental Concern been generated, treated, stored or disposed of at, on or

 

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under any of the Properties in violation of, or in a manner that has given rise to liability under, any applicable Environmental Law.

 

(e) No judicial proceeding or governmental or administrative action, to the knowledge of the Borrower, is pending or threatened under any Environmental Law to which any of the members of the Consolidated Group is or will be named as a party with respect to the Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial directives outstanding under any Environmental Law with respect to the Properties or the Business which could reasonably be expected to have a Material Adverse Effect.

 

(f) To the knowledge of the Borrower or except where such violation or liability could not reasonably be expected to have a Material Adverse Effect, there has been no release or threat of release of Materials of Environmental Concern at or from the Properties, or arising from or related to the operations of the members of the Consolidated Group in connection with the Properties or otherwise in connection with the Business, in violation of or in amounts or in a manner requiring remediation under Environmental Laws.

 

ARTICLE VI

 

AFFIRMATIVE COVENANTS

 

The Borrower covenants and agrees that so long as this Credit Agreement is in effect and until all of the Revolving Commitments have been terminated, no Loans remain outstanding and all amounts owing hereunder or under any other Credit Document or in connection herewith or therewith have been paid in full:

 

6.1 Financial Statements.

 

The Borrower will furnish, or cause to be furnished, to the Administrative Agent for distribution to the Lenders:

 

(a) Audited Financial Statements. As soon as available, but in any event within 90 days after the end of each fiscal year, an audited consolidated balance sheet of the Borrower and its subsidiaries as of the end of the fiscal year and the related consolidated statements of income, retained earnings, shareholders’ equity and cash flows for such fiscal year, audited by an independent certified public accounting firm of nationally recognized standing, setting forth in each case in comparative form the figures for the previous year, reported without a “going concern” or like qualification or exception, or qualification indicating that the scope of the audit was inadequate to permit such independent certified public accountants to certify such financial statements without such qualification.

 

(b) Company-Prepared Financial Statements. As soon as available, but in any event within 45 days after the end of each of the first three fiscal quarters, a company-prepared consolidated balance sheet of the Borrower and its subsidiaries as of the end of the quarter and related company-prepared consolidated statements of income, retained earnings, shareholders’ equity and cash flows for such quarterly period and for the fiscal year to date; in each case setting forth in comparative form the consolidated figures for the corresponding period or

 

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periods of the preceding fiscal year or the portion of the fiscal year ending with such period, as applicable, in each case subject to normal recurring year-end audit adjustments.

 

All such financial statements shall be complete and correct in all material respects (subject, in the case of interim statements, to normal recurring year-end audit adjustments) and shall be prepared in reasonable detail and, in the case of the annual and quarterly financial statements provided in accordance with subsections (a) and (b) above, in accordance with GAAP applied consistently throughout the periods reflected therein and further accompanied by a description of, and an estimation of the effect on the financial statements on account of, a change in the application of accounting principles as provided in Section 1.3.

 

6.2 Certificates; Other Information.

 

The Borrower will furnish, or cause to be furnished, to the Administrative Agent for distribution to the Lenders:

 

(a) Officer’s Certificate. Concurrently with the delivery of the financial statements referred to in Sections 6.1(a) and 6.1 (b) above, a certificate of a Responsible Officer stating that, to the best of such Responsible Officer’s knowledge and belief, (i) the financial statements fairly present in all material respects the financial condition of the parties covered by such financial statements, (ii) during such period the Borrower has observed or performed in all material respects its covenants and other agreements hereunder and under the other Credit Documents, and satisfied in all material respects the conditions contained in this Credit Agreement to be observed, performed or satisfied by it (except to the extent waived in accordance with the provisions hereof) and (iii) such Responsible Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate. Such certificate shall include the calculations required to indicate compliance with Section 6.7. A form of Officer’s Certificate is attached as Schedule 6.2(a).

 

(b) Public Information. Within thirty days after the same are sent, copies of all reports (other than those otherwise provided pursuant to Section 6.1 and other financial information which the Borrower sends to its public stockholders, and within thirty days after the same are filed, copies of all financial statements and non-confidential reports which the Borrower may make to, or file with, the Securities and Exchange Commission or any successor or analogous United States Governmental Authority.

 

(c) Other Information. Promptly, such additional financial and other information as the Administrative Agent, at the request of any Lender, may from time to time reasonably request, including, without limitation, any information requested pursuant to the Administrative Agent’s or any Lender’s customer identification program or anti-money laundering program under the Bank Secrecy Act.

 

Documents required to be delivered pursuant to Section 6.1(a) or (b) or Section 6.2(b) (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower posts such documents, or provides a link thereto on the Borrower’s website on the Internet; or (ii) on which such documents are posted on the Borrower’s behalf on an Internet or intranet website, if any, to which each Lender and the Administrative Agent have

 

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access (whether a commercial, third-party website or whether sponsored by the Administrative Agent).

 

6.3 Notices.

 

The Borrower will give notice to the Administrative Agent (which shall promptly transmit such notice to each Lender) of:

 

(a) Defaults. Promptly (but in any event within three (3) Business Days) after knowledge thereof, the occurrence of any Default or Event of Default (without giving effect to any notice requirement from the Agent or any Lender).

 

(b) Legal Proceedings. Promptly following the receipt of written notification relating thereto, any litigation or proceeding (including without limitation, any environmental proceeding) affecting the Borrower or its Subsidiaries which, if adversely determined, would reasonably be expected to have a Material Adverse Effect.

 

Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the Borrower proposes to take with respect thereto.

 

6.4 Maintenance of Existence and Compliance with Law.

 

(a) The Borrower will preserve, renew and keep in full force and effect its corporate existence and take all reasonable action to maintain all rights, privileges, licenses and franchises necessary or desirable in the normal conduct of its business.

 

(b) The Borrower will, and will cause its Subsidiaries to, (i) comply with all Requirements of Law (including, without limitation, all Environmental Laws and ERISA matters) applicable to them except to the extent that failure to comply with all Requirements of Law would not, in the aggregate, have a Material Adverse Effect, and (ii) without limiting the generality of clause (i), comply in all respects with all Requirements of Law in the use of proceeds of the Loans.

 

(c) The Borrower will, and will cause its Subsidiaries to, perform and satisfy its contractual obligations except to the extent that failure to perform and satisfy such obligations would not, in the aggregate, have a Material Adverse Effect.

 

6.5 Maintenance of Property; Insurance. The Borrower will, and will cause its Subsidiaries to, keep all material property necessary in its business in reasonably good working order and condition (ordinary wear and tear and obsolescence excepted); maintain with financially sound and reputable insurance companies casualty, liability and such other insurance (which may include plans of self-insurance) with such coverage and deductibles, and in such amounts as may be consistent with prudent business practice; and furnish to the Administrative Agent, upon written request, full information as to the insurance carried.

 

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6.6 Inspection of Property; Books and Records; Discussions.

 

(a) The Borrower will, and will cause its Subsidiaries to, keep proper corporate books and financial records in relation to its businesses and activities in conformity with GAAP and Requirements of Law.

 

(b) The Borrower will, and will cause its Subsidiaries to, permit, during regular business hours and upon reasonable notice by the Administrative Agent, the Administrative Agent to visit and inspect any of its properties and examine and make abstracts (including photocopies) from any of its books and records (other than materials protected by the attorney-client, work product or other privilege and materials which the Borrower and its Subsidiaries may not disclose without violation of a confidentiality obligation binding upon the Borrower or its Subsidiaries), and to discuss the business, operations, properties and financial and other condition of the members of the Consolidated Group with officers and employees of the members of the Consolidated Group and with their independent certified public accountants. The cost of the inspection referred to in the preceding sentence shall be for the account of the Lenders unless an Event of Default has occurred and is continuing, in which case the cost of such inspection shall be for the account of the Borrower.

 

6.7 Consolidated Funded Debt to Total Capitalization Ratio. The Consolidated Funded Debt to Total Capitalization Ratio will not at any time exceed 50%.

 

6.8 Use of Proceeds. The proceeds of the loans and extensions of credit hereunder will be used solely for the purposes provided in Section 5.10.

 

ARTICLE VII

 

NEGATIVE COVENANTS

 

The Borrower covenants and agrees that so long as this Credit Agreement is in effect and until all of the Revolving Commitments have been terminated, no Loans remain outstanding and all amounts owing hereunder or under any other Credit Document or in connection herewith or therewith have been paid in full:

 

7.1 Funded Debt of Subsidiaries. The Borrower will not permit any Subsidiary (excluding any Joint Venture) to incur or permit to exist any Funded Debt, except (i) Funded Debt existing on the date hereof and set forth on Schedule 7.1. and refundings and refinancings thereof, (ii) inter-company Funded Debt owed to the Borrower or other member of the Consolidated Group, (iii) Capital Lease obligations and purchase money indebtedness incurred in the ordinary course of business, and refundings and refinancings thereof, and (iv) other Funded Debt of up to $200,000,000 in aggregate principal amount at time outstanding.

 

7.2 Negative Pledge. The Borrower will not, nor will it permit any Subsidiary to, contract, create, incur, assume or permit to exist any Lien on any of its respective property or assets of any kind (whether real or personal, tangible or intangible), whether now owned or hereafter acquired, except:

 

(a) Liens existing on the date hereof and securing indebtedness outstanding on the date hereof, each of which is set forth on Schedule 7.2(a);

 

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(b) Liens securing inter-company indebtedness owed to members of the Consolidated Group other than Liens securing inter-company indebtedness owed by the Borrower;

 

(c) Liens on property and assets of any Person existing at the time such Person becomes a member of the Consolidated Group and not created in contemplation thereof, and provided that such Lien shall not extend to any other property of members of the Consolidated Group;

 

(d) Liens on property or assets securing indebtedness incurred or assumed for the purpose of financing all or any part of the costs of acquiring, improving or constructing such property or assets; provided that (i) with respect to real property (and personal property constituting a part of a project which is the subject of an industrial revenue bond, private activity bond, solid waste disposal bond or similar financing), such Lien attaches concurrently with or within eighteen (18) months after the date of acquisition, completion, construction or improvement (including without limitation liens in connection with industrial revenue bonds, private activity bonds, solid waste disposal bonds or other similar financing activity), (ii) with respect to personal property (other than the personal property referenced in clause (i) hereof), such Lien attaches concurrently with or within six (6) months after the date of acquisition, and (iii) such Lien shall extend only to the property or asset to be acquired or improved with such financing;

 

(e) Liens on property and assets prior to the acquisition thereof and not created in contemplation thereof, provided that such Lien shall not extend to any other property of members of the Consolidated Group;

 

(f) Liens arising out of the refinancing, extension, renewal or refunding of any indebtedness secured by a Lien permitted by any of the foregoing clauses of this Section, provided that (i) such indebtedness is not secured by any additional property or assets, and (ii) the amount of such indebtedness secured by such Lien is not increased;

 

(g) Liens incidental to the conduct of their business or the ownership of their assets that arise out of transactions involving the sale or purchase of goods or services on a consignment basis and that do not (i) secure Funded Debt or (ii) in the aggregate materially detract from the value of the assets or materially impair the use thereof in the operation of business;

 

(h) Liens imposed by law, such as Liens of carriers, warehousemen, mechanics, materialmen, repairmen and landlords, and other similar Liens incurred in the ordinary course of business for sums not constituting borrowed money that are not overdue for a period of more than thirty (30) days or that are being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP (if so required);

 

(i) Liens incurred in the ordinary course of business in connection with worker’s compensation, unemployment insurance or other forms of governmental insurance or benefits, or to secure the performance of letters of credit, bids, tenders, statutory obligations, surety and appeal bonds, leases, government contracts and other similar obligations (other than obligations for borrowed money) entered into in the ordinary course of business;

 

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(j) Liens for taxes, assessments or other governmental charges or statutory obligations that are not delinquent or remain payable without any penalty or that are being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP (if so required);

 

(k) Liens on accounts and receivables established or arising in connection with a securitization of such accounts or accounts receivable or a secured borrowing of money that requires the pledge of or a security interest in such accounts and receivables, provided that (i) such Lien encumbers only the accounts and receivables which are the subject of the securitization, and (ii) in the case of a secured borrowing of money any such Lien shall at all times be confined solely to such accounts and receivables that are required to secure such borrowing; and

 

(1) Liens not otherwise permitted by the foregoing clauses of this Section securing Funded Debt (other than the loans and obligations owing hereunder) in an aggregate principal amount at any time outstanding not to exceed $100,000,000.

 

7.3 Consolidation. Merger and Sale of Assets.

 

(a) The Borrower will not enter into a transaction of merger or consolidation, or sell, lease or otherwise transfer all or substantially all of its assets, except (i) the Borrower may enter into a transaction of merger or consolidation with any other Person so long as (A) such other Person is organized under the laws of the United States, Canada or Mexico or one of their respective states or provinces, and (B) the Borrower is the surviving entity, and (C) no Default or Event of Default will exist immediately after giving effect thereto, and (ii) the Borrower may sell, lease or transfer assets to Subsidiaries.

 

(b) The Borrower will not permit its Subsidiaries to enter into a transaction of merger or consolidation, or sell, lease or otherwise transfer all or substantially all of their assets (taken as a group), except (i) a Subsidiary may enter into a transaction of merger or consolidation with the Borrower or any other Subsidiary, or with any other Person so long as such (A) other Person is organized under the laws of the United States, Canada or Mexico or one of their respective states or provinces, and (B) the Borrower or a Subsidiary is the surviving entity, and (C) no Default or Event of Default will exist immediately after giving effect thereto, and (ii) Subsidiaries may sell, lease or transfer assets to the Borrower or other Subsidiaries.

 

7.4 Transactions with Affiliates. The Borrower will not, and will not permit its Subsidiaries to, enter into any transaction or series of transactions, whether or not in the ordinary course of business, with any of its officers, directors or Affiliates other than on terms and conditions not less favorable as would be obtainable in a comparable arm’s-length transaction with an unrelated party, except (i) transactions between and among the Borrower and its Subsidiaries not involving any other Affiliates, and (ii) transactions approved by a special committee comprised of independent directors of the board of directors of the Borrower (all which approved related-party transactions will be disclosed in writing to the Administrative Agent and the Lenders).

 

7.5 Permitted Investments. The Borrower will not, and will not permit its Subsidiaries to, make Investments, as a group, in Subsidiaries, joint ventures or other entities or

 

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enterprises that are organized outside the United States, Canada or Mexico or one of their respective states or provinces in an aggregate amount (based on original investment or cost basis without regard to accumulated income or accretion in value apart therefrom) in excess of thirty-five percent (35%) of Consolidated Net Worth (calculated, at any time, in accordance with the last financial statements delivered to the Administrative Agent pursuant to Section 6.1 prior to such determination).

