-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AoY4watNzyAYhMy1pNQ5tK+xVElo0T1MStUiqjojqGkB6lxqeYKhSV9yNmxTM5vA oKUAVjwbG4lnqTChTRax9A== 0000892793-00-000002.txt : 20000411 0000892793-00-000002.hdr.sgml : 20000411 ACCESSION NUMBER: 0000892793-00-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACX TECHNOLOGIES INC CENTRAL INDEX KEY: 0000892793 STANDARD INDUSTRIAL CLASSIFICATION: PAPERBOARD CONTAINERS & BOXES [2650] IRS NUMBER: 841208699 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-14060 FILM NUMBER: 582831 BUSINESS ADDRESS: STREET 1: 16000 TABLE MOUNTAIN PKWY CITY: GOLDEN STATE: CO ZIP: 80403 BUSINESS PHONE: 3032717000 MAIL ADDRESS: STREET 1: 4455 TABLE MOUNTAIN DRIVE, CITY: GOLDEN STATE: CO ZIP: 80403 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission file number 0-20704 ACX TECHNOLOGIES, INC. (Exact name of registrant as specified in its charter) Colorado 84-1208699 (State of incorporation) (IRS Employer Identification No.) 4455 Table Mountain Drive, Golden, Colorado 80403 (Address of principal executive offices) (Zip Code) (303) 215-4600 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class None Name of each exchange on which registered None Securities registered pursuant to Section 12(g) of the Act: $.01 par value Common Stock (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] As of March 22, 2000, there were 28,777,284 shares of common stock outstanding. The aggregate market value of such shares, other than shares held by persons who may be deemed affiliates of the Registrant, was $67,594,023. DOCUMENTS INCORPORATED BY REFERENCE Registrant's Proxy Statement filed in connection with the 2000 Annual Meeting of Shareholders is incorporated by reference into Part III. ACX TECHNOLOGIES, INC. Annual Report on Form 10-K December 31, 1999 TABLE OF CONTENTS Page No. PART I Item 1. Business 3 Item 2. Properties 10 Item 3. Legal Proceedings 11 Item 4. Submission of Matters to a Vote of Security Holders 11 PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters 12 Item 6. Selected Financial Data 13 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 14 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 27 Item 8. Financial Statements and Supplementary Data 28 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 60 PART III Item 10. Directors and Executive Officers of the Registrant 60 Item 11. Executive Compensation 60 Item 12. Security Ownership of Certain Beneficial Owners and Management 60 Item 13. Certain Relationships and Related Transactions 60 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 61 ACX TECHNOLOGIES, INC. Unless the context indicates otherwise, references herein to the Company include ACX Technologies, Inc. (ACX Technologies) and its subsidiaries, including Graphic Packaging Corporation and its subsidiaries (collectively referred to as Graphic Packaging), Golden Technologies Company, Inc. and its subsidiaries (collectively referred to as Golden Technologies) and Golden Aluminum Company and its subsidiaries (collectively referred to as Golden Aluminum) included prior to March 1997, and from August 23 through November 5, 1999. On December 31, 1999, the Company spun-off Coors Porcelain Company and its subsidiaries (collectively referred to as CoorsTek). Unless otherwise noted, references to the Company exclude CoorsTek. PART I ITEM 1. BUSINESS (a) General Development of Business The Company's principal executive offices are located at 4455 Table Mountain Drive, Golden, Colorado 80403. The Company's telephone number is (303) 215-4600. The Company, through its primary subsidiary Graphic Packaging, is a manufacturer of packaging products used by consumer product companies as primary packaging for their end-use products. The Company's strategy is to maximize its competitive position and growth opportunities in its core business, folding cartons. Toward this end, over the past several years the Company has acquired two significant folding carton businesses and has disposed of several noncore businesses and under- performing assets. The Company was incorporated in Colorado in August 1992 as a holding company for the packaging, ceramics, aluminum and developmental businesses formerly owned by Adolph Coors Company (ACCo). Effective December 27, 1992, ACCo distributed to its shareholders all outstanding shares of the Company's stock. The Company's initial years of operation included packaging, ceramics, aluminum and various developmental businesses. Through various acquisitions, divestitures, a spin-off and other transactions, the Company is now strategically focused on the folding carton segment of the packaging industry. To better reflect the nature of the Company's new business focus, the Company changed its ticker symbol on the New York Stock Exchange to "GPK" and is asking shareholders to formally change the Company's name to Graphic Packaging International Corporation at its May 2000 annual shareholders' meeting. CoorsTek Spin-Off Effective December 31, 1999, ACX Technologies distributed to its shareholders all the outstanding common stock of CoorsTek in a tax-free spin-off transaction. One share of CoorsTek common stock was distributed for every four shares of ACX Technologies common stock owned. The tax basis allocation of costs for ACX Technologies shares acquired pre-spin off is: ACX 55.56% and CoorsTek 44.44%. Recent Acquisitions On August 2, 1999, the Company purchased the Fort James packaging business, which included 12 folding carton converting operations located throughout North America and a recycled paperboard mill located in Kalamazoo, Michigan (the Kalamazoo Mill) for approximately $849 million, including working capital adjustments and acquisition costs. This business is a major supplier of folding cartons to leading consumer product companies for packaging food. The Kalamazoo Mill is currently being offered for sale. On January 14, 1998, the Company acquired Britton Group plc (Britton) pursuant to a cash tender offer for approximately $420 million. Britton was an international packaging group operating through two principal divisions: folding cartons and plastics. The folding cartons division, Universal Packaging, is a nonintegrated manufacturer of folding cartons in the United States, with capabilities in design, printing and manufacturing of multicolor folding cartons. The plastics division of Britton (the Plastics Division), which was disposed of by the Company on April 20, 1998, operated in the United Kingdom and included the extrusion, conversion and printing of polyethylene into films and bags for industrial customers. The Company realized consideration of approximately $135 million on the sale of the Plastics Division. Recent Dispositions On September 2, 1999, the Company sold its flexible packaging plants for approximately $105 million in cash. On August 3, 1999 the Company sold its interest in a solar energy distribution business (Golden Genesis Company) for approximately $21 million in cash, plus a $10 million repayment of intercompany debt. In 1996, the Board of Directors adopted a plan to dispose of the Company's aluminum rigid container sheet business, Golden Aluminum. On March 1, 1997, the sale of Golden Aluminum was completed for $70.0 million, $10.0 million of which was received at closing and $60.0 million of which was due by March 1999. As part of the sale, the buyer had the right to return Golden Aluminum to the Company in discharge of payment of the $60.0 million note. In December of 1998, the Company extended the due date on the $60.0 million payment until September 1, 1999. The initial payment of $10.0 million was nonrefundable. On August 23, 1999, the purchaser returned Golden Aluminum to the Company, in accordance with the agreement, and the $60.0 million note was cancelled. Golden Aluminum was subsequently sold to another buyer on November 5, 1999 for approximately $41 million. (b) Financial Information about Industry Segments, Foreign Operations and Foreign Sales Certain financial information for the Company's reportable segments is included in the following summary. Discontinued operations include the Kalamazoo Mill for the last five months of 1999 and CoorsTek for the years 1999, 1998 and 1997. Depreciation Net Operating And Capital Sales Income Amortization Assets Expenditures -------- --------- ------------ ---------- ------------ 1999 Packaging $786,843 $38,992 $47,834 $1,156,385 $73,707 Other 44,562 2,103 618 19,699 1,568 -------- ------- ------- ---------- ------- Segment total 831,405 41,095 48,452 1,176,084 75,275 Corporate --- (10,479) 260 225,954 17 Discontinued operations, net assets --- --- 30,283 225,000 16,163 -------- ------- ------- ---------- ------- Consolidated total 831,405 $30,616 $78,995 $1,627,038 $91,455 ======== ======= ======= ========== ======= 1998 Packaging $623,852 $38,232 $35,924 $539,039 $47,498 Other 67,925 (3,047) 1,270 56,905 3,384 -------- ------- ------- --------- ------- Segment total 691,777 35,185 37,194 595,944 50,882 Corporate --- (8,941) 336 101,359 690 Discontinued operations, net assets --- --- 19,977 148,719 26,891 -------- ------- ------- --------- ------- Consolidated total $691,777 $26,244 $57,507 $846,022 $78,463 ======== ======= ======= ========= ======= 1997 Packaging $365,123 $42,655 $20,211 $210,024 $18,022 Other 61,138 (31,186) 3,451 81,443 9,068 -------- ------- ------- --------- ------- Segment total 426,261 11,469 23,662 291,467 27,090 Corporate --- (10,177) 337 148,258 311 Discontinued operations, net assets --- --- 18,664 203,155 28,812 -------- ------- ------- -------- ------- Consolidated total $426,261 $1,292 $42,663 $642,880 $56,213 ======== ======= ======= ========= ======= The results of the Company's Other business segment for 1997, 1998 and 1999 relate primarily to businesses which have been sold as of December 31, 1999. Corporate assets for 1999 consist primarily of a $200 million note receivable from CoorsTek as a result of the spin- off, and debt issuance costs. In 1998 and 1997, corporate assets include a $60 million note receivable from the sale of Golden Aluminum, deferred taxes and certain properties. Certain financial information regarding the Company's domestic and foreign operations is included in the following summary, which excludes discontinued operating segments. Long- lived assets include plant, property and equipment, intangible assets, and certain other non-current assets. Net Long-Lived (In thousands) Sales Assets -------- ---------- 1999 United States $779,527 $964,880 Canada 51,878 3,689 Other --- 2,694 -------- ---------- Total $831,405 $971,263 ======== ========== 1998 United States $626,715 $401,579 Canada 57,079 34,807 Other 7,983 3,065 -------- ---------- Total $691,777 $439,451 ======== ========== 1997 United States $357,795 $118,998 Canada 59,730 34,535 Other 8,736 3,732 -------- ---------- Total $426,261 $157,265 ======== ========== (c) Narrative Description of Operating Segments Graphic Packaging General: Graphic Packaging develops, manufactures and sells value-added packaging products used by manufacturers as primary packaging for their end-use products. Value-added packaging has characteristics such as high-impact graphics; resistance to abrasion, radiant heat and microwave management; and barriers to moisture, gas penetration, solvent penetration and leakage. Graphic Packaging began business with a single plant in 1974 as part of the vertical integration of Adolph Coors Company's beer business operated through its subsidiary, Coors Brewing Company. Since that time, Graphic Packaging has expanded its product capabilities and geographic presence through plant expansions and acquisitions. Sales to Coors Brewing Company represented less than 13% of net sales in 1999. Graphic Packaging acquired Universal Packaging in January 1998 followed by the acquisition of the Fort James packaging business in August 1999. These two acquisitions added 18 converting facilities and the Kalamazoo Mill and complemented Graphic Packaging's capabilities with processes such as web-fed and sheet-fed printing, electron beam curing of inks and coatings and rotary die cutting. The acquisitions have allowed Graphic Packaging to expand into several new end-use markets and add to its blue-chip customer list. Coincident with the acquisitions, Graphic Packaging sold several noncore flexible packaging plants in September 1999. As of December 31, 1999, Graphic Packaging operated 23 converting facilities and the Kalamazoo Mill. In December 1999, Graphic Packaging announced its intention to offer the Kalamazoo Mill for sale as part of its plan to focus on its core folding carton business. The Kalamazoo Mill is included in discontinued operations. Also in December 1999, Graphic Packaging announced the planned closure of two folding carton facilities as part of its plan to reduce overhead without impacting effective capacity. See related discussion regarding asset impairment and restructuring charges in Management's Discussion and Analysis of Financial Condition and Results of Operations. Markets and Products: The fiber-based product packaging industry includes: paperboard packaging which consists of corrugated products, folding cartons and rigid fiber boxes and food service containers such as disposable clam-shells, plates and cups, and flexible packaging such as printed and laminated bags, overwraps and labels. Graphic Packaging competes in the folding carton segment of the industry. The U.S. folding carton industry is currently an estimated $8 billion market that experienced an average annual growth rate from 1987 to 1997 of 2%. Shipments from 1997 to 1998 declined 1% and from 1998 to 1999 were flat. Over the last several years, the major portion of Graphic Packaging's internal growth has come from sales to Coors Brewing and customers in the detergent, cereal, premium bar soap, quick service restaurant markets and promotional packaging. In addition, the Universal Packaging and the Fort James folding carton business acquisitions brought Graphic Packaging significant positions in the dry and frozen food markets. In manufacturing value-added folding cartons, Graphic Packaging uses an internally developed, patented composite packaging technology, Composipac[TM] (Composipac), which provides finished products with high quality graphics that have enhanced abrasion protection and moisture, air or other special barrier properties. Graphic Packaging's Composipac technology is designed to meet the continuing specialized needs of its beverage, powdered detergents, soap and promotional packaging customers. This technology also provides Graphic Packaging with the unique ability to cost effectively produce full web lamination holographic cartons. Demand for holographic cartons is growing in the toothpaste, promotional and other market segments. In addition, Graphic Packaging has been a leader in the development and marketing of microwave packaging technology. The Company's QwikWave[R] susceptor packaging provides browning and crisping qualities for microwave foods. This is made possible through the use of an ultra thin layer of aluminum that heats directly when exposed to microwave power. Graphic Packaging has added to the QwikWave[R] technology with packaging branded under the MicroRite[R] name, which consists of a series of aluminum circuits applied to paperboard that determine power distribution in foods. Interactive foil technology allows controlled heating that results in conventional oven quality in microwave time. Strategy: Graphic Packaging's strategy is to maintain its valued customer relationships and market leadership. It plans to continue to do so by employing capital and resources to remain the industry's low-cost producer of folding cartons while continuing to invest in the future through research and development. Leveraging its expanded sales force from the acquisitions of Universal Packaging and the Fort James folding carton business, Graphic Packaging emphasizes its ability to provide innovative products with value-added characteristics that stand out from its customers' competitors on the supermarket shelves. Manufacturing and Raw Materials: Graphic Packaging uses a variety of raw materials such as paperboard, paper, inks, aluminum foil, plastic films, plastic resins, adhesives and other materials which are available from domestic and foreign suppliers. Historically, Graphic Packaging has not experienced difficulty in obtaining adequate supplies or raw materials and difficulty is not anticipated in the future. While many sources of each of these materials are available, Graphic Packaging prefers to develop strategic long-standing alliances with vendors, including the use of multi-year supply agreements, in order to provide a guaranteed source of materials that satisfies customer requirements while obtaining the best quality, service and price. Business disruptions or financial difficulties of a sole source supplier, which Graphic Packaging does not anticipate, could have an adverse effect by increasing the cost of these materials and causing delays in manufacturing while other suppliers are being qualified. Sales and Distribution: Products are sold primarily to well- recognized consumer product manufacturers in North America. Sales are made primarily through direct sales employees of Graphic Packaging that work from offices located throughout the United States and, to a lesser degree, through broker arrangements with third parties. Graphic Packaging selling activities are supported by its technical and development staff. Sales to Kraft Foods, Inc. and affiliates under various contracts accounted for approximately 20%, 15% and 4% of ACX Technologies' consolidated sales for 1999, 1998 and 1997, respectively. Approximately 13%, 17% and 27% of sales were to Coors Brewing for the same years. A diverse customer base made up of manufacturers of detergents, frozen and dry foods, soap, tobacco producers and quick serve restaurants account for most of the balance. Most of Graphic Packaging's sales are made under sales contracts at prices that are subject to periodic adjustment for market price changes of raw materials and other costs. Products are made in accordance with customer specifications. Graphic Packaging had approximately $175 million in open orders in March 2000, as compared to approximately $122 million in March 1999. The Company expects to ship most of the open orders by the end of the second quarter of 2000. Total open orders and comparisons vary because of a number of factors and are not necessarily indicative of past or future operating results. Competition: Graphic Packaging is subject to strong competition in most markets it serves. The packaging industry continues to experience intense pricing pressures. The installation of state-of-the-art equipment by manufacturers has intensified the competitive pricing situation. A relatively small number of large competitors hold a significant portion of the folding carton segment of the paperboard industry. Major U.S. competitors include Smurfit-Stone Container Corporation, Field Container Company L.P, The Mead Corporation, Gulf States Paper Corporation, Westvaco, Rock-Tenn, Shorewood and International Paper. Mergers and acquisitions have contributed to a consolidation of the industry. Product Development: Graphic Packaging's development staff works directly with the sales and marketing personnel in meeting with customers and pursuing new business. Graphic Packaging's development efforts include, but are not limited to, extending the shelf life of customers' products, reducing production costs, enhancing the heat-managing characteristics of food packaging and refining packaging appearance through new printing techniques and materials. Potential new product development efforts are expected to involve sift-proof cartons, linerless cartons, liquid containment packaging, enhanced microwavable food containers and other packaging innovations. Other Businesses The Company's other businesses have generally been sold or reduced to investment holdings. The primary areas of focus of the other businesses has been distribution of solar electric systems (Golden Genesis); real estate development (Golden Equities); and corn-wet milling (Golden Technologies). The Company's interest in Golden Genesis was sold on August 3, 1999, Golden Equities has disposed of the majority of its real estate holdings, and the corn-wet milling operation was sold in January 1999. Therefore, Other segment information generally represents the final operating results of businesses disposed of before the end of 1999. Discontinued Operations Discontinued operations consists of three businesses: ceramics (CoorsTek); aluminum (Golden Aluminum); and the recycled paperboard mill (Kalamazoo Mill). CoorsTek (formerly known as Coors Ceramics Company) develops, manufactures and sells advanced technical products across a wide range of product lines for a variety of applications. It has been in business since 1911 and is the largest U.S. owned, independent manufacturer of advanced technical ceramics. CoorsTek was spun off as a separate public company effective December 31, 1999. Golden Aluminum produces rigid container sheet used in making can lids, tabs and bodies for the beverage and food can industry and other flat-rolled aluminum products used principally in the building industry. The assets of Golden Aluminum were sold on November 5, 1999. The Kalamazoo Mill was acquired on August 2, 1999 as a part of the Fort James packaging acquisition. The Kalamazoo Mill is a producer of high quality coated recycled paperboard and is believed to be the largest scale, lowest cost and most efficient recycled paperboard facility in North America. In December 1999, the Board of Directors adopted a plan to offer the Kalamazoo Mill for sale. The Company is pursuing the sale of the Kalamazoo Mill, as well as evaluating other strategic alternatives. Dependence on Major Customers Sales to Kraft Foods, Inc. and affiliates under various long- term contracts accounted for approximately 20%, 15% and 4% of the Company's consolidated sales for 1999, 1998 and 1997, respectively; however, future sales may vary from historical levels. In 1999, Graphic Packaging entered into a new five-year supply agreement with Kraft Foods whereby Graphic Packaging will supply one hundred percent of their folding carton needs for specified product lines. Sales to Coors Brewing accounted for approximately 13%, 17% and 27% of the Company's consolidated sales for 1999, 1998 and 1997, respectively; however, future sales may vary from historical levels. In 1998, Graphic Packaging entered into a new five-year supply agreement with Coors Brewing to supply packaging products. The new agreement includes stated quantity commitments and requires annual repricing. In addition, this contract provides for a three-year extension to be negotiated by December 31, 2000. The Company also sold aluminum products and refined corn starch to Coors Brewing until the disposition of these businesses on March 1, 1997 and January 31, 1999, respectively. The loss of Kraft Foods or Coors Brewing as a customer in the foreseeable future would have a material effect on the Company's results of operations. Research and Development The Company's ability to compete effectively in the value- added packaging market depends significantly on its continued and timely development of innovative technology, materials, products and processes using advanced and cost-efficient manufacturing processes. Total research and development expenditures for the Company were $3.8 million, $3.7 million and $13.1 million for 1999, 1998 and 1997, respectively. The Company's research and development expenditures from 1997 to 1998 decreased significantly as a percentage of net sales due to the dispositions of noncore developmental businesses. The Company believes the remaining expenditures will be adequate to meet the strategic objectives of its packaging business. Patents, Proprietary Rights and Licenses The Company holds a substantial number of patents and pending patent applications in the U.S. and in foreign countries. This portfolio primarily consists of microwave and barrier protection packaging and manufacturing methods. The patents and processes are significant to Graphic Packaging's operations and are supported by trademarks such as QwikWave[R], MicroRite[R] and Composipac[TM]. In addition, the Company licenses certain technology from third parties to enhance its technical capabilities. The Company's policy generally is to pursue patent protection that it considers necessary or advisable for the patentable inventions and technological improvements of its business and to defend its portfolio against third party infringers. The Company also relies significantly on its trade secrets, technical expertise and know-how, continuing technological innovations and other means such as confidentiality agreements with employees, consultants and customers to protect and enhance its competitive positions within its industry. The Company believes that its subsidiaries own or have the right to use the proprietary technology and other intellectual property necessary to their operations. Except as noted above, the Company does not believe that its success is materially dependent on the existence or duration of any individual patent, trademark or license or related group thereof. Environmental Matters The Company's operations are subject to extensive regulation by various federal, state, provincial and local agencies concerning compliance with environmental control statutes and regulations. These regulations impose limitations, including effluent and emission limitations, on the discharge of materials into the environment, as well as require the Company to obtain and operate in compliance with the conditions of permits and other governmental authorizations. Future regulations could materially increase the Company's capital requirements and certain operating expenses in future years. In the ordinary course of business the Company is continually upgrading and replacing its emission control equipment. The estimated capital expenditure for these types of projects for 2000 and 2001 is $200,000 per year. Some of the Company's operations have been notified that they may be potentially responsible parties (PRPs) under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 or similar laws with respect to the remediation of certain sites where hazardous substances have been released into the environment. The Company cannot predict with certainty the total costs of remediation, its share of the total costs, the extent to which contributions will be available from other parties, the amount of time necessary to complete the remediation or the availability of insurance. However, based on the investigations to date, the Company believes that any liability with respect to these sites would not be material to the financial condition or results of operations of the Company, without consideration for insurance recoveries. There can be no certainty, however, that the Company will not be named as a PRP at additional sites or be subject to other environmental matters in the future or that the costs associated with those additional sites or matters would not be material. In addition, the Company has received demands arising out of alleged contamination of various properties currently or formerly owned by the Company. In management's opinion, none of these claims will result in liability that would materially affect the Company's financial position or results of operations. Employees As of March 22, 2000, the Company had approximately 5,000 full-time employees. Management considers its employee relations to be good. ITEM 2. PROPERTIES The Company believes that its facilities are well maintained and suitable for their respective operations. The table below lists the Company's plants and most other physical properties and their locations and general character: Facility Location Character - --------------------- ----------------------------- --------------------- ACX Technologies: Company Headquarters Golden, Colorado(1) Graphic Packaging: Company Offices Golden, Colorado(1) Manufacturing Golden, Colorado(1) Converting/Labels Manufacturing Boulder, Colorado(2)(3)(5) Converting Operations Manufacturing Lawrenceburg, Tennessee Converting Operations Manufacturing Garden Grove, California Converting Operations Manufacturing Mississauga, Ontario(3) Converting Operations Manufacturing Portland, Oregon(2)(4) Converting Operations Manufacturing Wausau, Wisconsin Converting Operations Manufacturing Charlotte, North Carolina Converting Operations Manufacturing Kalamazoo, Michigan(5) Paperboard Mill Manufacturing Malvern, Pennsylvania Converting Operations Manufacturing Richmond, Virginia Converting Operations Manufacturing/Offices Bow, New Hampshire Converting Operations Manufacturing Centralia, Illinois Converting Operations Manufacturing Ft. Smith, Arkansas Converting Operations Manufacturing Mitchell, South Dakota Converting Operations Manufacturing Lumberton, North Carolina Converting Operations Manufacturing Saratoga Springs, New York(5) Converting Operations Manufacturing Gordonsville, Tennessee Converting Operations Manufacturing Kendallville, Indiana Converting Operations Manufacturing Kalamazoo, Michigan Converting Operations Manufacturing Menasha, Wisconsin Converting Operations Manufacturing Newnan, Georgia Converting Operations Manufacturing Perrysburg, Ohio Converting Operations Golden Technologies: Offices Golden, Colorado(2)(3) (1) The Company headquarters/Graphic Packaging offices and Golden, Colorado manufacturing facility are located in the same building. (2) Two facilities. (3) Leased facilities. (4) Two facilities, including one leased facility. (5) Plants for sale or other disposition in 2000. The operating facilities of the Company are not constrained by capacity issues. From time to time the Company also leases additional warehouse space and sales offices throughout North America, on an as-needed basis. ITEM 3. LEGAL PROCEEDINGS In the ordinary course of business, the Company's subsidiaries are subject to various pending claims, lawsuits and contingent liabilities, including claims by current or former employees relating to employment, sexual harassment or termination. In each of these cases, the Company is defending against them. The Company does not believe that disposition of these matters will have a material adverse effect on the Company's consolidated financial position or results of operations. For specific information regarding environmental legal proceedings, see Environmental Matters. In July 1999, Cinergy Resources, Inc. and the Cincinnati Gas & Electric company sued Graphic Packaging in Warren County, Ohio Court of Common Pleas claiming approximately $651,000, plus interest, fees and costs, for gas supplied to Graphic Packaging's Franklin, Ohio flexible packaging facility. Cinergy claims that, due to an improperly installed meter, Graphic Packaging was not billed for actual gas consumption. Graphic Packaging denies liability claiming that it has paid for the gas, and any errors are due to Cinergy's actions. Although this case is in the discovery stage, the Company does not believe the disposition of this matter will have a material adverse effect on the Company's financial position or results of operation. In February 1998, a subsidiary of Golden Technologies was sued for breach of a supply agreement to purchase thermal energy for the Johnstown, Colorado corn-wet mill. The Company sold the Johnstown, Colorado corn-wet mill in January 1999. Trial has been set for October 2000, but the Company does not believe the disposition will have a material adverse effect on the Company's financial position or results of operation. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter ended December 31, 1999. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The Company's common stock was quoted on the New York Stock Exchange under the symbol ACX through February 2000 when its symbol was changed to GPK. The historical range of the high and low sales price per share for each quarter of 1999 and 1998 was as follows: 1999 1998 ------------------ ------------------- High Low High Low --------- ------- -------- --------- First Quarter $15 1/2 $11 1/4 $25 $22 1/2 Second Quarter $16 1/4 $11 1/2 $25 3/4 $21 1/16 Third Quarter $15 15/16 $ 9 1/2 $22 3/4 $12 7/16 Fourth Quarter $11 1/8 $ 7 5/8 $15 3/16 $ 9 13/16 As a result of the spin-off of CoorsTek on December 31, 1999, the market price of the Company's stock opened on January 3, 2000 at $5.875 per share, versus the closing price of $10.6875 per share on December 31, 1999. During 1999 and 1998, no cash dividends were paid by the Company. At this time, the Company anticipates that it will retain any earnings and that the Company will not pay dividends to its shareholders in the foreseeable future. Also, the Company's credit facilities currently prohibit the payment of any cash dividends, and the Company expects this limitation to remain in effect through 2001. On March 22, 2000 there were approximately 2,400 shareholders of record of the Company's common stock. ITEM 6. SELECTED FINANCIAL DATA Financial Highlights - Five Year Overview In thousands, except per share and ratio data 1999 1998 1997 1996 1995 -------- -------- -------- -------- -------- Summary of Operations Net sales $831,405[a] $691,777[a] $426,261 $436,028 $389,976 -------- -------- -------- -------- -------- Gross profit $123,647 $124,244 $93,608 $80,393 $72,658 Selling, general and administrative expenses[b] $85,218 $76,609 $70,436 $57,319 $54,770 Asset impairment and restructuring charges[c] 7,813 21,391 21,880 34,642 2,297 -------- -------- -------- -------- -------- Operating income (loss) $30,616 $26,244 $1,292 ($11,568) $15,591 -------- -------- -------- -------- -------- Income (loss) from continuing operations $21,518[f] $5,453 ($2,272)($13,793) $2,284 -------- -------- -------- -------- -------- Income (loss) from discontinued operations[d] $6,073 $15,812 $29,988 ($78,231) $21,587 -------- -------- -------- -------- -------- Extraordinary loss on early extinguishment of debt, net of tax ($2,332) --- --- --- --- -------- -------- -------- -------- -------- Net income (loss) $25,259 $21,265 $27,716 ($92,024) $23,871 - ------------------------------------------------------------------------- Per basic share of common stock: Continuing operations $0.76 $0.19 ($0.08) ($0.49) $0.09 Discontinued operations $0.21 $0.56 $1.07 ($2.81) $0.80 Extraordinary loss ($0.08) --- --- --- --- -------- -------- -------- -------- -------- Net income (loss) $0.89 $0.75 $0.99 ($3.30) $0.89 -------- -------- -------- -------- -------- Per diluted share of common stock: Continuing operations $0.75 $0.19 ($0.08) ($0.49) $0.08 Discontinued operations $0.21 $0.54 $1.04 ($2.81) $0.79 Extraordinary loss ($0.08) --- --- --- --- -------- -------- -------- -------- -------- Net income (loss) $0.88 $0.73 $0.96 ($3.30) $0.87 - ------------------------------------------------------------------------- Financial Position Working capital, excluding current maturities of debt $292,774 $238,844 $158,551 $154,626 $168,801 Total assets $1,627,038[e] $846,022 $642,880 $623,520 $726,676 Current maturities of debt $400,000[e] $86,300 --- --- --- Long-term debt $615,500 $183,000 $100,000 $100,000 $100,000 Shareholders' equity $423,310 $447,955 $430,531 $397,903 $488,374 - ------------------------------------------------------------------------- Other Information Total debt to capitalization 71% 38% 19% 20% 17% Net book value per share of common stock $14.81 $15.76 $15.17 $14.24 $18.14 - ------------------------------------------------------------------------- [a] Includes sales from ongoing Graphic Packaging business (i.e., excludes sales from the flexible packaging plants) of $708.2 million and $504.6 million in 1999 and 1998, respectively. [b] Includes goodwill amortization of $11,533, $7,785, $3,209, $2,224 and $2,162 for 1999, 1998, 1997, 1996 and 1995, respectively. [c] Asset impairment and restructuring charges resulted in a loss per diluted share impact of $0.16, $0.44, $0.45, $0.73 and $0.05 in 1999, 1998, 1997, 1996 and 1995, respectively. [d] Discontinued operations include the spin-off of CoorsTek, the Kalamazoo Mill and the sale of Golden Aluminum Company. The income (loss) per diluted share for each business is as follows: 1999 1998 1997 1996 1995 ------------------------------------- CoorsTek $0.54 $0.54 $1.04 $0.88 $1.06 Golden Aluminum Company ($0.22) --- --- ($3.63) ($0.27) Kalamazoo Mill ($0.11) --- --- --- --- [e] Reduced by $200 million on January 4, 2000 with proceeds from the CoorsTek spin-off. [f] Includes $30.2 million pre-tax gain (approximately $18 million, net of tax) from sales of businesses. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General Overview The Company, through its principal subsidiary Graphic Packaging, is a manufacturer of packaging products used by consumer product companies as primary packaging for their end-use products. Over the past several years, and culminating with the spin-off of CoorsTek on December 31, 1999, the Company has moved from a diversified group of subsidiaries - each operating in different markets - to a Company focused on the folding carton segment of the packaging industry. By strategically disposing of noncore businesses and underperforming assets; acquiring two major businesses in the folding carton industry; and executing rationalization plans, the Company has developed into a prominent competitor in the folding carton industry. The Selected Financial Data in Item 6 summarizes the financial impact that the Company's acquisitions and dispositions have had on consolidated operating results over the past five years, and is primarily indicative of Graphic Packaging's results after the recent dispositions and spin-off of CoorsTek and the announcement of the intent to offer the Kalamazoo Mill for sale. Detailed analysis of Graphic Packaging's contribution to the Company's consolidated results over the past three years is provided in the Results from Continuing Operations section below. Net sales have more than doubled from 1995 to 1999 - with the most pronounced increases occurring in 1998 (the year of the Universal Packaging acquisition) and 1999 (the year of the Fort James packaging business acquisition). Gross profit margins, although reaching 22% in 1997, averaged 18% in other years. Gross profit fluctuations from year- to-year are generally due to integration issues when adding new plant locations and customers; changes in product mix; changing raw material costs; and pricing pressure due to increased competition in the folding carton industry. Selling, general and administrative expenses, excluding goodwill amortization, have declined from 13% of sales in 1995 to 9% of sales in 1999. This is a reflection of the Company's higher revenue base and restructuring efforts, particularly the reduction of staff levels and administrative facilities. See further discussion of the Company's restructuring activities for the past three years below. The Company has achieved operating income before asset impairment and restructuring charges of approximately 5% of net sales for the last five years despite the significant structural changes taking place in the packaging industry and a change in the Company's strategic focus. Income from continuing operations, again after adding back asset impairment and restructuring charges, has also remained consistent from year-to- year at approximately 4-5% of net sales. A long-term goal of the Company is to achieve operating income of 10% of net sales. The Company's financial position and liquidity are discussed in detail below. Generally, the Company's cash flow from operations have sustained restructuring costs, capital expenditures and debt service from year-to-year. Interest and principal from additional borrowings used to finance the acquisitions of Universal Packaging in 1998 and the Fort James packaging business in 1999 will be reduced by cash generated from operations and from future asset sales, including the sale or other disposition of the Kalamazoo Mill. This financial review presents the Company's operating results for each of the three years in the period ended December 31, 1999, and its financial condition at December 31, 1999 and 1998. This review should be read in connection with the information presented in the Consolidated Financial Statements and the related notes thereto. Results from Continuing Operations Consolidated Net Sales Net sales for 1999 totaled $831.4 million, an increase of $139.6 million or 20%, over 1998 sales of $691.8 million. Sales from Graphic Packaging's ongoing businesses increased $203.6 million to $708.2 million in 1999. The August 2, 1999 acquisition of the Fort James packaging business provided the increase in sales, which was partially offset by the sale of the flexible packaging plants on September 2, 1999. Net sales for 1998 totaled $691.8 million, an increase of $265.5 million or 62%, over 1997 sales of $426.3 million. The January 14, 1998 acquisition of Universal Packaging accounted for the increase in 1998 net sales. Net sales to Coors Brewing totaled $107.6 million in 1999, a decrease of $12.3 million or 10%, over net sales of $119.9 million in 1998. The decrease is due to the disposition of the Company's corn starch business in early 1999 and the five-year packaging supply agreement that was renegotiated in 1998. Net sales to Coors Brewing totaled $119.9 million in 1998, an increase of $6.6 million or 6%, over net sales of $113.3 million in 1997, due primarily to volume increases. The Company had sales to customers outside the United States, primarily in Canada, which accounted for 6%, 9% and 16% of total sales during 1999, 1998 and 1997, respectively. The decrease in foreign sales as a percentage of total sales in 1999 is attributable to the sale of several flexible packaging plants in Canada during 1999. The decrease in foreign sales as a percentage of total sales during 1998 is due to the acquisition of Universal Packaging, which sells principally in the United States. Net sales of the Company's Other segment totaled $44.6 million, $67.9 million and $61.1 million in 1999, 1998 and 1997, respectively. These sales accounted for approximately 5%, 10% and 14% of the Company's consolidated sales for the same years. The decreasing sales of the Other segment are due to the Company's divestiture of the majority of these businesses. Sales of the Other businesses are not expected to be material in 2000 and beyond. Gross Profit Consolidated gross profit was 15%, 18% and 22% of net sales in 1999, 1998 and 1997, respectively. The decreases in 1999 and 1998 reflect recent trends in the packaging industry in terms of changing raw material costs, coupled with pricing pressures due to increased competition. The decrease in 1999 also reflects the integration costs associated with the Fort James packaging business acquisition. As discussed below, future improvements in gross profit will depend upon management's ability to improve cost efficiencies and to maintain profitable, long-term customer relationships. Selling, General and Administrative Expenses Selling, general and administrative expenses, excluding goodwill amortization, for 1999, 1998 and 1997 were $73.7 million, $68.8 million and $67.2 million, which represented 9%, 10% and 16% of net sales, respectively. The percentage decrease in 1999 mainly reflects cost savings realized as a result of the Company's restructuring efforts over the past three years and the increased revenue base resulting from the Fort James packaging business and Universal Packaging acquisitions. The decrease in 1998 is due to operating efficiencies gained with the Universal Packaging acquisition and lower research and development costs associated with the dispositions of the developmental businesses held by ACX Technologies. Operating Income Consolidated operating income for 1999, excluding asset impairment and restructuring charges, decreased to $38.4 million, a decrease of 19% over 1998 operating income of $47.6 million before asset impairment and restructuring charges. The principal reasons for the decrease are the increased goodwill amortization and integration costs associated with the Fort James packaging business acquisition and declining gross profit margins. Consolidated operating income, on the same basis, increased to $47.6 million in 1998, a 105% increase from $23.2 million in 1997. This increase is due primarily to the January 1998 acquisition of Universal Packaging. Operating Income from Continuing Operations by Segment (In millions) 1999 1998 1997 ----- ----- ----- Before asset impairment and restructuring charges: Graphic Packaging $46.8 $59.5 $44.8 Other businesses 2.1 (2.9) (11.4) Corporate (10.5) (8.9) (10.2) ----- ----- ----- Operating income before asset impairment and restructuring charges 38.4 47.7 23.2 Asset impairment and restructuring charges: Graphic Packaging (7.8) (21.3) (2.1) Other businesses --- (0.1) (19.8) ----- ----- ----- Operating income after asset impairment and restructuring charges $30.6 $26.3 $1.3 ===== ===== ===== Asset Impairment Charges The Company recorded a total of $5.9 million, $19.4 million and $16.6 million in asset impairment charges in 1999, 1998 and 1997, respectively. Goodwill impairment of $5.5 million was included in the 1998 charge. The remainder of the 1998 charge consisted of fixed asset impairments. The 1999 and 1997 charges consisted entirely of fixed asset impairments as described below. 1999: Graphic Packaging recorded $5.9 million of asset impairment charges in 1999 due to decisions to close its Boulder, Colorado and Saratoga Springs, New York plants in 2000. The Boulder, Colorado plant has been replaced by a new manufacturing facility in Golden, Colorado which will use advanced equipment to improve the production process. The Company expects to close the Boulder plant in the third quarter of 2000. The Saratoga Springs plant operates at higher overhead levels than other plants and uses gravure press technology. Therefore, the decision was made to sell the Saratoga Springs building; move the business to other folding carton plants; and dispose of the gravure technology presses at Saratoga Springs. Boulder writedowns totaled $2.9 million and Saratoga Springs writedowns totaled $3.0 million. 1998: Graphic Packaging recorded $18.5 million in asset impairment charges in 1998. Deterioration of the performance at certain flexible packaging facilities and increased competitive conditions led management to review the carrying amounts of long- lived assets and goodwill in conjunction with an overall restructuring plan. Specifically, forecasted operating cash flows did not support the carrying amount of certain long-lived assets and goodwill at Graphic Packaging's Franklin, Ohio operation. In addition, management decided to offer for sale Graphic Packaging's Vancouver, British Columbia operation and close a divisional office in North Carolina. Therefore, the long- lived assets and related goodwill were written down to their estimated market values. The Company recorded net asset impairment charges of $0.9 million in its Other businesses during 1998. These charges included a $1.0 million asset impairment charge to write down long-lived assets of Solartec, S.A., a solar electric subsidiary in Argentina. Since acquiring Solartec in November 1996, operating cash flows were below original expectations. As a result, the Company recorded this impairment to reduce the carrying value of its investment in Solartec to its estimated fair market value. In addition, the Company recorded a $0.4 million asset impairment charge related to the consolidation and outsourcing of certain manufacturing activities at Golden Genesis. As a result, certain long-lived assets became impaired and were written down to their estimated market value. Also during 1998, the Company sold certain equipment formerly used in a biodegradable polymer project for approximately $0.5 million. These assets had been previously written off as an asset impairment, so the resulting gain on sale of these assets was netted against the 1998 asset impairment charge. 1997: During 1997, the Company recorded a $16.6 million asset impairment charge in its Other businesses when it adopted a plan to limit future funding for a biodegradable polymer project. This decision reduced expected future cash flows for this activity to a level below the carrying value of the manufacturing and intangible assets of this project. Restructuring Charges The Company recorded restructuring charges totaling $1.9 million, $2.0 million and $5.3 million in 1999, 1998 and 1997, respectively. The following table summarizes accruals related to these restructuring charges: Corn Biodegradable Syrup Graphic Graphic Polymer Exit Exit Packaging Packaging (In millions) Plan Plan Corporate Operations Other Total ------------- ----- --------- ---------- ----- ----- Balance, December 31, 1996 $--- $--- $--- $--- $1.8 $1.8 1997 restructuring charges 0.9 2.3 2.1 --- --- 5.3 Cash paid (0.5) (1.4) (0.2) --- (1.8) (3.9) Non-cash expenses --- --- (0.2) --- --- (0.2) ----- ----- ---- ----- ---- ----- Balance, December 31, 1997 0.4 0.9 1.7 --- --- 3.0 1998 restructuring charges --- (0.8) --- 2.8 --- 2.0 Cash paid (0.4) (0.1) (1.7) (1.0) --- (3.2) ----- ----- ---- ----- ---- ----- Balance, December 31, 1998 --- --- --- 1.8 --- 1.8 1999 restructuring charges --- --- --- 1.9 --- 1.9 Cash paid --- --- --- (1.8) --- (1.8) ----- ----- ---- ----- ---- ----- Balance, December 31, 1999 $--- $--- $--- $1.9 $--- $1.9 ===== ===== ===== ====== ===== ===== 1999: Graphic Packaging recorded a $1.9 million restructuring charge pursuant to a plant rationalization plan approved by the Company's Board of Directors in the fourth quarter. The Company has instituted this plan to further its goal of refining its focus on folding carton packaging and to reduce headcount. All of the 1999 charge relates to severance, primarily at the Lawrenceburg, Tennessee manufacturing plant. In total, 14 administrative and 59 plant positions will be eliminated at the Lawrenceburg, Tennessee plant at an estimated cost of $1.9 million. Severance packages have been offered commensurate with employees' positions and tenure with the Company. The Company paid $0.2 million in the fourth quarter of 1999 and expects to make the remaining cash outlays and complete this restructuring plan in 2000. The Company expects to record additional restructuring charges of approximately $3.4 million, primarily in the first quarter of 2000, when severance packages are communicated to employees at the Saratoga Springs plant. 1998: During 1998, the Company instituted a restructuring plan related to certain Graphic Packaging operations and recorded $2.8 million in restructuring charges. This plan included the consolidation and realignment of certain administrative functions within the flexible operations and the downsizing of its Franklin, Ohio operation. This plan resulted in the elimination of approximately 20 administrative and 65 manufacturing positions with related severance costs of approximately $2.5 million. This plan also included approximately $0.3 million in other exit costs related to the closure of the flexible divisional office in North Carolina. The Company paid $1.0 million of the costs in the fourth quarter of 1998 and $1.6 million during 1999. 