 

7.6 Limitation on Certain Restrictions. The Borrower will not, and will not permit or cause any of its Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any restriction or encumbrance on (i) the ability of the Borrower and its Subsidiaries to perform and comply with their respective obligations under the Credit Documents or (ii) the ability of any Subsidiary (other than any Joint Venture) to make any dividend payments or other distributions in respect of its capital stock, to repay indebtedness owed to the Borrower or any other Subsidiary, to make loans or advances to the Borrower or any other Subsidiary, or to transfer any of its assets or properties to the Borrower or any other Subsidiary, in each case other than such restrictions or encumbrances existing under or by reason of the Credit Documents or applicable Requirements of Law.

 

ARTICLE VIII

 

EVENTS OF DEFAULT

 

8.1 Events of Default.

 

An Event of Default shall exist upon the occurrence of any of the following specified events (each an “Event of Default”):

 

(a) the failure (i) to pay when due any principal of any Loan; or (ii) to pay within five (5) Business Days following receipt by the Borrower of notice that any interest, fees or other amounts owing hereunder or under any of the other Credit Documents is due (provided that notice hereunder shall be deemed satisfied by any regular invoice or other similar payment correspondence and does not require any type of special notice of late payment); or

 

(b) any representation, warranty, certification or statement made or deemed made by the Borrower herein or in any of the other Credit Documents, or in any statement or certificate delivered pursuant hereto or thereto, shall prove untrue or misleading in any material respect when made or deemed made; or

 

(c) the failure to observe or perform those covenants contained in Sections 6.3(a), 6.4(a) (with respect to existence), 6.6(b), 6.7, 6.8 or in Article VII; or

 

(d) the failure to observe or perform any other covenants or agreements contained herein or in the other Credit Documents (other than those covered by the foregoing clauses (a), (b) or (c) of this Section), and such failure shall continue unremedied for a period of thirty (30) days following the earlier of (i) first knowledge thereof by the Borrower and (ii) notice by the Administrative Agent to the Borrower thereof; or

 

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(e) with respect to Funded Debt of the Borrower and its wholly owned Subsidiaries (other than Funded Debt hereunder) in excess of $75,000,000 in principal amount, (i) there shall occur a default in the payment of any principal or interest amount when due (beyond applicable grace or cure periods, if any) of any such Funded Debt, or (ii) the principal amount of any such Funded Debt shall be declared due and payable or required to be repaid prior to its stated maturity, whether by acceleration, mandatory prepayment or otherwise; or

 

(f) the Borrower 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 appointment 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, or shall admit in writing its inability, to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; or

 

(g) an involuntary case or other proceeding shall be commenced against the Borrower 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 sixty (60) days; or an order for relief shall be entered against the Borrower under the federal bankruptcy laws as now or hereafter in effect; or

 

(h) one or more judgments or orders for the payment of money in an aggregate amount in excess of $75,000,000 shall be rendered against the Borrower or any Subsidiary and such judgment or order shall continue unsatisfied and unstayed or unbonded for a period of thirty (30) days; or

 

(i) the Borrower or any member of the Controlled Group shall fail to pay when due any amount in excess of $75,000,000 which it shall have become liable to pay to the PBGC or to a Plan under Title IV of ERISA; or the PBGC shall institute proceedings under Title IV of ERISA to terminate or to cause a trustee to be appointed to administer any such Plan or Plans or a proceeding shall be instituted by a fiduciary of any such Plan or Plans to enforce Section 515 or 4219(c)(5) of ERISA and such proceeding shall not have been dismissed within thirty (30) days thereafter; or a condition of which the Borrower has knowledge shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any such Plan or Plans must be terminated; or

 

(j) a federal tax lien shall be filed against the Borrower under Section 6323 of the Code or a lien of the PBGC shall be filed against the Borrower or any Subsidiary under Section 4068 of ERISA and in either case such lien shall remain undischarged for a period of thirty (30) days after the date of filing; or

 

(k) (i) any Person or two or more Persons acting in concert shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934), directly or indirectly, of 15% or more

 

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of the outstanding shares of the voting stock of the Borrower; or (ii) as of any date a majority of the Board of Directors of the Borrower consists of individuals who were not either (A) directors of the Borrower as of the corresponding date of the previous year, (B) selected or nominated to become directors by the Board of Directors of the Borrower of which a majority consisted of individuals described in clause (A), or (C) selected or nominated to become directors by the Board of Directors of the Borrower of which a majority consisted of individuals described in clause (A) and individuals described in clause (B); or

 

(1) the occurrence of an Event of Default under the Multi-Year Credit Agreement (as defined therein).

 

8.2 Acceleration; Remedies.

 

Upon the occurrence and during the continuance of an Event of Default, the Administrative Agent may, or upon the request and direction of the Required Lenders shall, by written notice to the Borrower take any or any combinations of the following actions:

 

(a) Termination of the Revolving Commitments. Declare the Revolving Commitments terminated whereupon the Revolving Commitments shall be immediately terminated.

 

(b) Acceleration. Declare the unpaid principal of and any accrued interest in respect of all Loans and any and all other indebtedness or obligations of any and every kind owing by the Borrower to the Administrative Agent and/or any of the Lenders hereunder to be due, whereupon the same shall be immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower.

 

(c) Enforcement of Rights. Enforce any and all rights and interests created and existing under the Credit Documents, whether at law or in equity.

 

Notwithstanding the foregoing, if an Event of Default specified in Section 8.1(f) or (g) shall occur, then the Revolving Commitments shall automatically terminate and all Loans, all accrued interest in respect thereof, all accrued and unpaid Fees, and other indebtedness or obligations owing to the Administrative Agent and/or any of the Lenders hereunder automatically shall immediately become due and payable without presentment, demand, protest or the giving of any notice or other action by the Administrative Agent or the Lenders, all of which are hereby waived by the Borrower.

 

ARTICLE IX

 

AGENCY PROVISIONS

 

9.1 Appointment. Each Lender hereby designates and appoints Bank of America as administrative agent of such Lender to act as specified herein and in the other Credit Documents, and each such Lender hereby authorizes the Administrative Agent as the Administrative Agent for such Lender, to take such action on its behalf under the provisions of this Credit Agreement and the other Credit Documents and to exercise such powers and perform such duties as are

 

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expressly delegated by the terms hereof and of the other Credit Documents, together with such other powers as are reasonably incidental thereto. Each Lender further directs and authorizes the Administrative Agent to execute releases (or similar agreements) to give effect to the provisions of this Credit Agreement and the other Credit Documents. Notwithstanding any provision to the contrary elsewhere herein and in the other Credit Documents, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein and therein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Credit Agreement or any of the other Credit Documents, or shall otherwise exist against the Administrative Agent. The provisions of this Section are solely for the benefit of the Administrative Agent and the Lenders and the Borrower shall have any rights as a third party beneficiary of the provisions hereof. In performing its functions and duties under this Credit Agreement and the other Credit Documents, the Administrative Agent shall act solely as Administrative Agent of the Lenders and does not assume and shall not be deemed to have assumed any obligation or relationship of agency or trust with or for the Borrower or any of its affiliates.

 

9.2 Delegation of Duties. The Administrative Agent may execute any of its duties hereunder or under the other Credit Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care.

 

9.3 Exculpatory Provisions. The Administrative Agent and its officers, directors, employees, agents, attorneys-in-fact or affiliates shall not be (i) liable for any action lawfully taken or omitted to be taken by it or such Person in good faith under or in connection herewith or in connection with any of the other Credit Documents (except for its or such Person’s own gross negligence or willful misconduct), or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower contained herein or in any of the other Credit Documents or in any certificate, report, document, financial statement or other written or oral statement referred to or provided for in, or received by the Administrative Agent under or in connection herewith or in connection with the other Credit Documents, or enforceability or sufficiency therefor of any of the other Credit Documents, or for any failure of the Borrower to perform its obligations hereunder or thereunder. The Administrative Agent shall not be responsible to any Lender for the effectiveness, genuineness, validity, enforceability, collectability or sufficiency of this Credit Agreement, or any of the other Credit Documents or for any representations, warranties, recitals or statements made herein or therein or made by the Borrower in any written or oral statement or in any financial or other statements, instruments, reports, certificates or any other documents in connection herewith or therewith furnished or made by the Administrative Agent to the Lenders or by or on behalf of the Borrower to the Administrative Agent or any Lender or be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained herein or therein or as to the use of the proceeds of the Loans or of the existence or possible existence of any Default or Event of Default or to inspect the properties, books or records of the Borrower or any of its affiliates.

 

9.4 Reliance on Communications. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement,

 

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order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower, independent accountants and other experts selected by the Administrative Agent with reasonable care). The Administrative Agent may deem and treat the Lenders as the owners of their respective interests hereunder for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent in accordance with Section 10.3(b) hereof. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Credit Agreement or under any of the other Credit Documents unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder or under any of the other Credit Documents in accordance with a request of the Required Lenders (or to the extent specifically provided in Section 10.6, all the Lenders) and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders (including their successors and assigns).

 

9.5 Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder, except with respect to defaults on payment of principal, interest and fees required to be paid to the Administrative Agent for the account of the Lenders, unless the Administrative Agent has received notice from a Lender or the Borrower referring to the Credit Document, describing such Default or Event of Default and stating that such notice is a “notice of default.” In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give prompt notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders.

 

9.6 Non-Reliance on Administrative Agent and Other Lenders. Each Lender expressly acknowledges that each of the Administrative Agent and its officers, directors, employees, agents, attorneys-in-fact or affiliates has not made any representations or warranties to it and that no act by the Administrative Agent or any affiliate thereof hereinafter taken, including any review of the affairs of the Borrower or any of its affiliates, shall be deemed to constitute any representation or warranty by the Administrative Agent to any Lender. Each Lender represents to the Administrative Agent that it has, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, assets, operations, property, financial and other conditions, prospects and creditworthiness of the Borrower or its affiliates and made its own decision to make its Loans hereunder and enter into this Credit Agreement. Each Lender also represents that it will, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Credit Agreement, and to make such investigation as it deems necessary to inform itself as to the business, assets, operations, property, financial and other conditions, prospects and creditworthiness of the Borrower and its affiliates. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent

 

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hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, assets, property, financial or other conditions, prospects or creditworthiness of the Borrower or any of its affiliates which may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates.

 

9.7 Indemnification. The Lenders agree to indemnify the Administrative Agent in its capacity as such (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective Revolving Commitment (or if the Revolving Commitments have expired or been terminated, in accordance with the respective principal amounts of outstanding Loans and Participation Interests of the Lenders), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at anytime (including without limitation at any time following the final payment of all of the obligations of the Borrower hereunder and under the other Credit Documents) be imposed on, incurred by or asserted against the Administrative Agent in its capacity as such in any way relating to or arising out of this Credit Agreement or the other Credit Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Administrative Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the gross negligence or willful misconduct of the Administrative Agent. If any indemnity furnished to the Administrative Agent for any purpose shall, in the opinion of the Administrative Agent, be insufficient or become impaired, the Administrative Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. The agreements in this Section shall survive the repayment of the Loans and other obligations under the Credit Documents and the termination of the Revolving Commitments hereunder.

 

9.8 Administrative Agent in its Individual Capacity. The Administrative Agent and its affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower, its Subsidiaries or their affiliates as though the Administrative Agent were not the Administrative Agent hereunder. With respect to the Loans made by the Administrative Agent hereunder and all obligations of the Borrower hereunder and under the other Credit Documents, the Administrative Agent shall have the same rights and powers under this Credit Agreement as any Lender and may exercise the same as though it were not the Administrative Agent, and the terms “Lender” and “Lenders” shall include the Administrative Agent in its individual capacity.

 

9.9 Successor Administrative Agent. The Administrative Agent may, at any time, resign upon 20 Business Days’ written notice to the Lenders and the Borrower, and may be removed, upon show of cause, by the Required Lenders upon 30 days’ written notice to the Administrative Agent. Upon any such resignation or removal, the Required Lenders and the Borrower shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the notice of resignation or notice of removal, as appropriate, then the retiring Administrative Agent shall select a successor Administrative Agent provided such successor is a Lender hereunder or a commercial bank organized under the laws of

 

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the United States of America or of any State thereof and has a combined capital and surplus of at least $400,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations as Administrative Agent, as appropriate, under this Credit Agreement and the other Credit Documents and the provisions of this Section 9.9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Credit Agreement.

 

9.10 Arrangers and Book Managers. None of the Lenders or other Persons identified on the facing page or signature pages of this Credit Agreement or the other Credit Documents as a “Sole Book Manager” or “Sole Lead Arranger” shall have any right, power, obligation, liability, responsibility or duty under this Credit Agreement and the other Credit Documents other than, in the case of such Lenders, those applicable to all Lenders as such. Without limiting the foregoing, none of the Lenders or other Persons so identified shall have or be deemed to have any fiduciary relationship with any Lender. Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders or other Persons so identified in deciding to enter into this Credit Agreement or in taking or not taking action hereunder.

 

ARTICLE X

 

MISCELLANEOUS

 

10.1 Notices. Except as otherwise expressly provided herein, all notices and other communications shall have been duly given and shall be effective (i) when delivered, (ii) when transmitted via telecopy (or other facsimile device) to the number set out below, (iii) the day following the day on which the same has been delivered prepaid to a reputable national overnight air courier service, or (iv) the third Business Day following the day on which the same is sent by certified or registered mail, postage prepaid, in each case to the respective parties at the address set forth on Schedule 10.1, or at such other address as such party may specify by written notice to the other parties hereto.

 

10.2 Right of Set-Off. In addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence of an Event of Default, each Lender is authorized at any time and from time to time, without presentment, demand, protest or other notice of any kind (all of which rights being hereby expressly waived), to set-off and to appropriate and apply any and all deposits (general or special) and any other indebtedness at any time held or owing by such Lender (including, without limitation branches, agencies or affiliates of such Lender wherever located) to or for the credit or the account of the Borrower against obligations and liabilities of the Borrower to such Lender hereunder, under the Notes or the other Credit Documents, irrespective of whether such Lender shall have made any demand hereunder and although such obligations, liabilities or claims, or any of them, may be contingent or unmatured, and any such set-off shall be deemed to have been made immediately upon the occurrence of an Event of Default even though such charge is made or entered on the books of such Lender subsequent thereto. Any Person purchasing a participation in the Loans and Revolving Commitments hereunder pursuant to Section 3.16 or Section 10.3(d) may exercise all rights of set-off with respect to its participation interest as fully as if such Person were a Lender hereunder.

 

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10.3 Benefit of Agreement.

 

(a) Generally. This Credit Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto; provided that the Borrower may neither assign nor transfer any of its interests without prior written consent of the Lenders; provided further that the rights of each Lender to transfer, assign or grant participations in its rights and/or obligations hereunder shall be limited as set forth in this Section 10.3, provided however that nothing herein shall prevent or prohibit any Lender from (i) pledging its Loans hereunder to a Federal Reserve Bank in support of borrowings made by such Lender from such Federal Reserve Bank, or (ii) granting assignments or selling participations in such Lender’s Loans and/or Revolving Commitment hereunder to its parent company and/or to any affiliate or Subsidiary of such Lender.

 

(b) Assignments. Each Lender may assign all or a portion of its rights and obligations hereunder, pursuant to an assignment agreement substantially in the form of Schedule 10.3(b), to (i) any Lender or any affiliate or Subsidiary of a Lender, or (ii) any other commercial bank, financial institution or “accredited investor” (as defined in Regulation D of the Securities and Exchange Commission) reasonably acceptable to the Administrative Agent (such consent shall not be unreasonably withheld or delayed) and, so long as no Default or Event of Default has occurred and is continuing, with the approval of the Borrower (which approval shall not be unreasonably withheld or delayed); provided that (i) any such assignment (other than any assignment to an existing Lender) shall be in a minimum aggregate amount of $5,000,000 (or, if less, the remaining amount of the Revolving Commitments being assigned by such Lender) of the Revolving Commitments and in integral multiples of $1,000,000 above such amount and (ii) each such assignment (other than Competitive Loans) shall be of a constant, not varying, percentage of all such Lender’s rights and obligations under this Credit Agreement. Any assignment hereunder shall be effective upon delivery to the Administrative Agent of written notice of the assignment together with a transfer fee of $3,500 payable to the Administrative Agent for its own account from and after the later of (i) the effective date specified in the applicable assignment agreement and (ii) the date of recording of such assignment in the Register pursuant to the terms of subsection (c) below. The assigning Lender will give prompt notice to the Administrative Agent and the Borrower of any such assignment. Upon the effectiveness of any such assignment (and after notice to, and (to the extent required pursuant to the terms hereof), with the consent of, the Borrower as provided herein), the assignee shall become a “Lender” for all purposes of this Credit Agreement and the other Credit Documents and, to the extent of such assignment, the assigning Lender shall be relieved of its obligations hereunder to the extent of the Loans and Revolving Commitments components being assigned. Along such lines the Borrower agrees that upon notice of any such assignment, it will promptly provide to the assigning Lender and to the assignee separate promissory notes in the amount of their respective interests substantially in the form of the original Note. By executing and delivering an assignment agreement in accordance with this Section 10.3(b), the assigning Lender thereunder and the assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows: (i) such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim; (ii) except as set forth in clause (i) above, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Credit Agreement, any of the other Credit

 

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Documents or any other instrument or document furnished pursuant hereto or thereto, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Credit Agreement, any of the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto or the financial condition of the Borrower or any of its affiliates or the performance or observance by the Borrower of any of its obligations under this Credit Agreement, any of the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto; (iii) such assignee represents and warrants that it is legally authorized to enter into such assignment agreement; (iv) such assignee confirms that it has received a copy of this Credit Agreement, the other Credit Documents and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such assignment agreement; (v) such assignee will independently and without reliance upon the Administrative Agent, such assigning Lender or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Credit Agreement and the other Credit Documents; (vi) such assignee appoints and authorizes the Administrative Agent to take such action on its behalf and to exercise such powers under this Credit Agreement or any other Credit Document as are delegated to the Administrative Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Credit Agreement and the other Credit Documents are required to be performed by it as a Lender (including without limitation the requirements of Section 3.13).

 

(c) Maintenance of Register. The Administrative Agent shall maintain at one of its offices in Charlotte, North Carolina a copy of each Lender assignment agreement delivered to it in accordance with the terms of subsection (b) above and a register for the recordation of the identity of the principal amount, type and Interest Period of each Loan outstanding hereunder, the names, addresses and the Revolving Commitments of the Lenders pursuant to the terms hereof from time to time (the “Register”). The Administrative Agent will make diligent efforts to maintain the accuracy of the Register and to promptly update the Register from time to time, as necessary. The entries in the Register shall be conclusive in the absence of manifest error and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Credit Agreement. The Register shall be available for inspection by the Borrower and each Lender, at any reasonable time and from time to time upon reasonable prior notice.

 

(d) Participations. Each Lender may sell, transfer, grant or assign participations in all or any part of such Lender’s interests and/or obligations hereunder; provided that (i) such selling Lender shall remain a “Lender” for all purposes under this Credit Agreement (such selling Lender’s obligations under the Credit Documents remaining unchanged) and the participant shall not constitute a Lender hereunder, (ii) no such participant shall have, or be granted, rights to approve any amendment or waiver relating to this Credit Agreement or the other Credit Documents except to the extent any such amendment or waiver would (A) reduce the principal of or rate of interest on or Fees in respect of any Loans in which the participant is participating, (B) postpone the date fixed for any payment of principal (including extension of the Termination Date or the date of any mandatory prepayment), interest or Fees in which the participant is participating, or (C) increase the dollar amount of such participant’s participation over the dollar amount thereof in effect (it being understood and agreed that a waiver of any Default or Event of

 

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Default or mandatory reduction in the participation amount (through a reduction in the Revolving Commitments or otherwise) shall not constitute a change in the terms of the participation amount of any participant), and (iii) sub-participations by the participant (except to an affiliate, parent company or affiliate of a parent company of the participant) shall be prohibited. In the case of any such participation, the participant shall not have any rights under this Credit Agreement or the other Credit Documents (the participant’s rights against the selling Lender in respect of such participation to be those set forth in the participation agreement with such Lender creating such participation) and all amounts payable by the Borrower hereunder shall be determined as if such Lender had not sold such participation, provided, however, that such participant shall be entitled to receive additional amounts under Sections 3.6, 3.7, 3.9, 3.10, 3.13 and 3.14 on the same basis as if it were a Lender (but in no event shall such additional amounts exceed the amount which would have been payable to the relevant Lender in the absence of such participation, and subject to limitations on such participant comparable to those contained in Section 3.12 with respect to Requesting Lenders).

 

10.4 No Waiver; Remedies Cumulative. No failure or delay on the part of the Administrative Agent or any Lender in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between the Administrative Agent or any Lender and the Borrower shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights and remedies provided herein are cumulative and not exclusive of any rights or remedies which the Administrative Agent or any Lender would otherwise have. No notice to or demand on the Borrower shall entitle the Borrower to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Administrative Agent or the Lenders to any other or further action in any circumstances without notice or demand.

 

10.5 Costs and Expenses. The Borrower agrees to: (i) pay all reasonable out-of-pocket costs and expenses (A) of the Administrative Agent in connection with the negotiation, preparation, execution and delivery and administration of this Credit Agreement and the other Credit Documents and the documents and instruments referred to herein and therein (including, without limitation, the reasonable fees and expenses of Helms Mulliss & Wicker, PLLC, special counsel to the Administrative Agent) and any amendment, waiver or consent relating hereto and thereto including, but not limited to, any such amendments, waivers or consents resulting from or related to any work-out, renegotiation or restructure relating to the performance by the Borrower under this Credit Agreement, provided, however, the Borrower’s obligations under this subsection (A) shall be limited to those of one law firm, and (B) of the Administrative Agent and the Lenders in connection with enforcement of the Credit Documents and the documents and instruments referred to therein (including, without limitation, in connection with any such enforcement, the reasonable fees and disbursements of counsel for the Administrative Agent and each of the Lenders); (ii) pay and hold each of the Lenders harmless from and against any and all present and future stamp and other similar taxes with respect to the foregoing matters and save each of the Lenders harmless from and against any and all liabilities with respect to or resulting from any delay or omission (other than to the extent attributable to such Lender) to pay such taxes; and (iii) reimburse each Lender and Agent, and their respective officers, directors, employees, representatives, from and hold each of them harmless against any and all losses,

 

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liabilities, claims, damages or expenses incurred by any of them as a result of, or arising out of, or in any way related to, or by reason of any investigation, litigation or other proceeding (whether or not any Lender is a party thereto) related to the entering into and/or performance of any Credit Document or the use of proceeds of any Loans (including other extensions of credit) hereunder or the consummation of any other transactions contemplated in any Credit Document, including, without limitation, the reasonable fees and disbursements of counsel incurred in connection with any such investigation, litigation or other proceeding (but excluding any such losses, liabilities, claims, damages or expenses to the extent incurred by reason of gross negligence or willful misconduct on the part of the Person to be indemnified).

 

10.6 Amendments; Waivers and Consents. Neither this Credit Agreement nor any other Credit Document nor any of the terms hereof or thereof may be amended, changed, waived, discharged or terminated unless such amendment, change, waiver, discharge or termination is in writing entered into by, or approved in writing by, the Required Lenders and the Borrower, provided, however, that:

 

(a) the consent of each Lender affected thereby is required to:

 

(i) extend the final maturity of any Loan or any Revolving Commitment, or any portion thereof, or extend or waive any principal amortization payment of any Loan, or any portion thereof, or waive application of any mandatory prepayment;

 

(ii) reduce the rate or extend the time of payment of interest (other than as a result of waiving the applicability of any increase in interest rates after the occurrence of an Event of Default or on account of a failure to deliver financial statements on a timely basis) thereon or Fees hereunder;

 

(iii) reduce or waive the principal amount of any Loan;

 

(iv) increase the Revolving Commitment of a Lender over the amount thereof in effect (it being understood and agreed that a waiver of any Default or Event of Default or mandatory reduction in the Revolving Commitments shall not constitute a change in the terms of any Revolving Commitment of any Lender);

 

(v) except as the result of or in connection with a dissolution, merger or disposition of a Subsidiary permitted under Section 7.3, release the Borrower from its obligations under the Credit Documents;

 

(vi) amend, modify or waive any provision of this Section 10.6 or Sections 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13, 3.14, 3.15, 3.16, 8.1(a), 10.2, 10.3, 10.5, or 10.9;

 

(vii) reduce any percentage specified in, or otherwise modify, the definition of Required Lenders;

 

(viii) expand or otherwise add any new currency to the definition of Available Foreign Currency; or

 

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(ix) consent to the assignment or transfer by the Borrower of any of its rights and obligations under (or in respect of) the Credit Documents except as permitted thereby; and

 

(b) without the consent of the Administrative Agent, no provision of Article IX may be amended.

 

Notwithstanding the fact that the consent of all the Lenders is required in certain circumstances as set forth above, (x) each Lender is entitled to vote as such Lender sees fit on any bankruptcy reorganization plan that affects the Loans, and each Lender acknowledges that the provisions of Section 1126(c) of the United States Bankruptcy Code supersedes the unanimous consent provisions set forth herein and (y) the Required Lenders may consent to allow the Borrower to use cash collateral in the context of a bankruptcy or insolvency proceeding.

 

10.7 Counterparts. This Credit Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall constitute one and the same instrument. It shall not be necessary in making proof of this Credit Agreement to produce or account for more than one such counterpart.

 

10.8 Headings. The headings of the Sections and subsections hereof are provided for convenience only and shall not in any way affect the meaning or construction of any provision of this Credit Agreement.

 

10.9 Survival. All indemnities set forth herein, including, without limitation, in Sections 3.10, 3.13, 3.14, 9.7 and 10.5 shall survive the execution and delivery of this Credit Agreement, the making of the Loans, the repayment of the Loans and other obligations under the Credit Documents and the termination of the Revolving Commitments hereunder, and all representations and warranties made by the Borrower herein shall survive delivery of the Notes and the making of the Loans hereunder.

 

10.10 Governing Law; Submission to Jurisdiction; Venue.

 

(a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA. Any legal action or proceeding with respect to this Credit Agreement or any other Credit Document shall be brought in the state or federal courts in the City of Charlotte, State of North Carolina and, by execution and delivery of this Credit Agreement, the Borrower hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the exclusive jurisdiction of such courts. The Borrower further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to it at the address set out for notices pursuant to Section 10.1, such service to become effective five (5) days after such mailing. Nothing herein shall affect the right of the Administrative Agent to serve process in any other manner permitted by law or to commence legal proceedings or to otherwise proceed against the Borrower in any other jurisdiction.

 

57


(b) The Borrower hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Credit Agreement or any other Credit Document brought in the courts referred to in subsection (a) hereof and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum.

 

(c) TO THE EXTENT PERMITTED BY LAW, EACH OF THE ADMINISTRATIVE AGENT, THE LENDERS AND THE BORROWER HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS CREDIT AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

 

10.11 Confidentiality. Each of the Administrative Agent and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information maybe disclosed (i) to its and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential); (ii) to the extent requested by any regulatory authority; (iii) to the extent required by applicable laws or regulations or by any subpoena or similar legal process; (iv) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Credit Agreement or the enforcement of rights hereunder; (v) subject to an agreement containing provisions substantially the same as those of this Section 10.11. to (A) any assignee or participant, or any prospective assignee or participant, any of its rights or obligations under this Credit Agreement, subject to the terms of Section 10.3, or (B) any direct or indirect contractual counterparty or prospective counterparty (or such contractual counterparty’s or prospective counterparty’s professional advisor) to any credit derivative transaction relating to the Loans; (vi) with the consent of the Borrower; (vii) to the extent such Information (A) becomes publicly available other than as a result of a breach of this Section 10.11 or (B) becomes available to the Administrative Agent or any Lender on a nonconfidential basis from a source other than the Borrower and its Subsidiaries; (viii) to the National Association of Insurance Commissioners or any other similar organization or any nationally recognized rating agency that requires access to information about a Lender’s or its Affiliates’ investment portfolio in connection with ratings issued with respect to such Lender or its Affiliates; or (ix) credit reporting activities pursuant to credit reporting laws, rules and regulations. For the purposes of this Section, “Information” means all information received from the Borrower or its Subsidiaries relating to the Borrower and its Subsidiaries or their business, other than any such information that is available to the Administrative Agent or any Lender on a non confidential basis prior to disclosure by the Borrower and its Subsidiaries.

 

10.12 Severability. If any provision of any of the Credit Documents is determined to be illegal, invalid or unenforceable, such provision shall be fully severable and the remaining provisions shall remain in full force and effect and shall be construed without giving effect to the illegal, invalid or unenforceable provisions.

 

10.13 Entirety. This Credit Agreement together with the other Credit Documents represent the entire agreement of the parties hereto and thereto, and supersede all prior

 

58


agreements and understandings, oral or written, if any, including any commitment letters or correspondence relating to the Credit Documents or the transactions contemplated herein and therein.

 

10.14 Binding Effect; Termination.

 

(a) This Credit Agreement shall become effective at such time on or after the Effective Date when it shall have been executed by the Borrower and the Administrative Agent, and the Administrative Agent shall have received copies hereof (telefaxed or otherwise) which, when taken together, bear the signatures of each Lender, and thereafter this Credit Agreement shall be binding upon and inure to the benefit of the Borrower, the Administrative Agent and each Lender and their respective successors and assigns.