1997: In December 1997, the Company recorded a $2.1 million charge related to the closure of the Graphic Packaging corporate offices in Wayne, Pennsylvania. This closure resulted in severance and outplacement costs of $1.1 million for approximately 22 administrative employees. The Company made cash payments of $1.7 million and $0.2 million related to this plan in 1998 and 1997, respectively. The Company eliminated 40 research and administrative positions and recorded approximately $0.9 million in severance and outplacement costs related to the biodegradable polymer project in 1997. The Company made cash outlays of approximately $0.4 million and $0.5 million related to this plan in 1998 and 1997, respectively. The Company adopted a plan to exit the high-fructose corn syrup business in 1997. As a result, the Company eliminated approximately 70 manufacturing and administrative positions and recorded $2.3 million in severance and other exit costs. The Company made approximately $0.1 million and $1.4 million in cash outlays related to this plan in 1998 and 1997, respectively. In the fourth quarter of 1998, the Company determined that the liability remaining for this exit plan was not required. Accordingly, the remaining liability was reversed and netted against the 1998 restructuring charges. In connection with the Fort James packaging business acquisition, the Company is continuing to evaluate rationalization opportunities within the folding carton converting operations to reduce overall operating costs while maintaining capacity. This includes evaluation of the capacity of the Company's web press facilities and evaluation of the opportunity to transfer business among the various web press facilities. The Company expects additional costs of approximately $2 million may be incurred in connection with further plant rationalizations, related primarily to severance and other plant shutdown costs. The Company expects to finalize its rationalization plan by June 30, 2000. Costs related to shutting down a facility acquired in the Fort James packaging business acquisition will be accounted for as a cost of the acquisition, with a resultant adjustment to goodwill. Gain from Sale of Businesses The Company disposed of two businesses during 1999, for which the following gains were recognized: Flexible Golden (In thousands) Plants Genesis Total -------- -------- -------- Cash proceeds $105,000 $20,800 $125,800 Net book value, less costs (82,300) (13,264) (95,564) -------- -------- -------- Gain recognized $22,700 $7,536 $30,236 ======== ======== ======== Interest Expense and Interest Income Interest expense for 1999, 1998 and 1997 was $28.6 million, $22.0 million and $8.6 million, respectively. The increase in 1999 is due to additional financing to acquire the Fort James packaging business. The increase in 1998 is due to additional financing to acquire Universal Packaging, along with interest on debt assumed in the acquisition. Interest expense of approximately $8 million was allocated to the discontinued operations of the Kalamazoo Mill in 1999, based upon an estimated fair value of $225 million. Interest expense of $16.0 million, $3.6 million and $0.1 million was allocated to the discontinued operations of CoorsTek in 1999, 1998 and 1997, respectively, based upon CoorsTek's $200 million allocation of total consolidated debt at the time of the spin-off for 1999 and $50 million of outstanding intercompany debt for 1998. The Company capitalized interest of $2.0 million, $0.3 million and $0.4 million in 1999, 1998 and 1997, respectively. The increase in capitalized interest during 1999 is attributable to the construction of Graphic Packaging's new Golden, Colorado facility. Interest income for 1999, 1998 and 1997 was $2.6 million, $5.4 million and $5.6 million, respectively. The decreases in 1999 and 1998 relate directly to the use of funds to acquire the Fort James packaging business and Universal Packaging. See related discussions about Financial Condition and Liquidity below. Income Taxes The consolidated effective tax rate for the Company in 1999 was 40% compared to 47% in 1998 and (10%) in 1997. The higher tax rate in 1998 resulted from a lower earnings base, which increased the impact of non-deductible items. The negative rate in 1997 was a result of no tax benefit taken for built-in losses on a subsidiary experiencing tax losses and for capital losses that may not be deductible due to a lack of offsetting capital gains. The Company expects to maintain its effective tax rate for future years at the historical rate of approximately 40%. Graphic Packaging 1999 was a transitional year for Graphic Packaging as the Company took steps to better position itself in the folding carton industry. At the beginning of 1999, Graphic Packaging was producing both folding carton and flexible packaging products. A strategic decision was made to focus entirely on folding cartons and dispose of the flexible packaging plants during 1999. The steps taken were necessary to establish Graphic Packaging as a leader in the folding carton industry. On August 2, 1999, Graphic Packaging purchased the Fort James packaging business, which included the Kalamazoo Mill and 12 folding carton plants throughout the United States and Canada. At the same time, a sale of the Company's flexible packaging plants was effected and closed on September 2, 1999. After these two transactions, Graphic Packaging had 23 plants, primarily producing folding cartons; the paperboard mill in Michigan; and a focus toward the future in the folding carton industry. Management has announced its plan to sell the Kalamazoo Mill and the Saratoga Springs, New York plant building in the year 2000. Management also expects to close another folding carton plant at a location to be determined in 2000. Graphic Packaging has recently completed the construction of a new production and office facility in Golden, Colorado that will soon take over all of the current Boulder, Colorado operations and a significant portion of the Lawrenceburg, Tennessee operations. These operations primarily serve Coors Brewing. Graphic Packaging has capitalized interest of $1.2 million related to the construction of this new facility and recognized a restructuring expense of $1.9 million in 1999 for staffing reductions primarily in Lawrenceburg, Tennessee. Folding Carton Industry The U.S. packaging industry is a mature industry that has experienced approximately 2% growth per year. Recent trends include rising paperboard costs; consolidation of competitors; and pricing pressures. Management mitigates rising paperboard costs through long-term contracting with suppliers and, as available, cost pass-throughs to customers. Acquisitions of Universal Packaging in 1998 and the Fort James packaging business in 1999 have kept Graphic Packaging in a competitive position in a consolidating industry; however, management's challenge will be to control costs of production against overall resistance to price increases in the folding carton market. Net Sales Graphic Packaging's net sales increased 26% in 1999 to $786.8 million as compared to $623.9 in 1998. The significant increase was due to the Fort James packaging business acquisition. Sales of ongoing business (excluding flexible plants sold in 1999) were $708.2 million, a 40% increase over sales on the same basis of $504.6 million in 1998. Graphic Packaging's net sales for 1998 were $623.9 million, an increase of $258.8 million, or 71%, over 1997 sales of $365.1 million. The increase is attributable to the January 1998 acquisition of Universal Packaging. These gains were partially offset by significant pricing pressures for flexible packaging and volume declines in the tobacco market. Graphic Packaging acquired long-standing customer relationships with the acquisition of the Fort James packaging business in 1999 and Universal Packaging in 1998. Maintaining these relationships at a profitable level is key to Graphic Packaging's future growth. Gross Profit Graphic Packaging's major task during 1999 was to integrate the Fort James plants into current operations with the primary focus on customer service and retention. In 2000, the Company will focus on rationally allocating production to maximize capacity in a cost-effective manner. The 3.5% decline in Graphic Packaging's gross profit percentage from 1998 to 1999 is due primarily to integration inefficiencies and increased costs associated with the Fort James acquisition in 1999 and pricing pressures in the fourth quarter of 1999. Inherent in the rationalization process are one-time transitional costs that management expects to eliminate in the latter half of 2000. The decrease in gross profit in 1998, as compared to 1997, is a reflection of the industry trends toward higher costs and lower pricing due to competition and the acquisition of Universal Packaging, which had lower comparative margins. Selling, General and Administrative Expenses Graphic Packaging's selling, general and administrative expenses for 1999, 1998 and 1997 were $55.8 million, $50.5 million and $38.8 million, which represented 7%, 8% and 11% of net sales, respectively. The decreased percentage of selling, general and administrative expenses to net sales in 1999 and 1998 reflect the addition of Universal Packaging, which operates with lower overhead expenses, and the effects of rationalization programs carried out by the end of 1999. Other Segment Net sales for the Other business segment in 1999 totaled $44.6 million, a decrease of $23.3 million, or 34%, from 1998 net sales of $67.9 million. The decrease in net sales is directly due to the disposition of virtually all the assets and related businesses of the Other group of ACX Technologies during 1999. Net sales for the Other business in 1998 totaled $67.9 million, an increase of $6.8 million, or 11%, over 1997 net sales of $61.1 million. The 1998 increase reflected higher sales volumes due to the acquisitions of certain solar electric distributors by Golden Genesis. The Other businesses reported operating income of $2.1 million in 1999, a favorable increase over the operating losses of $3.0 million and $31.2 million in 1998 and 1997, respectively. The improvements were directly due to the Company's decisions to dispose of the noncore, underperforming businesses operating in this segment. As of December 31, 1999, the Company had disposed of substantially all operating businesses in the Other segment. Discontinued Operations Coincident with the Company's strategic folding carton acquisitions, several noncore businesses and underperforming assets were selected for sale or other disposition by ACX Technologies during 1999. CoorsTek Spin-off On December 31, 1999, the Company distributed 100% of CoorsTek's shares of common stock to the ACX Technologies shareholders in a tax-free transaction. Shareholders received one share of CoorsTek stock for every four shares of ACX Technologies stock held. CoorsTek issued a promissory note to ACX Technologies on December 31, 1999 totaling $200.0 million in satisfaction of outstanding intercompany obligations at the time of the spin-off and as a special one-time dividend. The note was paid in full in January 2000. No gain or loss was recognized by ACX Technologies as a result of the spin-off transaction. The tax basis allocation of costs for ACX Technologies' shares acquired pre-spin off is: ACX 55.56% and CoorsTek 44.44%. Golden Aluminum In 1996, the Board of Directors adopted a plan to dispose of the Company's aluminum rigid container sheet business operated by Golden Aluminum. In conjunction with this decision, the Company recorded pre-tax charges of $155.0 million for anticipated losses upon the disposition and estimated operating losses of the business through the disposition date. In March of 1997, Golden Aluminum was sold for $70.0 million, of which $10.0 million was paid at closing and $60.0 million was due within two years. In December of 1998, the Company extended the due date on the $60.0 million payment until September 1, 1999. In accordance with the purchase agreement, the purchaser exercised its right to return Golden Aluminum to the Company on August 23, 1999 in discharge of the $60.0 million obligation. The initial payment of $10.0 million was nonrefundable. The Company subsequently sold the assets of Golden Aluminum to another buyer for approximately $41 million on November 5, 1999. An additional pre-tax charge of $10.0 million was recorded in 1999 related to the ultimate disposition of Golden Aluminum. Kalamazoo Mill The Company purchased the Kalamazoo Mill on August 2, 1999 as part of the acquisition of the Fort James packaging business. The Kalamazoo Mill produces recycled paperboard. In December 1999, the Board of Directors approved a plan to offer the Kalamazoo Mill for sale. An estimated fair value of $225 million has been ascribed to the net assets of the Kalamazoo Mill at December 31, 1999, which includes approximately $106 million of goodwill. The goodwill allocation between the Kalamazoo Mill and the continuing operations of the Fort James packaging business acquisition is subject to change upon disposition of the Kalamazoo Mill. As a result, no gain or loss will be recorded upon sale or other disposition of the Kalamazoo Mill. The Company allocated approximately $8 million of interest expense to the Kalamazoo Mill for the period August 2, 1999 through December 31, 1999. The Company expects to finalize the sale or other disposition of the Kalamazoo Mill in the second or third quarter of 2000. Financial Data - Discontinued Operations Financial data for CoorsTek, Golden Aluminum and the Kalamazoo Mill for the years ended December 31, in thousands, except for per share information, are summarized as follows: Golden Kalamazoo CoorsTek Aluminum Mill[a] Total -------- -------- --------- -------- 1999 Net Sales $365,061 $--- $18,750 $383,811 ======== ======== ======== ======== Income (loss) from operations before income taxes $25,117 $--- ($5,208) $19,909 Income tax expense (benefit) 9,480 --- (2,100) 7,380 -------- -------- -------- -------- Income (loss) from operations 15,637 --- (3,108) 12,529 Income (loss) from disposal, before taxes --- (10,000) --- (10,000) Income tax benefit (expense) --- 3,544 --- 3,544 -------- -------- -------- -------- Net income (loss) $15,637 ($6,456) ($3,108) $6,073 ======== ======== ======== ======== Per basic share of common stock: Income (loss) from operations $0.55 $--- ($0.11) $0.44 Income (loss) on disposal --- (0.23) --- (0.23) -------- -------- -------- -------- Net income (loss) per basic share $0.55 ($0.23) ($0.11) $0.21 ======== ======== ======== ======== Per diluted share of common stock: Income (loss) from operations $0.54 $--- ($0.11) $0.43 Income (loss) on disposal --- (0.22) --- (0.22) -------- -------- -------- -------- Net income (loss) per diluted share $0.54 ($0.22) ($0.11) $0.21 ======== ======== ======== ======== Current assets --- --- $18,449 $18,449 Current liabilities --- --- (13,948) (13,948) -------- -------- -------- -------- Net current assets --- --- $4,501 $4,501 Noncurrent assets --- --- $224,619 $224,619 Noncurrent liabilities --- --- (4,120) (4,120) -------- -------- -------- -------- Net noncurrent assets --- --- $220,499 $220,499 ======== ======== ======== ======== [a] Represents five months operating results. Golden Kalamazoo CoorsTek Aluminum Mill[a] Total -------- -------- --------- -------- 1998 Net Sales $296,614 $--- $--- $296,614 ======== ======== ======== ======== Income from operations before income taxes $25,361 $--- $--- $25,361 Income tax expense 9,549 --- --- 9,549 -------- -------- -------- -------- Income from operations 15,812 --- --- 15,812 Net income $15,812 $--- $--- $15,812 ======== ======== ======== ======== Net income per basic share $0.56 $--- $--- $0.56 ======== ======== ======== ======== Net income per diluted share $0.54 $--- $--- $0.54 ======== ======== ======== ======== Current assets $105,508 --- --- $105,508 Current liabilities (33,600) --- --- (33,600) -------- -------- -------- -------- Net current assets $71,908 --- --- $71,908 ======== ======== ======== ======== Noncurrent assets $158,394 --- --- $158,394 Noncurrent liabilities (81,583) --- --- (81,583) -------- -------- -------- -------- Net noncurrent assets $76,811 --- --- $76,811 ======== ======== ======== ======== Golden Kalamazoo CoorsTek Aluminum Mill[a] Total -------- -------- --------- -------- 1997 Net Sales $304,824 $38,995 $--- $343,819 ======== ======== ======== ======== Income from operations before income taxes $48,180 $--- $--- $48,180 Income tax expense 18,192 --- --- 18,192 -------- -------- -------- -------- Income from operations 29,988 --- --- 29,988 Net income $29,988 $--- $--- $29,988 ======== ======== ======== ======== Net income per basic share $1.07 $--- $--- $1.07 ======== ======== ======== ======== Net income per diluted share $1.04 $--- $--- $1.04 ======== ======== ======== ======== Financial Resources and Liquidity The Company's liquidity is generated from both internal and external sources and is used to fund short-term working capital needs, capital expenditures and acquisitions. During 1999, internally generated liquidity is measured by net cash from operations, as discussed below, and the sale of non-strategic assets. On August 2, 1999, the Company entered into a $1.3 billion revolving credit and term loan agreement (the Credit Agreement) with a group of lenders, with Bank of America, N.A. as agent. Subsequent to December 31, 1999, the Company reduced the amount available under the Credit Agreement by $50.0 million. The Credit Agreement is comprised of four senior credit facilities including a $125 million 180-day term facility, a $400 million one-year facility, a $325 million five-year term loan facility and a $400 million five-year revolving credit facility (collectively, the Senior Credit Facilities). Proceeds from the Senior Credit Facilities were used to finance the $849 million acquisition of the Fort James packaging business and to prepay the Company's other outstanding borrowings. The additional cost of prepaying the Company's other outstanding borrowings was $3.6 million before tax and $2.3 million after tax and is shown in the Consolidated Income Statement as an extraordinary loss from the early extinguishment of debt. After approximately $200 million of repayments made from the Company's cash flow from operations, the sale of Golden Aluminum, the sale of the Company's flexible packaging plants and the sale of the solar electric businesses, total borrowings under the Senior Credit Facilities were $1,015.5 million as of December 31, 1999. On January 4, 2000, the Company repaid an additional $200 million of debt with the proceeds of a note receivable from CoorsTek as a result of the spin-off. Borrowings under the revolving credit facility on March 22, 2000 were approximately $339 million, leaving $61 million available for future borrowing needs. Amounts borrowed under the Senior Credit Facilities bear interest under various pricing alternatives plus a spread depending on the Company's leverage ratio. The various pricing alternatives include (i) LIBOR, or (ii) the higher of the Federal Funds Rate plus .5% or the prime rate. In addition, the Company pays a commitment fee that varies based upon the Company's leverage ratio and the unused portion of the revolving credit facility. Mandatory prepayments under the Senior Credit Facilities are required from the proceeds of any significant asset sale or from the issuance of any debt or equity securities. In addition, the five-year term loan is due in quarterly installments beginning with the first quarter of 2000. Total installments for 2000 through 2004, respectively, are $25 million, $50 million, $70 million, $80 million and $100 million. The Senior Credit Facilities are secured with first priority liens on all material assets of the Company and all of its domestic subsidiaries. The Credit Agreement currently limits the Company's ability to pay dividends and imposes limitations on the incurrence of additional debt, acquisitions and the sale of assets. In February, the Company determined that certain covenants in its Senior Credit Facilities relating to leverage and interest coverage should be changed to reflect anticipated operating results for the Company in 2000. In March 2000, the Company and its lenders amended the Senior Credit Facilities to reset certain financial covenants including maximum debt to EBITDA, the ratio between EBITDA and interest, and debt to capitalization and to impose additional restrictions on capital expenditures and acquisitions. The interest rate spread from certain base indices was increased by .25 to .50 percent depending upon the Company's leverage. The Company anticipates paying an aggregate of approximately $2 million in fees in connection with the amendment. At December 31, 1999, the Company was in compliance with the financial covenants. As revised in March 2000, quarterly financial covenant levels in 2000 and beyond are stringent. Although there can be no assurance that all of these covenants will be met, management believes that the Company will remain in compliance with the revised covenants based upon the Company's expected performance and debt repayment forecasts. In the event of a default under the Credit Agreement, the lenders would have the right to call the Senior Credit Facilities immediately due and refrain from making further advances to the Company. If the Company is unable to pay the accelerated payments, the lenders could elect to proceed against the collateral in order to satisfy the Company's obligations. The Company has entered into contracts to hedge the underlying interest rate on $175 million of anticipated long-term borrowings. These contracts lock an average risk-free rate of approximately 6% and expire on May 1, 2000. The anticipated borrowings will be used to extend the maturity of the Company's current capital structure, thereby reducing exposure to short- term interest rates. As of December 31, 1999, the unrecognized gain associated with these hedge contracts was approximately $6 million. In addition, the Company has entered into interest rate swap arrangements to hedge $100 million of its borrowings under the Senior Credit Facilities. Under these agreements, the Company pays interest at an average fixed rate of 5.94%. During 2000, the Company expects to enter into additional interest rate swap transactions in accordance with the requirements of the Credit Agreement. The Consolidated Statement of Cash Flows includes the cash generated or used by the operations shown in the income statement as discontinued operations, namely Golden Aluminum Company, CoorsTek and the Kalamazoo Mill. On this basis, net cash provided by operations was $135.1 million, $97.3 million and $117.4 million for 1999, 1998 and 1997, respectively. During 1999, 1998 and 1997, net cash from operations was used to fund capital requirements and acquisitions. Over this three-year period, total capital expenditures for the Company were $226.2 million, as follows: (In millions) 1999 1998 1997 ----- ----- ----- Graphic Packaging $73.7 $47.5 $18.0 Other businesses and Corporate 1.6 4.1 9.4 Discontinued Operations 16.2 26.9 28.8 ----- ----- ----- $91.5 $78.5 $56.2 ===== ===== ===== Capital spending at Graphic Packaging during 1999 was primarily for an expansion of the Golden, Colorado manufacturing facility, the initial payment to begin the installation of an enterprise resource planning system (ERP) and equipment that improves productivity, increases capacity and reduces costs. The Company expects its capital expenditures for 2000 to be approximately $60 million, primarily related to the ERP system and manufacturing productivity improvements. There are no significant capital expenditures expected for the Other businesses in 2000. Acquisitions during 1999 included the acquisition of Fort James packaging business for approximately $849 million as well as acquisitions by CoorsTek for approximately $56 million in cash primarily in the semiconductor industry. Acquisitions in 1998 utilized $300.8 million in cash, primarily for the acquisition of Britton. The Company currently has no plans in 2000 to pursue acquisitions as a growth vehicle. Instead, the Company is focused on further integrating its recent acquisitions and utilizing cash flow to reduce its debt. Asset sales during 1999 generated $170.5 million in proceeds. These sales included the final disposition of Golden Aluminum Company, the sale of the Company's flexible packaging plants and the sale of the solar electric business. During the second or third quarter of 2000, the Company expects to sell or otherwise dispose of the Kalamazoo Mill, generating proceeds required to repay the remaining balance of the one-year facility. The Company currently expects that cash flows from operations, the sale of certain assets, and borrowings under its current credit facilities will be adequate to meet the Company's needs for working capital, temporary financing for capital expenditures and debt repayments. The Company's working capital position as of December 31, 1999 was a negative $107.2 million. Proceeds from the sale or other disposition of the Kalamazoo Mill will be applied to current maturities of debt. The impact of inflation on the Company's financial position and results of operations has been minimal and is not expected to adversely affect future results. Environmental Some of the Company's operations have been notified that they may be potentially responsible parties (PRPs) under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 or similar laws with respect to the remediation of certain sites where hazardous substances have been released into the environment. The Company cannot predict with certainty the total costs of remediation, its share of the total costs, the extent to which contributions will be available from other parties, the amount of time necessary to complete the remediation or the availability of insurance. However, based on the investigations to date, the Company believes that any liability with respect to these sites would not be material to the financial condition or results of operations of the Company, without consideration for insurance recoveries. There can be no certainty, however, that the Company will not be named as a PRP at additional sites or be subject to other environmental matters in the future or that the costs associated with those additional sites or matters would not be material. In addition, the Company has received demands arising out of alleged contamination of various properties currently or formerly owned by the Company. In management's opinion, none of these claims will result in liability that would materially affect the Company's financial position or results of operations. Year 2000 Disclosure The Company has experienced no material additional expense or business interruption related to the Year 2000 issue. The Year 2000 issue arose because many existing computer programs use only the last two digits to refer to a year. Therefore, these computer programs did not properly recognize a year that begins with "20" instead of the familiar "19". If not corrected, many computer applications could fail or create erroneous results disrupting normal business operations. The Company's management implemented an enterprise-wide program to prepare the Company's financial, manufacturing and other critical systems and applications for the year 2000. The program included a task force established in March 1998 that had the support and participation of upper management and included individuals with expertise in risk management, legal and information technologies. The Board of Directors monitored the progress of the program on a quarterly basis. The task force met its objective to ensure an uninterrupted transition to the year 2000 by assessing, testing and modifying all information technology (IT) and non-IT systems, interdependent systems and third parties such as suppliers and customers. Through December 31, 1999, the Company spent approximately $1.2 million related to the Year 2000 issue. These costs included the costs incurred for external consultants and professional advisors and the costs for software and hardware. The Company has not separately tracked internal costs such as payroll related costs for its information technologies group and other employees working on the Year 2000 project. The Company expensed all costs related to the Year 2000 issue as incurred. These costs were funded through operating cash flows. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk As of March 22, 2000, the Company's capital structure includes approximately $832 million of debt that bears interest with an underlying rate based upon short-term interest rates. The Company has entered into interest rate swap agreements that lock in a risk free interest rate of 5.94% on $100 million of the borrowings. The Company has also entered into contracts to hedge the underlying interest rate on $175 million of anticipated long- term borrowings. These contracts lock an average risk-free rate of approximately 6% and expire on May 1, 2000. As a result, interest on approximately $732 million of debt is subject to the volatility in short term interest rates. At these levels, a 1% change in interest rates could impact annual pre-tax results by approximately $7.3 million. During 2000, the Company expects to enter into additional interest rate swap transactions in order to reduce its susceptibility to potential interest rate fluctuations. Factors That May Affect Future Results Certain statements in this document constitute "forward- looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward- looking statements. Specifically, 1) the ability of the Company to remain in compliance with its debt convenants is dependent upon, among other things, the sale or other disposition of the Kalamazoo Mill at a satisfactory price and the Company meeting its financial plan; 2) future years' revenue growth is dependent on numerous factors, including the continued strength of the U.S. economy, the actions of competitors and customers, possible future governmental regulations, the Company's ability to execute its marketing plans and the ability of the Company to maintain or increase sales to existing customers and capture new business; 3) future improvements in margins will depend upon management's ability to improve cost efficiencies and maintain profitable long- term customer relationships; 4) the benefits of the integration to be realized in 2000 and 2001 are uncertain because of possible increases in costs and delays; 5) expected savings in selling, general and administrative expenses might not be realized due to the need for additional people, further support services or increased labor costs; 6) the sale or other disposition of the Kalamazoo Mill and related timing and amount of proceeds is dependent on finding a buyer or other arrangement on satisfactory terms; 7) revenues may be affected by plant closures if customers find alternative suppliers or if the Company is not able to efficiently move business or to qualify at other facilities; 8) operating margins might decrease in 2000 and 2001 due to competitive pricing of products sold and increases in costs, including costs for raw materials such as paperboard and variances and timing of cost increases, and the ability of the Company to pass through such increases; and 9) the Company's ability to maintain its effective tax rate at 40% depends on the current and future tax laws, the Company's ability to identify and use its tax credits and other factors. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Financial Statements Consolidated Financial Statements: Page(s) Report of Independent Accountants 29 Consolidated Income Statement for the years ended December 31, 1999, 1998 and 1997 30-31 Consolidated Statement of Comprehensive Income for the years ended December 31, 1999, 1998 and 1997 31 Consolidated Balance Sheet at December 31, 1999 and 1998 32 Consolidated Statement of Cash Flows for the years ended December 31, 1999, 1998 and 1997 33 Consolidated Statement of Shareholders' Equity for the years ended December 31, 1999, 1998 and 1997 34 Notes to Consolidated Financial Statements 35-58 Schedule II - Valuation and Qualifying Accounts for the years ended December 31, 1999, 1998 and 1997 59 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of ACX Technologies, Inc. In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of ACX Technologies, Inc. and its subsidiaries at December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and the financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP Denver, Colorado March 1, 2000 MANAGEMENT'S REPORT TO SHAREHOLDERS The preparation, integrity and objectivity of the financial statements and all other financial information included in this annual report are the responsibility of the management of ACX Technologies, Inc. The financial statements have been prepared in accordance with generally accepted accounting principles, applying estimates based on management's best judgment where necessary. Management believes that all material uncertainties have been appropriately accounted for and disclosed. The established system of accounting procedures and related internal controls provide reasonable assurance that the assets are safeguarded against loss and that the policies and procedures are implemented by qualified personnel. PricewaterhouseCoopers LLP, the Company's independent accountants, provides an objective, independent audit of the consolidated financial statements. Their accompanying report is based upon an examination conducted in accordance with generally accepted auditing standards, including tests of accounting procedures and records. The Board of Directors, operating through its Audit Committee composed of outside directors, monitors the Company's accounting control systems and reviews the results of the auditing activities. The Audit Committee meets at least quarterly, either separately or jointly, with representatives of management, the Company's independent accountants and internal auditors. To ensure complete independence, the Company's independent accountants and internal auditors have full and free access to the Audit Committee and may meet with or without the presence of management. GAIL A. CONSTANCIO JOHN S. NORMAN Chief Financial Officer Corporate Controller ACX TECHNOLOGIES, INC. CONSOLIDATED INCOME STATEMENT (In thousands, except per share data) Year Ended December 31, 1999 1998 1997 -------- -------- -------- Sales $723,760 $571,899 $312,938 Sales to Coors Brewing Company 107,645 119,878 113,323 -------- -------- -------- Total sales 831,405 691,777 426,261 Cost of goods sold 707,758 567,533 332,653 -------- -------- -------- Gross profit 123,647 124,244 93,608 Selling, general and administrative expense 73,685 68,824 67,227 Goodwill amortization 11,533 7,785 3,209 Asset impairment and restructuring charges 7,813 21,391 21,880 -------- -------- -------- Operating income 30,616 26,244 1,292 Gain from sale of businesses 30,236 --- --- Other income (expense) - net 618 576 (407) Interest expense (28,550) (21,978) (8,556) Interest income 2,643 5,362 5,606 -------- -------- -------- Income (loss) from continuing operations before income taxes and extraordinary loss 35,563 10,204 (2,065) Income tax expense 14,045 4,751 207 -------- -------- -------- Income (loss) from continuing operations before extraordinary loss 21,518 5,453 (2,272) Discontinued operations, net of tax Income from discontinued operations of CoorsTek 15,637 15,812 29,988 Loss on disposal of Golden Aluminum (6,456) --- --- Loss from discontinued operations of Kalamazoo Mill (3,108) --- --- -------- -------- -------- 6,073 15,812 29,988 -------- -------- -------- Income before extraordinary item 27,591 21,265 27,716 Extraordinary loss on early extinguishment of debt, net of tax of $1,312 (2,332) --- --- -------- -------- -------- Net income $25,259 $21,265 $27,716 ======== ======== ======== ACX TECHNOLOGIES, INC. CONSOLIDATED INCOME STATEMENT (In thousands, except per share data) Year Ended December 31, 1999 1998 1997 -------- -------- -------- Net income per basic share of common stock: Continuing operations $0.76 $0.19 ($0.08) Discontinued operations 0.21 0.56 1.07 Extraordinary loss (0.08) --- --- -------- -------- -------- Net income per basic share $0.89 $0.75 $0.99 ======== ======== ======== Weighted average shares outstanding - basic 28,475 28,504 28,118 ======== ======== ======== Net income per diluted share of common stock: Continuing operations $0.75 $0.19 ($0.08) Discontinued operations 0.21 0.54 1.04 Extraordinary loss (0.08) --- --- -------- -------- -------- Net income per diluted share $0.88 $0.73 $0.96 ======== ======== ======== Weighted average shares outstanding - diluted 28,767 29,030 28,885 ======== ======== ======== See Notes to Consolidated Financial Statements. ACX TECHNOLOGIES, INC. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (In thousands) Year Ended December 31, 1999 1998 1997 -------- -------- -------- Net income $25,259 $21,265 $27,716 -------- -------- -------- Other comprehensive income: Foreign currency translation adjustments: Adjustments arising during the period 1,686 (3,218) (3,127) Reclassifications for amounts already included in net income 3,362 --- --- Minimum pension liability adjustment, net of tax of $354 in 1999 and $459 in 1998 531 (688) --- -------- -------- -------- Other comprehensive income (loss) 5,579 (3,906) (3,127) -------- -------- -------- Comprehensive income $30,838 $17,359 $24,589 ======== ======== ======== See Notes to Consolidated Financial Statements. ACX TECHNOLOGIES, INC. CONSOLIDATED BALANCE SHEET (In thousands, except share data) December 31, 1999 1998 ---------- -------- ASSETS Current assets Cash and cash equivalents $15,869 $26,196 Accounts receivable, less allowance for doubtful accounts of $2,153 in 1999 and $2,140 in 1998 66,414 51,635 Accounts receivable from Coors Brewing 2,348 2,084 Notes receivable 200,000 60,568 Inventories 119,389 92,329 Deferred income taxes 18,026 12,095 Other assets 7,418 7,740 Net current assets of discontinued operations 4,501 71,908 ---------- -------- Total current assets 433,965 324,555 Properties, net 427,489 242,367 Goodwill, net 490,558 194,733 Other assets 54,527 7,556 Net noncurrent assets of discontinued operations 220,499 76,811 ---------- -------- Total assets $1,627,038 $846,022 ========== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Current maturities of long-term debt $400,000 $86,300 Accounts payable 56,165 34,403 Accrued salaries and vacation 10,608 5,988 Accrued expenses and other liabilities 74,418 45,320 ---------- -------- Total current liabilities 541,191 172,011 Long-term debt 615,500 183,000 Accrued postretirement benefits 17,405 17,177 Other long-term liabilities 24,492 12,500 ---------- -------- Total liabilities 1,198,588 384,688 Minority interest 5,140 13,379 Commitments and contingencies (Note 14) --- --- Shareholders' equity Preferred stock, nonvoting, $0.01 par value, 20,000,000 shares authorized and no shares issued or outstanding --- --- Common stock, $0.01 par value 100,000,000 shares authorized; 28,576,771 and 28,415,000 issued and outstanding at December 31, 1999 and 1998 286 284 Paid-in capital 422,885 451,401 Retained earnings --- 1,710 Accumulated other comprehensive income (loss) 139 (5,440) ---------- -------- Total shareholders' equity 423,310 447,955 ---------- -------- Total liabilities and shareholders' equity $1,627,038 $846,022 ========== ======== See Notes to Consolidated Financial Statements. ACX TECHNOLOGIES, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (In thousands) Year Ended December 31, 1999 1998 1997 ------- ------- ------- Cash flows from operating activities: Net income $25,259 $21,265 $27,716 Adjustments to reconcile net income to net cash provided by operating activities: Asset impairment and restructuring charges 7,813 34,488 21,880 Gain on sale of businesses and other assets (30,236) --- (391) Loss on disposal of Golden Aluminum 10,000 --- --- Depreciation 63,602 48,764 38,597 Amortization 15,393 8,743 4,066 Change in net deferred income taxes (908) 7,305 12,335 Change in current assets and current liabilities, net of effects from acquisitions Accounts receivable 3,757 2,865 11,603 Inventories 5,664 (1,232) 17,769 Other assets (6,866) 5,369 7,349 Accounts payable 29,237 (18,151) (1,462) Accrued expenses and other liabilities 20,392 (12,300) (22,229) Change in deferred items and other (7,969) 178 179 -------- ------- -------- Net cash provided by operating activities 135,138 97,294 117,412 Cash flows used in investing activities: Additions to properties (91,455) (78,463) (56,213) Acquisitions, net of cash acquired (905,069) (300,774) (44,718) Proceeds from sale of assets 170,526 131,899 13,594 Other 13,812 (369) (4,283) -------- -------- -------- Net cash used in investing activities (812,186) (247,707) (91,620) Cash flows from financing activities: Proceeds from issuance of debt 1,613,400 126,800 --- Repayment of debt (957,200) --- --- Stock issuance and other 10,521 454 7,892 --------- ------- ------- Net cash provided by financing activities 666,721 127,254 7,892 Cash and cash equivalents: Net increase (decrease) in cash and cash equivalents (10,327) (23,159) 33,684 Balance at beginning of year 26,196 49,355 15,671 --------- ------- ------- Balance at end of year $15,869 $26,196 $49,355 ========= ======= ======= Cash flows from discontinued operations have not been excluded from the Consolidated Statement of Cash Flows. See Notes to Consolidated Financial Statements. ACX TECHNOLOGIES, INC. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (In thousands) Accumulated Retained Other Common Paid-in Earnings Comprehensive Stock Capital (Deficit) Income (Loss) Total ------ -------- --------- ------------- -------- Balance at December 31, 1996 $279 $443,302 ($47,271) $1,593 $397,903 Exercise of stock options 4 5,168 --- --- 5,172 Tax benefit of option exercise --- 1,359 --- --- 1,359 Issuance of common stock 1 1,507 --- --- 1,508 Net income --- --- 27,716 --- 27,716 Cumulative translation adjustment --- --- --- (3,127) (3,127) ---- -------- -------- ------ -------- Balance at December 31, 1997 284 451,336 (19,555) (1,534) 430,531 Exercise of stock options 1 875 --- --- 876 Tax benefit of option exercise --- 480 --- --- 480 Issuance of common stock 1 1,097 --- --- 1,098 Share repurchase program (2) (2,387) --- --- (2,389) Net income --- --- 21,265 --- 21,265 Minimum pension liability adjustment --- --- --- (688) (688) Cumulative translation adjustment --- --- --- (3,218) (3,218) ---- ------- -------- ------ -------- Balance at December 31, 1998 284 451,401 1,710 (5,440) 447,955 Issuance of common stock 2 3,816 --- --- 3,818 Net income --- --- 25,259 --- 25,259 CoorsTek dividend --- (32,332) (26,969) --- (59,301) Minimum pension liability adjustment --- --- --- 531 531 Cumulative translation adjustment --- --- --- 5,048 5,048 ---- -------- -------- ------ -------- Balance at December 31, 1999 $286 $422,885 $--- $139 $423,310 ==== ======== ======== ====== ======== See Notes to Consolidated Financial Statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Summary of Significant Accounting Policies Nature of Operations: ACX Technologies, Inc. (the Company), through its principal subsidiary Graphic Packaging, is a manufacturer of packaging products used by consumer product companies as primary packaging for their end-use products. The Company's strategy is to maximize its competitive position and growth opportunities in its core business, folding cartons. Toward this end, over the past several years the Company has acquired two significant folding carton businesses and has disposed of several noncore businesses and under-performing assets. CoorsTek (formerly known as Coors Ceramics Company) develops, manufactures and sells advanced technical products across a wide range of product lines for a variety of applications. On December 31, 1999, the Company distributed 100% of CoorsTek's shares of common stock to the ACX Technologies shareholders in a tax-free transaction. Shareholders received one share of CoorsTek stock for every four shares of ACX Technologies stock held. CoorsTek issued a promissory note to ACX Technologies on December 31, 1999 totaling $200.0 million in satisfaction of outstanding intercompany obligations at the time of the spin-off and as a one-time, special dividend. The note was paid in full on January 4, 2000. No gain or loss was recognized by ACX Technologies as a result of the spin-off transaction. Amounts included in the notes to the consolidated financial statements pertain to continuing operations only, except where otherwise noted. Consolidation: The consolidated financial statements include the accounts of the Company and its wholly owned and majority owned subsidiaries. All material intercompany transactions have been eliminated. Use of Estimates: The consolidated financial statements have been prepared in conformity with generally accepted accounting principles, using management's best estimates and judgments where appropriate. Management has made significant estimates with respect to asset impairment charges, restructuring charges and the estimated sales price and related preliminary goodwill allocation for the Kalamazoo Mill. Actual results could differ from these estimates making it reasonably possible that a change in these estimates could occur in the near term. Reclassifications: Certain 1998 and 1997 amounts have been reclassified to conform to the 1999 presentation. Concentration of Credit Risk: Approximately 33% of the Company's 1999 net sales consist of sales to two customers. Revenue Recognition: Revenue is generally recognized when goods are shipped. Inventories: Inventories are stated at the lower of cost or market. Cost is determined by the first-in, first-out (FIFO) method. The classification of inventories, in thousands, at Decem- ber 31, was as follows: 1999 1998 -------- ------- Finished $ 55,451 $40,594 In process 20,466 15,409 Raw materials 43,472 36,326 -------- ------- Total inventories $119,389 $92,329 ======== ======= Properties: Land, buildings, equipment and purchased software are stated at cost. Real estate properties are non- operating properties held for sale. For financial reporting purposes, depreciation is recorded principally on the straight- line method over the estimated useful lives of the assets as follows: Buildings 30 years Machinery and equipment 3 to 15 years Building and leasehold improvements The shorter of the useful life, lease term or 15 years The cost of properties and related accumulated deprecia- tion, in thousands, at December 31, consisted of the following: 1999 1998 -------- -------- Land and improvements $11,926 $13,577 Buildings and improvements 102,405 71,508 Machinery and equipment 373,085 265,516 Real estate properties 5,944 10,251 Construction in progress 78,785 17,212 -------- -------- 572,145 378,064 Less accumulated depreciation 144,656 135,697 -------- -------- Net properties $427,489 $242,367 ======== ======== Accelerated depreciation methods are generally used for income tax purposes. Expenditures for new facilities and improvements that substantially extend the capacity or useful life of an asset are capitalized. Ordinary repairs and maintenance are expensed as incurred. Impairment of Long-Lived Assets and Identifiable Intangibles: The Company periodically reviews long-lived assets, identifiable intangibles and goodwill for impairment whenever events or changes in business circumstances indicate the carrying amount of the assets may not be fully recoverable. Measurement of the impairment loss is based on fair value of the asset, which is generally determined by the discounting of future estimated cash flows. Start-Up Costs: Start-up costs that are unrelated to construction and associated with manufacturing facilities are expensed as incurred. Goodwill: Goodwill is amortized on a straight-line basis over the estimated future periods to be benefited (30 years). Goodwill was $514.0 million at December 31, 1999 and $210.7 million at December 31, 1998, less accumulated amortization of $23.4 million and $16.0 million, respectively. Additional goodwill of approximately $106 million, less accumulated amortization of approximately $2 million, has been preliminarily allocated to the Kalamazoo Mill discontinued operations. Share Repurchase Program: On September 3, 1998, the Board of Directors authorized the repurchase of up to 5% of the Company's outstanding common shares on the open market. During 1998, the Company repurchased 181,200 shares for approximately $2 million under this share repurchase program. No shares were repurchased in 1999. The Credit Agreement entered into in 1999 currently prohibits additional share repurchases. Hedging Transactions: The Company periodically enters into forward exchange contracts to hedge transactions and firm commitments denominated in foreign currencies. Gains and losses on foreign exchange contracts are deferred and recognized in the basis of the transaction when completed. Through January 1999, the Company also periodically entered into forward, future and option contracts for commodities to hedge its exposure to price fluctuations. The gains and losses on qualified hedge contracts are deferred and recognized in cost of goods sold as part of the product cost. In addition, the Company has entered into contracts to hedge the underlying interest rate on $175.0 million of anticipated long-term borrowings. Gains and losses on the contracts are deferred and will be recognized in the effective interest rate of the transaction when completed. The Company has also entered into interest rate swap agreements for $100.0 million of its short-term borrowings. (See Note 7.) Earnings per Share: Following is a reconciliation between basic and diluted earnings per common share for each of the three years ended December 31, (in thousands, except per share information): Per Share Income Shares Amount 1999 ------- ------ ------ Income (loss) from continuing operations -- basic EPS $21,518 28,475 $0.76 Other dilutive equity instruments 292 ------- ------ ----- Income (loss) from continuing operations -- diluted EPS $21,518 28,767 $0.75 ======= ====== ===== 1998 Income (loss) from continuing operations -- basic EPS $5,453 28,504 $0.19 Other dilutive equity instruments 526 ------- ------ ----- Income (loss) from continuing operations -- diluted EPS $5,453 29,030 $0.19 ======= ====== ===== 1997 Income (loss) from continuing operations -- basic EPS $2,272 28,118 ($0.08) Other dilutive equity instruments 767 ------- ------ ----- Income (loss) from continuing operations -- diluted EPS $2,272 28,885 ($0.08) ======= ====== ===== Statement of Cash Flows: The Company defines cash equivalents as highly liquid investments with original maturities of 90 days or less. Income taxes paid were $2.8 million, $8.7 million and $5.2 million in 1999, 1998 and 1997, respectively. Interest incurred, capitalized, expensed and paid, in thousands, for the years ended December 31, were as follows: 1999 1998 1997 ------- ------- ------ Total interest costs $30,523 $22,308 $9,016 Interest capitalized 1,973 330 460 Interest expense 28,550 21,978 8,556 Interest paid 25,320 19,454 8,536 Non-cash investing and financing activities in 1999 include the receipt of a $200 million short-term note in connection with the CoorsTek spin-off, cancellation of a $60.0 million note receivable when Golden Aluminum was returned to the Company, and the issuance of shares of common stock valued at $3.2 million in exchange for compensation and other services. Environmental Expenditures and Remediation Liabilities: Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are expensed. Liabilities are recorded when environmental assessments and/or remedial efforts are probable and the costs can be reasonably estimated. New Accounting Standard: Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities," was issued in June 1998. This statement establishes accounting and reporting standards for derivative instruments and for hedging activities. It requires the recognition of all derivatives as either assets or liabilities in the statement of financial position at fair value. This statement is effective for the Company's financial statements for the year ending December 31, 2001 and the adoption of this standard is not expected to have a material effect on the Company's financial statements. Note 2. Discontinued Operations The historical operating results and losses on the sale of the following business segments have been segregated as discontinued operations on the accompanying Consolidated Income Statement for the years ended December 31, 1999, 1998 and 1997. Net assets from these discontinued operations are similarly segregated on the face of the accompanying Consolidated Balance Sheet as of December 31, 1999 and 1998. Discontinued operations have not been segregated on the Consolidated Statement of Cash Flows. Asset and business dispositions which do not constitute the discontinuation of a business segment are discussed in Note 4. CoorsTek Spin-off On December 31, 1999, the Company distributed 100% of CoorsTek's shares of common stock to the ACX Technologies shareholders in a tax-free transaction. Shareholders received one share of CoorsTek stock for every four shares of ACX Technologies stock held. CoorsTek issued a promissory note to ACX Technologies on December 31, 1999 totaling $200.0 million in satisfaction of outstanding intercompany obligations at the time of the spin-off and as a one-time, special dividend. The note was paid in full on January 4, 2000. No gain or loss was recognized by ACX Technologies as a result of the spin-off transaction. Interest expense of $16.0 million, $3.6 million and $0.1 million was allocated to the discontinued operations of CoorsTek in 1999, 1998 and 1997, respectively, based upon intercompany debt, plus CoorsTek's allocation of total consolidated debt at the time of the spin-off in 1999. Golden Aluminum In 1996, the Board of Directors adopted a plan to dispose of the Company's aluminum rigid container sheet business operated by Golden Aluminum. In conjunction with this decision, the Company recorded pre-tax charges of $155.0 million for anticipated losses upon the disposition and estimated operating losses of the business through the disposition date. In March of 1997, Golden Aluminum was sold for $70.0 million, of which $10.0 million was paid at closing and $60.0 million was due within two years. In December of 1998, the Company extended the due date on the $60.0 million payment until September 1, 1999. In accordance with the purchase agreement, the purchaser exercised its right to return Golden Aluminum to the Company on August 23, 1999 in discharge of the $60.0 million obligation. The initial payment of $10.0 million was nonrefundable. The Company subsequently sold the assets of Golden Aluminum to another buyer for approximately $41 million on November 5, 1999. An additional pre-tax charge of $10.0 million was recorded in 1999 related to the ultimate disposition of Golden Aluminum. Kalamazoo Mill The Company purchased the Kalamazoo Mill on August 2, 1999 as part of the acquisition of the Fort James packaging business. See related discussion of this acquisition in Note 3. The Kalamazoo Mill produces recycled paperboard. In December 1999, the Board of Directors approved a plan to offer the Kalamazoo Mill for sale. The Company is pursuing the sale of the Kalamazoo Mill, as well as evaluating other strategic alternatives. An estimated fair value of $225 million has been ascribed to the net assets of the Kalamazoo Mill at December 31, 1999, which includes approximately $106 million of goodwill allocated from the continuing operations of the Fort James packaging business acquisition. The amount of preliminary goodwill allocated to the Kalamazoo Mill is subject to change upon sale or other disposition of the Kalamazoo Mill. As a result, no gain or loss will be recorded upon the sale. The Company allocated approximately $8 million of interest expense to the Kalamazoo Mill for the period August 2, 1999 through December 31, 1999 based upon the estimated fair value of $225 million. The Company expects to finalize the sale or other disposition of the Kalamazoo Mill in the second or third quarter of 2000. Financial Data - Discontinued Operations Financial data for CoorsTek, Golden Aluminum and the Kalamazoo Mill for the years ended December 31, in thousands, are summarized as follows: Golden Kalamazoo CoorsTek Aluminum Mill[a] Total -------- -------- --------- -------- 1999 Net Sales $365,061 $--- $18,750 $383,811 ======== ======== ======== ======== Income (loss) from operations before income taxes $25,117 $--- ($5,208) $19,909 Income tax expense (benefit) 9,480 --- (2,100) 7,380 -------- -------- -------- -------- Income (loss) from operations 15,637 --- (3,108) 12,529 Income (loss) from disposal, before taxes --- (10,000) --- (10,000) Income tax benefit (expense) --- 3,544 --- 3,544 -------- -------- -------- -------- Net income (loss) $15,637 ($6,456) ($3,108) $6,073 ======== ======== ======== ======== Per basic share of common stock: Income (loss) from operations $0.55 $--- ($0.11) $0.44 Income (loss) on disposal --- (0.23) --- (0.23) -------- -------- -------- -------- Net income (loss) per basic share $0.55 ($0.23) ($0.11) $0.21 ======== ======== ======== ======== Per diluted share of common stock: Income (loss) from operations $0.54 $--- ($0.11) $0.43 Income (loss) on disposal --- (0.22) --- (0.22) -------- -------- -------- -------- Net income (loss) per diluted share $0.54 ($0.22) ($0.11) $0.21 ======== ======== ======== ======== Current assets --- --- $18,449 $18,449 Current liabilities --- --- (13,948) (13,948) -------- -------- -------- -------- Net current assets --- --- $4,501 $4,501 Noncurrent assets --- --- $224,619 $224,619 Noncurrent liabilities --- --- (4,120) (4,120) -------- -------- -------- -------- Net noncurrent assets --- --- $220,499 $220,499 ======== ======== ======== ======== [a] Represents five months operating results. Golden Kalamazoo CoorsTek Aluminum Mill[a] Total -------- -------- --------- -------- 1998 Net Sales $296,614 $--- $--- $296,614 ======== ======== ======== ======== Income from operations before income taxes $25,361 $--- $--- $25,361 Income tax expense 9,549 --- --- 9,549 -------- -------- -------- -------- Income from operations 15,812 --- --- 15,812 Net income $15,812 $--- $--- $15,812 ======== ======== ======== ======== Net income per basic share $0.56 $--- $--- $0.56 ======== ======== ======== ======== Net income per diluted share $0.54 $--- $--- $0.54 ======== ======== ======== ======== Current assets $105,508 --- --- $105,508 Current liabilities (33,600) --- --- (33,600) -------- -------- -------- -------- Net current assets $71,908 --- --- $71,908 ======== ======== ======== ======== Noncurrent assets $158,394 --- --- $158,394 Noncurrent liabilities (81,583) --- --- (81,583) -------- -------- -------- -------- Net noncurrent assets $76,811 --- --- $76,811 ======== ======== ======== ======== Golden Kalamazoo CoorsTek Aluminum Mill[a] Total -------- -------- --------- -------- 1997 Net Sales $304,824 $38,995 $--- $343,819 ======== ======== ======== ======== Income from operations before income taxes $48,180 $--- $--- $48,180 Income tax expense 18,192 --- --- 18,192 -------- -------- -------- -------- Income from operations 29,988 --- --- 29,988 Net income $29,988 $--- $--- $29,988 ======== ======== ======== ======== Net income per basic share $1.07 $--- $--- $1.07 ======== ======== ======== ======== Net income per diluted share $1.04 $--- $--- $1.04 ======== ======== ======== ======== Note 3. Acquisitions 1999 Acquisitions On August 2, 1999, the Company acquired the assets and liabilities of the packaging manufacturing business of Fort James Corporation for cash consideration of approximately $849 million, including a working capital price adjustment and transaction costs. The Fort James acquisition, which included 12 converting operations located throughout North America and a recycled paperboard mill located in Kalamazoo, Michigan (the Kalamazoo Mill) has been accounted for under the purchase method. Accordingly, the excess of the purchase price over the fair value of the assets and liabilities acquired of approximately $448 million is being amortized using the straight-line method over 30 years. Approximately $342 million of goodwill has been preliminarily allocated to the folding carton converting operations and approximately $106 million has been preliminarily allocated to the Kalamazoo Mill discontinued operations. The folding carton business of Fort James was a major supplier of folding cartons to leading consumer product companies for packaging food. The folding carton business of Fort James has been included in the Company's results since August 2, 1999. In December 1999, the Board of Directors adopted a plan to offer the Kalamazoo Mill for sale in order to focus on the Company's core folding carton business. The Kalamazoo Mill was included in the August 2, 1999 Fort James packaging business acquisition. The operating results and net assets of the Kalamazoo Mill have been segregated as discontinued operations in the Consolidated Income Statement and Balance Sheet. Discontinued operations have not been segregated on the Consolidated Statement of Cash Flows. Accordingly, the Consolidated Statement of Cash Flows includes sources and uses of cash for the Kalamazoo Mill for the year ended December 31, 1999. In connection with the Fort James packaging business acquisition, the Company is continuing to evaluate rationalization opportunities within the folding carton converting operations to reduce overall operating costs while maintaining capacity. This includes evaluation of the capacity of the Company's web press facilities and evaluation of the opportunity to transfer business among the various web press facilities. The Company expects additional costs of approximately $2 million may be incurred in connection with further plant rationalizations, related primarily to severance and other plant shutdown costs. The Company expects to finalize its rationalization plan by June 30, 2000. Costs related to shutting down a facility acquired in the Fort James packaging business acquisition will be accounted for as a cost of the acquisition, with a resultant adjustment to goodwill. The following unaudited pro forma information for ACX Technologies has been prepared assuming that the Fort James packaging business acquisition had occurred on January 1, 1998. The pro forma information includes adjustments for (1) amortization of goodwill, (2) increased interest expense related to new borrowings at applicable rates for the purchase, and (3) the net tax effect of pro forma adjustments at the statutory rate. The Kalamazoo Mill, CoorsTek and Golden Aluminum are reflected as discontinued operations in the unaudited pro forma financial information. The unaudited pro forma financial information is presented for informational purposes only and may not be indicative of the results of operations as they would have been had the transaction actually occurred on January 1, 1998 nor is it necessarily indicative of the results of operations which may occur in the future. Pro Forma Pro Forma Year Ended Year Ended December 31, December 31, 1999 1998 (Unaudited) (Unaudited) (In thousands, except per ------------ ------------ share data) Net sales $1,144,855 $1,239,547 ========== ========== Income (loss) from continuing operations, before extraordinary loss $3,933 ($25,795) ========== ========== Net income (loss) $3,982 ($15,107) ========== ========== Income (loss) from continuing operations, before extraordinary loss per basic share of common stock $0.14 ($0.90) ========== ========== Income (loss) from continuing operations, before extraordinary loss per diluted share of common stock $0.14 ($0.90) ========== ========== Net income (loss) per basic share of common stock $0.14 ($0.53) ========== ========== Net income (loss) per diluted share of common stock $0.14 ($0.53) ========== ========== On March 12, 1999, the Company acquired the net assets of Precision Technologies for approximately $22 million in cash and 300,000 warrants to receive shares of the Company's common stock at an exercise price equal to the fair market value at the date of closing. These warrants were converted into warrants to purchase shares of CoorsTek stock following the spin-off. The warrants were recorded as an increase in the purchase price at their estimated fair value on the date of acquisition using the Black-Sholes pricing model. The acquisition has been accounted for under the purchase method of accounting. Accordingly, the excess of the purchase price over the fair value of net assets acquired of $20.2 million is being amortized using the straight- line method over 20 years. Precision Technologies, located in Livermore, California, manufactures precision-machined parts for the semiconductor, medical and aircraft industries. The results of Precision Technologies since March 12, 1999 are included in the discontinued operations of CoorsTek. On March 1, 1999, the Company acquired all of the outstanding shares of Edwards Enterprises for approximately $18 million. The acquisition has been accounted for under the purchase method. Accordingly, the excess of the purchase price over the fair value of net assets acquired of $4.2 million is being amortized using the straight-line method over 20 years. Edwards Enterprises, located in Newark, California, manufactures precision-machined parts for the semiconductor industry. The results of Edwards Enterprises since March 1, 1999 are included in the discontinued operations of CoorsTek. In December 1999, CoorsTek acquired all of the outstanding shares of Doo Young Semitek Co., Ltd. for $3.6 million. The name of Doo Young Semitek Co., Ltd. was subsequently changed to CoorsTek-Korea. The acquisition has been accounted for under the purchase method of accounting and goodwill of $2.5 million is being amortized over 15 years. CoorsTek-Korea, located in Kyungbook, South Korea, manufactures technical ceramic parts for the semiconductor industry. The results of CoorsTek-Korea since December 1999 are included in the discontinued operations of CoorsTek. 1998 Acquisitions On January 14, 1998, the Company acquired Britton Group plc pursuant to a cash tender offer for approximately $420 million. The Britton acquisition has been accounted for under the purchase method. Accordingly, the estimated excess of purchase price over the fair value of net assets acquired of approximately $164 million is being amortized using the straight-line method over 30 years. Britton was an international packaging group operating through two principal divisions: folding cartons and plastics. The folding cartons division, Universal Packaging, is a nonintegrated manufacturer of folding cartons in the United States, with capabilities in design, printing and manufacturing of multicolor folding cartons. The plastics division of Britton (Plastics Division), which was disposed of by the Company on April 20, 1998, operated in the United Kingdom and included the extrusion, conversion and printing of polyethylene into films and bags for industrial customers. The results of Universal Packaging are reflected in the accounts of the Company beginning January 14, 1998. The Plastics Division was reflected as a discontinued operation through the April 20, 1998 disposal date. On August 17, 1998, the Company acquired the assets and business of Filpac, Inc. a flexible packaging company located in Montreal, Canada for $4.8 million in cash. The acquisition has been accounted for under the purchase method of accounting and has been included in the accounts of the Company since the acquisition date. No goodwill resulted from this acquisition. Filpac was included in the Company's September 2, 1999 sale of certain flexible packaging plants. 1997 Acquisition In order to broaden its material base, CoorsTek acquired Tetrafluor, Inc. for $15.8 million in August 1997. Tetrafluor manufactures Teflon[R] fluoropolymer sealing systems and compo- nents for use in the aerospace, industrial and transportation industries. The acquisition was accounted for under the purchase method of accounting and, accordingly, the discontinued operations of CoorsTek include the results of Tetrafluor since the acquisition date. The excess of the purchase price over the estimated fair market values of the net assets acquired was $10.7 million, which is being amortized over 15 years on a straight- line basis. Note 4. Dispositions 1999 Dispositions Flexible Packaging Plants On September 2, 1999, the Company sold its flexible packaging plants to Sonoco Products Company for approximately $105 million in cash. The Company used the proceeds from the sale, less transaction costs, to reduce debt associated with its recent acquisition of the packaging business of Fort James. The Company recorded a pre-tax gain of $22.7 million and after-tax gain of $13.6 million or $0.48 per share on a basic basis and $0.47 per share on a diluted basis. Solar Electric Business On August 3, 1999, the Company sold its majority interest in a group of solar electric distribution companies to Kyocera International, Inc., a wholly owned subsidiary of Kyocera Corporation. The Company realized $30.8 million in cash of which $20.8 million was consideration for the Company's equity position and $10.0 million was for the repayment of certain debt owed to the Company. The Company used the proceeds from the sale, less transaction costs, to reduce debt associated with its recent acquisition of the packaging business of Fort James. The pre-tax gain recorded in conjunction with this transaction totaled $7.5 million while the post-tax gain was $4.5 million. Resultant earnings per share on a basic and diluted basis for the gain on this sale were $0.16. 1998 Dispositions Britton Group Plastics Division On April 20, 1998, the Company sold the Plastics Division for approximately pounds 82 million, or $135.0 million, including pounds 80 million in cash and a pounds 2 million, 5% note receivable due in 2007 or upon change in control. The majority of the sale price, less transaction costs, was used to pay down debt incurred by the Company for the Britton acquisition. Subsequent to the acquisition date of Britton, the Company accounted for the Plastics Division as a discontinued operation held for sale. Therefore, the disposition of the Plastics Division did not have an impact on the Company's results of operations. The Plastics Division had net sales for the period January 14, 1998 through April 20, 1998 of $40.9 million, with breakeven operating results. The Company allocated $1.8 million of interest expense related to the acquisition of Britton to the Plastics Division during the period January 14, 1998 through April 20, 1998. Note 5. Asset Impairment and Restructuring Charges Asset Impairment Charges The Company recorded a total of $5.9 million, $19.4 million and $16.6 million in asset impairment charges in 1999, 1998 and 1997, respectively. Goodwill impairment of $5.5 million was included in the 1998 charge. The remainder of the 1998 charge consisted of fixed asset impairments. The 1999 and 1997 charges consisted entirely of fixed asset impairments as described below. 1999: Graphic Packaging recorded $5.9 million of asset impairment charges in 1999 due to decisions to close its Boulder, Colorado and Saratoga Springs, New York plants in 2000. The Boulder, Colorado plant has been replaced by a new manufacturing facility in Golden, Colorado, which will use advanced equipment to improve the production process. The Company expects to close the Boulder plant in the third quarter of 2000. The Saratoga Springs plant operates at higher overhead levels than other plants and uses gravure press technology. Therefore, the decision was made to sell the Saratoga Springs building; move the business to other folding carton plants; and dispose of the gravure technology presses at Saratoga Springs. Boulder writedowns totaled $2.9 million and Saratoga Springs writedowns totaled $3.0 million. 1998: Graphic Packaging recorded $18.5 million in asset impairment charges in 1998. Deterioration of the performance at certain flexible packaging facilities and increased competitive conditions led management to review the carrying amounts of long- lived assets and goodwill in conjunction with an overall restructuring plan. Specifically, forecasted operating cash flows did not support the carrying amount of certain long-lived assets and goodwill at Graphic Packaging's Franklin, Ohio operation. In addition, management decided to offer for sale the Vancouver, British Columbia operation and close a flexible divisional office in North Carolina. Therefore, the long-lived assets and related goodwill were written down to their estimated market values. The Company recorded net asset impairment charges of $0.9 million in its Other businesses during 1998. These charges included a $1.0 million asset impairment charge to write down long-lived assets of Solartec, S.A., a solar electric subsidiary in Argentina. Since acquiring Solartec in November 1996, operating cash flows were below original expectations. As a result, the Company recorded this impairment to reduce the carrying value of its investment in Solartec to its estimated fair market value. In addition, the Company recorded a $0.4 million asset impairment charge related to the consolidation and outsourcing of certain manufacturing activities at Golden Genesis. As a result, certain long-lived assets became impaired and were written down to their estimated market value. Also during 1998, the Company sold certain equipment formerly used in a biodegradable polymer project for approximately $0.5 million. These assets had been previously written off as an asset impairment, so the resulting gain on sale of these assets was netted against the 1998 asset impairment charge. 1997: During 1997, the Company recorded a $16.6 million asset impairment charge when it adopted a plan to limit future funding for a biodegradable polymer project. This decision reduced expected future cash flows for this activity to a level below the carrying value of the manufacturing and intangible assets of this project. Restructuring Charges The Company recorded restructuring charges totaling $1.9 million, $2.0 million and $5.3 million in 1999, 1998 and 1997, respectively. The following table summarizes accruals related to these restructuring charges: Corn Biodegradable Syrup Graphic Graphic Polymer Exit Exit Packaging Packaging (In millions) Plan Plan Corporate Operations Other Total ------------- ----- --------- ---------- ----- ----- Balance, December 31, 1996 $--- $--- $--- $--- $1.8 $1.8 1997 restructuring charges 0.9 2.3 2.1 --- --- 5.3 Cash paid (0.5) (1.4) (0.2) --- (1.8) (3.9) Non-cash expenses --- --- (0.2) --- --- (0.2) ----- ----- ---- ----- ---- ----- Balance, December 31, 1997 0.4 0.9 1.7 --- --- 3.0 1998 restructuring charges --- (0.8) --- 2.8 --- 2.0 Cash paid (0.4) (0.1) (1.7) (1.0) --- (3.2) ----- ----- ---- ----- ---- ----- Balance, December 31, 1998 --- --- --- 1.8 --- 1.8 1999 restructuring charges --- --- --- 1.9 --- 1.9 Cash paid --- --- --- (1.8) --- (1.8) ----- ----- ---- ----- ---- ----- Balance, December 31, 1999 $--- $--- $--- $1.9 $--- $1.9 ===== ===== ===== ====== ===== ===== 1999: Graphic Packaging recorded a $1.9 million restructuring charge pursuant to a plant rationalization plan approved by the Company's Board of Directors in the fourth quarter. The Company has instituted this plan to further its goal of refining its focus on folding carton packaging and to reduce headcount. All of the 1999 charge relates to severance, primarily at the Company's Lawrenceburg, Tennessee manufacturing plant. In total, 14 administrative and 59 plant positions will be eliminated at an estimated cost of $1.9 million. Severance packages have been offered commensurate with employees' positions and tenure with the Company. The Company paid $0.2 million in the fourth quarter of 1999 and expects to make the remaining cash outlays and complete this restructuring plan in 2000. The Company expects to record additional restructuring charges of approximately $3.4 million, primarily in the first quarter of 2000, when severance packages are communicated to employees at the Saratoga Springs plant. 1998: During 1998, the Company instituted a restructuring plan related to certain Graphic Packaging operations and recorded $2.8 million in restructuring charges. This plan included the consolidation and realignment of certain administrative functions and the downsizing of its Franklin, Ohio operation. This plan resulted in the elimination of approximately 20 administrative and 65 manufacturing positions with related severance costs of approximately $2.5 million. This plan also included approximately $0.3 million in other exit costs related to the closure of a divisional office in North Carolina. The Company made cash payments of $1.0 million in the fourth quarter of 1998 and $1.6 million during 1999. 1997: In December 1997, the Company recorded a $2.1 million charge related to the closure of the Graphic Packaging corporate offices in Wayne, Pennsylvania. This closure resulted in severance and outplacement costs of $1.1 million for approximately 22 administrative employees. The Company made cash payments of $1.7 million and $0.2 million related to this plan in 1998 and 1997, respectively. The Company eliminated 40 research and administrative positions and recorded approximately $0.9 million in severance and outplacement costs related to the biodegradable polymer project in 1997. The Company made cash outlays of approximately $0.4 million and $0.5 million related to this plan in 1998 and 1997, respectively. The Company adopted a plan to exit the high-fructose corn syrup business in 1997. As a result, the Company eliminated approximately 70 manufacturing and administrative positions and recorded $2.3 million in severance and other exit costs. The Company made approximately $0.1 million and $1.4 million in cash outlays related to this plan in 1998 and 1997, respectively. In the fourth quarter of 1998, the Company determined that the liability remaining for this exit plan was not required. Accordingly, the remaining liability was reversed and netted against the 1998 restructuring charges. Note 6. Indebtedness Long-term debt, in thousands, consisted of the following as of December 31: 1999 1998 -------- -------- One year term loan due August 1, 2000, interest at Eurodollar rate $375,000 $--- Five year term loan due August 2, 2004, interest at Eurodollar rate 325,000 --- $400 million revolving credit facility due August 2, 2004, interest at Eurodollar rate 315,500 --- 7.8% unsecured notes due November 1, 1999 --- 70,000 8.1% unsecured notes due November 1, 2001 --- 30,000 7.2% unsecured notes due 2000 through 2006 --- 45,000 7.0% unsecured notes due 1999 through 2003 --- 47,500 Revolving credit facilities due through 2000 --- 126,800 --------- -------- Total debt 1,015,500 319,300 Less current maturities 400,000 86,300 Less long-term debt allocated to CoorsTek --- 50,000 --------- -------- Total long-term debt $615,500 $183,000 ========= ======== On August 2, 1999, the Company entered into a $1.3 billion revolving credit and term loan agreement (the Credit Agreement), which established three term loans and one revolving credit facility (collectively, the Senior Credit Facilities). A 180-day term loan was fully repaid on November 5, 1999, leaving a balance of $1,015.5 million in debt outstanding on December 31, 1999. Proceeds from the Senior Credit Facilities were used to finance the $849.0 million acquisition of the Fort James packaging business and to prepay the Company's outstanding borrowings from the 1998 facilities described above. The Company and its subsidiaries have pledged all material assets as collateral for the Senior Credit Facilities. The five-year term loan is due in quarterly installments beginning with the first quarter of 2000. Total installments for 2000 through 2003, respectively, are $25.0 million, $50.0 million, $70.0 million and $80.0 million with $50.0 million due in the first half of 2004 and a final balance of $50.0 million due on August 2, 2004. The one-year term loan is due on August 1, 2000 and any remaining borrowings under the revolving credit facility are due on August 2, 2004. Mandatory prepayments under the Senior Credit Facilities are required from the proceeds of any significant asset sale or from the issuance of any debt or equity securities. Amounts borrowed under the Senior Credit Facilities bear interest under various pricing alternatives plus a spread depending on the Company's leverage ratio. The various pricing alternatives include (i) LIBOR, or (ii) the higher of the Federal Funds Rate plus .5% or the prime rate. Based on this formula, the interest rate on the Senior Credit Facilities at December 31, 1999 was 8.98%. In addition, the Company pays a commitment fee that varies based upon the Company's leverage ratio and the unused portion of the revolving credit facility. Debt issuance costs of approximately $30 million are included in other assets on the Consolidated Balance Sheet and are being amortized over the term of the Senior Credit Facilities as a component of interest expense. The financial covenants under the Credit Agreement include maximum leverage, minimum interest coverage, minimum net worth and maximum debt to capitalization tests. At December 31, 1999, the Company was in compliance with the financial covenants. Subsequent to year end, the Company amended the Credit Agreement primarily to relax the quarterly financial covenants through March 31, 2001. In addition, the Credit Agreement limits the Company's ability to pay dividends and imposes limitations on the incurrence of additional debt, acquisitions and the sale of assets. In the event of a default under the Credit Agreement, the lenders would have the right to call the Senior Credit Facilities immediately due and refrain from making further advances to the Company. If the Company is unable to pay the accelerated payments, the lenders could elect to proceed against the collateral in order to satisfy the Company's obligations. Interest expense of approximately $8 million was allocated to the discontinued operations of the Kalamazoo Mill in 1999, based upon an estimated fair value of $225 million. Interest expense of $16.0 million, $3.6 million and $0.1 million was allocated to the discontinued operations of CoorsTek in 1999, 1998 and 1997, respectively, based upon CoorsTek's $200 million allocation of total consolidated debt at the time of the spin-off for 1999, $50 million of outstanding intercompany debt for 1998, and intercompany interest charges or payments for the usage or generation of cash from operations for 1998 and 1997. Subsequent to December 31, 1999, the Company repaid $200.0 million of the one-year term loan facility with the proceeds from the spin off of CoorsTek. In addition, the Company reduced the revolving credit facility by $50 million to $400 million. Proceeds from the sale or other disposition of the Kalamazoo Mill will be applied to current maturities of debt. The Company incurred debt extinguishment costs in August 1999 of $3.6 million when existing debt instruments were repaid in connection with the purchase of the Fort James packaging business through the issuance of new credit facilities. Note 7. Fair Value of Financial Instruments The fair value of cash and cash equivalents, notes receivable and current maturities of long-term debt approximates carrying value because of the short maturity of these instruments. For 1999 and 1998, the fair value of the Company's long-term debt is estimated based on the current rates offered to the Company for debt of the same remaining maturity and credit quality. Because the interest rates on the long-term debt as of December 31, 1999 are reset monthly, the carrying value approximates the fair value of long-term debt. The carrying amount and fair value of the Company's long-term debt, in thousands, at December 31 is as follows: 1999 1998 Carrying value of long-term debt $615,500 $183,000 Estimated fair value of long-term debt $615,500 $187,000 The Company has entered into interest rate swap agreements to hedge the underlying interest rates on $100.0 million of short- term borrowings at an average fixed interest rate of 5.94%. In addition, the Company has entered into contracts to hedge the underlying interest rate on $175.0 million of anticipated long-term borrowings at an average risk-free rate of approximately 5.9%. These contracts expire on May 1, 2000, by which time the Company expects to complete the anticipated borrowings or extend the maturity of the hedging contracts. The Company has accounted for the contracts as hedges of an anticipatory borrowing and, as such, the contracts are not marked to market and any gain or loss upon settlement will be netted with the underlying cost of borrowing. As of December 31, 1999, the unrecognized gain associated with these contracts was approximately $6.0 million based upon a valuation performed by the banks issuing the contracts. The Company is exposed to credit loss in the event of nonperformance by the commercial banks that issued the interest rate contracts. However, the Company does not anticipate nonperformance by these banks. The Company utilizes foreign exchange contracts to hedge transactions and firm commitments denominated in foreign currencies. Gains and losses on foreign exchange contracts are deferred and recognized in the basis of the transaction when completed. There were no contracts outstanding as of December 31, 1999 and the unrecognized loss related to foreign currency contracts at December 31, 1998 was $0.2 million. Note 8. Operating Leases The Company leases a variety of facilities, warehouses, offices, equipment and vehicles under operating lease agreements that expire in various years. Future minimum lease payments, in thousands, required as of December 31, 1999, under noncancelable operating leases with terms exceeding one year, are as follows: 2000 $2,424 2001 1,960 2002 1,102 2003 723 2004 and thereafter 551 ------ Total $6,760 ====== Operating lease rentals for warehouse, production, office facilities and equipment amounted to $4.3 million in 1999, $2.6 million in 1998 and $4.2 million in 1997. Note 9. Income Taxes The sources of income, in thousands, from continuing operations before income taxes and extraordinary loss were: Year Ended December 31, 1999 1998 1997 ------- ------- ------- Domestic $30,468 $12,649 ($8,234) Foreign 5,095 (2,445) 6,169 ------- ------- ------- Income from continuing operations before income taxes and extraordinary loss $35,563 $10,204 ($2,065) ======= ======= ======= The total provision for income taxes, in thousands, included the following: Year Ended December 31, 1999 1998 1997 ------- ------- ------- Current provision: Federal $13,940 $2,781 $--- State 1,741 2,826 2,723 Foreign 4,347 2,671 3,727 ------- ------- ------- Total current tax expense $20,028 $8,278 $6,450 ======= ======= ======= Deferred provision: Federal $800 $8,568 $10,965 State 704 (931) 1,278 Foreign (4,963) (1,615) (294) ------- ------- ------- Total deferred tax expense (benefit) (3,459) 6,022 11,949 ------- ------- ------- Total income tax expense $16,569 $14,300 $18,399 ======= ======= ======= The total provision for income taxes, in thousands, is included in the Consolidated Income Statement as follows: Year Ended December 31, 1999 1998 1997 ------- ------- ------- Continuing operations $14,045 $4,751 $207 Discontinued operations 3,836 9,549 18,192 Extraordinary loss (1,312) --- --- ------- ------- ------- Total expense $16,569 $14,300 $18,399 ======= ======= ======= Temporary differences that gave rise to a significant portion of deferred tax assets (liabilities), in thousands, at December 31 were as follows: 1999 1998 Depreciation and other property related ($32,823) ($27,869) Amortization of intangibles (36) 4,732 Pension and employee benefits 9,123 9,201 Tax credits 15,152 7,133 Capitalized book interest (894) 283 Inventory 1,524 1,509 Accruals 12,928 11,258 Net operating loss and contribution carryovers 1,524 3,989 All other 108 (377) ------- ------- Gross deferred tax asset 6,606 9,859 Less valuation allowance 123 4,284 ------- ------- Net deferred tax asset $6,483 $5,575 ======= ======= The valuation allowance for deferred tax assets was decreased by $4.2 million in 1999 and decreased by $1.3 million in 1998. The decrease in the valuation allowance for 1999 resulted primarily from the transfer of deferred tax assets and associated valuation allowances on the sale of a subsidiary. The remaining valuation allowance relates primarily to uncertainty surrounding the ultimate deductibility of the remaining foreign net operating loss carryforward. The principal differences between the effective income tax rate, attributable to continuing operations, and the U.S. statutory federal income tax rate, were as follows: Year Ended December 31, 1999 1998 1997 ----- ----- ------ Expected tax rate 35.0% 35.0% 35.0% State income taxes (net of federal benefit) 2.9 5.8 (33.1) Nondeductible expenses and losses 2.0 31.2 (32.5) Effect of foreign investments (2.9) (0.3) (11.6) Change in deferred tax asset valuation allowance 0.3 5.8 (26.0) Benefit of Foreign Sales Corporation --- (4.4) --- Research and development and other tax credits --- (30.8) 95.5 Other - net 2.2 4.3 (37.3) ----- ------ ------ Effective tax rate 39.5% 46.6% (10.0%) ===== ====== ====== The Internal Revenue Service (IRS) has completed its examination of the Company's federal income tax returns through 1995. The IRS currently is completing its review of the federal income tax returns for 1996 through 1998. In the opinion of management, adequate accruals have been provided for all income tax matters and related interest. As a result of certain restructuring, the undistributed earnings of foreign subsidiaries previously considered as being permanently reinvested have been distributed to the U.S. as a dividend. Foreign tax credits are expected to be available to eliminate the resulting U.S. income tax liability on the dividend. The Company and CoorsTek have executed a tax sharing agreement that defines the parties' rights and obligations with respect to deficiencies and refunds of Federal, state and other taxes relating to the CoorsTek business for tax years prior to the spin-off and with respect to certain tax attributes of CoorsTek after the spin-off. In general, the Company will be responsible for filing consolidated Federal and combined or consolidated state tax returns and paying the associated taxes for periods through December 31, 1999. CoorsTek will reimburse the Company for the portion of such taxes relating to the CoorsTek business. CoorsTek is responsible for filing returns and paying taxes related to the CoorsTek business for periods after December 31, 1999. The tax sharing agreement is designed to preserve the status of the spin-off as a tax-free distribution. CoorsTek has agreed that it will refrain from engaging in certain transactions during the two-year period following the spin-off unless it first provides the Company with a ruling from the IRS or an opinion of tax counsel acceptable to the Company that the transaction will not adversely affect the tax-free nature of the spin-off. In addition, CoorsTek has indemnified the Company against any tax liability or other expense it may incur if the spin-off is determined to be taxable as a result of CoorsTek's breach of any covenant or representation contained in the tax sharing agreement or CoorsTek's action in effecting such transactions. By its terms, the tax sharing agreement will terminate when the statutes of limitations under applicable tax laws expire. Note 10. Stock Compensation The Company has an equity incentive plan that provides for the granting of nonqualified stock options and incentive stock options to certain key employees. The equity incentive plan also provides for the granting of restricted stock, bonus shares, stock units and offers to officers of the Company to purchase stock. The number of shares made available for award under the plan was equal to 4.8 million shares and is being increased annually by 2% of the Company's outstanding shares on each preceding December 31 beginning with 1997 and ending with 2001. Generally, options outstanding under the Company's equity incentive plan are subject to the following terms: (1) grant price equal to 100% of the fair value of the stock on the date of grant; (2) ratable vesting over either a three-year or four-year service period; and (3) maximum term of ten years from the date of grant. Officers' 1999 options generally provide for vesting upon attainment of certain stock prices, but vest completely after five years. In conjunction with the spin-off of CoorsTek at December 31, 1999, the Company cancelled options held by CoorsTek employees and adjusted the remaining options outstanding to reflect the new ratio of exercise price to market price of the Company's stock immediately prior and subsequent to the spin-off. The changes consisted of reducing the exercise price relative to the new market price and increasing the number of shares underlying the outstanding options, so as to restore the option holder to the economic position that existed immediately prior to the spin-off. Stock option activity for the three years ended December 31, was as follows (shares in thousands): 1999 1998 1997 --------------- --------------- --------------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price ------ -------- ------ -------- ------ -------- Options outstanding at January 1 2,672 $17.80 2,616 $16.78 2,788 $15.96 Granted 1,912 $13.43 476 $23.19 404 $20.92 Exercised --- --- (148) $15.33 (375) $14.83 Expired or forfeited (177) $17.62 (272) $18.94 (201) $17.31 ------ -------- ------ -------- ------- ------- Options outstanding at December 31, before CoorsTek spin-off 4,407 $15.91 2,672 $17.80 2,616 $16.78 Cancellation of CoorsTek employee options (2,036) $15.63 --- --- --- --- ACX employee options conversion 1,910 --- --- --- --- --- ------ -------- ------ -------- ------- ------- Options outstanding at December 31, after CoorsTek spin-off 4,281 $8.86 --- --- --- --- ====== ======== ====== ======== ======= ====== Exercisable 2,262 $9.41 1,964 $16.37 1,731 $15.75 ====== ======== ====== ======== ======= ====== Available for future grant 664 1,529 1,173 ====== ====== ======= The following table summarizes information about stock options outstanding at December 31, 1999 (shares in thousands): Options Outstanding Options Exercisable - -------------------------------------------------- -------------------- Weighted Average Weighted Weighted Remaining Average Average Range of Options Contractual Exercise Options Exercise Exercise Prices Outstanding Life Price Exercisable Price - ---------------- ----------- ----------- --------- ----------- -------- $5.57 to $7.56 2,388 6.9 years $7.36 643 $7.00 $8.18 to $10.65 1,481 4.6 years $10.03 1,441 $10.01 $11.05 to $13.74 412 7.9 years $13.30 178 $13.25 - ---------------- ----------- ----------- --------- ----------- -------- $5.57 to $13.74 4,281 6.4 years $8.86 2,262 $9.41 ================ =========== =========== ========= =========== ======== The Company applies Accounting Principles Board Opinion No. 25 and related interpretations in accounting for its stock-based compensation plans. Accordingly, no compensation expense has been recognized for its equity incentive plan and employee stock purchase plan. If the Company had elected to recognize compensation cost based on the fair value of the stock options at grant date as allowed by Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," compensation expense of $3.5 million, $2.0 million and $1.7 million would have been recorded for 1999, 1998 and 1997, respectively. Net income and earnings per share would have been reduced to the pro forma amounts indicated below: 1999 1998 1997 ------- ------- ------- Net income in thousands: As reported $25,259 $21,265 $27,716 Pro forma $23,159 $20,065 $26,696 Earnings per share - basic: As reported $0.89 $0.75 $0.99 Pro forma $0.81 $0.70 $0.95 Earnings per share - diluted: As reported $0.88 $0.73 $0.96 Pro forma $0.81 $0.69 $0.92 The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 30.8% in 1999, 28.1% in 1998 and 23.2% in 1997; (3) risk-free interest rate ranging from 5.7% to 6.7% in 1999, 4.7% to 5.2% in 1998 and 5.3% to 5.7% in 1997; and (4) expected life of 3 to 6.36 years in 1999 and 1998, and 3 to 6.23 years in 1997. The weighted average per-share fair value of options granted during 1999, 1998 and 1997 was $6.82, $7.42 and $6.47, respectively. Note 11. Defined Benefit Plans The Company maintains several defined benefit pension plans for the majority of the Company's employees. Benefits are based on years of service and average base compensation levels over a period of years. Plan assets consist primarily of equity and interest-bearing investments. The Company's funding policy is to contribute annually not less than the minimum funding standards required by the internal revenue code nor more than the maximum amount that can be deducted for federal income tax purposes. Retirement health care and life insurance benefits are provided to certain employees hired prior to 1999 and eligible dependents. Eligible employees may receive these benefits after reaching age 55 with 10 years of service. Prior to reaching age 65, eligible retirees may receive certain health care benefits identical to those available to active employees. The amount the retiree pays is based on age and service at the time of retirement. These plans are not funded. In connection with the acquisition of the Fort James packaging business, the Company assumed an $18.5 million prepaid pension asset and an $11.3 million postretirement benefit liability for the Fort James hourly employees as of August 2, 1999. Approximately $4.2 million of the prepaid pension asset and $2.6 million of the postretirement benefit liability have been allocated to the Kalamazoo Mill. After final reconciliations, pension assets of approximately $62 million will be transferred into an ACX Technologies defined benefit pension plan established for the benefit of the former Fort James hourly employees for the service period up to August 2, 1999. The following assets (liabilities), in thousands, were recognized for the combined, defined benefit plans at December 31: Pension Benefits [c] Other Benefits [c] 1999 1998 1999 1998 -------- -------- -------- -------- Change in benefit obligation Benefit obligation at beginning of year $156,662 $130,853 $20,131 $19,816 Settlements [a] (107,540) --- (13,897) --- Service cost 3,707 4,668 336 569 Interest cost 5,466 10,105 693 1,301 Amendments 2,088 --- --- (520) Actuarial loss (gain) (15,845) 5,448 --- (5) Acquisitions [b] 49,576 10,188 6,603 --- Change in actuarial assumptions --- --- (977) --- Benefits paid (729) (4,600) (639) (1,030) -------- -------- -------- -------- Benefit obligation at end of year 93,385 156,662 12,250 20,131 -------- -------- -------- -------- Change in plan assets Fair value of plan assets at beginning of year 120,519 112,630 --- --- Settlements [a] (91,029) --- --- --- Actual return on plan assets 6,767 2,217 --- --- Acquisitions [b] 62,945 9,411 --- --- Company contributions --- 543 --- --- Benefits paid (729) (4,282) --- --- -------- -------- -------- -------- Fair value of plan assets at end of year 98,473 120,519 --- --- -------- -------- -------- -------- Funded status 5,088 (36,143) (12,250) (20,131) Unrecognized actuarial loss (gain) (2,168) 18,172 (3,045) (3,914) Unrecognized prior service cost 3,597 5,834 (2,110) (3,607) Unrecognized transition (asset) liability (141) --- --- --- -------- -------- -------- -------- Net prepaid (accrued) benefit cost $6,376 ($12,137) ($17,405)($27,652) ======== ======== ======== ======== Weighted average assumptions at year end Discount rate 7.75% 6.80% 7.75% 6.80% Expected return on plan assets 9.75% 9.75% --- --- Rate of compensation increase 5.25% 4.30% --- --- [a] Reflects the spin-off of CoorsTek and the allocation of obligations and assets to the Kalamazoo Mill. [b] Reflects the acquisition of the Fort James packaging business in 1999 and Universal Packaging in 1998. [c] Includes CoorsTek assets and obligations in 1998. It is the Company's policy to amortize unrecognized gains and losses in excess of 10% of the larger of plan assets and the projected benefit obligation (PBO) over the expected service of active employees (12-15 years). However, in cases where the accrued benefit liability exceeds the actual unfunded liability by more than 20% of the PBO, the amortization period is reduced to 5 years. For measurement purposes, a 7.0% and 7.5% annual rate of increase in the per capita cost of covered health care benefits was assumed for 1999 and 1998, respectively. The rate was assumed to decrease by 0.5% per annum to 3.80% and remain at that level thereafter. The following, in thousands, excludes the Kalamazoo Mill from 1999 and CoorsTek from 1999, 1998 and 1997: Pension Benefits Other Benefits 1999 1998 1997 1999 1998 1997 ------ ------ ------ ----- ----- ------- Components of net periodic benefit cost Service cost $3,707 $2,378 $2,267 $336 $231 $475 Interest cost 5,466 3,666 5,150 693 409 737 Expected return on plan assets (1,805) (1,249) (9,902) --- --- --- Amortization of prior service cost 262 20 352 (703) (704) (248) Recognized actuarial loss (gain) (4,958) (2,382) 5,623 (385) (639) (2,090) Transition asset (69) --- --- --- --- --- ------ ------ ------ ----- ----- ------- Net periodic benefit cost (gain) $2,603 $2,433 $3,490 ($59) ($703) ($1,126) ====== ====== ====== ===== ===== ======= Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one- percentage-point change in assumed health care cost trend rates would have the following effects, in thousands: 1% 1% Point Point Increase Decrease -------- -------- Effect on total of service and interest cost components $135 $113 Effect on postretirement benefit obligation $1,000 $900 Note 12. Defined Contribution Plan The Company provides a defined contribution, profit sharing plan for the benefit of its employees, the ACX Technologies, Inc. Savings and Investment Plan (the Plan). The Plan and its associated trust are intended to comply with the provisions of the Internal Revenue Code and ERISA, to qualify as a profit sharing plan for all purposes of the Code, and to provide a cash or deferred arrangement that is qualified under Code Section 401(k). Generally, employees expected to complete at least 1,000 hours of service per year are immediately eligible to participate in the Plan upon employment. The Plan generally provided for Company matching of 50% of participant contributions, up to 2.5% of participant annual compensation through December 31, 1999. Company expenses related to the matching provisions of the Plan totaled approximately $2.4 million, $1.7 million and $1.2 million in 1999, 1998 and 1997, respectively. Effective January 1, 2000, Company matching shall be denominated in the Company's common stock. Due to various collective bargaining agreements and certain provisions in the purchase agreement related to the former Fort James packaging business, the Company provided matching in common stock to former Fort James employees during the final five months of 1999 approximating $1.0 million. The Plan also provides for discretionary matching. The Company did not elect to provide discretionary matching under this provision in 1999, 1998 or 1997. Note 13. Related Party Transactions On December 28, 1992, the Company was spun off from Adolph Coors Company (ACCo) and since that time ACCo has had no ownership interest in the Company. However, certain Coors family trusts have significant interests in both the Company and ACCo. At the time of spin-off from ACCo, the Company entered into agreements with Coors Brewing Company, a subsidiary of ACCo, for the sale of packaging, aluminum, starch products and the resale of brewery byproducts. The initial agreements had a stated term of five years and have resulted in substantial revenues to the Company. The Company continues to sell packaging products to Coors Brewing. Additionally, the Company sold aluminum products and refined corn starch to Coors Brewing until the disposition of these businesses on March 1, 1997 and January 31, 1999, respectively. In 1998, the supply agreement between Graphic Packaging and Coors Brewing was renegotiated. The new five-year agreement includes stated quantity commitments and requires annual repricing. In addition, this contract provides for a three-year extension to be negotiated by December 31, 2000. Sales of packaging products and refined corn starch to Coors Brewing accounted for approximately 13%, 17% and 27% of the Company's consolidated net sales for 1999, 1998 and 1997, respectively. Included in the 1997 results of discontinued operations are sales of aluminum products to Coors Brewing of $3.2 million. Sales were at terms comparable to those that could have been obtained on an arms-length basis between unaffiliated parties. The loss of Coors Brewing as a customer in the foreseeable future could have a material effect on the Company's results of operations. In connection with the spin-off of CoorsTek at December 31, 1999, ACX Technologies and CoorsTek entered into contracts governing certain relationships between them following the spin- off, including a tax-sharing agreement, a transitional services agreement and certain other agreements. CoorsTek and ACX Technologies believe that these agreements are at fair market value and are on terms comparable to those that would have been reached in arm's-length negotiations had the parties been unaffiliated at the time of the negotiations. Note 14. Commitments and Contingencies It is the policy of the Company generally to act as a self- insurer for certain insurable risks consisting primarily of employee health insurance programs. With respect to workers' compensation, the Company uses a variety of fully or partially self-funded insurance vehicles. The Company maintains certain stop-loss and excess insurance policies that reduce overall risk of financial loss. In the ordinary course of business, the Company's subsidiaries are subject to various pending claims, lawsuits and contingent liabilities, including claims by current or former employees relating to employment, sexual harassment or termination. In each of these cases, the Company is defending against them. The Company does not believe that disposition of these matters will have a material adverse effect on the Company's consolidated financial position or results of operations. In February 1998, a subsidiary of the Company was sued for breach of a supply agreement to purchase thermal energy for the Johnstown, Colorado corn-wet mill. The Company sold the Johnstown, Colorado corn-wet mill in January 1999. Trial has been set for October 2000, but the Company does not believe the disposition will have a material adverse effect on the Company's financial position or results of operations. Some of the Company's operations have been notified that they may be potentially responsible parties (PRPs) under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 or similar state laws with respect to the remediation of certain sites where hazardous substances have been released into the environment. The Company cannot predict with certainty the total costs of remediation, its share of the total costs, the extent to which contributions will be available from other parties, the amount of time necessary to complete the remediation or the availability of insurance. However, based on the investigations to date, the Company believes that any liability with respect to these sites would not be material to the financial condition or results of operations of the Company, without consideration for insurance recoveries. There can be no certainty, however, that the Company will not be named as a PRP at additional sites or be subject to other environmental matters in the future or that the costs associated with those additional sites or matters would not be material. In addition, the Company has received demands arising out of alleged contamination of various properties currently or formerly owned by the Company. In management's opinion, none of these claims will result in liability that would materially affect the Company's financial position or results of operations. In connection with the sale of various businesses, the Company has periodically agreed to guarantee the collectibility of accounts receivable and indemnify purchasers for certain liabilities for a specified period of time. Such liabilities include, but are not limited to, environmental matters and the indemnification periods generally last for 2 to 15 years. Note 15. Segment Information The Company's reportable segments are based on its method of internal reporting, which is based on product category. Thus, the Company's reportable segments are Packaging and Other. The packaging segment consists of the operations of Graphic Packaging. The Company's Other segment includes a real estate development partnership, a majority interest in a group of solar electric distribution companies prior to their August 3, 1999 sale and, prior to March 1999, several technology-based businesses. The accounting policies of the segments are the same as those described in Note 1 and there are generally no intersegment transactions. The Company evaluates the performance of its segments and allocates resources to them based primarily on operating income. The table below summarizes information, in thousands, about reportable segments as of and for the years ended December 31. Discontinued operations include the Kalamazoo Mill in 1999 and CoorsTek in 1999, 1998 and 1997. Depreciation Net Operating And Capital Sales Income Amortization Assets Expenditures -------- --------- ------------ ---------- ------------ 1999 Packaging $786,843 $38,992 $47,834 $1,156,385 $73,707 Other 44,562 2,103 618 19,699 1,568 -------- ------- ------- ---------- ------- Segment total 831,405 41,095 48,452 1,176,084 75,275 Corporate --- (10,479) 260 225,954 17 Discontinued operations, net assets --- --- 30,283 225,000 16,163 -------- ------- ------- ---------- ------- Consolidated total 831,405 $30,616 $78,995 $1,627,038 $91,455 ======== ======= ======= ========== ======= 1998 Packaging $623,852 $38,232 $35,924 $539,039 $47,498 Other 67,925 (3,047) 1,270 56,905 3,384 -------- ------- ------- --------- ------- Segment total 691,777 35,185 37,194 595,944 50,882 Corporate --- (8,941) 336 101,359 690 Discontinued operations, net assets --- --- 19,977 148,719 26,891 -------- ------- ------- --------- ------- Consolidated total $691,777 $26,244 $57,507 $846,022 $78,463 ======== ======= ======= ========= ======= 1997 Packaging $365,123 $42,655 $20,211 $210,024 $18,022 Other 61,138 (31,186) 3,451 81,443 9,068 -------- ------- ------- --------- ------- Segment total 426,261 11,469 23,662 291,467 27,090 Corporate --- (10,177) 337 148,258 311 Discontinued operations, net assets --- --- 18,664 203,155 28,812 -------- ------- ------- -------- ------- Consolidated total $426,261 $1,292 $42,663 $642,880 $56,213 ======== ======= ======= ========= ======= Corporate assets for 1999 consist primarily of a $200 million note receivable from CoorsTek as a result of the spin- off, and debt issuance costs. In 1998 and 1997, corporate assets include a $60 million note receivable from the sale of Golden Aluminum, deferred taxes and certain properties. Certain financial information regarding the Company's domestic and foreign operations is included in the following summary, which excludes discontinued operating segments. Long- lived assets include plant, property and equipment, intangible assets, and certain other non-current assets. Net Long-Lived (In thousands) Sales Assets -------- ---------- 1999 United States $779,527 $964,880 Canada 51,878 3,689 Other --- 2,694 -------- ---------- Total $831,405 $971,263 ======== ========== 1998 United States $626,715 $401,579 Canada 57,079 34,807 Other 7,983 3,065 -------- ---------- Total $691,777 $439,451 ======== ========== 1997 United States $357,795 $118,998 Canada 59,730 34,535 Other 8,736 3,732 -------- ---------- Total $426,261 $157,265 ======== ========== Note 16. Quarterly Financial Information (Unaudited) The following information summarizes selected quarterly financial information, in thousands except per share data, for each of the two years in the period ended December 31, 1999, which excludes discontinued operations. 1999 First Second Third Fourth Year -------- -------- -------- -------- -------- Net sales $165,976 $163,595 $236,381 $265,453 $831,405 Cost of goods sold 136,362 132,322 205,970 233,104 707,758 -------- -------- -------- -------- -------- Gross profit 29,614 31,273 30,411 32,349 123,647 Selling, general and administrative expenses 18,697 19,480 22,353 24,688 85,218 Asset impairment and restructuring charges --- --- --- 7,813 7,813 -------- -------- -------- -------- -------- Operating income (loss) 10,917 11,793 8,058 (152) 30,616 Other income (expense): Gain from sale of businesses --- --- 30,236 --- 30,236 Interest expense (1,776) (1,908) (8,992) (15,874) (28,550) Interest income 553 487 1,072 531 2,643 Other-net 93 (77) 350 252 618 -------- -------- -------- -------- -------- Income (loss) from continuing operations before income taxes and extraordinary loss 9,787 10,295 30,724 (15,243) 35,563 Income tax expense (benefit) 4,059 3,846 13,239 (7,099) 14,045 -------- -------- -------- -------- -------- Income (loss) from continuing operations before extraordinary loss 5,728 6,449 17,485 (8,144) 21,518 Income (loss) from discontinued operations, net of tax 3,990 4,813 (2,004) (726) 6,073 Extraordinary loss, net of tax --- --- (2,332) --- (2,332) -------- -------- -------- -------- -------- Net income (loss) $9,718 $11,262 $13,149 ($8,870) $25,259 ======== ======== ======== ======== ======== Net income (loss) per basic share: Continuing operations $0.20 $0.23 $0.61 ($0.28) $0.76 Discontinued operations 0.14 0.17 (0.07) (0.03) 0.21 Extraordinary loss --- --- (0.08) --- (0.08) -------- -------- -------- -------- -------- Net income (loss) per basic share $0.34 $0.40 $0.46 ($0.31) $0.89 ======== ======== ======== ======== ======== Net income (loss) per diluted share: Continuing operations $0.20 $0.22 $0.61 ($0.28) $0.75 Discontinued operations 0.14 0.17 (0.07) (0.03) 0.21 Extraordinary loss --- --- (0.08) --- (0.08) -------- -------- -------- -------- -------- Net income (loss) per diluted share $0.34 $0.39 $0.46 ($0.31) $0.88 ======== ======== ======== ======== ======== 1998 First Second Third Fourth Year -------- -------- -------- -------- -------- Net sales $155,788 $177,904 $177,996 $180,089 $691,777 Cost of goods sold 126,947 144,200 150,597 145,789 567,533 -------- -------- -------- -------- -------- Gross profit 28,841 33,704 27,399 34,300 124,244 Selling, general and administrative expenses 19,857 19,394 18,345 19,013 76,609 Asset impairment and restructuring charges 1,001 --- 19,900 490 21,391 -------- -------- -------- -------- -------- Operating income (loss) 7,983 14,310 (10,846) 14,797 26,244 Other income (expense): Interest expense (4,555) (5,730) (5,917) (5,776) (21,978) Interest income 1,236 1,456 1,457 1,213 5,362 Other-net (147) 207 508 8 576 -------- -------- -------- -------- -------- Income (loss) from continuing operations before income taxes and extraordinary loss 4,517 10,243 (14,798) 10,242 10,204 Income tax expense (benefit) 1,514 4,127 (5,291) 4,401 4,751 -------- -------- -------- -------- -------- Income (loss) from continuing operations before extraordinary loss 3,003 6,116 (9,507) 5,841 5,453 Income (loss)from discontinued operations, net of tax 2,436 6,439 2,001 4,936 15,812 -------- -------- -------- -------- -------- Net income (loss) $5,439 $12,555 ($7,506) $10,777 $21,265 ======== ======== ======== ======== ======== Net income (loss) per basic share: Continuing operations $0.10 $0.21 ($0.33) $0.21 $0.19 Discontinued operations 0.09 0.23 0.07 0.17 0.56 Extraordinary loss --- --- --- --- --- -------- -------- -------- -------- -------- Net income (loss) per basic share $0.19 $0.44 ($0.26) $0.38 $0.75 ======== ======== ======== ======== ======== Net income (loss) per diluted share: Continuing operations $0.10 $0.21 ($0.33) $0.21 $0.19 Discontinued operations 0.08 0.22 0.07 0.17 0.54 Extraordinary loss --- --- --- --- --- -------- -------- -------- -------- -------- Net income (loss) per diluted share $0.18 $0.43 ($0.26) $0.38 $0.73 ======== ======== ======== ======== ======== See Note 5 for detail on asset impairment and restructuring charges in 1999 and 1998. SCHEDULE II ACX TECHNOLOGIES, INC. VALUATION AND QUALIFYING ACCOUNTS (In thousands) Allowance for doubtful receivables (deducted from accounts receivable) Balance Additions at charged to Balance Beginning costs and Other Deductions at end of Year expenses (1) (2) of year --------- ---------- ------ ---------- ------- Year Ended December 31, 1997 $1,753 $351 $--- ($996) $1,108 1998 $1,108 $1,111 $1,232 ($1,311) $2,140 1999 $2,140 $503 $1,143 ($1,633) $2,153 (1) The effect of translating foreign subsidiaries' financial statements into U.S. dollars, the 1998 acquisition of Universal Packaging and the 1999 acquisition of the Fort James packaging business. (2) Write off of uncollectible accounts. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Within the last two years there have been no changes in the Company's independent accountants or disagreements on accounting and financial statement disclosure matters. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information regarding the Registrant's Directors is incorporated by reference to the Proxy Statement in connection with the 2000 Annual Meeting of Shareholders. The following executive officers of the Company serve at the pleasure of the Board: Jed J. Burnham, 55, Executive Vice President--Finance of the Company since January 2000; Chief Financial Officer of the Company from March 1995 to December 1999; Treasurer of the Company from August 1992 to December 1999; Chief Credit Officer for non-metro Denver banks at Norwest Bank from 1990 to 1992. Gail A. Constancio, 39, Chief Financial Officer of the Company since January 2000; Chief Financial Officer of Graphic Packaging since November 1997; Controller and Principal Accounting Officer of the Company from May 1994 to November 1997. Jeffrey H. Coors, 55, President of the Company since its formation in August 1992. President of Graphic Packaging since June 1997 and Chairman of Graphic Packaging since 1985; Executive Vice President of ACCo from 1991 to 1992; President of Coors Technology Companies from 1989 to 1992; President of ACCo from 1985 to 1989. David W. Scheible, 43, Chief Operating Officer of the Company since January 2000 and of Graphic Packaging since June 1999. Vice President and General Manager of the Specialty Tape Division from 1995 to 1999, and Vice President and General Manager of the Automotive Division from 1993 to 1995, of Avery Dennison Corporation. Jill B. W. Sisson, 52, General Counsel and Secretary of the Company since September 1992; Of Counsel to the Denver law firm of Bearman Talesnick & Clowdus Professional Corporation from 1984 to 1992. ITEM 11. EXECUTIVE COMPENSATION This information is incorporated by reference to the Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT This information is incorporated by reference to the Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS This information is incorporated by reference to the Proxy Statement. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Exhibit Number Document Description 2.1 Recommended Cash Offers by Baring Brothers International Limited on behalf of ACX (UK) Limited, a wholly-owned subsidiary of ACX Technologies, Inc. for Britton Group plc. (Incorporated by reference to Form 8-K filed on January 29, 1998) 2.2 Asset Purchase Agreement between ACX Technologies and Fort James Corporation. (Incorporated by reference to Form 8-K filed August 17, 1999) 2.3 Asset Purchase Agreement between Golden Aluminum Company and Alcoa Inc, dated November 5, 1999. 2.4 Distribution Agreement between ACX Technologies, Inc. and CoorsTek, Inc. 3.1 Articles of Incorporation of Registrant. (Incorporated by reference to Form 10 filed on October 6, 1992, file No. 0-20704) 3.1A Articles of Amendment to Articles of Incorporation of Registrant. (Incorporated by reference to Form 8 filed on December 3, 1992, file No. 0-20704) 3.2 Bylaws of Registrant, as amended and restated March 2, 2000. 4 Form of Stock Certificate of Common Stock. (Incorporated by reference to Form 10-K filed March 7, 1996, file No. 0-20704) 10.0 Credit Agreement among ACX Technologies, Inc., Bank of America, as agent, and other financial institutions party thereto. (Incorporated by reference to Form 8-K filed on August 17, 1999) 10.1 Supply Agreement between Graphic Packaging Corporation and Coors Brewing Company, dated January 1, 1997. (Incorporated by reference to Form 10-K filed on March 24, 1997) (Confidential treatment has been granted for portions of the Exhibit) 10.2 Credit Agreement among ACX Technologies, Inc., Wachovia Bank, N.A., as agent, and other financial institutions party thereto. (Incorporated by reference to Form 8-K filed on December 23, 1998.) 10.3 Asset Purchase Agreement between ACX Technologies and Sonoco Products Company. (Incorporated by reference to Form 8-K filed on September 17, 1999.) 10.4 Tax Sharing Agreement between ACX Technologies, Inc. and CoorsTek, Inc. 10.5 Environmental Responsibility Agreement between ACX Technologies, Inc. and CoorsTek, Inc. 10.6 Master Transition Materials and Services Agreement between ACX Technologies, Inc. and CoorsTek, Inc. 10.7* Description of Officers' Life Insurance Program. (Incorporated by reference to Form 10-K filed on March 24, 1997.) 10.8* Form of Officers' Salary Continuation Agreement, as amended. (Incorporated by reference to Form 10-K filed on March 20, 1995, file No. 0-20704) 10.9* ACX Technologies, Inc. Equity Incentive Plan, as amended. (Incorporated by reference to Form 10-K filed on March 7, 1996, file No. 0-20704) 10.10* ACX Technologies, Inc. Equity Compensation Plan for Non-Employee Directors, as amended. (Incorporated by reference to the Proxy Statement filed in connection with the May 17, 1994, Annual Meeting of Shareholders) 10.11* ACX Technologies, Inc. Phantom Equity Plan. (Incorporated by reference to Form 8 filed on November 19, 1992, file No. 0-20704) 10.15* ACX Technologies, Inc. Deferred Compensation Plan, as amended. (Incorporated by reference to Form 10-K filed on March 7, 1996, file No. 0-20704) 10.16* ACX Technologies, Inc. Executive Incentive Plan. (Incorporated by reference to Form 10-K filed on March 7, 1996, file No. 0-20704) 21 Subsidiaries of Registrant 23 Consent of PricewaterhouseCoopers LLP 27 Financial Data Schedule * Management contracts or compensatory plans, contracts or arrangements required to be filed as an Exhibit pursuant to Item 14(c). The Registrant will furnish to a requesting security holder any Exhibit requested upon payment of the Registrant's reasonable copying charges and expenses in furnishing the Exhibit. (b) Reports on Form 8-K. On October 18, 1999, the Company filed a Current Report on Form 8-K including the required pro forma financial information of the Fort James packaging business acquired August 2, 1999. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ACX TECHNOLOGIES, INC. Date: March 27, 2000 By /s/ Jeffrey H. Coors -------------------------- Jeffrey H. Coors President and Chief Executive Officer Date: March 27, 2000 By /s/ Gail A. Constancio -------------------------- Gail A. Constancio Chief Financial Officer Date: March 27, 2000 By /s/ John S. Norman -------------------------- John S. Norman Corporate Controller Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. Date: March 27, 2000 By /s/ William K. Coors -------------------------- William K. Coors Chairman of the Board of Directors and Director Date: March 27, 2000 By /s/ John D. Beckett -------------------------- John D. Beckett Director Date: March 27, 2000 By /s/ Jeffrey H. Coors -------------------------- Jeffrey H. Coors President, Chief Executive Officer and Director Date: March 27, 2000 By /s/ John H. Mullin, III -------------------------- John H. Mullin, III Director Date: By -------------------------- James K. Peterson Director Date: March 27, 2000 By /s/ John Hoyt Stookey -------------------------- John Hoyt Stookey Director EX-2.3 2 Exhibit 2.3 Execution Copy 11/5/99 ASSET PURCHASE AGREEMENT BETWEEN GOLDEN ALUMINUM COMPANY, AS SELLER AND ALCOA INC., AS BUYER Dated as of November 5, 1999 Table of Contents Page Article I Certain Definitions 1 Article II The Transaction 4 Section 2.1 Covenant of Purchase and Sale; Assets 4 Section 2.2 Excluded Assets 5 Section 2.3 Assumed Obligations and Liabilities 5 Section 2.4 Excluded Liabilities 6 Section 2.5 Consideration for Purchased Assets 7 Section 2.6 Accounts Receivable and Inventory Adjustment 7 Section 2.7 Closing 8 Article III Deliveries at Closing 8 Section 3.1 Items to be Delivered at Closing by Seller 8 Section 3.2 Items to be Delivered at Closing by Buyer 8 Section 3.3 Cooperation and Assignments 8 Article IV Representations and Warranties of Seller 9 Section 4.1 Organization 9 Section 4.2 Capitalization and Ownership; Power and Authority 9 Section 4.3 Subsidiaries 9 Section 4.4 Qualification; Location of Business 9 Section 4.5 Corporate Power; Authorization; Enforceability 10 Section 4.6 No Conflicts 10 Section 4.7 Consents 10 Section 4.8 Brokers' and Finders' Fees 10 Section 4.9 No Liabilities 11 Section 4.10 No Material Adverse Change 11 Section 4.11 Compliance with Law: Authorizations 11 Section 4.12 Transactions with Related Parties 12 Section 4.13 Litigation 12 Section 4.14 Title: Condition of Assets 12 Section 4.15 Insurance 12 Section 4.16 Contracts: Compliance 13 Section 4.17 Labor Matters 13 Section 4.18 Employee Benefit Plans and Arrangements 13 Section 4.19 Patents and Intellectual Property Rights 13 Section 4.20 Real Property 14 Section 4.21 Disclosure 14 Section 4.22 Year 2000 Compliance 14 Section 4.23 Customers and Suppliers of Colorado Mill 15 Article V Representations And Warranties Of Buyer 15 Section 5.1 Corporate Existence 15 Section 5.2 Corporate Power; Authorization; Enforceability 15 Section 5.3 No Conflicts 15 Section 5.4 Consents 16 Section 5.5 Ability to Purchase 16 Section 5.6 Brokers' and Finders' Fees 16 Article VI Certain Obligations of The Parties 16 Section 6.1 Agreements of Seller Pending the Closing 16 Section 6.2 Employee Matters 17 Section 6.3 License of Block Caster Technology 19 Section 6.4 Non-Solicitation 19 Section 6.5 Non-Compete 19 Section 6.6 Real Estate Matters 19 Section 6.7 Transfer Taxes 20 Section 6.8 Section 338(h)(10) Election 20 Section 6.9 Colorado Mill Baghouse 20 Article VII Environmental Indemnification 20 Section 7.1 Definitions 20 Section 7.2 Environmental Indemnification and Remediation Activities 21 Article VIII Survival of Representations and Warranties 22 Article IX Indemnification 22 Section 9.1 Indemnification By Seller 22 Section 9.2 Indemnification by Buyer 23 Section 9.3 Indemnification Procedures 24 Article X Conditions Precedent to the Closing 25 Section 10.1 Conditions Precedent to the Obligations of Buyer 25 Section 10.2 Conditions Precedent to the Obligations of Seller 26 Article XI Termination 27 Section 11.1 Termination 27 Section 11.2 Effect of Termination 27 Article XII Miscellaneous 27 Section 12.1 Expenses 27 Section 12.2 Contents of Agreement; Parties in Interest 28 Section 12.3 Assignment and Binding Effect 28 Section 12.4 Notices 28 Section 12.5 Governing Law 29 Section 12.6 No Benefit to Others 29 Section 12.7 Headings, Gender and "Person." 