 

(b) The term of this Credit Agreement shall be until no Loans or any other amounts payable hereunder or under any of the other Credit Documents shall remain outstanding and until the Revolving Commitments hereunder shall have expired or been terminated.

 

10.15 Judgment Currency. If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due hereunder or under any other Credit Document in one currency into another currency, the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase the first currency with such other currency on the Business Day preceding that on which final judgment is given. The obligation of the Borrower in respect of any such sum due from it to the Administrative Agent or any Lender hereunder or under the other Credit Documents shall, notwithstanding any judgment in a currency (the “Judgment Currency”) other than that in which such sum is denominated in accordance with the applicable provisions of this Credit Agreement (the “Agreement Currency”), be discharged only to the extent that on the Business Day following receipt by the Administrative Agent or such Lender of any sum adjudged to be so due in the Judgment Currency, the Administrative Agent or such Lender may in accordance with normal banking procedures purchase the Agreement Currency with the Judgment Currency. If the amount of the Agreement Currency so purchased is less than the sum originally due to the Administrative Agent or such Lender in the Agreement Currency, the Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Administrative Agent or such Lender or the Person to whom such obligation was owing against such loss. If the amount of the Agreement Currency so purchased is greater than the sum originally due to the Administrative Agent or such Lender in such currency, the Administrative Agent or such Lender agrees to return the amount of any excess to the Borrower (or to any other Person who may be entitled thereto under applicable law).

 

10.16 USA PATRIOT Act Notice. Each Lender that is subject to the Act (as hereinafter defined) and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender or the Administrative Agent, as applicable, to identify the Borrower in accordance with the Act.

 

59


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

 

NUCOR CORPORATION
By:   LOGO

Name:

 

Daniel R. DiMicco

Title:

 

Vice Chairman, President & Chief
Executive Officer

 

Nucor Corporation 364-Day Revolving Credit Agreement

Signature page 1


BANK OF AMERICA, N.A., as Administrative
Agent
By:   LOGO

Name:

 

Mollie S. Canup

Title:

 

Vice President

 

Nucor Corporation 364-Day Revolving Credit Agreement

Signature Page 2


BANK OF AMERICA, N.A., as a Lender
By:   LOGO

Name:

 

Douglas J. Bolt

Title:

 

Vice President

 

Nucor Corporation 364-Day Revolving Credit Agreement

Signature Page 3


CIBC INC., as a Lender
By:   LOGO

Name:

 

Dominic J. Sorresso

Title:

 

Executive Director

CIBC World Markets Corp., as Agent

 

Nucor Corporation 364-Day Revolving Credit Agreement

Signature Page 4


JPMORGAN CHASE BANK, as a Lender
By:   LOGO

Name:

 

Peter S. Predun

Title:

 

Vice President

 

Nucor Corporation 364-Day Revolving Credit Agreement

Signature Page 5


THE BANK OF NEW YORK, as a Lender
By:   LOGO

Name:

 

David C. Siegel

Title:

 

Vice President

 

Nucor Corporation 364-Day Revolving Credit Agreement

Signature Page 6


THE NORTHERN TRUST COMPANY, as a
Lender
By:   LOGO

Name:

 

John Konstantos

Title:

 

Vice President

 

Nucor Corporation 364-Day Revolving Credit Agreement

Signature Page 7


WACHOVIA BANK, NATIONAL
ASSOCIATION,
as a Lender
By:   LOGO

Name:

 

Jorge A. Gonzalez

Title:

 

Managing Director

 

Nucor Corporation 364-Day Revolving Credit Agreement

Signature Page 8

2004 ANNUAL REPORT (portions incorporated by reference)
     Exhibit 13
Nucor Corporation
2004 Form 10-K

 

FINANCIAL HIGHLIGHTS (dollar amounts in thousands, except per share data)

 

     2004

    2003

    % CHANGE

 

FOR THE YEAR

                      

Net sales

   $ 11,376,828     $ 6,265,823     82 %

Earnings:

                      

Earnings before income taxes

     1,731,276       66,877     2489 %

Provision for income taxes

     609,791       4,096     14,787 %
    


 


     

Net earnings

     1,121,485       62,781     1,686 %

Per share:

                      

Basic(1)

     7.08       0.40     1,670 %

Diluted(1)

     7.02       0.40     1,655 %

Dividends per share(1)

     0.47       0.40     18 %

Percentage of net earnings to net sales

     9.9 %     1.0 %   884 %

Return on average equity

     38.7 %     2.7 %   1,333 %

Capital expenditures

     285,925       215,408     33 %

Depreciation

     383,305       364,112     5 %

Sales per employee

     1,107       637     74 %

AT YEAR END

                      

Working capital

   $ 2,109,158     $ 990,965     113 %

Property, plant and equipment

     2,818,307       2,817,135     —    

Long-term debt

     923,550       903,550     2 %

Stockholders’ equity

     3,455,985       2,342,077     48 %

Per share(1)

     21.67       14.90     45 %

Shares outstanding(1)

     159,512       157,180     1 %

Employees

     10,600       9,900     7 %

 

(1) Per share amounts and shares outstanding have been restated to reflect the two-for-one stock split effective October 15, 2004.

 

FORWARD-LOOKING STATEMENTS Certain statements made in this annual report are forward-looking statements that involve risks and uncertainties. These forward-looking statements reflect the Company’s best judgment based on current information, and although we base these statements on circumstances that we believed to be reasonable when made, there can be no assurance that future events will not affect the accuracy of such forward-looking information. As such, the forward-looking statements are not guarantees of future performance, and actual results may vary materially from the results and expectations discussed in this report. Factors that might cause the Company’s actual results to differ materially from those anticipated in forward-looking statements include, but are not limited to: (1) the sensitivity of the results of our operations to prevailing steel prices and the changes in the supply and cost of raw materials, including scrap steel; (2) availability and cost of electricity and natural gas; (3) market demand for steel products; (4) competitive pressure on sales and pricing, including pressure from imports and substitute materials; (5) uncertainties surrounding the global economy, including excess world capacity for steel production; (6) U.S. and foreign trade policy affecting steel imports or exports; (7) significant changes in government regulations affecting environmental compliance; (8) the cyclical nature of the domestic steel industry; (9) capital investments and their impact on our performance; and (10) our safety performance.

 

All forward-looking statements speak only as of the date of this report or, in the case of any document incorporated by reference, the date of that document. All subsequent written and oral forward-looking statements attributable to the Company or any person acting on the Company’s behalf are qualified by the cautionary statements in this section. The Company does not undertake any obligation to update or publicly release any revisions to forward-looking statements to reflect events, circumstances or changes in expectations after the date of this report.

 


   

AT A GLANCE

        
    7         

 

 

 

 

 

LOGO

STEEL MILLS SEGMENT


 

BAR MILLS

 

Products: Steel bars, angles and other products for automotive, construction, farm machinery, metal buildings, furniture and recreational equipment.

 

Darlington, South Carolina

Norfolk, Nebraska

Jewett, Texas

Plymouth, Utah

Auburn, New York

    (Nucor Steel Auburn, Inc.)

Birmingham, Alabama

    (Nucor Steel Birmingham, Inc.)

Kankakee, Illinois

    (Nucor Steel Kankakee, Inc.)

Jackson, Mississippi

    (Nucor Steel Jackson, Inc.)

Seattle, Washington

    (Nucor Steel Seattle, Inc.)

 

SHEET MILLS

 

Products: Flat-rolled steel for automotive, appliances, pipes and tubes, construction and other industries.

 

Crawfordsville, Indiana Hickman, Arkansas

Berkeley County, South Carolina

Decatur, Alabama

    (Nucor Steel Decatur, LLC)

 

NUCOR-YAMATO STEEL COMPANY

 

Products: Super-wide flange steel beams, pilings and heavy structural steel products for fabricators, construction companies, manufacturers and steel service centers.

 

Blytheville, Arkansas

 

BEAM MILL

 

Products: Wide flange steel beams, pilings and heavy structural steel products for fabricators, construction companies, manufacturers and steel service centers.

 

Berkeley County, South Carolina

 

PLATE MILLS

 

Products: Steel plate for manufacturers of heavy equipment, rail cars, ships, barges, refinery tanks, pipe and tube, pressure vessels, construction and others.

 

Hertford County, North Carolina

Tuscaloosa, Alabama

    (Nucor Steel Tuscaloosa, Inc.)

 

 

STEEL PRODUCTS SEGMENT


 

VULCRAFT

 

Products: Steel joists, joist girders and steel deck for buildings.

 

Florence, South Carolina

Norfolk, Nebraska

Fort Payne, Alabama

Grapeland, Texas

St. Joe, Indiana

Brigham City, Utah

Chemung, New York

    (Vulcraft of New York, Inc.)

 

COLD FINISH

 

Products: Cold finished steel bars for shafting and precision machined parts.

 

Norfolk, Nebraska

Darlington, South Carolina

Brigham City, Utah

Oak Creek, Wisconsin

    (Nucor Cold Finish Wisconsin, Inc.)

 

BUILDING SYSTEMS

 

Products: Metal buildings and metal building components for commercial, industrial and institutional building markets.

 

Waterloo, Indiana

Swansea, South Carolina

Terrell, Texas

 

FASTENER

 

Products: Steel hexhead cap screws, structural bolts and hex bolts for automotive, machine tools, farm implements, construction and military applications.

 

St. Joe, Indiana

 

NUCON STEEL

 

Products: Load bearing light gauge steel framing systems for the commercial and residential construction markets.

 

Denton, Texas

Dallas, Georgia

 

 

CORPORATE OFFICE


 

Charlotte, North Carolina


     OPERATIONS REVIEW     
     8     

 

 

 

 

STEEL MILLS SEGMENT


BAR MILLS, SHEET MILLS, STRUCTURAL MILLS AND PLATE MILLS

Nucor operates scrap-based steel mills in seventeen facilities. These mills utilize modern steelmaking techniques and produce steel at a cost competitive with steel manufactured anywhere in the world.


 

BAR MILLS

 

Nucor has nine bar mills located in South Carolina, Nebraska, Texas, Utah, New York, Alabama, Illinois, Mississippi and Washington that produce bars, angles and light structural shapes in carbon and alloy steels. These products have wide usage, including automotive, construction, farm equipment, metal buildings, furniture and recreational equipment. Four of the bar mills were constructed by Nucor between 1969 and 1981. Over the years, Nucor has completed extensive capital projects to keep these facilities modernized, including a modernization of the rolling mill at the Nebraska facility, a new melt shop at the Texas facility, and a new finishing end at the South Carolina facility. In 2001, Nucor purchased substantially all of the assets of Auburn Steel Company, Inc.’s steel bar facility in Auburn, New York, which currently has the capacity to produce up to 470,000 tons of merchant and special bar quality (SBQ) steel shapes and rebar. In 2002, Nucor completed the acquisition of substantially all the assets of Birmingham Steel Corporation (“Birmingham Steel”). The four bar mills acquired from Birmingham Steel can produce in excess of 2,200,000 tons annually. The total capacity of our nine bar mills is approximately 6,300,000 tons per year.

 

SHEET MILLS

 

The sheet mills produce flat-rolled steel for automotive, appliances, pipes and tubes, construction and other industries. The four sheet mills are located in Indiana, Arkansas, South Carolina and Alabama. Nucor constructed three of the sheet mills between 1989 and 1996. The constructed sheet mills utilize thin slab casters to produce hot rolled sheet. In 2002, Nucor’s wholly owned subsidiary, Nucor Steel Decatur, LLC, purchased substantially all the assets of Trico Steel Company, LLC (“Trico”). This sheet mill is located in Decatur, Alabama, and has an annual capacity of approximately 1,900,000 tons, initially expanding our sheet capacity by 30%. In the third quarter of 2004, Nucor Steel Decatur, LLC purchased the adjacent cold rolling mill of Worthington Industries, Inc. (“Worthington”). All four of our sheet mills are now equipped with cold rolling mills for further processing of hot rolled sheet. The three greenfield constructed mills are also equipped with galvanizing lines. The total capacity of the four sheet mills is about 9,100,000 tons per year.

 

STRUCTURAL MILLS

 

The structural mills produce wide flange steel beams, pilings and heavy structural steel products for fabricators, construction companies, manufacturers and steel service centers. In 1988, Nucor and Yamato Kogyo, one of Japan’s major producers of wide-flange beams, completed construction of a beam mill located near Blytheville, Arkansas. Nucor owns a 51% interest in Nucor-Yamato Steel Company. During 1999, Nucor started operations at its 700,000 tons-per-year steel beam mill in South Carolina. Both mills use a special continuous casting method that produces a beam blank closer in shape to that of the finished beam than traditional methods. Current annual production capacity of our two structural mills is approximately 3,200,000 tons.

 

PLATE MILLS

 

Nucor operates two plate mills. Nucor completed construction of its first plate mill, located in North Carolina, in 2000 with the competitive advantages of new, more efficient production technology. This mill produces plate for manufacturers of heavy equipment, rail cars, ships, barges, refinery tanks and others. During the third quarter of 2004, Nucor’s wholly owned subsidiary, Nucor Steel Tuscaloosa, Inc., purchased substantially all the assets of Corus Tuscaloosa. The Tuscaloosa mill has an annual capacity of 800,000 tons, and complements our product offering with thinner gauges of coiled and cut-to-length plate used in the pipe and tube, pressure vessel, transportation and construction industries. Current annual production capacity of our two plate mills is approximately 2,100,000 tons.


    OPERATIONS REVIEW         
    9         

 

 

 

OPERATIONS

Nucor’s steel mills are among the most modern and efficient mills in the United States. Recycled steel scrap and other metallics are melted in electric arc furnaces and poured into continuous casting systems. Highly sophisticated rolling mills convert the billets, blooms and slabs into rebar, angles, rounds, channels, flats, sheet, beams, plate and other products.

 

Production in 2004 was a record 19,737,000 tons, a 13% increase from 17,441,000 tons in 2003. Annual production capacity has grown from 120,000 tons in 1970 to a present total of about 20,700,000 tons.

 

The operations in the rolling mills are highly automated and require fewer operating employees than older mills. All Nucor steel mills have high productivity, which results in employment costs of approximately 8% of the sales dollar. This is lower than the employment costs of integrated steel companies producing comparable products. Employee turnover in all mills is extremely low. All employees have a significant part of their compensation based on their productivity. Production employees work under group incentives that provide increased earnings for increased production. This additional compensation is paid weekly.

 

Steel mills are large consumers of electricity and gas. Total energy costs were essentially flat from 2003 to 2004, as productivity gains offset higher unit gas and electricity costs. Because of the high efficiency of Nucor steel mills, these energy costs were less than 10% of the sales dollar in 2004 and 2003.