29 Section 12.8 Publicity 30 Section 12.9 Severability 30 Section 12.10 Counterparts 30 Schedules and exhibits Schedule Title 1.1(a) Colorado Employees 1.1(b) Texas Employees 2.1 Fixed Asset Listing 2.2 Excluded Assets 2.3 Assumed Liabilities 4.3 Organizational Regulations of Golden Engineering AG 4.4 Qualifications 4.9 Liabilities 4.10 Material Adverse Changes 4.11 Authorizations 4.12 Related Party Transactions 4.13 Litigation 4.15 Insurance 4.16 Contracts 4.17 Labor Matters 4.19 Intellectual Property Rights 4.20 Real Property 4.22 Year 2000 Compliance 4.23 Customers and Suppliers of Colorado Mill 6.2 Texas Employees for Reimbursement 6.10 Colorado Mill Baghouse Repairs Exhibits Exhibit A Bill of Sale, Assignment, Assumption Agreement Exhibit B Form of Owner's Affidavit Exhibit C Guaranty Exhibit D Consent Decree ASSET PURCHASE AGREEMENT This Asset Purchase Agreement is dated as of November 5, 1999, between Golden Aluminum Company, a Colorado corporation ("Seller") and Alcoa Inc., a Pennsylvania corporation ("Buyer"). Recitals A. Seller is in the business of manufacturing and selling aluminum rigid container sheet and flat rolled aluminum products produced through a continuous cast mini-mill process (the "Business"). Seller operates the Business primarily at two aluminum rolling mills located at Fort Lupton, Colorado (the "Colorado Mill") and San Antonio, Texas (the "Texas Mill"). As of August 23, 1999, Seller has substantially ceased operation of the Texas Mill. The Business also includes the following wholly- owned subsidiaries of Seller: GAC Technology Company, a Colorado corporation, and Golden Engineering AG, a Swiss corporation (the "Subsidiaries"). Seller and the Subsidiaries are collectively referred to as the "Company." B. Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, the business, assets and properties of the Company, subject to the terms and conditions of this Agreement. NOW, THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the parties agree as follows: Article I Certain Definitions As used in this Agreement, the following terms (whether used in singular or plural forms) shall have the following meanings: "Affiliate" means any person, directly or indirectly, controlling, controlled by, or under common control with a party (excluding, with respect to Seller, Coors Brewing Company and Adolph Coors Company). Without limiting the generality of the foregoing, a person is considered to be in control of or to be controlled by another person if such person holds 50% or more of the outstanding voting equity interest in such other person or such other person holds 50% or more of its outstanding voting equity interest. "Assets" is defined in Section 2.1. "Assumed Liabilities" is defined in Section 2.3. "Buyer" is defined in the introductory paragraph of this Agreement. "Closing" is defined in Section 2.6. "Closing Date" is defined in Section 2.6. "Code" means the Internal Revenue Code of 1986, as amended. "Colorado Employees" means all of the salaried and hourly employees of the Colorado Mill who are actively employed (including those employees currently on an authorized leave of absence, but excluding any employee on layoff status) by Seller as of the day before the Closing identified on Schedule 1.1(a). "Crown Cork Ownership Period" means the period of time from March 1, 1997 through August 22, 1999, during which period Seller was owned by Crown Cork & Seal Company, Inc. "Damages" means losses, liabilities, claims, obligations, damages, deficiencies, costs, expenses and fees, including without limitation, legal fees, reasonable expert witness fees and reasonable costs of investigation incurred in defending against any assertion of the foregoing. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "ERISA Affiliate" means (i) any corporation included with a person in a controlled group of corporations within the meaning of Section 414(b) of the Code; (ii) any trade or business (whether or not incorporated) which is under common control with a person within the meaning of Section 414(c) of the Code; (iii) any member of an affiliated service group of which a person is a member within the meaning of Section 414(m) of the Code; or (iv) any other person or entity treated as an affiliate of a person under Section 414(o) of the Code; provided that with respect to Seller, Coors Brewing Company and Adolph Coors Company shall not be deemed an ERISA Affiliate. "Excluded Assets" is defined in Section 2.2. "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "Indemnified Party" is defined in Section 9.3(a). "Indemnifying Party" is defined in Section 9.3(a). "Intellectual Property Rights" means all patents, license and sublicenses, intellectual property, trademarks, trade names, services marks, service names, logos, copyrights, inventions, technology, formulae, technical information, know-how, trade secrets, drawings, blueprints, designs, design protocols, specifications for materials, specifications for parts and devices, safety procedures for the handling of materials and substances, quality assurance and control procedures, design tools and simulation capability, and all manuals and technical data Seller provides to its own employees, customers, suppliers, agents or licensees used in the Business. "Inventory" means all inventories of raw materials, work in process and finished goods of the Business. "Liens" means liens, claims, security interests, pledges, charges, equities, options, restrictions and encumbrances. "Litigation Conditions" is defined in Section 9.3(b). "Material Adverse Effect" means any change in, or effect on, the Business, as currently conducted by Seller that is materially adverse to the assets, liabilities, results of operations or the financial condition of the Business. "Permitted Liens" means (i) liens for current real or personal property taxes not yet due and payable; (ii) liens disclosed in Schedule 4.20; (iii) statutory liens arising by mandatory provisions of law securing obligations in the ordinary course of business which are not yet due or which are being contested in good faith; and (iv) liens, encumbrances and restrictions such as easements, licenses and rights-of-way that do not materially detract from the value of the Real Property used in the Business or materially interfere with the present use of the Real Property by the Business. "Related Party" means ACX Technologies, Inc., any of the officers or directors of the Company, any Affiliate of the Company (excluding Coors Brewing Company and Adolph Coors Company), or any business or entity in which the Company, or any Affiliate of any such person, has any direct or material indirect interest. "Seller" is defined in the introductory paragraph of this Agreement. "Seller Benefit Plans" means each (i) "employee benefit plan," as defined in Section 3(3) of ERISA (including any "multiemployer plan" as defined in Section 3(37) of ERISA); (ii) all other pension, retirement, supplemental retirement, deferred compensation, excess benefit, profit sharing, bonus, incentive, stock purchase, stock ownership, stock option, stock appreciation right, employment, severance, salary continuation, termination, change-of-control, health, life, disability, group insurance, vacation, holiday and fringe benefit plan, program, contract, or arrangement (whether written or unwritten, qualified or nonqualified, funded or unfunded and including any that have been frozen or terminated) maintained, contributed to, or required to be contributed to, by Seller or any ERISA Affiliate of Seller for the benefit of any employee or former employee of Seller, director, officer or independent contractor of Seller or under which Seller or any ERISA Affiliate of Seller has any liability with respect to any employee, former employee, director, officer or independent contractor of Seller. "Subsidiaries" is defined in Recital A. "Texas Employees" means all of the salaried and hourly employees of the Texas Mill who are actively employed (including those employees currently on an authorized leave of absence, but excluding any employee on layoff status) by Seller as of the day before the Closing identified on Schedule 1.1(b). "Third Party Claim" is defined in Section 9.3(a). "Working Capital Value" means the value of the Inventory, calculated in accordance with Section 2.5(b), plus the value of the accounts receivable of the Business as of the Closing Date, minus the accounts payable of the Business as of the Closing Date. Article II The Transaction Section 2.1 Covenant of Purchase and Sale; Assets. Subject to the terms and conditions set forth in this Agreement, and except as otherwise provided in Section 2.2, at the Closing, Seller shall sell, convey, assign, transfer and deliver to Buyer, all of Seller's title and interest in all of the properties, assets, and rights of any kind, where ever located, whether tangible or intangible, real or personal, used by Seller in its operation of the Business (the "Assets"), including without limitation the following: (a) all of the issued and outstanding capital stock of each of the Subsidiaries; (b) all cash on hand as of the Closing Date, all accounts receivable and all prepaid expenses and security deposits of the Company; (c) all of the Intellectual Property Rights; (d) the Real Property, as set forth in Schedule 4.20; (e) the leases, contracts and commitments set forth in Schedule 4.16 including without limitation the Nitrogen Lease and Ground Lease described therein; (f) all of the Authorizations, as defined in Section 4.11. (g) all of Seller's technical information and data, customer lists, machinery and equipment warranties, maps, com- puter disks and tapes, plans, diagrams, blueprints and schematics relating to the Colorado Mill and the Texas Mill; (h) all machinery, equipment (including all trans- portation and office equipment), fixtures, trade fixtures, and furniture located at the Colorado Mill or the Texas Mill or in any other space owned, leased or occupied by Seller; (i) the Inventory; (j) the fixed assets, in the listing attached as Schedule 2.1 and the stores inventory, in the listing previously provided by Seller to Buyer; (k) all claims (but not tax refund claims), causes of action, choses in action, right of recovery and rights of set-off of any kind, except those retained by Seller as excluded assets; (l) the right to receive mail, accounts receivable payments and other communications addressed to the Company; (m) all books and records relating to the Business or the operations of the Company, provided that Seller shall have the right to have such records made available to it for a reason- able period after the Closing Date for reasonable tax reporting purposes; (n) all goodwill and going concern value generated by Seller with respect to the Business; and (o) all intangible assets of the Company relating to the Business not specifically described above. Section 2.2 Excluded Assets. Notwithstanding the provisions of Section 2.1, the Assets shall not include the following, which shall be retained by Seller (the "Excluded Assets"): (a) Seller's minute books and stockholder and stock transfer records; (b) bonds, letters of credit, surety instruments, and other similar items; (c) All employee benefit plans of the Company, includ- ing without limitation, employee pension, profit sharing, 401(k), medical benefit or health plans and trusts and related trust accounts, funds, investments or other assets. (d) all claims, rights and interests in and to any refunds for Taxes or fees for periods prior to the Closing Date; (e) all rights under judgment and rights of recovery related to operation of the Business prior to the Closing Date; and (f) all rights, assets, and properties described in Schedule 2.2. Section 2.3 Assumed Obligations and Liabilities. After the Closing Date, Buyer shall assume, pay, discharge, and perform the following (the "Assumed Liabilities"): (a) those obligations and liabilities attributable to periods after the Closing Date under the contracts, licenses and commitments transferred to Buyer at closing, including with- out limitation Seller's obligations under the material agreements listed on Schedule 4.16, and further including all contingent liabilities under the Tax Abatement Agreement between Seller and the City of San Antonio, dated July 27, 1989 ("Abatement Agreement"), with respect to refund of tax abatements for failure to operate the Texas Mill for one year.; (b) those liabilities and obligations set forth on Schedule 2.3; and (c) all obligations and liabilities arising out of Buyer's ownership of the Assets or operation of the Business after the Closing Date. Section 2.4 Excluded Liabilities. Other than the Assumed Liabilities, Buyer does not assume and will not be responsible for, and Seller will retain and remain responsible for, any and all obligations and liabilities of the Company and the Business of any nature whatsoever, whether past, current or future, whether accrued, contingent, known or unknown, including without limitation third party claims for personal injury filed after the Closing Date to the extent such claims relate to actions or inactions of the Company prior to the Closing Date. Without limiting the foregoing and by way of example only, Buyer may not be deemed to assume any liabilities relating to or arising out of: (a) all accrued liabilities, and accrued expenses, including accrued wages, performance pay, incentive compensation, salary, and sick pay in respect of employees of the Company; (b) contributions to or other obligations arising under the employee benefit plans of the Company; (c) any short or long-term debt of the Company; (d) all amounts payable (fixed, contingent or other- wise) by the Company to an Affiliate of the Company; (e) all warranty claims and all claims for injury or damage attributable to the design, manufacture or sale of any product produced by the Company prior to the Closing Date; (f) all taxes assessed, accrued or attributable to the Company for periods prior to the Closing Date and related penalties and interest, if any, excluding all liabilities under the Abatement Agreement assumed by Buyer under Section 2.3(a); (g) any complaint, suit, action, arbitration or regu- latory, administrative or governmental proceeding or investiga- tion which relates to the Business conducted on or prior to the Closing Date including, without limitation, the items of litigation set forth on Schedule 4.13; and (h) all amounts due as of the Closing Date under the accounts payable between Seller and ACX Technologies, Inc. cover- ing advances by ACX Technologies, Inc. to Seller for product included in the Inventory and being acquired by Buyer, which as of October 29, 1999, was $14,300,000. Section 2.5 Consideration for Purchased Assets. (a) As consideration for the Assets, Buyer will pay Seller $41,000,000 ("Asset Value"), plus the Working Capital Value (the Asset Value and the Working Capital Value collec- tively the "Purchase Price"). Buyer will pay the Asset Value to Seller by wire transfer of immediately available funds to an account designated in writing by Seller no later than 1:00 p.m. EST on the Closing Date. Within five business days after the Closing, Seller and Buyer will jointly determine the value of the Inventory in accordance with Section 2.5(b) and will value the accounts receivable and accounts payable based on the book value as of the Closing Date, which values will be used to cal- culate the Working Capital Value as of the Closing Date (the "Final WC Value"). If the accounts receivable included within the Final WC Value ("Receivables") and the value of the Inventory exceed the accounts payable included within the Final WC Value ("Payables"), then Buyer will pay Seller within five business days following determination of the Final WC Value, by wire transfer in immediately available funds, the amount of such excess. If the Receivables and the value of the Inventory are less than the Payables, then Seller will pay Buyer within five business days following determination of the Final WC Value, by wire transfer in immediately available funds, the amount of such deficiency. (b) For purposes of calculating the Purchase Price, the value of the Inventory will be determined as follows: (i) Raw materials inventory will be valued at market price; (ii) Work in process inventory will be valued at raw material costs plus standard cost build-up; and (iii) Finished goods inventory will be valued at the price established under the customer contracts covering the inventory, less freight to the extent freight is already included in the customer contract price. Section 2.6 Accounts Receivable and Inventory Adjustment. If, within 90 days of the Closing Date, any of the Receivables has not been collected in full, or any of the finished goods inventory has been returned by the customer to Buyer, Seller will repurchase such uncollected Receivables and inventory from Buyer. Seller also will reimburse Buyer for new back-up rolls to be purchased by Buyer for the cold mills of the Business in the amount of $275,000. Buyer and Seller will cooperate to finalize the amount for reimbursement so that Seller may pay Buyer for such repurchased Receivables and inventory, as well as the back- up rolls, within 100 days of the Closing Date by wire transfer of immediately available funds. Section 2.7 Closing. The closing of the sale of the Assets (the "Closing") shall be held at 11:00 a.m. at the offices of Holland & Hart, LLP, 555 17th Street, Suite 3200, Denver, Colorado, on November 5, 1999, or on another date mutually agreed upon in writing by the parties (the "Closing Date"), and shall be effective as of 11:59 p.m. EST on the Closing Date. Article III Deliveries at Closing Section 3.1 Items to be Delivered at Closing by Seller. At the Closing, subject to the terms and conditions of this Agreement, Seller shall deliver to Buyer: (a) a fully executed Bill of Sale, Assignment and Assumption Agreement in substantially the form of Exhibit A (the "Bill of Sale"), and any general warranty deeds, assignments of leases and all other instruments of conveyance which are necessary or reasonably requested by Buyer to effect the transfer of the Assets to Buyer; and (b) the agreements, documents and instruments required by Section 10.1. Section 3.2 Items to be Delivered at Closing by Buyer. At the Closing, subject to the terms and conditions of this Agree- ment, Buyer shall deliver to Seller: (a) the Asset Value in accordance with Section 2.5; (b) an executed counterpart of the Bill of Sale; (c) any agreements, documents and instruments required by Section 10.2; and (d) any assumption or other documents which are necessary or reasonably requested by Seller to effect the assump- tion of the Assumed Liabilities by Buyer. Section 3.3 Cooperation and Assignments. After the Closing Date, Seller and Buyer will cooperate so that Buyer may secure all necessary consents, approvals, authorizations, exemptions and waivers from third parties, including all permits, licenses and other authorizations from governmental agencies, required to enable Buyer to obtain the benefit of the transactions contemplated hereby. Article IV Representations and Warranties of Seller Seller represents and warrants to Buyer the following: Section 4.1 Organization. Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Colorado. Seller has all requisite power and authority to own or lease its properties and assets as now owned or leased and to carry on its business as and where now being conducted. Section 4.2 Capitalization and Ownership; Power and Authority. Seller's authorized capital stock consists solely of 100 shares of common stock, par value $1.00 per share, 100 shares of which are issued and outstanding and owned by ACX Technologies, Inc. The authorized capital stock of each of the Subsidiaries consists of the following: with respect to GAC Technology Company, 1,000 shares of common stock, par value $0.01, all of which are issued and outstanding and owned by Seller, and, with respect to Golden Engineering AG, 100 shares of common stock, par value $0.01, all of which are issued and outstanding, 97 of which are owned by Seller and three of which are held of record by directors of such Subsidiary. There are no other outstanding voting securities of the Subsidiaries except for the above described capital stock. There are no outstanding options, warrants, rights, agreements, calls, commitments or demands of any character relating to the capital stock of the Subsidiaries and no securities convertible into or exchangeable for any of such capital stock of the Subsidiaries. All of the capital stock of the Subsidiaries is owned free of Liens. Section 4.3 Subsidiaries. Except for the Subsidiaries, Seller does not, directly or indirectly, own any stock of, or any other interest in, any other corporation, joint venture, partner- ship, trust or other business entity. Each of the Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has full corporate power and authority to carry on its busi- ness as it is now being conducted and to own, operate and lease its properties and assets. The Organizational Regulations attached as Schedule 4.3 are a true and correct copy of the Organizational Regulations of Golden Engineering AG and are in full force and effect. Section 4.4 Qualification; Location of Business. Seller and the Subsidiaries are duly authorized to do business in the jurisdictions set forth on Schedule 4.4. The jurisdictions set forth on Schedule 4.4 are the only jurisdictions where the character of the properties owned or leased or the nature of activities conducted by Seller or the Subsidiaries make such qualification necessary. Section 4.5 Corporate Power; Authorization; Enforceability. Seller has the corporate power, authority and legal right to execute, deliver and perform this Agreement. The execution, delivery and performance of this Agreement by Seller have been duly authorized by all necessary corporate action and shareholder action. This Agreement and all the other agreements and instruments required to be executed and delivered by Seller in connection with this Agreement have been duly executed and delivered by Seller and constitute the legal, valid and binding obligation of the Company, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization and similar laws affecting creditors' rights generally and general principles of equity. Section 4.6 No Conflicts. The execution and delivery of this Agreement by Seller does not, and the consummation of the transactions contemplated by this Agreement and the compliance with the terms, conditions, and provisions of this Agreement by Seller will not: (a) contravene any provision of the Company's articles of incorporation, bylaws or other governing instruments; or (b) conflict with or result in a breach of or constitute a default (or an event which, with the passage of time or the giving of notice or both, constitute a default) under any of the terms, conditions or provisions of any material indenture, mortgage, loan or credit agreement or any other material authorization agreement or instrument to which the Company or Seller is a party or by which any of them or any of their assets may be bound or affected, or any judgment or order of any court or governmental department, commission, board, agency or instrumentality, domestic or foreign, affecting the Company, or any applicable Regulation; (c) result in the creation or imposition of any Liens of any nature whatsoever upon any of the Assets or the stock of the Subsidiaries or give to others any interests or rights in the Assets or such stock; (d) result in the maturation or acceleration of any of the Assumed Liabilities (or give others the right to cause such a maturation or acceleration); (e) result in the termination of or loss of any material right (or give others the right to cause such a ter mination or loss) under any agreement or contract to which the Company is a party or under which the Company may be a beneficiary. Section 4.7 Consents. Except as required under the HSR Act, no material consent, approval or authorization of, or registration or filing with any governmental authority or other regulatory agency, is required in connection with the execution, delivery and performance of this Agreement by Seller. Section 4.8 Brokers' and Finders' Fees. Seller represents and warrants to Buyer that all negotiations relative to this Agreement have been carried on by it directly without the intervention of any person who may be entitled to any brokerage or finder's fee or other commission in respect of this Agreement or the consummation of the transactions contemplated hereby. Section 4.9 No Liabilities. To Seller's knowledge, except as disclosed on Schedule 4.9, the Company has no liability or obligation of any nature whatsoever, secured or unsecured, known or unknown, whether due or to become due, absolute, accrued, contingent or otherwise. Section 4.10 No Material Adverse Change. Except as set forth on Schedule 4.10 and the fact that the Business has been held for sale, and operations at the Texas Mill have substantially ceased, since August 23, 1999, the Business has been conducted in the ordinary course consistent with past practice (including with respect to the collection of receivables, payment of payables and other liabilities, sales practices, capital expenditures and inventory levels) and there has not occurred with respect to the Business: (a) any event, occurrence or development which, individually or in the aggregate, has had a Material Adverse Effect; (b) any damage, destruction or loss to the Company not covered by insurance that would have a Material Adverse Effect; (c) Any sale or other disposition of any capital asset or Intellectual Property Right having a book value in excess of $25,000 used in the Business; (d) Any increase in the wage, salary, commission or other compensation (other than routine increases granted in the ordinary course of business and consistent with past practice) payable or to become payable by the Company to any of its employees, or any change in any existing, or creation of any new, insurance or other plan under which the Company provides benefits to such employees; or (e) Any release or waiver by Seller or the Company of any material claim or right of the Company. Section 4.11 Compliance with Law: Authorizations. The Company has complied in all material respects with and is in compliance in all material respects with each law, ordinance, or governmental or regulatory rule or regulation, whether federal, state, cantonal, local or foreign ("Regulation"), to which the Company's business, operations, assets or properties is subject. The Company owns, holds, possesses or lawfully uses in the operation of its business all material franchises, licenses, permits, approvals, filings, registrations and other authorizations from any governmental or regulatory official body or authority ("Authorizations") that are required to conduct the Business and such Authorizations are in full force and effect. The Company is in compliance in all material respects with the terms of the Authorizations and Regulations. To Seller's knowledge, no notice, citation, summons or order has been issued, no complaint has been filed, no penalty has been assessed and no investigation or review is pending or threatened by any governmental entity with respect to any alleged violation by the Company of any Regulation or with respect to any alleged failure by the Company to have any Authorization required in connection with the Business. All Authorizations are listed in Schedule 4.11. Section 4.12 Transactions with Related Parties. Except as disclosed on Schedule 4.12 and below, no Related Party: (a) has borrowed money from or loaned money to the Company that has not been repaid; (b) has any contractual or other claim of any kind whatsoever against the Company; (c) has had, since March 1, 1997, any interest in any Intellectual Property Rights used in the Business; or (d) has been engaged, since March 1, 1997, in any other transaction (or series of transactions) involving in excess of $50,000 in any fiscal year with the Company. Section 4.13 Litigation. Except as set forth on Schedule 4.13, no litigation, including any arbitration, investigation or other proceeding of or before any court, arbitrator or govern- mental or regulatory official, body or authority is pending or, to Seller's knowledge, threatened against the Company which relates to the assets of the Company, the stock of the Sub- sidiaries or the transactions contemplated by this Agreement. The Company is not a party to or subject to, and the assets of the Company and the stock of the Subsidiaries, are not subject to, the provisions of any judgment, order, writ, injunction, decree or award of any court, arbitrator or governmental or regulatory official, body or authority. Section 4.14 Title: Condition of Assets. The Company has good and valid title to the Assets, free and clear of all Liens of whatsoever nature except Permitted Liens, and subject only to minor imperfections of title, none of which, individually or in the aggregate, materially impairs the use of the affected property or materially impairs any operations of the Business. All of the Assets are in the Company's possession and control, are in good working order and operating condition and repair (ordinary wear and tear and routine maintenance excepted), are suitable for the purposes for which they are used in the Business, and are structurally sound and free from material defects. Since August 23, 1999, Seller has not removed any of the Assets from the Business. Section 4.15 Insurance. All policies of general liability and property insurance under which the Company is listed as an additional insured or a beneficiary are listed on Schedule 4.15. All such policies are in full force and effect in accordance with their terms, no notice of cancellation or non-renewal has been received, and there is no existing default or event which, with the giving of notice or lapse of time or both, would constitute a default under such policies. All premiums to date have been paid in full. Section 4.16 Contracts: Compliance. Schedule 4.16 contains a complete and accurate list of all material written leases, licenses, contracts or commitments of any kind, formal or informal, to which the Company is a party to or bound by. All material leases, contracts and other commitments to which the Company is a party or by which it is bound are in full force and effect. For purposes of this Section 4.16, "material" means any lease, license, contract or commitment involving a payment in excess of $100,000 in any 12-month period or having a term of 12 months or greater. To Seller's knowledge, (a) all parties to such leases, licenses, contracts and other commitments have complied with the provisions thereof; (b) no such party is in default under any of the terms thereof; and (c) no event has occurred that with the passage of time or the giving of notice or both would constitute a default by any party under any provision thereof. Section 4.17 Labor Matters. Except as disclosed on Schedule 4.17: (a) no employee of the Company is represented by any union or other labor organization; (b) there is no unfair labor practice complaint against the Company pending or, to Seller's knowledge, threatened before the National Labor Relations Board; (c) there is no labor strike, dispute, slow down or stoppage pending or, to Seller's knowledge, threatened against the Company; and (d) no grievance against the Company which might have a Material Adverse Effect on the Company or the conduct of its business is pending; (e) no private agreement restricts the Company from relocating, closing or terminating any of its operations or facilities; (f) to Seller's knowledge, the Company in the past three years has not experienced any work stoppage or other labor difficulty or committed any unfair labor practice; and (g) there are no efforts in progress by any union or other labor organization to organize any employees of the Company. For purposes of this Section 4.17 only, "Seller's knowledge" is defined as the personal knowledge of Joe Toscano, the plant manager of the Colorado Mill. Section 4.18 Employee Benefit Plans and Arrangements. Seller's execution of, and performance of the transactions con- templated by this Agreement will not constitute an event under any Seller Benefit Plan that will result in any payment (whether as severance pay or otherwise), acceleration, vesting or increase in benefits with respect to any employee for which Buyer would be responsible. No Seller Benefit Plan provides for "parachute payments" within the meaning of Section 280G of the Code. Section 4.19 Patents and Intellectual Property Rights. Schedule 4.19 contains a complete and accurate list and description (including the name and owner thereof) of the Intellectual Property Rights. Seller is the registered and beneficial owner of all of the Intellectual Property Rights free and clear of any royalty claims or other Liens except as stated on Schedule 4.19. To Seller's knowledge, the operation of the Business as currently conducted or conducted in the past does not conflict with or infringe on the rights of any other person, and Seller has not received any claim or notice from any person to such effect. To Seller's knowledge, no other person is infringing the Intellectual Property Rights. Except as set forth on Schedule 4.19, the Company owns or is licensed or otherwise has the exclusive use of all Intellectual Property Rights necessary for the operation of the Business as it is currently conducted. Section 4.20 Real Property. (a) For purposes of this Agreement, "Real Property" will mean all interests in and rights to the real property and the related improvements which are owned, leased or otherwise subject to a right of use, occupancy or license by the Company and are used in connection with the Business. All such Real Property is listed on Schedule 4.20. (b) With respect to the Real Property owned by the Company, the Company has good and marketable title, including all legal, equitable and beneficial interests, to the lots and parcels of land listed on Schedule 4.20 together with the buildings, structures and other improvements, with all easements, rights and other privileges appurtenant thereto, free and clear of all mortgages, liens, encumbrances, ground rents, leases, tenancies, licenses, reservations or other rights of occupancy or use for all or any portion of the Real Property, options, security interests, covenants, conditions, restrictions, rights- of-way, easements, encroachments and any other matter affecting title except Permitted Liens. (c) With respect to the Real Property leased by the Company, each lease is in full force and effect and has not been assigned, modified, supplemented or amended and neither the Company nor, to the Company's knowledge, the landlord or subland- lord under any lease is in default under any of the leases, and no circumstance presently exists which, with the giving of notice or passage of time, or both, would permit the landlord or sub- landlord under any lease to terminate any lease. Section 4.21 Disclosure. No representation or warranty by Seller in this Agreement, and no exhibit, document, statement, certificate or schedule furnished or to be furnished to Buyer pursuant to this Agreement, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained herein or therein not misleading, taken as a whole, and in light of the circumstances under which they were made. Section 4.22 Year 2000 Compliance. To Seller's knowledge, except as disclosed on Schedule 4.22, the Business is in all material respects Year 2000 Compliant in that no products, facilities, machinery, equipment, business systems and operational infrastructure are or will be affected in performance or functionality by dates prior to, during and after the year 2000. Section 4.23 Customers and Suppliers of Colorado Mill. Seller is not required to provide bonding or any other security arrangements in connection with any transactions with any customers or suppliers for the Colorado Mill. Schedule 4.23 contains, with respect to the nine-month period ending Sep- tember 30, 1999, a true and complete list of the (i) ten largest customers (in dollar volume of purchases) of the Colorado Mill of Seller and (ii) the five largest suppliers (in dollar volume of sales) to the Colorado Mill of Seller. Except as disclosed on Schedule 4.23, to the knowledge of Seller, no such supplier or customer intends or has threatened to terminate or modify its respective relationships with Seller. Article V Representations And Warranties Of Buyer Section 5.1 Corporate Existence. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania. Section 5.2 Corporate Power; Authorization; Enforceability. Buyer has the corporate power, authority and legal right to execute, deliver and perform this Agreement. The execution, delivery and performance of this Agreement by Buyer have been duly authorized by all necessary corporate and shareholder action. This Agreement and all the other agreements and instruments required to be executed and delivered by Buyer in connection with or pursuant hereto have been duly executed and delivered by Buyer and constitute the legal, valid and binding obligation of Buyer, enforceable in accordance with its terms except as such enforceability may be limited by bankruptcy, insol vency, moratorium, reorganization and similar laws affecting creditors' rights generally and general principles of equity. Section 5.3 No Conflicts. The execution and delivery of this Agreement by Buyer do not, and the consummation of the transactions contemplated by this Agreement and the compli- ance with the terms, conditions and provisions of this Agreement by Buyer will not (a) contravene any provision of Buyer's articles of incorporation or bylaws; or (b) conflict with or result in a breach of or constitute a default (or an event which might, with the passage of time or the giving of notice or both, constitute a default) under any of the terms, conditions or provisions of any material indenture, mortgage, loan or credit agreement or any other material agreement or instrument to which Buyer is a party or by which it or any of its assets may be bound or affected, or any judgment or order of any court or governmen- tal department, commission, board, agency or instrumentality, domestic or foreign, or any applicable regulation. Section 5.4 Consents. Except as required under the HSR Act, no consent, approval or authorization of, or registration or filing with any governmental authority or other regulatory agency, is required in connection with the execution, delivery and performance of this Agreement by Buyer. Section 5.5 Ability to Purchase. Buyer has the requisite financial ability to purchase the Assets and to consummate the transactions hereunder. Section 5.6 Brokers' and Finders' Fees. Buyer represents and warrants that all negotiations relative to this Agreement have been carried on by it directly without the intervention of any person who may be entitled to any brokerage or finder's fee or other commission in respect of this Agreement or the consum- mation of the transactions contemplated hereby. Article VI Certain Obligations of The Parties Section 6.1 Agreements of Seller Pending the Closing. Seller agrees that, pending the Closing and except as otherwise agreed to in writing by Buyer: (a) Maintenance of Insurance. The Company shall main- tain in full force adequate insurance policies. (b) Maintenance of Authorizations and Permits. The Company will maintain in full force and effect all Authorizations necessary for the conduct of the Business. (c) Compliance with Laws. The Company will comply in all material respects with all laws, ordinances, rules, regula- tions and orders applicable to the Business. (d) Fulfillment of Agreements. Seller will use its best efforts to cause all of the conditions to the obligations of Buyer under Section 6.1 of this Agreement to be satisfied on or prior to the Closing. (e) Access. Seller will give to Buyer's officers, employees, counsel, accountants and other representatives access to and the right to inspect, upon reasonable notice and during normal business hours, all of the premises, properties, assets, records, contracts and other documents relating to the Business and will permit them to consult with the officers of the Company, Seller and accountants, counsel and agents of the Company for the purpose of making such investigation of the Business as Buyer shall reasonably desire to make; provided, however, that such investigation shall not unreasonably interfere with the operation of the Business. (f) Assets. The Company will not remove any of the Assets from the Business except in the ordinary course of busi- ness. (g) Supplier/Customer Relations. The Company will use its best efforts to maintain the existing relationships of the Business with the Company's suppliers and customers so that they will be preserved after the Closing. (h) Confidentiality. If the transactions contemplated by this Agreement are not consummated, Buyer will, at its option, return to Seller or destroy all written materials and all copies thereof that were supplied to Buyer by Seller and that contain any confidential data or information and Buyer will and will cause its agents to hold in confidence any confidential data or information made available to Buyer in connection with this Agreement with respect to the Business. (i) Employee Relations. The Company will use its reasonable best efforts to retain its present employees of the Business so that they will be available to provide service to the Business after the Closing, but not grant any compensation or benefits increases outside the ordinary course (except for reten- tion bonuses, if any, granted by Seller to be paid by Seller for employment prior to the Closing Date). Section 6.2 Employee Matters. Buyer agrees to give each Transferred Texas Employee of Seller credit for time worked at Seller (including during the Crown Cork Ownership Period) for purposes of eligibility and vesting, but not benefit accrual, with respect to all applicable employee benefit plans to be provided by Buyer to the Transferred Texas Employees, and to treat each such employee the same as similarly situated employees of Buyer pursuant to each of its employee benefits plans. (a) Comparable Employment. Buyer will offer employment to all of the Colorado Employees and Texas Employees actively at work at the Business on the date of the Closing on comparable terms and conditions to those terms and conditions at which they were employed at the Closing. Nothing contained herein prohibits Buyer from terminating, discharging or laying off any Colorado Employees or Texas Employees after the Closing Date. Those Colorado Employees and Texas Employees accepting such offer prior to the Closing Date will become employees of Buyer as of the Closing Date (individually respectively the "Transferred Colorado Employees" and the "Transferred Texas Employees" and collectively the "Transferred Employees"). In the event that any Colorado Employees or Texas Employees decline or do not respond prior to the Closing Date to such offer of employment of Buyer, Buyer will have no obligation of any kind to such employees. Seller will be responsible for all liabilities, obli- gations and claims of the Transferred Employees who are employed by Buyer which (i) arise, within the meaning of any existing Seller Benefit Plan for the employees of the Business, prior to the date of the Closing (including without limitation claims for benefits filed after the Closing Date that Buyer can reasonably demonstrate relate to incidents that occurred prior to the Closing Date) and (ii) are payable under the terms and conditions of such Seller Benefit Plan on or prior to the Closing Date. (b) Texas Mill Benefits. Effective on the Closing Date, each Transferred Texas Employee who is an active participant in the Seller Benefit Plans will cease to be an active participant in such plans. Buyer will provide to the Transferred Texas Employees, effective on the Closing Date, employee benefit plans, programs and arrangements, which are comparable in the aggregate to those Seller had provided immediately prior to the Closing Date. Buyer may choose to pay COBRA premiums on behalf of Trans- ferred Texas Employees, while it establishes a health care plan. (c) Colorado Mill Benefits. Effective on the Closing Date, each Transferred Colorado Employee who is an active parti- cipant in the Seller Benefit Plans will cease to be an active participant in such plans, except as provided below. Buyer will provide to the Transferred Colorado Employees, effective on the Closing Date, employee benefit plans, programs and arrangements, which are comparable in the aggregate to those Seller had pro- vided immediately prior to the Closing Date. After the Closing Date and for a period not to exceed 180 days, Seller will provide health care coverage (including health, prescription drug, dental and life insurance) under COBRA for all Transferred Colorado Employees. In providing such health care coverage, Seller will comply with all applicable laws, including ERISA. Buyer will reimburse Seller for all costs incurred by Seller for such coverage. Buyer will notify Seller when the Transferred Colorado Employees will cease to be active participants in Seller's health care plan. Seller will invoice Buyer by the 10th day of each month for costs incurred during the prior month by Buyer for the Transferred Colorado Employees. Buyer will pay such invoices within 30 days of receipt. (d) No Liability for Seller Benefit Plans. Except as expressly provided in this Section 6.2, Buyer will not assume or be responsible for any liability under any of Seller's Benefit Plans, which are payable at any time to, or in respect of, any former or present employee of the Business after the Closing. (e) Workers' Compensation and Short-Term Disability. Seller retains all obligations for workers' compensation claims which may be made by a Transferred Employee on or after the Closing Date with respect to events occurring prior to the Closing Date that give rise to such claims. Seller will satisfy all obligations and make all payments with respect to such claims in accordance with Seller's policies in effect as of the Closing Date. Seller also retains all obligations for short-term dis- ability benefits due to Transferred Employees for all events occurring prior to the Closing Date that give rise to such benefits, including, without limitation, all medical and related payments, in accordance with Seller's policies in effect as of the Closing Date. (f) Reimbursement for Employment of Texas Employees. Buyer will reimburse Seller for all reasonable compensation and benefits costs incurred by Seller since August 23, 1999, in employing the Texas Employees identified on Schedule 6.2. Section 6.3 Cooperation and Access. After the Closing Date as either party may from time to time reasonably request, the other party will provide the requesting party with such information regarding the Company and the Business as such party reasonably requires. But, neither party will be obligated to provide the other party with any information of a commercially sensitive nature, relating to trade secrets or in violation of the applicable law, rule or regulation or any contractual provision prohibiting disclosure. Section 6.4 License of Block Caster Technology. Buyer agrees that, if within two years of the date of this Agreement, Buyer elects to remove the block caster equipment, which includes the blocks and the frames but does not include any of the ancil- lary equipment, such as the block heaters or the water system ("Caster") from the Texas Mill, Buyer will (i) offer to sell the Caster to ACX Technologies, Inc. or a designated affil- iate of ACX Technologies, Inc. for $1.00 on an "as is, where is" basis; and (ii) if Seller elects to buy the Caster, which election must be made within 30 days of Buyer's offer to sell the Caster, convey to ACX Technologies, Inc. or its designated affiliate purchaser a non-exclusive, non-transferable, fully paid-up, perpetual license without right of sublicense under the terms of a license agreement to be negotiated to the mutual satisfaction of the parties within 60 days of the Closing Date to use the Caster in the United States, to make use and sell can sheet body stock under all Intellectual Property Rights that have been used to operate the Caster at the Texas Mill. ACX Technologies, Inc. or its affiliate will have 60 days from the date it elects to buy the Caster to remove the Caster from Buyer's facility and will be responsible for all costs of removing the Caster from Buyer's facility. In removing the Caster from Buyer's facility, ACX Technologies Inc. will not, or will ensure that its designated affiliate will not, unreason- ably interfere with Buyer's operation of the facility. Section 6.5 Non-Solicitation. Seller covenants and agrees that for a period of two years from the Closing Date, Seller will not solicit, hire or otherwise engage as an employee, any person who continues to be employed by the Company or the Business, except when the employee responds, unsolicited, to a public advertisement or with the prior written consent of Buyer. Section 6.6 Non-Compete. Seller covenants and agrees that for a period of two years from the Closing Date Seller will not directly or indirectly engage in or become associated as an employee, consultant, partner, owner, agent, stockholder, member, officer or director of, any person or entity engaged in, or about to become engaged in, the design, development, operation, marketing or selling of aluminum can sheet in competition with the Business, except as expressly permitted under any license agreement entered into by the parties in accordance with Section 6.4. Section 6.7 Real Estate Matters. Seller will arrange, pay for and deliver to Buyer an as-built survey of all of the owned Real Property within 30 days after the Closing Date. At Closing, Seller will provide an Owner's Affidavit in the form of Exhibit B related to such owned Real Property. Section 6.8 Transfer Taxes. All Taxes, fees, and assess- ments arising from or payable in connection with the transfer of the Assets shall be paid by Buyer, except Colorado real estate documentary and transfer taxes, which will be split equally by Buyer and Seller. Section 6.9 Section 338(h)(10) Election. It is understood by the parties that, in connection with the acquisition of the shares of Seller by ACX Technologies, Inc. from Crown Cork & Seal on August 23, 1999, ACX Technologies, Inc. and Crown Cork & Seal agreed that one Section 338(h)(10) election would occur with respect to those shares. Under that agreement, ACX Technologies, Inc. and Crown Cork & Seal will agree upon an allocation of the purchase price to the assets acquired. As that allocation will have a direct bearing on the allocation to be agreed upon as between Buyer and Seller, Seller will cause ACX Technologies, Inc. to include Buyer's representatives as a party to the allocation negotiations with Crown Cork & Seal. Seller and Buyer will each report all transactions pursuant to this Agreement in a manner that is consistent with such election and will take no position contrary thereto unless required to do so pursuant to a "determination" within the meaning of Section 1313 of the Code. Section 6.10 Colorado Mill Baghouse. Seller will make the repair described in Schedule 6.10 to correct damage at the Colorado Mill baghouse. Article VII Environmental Indemnification Section 7.1 Definitions. (a) Hazardous Substance. For purposes of this Article, "Hazardous Substance" means any substance, chemical or waste that is listed or defined as hazardous, toxic, or dangerous under Applicable Law (defined below). (b) Applicable Law. For purposes of this Article, "Applicable Law" means any and all federal, state and local laws concerning the protection of human health and the environment, including but not limited to the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. 9601 et seq; the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. 6901, et seq.; the Federal Water Pollution Control Act, 33 U.S.C. 1251 et seq.; the Clean Air Act, 42 U.S.C. 7401, et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. 1471, et seq.; the Toxic Substances Control Act, 15 U.S.C. 2601 through 2629; and the Safe Drinking Water Act, 42 U.S.C. 300f through 300j; each, as amended from time to time, or any successor laws thereto, together with the rules and regulations promulgated thereunder, together with any and all environmental or land use laws, rules, ordinances, or regulations. (c) Cleanup. For purposes of this Article, "Cleanup" means all actions required to: (i) clean up, remove, treat or remediate any Hazardous Substance in the indoor or outdoor environment; (ii) prevent the Release of Hazardous Substances so that they do not migrate, endanger or threaten to endanger public health or welfare or the indoor or outdoor environment; (iii) perform pre-remedial studies and investigations and post-remedial monitoring and care; or (v) respond to any government requests for information or documents in any way relating to cleanup, removal, treatment or remediation of the indoor or outdoor environment. (d) Release. For purposes of this Article, "Release" means any release, spill, emission, discharge, leaking, pumping, injection, deposit, disposal, dispersal, leaching or migration into the indoor or outdoor environment (including, without limitation, ambient air, surface water, groundwater and surface or subsurface strata) or into or out of any property, including the movement of any Hazardous Substance through or in the air, soil, surface water, groundwater or property. (e) Environmental Liabilities. For purposes of this Article, "Environmental Liabilities" means all losses, liabil- ities, claims, obligations, damages, deficiencies, costs, expenses and fees, including costs of Cleanup (excluding all employment and benefit costs of Buyer's employees), incurred or required to be paid as a result of or arising out of: (i) Hazardous Substances that are or were at, upon, in or under the Real Property prior to the Closing, (ii) Hazardous Substances Released at anytime at any location other than the Real Property (including Hazardous Substances emanating from the Real Property) if such Hazardous Substances were generated, stored, disposed of, recycled, Released, used or transported, by or on behalf of Seller or the Subsidiaries prior to the Closing; or (iii) acts, omissions or any noncompliance with any Applicable Law prior to the Closing. Section 7.2 Environmental Indemnification and Remediation Activities. (a) Environmental Indemnification. Seller will indem- nify, defend and hold Buyer and Affiliates of Buyer harmless from and against any and all Environmental Liabilities, except for Environmental Liabilities arising due to a post-closing change in Applicable Law. The express indemnification set forth in this Section 7.2(a) will remain in full force and effect for a period of 15 years from the Closing Date. After ten years, Seller's liability under this express indemnification will decrease by 20% each year for the remaining five years. The limitations to Seller's indemnification set forth in Section 9.1(b) will not apply to this Article 7. (b) Remediation Activities. Seller agrees to assume monetary responsibility for the remediation activities described below to the extent Buyer undertakes these activities after the Closing Date and provided such remediation activities are com- pleted in accordance with the remediation plans established by Buyer and agreed to by Seller as set forth below. Seller will reimburse Buyer for the costs and expenses incurred by Buyer (ex- cluding all compensation and benefit costs of Buyer's employees) in completing the following remedial actions: (i) 50% of the anticipated total cost of $275,000 of obtaining new operating permits and associated testing, up to a maximum of $137,500. (ii) 80% of the anticipated total cost of $400,000 of (i) removal of beryllium from interior wall areas and from overhead steel rafters and certain horizontal surfaces existing on the Closing Date at the Colorado Mill, and (ii) final closure of a disposal trench at the Colorado Mill, up to a maximum of $320,000 for the remediation activities set forth in this Section 7.2(b)(2). Article VIII Survival of Representations and Warranties All of the representations and warranties set forth in this Agreement or in any exhibit, schedule, document or other instrument delivered under this Agreement will (unless waived in writing by the party for whose benefit such representation or warranty was made) remain in full force and effect regardless of any investigation, verification or approval by or on behalf of any party hereto, and will survive the Closing Date for a period of two years, except that all representations made related to title of the Assets or the stock of the Subsidiaries will survive for the applicable statute of limitations. Article IX Indemnification Section 9.1 Indemnification By Seller. (a) Extent of Indemnity. Seller agrees to indemnify, defend and hold harmless Buyer from and against: (i) any Damages of Buyer resulting from any mis- representation or breach of representation or warranty of Seller in this Agreement or in any agreement or statement or certificate furnished by Seller to Buyer pursuant hereto or in connec- tion with the transactions contemplated hereby; (ii) any Damages of Buyer arising out of or resulting from any breach of any covenant or agreement of Seller in this Agreement or in any agreement or statement or certificate furnished by Seller to Buyer pursuant hereto or in connection with the transactions contemplated hereby; (iii) the failure of Seller to discharge in full any liability or obligation of Seller or Company related to the Business that existed or occurred prior to the Closing Date, which was not expressly assumed as an Assumed Liability by the Buyer under this Agreement; and (iv) any actions, judgments, costs and expenses (including reasonable attorneys' fees and all other expenses incurred in investigating, preparing or defending any liti- gation or proceeding, commenced or threatened) incident to any of the foregoing or the enforcement of this Section by Seller. (b) Limitations on Liability. Seller shall not be liable to Buyer under Section 9.1(a)(i) unless the cumulative total of Damages indemnified under this Section exceeds $1,000,000 (the "Basket"), in which event Buyer shall be entitled to indemnification only to the extent that such Damages exceed the Basket. Seller's aggregate liability under Section 9.1(a)(i) shall in no event exceed $7,500,000 (the "Cap"). No Basket or Cap will apply to indemnification by Seller under Sections 9.1(a)(ii) through 9.1(a)(iv). The right to indemnification provided under Section 9.1(a)(i) shall be the exclusive remedy of Buyer against Seller for breach of a representation or warranty. Section 9.2 Indemnification by Buyer. (a) Extent of Indemnity. Buyer agrees to indemnify, defend and hold harmless Seller from and against: (i) any Damages of Seller arising out of or resulting from any material misrepresentation or breach of representation or warranty of Buyer in this Agreement or in any agreement or statement or certificate furnished by Buyer to Seller in connection with the transactions contemplated hereby; (ii) any Damages of Seller arising out of or resulting from any breach or nonfulfillment of any covenant or agreement of Buyer in this Agreement or in any agreement or statement or certificate furnished by Buyer to Seller in con- nection with the transactions contemplated hereby; (iii) any Damages of Seller arising out of or resulting from any assertion against Seller of any liability or obligation included in the Assumed Liabilities; and (iv) any actions, judgments, costs and expenses (including reasonable attorneys' fees and all other expenses incurred in investigating, preparing or defending any litigation or proceeding, commenced or threatened) incident to any of the foregoing or the enforcement of this Section by Buyer. Section 9.3 Indemnification Procedures. (a) A party seeking indemnification pursuant to this Agreement (an "Indemnified Party") shall give prompt notice to the party from whom such indemnification is sought (the "Indemni- fying Party") of the assertion of any claim, or the commencement of any action, suit or proceeding by a third party which is not an Affiliate of any party hereto in respect of which indem- nity may be sought hereunder (a "Third Party Claim"), and will give the Indemnifying Party such information with respect thereto as the Indemnifying Party may reasonably request, but failure to give such notice shall not relieve the Indemnifying Party of any liability except to the extent that the Indemnifying Part is actually prejudiced thereby. (b) The Indemnifying Party shall have the right, exercisable by written notice to the Indemnified Party within 30 days of receipt of notice from the Indemnified Party of the commencement or assertion of any Third Party Claim, to assume and conduct the defense of such Third Party Claim with counsel selected by the Indemnifying Party and reasonably acceptable to the Indemnified Party; provided that (i) the defense of such Third Party Claim by the Indemnifying Party will not, in the reasonable judgment of the Indemnified Party, have a Material Adverse Effect on the Indemnified Party; and (ii) the Indemnify- ing Party has sufficient financial resources, in the reasonable judgment of the Indemnified Party, to satisfy the amount of any adverse monetary judgment that is reasonably likely to result; and (iii) the Third Party Claim solely seeks (and continues to seek) monetary damages (the conditions set forth in clauses (i) through (iii) are collectively referred to as the "Litigation Conditions"). If the Indemnifying Party does not assume the defense of such Third Party Claim in accordance with this Section 9.3, the Indemnified Party may continue to defend the Third Party Claim. If the Indemnifying Party has assumed the defense of a Third Party Claim as provided in this Section 9.3, the Indemnify- ing Party will not be liable for any legal expenses subsequently incurred by the Indemnified Party in connection with the defense thereof; provided, however, that if (i) the Litigation Conditions cease to be met, or (ii) the Indemnifying Party fails to take reasonable steps necessary to defend diligently such Third Party Claim, the Indemnified Party may assume its own defense, and the Indemnifying Party will be liable for all reasonable costs or expenses paid or incurred in connection therewith. (c) The Indemnifying Party or the Indemnified Party, as the case may be, shall have the right to participate in (but not control), at its own expense, the defense of any Third Party Claim which the other is defending as provided in this Agreement. (d) No settlement of a Third Party Claim may be made without the prior written consent of the Indemnifying Party and the Indemnified Party, which consents may not be unreasonably withheld, conditioned or delayed. Consent is presumed in the case of settlement of $50,000 or less where the other party has not responded to the proposal to settle within 10 business days of notice of a proposed settlement. (e) Amounts payable in respect of indemnification obligations of the parties shall be treated as an adjustment to the Purchase Price. Whether or not the Indemnifying Party chooses to defend or prosecute any Third Party Claim, all the parties hereto shall cooperate in the defense or prosecution thereof and shall furnish such records, information and testimony, and attend such conferences, discovery proceedings, hearings, trials and appeals, as may be reasonably requested in connection therewith. Article X Conditions Precedent to the Closing Section 10.1 Conditions Precedent to the Obligations of Buyer. All obligations of Buyer under this Agreement are, at its sole option, subject to the fulfillment or satisfaction, prior to or at the Closing, of each of the following conditions precedent: (a) Representations and Warranties. The representations and warranties of Seller contained in this Agreement (i) quali- fied as to materiality must have been true and correct in all respects when made and must be true and correct in all respects at and as of the Closing Date, and (ii) not qualified as to materiality must have been true and correct in all material respects when made and must be true and correct in all material respects at and as of the Closing Date. (b) Compliance with this Agreement. Seller shall have performed and complied in all respects with all agreements and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing. (c) No Pending Litigation. On the Closing Date, no suit, action or other proceeding, or injunction or final judgment relating thereto, shall be pending before any court or governmen- tal or regulatory official, body or authority in which it is sought to restrain or prohibit or to obtain damages or other relief in connection with this Agreement or the consummation of the transactions contemplated hereby. (d) HSR Act. The waiting period under the HSR Act shall have expired or been terminated. (e) Satisfactory Instruments. All instruments and documents required on Seller's part to effectuate and consummate the transactions contemplated hereby shall be delivered to Buyer and shall be in form and substance reasonably satisfactory to Buyer and its counsel. (f) Consents. Seller shall have delivered to Buyer at Closing copies of all consents to assignment of all material contracts, agreements and arrangements. (g) Guaranty. Seller shall have caused ACX Technologies, Inc. its parent corporation, to deliver to Buyer at Closing a Guaranty of all of Seller's indemnity obligations here- under, in substantially the form of Exhibit C. (h) Owner's Affidavit. Seller shall have delivered to Buyer the Owner's Affidavit described in Section 6.7. (i) Consent Decree. The Final Judgment, Hold Separate Stipulation and Order in the matter United States of America v. Alcoa Inc., ACX Technologies, Inc., and Golden Aluminum Company shall have been filed in the United States District Court for the District of Columbia in the form attached hereto as Exhibit D, or as modified with the prior written consent of Buyer and ACX Technologies, Inc. Section 10.2 Conditions Precedent to the Obligations of Seller. All obligations of Seller under this Agreement are, at its sole option, subject to the fulfillment or satisfaction, prior to or at the Closing, of each of the following conditions precedent: (a) Representations and Warranties. The representations and warranties of Buyer contained in this Agreement shall be true and correct in all material respects on the Closing Date, with the same force and effect as though such representations and warranties had been made on the Closing Date. (b) Compliance with this Agreement. Buyer shall have performed and complied in all material respects with all agree- ments and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing. (c) No Pending Litigation. On the Closing Date, no suit, action or other proceeding, or injunction or final judgment relating thereto, shall be pending before any court or governmen- tal or regulatory official, body or authority in which it is sought to restrain or prohibit or to obtain damages or other relief in connection with this Agreement or the consummation of the transactions contemplated hereby. (d) HSR Act. The waiting period under the HSR Act shall have expired or been terminated. (e) Satisfactory Instruments. All instruments and documents required on the part of Buyer to effectuate and consum- mate the transactions contemplated hereby shall be delivered to Seller and shall be in form and substance reasonably satisfactory to Seller and its counsel. (f) Consent Decree. The Final Judgment, Hold Separate Stipulation and Order in the matter United States of America v. Alcoa Inc., ACX Technologies, Inc., and Golden Aluminum Company shall have been filed in the United States District Court for the District of Columbia in the form attached hereto as Exhibit D, or as modified with the prior written consent of Buyer and ACX Technologies, Inc. Article XI Termination Section 11.1 Termination. This Agreement may be terminated by either Seller or Buyer at any time prior to the Closing: (a) by mutual written consent of Seller and Buyer; (b) by either Seller or Buyer (by written notice to the other) if the Closing shall not have occurred on or before November 15, 1999, provided that no termination right under this Section shall be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of the failure of the Closing to occur on or prior to such date; or (c) by either Seller or Buyer (by written notice to the other) if any court of competent jurisdiction in the United States or federal or state governmental or regulatory body in the United States shall have issued an order, decree or ruling or taken such other action that permanently restrains, enjoins or otherwise prohibits the transactions contemplated hereby and such order, decree, ruling or other action shall have become final and non-appealable; Section 11.2 Effect of Termination. Upon of the termination of this Agreement in accordance with the provisions of Section 11.1, this Agreement shall become null and void and have no further effect without any liability on the part of any of the parties, except as follows: (a) if the termination results from the willful failure to perform its obligations under this Agreement, such nonperform- ing party shall be fully liable for any and all damages, cost and expenses (including, without limitation, reasonable attorney's fees) sustained or incurred by such other party; or (b) if the termination results, not as a result of willful failure of any party to perform its obligations here- under, but as the result of the material breach by such party of a representation, warranty, or covenant hereunder, such breaching party shall be liable to the other party for all costs and expenses of the other party in connection with the preparation, negotiation, execution and performance of this Agreement. Article XII Miscellaneous Section 12.1 Expenses. Each of the parties to this Agree- ment will bear all the expenses incurred by it in connection with the negotiation and preparation of this Agreement and the consummation of the transactions contemplated by this Agreement regardless of whether this Agreement is terminated. Except as otherwise provided in this Agreement, the following taxes, charges and payments ("Charges") will be prorated on a per diem basis as indicated and apportioned between Seller and Buyer as of the date of the Closing: real property (daily), use (monthly), intangible taxes (monthly), utility charges (monthly), rental or lease charges (term of lease), license fees (term of lease), general assessments (taxable year), and franchise, national or cantonal or other income taxes (daily) imposed with respect to the Assets and employee payrolls (monthly). Seller will be liable for that portion of the Charges relating to, or arising in respect of, the period on or prior to the date of the Closing and Buyer will be liable for that portion of the Charges relating to, or arising in respect of, any periods after the date of the Closing. Section 12.2 Contents of Agreement; Parties in Interest. This Agreement sets forth the entire understanding of Buyer and Seller with respect to the transactions contemplated hereby. This Agreement shall not be amended or modified except by written instrument duly executed by Buyer and Seller. Any and all previous agreements and understandings between Buyer and Seller regarding the subject matter hereof, whether written or oral, are superseded by this Agreement. Section 12.3 Assignment and Binding Effect. Except as provided below, this Agreement may not be assigned by Buyer or Seller without the prior written consent of the other party, which consent may not be unreasonably withheld. Buyer may assign its rights and may delegate its duties under Sections 6.5 and 6.6 of this Agreement, in whole or in part as Buyer deems appropriate, to a buyer of the Colorado Mill. Subject to the foregoing, all of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the successors and permitted assigns of Seller and Buyer. Section 12.4 Notices. Any notice, request, demand, waiver, consent, approval or other communication which is required or permitted hereunder shall be in writing and shall be deemed given only if delivered personally or sent by facsimile or by registered or certified mail, postage prepaid, as follows: If to Buyer, to: Alcoa Inc. Alcoa Corporate Center 201 Isabella Street Pittsburgh, PA 15212-5858 Attention: Lawrence R. Purtell, General Counsel Facsimile: (412) 553-3200 If to Seller, to: Golden Aluminum Company 16000 Table Mountain Parkway Golden, CO 80403 Attention: Jed J. Burnham Facsimile: (303) 271-7055 With a required copy to: Golden Aluminum Company 16000 Table Mountain Parkway Golden, CO 80403 Attention: Jill B. W. Sisson, General Counsel Facsimile: (303) 271-7055 With an additional required copy to: Holland & Hart LLP Suite 3200 555 Seventeenth Street Denver, CO 80202 Attention: Betty C. Arkell, Esq. Facsimile: (303) 295-8261 or to such other address as the addressee may have specified in a notice duly given to the sender as provided herein. Such notice, request, demand, waiver, consent, approval or other communication will be deemed to have been given as of the date so delivered, sent by facsimile (with confirmation of receipt) or three days after deposited with the United States Post Office. Section 12.5 Governing Law. This Agreement shall be governed by and interpreted and enforced in accordance with the laws of the State of Colorado without regard to conflicts of law principles. Section 12.6 No Benefit to Others. The representations, warranties, covenants and agreements contained in this Agreement are for the sole benefit of the parties hereto and their successors and assigns, and they shall not be construed as conferring any rights on any other persons. Section 12.7 Headings, Gender and "Person." All section headings contained in this Agreement are for convenience of reference only, do not form a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agree ment. Words used herein, regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine, or neuter, as the context requires. Any reference to a "person" herein shall include an individual, firm, corporation, partnership, trust, governmental authority or body, association, unincorporated organization or any other entity. Section 12.8 Publicity. No press release, notice, disclo- sure or other publicity concerning the transactions contemplated by this Agreement shall be issued, given, made or other- wise disseminated by Buyer or Seller without the prior approval of the other party, unless required by law. Section 12.9 Severability. Any provision of this Agreement which is invalid or unenforceable in any jurisdiction shall be ineffective to the extent of such invalidity or unenforceability without invalidating or rendering unenforceable the remaining provisions hereof, and any such invalidity or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 12.10 Counterparts. This Agreement may be executed in any number of counterparts, and Buyer and Seller may execute any such counterpart, each of which when executed and delivered shall be deemed to be an original and all of which counterparts taken together shall constitute one and the same instrument. This Agreement shall become binding when one or more counter- parts taken together shall have been executed and delivered by Buyer and Seller. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the date first written. BUYER: ALCOA INC. By:_____________________________ Name:___________________________ Title:__________________________ SELLER: GOLDEN ALUMINUM COMPANY By:_____________________________ Name:___________________________ Title:__________________________ EX-2.4 3 Exhibit 2.4 FORM OF DISTRIBUTION AGREEMENT BETWEEN ACX TECHNOLOGIES, INC. AND COORSTEK, INC. December 1, 1999 TABLE OF CONTENTS PAGE ARTICLE I DEFINITIONS 1 ARTICLE II PRE-DISTRIBUTION TRANSACTIONS 5 2.01 Transferred Assets and Assumed Liabilities 5 2.02 Financing Arrangements 5 2.03 Related Agreements 6 2.04 ACX Approval 6 2.05 Securities Law Actions 6 ARTICLE III ASSUMPTION AND RETENTION OF LIABILITIES 6 3.01 Assumed Liabilities 6 3.02 Retained Liabilities 7 ARTICLE IV THE DISTRIBUTION 7 4.01 The Distribution 7 4.02 Fractional Shares 7 4.03 ACX Board Action 7 ARTICLE V SURVIVAL, INDEMNIFICATION, CLAIMS AND OTHER MATTERS 8 5.01 Survival of Agreements 8 5.02 Indemnification 8 5.03 Procedure for Indemnification 9 5.04 Direct Claims 10 5.05 Adjustment of Indemnifiable Losses 11 5.06 No Third Party Beneficiaries 12 5.07 Joint Defense Agreements 12 5.08 Special Notices 12 ARTICLE VI CERTAIN ADDITIONAL MATTERS 13 6.01 Construction of Agreements 13 6.02 No Representations or Warranties; Exceptions 13 6.03 Further Assurances 14 6.04 Consents, etc. 14 6.05 Officers and Directors 14 6.06 Existing Intercompany Arrangements 14 6.07 Intercompany Accounts 14 6.08 Transfer Taxes 14 6.09 Proration of Taxes, Lease and Utility Payments 15 ARTICLE VII ACCESS TO INFORMATION AND SERVICES 15 7.01 Provision of Corporate Records 15 7.02 Access to Information 15 7.03 Production of Witnesses and Individuals 16 7.04 Retention of Records 16 7.05 Confidentiality 16 7.06 Privileged Matters 17 ARTICLE VIII INSURANCE 18 8.01 General 18 8.02 Certain Insured Claims 19 ARTICLE IX DISPUTE RESOLUTION 19 9.01 Initiation 19 9.02 Mediation 19 9.03 Arbitration 20 9.04 Cost of Arbitration 20 ARTICLE X MISCELLANEOUS 20 10.01 Complete Agreement 20 10.02 Expenses 21 10.03 Governing Law 21 10.04 Notices 21 10.05 Amendment and Modification 21 10.06 Termination 21 10.07 Successors and Assigns 22 10.08 No Third Party Beneficiaries 22 10.09 Counterparts 22 10.10 Interpretation 22 10.11 Schedules, Etc. 22 10.12 Legal Enforceability 22 SCHEDULE I - TRANSFERRED ASSETS AND ASSUMED LIABILITIES SCHEDULE II - INTERCOMPANY DEBT EXHIBIT A - FORM OF PROMISSORY NOTE EXHIBIT B - FORM OF ENVIRONMENTAL RESPONSIBILITY AGREEMENT EXHIBIT C - FORM OF TRANSITIONAL SERVICES AGREEMENT EXHIBIT D - FORM OF TAX SHARING AGREEMENT DISTRIBUTION AGREEMENT THIS DISTRIBUTION AGREEMENT (this "Distribution Agreement" or this "Agreement"), dated as of December 1, 1999, is between ACX Technologies, Inc., a Colorado corporation ("ACX"), and COORSTEK, INC., a Colorado corporation and a wholly-owned subsidiary of ACX (together with its subsidiaries, "CTI"). RECITALS 1. ACX conducts its business through its subsidiaries, Graphic Packaging Holdings Inc. and its subsidiaries, ACX International Sales Corp. and CTI. 2. The Board of Directors of ACX (the "Board") has authorized a plan that, if completed as contemplated herein, will separate CTI from ACX's business by distributing the CTI common stock (the "CTI Common Stock"), to the holders of the common stock of ACX (the "ACX Common Stock"), on a pro rata basis. 3. ACX and CTI have determined that it is necessary and desirable to establish the principal corporate transactions required to separate CTI's business from ACX and distribute the CTI Common Stock, and to agree on certain other matters, all as provided in this Agreement. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, ACX and CTI agree as follows: ARTICLE I DEFINITIONS As used in this Agreement, capitalized terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): ACX Group: ACX and its Affiliates immediately following the Distribution. Action: any action, claim, suit, arbitration, inquiry, subpoena, discovery request, proceeding or investigation by or before any court or grand jury, any governmental or other regulatory or administrative agency or commission or any arbitration tribunal. Affiliate: with respect to any specified person, a person that, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, such specified person; provided that ACX (and its subsidiaries) shall not be deemed to be Affiliates of CTI (and its subsidiaries), and vice versa, for purposes of this Agreement; further provided, that neither ACX nor CTI (and their respective subsidiaries) shall be deemed to be Affiliates of Adolph Coors Company (and its subsidiaries), or vice versa, for purposes of this Agreement. Agent: Norwest Bank Minnesota, NA, the distribution agent appointed by ACX to distribute the CTI Common Stock. Assumed Liabilities: collectively, the Liabilities and other obligations of ACX related to CTI that are described or listed on Schedule 1 hereto. Bill of Sale, Assignment and Assumption Agreements: one or more bills of sale, assignments and assumption agreements to be entered into between ACX and CTI on or after the date of this Distribution Agreement pursuant to which ACX transfers the Transferred Assets to CTI and CTI assumes the Assumed Liabilities, as and when contemplated by Section 2.01 of this Distribution Agreement. Board: as defined in the Recitals to this Agreement. Books and Records: the books and records (including computerized books and records) of ACX or its Affiliates that relate principally to CTI, all books and records relating to Employees; and all files relating to any Action being assumed by CTI as part of the Assumed Liabilities or any Action in which, as between the parties hereto or their Affiliates, CTI is the principal party in interest. CTI Group: CTI and its Affiliates immediately following the Distribution. Code: the Internal Revenue Code of 1986, as amended. Conveyancing and Assumption Instruments: collectively, the Bill of Sale, Assignment and Assumption Agreements and any other agreements, instruments and other documents to be entered into in order to effect the transfer to CTI of the Transferred Assets and the assumption by CTI of the Assumed Liabilities. Distribution: the distribution as a dividend to holders of ACX Common Stock of CTI Common Stock on the basis provided in Article IV hereof, which shall be made on the date specified by the Board. Distribution Date: the date of the Distribution as determined by the Board. Distribution Ratio: as determined by the Board, the ratio of the number of shares (or fraction thereof) of CTI Common Stock to be distributed to the holders of each share of ACX Common Stock on the Record Date. Dividend: the special cash dividend in an amount equal to $200 million less the Intercompany Debt to be paid by CTI to ACX on the Distribution Date. Employee: any employee of ACX or any of its subsidiaries other than CTI who is assigned to CTI on or prior to the Distribution Date, including but not limited to any such employee who was laid off, on leave of absence or on disability leave as of the Distribution Date. Environmental Responsibility Agreement: the agreement, substantially in the form of Exhibit B hereto, pursuant to which ACX and CTI will provide for responsibility for potential environmental matters. Exchange Act: the Securities Exchange Act of 1934, as amended. Final Determination: as defined in the Tax Sharing Agreement. Form 10: the registration statement on Form 10, as amended from time to time, filed by CTI with the SEC to register the CTI Common Stock pursuant to the Exchange Act. Indemnifiable Loss Deduction: as defined in Section 5.05(b). Indemnifiable Losses: with respect to any claim by an Indemnitee for indemnification authorized pursuant to Article V hereof, any and all losses, liabilities, claims, damages, obligations, payments, costs and expenses (including, without limitation, the costs and expenses of any and all Actions, demands, assessments, judgments, settlements and compromises relating thereto and reasonable attorneys' fees and expenses in connection therewith) suffered by such Indemnitee with respect to such claim. Indemnifying Party: any party who is required to pay any other person pursuant to Article V hereof. Indemnity Return: as defined in Section 5.05. Indemnitee: any party who is entitled to receive payment from an Indemnifying Party pursuant to Article V hereof. Indemnity Payment: the amount an Indemnifying Party is required to pay an Indemnitee pursuant to Article V hereof. Information Statement: the definitive information statement, substantially in compliance with Schedule 14C under the Exchange Act, to be mailed to the holders of ACX Common Stock in connection with the Distribution. Insurance Effective Time: as defined in Section 8.03(a). Insurance Program: collectively, the series of policies as of the date of this Agreement pursuant to which various insurance carriers provide or have provided insurance coverage to ACX and its Affiliates. Intercompany Debt: the aggregate intercompany debt owed to ACX by CTI set forth on Schedule II hereto. In no event shall trade payables incurred in the ordinary course of business between ACX and CTI or their Affiliates be considered Intercompany Debt for purposes of this definition. Intercompany Debt Methodology: the financial methodology heretofore approved by the Board to split the consolidated debt of ACX between ACX and CTI prior to the Distribution. Liabilities: any and all debts, liabilities and obligations, whether accrued, contingent or reflected on a balance sheet, known or unknown, including, without limitation, those arising under any law, rule, regulation, Action, order or consent decree of any governmental entity or any judgment of any court of any kind or award of any arbitrator of any kind, and those arising under any contract, commitment or undertaking. New Debt: shall mean at least $205 million principal amount of debt to be incurred by CTI prior to the Distribution Date. Notice: as defined in Section 9.01. Policy Termination Date: as defined in Section 8.01(a). Privilege: as defined in Section 7.06(a). Privileged Information: as defined in Section 7.06(a). Promissory Note: as defined in Section 2.02. Record Date: the date determined by the Board as the record date for the Distribution. Recovery: the amount obtained pursuant to a claim under an insurance policy in the Insurance Program. Related Agreements: the Environmental Responsibility Agreement, Transitional Services Agreement, Tax Sharing Agreement, any joint defense agreement, the Conveyancing and Assumption Instruments, all other agreements referred to in Section 2.04 and any other agreement entered into by ACX or one or more of its Affiliates, and CTI and one or more of its Affiliates pursuant to this Agreement or otherwise in connection with the Distribution. Restated Tax Saving Amount: as defined in Section 5.05(b). Retained Liabilities: collectively, all Liabilities and obligations of ACX that are not Assumed Liabilities. SEC: the Securities and Exchange Commission. Tax Ruling: the ruling by the Internal Revenue Service that the Distribution will be tax free to ACX and ACX stockholders under Section 355 of the Code. Tax Saving Amount: as defined in Section 5.05. Tax Sharing Agreement: the agreement substantially in the form of Exhibit D hereto, pursuant to which ACX and CTI will provide for certain tax matters. Third Party Claim: as defined in Section 5.03(b). Transferred Assets: Collectively, all assets of ACX being transferred to CTI that are described or listed on Schedule I hereto. Transfer Taxes: as defined in Section 6.08. Transitional Services Agreement: the agreement, substantially in the form of Exhibit C hereto, pursuant to which ACX and CTI, or their Affiliates, will provide certain transitional services to each other. ARTICLE II PRE-DISTRIBUTION TRANSACTIONS Section 2.01 Transferred Assets and Assumed Liabilities. Certain Transferred Assets to be transferred and certain Assumed Liabilities to be assumed pursuant to this Agreement are to be transferred and assumed on or before December 15, 1999. Certain other Transferred Assets to be transferred and Assumed Liabilities to be assumed are to be transferred and assumed as of the close of business on the Distribution Date. Schedule I hereto sets forth the Transferred Assets and Assumed Liabilities and their respective transfer and assumption dates. ACX and CTI agree to execute such Bill of Sale, Assignment and Assumption Agreements as necessary or desirable to effect such transfers and assumptions in accordance with this Agreement and such Schedule. Section 2.02 Financing Arrangements. ACX and CTI shall use their respective best efforts to cause the following to occur on or before the close of business on the Distribution Date: (a) the incurrence by CTI of the New Debt; (b) the repayment by CTI from the proceeds of the New Debt of the Intercompany Debt; and (c) the payment by CTI of the Dividend to ACX from the proceeds of the New Debt. ACX and CTI agree that if CTI shall not have received the proceeds of the New Debt on or before the close of business on the Distribution Date, then CTI shall make the payments in subsections (b) and (c) above by issuing to ACX on the Distribution Date a promissory note substantially in the form of Exhibit A hereto, which shall be due on January 4, 1999 subject to extension to a later date by mutual agreement of the parties. ACX and CTI further agree that CTI shall indemnify ACX pursuant to Article V for any payment or fee ACX is required to pay or any other expense ACX may incur in respect of the New Debt. Section 2.03 Related Agreements. ACX and CTI shall use their best efforts to cause, on or before the Distribution Date, the execution and delivery by ACX and CTI, or their respective Affiliates, of the Transitional Services Agreement, Environmental Responsibility Agreement, any Joint Defense Agreement, Tax Sharing Agreement, and other agreements deemed necessary or desirable by the applicable parties to establish and govern their post-Distribution relationships. Section 2.04 ACX Approval. ACX, as the sole shareholder of CTI, shall approve or ratify any actions that are reasonably necessary or desirable to be taken by CTI to effectuate the transactions contemplated by this Agreement in a manner consistent with the terms of this Agreement, including, without limitation, approval of appropriate equity or other plans, agreements and arrangements for Employees and non-Employee members of CTI's Board of Directors. Section 2.05 Securities Law Actions. ACX and CTI shall have prepared and filed with the SEC, the Form 10, which shall include or incorporate by reference the Information Statement setting forth appropriate disclosure concerning CTI, the Distribution and any other appropriate matters required to be stated therein. ACX and CTI shall update, supplement and amend this information and shall use reasonable efforts to cause the Form 10 to become effective under the Exchange Act, and thereafter ACX shall mail the Information Statement to holders of ACX Common Stock as of the Record Date. (b) ACX and CTI shall take all such action as may be necessary or appropriate under the securities or blue sky laws of states or other political subdivisions of the United States in connection with the Distribution. (c) CTI shall prepare and file an application and shall pursue inclusion of its Common Stock in the Nasdaq National Market System. ARTICLE III ASSUMPTION AND RETENTION OF LIABILITIES Section 3.01 Assumed Liabilities. Upon the terms and subject to the conditions set forth in this Agreement and the Bill of Sale, Assignment and Assumption Agreements, CTI hereby agrees with ACX to assume, pay, perform and discharge in due course any and all Assumed Liabilities. Section 3.02 Retained Liabilities. Upon the terms and subject to the conditions set forth in this Agreement and the Bill of Sale, Assignment and Assumption Agreements, ACX hereby agrees with CTI to pay, perform and discharge in due course any and all Retained Liabilities. ARTICLE IV THE DISTRIBUTION Section 4.01 The Distribution. Prior to the Distribution Date, ACX shall deliver to CTI the certificate for 200,000 shares of CTI Common Stock held by ACX and representing all of the outstanding CTI Common Stock, and CTI shall cancel such certificate and issue and deliver to ACX in exchange therefor an omnibus stock certificate representing that number of shares of CTI Common Stock equal to the product of (i) the number of shares of ACX Common Stock outstanding on the Record Date multiplied by (ii) the Distribution Ratio. ACX shall then deliver such omnibus certificate to the Agent and shall instruct the Agent to distribute, beginning on the Distribution Date, to holders of ACX Common Stock on the Record Date, the appropriate number of shares of CTI Common Stock based on the Distribution Ratio, and, as soon thereafter as reasonably practicable, cash, if applicable, in lieu of fractional shares obtained in the manner provided in Section 4.02 hereof. CTI agrees to provide to the Agent sufficient certificates in such denominations as the Agent may request in order to effect the Distribution. All of the shares of CTI Common Stock issued in the Distribution shall be fully paid, nonassessable and free of preemptive rights. ACX shareholders shall not be required to pay cash or other consideration for the CTI Common Stock received in the Distribution. Section 4.02 Fractional Shares. No certificate or scrip representing fractional shares of CTI Common Stock shall be issued as part of the Distribution. In lieu of receiving fractional shares, each holder of ACX Common Stock who would otherwise be entitled to receive a fractional share of CTI Common Stock pursuant to the Distribution will receive cash for such fractional share. ACX shall instruct the Agent to determine the number of whole shares and fractional shares of CTI Common Stock allocable to each holder of record of ACX Common Stock on the Record Date, to aggregate all such fractional shares into whole shares and sell the whole shares obtained thereby in the open market at then prevailing prices on behalf of holders who otherwise would be entitled to receive fractional share interests and to distribute to each such holder such holder's ratable share of the total proceeds (net of total selling expenses) of such sale; provided however that the Agent shall have sole discretion to determine when, how, through which broker-dealer and at what price to make its sales; further provided that the broker-dealer shall not be an affiliate of ACX or CTI. Section 4.03 ACX Board Action. (a) The Board, in its discretion, shall establish the Record Date, the Distribution Date, the Distribution Ratio and all appropriate procedures in connection with the Distribution. (b) In its sole discretion for any reason, (including failure to receive confirmation (if requested) of the Tax Ruling) the Board may refuse to declare the Distribution; and after the declaration and until the Distribution, the Board may postpone or rescind the Distribution. In any event, the Board shall refuse to declare the Distribution until and unless the following conditions have been satisfied: (i) the Tax Ruling shall have been obtained and shall continue to be in effect; (ii) CTI Common Stock shall have been approved for inclusion in the Nasdaq National Market. ARTICLE V SURVIVAL, INDEMNIFICATION, CLAIMS AND OTHER MATTERS Section 5.01 Survival of Agreements. (a) The obligations of CTI with respect to the Assumed Liabilities and the obligations of ACX with respect to the Retained Liabilities, and the related indemnification rights under this Agreement, shall survive indefinitely. Except as specifically provided for herein or in any Related Agreement, all other obligations of ACX and CTI shall terminate and be of no further force and effect on the tenth anniversary of the Distribution Date. (b) The obligations of ACX and CTI under this Agreement shall survive the sale or other transfer by either of them of any assets or businesses or the assignment by either of them of any Liabilities. To the extent that ACX transfers any of the Retained Liabilities (except for such amounts of Retained Liabilities that are not material individually or in the aggregate), ACX shall cause the transferee of such Retained Liabilities to assume specifically its obligations with respect thereto under this Agreement and to fulfill its obligations related to such Retained Liabilities. To the extent that CTI transfers any of the Assumed Liabilities (except for such amounts of Assumed Liabilities that are not material individually or in the aggregate), CTI shall cause the transferee of such Assumed Liabilities to assume specifically its obligations with respect thereto under this Agreement and to fulfill its obligations related to such Assumed Liabilities. No such transfer shall relieve either ACX or CTI from its respective obligations under this Agreement or the Related Agreements. Section 5.02 Indemnification. (a) ACX shall indemnify, defend and hold harmless the CTI Group, and each of their respective directors, officers, employees and agents from and against any and all Indemnifiable Losses incurred or suffered by the CTI Group in connection with any Action or threatened Action and arising out of or due to, directly or indirectly, (i) any of the Retained Liabilities, or (ii) any failure to perform, or violation of, any provision of this Agreement or any Related Agreement that is to be performed or complied with by ACX or its Affiliate. (b) CTI shall indemnify, defend and hold harmless the ACX Group, and each of their respective directors, officers, employees and agents from and against any and all Indemnifiable Losses incurred or suffered by the ACX Group in connection with any Action or threatened Action and arising out of or due to, directly or indirectly, (i) any of the Assumed Liabilities, (ii) any payment, fee or other expense incurred by ACX in respect of the New Debt, or (iii) any failure to perform, or violation of, any provision of this Agreement or any Related Agreement that is to be performed or complied with by CTI or its Affiliates. Section 5.03 Procedure for Indemnification. (a) The following procedures shall apply to any claim for indemnification made by the ACX Group or the CTI Group pursuant to the indemnities provided in Section 5.02 of this Agreement and pursuant to any indemnities provided in any Related Agreement unless such Related Agreement establishes other procedures with respect to indemnities thereunder. (b) If ACX or CTI shall receive notice of any Action by any third party, or any fact or allegation upon which such Action could be based (hereinafter a "Third Party Claim"), with respect to which the other party is or may be obligated to make an Indemnity Payment, it shall give such other party prompt notice thereof (including any pleadings relating thereto), specifying in reasonable detail the nature of such Third Party Claim and the amount or estimated amount thereof to the extent then feasible (which estimate shall not be conclusive of the final amount of such Indemnity Payment); provided, however, that the failure of a party to give notice as provided in this Section 5.03 shall not relieve the other party of its indemnification obligations under this Article V, except to the extent that such other party is actually prejudiced by such failure to give notice. (c) For any Third Party Claim upon which notice is required to be given under paragraph (b) of this Section 5.03, the Indemnifying Party shall defend such Third Party Claim at its sole cost and expense and through counsel employed by the Indemnifying Party and reasonably acceptable to the Indemnitee. Within 30 days of receipt of the notice of Third Party Claim received under paragraph (b), the Indemnifying Party shall give notice of its intent to defend or objection to the claim of indemnification specifying in reasonable detail the grounds therefore. Failure to provide such notice within such 30-day period shall be deemed acknowledgment by the Indemnifying Party of its indemnity obligation for the Third Party Claim. (d) The Indemnifying Party's right to defend any Third Party Claim includes the right to control, manage and direct the defense of the Third Party Claim and to compromise, settle or consent to the entry of any judgment or determination of liability concerning such Third Party Claim; provided, however, that the Indemnifying Party shall not compromise, settle or consent to the entry of judgment or determination of liability against the Indemnitee without prior written approval by the Indemnitee, which approval shall not be unreasonably withheld; provided, however, that if the Indemnifying Party shall seek the approval of the Indemnitee to a settlement for monetary damages for which the Indemnifying Party accepts responsibility and if the Indemnitee shall withhold approval of such settlement, then the obligation of the Indemnifying Party shall be limited to the amount of the proposed and unapproved settlement, plus attorney's fees and costs to the date of the proposed settlement, and the Indemnitee shall be solely responsible for any additional amount. (e) The Indemnitee may participate in the Indemnifying Party's defense of any Third Party Claim in which the Indemnitee has an interest and be represented by counsel of its own choosing at the Indemnitee's sole cost and expense. (f) If the Indemnifying Party fails to defend a Third Party Claim, the Indemnitee may defend and may compromise and settle or consent to an entry of judgment or a determination of liability concerning such Third Party Claim at the sole cost and expense of the Indemnifying Party. (g) Regardless of the party that defends a Third Party Claim, the other shall make available to the Indemnifying Party all employees, Books and Records, communications, and documents, within its possession or control that are necessary, appropriate or reasonably deemed relevant with respect to such defense, and otherwise shall reasonably cooperate in the defense of the Third Party Claim. (h) With respect to any Third Party Claim, neither party to this Agreement shall enter into any compromise or settlement or consent to the entry of any judgment that does not include as an unconditional term thereof the giving by the third party of a release, from all further liability concerning such Third Party Claim, of the other party to this Agreement. (i) Upon final judgment after exhaustion of all appeals, settlement, compromise or other final resolution of any Third Party Claim, and unless otherwise agreed by the parties, the Indemnifying Party shall pay promptly on behalf of the Indemnitee, or to the Indemnitee in reimbursement of any amount theretofore required to be paid by it, the amount so determined by final judgment after exhaustion of all appeals, settlement, compromise or final resolution. Upon the payment in full by the Indemnifying Party of such amount, the Indemnifying Party shall succeed to the rights of such Indemnitee, to the extent not waived in settlement, against any third party. Section 5.04 Direct Claims. Any claim for indemnity pursuant to Section 5.02 on account of an Indemnifiable Loss made directly by the Indemnitee against the Indemnifying Party and does not result from a Third Party Claim shall be asserted by written notice from the Indemnitee to the Indemnifying Party. Such Indemnifying Party shall have a period of 90 days (or such shorter time period as may be required by law as indicated by the Indemnitee in the written notice) within which to respond thereto. If such Indemnifying Party does not respond within such 90-day (or lesser period), such Indemnifying Party shall be deemed to have accepted responsibility to make payment and shall have no further right to contest the validity of such claim. If such Indemnifying Party does respond within such 90-day (or lesser) period and rejects such claim in whole or in part, such Indemnitee shall be free to pursue resolution as provided in Article IX. Section 5.05 Adjustment of Indemnifiable Losses. (a) The amount which an Indemnifying Party is required to pay to an Indemnitee pursuant to Section 5.02(a) or Section 5.02(b) shall be reduced (including, without limitation, retroactively) by any insurance proceeds and other amounts actually recovered by such Indemnitee in reduction of the related Indemnifiable Loss. If an Indemnitee shall have received an Indemnity Payment in respect of an Indemnifiable Loss and shall subsequently actually receive insurance proceeds or other amounts in respect of such Indemnifiable Loss, then such Indemnitee shall pay to such Indemnifying Party a sum equal to the lesser of the amount of such insurance proceeds or other amounts actually received or the net amount of Indemnity Payments actually received previously. The Indemnitee agrees that (i) it shall use commercially reasonable efforts to recover all insurance proceeds that may be available, and (ii) the Indemnifying Party shall be subrogated to such Indemnitee under any insurance policy. (b) (i) If an Indemnitee receives a tax saving by reason of having incurred an Indemnifiable Loss for which such Indemnitee shall have received an Indemnity Payment from an Indemnifying Party, then such Indemnitee shall pay to such Indemnifying Party an amount equal to such tax saving. For purposes of this Section 5.05(b), an Indemnitee shall be deemed to have received a tax saving with respect to an Indemnifiable Loss if, upon the filing of a Federal, state or local income tax return for a taxable year ending on or after the Distribution Date (the "Indemnity Return"), an amount attributable to an Indemnifiable Loss is deductible by the Indemnitee or any of its Affiliates and the amount of the related Indemnity Payment that is includible in gross income by the Indemnitee or any of its Affiliates is less than the amount of such tax deduction. The amount, if any, by which such deduction exceeds the amount of the related gross income is referred to herein as the "Indemnifiable Loss Deduction." Both ACX and CTI shall consult with each other and act in good faith to coordinate tax return filing positions with respect to Indemnity Payments for the periods that include an Indemnity Payment. (ii) In the event that an Indemnitee will receive a tax saving by reason of an Indemnifiable Loss, such Indemnitee shall pay the Indemnifying Party within 30 days after the filing of an Indemnity Return, a sum equal to the Indemnifiable Loss Deduction multiplied by an amount equal to A + [(1 - A) x .05)], where A equals the highest marginal corporate Federal income tax rate applicable to corporations taxable under Subchapter C of the Code on the date the Indemnity Return is filed (the "Tax Saving Amount"). (iii) In the event that an Indemnitee may receive a tax saving by reason of an Indemnifiable Loss, such Indemnitee shall adopt, in good faith, a reasonable tax return filing position so as to report the Indemnifiable Loss Deduction on such returns. The Indemnitee shall have the sole responsibility for the preparation of its tax returns and reporting thereon such Indemnifiable Loss Deduction. If a dispute arises between the Indemnitee and the Indemnifying Party as to the reasonableness of an Indemnity Return filing position with respect to an Indemnifiable Loss Deduction, such dispute shall be resolved by a mutually agreed upon party selected and approved by both the Indemnitee and Indemnifying Party. The cost of retaining such mutually agreed upon party shall be shared by the parties equally, and the decision shall be binding on the parties. (iv) There shall be an adjustment to any Tax Saving Amount calculated under Section 5.05(b)(ii) hereof in the event of an audit or other proceeding that results in a Final Determination that increases or decreases the amount of the Indemnifiable Loss Deduction (the "Restated Indemnifiable Loss Deduction") reported on the Indemnity Tax Return by the Indemnitee. The Indemnitee shall promptly inform the Indemnifying Party of any such audit or proceeding and shall attempt in good faith to sustain the tax saving at issue. Upon receiving a written notice of a Final Determination in respect of a Restated Indemnifiable Loss Deduction, the Indemnitee shall redetermine the Tax Saving Amount attributable to the Restated Indemnifiable Loss Deduction under the tax saving calculation of Section 5.05(b) (ii) hereof substituting the Restated Indemnifiable Loss Deduction for the Indemnifiable Loss Deduction, taking into account the Final Determination (the "Restated Tax Saving Amount"). If the Restated Tax Saving Amount is greater than the Tax Saving Amount, the Indemnitee shall pay the Indemnifying Party a sum equal to the difference between such amounts, within 30 days after receiving written notice of the Final Determination. If the Restated Tax Saving Amount is less than the Tax Saving Amount, then the Indemnifying Party shall pay the Indemnitee, within 30 days of receiving written notice from the Indemnitee of the Final Determination, an amount equal to the sum of (1) the difference between such amounts, plus (2) any interest assessed against the Indemnitee by a tax authority which is attributable to any tax assessed as a result of a reduction in the Indemnifiable Loss Deduction effected by the Final Determination. Section 5.06 No Third Party Beneficiaries. Except to the extent expressly provided otherwise in this Article V, the indemnification provided for by this Article V shall not inure to the benefit of any third party or parties and shall not relieve any insurer or other third party who would otherwise be obligated to pay any claim of the responsibility with respect thereto or, solely by virtue of the indemnification provisions hereof, provide any subrogation rights with respect thereto, and each party agrees to waive such rights against the other to the fullest extent permitted. Section 5.07 Joint Defense Agreements. Except as otherwise provided in this Agreement, for any Third Party Claim in which both ACX (or its Affiliate) and CTI (or its Affiliate) share an actual or potential material interest, ACX and CTI or their respective Affiliates shall enter into a Joint Defense Agreement. Unless an Indemnifying Party is the sole indemnifying party or the parties otherwise specifically agree in writing in a Joint Defense Agreement, each party shall pay its proportionate share (as provided in the Joint Defense Agreement) of all costs and expenses reasonably incurred in connection with the defense of such Third Party Claim. Section 5.08 Special Notices. (a) CTI shall notify ACX, in the manner specified in subparagraph 5.03(b), concerning all Third Party Claims where ACX is or could be named a party thereto or where, based on information available to CTI at that time, there is a reasonable likelihood that, based on the outcome of such Third Party Claim, the reputation of ACX or any Affiliate of ACX could be adversely affected, or ACX's or any Affiliate's ability to conduct its business or to take certain actions with respect thereto could be impaired as a result of any injunctive relief sought, or ACX could be liable for the payment of monetary damages. ACX or its Affiliate shall have the right to participate in the development and execution of strategy for the response to, preparation for and handling of such Third Party Claim in addition to its rights under Section 5.03. (a) ACX shall notify CTI, in the manner specified in subparagraph 5.03(b), concerning all Third Party Claims where CTI is or could be named a party thereto or where, based on information available to ACX at that time, there is a reasonable likelihood that, based on the outcome of such Third Party Claim, the reputation of CTI or any Affiliate of CTI could be adversely affected, or CTI's or any Affiliate's ability to conduct its business or to take certain actions with respect thereto could be impaired as a result of any injunctive relief sought, or CTI could be liable for the payment of monetary damages. CTI or its Affiliate shall have the right to participate in the development and execution of strategy for the response to, preparation for and handling of such Third Party Claim in addition to its rights under Section 5.03. ARTICLE VI CERTAIN ADDITIONAL MATTERS Section 6.01 Construction of Agreements. Notwithstanding any other provisions in this Agreement to the contrary, in the event and to the extent that there is a conflict between the provisions of this Agreement (or any Conveyancing and Assumption Instrument) and the provisions of any Related Agreement, the provisions of such Related Agreement shall control. Section 6.02 No Representations or Warranties; Exceptions. CTI understands and agrees that ALL OF THE TRANSFERRED ASSETS ARE BEING TRANSFERRED "AS IS, WHERE IS" and that ACX is not, in this Agreement or in any other agreement or document contemplated by this Agreement, representing or warranting in any way (i) the value or freedom from encumbrance of, or any other matter concerning, any Transferred Assets or (ii) the legal sufficiency to convey title to any Transferred Assets of the execution, delivery and filing of the Conveyancing and Assumption Instruments, and that CTI shall bear the economic and legal risk that CTI's title to any such assets shall be other than good and marketable and free from encumbrances. Similarly, CTI understands and agrees that ACX is not in this Agreement, or in any other agreement or document contemplated by this Agreement, representing or warranting in any way that the obtaining of the consents or approvals, the execution and delivery of any amendatory agreements or the making of the filings and applications contemplated by this Agreement shall satisfy the provisions of all applicable agreements or the requirements of all applicable laws or judgments, it being understood and agreed that, subject to Section 6.04 hereof, CTI shall bear the economic and legal risk that any necessary consents or approvals are not obtained or that any requirements of law or judgments are not complied with. Section 6.03 Further Assurances. Each of ACX and CTI shall execute and deliver such further instruments of conveyance, transfer and assignment and shall take such other actions as each of them may reasonably request of the other as may be necessary or desirable to effect, perfect or confirm the record and beneficial transfer of the Transferred Assets, the assumption of the Assumed Liabilities and the purposes of this Agreement and to carry out the terms hereof. Notwithstanding the foregoing, ACX and CTI shall not be obligated, in connection with the foregoing, to expend monies other than reasonable out-of-pocket expenses and attorneys' fees. Section 6.04 Consents, etc. ACX and CTI shall use their best efforts to obtain any consent, approval or amendment required to novate and/or assign all agreements, leases, licenses and other rights of any nature whatsoever relating to the Transferred Assets to CTI; provided, however, that ACX shall not be obligated to pay any consideration therefor (except for filing fees and other administrative charges) to the third party from whom such consents, approvals and amendments are requested. Section 6.05 Officers and Directors. On or before the Distribution Date, CTI and ACX shall take all necessary actions to elect or otherwise appoint individuals to be directors or officers (or both) of CTI and to cause the resignations of individuals as officers and directors of each so that there are no common directors or officers except as described in the Information Statement under the sections entitled "Management-- Directors" and "--Executive Officers." Section 6.06 Existing Intercompany Arrangements. Except as contemplated by this Agreement or any Related Agreement, all material existing agreements relating to goods, rights or services provided or licensed between ACX or any of its Affiliates and CTI or any of its Affiliates shall be terminated effective as of the close of business on the Distribution Date. Until the Distribution Date, no such existing agreement shall be deemed terminated, amended or otherwise affected by this Agreement. After the Distribution Date, any such agreement between ACX or any of its Affiliates and CTI or any of its Affiliates shall be the result of arms-length negotiations and on the basis of fair market pricing. Section 6.07 Intercompany Accounts. Any intercompany receivable, payable or loan between ACX or its Affiliates and CTI or its Affiliates outstanding on the Distribution Date (other than the Intercompany Debt) shall not be deemed altered, amended or terminated as a result of this Agreement or the consummation of the transactions contemplated hereby and shall be settled between ACX or its Affiliates and CTI or its Affiliates in due course following the Distribution Date. Section 6.08 Transfer Taxes. (a) CTI shall pay all federal, state and local sales taxes, use taxes, documentary taxes, stock transfer taxes, real property transfer taxes and any other transfer taxes or fees, including any interest, penalties or additions to such taxes (the "Transfer Taxes") with respect to the transactions described in Section 2.01 hereof. (b) ACX shall file timely all tax returns and reports with respect to Transfer Taxes that it is required to file under applicable law, and CTI shall reimburse ACX for any Transfer Taxes due and paid with such returns and reports. CTI shall file timely all returns and reports with respect to Transfer