 

Scrap and scrap substitutes are the most significant element in the total cost of steel production. The average cost of scrap and scrap substitutes used increased 74% to $238 per ton in 2004 from $137 per ton in 2003. A raw material surcharge implemented in 2004 has allowed Nucor to maintain operating margins and meet our commitment to customers in spite of highly volatile scrap and scrap substitute costs.

 

MARKETS AND MARKETING

Approximately 90% of the seventeen steel mills’ production in 2004 was sold to outside customers and the balance was used internally by the Vulcraft, Cold Finish, Building Systems and Fastener divisions. Steel sales to outside customers in 2004 were a record 17,787,000 tons, 9% higher than the 16,263,000 tons in 2003.

 

Our steel mill customers are primarily manufacturers, steel service centers and fabricators. The sheet mills continue to build long-term relationships with contract customers who purchase more value-added products. We enter 2005 with 60-65% of our sheet mill volume committed to contract customers. Contract terms are typically six to twelve months in length with various renewal dates. These contracts are non-cancelable agreements with a pricing formula that varies based on raw material costs. Long term, the sheet mills will continue to pursue profitable contract business.

 

TRADE ISSUES

Nucor’s continued involvement in trade issues is a critical part of our efforts to support the long-term success of our steel-making operations. Unfairly traded, illegally dumped steel imports have devastated the U.S. steel industry and its workers. In 2002, the Bush Administration implemented Section 201 to help the domestic steel industry recover from the illegal and predatory trading practices of foreign competitors. In December 2003, the Administration chose to prematurely end the temporary steel safeguard tariffs; however, we are optimistic about the Administration’s commitment to the vigorous enforcement of U.S. trade laws and the President’s promise to work with Congress to achieve a long-term solution to illegal dumping and other unfair trade practices that necessitated Section 201. Nucor actively supports several organizations that promote free and fair trade and that oppose currency manipulation.

 

NEWER FACILITIES AND EXPANSIONS

In February 2002, Nucor announced that over $200.0 million would be spent on three bar mill capital projects over the next three years. During 2003, modernization of the rolling mill at our Nebraska facility and the installation of a new finishing end at our South Carolina bar mill were completed. During 2004, the Nucor team completed the last of these projects – a new melt shop at our Texas facility. All three of these projects were completed on time and on budget. Through 2004, these three bar mills have continued to lower their conversion costs, increase their yields and productivity, and improve product consistency.

 

In July 2002, Nucor’s wholly owned subsidiary, Nucor Steel Decatur, LLC, purchased substantially all the assets of Trico for a purchase price of $117.7 million. This 1,900,000-ton sheet mill, located in Decatur, Alabama, began operations in 1997 but had been shut down as the result of bankruptcy. The purchase strategy called for a major renovation of the facility, including: the scrap handling system, both electric arc furnaces, the alloy system, the water systems, the tunnel furnace, rolling mill gearing and the finished coil handling equipment. Capital expenditures for this facility have exceeded $100.0 million from acquisition through 2004. Nucor Steel Decatur continues to grow its capacity and is targeting 2,100,000 tons of hot rolled production for 2005.


     OPERATIONS REVIEW     
     10     

 

 

In December 2002, we completed the acquisition of substantially all the assets of Birmingham Steel for a cash purchase price of approximately $615.0 million, including $116.9 million in inventory and receivables. Primary assets purchased were four operating steel mills that produce rebar and other bar products and have combined annual capacity of more than 2,200,000 tons. The compatibility of the four purchased bar mills has helped to facilitate a smooth transition and integration process. These four bar mills, the largest acquisition in Nucor’s history, made significant operating profit contributions in 2003 and 2004.

 

In late 2003, the sheet mill in Berkeley County, South Carolina, completed construction and began trials of a vacuum degasser. The degasser has allowed Nucor to expand this facility’s product capacity into deep drawing steel grades. We expect to continue advancement and participation in more value-added business in the automotive, appliance, lawn and garden, and heating-ventilation-air conditioning markets in 2005.

 

During the third quarter of 2004, Nucor purchased substantially all of the assets of Corus Tuscaloosa for a cash purchase price of approximately $89.4 million. This plate mill has an annual capacity of about 800,000 tons and complements the product offering of our Hertford County plate mill with thinner gauges of coiled and cut-to-length plate. This acquisition was immediately accretive to earnings and made a significant operating contribution in 2004.

 

Also in the third quarter of 2004, Nucor purchased certain cold rolling assets from Worthington, located adjacent to our Decatur, Alabama sheet mill, for a cash purchase price of approximately $80.3 million. The purchased assets include all of the buildings, a pickle line, four-stand tandem mill, temper mill and annealing furnaces. This modern 1,000,000-ton cold mill with 600,000 tons of annealing capacity was constructed in 1998 and complements our strategy to serve value-added customers in the Southeast market.

 

In September 2004, Nucor exercised its option to acquire the assets of an idled direct reduced iron (“DRI”) plant located in Louisiana. We have begun dismantling and refurbishing this DRI plant for relocation to Trinidad and to expand annual capacity to 1,800,000 metric tons per year. The Trinidad site will benefit from a low cost supply of natural gas and favorable logistics for receipt of Brazilian iron ore and shipment of DRI to the United States. This new entity will be named Nu-Iron Unlimited (“Nu-Iron”) and has a capital budget of approximately $225.0 million. Nu-Iron is expected to begin operations in early 2006.

 

COMMERCIALIZATION OF NEW TECHNOLOGIES

In April 2002, Nucor entered a joint venture with The Rio Tinto Group, Mitsubishi Corporation and Chinese steel maker Shougang Corporation to construct a commercial HIsmelt® plant in Kwinana, Western Australia. The HIsmelt process converts iron ore fines and coal fines to liquid metal, eliminating the need for a blast furnace, sinter/pellet plants and coke ovens. Nucor has a 25% interest in the joint venture that owns the HIsmelt commercial plant. Construction is nearing completion and cold commissioning of about 75% of the plant is in progress. Production is now scheduled to begin in the second quarter of 2005. This plant will have an initial annual capacity of 800,000 metric tons and is expandable to over 1,500,000 metric tons at a very attractive capital cost.

 

Nucor began operations of its 100% owned Castrip® facility in Crawfordsville, Indiana, in May 2002. This facility uses the breakthrough technology of strip casting, to which Nucor holds exclusive rights in the United States and Brazil. Strip casting involves the direct casting of molten steel into final shape and thickness without further hot or cold rolling. This process allows lower investment and operating costs, reduced energy consumption and smaller scale plants than can be economically built with current technology. This process also reduces the overall environmental impact of producing steel by generating significantly lower emissions, particularly NOx. In early 2005, Nucor announced that the Castrip process had achieved commercial viability and that a second Nucor location for a Castrip operation was being sought in the United States. Nucor also announced plans to establish at least one joint venture partner overseas in 2005 to utilize the Castrip technology.

 

In April 2003, Nucor entered a joint venture with Companhia Vale do Rio Doce (“CVRD”) to construct and operate an environmentally friendly pig iron project in northern Brazil. The project, named Ferro Gusa Carajás S.A. (“Ferro Gusa”), will utilize two conventional mini-blast furnaces to produce about 380,000 metric tons of pig iron per year in its initial phase, using iron ore from CVRD’s Carajás mine in northern Brazil. The charcoal source will be exclusively from eucalyptus trees grown in a cultivated forest of 82,000 acres with the total forest encompassing approximately 200,000 acres in northern Brazil. The cultivated forest removes more carbon dioxide from the atmosphere than the blast furnace emits. Production is expected to begin in the third quarter of 2005. It is anticipated that Nucor will purchase all of the production of the plant.

 

The Ferro Gusa project, together with the Nu-Iron and HIsmelt projects discussed above, represent the initial steps in Nucor’s raw materials strategy to control about one-third of our iron units consumption. At our current consumption rate, achieving this strategic goal will require between 6,000,000 and 7,000,000 tons per year of high quality scrap substitutes.


    OPERATIONS REVIEW         
    11         

 

 

 

 

 

LOGO

 

 


     OPERATIONS REVIEW     
     12     

 

 

 

 

STEEL PRODUCTS SEGMENT


VULCRAFT

is the nation’s largest producer of open-web steel joists, joist girders and steel deck, which are used for building construction.


 

 

OPERATIONS

Steel joists and joist girders are produced and marketed nationally through seven Vulcraft facilities located in South Carolina, Nebraska, Alabama, Texas, Indiana, Utah and New York. Current annual production capacity is more than 685,000 tons. In 2004, Vulcraft produced 522,000 tons of steel joists and joist girders, an increase of 4% from the 503,000 tons produced in 2003.

 

Material costs, primarily steel, were 53% of the joist sales dollar in 2004 (56% in 2003). Vulcraft obtained 99% of its steel requirements for joists and joist girders from the Nucor bar mills in both 2004 and 2003. Freight costs for joists and joist girders were less than 10% of the sales dollar in 2004 and 2003. Vulcraft maintains an extensive fleet of trucks to ensure and control on-time delivery.

 

The Vulcraft facilities in South Carolina, Nebraska, Alabama, Texas, Indiana and New York produce steel deck. Current deck annual production capacity is approximately 430,000 tons. Vulcraft steel deck sales increased 3% from 353,000 tons in 2003 to 364,000 tons in 2004. Coiled sheet steel was about 54% of the steel deck sales dollar in 2004 (66% in 2003). In 2004 and 2003, Vulcraft obtained 99% of its steel requirements for steel deck production from the Nucor sheet mills. For 2004 and 2003, freight costs for deck were less than 10% of the sales dollar.

 

Production employees of Vulcraft work with a group incentive system that provides increased compensation each week for increased performance.

 

MARKETS AND MARKETING

Steel joists, joist girders and steel decking are used extensively as part of the roof and floor support systems in manufacturing buildings, retail stores, shopping centers, warehouses, schools, churches, hospitals and, to a lesser extent, in multi-story buildings and apartments. Building support systems using joists, joist girders and steel deck are frequently more economical than other systems.

 

Steel joists and joist girder sales are obtained by competitive bidding. Vulcraft quotes on a significant percentage of the domestic buildings using steel joists and joist girders as part of the support systems. In 2004, Vulcraft supplied more than 40% of total domestic sales of steel joists. Steel deck is specified in the majority of buildings using steel joists and joist girders. In 2004, Vulcraft supplied more than 30% of total domestic sales of steel deck.

 

Sales of steel joists, joist girders and steel deck are dependent on the non-residential building construction market.


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COLD FINISH AND FASTENER

Nucor manufactures a variety of products using steel from Nucor mills.


 

COLD FINISH

 

Nucor Cold Finish is the largest producer of cold finished bars in the United States and has facilities in Nebraska, South Carolina, Utah and Wisconsin. Three of these facilities were originally constructed by Nucor between 1978 and 1983 and are located in Nebraska, South Carolina and Utah. In February 2005, Nucor purchased the assets of Fort Howard Steel, Inc.’s operations in Oak Creek, Wisconsin. This facility has approximately 140,000 tons of annual capacity. The total capacity of the four facilities is approximately 490,000 tons per year.

 

These facilities produce cold drawn and turned, ground and polished steel bars that are used extensively for shafting and precision machined parts. Nucor Cold Finish produces rounds, hexagons, flats and squares in carbon, alloy and leaded steels. These bars, in turn, are purchased by the automotive, farm machinery, hydraulic, appliance and electric motor industries, as well as by service centers. Nucor Cold Finish bars are used in tens of thousands of products. A few examples include anchor bolts, farm machinery, hydraulic cylinders, and shafting for air conditioner compressors, ceiling fan motors, garage door openers, electric motors and lawn mowers.

 

All four facilities are among the most modern in the world and use in-line electronic testing to ensure outstanding quality. Nucor Cold Finish obtains most of its steel from the Nucor bar mills. This factor, along with the efficient facilities using the latest technology, results in a highly competitive cost structure.

 

In 2004, sales of cold finished steel products were a record 271,000 tons, an
increase of 14% from 2003’s 237,000 tons. The total cold finish market is
estimated to be approximately 2,000,000 tons. The Wisconsin facility
represents a continuation of our successful value-added strategy and expands
our presence in the Midwest market. Nucor Cold Finish anticipates opportunities
for significant increases in sales and earnings during the next several years.

 

FASTENER

 

Nucor Fastener’s state-of-the-art steel bolt-making facility in Indiana produces
standard steel hexhead cap screws, hex bolts, structural bolts and custom-
engineered fasteners. Fasteners are used in a broad range of markets,
including automotive, machine tools, farm implements, construction and military
applications.

 

Annual capacity is more than 75,000 tons, which is less than an estimated 10%
of the total market for these products. The modern facility allows Nucor
Fastener to maintain competitive pricing in a market currently dominated by
foreign suppliers. This operation is highly automated and has fewer employees
than comparable facilities. Nucor Fastener obtains much of its steel from the
Nucor bar mills.

 

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BUILDING SYSTEMS AND LIGHT GAUGE STEEL FRAMING

Nucor manufactures metal buildings and steel framing systems for commercial, industrial and residential construction markets.


 

BUILDING SYSTEMS

 

Nucor Building Systems produces metal building systems and components in Indiana, South Carolina and Texas. The annual capacity is more than 145,000 tons. The size of the buildings that can be produced ranges from less than 500 square feet to more than 1,000,000 square feet.

 

Complete metal building packages can be customized and combined with other materials such as glass, wood and masonry to produce a cost-effective, aesthetically pleasing building designed for customers’ special requirements. The buildings are sold primarily through an independent builder distribution network in order to provide fast-track, customized solutions for building owners.

 

Building systems sales in 2004 were a record 113,000 tons, an increase of 49% from the 76,000 tons sold in 2003. The primary markets are commercial, industrial and institutional buildings, including distribution centers, automobile dealerships, retail centers, schools, warehouses and manufacturing facilities. Nucor Building Systems obtains a significant portion of its steel requirements from the Nucor bar and sheet mills.

 

LIGHT GAUGE STEEL FRAMING

 

Nucon Steel specializes in load bearing light gauge steel framing systems for
the commercial and residential construction markets with fabrication facilities in
Texas and Georgia. Nucon also sells its proprietary products through a growing
network of independent authorized fabricators located throughout the United
States.

 

In 2004, Nucon introduced two new low cost automated fabrication systems for
residential construction: the NuWall automated wall panel system and the
NuTruss automated truss system. Nucon uses these new systems in its
residential wall panel and truss fabrication facility in Texas and has formed a
separate group within Nucon to sell and license the systems to third parties.
Nucor plans to continue to aggressively broaden Nucon Steel’s opportunities
through geographic expansion and the introduction of new products.

 

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OVERVIEW

 

Nucor is a domestic manufacturer of steel and steel products whose customers are located primarily in the United States. Additionally, Nucor is the nation’s largest recycler. Nucor reports its results in two segments, steel mills and steel products.