Taxes that it is required to file under applicable law and shall pay the taxes due with such returns and reports. (c) The responsibility and authority for filing amended returns and refund claims with respect to Transfer Taxes and the overall coordination and administration of audits and any dispute resolution proceedings related to Transfer Taxes shall be as set forth in the Tax Sharing Agreement. CTI shall be obligated for any additional Transfer Taxes that are payable, and shall be entitled to all refunds of Transfer Taxes previously paid, pursuant to these transactions. Section 6.09 Proration of Taxes, Lease and Utility Payments. All real property, personal property and similar taxes and installments of general and special assessments, if any, with respect to the Transferred Assets shall be prorated on the basis of actual days elapsed between the commencement of the relevant fiscal tax year and the date of transfer, based on a 365-day year and the most recent tax statements or bills applicable thereto, without later adjustment. Any installment of rental payments with respect to leases that are part of the Transferred Assets, or utility or similar periodic charges incurred by any entity which are payable with respect to the current period in which the transfer occurs shall be prorated between ACX and CTI on the basis of actual days elapsed from the first day of the relevant period to the date of transfer. ACX shall be responsible for all such taxes, payments and charges allocable to all times prior to and including the date of transfer and CTI shall be responsible for all such taxes, payments and charges allocable to all times after the date of transfer. Following the date of this Agreement, each party shall, upon request of the other party, immediately reimburse the other party for any such taxes, payments and charges or other expenses for which said party is responsible but which have been paid by or are owed by the other party and for collections made by one party on behalf of the other party. ARTICLE VII ACCESS TO INFORMATION AND SERVICES Section 7.01 Provision of Corporate Records. As soon as practicable after the date of this Agreement, ACX shall deliver to CTI all Books and Records. Such Books and Records shall be the property of CTI, but shall be retained and made available readily to ACX for review and duplication until the earlier of notice from ACX that such records are no longer needed by ACX or the tenth anniversary of the Distribution Date. Notwithstanding the foregoing provisions of this Section 7.01, those Books and Records relating to any Action that is the subject matter of a Joint Defense Agreement shall be handled as provided in such Joint Defense Agreement. Section 7.02 Access to Information. From and after the Distribution Date, ACX and CTI shall afford to each other and to each other's authorized accountants, counsel and other designated representatives reasonable access and duplicating rights (with copying costs to be borne by the requesting party) during normal business hours to all Books and Records and documents, communications, items and matters, including computer programs and data within each other's knowledge, possession or control relating to the Transferred Assets or the Employees, insofar as such access is reasonably required by ACX or CTI, as the case may be (and shall use reasonable efforts to cause persons or firms possessing relevant items or information to give similar access). Items or information may be requested under this Article VII for any legitimate business purpose including, without limitation, audit, accounting, claims, Actions, litigation and tax purposes, as well as for purposes of fulfilling disclosure and reporting obligations, but not for competitive purposes. Section 7.03 Production of Witnesses and Individuals. From and after the date of this Agreement, ACX and CTI shall use reasonable efforts to make available to each other, upon written request, its officers, directors, employees and agents for fact finding, consultation and interviews and as witnesses to the extent that any such person may reasonably be required in connection with any Actions in which the requesting party may from time to time be involved relating to the conduct of CTI prior to the date of this Agreement. Except as otherwise agreed between the parties or pursuant to a Joint Defense Agreement, ACX and CTI agree to reimburse each other for reasonable out-of- pocket expenses (but not labor charges or salary payments) incurred by the other in connection with providing individuals and witnesses pursuant to this Section 7.03. Section 7.04 Retention of Records. Except when a longer retention period is otherwise required by law, agreed to in writing or specifically provided for herein or in any Related Agreement, ACX and CTI shall retain, for a period of at least ten years following the date of this Agreement, all material Information relating to CTI. Notwithstanding the foregoing, in lieu of retaining any specific information, ACX or CTI may offer in writing to deliver such information to the other and, if such offer is not accepted within 90 days, the offered information may be destroyed or otherwise disposed of at any time. If a recipient of such offer shall request in writing prior to the scheduled date for such destruction or disposal that any of the information proposed to be destroyed or disposed of be delivered to such requesting party, the party proposing the destruction or disposal shall promptly arrange for the delivery of such of the information as was requested (at the cost of the requesting party). Section 7.05 Confidentiality. ACX and CTI shall hold, and shall cause its directors, officers, employees, agents, consultants and advisors to hold, in strict confidence, unless compelled to disclose by judicial or administrative process or, in the opinion of its independent legal counsel, by other requirements of law, all information concerning the other party furnished it by such other party or its representatives pursuant to this Agreement (except to the extent that such information can be shown to have been (a) available to such party on a non- confidential basis prior to its disclosure by the other party, (b) in the public domain through no fault of such party or (c) later lawfully acquired from other sources by the party to which it was furnished), and neither party shall release or disclose such information to any other person, except its auditors, attorneys, financial advisors, bankers and other consultants and advisors who shall be bound by the provisions of this Section 7.05. Each party shall be deemed to have satisfied its obligation to hold confidential information concerning or supplied by the other party if it exercises the same care as it takes to preserve confidentiality for its own similar information. Section 7.06 Privileged Matters. (a) The parties each agree that they will maintain, preserve and assert all privileges, including without limitation privileges arising under or relating to the attorney-client relationship (which shall include without limitation the attorney- client and work product privileges), that relate directly or indirectly to such party for any period prior to the Distribution Date ("Privilege" or "Privileges"). Neither party shall not waive any Privilege that could be asserted under applicable law without the prior written consent of the other party. The rights and obligations created by this paragraph shall apply to all information as to which, but for the Distribution, a party would have been entitled to assert or did assert the protection of a Privilege ("Privileged Information"), including but not limited to (i) any and all information generated prior to the Distribution Date but which, after the Distribution, is in the possession of the other party; (ii) all communications subject to a Privilege occurring prior to the Distribution Date between counsel for such party and any person who, at the time of the communication, was an employee of such party, regardless of whether such employee is or becomes an employee of the other party; and (iii) all information generated, received or arising after the Distribution Date that refers or relates to Privileged Information generated, received or arising prior to the Distribution Date. (b) Upon receipt by a party or any of its Affiliates of any subpoena, discovery or other request that arguably calls for the production or disclosure of Privileged Information or if such party or any of its Affiliates obtains knowledge that any current or former employee of such party or any of its Affiliates has received any subpoena, discovery or other request which arguably calls for the production or disclosure of Privileged Information, such party shall promptly notify the other party of the existence of the request and shall provide the other party a reasonable opportunity to review the information and to assert any rights it may have under this Section 7.06 or otherwise to prevent the production or disclosure of Privileged Information. Neither party will produce or disclose any information arguably covered by a Privilege under this Section 7.06 unless (a) the other party has provided its express written consent to such production or disclosure, or (b) a court of competent jurisdiction has entered a final, non-appealable order finding that the information is not entitled to protection under any applicable privilege. (c) ACX's transfer of Books and Records and other information to CTI, and each party's agreement to permit the other to possess Privileged Information occurring or generated prior to the date of this Agreement, are made in reliance on such other party's agreement, as set forth in this Section 7.06, to maintain the confidentiality of Privileged Information and to assert and maintain all applicable Privileges. The access to information being granted pursuant to Section 7.02 hereof, the agreement to provide witnesses and individuals pursuant to Section 7.03 hereof and transfer of Privileged Information pursuant to this Agreement shall not be deemed a waiver of any Privilege that has been or may be asserted under this Section 7.06 or otherwise. Nothing in this Distribution Agreement shall operate to reduce, minimize or condition the rights granted to, or the obligations imposed upon either party by this Section 7.06. (d) If there is a reasonable likelihood that the waiver by either party of any Privilege could expose the other party or any of its Affiliates to liability or could otherwise adversely affect the other party or any of its Affiliates, such party will notify the other party prior to such waiver, and, at the other party's request, such party will assert or preserve the Privilege, as applicable, if such party's interests will not be adversely affected by its assertion or preservation of the Privilege. ARTICLE VIII INSURANCE Section 8.01 General. (a) ACX shall use its best efforts to keep in effect all policies under its Insurance Program that are in effect as of the date of this Agreement insuring the Transferred Assets and CTI until the next termination date of each policy occurring on or after the Distribution Date. If ACX's insurers will not provide continued coverage, ACX shall assist CTI in obtaining such insurance to be effective on the Distribution Date. Premiums for such continued policies and any applicable interest charges for such policies shall be allocated between ACX and CTI in accordance with the methods employed by ACX for the allocation of such premiums among ACX, its Affiliates and CTI as of the date of this Agreement. The date and time as of which each ACX policy issued under its Insurance Program will, pursuant to this provision, cease covering the Transferred Assets or CTI will be referred to herein as the "Policy Termination Date" for that policy. CTI understands that ACX will be terminating coverage under each policy issued under its Insurance Program with respect to the Transferred Assets and CTI as of the Policy Termination Date of each policy. After such date, ACX shall, if so requested by CTI, use reasonable efforts to assist CTI in obtaining its own insurance coverage, but shall not be obligated to obtain or pay for such insurance, and if CTI is unable to obtain its own policies, and if requested by CTI, ACX will use reasonable efforts to obtain coverage for CTI, at CTI's expense. (b) From the Distribution Date and until the Policy Termination Date, CTI shall be responsible for reporting to ACX any claims it or any of its Affiliates may have under any policy continued under paragraph (a). From and after the Policy Termination Date, CTI shall be responsible for notifying the appropriate insurance carrier of any claims it or any of its Affiliates may have. (c) Each of ACX and CTI shall cooperate with and assist the other party in making claims under insurance policies relating to periods prior to the Policy Termination Date and collecting Recoveries with respect thereto. ACX and CTI shall each give the other periodic reports regarding claims arising prior to the Policy Termination Date that are material or may reasonably jeopardize the availability of coverage for the other and shall give each other prompt notice of any dispute that is anticipated to give rise to a claim against any insurance carrier. Section 8.02 Certain Insured Claims. ACX agrees that with respect to claims made prior to the Policy Termination Date that arise from or relate to the Transferred Assets or Transferred Business, ACX or its Affiliate will, prior to the Policy Termination Date, use its reasonable efforts to obtain Recoveries for CTI and remit to CTI any Recovery obtained by ACX pursuant to such claims. From and after the Policy Termination Date, CTI shall be responsible for administering all claims relating to the Transferred Assets or CTI, including those claims initiated prior to the Policy Termination Date; provided, however, that if a claim relates to both ACX or its Affiliates, and CTI or its Affiliates, ACX or its Affiliate shall continue to administer the claim, and CTI shall pay its proportionate share of the costs of such administration, based on the reasonable estimate of the proportionate amount of each party's claim, as agreed to by the parties. If the amount of any Recovery is less than the claims of ACX and CTI or their Affiliates to be paid from such Recovery, the parties shall agree on the allocation of the Recovery between the parties. ARTICLE IX DISPUTE RESOLUTION Section 9.01 Initiation. Except with respect to matters involving Section 7.06 hereof, if ACX or its Affiliate and CTI or its Affiliate are unable to resolve any disagreement or dispute, either party may refer the matter to the Chief Executive Officers (CEOs) of the parties by giving the other party written notice ("Notice"). Within 20 days after delivery of Notice, or if the CEOs fail to meet within 20 days after delivery of Notice, the CEOs of both parties shall meet at a mutually acceptable time and place to exchange relevant information and to attempt to resolve the dispute. If the matter has not been resolved within 45 days after delivery of Notice, or if the CEOs fail to meet within 20 days after delivery of Notice, either party may initiate mediation and, if applicable, arbitration proceedings as set forth herein. All negotiations pursuant to this Section 9.01 shall be confidential and shall be treated as compromise and settlement negotiations for purposes of the Federal Rules of Evidence and state rules of evidence. Section 9.02 Mediation. In the event a dispute exists between the parties and the respective CEOs are unable to resolve the dispute, the parties agree to participate in a nonbinding mediation procedure as follows: (a) A mediator will be selected by having counsel for each party agree on a person to act as mediator. The parties' counsel as well as the CEOs of each party and not more than two other participants from each party will appear before the mediator at a time and place determined by the mediator, but not more than 60 days after delivery of Notice. The fees of the mediator and other costs of mediation shall be shared equally by the parties. (b) Each party's counsel will have 45 minutes to present a review of the issues and arguments before the mediator. After each counsel's presentation, the other counsel may present specific counter-arguments not to exceed 10 minutes. The 45- minute and 10-minute periods will be exclusive of the time required to answer questions from the mediator or attendees. (c) After both presentations, the CEOs may ask questions of the other side. At the conclusion of both presentations and the question periods, the CEOs and their respective counsel will meet together to try and resolve the dispute. The length of the meeting will be as agreed between the parties. Either party may abandon the procedure at the end of the presentations and question periods if they feel it is not productive to go further. This mediation procedure shall not be binding on either party. (d) The duties of the mediator are to be sure that the above set-out time periods are adhered to and to ask questions so as to clarify the issues and understanding of the parties. The mediator may also offer possible resolutions of the issue but has no duty to do so. Section 9.03 Arbitration. After applying the mediation procedure set forth above, or if either party refuses to take part in the mediation process, the parties hereby agree to submit all controversies, claims and matters of difference that are unresolved to arbitration in Denver, Colorado, according to the rules and practices of the American Arbitration Association from time to time in force, except that insofar as such rules and practices are unenforceable under or are directly supplemented by the Colorado Rules of Civil Procedure or any other provisions of Colorado law then in force, such Colorado rules and provisions shall govern. This submission and agreement to arbitrate shall be specifically enforceable. Arbitration may proceed in the absence of either party if notice of the proceedings has been given to such party. The arbitrators are not empowered to award damages in excess of compensatory damages, and each party hereby irrevocably waives any damages in excess of compensatory damages. The parties agree to abide by all awards rendered n such proceedings. Such awards shall be final and binding on all parties to the extent and in the manner provided by the Colorado Rules of Civil Procedure. All awards may be filed with the clerk of one or more courts, state or federal, having jurisdiction over the party against whom such award is rendered or such party's property as a basis of judgment and of the issuance of execution for its collection. Section 9.04 Cost of Arbitration. The costs of arbitration shall be apportioned between ACX and CTI as determined by the arbitrator in such manner as the arbitrator deems reasonable taking into account the circumstances of the case, the conduct of the parties during the proceeding, and the result of the arbitration. ARTICLE X MISCELLANEOUS Section 10.01 Complete Agreement. This Agreement, including the Schedules and Exhibits and the agreements and other documents referred to herein, shall constitute the entire agreement between ACX and CTI with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter. Section 10.02 Expenses. Except as otherwise expressly provided in this Agreement, ACX and CTI shall each pay their own costs and expenses incurred in connection with the Distribution and the consummation of the transactions contemplated by this Agreement. Section 10.03 Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Colorado (regardless of the laws that might otherwise govern under applicable principles of conflicts law) as to all matters, including, without limitation, matters of validity, construction, effect, performance and remedies. Section 10.04 Notices. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (i) on the date of service if served personally on the party to whom notice is given, (ii) on the day of transmission if sent via facsimile transmission to the facsimile number given below, provided telephonic confirmation of receipt is obtained promptly after completion of transmission, (iii) on the business day after delivery to an overnight courier service or the Express mail service maintained by the United States Postal Service, provided receipt of delivery has been confirmed, or (iv) on the fifth day after mailing, provided receipt of delivery is confirmed, if mailed to the party to whom notice is to be given, by registered or certified mail, postage prepaid, properly addressed and return- receipt requested, to the party as follows: If to ACX: ACX Technologies, Inc. Attn: Jill B.W. Sisson, General Counsel 4455 Table Mountain Drive Golden, Colorado 80403 If to CTI: CoorsTek, Inc. Attn: Katherine A. Resler, General Counsel 16000 Table Mountain Parkway Golden, Colorado 80403 Any party may change its address by giving the other party written notice of its new address in the manner set forth above. Section 10.05 Amendment and Modification. This Agreement may be amended, modified or supplemented only by written agreement of the parties. Section 10.06 Termination. This Agreement may be terminated and the Distribution abandoned at any time prior to the Distribution Date by and in the sole discretion of the Board without the approval of CTI. In the event of such termination, no party shall have any liability of any kind to any other party. Section 10.07 Successors and Assigns. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by either party without the prior written consent of the other party. Section 10.08 No Third Party Beneficiaries. This Agreement is solely for the benefit of the parties hereto and is not intended to confer upon any other person except the parties hereto any rights or remedies hereunder. Section 10.09 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Section 10.10 Interpretation. The Article and Section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not in any way affect the meaning or interpretation of this Agreement. As used in this Agreement, the term "person" shall mean and include an individual, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof. Whenever any words are used herein in the masculine gender, they shall be construed as though they were also used in the feminine gender in all cases where they would so apply. Section 10.11 Schedules, Etc.. The Schedules and Exhibits shall be construed with and as an integral part of this Agreement to the same extent as if the same had been set forth verbatim herein. Section 10.12 Legal Enforceability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof. Any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. * * * * * IN WITNESS WHEREOF, the parties hereto have caused this Distribution Agreement to be executed and delivered as of the day and year first written above. ACX TECHNOLOGIES, INC. By: /s/ Jill B. W. Sisson ----------------------------- Name: Jill B. W. Sisson Title: General Counsel and Secretary COORSTEK, INC. By: /s/ Katherine A. Resler ---------------------------- Name: Katherine A. Resler Title: General Counsel and Secretary SCHEDULE I Transferred Assets and Assumed Liabilities Transferred Assets: 1. [Airplane] 2. [Sports tickets] Assumed Liabilities: [?] SCHEDULE II Intercompany Debt [describe and schedule] EXHIBIT A FORM OF PROMISSORY NOTE January 1, 2000 $ ____________ PROMISSORY NOTE For value received, the undersigned, COORSTEK, INC., a Delaware corporation and having its principal executive offices in Colorado ("Maker"), hereby promises to pay to the order of ACX TECHNOLOGIES, INC., a Colorado corporation, or its assigns (the "Holder"), the principal amount of $______________, with interest, compounded [daily/monthly/annually], accruing from the date hereof at __% per annum, payable in full on January ___, 2000 or earlier upon demand. This Promissory Note is an assignable, endorsable and transferable note of Maker. All payments due under this Promissory Note shall be satisfied in lawful money of the United States at the offices of Holder's agent located at 16000 Table Mountain Parkway, Golden, Colorado 80403, or at such other place as Holder may designate. This Promissory Note may be prepaid without premium or penalty, in whole or in part, at any time and from time to time in each case together with payment of all accrued, but unpaid interest on the principal amount being prepaid. Maker waives presentment, demand, protest and notice thereof or of dishonor, and waives the right to be released by reason of any extension of time or change in terms of payment or any change, alteration or release of any security given for the payment hereof. No waiver of any payment under this Promissory Note shall operate as a waiver of any other payment. Maker agrees to pay all reasonable out-of-pocket expenses, including reasonable attorney fees, incurred by Holder in collecting any amounts due hereunder, by litigation or otherwise. All principal and interest and any other sums due hereunder can be made, unless agreed otherwise between the Holder and the Maker, by way of set off, recoupment or counterclaim. If any provision of this Promissory Note shall be held invalid, illegal or unenforceable in any jurisdiction, the validity, legality or enforceability of any defective provision shall not be in any way be affected or impaired in any other jurisdiction. In the event that any interest payable hereunder shall exceed the maximum lawful rate of interest in the State of Colorado, the applicable interest rate shall be limited to the lesser of such rates (the "Maximum Rate"), but only for such period as the applicable interest rate hereunder exceeds the Maximum Rate. No delay or failure of Holder in the exercise of any available right or remedy shall be deemed a waiver of such right by Holder, and no exercise of any right or remedy shall be deemed a waiver of any other right or remedy that Holder may have. This Promissory Note is to be governed by and construed according to the laws of the State of Colorado. DATED as of the date first set forth above. COORSTEK, INC. By: Name: Title: EXHIBIT B FORM OF ENVIRONMENTAL RESPONSIBILITY AGREEMENT EXHIBIT C FORM OF TRANSITIONAL SERVICES AGREEMENT EXHIBIT D FORM OF TAX SHARING AGREEMENT EX-3.2 4 Exhibit 3.2 BYLAWS OF ACX TECHNOLOGIES, INC. (As amended and restated March 2, 2000) INDEX TO BYLAWS OF ACX TECHNOLOGIES, INC. Page ARTICLE I - Offices Section 1.01 Business Offices 1 Section 1.02 Registered Office 1 ARTICLE II - Shareholders Section 2.01 Annual Meeting... 1 Section 2.02 Special Meetings. 2 Section 2.03 Place of Meetings 2 Section 2.04 Notice of Meetings......... 2 Section 2.05 Waiver of Notice. 3 Section 2.06 Closing of Transfer Books or Fixing of Record Date. 3 Section 2.07 Voting List........ 4 Section 2.08 Proxies 5 Section 2.09 Quorum and Manner of Acting 5 Section 2.10 Extraordinary Matters...... 5 Section 2.11 Voting of Shares. 6 Section 2.12 Voting of Shares by Certain Holders.. 6 Section 2.13 Unanimous Action Without a Meeting... 8 Section 2.14 Conduct of Meetings 8 Section 2.15 Nomination of Directors and Presentation of Business at Shareholder Meetings 11 Section 2.16 Advisory Shareholder Votes 14 ARTICLE III - Board of Directors Section 3.01 General Powers... 14 Section 3.02 Number, Tenure and Qualifications.... 14 Section 3.03 Resignation...... 15 Section 3.04 Removal 15 Section 3.05 Vacancies........ 15 Section 3.06 Regular Meetings. 16 Section 3.07 Special Meetings. 16 Section 3.08 Meetings by Telephone 16 Section 3.09 Notice of Meetings......... 16 Section 3.10 Waiver of Notice. 17 Section 3.11 Presumption of Assent...... 17 Section 3.12 Quorum and Manner of Acting 18 Section 3.13 Action Without a Meeting 18 Section 3.14 Authorized Committees 18 Section 3.15 Executive Committee 19 Section 3.16 Audit Committee 20 Section 3.17 Compensation Committee 21 Section 3.18 Directors' Committee 23 Section 3.19 Compensation 24 Section 3.20 Organization 24 Section 3.21 Director Emeritus 24 ARTICLE IV - Officers Section 4.01 Number and Qualifications 25 Section 4.02 Election and Term of Office 25 Section 4.03 Compensation 25 Section 4.04 Resignation 26 Section 4.05 Removal 26 Section 4.06 Vacancies 26 Section 4.07 Authority and Duties 26 Section 4.08 Surety Bonds 29 ARTICLE V - Stock Section 5.01 Issuance of Shares 30 Section 5.02 Stock Certificates; Uncertificated Shares 30 Section 5.03 Consideration for Shares 30 Section 5.04 Lost Certificates 31 Section 5.05 Transfer of Shares 31 Section 5.06 Holders of Record 31 Section 5.07 Shares Held for Account of Another 32 Section 5.08 Transfer Agents, Registrars and Paying Agents 32 ARTICLE VI - Indemnification Section 6.01 Definitions...... 32 Section 6.02 Right to Indemnification 33 Section 6.03 Advancement of Expenses 34 Section 6.04 Burden of Proof... 34 Section 6.05 Notification and Defense of Claim... 35 Section 6.06 Enforcement 36 Section 6.07 Proceedings by a Party 36 Section 6.08 Subrogation...... 36 Section 6.09 Other Payments...... 36 Section 6.10 Insurance..... 37 Section 6.11 Other Rights and Remedies 37 Section 6.12 Applicability; Effect...... 37 Section 6.13 Severability... 38 ARTICLE VII - Dividends ARTICLE VIII - Conflicts of Interest Section 8.01 Financial Interest 39 Section 8.02 Interested Directors 39 ARTICLE IX - Contracts, Loans, Checks and Deposits Section 9.01 Contracts 40 Section 9.02 Loans 40 Section 9.03 Checks, Drafts, etc. 40 Section 9.04 Deposits 40 ARTICLE X - Miscellaneous Section 10.01 Voting of Securities by the Corporation 40 Section 10.02 Seal 41 Section 10.03 Fiscal Year 41 Section 10.04 Gender 41 Section 10.05 Amendments 41 BYLAWS OF ACX TECHNOLOGIES, INC. ARTICLE I Offices Section 1.01 Business Offices. The corporation may have such offices, either within or outside Colorado, as the board of directors may from time to time determine or as the business of the corporation may require. Section 1.02 Registered Office. The registered office of the corporation required by the Colorado Corporation Code to be maintained in Colorado shall be as set forth in the articles of incorporation, unless changed as provided by law. ARTICLE II Shareholders Section 2.01 Annual Meeting. An annual meeting of the shareholders shall be held at the time and place as may be determined by the board of directors, beginning with the year 1994, for the purpose of electing directors and for the transaction of such other business as may come before the meeting. At the annual meeting, the shareholders shall elect by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote the election of directors, by ballot, a board of directors or successors to directors whose terms expire at the annual meeting, in accordance with the articles of incorporation of the corporation. If the election of directors shall not be held on the day designated herein for any annual meeting of the shareholders, or at any adjournment thereof, the board of directors shall cause the election to be held at a meeting of the shareholders as soon thereafter as conveniently may be. Failure to hold an annual meeting as required by these bylaws shall not invalidate any action taken by the board of directors or officers of the corporation. Section 2.02 Special Meetings. Except as otherwise required by law, and subject to the rights of the holders of any class or series of shares issued by the corporation having a preference over the common stock of the corporation as to dividends or upon liquidation to elect directors upon certain circumstances, special meetings of the shareholders of the corporation may be called, for any purpose or purposes, only by the board of directors pursuant to a resolution approved by the affirmative vote of a majority of directors then in office. Except as otherwise required by law, no shareholder may submit a proposal for consideration at a special meeting of shareholders, provided that, if the special meeting is called for the purpose of electing directors, a shareholder may nominate a candidate subject to the provisions of Section 2.15. Section 2.03 Place of Meetings. Each meeting of the shareholders shall be held at such place, either within or outside Colorado, as may be designated in the notice of meeting, or, if no place is designated in the notice, at the principal office of the corporation if in Colorado, or if the principal office is not located in Colorado, at the registered office of the corporation in Colorado. Section 2.04 Notice of Meetings. Except as otherwise required by law, written notice of each meeting of the shareholders stating the place, day and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called shall be given, either personally (including delivery by private courier) or by first class, certified or registered mail, to each shareholder of record entitled to notice of such meeting, not less than ten nor more than 50 days before the date of the meeting, except that if the authorized shares of the corporation are to be increased, at least 30 days notice shall be given, and if the sale, lease, exchange or other disposition of all or substantially all of the property and assets of the corporation not in the usual and regular course of business is to be voted on, at least 20 days notice shall be given. Such notice shall be deemed to be given, if personally delivered, when delivered to the shareholder, and, if mailed, when deposited in the United States mail, addressed to the shareholder at his address as it appears on the stock transfer books of the corporation, with postage thereon prepaid, but if three successive notices mailed to the last-known address of any shareholder of record are returned as undeliverable no further notices to such shareholder shall be necessary until another address for such shareholder is made known to the corporation. If a meeting is adjourned to another time or place, notice need not be given if the time and place thereof are announced at the meeting, unless the adjournment is for more than 30 days or if after the adjournment a new record date is fixed, in either of which case notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the meeting in accordance with the foregoing provisions of this Section 2.04. Section 2.05 Waiver of Notice. Whenever notice is required by law, the articles of incorporation or these bylaws to be given to any shareholder, a waiver thereof in writing signed by the shareholder entitled to such notice, whether before, at or after the time stated therein, shall be equivalent to the giving of such notice. By attending a meeting, a shareholder (a) waives objection to lack of notice or defective notice of such meeting unless the shareholder, at the beginning of the meeting, objects to the holding of the meeting or the transacting of business at the meeting, and (b) waives objection to consideration at such meeting of a particular matter not within the purpose or purposes described in the notice of such meeting unless the shareholder objects to considering the matter when it is presented. Section 2.06 Closing of Transfer Books or Fixing of Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of the shareholders or any adjournment thereof, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the board of directors may provide that the stock transfer books shall be closed for any stated period not exceeding 50days. In lieu of closing the stock transfer books the board of directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than 50 days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. If the stock transfer books shall be closed or a record date fixed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of the shareholders, such books shall be closed for at least, or such record shall be fixed not less than, ten days immediately preceding such meeting (30 days if the authorized stock is to be increased, 20 days if the sale, lease, exchange or other disposition of all or substantially all of the property and assets of the corporation not in the usual and regular course of business is to be considered). If the stock transfer books are not so closed or no record date is so fixed, the date on which notice of the meeting is mailed or the date on which the resolution of the board of directors declaring the dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of the shareholders has been made as provided in this Section, such determination shall apply to any adjournment thereof except where the determination has been made through the closing of the stock transfer books and the stated period of the closing has expired. Notwithstanding the foregoing provisions of this Section, the record date for determining shareholders entitled to take action without a meeting as provided in Section 2.13 below shall be the date specified in such Section. Section 2.07 Voting List. The officer or agent having charge of the stock transfer books for shares of the corporation shall make, at least ten days before each meeting of the shareholders, a complete record of the shareholders entitled to vote at such meeting or any adjournment thereof, arranged in alphabetical order, with the address of and the number of shares held by each. For a period of ten days before such meeting, this record shall be kept on file at the principal office of the corporation, whether within or outside Colorado, and shall be subject to inspection by any shareholder for any purpose germane to the meeting at any time during usual business hours. Such record shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder for any purpose germane to the meeting during the whole time of the meeting. The original stock transfer books shall be prima facie evidence as to who are the shareholders entitled to examine such record or transfer books or to vote at any meeting of the shareholders. Section 2.08 Proxies. At any meeting of the shareholders, a shareholder may vote by proxy executed in writing by the shareholder or his duly authorized attorney-in-fact. Such proxy shall be filed with the secretary of the corporation before or at the time of the meeting. No proxy shall be valid after eleven months from the date of its execution, unless otherwise provided in the proxy. Section 2.09 Quorum and Manner of Acting. At all meetings of shareholders, a majority of the outstanding shares of the corporation entitled to vote, represented in person or by proxy, shall constitute a quorum, except or otherwise required by law. If a quorum is present, the affirmative vote of a majority of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the shareholders, unless the vote of a greater proportion or number or voting by classes is otherwise required by the laws of Colorado, the articles of incorporation or these bylaws in which case the express provision shall govern and control the decision on the subject matter in question. In the absence of a quorum, a majority of the shares so represented may adjourn the meeting from time to time for a period not to exceed sixty days at any one adjournment. At any such adjourned meeting, at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the original meeting. Section 2.10 Extraordinary Matters. Notwithstanding the provisions of Section 2.09, the following actions shall require the affirmative vote or concurrence of two-thirds of all of the outstanding shares of the corporation (or of each class if class voting is required by the laws of Colorado or the articles of incorporation) entitled to vote thereon: (a) adopting an amendment or amendments to the articles of incorporation, except that the affirmative vote or concurrence of a majority of outstanding shares is required to adopt an amendment to Article One of the articles of incorporation, (b) lending money to, guaranteeing the obligations of or otherwise assisting any of the directors of the corporation or of any other corporation the majority of whose voting capital stock is owned by the corporation provided that no such loans or guaranties to directors shall be made by the corporation secured by its shares, (c) authorizing the sale, lease, exchange or other disposition of all or substantially all of the property and assets of the corporation, with or without its goodwill, not in the usual and regular course of business, (d) approving a plan of merger, consolidation or exchange that is required to be approved by the shareholders, (e) adopting a resolution submitted by the board of directors to dissolve the corporation, and (f) adopting a resolution submitted by the board of directors to revoke voluntary dissolution proceedings. Section 2.11 Voting of Shares. Subject to the provisions of Section 2.06, each outstanding share of record, regardless of class, is entitled to one vote, and each outstanding fractional share of record is entitled to a corresponding fractional vote, on each matter submitted to a vote of the shareholders either at a meeting thereof or pursuant to Section 2.13, except to the extent that the voting rights of the shares of any class or classes or series are limited or denied by the articles of incorporation as permitted by the Colorado Corporation Code. In the election of directors each record holder of stock entitled to vote at such election shall have the right to vote the number of shares owned by him for as many persons as there are directors to be elected, and for whose election he has the right to vote. Cumulative voting shall not be allowed. Section 2.12 Voting of Shares by Certain Holders. (a) Shares Held or Controlled by the Corporation. Neither treasury shares nor shares held by another corporation if a majority of the shares entitled to vote for the election of directors of such other corporation is held by this corporation, shall be voted at any meeting or counted in determining the total number of outstanding shares at any given time. (b) Shares Held by Another Corporation. Shares standing in the name of another corporation may be voted by such officer, agent or proxy as the bylaws of such corporation may prescribe or, in the absence of such provision, as the board of directors of such corporation may determine. (c) Shares Held by More Than One Person. Shares standing of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety or otherwise, or if two or more persons have the same fiduciary relationship respecting the same shares, voting with respect to the shares shall have the following effects: (i) if only one person votes, his act binds all; (ii) if two or more persons vote, the act of the majority so voting binds all; (iii) if two or more persons vote, but the vote is evenly split on any particular matter, each faction may vote the shares in question proportionally, or any person voting the shares of a beneficiary, if any, may apply to any court of competent jurisdiction in Colorado to appoint an additional person to act with the persons so voting the shares, in which case the shares shall be voted as determined by a majority of such persons; and (iv) if a tenancy is held in unequal interests, a majority or even split for the purposes of subparagraph (iii) shall be a majority or even split in interest. The foregoing effects of voting shall not be applicable if the secretary of the corporation is given written notice of alternative voting provisions and is furnished with a copy of the instrument or order wherein the alternative voting provisions are stated. (d) Shares Held in Trust or by a Personal Representative. Shares held by an administrator, executor, guardian, conservator or other personal representative may be voted by him, either in person or by proxy, without a transfer of such shares into his name. Shares standing in the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be entitled to vote shares held by him without a transfer of such shares into his name. (e) Shares Held by a Receiver. Shares standing in the name of a receiver may be voted by such receiver and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority so to do is contained in an appropriate order of the court by which such receiver was appointed. (f) Pledged Shares. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. (g) Redeemable Shares Called for Redemption. Redeemable shares that have been called for redemption shall not be entitled to vote on any matter and shall not be deemed outstanding shares on and after the date on which written notice of redemption has been mailed to shareholders and a sum sufficient to redeem such shares has been deposited with a bank or trust company with irrevocable instruction and authority to pay the redemption price to the holders of the shares upon surrender of certificates therefor. Section 2.13 Unanimous Action Without a Meeting. Any action required or permitted to be taken at a meeting of the shareholders may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by all of the shareholders entitled to vote with respect to the subject matter thereof. Such consent (which may be signed in counterparts) shall have the same force and effect as a unanimous vote of the shareholders and may be stated as such in any document. Unless the consent specifies a different effective date, action taken without a meeting pursuant to a consent in writing as provided herein shall be effective when all shareholders entitled to vote have signed the consent. The record date for determining shareholders entitled to take action without a meeting is the date the first shareholder signs the consent. All consents signed pursuant to this Section 2.13 shall be delivered to the secretary of the corporation for inclusion in the minutes or for filing with the corporate records. Section 2.14 Conduct of Meetings. (a) General. The chairman of the annual or any special meeting of the shareholders shall be the chairman of the board, if there is one, or, if there is not one or in his absence, the vice-chairman, if there is one, or, if there is not one or in his absence, the president, if there is only one, or, if there are co-presidents, then one of the co-presidents, as designated by a majority of the directors present, or, in the absence of all co-presidents, then any person designated by a majority of the directors present, unless and until a different person is elected by a majority of the shares entitled to vote at such meeting. (b) Inspectors of Election. The corporation shall, in advance of any meeting of shareholders, appoint one or more inspectors to act at the meeting and make a written report thereof. The corporation may designate one or more persons as alternative inspectors to replace any inspector who fails to act. If no inspector or alternative is able to act at a meeting of shareholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his ability. The inspectors shall (i) ascertain the number of shares outstanding and the voting power of each, (ii) determine the shares represented at a meeting and the validity of proxies and ballots, (iii) count all votes and ballots, (iv) determine and retain for a reasonable period a determination by the inspectors, and (v) certify their determination of the number of shares represented at the meeting, and their count of all votes and ballots. The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of the duties of the inspectors. The date and time of the opening and the closing of the polls for each matter upon which the shareholders will vote at a meeting shall be announced at the meeting. No ballot, proxies or votes, nor any revocations thereof or changes thereto, shall be accepted by the inspectors after the closing of the polls unless a court of competent jurisdiction upon application by a shareholder shall determine otherwise. In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted with those proxies, any information provided in accordance with applicable law, ballots and the regular books and records of the corporation, except that the inspectors may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to case, or more more votes than the shareholder holds of record. If the inspectors consider other reliable information for the limited purpose permitted herein, the inspectors at the time they make their certification pursuant this section shall specify the precise information considered by them including the person or persons from whom they obtained the information, when the information was obtained, the means by which the information was obtained and the basis for the inspectors' belief that such information is accurate and reliable. (c) Rules of Conduct. Meetings of shareholders shall be conducted in accordance with the following rules: (i) The chairman of the meeting shall have absolute authority over matters of procedure and there shall be no appeal from the ruling of the chairman. If the chairman, in his absolute discretion, deems it advisable to dispense with the rules of parliamentary procedure as to any one meeting of shareholders or part thereof, the chairman shall so state and shall clearly state the rules under which the meeting or appropriate part thereof shall be conducted. (ii) If disorder should arise that prevents continuation of the legitimate business of the meeting, the chairman may quit the chair and announce the adjournment of the meeting and upon his so doing the meeting is immediately adjourned. (iii) The chairman may ask or require that anyone who is not a bona fide shareholder or proxy leave the meeting. Section 2.15 Nomination of Directors and Presentation of Business at Shareholder Meetings. (a) General. Nominations of persons for election to the board of directors and the proposal of business to be considered by the shareholders may be made at an annual meeting of shareholders (i) pursuant to the corporation's notice of meeting, (ii) by or at the direction of the board of directors or (iii) by a shareholder who was a shareholder of record at the time of the giving of notice provided for in this Section 2.15, who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section 2.15. (b) Annual Meetings. Except as provided in the last sentence of Section 2.15(f), for nominations or other business to be properly brought before an annual meeting by a shareholder pursuant to clause (iii) of paragraph (a) of this Section 2.15, the shareholder must have given timely notice thereof in writing to the secretary of the corporation. To be timely, a shareholder's notice shall be delivered to the secretary at the principal executive offices of the corporation not less than 90 days before the anniversary of the date that the corporation mailed its proxy material for the preceding annual meeting. (c) Special Meetings. Only such business shall be conducted at a special meeting of shareholders as shall have been brought before the meeting pursuant to the corporation's notice of meeting or as otherwise required by law. Nominations of persons for election to the board of directors may be made at a special meeting of shareholders with regard to which the board of directors has determined that directors are to be elected (i) pursuant to the corporation's notice of meeting; (ii) by or at the direction of the board of directors or (iii) by any shareholder who is a shareholder of record at the time of the giving of notice provided for in this Section 2.15, who shall be entitled to vote for the election of directors at the meeting and who complies with the notice procedures set forth in this Section 2.15. In the event the corporation calls a special meeting of shareholders for the purpose of electing one or more directors to the board, any such shareholder may nominate a person or persons (as the case may be) for election to such position(s) as specified in the corporation's notice of meeting, if the shareholder's notice setting forth the information and complying with the form described in paragraph (b) of this Section 2.15 shall be delivered to the Secretary at the principal executive offices of the corporation not earlier than the 90th day prior to such special meeting and not later than the close of business on the later of (i) the 60th day prior to such special meeting or (ii) the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the board of directors to be elected at such meeting. (d) Procedures. Only such persons who are nominated in accordance with the procedure, set forth in this Section 2.15 shall be eligible to serve as directors and only such business shall be conducted at a meeting of shareholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 2.15. The chairman of the meeting of shareholders shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in this Section 2.15 and, if any proposed nomination or business is not in compliance with this Section 2.15, to declare that such defective nominations or proposal shall be disregarded. (e) Public Announcement. For purposes of this Section 2.15, "public announcement" shall mean disclosure of a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act. (f) Special Procedures. Notwithstanding the foregoing provisions of this Section 2.15, (i) if any class or series of stock has the right, voting separately by class or series, to elect directors at an annual or special meeting of shareholders, such directors shall be nominated and elected pursuant to the terms of such class or series of stock; and (ii) a shareholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 2.15. Nothing in this Section 2.15 shall be deemed to affect any rights of shareholders to request inclusion of proposals in the corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act. (g) Management Proposals. Nominations of persons to stand for election at any annual or special meeting of shareholders may be made at any time prior to the vote thereon by the board of directors or a committee of the board. For any new business proposed by management to be properly brought before the annual meeting of shareholders, such new business shall be approved by the board of directors, either directly or through its approval by proxy solicitation materials related thereto, and shall be stated in writing and filed with the secretary of the corporation at least five days before the date of the annual meeting, and all business so stated, proposed and filed shall be considered at the annual meeting. Section 2.16 Advisory Shareholder Votes. In order for the shareholders to adopt or approve any proposal submitted to them for the purpose of requesting the board of directors to take specified action, a majority of the outstanding stock of the corporation entitled to vote thereon must be voted for the proposal. ARTICLE III Board of Directors Section 3.01 General Powers. The business and affairs of the corporation shall be managed by its board of directors, except as otherwise provided in the Colorado Corporation Code, the articles of incorporation or these bylaws. Section 3.02 Number, Tenure and Qualifications. The number of directors of the corporation shall be fixed from time to time by resolution of the board of directors but in no event fewer than the number required by law. Except as provided in Sections 2.01 and 3.05, directors shall be elected at each annual meeting of the shareholders. Each director shall hold office until the annual meeting of the shareholders at which such director's term expires and thereafter until his successor shall have been elected and qualified, or until his earlier death, resignation or removal. Directors must be at least eighteen years old but need not be residents of Colorado or shareholders of the corporation. The directors shall be divided into three classes, in accordance with the articles of incorporation. Section 3.03 Resignation. Any director may resign at any time by giving written notice to the president or any co- president or to the board of directors. A director's resignation shall take effect at the time specified in the notice and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 3.04 Removal. At a meeting of shareholders called expressly for that purpose, the entire board of directors or any lesser number may be removed in accordance with law and the articles of incorporation, by a vote of the holders of 80 percent of shares then generally entitled to vote at an election of directors; except that if the holders of shares of any class of stock are entitled to elect one or more directors by the provisions of the articles of incorporation, the provisions of this Section 3.04 shall apply, with respect to the removal of a director or directors so elected by such class, to the vote of the holders of the outstanding shares of that class and not to the vote of the outstanding shares as a whole. Any reduction in the authorized number of directors shall not have the effect of shortening the term of any incumbent director unless such director is also removed from office in accordance with this Section 3.04. Section 3.05 Vacancies. Unless otherwise required in the articles of incorporation, any vacancy occurring in the board of directors may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum, or by the affirmative vote of two directors if there are only two directors remaining, or by a sole remaining director, or by the shareholders if there are no directors remaining. A director elected by one or more directors to fill a vacancy shall, without regard to the class of directors in which the vacancy occurred, be elected until the next succeeding annual meeting of shareholders and until his or her successor shall have been elected and qualified. Any director elected by shareholders to fill a vacancy shall be elected for the balance of the term or the term of other directors of the same class. Section 3.06 Regular Meetings. A regular meeting of the board of directors shall be held immediately after and at the same place as the annual meeting of the shareholders, or as soon thereafter as conveniently may be, at the time and place, either within or outside Colorado, determined by the board, for the purpose of electing officers and for the transaction of such other business as may come before the meeting. Failure to hold such meeting, however, shall not invalidate any action taken by any officer then or thereafter in office. The board of directors may provide, by resolution, the time and place, either within or outside Colorado, for the holding of additional regular meetings without other notice than such resolution. Section 3.07 Special Meetings. Special meetings of the board of directors may be called by or at the request of the chairman or any two directors. The person or persons authorized to call special meetings of the board of directors may fix any convenient place, either within or outside Colorado, as the place for holding any special meeting of the board called by them. Section 3.08 Meetings by Telephone. Unless otherwise provided by the articles of incorporation, one or more members of the board of directors may participate in a meeting of the board by means of conference telephone or similar communications equipment by which all persons participating in the meeting can hear each other at the same time. Such participation shall constitute presence in person at the meeting. Section 3.09 Notice of Meetings. Notice of each meeting of the board of directors (except those regular meetings for which notice is not required) stating the place, day and hour of the meeting shall be given to each director at least five days prior thereto by the mailing of written notice by first class, certified or registered mail, or