 

Principal products from the steel mills segment are hot-rolled steel (angles, rounds, flats, channels, sheet, wide-flange beams, pilings, billets, blooms, beam blanks and plate) and cold-rolled steel. Principal products from the steel products segment are steel joists and joist girders, steel deck, cold finished steel, steel fasteners, metal building systems and light gauge steel framing. Hot-rolled steel is manufactured principally from scrap, utilizing electric arc furnaces, continuous casting and automated rolling mills. Cold-rolled steel, cold finished steel, steel joists and joist girders, and steel fasteners are manufactured by further processing of hot-rolled steel. Steel deck is manufactured from cold-rolled steel. In 2004, approximately 90% of the steel mills segment production was sold to non-affiliated customers; the remainder was used internally by the steel products segment.

 

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During the last five years, Nucor’s sales have increased 174% from $4.16 billion in 1999 to $11.38 billion in 2004. Average sales price per ton has increased 45% from $409 in 1999 to $595 in 2004. Total tons sold have increased 88% from 10,176,000 tons in 1999 to 19,109,000 tons in 2004. This growth has been generated through acquisitions, optimization of existing operations, and development of traditional greenfield projects using new technologies.

 

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Nucor achieved record sales and net earnings in 2004 due to historically high selling prices, margins and shipments. In fact, Nucor’s results for the first half of 2004 exceeded the previous record annual earnings, as did both the third and the fourth quarters.

 

In addition to Nucor’s traditional strategy of growing by developing greenfield projects and continually improving existing operations, Nucor’s focus over the past several years has included growing profitably through acquisitions. In December 2002, Nucor purchased substantially all of the assets of Birmingham Steel Corporation (“Birmingham Steel”), the largest acquisition in Nucor’s history. The Birmingham mills made significant contributions to Nucor’s sales and net earnings in 2003 and 2004. With remarkably similar cultures and excellent conversion costs, we expect continued attractive earnings growth from the four acquired bar mills.

 

In July 2002, Nucor acquired the assets of Trico Steel Company, LLC (“Trico”), in Decatur, Alabama. Although we experienced equipment problems early in 2003, which resulted in a prolonged start-up period, we overcame these issues and generated an operating profit at this sheet mill in 2004. In August 2004, Nucor purchased certain assets of Worthington Industries, Inc.’s (“Worthington”) cold rolling mill adjacent to this sheet mill. This facility provides expanded value-added products to our customers in the Southeast.

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In February 2004, Nucor purchased a one-half interest in Harris Steel, Inc., a wholly owned subsidiary of Harris Steel Group, Inc. This rebar fabricator complements Nucor’s value-added steel products offerings. Harris Steel, Inc. has fabricating facilities located in Arizona, California, Massachusetts, Nevada, Pennsylvania and Washington. These facilities purchase steel from Nucor at market prices. In July 2004, Nucor’s wholly owned subsidiary, Nucor Steel Tuscaloosa, Inc., purchased substantially all of the steelmaking assets of Corus Tuscaloosa. The facility is a coiled plate mill that manufactures pressure vessel steel coil, discrete plate and cut-to-length plate products. This acquisition made a significant operating contribution in the second half of 2004.

 

In 2003, the prices of scrap steel and other raw materials surged dramatically, negatively affecting our profitability. Nucor’s average scrap cost per ton purchased increased $65 (57%) from December 2002 to December 2003 and increased $99 (55%) from December 2003 to December 2004. To address this unprecedented escalation in the price of our raw materials, Nucor announced a raw material sales price surcharge on its products in January 2004. This surcharge has helped offset the impact of significantly higher scrap prices and has ensured that Nucor is able to purchase the raw materials needed to fill our customers’ orders. We expect to continue to be able to collect the surcharge in 2005.

 


COMPARISON OF 2004 TO 2003

 

NET SALES

 

Net sales for 2004 increased 82% to $11.38 billion, compared with $6.27 billion in 2003. The average sales price per ton increased 66% from $359 in 2003 to $595 in 2004, while total shipments to outside customers increased 9%. In the steel mills segment, net sales to external customers increased 86% from $5.45 billion in 2003 to $10.11 billion in 2004. Approximately 85% of the increase was due to higher average selling prices resulting from increased demand for our products, which affected base prices, and the implementation of a raw materials surcharge to address historically high scrap costs. The remaining 15% of the sales increase was due to higher sales volume resulting from increased demand and the additional production capacity obtained from the acquisition of assets from Corus Tuscaloosa and Worthington in the second half of 2004 and the ramp-up of production at Nucor Steel Decatur, LLC throughout the year. Net sales to external customers in the steel products segment were $819.7 million in 2003, compared with $1.27 billion in 2004, an increase of 55%. Approximately 75% of the increase was due to higher average selling prices and approximately 25% of the increase was due to increased volume, reflecting an improved non-residential construction market.

 

Nucor established new annual tonnage records in the steel mills segment for total steel shipments and steel shipments to outside customers in 2004. Total steel shipments, including those to the steel products segment, increased 10% to 19,464,000 tons in 2004, compared with 17,656,000 tons in the previous year. Steel sales to outside customers increased 9% to 17,787,000 tons in 2004, compared with 16,263,000 tons in 2003. In the steel products segment, production and shipment volumes increased over the prior year across all major product lines. Steel joist production for 2004 was 522,000 tons, compared with 503,000 tons in the previous year. Steel deck sales were 364,000 tons, compared with 353,000 tons in 2003. Cold finished steel sales were a record 271,000 tons in 2004, compared with 237,000 tons in the previous year.


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COST OF PRODUCTS SOLD

The major component of cost of products sold is raw material costs. The average volume of raw materials used increased 12% from 2003 to 2004, consisting of an increase of 12% in the steel mills segment and an increase of 14% in the steel products segment. The average price of raw materials increased 67% from 2003 to 2004. The average price of raw materials in the steel mills segment and the steel products segment increased 71% and 24%, respectively, from 2003 to 2004. The average scrap and scrap substitute cost per ton used in our steel mills segment was $238 in 2004, an increase of 74% from $137 in 2003. By the fourth quarter of 2004, the average scrap and scrap substitute cost per ton used had increased to $278. The average scrap cost per ton purchased increased $99 (55%) from December 2003 to December 2004.

 

As a result of the increases in the cost of scrap and scrap substitutes, Nucor incurred a charge to value inventories using the last-in, first-out (“LIFO”) method of accounting of $375.9 million in 2004 (including a LIFO charge of $36.7 million for Nucor-Yamato Steel Company, of which Nucor owns 51%), compared with a charge of $115.0 million in 2003 (including a LIFO charge of $17.6 million for Nucor-Yamato Steel Company).

 

LOGO

 

Another significant component of cost of products sold for the steel mills segment is energy costs, since steel mills are large consumers of electricity and natural gas. Total energy costs per ton were flat from 2003 to 2004 as higher natural gas prices of approximately 8% were offset by increased production efficiency at our steel mills. These energy costs were less than 10% of the sales dollar in 2004 and 2003 and we expect that they will remain at this level in 2005. Nucor hedges a portion of its exposure to the variability of future cash flows for forecasted natural gas purchases over various time periods not exceeding three years. In addition, Nucor has entered into natural gas purchase contracts that commit Nucor to purchase $50.5 million, $2.4 million and $1.8 million of natural gas for production in 2005, 2006 and 2007, respectively.

 

In December 2000, Nucor entered into a consent decree with the United States Environmental Protection Agency (“USEPA”) and certain states in order to resolve alleged environmental violations. Under the terms of this decree, Nucor is conducting testing at some of its facilities, performing corrective action where necessary, and piloting certain pollution control technologies.

 

During 2003 and 2004, Nucor revised estimates for environmental reserves as additional information became available and projects were completed. Nucor made approximately $19.0 million in cash payments for remedial efforts during 2003 and reduced reserves by approximately $8.3 million. In 2004, Nucor made approximately $.4 million in cash payments for remedial efforts and reduced reserves by approximately $10.0 million. The most significant components of the decreases in 2003 and 2004 related to an agreement with the USEPA that certain technologies identified in the consent decree are not feasible and a favorable court ruling that implicated additional potentially responsible parties for the cleanup of an off-site waste-recycling facility.

 

GROSS MARGIN

Gross margins increased from 4% in 2003 to 20% in 2004. In addition to the events and trends discussed above, gross margins improved due to the turnaround achieved at our sheet mill in Decatur, Alabama and the plate mill in Hertford County, North Carolina, and to the acquisitions we made in the third quarter of 2004. Nucor defines pre-operating and start-up costs, all of which are expensed, as the losses attributable to facilities or major projects that are either under construction or in the early stages of operation. Once these facilities or projects have attained a utilization rate that is consistent with our similar operating facilities, they are no longer considered by Nucor to be in start-up. Pre-operating and start-up costs of new facilities decreased to $28.8 million in 2004, compared with $117.5 million in 2003. In 2004, these costs primarily related to the continuing start-up of the Castrip® facility at our sheet mill in Crawfordsville, Indiana. In 2003, these costs primarily related to the start-up of the sheet mill in Decatur, Alabama, and the Castrip facility. Late in 2004, the Castrip process achieved commercial viability, and the costs associated with this facility will not be included in start-up costs in 2005.

 

MARKETING, ADMINISTRATIVE AND OTHER EXPENSES

The major components of marketing, administrative and other expenses are freight and profit sharing costs. Unit freight costs increased 2% from 2003 to 2004. Profit sharing costs, which are based upon and fluctuate with pre-tax earnings, increased approximately fifteenfold from 2003 to 2004. In 2004, profit sharing costs included $172.3 million for contributions to a


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Profit Sharing and Retirement Savings Plan for qualified employees, compared with $8.9 million in 2003. In addition, profit sharing costs in 2004 included over $21.0 million in extraordinary bonuses paid to employees for the achievement of record earnings during the year. All employees except for senior officers received two special cash bonuses of $1,000 each in July and November in addition to their regular profit-sharing payments.

 

INTEREST EXPENSE

Net interest expense is detailed below (in thousands):

 

Year Ended December 31,        2004             2003      

Interest expense

   $ 29,335     $ 27,152  

Interest income

     (6,983 )     (2,525 )
    


 


Interest expense, net

   $ 22,352     $ 24,627  
    


 


                  

 

Interest expense, net of interest income, decreased from 2003 to 2004 primarily due to an increase in average short-term investments, partially offset by an increase in average long-term debt.

 

MINORITY INTERESTS

Minority interests represent the income attributable to the minority partners of Nucor’s joint venture, Nucor-Yamato Steel Company. Income attributable to minority interests increased from $23.9 million in 2003 to $80.9 million in 2004. Cash distributions to minority interests increased from $63.3 million in 2003 to $84.9 million in 2004. Under the partnership agreement, the minimum amount of cash to be distributed each year to the partners of Nucor-Yamato Steel Company is the amount needed by each partner to pay applicable U.S. federal and state income taxes. In some years, such as 2004 and 2003, the amount of cash distributed to minority interests exceeds amounts allocated to minority interests based on mutual agreement of the general partners; however, the cumulative amount of cash distributed to partners is less than the cumulative net earnings of the partnership.

 

OTHER INCOME

In 2004 and 2003, Nucor sold equipment resulting in pre-tax gains of $1.6 million and $4.4 million, respectively. In 2003, Nucor received $7.1 million, related to graphite electrodes anti-trust settlements. Producers of graphite electrodes, which are used by Nucor to deliver energy in electric arc furnaces, have entered into several settlement agreements with their customers as the result of a price fixing investigation by the Department of Justice that became public in 1997. No settlements were received in 2004 and we do not expect to receive any further graphite electrodes settlements.

 

Subsequent to year-end, Nucor expects to receive $9.2 million for settlement of legal claims related to environmental matters.

 

PROVISION FOR INCOME TAXES

Nucor had an effective tax rate of 35.22% in 2004 compared with 6.12% in 2003. The higher tax rate in 2004 is primarily due to the effect of increased pre-tax earnings, partially offset by the resolution of certain tax issues in the second half of 2004. In 2004 and 2003, Nucor recorded refundable state income tax credits of $10.4 million and $10.5 million, respectively.

 

NET EARNINGS

Net earnings were 39% of average equity in 2004, compared with 3% in 2003. The increase in 2004 net earnings resulted primarily from increased shipments, higher average selling prices, increased margins and decreased pre-operating and start-up costs accompanied by the successful integration of recent acquisitions. The increase in net earnings was partially offset by increased scrap costs, increased LIFO charges, increased profit-sharing costs and an increase in the effective tax rate.

 


COMPARISON OF 2003 TO 2002

 

NET SALES

Net sales for 2003 increased 30% to $6.27 billion, compared with $4.80 billion in 2002. The average sales price per ton increased less than 1% from $357 in 2002 to $359 in 2003, while total shipments to outside customers increased 30%. In the steel mills segment, net sales to external customers increased 34% from $4.06 billion in 2002 to $5.45 billion in 2003, primarily due to the additional production capacity obtained from the acquisitions of the assets of Trico and Birmingham Steel in 2002. Excluding the increases resulting from these acquisitions, total net sales to external customers increased 10% from 2002 to 2003. Net sales to external customers in the steel products segment were $739.2 million in 2002, compared with $819.7 million in 2003, an increase of 11%. This increase was primarily due to increased volume reflecting an improved non-residential construction market.


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In the steel mills segment, total steel shipments increased 31% to 17,656,000 tons in 2003, compared with 13,438,000 tons in the previous year. Steel sales to outside customers increased 32% to 16,263,000 tons in 2003, compared with 12,314,000 tons in 2002. In the steel products segment, steel joist production for 2003 was 503,000 tons, compared with 462,000 tons in the previous year. Steel deck sales were 353,000 tons, compared with 330,000 tons in 2002. Cold finished steel sales were 237,000 tons in 2003, compared with 226,000 tons in the previous year.

 

COST OF PRODUCTS SOLD

The average volume of raw materials used increased 24% from 2002 to 2003, consisting of an increase of 27% in the steel mills segment and an increase of 5% in the steel products segment. The average price of raw materials increased 19% from 2002 to 2003. The average price of raw materials in the steel mills segment and the steel products segment increased 21% and 5%, respectively, from 2002 to 2003. The average scrap and scrap substitute cost per ton used in our steel mills segment was $137 in 2003, an increase of 25% from $110 in 2002.

 

Nucor incurred a charge to value inventories using the LIFO method of accounting of $115.0 million in 2003 (including a LIFO charge of $17.6 million for Nucor-Yamato Steel Company, of which Nucor owns 51%), compared with a charge of $34.3 million in 2002 (including a LIFO charge of $50,000 for Nucor-Yamato Steel Company).

 

Total energy costs increased approximately $4 per ton from 2002 to 2003; however, because of the high efficiency of Nucor steel mills, these energy costs were less than 10% of the sales dollar in 2003 and 2002.