at least two days prior thereto by personal delivery (including delivery by private courier) of written notice or by telephone, telegram, telex, cablegram or other similar method, except that in the case of a meeting to be held pursuant to Section 3.08 notice may be given by telephone one day prior thereto. The method of notice need not be the same to each director. Notice shall be deemed to be given when deposited in the United States mail, with postage thereon prepaid, addressed to the director at his business or residence address, when delivered or communicated to the director or when the telegram, telex, cablegram or other form of notice is personally delivered to the director or delivered to the last address of the director furnished by him to the corporation for such purpose. Neither the business to be transacted at nor the purpose of any meeting of the board of directors need be specified in the notice or waiver of notice of such meeting unless otherwise required by statute. Section 3.10 Waiver of Notice. Whenever notice is required by law, the articles of incorporation or these bylaws to be given to the directors, a waiver thereof in writing signed by the director entitled to such notice, whether before, at or after the time stated therein, shall be equivalent to the giving of such notice. By attending or participating in a meeting, a director waives any required notice of such meeting unless, at the beginning of the meeting, he objects to the holding of the meeting or the transacting of business at the meeting. Section 3.11 Presumption of Assent. A director of the corporation who is present at a meeting of the board of directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless he objects at the beginning of the meeting to the holding of the meeting or the transacting of business at the meeting, contemporaneously requests that his dissent to the action taken be entered in the minutes of such meeting or gives written notice of his dissent to the presiding officer of such meeting before its adjournment or to the secretary of the corporation immediately after adjournment of such meeting. The right of dissent as to a specific action taken at a meeting of the board is not available to a director who votes in favor of such action. Section 3.12 Quorum and Manner of Acting. Except as otherwise may be required by law, the articles of incorporation or these bylaws, a majority of the number of directors fixed in accordance with these bylaws, present in person, shall constitute a quorum for the transaction of business at any meeting of the board of directors, and the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors. If less than a quorum is present at a meeting, a majority of the directors present may adjourn the meeting from time to time without further notice other than an announcement at the meeting, until a quorum shall be present. No director may vote or act by proxy or power of attorney at any meeting of directors. Section 3.13 Action Without a Meeting. Any action required or permitted to be taken at a meeting of the directors may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by all of the directors. Such consent (which may be signed in counterparts) shall have the same force and effect as a unanimous vote of the directors and may be stated as such in any document. Unless the consent specifies a different effective date, action taken without a meeting pursuant to a consent in writing as provided herein is effective when all directors have signed the consent. All consents signed pursuant to this Section 3.13 shall be delivered to the secretary of the corporation for inclusion in the minutes or for filing with the corporate records. Section 3.14 Authorized Committees. The board of directors, by resolution adopted by a majority of the full board, may designate from among its members an executive committee and one or more other committees, each of which, to the extent provided in the resolution establishing such committee or in these bylaws, shall have and may exercise all of the authority of the board of directors in the management of the business and affairs of the corporation, except that no such committee shall have the power or authority to (a) declare dividends or distributions, (b) approve, recommend or submit to the shareholders actions or proposals required by law to be approved by the shareholders, (c) fill vacancies on the board of directors or any committee thereof, including any committee authorized by this Section 3.14, (d) amend the bylaws, (e) approve a plan of merger not requiring shareholder approval, (f) reduce earned or capital surplus, (g) authorize or approve the reacquisition of shares of the corporation, unless pursuant to a general formula or method specified by the board of directors, or (h) authorize or approve the issuance or sale of, or any contract to issue or sell, shares of the corporation's stock or designate the terms of a series of a class of shares. The delegation of authority to any committee shall not operate to relieve the board of directors or any member of the board from any responsibility imposed by law. Subject to the foregoing, the board of directors may provide such powers, limitations and procedures for such committees as the board deems advisable. To the extent the board of directors or such committee does not establish other procedures, each committee shall be governed by the procedures set forth in Sections 3.06 (except as they relate to an annual meeting) and 3.07 through 3.13 as if the committee were the board of directors. Each committee shall keep regular minutes of its meetings, which shall be reported to the board of directors when required and submitted to the secretary of the corporation for inclusion in the corporate records. Section 3.15 Executive Committee. The board of directors at the annual or any regular or special meeting of the directors shall, by resolution adopted by a majority of the whole board, designate and elect two or more directors to constitute an Executive Committee and appoint one of the designees as the chairman of the Executive Committee. Subject to applicable law and these bylaws, the Executive Committee during intervals between the meetings of the board shall exercise all powers and have all authority of the board of directors. The Executive Committee shall keep a record of its acts and proceedings, which shall form a part of the records of the corporation in the custody of the secretary, and all actions of the Executive Committee shall be reported to the board of directors at the next meeting of the board. The minute books of the Executive Committee shall at all times be open to the inspection of any director. Section 3.16 Audit Committee. (a) Membership. The board of directors at the annual or any regular or special meeting of the directors shall, by resolution adopted by a majority of the whole Board, designate and elect two or more directors to constitute an Audit Committee and appoint one of the directors so designated as the chairman of the Audit Committee. A majority of the members on the Audit Committee shall be directors who are not officers or employees of the corporation and are free from any relationship that, in the opinion of the board of directors, would interfere with the exercise of independent judgment as a member of the committee. Vacancies in the committee may be filled by the board of directors at any meeting thereof. Each member of the committee shall hold office until his successor has been duly elected, or until his death, resignation or removal from the Audit Committee by the board of directors, or until he otherwise ceases to be a director. Any member of the Audit Committee may be removed from the committee by resolution adopted by a majority of the whole board of directors whenever in its judgment (1) that person is no longer an independent director or free from any relationship with the corporation or any of its officers prohibited by this section, or (2) the best interests of the corporation would be served thereby. The compensation, if any, of members of the committee shall be established by resolution of the board of directors. (b) Responsibilities. The Audit Committee shall be responsible for recommending to the board of directors the appointment or discharge of independent auditors; reviewing with the management and the independent auditors the terms of engagement of independent auditors, including the fees, scope and timing of the audit and any other services rendered by the independent auditors; reviewing with the independent auditors and management the corporation's policies and procedures with respect to internal auditing, accounting and financial controls; reviewing with the management, the independent auditors and the internal auditors, the corporation's financial statements, audit results and reports and the recommendations made by any of the auditors with respect to changes in accounting procedures and internal controls; reviewing the results of studies of the corporation's system of internal accounting controls; performing any other duties or functions required by any organization under which the securities of the Company may be listed; and performing such other duties deemed appropriate by the board of directors. The committee shall have the powers and rights necessary or desirable to fulfill these responsibilities, including the power and right to consult with legal counsel and to rely upon the opinion of legal counsel. The Audit Committee is authorized to communicate directly with the corporation's financial officers and employees, internal auditors and independent auditors as it deems desirable and to have the internal auditors or independent auditors perform any additional procedures as it deems appropriate. (c) Minutes. The Audit Committee shall keep a record of its acts and proceedings, which shall form a part of the records of the corporation in the custody of the secretary, and all actions of the Audit Committee shall be reported to the board of directors at the next meeting of the Board. The minute books of the Audit Committee shall at all times be open to the inspection of any director. (d) Quorum. The Audit Committee shall meet at the call of its chairman or of any two members of the committee. A majority of the Audit Committee shall constitute a quorum for the transaction of business and the act of a majority of those present at any meeting at which a quorum is present shall constitute the act of the committee. Section 3.17. Compensation Committee. (a) Members. The board of directors at the annual or any regular or special meeting shall, by resolution adopted by a majority of the whole Board, designate and elect two or more directors to constitute a Compensation Committee and appoint one of the directors so designated as the chairman of the Compensation Committee. Membership on the Compensation Committee shall be restricted to disinterested persons which for this purpose shall mean any director who, during the time he is a member of the Compensation Committee is not eligible, and has not at any time within one year prior thereto been eligible, for selection to participate (other than in a manner as to which the Compensation Committee has no discretion) in any of the compensation plans administered by the Compensation Committee. Vacancies in the committee may be filled by the board of directors at any meeting. Each member of the committee shall hold office until his successor has been duly elected, or until his death, resignation or removal from the Compensation Committee by the board of directors, or until he otherwise ceases to be a director or a disinterested person. Any member of the Compensation Committee may be removed by resolution adopted by a majority of the whole board of directors whenever (1) that person is no longer a disinterested person or (2) in the judgment of the board the best interests of the corporation would be served thereby. The compensation, if any, of members of the committee shall be established by resolution of the board of directors. (b) Responsibilities. The Compensation Committee shall, from time to time, recommend to the board of directors the compensation and benefits of the executive officers of the corporation. The Compensation Committee shall have the power and authority vested in it by any benefit plan of the corporation. (c) Minutes. The Compensation Committee shall keep a record of its acts and proceedings, which shall form a part of the records of the corporation in the custody of the secretary, and all actions of the Compensation Committee shall be reported to the board of directors at the next meeting of the Board. The minute books of the Compensation Committee shall at all times be open to the inspection of any directors. (d) Quorum. The Compensation Committee shall meet at the call of the chairman of the Compensation Committee or of any two members of the committee. A majority of the Compensation committee shall constitute a quorum for the transaction of business and the act of a majority of those present at any meeting at which a quorum is present shall be the act of the committee. Section 3.18 Directors' Committee. (a) Membership. The board of directors at the annual or any regular or special meeting of the directors shall, by resolution adopted by a majority of the whole Board, designate and elect two or more directors to constitute a Directors' Committee and appoint one of the directors so designated as the chairman of the Directors' Committee. Vacancies in the committee may be filled by the board of directors at any meeting thereof. Each member of the committee shall hold office until his successor has been duly elected, or until his death, resignation or removal from the Directors' Committee by the board of directors, or until he otherwise ceases to be a director. Any member of the Directors' Committee may be removed from the committee by resolution adopted by a majority of the whole board of directors whenever in its judgment the best interests of the corporation would be served thereby. The compensation, if any, of the members of the committee shall be established by resolution of the board of directors. (b) Responsibilities. The Directors' Committee shall be responsible for recommending to the board of directors nomination of new board members and the compensation, including ownership amounts of the corporation's common stock, of the members of the board of directors. The Directors' Committee shall be responsible for orientation of new board members and evaluation of performance of the board of directors. (c) Minutes. The Directors' Committee shall keep a record of its acts and proceedings, which shall form a part of the records of the corporation in the custody of the secretary, and all actions of the Directors' Committee shall be reported to the board of directors at the next meeting of the Board. The minute books of the Directors' Committee shall at all times be open to the inspection of any directors. (d) Quorum. The Directors' Committee shall meet at the call of the chairman of the Directors' Committee or of any two members of the committee. A majority of the Directors' Committee shall constitute a quorum for the transaction of business and the act of a majority of those present at any meeting at which a quorum is present shall be the act of the committee. Section 3.19 Compensation. By resolution of the board of directors, notwithstanding any personal interest of a director in such action, the board shall determine and fix the compensation, if any, and the reimbursement of expenses which sall be allowed and paid to the directors. A director may be reimbursed for the expenses of performing his duties, including attendance at each meeting of the board of directors and each meeting of any committee of the board of which he is a member and may be paid a fixed sum for attendance at each such meeting or a stated fee, or both a fixed sum and a stated fee. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Section 3.20 Organization. The board of directors shall elect a chairman of the board from among its members, who may also be designated by the board as an officer of the corporation. The board may also elect one or more vice-chairmen from among its members to perform the duties of the chairman in his absence and such other duties as the board may assign. At each meeting of the board of directors, the chairman, or in his absence, a vice-chairman chosen by a majority of the directors present, or in the absence of any vice-chairman, a director chosen by a majority of the directors present shall act as chairman of the meeting. The secretary, or in his absence, the assistant secretary, if there is one, or if there is not one or in his absence, the person whom the chairman of the meeting shall appoint, shall act as secretary of the meeting and keep the minutes thereof. Section 3.21 Director Emeritus. The board of directors at any regular or special meeting may, by resolution adopted by a majority of the whole Board, designate a retired director as Director Emeritus. A Director Emeritus shall be a director for all purposes except that he will not vote or be counted for quorum purposes. Compensation for a Director Emeritus shall be the same as disinterested directors, including the reimbursement of expenses for the performance of his duties. ARTICLE IV Officers Section 4.01 Number and Qualifications. The officers of the corporation shall consist of a president or co-presidents, a secretary, a treasurer and such other officers, including a general counsel, one or more vice-presidents and a controller, as may from time to time be elected or appointed by the board. Unless specifically designated, the chairman of the board shall not be an officer of the corporation. In addition, the board of directors, the president or any co-president may elect or appoint such assistant and other subordinate officers, including assistant vice presidents, assistant secretaries and assistant treasurers, as it or he shall deem necessary or appropriate. Any number of offices may be held by the same person, except that no person may simultaneously hold the offices of president or co- president and secretary. All officers must be at least eighteen years old. Section 4.02 Election and Term of Office. Except as provided in Sections 4.01 and 4.06, the officers of the corporation shall be elected by the board of directors annually at the first meeting of the board held after each annual meeting of the shareholders as provided in Section 3.06. If the election of officers shall not be held as provided herein, such election shall be held as soon thereafter as conveniently may be. Each officer shall hold office until his successor shall have been duly elected and shall have qualified, or until the expiration of his term in office if elected or appointed for a specified period of time, or until his earlier death, resignation or removal. Section 4.03 Compensation. Executive officers shall receive such compensation for their services as shall be recommended by the Compensation Committee and authorized or ratified by the board of directors. The salaries and fees of the other officers of the corporation shall be fixed from time to time by the board of directors. No officer shall be prevented from receiving compensation by reason of the fact that he is also a director of the corporation. Election or appointment as an officer shall not of itself create a contract or other right to compensation for services performed as such officer. Section 4.04 Resignation. Any officer may resign at any time, subject to any rights or obligations under any existing contracts between the officer and the corporation, by giving written notice to the president or to the board of directors. An officer's resignation shall take effect at the time specified in such notice, and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 4.05 Removal. Any officer may be removed at any time by the board of directors, or, in the case of assistant and other subordinate officers, by the board of directors or the president or any co-president (whether or not such officer was appointed by the president) whenever in its or his judgment, as the case may be, the best interests of the corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer shall not in itself create contract rights. Section 4.06 Vacancies. A vacancy in any office, however occurring, may be filled by the board of directors, or, if such office may be filled by the president as provided in Section 4.01, by the president, for the unexpired portion of the term. Section 4.07 Authority and Duties. The officers of the corporation shall have the authority and shall exercise the powers and perform the duties specified below and as may be additionally specified by the president, any co-president, the board of directors or these bylaws (and in all cases where the duties of any officer are not prescribed by the bylaws or by the board of directors, such officer shall follow the orders and instructions of the president or any co-president), except that in any event each officer shall exercise such powers and perform such duties as may be required by law. (a) Office of the President, President, Co- Presidents. The board of directors may from time to time designate either a president or two or more co-presidents of the corporation. Two or more co-presidents shall constitute and be members of the Office of the President of the corporation. The president or the Office of the President shall, subject to the direction and supervision of the board of directors, be or constitute the principal executive officer of the corporation, shall have general and active control and charge of the property, business and affairs of the corporation and shall have general supervision of the corporation's officers, agents and employees. The president or the Office of the President shall see that all orders and resolutions of the board are carried out and shall perform all other duties incident to the office and such other duties as may from time to time be assigned by the board of directors. Members of the Office of the President shall confer regularly in carrying out their duties as co-presidents and shall divide the responsibilities of the Office of the President and establish procedures for decision making as they may agree, subject always to the general supervision of the board of directors. Any authority, power or duty assigned by these bylaws or by the board or the Executive Committee to the president or the Office of the President may be exercised or performed by any co-president and the act of any one of them shall constitute the act of the Office of the President. The president or any co-president may sign any and all documents, mortgages, bonds, contracts, leases, deeds or other instruments in the ordinary course of business with or without the signature of a second corporate officer, may sign certificates for shares of the corporation with the secretary or assistant secretary of the corporation, and may sign any documents which the board of directors has authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the board of directors or by these bylaws to some other officer or agent of the corporation, or shall be required by law to be otherwise signed or executed. One member of the Office of the President shall be designated from time to time as "president" for purposes of carrying out duties required by Colorado or other applicable law to be performed by the "president" of the corporation. (b) Vice-Presidents. The vice-president, if any (or if there is more than one then each vice-president), shall assist the president and shall perform such duties as may be assigned to him by the president, or co-president or by the board of directors. The vice-president, if there is one (or if there is more than one then the vice-president designated by the board of directors, or if there be no such designation then the vice- presidents in order of their election), shall, at the request of the president or co-president, or in his absence or inability or refusal to act, perform the duties of the president and when so acting shall have all the powers of and be subject to all the restrictions upon the president. Assistant vice-presidents, if any, shall have such powers and perform such duties as may be assigned to them by the president or by the board of directors. (c) Secretary. The secretary shall: (i) keep the minutes of the proceedings of the shareholders, the board of directors and any committees of the board; (ii) see that all notices are duly given in accordance with the provisions of these bylaws or as required by law; (iii) be custodian of the corporate records and of the seal of the corporation; (iv) keep at the corporation's registered office or principal place of business within or outside Colorado a record containing the names and addresses of all shareholders and the number and class of shares held by each, unless such a record shall be kept at the office of the corporation's transfer agent or registrar; (v) have general charge of the stock books of the corporation, unless the corporation has a transfer agent; and (vi) in general, perform all duties incident to the office of secretary and such other duties as from time to time may be assigned to him by the president or by the board of directors. Assistant secretaries, if any, shall have the same duties and powers, subject to supervision by the secretary. (d) Treasurer. The treasurer shall: (i) have the care and custody of all its funds, securities, evidences of indebtedness and other personal property and deposit the same in accordance with the instructions of the board of directors; (ii) receive and give receipts and acquittances for moneys paid in on account of the corporation, and pay out of the funds on hand all bills, payrolls and other just debts of the corporation of whatever nature upon maturity; (iii) unless there is a controller, be the principal accounting officer of the corporation and as such prescribe and maintain the methods and systems of accounting to be followed, keep complete books and records of account, prepare and file all local, state and federal tax returns, prescribe and maintain an adequate system of internal audit and prepare and furnish to the president and the board of directors statements of account showing the financial position of the corporation and the results of its operations; (iv) upon request of the board, make such reports to it as may be required at any time; and (v) perform all other duties incident to the office of treasurer and such other duties as from time to time may be assigned to him by the board of directors or the president. Assistant treasurers, if any, shall have the same powers and duties, subject to the supervision by the treasurer. (e) Other Officers, Designations. Any officer who is elected or appointed from time to time by the board of directors and whose duties are not specified in these bylaws shall perform the duties and have the powers or may be prescribed from time to time by the board or any co-president. The board may designate a principal financial officer of the corporation and such other designation as the board, in its discretion, deems appropriate. Section 4.08 Surety Bonds. The board of directors may require any officer or agent of the corporation to execute to the corporation a bond in such sums and with such sureties as shall be satisfactory to the board, conditioned upon the faithful performance of his duties and for the restoration to the corporation of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation. ARTICLE V Stock Section 5.01 Issuance of Shares. The issuance or sale by the corporation of any shares of its authorized capital stock of any class, including treasury shares, shall be made only upon authorization by the board of directors, except as otherwise may be provided by law. No shares shall be issued until full consideration has been received therefor. Every issuance of shares shall be recorded on the books maintained for such purpose by or on behalf of the corporation. Section 5.02 Stock Certificates; Uncertificated Shares. The shares of stock of the corporation shall be represented by certificates, except that the board of directors may authorize the issuance of any class or series of stock of the corporation without certificates as provided by law. If shares are represented by certificates, such certificates shall be signed in the name of the corporation by the chairman or vice- chairman of the board of directors or by the president or a vice- president and by the treasurer or an assistant treasurer or by the secretary or an assistant secretary and sealed with the seal of the corporation or with a facsimile thereof. The signatures of the corporation's officers on any certificate may also be facsimiles if the certificate is countersigned by a transfer agent or registered by a registrar. In case any officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer at the date of its issue. Certificates of stock shall be in such form consistent with law as shall be prescribed or authorized by the board of directors. Section 5.03 Consideration for Shares. Shares shall be issued for such consideration expressed in dollars (but not less than the par value thereof) as shall be fixed from time to time by the board of directors. Treasury shares shall be disposed of for such consideration expressed in dollars as may be fixed from time to time by the board. Such consideration may consist, in whole or in part, of money, other property, tangible or intangible, or labor or services actually performed for the corporation, but neither the promissory note of a subscriber or direct purchaser of shares from the corporation, nor the unsecured or nonnegotiable promissory note of any other person, nor future services shall constitute payment or part payment for shares. Section 5.04 Lost Certificates. In case of the alleged loss, destruction or mutilation of a certificate of stock the board of directors may direct the issuance of a new certificate in lieu thereof upon such terms and conditions in conformity with law as it may prescribe. The board of directors may in its discretion require a bond in such form and amount and with such surety as it may determine before issuing a new certificate. Section 5.05 Transfer of Shares. Upon presentation and surrender to the corporation or to the corporation's transfer agent of a certificate of stock duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, payment of all transfer taxes, if any, and the satisfaction of any other requirements of law, including inquiry into and discharge of any adverse claims of which the corporation has notice, the corporation or the transfer agent shall issue a new certificate to the person entitled thereto, cancel the old certificate and record the transfer on the books maintained for such purpose by or on behalf of the corporation. No transfer of shares shall be effective until it has been entered on such books. The corporation or the corporation's transfer agent may require a signature guaranty or other reasonable evidence that any signature is genuine and effective before making any transfer. Transfers of uncertificated shares shall be made in accordance with applicable provisions of law. Section 5.06 Holders of Record. The corporation shall be entitled to treat the holder of record of any share of stock as the holder in fact thereof, and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person whether or not it shall have express or other notice thereof, except as may be required by the laws of Colorado. Section 5.07 Shares Held for Account of Another. The board of directors, in the manner provided by the Colorado Corporation Code, may adopt a procedure whereby a shareholder of the corporation may certify in writing to the corporation that all or a portion of the shares registered in the name of such shareholder are held for the account of a specified person or persons. Upon receipt by the corporation of a certification complying with such procedure, the persons specified in the certification shall be deemed, for the purpose or purposes set forth therein, to be the holders of record of the number of shares specified in place of the shareholder making the certification. Section 5.08 Transfer Agents, Registrars and Paying Agents. The board of directors may at its discretion appoint one or more transfer agents, registrars or agents for making payment upon any class of stock, bond, debenture or other security of the corporation. Such agents and registrars may be located either within or outside Colorado. They shall have such rights and duties and shall be entitled to such compensation as may be agreed. ARTICLE VI Indemnification Section 6.01 Definitions. For purposes of this Article, the following terms shall have the meanings set forth below: (a) Code. The term "Code" means the Colorado Corporation Code as it exists on the date of the adoption of this Article and as it may hereafter be amended from time to time, but in the case of any amendment, only to the extent that the amendment permits the corporation to provide broader indemnification rights than the Colorado Corporation Code permitted the corporation to provide at the date of the adoption of this Article and prior to the amendment. (b) Corporation. The term "corporation" means the corporation and, in addition to the resulting or surviving corporation, any domestic or foreign predecessor entity of the corporation in a merger, consolidation or other transaction in which the predecessor's existence ceased upon consummation of the transaction. (c) Expenses. The term "expenses" means the actual and reasonable expenses (including but not limited to expenses of investigation and preparation and fees and disbursements of counsel, accountants or other experts) incurred by a party in connection with a proceeding. (d) Liability. The term "liability" means the obligation to pay a judgment, settlement, penalty, fine (including an excise tax assessed with respect to an employee benefit plan) or expense incurred with respect to a proceeding. (e) Party. The term "party" means any individual who was, is, or is threatened to be made, a named defendant or respondent in a proceeding by reason of the fact that he is or was a director, officer or employee of the corporation and any individual who, while a director, officer or employee of the corporation is or was serving at the request of the corporation as a director, officer, partner, trustee, employee, fiduciary or agent of any other foreign or domestic corporation or of any partnership, joint venture, trust, other enterprise or employee benefit plan. A party shall be considered to be serving an employee benefit plan at the corporation's request if his duties to the corporation also impose duties on or otherwise involve services by him to the plan or to participants in or beneficiaries of the plan. (f) Proceeding. The term "proceeding" means any threatened, pending or completed action, suit or proceeding, or any appeal therein, whether civil, criminal, administrative, arbitrative or investigative (including an action by or in the right of the corporation), and whether formal or informal. Section 6.02 Right to Indemnification. The corporation shall indemnify any party to a proceeding against liability incurred in, relating to or as a result of the proceeding to the fullest extent permitted by law (including without limitation in circumstances in which, in the absence of this Section 6.02, indemnification would be (a) discretionary under the Code or (b) limited or subject to particular standards of conduct under the Code). Section 6.03 Advancement of Expenses. In the event of any proceeding in which a party is involved or which may give rise to a right of indemnification under this Article, following written request to the corporation by the party, the corporation shall pay to the party, to the fullest extent permitted by law (including without limitation in circumstances in which, in the absence of this Section 6.02, advancement of expenses would be (a) discretionary under the Code or (b) limited or subject to particular standards of conduct under the Code), amounts to cover expenses incurred by the party in, relating to or as a result of such proceeding in advance of its final disposition. Section 6.04 Burden of Proof. If under applicable law the entitlement of a party to be indemnified or advanced expenses hereunder depends upon whether a standard of conduct has been met, the burden of proof of establishing that the party did not act in accordance with such standard shall rest with the corporation. A party shall be presumed to have acted in accordance with such standard and to be entitled to indemnification or the advancement of expenses (as the case may be) unless, based upon a preponderance of the evidence, it shall be determined that the party has not met such standard. Such determination and any evaluation as to the reasonableness of amounts claimed by a party shall be made by the board of directors of the corporation or such other body or persons as may be permitted by the Code. Subject to any express limitation of the Code, if so requested by the party, such determination and evaluation as to the reasonableness of the amounts claimed by the party shall be made by independent counsel who is selected by the party and approved by the corporation (which approval shall not be unreasonably withheld). For purposes of this Article, unless otherwise expressly stated, the termination of any proceeding by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere or its equivalent, shall not create a presumption that a party did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law. Section 6.05 Notification and Defense of Claim. Promptly after receipt by a party of notice of the commencement of any proceeding, the party shall, if a claim in respect thereof is to be made against the corporation under this Article, notify the corporation in writing of the commencement thereof; provided, however, that delay in so notifying the corporation shall not constitute a waiver or release by the party of any rights under this Article. With respect to any such proceeding: (a) the corporation shall be entitled to participate therein at its own expense; (b) any counsel representing the party to be indemnified in connection with the defense or settlement thereof shall be counsel mutually agreeable to the party and to the corporation; and (c) the corporation shall have the right, at its option, to assume and control the defense or settlement thereof, with counsel satisfactory to the party. If the corporation assumes the defense of the proceeding, the party shall have the right to employ its own counsel, but the fees and expenses of such counsel incurred after notice from the corporation of its assumption of the defense of such proceeding shall be at the expense of the party unless (i) the employment of such counsel has been specifically authorized by the corporation, (ii) the party shall have reasonably concluded that there may be a conflict of interest between the corporation and the party in the conduct of the defense of such proceeding, or (iii) the corporation shall not in fact have employed counsel to assume the defense of such proceeding. Notwithstanding the foregoing, if an insurance carrier has supplied directors' and officers' liability insurance covering a proceeding and is entitled to retain counsel for the defense of such proceeding, then the insurance carrier shall retain counsel to conduct the defense of such proceeding unless the party and the corporation concur in writing that the insurance carrier's doing so is undesirable. The corporation shall not be liable under this Article for any amounts paid in settlement of any proceeding effected without its written consent. The corporation shall not settle any proceeding in any manner that would impose any penalty or limitation on a party without the party's written consent. Consent to a proposed settlement of any proceeding shall not be unreasonably withheld by either the corporation or the party. Section 6.06 Enforcement. The right to indemnification and advancement of expenses granted by this Article shall be enforceable in any court of competent jurisdiction if the corporation denies the claim, in whole or in part, or if no disposition of such claim is made within 90 days after the written request for indemnification or advancement of expenses is received. If successful in whole or in part in such suit, the party's expenses incurred in bringing and prosecuting such claim shall also be paid by the corporation. Whether or not the party has met any applicable standard of conduct, the court in such suit may order indemnification or the advancement of expenses as the court deems proper (subject to any express limitation of the Code). Further, the corporation shall indemnify a party from and against any and all expenses and, if requested by the party, shall (within ten business days of such request) advance such expenses to the party, which are incurred by the party in connection with any claim asserted against or suit brought by the party for recovery under any directors' and officers' liability insurance policies maintained by the corporation, regardless of whether the party is unsuccessful in whole or in part in such claim or suit. Section 6.07 Proceedings by a Party. The corporation shall indemnify or advance expenses to a party in connection with any proceeding (or part thereof) initiated by the party only if such proceeding (or part thereof) was authorized by the board of directors of the corporation. Section 6.08 Subrogation. In the event of any payment under this Article, the corporation shall be subrogated to the extent of such payment to all of the rights of recovery of the indemnified party, who shall execute all papers and do everything that may be necessary to assure such rights of subrogation to the corporation. Section 6.09 Other Payments. The corporation shall not be liable under this Article to make any payment in connection with any proceeding against or involving a party to the extent the party has otherwise actually received payment (under any insurance policy, agreement or otherwise) of the amounts otherwise indemnifiable hereunder. A party shall repay to the corporation the amount of any payment the corporation makes to the party under this Article in connection with any proceeding against or involving the party, to the extent the party has otherwise actually received payment (under any insurance policy, agreement or otherwise) of such amount. Section 6.10 Insurance. So long as any party who is or was an officer or director of the corporation may be subject to any possible proceeding by reason of the fact that he is or was an officer or director of the corporation (or is or was serving in any one or more of the other capacities covered by this Article during his tenure as officer or director), if the corporation maintains an insurance policy or policies providing directors' and officers' liability insurance, such officer or director shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage applicable to any then current officer or director of the corporation, or the corporation shall purchase and maintain in effect for the benefit of such officer or director one or more valid, binding and enforceable policy or policies of directors' and officers' liability insurance providing, in all respects, coverage at least comparable to that provided to any then current officer or director at the corporation. Section 6.11 Other Rights and Remedies. The rights to indemnification and advancement of expenses provided in this Article shall be in addition to any other rights to which a party may have or hereafter acquire under any law, provision of the articles of incorporation, any other or further provision of these bylaws, vote of the shareholders or directors, agreement or otherwise. The corporation shall have the right, but shall not be obligated, to indemnify or advance expenses to any agent of the corporation not otherwise covered by this Article in accordance with and to the fullest extent permitted by the Code. Section 6.12 Applicability; Effect. The rights to indemnification and advancement of expenses provided in this Article shall be applicable to acts or omissions that occurred prior to the adoption of this Article, shall continue as to any party during the period such party serves in any one or more of the capacities covered by this Article, shall continue thereafter so long as the party may be subject to any possible proceeding by reason of the fact that he served in any one or more of the capacities covered by this Article, and shall inure to the benefit of the estate and personal representatives of each such person. Any repeal or modification of this Article or of any Section or provision hereof shall not affect any rights or obligations then existing. All rights to indemnification under this Article shall be deemed to be provided by a contract between the corporation and each party covered hereby. Section 6.13 Severability. If any provision of this Article shall be held to be invalid, illegal or unenforceable for any reason whatsoever (a) the validity, legality and enforceability of the remaining provisions of this Article (including without limitation, all portions of any Sections of this Article containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby, and (b) to the fullest extent possible, the provisions of this Article (including, without limitation, all portions of any Section of this Article containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent of this Article that each party covered hereby is entitled to the fullest protection permitted by law. ARTICLE VII Dividends The board of directors may, from time to time, declare and the corporation may pay dividends on its outstanding shares in the manner, and upon the terms and conditions provided by law and its articles of incorporation. ARTICLE VIII Conflicts of Interest Section 8.01 Financial Interest. (a) Conflicting Interest Transactions Not Void or Voidable. No contract or transaction between the corporation and one or more of its directors or officers or between the corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers or have a financial interest ("Conflicting Interest Transaction") shall be void or voidable solely for that reason; or solely because the director or officer is present at or participates in the meeting of the board or committee thereof which authorizes, approves or ratifies the contract or transaction; or solely because his or their votes are counted for such purpose, if: (i) The material facts as to his relationship or interest and as to the Conflicting Interest Transaction are disclosed or are known to the board of directors or the committee, and the board or committee in good faith authorizes, approves or ratifies the contract or transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors are less than a quorum; or (ii) The material facts as to his relationship or interest and as to the Conflicting Interest Transaction are disclosed, or are known to the shareholders entitled to vote thereon, and the contract or transaction is specifically authorized, approved or ratified in good faith by vote of the shareholders; or (iii) The Conflicting Interest Transaction was fair as to the corporation. (b) Definition of Conflicting Interest Transaction. The term "Conflicting Interest Transaction" shall not include any transaction between the Company and another entity that owns, directly or indirectly all of the outstanding shares of the Company or all of the outstanding shares or other equity interests of which are owned, directly or indirectly, by the Company. Section 8.02 Interested Directors. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the board of directors or of a committee which authorizes, approves or ratifies the contract or transaction. ARTICLE IX Contracts, Loans, Checks and Deposits Section 9.01 Contracts. The board of directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances. Section 9.02 Loans. No loans shall be contracted on behalf of the corporation and no evidence of indebtedness shall be issued in its name unless authorized by the board of directors. Such authority may be general or confined to specific instances. Section 9.03 Checks, Drafts, etc. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation, shall be signed by such officers, agent or agents of the corporation and in such manner as shall from time to time be determined by the board of directors. Section 9.04 Deposits. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositories as the board of directors may select. ARTICLE X Miscellaneous Section 10.01 Voting of Securities by the Corporation. Unless otherwise provided by resolution of the board of directors, on behalf of the corporation the president or any co- president shall attend in person or by substitute appointed by him, or shall execute written instruments appointing a proxy or proxies to represent the corporation at, all meetings of the shareholders of any other corporation, association or other entity in which the corporation holds any stock or other securities, and may execute written waivers of notice with respect to any such meetings. At all such meetings and otherwise, the president or any vice-president, in person or by substitute or proxy as aforesaid, may vote the stock or other securities so held by the corporation and may execute written consents and any other instruments with respect to such stock or securities and may exercise any and all rights and powers incident to the ownership of said stock or securities, subject, however, to the instructions, if any, of the board of directors. Section 10.02 Seal. The corporate seal of the corporation shall be in such form as authorized or adopted by the board of directors, and any officer of the corporation may, when and as required, affix or impress the seal, or a facsimile thereof, to or on any instrument or document of the corporation. Section 10.03 Fiscal Year. The fiscal year of the corporation shall be as established by the board of directors. Section 10.04 Gender. As used herein, pronouns in the masculine gender include the feminine and, where applicable, the neuter. Section 10.05 Amendments. The board of directors shall have the power to adopt, alter, amend or repeal the bylaws of the corporation by vote of not less than a majority of the directors then in office. The holders of shares of capital stock of the corporation entitled at the time to vote for the election of directors shall, to the extent such power is at the time conferred on them by applicable law, also have the power to adopt, alter, amend or repeal the bylaws of the corporation provided, that any proposal by a shareholder to adopt, alter, amend or repeal the bylaws shall require for adoption the affirmative vote of the holders of at least 80 percent of the outstanding shares of stock generally entitled to vote in the election of directors, voting together as a single class. (END) EX-10.4 5 Exhibit 10.4 TAX SHARING AGREEMENT --------------------- This Agreement is entered into as of the 1st day of December, 1999 between ACX Technologies, Inc. ("ACX"), a Colorado corporation, and CoorsTek, Inc. ("CTI"), a Delaware corporation. W I T N E S S E T H: - - - - - - - - - - WHEREAS, ACX and CTI have entered into a Distribution Agreement dated October [], 1999 (the "Distribution Agreement"), providing for the distribution by ACX to its shareholders of all of the common stock of CTI (the "Distribution"); WHEREAS, ACX and CTI desire to set forth their agreement on the rights and obligations of ACX, CTI and their respective Affiliates with respect to various Tax matters and the handling and allocation of Federal, state, local and foreign Taxes incurred in Taxable periods beginning prior to the Effective Date; NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, the parties agree as follows: 1. Definitions ----------- (a) As used in this Agreement: "ACX Consolidated Group" shall mean, with respect to any Taxable period, the corporations which are members of the affiliated group of corporations of which ACX or its successor is the common parent (within the meaning of Section 1504 of the Code). "ACX Group" shall mean the corporations which are members of the ACX Consolidated Group during any Taxable period, excluding the corporations which are the members of the CTI Group. "CTI Group" shall mean the corporations which are members of the affiliated group of corporations of which CTI is the common parent (within the meaning of Section 1504 of the Code) immediately after the Distribution Date and any predecessors or successors thereto (and to the extent applicable, a corporation, sold prior to the Distribution, that was a subsidiary of a member of the CTI Group). "Affiliate" (and the correlative meaning, "Affiliation") of any person shall mean any individual, corporation, partnership or other entity directly or indirectly controlling, controlled by or under common control with such person. Notwithstanding the foregoing, (i) a member of the CTI Group and a member of the ACX Group shall not be Affiliates, and (ii) neither Adolph Coors Company nor any of its subsidiaries shall be an Affiliate of any member of the ACX Group or any member of the CTI Group. "After-Tax Amount" shall mean an amount that, on an "After-tax basis", is equal to the obligation amount hereunder. "After-tax basis" shall reflect the hypothetical Tax consequences resulting from (i) receipt or accrual of the required payment by the recipient hereunder and (ii) any deduction for the payment or accrual of the item giving rise to the obligation. References to "after-Tax basis" and "hypothetical Tax consequences" refer to calculations of Tax at the maximum statutory rate (or rates, in the case of an item that affects more than one Tax) to the extent applicable for the relevant year. "Code" shall mean the Internal Revenue Code of 1986, as amended, or any successor thereto. "Consolidated State Tax" shall mean any income, franchise or similar Tax (based on income) payable to any state or local government as to which CTI or any of its Affiliates is or may be liable for such Tax on a consolidated, combined or unitary basis with ACX or any of its Affiliates. This term shall specifically exclude any combined state Tax Returns filed with CTI or any member of the CTI Group as the common parent. Such combined state Tax Returns shall be treated similar to separate company state Returns with responsibility being exclusive to the filing entity. "Distribution Date" shall mean the date on which ACX distributes to its shareholders all of the common stock of CTI. "Effective Date" shall mean ________. "Federal Tax" shall mean any United States Federal income, environmental, alternative or add-on minimum Tax. "Final Determination" shall mean (i) with respect to Federal Taxes, (A) a "determination" as defined in Section 1313(a) of the Code, or (B) the date of acceptance by or on behalf of the Internal Revenue Service of Form 870-AD (or any successor form thereto), as a final resolution of Tax liability for any Taxable period, except that a Form 870-AD (or successor form thereto) that reserves the right of the taxpayer to file a claim for refund and/or the right of the Internal Revenue Service to assert a further deficiency shall not constitute a Final Determination with respect to the item or items so reserved; (ii) with respect to Taxes other than Federal Taxes, any final determination of liability in respect of a Tax provided for under applicable law; (iii) any final disposition by reason of the expiration of the applicable statute of limitations; and (iv) the payment of Tax by ACX, CTI, or any Affiliate of ACX or CTI, whichever is responsible for payment of such Tax under applicable law, with respect to any item disallowed or adjusted by a Taxing Authority, provided that the provisions of Section 8 hereof have been complied with, or, if such section is inapplicable, that the party responsible under the terms of this Agreement for such Tax is notified by the party paying such Tax that it has determined that no action should be taken to recoup such disallowed item, and the other party agrees with such determination. "Other Taxes," are defined in Section 4. "Post-Effective Period" shall mean any Taxable period beginning after the Effective Date. "Pre-Effective Period" shall mean any Taxable period ending on or before the Effective Date. "Pre-Effective Tax Liability" shall mean (i) the Federal Tax liability of ACX and each corporation included in the ACX Consolidated Group for any period as to which a consolidated Federal Tax Return is filed by ACX for such group for all Pre- Effective Periods, and (ii) the Consolidated State Tax liability for such group for all Pre-Effective Periods and for the portions (up to the Effective Date) of any Taxable periods including but not ending on the Effective Date, regardless of whether any such liability has been previously assessed in whole or in part or is assessed in whole or in part after the date hereof, or whether such liability is or was imposed on the ACX Consolidated Group or on any corporation included within any such Group separately. "Prime" shall mean the rate of interest announced from time to time as "prime" by the Bank of America, N.A. "Referee" is defined in Section 16. "Return" shall mean any Tax Return, statement, report or form (including estimated Tax Returns and reports and information Returns and reports) required to be filed with any Taxing Authority. "Tax" (and the correlative meaning, "Taxes," "Taxing" and "Taxable") shall mean (A) any net income, alternative or add- on minimum, gross income, gross receipts, sales, use, ad valorem, franchise, profits, license, withholding, payroll, employment, excise, transfer, recording, severance, stamp, occupation, premium, property, environmental, custom duty, or other tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest and any penalty, addition to tax or additional amount imposed by a Taxing Authority; (B) any liability of ACX, CTI or any Affiliate of ACX or CTI (or, in each case, any successor in interest thereto by merger or otherwise), as the case may be, for the payment of any amounts of the type described in clause (A) for any Taxable period resulting from the application of Treasury Regulation Section 1.1502-6 or, in the case of any Consolidated State Tax, any similar provision applicable under state law; and (C) any liability of ACX, CTI or any Affiliate of ACX or CTI (or, in each case, any successor in interest thereto by merger or otherwise) for the payment of any amounts described in clause (A) as a result of any express or implied obligation to indemnify any other party. "Tax Asset" shall mean any net operating loss, net capital loss, investment Tax credit, foreign Tax credit, charitable deduction or any other credit or Tax attribute, including additions to basis of property, which could reduce Federal Taxes or Consolidated State Taxes, as the case may be, including, without limitation, deductions or credits related to alternative minimum Taxes. "Taxing Authority" shall mean any governmental authority responsible for the imposition of any Tax. (b) Any term used in this Agreement which is not defined in this Agreement shall, to the extent the context requires, have the meaning assigned to it in the Code or the applicable Treasury regulations thereunder. 2. Federal Taxes and Consolidated State Taxes-- Administrative and Compliance Matters. (a) Sole Tax Sharing Agreement. The parties acknowledge that there has not been a Final Determination of the Pre-Effective Tax Liability, that the members of the CTI Group are includible in the ACX Consolidated Group, and may be found to be includible in certain State Consolidated Groups through the Effective Date, that pursuant hereto any and all existing Tax sharing agreements or arrangements, written or unwritten, between the ACX Group and the CTI Group shall be terminated as of the Effective Date, and that after the Effective Date this Agreement shall constitute the sole Tax sharing agreement between the ACX Group and the CTI Group. Any tax sharing agreements between Adolph Coors Company and ACX will still be legally binding and applicable to both ACX Group and CTI Group. (b) Intent. Treasury regulations designate ACX as the sole agent of all members of the ACX Consolidated Group with respect to virtually all Federal Tax matters. Certain states have corresponding provisions. Notwithstanding Section 2(d) hereof, if the Internal Revenue Service District Director (or a corresponding state official) deals directly with any member of the CTI Group in respect of its Tax liability for a Pre-Effective Period (as is the District Director's right), such member of the CTI Group shall have full authority to act, provided, however, that such actions do not cause a material detriment to the ACX Group. It is the intent of ACX and CTI, as common parents of their respective groups for Post-Effective Periods, that, since each group is ultimately responsible for Federal Tax and Consolidated State Tax liabilities allocable thereto hereunder, each group, through its common parent, shall have the authority to negotiate, resolve and settle its own Tax matters to the extent such actions do not cause a material detriment to the other group or are otherwise inconsistent with the specific provisions of this Agreement. (c) Designation of Agent. CTI and each member of the CTI Group hereby irrevocably designate ACX as its agent, coordinator, and administrator for the purpose of taking any and all actions (including the execution of waivers of applicable statutes of limitation) necessary or incidental to the filing of any Federal or Consolidated State Tax Return, any amended Federal or Consolidated State Tax Return or any claim for refund (even where an item or Tax Asset giving rise to an amended Return or refund claim arises in a Post-Effective Period), credit or offset of Tax or any other proceedings relating to any Pre-Effective Period. ACX, as agent, shall be responsible to see that all such administrative matters relating thereto shall be handled promptly and appropriately. ACX shall be CTI's agent with respect to making payments to, or collecting Refunds from, any Taxing Authority with respect to Pre-Effective Tax Liabilities. CTI will then reimburse ACX, or ACX will reimburse CTI, as the case may be, for the CTI share of the total pursuant to such agency. ACX shall inform and consult with CTI prior to taking any action on behalf of, or which will have any material impact on, any member of the CTI Group, including, without limitation, strategies relating to waivers of any statute of limitations. (d) 1999 Returns. ACX will prepare and file the consolidated Federal Tax Return and each Consolidated State Tax Return for the taxable years ending on the Effective Date. ACX will provide CTI with "packets" at a time and in a form similar to prior years for CTI and each of its Affiliates for which data is necessary for the Federal and Consolidated State Returns, and CTI will complete and return such packets with respect to each member of the CTI Group or relevant CTI Affiliate, pursuant to a schedule mutually agreed upon by ACX and CTI, but in no event later than June 1, 2000. CTI will have sole responsibility for the technical propriety and accuracy of the packets relating to members of the CTI Group and CTI Affiliates. (e) Tax Assets. Tax Assets from any Pre-Effective Period shall be computed and agreed upon by ACX and CTI after the completion of the last ACX Consolidated Group Return which includes CTI or any member of the CTI Group. 3. Federal Taxes and Consolidated State Taxes-- Allocation of Taxes. (a) 1999 Federal and Consolidated State Income Taxes. In its capacity as agent, ACX shall pay all Federal Taxes and Consolidated State Taxes due in connection with the filing of its 1999 Returns or with any request for extension of time within which to file any such Return. Within 20 days of filing of any such Returns, ACX shall send a statement to CTI showing the amount of the unpaid or overpaid portion of the CTI Group's allocated share of the total Federal Tax liability or Consolidated State Tax liability as shown on such Returns as filed. (b) Carrybacks. ACX agrees to pay CTI the actual benefits received by ACX from the use in any Pre-Effective Period of any Tax Asset of CTI, a member of the CTI Group or a CTI Affiliate arising in a Post-Effective Period. Such benefit shall be considered equal to the excess of the actual amount of Federal Taxes or Consolidated State Taxes that would have been payable by the ACX Consolidated Group in the absence of such carryback over the amount of Federal Taxes or Consolidated State Taxes actually payable by the ACX Consolidated Group as a result of such carryback or subsequent increase to such carryback. Payment of the amount of such benefit shall be made within 30 days of (i) receipt of the refund or (ii) the end of the Taxable year during which ACX or the relevant ACX Affiliate receives the credit or other offset attributable thereto. (c) Subsequent Adjustments to Carrybacks. If, subse- quent to the payment by ACX to CTI of any amount referred to in Section 3(b) above, there shall be (i) a Final Determination under applicable law of a deficiency of Federal Taxes or Consolidated State Taxes of the ACX Consolidated Group or the relevant State Consolidated Group on the grounds that the Tax Asset giving rise to such payment was in fact not available in whole or in part, (ii) a Final Determination resulting from an audit of any member of the CTI Group or any CTI Affiliate which results in a reduction of any Tax Asset so carried back, or (iii) the filing of a subsequent Return reflecting a recapture by the ACX Consolidated Group or the relevant State Consolidated Group of any Tax Asset so carried back, then within 20 days of such event, ACX shall send a statement to CTI setting forth an amount reflecting the amount which would not have been payable to CTI pursuant to this Section 3 had the amount of the benefit been determined in light of such event. In addition, CTI shall hold ACX and each of its Affiliates harmless by paying an amount for any penalty or interest paid by ACX or any such Affiliate as a result of any such decrease. (d) Amended Returns with Amounts Due by CTI. If ACX files an amended Return on behalf of the ACX Consolidated Group or a State Consolidated Group for any Pre-Effective Period and such Return results in an increase in the Pre-Effective Tax Liability attributable to any member of the CTI Group or any CTI Affiliate for such period, CTI shall pay to ACX the amount of such increase, plus any applicable interest and penalties. (e) Amended Returns with Refunds Due to CTI. (i) CTI may request that ACX file an amended Return or assert a claim for refund. ACX shall assert a claim for refund or file an amended Return within 60 days of such request, provided, however, that ACX shall have no obligation to file such an amended Return or assert such a claim for a refund if ACX reasonably determines in good faith after consulting with CTI that the benefit of filing such Return or asserting such claim to the members of the CTI Group or CTI Affiliates is outweighed by the detriment to it or the members (or former members) of the ACX Group. If CTI believes that ACX's determination is unreasonable, the dispute shall be subject to the procedures set forth in Section 16. (ii) If ACX files an amended Return on behalf of the ACX Consolidated Group for any Pre-Effective Period that results in a decrease in the Pre-Effective Tax Liability attributable to any member of the CTI Group or any CTI Affiliate for such period, or if ACX asserts a claim for a refund of Federal Taxes or Consolidated State Taxes which would be attributable to any member of the CTI Group or any CTI Affiliate in any audit or other proceeding, then ACX shall pay to CTI the amount of any refund received resulting from such decrease or claim for refund, plus any interest received by ACX attributable thereto. (f) Calculation and Payments of Amounts Due. (i) Responsible Party. Calculations required to be made pursuant to this Section 3 and the relevant portion of Section 6(c) shall be made by ACX. Upon receipt of such calculations, CTI shall have 10 days to review the computations and to notify ACX of any disagreements. During CTI's review and in the event that CTI has notified ACX of a disagreement, for an additional 10 days both CTI and ACX shall make reasonable efforts to resolve any questions or disputes. In the event the parties cannot agree, their disputes will be resolved pursuant to Section 16. (ii) Method of Calculation. Except as otherwise provided, CTI's share of any Federal Tax, or Consolidated State Tax shall be calculated pursuant to the method described in Exhibit A hereto. (iii) Payments Due. Except as otherwise provided, all payments required by this Section 3 and the relevant portions of Section 6(c) will be due 30 days after the fixing of liability or the resolution of a dispute (as provided for in 3(f)(i)). (iv) Interest. Any amount not paid when due under Section 3(f)(iii) shall bear interest at Prime plus 3%, except that any amount not paid because of any good faith dispute under Section 16 shall bear interest at Prime. (v) After-Tax Amounts. ACX and CTI shall discharge their obligations under this Section 3 and the relevant portions of Section 6(c), other than payments required under Section 3(b), by paying After-Tax Amounts. (vi) Duplicative Payments Not Required. Notwithstanding the foregoing, no payment shall be required under any provision of this Agreement to the extent it is duplicative of any payment required by any other provision of this Agreement. (g) In the event that the Treasury Department promulgates regulations under the Code that provide a method for the allocation of a consolidated group's "minimum tax credit" (within the meaning of Section 53 of the Code) among a group's members, and, as a result of such regulations' mandatory application, the ACX Consolidated Group is required to allocate the maximum tax credit carried forward to any Post-Effective Period from any federal income Tax Return for any Pre-Effective Period, so that the amount originally allocated to members of the CTI Group (the "Original CTI Allocation") is different from the amount that is allocated under such regulations (the "Adjusted CTI Allocation"), then, ACX shall pay CTI an amount equal to the excess of the Original CTI Allocation over the Adjusted CTI Allocation, or, if applicable, CTI shall pay ACX an amount equal to the excess of the Adjusted CTI Allocation over the Original CTI Allocation. Within 20 days of the effective date of such regulations, ACX shall send a statement to CTI showing the amount of the Adjusted CTI Allocation. 4. Other Taxes. ----------- (a) Liability for all Taxes other than Federal Taxes and Consolidated State Taxes ("Other Taxes"), attributable to any member of the CTI Group, and the responsibility for filing of all Returns relating to such other Taxes, shall be the sole responsibility of the CTI Group. Liability for all Other Taxes, attributable to any member of the ACX Group and the responsibility for filing all Returns relating to such Other Taxes, shall be the sole responsibility of the ACX Group. Each party agrees to indemnify and hold the other harmless in accordance with the undertakings contained in this Section 4(a). (b) The CTI Group shall be entitled to all refunds and credits of Other Taxes attributable to any member of the CTI Group, and the ACX Group shall be entitled to all refunds and credits of Other Taxes attributable to any member of the ACX Group. 5. Certain Representations and Covenants. ------------------------------------- (a) (I) CTI Representations. CTI represents and agrees that, as of the date hereof, and covenants that on the Distribution Date: (i) There is no plan or intention (A) to liquidate CTI or to merge or consolidate CTI with any other person subsequent to the Distribution or (B) to sell or otherwise dispose of any asset of CTI subsequent to the Distribution, except in the ordinary course of business. (ii) CTI will not take any action inconsistent with the information and representations furnished to the IRS in connection with the request for a private letter ruling with respect to the spin-off, regardless of whether such information and representations were included in the ruling or pronouncement issued by the IRS. (iii) CTI will not enter into any negotiation, agreements or arrangements with respect to transactions or events (including stock issuances, pursuant to the exercise of options or otherwise, option grants, the adoption of, or authorization of shares under, a stock option plan, capital contributions, or acquisitions, but not including the spin-off) which may cause the spin-off to (a) be treated as part of a plan pursuant to which one or more persons acquire directly or indirectly CTI stock representing a "50-percent or greater interest" within the meaning of Section 355(d)(4) or the Code, or (b) violate the "continuity of interest requirement" set forth in Treasury Regulation 1.355- 2(c). (II) CTI and ACX Representations. CTI and ACX each represents that, as of the date hereof, and covenants that on the Distribution Date: (i) To the best of ACX's and CTI's knowledge (as applicable), payments made in connection with all continuing non-transitional transactions between any member of the CTI Group and any member of the ACX Group occurring after the Distribution will be for fair market value based on terms and conditions arrived at by the parties bargaining at arm's length and payments made in connection with certain transitional services also will be provided for fair market value. (ii) Neither CTI nor ACX (as applicable) is aware of any plan or intention by the shareholders of ACX to sell, exchange, transfer by gift, or otherwise dispose of any of their stock in, or securities of, ACX or CTI subsequent to the Distribution, except for any dispositions of ACX stock or CTI stock through the 401(k) plans of ACX and CTI, respectively. (b) CTI Covenants. CTI covenants to ACX and agrees that during the two-year period following the Distribution Date: (i) It will not liquidate, merge or consolidate with any other person, or sell, exchange, distribute or otherwise dispose of its assets other than in the ordinary course of business, redeem or otherwise reacquire any of its capital stock, other than through stock purchases meeting the requirements of Section 4.05(1)(b) of Rev. Proc. 96-30. (ii) CTI Group will continue the active conduct of the historic business conducted by CTI Group throughout the five year period prior to the spin-off. (iii) CTI will not, nor will it permit any member of the CTI Group to, take any action inconsistent with the information and representations furnished to the IRS in connection with the request for a private letter ruling with respect to the spin-off, regardless of whether such information and representations were included in the ruling or pronouncement issued by the IRS. (iv) During the applicable period provided in Section 355(e)(2)(B) of the Code with respect to the spin-off, CTI will not enter into any transaction or make any change in its equity structure (including stock issuances, pursuant to the exercise of options or otherwise, option grants, the adoption of, or authorization of shares under, a stock option plan, capital contributions, or acquisitions, but not including the spin-off) which may cause the spin-off to (a) be treated as part of a plan pursuant to which one or more persons acquire directly or indirectly CTI stock representing a "50-percent or greater interest" within the meaning of Section 355(d)(4) of the Code, or (b) violate the "continuity of interest requirement" set forth in Treasury Regulation 1.355-2(c). (v) CTI will covenant that in the one-year period after the spin-off, it will make the borrowings and acquisitions described in the materials submitted to the IRS with respect to the business purpose of the spin-off. (c) Exceptions. Notwithstanding the foregoing, CTI may take actions inconsistent with the covenants contained in Section 5(b) above if: (i) CTI obtains a ruling from the Internal Revenue Service to the effect that such actions will not cause either ACX or its shareholders to recognize Taxable income by virtue of the Distribution; or (ii) CTI obtains an opinion, acceptable to ACX, from recognized counsel acceptable to ACX to the same effect as in Section 5(c)(i). 6. Indemnities. ----------- (a) CTI Indemnity. CTI and each member of the CTI Group will jointly and severally indemnify ACX and each member of the ACX Group against and hold them harmless from (i) any Pre-Effective Tax Liability assessed after the Distribution Date pursuant to a Final Determination, which is attributable to any item of income, loss, credit, deduction or other Tax attribute of any member of the CTI Group, or a CTI Affiliate, (ii) any liability (including any and all Taxes) relating to the Distribution, in the event the Distribution is Taxable due to a breach by CTI or any member of the CTI Group of any agreement, representation or covenant made by CTI herein; provided, however, that if the Distribution is Taxable as a result, in part, of ACX's action, then CTI shall be liable only for the proportionate amount of the liability attributed to CTI's action, and (iii) all liability for fees, costs and expenses (including reasonable attorneys' fees) arising out of or incident to any proceedings before any Taxing Authority, or any judicial authority, with respect to any amount indemnifiable under this Section 6(a). (b) ACX Indemnity. ACX and each member of the ACX Group will jointly and severally indemnify CTI and each member of the CTI Group against and hold them harmless from (i) any Pre-Effective Tax Liability, or Tax liability resulting from the Distribution, other than any such liabilities described in Sections 6(a)(i) and (ii) hereof, (ii) any liability resulting from a breach by ACX or any member of the ACX Group after the Distribution Date of any covenant made by ACX herein, and (iii) all liability for fees, costs and expenses (including reasonable attorneys' fees) arising out of or incident to any proceedings before any Taxing Authority, or any judicial authority, with respect to any amount indemnifiable under this Section 6(b). (c) Discharge of Indemnity. CTI and each member of the CTI Group, and ACX and each member of the ACX Group, shall discharge their obligations under Sections 6(a)(ii), 6(a)(iii), 6(b)(i), 6(b)(ii) and 6(b)(iii) hereof, respectively, by paying an After-Tax Amount within 30 days of demand therefore. Within 20 days of a Final Determination of an obligation of CTI and each member of the CTI Group under Section 6(a)(i) ACX shall send a statement to CTI showing the amount due thereunder. Calculation and payment mechanics relating to items described in Section 6(a)(i) are set forth in Section 3(f). Notwithstanding the foregoing, if either CTI or ACX disputes in good faith the fact or the amount of its obligation under Section 6(a) or Section 6(b) (including, without limitation, any After-Tax Amount), then no payment of the amount in dispute shall be required until any such good faith dispute is resolved in accordance with Section 16 hereof; provided, however, that any amount not paid within 30 days of demand therefore shall bear interest as provided in Section 3(f)(iv). Notwithstanding anything to the contrary herein, any Final Determination relating to the applicability, determination or calculation of the gross-up required to achieve an After-Tax Amount under this Agreement shall be subject to indemnity as if an indemnifiable Tax relating to a Pre-Effective Period. (d) Method of Calculation. Except as otherwise provided, the amount of CTI's liability under Section 6(a)(i) and ACX's liability under Section 6(b)(i), including the calculation of any party's share of any Federal Tax or Consolidated State Tax, shall be calculated pursuant to the method described in Exhibit A hereto. (e) Joint and Several Liability. The joint and several liabilities of the members of the CTI Group under Section 6(a) shall become several liabilities (and not joint) with respect to any member upon a disposition, causing a break in Affiliation from the CTI Group, of such member to a third party for fair value. The several liability responsibility of such member shall equal the portion of the total liability multiplied by a fraction, the numerator of which is the fair market value of the member and the denominator of which is the fair market value of the CTI Group immediately prior to the disposition. 7. Communication and Cooperation. ----------------------------- (a) Consult and Cooperate. CTI and ACX shall consult and cooperate (and shall cause each of their Affiliates to cooperate) fully at such time and to the extent reasonably requested by the other party in connection with all matters subject to this Agreement. Such cooperation shall include, without limitation, (i) the retention and provision on reasonable request of any and all information including all books, records, documentation or other information, any necessary explanations of information, and access to personnel, until the expiration of the applicable statute of limitation (giving effect to any extension, waiver, or mitigation thereof), (ii) the execution of any document that may be necessary or helpful in connection of any required Return or in connection with any audit, proceeding, suit or action, and (iii) the use of the parties' best efforts to obtain any documentation from a governmental authority or a third party that may be necessary or helpful in connection with the foregoing. (b) Provide Information. ACX and CTI shall keep each other fully informed with respect to any development relating to all matters subject to this Agreement. (c) Tax Attribute Matters. ACX and CTI shall advise and consult with each other with respect to any proposed Tax adjustment relating to the ACX Consolidated Group or any State Consolidated Group which are the subject of an Internal Revenue Service or State Taxing Authority audit or investigation, or are the subject of any proceeding or litigation, and which may affect any Tax attribute of ACX, CTI or any Affiliate of ACX or CTI (including, but not limited to, basis in an asset or the amount of earnings and profits). 8. Audits and Contests. ------------------- (a) Notice. ACX shall promptly notify CTI in writing of any inquiries from the Internal Revenue Service or any other Taxing Authority which relate or may relate to matters described in Section 3(c) or 6(a). CTI shall promptly notify ACX in writing of any inquiries from the Internal Revenue Service or other Taxing Authority which relate or may relate to matters described in Section 3(c) or 6(b). Each party shall forward to the other party relevant portions of any reports or other communications which relate to such matters. (b) Settlement of Issues. No settlement of any audit, examination, action, suit or other judicial or administrative proceeding relating to matters described in Section 6(a) for any Pre-Effective Period (or with respect to matters relating to Section 6(a)(ii) for any Taxable period) shall be accepted or entered into by or on behalf of the ACX Consolidated Group or State Consolidated Group unless CTI has consented thereto in writing (which consent shall not be unreasonably withheld); provided, however, that in the event that CTI does not consent and ACX believes that the withholding of consent was unreasonable, the parties shall resolve their disagreement under the procedures provided in Section 16. In the process of resolving such a disagreement, the Referee (or other applicable arbiter) shall consider the magnitude and size of the item in question, the impact of the resolution on other CTI Taxable periods and the likelihood of CTI's position ultimately prevailing. (c) Venue. In the event that a notice of deficiency (or similar notice) is received from the Internal Revenue Service or other Taxing Authority by the ACX Consolidated Group or State Consolidated Group for a Pre-Effective Period (or, with respect to a notice of deficiency relating to an item described in Section 6(a)(ii), for any Taxable period) and such notice relates in whole or in part to a matter described in Section 6(a), then (i) ACX, upon receiving a written request from CTI, which shall be given no later than a date reasonably required to permit timely filing of a petition in the United States Tax Court, (or, if applicable, similar State venue) for redetermination of the deficiency, shall timely file such petition; provided, however, that, notwithstanding such request, after consultation with CTI, ACX shall have the option, if the notice also relates to matters described in Section 6(b), to pay the amount of the deficiency, to file a claim for the refund thereof, and, if the claim is denied, to bring an action in a court of competent jurisdiction seeking the refund of such Tax. If a Final Determination does not provide for a refund of any amount covered by Section 6(a) and contested under this Section, CTI shall pay ACX such amount plus interest from the time ACX's payment of the deficiency at a rate equal to Prime; or (ii) If (A) CTI does not request ACX to file a petition in the United States Tax Court (or, if applicable, similar State venue) for redetermination of the deficiency pursuant to Section 8(c)(i), (B) ACX does not, on its own initiative, timely file such a petition, and (C) CTI requests that ACX file a claim for refund, then ACX shall pay the deficiency, file a claim for refund thereof, and, if the claim is denied, bring an action in a court of competent jurisdiction seeking such refund; provided that, in such case, CTI shall pay to ACX, on or before the date on which the deficiency is paid by ACX, the amount as if the notice of deficiency were a Final Determination (that CTI would otherwise be responsible for with respect to matters described in Section 6(a)) and any such payment shall be credited against the payment required with appropriate adjustment to be made promptly upon a Final Determination with respect to such proceedings for refund. Notwithstanding anything to the contrary herein, if as a result of a Final Determination the amount due by CTI (the "Final Liability") is less than the amount previously paid by CTI pursuant hereto (the "Prepaid Amount"), ACX shall pay to CTI within 30 days after such Final Determination an amount based upon an amount equal to the excess or the Prepaid Amount over the Final Liability, together with interest attributable to such excess (reduced by the excess of any tax imposed on the receipt of such interest over the amount of any Tax savings realized by ACX upon any payment made to CTI pursuant to this sentence). Notwithstanding the foregoing, no payment shall be required under this provision to the extent it is duplicative of any payment required by any other provision of this Agreement. (d) Judicial Appeals. In the event that a judgment of the United States Tax Court or other court of competent jurisdiction results in an adverse determination with respect to a matter described in Section 6(a) then: (i) In the case an appeal of the adverse determination involves no material issues other than matters described in Section 6(a), CTI shall have the right to cause ACX to appeal from such adverse determination if CTI delivers to ACX an opinion from an independent tax counsel selected by CTI and reasonably acceptable to ACX that such appeal has a reasonable chance of success. (ii) In the case of an appeal of any other adverse determination which involves material issues other than those described in Section 6(a), CTI shall have the right to cause ACX to appeal from such adverse determination if CTI delivers to ACX an opinion from an independent tax counsel selected by CTI and reasonably acceptable to ACX that it is more likely than not that such appeal will succeed. (iii) In the case of an adverse determination which involves matters described in Section 6(b) and within such determination material matters described in Section 6(a) were favorably disposed, CTI shall have the right to prevent ACX from appealing from such adverse determination, unless ACX delivers to CTI an opinion from an independent tax counsel selected by ACX and reasonably acceptable to CTI that it is more likely than not that such appeal will succeed. (e) Participation and Closing. (i) CTI and its representatives, at CTI's expense, shall be entitled to participate in all conferences, meetings, or proceedings with any Taxing Authority, the subject matter of which is or includes matters described in Section 6(a); provided, however, that if (A) less than $200,000 of the amount of the total of annual proposed adjustment is attributable to matters described in Section 6(a) and the proposed adjustments do not cause significant prejudice to the CTI Group in other Taxable periods, and (B) ACX, in good faith and in its sole discretion, determines that the commencement or continuance of any such discussions or submissions by CTI would extend the audit or review of the Tax Return of the ACX Consolidated Group or State Consolidated Group for such Taxable year beyond the period such audit or review would require but for the commencement or continuance of such discussions or submissions, then, upon receipt of notice by CTI from ACX to such effect, CTI shall have no further right to commence or continue such discussions or submissions with respect to the audit or review for such Taxable year, and ACX shall have the right to compromise such issues and cause such audit or review to be closed. (ii) If ACX suspends CTI's rights to commence or continue discussions or submissions with respect to a Taxable year under Section 8(e)(i) and compromises the proposed adjustments thereunder, ACX will not be entitled to indemnity under Section 6(a) for any such items if it is more likely than not that any such item would have prevailed in a court of competent jurisdiction. If ACX believes it is entitled to an indemnity for such an item under Section 6(a) and CTI disagrees (on the grounds that CTI believes that the item is more likely than not to prevail) the parties shall resolve the disagreement provided in Section 16. (iii) CTI and its representatives, at CTI's expense, shall be entitled to participate in all appearances before any court, the subject matter of which includes matter described in Section 6(a). (iv) The participation referred to in Sections 8(e)(i) and (iii) shall include the right to control the submission and content of documentation, protests, memoranda of fact and law and briefs, the conduct of oral arguments or presentations, the selection of witnesses and the negotiation of stipulations of fact, all as may be deemed appropriate by CTI, but solely with respect to a matter described in Section 6(a). (f) Taxability of the Distribution. Notwithstanding anything to the contrary herein, to the extent any issue is based on a theory which would, if true, result in CTI being liable under Section 6(a)(ii) of this Agreement for any Tax that might result from an adverse determination of such issue, then ACX shall provide CTI with such notice and information as would be required under Section 8(a) hereof, and CTI shall have the right to be involved, at its own expense, in the development and execution of strategy for the response to, preparation of and defense of any contest relating to such issue. In the case of any such issue which is based solely on such a theory, ACX shall not settle such issue in a manner which would be impermissible under Section 8(b). 9. Payments. -------- All payments to be made hereunder shall be made in immediately available funds. Payments shall be deemed made when received. 10. Notices. ------- Any notice, demand, claim, or other communication under this Agreement shall be in writing and shall e deemed to have been given upon the delivery or mailing hereof, as the case may be, if delivered personally or sent by certified mail, Return receipt requested, postage prepaid, to the parties at the following addresses (or at such other address as a party may specify by notice to the other): If to ACX, to: ACX Technologies, Inc. 4455 Table Mountain Parkway Golden, CO 80403 Attn: Tax Director, ACX Technologies, Inc. If to CTI, to: CoorsTek, Inc. 16000 Table Mountain Parkway Golden, CO 80403 Attn: Tax Manager, CoorsTek, Inc. 11. Costs and Expenses. ------------------ Except as expressly set forth in this Agreement, each party shall bear its own costs and expenses incurred pursuant to this Agreement. 12. Effectiveness; Termination and Survival. --------------------------------------- This Agreement shall become effective upon the consummation of the Distribution, provided, however, that this Agreement will only become effective if consummation of the Distribution occurs prior to the close of business on March 1, 2000. Notwithstanding anything in this Agreement to the contrary, this Agreement shall remain in effect and its provisions shall survive for the full period of all applicable statutes of limitation (giving effect to any extension, waiver or mitigation thereof). 13. Section Headings. ---------------- The headings contained in this Agreement are inserted for convenience only and shall not constitute a part hereof or in any way affect the meaning or interpretation of this Agreement. 14. Entire Agreement; Amendments and Waivers ---------------------------------------- (a) Entire Agreement. This Agreement contains the entire understanding of the parties hereto with respect to the subject matter contained herein. No alteration, amendment, modification, or waiver of any of the terms of this Agreement shall be valid unless made by an instrument signed by an authorized officer of ACX and CTI, or in the case of a waiver, by the party against whom the waiver is to be effective. (b) Waiver. No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver hereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any right, power or privilege. 15. Governing Law and Interpretation. -------------------------------- This Agreement has been made in and shall be construed and enforced in accordance with the laws of the State of Colorado. 16. Dispute Resolution. ------------------ (a) CEO's. If the parties hereto are unable to resolve any disagreement or dispute, either party may refer the matter to the Chief Executive Officers (CEOs) of the parties by giving the other party written notice ("Notice"). Within 20 days after delivery of Notice, the CEOs of both parties shall meet at a mutually acceptable time and place to exchange relevant information and attempt to resolve the dispute within 45 days after delivery of Notice. All negotiations pursuant to this Section 16(a) shall be confidential and shall be treated as compromise and settlement negotiations for purposes of the Federal Rules of Evidence and State Rules of Evidence. (b) Referees. Except for disagreements relating to Section (ii), any disagreement not resolved by mutual agreement of the parties or under Section 16(a) shall be resolved by an independent referee that is mutually acceptable to the parties hereto (a "Referee"). In the event the parties cannot agree on a Referee, each party shall select an independent nationally recognized law firm or accounting firm expert in tax matters and such firms shall jointly choose the Referee. A Referee so chosen shall resolve any such disagreement within 30 days of appointment pursuant to such procedures as it may deem advisable. Any such resolution shall be binding on the parties hereto without further recourse. (c) Costs. The costs of any Referee shall be apportioned between ACX and CTI as determined by such Referee in such manner as the Referee deems reasonable taking into account the circumstances of the dispute, the conduct of the parties and the result of the dispute. 17. Counterparts. ------------ This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 18. Assignments; Third Party Beneficiaries. -------------------------------------- This Agreement shall be binding upon and shall inure only to the benefit of the parties hereto and their respective successors and assigns. This Agreement is not intended to benefit any person other than the parties hereto and such successors and assigns, and no such other person shall be a third party beneficiary hereof. EXHIBIT A Allocated on a stand alone basis, consistent with prior years with the exception of any 1999 pension plan contributions which will be allocated to ACX. The undersigned hereby irrevocably appoints ACX Technologies, Inc. as its agent and true and lawful attorney in fact in the name of the undersigned to execute on behalf of the undersigned and bind it to a Tax Sharing Agreement (the "TSA") that ACX and its Affiliates will enter into with CoorsTek, Inc. and its Affiliates in order to enable ACX to effect the contemplated Distribution of the shares of CTI to the shareholders of ACX. The TSA sets forth the rights and obligations of the parties (including the undersigned) with respect to certain Tax matters and sets forth indemnification obligations of all parties (on a joint and several basis). ACX Technologies, Inc. By /s/ Jill B. W. Sisson ------------------------------------ Title: General Counsel and Secretary ----------------------------- The undersigned hereby irrevocably appoints CoorsTek, Inc. as its agent and true and lawful attorney in fact in the name of the undersigned to execute on behalf of the undersigned and bind it to a Tax Sharing Agreement (the "TSA") that CTI and its Affiliates will enter into with ACX Technologies, Inc. and its Affiliates in order to enable ACX to effect the contemplated Distribution of the shares of CTI to the shareholders of ACX. The TSA sets forth the rights and obligations of the parties (including the undersigned) with respect to certain Tax matters and sets forth indemnification obligations of all parties (on a joint and several basis). CoorsTek, Inc. By /s/ Katherine A. Resler ------------------------------- Title: General Counsel and Secretary ----------------------------- EX-10.5 6 Exhibit 10.5 ENVIRONMENTAL RESPONSIBILITY AGREEMENT This ENVIRONMENTAL RESPONSIBILITY AGREEMENT ("Agreement") is made as of December 1, 1999, by and among ACX Technologies, Inc. ("ACX"), and its Affiliates, and CoorsTek, Inc. ("CTI"), and its Affiliates, hereinafter collectively referred to as the "Parties." RECITALS As part of this Agreement, the Parties recite certain background information, so that persons who may subsequently read, interpret, and apply this Agreement may understand the motives and intent of the Parties and be better able to interpret and apply its provisions. A. The Parties recognize that their historical operations may give rise to certain environmental liabilities. B. The Parties recognize that future situations may involve both ACX Parties and CTI Parties as a result of geographic proximity of operations and past inter-company transactions and arrangements. C. The Parties intend that each of them will be and remain responsible for their own respective actions, practices, operations, and wastes, including those that pre-date this Agreement. D. The Parties further recognize that providing for the handling and resolution of environmental conditions involving ACX Parties and CTI Parties is in their common interests. E. In furtherance of their common interests, the Parties may desire to exchange documents (as that term is used in Fed. Rule Civ. P. 34) and/or information that may be privileged work product or subject to federal and/or state privileges, including, but not limited, to the attorney-client privilege. F. By distributing any documents or information among themselves under the terms and conditions as set forth herein, the Parties intend to fully preserve and not to waive any privilege or other protection that may be available with respect to such documents or information. G. In no event shall entering into this Agreement, or any subsequent agreement relating to allocation of costs associated with any Liability, be construed or used in any manner as an admission of any responsibility or liability or any share thereof by any Party, or as a waiver by any Party of any defenses or claims relating to any Liability, except as expressly set forth herein. 1. Definitions. Capitalized terms used and not otherwise defined herein will have the definitions set forth in the Distribution Agreement dated as of October __, 1999, between ACX and CTI ("Distribution Agreement"). Other terms capitalized herein shall have the following meanings: "ACX" shall mean ACX and its successors and assigns. "ACX Parties" shall mean ACX and its Affiliates. "CTI" shall mean CTI and its successors and assigns. "CTI Parties" shall mean CTI and its Affiliates. "Environmental Liability(ies)" shall mean any demand, claim, proceeding, cause of action, obligation, or liability which arises, or allegedly arises, from a Party's use, storage, generation, transportation, release, discharge, emission or disposal of any material, waste, pollutant or contaminant at any time, including all times prior to the effective date of this Agreement. "Parties(ies)" shall mean CTI Parties and ACX Parties. "Shared Information" shall mean mental impressions, client confidences, expert opinions, data bases, opinions, work product, information, memoranda, reports, and other documents shared by the Parties under this Agreement that are considered confidential and/or privileged. 2. Term of Agreement. The Agreement shall be effective commencing on January 1, 2000, and shall remain in effect for fifty (50) years thereafter. 3. Indemnification. (a) Each ACX Party shall severally indemnify, defend and hold harmless each CTI Party and each of their respective directors, officers, employees and agents from and against any and all Environmental Liabilities incurred or suffered by such CTI Party in connection with or arising out of or due to, directly or indirectly, (i) any past, present or future actions, practices, or operations of such ACX Party, or (ii) any failure to perform, or violation of, any provision of this Agreement that is to be performed or complied with by such ACX Party. (b) Each CTI Party shall severally indemnify, defend and hold harmless each ACX Party and each of their respective directors, officers, employees and agents from and against any and all Environmental Liabilities incurred or suffered by such ACX Party in connection with or arising out of or due to, directly or indirectly, (i) any past, present or future actions, practices, or operations of such CTI Party, or (ii) any failure to perform, or violation of, any provision of this Agreement that is to be performed or complied with by such CTI Party. 4. Duty to Notify. If any ACX Party or CTI Party becomes aware of (a) any potential or actual Environmental Liability with respect to which the other is or could be named or (b) a reasonable likelihood that Environmental Liabilities may be asserted against such other Party, it shall promptly so notify such Party. 5. Duty to Cooperate. The Party giving such notice and the Party that has been so notified shall cooperate with each other to coordinate the exchange of information (including access to knowledgeable employees) related to the investigation, defense or settlement of any Environmental Liability. 6. Confidentiality and Use of Information. (a) Confidentiality of Shared Information. By distributing any documents or information among themselves under the terms and conditions of this Agreement, the Parties expressly agree not to waive, and intend to fully preserve, any privilege or other protection that may be available with respect to such documents or information. Each Party agrees that all Shared Information received from any other Party or its counsel pursuant to this Agreement shall be held in strict confidence by the receiving Party and that such information shall be used only in connection with any Liability. The Shared Information may, but need not, be marked "Confidential" or with a similar legend. Distribution of Shared Information among the Parties shall not constitute a waiver of the attorney-client or attorney-work product privileges. Any Party receiving Shared Information pursuant to this Agreement agrees to distribute the information only in a manner consistent with the privileges protecting such information. Each Party shall take all necessary and appropriate measures to ensure that any person who is granted access to any Shared Information or who in any manner participates in joint projects, or who otherwise assists any counsel in connection with the performance of this Agreement, is familiar with the terms of this Agreement and complies with such terms as they relate to the duties of such person. (b) Intent, Duration, and Scope of Confidentiality Provisions. The Parties intend to protect from disclosure all Shared Information exchanged pursuant to this Agreement to the greatest extent permitted by law regardless of whether the information is marked "Confidential." The provisions of this Agreement shall not apply to information that is now or hereafter becomes public knowledge without violation of this Agreement or which is sought and attained from a Party pursuant to discovery procedures and not otherwise protected from disclosure. The confidentiality obligations of the Parties shall survive the termination of this Agreement and the resolution or settlement of any Liability. (c) Notification of Proposed Disclosure. If any Party is subpoenaed or becomes the subject of any process that will require or result in the disclosure of any confidential information, that Party will promptly notify the other Parties. 7. Enforcement of Agreement/Dispute Resolution. If the Parties are unable to resolve any disagreement or dispute arising out of matters within the scope of this Agreement, then the provisions in Article IX of the Distribution Agreement shall apply. All negotiations pursuant to this clause are confidential and shall be treated as compromise and settlement negotiations for purposes of the federal and state rules of evidence. 8. Rights of Contribution. In circumstances in which the indemnification provisions of this Agreement apply, such provisions are in lieu of federal and state statutory and common law rights of contribution. The rights created by the Agreement are stipulated to be contractual in nature. 9. Reservation of Rights. Except as provided in Section 8, the Parties reserve any and all rights they may have under other agreements or under any federal or state statutory or common law. 10. Joint Defense Agreements. Except as otherwise provided in the Distribution Agreement, for any Third Party Claim in which both one or more ACX Parties and one or more CTI Parties share an actual or potential material interest, the Parties affected thereby shall enter into a Joint Defense Agreement. Unless an Indemnifying Party is the sole indemnifying party or the parties otherwise specifically agree in writing in a Joint Defense Agreement, each party shall pay its proportionate share (as provided in the Joint Defense Agreement) of all costs and expenses reasonably incurred in connection with the defense of such Third Party Claim. 11. Miscellaneous. (a) Amendment. This Agreement may be amended at any time by agreement of ACX and CTI. All amendments shall be in writing and executed by ACX and CTI. (b) No Admission. Nothing in this Agreement is intended as, shall constitute, or shall be interpreted, construed, or used as evidence of any admission by a Party of any wrongdoing, liability, or fault (including comparative or proportional fault or liability), a waiver of any defense, an estoppel, or an admission as to any matter of law or fact, either as among the Parties or with respect to any person or entity not a Party to this Agreement; provided, however, that any Party shall be entitled to use this Agreement as may become necessary to enforce its terms. (c) Entire Agreement. This Agreement constitutes the entire Agreement and understanding among the Parties with respect to the subject matter hereof and supersedes all prior and/or contemporaneous written or oral agreements or understandings relating to the subject matter of this Agreement. (d) Counterparts. This Agreement may be executed in multiple counterparts. (e) Successors, Assigns and Additional Parties. This Agreement shall be binding upon, inure to the benefit of, and be enforceable by the successors and assigns of any of the Parties. ACX and CTI shall cause their respective new Affiliates to be bound by this Agreement. (f) Partial Invalidity. If any portion of this Agreement is declared invalid or unenforceable, the remainder of this Agreement shall continue in full force and effect. (g) No Other Beneficiaries. Except to the extent expressly provided otherwise herein, this Agreement shall not inure to the benefit of any third party or parties and shall not relieve any insurer or other third party who would otherwise be obligated to pay any claim of the responsibility with respect thereto or, solely by virtue of the indemnification provisions hereof, provide any subrogation rights with respect thereto, and each party agrees to waive such rights against the other to the fullest extent permitted. (h) Governing Law. This Agreement shall be governed by and shall be construed and enforced in accordance with the laws of the State of Colorado, except for any conflict of laws provisions in said laws of the State of Colorado that might otherwise require the application of the laws of a jurisdiction other than the State of Colorado. (i) Headings. The headings contained in this Agreement are for convenience only and are not intended to limit the scope or affect the interpretation of any provision of this Agreement. (j) Joint Negotiation. The Parties acknowledge that this Agreement is the result of joint negotiations among the Parties and agree that neither this agreement nor any amendment to the Agreement shall be construed or interpreted against any Party on the grounds of sole or primary authorship. (k) Relationship of Parties. Each Party reserves the right to select and retain or employ its own legal counsel to represent such Party in connection with this Agreement. Nothing contained in this Agreement shall be deemed to create a partnership, joint venture, agency, or other similar relationship between or among any Parties. Effective as of the 1st day of January, 2000. ACX TECHNOLOGIES, INC. COORSTEK, INC. By: /s/ Jill B. W. Sisson By: /s/ Katherine A. Resler - ------------------------- --------------------------- Name: Jill B. W. Sisson Name: Katherine A. Resler Title: General Counsel and Title: General Counsel and Secretary Secretary EX-10.6 7 Exhibit 10.6 MASTER TRANSITION MATERIALS AND SERVICES AGREEMENT This Agreement is made as of December 1, 1999, by and among ACX Technologies, Inc. ("ACX"), and its Affiliates, and CoorsTek, Inc., ("CoorsTek"), and its Affiliates, hereinafter collectively referred to as the "Parties." 1. Purpose. The purpose of this Agreement is to set forth the terms and conditions pursuant to which ACX shall provide materials and perform services for each other as described in Attachment A, attached hereto and by this reference made a part hereof. 2. Term. This Agreement shall be effective commencing on January 1, 2000, and shall remain in effect for one (1) year thereafter. 3. Independent Contractor. The parties expressly understand and agree that ACX and CoorsTek, respectively are acting as independents contractors unrelated to each other or any of their respective subsidiaries or affiliated companies. Nothing in this Agreement is intended to create a relationship, express or implied, of employer-employee, principal-agent, or joint venture between CoorsTek and ACX. 4. Consideration/Billing. (a) Invoices for services will be sent to the addresses designated on Attachment B. Best efforts will be made to bill in a timely manner. The year-end invoice shall be sent within 60 days after the close of the accounting year books with an additional 30 days to be set aside for any dispute resolution regarding billing. (b) Remittance for services will be in the form of a check and mailed to the party providing the service (the "Provider") at the address set forth in Attachment B: (c) Backup documentation for charges less than $50.00 may not be available. (d) Additional requested services not listed in the "Description of Service Provided" (Attachment A) will be charged to the party receiving the material or service ("Receiving Party"). 5. Limitation of Liability. In no event shall either party be responsible for incidental or consequential damages, including lost profits, incurred by the other party in connection with this Agreement, regardless of legal theory (including, without limitation, contract, negligence, strict liability, tort or warranty of any kind), even if advised of the possibility of such damage. In the event of a loss or claim resulting from work performed pursuant to this Agreement, the Receiving Party shall be responsible for responding to the loss or claim on behalf of both parties to this Agreement until such time as legal liability is established, at which time each party shall pay its pro rata share of costs, expenses and judgments. The Provider shall have the right to participate in the response to the loss or claim and shall have the right to approve any settlement provided, however, that such approval shall not be unreasonably withheld. 6. Warranty. Each Party represents and warrants to the other party that all materials provided and services performed by each party hereunder will meet the other party's specifications as set forth in Attachment A. THE PARTIES AGREE THAT THE WARRANTY SET FORTH IN THIS PARAGRAPH 6 IS THE SOLE AND EXCLUSIVE WARRANTY PROVIDED AND THAT THERE IS NO OTHER WARRANTY OF ANY KIND WHATSOEVER, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. ALL SUCH OTHER WARRANTIES ARE EXPRESSLY AND SPECIFICALLY DISCLAIMED. IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT NEITHER PARTY ACCEPTS RESPONSIBILITY OR LIABILITY FOR THE USE OF THE SERVICES PERFORMED OR MATERIALS PROVIDED HEREUNDER. 7. Designated Representative. The Designated Representatives as set forth in Attachment A are responsible for authorizing and coordinating the work under this Agreement. All matters of a technical coordinating or project authorization nature shall be directed to the Designated Representative. All matters of an administrative or contractual nature, including but not limited to the issuance of notices, amendments, time extensions, request for changes, submission of Insurance Certificates and any other contractual correspondence, including exchange of signed copies of this Agreement, shall be directed to the designated Purchasing Representative. 8. Miscellaneous. (a) Amendment. This Agreement may not be amended except in writing properly executed by the parties hereto. (b) Assignment and Subcontracting. Neither party shall have the right or power to assign or subcontract its rights or obligations hereunder without the express written consent of the other party. Any attempt to do so without such consent shall be null and void and shall give the other party the right to cancel and terminate this Agreement. (c) Waiver. Any express waiver of a term of this Agreement shall not be binding and effective unless made in writing and properly executed. (d) Severability. Any invalid or unenforceable provision shall be deemed severed from this Agreement to the extent of its invalidity or unenforceability, and this Agreement shall be construed and enforced as if the Agreement did not contain that particular provision to the extent of its invalidity or unenforceability. (e) Governing Law. The laws of the State of Colorado shall govern any interpretations or constructions of this Agreement. Any action pertaining to this Agreement shall be commenced and prosecuted in the courts of Jefferson County, Colorado, and each party submits to the jurisdiction of said courts and waives the right to change venue. (f) Entire Agreement. There are no understandings between the parties hereto as to the subject matter of this Agreement other than as set forth herein and in the documents specifically incorporated herein. BY SIGNING BELOW, both parties hereto accept this Agreement. ACX TECHNOLOGIES, INC. COORSTEK, INC. By: /s/ Jill B. W. Sisson By: /s/ Katherine A. Resler - ------------------------- --------------------------- Name: Jill B. W. Sisson Name: Jill B. W. Sisson Title: General Counsel and Title: General Counsel and Secretary Secretary ATTACHMENT A Transitional Services: Liability/Property Insurance Telecommunication Services Courier and Transportation Services EX-21 8 Exhibit 21 ACX TECHNOLOGIES, INC. AND SUBSIDIARIES SUBSIDIARIES OF REGISTRANT The following table lists subsidiaries of the Registrant and the respective jurisdictions of their incorporation as of December 31, 1999. All subsidiaries are included in Registrant's consolidated financial statements. State/Country of Name Incorporation - ----------------------------------------------- ---------------- Graphic Packaging Holdings, Inc. Colorado ACX (UK) Ltd. England ACX Group, Ltd. Wales NMC Group, Ltd. England Graphic Packaging Corporation Delaware Universal Packaging Corporation Delaware Graphic Packaging Corporation of Virginia Virginia GP Holdings, Inc. Colorado Graphic Packaging Toronto Corporation Canada Lauener Engineering Limited Delaware Lauener Engineering, AG Switzerland Kalamazoo Valley Group Michigan Golden Technologies Company, Inc. Colorado Golden Equities, Inc. Colorado GEI Brokers, Inc. Colorado Golden Properties Limited Colorado Chronopol, Inc. Colorado GTC Nutrition Company Colorado Mecor, Inc. Colorado Golden Aluminum Company Colorado ACX International Sales, Inc. Barbados EX-23 9 Exhibit 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 33-55894 and 33-68898) and Form S-3 (Nos. 33-94666 and 333-1988) of ACX Technologies, Inc. of our report dated March 1, 2000 relating to the financial statements and financial statement schedule, which appear in this Form 10-K. PricewaterhouseCoopers LLP Denver, Colorado March 27, 2000 EX-27 10
5 1,000 12-MOS DEC-31-1999 DEC-31-1999 15,869 0 68,762 2,153 119,389 433,965 572,145 144,656 1,627,038 541,191 0 0 0 286 423,024 1,627,038 831,405 831,405 707,758 707,758 0 0 28,550 35,563 14,045 21,518 6,073 2,332 0 25,259 0.89 0.88
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