 

Nucor made approximately $6.0 million in cash payments for environmental remedial efforts during 2002 and made approximately $22.9 million in net reductions to environmental reserves. In 2003, Nucor made approximately $19.0 million in cash payments for remedial efforts and reduced reserves by approximately $8.3 million. The most significant components of the decreases in environmental reserves in 2002 and 2003 related to an agreement with the USEPA that certain technologies identified in the consent decree are not feasible and a favorable court ruling that implicated additional potentially responsible parties for the cleanup of an off-site waste-recycling facility.

 

GROSS MARGIN

Gross margins decreased from 10% in 2002 to 4% in 2003. In addition to the net sales and cost of products sold factors discussed above, gross margins were affected by pre-operating and start-up costs at several Nucor facilities. Pre-operating and start-up costs of new facilities increased 39% to $117.5 million in 2003, compared with $84.4 million in 2002. In 2003, these costs primarily related to the start-up of the sheet mill in Decatur, Alabama, and the Castrip facility at our sheet mill in Crawfordsville, Indiana. In 2002, these costs were attributable to the start-up of the Castrip facility, the Vulcraft facility in Chemung, New York, and Nucor Steel Decatur, LLC.

 

MARKETING, ADMINISTRATIVE AND OTHER EXPENSES

Unit freight costs decreased 1% from 2002 to 2003. Profit sharing costs, which are based upon and fluctuate with pre-tax earnings, decreased 40% from 2002 to 2003.

 

INTEREST EXPENSE

Net interest expense is detailed below (in thousands):

 

Year Ended December 31,    2003     2002  

Interest expense

   $ 27,152     $ 22,918  

Interest income

     (2,525 )     (8,632 )
    


 


Interest expense, net

   $ 24,627     $ 14,286  
    


 


                  

 

Interest expense, net of interest income, increased from 2002 to 2003 primarily due to an increase in average long-term debt and a decrease in average short-term investments. In 2003, Nucor redeemed $61.3 million aggregate principal amount of fixed rate industrial revenue bonds and reissued debt in the form of new variable rate industrial revenue bonds in like principal amount. The variable rates of these reissued bonds are currently several percentage points lower than the fixed rates of the redeemed bonds.

 

MINORITY INTERESTS

Income attributable to minority interests decreased from $79.5 million in 2002 to $23.9 million in 2003. Cash distributions to minority interests decreased from $146.7 million in 2002 to $63.3 million in 2003.


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OTHER INCOME

In 2003 and 2002, Nucor received $7.1 million and $29.9 million, respectively, related to graphite electrodes anti-trust settlements. In 2003, Nucor realized a pre-tax gain on the sale of equipment of $4.4 million.

 

PROVISION FOR INCOME TAXES

Nucor had an effective tax rate of 6.12% in 2003 compared with 29.55% in 2002. The lower tax rate in 2003 is primarily due to state income tax credits, resolution of certain tax issues and the effect of reduced pre-tax earnings. In 2003 and 2002, Nucor recorded refundable state income tax credits of $10.5 million and $16.2 million, respectively.

 

NET EARNINGS

Net earnings were 3% of average equity in 2003, compared with 7% in 2002. The decrease in 2003 net earnings resulted primarily from higher scrap and energy costs, increased LIFO charges, increased pre-operating and start-up costs, less benefit from decreases in environmental reserves, increased interest expense and decreased other income. The decrease in net earnings was partially offset by decreased profit-sharing costs and a decrease in the effective tax rate.

 


 

LIQUIDITY AND CAPITAL RESOURCES

 

Cash flows provided by operating activities provide us with a significant source of liquidity. When needed, we also have external short-term financing sources available including the issuance of commercial paper and borrowings under our bank credit facilities. We also issue long-term debt from time to time. Our strong financial position and our industry-high credit rating provide us with flexibility and significant capacity to obtain additional capital on a cost-effective basis.

 

We anticipate that cash flows from operations and our existing borrowing capacity will be sufficient to fund expected normal operating costs, working capital, dividends and capital expenditures for our existing facilities. Any future significant acquisitions could require additional financing from external sources.

 

During 2004, cash and short-term investments increased 122% from $350.3 million to $779.0 million and working capital increased 113% from $991.0 million to $2.11 billion. The current ratio was 3.0 in 2004 compared to 2.6 in 2003. Approximately $71.1 million and $134.7 million of the cash and short-term investments position at December 31, 2004 and 2003, respectively, was held by our 51%-owned joint venture, Nucor-Yamato Steel Company. We have a simple capital structure with no off-balance sheet arrangements or relationships with unconsolidated special purpose entities. Nucor uses derivative financial instruments from time to time, primarily to manage the exposure to price risk related to natural gas purchases used in the production process and to manage exposure to changes in interest rates on outstanding debt instruments.

 

 

          (in thousands)
December 31,    2004    2003

Cash and short-term investments

   $ 779,049    $350,332

Cash and short-term investments held by Nucor-Yamato

   71,081    134,700

Working capital

   2,109,158    990,965

Current ratio

   3.0    2.6
           

 

OPERATING ACTIVITIES

Nucor generated cash provided by operating activities of $1.03 billion in 2004 compared with $494.6 million in 2003, an increase of 108%. This increase was the result of the eighteenfold increase in net earnings, which was partially offset by changes in operating assets and liabilities (exclusive of acquisitions and dispositions) that used cash of $574.3 million in 2004 compared with $26.1 million in 2003. Accounts receivable increased $354.9 million in 2004 due to significantly higher steel prices and increased sales volume. Our inventories increased $635.6 million in 2004 primarily due to higher quantities to support the increased sales levels and higher purchase costs. Similarly, accounts payable increased $130.6 million due to increased inventory purchases and higher steel prices. Salaries, wages and related accruals increased $228.2 million in 2004 primarily due to increased profit sharing costs and bonuses attributable to the record earnings.


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INVESTING ACTIVITIES

Our business is capital intensive; therefore, cash used in investing activities primarily represents capital expenditures for new facilities, the expansion and upgrading of existing facilities, and the acquisition of the assets of other companies. Cash used in investing activities increased to $534.9 million in 2004 compared with $267.6 million in 2003. Capital expenditures for new facilities and expansion of existing facilities increased to $285.9 million in 2004 compared with $215.4 million in 2003.

 

In July 2004, Nucor’s wholly owned subsidiary, Nucor Steel Tuscaloosa, Inc., purchased substantially all of the steelmaking assets of Corus Tuscaloosa for a cash price of approximately $89.4 million. In August 2004, Nucor’s wholly owned subsidiary, Nucor Steel Decatur, LLC, purchased certain assets of Worthington’s cold rolling mill in Decatur, Alabama, for a cash purchase price of approximately $80.3 million. In March 2003, Nucor’s wholly owned subsidiary, Nucor Steel Kingman, LLC, purchased substantially all of the assets of the Kingman, Arizona, steel facility of North Star Steel for approximately $35.0 million. Existing cash and short-term investments funded these acquisitions in 2004 and 2003.

 

Nucor expects to continue to pursue profitable growth through acquisitions. Subsequent to year-end, Nucor purchased the assets of Fort Howard Steel, Inc.’s operations in Oak Creek, Wisconsin, for a cash purchase price of $44.2 million.

 

Nucor’s investment in affiliates increased from $22.1 million in 2003 to $82.5 million in 2004 primarily due to the purchase of a one-half interest in Harris Steel, Inc. for $21.0 million and additional capital contributions for the HIsmelt® project of $46.4 million.

 

FINANCING ACTIVITIES

Cash used in financing activities decreased to $66.1 million in 2004 compared with $95.7 million in 2003. In 2004, Nucor issued $20.0 million aggregate principal amount of variable rate industrial revenue bonds due 2020. In 2003, Nucor issued $25.0 million aggregate principal amount of variable rate industrial revenue bonds due 2038 and retired $16.0 million aggregate principal amount of fixed rate industrial revenue bonds. During 2004 and 2003, Nucor terminated interest rate swap agreements that resulted in gains of $4.8 million and $2.3 million, respectively, that will be amortized over the remaining life of the debt as an adjustment to interest expense.

 

The percentage of long-term debt to total capital (long-term debt plus minority interests plus stockholders’ equity) was 20% and 26% at year-end 2004 and 2003, respectively.

 

Nucor has an unsecured revolving credit facility that provides for up to $425.0 million in revolving loans. The credit facility consists of (a) a $125.0 million 364-day revolver maturing in September 2005 with an option to convert amounts outstanding under this facility to a 364-day term loan, and (b) a $300.0 million multi-currency revolver maturing in October 2007. No borrowings were outstanding under the credit facility at December 31, 2004.

 

Nucor’s directors have approved the purchase of up to 30.0 million shares of Nucor common stock. There were no repurchases during 2004 or 2003. Since the inception of the stock repurchase program in 1998, a total of approximately 21.5 million shares have been repurchased at a cost of about $444.5 million.

 

MARKET RISK

All of Nucor’s industrial revenue bonds have variable interest rates that are adjusted weekly or annually. These industrial revenue bonds represent 43% of Nucor’s long-term debt outstanding at December 31, 2004. The remaining 57% of Nucor’s long-term debt is at fixed rates. Future changes in interest rates are not expected to significantly impact earnings. From time to time, Nucor makes use of interest rate swaps to manage interest rate risk. As of December 31, 2004, there were no such contracts outstanding. Nucor’s investment practice is to invest in securities that are highly liquid with short maturities. As a result, we do not expect changes in interest rates to have a significant impact on the value of our investment securities.

 

Nucor also uses derivative financial instruments from time to time to manage the exposure to price risk related to natural gas purchases used in the production process. Nucor, generally, does not enter into derivative instruments for any purpose other than hedging the cash flows associated with specific volumes of commodities that will be purchased and processed in future periods and hedging the exposures related to changes in the fair value of outstanding fixed rate debt instruments. Nucor recognizes all derivative instruments in the consolidated balance sheets at fair value.

 

Nucor has ventures in Brazil and Australia that will begin operations in 2005. Accordingly, Nucor is exposed to the effects of currency fluctuations in those countries. Nucor presently does not hedge its exposure to foreign currency risk.


    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS         
    23         

 

 

 

CONTRACTUAL OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS

The following table sets forth our contractual obligations and other commercial commitments as of December 31, 2004, not including related interest expense, if any, for the periods presented (in thousands).

 

     Payments Due By Period
Contractual Obligations    Total    Less than 1 year        1-3 years    4-5 years    After 5 years

Long-term debt

   $ 923,550    $    $ 1,250    $ 180,400    $ 741,900

Operating leases

     4,048      1,574      2,383      89      2

Raw material purchase commitments(1)

     605,271      578,308      11,625      7,750      7,588

Utility purchase commitments(1)

     221,498      100,664      78,861      17,140      24,833

Other unconditional purchase obligations(2)

     96,322      78,290      11,760      4,167      2,105

Other long-term obligations(3)

     109,243      3,751      5,811      3,793      95,888
    

  

  

  

  

Total contractual obligations

   $ 1,959,932    $ 762,587    $ 111,690    $ 213,339    $ 872,316
    

  

  

  

  

                                    

 

(1) Nucor enters into contracts for the purchase of scrap and scrap substitutes, electricity, natural gas and other raw materials and related services. These contracts include multi-year commitments and minimum annual purchase requirements and are valued at prices in effect on December 31, 2004, or according to the contract language. These contracts are part of normal operations and are reflected in historical operating cash flow trends. We do not believe such commitments will adversely affect our liquidity position.
(2) Other unconditional purchase obligations include commitments for capital expenditures on operating machinery and equipment.
(3) Other long-term obligations include amounts associated with Nucor’s early retiree medical benefits and management compensation.

 

DIVIDENDS

Nucor has increased its cash dividend every year since it began paying dividends in 1973. We increased dividends twice in 2004, paying at the rate of $0.10 per share in the first quarter, $0.105 per share in the second and third quarters and $0.13 per share in the fourth quarter. On February 24, 2005, Nucor’s board of directors announced an increase in the base dividend to $0.15 per share and a supplemental dividend of $0.25 payable on May 11, 2005 to stockholders of record on March 31, 2005 for a total dividend of $0.40 per share. This additional dividend is the first installment of a total estimated supplemental dividend of $1.00 per share to be paid over four consecutive quarters.

 

OUTLOOK

Nucor’s objective is to maintain a strong balance sheet while pursuing profitable growth. Nucor expects to obtain additional capacity through expansions at our existing steel mills, greenfield construction utilizing advantageous new technologies, and future acquisitions. Capital expenditures are currently projected to be approximately $415.0 million in 2005, an increase of 45% over 2004. This expected increase in capital expenditures is primarily due to the relocation of the direct reduced iron plant acquired in 2004 from Louisiana to Trinidad and costs for the refurbishment of this facility. Funds provided from operations, existing credit facilities and new borrowings are expected to be adequate to meet future capital expenditure and working capital requirements for existing operations. Nucor believes that it has the financial ability to borrow significant additional funds and still maintain reasonable leverage in order to finance major acquisitions.

 

Manufacturing steel will continue to be a key factor in Nucor’s future performance. In the steel mills segment, total steel production is anticipated to increase over the next several years from the 19,737,000 tons produced in 2004. We expect that demand in non-residential construction will remain strong throughout 2005 as the economy continues to recover. Although scrap prices remain at historically high levels, higher average selling prices, achieved through increased demand and the raw material surcharge implemented in 2004, will provide appropriate margins for our products. This surcharge will continue to ensure that we will be able to purchase the scrap needed to fill our customers’ needs.

 

Nucor continues to build market leadership positions in attractive downstream steel products businesses. We anticipate that the continued improvement in non-residential building will increase sales and the volume supplied by Vulcraft and Nucor Building Systems in 2005. Cold Finish sales will increase as additional capacity from our recent acquisition expands our presence in the Midwest market. The positive impact of increased volume on earnings will be mitigated by the increased cost of raw materials for this segment.


     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS     
     24     

 

 

 

 

We recognize that uncertainty in external factors such as raw materials costs, growth rate of the economy, and the level of imports will have a significant impact on our results. In 2005, we will work towards our goal of controlling one-third of our raw material supply. Based on our current consumption rate, this would represent between six and seven million tons per year of high-quality scrap substitutes. While we cannot control these outside forces, Nucor will continue to be on the forefront of anticipating and addressing the issues that this uncertainty in external factors raises for us and other steel producers.

 


CRITICAL ACCOUNTING POLICIES AND ESTIMATES

 

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at year-end, and the reported amount of revenues and expenses during the year. On an ongoing basis, we evaluate our estimates, including those related to the valuation allowances for receivables; the carrying value of property, plant and equipment; reserves for environmental obligations; and income taxes. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Accordingly, actual costs could differ materially from these estimates under different assumptions or conditions.

 

We believe the following critical accounting policies affect our significant judgments and estimates used in the preparation of our consolidated financial statements.

 

ALLOWANCES FOR DOUBTFUL ACCOUNTS

We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

 

ASSET IMPAIRMENTS

We evaluate the impairment of our property, plant and equipment on an individual asset basis or by logical groupings of assets. Asset impairments are recognized whenever changes in circumstances indicate that the carrying amounts of those productive assets exceed their projected undiscounted cash flows. When it is determined that an impairment exists, the related assets are written down to estimated fair market value.

 

ENVIRONMENTAL REMEDIATION

We are subject to environmental laws and regulations established by federal, state and local authorities, and make provision for the estimated costs related to compliance. Undiscounted remediation liabilities are accrued based on estimates of known environmental exposures. The accruals are reviewed periodically and, as investigations and remediation proceed, adjustments are made as we believe are necessary. The accruals are not reduced by possible recoveries from insurance carriers or other third parties. Our measurement of environmental liabilities is based on currently available facts, present laws and regulations, and current technology.

 

INCOME TAXES

We account for income taxes in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 109, “Accounting for Income Taxes.” We estimate our actual current tax expense and assess temporary differences that exist due to differing treatments of items for tax and financial statement purposes. These differences result in the recognition of deferred tax assets and liabilities. The deferred tax assets and liabilities are measured using tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period in which the change is enacted. We assess the realizability of deferred tax assets on an ongoing basis by considering whether it is more likely than not that some portion of the deferred tax assets will not be realized. If it is more likely than not, in our judgment, that the deferred tax assets will not be realized, we provide a valuation allowance.

 


RECENT ACCOUNTING PRONOUNCEMENTS

 

In December 2004, the Financial Accounting Standards Board issued SFAS No. 123(R), “Share Based Payment,” which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. The provisions of this statement become effective for Nucor’s fiscal quarter beginning July 3, 2005. Management is currently evaluating the financial statement impact of the adoption of SFAS 123(R).


     SIX-YEAR FINANCIAL REVIEW     
     28     

 

 

 

 

 

     (dollar amounts in thousands, except per share data)  
     2004     2003     2002     2001     2000     1999  
FOR THE YEAR                                                 

Net sales

   $ 11,376,828     $ 6,265,823     $ 4,801,777     $ 4,333,707     $ 4,756,521     $ 4,158,293  

Costs, expenses and other:

                                                

Cost of products sold

     9,128,872       5,996,547       4,332,277       3,914,278       3,929,182       3,531,896  

Marketing, administrative and other expenses

     415,030       165,369       175,589       150,666       183,175       154,774  

Interest expense (income)

     22,352       24,627       14,286       6,525       (816 )     (5,095 )

Minority interests

     80,894       23,950       79,472       103,069       151,462       85,783  

Other income

     (1,596)       (11,547 )     (29,900 )     (20,200 )            
    


 


 


 


 


 


       9,645,552       6,198,946       4,571,724       4,154,338       4,263,003       3,767,358  

Earnings before income taxes

     1,731,276       66,877       230,053       179,369       493,518       390,935  

Provision for income taxes

     609,791       4,096       67,973       66,408       182,610       146,346  
    


 


 


 


 


 


Net earnings

     1,121,485       62,781       162,080       112,961       310,908       244,589  

Net earnings per share:

                                                

Basic(1)

     7.08       0.40       1.04       0.73       1.90       1.40  

Diluted(1)

     7.02       0.40       1.04       0.73       1.90       1.40  

Dividends per share(1)

     0.47       0.40       0.38       0.34       0.30       0.26  

Percentage of net earnings to net sales

     9.9 %     1.0 %     3.4 %     2.6 %     6.5 %     5.9 %

Return on average equity

     38.7 %     2.7 %     7.2 %     5.2 %     14.2 %     11.3 %

Capital expenditures

     285,925       215,408       243,598       261,146       415,405       374,718  

Depreciation

     383,305       364,112       307,101       289,063       259,365       256,637  

Sales per employee

     1,107       637       528       531       619       568  
           
AT YEAR END                                                 

Current assets

   $ 3,174,948     $ 1,620,560     $ 1,415,362     $ 1,373,666     $ 1,379,529     $ 1,538,509  

Current liabilities

     1,065,790       629,595       591,536       484,159       558,068       531,031  
    


 


 


 


 


 


Working capital

     2,109,158       990,965       823,826       889,507       821,461       1,007,478  

Cash provided by operating activities

     1,029,718       494,620       497,220       495,115       820,755       604,834  

Current ratio

     3.0       2.6       2.4       2.8       2.5       2.9  

Property, plant and equipment

     2,818,307       2,817,135       2,932,058       2,365,655       2,329,421       2,180,419  

Total assets

     6,133,207       4,492,353       4,381,001       3,759,348       3,710,868       3,718,928  

Long-term debt

     923,550       903,550       878,550       460,450       460,450       390,450  

Percentage of debt to capital

     20.3 %       26.4 %     26.0 %     15.6 %     15.9 %     13.4 %

Stockholders’ equity

     3,455,985       2,342,077       2,322,990       2,201,461       2,130,952       2,262,248  

Per share(1)

     21.67       14.90       14.86       14.15       13.73       12.98  

Shares outstanding(1)

     159,512       157,180       156,360       155,630       155,166       174,267  

Stockholders

     82,000       61,000       64,000       47,000       51,000       55,000  

Employees

     10,600       9,900       9,800       8,400       7,900       7,500  

 

(1) Per share amounts and shares outstanding have been restated to reflect the two-for-one stock split effective October 15, 2004.


   

 

MANAGEMENT’S REPORT AND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

        
    29         

 

 

 


MANAGEMENTS REPORT

on internal control over financial reporting

 


 

Nucor’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f) under the Securities and Exchange Act of 1934, as amended.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Management assessed the effectiveness of Nucor’s internal control over financial reporting as of December 31, 2004. In making this assessment, management used criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.

 

Based on its assessment, management concluded that Nucor’s internal control over financial reporting was effective as of December 31, 2004. PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited management’s assessment of Nucor’s internal control over financial reporting as stated in their report which is included herein.

 


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 


 

PricewaterhouseCoopers LLP

 

March 1, 2005

 

To the Board of Directors and Stockholders of

Nucor Corporation

 

We have completed an integrated audit of Nucor Corporation’s 2004 consolidated financial statements and of its internal control over financial reporting as of December 31, 2004 and audits of its 2003 and 2002 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.

 

CONSOLIDATED FINANCIAL STATEMENTS

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings, stockholders’ equity and cash flows present fairly, in all material respects, the financial position of Nucor Corporation and its subsidiaries at December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2004 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.


    

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     30     

 

 

INTERNAL CONTROL OVER FINANCIAL REPORTING

Also, in our opinion, management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that the Company maintained effective internal control over financial reporting as of December 31, 2004 based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control—Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

 

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

LOGO

Charlotte, North Carolina


    CONSOLIDATED STATEMENTS OF EARNINGS AND STOCKHOLDERS’ EQUITY         
    31         

 

 

 

 

CONSOLIDATED STATEMENTS OF EARNINGS (in thousands, except per share data)        
Year Ended December 31,    2004     2003     2002  

NET SALES

   $ 11,376,828     $ 6,265,823     $ 4,801,777  
    


 


 


COSTS, EXPENSES AND OTHER:

                        

Cost of products sold

     9,128,872       5,996,547       4,332,277  

Marketing, administrative and other expenses

     415,030       165,369       175,589  

Interest expense, net (Note 11)

     22,352       24,627       14,286  

Minority interests

     80,894       23,950       79,472  

Other income (Note 12)

     (1,596 )     (11,547 )     (29,900 )
    


 


 


       9,645,552       6,198,946       4,571,724  
    


 


 


EARNINGS BEFORE INCOME TAXES

     1,731,276       66,877       230,053  

PROVISION FOR INCOME TAXES (Note 13)

     609,791       4,096       67,973  
    


 


 


NET EARNINGS

   $ 1,121,485     $ 62,781     $ 162,080  
    


 


 


NET EARNINGS PER SHARE (Note 14):

                        

Basic

     $7.08       $0.40       $1.04  
    


 


 


Diluted

     $7.02       $0.40       $1.04  
    


 


 


See notes to consolidated financial statements.

 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands, except per share data)        
   

COMMON STOCK

 

 

ADDITIONAL

PAID-IN

    RETAINED     UNEARNED  

ACCUMULATED
OTHER

COMPRE-

HENSIVE

 

TREASURY STOCK

(at cost)

   

TOTAL
STOCK-

HOLDERS’

 
    Shares   Amount   CAPITAL     EARNINGS     COMPENSATION   LOSS   Shares     Amount     EQUITY  

BALANCES, December 31, 2001

  90,327   $ 36,131   $ 81,190     $ 2,538,884         12,512     $ (454,744 )   $2,201,461  

Comprehensive income:

                                                     

Net earnings in 2002

                      162,080                           162,080

 

Total comprehensive income

                                                  162,080  

Stock options

  352     141     16,088                                   16,229  

Employee stock compensation and service awards

              2,118                     (13 )     485     2,603  

Cash dividends ($0.38(1) per share)

                      (59,383 )                         (59,383 )

BALANCES, December 31, 2002

  90,679     36,272     99,396       2,641,581         12,499       (454,259 )   2,322,990  

Comprehensive income:

                                                     

Net earnings in 2003

                      62,781                           62,781

 

Total comprehensive income

                                                  62,781  

Stock options

  388     155     16,273                                   16,428  

Employee stock compensation and service awards

              1,730                     (22 )     802     2,532  

Cash dividends ($0.40(1) per share)

                      (62,654 )                         (62,654 )

BALANCES, December 31, 2003

  91,067     36,427     117,399       2,641,708         12,477       (453,457 )   2,342,077  

Comprehensive income:

                                                     

Net earnings in 2004

                      1,121,485                           1,121,485  

Net unrealized loss on hedging derivatives, net of income taxes

                                (1,177)                 (1,177 )
                                                   

Total comprehensive income

                                                  1,120,308  

Stock options

  1,333     533     54,685                                   55,218  

Employee stock compensation and service awards

              11,915             (592)       (43 )     1,497     12,820  

Amortization of unearned compensation

                            200                          200  

2-for-1 stock split (Note 1)

  91,983     36,793     (36,793 )                   12,437              

Cash dividends ($0.47(1) per share)

                      (74,638 )                         (74,638 )

BALANCES, December 31, 2004

  184,383   $ 73,753     $147,206     $ 3,688,555     $(392)   $(1,177)   24,871     $ (451,960 )   $3,455,985  

 

(1) Adjusted for stock split. See Note 1.

See notes to consolidated financial statements.


     CONSOLIDATED BALANCE SHEETS     
     32     

 

 

 

CONSOLIDATED BALANCE SHEETS (in thousands)

 

December 31,      2004        2003  
ASSETS                      

CURRENT ASSETS:

                     

Cash and short-term investments

     $ 779,049         $ 350,332  

Accounts receivable (Note 2)

       962,755          572,479  

Inventories (Note 3)

       1,239,888          560,396  

Other current assets (Note 13)

       193,256          137,353  
      


    


Total current assets

       3,174,948          1,620,560  

PROPERTY, PLANT AND EQUIPMENT (Note 4)

       2,818,307          2,817,135  

OTHER ASSETS

       139,952          54,658  
      


    


TOTAL ASSETS

     $ 6,133,207        $ 4,492,353  
      


    


                       
LIABILITIES AND STOCKHOLDERS’ EQUITY                      

CURRENT LIABILITIES:

                     

Accounts payable

       471,549          329,863  

Federal income taxes payable

       28,957           

Salaries, wages and related accruals

       320,276          91,187  

Accrued expenses and other current liabilities (Note 9)

       245,008          208,545  
      


    


Total current liabilities

       1,065,790          629,595  
      


    


LONG-TERM DEBT DUE AFTER ONE YEAR (Note 5)

       923,550          903,550  
      


    


DEFERRED CREDITS AND OTHER LIABILITIES (Notes 8, 9, 10 and 13)

       514,569          439,852  
      


    


MINORITY INTERESTS

       173,313          177,279  
      


    


STOCKHOLDERS’ EQUITY (Note 6):

                     

Common stock

       73,753          36,427  

Additional paid-in capital

       147,206          117,399  

Retained earnings

       3,688,555          2,641,708  

Unearned compensation

       (392 )         

Accumulated other comprehensive loss, net of income taxes

       (1,177 )         
      


    


         3,907,945          2,795,534  

Treasury stock

       (451,960 )        (453,457 )
      


    


Total stockholders’ equity

       3,455,985          2,342,077  
      


    


TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

     $ 6,133,207        $ 4,492,353  
      


    


                       

See notes to consolidated financial statements.


    CONSOLIDATED STATEMENTS OF CASH FLOWS         
    33         

 

CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)

 

 

 

 

 

Year Ended December 31,    2004        2003        2002  
OPERATING ACTIVITIES                               

Net earnings

   $ 1,121,485         $ 62,781         $ 162,080  

Adjustments:

                              

Depreciation

     383,305          364,112          307,101  

Gain on sale of equipment

     (1,596 )        (4,400 )         

Impairment of assets

     13,200                    

Deferred income taxes

     6,693          74,300          31,200  

Minority interests

     80,892          23,942          79,469  

Changes in (exclusive of acquisitions and dispositions):

                              

Accounts receivable

     (354,897 )        (88,871 )        (99,778 )

Inventories

     (635,641 )        28,973          (58,372 )

Accounts payable

     130,604          82,634          57,994  

Federal income taxes payable

     35,403          (15,396 )        12,076  

Salaries, wages and related accruals

     228,203          (25,060 )        17,477  

Other

     22,067          (8,395 )        (12,027 )
    


    


    


Cash provided by operating activities

     1,029,718          494,620          497,220  
                                
INVESTING ACTIVITIES                               

Capital expenditures

     (285,925 )        (215,408 )        (243,598 )

Investment in affiliates

     (82,458 )        (22,125 )        (5,573 )

Disposition of plant and equipment

     3,094          11,634          448  

Acquisitions (net of cash acquired)

     (169,646 )        (34,941 )        (652,689 )

Other investing activities

              (6,742 )         
    


    


    


Cash used in investing activities

     (534,935 )        (267,582 )        (901,412 )
                                
FINANCING ACTIVITIES                               

Proceeds from long-term debt

     20,000          25,000          350,000  

Repayment of long-term debt

              (16,000 )        (1,900 )

Issuance of common stock

     68,630          18,961          18,832  

Distributions to minority interests

     (84,858 )        (63,318 )        (146,701 )

Cash dividends

     (74,638 )        (62,654 )        (59,383 )

Termination of interest rate swap agreement

     4,800          2,300